2012 Consolidated Financial Report - UBI Banca
2012 Consolidated Financial Report - UBI Banca
2012 Consolidated Financial Report - UBI Banca
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<strong>Report</strong>s and<br />
Accounts <strong>2012</strong><br />
Translation from the Italian original which remains the<br />
definitive version<br />
10 th financial year<br />
Joint stock co-operative company<br />
Registered office: Bergamo, Piazza Vittorio Veneto 8<br />
Operating offices: Bergamo, Piazza Vittorio Veneto 8; Brescia, Via Cefalonia 74<br />
Member of the Interbank Deposit Protection Fund and the National Guarantee Fund<br />
Tax Code, VAT No. and Bergamo Company Registration No. 03053920165<br />
ABI (Italian Banking Association) 3111.2 Register of Banks No. 5678 Register of banking groups No. 3111.2<br />
Parent of the Unione di Banche Italiane Banking Group<br />
Share capital as at 5 th February 2013: euro 2,254,367,552.50 fully paid up<br />
www.ubibanca.it
Contents<br />
Letter to the registered and non-registered shareholders ........................................................ 5<br />
<strong>UBI</strong> <strong>Banca</strong>: company officers .................................................................................................. 9<br />
<strong>UBI</strong> <strong>Banca</strong> Group: branch network as at 31 st December <strong>2012</strong> ................................................ 10<br />
<strong>UBI</strong> <strong>Banca</strong> Group: the main investments as at 31 st December <strong>2012</strong> ....................................... . 11<br />
<strong>UBI</strong> <strong>Banca</strong> Group: principal figures and performance indicators ............................................. 13<br />
The rating .............................................................................................................................. 14<br />
Notice of call .......................................................................................................................... 16<br />
CONSOLIDATED FINANCIAL STATEMENTS OF THE <strong>UBI</strong> BANCA GROUP AS AT AND FOR<br />
THE YEAR ENDED 31 ST DECEMBER <strong>2012</strong><br />
CONSOLIDATED MANAGEMENT REPORT ................................................................................... 19<br />
▪ The macroeconomic scenario ............................................................................................ 20<br />
▪ Significant events that occurred during the year ................................................................ 31<br />
▪ Commercial activity ........................................................................................................... 41<br />
▪ The distribution network and market positioning ............................................................. 59<br />
▪ Human resources ............................................................................................................. 67<br />
▪ The scope of consolidation ................................................................................................ 76<br />
▪ Reclassified consolidated financial statements, reclassified income statement<br />
net of the most significant non-recurring items and reconciliation schedules ..................... 86<br />
▪ The consolidated income statement ................................................................................... 94<br />
▪ General banking business with customers: funding ........................................................... 107<br />
- Total funding ............................................................................................................................... 107<br />
- Direct funding .............................................................................................................................. 108<br />
- Indirect funding and assets under management ........................................................................... 114<br />
▪ General banking business with customers: lending .......................................................... 117<br />
- Performance of the loan portfolio ................................................................................................. 117<br />
- Risk .............................................................................................................................................. 120<br />
▪ The interbank market and the liquidity situation ............................................................... 126<br />
▪ <strong>Financial</strong> activities ........................................................................................................... 130<br />
▪ Equity and capital adequacy ............................................................................................. 149<br />
▪ Research & Development .................................................................................................. 153<br />
▪ The system of internal control .......................................................................................... 154<br />
▪ Transactions with related parties ...................................................................................... 155<br />
▪ <strong>Consolidated</strong> companies: the principal figures ................................................................... 158<br />
▪ The performance of the main consolidated companies ....................................................... 162<br />
▪ Other information ............................................................................................................. 193<br />
- Treasury shares ........................................................................................................................... 193<br />
- Litigation ...................................................................................................................................... 193<br />
- Inspections .................................................................................................................................. 194<br />
- Antitrust authority provisions ...................................................................................................... 196<br />
- Tax aspects .................................................................................................................................. 196<br />
- Investor relations and external communication ............................................................................ 205<br />
- Social and environmental responsibility ....................................................................................... 207<br />
- Compliance with personal data protection regulations .................................................................. 209<br />
▪ Principal risks and uncertainties to which the <strong>UBI</strong> <strong>Banca</strong> Group is exposed ...................... 210<br />
▪ Subsequent events occurring and the business outlook<br />
for consolidated operations .......................................................................................... 218<br />
STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER<br />
RESPONSIBLE FOR PREPARING THE COMPANY ACCOUNTING DOCUMENTS ............................. 219<br />
1
INDEPENDENT AUDITORS’ REPORT ................................................................................ 221<br />
CONSOLIDATED FINANCIAL STATEMENTS ........................................................................ 224<br />
▪ <strong>Consolidated</strong> balance sheet ............................................................................................... 225<br />
▪ <strong>Consolidated</strong> income statement ........................................................................................ 226<br />
▪ <strong>Consolidated</strong> statement of comprehensive income ............................................................. 227<br />
▪ Statement of changes in consolidated equity .................................................................... 228<br />
▪ <strong>Consolidated</strong> statement of cash flows ............................................................................. 230<br />
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ................................................... 232<br />
▪ Part A – Accounting policies ............................................................................................. 233<br />
- A.1 – General part ........................................................................................................................ 233<br />
- A.2 – The main items in the financial statements .......................................................................... 250<br />
- A.3 – Information on fair value ...................................................................................................... 276<br />
▪ Part B – Notes to the consolidated balance sheet ............................................................... 281<br />
- Assets ........................................................................................................................................... 281<br />
- Liabilities ..................................................................................................................................... 313<br />
- Other information ......................................................................................................................... 335<br />
▪ Part C – Information on the consolidated income statement ............................................... 338<br />
▪ Part D – <strong>Consolidated</strong> statement of comprehensive income ............................................... 359<br />
▪ Part E – Information on risks and the relative hedging policies ......................................... 360<br />
▪ Part F – Information on consolidated equity ...................................................................... 466<br />
▪ Part G – Business combination transactions concerning companies or lines of business .... 474<br />
▪ Part H – Transactions with related parties ......................................................................... 475<br />
▪ Part I – Share-based payments ......................................................................................... 480<br />
▪ Part L – Segment reporting ............................................................................................... 482<br />
ATTACHMENT TO THE CONSOLIDATED FINANCIAL STATEMENTS ......................................... 484<br />
Disclosures concerning the fees of the independent auditors and for services other<br />
than auditing in compliance with Art. 149 duodecies of Consob Issuers’ Regulations ......... 484<br />
SEPARATE FINANCIAL STATEMENTS OF <strong>UBI</strong> BANCA SCPA AS AT AND FOR THE YEAR<br />
ENDED 31 ST DECEMBER <strong>2012</strong><br />
MANAGEMENT REPORT ............................................................................................... 1*<br />
▪ <strong>UBI</strong> <strong>Banca</strong>: principal figures and performance indicators ................................................. 2*<br />
▪ The <strong>UBI</strong> <strong>Banca</strong> organisation chart ..................................................................................... 3*<br />
▪ The macroeconomic scenario ............................................................................................ 4*<br />
▪ Human resources ............................................................................................................. 4*<br />
▪ Reclassified financial statements, reclassified income statement net of the most significant<br />
non-recurring items and reconciliation schedules ............................................................. 6*<br />
▪ The income statement ....................................................................................................... 14*<br />
▪ General banking business ................................................................................................. 25*<br />
- Funding ....................................................................................................................................... 25*<br />
- Lending ........................................................................................................................................ 28*<br />
- Operations on the interbank market ............................................................................................. 31*<br />
▪ <strong>Financial</strong> activities ........................................................................................................... 34*<br />
▪ Equity and capital adequacy ............................................................................................ 42*<br />
▪ Relations with Group member companies .......................................................................... 44*<br />
▪ Research & Development .................................................................................................. 44*<br />
▪ The internal control system .............................................................................................. 44*<br />
▪ Transactions with related parties ...................................................................................... 45*<br />
▪ Share performance and shareholder structure ................................................................... 46*<br />
- Share performance ....................................................................................................................... 46*<br />
- <strong>Report</strong> on corporate governance and the ownership structure ...................................................... 49*<br />
2
- Treasury shares ........................................................................................................................... 51*<br />
- <strong>Report</strong> on the admission of new registered shareholders ............................................................... 51*<br />
- <strong>Report</strong> on mutual objects .............................................................................................................. 51*<br />
- De jure and delegated powers of the corporate bodies .................................................................. 53*<br />
▪ Other information ............................................................................................................. 54*<br />
- Litigation ...................................................................................................................................... 54*<br />
- Tax aspects .................................................................................................................................. 54*<br />
- Compliance with personal data protection regulations .................................................................. 54*<br />
- Complaints .................................................................................................................................. 54*<br />
▪ Principal risks and uncertainties to which <strong>UBI</strong> <strong>Banca</strong> is exposed ....................................... 56*<br />
Subsequent events and the business outlook for operations ............................................. 56*<br />
▪ Proposal for the allocation of profit for the year and dividend distribution .......................... 57*<br />
STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER<br />
RESPONSIBLE FOR PREPARING THE COMPANY ACCOUNTING DOCUMENTS ............................ 58*<br />
INDEPENDENT AUDITORS’ REPORT ................................................................................ 60*<br />
SEPARATE FINANCIAL STATEMENTS .............................................................................. 64*<br />
▪ Balance sheet .................................................................................................................... 65*<br />
▪ Income statement ............................................................................................................. 66*<br />
▪ Statement of comprehensive income ................................................................................. 67*<br />
▪ Statement of changes in equity .......................................................................................... 68*<br />
▪ Statement of cash flows .................................................................................................... 70*<br />
NOTES TO THE ACCOUNTS .......................................................................................... 72*<br />
▪ Part A – Accounting policies ............................................................................................. 73*<br />
- A.1 – General part ........................................................................................................................ 73*<br />
- A.2 – The main items in the financial statements .......................................................................... 79*<br />
- A.3 – Information on fair value ...................................................................................................... 103*<br />
▪ Part B – Notes to the balance sheet .................................................................................... 105*<br />
- Assets ........................................................................................................................................... 105*<br />
- Liabilities ..................................................................................................................................... 142*<br />
- Other information ........................................................................................................................ 163*<br />
▪ Part C – Notes to the income statement ............................................................................. 166*<br />
▪ Part D – Comprehensive income ....................................................................................... 188*<br />
▪ Part E – Information on risks and the relative hedging policies .......................................... 190*<br />
▪ Part F – Information on equity ........................................................................................... 286*<br />
▪ Part G – Business combination transactions concerning companies or lines of business ... 293*<br />
▪ Part H – Transactions with related parties ........................................................................ 295*<br />
▪ Part I – Share based payments ......................................................................................... 303*<br />
▪ Part L – Segment <strong>Report</strong>ing ............................................................................................... 305*<br />
ATTACHMENTS TO THE SEPARATE FINANCIAL STATEMENTS ............................................... 306*<br />
▪ List of real estate properties .............................................................................................. 307*<br />
▪ Convertible bonds ............................................................................................................ 312*<br />
▪ Disclosures concerning the fees of the independent auditors and services other than<br />
auditing in compliance with Art. 149 duodecies of Consob Issuers’ Regulations ................. 313*<br />
3
REPORT ON THE CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURE OF <strong>UBI</strong> BANCA SCPA .... 1**<br />
REPORT OF THE SUPERVISORY BOARD TO THE SHAREHOLDERS’ MEETING<br />
in compliance with Art,153, paragraph 1 of Legislative Decree No. 58 of 24 th February 1998<br />
and article 46, paragraph 1, letter h) of the Articles of Association .............................................. 73**<br />
REPORTS ON THE OTHER ITEMS ON THE AGENDA OF THE SHAREHOLDERS’ MEETING................. 89**<br />
GLOSSARY ..................................................................................................................................................... 135**<br />
BRANCH NETWORK OF THE <strong>UBI</strong> BANCA GROUP<br />
Calendar of corporate events of <strong>UBI</strong> <strong>Banca</strong> for 2013<br />
DELIBERAZIONI ASSUNTE DALL’ASSEMBLEA DEL ........ <strong>2012</strong><br />
CONTACTS<br />
KEY<br />
The following abbreviations are used in the tables:<br />
- dash (-): when the item does not exist;<br />
- not significant (n.s.): when the phenomenon is not significant;<br />
- not available (n.a.): when the information is not available;<br />
- a cross “X”: when no amount is to be given for the item (in compliance with Bank of Italy instructions).<br />
All figures are given in thousands of euros, unless otherwise stated.<br />
4
Letter to the registered and non-registered<br />
shareholders<br />
Dear registered and non-registered shareholders,<br />
The Chairman of the Supervisory Board, Corrado Faissola, passed away on 20 th December <strong>2012</strong>.<br />
With his passing we have lost an immeasurably well-respected banker who was a driving force<br />
behind the creation of <strong>UBI</strong> <strong>Banca</strong> and left a permanent mark on the history of the Group and the<br />
Italian banking industry as a whole.<br />
We would like to remember him in light of the friendship that flowered in the years spent working<br />
together. This friendship was a precious gift reserved for those who worked alongside him on a daily<br />
basis in developing programmes to shape the future. Indeed, his basic inclination was to open up<br />
unreservedly to anyone who was prepared to exchange ideas freely and commit to working towards<br />
shared goals with the same intensity that he himself demonstrated.<br />
Corrado Faissola was an unwavering follower of a strict personal code, fundamentally geared<br />
towards espousing an overall ethical position that governed both life and work based on the principle<br />
that the common good should never be supplanted by the possibility of delivering a result, no matter<br />
how desirable. He worked in banking for many years, and was a shining example of tenacity,<br />
wisdom and acumen.<br />
He was one of the leading advocates of the aggregation that gave birth to <strong>UBI</strong> <strong>Banca</strong>: he initially filled<br />
the position of Deputy Chairman of the Management Board and subsequently became Chairman of<br />
the Supervisory Board. In these roles we had the opportunity to perceive his talents as an enlightened<br />
banker, an inspirational strategist, a source of knowledge and insight into the world of banking and<br />
credit, a keen judge of programmes and of people.<br />
As a token of our esteem and affection, and in recognition of his great contribution, we have created a<br />
scholarship in his name to be granted to a deserving student of economy and finance at the University<br />
of Brescia. We believe that this practical gesture aimed at honouring his memory through providing<br />
assistance to the next generation is something he would have genuinely appreciated.<br />
We would also like to take this opportunity to remember Giuseppe Camadini, a Member of the<br />
Management Board of <strong>UBI</strong> <strong>Banca</strong> and a figure of authority in the business and financial world, who<br />
died on 25 th July <strong>2012</strong>.<br />
As a young notary, he soon dedicated himself to a career in the banking sector, initially joining <strong>Banca</strong><br />
di Valle Camonica and then moving to <strong>Banca</strong> San Paolo, where he became Chairman. Following the<br />
merger with CAB, he promoted <strong>Banca</strong> Lombarda, where he held positions on the Boards of Banco di<br />
Brescia and <strong>Banca</strong> di Valle Camonica itself. He continued to fill important roles following the<br />
formation of the <strong>UBI</strong> <strong>Banca</strong> Group, on the Management Board of the Parent from 2007, and on the<br />
Boards of Banco di Brescia, <strong>Banca</strong> di Valle Camonica and <strong>Banca</strong> Regionale Europea.<br />
A long-standing Director and then Chairman of Cattolica Assicurazioni, Giuseppe Camadini was first<br />
and foremost a man of faith and culture.<br />
A tireless instigator of and participator in good works and charity initiatives, he played a driving role<br />
in the leading Catholic institutions in the Brescia area for decades. Many of these institutions were<br />
entrusted to his supervision and became his responsibility.<br />
As President of Fondazione Tovini and Istituto Paolo VI, and Vice-President of Editrice La Scuola, he<br />
helped preserve the memory and continue the good works of Antonio Tovini (founder of <strong>Banca</strong> di Valle<br />
Camonica and Banco Ambrosiano) and of Pope Paul VI, tasks which represented his life’s work.<br />
We would like to remember him, not only for his constant and unstinting support for the decisions and<br />
strategic direction of <strong>UBI</strong> <strong>Banca</strong>, but also for his human characteristics: Giuseppe Camadini was a<br />
man of gentle ways and refined thinking, whose life was inspired by extraordinary values, a<br />
constructive spirit and the harmonious manner in which he fulfilled the roles and responsibilities<br />
entrusted to him.<br />
5
Dear registered and non-registered shareholders,<br />
It is hard to abandon our affectionate thoughts in recognition of those that have left us in order to talk<br />
about the situation at the Bank, but this is the task that now lies before us.<br />
In <strong>2012</strong>, the real economy weakened further and Italy was hit particularly hard. Italian GDP shrank<br />
for the sixth consecutive quarter, although pressure on sovereign debts nevertheless gradually eased<br />
and the spread on government bonds reduced as a consequence.<br />
In this context, the <strong>UBI</strong> <strong>Banca</strong> Group continued to focus further on internal reorganisation, with priorty<br />
given to a strong balance sheet and a balanced capital structure, as the right foundations for stability<br />
and above all for future growth.<br />
GROUP REORGANISATION<br />
The year <strong>2012</strong> saw a continuation of the process already begun in preceding years, with a series of<br />
major initiatives aimed at bringing about immediate further cuts to structural costs:<br />
<br />
<br />
<br />
<br />
simplification of how the Group functions, with an overall reduction in the size of the branch<br />
network and streamlining of internal units with shorter lines of lines in the network banks, the<br />
Parent and <strong>UBI</strong>.S;<br />
following agreements signed with trade unions in November <strong>2012</strong> and February 2013, a voluntary<br />
redundancy programme was implemented for 736 staff in the first quarter of this year, while an<br />
additional programme to suspend work/reduce working hours was launched. Demand from the<br />
workforce for both programmes far exceeded the company’s target.<br />
As part of those same agreements, the Bank undertook to transform employment contracts from<br />
temporary to permanent or to recruit 283 young people in order to support generation turnover;<br />
changes to the service model for private and corporate banking customers, with unification of<br />
operating units in order to serve both types of customer and the creation at the same time of<br />
combined units (Private & Corporate Unity) that came into operation at the beginning of 2013;<br />
the coporate structure of the Group was streamlined through a series of mergers completed during<br />
the course of the year: Banco di San Giorgio was merged into BRE, B@nca 24-7 was merged into<br />
<strong>UBI</strong> <strong>Banca</strong> (after the prior contribution to Prestitalia of the salary and pension backed lending<br />
operations ); and SILF was merged into the Parent.<br />
On 6 th February 2013 work was begun on the merger of Centrobanca into <strong>UBI</strong> <strong>Banca</strong>, which<br />
should be completed by the end of June.<br />
CAPITAL STRENGTH<br />
Capital ratios improved significantly, as a result of the adoption of internal models for the calculation<br />
of capital requirements (authorisation was received from the Bank of Italy for the corporate segment in<br />
May <strong>2012</strong>, while the validation process for the retail segment is ongoing), efforts made to optimise<br />
risk weighted assets and capital management operations that were undertaken. The ratios now<br />
remain more than adequate to support core banking activity: the core tier one ratio increased by +173<br />
basis points to 10.29% and the total capital ratio increased by +251 basis points to 16.01%.<br />
Moreover, as at 30 th June <strong>2012</strong> the Group had already achieved the ratios recommended by the<br />
European Banking Authority (EBA), with a core tier one ratio of 9.16% at the end of the year, which<br />
incorporated the impact of the fair valuation of government securities held in portfolio as at 30 th<br />
September 2011 (-€868 million).<br />
CUSTOMER FUNDING<br />
Direct funding from retail customers – traditionally one of the Group’s strong points, but subject to<br />
increasing competitive pressure – amounted to €80.3 billion at year end (+€0.8 billion over the twelve<br />
months). This result was driven by bonds, term deposits (which are both types of funding that help to<br />
stabilise liabilities) and also by online current accounts at IWBank.<br />
Total customer funding comprises over 80% of the Group’s direct funding and finances 86.5% of its<br />
lending.<br />
On the institutional front, the healthy liquidity position ensured that the Group could manage its<br />
financial position without needing to renew its maturing medium to long-term funding, both because<br />
renewal was not needed to maintain the structural balance between assets and liabilities and<br />
because the conditions for renewing this financing were still too expensive. It was not until October<br />
that <strong>UBI</strong> <strong>Banca</strong> returned to the international markets with a benchmark issue of €750 million.<br />
Indirect funding, influenced by the so-called market effect, or in other words by the volatility of<br />
financial markets, was €70.2 billion (-2.6%), of which assets under management (consisting of mutual<br />
investment funds, managed customer portfolios, insurance policies and units in pension funds)<br />
6
exceeded €38 billion (+3.3%) as a result of the success of the new <strong>UBI</strong> Pramerica sicav, which was<br />
placed on the market during the year.<br />
CUSTOMER LENDING<br />
At the end of December the loan book amounted to €92.9 billion, 70% of which was disbursed in<br />
Lombardy and 72% of which came from medium to long-term lending.<br />
The Group’s strong position was nevertheless affected by a reduction in volumes (-6.8% compared to<br />
2011), attributable on the one hand to weak demand from households and businesses still in the grip<br />
of a serious recession and on the other to the impact of action taken to focus activity increasingly on<br />
network bank customers, thereby strengthening the Group’s traditional links with local areas and<br />
their people.<br />
The Group has in fact completed the disposal of third party networks, with a consequent reduction in<br />
lending to non-captive customers which involved all of its product companies, especially <strong>UBI</strong> Leasing.<br />
It also continued to reduce its exposure to the large corporate segment.<br />
These initiatives allowed the group to rebalance its lending to funding ratio, which improved to 94%<br />
(97% at the end of 2011).<br />
LIQUIDITY AND THE SECURITIES PORTFOLIO<br />
The easing of pressures on sovereign debt allowed the wholesale market to start functioning again,<br />
although the situation is not yet back to normal.<br />
<strong>UBI</strong> <strong>Banca</strong> – which was allotted €12 billion from the two LTRO auctions held by the ECB in December<br />
2011 and February <strong>2012</strong> – made a series of investments in government securities, while also<br />
increasing its liquidity reserves.<br />
At the end of the year, the financial asset portfolio had reached €21.4 billion, 84% of which consisted<br />
of Italian government securities, and the Group continued to shun any exposure to “at risk” countries<br />
or product types. As an example, the deliberately limited use of derivative contracts is entirely<br />
dedicated to hedging items carried on the balance sheet or to trading with customers as<br />
counterparties, which are then adequately balanced on the market.<br />
The stabilisation of the operating environment, together with actions taken over the last two years to<br />
tackle the systemic crisis, have allowed the group to achieve a liquidity position that is more than<br />
satisfactory and which already complies with the provisions of Basel III regulations.<br />
GROUP PROFITS<br />
The Group ended the year with profit of approximately €83 million, having incurred €152 million of<br />
expenses for redundancy incentive schemes in relation to agreements signed with trade unions in<br />
November <strong>2012</strong> and February 2013.<br />
This result was achieved as a result of revenues from core banking activities holding up well, which<br />
led to operating income of €3.5 billion (+2.6% compared to the previous year, partly due to the overall<br />
contribution of €257 million from financial activities), while operating expenses were contained to<br />
approximately €2.3 billion, down by 5.2%, with further improvements expected as a result of the<br />
initiatives launched in <strong>2012</strong>.<br />
These trends have driven an increase of 20% in net operating income, which came to nearly €1.3<br />
billion, and an increase of 15% in pre-tax profit from continuing operations to €323 million.<br />
On the income side, however, pressure on net interest income continued (-7.7% to €1.9 billion), which,<br />
despite the guaranteed support from interest on the securities portfolio, was affected by the persistent<br />
decline in market interest rates (the average one month Euribor rate was 0.34% in <strong>2012</strong> compared to<br />
1.19% in 2011) and lower volumes of lending caused by weak demand for credit and by the selective<br />
policies already described previously. Fee and commission income performed well, more or less<br />
unchanged at €1.2 billion.<br />
All components of operating expenses recorded a year-on-year fall, to reach the lowest level in the last<br />
six years.<br />
The current recession is reflected in the loan loss rate (€847 million), which rose to 91 basis points<br />
(from 61 bps in 2011). However, this nevertheless confirmed <strong>UBI</strong> <strong>Banca</strong>’s place as one of the best<br />
Italian banks in terms of asset quality: net non-performing loans as a percentage of the loan book<br />
stood at 3.18%, compared to an average of 3.35% for the sector nationally.<br />
In compliance with supervisory authority recommendations, the Management Board has decided to<br />
propose a dividend of €0.05 per share. The total dividend payment will be €45 million, to be drawn<br />
from the profit of the Parent.<br />
7
Dear registered and non-registered shareholders,<br />
The Annual General Meeting of the Shareholders scheduled for 19 th and 20 th April will be called upon<br />
to elect members of the Supervisory Board, which will subsequently appoint a Management Board for<br />
the next three-years.<br />
The outgoing Directors have presided over the formation and subsequent consolidation of a major<br />
Group of co-operative origins and one of the leading banks in the country. The key features of this<br />
legal and financial model are democratic governance, retail lending and retail funding, closeness to<br />
local people and a strong sense of social responsibility towards the communities served. Even today<br />
these still remain indispensable requirements for enuring that developments in the banking system go<br />
hand in hand with providing meaningful concrete support to small and medium-sized businesses in<br />
the community to enable balanced economic development that is still mindful of social growth. We do<br />
this in the context of our fundamental principle of mutual assistance, which unfortunately not always<br />
prevails.<br />
These values, combined with a firm desire for independence and autonomy, will be passed on to the<br />
new candidates, who will be selected and proposed by the Appointments Committee in a list<br />
approved by the outgoing Supervisory Board. The list bears many new names, incorporating a more<br />
modern outlook (with the presence of five female candidates) and new personal characteristics (the<br />
average age of the candidates is 58) which will help enrich the composition of the next Supervisory<br />
Board, ready to meet the challenges of an increasingly difficult and competitive market environment.<br />
However, if it is to look to the future with confidence it must never overlook not only the basic tenets of<br />
banking, but also the fundamental principles that underpin our identity and our local mission.<br />
27 th March 2013<br />
The Chairman<br />
of the Management Board<br />
Emilio Zanetti<br />
Senior Deputy Chairman<br />
of the Supervisory Board<br />
Giuseppe Calvi<br />
8
<strong>UBI</strong> <strong>Banca</strong>: company officers<br />
Honorary Chairman<br />
Giuseppe Vigorelli<br />
Supervisory Board (appointed by a Shareholders’ Meeting on 24 th April 2010)<br />
Chairman Corrado Faissola (*)<br />
Senior Deputy Chairman<br />
Giuseppe Calvi<br />
Deputy Chairman<br />
Deputy Chairman<br />
Alberto Folonari<br />
Mario Mazzoleni<br />
Battista Albertani<br />
Luigi Bellini<br />
Mario Cattaneo<br />
Silvia Fidanza<br />
Enio Fontana<br />
Carlo Garavaglia<br />
Alfredo Gusmini<br />
Pietro Gussalli Beretta<br />
Giuseppe Lucchini<br />
Italo Lucchini<br />
Federico Manzoni<br />
Enrico Minelli (**)<br />
Toti S. Musumeci<br />
Sergio Orlandi<br />
Giorgio Perolari<br />
Sergio Pivato<br />
Armando Santus (**)<br />
Roberto Sestini<br />
Giuseppe Zannoni<br />
Management Board (appointed by the Supervisory Board on 27 th April 2010)<br />
Chairman<br />
Deputy Chairman<br />
Chief Executive Officer<br />
Emilio Zanetti<br />
Flavio Pizzini<br />
Victor Massiah<br />
Giampiero Auletta Armenise<br />
Giuseppe Camadini (***)<br />
Mario Cera<br />
Giorgio Frigeri<br />
Gian Luigi Gola (****)<br />
Guido Lupini<br />
Andrea Moltrasio<br />
Franco Polotti<br />
General Management<br />
General Manager<br />
Senior Deputy General Manager<br />
Deputy General Manager<br />
Deputy General Manager<br />
Deputy General Manager<br />
Deputy General Manager<br />
Francesco Iorio<br />
Elvio Sonnino<br />
Rossella Leidi<br />
Giovanni Lupinacci<br />
Ettore Medda<br />
Pierangelo Rigamonti<br />
Senior Officer Responsible in accordance with<br />
Art. 154 bis of the <strong>Consolidated</strong> Finance Act<br />
Elisabetta Stegher<br />
Independent auditors<br />
DELOITTE & TOUCHE Spa<br />
(*) Deceased 20 th December <strong>2012</strong>.<br />
(**) Appointed by a shareholders meeting on 28 th April <strong>2012</strong>.<br />
(***) Deceased 25 th July <strong>2012</strong>.<br />
(****) Appointed by the Supervisory Board on 30 th June 2010.<br />
9
<strong>UBI</strong> <strong>Banca</strong> Group: branch network as at 31 st<br />
December <strong>2012</strong><br />
10
<strong>UBI</strong> <strong>Banca</strong> Group: the main investments as<br />
at 31 st December <strong>2012</strong><br />
11
<strong>UBI</strong> <strong>Banca</strong> Group:<br />
key figures and performance indicators 1<br />
31.12.<strong>2012</strong> 31.12.2011 31.12.2010 31.12.2009 31.12.2008<br />
STRUCTURAL INDICATORS<br />
Net loans and advances to customers/total assets 70.1% 76.8% 78.0% 80.1% 79.0%<br />
Direct funding from customers/total liabilities 74.6% 79.2% 81.8% 79.5% 80.0%<br />
Net loans and advances to customers/direct funding from customers 94.0% 97.0% 95.4% 100.8% 98.7%<br />
Equity (including profit/loss for the period )/total liabilities 7.4% 6.9% 8.4% 9.3% 9.1%<br />
Assets under management/indirect funding from private individual customers 54.3% 51.2% 54.6% 53.2% 53.1%<br />
Leverage ratio<br />
(total assets - intangible assets) /(equity inclusive of profit (loss) for the year + equity attributable to<br />
non-controlling interests - intangible assets) 17.0 18.5 19.3 17.1 17.3<br />
PROFIT INDICATORS<br />
ROE (Profit for the year/equity including profit (loss) for the year) 0.8% 3.9% 1.6% 2.4% 0.6%<br />
ROTE annualised<br />
[profit for the year/tangible equity (equity inclusive of profit (loss), net of intangible assets)] 1.2% 5.9% 3.1% 4.6% 1.2%<br />
ROA (Profit for the year/total assets) annualised 0.06% 0.27% 0.13% 0.22% 0.06%<br />
Cost/Income ratio (operating expenses/operating income) 64.3% 69.5% 70.6% 64.4% 63.9%<br />
Personnel expense/operating income 39.0% 41.4% 41.5% 37.5% 38.8%<br />
Net impairment losses on loans/net loans to customers (loan losses) 0.91% 0.61% 0.69% 0.88% 0.59%<br />
Net interest income/operating income 52.8% 61.7% 61.3% 61.5% 68.7%<br />
Net fee and commission income/operating income 33.5% 34.7% 33.9% 31.1% 33.3%<br />
Net result on financial activities/operating income 7.3% 0.2% 1.0% 3.2% -5.9%<br />
RISK INDICATORS<br />
Net non-performing loans/net loans to customers 3.18% 2.49% 1.91% 1.36% 0.88%<br />
Net impairment losses on non-performing loans/gross non-performing loans<br />
(coverage for non-performing loans) 42.60% 43.31% 48.69% 51.57% 54.58%<br />
Coverage for non-performing loans, gross of write-offs of positions subject to bankruptcy<br />
proceedings and relative impairment losses 57.63% 59.06% 63.62% 66.10%<br />
Net non-performing + net impaired loans/net loans to customers 7.06% 5.03% 3.91% 3.24% 2.08%<br />
Net impairment losses on non-performing and impaired loans/gross non-performing<br />
loans+impaired loans (coverage) 29.26% 30.55% 34.89% 35.93% 38.22%<br />
CAPITAL RATIOS Basel 2 AIRB as at 31st December <strong>2012</strong><br />
Tier 1 ratio (tier 1 capital/total risk weighted assets) 10.79% 9.09% 7.47% 7.96% 7.73%<br />
Core tier 1 ratio after specific deductions to tier 1 capital (tier 1 capital net of preference shares<br />
and savings shares or privileged shares of non controlling interests/total risk weighted assets) 10.29% 8.56% 6.95% 7.43% 7.09%<br />
Total capital ratio [(regulatory capital+tier 3/total risk weighted assets)] 16.01% 13.50% 11.17% 11.91% 11.08%<br />
Regulatory capital (in thousands of euro) 12,203,619 12,282,153 10,536,200 10,202,555 9,960,812<br />
of which:<br />
Tier one capital after the application of prudential filters and specific deductions 8,263,720 8,276,278 7,047,888 6,816,876 6,944,723<br />
Risk weighted assets 76,589,350 91,010,213 94,360,909 85,677,000 89,891,825<br />
INCOME STATEMENT, BALANCE SHEET FIGURES (in thousands of euro),<br />
STRUCTURAL DATA (numbers)<br />
Profit (loss) for the period attributable to the shareholders of the Parent 82,708 (1,841,488) 172,121 270,099 69,001<br />
Profit (loss) for the period attributable to the shareholders of the Parent normalised 97,324 111,562 105,116 173,380 425,327<br />
Operating income 3,526,311 3,438,339 3,496,061 3,906,247 4,089,739<br />
Operating expenses (2,266,660) (2,389,626) (2,468,564) (2,514,347) (2,611,348)<br />
Net loans and advances to customers 92,887,969 99,689,770 101,814,829 98,007,252 96,368,452<br />
of which: net non-performing loans 2,951,939 2,481,417 1,939,916 1,332,576 848,671<br />
net impaired loans 3,602,542 2,533,780 2,032,914 1,845,073 1,160,191<br />
Direct funding from customers 98,817,560 102,808,654 106,760,045 97,214,405 97,591,237<br />
Indirect funding from customers 70,164,384 72,067,569 78,078,869 78,791,834 74,288,053<br />
of which: assets under management 38,106,037 36,892,042 42,629,553 41,924,931 39,430,745<br />
Total funding from customers 168,981,944 174,876,223 184,838,914 176,006,239 171,879,290<br />
Equity (inclusive of profit/loss for the year) 9,737,882 8,939,023 10,979,019 11,411,248 11,140,207<br />
Intangible assets 2,964,882 2,987,669 5,475,385 5,523,401 5,531,633<br />
Total assets 132,433,702 129,803,692 130,558,569 122,313,223 121,955,685<br />
Branches in Italy 1,727 1,875 1,892 1,955 1,944<br />
Total personnel at the end of the period<br />
(actual employees in service + workers on agency leasing contracts) 19,086 19,407 19,699 20,285 20,680<br />
Total personnel average (*)<br />
(actual employees in service + workers on agency leasing contracts) 18,490 18,828 19,384 20,185 20,606<br />
<strong>Financial</strong> advisors 672 713 786 880 924<br />
1 The indicators have been calculated using the reclassified figures contained in the section “Reclassified consolidated financial statements, reclassified<br />
income statement net of the most significant non-recurring items and reconciliation schedules” in the <strong>Consolidated</strong> Management <strong>Report</strong>.<br />
The profit indicators for 2011 were calculated on profit before impairment losses on goodwill and finite life intangible assets, which<br />
amounted to €349,373 thousand.<br />
Information on the share is reported in the relative section of the <strong>UBI</strong> <strong>Banca</strong> Management <strong>Report</strong>.<br />
(*) Part time employees have been calculated within total average personnel numbers according to convention on a 50% basis.<br />
13
The rating<br />
As governments were perceived to fail to come to an agreement during the year over the reform<br />
of European governance and over improvements to the mechanisms for managing the crisis in<br />
the euro area, rising pressures on sovereign debts and the growing difficulties with the<br />
macroeconomic environment led rating agencies to revise their ratings for Italy and Italian<br />
banks, including <strong>UBI</strong> <strong>Banca</strong>, several times.<br />
On 27 th January <strong>2012</strong>, as part of action taken on six eurozone countries (set on rating watch<br />
negative on 16 th December 2011), Fitch Ratings lowered its rating for Italy from A+ to A-<br />
(down two notches), keeping it on outlook negative.<br />
On the following 6 th February <strong>2012</strong>, this agency removed its negative rating watches assigned<br />
on 20 th December 2011 and made a series of cuts to the ratings of the main Italian banks. For<br />
<strong>UBI</strong> <strong>Banca</strong>, its long-term and viability ratings were reduced from A-/a- to BBB+/bbb+ (-1<br />
notch), again with a negative outlook.<br />
On 14 th December Fitch confirmed its ratings and outlook negative for Italy 1 and on 29 th<br />
January 2013 it revised its ratings for the four main Italian banks, including <strong>UBI</strong> <strong>Banca</strong>,<br />
whose ratings (and the relative outlooks) all remained unchanged.<br />
On 13 th July Moody’s intervened for the second time in <strong>2012</strong> on its Italian sovereign debt<br />
rating, cutting it by two notches from A3 to Baa2 and maintaining its negative outlook. In<br />
consideration of the magnitude of the changes already made to the ratings of Italian banks on<br />
the preceding 14 th May, the adjustments that the agency made to take account of the new<br />
ratings on sovereign debt were very limited and affected just ten banks, which did not include<br />
<strong>UBI</strong> <strong>Banca</strong>.<br />
As already reported, as part of extensive measures which affected the sovereign ratings of nine<br />
European countries, on 13 th February <strong>2012</strong> this agency downgraded its rating on Italy’s longterm<br />
debt from A2 to A3 (down one notch), again with a negative outlook and on the following<br />
15 th February it announced a review for possible downgrading of 114 financial institutions<br />
operating in 16 European countries.<br />
This review was concluded for Italy on 14 th May and was accompanied by a general reduction<br />
in the long-term ratings of 26 Italian banks, a reduction which in almost all cases reflected a<br />
lower rating by Moody’s on the financial strength of single banks. In this context <strong>UBI</strong> <strong>Banca</strong>’s<br />
bank financial strength rating was cut from C- (baa1) to D+ (baa3), while its long-term rating<br />
fell from A3 to Baa2. In both cases the outlook was kept on negative.<br />
On 3 rd August <strong>2012</strong>, Standard & Poor’s released the results of a revision of the Italian<br />
banking sector (which involved 32 financial institutions) that it performed to take account of<br />
the deterioration of the outlook for credit risk in the context of a recession which is potentially<br />
more severe than originally expected. In this context, the long-term rating for <strong>UBI</strong> <strong>Banca</strong> fell<br />
from BBB+ to BBB (down by one notch), again with a negative outlook.<br />
As a result of the sovereign debt downgrade of two notches announced on 13 th January (from<br />
A to BBB+ with a negative outlook) and a consequent lowering of the Italian BICRA rating<br />
(from three to four), this agency had already taken a series of negative measures on 10 th<br />
February <strong>2012</strong> involving 37 Italian financial institutions, including <strong>UBI</strong> <strong>Banca</strong>, whose longterm<br />
rating had been downgraded from A- to BBB+ (down one notch), with a negative outlook.<br />
The tables below summarise the ratings currently assigned to the Group by the three<br />
international agencies.<br />
1 As a consequence of the results of the parliamentary elections, considered inconclusive and economic figures for the last quarter of<br />
<strong>2012</strong>, which showed the Italian economy to be in one of the deepest recessions in Europe, on 8 th March 2013 this agency further<br />
downgraded its sovereign rating to BBB+ again with outlook negative.<br />
14
STANDARD & POOR’S<br />
Short-term Counterparty Credit Rating (i) A-2<br />
Long-term Counterparty Credit Rating (i)<br />
Stand Alone Credit Profile (SACP) (ii)<br />
Outlook<br />
RATINGS ON ISSUES<br />
Senior unsecured debt<br />
Subordinated debt (Lower Tier 2)<br />
Preference shares (former BPB-CV and former<br />
BPCI)<br />
BBB<br />
bbb<br />
Negative<br />
BBB<br />
BBB-<br />
BB<br />
French Certificats de Dépôt Programme A-2<br />
(i) The issuer credit rating reflects the agency’s opinion of the<br />
intrinsic creditworthiness of the bank combined with an<br />
assessment of the potential for future support that the bank<br />
might receive in the event of default (from government or from<br />
the group to which it belongs).<br />
Short-term: ability to repay short-term debt with a maturity<br />
of less than one year (A-1+: best rating – C: worst rating)<br />
Long-term: ability to pay interest and principal on debt with<br />
a maturity of longer than one year (AAA: best rating – D:<br />
default)<br />
(ii) The SACP is a rating of the intrinsic creditworthiness of<br />
the bank in the absence of external support (from government<br />
or from the group to which it belongs). It is calculated on the<br />
basis of an “anchor SACP”, which summarises economic and<br />
industry risk for the Italian banking sector. This is then<br />
adjusted to take account of bank-specific factors such as<br />
capitalisation, market positioning, exposure to risk and the<br />
funding and the liquidity situation, which are also assessed<br />
from a comparative viewpoint.<br />
MOODY'S<br />
Long-term debt and deposit rating (I)<br />
Short-term debt and deposit rating (II)<br />
Baa2<br />
Prime-2<br />
Bank <strong>Financial</strong> Strength Rating (BFSR) (III) D+<br />
Baseline Credit Assessment (BCA) (IV)<br />
Outlook (deposit ratings)<br />
Outlook (Bank <strong>Financial</strong> Strength Rating)<br />
RATINGS ON ISSUES<br />
Senior unsecured<br />
Lower Tier 2 subordinated<br />
Preference shares<br />
(former BPB-CV and <strong>Banca</strong> Lombarda)<br />
Euro Commercial Paper Programme<br />
Covered Bond<br />
baa3<br />
Negative<br />
Negative<br />
Baa2<br />
Ba1<br />
Ba3(hyb)<br />
Prime-2<br />
A2<br />
(I) The ability to repay long-term debt (maturing in or after one<br />
year) in local currency. By using the JDA method (Joint<br />
Default Analysis), this rating associates the financial strength<br />
rating (BFSR – Bank <strong>Financial</strong> Strength Rating) with the<br />
probability of intervention if needed by external support<br />
(shareholders, the group to which it belongs or official<br />
institutions).<br />
(Aaa: best rating– C: default)<br />
(II) The ability to repay debt in local currency maturing in the<br />
short-term (due in less than one year).<br />
(Prime -1: highest quality – not prime: speculative grade)<br />
(III) This rating does not relate to the ability to repay debt, but<br />
considers the bank’s intrinsic financial strength (by analysing<br />
factors such as its geographical market presence, the<br />
diversification of its activities, the financial basics, its<br />
exposure to risk) in the absence of external support.<br />
(A: best rating – E: worst rating)<br />
(IV) The Baseline Credit Assessment represents the equivalent of<br />
the Bank <strong>Financial</strong> Strength Rating on the traditional scale of<br />
the long-term rating.<br />
FITCH RATINGS<br />
Short-term Issuer Default Rating (1)<br />
F2<br />
(1) The ability to repay debt maturing in the short-term (duration<br />
of less than 13 months)<br />
(F1+: best rating – D: worst rating)<br />
Long-term Issuer Default Rating (2)<br />
BBB+<br />
Viability Rating (3)<br />
bbb+<br />
Support Rating (4) 2<br />
Support Rating Floor (5)<br />
BBB<br />
Outlook (Long-term Issuer Default Rating) Negative<br />
RATINGS ON ISSUES<br />
Senior unsecured debt<br />
BBB+<br />
Lower Tier 2 subordinated<br />
BBB<br />
Preference shares<br />
BB<br />
Euro Commercial Paper Programme<br />
F2<br />
(2) The ability to meet financial commitments in the long-term,<br />
independently of the maturity of individual obligations. This<br />
rating is an indicator of the probability that an issuer will<br />
default.<br />
(AAA: best rating – D: default)<br />
(3) An assessment of a bank’s intrinsic strength in the event that<br />
it cannot rely on forms of external support (a: best rating - d:<br />
default).<br />
(4) A rating of the possibility of concrete and timely external<br />
support (from the state or large institutional investors) if the<br />
bank finds itself in difficulty (1: best rating – 5: worst rating).<br />
(5) This rating gives additional information, closely linked to the<br />
Support Rating, in that for each level of the Support Rating it<br />
identifies the minimum level which the Issuer Default Rating<br />
could reach if negative events were to occur.<br />
Covered Bonds<br />
AA-<br />
15
Notice of call 1<br />
An Ordinary General Meeting of the Shareholders of Unione di Banche Italiane Scpa is convened in first<br />
call on Friday 19 th April 2013 at 5:00, p.m. at the registered address of the bank, at No. 8 Piazza Vittorio<br />
Veneto, Bergamo, and in second call on Saturday 20 th April 2013 at 9:30 a.m. at the New Bergamo<br />
Trade Fair, in Via Lunga, Bergamo to discuss and resolve on the following<br />
agenda<br />
1) Appointment of the members of the Supervisory Board and of the Chairman and Senior Deputy<br />
Chairman for the three-year period 2013-2014-2015 and the determination of the related<br />
remuneration in accordance with the Articles of Association.<br />
2) Proposal for the allocation and distribution of profits, after first presenting the separate and<br />
consolidated financial statements as at and for the year ended 31 st December <strong>2012</strong>.<br />
3) <strong>Report</strong> on remuneration.<br />
4) Proposal for setting remuneration policies for members of the Management Board.<br />
5) 2013 incentive scheme based on financial instruments:<br />
proposal to pay a portion of the variable remuneration of “top management” and the “highest<br />
management level of the control functions” by assigning ordinary shares of the Parent <strong>UBI</strong> <strong>Banca</strong> to<br />
them.<br />
***<br />
The subscribed and paid up share capital of <strong>UBI</strong> <strong>Banca</strong> Scpa amounts to Euro 2,254,367,552.5 consisting of<br />
901,747,021 shares with a nominal value of Euro 2.50 each. At the date of this notice <strong>UBI</strong> <strong>Banca</strong> possesses 1,700,000<br />
treasury shares.<br />
The total number of registered shareholders with the right to vote is 87,150.<br />
Persons wishing to participate in Shareholders Meetings, to exercise voting rights and to be eligible for election to<br />
corporate bodies must have been a registered shareholder for at least 90 (ninety) days from the date of registration in<br />
the shareholders’ register.<br />
Legitimate entitlement to participate in Shareholders’ Meetings and to exercise voting rights is certified by a<br />
communication to the Bank, performed – pursuant to Art. 83-sexies of Legislative Decree No. 58 of 24 th February 1998<br />
– by the relative intermediary, a member of the Monte Titoli Spa centralised management system, on the basis of its<br />
accounting records, in favour of the party holding the right to vote. In this regard, Registered Shareholders for whom<br />
the said communication has been made to the Bank by the end of the third market trading day prior to that set for the<br />
Shareholders’ Meeting in first call may attend the Shareholders’ Meeting, in accordance with the law. The legitimate<br />
right to attend and vote nevertheless remains, should the communications be received by the Bank later than the<br />
aforementioned time limit, provided they are received before the commencement of the proceedings of each single<br />
session of the shareholders’ meetings.<br />
Registered shareholders holding shares that have not yet been dematerialised pursuant to the legislation and<br />
regulations in force must deliver them in good time to an approved intermediary in order to perform the<br />
dematerialisation procedure required and to make the communication mentioned above.<br />
The communication performed by the intermediary shall contain a special section which may be used to authorise a<br />
proxy by signing the said section.<br />
Each registered shareholder has the right to one vote only no matter how many shares are held and it may not be<br />
exercised by correspondence.<br />
Each Registered Shareholder has the right to be represented by written proxy issued to another Registered<br />
Shareholder entitled to attend the Meeting. Proxies may not be granted to any members of the Management Board or<br />
the Supervisory Board, or to employees of the Bank, or to any of its subsidiaries or to any member of the management<br />
or control bodies, or employees of the aforesaid subsidiaries, or to the firm of external statutory auditors appointed or<br />
to the person responsible for the statutory audit of the Bank, or to parties to whom one of the other conditions of<br />
incompatibility apply according to the law.<br />
Each registered shareholder may act as a proxy for not more than 3 (three) other registered shareholders.<br />
***<br />
As concerns item 1) on the agenda, the election of the members of the Supervisory Board shall be performed in<br />
accordance with the law and the Articles of Association by the Shareholders' Meeting on the basis of lists, which may<br />
be submitted by registered shareholders or by the Supervisory Board, according to the following procedures.<br />
The lists of candidates, signed by those submitting them, must be deposited at the registered offices of the Bank<br />
between by the twentyfifth day prior to the Shareholders’ Meeting in first call and they must contain the names of at<br />
1 Published on 14 th March 2013 on the corporate website www.ubibanca.it and also in the principal national newspapers, in local<br />
newspapers in areas where the Group has a longstanding market presence and in the Official Journal No. 32 of 16 th March 2013.<br />
16
least two candidates and also, where they are composed of at least three candidates, comply with the gender<br />
proportions established by Law No. 120 of 12 th July 2011 in order to ensure that a balance is maintained between<br />
them on the Supervisory Board. Submission of the lists may be performed by remote means of communication defined<br />
by the Management Board in a manner, stated in the notice to convene, which allows those depositing the lists to be<br />
identified. The signature of each Registered Shareholder submitting a list must be duly authenticated in accordance<br />
with the law by employees of either the Bank or its subsidiaries specifically authorised by the Management Board.<br />
The lists must also be accompanied by information concerning the identity of the registered shareholders who have<br />
submitted them, with details of the number of shares and therefore the total percentage of the shares held by the<br />
registered shareholders submitting them and, within the time limits set by the legislation and regulations in force, by<br />
a communication which demonstrates ownership of the investment, as well as all other information required by the<br />
regulations in force.<br />
Exhaustive information must be deposited together with each list on the personal and professional characteristics of<br />
the candidates as well as a declaration by the candidates themselves stating that they are in possession of the<br />
requirements specified by the law and by regulatory and Articles of Association provisions and also that they accept<br />
their candidature.<br />
In cases where only one list has been presented within the time limit mentioned above, or in any event in the cases<br />
provided for by the regulations in force, the Bank reports this immediately with a press release sent to at least two<br />
press agencies. In this case lists may be presented up until the third day following the date of the time limit cited.<br />
Again in this case the limits laid down in the subsequent paragraph are reduced by half.<br />
The election of the members of the Supervisory Board shall take place on the basis of lists presented:<br />
a) directly by at least 500 (fivehundred) Registered Shareholders who have the right to participate in and vote in the<br />
Shareholders' Meeting called to elect the Supervisory Board, who provide documentary evidence of the right<br />
according to the legislation in force, and that is by one or more registered shareholders who represent at least<br />
0.50% of the share capital, calculated on the basis of the share capital existing 90 (ninety) days before the date set<br />
for calling the Shareholders' Meeting and to be indicated in the notice given to call the meeting;<br />
b) by the outgoing Supervisory Board on the basis of a proposal made by the Appointments Committee and with the<br />
approval of the Supervisory Board passed with the votes of at least 17 (seventeen) of its members, and in any case<br />
supported as reported in the preceding letter a) by at least 500 (fivehundred) Registered Shareholders who have<br />
the right to participate in and vote in the Shareholders' Meeting called to elect the Supervisory Board, who provide<br />
documentary evidence of the right according to the legislation in force, and that is by one or more registered<br />
shareholders who represent at least 0.50% of the share capital, calculated on the basis of the share capital<br />
existing 90 (ninety) days before the date set for calling the Shareholders' Meeting and to be indicated in the notice<br />
given to call the meeting.<br />
Each Registered Shareholder may participate in the presentation of one list only: if this rule is not observed, the<br />
Registered Shareholder’s signature is not counted as valid for any list.<br />
Each candidate may be included in one list only on pain of ineligibility.<br />
Lists presented that fail to observe the procedures reported above are considered as not presented.<br />
Each Registered Shareholder may vote for one list only.<br />
The election of the Supervisory Board shall be performed as follows:<br />
a) in the case of the presentation of more than one list and without prejudice to the provisions of the following letter<br />
b), 22 (twentytwo) members of the Supervisory Board are taken from the list that obtains a majority of Registered<br />
Shareholders' votes in the order of preference stated on it;<br />
b) 1 (one) member of the Supervisory Board is taken from the list with the second highest number of votes which is<br />
not connected within the meaning of the regulations in force with the list mentioned in letter b), and it is the name<br />
of the first person on that list. If that list has obtained at least 15% of the votes counted in the Shareholders’<br />
Meeting, in addition to the first name indicated on that list, a further 2 (two) members of the Supervisory Board<br />
shall be taken from that list, and they shall be the second and third persons on that list. However, if that list has<br />
obtained at least 30% of the votes counted in the Shareholders’ Meeting, in addition to the first name indicated on<br />
that list a further 4 (four) members shall be taken from that list, and they shall be the second, third, fourth and<br />
fifth persons on that list. Consequently 20 (twenty) or 18 (eighteen) members respectively of the Supervisory Board<br />
shall be taken from the list that obtains a majority of Registered Shareholders’ votes in the order of preference<br />
stated on it.<br />
c) if the minority list mentioned in letter b) should contain the names of only two candidates, the third and if<br />
necessary the fourth and fifth members of the board, where at least 30% of the votes are obtained, shall be taken<br />
from the majority list consisting of the persons not already elected on that list in order of preference stated on it.<br />
If, after identifying the candidates to be taken from the lists which received the majority of the votes on the basis of the<br />
order in which they are indicated on the lists to which they belong, the gender proportions required under Law No.<br />
120 of 12 th July 2011 are not complied with, then those members of the Supervisory Board taken last from the<br />
aforementioned lists whose appointment would violate the said law are considered not elected. In this event the<br />
number of those board members indicated on the same list to which they belong shall be appointed which allows<br />
compliance with the composition requirements for the Supervisory Board in accordance with Law No. 120 of 12 th July<br />
2011 and with the Articles of Association, again proceeding in the order in which those persons are indicated on the<br />
list to which they belong. In particular, in this circumstance, the candidates to be appointed belonging to the gender<br />
that is less represented on the basis of the results of the vote will be taken from each list in proportion to the total<br />
number of candidates elected on each list according to the results of the voting. In this event, if the minority list<br />
pursuant to letter c) has not complied with the gender proportions established by Law No. 120 of 12 th July 2011, the<br />
candidates to be appointed belonging to the less represented gender will be taken from the list that obtained the<br />
greatest number of votes only.<br />
If only one list is validly proposed and this obtained the majority required for an ordinary Shareholders' Meeting, then<br />
all 23 members of the Supervisory Board shall be taken from that list.<br />
The Shareholders’ Meeting shall proceed by a relative majority vote to appoint those members of the Supervisory<br />
Board, who for any reason whatsoever could not be elected by means of the procedures mentioned in the preceding<br />
paragraphs or if no list at all is presented, again in compliance with the requirements for the composition of the<br />
17
Supervisory Board pursuant to Law No. 120 of 12 th July 2011 and to the Articles of Association; in the event of a tied<br />
vote the candidate more senior by age is elected.<br />
If two or more lists obtain an equal number of votes, those lists must be voted on again until they no longer receive an<br />
equal number of votes.<br />
The positions of Chairman and Senior Deputy Chairman of the Board are reserved to the first and second members<br />
respectively on the list that obtains a majority of votes, or on the only list presented or to the members appointed as<br />
such by the Shareholders’ Meeting if no list is presented at all.<br />
Furthermore, in accordance with article 44 of the Articles of Association, “the Members of the Supervisory Board must<br />
be in possession of the requirements of integrity, professionalism and independence prescribed by regulations<br />
currently in force. At least 15 (fifteen) of the members of the Supervisory Board must be in possession of the<br />
requirements of professionalism required by the legislation currently in force for persons who perform functions as<br />
directors of banks.<br />
In particular, at least 3 (three) members of the Supervisory Board must be chosen from amongst persons enrolled in<br />
the register of external statutory auditors who have exercised statutory auditing activities for a period of not less than<br />
three years.<br />
Furthermore, the composition of the Supervisory Board must ensure, in compliance with the provisions of Law No.<br />
120 of 12 th July 2011, that a balance is maintained between genders for the period provided for by that law.<br />
While mandatory regulations of the law, the Supervisory Authority or other regulations must be complied with,<br />
persons already holding the office of full statutory auditor, or who are members of other supervisory bodies in more<br />
than five listed companies and/or their parent companies or subsidiaries, cannot hold office as a member of the<br />
Supervisory Board.<br />
***<br />
The lists of candidates, together with the related documentation required by the legislation in force and by the Articles<br />
of Association, signed by those presenting them, must be deposited, in accordance with the provisions mentioned<br />
above, by following one of the following procedures:<br />
- at the “Management Board and Registered Shareholders Support Area” of the <strong>Banca</strong> at 8 Piazza Vittorio Veneto<br />
Bergamo by 5:00 p.m. on 25 th March 2013;<br />
- by sending them by certified electronic mail to the following address “soci.comunicazioni@pecgruppoubi.it”, by the<br />
absolute deadline of 25 th March 2013 and by attaching the documents in pdf format with a digital signature.<br />
In relation to the provisions of paragraph six of article 45 of the Articles of Association, the share capital outstanding<br />
as at 19 th January 2013 amounted to €2,254,367,512.5 divided into 901,747,005 shares of €2.50 each.<br />
The lists received by the ”Management Board and Registered Shareholders Support Area” will be progressively<br />
registered and numbered on the basis of the day and time of receipt.<br />
When lists are deposited, a record of receipt of the documentation shall be prepared, signed by at least one of the<br />
presenters of the list and by a member of General Management or by senior managers or management staff of the<br />
“Management Board and Registered Shareholders Support Area” of <strong>UBI</strong> <strong>Banca</strong>.<br />
In compliance with the regulations in force, the lists submitted shall be made available to the public at least twenty<br />
one days before the Shareholders' Meeting at the registered address of the Bank and also published on the website of<br />
<strong>UBI</strong> <strong>Banca</strong> (www.ubibanca.it – registered shareholders section).<br />
Those who intend to present a list of candidates for the Supervisory Board may contact the “Management Board and<br />
Registered Shareholders Support Area” of the Bank.<br />
In compliance with Bank of Italy recommendations concerning regulations governing the organisation and corporate<br />
governance of banks, the ideal profiles of candidates for membership of the Supervisory Board are made available at<br />
the Bank and on the corporate website at www.ubibanca.it in the corporate governance section.<br />
In order to facilitate procedures for the presentation of candidates to the Supervisory Board, the following may be<br />
downloaded from the <strong>UBI</strong> <strong>Banca</strong> website (www.ubibanca.it – registered shareholders section) as examples to follow:<br />
- form for the presentation of lists<br />
- form for candidates declarations that they accept their candidature and certifying that they possess the<br />
requirements to take up office.<br />
***<br />
The documentation relating to the items on the agenda will be deposited and made available to the public at the<br />
registered address of the Bank and on the website (www.ubibanca.it – registered shareholders section) and it will be<br />
filed with Borsa Italiana Spa within the time limits and according to the procedures of the Law and regulations.<br />
Registered Shareholders may view and obtain copies of the aforementioned documentation in accordance with the law<br />
by applying in advance to the “Management Board and Registered Shareholders Support Area”.<br />
Bergamo, 12 th March 2013<br />
The Chairman of the Management Board<br />
Emilio Zanetti<br />
18
The macroeconomic scenario<br />
In <strong>2012</strong> the decisions of the European Central Bank (ECB), domestic reforms and European<br />
economic governance reform to a large extent dispelled the pessimism about the single<br />
currency that had worsened the sovereign debt crisis and pushed risk premiums on<br />
government securities to exceptionally high levels in some EU member states.<br />
Specifically, in the second quarter the emergence of fresh tensions had fed a growing<br />
contagion effect, further sustained by the perception of a lack of cohesion by governments in<br />
orienting the reform of governance in Europe and in improving the crisis management<br />
mechanisms within the euro area.<br />
Alongside the persistence of Greece's financial woes there have been growing difficulties for<br />
the Spanish banking industry, which required a substantial government bail-out, leading its<br />
government to make a formal request to the EU for funds to recapitalise its banks. In the last<br />
week of June Cyprus also made a formal request to the European authorities for aid for its<br />
financial sector, which is burdened by the amount of Greek debt in its portfolio.<br />
The first step towards preventing the risk of a break-up of the euro area, breaking the vicious<br />
circle between sovereign debt and banks, came with the summit in Brussels on 28 th -29 th June<br />
and the announcement of a joint, independent banking supervision system. This, along with<br />
an anti-spread shield, strongly pushed for by Italy, joined the European Stability Mechanism<br />
(ESM) which is purely for the rescue of member states in difficulty.<br />
The official decision by the ECB to introduce the plan for outright transactions in the<br />
secondary sovereign bond markets for bonds issued by member states experiencing difficulties<br />
(outright monetary transactions, or OMT) played a major part in easing tensions, and dispelled<br />
any doubts about the concrete introduction of an ‘anti-spread shield’.<br />
In the last quarter further events took place that will restore confidence in the market:<br />
• the ratification in October of the treaty establishing the European Stability Mechanism<br />
(ESM) which became effective alongside the temporary European <strong>Financial</strong> Stability Facility<br />
(EFDF);<br />
• the concession to Greece of an additional two years (to 2016) to reduce its deficit to GDP<br />
ratio to less than 3% 1 ;<br />
• the positive outcome of the Greek government’s 2 operation to repurchase its debt in issue<br />
(buy-back), which was accomplished in December and allowed approval of the second<br />
payment of €49.1 billion by the EFSF 3 ;<br />
• the payment of €37 billion in aid to Spain, to be used to recapitalise the four struggling<br />
nationalised banks;<br />
• the reaching of an agreement between the 27 EU member states on 12 th December in which<br />
a single Europe-wide supervisory mechanism (SSM) was set up. This comprises the ECB<br />
and national supervisory authorities of the member states (in the euro area and other EU<br />
member states).<br />
The agreement should be fully operational from 1 st March 2014. It divides tasks between the ECB,<br />
which will directly supervise major banks (with assets in excess of €30 billion or 20% of GDP), and the<br />
national central banks, which will monitor the other institutions, under the supervision of the ECB 4 . The<br />
introduction of a single supervisory mechanism will allow direct recapitalisation of struggling banks by<br />
the ESM, instead of bailing out member states with loans that have the effect of worsening their debt<br />
position.<br />
1 At the same time the target for public debt to GDP ratio for 2020 has been raised from 120% to 124%.<br />
2 The operation involved securities with a nominal value of €31.9 billion, allowing the debt to be reduced by about ten percentage<br />
points of GDP.<br />
3 €34.3 billion was paid in December, €16 billion of which for the recapitalisation of the banking sector and €11.3 billion for the<br />
buyback, while the remaining €14.8 billion will be paid during the first quarter of 2013.<br />
4 It is estimated that under the planned division of tasks around 200 banks should be under the direct supervision of the European<br />
Central Bank, while 5,800 banks will be supervised by the national regulatory bodies. The ECB will also have the power to intervene,<br />
where necessary, even in the case of banks not falling within its remit of direct supervision, while the central banks, according to<br />
their respective domestic legislation, will in any case retain their powers to obtain information and to carry out inspections of banks.<br />
20
It was also decided at the summit that the ECB will retain its EU-level supervisory powers and the<br />
voting mechanism was reformed with a dual-majority system designed to protect EU countries not part<br />
of the euro area which will therefore not be part of the single supervisory mechanism.<br />
Completion of the banking union should therefore continue, before the end of June 2013,<br />
with the reaching of an agreement on the creation of a European bank deposit guarantee<br />
fund and an agency for managing the liquidation of insolvent banks.<br />
Again with reference to European banking regulation, at the beginning of 2013 the Basel Committee<br />
reviewed bank liquidity standards, with specific reference to the definition of liquidity capital ratio (LCR),<br />
with a more gradual introduction of the 100% standard measure and a widening of the assets that can be<br />
used in calculating the ratio.<br />
In line with what has already happened in the United States, on 28 th February 2013 the European<br />
Parliament and Council reached a preliminary agreement, which will need to be approved by a majority of<br />
the 27 EU member-states, postponing the gradual introduction of the new rules on capital introduced by<br />
Basel III.<br />
The interventions reported above have played a part in reducing government bond spreads in<br />
countries at risk 5 . As the graph shows, after peaking at over 500 basis point in July, the BTP-<br />
Bund spread has progressively fallen, ending the year at 322 6 . This improvement has<br />
continued into the first few weeks of the new year, also as a result of a slowdown in the flight<br />
to quality that has<br />
benefited public debt<br />
Ten-year BTP-Bund spread (2010-<strong>2012</strong>)<br />
Graph No. 1<br />
in the core countries<br />
600<br />
beginning in early<br />
550<br />
2011. There has been<br />
a sharp reversal in<br />
500<br />
the trend after the<br />
elections of 24 th -25 th<br />
450<br />
February.<br />
400<br />
Finally, the new<br />
Fiscal Compact came<br />
into force on 1 st<br />
January 2013. This<br />
requires member<br />
states to:<br />
- introduce a rule<br />
requiring their<br />
structural budgets<br />
to be balanced and<br />
not to deviate<br />
Basis<br />
points<br />
significantly from<br />
this, which is<br />
Source: Thomson <strong>Financial</strong> Reuters<br />
defined as a medium-term objective;<br />
- gradually reduce the debt in excess of 60% of GDP 7 .<br />
350<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M<br />
2010 2011<br />
Given the increasingly difficult economic climate and the fact that inflation forecasts are in<br />
any case low, the monetary policies adopted in <strong>2012</strong> by the central banks of developed and<br />
emerging countries continued to be oriented towards support for growth, both by intensifying<br />
the use of non-conventional operations, and by further loosening monetary conditions where<br />
possible 8 .<br />
<strong>2012</strong><br />
2013<br />
5 Reducing the cost of Spain's debt has meant that for the moment it is not strictly necessary for the Spanish government to request<br />
aid from the ESM.<br />
6 According to a study carried out by Consob in <strong>2012</strong> the contagion effect for Italy is estimated to be around 200 basis points.<br />
7 Specifically, after ending of the procedures for excessive deficits the pact requires deficits to converge towards the “medium-term<br />
objective” at a certain pace, and with reference to debt, requires the debt in excess of 60% of GDP to be reduced at an average rate of<br />
one twentieth per year.<br />
8 In July the ECB reduced the main refinancing rate by 25 basis points to 0.75%, while for non-conventional operations, it introduced<br />
the aforementioned OMT, a programme to buy government bonds on secondary markets which will affect government bonds with a<br />
residual life of between one and three years without restrictions on volume or duration. At the meeting in early December it was then<br />
decided to extend all the refinancing operations by means of fixed-rate tender procedures with full allotment of all bids for as long as<br />
deemed necessary, and in any case at least until early July 2013.<br />
21
The volatility on the 1.62<br />
financial markets 1.58<br />
also affected the 1.54<br />
foreign exchange<br />
1.50<br />
markets, especially<br />
the euro, which,<br />
1.46<br />
1.42<br />
compared with the<br />
1.38<br />
other leading<br />
1.34<br />
international<br />
currencies,<br />
weakened between<br />
1.30<br />
1.26<br />
March and August<br />
as the sovereign debt<br />
1.22<br />
1.18<br />
crisis worsened, 1.14<br />
picking up gradually 1.10<br />
since then.<br />
1.06<br />
Graph 2 and the<br />
table also show the<br />
substantial<br />
devaluation of the yen against<br />
both the euro and the dollar<br />
that took place during the last<br />
quarter of the year, which was<br />
identified by the Japanese<br />
government as a possible<br />
means of relaunching the<br />
Japanese economy.<br />
Euro-dollaro and dollaro-yen exchange rates (2009-<strong>2012</strong>)<br />
The main exchange rates and oil (Brent) and commodities prices<br />
Dec-12<br />
A<br />
Sep-12<br />
B<br />
€/$ $/Yen (right axis)<br />
G F M A M G L A S O N D G F M A M G L A S O N D G F M A M G L A S O N D G F M A M G L A S O N D<br />
2009 2010 2011<br />
<strong>2012</strong><br />
Jun-12<br />
C<br />
Mar-12<br />
D<br />
Dec-11<br />
E<br />
Graph No.2<br />
% change<br />
A/E<br />
Euro/Dollar 1.3194 1.2858 1.2658 1.3343 1.2945 1.9%<br />
Euro/Yen 114.46 100.13 100.97 110.47 99.57 15.0%<br />
Euro/Yuan 8.2200 8.0776 8.0416 8.4028 8.1449 0.9%<br />
Euro/Franc CH 1.2074 1.2078 1.2004 1.2035 1.2133 -0.5%<br />
Euro/Sterling 0.8127 0.7950 0.8056 0.8331 0.8328 -2.4%<br />
Dollar/Yen 86.74 77.90 79.77 82.79 76.94 12.7%<br />
Dollar/Yuan 6.2301 6.2841 6.3530 6.2975 6.2939 -1.0%<br />
Futures - Brent (in $) 111.11 112.39 97.80 122.88 107.38 3.5%<br />
CRB Index (commodities) 295.01 309.30 284.19 308.46 305.30 -3.4%<br />
103<br />
101<br />
99<br />
97<br />
95<br />
93<br />
91<br />
89<br />
87<br />
85<br />
83<br />
81<br />
79<br />
77<br />
75<br />
Source: Thomson <strong>Financial</strong> Reuters<br />
The macroeconomic background<br />
In the course of <strong>2012</strong> the world economy weakened due to slower growth in the United States<br />
and emerging countries and to Japan and the euro area entering into recession. Within the<br />
euro area the contrast grew between Germany and France, which saw modest growth, and<br />
peripheral countries such as Spain and Italy, which are in deep recession.<br />
The major imbalances in the leading industrialised economies and continuing geopolitical<br />
tensions in the Middle East means that the pace of growth will remain slow in the coming<br />
months, especially in advanced countries, while it should be more dynamic in the emerging<br />
markets 9 .<br />
The Federal Reserve has been very active in carrying out non-conventional operations, with a view to making financial conditions<br />
more accommodating, in order to deliver substantial improvements to the labour market: In June it decided to extend Operation<br />
Twist until the end of the year, which involves purchasing government bonds with maturities of between six and thirty years, to be<br />
financed through the sale of securities with maturities of less than three years. With the end of the previous programme it<br />
announced the launch of outright buybacks of long-term treasury bonds at a rate of $45 billon a month. Furthermore, in September<br />
it also launched a new programme for the purchase of mortgage-backed securities for $40 billion a month with no time limits. With<br />
regard to interest rates the Fed linked the changes in official rates to set inflation and unemployment levels: reference rates will<br />
remain between 0%-0.25% while unemployment remains higher than 6.5%. The inflation forecast for one-two years will not be more<br />
than half a percentage point higher than the 2% target and long-term inflation forecasts will remain closely linked.<br />
Also in Japan the central bank has progressively increased the purchase of government bonds from 70 billion yen to 101 billion yen,<br />
extending it for the whole of 2013. It has also set a specific inflation target of 2%. For the time being the reference interest rate has<br />
been confirmed at between 0% and 0.1%.<br />
As far as the main emerging economies are concerned, China reduced compulsory reserves by 0.5 percentage points both in<br />
February and May <strong>2012</strong>, which now stands at 20%, while the bank lending rate underwent two reductions for a total of 56 basis<br />
points to 6%. The Central Bank of Brazil was especially active, reducing the reference rate seven times between January and<br />
October <strong>2012</strong> from 11% to the record low of 7,25%. The Reserve Bank of India cut its repo rate by 50 basis points and then made a<br />
further cut of 25 basis points bringing it to 7.75% in January 2013. In contrast, the Central Bank of Russia implemented a 25 basis<br />
point rise in September to 8.25%.<br />
9 According to the January 2013 update to the International Monetary Fund estimates, this year the global economy is expected to<br />
grow by 3.5% (3.2% in <strong>2012</strong>), which is the combination of 1.4% growth for advanced countries and 5.5% growth for emerging<br />
nations.<br />
22
The economic situation was one of high unemployment levels, which rose further in Europe,<br />
and moderate inflation during the summer months following the rise in commodities prices,<br />
which then fell back as a result of reduced growth forecasts.<br />
The price of Brent oil was especially volatile, under the influence of tensions in the oilproducing<br />
countries and the embargo against Iran. After rising to over $125 a barrel in March,<br />
prices fell sharply to<br />
bellow $90 in June,<br />
Brent oil prices (2009-<strong>2012</strong>) Graph No. 3<br />
130<br />
partly as a result of<br />
125<br />
increased crude oil 120<br />
115<br />
supplies, before picking<br />
110<br />
up again in July and 105<br />
August and stabilising at<br />
around $110 in the last<br />
quarter.<br />
100<br />
95<br />
90<br />
85<br />
80<br />
75<br />
70<br />
According to initial<br />
65<br />
estimates, the US<br />
60<br />
economy seems to have<br />
55<br />
50<br />
come to a standstill in<br />
45<br />
the fourth quarter. GDP<br />
40<br />
35<br />
fell 0.1% year-on-year,<br />
G F M A M G L A S O N D G F M A M G L A S O N D G F M A M G L A S O N D G F M A M G L A S O N D<br />
2009 2010 2011 <strong>2012</strong><br />
after rising 3.1% in the<br />
previous quarter and<br />
1.3% and 2% in the second and first quarters respectively.<br />
On average US GDP rose 2.2% overall during the year compared with 1.8% in 2011, sustained<br />
by domestic consumer and investment demand in which the property sector once more played<br />
a positive part. In contrast the contribution from balance of trade was zero.<br />
The situation on the jobs market appears to be slowly and gradually improving, with the<br />
unemployment rate at 7.8% in December, the lowest level in the last four years. It has<br />
remained more or less stable since August after falling continuously since the second half of<br />
2011 (at the end of 2011 it was 8.5%). The <strong>2012</strong> average of 8.1% is lower than the previous<br />
year’s average of 8.9%.<br />
Inflation, which fell from 3% in December 2011 to 1.4% in July <strong>2012</strong>, climbed rapidly back up<br />
to 2.2% in October to then fall back again to 1.7% in December. Core inflation (net of food and<br />
energy products) was slightly down from June and ended the year at 1.9% (compared with<br />
2.2% at the end of 2011). The average figure for <strong>2012</strong> was 2.1% (compared with 3.2% in 2011).<br />
During the year the negative balance of trade fell slightly to $540.4 billion (down 3.5%), mainly<br />
benefiting from a smaller deficit with Opec countries and Africa. On the other hand the deficit<br />
with China increased further.<br />
The US growth prospects remain strongly conditioned by the need to balance the public<br />
accounts. On 2 nd January a last-minute temporary measure was passed which avoided the<br />
‘fiscal cliff’, the package of automatic increases in all the personal and corporate income tax<br />
rates and cuts in public spending that would probably have pushed the US economy into<br />
recession 10 . The failure to reach a parliamentary agreement at the end of February 2013 in<br />
any case determined the automatic implementation of gradual spending cuts worth $85<br />
billion, which according to estimates could lead to a potential loss of 750 thousand jobs during<br />
the year, bringing about a 0.6% fall in GDP.<br />
10 This agreement extends the tax relief introduced in 2001 and 2003 with the exception of relief for individuals with incomes in<br />
excess of $400 thousand a year; the rate for the latter group has been increased from 35% to 39.6% and capital gains tax has been<br />
increased from 15% to 20%. It was confirmed that the relief on social security contributions for workers would be abolished.<br />
23
Actual and forecast data: industrialised countries<br />
Percentages<br />
Gross domestic product<br />
Consumer prices<br />
(average annual rate)<br />
Unemployment<br />
(average annual rate)<br />
Deficit (+) Surplus (-) Public<br />
sector (% of GDP)<br />
Reference interest<br />
rates<br />
2011 <strong>2012</strong> 2013 (1) 2011 <strong>2012</strong> 2013 (1) 2011 <strong>2012</strong> 2013 (1) 2011 <strong>2012</strong> 2013 (1) Dec-11 12-dic-13<br />
United States 1.8 2.2 1.9 3.2 2.1 1.8 8.9 8.1 7.6 10.1 8.5 6.6 0-0,25 0-0,25<br />
Japan -0.6 1.9 1.0 -0.3 -0.1 0.2 4.5 4.3 4.3 8.9 9.1 9.1 0-0,10 0-0,10<br />
Euro Area 1.4 -0.6 -0.3 2.7 2.5 1.8 10.2 11.4 12.2 4.2 3.5 2.8 1.00 0.75<br />
Italy 0.4 -2.4 -1.0 2.9 3.3 2.0 8.4 10.6 11.6 3.8 3.0 2.1 - -<br />
Germany 3.0 0.7 0.5 2.5 2.1 1.8 5.9 5.5 5.7 0.8 -0.1 0.2 - -<br />
France 1.7 0.0 0.1 2.3 2.2 1.6 9.6 10.3 10.7 5.2 4.6 3.7 - -<br />
Portugal -1.6 -3.2 -1.9 3.6 2.8 0.6 12.9 15.7 17.3 4.4 5.0 4.9 - -<br />
Ireland 1.4 0.7 1.1 1.2 1.9 1.3 14.7 14.8 14.6 13.4 7.7 7.3 - -<br />
Greece -7.1 -6.4 -4.4 3.1 1.0 -0.8 17.7 24.7 27.0 9.4 6.6 4.6 - -<br />
Spain 0.4 -1.4 -1.4 3.1 2.4 1.5 21.7 25.0 26.9 9.4 10.2 6.7 - -<br />
United Kingdom 0.9 0.2 0.9 4.5 2.8 2.6 8.0 7.9 8.0 7.8 6.3 7.4 0.50 0.50<br />
, ,<br />
(1) Forecasts Source: European Economic Forecast and Official Statistics<br />
Strong growth in China, the world’s second largest economy, continued during <strong>2012</strong>, although<br />
at a slower pace than in previous years. GDP rose 7.8% year-on-year (+9.3% in 2011), after a<br />
gradual slowdown in the first three quarters (8.1%, 7.6% and 7.4%) and an improvement in<br />
the last quarter (7.9%).<br />
All the key indicators of domestic demand made important contributions during the year.<br />
Fixed investments rose 20.6%, driven by manufacturing (up 22%). Retail sales of consumer<br />
goods were up 14.3%. Industrial production rose 10% with peaks of 12% for the chemicals<br />
and computer components industries.<br />
As regards trade, exports increased more than imports (7.9% and 4.3% respectively), creating<br />
a surplus of $231 billion which further strengthened the currency reserves, which rose to<br />
$3,310 billion at the end of <strong>2012</strong>, over a third of which is invested in US government<br />
securities.<br />
Inflation slowed from 4.5% in December 2011 to 1.7% in October, regaining momentum at the<br />
end of the year at 2.5% (the <strong>2012</strong> average was 2.6%) driven by foodstuffs (up 4.2%).<br />
Actual and forecast data: the principal emerging countries<br />
Gross domestic product<br />
Consumer prices (average<br />
annual rate)<br />
Unemployment (average<br />
annual rate)<br />
Reference interest<br />
rates<br />
Percentages 2011 <strong>2012</strong> 2013 (1) 2011 <strong>2012</strong> 2013 (1) 2011 <strong>2012</strong> 2013 (1) Dec-11 Dec-12<br />
China 9.3 7.8 8.1 5.4 2.6 3.0 4.1 4.1 4.1 6.56 6.00<br />
India 8.0 4.7 6.0 8.9 9.3 9.6 n.a. n.a. n.a. 8.50 8.00<br />
Brazil 2.7 0.9 3.5 6.6 5.4 4.9 6.0 5.5 6.5 11.00 7.25<br />
Russia 4.4 3.6 4.1 8.4 5.1 6.6 6.6 5.7 6.0 8.00 8.25<br />
, , , , , ,<br />
(1) Forecasts Source: Prometeia, IMF and official statistics<br />
Economic performance in the other emerging nations continued to slow. Growth rates are expected to<br />
increase in the immediate future, albeit remaining below pre-crisis levels.<br />
In the third quarter India’s GDP rose 2.9% year-on-year (compared with 3.8% and 5.6% in the first and<br />
second quarters respectively), affected by domestic consumer and investment demand and by the negative<br />
balance of trade resulting from stronger imports over exports. In November industrial production fell,<br />
confirming the mainly negative trend of recent months. Inflation went back up to 10.6% in December due to<br />
increased food prices, but is expected to fall in 2013.<br />
Brazil reacted to the slowdown in the global economy by introducing barriers to the movement of capital in<br />
order to curb currency appreciation, while some domestic prices were regulated in order to keep inflation<br />
under control (it stood at 5.8% in December) and incentives for the industrial sector were tied to<br />
interventions in the labour market. At the end of <strong>2012</strong> GDP had risen 0.9% year-on-year.<br />
In the third quarter Russian GDP had risen 0.8% compared with the previous quarter (0.4%), thanks to the<br />
rise in investments and stable consumption, which supported import growth (up 6.3% compared to the<br />
second quarter). Exports also rose again slightly after falling in the first two quarters. High oil prices meant<br />
the trade surplus remained substantial, while inflation has remained relatively stable since September<br />
(6.6% in December). In December the unemployment rate was 5.3% (6.1% at the end of 2011).<br />
24
Japan is experiencing another recession. In the fourth quarter GDP fell by 0.1%, for the third<br />
consecutive quarter (down 1% and 0.2% in the two previous quarters and up 1.5% in the first<br />
quarter), although it did show some signs of recovery in consumption. However, this was more<br />
than offset by the fall in investments (except for the residential sector) and inventories, as well<br />
as by the still negative contribution from foreign demand, even if this was improving.<br />
In December industrial production rose 2.4% compared to the previous month, but the yearon-year<br />
change worsened, falling for the seventh consecutive month (down 7.9%). December’s<br />
Tankan report showed that the forecast for the entire industrial sector, especially<br />
manufacturing, is still negative, with a small improvement for SMEs only.<br />
Unemployment remained stable until April, and fell in the following months to 4.2% in<br />
December (4.5% at the end of 2011), while price deflation continued (down 0.1% in December).<br />
Despite a high level of public debt (estimated at 221.2% of GDP in <strong>2012</strong>), the new government<br />
that came into power in the autumn introduced an impressive programme of public works<br />
worth a total of 20 thousand billion yen focusing on seismic prevention and reconstruction,<br />
measures designed to boost competitiveness and welfare.<br />
The euro area also remained in recession, with GDP falling 0.6% in the fourth quarter<br />
compared with the previous quarter (down 0.1% and 0.2% in the two previous quarters and<br />
unchanged prior to that). All the major economies in the euro area saw a slowdown between<br />
October and December, including Germany (down 0.6%).<br />
Overall GDP fell by an average of 0.6% during the year (compared with a rise of 1.4% in 2011).<br />
This was due to a fall in fixed investments and consumption, which contrasted with an<br />
increase in the trade surplus brought about by a significant fall in imports.<br />
In December the monthly trend for industrial production went back into positive figures (up<br />
0.7%), thanks to recovery in Germany and Italy. However, the year-on-year trend remains<br />
negative, but improving (down 2.4%).<br />
The unemployment rate rose steadily to reach 11.7% (10.7% at the end of 2011), with the<br />
situation critical in some of the countries worst hit by the debt crisis: Greece (26.8% in<br />
October), Spain (26.1%), Portugal (16.5%) and Ireland (14.7%).<br />
As far as prices are concerned, in the last few months of <strong>2012</strong> the inflation rate measured by<br />
the “Harmonised Index of Consumer Prices” stood at 2.2%, the lowest point of the year, after<br />
the temporary rise during the summer months (2.6% in August and September and 2.7% at<br />
the end of 2011). Net of foodstuffs and energy products it has been stable at 1.6% since<br />
September, after slowly falling from 2% at the end of 2011. The average inflation for the year<br />
was 2.5% (compared with 2.7% in 2011).<br />
The economic prospects for the euro area are still conditioned by the risks involved in the slow<br />
rate of implementation of structural reforms, potential impact of tensions in countries that<br />
produce raw materials and imbalances existing in the leading industrialised nations. These<br />
factors could delay the recovery of private investment, employment and consumption.<br />
Of the leading euro area economies, Italy is one of the least dynamic. In the last quarter GDP<br />
fell for the sixth consecutive quarter by 0.9% (after falls of 0.2%, 0.7% and 0.8% in the<br />
previous quarters).<br />
Overall GDP fell by an average of 2.4% in <strong>2012</strong> (compared with a rise of 0.4% in 2011),<br />
reflecting particularly poor consumption figures and a persisting weakness in fixed<br />
investments, despite a good performance by net foreign demand.<br />
The poorer macroeconomic background in <strong>2012</strong> was mainly due to the increased cost of<br />
borrowing and reduced credit facilities, brought about by the worsening sovereign debt crisis<br />
and higher spreads. The measures taken to correct public finances in the second half of 2011<br />
in order to avoid conditions on the financial markets spiralling out of control had a negative<br />
effect on demand, which can be estimated as more than one percentage point of annual<br />
growth. The slowdown in the international economy and global trade were responsible for<br />
subtracting a further 0.6 of a percentage point from the annual growth figure, while<br />
approximately another half a percentage point was lost due to the increase in uncertainty and<br />
loss of confidence among households and businesses, which impacted on consumption and<br />
investments.<br />
GDP is expected to contract further in 2013 as a result of the slowdown in the global economy<br />
and foreign demand as well as the impact of budget measures.<br />
25
Production continued to fall as the (seasonally adjusted) industrial production index shows,<br />
which was down 6.6% year-on-year in December (for the sixteenth consecutive time). On<br />
average industrial production fell 6.7% in <strong>2012</strong> compared with 2011, with contractions in all<br />
sectors, particularly the ‘manufacture of rubber and plastic products’ (down 10.4%), 'electrical<br />
equipment manufacturing' (down 10%), the 'wood, paper and printing industry' (down 9.9%)<br />
and 'textiles' (down 9.4%).<br />
The situation on the labour market also appears to be continuing to worsen, the<br />
unemployment rate having risen to 11.2% from 9.5% a year earlier. The 15-24 age range has<br />
been the most seriously affected age range (36.6% 11 ). The general figure has also benefited<br />
from the input of state unemployment schemes, with a 12.1% increase in the use of the<br />
government’s temporary lay-off benefits scheme (CIG). The total number of hours authorised<br />
in <strong>2012</strong> was 1,090.6 million, compared with 973.2 million in 2011, close to the peak of<br />
1,197.8 million reached in 2010 12 .<br />
As far as prices are concerned, the inflation rate measured by the Harmonised Index of<br />
Consumer Prices remained at over 3% until September, peaking at 3.8% in April, and then fell<br />
to 2.6% in November and December (compared with 3.7% at the end of 2011), partly because<br />
the statistical effects relating to the increase in VAT in autumn 2011 were no longer making<br />
themselves felt. Average inflation for the year was 3.3% (2.9% in 2011), with significant<br />
increases in ‘housing, water, electricity and fuel’ (up 7.1%) and ‘transport’ (up 6.5%).<br />
The balance of trade accumulated a surplus of €11 billion, the biggest since 1999 (in 2011<br />
there was a deficit of €25.5 billion), benefiting from the significant surplus generated by nonenergy<br />
products (+€74 billion), two thirds of which are classified as plant and equipment.<br />
Exports were driven by trade with non-EU countries, and rose by 3.7% (compared with a rise<br />
of 11.7% in 2011), while imports fell overall by 5.7% (up 9.3% in 2011), especially from EU<br />
countries.<br />
Based on initial estimates from ISTAT, the benefits from higher tax revenues reduced the<br />
deficit to GDP ratio (net of property sales and EFSF loans) to 3% (compared with a revised<br />
figure of 3.8% in 2011). This was in line with the commitment made to Europe to balance the<br />
structural budget in 2013. However the debt-to-GDP ratio rose by more than six percentage<br />
points to 127% (compared with a revised figure of 120.8% in 2011), also as a result of the<br />
sharp fall in production.<br />
<strong>Financial</strong> markets<br />
The trend for Italian yield curves reflects the<br />
gradual reduction in the perceived risk of<br />
Italian government securities during <strong>2012</strong>. In<br />
the first half of the year the downward slope in<br />
the curve benefited from the liquidity<br />
generated by LTROs carried out by the ECB –<br />
mainly used by intermediaries to buy<br />
government securities – and from corrective<br />
measures taken by the government in the<br />
expectation that the European reference rate<br />
would be reduced, as was the case in early<br />
July. The further reduction in the second half<br />
of <strong>2012</strong> reflects the markets' renewed<br />
confidence after the ECB governor's<br />
announcement that there was no going back<br />
11 The figure shows the percentage of unemployed young people out of the total of young people in work or seeking work.<br />
12 Between January and November <strong>2012</strong> 1,285,299 unemployment applications (up 14.5% compared with the same period in 2011),<br />
and 133,052 redundancy applications were made (up 17.8%).<br />
26
on the euro last July, and the announcement in September of a new programme of<br />
government security purchases on the secondary market.<br />
As the table shows, the performance of equity markets varied considerably during the year,<br />
despite a positive overall trend. The positive first quarter was followed by heavy losses in the<br />
second. A slow recovery began from July, which became stronger in the latter months of the<br />
year and the first few weeks of 2013. In the US the agreement reached to avoid the fiscal cliff<br />
actually allowed the indices to return to pre-crisis levels. In the euro area banking shares in<br />
particular benefited from the looser and postponed tigher liquidity requirements of Basel III,<br />
and for banks in peripheral countries in particular, from the downward pressure on<br />
government bond yields. The outcome of the Italian government elections at the end of<br />
February brought fears of a fresh ‘contagion effect’ to the markets, leading Fitch to downgrade<br />
Italy’s sovereign rating.<br />
After the heavy falls suffered in 2010 and 2011, the Italian markets managed by Borsa<br />
Italiana ended the year with an annual gain of around 8%, despite taking a battering in the<br />
second half of the year.<br />
Despite this positive performance, trading was down both in terms of volumes (57.6 million,<br />
down 15.9%) and value (€506.1 billion, down 28.7%) compared with the previous year.<br />
However, the fixed income market (MOT and ExtraMOT) achieved its best ever trading<br />
volumes, with approximately 6.5 million contracts (up 37.4%) worth €326.1 billion (up 57.7%).<br />
This was partly due to three issues of the BTP Italia, the first inflation-linked Italian bond,<br />
which brought in a total of more than €27 billion 13 .<br />
The principal share indices in local currency<br />
Borsa Italiana also confirmed its<br />
Dec-12 Sep-12 Jun-12 Mar-12 Dec-11 % change<br />
leading position in Europe for<br />
A B<br />
C D<br />
E A/E contracts traded electronically<br />
Ftse Mib (Milan) 16,273 15,096 14,274 15,980 15,090 7.8% on both the ETF Plus and MOT<br />
Ftse Italia All Share (Milan) 17,175 15,999 15,185 16,999 15,850 8.4%<br />
markets.<br />
Xetra Dax (Frankfurt) 7,612 7,216 6,416 6,947 5,898 29.1%<br />
Cac 40 (Paris) 3,641 3,355 3,197 3,424 3,160 15.2% At the end of the year listed<br />
Ftse 100 (London) 5,898 5,742 5,571 5,768 5,572 5.9%<br />
companies on the Italian Stock<br />
S&P 500 (New York) 1,426 1,441 1,362 1,408 1,258 13.4%<br />
DJ Industrial<br />
Exchange numbered 323, down<br />
(New York) 13,104 13,437 12,880 13,212 12,218 7.3%<br />
Nasdaq Composite (New York) 3,020 3,116 2,935 3,092 2,605 15.9% from 328 twelve months before<br />
Nikkei 225 (Tokyo) 10,395 8,870 9,007 10,084 8,455 22.9%<br />
as a result of eight new<br />
Topix (Tokyo) 860 737 770 854 729 18.0%<br />
MSCI emerging markets 1,055 1,003 937 1,041 916 15.2% admissions and thirteen<br />
withdrawals. Total market<br />
Source: Thomson <strong>Financial</strong> Reuters<br />
capitalisation however was up at<br />
€365.5 billion, from €332.4 billion at the end of 2011, equivalent to 22.5% of Italian GDP.<br />
As a result of the lower value of the shares traded while capitalisation was higher, turnover<br />
velocity 14 fell during the year to 138% from 214% at the end of 2011.<br />
Despite a generally unfavourable context for assets under management, mutual funds ended<br />
the year with positive net inflows of €1.2 billion 15 , showing an increasingly clear distinction<br />
between foreign-registered funds (up €15 billion), which now represent 69% of managed<br />
assets, and Italian-registered funds (down €13.8 billion).<br />
Looking at net inflows by type, bond funds recovered strongly (up €23 billion) while flexible<br />
funds remained essentially stable (up €0.4 billion) and other categories of funds fell, albeit at<br />
different rates: monetary funds down €12.6 billion, equity funds down €7.1 billion, hedge<br />
funds down €2.5 billion and balanced funds down 1.3 billion 16 .<br />
Thanks to the recovery in prices, in December assets under management reached €482.2<br />
billion, up from €421.7 billion at the end of 2011 (a 14.4% rise). In terms of the product mix<br />
bonds did well, rising from 43.4% to 51.6%, while monetary funds fell from 11.6% to 6.7% and<br />
equity funds also fell, from 22.3% to 20.6%.<br />
13 The third issue, in October <strong>2012</strong>, was Europe’s biggest ever bond placement, with over €18 billion paid in the first four days of<br />
subscription on the MOT.<br />
14 An indicator which, as the ratio of the value of the shares traded to the stock market capitalisation, gives a measure of the<br />
turnover of the shares traded.<br />
15 Assogestioni, “quarterly map of assets under management”, fourth quarter <strong>2012</strong>.<br />
16 Net inflows over the year also included an additional €1.3 billion into ‘non classified funds’.<br />
27
Principal long-term interest rates (2010-<strong>2012</strong>)<br />
Graph No. 5<br />
7.50<br />
7.00<br />
6.50<br />
US Treasury 10 anni BTP 10 anni Bund 10 anni<br />
6.00<br />
5.50<br />
5.00<br />
4.50<br />
4.00<br />
3.50<br />
3.00<br />
2.50<br />
2.00<br />
1.50<br />
1.00<br />
0.50<br />
G F M A M G L A S O N D G F M A M G L A S O N D G F M A M G L A S O N D<br />
2010 2011 <strong>2012</strong><br />
The banking system<br />
The easing of tensions on the sovereign debt markets helped to improve funding conditions for<br />
Italian intermediaries, although these have not yet normalised. However, the unfavourable<br />
economic conditions continued to manifest in terms of weak demand for credit from<br />
households and businesses, and poorer credit quality.<br />
Based on figures provided by the Bank of Italy 17 , at the end of December the year-on-year<br />
change in direct funding (deposits of residents and bonds) continued to rise from the lowest<br />
levels of the year (down 0.8% in May and July), despite remaining moderate (rising 1.6%<br />
compared with 1% at the end of 2011). Within the mix the contrast between funding from<br />
bonds (down 6.8%; up 3.2% 18 ) and other forms gradually increased (up 6.2%; down 0.2% 19 ).<br />
The latter include deposits with a fixed term of up to two years, which grew considerably (up<br />
87%), and repurchase agreements (up 34.1%).<br />
Bank of Italy figures show that loans to residents in the private sector fell 1.8% in over the<br />
year (whereas they had risen 2.9% at the end of 2011), after the lowest point in November,<br />
when they were down 2.4%. In terms of recipients overall loans to households weakened (down<br />
1.4% compared with a rise of 4.4% in December 2011), as did the various types of lending:<br />
consumer credit (down 6.9% compared with an increase of 2.7%), mortgages (down 0.6%<br />
compared with an increase of 4.4%) and other loans (down 1% compared with an increase of<br />
4.9%).<br />
The year-on-year trend for loans to businesses appears to be even worse (down 3.3%<br />
compared with a rise of 3.1%), as the result of an across-the-board fall that has affected both<br />
17 Bank of Italy, supplement to the statistics bulletin Moneta e Banche, March 2013.<br />
18 The changes were calculated excluding the investments included in the securities portfolio (item “Other securities”) from the<br />
funding from bonds. Including this component, at the end of December the funding for Italian banks from bonds had grown by an<br />
annual rate of 5% (compared with a rise of 13.4% in December 2011).<br />
19 The changes were calculated excluding sums related to disposals of loans and transactions with central counterparties from the<br />
deposits. Including these components, at the end of December the funding consisting of the different types of deposit had grown by<br />
an annual rate of 8.3% (compared to a fall of 3.8% in December 2011)<br />
28
short-term loans (down 1.9% compared with a rise of 5.2%) – especially in the first half of the<br />
year – and medium to long-term loans (down 4.1% compared to a rise of 1.9%), especially in<br />
the second half of the year.<br />
From the point of view of risk, after a stable first quarter, non-performing loans in the private<br />
sector gross of write-downs rose sharply – especially those with non-financial companies,<br />
reaching €124.7 billion in December (up 16.6% for the year and up 10.5% from June), €40.4<br />
billion of which were to households and €83.5 billion to businesses. The ratio of gross nonperforming<br />
loans in the private sector to loans to the private sector rose by one percentage<br />
point during the year, ending at 7.24% (6.24% at the end of 2011), while the ratio of gross<br />
non-performing loans in the private sector to share capital and reserves rose to 33.45% (from<br />
28.15%).<br />
Net non-performing loans, at €64.6 billion rose (by 25.6% year-on-year; up 19.5% from June),<br />
after reaching their lowest level of the year in March (48.3 billion). Consequently the ratio of<br />
net non-performing loans to total loans rose to 3.35% from 2.69% at the end of 2011, while<br />
the ratio of net non-performing loans to capital and reserves rose to 17.34% (from13.55%).<br />
Securities issued by residents in Italy in the portfolios of Italian banks reached €873.9 billion<br />
in December, an increase of €203.3 billion over the year (up 30.3%), 60% of which consisted of<br />
investments in Italian government securities (up €121.5 billion, €106.6 billion of which in the<br />
first half of the year), which benefited from the injection of liquidity generated by two long-term<br />
refinancing operations by the ECB in December 2011 and February <strong>2012</strong>. Purchases were<br />
mainly of medium to long-term government securities, (BTPs and CCTs; up €90.1 billion,<br />
€67.9 billionof which in the first half of the year) and to a lesser extent of short-term securities<br />
(BOTs and CTZs; up €29.7 billion).<br />
“Other securities” also increased (81.9%), also driven by bank bonds (up €87 billion), which<br />
accounted for over 70% by year end.<br />
In December, the average interest rate on bank funding from customers calculated by the<br />
Italian Banking Association ABI 20 (which includes the yield on deposits, bonds and repurchase<br />
agreements in euro for households and non financial companies) stood at 2.08% (compared<br />
with 2% at the end of 2011). The weighted average rate on loans to families and businesses<br />
and non-financial companies gradually fell to 3.78% after peaking between December 2011<br />
and January <strong>2012</strong> (4.23%).<br />
* * *<br />
In addition to the developments in international regulations mentioned above, a number of changes were<br />
introduced into the legislative framework for Italian banks in <strong>2012</strong>:<br />
• on 5 th April the Constitutional Court issued ruling 78 declaring that article 2, paragraph 61 of Decree<br />
Law No. 225 of 29 December 2010 (known as the “Thousand extensions”) on banks compounding<br />
interest was unlawful. The Decree had introduced an authentic interpretation of article 2935 of the<br />
Civil Code which, with the regard to the statute of limitations for legal actions relating to current<br />
account transactions, set the ten-year period as running from the date on which the relevant<br />
transaction was recorded on the account rather than from the day the account was closed;<br />
• Law No. 62 of 18 th May <strong>2012</strong> set up an observatory within the Ministry of Finance and the Economy<br />
to monitor the credit and terms granted by banks to customers, especially micro, small, mediumsized,<br />
young people's and women's enterprises, and the implementation of agreements and<br />
procedures to support their access to credit. The observatory monitors the trend in funding provided<br />
by the banking and finance industry along with the relative terms and conditions, and it has the right<br />
to apply to the Bank of Italy on a regular basis if required for information about the granting of loans<br />
and their terms and conditions. The law also gives prefects the right to report specific problems<br />
relating to banking and financial transactions and services to the Banking and Finance Ombudsman;<br />
• from 1 st June banks are obliged to offer the ‘basic’ bank account introduced by Decree Law No.1 of<br />
20 th January <strong>2012</strong> – converted into Law No, 28 of 24 th March – after the MEF, ABI, Poste Italiane<br />
and Italian association of payment agencies and electronic payment services drew up an agreement<br />
on 28 th March specifying the features it should offer;<br />
20 ABI Monthly Outlook, “Economia e Mercati Finanziari e Creditizi”, February 2013.<br />
29
• on 22 nd October MEF and ABI signed an agreement granting banks and financial intermediaries<br />
access to the electronic platform for certifying payables due from public administration. This makes it<br />
possible to check the status of the payable instantly, streamlining and accelerating the advance<br />
payment or discount procedures for public administration suppliers;<br />
• Law No. 134/<strong>2012</strong>, which converted Decree No. 83/<strong>2012</strong> (the “Growth” Decree), introduced<br />
numerous changes to company reorganisation, completing the Bankruptcy Law reforms introduced in<br />
2005 by adding many provisions to make settlement procedures for struggling businesses more<br />
efficient. The new regulations should therefore play a major part in helping crises to be identified<br />
earlier and managed more carefully, as well as expanding recourse to arrangements with creditors<br />
and restructuring agreements in accordance with article 182-bis of the Bankruptcy Law, as these<br />
tools help foster a negotiated settlement to crises;<br />
• in December the Bank of Italy published a measure containing regulatory provisions regarding<br />
penalties and the procedure for administrative penalties. The document came into force on 1 st<br />
February 2013. Its target includes banks and it establishes rules designed to communicate the<br />
procedure for penalties followed by the Authority when exercising its regulatory powers in the proper<br />
and prudent management of banking and financial activities, correct conduct and prevention in the<br />
use of the financial system for laundering the proceeds of criminal activities and funding terrorism.<br />
With reference to listed entities in particular, the following is also noted:<br />
• Legislative Decree No. 91/<strong>2012</strong>, which came into force on 17 th July (implementing Directive<br />
2007/36/EC on the exercise of certain rights of shareholders in listed companies), which changed<br />
some regulations in the Civil Code and the <strong>Consolidated</strong> Finance Act in order to facilitate and<br />
therefore provide an incentive for shareholders to take part in company life;<br />
• Legislative Decree No. 184/<strong>2012</strong>, which came into force on 13 th November (implementing Directive<br />
2010/73/EU harmonising transparency obligations for listed issuers), and abolished article 120,<br />
paragraph 2 of the <strong>Consolidated</strong> Finance Act, meant that it was no longer necessary to inform the<br />
investee company and Consob about the acquisition of investments of more than 10% in unlisted<br />
S.p.A.s or S.r.l.s. The obligations for parent companies of listed issuers to provide the public with the<br />
relevant information and to keep a record of the people with access to privileged information were also<br />
abolished.<br />
30
Significant events that occurred during the<br />
year<br />
Strategic and organisational change in the <strong>UBI</strong> <strong>Banca</strong> Group<br />
In line with the work that has been under way since 2010 (e.g. changes to the branch network,<br />
revision of the marketing and distribution model, simplification of the customer service model,<br />
the disposal of non-strategic assets, and rationalisation of the ownership structure) and in a<br />
year that was once again a complex one in terms of the economy, the Group has implemented<br />
the new mechanisms designed to further reduce overhead costs with immediate effect.<br />
On 18 th July <strong>2012</strong>, with the goal of simplifying operations so as to streamline them and make<br />
them better respond to market needs, as well as to make them less of a burden both in terms<br />
of costs and in terms of procedures and practices, we announced a change in strategy and<br />
organisation for the entire Group, which is centred around the following key guidelines:<br />
a) the implementation of a series of organisational changes designed to simplify the<br />
functioning of the Group, which is to be achieved by way of the following:<br />
- changes to the overall size of the branch network, including the closure of regular and<br />
mini-branches, the transformation of ordinary branches into mini-branches, actions to<br />
rationalise and simplify the internal structure of the network banks, of the Parent, and<br />
of <strong>UBI</strong> Sistemi e Servizi, and more effective methods for the Parent and the network<br />
banks to interact;<br />
- a reduction in staff numbers estimated at approximately 1,500 full-time equivalents<br />
through the use of provisions contained in labour contracts and labour law currently in<br />
force, including the use, above all, of “solidarity funds” for early retirement and greater<br />
flexibility with regard to working hours;<br />
b) a reduction of at least 20% in governance expenses by reducing the number of members of<br />
the various corporate bodies as well as their respective fees;<br />
c) the revision of the service model for private-banking and corporate clients through the<br />
creation of single operating units for both types of client with the creation of new “Private-<br />
Corporate Centres” (approximately one for each Local Department), designed to provide an<br />
integrated range of products and services for the Group’s core business clients on its local<br />
markets and to facilitate the development of additional income opportunities.<br />
A structural reduction in the cost of labour<br />
On 28 th August <strong>2012</strong>, in a letter sent to the various trade unions, the legally and contractually<br />
required procedure concerning the strategic and technical evolution of the Group officially<br />
began.<br />
The letter contained an explanation of the main mechanisms needed in order to achieve a<br />
significant recovery in both efficiency and profitability through rigorous cost controls, and of<br />
structural staff costs in particular. Without these mechanisms, such costs would no longer be<br />
sustainable given both the current trend in revenues and the changes made to the social<br />
security system introduced by way of the Salva Italia (Save Italy) decree 1 , which are affecting the<br />
full achievement of targets for staff numbers called for in the 2011/2013-2015 business plan.<br />
1 Italian law No. 214 of 22 nd December 2011 based on Italian Law Decree No. 201 of 6 th December 2011: In short, this reform<br />
established that, as of 1 st January <strong>2012</strong>, the retirement age for all employees is to be 66 years of age. The requirement for retirement<br />
rose to 62 years of age in <strong>2012</strong> for employees, to 63 years 6 months in 2014, to 65 in 2016 and, finally, to 66 beginning in 2018. The<br />
reform also changed the pension system by removing the possibility of retiring with quotas and introduced the possibility of early<br />
retirement. Practically speaking, one may retire before old age only after the age of 41 years 1 month for women – increased to 41<br />
years 2 months in 2013 and 41 years 3 months in 2014 – and 42 years 1 month for men – increased to 42 years 2 months in 2013<br />
31
Trade union talks were held from 7 th September to 17 th October <strong>2012</strong> – the technical deadline<br />
for the procedure, which was completed without agreement between the parties being reached<br />
– and then continued on 21 st November in an effort to find possible areas of agreement. In the<br />
meantime, <strong>UBI</strong> <strong>Banca</strong> did, nonetheless, begin work to optimise the Group's operations, as<br />
described in greater detail below.<br />
On 29 th November <strong>2012</strong>, talks with the trade unions came to a close with the signing of a<br />
framework agreement for the Group, which established the regulatory, financial and<br />
operational solutions to be implemented in order to reach the stated objective, while also<br />
calling for the introduction of an early retirement plan concerning all personnel at all levels<br />
and affecting at least 650 staff throughout the various Group companies.<br />
In order to mitigate the socio-economic impact of these changes, it has also been agreed that<br />
the income support mechanisms established by way of Italian ministerial decree no. 158 of<br />
28 th April 2000 as amended (i.e. the Bank Employee Solidarity Fund) would also be taken<br />
advantage of, including:<br />
• voluntary early retirement for employees meeting the requirements set by law granting<br />
them the right to receive a pension by 1 st January 2014 (INPS “window” of no later than 1 st<br />
January 2014 inclusive) and for employees that will obtain the right to receive a pension<br />
after 1 st January 2014 and by no later than 1 st January 2018 (INPS “window” of no later<br />
than 1 st January 2018 inclusive);<br />
• the suspension of work or a reduction in working hours of up to 220,000 working days to<br />
be implemented during the period 2013-2015, with a corresponding reduction in wages and<br />
including the use of the ordinary services under Article 5(1° comma, lett a), point 2, of the<br />
aforementioned ministerial decree No. 158/2000.<br />
Overall, the targets set at the<br />
Group level have been amply<br />
achieved, as was seen during the<br />
verification process with the trade<br />
unions that signed the framework<br />
agreement reached on 12 th<br />
February 2013.<br />
During the established sign-up<br />
period, 920 requests for voluntary<br />
early retirement were received.<br />
Given the greater demand, a<br />
supplement to the agreement was<br />
signed by the trade unions that<br />
allows for additional requests to<br />
be accepted for a total of 736 early<br />
retirements during the first<br />
quarter of 2013, of which roughly<br />
600 had already been carried out<br />
by the end of January.<br />
<strong>UBI</strong> <strong>Banca</strong> Group early retirement plan<br />
Retirements<br />
No. of employees<br />
as per<br />
framework<br />
Company<br />
agreement<br />
29 11 <strong>2012</strong><br />
Retirements<br />
as per<br />
framework<br />
agreement<br />
annex<br />
12 2 2013<br />
<strong>UBI</strong> <strong>Banca</strong> 41 55<br />
<strong>UBI</strong> Sistemi e Servizi 103 131<br />
Banco di Brescia 39 48<br />
<strong>Banca</strong> Popolare di Bergamo 106 116<br />
<strong>Banca</strong> Popolare Commercio e Industria 39 55<br />
<strong>Banca</strong> Regionale Europea 57 83<br />
<strong>Banca</strong> Popolare di Ancona 72 68<br />
<strong>Banca</strong> di Valle Camonica 6 14<br />
<strong>Banca</strong> Carime 187 150<br />
Centrobanca - 7<br />
<strong>UBI</strong> Leasing - 3<br />
<strong>UBI</strong> Factor - 5<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment - 1<br />
Total 650 736<br />
As for the reduction of hours or the suspension of work, here, too, demand amply surpassed<br />
the target of 220,000 working days. As such, the trade unions agreed to accept requests for a<br />
total of no more than 377,459 days over the course of 2013-2015, which are to be financed, as<br />
agreed, using the “National Income Support Fund”.<br />
In order to support generation turnover, with the agreement of 29 th November <strong>2012</strong>, a plan<br />
was agreed to render contracts permanent and to hire 240 young people over three years<br />
starting from 2013, taking advantage, amongst other things, of the opportunities afforded by<br />
the “National Employment Fund”, recently established when the national labour contract was<br />
renewed. The trade union agreement document signed on 12 th February 2013 called for<br />
and 42 years 3 months in 2014. These age limits are to be increased further based on the mechanism linking retirement age to life<br />
expectancy.<br />
32
increasing this number by a further 43 young people in order to take account of the greater<br />
number of early retirements than originally expected.<br />
The one-off charges for the early retirements totalled €143.5 million, which was charged in its<br />
entirety to the consolidated income statement during the fourth quarter of <strong>2012</strong>.<br />
On the whole, these initiatives (redundancies and suspension/reduction of working hours)<br />
defined together with the trade union organisations will allow gross savings to be achieved,<br />
beginning in 2013, estimated when fully phased-in in 2014 at over €100 million.<br />
***<br />
In parallel with these trade union proceedings and in an effort to achieve the same goals, <strong>UBI</strong><br />
<strong>Banca</strong> defined a “managerial manoeuvre” aimed at reorganising both the number of senior<br />
executives and their related remuneration, for which the one-off charge for the Group is<br />
estimated at €4.5 million not including the costs related to the personnel involved in the early<br />
retirement plan. This expense has already been charged to the income statement in the third<br />
quarter of <strong>2012</strong> and the consequent benefit in terms of the cost of labour is estimated at<br />
roughly €7 million.<br />
The optimisation of Group functioning<br />
From a structural point of view, the reduction of administrative costs falls within the scope of<br />
a broader programme referred to as the “Optimisation of Group Functioning”, which has been<br />
organised and implemented in three stages.<br />
Effective as of 5 th November <strong>2012</strong>, the organisation of <strong>UBI</strong> <strong>Banca</strong>, <strong>UBI</strong> Sistemi e Servizi and of<br />
the various network banks has been revised and the procedures for interaction between the<br />
Parent and the network banks have been updated in order to further increase focus and<br />
specialisation in their respective roles. In this respect the Parent is committed to providing<br />
guidance, co-ordination, monitoring and support with an increasing focus on operations and<br />
the network banks, within the scope of their respective prerogatives of governance, are keenly<br />
focused on managing their local markets, optimising their distribution capacities and<br />
controlling risks, with a particular emphasis on credit and operational risk.<br />
The launch of stage one of the programme (roll-out) included the following actions:<br />
• the organisational changes at the Parent, <strong>UBI</strong> <strong>Banca</strong>, with the following objectives:<br />
- simplification through streamlining units and shortening reporting lines;<br />
- redistribution and aggregation of activities in order to achieve greater synergies and<br />
improve the management of the individual processes;<br />
- standardisation and adaptation at the same time to innovations introduced to the<br />
organisational structure of the network banks, with regard above all to commercial<br />
functions;<br />
- a change of focus by management with regard to risk and credit;<br />
• the adoption of a new organisational model for <strong>UBI</strong> Sistemi e Servizi, with the following<br />
objectives:<br />
- simplification of the organisational structure, which now consists of divisions,<br />
departments and sectors, with the creation of a specific Business Services Division<br />
based on the same operational areas as those in the Parent, in order to constitute the<br />
primary interface with it;<br />
- organisation of work in teams and improvements to some internal processes in order to<br />
achieve greater fluidity in operations;<br />
• the revision of the organisational structure of the network banks in the following areas:<br />
- commercial, with the elimination of commercial retail/corporate/private-banking staff<br />
units and the centralisation at the same time of the activities at the Parent, by creating<br />
network support units for each market (retail and private banking/corporate);<br />
- governance and support, with the creation of two new units: “General Management<br />
Support”, to optimise the operations of all management support activities, and “Human<br />
resources and organisation”, the latter along the same lines of that in the Parent and<br />
complementary to it in order to promote greater co-ordination in the integrated<br />
33
management of employee mobility within the Group and more effective implementation<br />
of the projects developed.<br />
On 10 th December <strong>2012</strong>, stage two of the programme (branch network optimisation) began. This<br />
stage focused on the scheduled series of actions involving the distribution network as follows:<br />
the closure of branches and mini-branches where there was geographical overlap; and the<br />
transformation of smaller branches into mini-branches. These actions affected <strong>Banca</strong> Popolare<br />
di Bergamo, Banco di Brescia, <strong>Banca</strong> Popolare Commercio e Industria, <strong>Banca</strong> Regionale<br />
Europea, <strong>Banca</strong> Popolare di Ancona, <strong>Banca</strong> Carime and <strong>Banca</strong> di Valle Camonica.<br />
For a more detailed analysis, see the related section below, “Action undertaken on the branch<br />
network of the Group”, where all of the changes that took place during the year are described.<br />
Finally, on 7 th January 2013, stage three of the programme (completion) was implemented,<br />
including the final part of the actions affecting the commercial processes of the network banks<br />
in order to simplify coordinating activities and related roles and to enhance cross-market<br />
coverage by developing a dedicated range of products and services and providing the new<br />
specialist skills needed for our business and corporate customers.<br />
The following actions were taken in particular: elimination of the commercial area, with the<br />
Local Departments now reporting directly to General Management; elimination of the Retail<br />
Co-ordination Staff Units of the Local Departments; the revision of the distribution network<br />
with the introduction of integrated “Private & Corporate Unity” points of sale and the<br />
elimination at the same time of the previous corporate-banking and private-banking units;<br />
and, in the retail area, the revision of the branch groups (for the banks that adopt the<br />
Head/Group model) and the consequent redistribution of the small-business and SME<br />
customer portfolios among the former “Group” banks.<br />
<strong>UBI</strong> <strong>Banca</strong> is the first Italian bank to unify its private<br />
and corporate banking markets. From this integration,<br />
we created <strong>UBI</strong> <strong>Banca</strong> Private & Corporate Unity, a<br />
single unit for the management, custody and<br />
development of the wealth of both businesses and<br />
individuals. This range of products and services meets<br />
the need to combine consulting services for individuals<br />
with a specialist approach towards businesses, made<br />
possible by the creation of specific units and the use of<br />
expert teams. From the point of view of the<br />
businessman-corporate client, value will be created by<br />
way of the innovative, integrated advisory approach: for<br />
personal wealth (Pro-Active Wealth Advisory®); for<br />
generation turnover (Family Business Advisory®); and<br />
for businesses (Corporate Advisory).<br />
The new structure currently includes over 600<br />
specialist bankers working in branches throughout<br />
Italy.<br />
Private & Corporate Banking Units<br />
31.1.2013<br />
Private & Corporate Banking Units 131<br />
Private & Corporate Banking Units (PCUs) (*) 50<br />
<strong>Banca</strong> Popolare di Bergamo 13<br />
Banco di Brescia 9<br />
<strong>Banca</strong> Popolare Commercio e Industria 7<br />
<strong>Banca</strong> Regionale Europea 7<br />
<strong>Banca</strong> Carime 5<br />
<strong>Banca</strong> Popolare di Ancona 7<br />
<strong>Banca</strong> di Valle Camonica 2<br />
"Corners" 81<br />
<strong>Banca</strong> Popolare di Bergamo 26<br />
Banco di Brescia 12<br />
<strong>Banca</strong> Popolare Commercio e Industria 9<br />
<strong>Banca</strong> Regionale Europea 4<br />
<strong>Banca</strong> Carime 6<br />
<strong>Banca</strong> Popolare di Ancona 22<br />
<strong>Banca</strong> di Valle Camonica 2<br />
(*) The figure do es no t include s ix units o f UB I <strong>Banca</strong> P rivate Inves tment dedicated to<br />
private banking cus to mers o nly.<br />
The reduction of governance costs<br />
The process of strategic organisational change for the Group as announced last July also<br />
called for efforts to optimise governance costs. This commitment, which is to include a<br />
reduction in both the number of and the fees paid to the members of the various corporate<br />
bodies, was also expressed in a statement included in the framework agreement of 29 th<br />
November <strong>2012</strong>.<br />
In line with the above, and as proposed by the Remuneration Committee, the Supervisory<br />
Board authorised a proposal to be presented at the 2013 Shareholders Meeting to appoint the<br />
new Supervisory Board for a reduction in the annual fees paid to members of that Board and<br />
in the total annual remuneration paid to the Board Members vested with special powers, roles<br />
and responsibilities. The Board has also prepared a proposed guideline for a reduction in the<br />
remuneration of the Management Board, which is then to be promptly confirmed and finalised<br />
by the newly appointed Supervisory Board.<br />
34
As for the other Group companies, the Management Board has conducted an analysis of the<br />
Articles of Association of the various subsidiaries with regard to the composition of the Boards<br />
of Directors and related specific appointments. In light of this study, the Board then approved<br />
a reduction in the number of members on the corporate boards of some companies and<br />
consequent changes to their articles of association where necessary.<br />
Therefore, in the first months of 2013, the Board took steps to initiate the process and<br />
submitted the related documentation to the Supervisory Board where necessary.<br />
The planned actions described above will result in a significant reduction in the total fees paid<br />
throughout the Group and this will be implemented gradually as the terms of office of the<br />
current Boards of Directors expire naturally.<br />
Action undertaken on the branch network of the Group<br />
In <strong>2012</strong>, the distribution network of the <strong>UBI</strong> <strong>Banca</strong> Group underwent numerous actions<br />
related mainly to the need to further rationalise the Group’s geographical presence in markets<br />
that are either saturated or show limited room for growth, including changes to the units that<br />
do not show sufficient current and/or potential profitability and at the same time to<br />
strengthen both the branches that are close to those that are undergoing these changes and<br />
those that show the greatest potential for growth.<br />
In this context, two mass actions were carried out that affected all of the network banks and<br />
made it possible to contain operating costs by eliminating several costly lease agreements.<br />
The actions taken, effective as of 27 th February <strong>2012</strong>, resulted in:<br />
• the closure of 32 branches 2 and 46 mini-branches;<br />
• the transformation of 40 branches into mini-branches and one mini-branch into a branch;<br />
• the partial transfer of customers belonging to one branch and transformations into parent units for three<br />
mini-branches.<br />
The subsequent rationalisation, effective as of 10 th December, was achieved through:<br />
• the closure of 34 branches and 33 mini-branches;<br />
• the transformation of 80 branches into mini-branches;<br />
• transformations into parent units for four mini-branches.<br />
At the same time, work was done within the broader efforts to simplify the Group’s<br />
organisation and better focus geographical coverage, including the merger of Banco di San<br />
Giorgio into <strong>Banca</strong> Regionale Europea (BRE), effective as of 22 nd October.<br />
Action taken on the branch network of the Group in Italy in <strong>2012</strong><br />
Openings/Merger acquisitions: Closures: Transformation of<br />
branches into<br />
branches mini-branches branches mini-branches<br />
mini-branches<br />
Transformation of<br />
mini-branches<br />
into branches<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa (*) 1 - - - - -<br />
<strong>Banca</strong> Popolare di Bergamo Spa 3 - 4 4 16 -<br />
Banco di Brescia Spa - - 33 9 24 -<br />
<strong>Banca</strong> Popolare Commercio e Industria Spa - - 10 6 25 1<br />
<strong>Banca</strong> Regionale Europea Spa (*) 45 8 7 16 17 -<br />
<strong>Banca</strong> Popolare di Ancona Spa 1 - 5 14 21 -<br />
<strong>Banca</strong> Carime Spa - 1 6 34 15 -<br />
<strong>Banca</strong> di Valle Camonica Spa - - - - 2 -<br />
Banco di San Giorgio Spa (*) - - 48 9 2 -<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment Spa - - 1 - - -<br />
B@nca 24-7 (*) - - 1 - - -<br />
TOTAL 50 9 115 92 122 1<br />
(*) The changes take into account the effects of the mergers of B@nca 24-7 into <strong>UBI</strong> <strong>Banca</strong> and of Banco di San Giorgio into BRE.<br />
2 For logistics and organisational reasons, the closure or two <strong>Banca</strong> Popolare di Bergamo branches could only be performed after the<br />
preparatory stage for the transformation into mini-branches. These branches have therefore been counted among transformations<br />
into mini-branches in the table for <strong>2012</strong> changes and subsequently among closures of mini-branches.<br />
35
The general economic landscape, on the other hand, called for a prudent revision of our short<br />
and medium-term strategy regarding new branch openings, limiting them to tangible business<br />
opportunities that should arise in a given area, although this does not affect the policy of<br />
ongoing development and innovation in other commercial channels as alternatives to the<br />
bricks-and-mortar variety. In <strong>2012</strong>, the network banks opened six new branches in Italy (four<br />
branches and two mini-branches). In January 2013, five BPB treasury branches were<br />
transformed into mini-branches.<br />
The ongoing rationalisation process also involves the logistical transfer of operating units<br />
within the towns and cities where they are currently located with a view to a more appropriate<br />
sizing of units and also to optimising costs.<br />
A detailed report on closures and openings in the branch network of the Group that occurred in <strong>2012</strong> is given in the<br />
subsequent section “The distribution network and positioning”.<br />
Action to streamline the ownership structure and areas of<br />
business<br />
During the year, a series of actions were undertaken which sought to simplify and streamline<br />
the Group’s structure and its areas of business. The strategic aspects of these initiatives,<br />
which were approved in part by the <strong>UBI</strong> <strong>Banca</strong> Management Board on 14 th November 2011,<br />
are summarised below, whereas the subsequent section “The scope of the consolidation”<br />
provides details regarding the legal and corporate aspects of these operations and their impact<br />
on the consolidation scope.<br />
An important banking centre has been created in the North-West of the country:<br />
- on 22 nd October <strong>2012</strong>, the merger of Banco di San Giorgio into <strong>Banca</strong> Regionale Europea<br />
became effective. The operation, based on clear and natural connections and synergies<br />
existing between Liguria, Piedmont, Valle d’Aosta and the nearby France, was designed to<br />
safeguard the recognised high quality of the activities and services which had been provided<br />
by BSG, as well as its strong roots in local communities. The brand name of this Ligurian<br />
bank has therefore been left on signs at branches and also on many documents. With the<br />
merger, central units of BSG have been integrated into their counterparts at BRE on the<br />
basis of the organisational model of the surviving bank, while branch network units have<br />
been renamed and in some cases also transformed.<br />
The process to streamline consumer credit business has been completed:<br />
- on 1 st July <strong>2012</strong>, the contribution of the “salary and pension backed loans and payment<br />
authorisations” line of business by B@nca 24-7 to Prestitalia became effective. The<br />
beneficiary company, which received approximately €3 billion of loans and receivables,<br />
therefore became the Group company which specialises in this business sector;<br />
- on 23 rd July <strong>2012</strong>, the merger of B@nca 24-7 into <strong>UBI</strong> <strong>Banca</strong> became effective. The Parent<br />
took full ownership of all assets, liabilities, rights, obligations and contractual<br />
relationships, and it assumed the role of credit card issuer and will manage the remaining<br />
outstanding non-captive mortgages and personal and special purpose loans of B@nca 24-7<br />
(approximately €7 billion of loans). Operations for new disbursements for captive personal<br />
loans had already been transferred to the Group’s network banks in May <strong>2012</strong>;<br />
- on 21 st December <strong>2012</strong>, the merger of the Società Italiana Leasing e Financing Spa (SILF) into<br />
<strong>UBI</strong> <strong>Banca</strong> was completed. In addition to helping to optimise overhead costs, this operation<br />
represented the final act, from a corporate point of view, in the broader project of reorganising<br />
the consumer credit segment, which, in April <strong>2012</strong>, had already led to bringing a halt to<br />
disbursements of non-captive personal loans, the origination of which was SILF’s sole<br />
business. The company was therefore no longer operational (all the agent mandates having<br />
been revoked) and the outstanding loan portfolio is now managed by <strong>UBI</strong> <strong>Banca</strong> following the<br />
merger into it of B@nca 24-7.<br />
36
An IW Bank business unit has been transferred to <strong>UBI</strong>.S:<br />
- the transfer of an IW Bank business unit to <strong>UBI</strong>.S was completed on 30 th November <strong>2012</strong>.<br />
This business unit includes:<br />
• information technology (application management, facility management and relations<br />
with software vendors and providers of IT infrastructures) and back office activities<br />
(limited to the financial services segment, i.e. regulations, securities custody, and back<br />
office activities for funds and derivatives);<br />
• security (both physical security and fraud) and logistics.<br />
The operation will allow IW Bank to focus more on its business activities, conserving and<br />
strengthening its specific online character operating with its own brand. At the same time,<br />
the transfer of these activities to <strong>UBI</strong>.S has integrated internet banking within the Group’s<br />
service model, thereby providing numerous benefits in terms of:<br />
• aligning the operational model with existing operations at other Group banks;<br />
• providing support to major operational areas with the expertise already present at <strong>UBI</strong>.S<br />
(which has, for said purpose, made the changes needed to integrate the organisationsal<br />
units constituting the operations contributed. This included the creation of a new unit<br />
named “IWBank and Innovative Channels”, while the assets and personnel related to the<br />
real estate and security areas have been allocated to the <strong>UBI</strong>.S units that handle those<br />
areas of business);<br />
• extending oversight of IT governance by <strong>UBI</strong>.S;<br />
• creating cost synergies when fully operational as a result of geographical and<br />
technological convergence of the basic IT infrastructures.<br />
Also during the year, the Group completed the following operations with the same goal<br />
specified above:<br />
- on 1 st August <strong>2012</strong>, InvestNet International was merged into IW Bank;<br />
- on 3 rd September <strong>2012</strong>, the process resulting from exercising our right to withdrawal on the<br />
shares in Arca SGR was completed;<br />
- on 25 th October <strong>2012</strong>, the voluntary liquidation of Barberini (which until January 2011 had<br />
a controlling interest in Prestitalia) was completed;<br />
- On 21 st December <strong>2012</strong>, <strong>UBI</strong> Insurance Broker was sold with the goal of both optimising our<br />
insurance brokerage services and realising cost savings.<br />
Ten-year co-operation agreements were signed on an exclusive basis as part of the<br />
operation, which involve maintaining all the current commercial relations of the company<br />
and growth in the capacity to provide services to the corporate clients of the <strong>UBI</strong> <strong>Banca</strong><br />
Group.<br />
-<br />
On 6 th February <strong>2012</strong>, the merger of Centrobanca into <strong>UBI</strong> <strong>Banca</strong> began and should be<br />
completed during the first half of the year. Authorised by the Bank of Italy on 20 th February<br />
2013, the merger had already been announced in November 2011 and is a part of the ongoing<br />
process to simplify the Group’s organisation.<br />
-The specialised lines of business currently handled by Centrobanca, particularly those in the<br />
areas of corporate and investment banking, will continue to be managed by units within the<br />
Parent and/or in tandem with other areas of its operations. <strong>UBI</strong> Sistemi e Servizi has already<br />
selected the IT architecture needed to provide the necessary support for the specialist needs of<br />
the activities to be migrated to the target system.<br />
In the same way, the financial service activities conducted by Centrobanca will be allocated to<br />
<strong>UBI</strong> <strong>Banca</strong> as part of the existing model, which already calls for a clear separation between<br />
finance for the bank and finance for our customers.<br />
37
The recapitalisation plan requested by the EBA<br />
On the capital front, on 20 th January <strong>2012</strong> <strong>UBI</strong> <strong>Banca</strong> submitted a plan to the domestic<br />
Supervisory Authority to achieve a core tier-one ratio of 9% by the end of June <strong>2012</strong>, as<br />
required by the European Banking Authority on the basis of the results of the capital exercise<br />
conducted on 30 th September 2011 (pursuant to the recommendation of 8 th December 3 ).<br />
In consideration of the temporary nature of the requested increase, the <strong>UBI</strong> <strong>Banca</strong> plan fully<br />
excluded the option of new resort to the market following the substantial operation conducted<br />
in the spring of 2011. It relied primarily, on the one hand, on the adoption of advanced<br />
internal models for the calculation of capital requirements for corporate credit risk and on the<br />
other, on further action to optimise risk weighted assets and on self funding.<br />
With Bank of Italy measure No. 423940 of 16 th May <strong>2012</strong>, the <strong>UBI</strong> <strong>Banca</strong> Group obtained the<br />
authorisations needed to use advanced internal rating based (AIRB) systems to calculate capital<br />
requirements for credit risk – i.e. the corporate (“exposure to businesses”) segment of the<br />
network banks and Centrobanca – and for operational risk (using the Advanced Measurement<br />
Approach, or “AMA”) for <strong>UBI</strong> <strong>Banca</strong>, <strong>UBI</strong>.S, Centrobanca and the network banks. 4<br />
With the reduction in risk-weighted assets allowed by using these internal models, the Group’s<br />
core tier one capital had already improved by 92 basis points by 30 th June <strong>2012</strong> (84 basis<br />
points resulting from the use of the advanced approach to measure corporate credit risk and<br />
eight basis points from using the AMA to measure operational risk).<br />
In the second half of <strong>2012</strong>, another phase of the Basel 2 project began. This phase calls for<br />
extending the use of AIRB systems for credit risk to the retail segment for the portfolio<br />
segments of “exposures backed by residential properties” and “other retail exposures towards<br />
small businesses”. Within this context, the application of these models to the corporate area<br />
will also be expanded to include <strong>UBI</strong> <strong>Banca</strong>.<br />
Subject to prior authorisation by the supervisory authority, the goal is to use the retail models<br />
for regulatory purposes in 2013.<br />
The use of valuation reserves from revaluations of properties as authorised by prior year<br />
special laws falls within the scope of the initiatives undertaken. They were used to perform no<br />
cost increases to the share capital with the objective of increasing the core tier one ratio of<br />
both the banks concerned and the Group.<br />
The inclusion of those reserves within capital (pursuant to Art. 2442 of the Italian Civil Code)<br />
does in fact involve the transfer of capital resources from the tier two capital to the tier one<br />
capital, with a consequent improvement in the quality of the latter.<br />
This action affected the following two banks:<br />
• <strong>Banca</strong> Popolare di Ancona Spa: on 26 th June <strong>2012</strong>, the bank approved an increase in share<br />
capital in the amount of €24,958,090.32 by increasing the par value of its stock from €5.00<br />
to €6.02 per share;<br />
3 The recommendation concerning the creation of a temporary capital buffer to restore the confidence of the markets was issued by<br />
the Board of Supervisors of the EBA on 8 th December 2011 in order to address the difficult situation facing the banking system in<br />
the European Union, especially with regard to sovereign debt risk, and to restore stability to markets. The recommendation formed<br />
part of a series of measures agreed within the EU, and it invited national supervisory authorities to ask banks included in a sample<br />
to create an exceptional and temporary capital buffer to bring their core tier-one ratios up to at least 9%, by the end of June <strong>2012</strong>.<br />
Banks were also requested to form an exceptional and temporary buffer to cover exposure to sovereign debt, sufficient to reflect the<br />
valuation at market prices at the end of September 2011. Despite the fact that prices significantly improved in the meantime, the<br />
amount of the capital buffer required to cover the sovereign debt was not changed.<br />
The initial sample of the banks that took part in the capital exercise consisted of 71 banks. The six Greek banks were treated<br />
separately to take account of Greek participation in a programme of joint European Union and International Monetary Fund<br />
assistance. Another four banks belonging to the original sample (Oesterreichische Volksbank AG, Dexia, WestLB AG and Bankia) are<br />
monitored separately, because they are involved in significant restructuring processes. The final results published therefore involved<br />
61 banks.<br />
4 Compliance with qualitative and quantitative requirements set by the regulations for the advanced internal rating based (AIRB)<br />
approach for the calculation of capital requirements for corporate credit risk and recognition of it for prudential purposes, as well as<br />
validation of the advanced measurement approach (AMA) for the calculation of capital requirements for operational risk.<br />
38
• <strong>Banca</strong> Regionale Europea Spa: on 27 th June <strong>2012</strong>, the bank approved an increase in share<br />
capital in the amount of €117,220,087.01 by increasing the par value of its stock from<br />
€0.52 to €0.65 per share.<br />
The impact of these actions on the consolidated core tier one capital was approximately €34<br />
million.<br />
Finally, following the revision of supervisory regulations concerning redemptions and the<br />
repurchase of liabilities that qualify for inclusion in regulatory capital – which eliminated the<br />
replacement obligation that put limits on liability management – the Group performed a<br />
repurchase operation in February and March <strong>2012</strong> by launching a public tender offer on its own<br />
institutional liabilities, consisting of preference shares.<br />
The offer generated a gain of approximately €15 million (net of taxes and the expenses<br />
incurred) recognised in the first quarter of <strong>2012</strong>. It also made it possible to generate higher<br />
quality capital and to benefit from lower interest expense of over €7 million per year.<br />
The action described above was taken together with measures to reclassify and rationalise risk<br />
weighted assets, with regard above all to loans and advances to customers, performed in<br />
selective terms, without prejudice to the Group’s traditional support to local economies and its<br />
core customers.<br />
As confirmed by the EBA and by the Bank of Italy on 3 rd October <strong>2012</strong> (when the final result<br />
for the year was published), the <strong>UBI</strong> <strong>Banca</strong> Group has fully complied with the<br />
recommendation of reaching a core tier one capital ratio of greater than 9%, including the<br />
sovereign-debt securities buffer, by achieving a ratio of 9.24% as at 30 th June <strong>2012</strong> and 9.16%<br />
at year end.<br />
That ratio not only included the fair valuation of sovereign-debt risk as at 30 th September 2011 (€868 million), but it<br />
also comprises, in accordance with EBA instructions, a minimum capital requirement of 80% of capital requirements<br />
calculated on the basis of Basel 1 rules.<br />
Action taken on the liquidity front<br />
During the first half of the year, the Group carried out important actions to strengthen<br />
liquidity reserves and also to achieve sustainable funding from customers, which are basic<br />
and necessary conditions to be able to provide financial support to economies in our local<br />
markets.<br />
On the liquidity front, while on the one hand the funds obtained from the European Central<br />
Bank from two long-term refinancing operations (€12 billion) provided greater stability to the<br />
structure of balance sheet liabilities, on the other hand, given the weak demand for credit from<br />
the economy, they allowed new investments to be made in government securities with a view<br />
to supporting net interest income, which increased Group liquidity reserves at the same time,<br />
consisting of assets eligible for refinancing operations. These assets have nearly tripled<br />
compared to December 2011, going from €11.6 to €29.4 billion, having benefited, in part, from<br />
two government-backed issues in the first part of the year for a total nominal value of €6<br />
billion.<br />
Given the ample pool of segregated assets available to back the covered bonds, three selfretained<br />
issuances were carried out in February for a total nominal value of €750 million as<br />
part of the residential programme. At the same time, a second programme backed by<br />
commercial loans intended solely for self-retained issues was structured and two issues have<br />
already been carried out for a total nominal value of €2.3 billion (€1.8 billion in May and €0.5<br />
billion in October).<br />
Furthermore, and again with regard to initiatives designed to increase assets eligible as<br />
collateral with the ECB, three new special-purpose vehicles (SPVs) were formed in accordance<br />
with Law No. 130/1999 to be the purchasers of the new portfolios of loans eligible as<br />
underlying collateral for Eurosystem monetary policy operations. On 8 th December 2011, one<br />
39
of the measures decided by the ECB to support the bank liquidity was the extension of the<br />
type of asset backed securities eligible for refinancing that can be securitised to include<br />
performing loans to approved parties such as SMEs as defined in EU regulations.<br />
Consequently, on 19 th April the following special purpose vehicles were formed: <strong>UBI</strong> SPV BBS<br />
<strong>2012</strong> Srl, <strong>UBI</strong> SPV BPCI <strong>2012</strong> Srl and <strong>UBI</strong> SPV BPA <strong>2012</strong> Srl.<br />
On 26 th June <strong>2012</strong>, the network banks involved sold loans for a total remaining principal<br />
balance of €3 billion to their respective SPEs: €889 million for Banco di Brescia; €852 million<br />
for <strong>Banca</strong> Popolare Commercio e Industria; and €1,017 million for <strong>Banca</strong> Popolare di Ancona.<br />
On 30 th October <strong>2012</strong>, securities were issued for a total of €1.93 billion in class A notes (€1.25<br />
billion net of haircuts) and €829 million in class B notes.<br />
40
Commercial activity<br />
In <strong>2012</strong>, the <strong>UBI</strong> <strong>Banca</strong> Group launched a project to optimise Group functioning, designed, amongst other<br />
things, to streamline the distribution network, to create synergies between services to private and corporate<br />
banking customers and to standardise network bank branch units in order to simplify support activities<br />
(the previous section “Significant events that occurred during the year” may be consulted in this respect).<br />
The commercial performance of the Group continued to be focused on growth in direct funding, consistent<br />
with the maintenance of high standards of structural balance.<br />
Products such as bond issuances, new ranges of “welcome edition” deposit accounts and a specific<br />
commercial campaign entitled “Risparmi Premiati” (rewarded savings) were employed to achieve this<br />
objective. The campaign included the offer of a check-up to customers on their savings by account<br />
managers, intended to enhance the <strong>UBI</strong> <strong>Banca</strong> services model on financial planning and advice as its main<br />
distinguishing feature compared to the competition.<br />
From the viewpoint of funding and current accounts in particular, the following were introduced: a “basic<br />
account” designed specifically for customers in the socially most vulnerable groups, with reduced charges<br />
for a limited number of transitions; and the “QUBÌ” account, a modular account for customers who wish to<br />
combine the different services offered on the basis of needs and normal patterns of use on a flexible basis.<br />
The approach to customers with regard to investments has become increasingly more advisory (“Pro-Active<br />
Wealth Advisory” and “Family Business Advisory” for private banking customers; <strong>UBI</strong> Gold for Top Affluent<br />
customers, in addition to the other investment advisory service model provided on the “<strong>Financial</strong> Planning<br />
and Advisory Platform” in the “<strong>UBI</strong> Light” version) and was facilitated by the greater number of training<br />
programmes for affluent account managers. At the same time the range of investment solutions was<br />
diversified with new types of Sicav’s, including versions which pay a coupon and those linked to gradual<br />
savings plans.<br />
With regard to the range of insurance products, the range of non-life policies was broadened with the<br />
launch of two new products (Blufamily xl for the health sector and Blucasa for the property sector) and it<br />
was also enhanced with initiatives for potential customers conducted at the same time from sales outlets<br />
and through direct channels (direct marketing campaigns using banners for selected customers on home<br />
banking services).<br />
These initiatives for private individual customers were accompanied by action taken to improve funding<br />
products for businesses, especially in the corporate segment, while the specialisation of the range of<br />
advisory services for subsidised loans continued again in <strong>2012</strong> for the small business segment.<br />
Initiatives concerning direct funding were accompanied by a strategy to manage lending designed to ensure<br />
full support for medium to small-size and core corporate firms by developing customer relations across a<br />
broad spectrum together with re-pricing action, to take account of the deterioration of credit risk and<br />
funding conditions. Additional action was also taken to rationalise lending to the large corporate segment,<br />
with careful management of trends for both volumes and pricing and also for the lowest credit rating<br />
classes.<br />
A strong focus was also maintained on the range of advisory services (“Corporate Advisory”) for mid and<br />
large corporate clients.<br />
Action to strengthen the multichannel strategy continued at the same time through the provision of<br />
multichannel bank services on an innovative and complete platform which combines all the direct channels<br />
available to private individual and business customers (internet and mobile banking, customer services,<br />
self-service channels - ATMs and kiosks – evolved payment systems and POS terminals).<br />
Action was taken in particular to improve the platform for online sales of the Enjoy and Qui <strong>UBI</strong> cards. New<br />
and more powerful consultation functions were added to the platform for private individual and small<br />
business customers and the release of free apps for smartphones, tablets and Blackberry phones were<br />
completed. Direct marketing initiatives were also intensified through customer services activities.<br />
Numerous changes were also introduced on the cards front, favoured by the technological advances for<br />
these tools, with the objective of simplifying customer payment transactions. Various initiatives were<br />
started for the Enjoy card, including some using smartphones and the Facebook social network to involve<br />
greater numbers of potential customers.<br />
Action also continued during the year to upgrade payment systems to comply with the European directive<br />
on payment services (PSD) and the relative subsequent provisions, and to migrate onto SEPA payment<br />
instruments.<br />
Finally, the Group increased its commitment for support to the third sector with the new service model for<br />
the church and non-church nonprofit world, named <strong>UBI</strong> Community.<br />
41
The retail market 1<br />
The retail market is composed of 3.6 million customers, of which 3.3 million are private<br />
individuals (mass market and affluent), 250 thousand are legal entities (small to medium-sized<br />
enterprises and small economic operators) and 30 thousand are authorities, associations and<br />
nonprofit organisations. Approximately 6,600 professional staff work in customer services<br />
consisting of branch managers, account managers and customer contacts.<br />
“Anti Crisis” measures to support small to medium-size enterprises 2 and<br />
families<br />
During the year the banks in the Group participated in a series of measures to help families<br />
and business on their respective markets, both locally and nationally, co-operating with public<br />
institutions (chambers of commerce, regional and provincial governments) and guarantee<br />
bodies 3 .<br />
Activities also continued, started back in 2009, to support families and small to medium-sized<br />
enterprises with action taken, amongst other things, under the “Avviso Comune” (joint<br />
announcement) of 3 rd August 2009 4 , the “Accordo per il Credito alle PMI” 5 (Agreement on Loans<br />
to SMEs) of 16 th February 2011 and the agreement of 20 th January 2010 as part of the “Piano<br />
famiglie” (families plan) organised by the Italian Banking Association.<br />
“New measures for Credit to Small and Medium-Sized Enterprises” Accord<br />
With regard to SMEs, in <strong>2012</strong> the Group adhered, on 29 th March, to the “New measures for Credit to<br />
Small and Medium-Sized Enterprises Accord” signed on 28 th February <strong>2012</strong> by the Italian Banking<br />
Association, the Ministries of the Economy and Finance and Economic Development and by other<br />
business associations.<br />
This agreement involves the following:<br />
1. deferments of up to twelve months on the capital repayments on medium to long-term mortgages and<br />
unsecured loans (ordinary and subsidised) and up to twelve or six months for the repayment of the<br />
capital portion implicit in property and non-property lease instalments, respectively;<br />
2. extension of the terms of medium to long-term mortgages and unsecured loans (ordinary and<br />
subsidised) for a maximum period of two years for unsecured loans and three years for mortgages;<br />
3. extension of the maturities of short-term loans to 270 days to support cash flow requirements, for<br />
advances on amounts that are certain, liquid and payable in cash (excluding import finance and<br />
advances on contracts);<br />
4. extensions for a maximum of 120 days of the terms for agricultural working capital credit pursuant to<br />
Art. 43 of Legislative Decree No. 385/1993, granted with or without bills of exchange.<br />
1 The retail market is composed of the following customers: mass market customers (private individuals with financial wealth – direct<br />
and indirect funding – of less than €50,000 thousand), affluent customers (private individuals with financial wealth – direct and<br />
indirect funding of between €50,000 thousand and €500,000 thousand) and small businesses (small economic operators with<br />
turnover of less than €300,000 and businesses with turnover between €300,000 and €15,000,000).<br />
2 According to the definition in EU regulations, small-to-medium size enterprises are considered entities which carry on a business<br />
and regardless of their legal status employ fewer than 250 persons, with an annual turnover of not more than €50 million or with<br />
total assets of less than €43 million.<br />
3 The Group participated in various initiatives to provide subsidies to businesses, including the following: measures in the Piedmont<br />
Region for development and the promotion of co-operation with backing from the Regional Guarantee Fund; measures in the<br />
Lombardy Region to support businesses backed by the following Fondi di Rotazione (rotation funds) funds, “FESR Sottomisura 2”<br />
funds for the “Industrial application of the results of research” and “FRIM Linee 1, 4 e 5” funds for “company development”, “growth<br />
in size” and the “transfer of company ownership” and also measures to support farms for investments under the “Extraordinary<br />
Programme for the implementation of the Nitrates Directive” (e.g. biogas co-generation plants); measures in the Apulia Region to<br />
support businesses in accordance with the new regulations under the Regional Operational Programme.<br />
4 This agreement, which became operational on 28 th September 2009 is for SMEs that were in temporary difficulty but which reported<br />
good operating prospects and were going concerns. It enabled them to benefit from four measures: i) the deferment for twelve months<br />
of principal repayments on mortgages; ii) the deferment for twelve or six months of the principal repayment portion of property or<br />
equipment leasing instalments respectively; iii) an extension to 270 days for the repayment of bank advances on short-term<br />
receivables; iv) special finance designed to strengthen capital.<br />
5 This agreement, which became operational on 21 st March 2011, involved the following: i) the extension until 31 st July 2011 of the<br />
time limit for the presentation of applications to defer loans to banks in accordance with the Avviso Comune; ii) the extension of the<br />
repayment schedules for medium to long-term loans which had benefited from the deferment under the Avviso Comune by up to a<br />
maximum of two years (three years for secured loans). The deadline that had been set for the presentation of applications for<br />
extensions by businesses was 31 st December 2011. The Group agreed to maintain the existing contractually agreed interest rate if<br />
the extension had benefited from backing made available by the Cassa Deposito e Prestiti (CDP – state controlled fund and deposit<br />
institution) on the basis of a special agreement signed on 31 st May 2011, which involved the assignment of a budget of up to a<br />
maximum of €54,529,000.<br />
42
By signing that agreement, the Group is committed to maintaining the contractually agreed interest rate<br />
if, amongst the other conditions, the deferment or extension benefits from backing from the Guarantee<br />
Fund for SMEs or the ISMEA (agricultural food market services institute) fund.<br />
Again, in accordance with the agreement, the offer was renewed by Group banks to provide funding to<br />
promote the recovery and development of economic activities by an amount proportional to increases in<br />
owners’ funds made by businesses.<br />
The deadline set for the presentation of applications, which was originally 31 st December <strong>2012</strong>, was<br />
extended until 31 st March 2013.<br />
Approximately 20,700 applications were processed by the Group for deferments under the “Avviso<br />
Comune” (joint announcement) and subsequent agreements – mainly on medium to long-term loans – for<br />
a total of €6.8 billion and for deferred capital repayments of €850 million. Almost all the applications<br />
meeting the requirements for eligibility were accepted.<br />
In accordance with the agreements cited, approximately 350 applications were presented to extend<br />
repayment schedules for loans where the remaining principal totalled €107 million.<br />
Initiatives for populations hit by the earthquake in Emilia Romagna, Lombardy and Veneto<br />
In order to assist the people and businesses damaged by the earthquakes which hit Emilia Romagna,<br />
Lombardy and Veneto on and after 20 th May <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> promptly applied the measures of Decree<br />
Law No. 74 of 6 th June <strong>2012</strong> and subsequent amendments and additions which, with regard to loans,<br />
established deferment – initially until 30 th September <strong>2012</strong> and subsequently until 30 th November <strong>2012</strong> –<br />
of repayments on mortgages and loans of any kind granted by banks to individuals and businesses who<br />
were resident or located on 20 th May <strong>2012</strong> in the area of the towns hit by the earthquakes.<br />
The deferment was on repayments due in the period between 8 th June <strong>2012</strong> and 30 th November <strong>2012</strong>.<br />
However, in order to further meet the needs of its customers, <strong>UBI</strong> <strong>Banca</strong> decided to apply the deferment<br />
period immediately from 20 th May <strong>2012</strong>. Loans in default were also included in the deferment.<br />
On the basis of that action, repayments on approximately 4,480 loans were deferred on a total remaining<br />
debt of approximately €283 million.<br />
In addition to the measures reported above, <strong>UBI</strong> <strong>Banca</strong> also took two additional measures as follows:<br />
- the deferment for a maximum of 12 months (at the contracted interest rate for the loan) of<br />
repayments on unsecured loans (businesses only) and on mortgages (businesses and individuals) to<br />
the following:<br />
• individuals and businesses operating in all economic sectors inclusive of nonprofit organisations,<br />
holders of ordinary mortgage loans backed by residential, commercial and industrial property<br />
located in the municipalities hit by the earthquakes who suffered even partial, but significant<br />
damage;<br />
• businesses with operational premises located in the municipalities hit by the earthquakes<br />
(including provincial capitals), holders of ordinary unsecured medium to long-term loans.<br />
- the creation of a loan pool totalling €60 million (distributed among the Group banks operating in the<br />
areas hit) for the grant of medium to long-term unsecured loans under particularly competitive terms<br />
and conditions to businesses and individuals who have suffered material damage attributable to the<br />
earthquake. As at 31 st December <strong>2012</strong>, over €6.5 million of this loan pool had been used with 115<br />
loans to both businesses and private individuals. The time limit for use was extended by six months<br />
until 30 th June 2013.<br />
Again for SMEs located in the zones hit by earthquakes, <strong>UBI</strong> <strong>Banca</strong> has also taken action on the basis,<br />
amongst other things, of measures taken by Mediocredito Centrale, which involve the intervention of the<br />
Fondo di Garanzia per le PMI (Guarantee Fund for SMEs) free of charge and with processing and approval<br />
priorities over other actions. The maximum amount that may be guaranteed for a single business is €2.5<br />
million with maximum backing equal to 80% of each loan.<br />
<strong>UBI</strong> <strong>Banca</strong> also promptly adhered to the Convention signed on 5 th November <strong>2012</strong> by the Italian Banking<br />
Association and the Cassa Deposito e Prestiti (CDP – state controlled fund and deposit institution), as<br />
added to on 18 th November, for the grant of loans to population groups hit by earthquakes (private<br />
individuals and legal entities) pursuant to Decree Law No. 174 of 10 th October <strong>2012</strong>. These loans with a<br />
term of 24 months backed by central government guarantees are for the payment in instalments of tax,<br />
social security and welfare obligations deferred until 30 th November <strong>2012</strong> (on the basis of legislation for<br />
earthquake victims) and they are due from 1 st December <strong>2012</strong> until 30 th June 2013.<br />
The beneficiaries of the loans are either private individuals or legal entities that earn business income –<br />
located (with registered offices or operating headquarters) in the municipalities hit by the earthquakes<br />
and who suffered damages from those events – and that earn ordinary income as employees, who are the<br />
owners of a damaged housing unit which is their principal dwelling (the latter only for the payment of<br />
taxes due from 16 th December <strong>2012</strong> until 30 th June 2013).<br />
Considering that the CDP funds allocated for the loans – a maximum loan pool of €6 billion – have hardly<br />
been used in the sector nationally, a repeat of the subsidised loan procedure is planned.<br />
Following the applications made by customers in the set period between 19 th November <strong>2012</strong> and 30 th<br />
November <strong>2012</strong>, the Group concluded 35 transactions for more than €2 million (additions may be<br />
43
equested by the beneficiaries on the basis of the amount of the actual tax to be paid to the tax<br />
authorities).<br />
The beneficiaries of the loans will only repay the principal, while the interest accruing will be paid to the<br />
Bank through a tax credit granted to it.<br />
“Italy Investment Projects” and “Public Administration Receivables” Loan Pool<br />
Again under the Accord “New measures for Credit to SMEs”, <strong>UBI</strong> <strong>Banca</strong> has already decided to adhere to<br />
two new memorandums – signed on 22 nd May <strong>2012</strong> again by the Italian Banking Association, the<br />
Ministry of the Economy and Finance, the Ministry of Economic Development and by representatives of<br />
other business associations – to assist with financing for the investment projects of SMEs (“Italy<br />
Investment Projects”) and to facilitate the payment of amounts due to companies from public<br />
administrations (“Public Administration Receivables”).<br />
By signing those memorandums, the Italian Banking Association is committed to promoting the<br />
establishment of two specific loan pools for those initiatives amounting to €10 billion for each or them:<br />
• the first entitled “Italy Investment Projects” is designed to support SME investment projects in assets<br />
for use in operations;<br />
• the second entitled “Public Administration Receivables” is designed to support SMEs who find<br />
themselves in temporary difficulty due to delays in the payment of receivables from public<br />
administrations by paying advances on those receivables. Those receivables may be unfrozen by<br />
paying advances on them backed by the sale with recourse of receivables certified as “certain, liquid<br />
and payable in cash” (in accordance with article 9 paragraph 3-bis of Decree Law No. 185/2008), by<br />
the public administration debtor with compulsory indication of the agreed date of payment.<br />
<strong>UBI</strong> <strong>Banca</strong> decided to contribute to the formation of those loan pools by allocating €600 million to each<br />
one.<br />
The legislative framework for the launch of the two initiatives was not completed until the end of<br />
December <strong>2012</strong> and they therefore became operational in January 2013.<br />
Loans to SMEs drawn from Cassa Deposito e Prestiti (CDP – state controlled fund and deposit<br />
institution) funds<br />
Again as part of “anti crisis” action taken, the grant of loans continued to support planned and/or<br />
existing investments or to increase working capital by drawing on CDP funds resulting from post office<br />
savings.<br />
In this context, <strong>UBI</strong> <strong>Banca</strong> adhered to the “fourth convention” for loans to SMEs, signed by the Italian<br />
Banking Association and the CDP on 1 st March <strong>2012</strong>, by which the CDP made a loan pool of €10 billion<br />
available to banks for medium to long-term loans to SMEs following the almost total use of the loan pool<br />
of €8 billion under the three previous conventions on the matter.<br />
The new loan pool of €10 billion is divided into an “Investments Pool” of €8 billion to facilitate access to<br />
loans for investments by SMEs and a “Public Administration Receivables Pool” of €2 billion, designed to<br />
mitigate the negative effects of late payments by public administrations and they will come into operation<br />
in the first months of 2013.<br />
The Group has decided to use the CDP funds available from the “investments pool” for unsecured loans<br />
with a term of between 13 months (19 months if backed by the Guarantee Fund for SMEs pursuant to<br />
Law No. 662/1996) and 60 months, for investments to be made and/or being made and to increase<br />
working capital.<br />
A total of 300 loans worth over €13 million have been concluded, drawn from the “investments loan pool”<br />
established for the “fourth convention” and they became operational in the Group from November <strong>2012</strong>.<br />
The CDP “third convention”, signed on 17 th December 2010 involved the following:<br />
- a “ten year loan pool” usable for loans with a maturity of from seven to ten years, with funding for the<br />
banking sector nationally of €1 billion;<br />
- a “Stable loan pool” to finance the growth of SMEs, into which the funds not fully used by the<br />
previous pools gradually flowed, and which comprises all maturities (three, five, seven and ten years).<br />
In June <strong>2012</strong>, when the funds had been fully drawn on, Group banks had granted approximately 5,700<br />
loans amounting to €320 million.<br />
Guarantee fund for SMEs pursuant to Law No. 662/1996<br />
At the same time, with a view to facilitating access to credit by SMEs in the current difficult economic<br />
environment, use of public sector instruments such as the Guarantee Fund for SMEs pursuant to Law No.<br />
662/1996 to mitigate credit risk continued.<br />
Outstanding loans in the Group backed by the guarantee pursuant to Law 662/1996 amounted to €753<br />
million, while disbursements in <strong>2012</strong> totalled €312 million. <strong>Banca</strong> Carime and <strong>Banca</strong> Popolare di Ancona<br />
are the banks involved most in the use of this form of guarantee, however in <strong>2012</strong>, the other network<br />
banks contributed to a greater extent because the internal process for the relative applications also<br />
became fully operational in those banks too.<br />
44
“Memorandum of Intent” of 23 rd November 2011<br />
On 12 th January <strong>2012</strong>, the Group adhered to the “Memorandum of Intent” at national level, signed on<br />
23 rd November 2011, by the Italian Banking Association and various employers’ associations: Alleanza<br />
delle Cooperative Italiane (Alliance of Italian Co-operatives), Assoconfidi (association of loan guarantee<br />
consortiums), Confagricoltura (the farmers association), Confedilizia (confederation of builders), CIA<br />
(Italian farmers confederation), Coldiretti (the direct small farmers’ association), Confapi (the SMEs’<br />
association), Confindustria (confederation of industry) and Rete Imprese Italia. It regarded regulatory<br />
changes introduced to the time limit for reporting receivables past due, which was reduced to 90 days<br />
from 31 st December 2011. Following applications made by businesses belonging to the associations<br />
listed, positions to be classified within past due loans were examined on the basis of the relationship<br />
between the amount of the credit lines agreed and amounts drawn on them, with particular reference to<br />
the size and duration of the amounts past due. This was done with a view on the one hand to educating<br />
business members of the association on the new regulations and, on the other, to preventing possible<br />
inconveniences arising due to possible reports of late payments.<br />
This agreement followed a similar memorandum of 22 nd September 2011, signed in the Region of<br />
Lombardy by the Regional Commission of the Italian Banking Association and by Assolombarda (a<br />
Lombard employers’ association), to which the Group had similarly adhered.<br />
Initiatives designed to support families hit by the economic crisis<br />
In addition to the those already mentioned to help people hit by the earthquake in Emilia, initiatives to<br />
support families hit by the economic crisis included the continuation in <strong>2012</strong> of the various institutional<br />
initiatives started in previous years. These included the following:<br />
• the “Italian Banking Association moratorium”, which forms part of the “Families Programme” 6 ,<br />
extended until 31 st March 2013, enabled 848 customers to defer mortgage repayments during the<br />
year (on a total debt of almost €70 million);<br />
• the “solidarity fund for the purchase of a main dwelling” 7 , which was created as the result of an<br />
initiative by the Ministry of the Economy and Finance and became operational at the end of 2010,<br />
enabled 24 customers to benefit in <strong>2012</strong> from the deferment of repayments amounting to over €2.5<br />
million;<br />
• the “Loan of hope” 8 , which as a result of amendments made in 2010 by the Italian Banking<br />
Association and the Italian Episcopal Conference, further increased its effectiveness with the<br />
disbursement of 300 loans for a total of €1.7 million;<br />
• the “New Babies Loan”, which involves the creation of a guarantee fund to facilitate access to credit<br />
for families with a child born or adopted between 2009-2011, and subsequently extended to include<br />
those children born between <strong>2012</strong>-2015. It has allowed 262 families to obtain a guaranteed loan for a<br />
total of over €1.2 million;<br />
• the agreement signed between the Italian Banking Association and the CDP for the grant of loans to<br />
support Abruzzo families hit by the 2009 earthquake, saw the overall grant of 14 loans for a total of<br />
€1.6 million;<br />
• “Give them a future”, an initiative of the Italian Banking Association and the Youth Ministry, which<br />
the Group adhered to in September 2011, to grant subsidised loans to young students, which follows<br />
on from the previous “Give them credit” programme, saw the grant during the year of almost €200<br />
thousand to 38 students;<br />
• finally, in February <strong>2012</strong>, the Group adhered to the Italian Banking Association’s “Young Couples’<br />
Fund” initiative to provide the guarantees needed to obtain a mortgage for the purchase of a first<br />
home by young couples or even single parent families with young children, with “atypical” or<br />
temporary employment contracts. Ten loans for a total of €1.2 million were recorded in <strong>2012</strong>.<br />
To confirm the Group’s closeness to its traditional local markets, it also intervened, through Banco di<br />
Brescia and the former Banco di San Giorgio, to support towns in the Veneto and Liguria regions<br />
respectively, hit by flooding in October 2010 and November 2011, by adhering promptly – both for<br />
6 Briefly, the agreement involves the deferment for at least twelve months of repayments on mortgages of up to €150,000 taken out for<br />
the purchase, construction or renovation of a main dwelling even with arrears in payments of up to 180 consecutive days for<br />
customers:<br />
- with taxable annual income of up to €40,000;<br />
- who have suffered from particularly negative events (death, job-loss, becoming non self-sufficient, becoming eligible for state<br />
redundancy benefits).<br />
7 For mortgage contracts for the purchase of a main dwelling for borrowers, this gives the possibility for a customer, if certain<br />
conditions are met, to apply for the deferment of repayments not more than twice, for a maximum period of not longer than 18<br />
months in the life of the mortgage.<br />
8 For families that have lost all income from work, have no unearned income or income other than that generated by the ownership of<br />
a home or ordinary or extraordinary state redundancy benefits. It is designed to implement projects for the return to work or the<br />
start of small businesses.<br />
45
families and for SMEs – to the measures of the Ordinances of the President’s Office of the Council of<br />
Ministers No. 3906 of 13 th November 2010 and No. 3974 of 5 th November 2011 (deferral of mortgage<br />
repayments).<br />
Private individuals<br />
Again in <strong>2012</strong>, the commercial strategy for the private individual segment gave priority to the<br />
capacity to attract and develop new direct funding in observance of customer needs and<br />
characteristics, in order to improve the overall funding capacity of the Group consistent with<br />
the objectives of overall financial structural balance.<br />
A particular focus was placed on the capacity to satisfy customer needs in terms of proper<br />
diversification of savings, especially in the asset management sector, and also on meeting<br />
growing demands for capital and family protection.<br />
With regard to commercial action taken to develop new funding, in addition to offers of<br />
specialist products such as bond issuances and the new range of “welcome edition” deposit<br />
accounts, a specific new campaign entitled “Risparmi Premiati” (rewarded savings) was<br />
launched.<br />
This campaign, which has become an important annual appointment for the Group, was<br />
designed to encourage customers to carry out a check-up on their savings with their account<br />
managers and to take the opportunity at the same time to enhance the <strong>UBI</strong> <strong>Banca</strong> customer<br />
service model on financial planning and advice, as the main distinguishing feature of the<br />
Group compared to its competitors.<br />
In order to strengthen customer loyalty, the campaign was developed in combination with an<br />
advertising initiative as part of the “Formula <strong>UBI</strong>” programme, which involved giving additional<br />
points to the customers enrolled in it on the basis of new savings.<br />
In the asset management sector, the ability to offer a range of diversified investments was<br />
improved with new types of Sicav, including those which pay a coupon and those linked to<br />
fund-based savings plans. The new range of Sicav’s was received very positively by customers<br />
and helped reverse the trend in terms of net inflows for this type of business compared to<br />
2011. Significant growth was also recorded in 2102 in fund-based savings plans, especially<br />
after the launch of a special advertising initiative in the third quarter of <strong>2012</strong>.<br />
In accordance with the introduction of the <strong>UBI</strong> Gold customer service model and with the<br />
strategic goal of deploying an increasingly advisory approach with customers on investments,<br />
a specific training programme was implemented for affluent account managers, which will also<br />
continue in 2013. It is designed to improve the ability of staff to assist customers in the<br />
formulation of investment proposals and is oriented towards efficient allocation of their<br />
portfolios.<br />
Initiatives were started with regard to protection, designed to improve the range of non-life<br />
policies, not only in the auto sector, but also in the health and property sectors which saw the<br />
launch of two new products (Blufamily xl for health and Blucasa for properties).<br />
The capacity to sell non-life policies in branches was strengthened by the introduction of more<br />
co-ordinated action between staff responsible for family customers, both at the stage of<br />
acquiring lists of potential customers and also when making proposals to potential target<br />
customers. The activity of making commercial proposals was also accompanied by direct<br />
marketing action through both email and banner channels targeted at customers selected<br />
from those that use the home banking service (Qui <strong>UBI</strong>).<br />
Finally, on a commercial level, a specific advertising campaign was commenced in the second<br />
quarter of <strong>2012</strong>, linked to a competition with monthly prizes for all customers who took out a<br />
policy or requested an estimate.<br />
46
CURRENT ACCOUNTS<br />
Basic Account<br />
On 28 th March <strong>2012</strong>, the Ministry of the Economy and Finance, the Italian Banking Association, the<br />
Italian Post Office and payment services associations – consistent with and in compliance with the time<br />
limits set by article 12, paragraph three of Decree Law No. 201/2011 – concluded a Convention to define<br />
the features of a Basic Account: a current account designed for financial inclusion purposes, which<br />
constitutes an effective instrument for the full and real participation of all consumers in the single<br />
market, constituting an instrument for broad social inclusion. The account also forms part of the<br />
framework of initiatives taken by government in the fight against the use of cash and the promotion of<br />
more efficient payment tools, by offering pensioners an ideal product for the receipt of pensions, which<br />
can no longer be paid in cash.<br />
In compliance with the provisions of that Convention, marketing of Basic Accounts commenced in the<br />
Group on 1 st June <strong>2012</strong>. They are available to all consumers, with a limited number of transactions at<br />
reduced charges.<br />
Basic Accounts are designed in particular for disadvantaged customer groups in society, with an annual<br />
ISEE (equivalent economic status indicator) income of less than €7,500, who can make the same annual<br />
transaction and use the same services provided for consumers, without charges and with exemption from<br />
stamp duty. Those with the right to a pension of up to €1,500 per month, who do not belong to socially<br />
disadvantaged groups, may as an alternative request a bank account to be opened to be used solely for<br />
certain types of services and a limited number of transactions.<br />
QUBÌ<br />
On 2 nd July <strong>2012</strong> marketing of QUBÌ commenced, the new modular solution which allows customers to<br />
combine different services offered on the basis of their needs and habitual use of banking services, with<br />
the certainty of knowing in advance how much they will spend each month for the products they have<br />
chosen.<br />
QUBÌ enabled <strong>UBI</strong> <strong>Banca</strong> to win first place in the family category of accounts in the special classification<br />
table of the best banking products selected by the financial newspaper Milano Finanza.<br />
At present QUBÌ is composed of four modules:<br />
• Semplicity, the basic version which provides the main current account services, with all transactions<br />
exempt from registration and account management fees, Qui <strong>UBI</strong> services and Bancomat international<br />
Libramat debit cards;<br />
• Liberty, which, depending on the option chosen, eliminates charges on transactions;<br />
• Convenience, for those who make purchases using payment cards, benefitting from the advantages of<br />
frequent use;<br />
• Protection, which comprises accident insurance cover for customers.<br />
There is a monthly charge for each module. The total cost is the sum of the charges for the individual<br />
modules and services purchased and the amount may vary as a consequence of discounts and<br />
promotions there may be.<br />
Small Businesses<br />
The commitment to support small to medium-sized enterprises continued in <strong>2012</strong>, especially<br />
towards firms which have demonstrated innovative capacities and the ability to adapt to the<br />
market context, a context that has continued to impose a pricing policy strictly linked to the<br />
risk profiles of businesses.<br />
Great attention was paid to foreign services, to qualified growth in short-term loans, to the<br />
ability to attract and manage the liquidity of firms and entrepreneurs and to the design of tools<br />
for use by account managers to improve their knowledge and management of customers.<br />
A very large training project started in 2011 was completed in <strong>2012</strong>, designed to further<br />
increase the expertise of Small Business Account Managers on matters of interest to<br />
businesses: choice of sources of funding, treasury management, internationalisation<br />
processes, knowledge of opportunities for access to subsidised access to finance and different<br />
forms of guarantee.<br />
<strong>Financial</strong> consulting<br />
Profitable co-operation is in place between network banks and the associate company SF Consulting,<br />
controlled by the Finservice Group. This company specialises in providing consulting services on<br />
subsidised finance: assessment of the eligibility of companies for subsidies, the preparation of investment<br />
47
projects, the assessment of investment plans and general assistance in making and processing<br />
applications for subsidised loans.<br />
Commercial interaction with the network banks resulted in more than 1,160 new potential applications<br />
with over 5,800 visits to firms (small businesses and corporates).<br />
<strong>UBI</strong> <strong>Banca</strong>, SF Consulting and Finservice have also signed a convention agreement for support and<br />
advisory activities in relation to formalities for the issue of guarantees under Law No. 662/1996<br />
(Guarantee Fund for SMEs), which has been operational since February 2011.<br />
The purpose of the convention is to support account managers with activities required to obtain<br />
guarantees issued by the Fund, ranging from feasibility assessment (inclusive of assessment of the<br />
subjective and objective requirements of the client firm) to the acquisition of guarantee certification.<br />
Businesses can benefit from the Fund for any type of operation, provided it is directly linked to the<br />
operating activities of the business. Depending on the nature of the eligible operations, the type of<br />
beneficiaries and their location, the guarantee covered 85%, 80% or 60% of the loan with a maximum<br />
amount guaranteed per firm of €1.5 million. These percentages and limits were changed and improved by<br />
the new fund regulations which came into operation in December <strong>2012</strong> and were immediately<br />
implemented by the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
As part of the convention, SF Consulting has created a special IT platform, implemented by the Group,<br />
which allows account managers to interact with the company while applications to the manager of the<br />
Guarantee Fund are being processed.<br />
In <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> signed a further agreement with SF Consulting, in addition to the established cooperation<br />
for medium to long-term loans, which governs this company’s activities for the preparation and<br />
filing – in the name of and on behalf of BPB, BPCI, BBS, BRE and <strong>Banca</strong> di Valle Camonica – of<br />
applications for access to the Fund pursuant to Law No. 662/1996 also for short-term loans approved for<br />
customers.<br />
Sector products<br />
The small business service model is also based on the development of distinct product ranges<br />
focused on business sectors. By taking account of the principal financial needs and the<br />
specifics of the “value chain” which characterise them, these ranges are designed to<br />
strengthen the role of <strong>UBI</strong> <strong>Banca</strong> as a “partner bank”.<br />
Action for farms<br />
The farming sector, which varies greatly in terms of specialisation in its production, is of great<br />
importance to regional economies and to the national economy, partly because of its connections with<br />
the food industry and it represents an economic sector of interest to the Group.<br />
Purchase of supplies – livestock<br />
A new product was made available in <strong>2012</strong> specifically designed for livestock farms – the first of other<br />
similar products that will be developed for other farming sectors of interest such as the wine sector – to<br />
meet the demand for liquidity resulting from the introduction of regulations (article 62 of Law No.<br />
27/<strong>2012</strong>) designed to govern commercial relations between farmers, the food processing industry and the<br />
mass retail industry.<br />
These regulations concern the sale of goods and they establish definite and stringent time limits on<br />
payments with fines and penalties for failure to observe them. Farms are therefore required to meet the<br />
deadlines for paying their suppliers.<br />
This special new product, named “Purchase of supplies – livestock”, is designed to meet the resulting<br />
needs of farmers for liquidity and it is based on a general farm loan contract for a total maximum<br />
amount set on the basis of the planned spending for the purchase of animal feed for raising livestock.<br />
This credit line can be used by taking out individual short-term loans, granted up to the maximum<br />
authorised amount set in the general contract, with a term based on the livestock cycle financed.<br />
Direct guarantee from SGFA - Società di Gestione Fondi per l’Agroalimentare Srl<br />
In <strong>2012</strong> the Group took advantage of the new regulations governing the issue of SGFA direct guarantees 9<br />
and extended its business to include unsecured farm loans with a term of less than 18 months.<br />
In order to further educate the distribution network on the use of that form of guarantee, promotional<br />
and training meetings were organised with the branches in areas where farming is more important to the<br />
economy, with the participation of representatives from SGFA, an important trade association in the<br />
sector and from the major farming guarantee bodies.<br />
9 A first level or direct guarantee granted by SGFA: this is the same as a standard unsecured guarantee issued by SGFA to the bank<br />
on behalf of the borrowing business, after independent risk assessment has been performed. This “direct” guarantee covers 70-80%<br />
of the amount of the loan concerned and is recognised as an appropriate credit risk mitigation instrument because that company is<br />
covered by a guarantee of last resort from the Italian government.<br />
48
Again, in this respect co-operation was and is being established with trade associations and guarantee<br />
bodies that operate in the sector in order to provide assistance to account managers in the preparation of<br />
applications to SGFA for that guarantee.<br />
Authorities, Associations and the third sector<br />
The year <strong>2012</strong> saw the progressive consolidation of the service model for authorities and third<br />
sector associations launched in 2011 with the following objectives: to meet the specific<br />
demands of these customers more effectively; to grasp opportunities provided by market<br />
trends; to adapt products and services to changes in the legislative and regulatory context.<br />
More specifically, important activity to acquire data on counterparties was carried out<br />
designed to provide a more accurate classification of the different types of authority (which<br />
differ in terms of type of legal status and organisational model, which are often specific). The<br />
reclassification of approximately 20 thousand counterparties will allow targeted commercial<br />
policies to be set through a more accurate interpretation of their needs and the launch of<br />
dedicated initiatives in 2013.<br />
Associations and guarantee bodies<br />
In order to support businesses and firms on the Group’s local markets and with a view to<br />
facilitating access to credit by SMEs under competitive conditions in an economic and<br />
financial environment which has been difficult for some time now, a central role continues to<br />
be reserved to relations between Group Banks and guarantee consortiums and trade<br />
associations as well as to the use of public sector instruments to mitigate credit risk, such as<br />
the Guarantee fund for SMEs (pursuant to Law No. 662/1996) and the fund managed by<br />
SGFA (Fund Management Company for the agricultural and food sectors) for farms.<br />
As a result of new loan disbursements – €1,258 million for over 17,700 loans – total<br />
outstanding loans backed by guarantee bodies and guarantee funds amounted at year-end to<br />
approximately €3.7 billion.<br />
The broad range of existing products was updated to incorporate the main initiatives organised<br />
in co-operation with trade associations and local public institutions (chambers of commerce,<br />
regions and provinces), in addition to specific initiatives launched at local level by individual<br />
network banks.<br />
More specifically, with a view to supporting local businesses and providing a concrete answer<br />
to strong concerns in the sector nationally in Italy over credit rationing for the real economy,<br />
in the second half <strong>UBI</strong> <strong>Banca</strong> launched the project T 2 Territorio per il Territorio (C 2 The<br />
Community for the Community), which involved the acquisition of funding – through the issue<br />
of dedicated bonds – to be put back into circulation by making credit lines available under<br />
competitive conditions destined to support communities in the Group's local markets. The<br />
following initiatives were promoted as part of that project – designed to help channel funding<br />
acquired directly into a local market to support SMEs operating in that local area – by the<br />
Parent or by Group banks in co-operation with local organisations and associations (consisting<br />
for example of trade associations):<br />
<br />
<br />
<br />
<br />
the first, launched in July, involved BBS, BPB and <strong>Banca</strong> di Valle Camonica in partnership with the<br />
Associazione Industriali di Brescia (Brescia Association of Industrialists) with the issuance of bonds<br />
for a total of €23 million and the subsequent creation of a loan pool of €46 million;<br />
the second, which saw the issuance of bonds for a total of €16 million by BPB, BBS and <strong>Banca</strong> di<br />
Valle Camonica and the subsequent creation of a loan pool of €32 million for the benefit of member<br />
companies of the Bergamo Confindustria (confederation of industry);<br />
there then followed an issuance of bonds, listed on the MOT (electronic bond market), for a total of<br />
€18.55 million by <strong>UBI</strong> <strong>Banca</strong> – placed by BPCI, BPB and BBS – with the subsequent creation of a loan<br />
pool of up to €37.1 million for the benefit of member companies of Assolombarda (an employers<br />
association in the Milan area);<br />
this was again followed by the issuance of bonds for a total of €5 million by BPB and the subsequent<br />
creation of a loan pool of €10 million for the benefit of businesses registered with the Lecco Chamber<br />
of Commerce and of member companies of the main local trade associations.<br />
Further initiatives will be added to these in 2013, including those of BRE to assist business<br />
members of the Cuneo Confartigianato (artisans’ association) and of BPB to assist businesses<br />
registered with the Brianza Chamber of Commerce, Monza Brianza which are members of the<br />
main local trade associations.<br />
49
In the light of the increased competition between guarantee bodies and ownership changes<br />
that have occurred in recent years (company reorganisations and mergers between guarantee<br />
bodies and the transformation of some guarantee bodies into intermediaries supervised by the<br />
Bank of Italy), activity to revise existing convention agreements with guarantee bodies (to bring<br />
them into line with Bank of Italy prudential supervisory provisions in order to further reduce<br />
regulatory capital requirements) has continued and is almost complete.<br />
Third sector<br />
The <strong>UBI</strong> Community customer service model for the church and non-church nonprofit world<br />
became firmly established in <strong>2012</strong>. It was launched in the second half of 2011 with the<br />
objective of providing rapid and effective responses to emerging needs in the third sector,<br />
thereby further enhancing ties between the network banks and local communities.<br />
Relations with nonprofit organisations (NPOs) are of strategic importance due to the<br />
considerable growth in this sector over the last two decades. According to the latest – and still<br />
provisional – Istat (national office for statistics) data (third nonprofit census), today there are<br />
over 470 thousand NPOs active in Italy and they involve individuals linked to them –<br />
employees, volunteers and helpers – which total at least five million people. <strong>UBI</strong> Community<br />
was been positively received because it is considered a commercial proposal that is calibrated<br />
to meet real needs and is able to support growth plans, thanks to its range of products and<br />
services specially designed to provide banking and credit support for the management of daily<br />
activities, projects and investments.<br />
The range of commercial products and services has been progressively added to as follows:<br />
• in April <strong>2012</strong>, <strong>UBI</strong> Community social bonds were launched, an important innovation in the sector<br />
nationally, which brought Italy into line with the more evolved European countries in the area of<br />
finance for nonprofit organisations. <strong>UBI</strong> Community social bonds provide subscribers with the<br />
opportunity to obtain a return on their investment (in line with the rates offered by the Bank with<br />
respect to similar investments) and at the same time to help support high social value and impact<br />
projects organised by public and private sector organisations in local communities. More specifically,<br />
the Bank donates part of the funding acquired to support those initiatives, or it injects it into a loan<br />
pool to disburse funds to third sector initiatives.<br />
The reception by customers was very positive, which bears witness to the extent to which the Bank,<br />
with its values and objectives as the issuer, is in tune with local communities: from April until the<br />
end of the year, the <strong>UBI</strong> <strong>Banca</strong> Group issued 17 social bonds (14 by the network banks and three by<br />
the Parent), which in many cases were fully subscribed well before the issue period came to an end.<br />
Social bonds were issued worth €198.54 million, which resulted in charitable donations of over €1<br />
million to institutions operating in the following sectors: social and welfare (8), public utility<br />
infrastructures and services (5), universities and research (1), education and training (1) and<br />
community and economic development (2).<br />
Particularly important among these were the social bonds “<strong>UBI</strong> Comunità per l'imprenditoria sociale del<br />
sistema CGM” issued by the Parent, which enabled a loan pool of €17.552 million to be created to be<br />
used to grant medium to long-term loans under competitive terms and conditions to consortiums,<br />
firms and social co-operatives that are members of the Consorzio Nazionale della Cooperazione Sociale<br />
Gino Mattarelli (CGM – the Gino Mattarelli national consortium of social co-operation). Further<br />
issuances of social bonds are planned for 2013;<br />
• marketing of a new bundled product was launched in June <strong>2012</strong> entitled “Non Profit On Line”,<br />
specially for organisations that prefer to use internet channels.<br />
At the same time, the road show for the presentation of <strong>UBI</strong> Community to operators in the<br />
sector, which had visited Milan, Genoa, Bergamo, Pavia and Jesi the year before continued. In<br />
March and April <strong>Banca</strong> Popolare di Bergamo organised meetings at Varese, Monza and Erba<br />
and in November Banco di Brescia and <strong>Banca</strong> di Valle Camonica held a joint event at Concesio<br />
(BS).<br />
Important agreements have been concluded in the <strong>UBI</strong> Community context with major<br />
nonprofit organisations and representatives of operators in the sector – the CGM Co-operative<br />
Group, Federazione Italiana Scuole Materne di Bergamo e Brescia (the Bergamo and Brescia<br />
Italian Federation of children’s nurseries) and Accademia Teatro alla Scala (La Scala theatre<br />
academy) – designed to make products and services available to stakeholders under<br />
competitive terms and conditions, with particular reference to access to sources of finance.<br />
A fundamental requirement of the <strong>UBI</strong> Community customer service model is thorough<br />
assessment of the creditworthiness of nonprofit organisations. Special tools have been created<br />
for this purpose, able to value them on the basis of their specific characteristics and testing<br />
was carried out during the year by some network banks to verify their effectiveness, with a<br />
view, therefore, to adopting them as additional tools for assessing nonprofit counterparties.<br />
50
With technical assistance from AICCON (Italian Association for the promotion of a co-operation<br />
and nonprofit culture), <strong>UBI</strong> <strong>Banca</strong> has created the first national observatory on finance and<br />
the third sector, a tool for processing and divulging information annually on the financial<br />
requirements of the third sector. The observatory’s first publication was on the results of a<br />
survey of the financial requirements of a sample of social co-operatives in Italy.<br />
Authorities<br />
The “authorities” segment comprises public authorities and those institutions for which the<br />
banks in the Group provide treasury management and payment and collection services (1,894<br />
services of this type were managed at the end of December).<br />
Commercial guidelines were drawn up during the year to define the terms and conditions to<br />
apply to the treasury management and payment and collection service for public authorities<br />
on core services with the objective of standardising the approach by network banks. The<br />
significant regulatory changes that occurred in <strong>2012</strong>, and in particular the changeover of<br />
many authorities managed to a “Single Treasury” – which involved an outflow of funds of<br />
approximately €430 million as a result of the centralisation of all funds held in special<br />
accounts opened in the name of the authorities with the Bank of Italy – placed a question<br />
mark over the operating and financial balance underlying existing treasury and cash services,<br />
which resulted in the increasing use of a “cost to serve” approach to this type of business. The<br />
implementation of commercial guidelines will continue in 2013 for non-core services.<br />
The year <strong>2012</strong> was also one of significant changes in the collection and payment service<br />
provided for schools. The Group worked profitably with the MIUR – Ministry of Education,<br />
Universities and Research – participating in the preparatory stages for the launch of a project<br />
to adopt the “IT Ordinance” in schools and it created a special task-force to provide schools<br />
with expert and professional assistance to help them with the changeover to a paperless<br />
system.<br />
The attention paid to the computerisation of treasury management and collection and<br />
payment services provided to authorities also led to the proposal of a “substitute record<br />
keeping” service for the relative documentation, which enables authorities, together with the<br />
“IT Ordinance” to benefit from an efficient service which reduces operating risks and is<br />
compliant with regulations for the digitalisation of public administrations.<br />
A customer satisfaction survey was conducted in May and June on treasury and payment and<br />
collection services provided to public authorities. This was also used for the certification of the<br />
system for the management of the “quality of treasury services provided to public authorities”<br />
(UNI EN ISO standard 9001:2008). The over 800 authorities interviewed gave very high<br />
satisfaction scores for the service delivered by the Group, both in terms of expertise and<br />
efficiency (see the following sub-section on customer care in this respect).<br />
PattiChiari Consortium: Commitments to Quality<br />
The involvement of Group banks in the PattiChiari Consortium continued during the year in<br />
question with the application of “Commitments to Quality” and the dissemination of financial<br />
education.<br />
As concerns “Commitments to Quality” (some of which were subject to specific action to<br />
update them in consideration of the very many changes in the regulatory framework),<br />
monitoring of results confirmed the increasingly higher levels of compliance, with positive<br />
repercussions on the standard of service actually provided to customers.<br />
Further action was planned in the second half of the year to enable customers, even as early<br />
as 2013, to see even more clearly the areas in which self-regulation of the industry is<br />
developing (current accounts compared, the transferability of services, the security of<br />
transactions, credit assistance), thereby enhancing the commitment of member banks.<br />
The network banks also continued to take action with regard to the dissemination of financial<br />
education, above all with didactic activities for students. The brilliant results achieved, both in<br />
numerical and qualitative terms, were again explicitly acknowledged by the consortium.<br />
The contribution already made for many years by the Group to broadening knowledge on<br />
financial subjects is designed to represent not only a concrete response to the growing demand<br />
for financial education in society, but also a new tool for developing customer relationships<br />
that are increasingly more open and positive on the Group’s markets.<br />
51
The Private-Corporate Banking Market 10<br />
<strong>UBI</strong> <strong>Banca</strong> carried out an in-depth analysis in <strong>2012</strong> of the needs of private and corporate<br />
banking customers, which led to the definition of a new organisational model and a new<br />
commercial range (Value Proposition) differentiated for each customer segment (cluster).<br />
In consideration of the strategic focus on the development of stable funding, on a range of high<br />
value added products and on the need to increase the customer base, the integration of private<br />
and corporate banking markets was assessed positively. It is closely bound together by an<br />
organisational “fabric”, a range of products and services and an expert professional team able<br />
to satisfy the needs of the most evolved customers, both individuals and businesses, in a<br />
complete, synergetic and innovative manner.<br />
The private and corporate banking markets were therefore the protagonists of the birth of a<br />
new customer service model in November <strong>2012</strong> entitled <strong>UBI</strong> <strong>Banca</strong> Private & Corporate Unity.<br />
The new model involved the identification of three distinct customer segments served by 50<br />
operating units (Private & Corporate Unity) and 81 “corners”:<br />
- Private Individuals not Entrepreneurs and not Linked to Companies: 36,500 customers<br />
with financial wealth of €20 billion, served by 200 Private Bankers or Private Banking Coordinators;<br />
- Private Individuals Entrepreneurs or Linked to Companies: approximately 22,500<br />
customers with financial wealth of €15 billion, served by 100 Wealth Bankers;<br />
- Corporates: approximately 32,000 customers with capital of €35 billion, served by<br />
approximately 600 Corporate Bankers and Assistants supported for “foreign commercial”<br />
activities by 212 specialists operating in 37 Foreign Centres, in addition to the<br />
Centrobanca, <strong>UBI</strong> Factor and <strong>UBI</strong> Leasing specialist centres.<br />
Given the specific nature of each cluster, the range of advisory products and services was<br />
standardised in parallel and currently comprises the following services:<br />
1. the Pro-Active Wealth Advisory Service: a customised financial advisory service which performs<br />
thorough assessments of the characteristics and needs of family groups, analysing estates and<br />
proposing the best investment solutions available on the market. It is designed for:<br />
a) private individuals of high financial standing;<br />
b) businessmen and professionals linked to businesses who are offered integrated financial advice<br />
(business and personal);<br />
2. Corporate Advisory, designed for businessmen or companies;<br />
a) Corporate Advisory: carries out outlook analyses on financial statements, sector performance and<br />
benchmarking. At the same time it highlights risk factors to be included in analyses of a<br />
businessman’s personal investments. This activity also allows proposals to be made to optimise<br />
the balance in financial management between the personal wealth of the businessman and the<br />
funding costs of the company;<br />
b) the “Family Business Advisory Service: this is designed to meet specific customer requirements for<br />
generation turnover, capital protection, family and corporate governance and estate control<br />
structures.<br />
3. Pro-Active Wealth Advisory Institutional: this is a customised financial advisory service which<br />
performs thorough assessments of the characteristics and needs of institutional customers (Church<br />
institutions, Charities and Onlus nonprofit organisations, Banking Foundations, Building Funds,<br />
Trade Association Funds, Guarantee Body Consortia, Bank Treasuries), by analysing their capital and<br />
making investment proposals consistent with their institutional objectives and with the presence of<br />
regulatory constraints.<br />
10 The “Private-Corporate Banking Market” comprises customers with financial wealth (direct and indirect funding) of greater than<br />
€500,000 and firms with turnover of greater than €15 million. More specifically, customers with financial wealth of greater than<br />
€2 million are defined as “high net worth” and firms with turnover of over €250 million are defined as “large corporate”.<br />
52
The following action was taken with regard to commercial activity in the first ten months of<br />
<strong>2012</strong> – before the definition of the new model – on the individual private and corporate<br />
banking markets.<br />
The process continued with regard to services for “private banking” customers to develop a<br />
planning and financial consulting platform which is used, on the basis of customer data<br />
analyses acquired from answers to the MiFID questionnaire, to formulate financial solutions<br />
which match customers’ requirements.<br />
The following activities were performed with regard to products in <strong>2012</strong>:<br />
the “<strong>UBI</strong> Pramerica asset management” range of products was broadened:<br />
- the launch of the new “GP Top Selection” which, in the context of open customer portfolio<br />
managements, allows customised lines of investments to be created on the basis of the<br />
expectations and the risk profile of each subscriber;<br />
- expansion of the range of Sicav classes dedicated to the private banking market;<br />
the range of banc assurance products was revised by:<br />
- the launch of two new external fund unit policies, that can be selected from 21 different and<br />
prestigious asset management companies to ensure the maximum ability to diversify in terms of<br />
asset class.<br />
As concerns corporate customers on the other hand, in consideration of the negative<br />
macroeconomic scenario, a commercial policy differentiated by customer segment, already<br />
launched in 2011 was continued. Its objective was to maintain the Group’s traditional “local<br />
community banking” vocation and to develop the large corporate segment selectively, with the<br />
continuation of repositioning action designed to maximise asset returns. This objective was<br />
pursued in a context of rigorous monitoring of the portfolio, which resulted in de-risking<br />
actions (withdrawal from high risk sectors and positions), while ensuring support at the same<br />
time to the core segment. Given the risk of the economic context, a particular focus was placed<br />
on the management of pricing in relation to the actual credit ratings for single positions.<br />
As concerns the foreign commerce sector, the Group maintained its market position within an<br />
economic environment of general crisis which had a negative impact on international trade in<br />
<strong>2012</strong>. This activity gave rise to stable results, where a moderately positive rise in the exports<br />
curve was accompanied by a sharp fall in imports (especially net of energy items).<br />
The results for export business were unchanged compared with the year before and with the<br />
performance of Italian exports which was positive, although in a negative economic situation,<br />
which confirmed that Italian companies that are more open to international markets were<br />
better able to manage the crisis experienced by the country.<br />
The Group’s import business performed negatively in line with the fall in the country’s<br />
imports, due to the collapse of domestic sales and the consequent failure to turn over stocks.<br />
Even in this context, the Group never relaxed its focus on the quantity and quality of business<br />
volumes intermediated on behalf of corporate clients.<br />
The harmonisation of the single European payments market (SEPA), introduced by further<br />
PSD regulatory developments during the year, did in fact lead to a remarkable rationalisation<br />
of operations with positive repercussions in favour of customers in terms of charges.<br />
On the other hand, the Group is focused on and committed to providing greater assistance to<br />
Italian customers on markets outside Europe. Its presence in BRIC countries for example with<br />
representative offices in each of them is providing confirmation of an increasingly more<br />
effective response to company needs and is an optimum method of making a positive impact<br />
on the standard of service and advice provided. The focus on business with emerging<br />
economies (Turkey, India, China, Brazil, Russia, Middle East) is therefore continuing in order<br />
to identify – with the assistance of commercial agreements and partnerships with major<br />
international operators – business areas with high value added connected with the world of<br />
trade finance.<br />
The Group is also continuing to pursue policies set in recent years, by investing in:<br />
a) initiatives designed to strengthen its image and that of its individual local banks. <strong>UBI</strong> International<br />
Open Day, a genuine international trade fair open to businesses, has now become a regular event.<br />
After the success of the initiatives organised in 2010 at the Kilometro Rosso in Bergamo and in 2011<br />
at the Brescia Trade Fair, the initiative was held in Milan this year (as part of the “Security <strong>2012</strong>”<br />
53
trade fair) and in Bari (organised by <strong>UBI</strong> <strong>Banca</strong> and <strong>Banca</strong> Carime to reach businesses in southern<br />
Italy). The large numbers attending the events confirmed the validity of the format, which involves the<br />
participation of professional firms operating directly on emerging markets as exhibitors;<br />
b) constant monitoring of the quality of the service provided by the dedicated distribution network,<br />
combined with the search for new technical and organisational solutions to render processes<br />
increasingly more efficient. The efforts made were rewarded by customer satisfaction surveys which<br />
recorded a flattering opinion from the corporate clients interviewed;<br />
c) an increase in the professionalism of personnel, achieved as a result of a continuing commitment to<br />
the commercial and technical training of the personnel involved in the delivery of foreign commercial<br />
services.<br />
Initiatives in co-operation with the European Investment Bank (EIB)<br />
Having fully disbursed the first tranche in 2011, the <strong>UBI</strong> <strong>Banca</strong> Group continued to use the second<br />
tranche of the “EIB covered bond” loan of €250 million, subscribed on 11 th November 2011 and used to<br />
fund businesses operating in industrial, agricultural, tourism and service sectors, in order to implement<br />
investment projects in the Republic of Italy and the European Union. The companies funded (some in the<br />
form of finance leases) are SMEs with personnel numbering fewer than 250 employees or businesses with<br />
employees numbering between 250 and 2,999 (mid caps).<br />
Approximately 200 loans or leases had been disbursed for a total of €190 million as at 31 st December<br />
<strong>2012</strong>.<br />
As concerns new initiatives on the other hand, <strong>UBI</strong> <strong>Banca</strong> and Centrobanca signed agreements on 15 th<br />
October <strong>2012</strong> with the EIB for four loan pools for a total of €130 million as follows:<br />
− a “Mid Cap IV” loan pool, amounting to €50 million, for firms with between a minimum of 250 and a<br />
maximum of 2,999 employees (Mid Cap) to finance any type of project in agriculture, industry and<br />
services for the purchase/renewal of tangible assets, investments in intangible assets and support for<br />
working capital;<br />
− a “Business Network” loan pool, amounting to €25 million, to finance initiatives in industry, services<br />
and the tourist sector by SMEs and Mid Caps belonging to a “business network” 11 ;<br />
− an “Industry 2015” loan pool, amounting to €30 million, for firms of all types and sizes operating in<br />
agriculture, industry and services for expenditure programmes for research, development and<br />
innovation approved as admissible for “Industrial Innovation Projects” (Industria 2015) implemented<br />
by the Ministry for Economic Growth;<br />
− an “Emilia Romagna Earthquake Victims” loan pool, amounting to €25 million, for public authorities<br />
and/or private sector companies hit by the earthquake last May located in Emilia Romagna or the<br />
Lombard and Venetian provinces affected by the earthquake.<br />
The disbursements and authorisations of funds drawn from those pools – which can only be used<br />
through Centrobanca, but which are available to all Group customers – started to run from January<br />
2013.<br />
In addition to those credit lines, a further debt was subscribed on 28 th November <strong>2012</strong> (a “Global Loan”)<br />
for €250 million, directly available to all Group banks. The purpose of this loan pool is to finance the<br />
medium to long-term working capital requirements and investments of SMEs, MidCaps and private<br />
sector businesses with more than 3,000 employees. Disbursement of loans drawn from that loan pool<br />
runs from March 2013.<br />
Finally, in view of the positive collaboration that has been established, the Group is currently preparing<br />
new initiatives with the EIB for companies, and these should be operational in the second half of 2013.<br />
11 Businesses which sign a network contract with which a group of companies can pursue the objective of increasing their ability to<br />
innovate and to compete on the market (article 42, Decree Law No. 78/2010, converted with amendments by Law No. 22 of 30 th<br />
July 2010).<br />
54
Customer Care<br />
Following on from previous years “customer care” consultation activities continued, with the<br />
level of satisfaction surveyed for approximately 130,000 customers of the network banks<br />
(private individuals and corporate customers) and analyses of the competition conducted,<br />
involving over 12,000 customers of competitors.<br />
The research measured satisfaction on basic issues regarding bank-customer relationships:<br />
relationship with the branch, products and services, image and corporate social responsibility<br />
(CSR). The <strong>UBI</strong>NDEX, an index which measures the quality perceived by customers in relation<br />
to each operational unit found the following for <strong>2012</strong>: a stable score of 56 compared to the<br />
previous year for the retail market; a fall of four points to 50 for the corporate orate market, which is<br />
nevertheless consistent with the difficult economic context; and an increase to a score of 56 for<br />
private banking customers.<br />
In addition to the usual subject areas surveyed, the Group decided to focus in-depth on issues<br />
regarding the following: affluent customers, in consideration of the launch of <strong>UBI</strong> Gold; mini-<br />
branches, after the organisational changes; and on lost customers, in order to improve<br />
management of account closure processes.<br />
Surveys were also carried out on “Treasuries” and public authorities and also on customers<br />
who operate abroad:<br />
• with regard to treasury services delivered to public authorities, 806 customers were<br />
interviewed, representing municipalities, health institutes and hospitals, schools and<br />
consortia, which recorded very high satisfaction scores on the service as a whole (<strong>UBI</strong>NDEX<br />
score of 74, higher than for the previous survey in 2010). The strengths declared were<br />
expertise and efficiency, to the extent that the authorities would choose <strong>UBI</strong> <strong>Banca</strong> again.<br />
Authority customers appreciate dealing with the same person in daily contacts with the<br />
treasury office and short response times, but above all a service which meets their needs.<br />
Excellent judgements were made on all services provided and in particular on the security<br />
of the service and on compliance with the conditions set in the tender documents. These<br />
customers said they received satisfactory answers to requests for regulatory and<br />
operational information and when problems were raised or complaints made, these were<br />
resolved in most cases;<br />
• the 500 corporate clients interviewed who operate abroad making use of <strong>UBI</strong> <strong>Banca</strong> services<br />
and products were generally ly more satisfied than ordinary customers (<strong>UBI</strong>NDEX 58), with a<br />
satisfaction score that increased with the number of services used (the most satisfied<br />
55
customers where those who use advisory services). Those who use local “Foreign Centre”<br />
services recorded the highest satisfaction scores (<strong>UBI</strong>NDEX 69) and they particularly<br />
appreciated the ease of contact, the speed with which transactions were performed and the<br />
advice offered.<br />
One initiative deployed in the retail market was measurement of satisfaction for small<br />
business customers in the retail market after a “check-up” with the branch manager: the<br />
extremely positive result of the survey confirmed the knowledge that frequent contact is a<br />
primary condition for the high quality of customer relationships and user satisfaction. The<br />
score recorded after the meeting was in fact eleven points higher than the total for small<br />
businesses.<br />
The diffusion of a “quality” culture and of customer satisfaction is of fundamental importance,<br />
amongst other things, in training. Consequently a remote training course was organised in<br />
<strong>2012</strong> on customer satisfaction which reached staff throughout the Group. The course was<br />
taken by over 11,000 employees.<br />
Education on quality is also provided with sections on the subject inserted in standard<br />
training programmes, such as that for future branch managers, or within specific programmes<br />
designed to enhance human resources.<br />
Consultation activity also involved internal customer satisfaction (CSI) surveys, which involved<br />
“internal customers” (i.e. the distribution network staff in contact with the final customers of<br />
bank) and the suppliers of services to the distribution network (i.e. units at the Parent, <strong>UBI</strong><br />
Sistemi e Servizi and the product companies).<br />
The purpose of the CSI surveys is to understand the level of satisfaction experienced with the<br />
various services available to the distribution network, which could determine the level of<br />
customer satisfaction experienced by the final customer.<br />
An initial survey was carried out in 2011 to measure satisfaction with services provided to the<br />
distribution network, such as the Contact Centre, the Help Desk, Training, Qui<strong>UBI</strong> Business<br />
and Companies and also <strong>UBI</strong> Pramerica. Following a series of actions taken on the basis of<br />
the results, the same subjects were proposed again at the end of <strong>2012</strong> to measure the<br />
effectiveness of the action taken. Improvements were found on all services in terms of<br />
simplicity and speed, with particularly positive judgements given for <strong>UBI</strong> Pramerica and the<br />
Help Desk on most aspects surveyed.<br />
An additional survey was commenced during the year to measure distribution network<br />
satisfaction with 16 software applications in daily use (these included management of<br />
customer details, applications to support the grant of loans and credit monitoring, product<br />
sales and credit transfers). Each survey was carried out on over 11,000 staff to whom a total of<br />
75 thousand questionnaires were distributed (they were sent via mail using the Computer<br />
Assisted Web Interviewing – CAWI – method). These initiatives were received positively and the<br />
percentage of staff who completed the interview was close to 60%. Over 46 thousand<br />
completed questionnaires were analysed.<br />
Complaint management in the network banks<br />
The management of claims and complaints constitutes a fundamental tool for the <strong>UBI</strong> <strong>Banca</strong><br />
Group, in support of customer satisfaction management. <strong>Report</strong>s made by customers allow the<br />
efficiency of processes to be investigated and constitute a tool for verifying the quality of<br />
services provided and a guide to consequent corrective action where necessary. Careful and<br />
prompt complaints management is also used as a tool to reduce potential “reputational risk”<br />
connected with manifestations of dissatisfaction, when it is badly managed.<br />
The process is strongly rooted locally: the network banks respond to complaints made by<br />
customers through their own operating units. Centralised specialist units on the other hand<br />
are involved in technical investigations of complaints and carry out administrative formalities.<br />
This is all carried out in full compliance with the time limits set for processing complaints by<br />
legislation and regulations and the aim is to work well within those time limits where possible.<br />
Moreover, the entire process is co-ordinated by a unit specifically assigned at the Parent which<br />
works in customer care.<br />
56
Distribution of complaints received by the network<br />
banks in <strong>2012</strong> by channel of reipt<br />
Hardcopy 62.7%<br />
In <strong>2012</strong> a total of 4,551 complaints were<br />
received by the Group’s network banks,<br />
down by 1.5% over the previous year..<br />
The total percentage of solutions in<br />
favour of customers was 35% (slightly<br />
down compared to 39% in 2011). No<br />
Website 7.9%<br />
backlogs existed at the end of the year<br />
in the processing of complaints.<br />
The profiles of customers complaining<br />
again consisted – by over 93% – of<br />
customers with active accounts with the<br />
network banks. The frequency of<br />
customer complaints is a little over<br />
eleven complaints for every 10,000 customer relationships.<br />
The policy pursued for years now by the Group (to make conditions easy for customers to<br />
make complaints) is translating into an increasingly greater use of remote communications<br />
tools: emails and official complaint forms on the network bank websites, which total 37% of<br />
complaints communicated.<br />
An analysis of complaints by product or service confirm the composition that has been<br />
established in the past with a prevalence for current accounts and savings deposits (39% of<br />
the total), a reduction in the percentage for securities and investment services (10%) and an<br />
increase in complaints over mortgages and loans (19%).<br />
As concerns reasons, yet again for the year just ended, the main reason was the execution of<br />
transactions (31% compared to<br />
32% in 2011), followed by items<br />
relating to the management of<br />
terms and conditions, which as a<br />
whole accounted for 27% of<br />
complaints.<br />
Verbale / telefonico<br />
0,2%<br />
Email 29.2%<br />
Current accounts and savings<br />
deposits<br />
Securities and investment services<br />
Complaints by product/service<br />
0% 10% 20% 30% 40% 50%<br />
In addition to initial complaints<br />
and the relative repeat<br />
complaints, the picture for<br />
complaint management in <strong>2012</strong> is<br />
completed by mediation<br />
procedures initiated by customers<br />
in accordance with Legislative<br />
Decree No. 28/2010 and by<br />
appeals to alternative mediation<br />
bodies: 642 applications for<br />
mediation were made for the<br />
network banks. A total of 71<br />
mediation processes were<br />
concluded with a settlement<br />
during the year.<br />
A hundred and one cases were<br />
presented to the <strong>Financial</strong><br />
Banking Arbitrator with 92 cases<br />
concluded, 32 of which in favour<br />
of customers. The Banking<br />
Ombudsman who specialises in<br />
complaints concerning investment<br />
instruments dealt with six<br />
applications, two of which settled<br />
in favour of customers.<br />
A total of 127 complaints were<br />
Loans and mortgages<br />
Collection and payment services<br />
Credit and debit cards<br />
Insurance products<br />
Other<br />
General aspects<br />
Execution of transactions<br />
Application of conditions<br />
Other<br />
Frauds and losses<br />
Communication and information to<br />
customer<br />
Conditions<br />
Compounding of interest<br />
Creditworthiness or similar<br />
<strong>Report</strong>s to the centrale rischi (central<br />
credit bureau)<br />
Organisational aspects<br />
Personnel<br />
Equipment malfunctions<br />
Complaints by underlying grounds<br />
0% 10% 20% 30% 40%<br />
<strong>2012</strong><br />
2011<br />
<strong>2012</strong><br />
2011<br />
57
filed with the supervisory authorities (122 with the Bank of Italy and five with the Consob –<br />
Italian securities market authority).<br />
Distribution of complaints received in <strong>2012</strong><br />
by operating unit<br />
An analysis of statistics for complaints show that<br />
21% of local operating units received no complaints<br />
and 23% received one complaint only in <strong>2012</strong> 12 .<br />
23%<br />
15%<br />
21%<br />
41%<br />
Operating units with more than 2 complaints per year<br />
Operating units with 2 complaints per year<br />
Operating units with 1 complaint per year<br />
Operating units with no complaints<br />
***<br />
Again with regard to complaints, we report that the<br />
merger of B@nca 24-7 into <strong>UBI</strong> <strong>Banca</strong> resulted in<br />
769 complaints being recorded in the Complaints<br />
Register of the Parent along with the related ADR 13<br />
files (28 mediations, 59 applications to the <strong>Financial</strong><br />
Banking Arbitrator).<br />
The complaints related to credit card business,<br />
where <strong>UBI</strong> <strong>Banca</strong> has become the direct issuer, and<br />
to retail loans, already in the portfolio of the merged<br />
bank.<br />
The cases entered in the register relate both to<br />
matters which migrated from this consumer bank<br />
and to complaints managed directly after the merger took effect (23 rd July <strong>2012</strong>).<br />
12 The data is not comparable with 2011 because of the massive restructuring performed on the branch network during the year.<br />
13 ADR is an acronym for alternative dispute resolution and therefore relates to bodies responsible for providing this service, such as<br />
the <strong>Financial</strong> Banking Arbitrator and the Banking Ombudsman.<br />
58
The distribution network and<br />
positioning<br />
The branch network of the Group<br />
As at 31 st December <strong>2012</strong> the <strong>UBI</strong> <strong>Banca</strong> Group had 1,735 branches (which numbered 1,740<br />
at the date of this report) as compared to the 1,884 at the end of 2011.<br />
The branch network of the <strong>UBI</strong> <strong>Banca</strong> Group in Italy and abroad<br />
number of branches<br />
31.12.<strong>2012</strong> 31.12.2011 Change<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa 3 2 1<br />
<strong>Banca</strong> Popolare di Bergamo Spa 353 358 -5<br />
Banco di Brescia Spa 322 364 -42<br />
<strong>Banca</strong> Popolare Commercio e Industria Spa (1) 219 235 -16<br />
<strong>Banca</strong> Regionale Europea Spa (2) (3) 259 229 30<br />
<strong>Banca</strong> Popolare di Ancona Spa 220 238 -18<br />
<strong>Banca</strong> Carime Spa 255 294 -39<br />
<strong>Banca</strong> di Valle Camonica Spa 66 66 -<br />
Banco di San Giorgio Spa (3) - 57 -57<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment Spa 25 26 -1<br />
Centrobanca Spa 6 6 -<br />
IW Bank Spa 2 2 -<br />
B@nca 24-7 Spa - 1 -1<br />
<strong>UBI</strong> <strong>Banca</strong> International Sa - Lussemburgo 3 3 -<br />
Banque de Dépôts et de Gestion Sa - Svizzera 2 3 -1<br />
TOTAL 1,735 1,884 -149<br />
Total Branches in Italy 1,727 1,875 -148<br />
<strong>Financial</strong> advisors 672 713 -41<br />
ATMs 2,337 2,451 -114<br />
POS TERMINALS 60,049 61,224 -1,175<br />
(1) The figures do not include nine units dedicated exclusively to pawn credit operating under the <strong>Banca</strong> Popolare<br />
Commercio e Industria brand.<br />
(2) The figures include three foreign branches.<br />
(3) The change takes into account the effect of the merger of Banco di San Giorgio into <strong>Banca</strong> Regionale Europea<br />
which became effective on 22 nd October <strong>2012</strong>.<br />
As already reported in the previous section “Significant events that occurred during the year”,<br />
the changes that occurred compared to the end of 2011 mainly reflect two important actions<br />
taken to rationalise the branch network which took place over the twelve month period.<br />
- The first step implemented and effective from 27 th February <strong>2012</strong> involved the closure of 32 branches<br />
and 46 mini-branches, as well as the transformation of 40 branches into mini-branches and one minibranch<br />
into a branch.<br />
- A second step effective from 10 th December <strong>2012</strong> involved the closure of 34 branches and 33 minibranches<br />
as well as the transformation of 80 branches into mini-branches.<br />
A summary is given below of the changes that occurred from the beginning of the year until<br />
the date of this report which affected Italian branches :<br />
• <strong>UBI</strong> BANCA, following the merger into it of B@nca 24-7, it opened a branch in Via Stoppani in<br />
Bergamo in July to support operations to manage the outstanding loans, while at the same<br />
time it closed the existing branch of the merged bank;<br />
• BANCA POPOLARE DI BERGAMO closed a branch in Como in Via dei Mille in February <strong>2012</strong>,<br />
while in March <strong>2012</strong> it opened a new branch for business in Rome in Via dello Statuto. In<br />
July and September it closed mini-branches operating in Milan at the Centrobanca and in<br />
Luino (Varese) in Via Vittorio Veneto, while the Ciampino (Rome) branch became<br />
operational in October. In December one branch opened in Lurago D'Erba whereas 5<br />
59
anches were closed 1 . In January 2013, the treasury branches in Camerata Cornello, Riva<br />
di Solto, Roncola (Bergamo), Lozza and Castelseprio (Varese) were transformed into minibranches;<br />
• BANCO DI BRESCIA closed 22 branches in February and 20 in December 2 ;<br />
• BANCA POPOLARE COMMERCIO E INDUSTRIA closed ten branches in February and four in<br />
December 3 and another two mini-branches at the beginning of November in Milan,<br />
respectively in Via Trivulzio and in Via Grassi;<br />
• BANCA REGIONALE EUROPEA opened the mini-branch at the Santi Antonio e Biagio hospital at<br />
Alessandria in January, while in February five mini-branches were closed down located on<br />
Via Margarita at Cuneo, Casteldelfino and Crissolo (Cuneo), in Via Lega Lombarda at<br />
Valenza (Alessandria) and Ghiffa (Verbania). In December 18 other closures took place 4 ;<br />
• BANCA POPOLARE DI ANCONA opened a new branch in March at San Salvo (Chieti) and closed<br />
13 units in February and six in December 5 ;<br />
• BANCA CARIME opened a mini-branch at the University of Bari in May, while it closed 24<br />
branches in February and 16 in December 6 ;<br />
• BANCO DI SAN GIORGIO, before its merger into the <strong>Banca</strong> Regionale Europea, had closed two<br />
mini-branches in La Spezia in Corso Nazionale and in Sarzana (La Spezia) in Via Pietro Gori<br />
and branches in Albenga (Savona) in Via Cesare Battisti, Vado Ligure (Savona) and<br />
Ventimiglia (Imperia) in Via Roma in October;<br />
• <strong>UBI</strong> BANCA PRIVATE INVESTMENT lastly closed a branch in Florence in Via Ricasoli, in February.<br />
A full list of all Group branches in Italy and abroad is given in the final pages of this publication.<br />
As at 31 st December <strong>2012</strong>, the Italian distribution network of the Group was completed by<br />
units dedicated specifically to private banking customers (private banking units and the<br />
associated “corners”) and to corporate customers (corporate banking units and the associated<br />
“corners”).<br />
As can be seen from the table, at the end of the year, 104 private banking facilities were<br />
operational, a decrease of three units, together with 98 corporate banking facilities,<br />
unchanged on aggregate 7 .<br />
1 Varese at 106 Viale Borri; Monza in Via Pesa del Lino; Gallarate (Varese) in Via Torino; Tradate (Varese) in Corso Bernacchi and<br />
Besozzo (Varese) at 24 Via XXV Aprile.<br />
2 In February: Barghe; Chiari in Via Maffoni; Gussago in Via Richiedei; Leno in Via Garibaldi; Lumezzane in Via Montini in the San<br />
Sebastiano district and in Via Bixio in the Pieve district; Manerbio in Via Cremona; Ospitaletto in Via Rizzi; Salò (Brescia) in Piazza<br />
Vittoria; Soncino (Cremona) in Largo Manzella; Lodi in Via Fissiraga; Codogno (Lodi) in Via Roma; Mantua in Via Bertani; Quistello<br />
(Mantua) in Via Europe in the Nuvolato district; Cologno Monzese (Milan) in Via Cavallotti; Paderno Dugnano (Milan) in Via Tripoli;<br />
Arta Terme (Udine); Viterbo in Via Cattaneo and in Via San Lorenzo; Venezia; Verona in Piazza Simoni and Storo (Trento) in the<br />
Lodrone district.<br />
In December: Brescia in Via San Rocchino, in Via Volturno and in Via Orzinuovi; Bedizzole in Via Sonvigo, Capriano del Colle in the<br />
Fenili Belasi and Milzano district (Brescia); Bergamo in Via Borgo Palazzo; Milano in Via Staro, in Via Marche and in Via Muratori;<br />
Cremona in Piazza Risorgimento; Rubano (Padova) in the Sarmeola district; Verona in Via Salgari; Castel d’Azzano and San Giovanni<br />
Lupatoto (Verona); Altavilla Vicentina (Vicenza); Pieve di Soligo and Resana (Treviso); Magnano in Riviera (Udine) and Vasanello<br />
(Viterbo).<br />
3 In February: Milan in Via Pirelli, in Piazza Siena and in Via Saffi; Gorgonzola (Milano); Brallo di Pregola (Pavia); Voghera (Pavia) in<br />
Via Sant’Ambrogio; Imola and San Giovanni Persiceto (Bologna); Formigine (Modena) and Colorno (Parma).<br />
In December: Milan in Via Astesani; Vimodrone (Milano); Pavia in Piazza Duomo and Cassolnovo (Pavia).<br />
4 Torino in Corso Trapani; Chianocco (Torino); Cuneo in Piazza Europa; Alba (Cuneo) in Piazza Savona; Alessandria in Piazza Marconi;<br />
Casale Monferrato (Alessandria); Tortona (Alessandria) in Via Sacro Cuore, in Corso Don Orione and in the Rivalta Scrivia district;<br />
Novara in Via Canobio; Borgomanero in Piazza Martiri della Libertà and Gozzano (Novara); Asti in Piazza 1° Maggio; Biella in Via XX<br />
Settembre; Cossato (Biella) in Via Pajetta; Genova in Via Merano; Rapallo (Genoa) in Via Diaz and La Spezia in Corso Cavour.<br />
5 In February: Belvedere Ostrense and Ostra Pianello (Ancona); Appignano (Macerata); Piobbico (Pesaro Urbino); Riardo (Caserta);<br />
Naples in Piazza del Gesù Nuovo; Terzigno (Naples); Rimini in Via Caduti di Marzabotto and Pennabilli (Rimini); Guidonia Montecelio<br />
(Rome) in Piazza Buozzi; Perugia in Via dei Filosofi; Collazzone and Fossato di Vico (Perugia).<br />
In December; Fossombrone (Pesaro Urbino) in the Isola di Fano district; Treia (Macerata) in the Passo Treia district; Falerone (Fermo)<br />
in Piazza della Concordia; Gualdo Cattaneo (Perugia); Pescara in Via Latina and Limatola (Benevento).<br />
6 In February: Carolei, Francavilla Marittima, Grimaldi, Rocca Imperiale Marina (Cosenza); Squillace (Catanzaro); Cutro (Crotone);<br />
Bovalino, Delianuova, Gioiosa Ionica, Molochio (Reggio Calabria); Briatico (Vibo Valentia); Matera in Via Dante Alighieri; Maratea<br />
(Potenza); Atena Lucana and Sapri (Salerno); Bari in Corso Italia and in Via M. Cristina di Savoia; Fasano (Brindisi) in the Pezze di<br />
Greco and Montalbano districts; San Pietro Vernotico (Brindisi); San Severo (Foggia) in Corso Garibaldi; Gallipoli and Ruffano<br />
(Lecce); and Taranto in Via Battisti.<br />
In December: Rende (Cosenza) in Piazza degli Eroi; Guardavalle and Nocera Terinese (Catanzaro); Crotone in Via Cutro; Stilo (Reggio<br />
Calabria); Bernalda in the Metaponto and Pisticci (Matera) and Marconia districts; Avigliano (Potenza); Buccino, Buonabitacolo,<br />
Corbara and Sarno (Salerno); Bari in Via Dalmazia; Monopoli (Bari) in Via Fra’ Ippolito; Brindisi in Via Commenda and Copertino<br />
(Lecce).<br />
60
Following the integration of the private<br />
banking and corporate markets,<br />
mention of which is made in the<br />
previous section “Significant events<br />
that occurred during the year”, in<br />
January 2013 the new <strong>UBI</strong> <strong>Banca</strong><br />
Private & Corporate Unity facility was<br />
established to unify and rationalise the<br />
already existing private and corporate<br />
facilities. The new unit will include 131<br />
centres (50 PCUs and 81 corners)<br />
throughout Italy.<br />
The distribution network of the Group<br />
was also supported by a network of<br />
672 financial advisors reporting to <strong>UBI</strong><br />
<strong>Banca</strong> Private Investment, consisting<br />
of 392 operating in the Central and<br />
Northern Division and 280 in the<br />
Central and Southern Division.<br />
The decrease compared to the 713<br />
advisors operating at the end of 2011<br />
continues to reflect the dynamics of<br />
appointments and departures designed<br />
to progressively increase the size or<br />
average profitability per capita of the<br />
customer portfolios under<br />
management 8 .<br />
Private and corporate banking units as at 31st December <strong>2012</strong><br />
31.12.<strong>2012</strong> 31.12.2011 Change<br />
Private Banking Units 104 107 -3<br />
Private Banking Units (PBUs) 55 58 -3<br />
<strong>Banca</strong> Popolare di Bergamo 14 14 -<br />
Banco di Brescia 7 7 -<br />
<strong>Banca</strong> Popolare Commercio e Industria 8 8 -<br />
<strong>Banca</strong> Regionale Europea 7 6 1<br />
<strong>Banca</strong> Carime 5 5 -<br />
<strong>Banca</strong> Popolare di Ancona 7 7 -<br />
<strong>Banca</strong> di Valle Camonica 1 2 -1<br />
Banco di San Giorgio - 3 -3<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment 6 6 -<br />
Private banking "corners" 49 49 -<br />
<strong>Banca</strong> Popolare di Bergamo 21 21 -<br />
Banco di Brescia 6 6 -<br />
<strong>Banca</strong> Popolare Commercio e Industria 4 5 -1<br />
<strong>Banca</strong> Regionale Europea 2 1 1<br />
<strong>Banca</strong> Carime 7 7 -<br />
<strong>Banca</strong> Popolare di Ancona 9 9 -<br />
Corporate Banking Units 98 98 -<br />
Corporate Banking Units (CBUs) 63 64 -1<br />
<strong>Banca</strong> Popolare di Bergamo 19 19 -<br />
Banco di Brescia 10 11 -1<br />
<strong>Banca</strong> Popolare Commercio e Industria 9 9 -<br />
<strong>Banca</strong> Regionale Europea 11 8 3<br />
<strong>Banca</strong> Carime 5 5 -<br />
<strong>Banca</strong> Popolare di Ancona 7 7 -<br />
<strong>Banca</strong> di Valle Camonica 2 2 -<br />
Banco di San Giorgio - 3 -3<br />
Corporate banking "corners" 35 34 1<br />
<strong>Banca</strong> Popolare di Bergamo 2 2 -<br />
Banco di Brescia 11 11 -<br />
<strong>Banca</strong> Popolare Commercio e Industria 5 5 -<br />
<strong>Banca</strong> Regionale Europea 3 2 1<br />
<strong>Banca</strong> Carime 3 3 -<br />
<strong>Banca</strong> Popolare di Ancona 9 9 -<br />
<strong>Banca</strong> di Valle Camonica 2 2 -<br />
In a highly concentrated sector (the four largest companies occupy approximately 65% of the market), the<br />
data for December published by Assoreti (national association of stock brokerage companies) place <strong>UBI</strong><br />
<strong>Banca</strong> Private Investment in tenth place in terms of total assets (ninth in terms of banking groups), with a<br />
substantially stable market share of 2.20%.<br />
The international presence<br />
At the date of this report the international presence of the <strong>UBI</strong> <strong>Banca</strong> Group was structured as<br />
follows:<br />
• two foreign banks: Banque de Dépôts et de Gestion Sa (with two 9 branches in Switzerland<br />
at Lausanne and Lugano) and <strong>UBI</strong> <strong>Banca</strong> International Sa (with headquarters in<br />
Luxembourg and branches in Munich and Madrid);<br />
• three foreign branches of <strong>Banca</strong> Regionale Europea in France (at Nice, Menton and<br />
Antibes);<br />
• representative offices in Sao Paolo in Brazil, Mumbai, Shanghai, Hong Kong and Moscow;<br />
• investments (prevalently controlling interests) in four foreign companies: <strong>UBI</strong> Trustee Sa<br />
and <strong>UBI</strong> Management Co. Sa, <strong>UBI</strong> Capital Singapore Pte Ltd 10 , Lombarda China Fund<br />
Management Company 11 ;<br />
7 The following changes occurred during <strong>2012</strong>:<br />
- with regard to private banking facilities, in July <strong>Banca</strong> Popolare Commercio e Industria closed a private corner at Roma Parioli,<br />
while <strong>Banca</strong> di Valle Camonica closed a PBU at Franciacorta. In October, when Banco di San Giorgio was merged into <strong>Banca</strong><br />
Regionale Europea, the PBU at Ponente ceased operations, while the PBU at Levante was transformed into a corner;<br />
- as concerns corporate centres, in January, Banco di Brescia transformed its two CBUs at Iseo (Brescia) and Bergamo into corners<br />
at the same time as it opened a new CBU at Brescia. The <strong>Banca</strong> also closed two corners at Milan Lambrate and Montebelluna in<br />
October and December. <strong>Banca</strong> Regionale Europea did, however, open a new CBU at Turin whereas, in July ,it transformed a CBU<br />
in Milan into a corner. In October the <strong>Banca</strong> lastly amalgamated the three CBUs into the Banco di San Giorgio.<br />
8 The average size of financial advisors’ portfolios increased from approximately €6.2 million to €6.6 million of assets administered<br />
over twelve months.<br />
9 BDG closed its Geneva branch in June <strong>2012</strong>.<br />
61
• a Branch of <strong>UBI</strong> Factor Spa in Krakow in Poland;<br />
• 37 commercial co-operation agreements with foreign banks (covering more than 50<br />
countries), two “Trade Facilitation” agreements with the European Bank for Reconstruction<br />
and Development (EBRD) and with the International <strong>Financial</strong> Corporation (IFC) and also a<br />
“product partnership” in the Middle East and in Asia with Standard Chartered Bank to<br />
ensure corporate customers receive effective assistance on all the principal markets in<br />
those areas.<br />
Again in <strong>2012</strong>, the <strong>UBI</strong> <strong>Banca</strong> Group sponsored events of national and international<br />
importance in order to increase the visibility of its brand in Italy and abroad and to<br />
consolidate its closeness to customers who operate on international markets. It also organised<br />
conventions, meetings and events 12 .<br />
Remote channels<br />
The current progressively deteriorating economic environment has advised optimisation of<br />
geographical market coverage by rationalising the branch network and pursuing a more<br />
prudent policy for opening new units. In this context, the continuous growth and technological<br />
improvement in direct distribution channels is therefore increasingly becoming a strategic tool<br />
for the acquisition of new customers and for the management of relationships with the current<br />
customer base, which also ensures savings on operating costs at the same time.<br />
Therefore, in parallel with targeted closures of conventional bricks and mortar facilities, the<br />
Group is extending multichannel bank services provided through a single platform that<br />
combines all the direct channels available to the private individual and corporate customers of<br />
the network banks: internet and mobile banking, customer services, self service branches<br />
such as ATMs and kiosks, cards and evolved payment systems and POS terminals.<br />
In addition to the attractiveness of the economic conditions compared to standard conditions<br />
available at branches, the integrated multi-channel service provides increasingly broader<br />
guarantees in terms of security, accessibility 24 hours a day, seven days a week and the<br />
ability to customise to suit the characteristics of the users.<br />
Channels available to customers include:<br />
• the QUI <strong>UBI</strong> internet banking service for information on banking positions (current<br />
accounts, securities deposits, payment cards, mortgages, insurance policies, etc.) and to<br />
10 An operation to transfer control of this company from its previous parent company, Banque de Dépôts et de Gestion Sa, to <strong>UBI</strong><br />
<strong>Banca</strong> International Sa was completed on 30 th May <strong>2012</strong>. Following this, the company changed its name from BDG Singapore<br />
Private Ltd to <strong>UBI</strong> Capital Singapore Pte Ltd, its present name.<br />
11 The company will change its name to Zhong Ou Fund Management Co.<br />
12 The very many initiatives included the following:<br />
- sponsorship by the representative office in Mumbai of the 8 th annual Indian Trade & Export Finance Conference held in<br />
February;<br />
- the contribution made by <strong>UBI</strong> <strong>Banca</strong> to the organisation of the twelfth International Conference of Russian Bankers and<br />
Businessman, held in Rome on 23 rd and 24 th February. Staff members of the <strong>UBI</strong> <strong>Banca</strong> addressed issues regarding the economic<br />
situation in the euro zone and relations between Italy and Russia, with a focus on the corporate market;<br />
- collaboration by the representative office in Moscow in the organisation in March of the business mission in Russia, dedicated to<br />
the food and agriculture sector, designed to organise meetings between companies from Brescia and Russia;<br />
- participation on 19 th March as the exclusive banking sponsor in the 9 th edition of the China Trader Award, an important and<br />
prestigious prize for Italian companies that have excelled in the development of business relations with Hong Kong and China;<br />
- the presence of the Group's representative in Moscow as speaker at the convention, “Doing Business in Russia: what<br />
opportunities for Italian companies with the entry of Russia into the WTO?" held in Milan on 28 th March <strong>2012</strong>. The speech<br />
focused on the local financial system, on the presence of the Italian banking system, on the methods of financing and on the<br />
means of payment and risk hedging instruments;<br />
- participation in May by the representative office in San Paolo in the multi-sector, joint Government-Regions-Chambers of<br />
Commerce mission in Brazil, organised by the Ministry of Economic Development in co-operation with the Agency for the<br />
Promotion Abroad and the Internationalisation of Italian businesses (ICE);<br />
- the participation of the Group as main sponsor of INDIA DAY, an event organised by the MIP-Polytechnic of Milan held on 27 th<br />
September to describe the country's economic situation, the main legal and financial problems and the services for Italian<br />
companies;<br />
- the third edition of the ”International Open Day” initiative designed to promote the internationalisation of Italian businesses. The<br />
event was held at the Milan Trade Fair in Rho from 7 th to 9 th November and in Bari on 12 th November.<br />
62
perform numerous payment and investment transactions autonomously, with maximum<br />
security, speed and savings. The “Affari” (business) version for small business customers<br />
provides access to specific additional functions for single bank management of a company,<br />
which include the payment of single or multiple bills of exchange and the management of<br />
commercial portfolios. The “Imprese” (Companies) version, which operates using the<br />
services of the corporate banking interbank (CBI) platform, allows corporate clients to<br />
consult their accounts remotely and to make payments with many advantages. These<br />
include considerable savings in time, the optimisation of cash flows, improved organisation<br />
of administrative activities, the automation of record making processes and the verification<br />
and reconciliation of bank transactions. The authorised users may also see and operate on<br />
the accounts of all the companies belonging to its particular group of companies;<br />
• Customer Services, contactable on a toll free number even outside normal branch opening<br />
times, available to customers less likely to use the internet or who do not have a<br />
connection; 13 ;<br />
• the Mobile Banking service for customers who wish to use the main internet banking<br />
functions directly from their tablets, Blackberrys and smartphones, in the latter case<br />
including the optimised version of the website (www.quiubi.it/m);<br />
• a network consisting of over 2,300 self service facilities (ATMs and kiosks), which are<br />
decreasing in number due to the rationalisation of the branches over the course of the year,<br />
including over 300 able to deposit payments in cash and cheques using a “Bancomat” debit<br />
card or the free-of-charge VersaQuick card (evolved ATMs) 14 .<br />
At the end of the year the number of QUI <strong>UBI</strong> service customers grew by 15% to 1.07 million<br />
(there were 928 thousand in 2011). This performance was driven by encouraging trends for<br />
internet banking (up by 19.7% to 927 thousand users compared to 775 thousand at the end of<br />
2011) including QUI <strong>UBI</strong> Business, for which users were over 112 thousand in December, up<br />
from over 90 thousand twelve months earlier (+24.3%).<br />
As concerns mobile banking, the number of monthly accesses to the site optimised for cell<br />
phone navigation increased more than twofold to over 230 thousand (approximately 100<br />
thousand in 2011), while approximately 100 thousand dedicated apps were downloaded.<br />
The popularity with customers was also confirmed by the results for use over twelve months:<br />
• +35%, to over 8.1 million, for payment and reload transactions;<br />
• 54% of securities trades on regulated markets performed via internet;<br />
• over a fifth of payments made using evolved ATMs;<br />
• more than 2.8 million commercial contacts (2 million incoming and 800 thousand outgoing)<br />
and over 37 thousand e-mails managed by customer services.<br />
The initial results for the online sales platform launched in October 2011 are encouraging,<br />
with 9,800 requests completed online and approximately 2,500 products sold.<br />
These results were also assisted by continuous improvements made as follows:<br />
• the trends on the platform for online sales of the Enjoy card and of QUI <strong>UBI</strong> from the<br />
ubibanca.com commercial website and the quiubi.it site;<br />
• the launch of numerous commercial initiatives to support the online sales of the prepaid<br />
Enjoy card: including "Enjoy Your Summer", "Enjoy Your Card", “Enjoy & Fly” and “Enjoy &<br />
Win”, the latter by using the Facebook social network to involve the greatest number of<br />
potential customers;<br />
• the expansion of the platform for small business and private customers with new<br />
consultation functions (overall viewing of the commercial portfolio and “RiBa” automatic<br />
electronic payment due date notification), payment functions (refusal to pay Ri.Ba.s) and<br />
functions dedicated to increasing the security level of payment cards (e-mail alerts on<br />
denied transactions);<br />
13 Customer relationship and consultation activity was further expanded in the first half of <strong>2012</strong> with the opening of a new centre at<br />
Varese, in addition to those already in operation at Brescia and Milan.<br />
14 A new experimental software application “Qui Multibanca plus” will be piloted in 2013. It will enable new consultation and payment<br />
services to be developed on the Group’s Bancomat debit card ATMs and will also allow marketing messages to be sent, matched to<br />
customer profiles.<br />
63
• the release of a virtual assistant (avatar) available in the area reserved for QUI <strong>UBI</strong> and QUI<br />
<strong>UBI</strong> affari business internet banking, used for marketing initiatives to customers;<br />
• the launch of the "Come over to QUI <strong>UBI</strong> and win!" competition to encourage QUI <strong>UBI</strong> Light<br />
information service users to go over to the QUI <strong>UBI</strong> profile;<br />
• the completion and development of free apps for all the main instruments on the market<br />
(smartphones, tablets and BlackBerrys);<br />
• the improvement in the graphics and the extension of the functions available on the mobile<br />
site www.quiubi.it/m;<br />
• the development of the "My accounts" service with the availability of new documents on safe<br />
deposit boxes 15 .<br />
New initiatives are also planned for 2013, designed to generally improve the services on offer.<br />
These include the following: the development of the online sales platform with an increased<br />
range of products that can be purchased (such as the Q<strong>UBI</strong>’ modular account and non-life<br />
banc assurance products); the development of an innovative demo of the multichannel bank<br />
designed to help customers become familiar with the various channels available for banking<br />
services; the development of a virtual assistant and the ability to provide reply to customers’<br />
questions via an innovative semantic engine and the launch of a new site dedicated to <strong>UBI</strong><br />
<strong>Banca</strong> Private & Corporate Unity.<br />
Cards and payment systems<br />
Despite the continuing difficult economic market conditions, the <strong>UBI</strong> <strong>Banca</strong> Group continues<br />
to be very active in the payment card business, on the one hand by seeking the most up-todate<br />
technological solutions and, on the other, by conducting an effective campaign to support<br />
the products offered.<br />
The total number of Libra credit cards issued by <strong>UBI</strong> <strong>Banca</strong> and CartaSi amounted to<br />
approximately 723 thousand. This decrease of 3.9% compared to the more than 752 thousand<br />
units of the previous twelve months also marks the effect of the migration towards cards with<br />
microchips which occurred in 2011, leading to a contraction in the numbers of inactive cards.<br />
The negative performance of the economy was reflected in the 3.8% fall in the use of cards.<br />
The range currently offered by the <strong>UBI</strong> Group is differentiated by type of user:<br />
• private individual customers can choose between charge cards and revolving or flexible<br />
cards (with repayment either of the balance or in instalments) of different varieties<br />
according to the market (retail or private banking);<br />
• companies, on the other hand, are offered business and corporate cards which vary<br />
according to the credit limit and the services.<br />
The merger by incorporation of B@nca 24-7 into <strong>UBI</strong> <strong>Banca</strong> on 23 rd July brought about the<br />
internalisation in the Parent of the management of the existing cards and activities to issue<br />
new Libra and Kalìa cards. This guaranteed continuity of the service offered to customers<br />
which even improved in the areas reserved for the www.cartalibra.it and www.cartakalia.it<br />
sites, which became accessible through direct connection from QUI <strong>UBI</strong> banking.<br />
THE good performance by prepaid cards continued with total exceeding cards in December<br />
which exceeded 269 thousand, a 21% increase over twelve months, mainly due to the success<br />
of the Enjoy card, the prepaid card associated with an IBAN number and to the connected<br />
commercial initiatives. In detail:<br />
• Enjoy Special Edition, the card for Group employees issued in December 2011, which<br />
allows a donation to be made to charitable projects;<br />
15 As at the end of December the number of customers who had agreed to forgo receipt of hardcopy correspondence reached<br />
approximately 598 thousand (+48% compared to 404 thousand at the end of 2011), while the number of ordinary and deposit<br />
accounts using the “My accounts” service increased by an equally significant number (+51% to 837 thousand).<br />
64
• Enjoy <strong>UBI</strong> Community, the card with a customised design and special terms and conditions<br />
reserved for employees of non-profit organisations;<br />
• Enjoy Pension, a card with special terms and conditions designed for pensioners who do<br />
not have current accounts. Pensions can be credited to these with no limits on the amount;<br />
• Enjoy S.I.P., the card dedicated to members of the Italian Paediatric Association featuring<br />
customised graphics with special terms and conditions, sold both in branches and via<br />
remote selling.<br />
The positive reception by the public of prepaid cards is also seen in the increase by over 15%<br />
in their use.<br />
The number of debit cards issued by the Group was around 1.43 million with an increase of<br />
6% over December 2011. The use of card also increased (+7.5% for purchases with<br />
PagoBancomat debit cards and +4.6% for withdrawals).<br />
Over the year the Group continued with its commercial initiatives aimed at consolidating its<br />
current user base and at attracting new potential customers. Some of them were founded on<br />
the principles of integrated multichannel services, resorting in sequence to other channels for<br />
contacting customers (texting, newsletter, banners in the QUI <strong>UBI</strong> reserved section, phone<br />
calls from customer services) 16 .<br />
Action was also taken to support people affected by the earthquake in Emilia Romagna, Veneto<br />
and Lombardy which took the concrete form of deferment of repayments on the Libra cards<br />
with instalment options and on the Libra Extra/Extra Plus cards as well as the exemption<br />
from commissions for withdrawals at ATMs made using Libramat debit cards both in Italy and<br />
abroad.<br />
The most significant technological innovation launched in <strong>2012</strong>, however, was the realisation<br />
of the pilot project "Enjoy Mobile Payments" presented to the market in January 2013. It<br />
involves the virtualisation of a card (Enjoy) on a telephone SIM and the ability to make<br />
payments using NFC smartphones on contactless POS terminals 17 .<br />
As concerns payment systems, the Group also has over €60 thousand POS terminals installed<br />
in retail outlets, slightly down on the previous year (-2%), the result of streamlining the<br />
geographical market coverage of the network banks on the one hand and of the unfavourable<br />
economic situation on the other. By contrast, volumes of business remained stable<br />
(Visa/MasterCard) or increased slightly (PagoBancomat).<br />
The necessary adjustments were completed over the twelve months to comply with legal<br />
provisions requiring the elimination of commissions on petrol refuelling for amounts lower<br />
than €100.<br />
During the year in particular, in accordance with Regulation No. 260/<strong>2012</strong> (the European<br />
regulation issued with immediate effect on 30 th March <strong>2012</strong>, which establishes the technical<br />
and commercial requirements for credit transfers and direct debits in euro and amends<br />
Regulation EC 924/2009):<br />
• the commissions on all “foreign” credit transfers in the EEA 18 have been set at the same<br />
level as those for domestic transfers, regardless of the amount of the transaction;<br />
• activities continued for the migration by February 2014, as required by the Regulation, of<br />
all domestic payment instruments (direct debits and credit transfers) to the corresponding<br />
SEPA payment instruments (Sepa Direct Debit 19 and Sepa Credit Transfer respectively).<br />
In addition to its constant technological improvement of existing products, 2013 will see the<br />
Parent Company also engaged in:<br />
- the launch of a new prepaid card with microchip technology which will change part of the<br />
typical additional functionalities of the Enjoy card but this will be offered to customers who<br />
are minors, to non-residents and to business customers;<br />
16 The “Experience the magic of Paris” and “A weekend for a true connoisseur” competitions and the commercial campaigns were used<br />
to increase cross selling with the offer of Libramat and Libra Classic cards and free membership for the first year.<br />
17 See the section “Research & Development” for further details.<br />
18 In addition to the 27 countries of the European Union, the European Economic Area also includes Iceland, Norway and<br />
Lichtenstein.<br />
19 In order to complete the range of services provided for businesses, marketing of the Sepa Active Direct Debit service will be<br />
launched in the first half of 2013. The service will allow these customers to present payment collection instructions in euro to its<br />
debtor customers within the SEPA area.<br />
65
- in the progressive extension of the Contactless payment methods to other types of cards<br />
(currently this opportunity is basically limited to the Enjoy card), and in the start-up of<br />
replacement of the current POS terminals with equipment for Contactless technology;<br />
The positioning of the Group<br />
The table summarises the<br />
market positioning of the <strong>UBI</strong><br />
Group in terms of branches,<br />
conventional funding (excluding<br />
bonds) and lending, both with<br />
respect to the national and to<br />
the regional and provincial<br />
markets where the banks<br />
operating in the Group have a<br />
more significant presence.<br />
The information is based on the<br />
most recent data made available by<br />
the Bank of Italy: 30 th September<br />
<strong>2012</strong> for branches and 31 st<br />
December <strong>2012</strong> for the balance<br />
sheet items, considered in relation to<br />
branch location.<br />
Despite the action taken to<br />
rationalise the distribution<br />
network in February <strong>2012</strong>,<br />
marginal differences can be<br />
seen in terms of market share<br />
for branches compared to end of<br />
2011 data.<br />
More specifically, the market<br />
share of the Group at national<br />
level was 5.4%, with market<br />
shares again higher than 10%<br />
in 15 Italian provinces, together<br />
with a substantial presence in<br />
Milan (9%) and Rome<br />
(approximately 4%).<br />
As concerns market share for loans,<br />
the decrease for the Province of<br />
Bergamo and, to a lesser degree, for<br />
Lombardy is due mainly to<br />
outstanding loans of the former<br />
B@nca 24-7 contributed to the<br />
Parent in July, affected by both an<br />
organic reduction and by the<br />
absence of grants of non-captive<br />
loans, following the discontinuation<br />
of distribution through indirect<br />
networks.<br />
<strong>UBI</strong> <strong>Banca</strong> Group: market share (*)<br />
30.9.<strong>2012</strong><br />
Branches<br />
Funding<br />
(**) (***)<br />
Lending<br />
(***)<br />
Branches<br />
Funding<br />
(**) (***)<br />
Lending<br />
(***)<br />
North Italy 6.3% 5.9% 6.6% 6.4% 6.3% 6.8%<br />
Lombardy 12.8% 10.0% 9.8% 12.9% 10.7% 10.0%<br />
Prov. of Bergamo 21.2% 30.3% 40.6% 21.0% 32.3% 43.1%<br />
Prov. of Brescia 22.4% 36.1% 35.7% 22.8% 35.8% 35.8%<br />
Prov. of Como 5.8% 5.4% 8.3% 6.0% 5.8% 8.0%<br />
Prov. of Lecco 5.9% 5.7% 7.2% 5.8% 5.1% 6.7%<br />
Prov. of Sondrio 8.1% 1.7% 3.3% 8.1% 1.7% 3.6%<br />
Prov. of Mantua 5.1% 3.3% 3.7% 5.6% 3.6% 4.3%<br />
Prov. of Milan 9.1% 4.8% 3.8% 9.2% 5.1% 4.0%<br />
Prov. of Monza Brianza 8.3% 7.1% 9.8% 8.2% 8.0% 8.8%<br />
Prov. of Pavia 15.1% 15.1% 11.4% 15.6% 16.6% 11.9%<br />
Prov. of Varese 23.3% 28.3% 20.7% 23.0% 30.3% 21.1%<br />
Piedmont 8.3% 5.3% 6.3% 8.3% 5.6% 6.3%<br />
Prov. of Alessandria 12.0% 7.6% 10.4% 11.7% 8.4% 10.0%<br />
Prov. of Cuneo 23.8% 21.3% 16.5% 24.2% 22.3% 16.9%<br />
Prov. of Novara 4.6% 3.5% 6.6% 4.6% 3.2% 7.0%<br />
Liguria 6.0% 5.0% 7.8% 6.0% 5.2% 8.2%<br />
Prov. of Genoa 4.9% 4.4% 7.2% 4.8% 4.6% 7.7%<br />
Prov. of Imperia 6.0% 3.4% 9.1% 5.8% 3.6% 9.2%<br />
Prov. of Savona 6.6% 3.5% 9.4% 6.3% 3.5% 10.1%<br />
Prov. of La Spezia 9.0% 11.1% 7.0% 10.1% 12.2% 7.2%<br />
Central Italy 3.3% 2.6% 2.5% 3.5% 3.1% 2.5%<br />
Marches 7.8% 8.8% 8.8% 8.1% 9.4% 9.0%<br />
Prov. of Ancona 9.5% 13.3% 11.8% 10.0% 14.1% 11.8%<br />
Prov. of Macerata 8.4% 9.7% 8.8% 8.8% 11.5% 9.7%<br />
Prov. of Fermo 10.8% 10.5% 15.0% 10.8% 9.5% 14.0%<br />
Prov. of Pesaro and Urbino 6.2% 3.7% 4.6% 6.9% 4.1% 4.8%<br />
Latium 4.2% 2.5% 2.6% 4.2% 3.2% 2.6%<br />
Prov. of Viterbo 14.0% 11.9% 11.1% 14.7% 13.4% 11.5%<br />
Prov. of Rome 3.9% 2.4% 2.5% 3.9% 3.2% 2.5%<br />
South Italy 7.8% 6.5% 5.3% 8.2% 6.9% 5.3%<br />
Campania 5.6% 4.3% 4.2% 5.8% 4.4% 4.2%<br />
Prov. of Caserta 8.7% 6.9% 7.7% 9.0% 6.9% 7.0%<br />
Prov. of Salerno 7.5% 5.3% 5.9% 7.9% 5.7% 6.3%<br />
Prov. of Naples 4.6% 3.8% 3.4% 4.8% 3.9% 3.3%<br />
Calabria 20.6% 20.8% 14.3% 22.1% 21.3% 14.1%<br />
Prov. of Catanzaro 13.6% 16.1% 9.9% 14.2% 16.0% 10.1%<br />
Prov. of Cosenza 24.2% 27.1% 19.5% 25.7% 27.8% 19.1%<br />
Prov. of Crotone 16.2% 11.8% 7.5% 18.9% 11.8% 7.1%<br />
Prov. of Reggio Calabria 20.6% 16.1% 11.3% 22.4% 17.1% 11.3%<br />
Prov. of Vibo Valentia 24.3% 28.2% 19.0% 26.3% 28.4% 18.6%<br />
Basilicata 13.8% 11.8% 8.8% 14.3% 11.8% 8.9%<br />
Prov. of Matera 15.0% 10.8% 7.5% 15.7% 10.5% 7.3%<br />
Prov. of Potenza 13.3% 12.5% 9.6% 13.7% 12.7% 9.8%<br />
Apulia 7.7% 6.7% 4.9% 8.1% 7.2% 4.8%<br />
Prov. of Brindisi 9.9% 8.1% 5.4% 12.0% 9.5% 5.9%<br />
Prov. of Bari 9.8% 7.9% 5.4% 10.0% 8.6% 5.4%<br />
Prov. of Barletta Andria Trani 6.5% 5.7% 4.9% 6.4% 6.4% 5.1%<br />
Prov. of Taranto 8.0% 7.1% 5.3% 8.4% 7.3% 5.4%<br />
Total Italy 5.4% 5.0% 5.4% 5.6% 5.3% 5.6%<br />
(*) The financial data is taken from Bank of Italy statistics.<br />
31.12.<strong>2012</strong><br />
31.12.2011<br />
(**) Current accounts, certificates of deposit, savings deposits.<br />
As a result of the characteristics (***) Market share by location of the branch.<br />
of the two original groups, in<br />
some areas where the Group’s presence is stronger, it continues to have a market share of<br />
conventional funding and/or lending that is greater than the percentage of branches.<br />
66
Human Resources<br />
The composition of Group staff and changes in <strong>2012</strong><br />
Group personnel<br />
Employees actually in service<br />
31.12.<strong>2012</strong> 31.12.2011 Changes 31.12.<strong>2012</strong> 31.12.2011 Changes<br />
Number A B A-B C D C-D<br />
<strong>Banca</strong> Popolare di Bergamo Spa 3,697 3,723 -26 3,787 3,795 -8<br />
Banco di Brescia Spa 2,555 2,584 -29 2,577 2,594 -17<br />
<strong>Banca</strong> Carime Spa 2,143 2,183 -40 2,278 2,320 -42<br />
<strong>Banca</strong> Regionale Europea Spa 1,899 1,932 -33 1,982 1,996 -14<br />
<strong>Banca</strong> Popolare Commercio e Industria Spa 1,676 1,713 -37 1,859 1,896 -37<br />
<strong>Banca</strong> Popolare di Ancona Spa 1,675 1,711 -36 1,762 1,798 -36<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa * 1,412 1,465 -53 2,328 2,359 -31<br />
<strong>Banca</strong> di Valle Camonica Spa 346 348 -2 341 345 -4<br />
Centrobanca Spa 300 316 -16 310 316 -6<br />
IW Bank Spa 202 280 -78 210 296 -86<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment Spa 163 165 -2 149 153 -4<br />
<strong>UBI</strong> <strong>Banca</strong> International Sa 101 98 3 93 93 -<br />
Banque de Dépôts et de Gestion Sa 62 68 -6 62 67 -5<br />
TOTAL FOR BANKS 16,231 16,586 -355 17,738 18,028 -290<br />
<strong>UBI</strong> Sistemi e Servizi SCpA 2,061 2,021 40 762 676 86<br />
<strong>UBI</strong> Leasing Spa 244 255 -11 223 245 -22<br />
Prestitalia Spa * 170 104 66 83 96 -13<br />
<strong>UBI</strong> Factor Spa 151 153 -2 138 144 -6<br />
<strong>UBI</strong> Pramerica SGR Spa 145 142 3 117 120 -3<br />
<strong>UBI</strong> Fiduciaria Spa 22 24 -2 17 17 -<br />
<strong>UBI</strong> Academy SCRL ** 16 - 16 - - -<br />
<strong>UBI</strong> Capital Singapore Pte Ltd 10 18 -8 10 16 -6<br />
BPB Immobiliare Srl 9 9 0 4 4 -<br />
<strong>UBI</strong> Gestioni Fiduciarie Sim Spa 7 7 - 4 4 -<br />
Centrobanca Sviluppo Impresa SGR Spa 6 6 - 2 2 -<br />
Coralis Rent Srl 4 5 -1 - - -<br />
<strong>UBI</strong> Trustee Sa 4 4 - 4 4 -<br />
<strong>UBI</strong> Management Company Sa 3 3 - 3 3 -<br />
S.B.I.M. Spa 1 1 - - - -<br />
TOTAL 19,084 19,338 -254 19,105 19,359 -254<br />
Workers on staff leasing contracts 2 31 -29 2 31 -29<br />
TOTAL PERSONNEL 19,086 19,369 -283<br />
Employees on the payroll<br />
On secondment outside the Group<br />
- out 28 30 -2<br />
- in 7 9 -2<br />
TOTAL WORKFORCE 19,114 19,399 -285 19,114 19,399 -285<br />
* On 1 st July the contribution to Prestitalia of the B@nca 24-7 line of business consisting of salary backed lending operations became effective. On the<br />
following 23 rd July <strong>Banca</strong> 24-7 was merged into <strong>UBI</strong> <strong>Banca</strong>.<br />
** In July <strong>2012</strong> <strong>UBI</strong> Academy was formed, without staff transfers. Staff from the consortium company, previously working in the Training Service were<br />
transferred.<br />
The table above gives details for each company of the actual distribution of employees (workers on permanent and temporary contracts,<br />
and on apprenticeship contracts) within the Group as at 31 st December <strong>2012</strong>, adjusted to take account of secondments to and from other<br />
entities within or external to the Group (column A) compared with the position at the end of 2011 (column B) restated on a consistent basis.<br />
Column C, on the other hand, gives details for each company of the number of employees on the payroll as at 31 st December <strong>2012</strong><br />
compared with the end of 2011 also restated on a consistent basis (column D).<br />
Compared to the figures published in the previous annual report, staff numbers as at 31 st December 2011 were adjusted as follows:<br />
staff numbers at <strong>Banca</strong> Carime and <strong>Banca</strong> Popolare di Ancona increased by one including two reinstatements in the first quarter, due to<br />
INPS (National Insurance) failing to recognise pension entitlements following retirement;<br />
the <strong>UBI</strong> <strong>Banca</strong> workforce was restated to include the B@nca 24-7 and Silf mergers effective 23 rd July and 21 st December <strong>2012</strong>. The total<br />
figures also include a limited number of staff transfers to Prestitalia on 1 st July <strong>2012</strong>, following the contribution of salary backed<br />
operations;<br />
the IW Bank workforce was restated to include the InvestNet International merger, effective 23 rd July <strong>2012</strong>;<br />
the <strong>Banca</strong> Regionale Europea workforce was restated to include the Banco San Giorgio merger, effective 22 nd October <strong>2012</strong>;<br />
<strong>UBI</strong> Insurance Broker was not included in the Group workforce due to the disposal of the company effective 31 st December <strong>2012</strong>.<br />
67
At the end of <strong>2012</strong>, the total workforce of the <strong>UBI</strong> <strong>Banca</strong> Group numbered 19,086, compared<br />
to 19,369 in December 2011 1 a decrease of 283.<br />
These trends are the result of the almost complete elimination of workers on staff leasing<br />
contracts (-29 contracts, almost all in the network banks), but is principally due to the<br />
reduction in the workforce in terms of employees (-254), nearly half of which concentrated in<br />
the fourth quarter.<br />
Reductions in staff numbers reflects the efforts made to generate generalised efficiencies in all<br />
Group companies, at the same time as the geographical and operational reorganisations that<br />
accompanied the two large-scale branch rationalisations undertaken last year (in February<br />
and December), in addition to the changes to units at the Parent, in the network banks and<br />
the Service Companies.<br />
The apparent exception of Prestitalia (+66 employees) was due to the contribution to that<br />
company of B@nca 24-7 operations consisting of salary and pension-backed loans which<br />
required an increase in the workforce using internal Group staff from governance and<br />
operating units.<br />
Furthermore, the increase recorded in staff numbers at <strong>UBI</strong> Systems and Services (+40<br />
employees), is to be seen in relation to the transfer to that Company of the IW Bank operations<br />
consisting of IT, Back Office, Security and Logistics operations, which involved the transfer of<br />
78 employees, effective from 1 st December.<br />
The decline in staff numbers includes 60 staff leaving after accepting leaving incentive<br />
proposals for employees covered by the safeguards of the "Salva Italia" (Save Italy) decree,<br />
launched in March, and completed within the following three months.<br />
The table gives details of changes in the<br />
type of employee contract, with a total<br />
decrease in employees on the pay-roll over<br />
twelve months of 254 (228 of which on<br />
permanent contracts).<br />
This change is due to:<br />
- 456 staff leaving, of which 112<br />
voluntarily, 109 retired (100 early<br />
on incentive schemes) and 143 for<br />
end-of-contract;<br />
Employees on the payroll<br />
Number 31.12.<strong>2012</strong> 31.12.2011 Change<br />
Total employees 19,105 19,359 -254<br />
of which:permanent 19,010 19,238 -228<br />
on temporary contracts 87 104 -17<br />
apprentices (*) 8 17 -9<br />
(*) Contract for young people between the ages of 18 and 29, by which they acquire a<br />
qualification through training at work which provides them with specific<br />
occupational skills. The duration varies from a minimum of 18 months to a<br />
maximum of 48 months.<br />
- 202 new appointments composed of 61 permanent contracts and 141 temporary<br />
contracts. The latter include the quota of 44 seasonal employees at BPB Immobiliare,<br />
with the remainder being temporary staff hired to support company operations in<br />
<strong>2012</strong>.<br />
Apart from company<br />
mergers, 586 employees<br />
were involved in<br />
intragroup transfers.<br />
As shown in the table no<br />
significant changes in the<br />
composition of personnel by<br />
rank occurred.<br />
Composition of personnel in Group Banks by rank<br />
Number 31.12.<strong>2012</strong> % 31.12.2011 %<br />
Senior managers 379 2.2% 391 2.2%<br />
Middle managers 3rd and 4th level 3,250 18.3% 3,264 18.1%<br />
Middle managers 1st and 2nd level 3,904 22.0% 3,886 21.5%<br />
3rd Professional Area (office staff) 9,992 56.3% 10,256 56.9%<br />
1st and 2nd Professional Area (other staff) 213 1.2% 231 1.3%<br />
TOTAL FOR BANKS 17,738 100.0% 18,028 100.0%<br />
1 The figures published in the consolidated <strong>Financial</strong> Statements as at 31 st December 2011 (19,405 employees) included 38 staff<br />
working in <strong>UBI</strong> Insurance Broker, sold in <strong>2012</strong>; but on the other hand, did not include the 2 employees (from the <strong>Banca</strong> Carmine<br />
and <strong>Banca</strong> Popolare di Ancona) re-employed during the first quarter of <strong>2012</strong>.<br />
68
As at 31 st December <strong>2012</strong> the average age of Group employees was 45 years and two months,<br />
compared to 44 years and four months at the end of 2011, reflecting lower staff turnover,<br />
while the average length of service was between 18 years and six months, compared to 17<br />
years and seven months a year before.<br />
The percentage of part-time employees was 8.6% (7.9% at the end of 2011). Female staff made<br />
up 36.9% of the total, unchanged compared to 36.8% the year before.<br />
Further details in trends and in the composition of the Group workforce are given in the <strong>2012</strong><br />
Social <strong>Report</strong>, which may be consulted.<br />
***<br />
As concerns the fourth quarter, staff numbers fell by 128 which mainly affected employees (in<br />
total -126), due also to a number of temporary contracts coming to an end (28). Staff on<br />
agency leasing contracts were also affected by contracts ending, with a reduction of two in the<br />
quarter.<br />
Redundancies for the period do not include staff leaving under the trade union agreement of<br />
29 th November <strong>2012</strong> and the subsequent agreement signed on 12 th February 2013, for a total<br />
of 736 staff at Group level, of which approximately 600 had already left in January.<br />
Remuneration and incentive policies<br />
Details of remuneration and incentive policies are reported in the Remuneration <strong>Report</strong> which<br />
is given in another part of this document.<br />
The report has been prepared in accordance with the “Supervisory Provisions on remuneration<br />
and incentive policies and practices in banks and banking groups” issued by the Bank of Italy<br />
on 30 th March 2011 and with articles 123-ter of the <strong>Consolidated</strong> Finance Act and 84-quater of<br />
the Issuers’ Regulations. Reference is also made to public disclosure requirements under Pillar<br />
III published in July 2011 by the Basel Committee on Banking Supervision as regulated by<br />
Bank of Italy Circular No. 263 of 27 th December 2006 and subsequent amendments.<br />
Further information is given on the matter in the <strong>UBI</strong> <strong>Banca</strong> report on corporate governance,<br />
again in an attachment to this document.<br />
Personnel management policies and instruments<br />
In a particularly difficult economic context like that of the present, the combined skills and<br />
professional abilities of each staff member represent a fundamental and strategic asset to the<br />
Group. Now more than ever, fostering professional development means growing the intellectual<br />
capital of the Group to create competitive advantages which will provide stability and reliability<br />
to the Group's performance in the long term. We strongly believe that the strength of the<br />
Group is its people and their value, and for this very reason, we have an on-going commitment<br />
to the development of our human resources, their professional skills, and abilities, to ensure<br />
that at every opportunity we nurture these skills and confirm the strategic importance of each<br />
role. To achieve these objectives in a more uniform and synergetic manner, a shared vision of<br />
management development and policies was outlined and implemented, taking into account the<br />
individual requirements of each member company.<br />
With this in mind, all the Group member companies have now adopted a standard role<br />
system, and tools for skill assessment, performance assessment, and measurement of<br />
69
potential. These tools are used to increase knowledge of human resources and to define<br />
actions consistent with supporting their career growth and development in terms of training<br />
requirements, horizontal and vertical mobility, financial rewards, as well as cross company<br />
transfers inside the Group structure.<br />
Yearly measurement of potential and skill assessments were carried out respectively on 98.7%<br />
and 91.2% of the Group staff.<br />
In <strong>2012</strong>, over 200 interviews were carried out using these "managerial appraisal" tools to<br />
protect key roles in terms of new marketplace challenges and to promote the identification of<br />
managers, consistent with the Group strategic goals in terms of organisational change. These<br />
interviews are also an important instrument in identifying targeted career paths and to allow<br />
for management engagement with the Group's key human resources.<br />
Similarly, in order to foster opportunities for professional development, over 300 staff were<br />
assessed in terms of their professional potential, 50% of which were Branch network<br />
commercial managers. The results of these assessments will determine access to career paths<br />
for future Branch Managers.<br />
On the basis of these results, and during the year, in partnership with the Polytechnic of<br />
Milan, an advanced career development course focused on the young talent within the Group<br />
was launched, whereby they enrolled in a two year post-graduate Masters course. (the<br />
following section specifically on training programmes may be consulted in this respect). At the<br />
same time, and as happened in the past, specific career development training courses were<br />
launched for other staff that were also assessed with the aim of strengthening their weakest<br />
skills and competencies.<br />
Trade Union relations<br />
At the beginning of <strong>2012</strong> a process was implemented with the aim, on the one hand, of<br />
rationalising the Group branch network, and on the other of revising the distribution model in<br />
<strong>Banca</strong> Popolare Commercio e Industria, involving the introduction of the "Head Branch-Group<br />
Branch” model, already effective in all Group companies, and fully and finally implemented in<br />
February. The impact on staff working conditions only involved some limited geographical<br />
mobility requirements.<br />
As part of finalising the agreed procedures, on the 20 th April two trade union Memorandums of<br />
Intent were signed relating to the B@nca 24-7 merger into <strong>UBI</strong> <strong>Banca</strong>, following the<br />
contribution to Prestitalia of the B@nca 24-7 line of business consisting of salary backed<br />
lending operations:<br />
with regard to the B@nca 24-7 merger into <strong>UBI</strong> <strong>Banca</strong>, the parties shared the joint mission<br />
of identifying appropriate solutions to minimise the impact on employees affected, by<br />
introducing specific policies relating to insurance cover, supplementary pension benefits,<br />
part-time contracts, and geographic mobility. Mobility itself was limited through identifying<br />
opportune organisational actions to ensure that the distribution of the activities across<br />
various geographic areas was optimised. With the aim of maximising human and<br />
professional capital, particular importance is attributed to retraining and professional<br />
development programmes for staff involved in occupational mobility processes and also for<br />
staff required to work on a different IT system;<br />
a memorandum of intent was signed with trade unions, to regulate overall treatment under<br />
labour agreements with regard to both pay and conditions, for staff involved in the transfer<br />
to Prestitalia, in relation to the contribution to Prestitalia of B@nca 24-7 salary and pension<br />
backed loan operations.<br />
In May <strong>2012</strong> the process commenced of transferring the training and managerial professional<br />
development activities of Group companies to the consortium company <strong>UBI</strong> Academy. The<br />
70
implementation of this programme involved transferring activities previously undertaken by<br />
the <strong>UBI</strong> <strong>Banca</strong> Training Department and launching them at the same time at <strong>UBI</strong> Academy.<br />
This operation which commenced on the 10 th of July did not impact on the relevant staff<br />
involved, neither in terms of geographical mobility, nor in terms of their legal or professional<br />
status.<br />
Again in May negotiations commenced relating to the merger of Banco di San Giorgio into<br />
<strong>Banca</strong> Regionale Europea and they were concluded with the signing of a trade union<br />
memorandum of intent on 30 th of May. This operation formed part of a broader project<br />
designed to strengthen the position of the <strong>UBI</strong> <strong>Banca</strong> Group both in terms of commercial<br />
effectiveness and operational efficiency and its purpose was to simplify the Group structure<br />
through the creation of a single operational unit focused on the north west of the country. This<br />
required adopting limited geographic mobility measures, some transitory, in conjunction with<br />
suitable professional qualification courses and retraining programmes for certain staff.<br />
Agreements were signed at the end of June and the beginning of July at the network banks,<br />
the Parent <strong>UBI</strong> <strong>Banca</strong> and <strong>UBI</strong> Sistemi e Servizi with trade union organisations for the<br />
payment of company bonuses (“employee value added”) relating to 2011. It was agreed during<br />
these negotiations, having examined company performances for the period and with account<br />
taken of the overall economic situation and specifically in relation to the credit sector, to<br />
introduce new, innovative instruments with, in addition to a cash payment, also a “welfare<br />
plan” option which will allow staff to allocate their remuneration to finance services of a social<br />
nature (e.g. educational expenses). Similar discussions commenced in July with the trade<br />
unions at the product companies resulted in the signing of relevant agreements.<br />
In October procedures commenced for the merger of Silf Societa Italiana Leasing and<br />
Finanziamenti Spa into <strong>UBI</strong> <strong>Banca</strong>, with the signing of a trade union agreement on the 12 th of<br />
November. The company integration, within the framework of the overall reorganisation of the<br />
consumer lending arm, did not in itself cause any job losses, nor was any geographical<br />
mobility required of the staff.<br />
Again in October procedures for the transfer of the IW Bank operations to <strong>UBI</strong> Sistemi e<br />
Servizi took place, concluding with the trade union agreement on the 6 th of November. The<br />
transfer, consistent with the Group service model which involves assigning support and<br />
service activities to <strong>UBI</strong>.S for all companies in the consortium group, will allow IW Bank to<br />
better focus on its own business activity.<br />
This did not create any job losses at IW Bank and did not have any significant impact on the<br />
staff involved, except to a limited degree in terms of geographical mobility.<br />
In December the Trade Unions were sent the legislative information regarding <strong>UBI</strong> <strong>Banca</strong>’s sale<br />
of the controlling share packet in <strong>UBI</strong> Insurance Broker to Marine & Aviation JTL Spa.<br />
This operation did not have any impact on the working conditions of <strong>UBI</strong> staff transferred to<br />
the company.<br />
Finally negotiations were commenced on 28 th February 2013 in relation to the merger of<br />
Centrobanca into the Parent.<br />
Training<br />
<strong>UBI</strong> Academy, the corporate university of the <strong>UBI</strong> Group, was established on the 2 nd of July <strong>2012</strong>. It was<br />
formed as a consortium between <strong>UBI</strong> <strong>Banca</strong>, the network banks, <strong>UBI</strong>.S and the main product companies, to<br />
study, plan, advise and provide training and professional managerial development programmes for staff<br />
employed in the Companies of the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
Therefore, from the second half onwards, all activities relating to planning and management of professional<br />
training programmes of the Group were carried out by <strong>UBI</strong> Academy.<br />
71
The key elements of its mission are:<br />
- the clear link between the training courses and overall company strategy in terms of the company's<br />
culture of quality and customer-focus, with the consequent support and involvement extending to all the<br />
main players on the corporate management team;<br />
- forward-thinking and innovation;<br />
- the creation of partnerships with national and international institutes of learning (universities, business<br />
schools, consultancy businesses, research centres) adding value to the In-house School of Teachers;<br />
- the use of training practices that complement classroom-based programmes in terms of offering<br />
innovative distant learning and experience-based training channels;<br />
- a focus on adding value to local communities, fostering social promotional initiatives in addition to<br />
promoting cultural events and activities, research and third-level training.<br />
Based on the key strategies of the Parent, <strong>UBI</strong> Academy proposes the launch of training and professional<br />
development initiatives based on the virtuous balance of three fundamental elements: "Knowledge"<br />
(continued growth of overall knowledge, information, etc., specialisms), "Know-how" (development of skills<br />
for the practical implementation of the acquired Knowledge) and "Will do" (fostering and developing<br />
exemplary behavioural models leading to efficient delivery of services)<br />
Training activities by subject areas in <strong>2012</strong><br />
Subject area<br />
Classroom<br />
Remote<br />
training<br />
Internship<br />
Total<br />
person/days<br />
of training<br />
Insurance 14,353 14,280 - 28,633 28.8% 29,716 28.7%<br />
Commercial 14,861 - 489 15,350 15.4% 9,409 9.1%<br />
Finance 5,172 18 157 5,347 5.4% 4,836 4.7%<br />
Credit 5,277 956 1,111 7,344 7.4% 11,380 11.0%<br />
Managerial-Behavioural 9,531 2,903 - 12,434 12.5% 9,732 9.4%<br />
Regulatory 3,991 16,091 - 20,082 20.2% 26,891 26.0%<br />
Operational and other subjects 1,613 1,304 7,351 10,268 10.3% 11,476 11.1%<br />
TOTAL 54,798 35,552 9,108 99,458 100.0% 103,440 100.0%<br />
%<br />
2011<br />
Total %<br />
person/days<br />
Over 100 thousand days (between classroom training, distance learning and development<br />
programmes) with an average of 5.4 training days per employee (5.6 in 2011, 5.2 in 2010),<br />
were allocated to training activities aimed at promoting, developing and adding value to the<br />
technical and professional knowledge-bases as well as to the experience and managerial skillbases,<br />
in addition to the ethical and cultural behaviours within the Group.<br />
The main initiatives implemented in <strong>2012</strong> were as follows:<br />
the extension of the "Value Programme" 2 to other strategic functions in the business; small<br />
business managers, Corporate Account Managers and private bankers;<br />
training programmes to support the launch of the Branch service model "Mass Market<br />
Team", for employees and referred clients;<br />
the training project aimed at honing the skills for new programme developer roles, a focus<br />
point of the new service model for the branch network;<br />
initiatives relating to "Optimising the anti-Money-Laundering Model" to improve employee<br />
knowledge when dealing with customers on anti-money-laundering legislation;<br />
strengthening and educating employees in areas relating to "pricing excellence" and<br />
"customer satisfaction";<br />
strengthening the financial capabilities of the branch network by focusing on financial<br />
markets and asset allocation analyses.<br />
Almost one third of the whole training activity focused on the technical-professional<br />
competencies (commercial, credit and finance operations) of branch staff.<br />
Insurance topics continued to represent a significant proportion of the training programmes<br />
allocated for the year (29%), with programmes differentiated per market and per client<br />
2 These training programmes, already positively implemented with Bank Managers, over the two years from 2010-2011 involve<br />
assessment workshops to identify exemplary behavioural models and the concrete actions required to improve on-going<br />
performances and client relationships.<br />
72
segment (private, company) focusing specifically on training and up-skilling employees<br />
involved in insurance brokering activities in accordance with the ISVAP 5/2006 Regulation.<br />
Updates on legislation (20% of the total training) is, as in the past, focused on areas relevant<br />
to banking operations, such as "Transparency", "Enforcing health, and safety in the<br />
workplace" and "anti-money-laundering" as previously mentioned.<br />
The managerial training programme targeting roles of responsibility, not only focused on the<br />
professional development of the whole organisation and managerial spectrum, but specifically<br />
concentrated on employee management and motivation in order to foster a greater sense of<br />
team spirit. Staff were also given access to a programme which allowed them the opportunity<br />
to meet with leading managers, businessmen, academics, and university luminaries to<br />
improve their knowledge in the areas of economics, politics, and sociology.<br />
In a period of enormous shake-ups and changes in the competitive landscapes, it is important<br />
for Management to become involved in these programmes, to ensure they are up to date with<br />
changes in the real world, as well as offering them opportunities to reflect and take stock. This<br />
is a strategic resource for the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
With regard to initiatives involving young talent within the Group, forty-five young employees<br />
enrolled in the level II two-year University Masters programme in "Management of banking<br />
companies,” developed in partnership with the Polytechnic Institute of Milan School of<br />
Business.<br />
The entire in-house training team, made up of over 400 employees spent a total of almost 30<br />
thousand days on training (almost 54% of the total training was delivered in the classroom).<br />
The preparation and the up-skilling programmes were structured in the form of training<br />
courses aimed at developing and refining teaching techniques, classroom management, and<br />
the skills of imparting best-practice behavioural models. The trainer's role is not simply one of<br />
transferring knowledge, but the sharing of experiences, positive examples and exemplary<br />
behaviours, so that a shared language, company culture, and values can become embedded<br />
throughout the whole region coupled with a sense of belonging to the Group.<br />
***<br />
The 2013 programme based on the "lifelong learning" model (i.e. continuous learning) is<br />
expected to involve a total investment of 90,000 training days, mainly delivered in classroombased<br />
settings and supported by distance learning and "on the job" training programmes.<br />
Amongst the initiatives planned for the current business are:<br />
the "Quality in the Bank" project, which envisages a programme of initiatives aimed at creating a<br />
greater sense of appreciation throughout the "sales network" of the importance of the quality of the<br />
service offered;<br />
the strengthening of performance, maximising and re-launching of Affluent Managers (Value<br />
programme). This operation is aimed at endorsing exemplary commercial behaviours and at<br />
strengthening the distinctive competencies and performances of Affluent Managers within the<br />
commercial and financial areas;<br />
the strengthening of "excellent competencies" in the new <strong>UBI</strong> Private and Corporate Unity, with high<br />
level training courses focused on the competencies of Managers and Wealth Bankers;<br />
consolidating the training programme aimed at supporting the Mass Market team and dedicated to<br />
employees and customer service employees, focused on refining the new service model and the<br />
commercial behaviours expected;<br />
consolidating the training programme for new business development employees, in terms of<br />
competency training and competency up-skilling;<br />
continuation of the training programme on the new credit monitoring tools, to support the<br />
rationalisation of loan performance monitoring processes, launched at the end of <strong>2012</strong>;<br />
activities undertaken to outline the 2013 commercial objectives, concentrating on prioritising certain<br />
segments and aimed at educating the Branch Managers on performance management of their own<br />
staff;<br />
developing the Branch Managers and the Managers of the new Private and Corporate units knowledge<br />
of compliance procedures within the Group in relation to operational risks and controls, in addition to<br />
MiFID legislation and <strong>Financial</strong> planning and consultancy to reinforce exemplary behavioural models<br />
73
elating to controls, and linking these to the management and to the development of the commercial<br />
activities;<br />
maximising the Group's talents through the pursuit of the aforementioned level II University Masters<br />
in "Management of banking companies" and the launch of further initiatives in partnership with other<br />
Universities in the region;<br />
Other specific initiatives in the area of Diversity Management, aimed particularly at<br />
maximising the value of the over 55 groups, on which the Group has focused particular<br />
attention in light of changes relating to pension legislation, to facilitate reintegration<br />
operationally and within the context of staff on long term absences.<br />
The development of the management culture will continue through a renewed workshop<br />
programme organised with leaders from the world of business and academia as well as the<br />
development of knowledge in the field of management and great company strategies offered by<br />
qualified centres of excellence (Business schools, Universities etc.)<br />
A new initiative aimed at developing "entrepreneurial skills,” strategic goals and leadership<br />
qualities will accompany the 2013 management training programme and the on-going<br />
refresher courses.<br />
With the purpose of involving and empowering staff to assume personal responsibility for<br />
maintaining their skills up to date, as well as developing their own competencies, during the<br />
course of 2013 a new e-Learning interface will be launched allowing each individual employee<br />
to assess their own yearly learning goals, specific to each role and to monitor their own<br />
achievement of these goals.<br />
Internal Communications<br />
The new "<strong>UBI</strong>Life" Corporate Group Portal, which went online in the first half of <strong>2012</strong>, has<br />
moved on to become a consolidated space permanently accessed by Group employees, with a<br />
total number of 100,000 page views per week.<br />
During the year and after a trial period, the "Job Posting" tool became live in all the banks and<br />
Group companies, advertising all vacant professional positions so that employees, potentially<br />
interested in these roles, could apply automatically, thereby not only promoting internal<br />
mobility but also broadening the candidate pool to cover the roles.<br />
As had already occurred in the two previous years, an easy to consult electronic magazine was<br />
created and inserted in the home page of <strong>UBI</strong>Life in order to provide all Group employees with<br />
prompt information on the <strong>UBI</strong> <strong>Banca</strong> Annual General Meeting held on 28 th April <strong>2012</strong>. It<br />
contained the main news on the subjects addressed in the meeting, a few photos of the day and<br />
videos of interviews with the Chairmen of the Management and Supervisory Boards and with<br />
the Chief Executive Officer of <strong>UBI</strong> <strong>Banca</strong>.<br />
Internal Communication activity also involved the use of institutional videos (<strong>UBI</strong>Click) to<br />
furnish updates on Group life and strategies.<br />
Multimedia videos were also produced, not only to support daily operations (e.g. the new credit<br />
transfer procedure introduced in February <strong>2012</strong>), but also for reports on specific projects and<br />
internal communication initiatives (e.g. the results of the first suggestions box on the<br />
“simplicity programme” and on charitable initiatives undertaken by the Group in 2011).<br />
Of significant importance and greatly used by the Group employees were the information<br />
videos on the reorganisation (November <strong>2012</strong>) and leaving incentive scheme and the<br />
suspension/reduction of working hours (December).<br />
In terms of publications, the first edition of the Almanacco YO<strong>UBI</strong> was printed in April, with<br />
news of the main events involving the Group as a whole as well as individual banks and<br />
companies occurring in 2011 and at the beginning of <strong>2012</strong>. The publication was distributed<br />
not only to all employees of the <strong>UBI</strong> <strong>Banca</strong> Group, but also to registered shareholders who<br />
attended the <strong>UBI</strong> <strong>Banca</strong> Annual General Meeting.<br />
74
In addition the creation of the three monthly "We, <strong>UBI</strong> trainers”, for employees who took on<br />
training roles within the organisation.<br />
On the 19 th and 20 th of April two annual conventions were held in Vigevano of the Associations<br />
of Retired Personnel of the former BPB-CV and the former BPCI, which saw the overall<br />
participation of over 500 people and provided the opportunity to give updated information on<br />
the consolidated business results for 2011.<br />
In mid-December the solidarity Christmas lunch was organised for disadvantaged people and<br />
families. This is a traditional event for those most in need and made possible thanks to the<br />
commitment across all Group companies and banks. The event took place in every town and<br />
city where the banks and companies have offices, with the involvement of the Bari Bitonto<br />
Caritas Diocese (for the Bari offices) and the Exodus Foundation (for all the other offices). Over<br />
150 employees volunteered to serve lunches to over one thousand guests, including numerous<br />
children.<br />
Finally, on 20 th December, at the New Bergamo Fair, a convention on the subject "<br />
Opportunities in crises" brought together over 1,400 colleagues from all areas of the Group<br />
structure.<br />
In 2013 the range of internal communication tools and initiatives described above, was further<br />
enhanced by several initiatives such as:<br />
<strong>UBI</strong>Pod, or the regular "radio transmissions" that can be heard on the <strong>UBI</strong>Life, intranet<br />
portal, including brief informative discussions on company topics;<br />
the trial launch by the developers, of the first "professional community" space, a special<br />
area of the <strong>UBI</strong>Life portal, to share documents, activities and experiences, specific to groups<br />
of professionals;<br />
the development of <strong>UBI</strong>Life consistent with the organisational transformation of the Group,<br />
through the redefinition of the structure of some of the Portal pages, as well as the on-going<br />
functional improvements to the tools that support work activities.<br />
The working environment and staff welfare<br />
The section “Principal risks and uncertainties to which the <strong>UBI</strong> <strong>Banca</strong> Group is exposed” may<br />
be consulted for information on matters regulated by Legislative Decree No. 81 of 9 th April<br />
2008 (health and safety at the workplace), while information on environmental responsibility is<br />
given as part of the information on corporate social and environmental responsibility<br />
contained in the section “other information”.<br />
The main initiatives carried forward in the field of welfare are reported as part of the<br />
information given on corporate social responsibility contained in the section “Other<br />
information.”<br />
75
The scope of Consolidation<br />
The companies included in the consolidation as at 31 st December <strong>2012</strong> are listed below,<br />
divided into subsidiaries (fully consolidated), and associates (accounted for using the equity<br />
method).<br />
The percentage of control or ownership attributable to the Group (direct or indirect), their<br />
headquarters (registered address or operating headquarters) and the share capital is also<br />
indicated for each of them.<br />
Fully consolidated companies (control is by the Parent of the Group where no other indication is<br />
given):<br />
1. Unione di Banche Italiane Scpa – <strong>UBI</strong> <strong>Banca</strong> (Parent)<br />
registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: €2,254,367,552.50 1<br />
2. <strong>Banca</strong> Popolare di Bergamo Spa (100% controlled)<br />
registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: €1,350,514,252<br />
3. Banco di Brescia San Paolo CAB Spa (100% controlled)<br />
registered address: Brescia, Corso Martiri della Libertà, 13 – share capital: €615,632,230.88<br />
4. <strong>Banca</strong> Popolare Commercio e Industria Spa (75.0769% controlled)<br />
registered address: Milano, Via della Moscova, 33 – share capital: €934,150,467.60<br />
5. <strong>Banca</strong> Regionale Europea Spa (74.7159% controlled) 2<br />
registered address: Cuneo, Via Rome, 13 – share capital: €587,892,824.35<br />
6. <strong>Banca</strong> Popolare di Ancona Spa (92.9711% controlled)<br />
registered address: Jesi (Ancona), Via Don A. Battistoni, 4 – share capital: €147,301,670.32<br />
7. <strong>Banca</strong> Carime Spa (92.8371% controlled)<br />
registered address: Cosenza, Viale Crati snc – share capital: €1,468,208,505,92<br />
8. <strong>Banca</strong> di Valle Camonica Spa (74.2439% controlled and BBS holds 8.7156%)<br />
registered address: Breno (Brescia), Piazza Repubblica, 2 – share capital: €2,738,693<br />
9. Banque de Dépôts et de Gestion Sa (100% controlled)<br />
registered address: Avenue du Théâtre, 14 - Lausanne (Switzerland) – share capital: 10,000,000<br />
Swiss francs<br />
10. <strong>UBI</strong> <strong>Banca</strong> International Sa (91.1959% controlled and 5.4825% held by BBS, 3.1598% held by<br />
BPB and 0.1618% by BRE)<br />
registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: €70,613,580<br />
11. <strong>UBI</strong> Trustee Sa (100% controlled by <strong>UBI</strong> <strong>Banca</strong> International)<br />
registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: €250,000<br />
12. <strong>UBI</strong> Capital Singapore Pte Ltd (100% controlled by <strong>UBI</strong> <strong>Banca</strong> International)<br />
registered address: 47 Scotts Road # 06-01/02, Goldbell Towers, 228233 Singapore – share capital:<br />
10,600,000 Singapore dollars<br />
13. Prestitalia Spa (100% controlled)<br />
registered address: Bergamo, Via A. Stoppani, 15 – share capital: €153,997,228<br />
14. IW Bank Spa (75.3750% controlled and 23.4960% held by Centrobanca) 3<br />
registered address: Milano, Via Cavriana, 20 – share capital: €18,404,795<br />
15. <strong>UBI</strong> <strong>Banca</strong> Lombarda Private Investment Spa (100% controlled)<br />
1 This is the share capital as at 5 th February 2013, modified following the exercise of conversion rights.<br />
As at 31 st December <strong>2012</strong>, the share capital amounted to €2,254,367,512.50, an increase of €615 compared to €2,254,366,897.50<br />
as at 31 st December 2011, the result of a similar conversion which occurred on 4 th July <strong>2012</strong>.<br />
2 The percentage of control relates to the total share capital held.<br />
3 In reality the Group fully controls this online bank, because the remaining shares, amounting to 1.1290% of the share capital, are<br />
held in portfolio by IW Bank (and as treasury shares do not pay a dividend).<br />
76
egistered address: Brescia, Via Cefalonia, 74 – share capital: €67,950,000<br />
16. Centrobanca Spa (94.3231% controlled and BPA a 5.4712% interest held)<br />
registered address: Milano, Corso Europa, 16 – share capital: €369,600,000<br />
17. Centrobanca Sviluppo Impresa SGR Spa (100% controlled by Centrobanca)<br />
registered address: Milano, Corso Europa, 16 – share capital: €2,000,000<br />
18. <strong>UBI</strong> Pramerica SGR Spa (65% controlled)<br />
operating headquarters: Milano, Via Monte di Pietà, 5 – share capital: €19,955,465<br />
19. <strong>UBI</strong> Management Company Sa (100% controlled by <strong>UBI</strong> Pramerica SGR)<br />
registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: €125,000<br />
20. <strong>UBI</strong> Insurance Broker Srl (100% controlled) 4<br />
registered address: Bergamo, Via f.lli Calvi, 15 – share capital: €3,760,000<br />
21. <strong>UBI</strong> Leasing Spa (98.9927% controlled)<br />
registered address: Brescia, Via Cefalonia, 74 – share capital: €241,557,810 5<br />
22. Unione di Banche Italiane per il Factoring Spa - <strong>UBI</strong> Factor Spa (100% controlled)<br />
registered address: Milan, Via f.lli Gabba, 1 – share capital: €36,115,820<br />
23. BPB Immobiliare Srl (100% controlled)<br />
registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: €185,680,000<br />
24. Società Bresciana Immobiliare Mobiliare - S.B.I.M. Spa (100% controlled)<br />
registered address: Brescia, Via A. Moro, 13 – share capital: €35,000,000<br />
25. Società Lombarda Immobiliare Srl - SOLIMM (100% controlled)<br />
registered address: Brescia, Via Cefalonia, 74 – share capital: €100,000<br />
26. BPB Funding Llc (100% controlled)<br />
registered address: One Rodney Square, 10 th floor, Tenth and King Streets, Wilmington, New Castle<br />
County, Delaware, USA – share capital: €1,000,000<br />
27. BPB Capital Trust (100% controlled by BPB Funding Llc)<br />
registered address: One Rodney Square, 10 th floor, Tenth and King Streets, Wilmington, New Castle<br />
County, Delaware, USA – share capital: €1,000<br />
28. <strong>Banca</strong> Lombarda Preferred Capital Company Llc (100% controlled)<br />
registered address: 1209, Orange Street the Corp. Trust Center, Wilmington, New Castle County,<br />
Delaware, USA – share capital: €1,000<br />
29. <strong>Banca</strong> Lombarda Preferred Securities Trust (100% controlled)<br />
registered address: 1209, Orange Street the Corp. Trust Center, Wilmington, New Castle County,<br />
Delaware, USA – share capital: €1,000<br />
30. BPCI Funding Llc (100% controlled)<br />
registered address: One Rodney Square, 10 th floor, Tenth and King Streets, Wilmington, New Castle<br />
County, Delaware, USA – share capital: €1,000,000<br />
31. BPCI Capital Trust (100% controlled by BPCI Funding Llc)<br />
registered address: One Rodney Square, 10 th floor, Tenth and King Streets, Wilmington, New Castle<br />
County, Delaware, USA – share capital: €1,000<br />
32. <strong>UBI</strong> Fiduciaria Spa (100% controlled)<br />
registered address: Brescia, Via Cefalonia, 74 – share capital: €1,898,000<br />
33. <strong>UBI</strong> Gestioni Fiduciarie Sim Spa (100% controlled by <strong>UBI</strong> Fiduciaria)<br />
registered address: Brescia, Via Cefalonia, 74 – share capital: €1,040,000<br />
34. Coralis Rent Srl (100% controlled)<br />
registered address: Milano, Via f.lli Gabba, 1 – share capital: €400,000<br />
35. <strong>UBI</strong> Sistemi e Servizi SCpA 6 – Consortium Stock Company (70.3592% controlled and 4.3154%<br />
held by BRE; 2.8769% held by: BPB, BBS, BPCI, BPA and <strong>Banca</strong> Carime; 2.8757% held by IW<br />
Bank; 1.4385% held by: <strong>Banca</strong> di Valle Camonica, <strong>UBI</strong> <strong>Banca</strong> Private Investment, <strong>UBI</strong> Pramerica<br />
4 The company was sold on 21 st December <strong>2012</strong> and was consolidated at year-end for income statement items only.<br />
5 Following the increase in the share capital subscribed by the Parent in January 2013, the share capital rose to €541,557,810.<br />
6 The Group holds a 98.49% controlling interest in the share capital of <strong>UBI</strong>.S; 1.44% is held by <strong>UBI</strong> Assicurazioni and the remaining<br />
0.07% by <strong>UBI</strong> Insurance Broker.<br />
77
SGR and Centrobanca; 0.7192% held by <strong>UBI</strong> Factor; 0.0719% held by Prestitalia; and 0.0097% held<br />
by <strong>UBI</strong> Academy)<br />
registered address: Brescia, Via Cefalonia, 62 – share capital: €36,149,948.64<br />
36. <strong>UBI</strong> Academy SCRL – Limited Consortium Company (68.5% controlled and 3% held by: BPB,<br />
BBS, BPCI, BPA, <strong>Banca</strong> Carime, BRE and <strong>UBI</strong>.S; 1.5% held by: <strong>Banca</strong> di Valle Camonica, IW Bank,<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment, <strong>UBI</strong> Pramerica SGR, <strong>UBI</strong> Leasing, <strong>UBI</strong> Factor and Prestitalia)<br />
registered address: Bergamo, Via f.lli Calvi, 9 – share capital: €100,000<br />
37. <strong>UBI</strong> Finance Srl 7 (60% controlled)<br />
registered address: Milano, Foro Bonaparte, 70 – share capital: €10,000<br />
38. <strong>UBI</strong> Finance CB 2 Srl 8 (60% controlled)<br />
registered address: Milano, Foro Bonaparte, 70 – share capital: €10,000<br />
39. Albenza 3 Srl 9<br />
40. Orio Finance Nr. 3 Plc 9<br />
41. 24-7 Finance Srl 10<br />
42. Lombarda Lease Finance 4 Srl 11<br />
43. <strong>UBI</strong> Finance 2 Srl 12<br />
44. <strong>UBI</strong> Finance 3 Srl 13<br />
45. <strong>UBI</strong> Lease Finance 5 Srl 14<br />
46. <strong>UBI</strong> SPV BBS <strong>2012</strong> Srl 15<br />
47. <strong>UBI</strong> SPV BPCI <strong>2012</strong> Srl 15<br />
48. <strong>UBI</strong> SPV BPA <strong>2012</strong> Srl 15<br />
Companies consolidated for using the equity method (the investment is by the Parent where no<br />
other indication is given):<br />
1. Aviva Vita Spa (50% interest held) 16<br />
registered address: Milan, Via Scarsellini, 14 – share capital: €155,000,000<br />
2. Aviva Assicurazioni Vita Spa (formerly <strong>UBI</strong> Assicurazioni Vita Spa) 16 (49.9999% interest held)<br />
registered address: Milan, Via Scarsellini, 14 – share capital: €49,721,776<br />
3. Lombarda Vita Spa (40% interest held)<br />
registered address: Brescia, Corso Martiri della Libertà, 13 – share capital: €185,300,000<br />
4. <strong>UBI</strong> Assicurazioni Spa (49,9999% interest held)<br />
registered address: Milano, via Tolmezzo, 15 – share capital: €32,812,000<br />
7 A special purpose entity in accordance with Law No. 130/1999, this company, enrolled on the general list of intermediaries<br />
pursuant to Art. 106 of the consolidated banking act, was formed on 18 th March 2008 to allow <strong>UBI</strong> <strong>Banca</strong> to implement a<br />
programme to issue covered bonds on residential mortgages.<br />
8 A special purpose entity in accordance with Law No. 130/1999, this company, enrolled on the general list of intermediaries<br />
pursuant to Art. 106 of the consolidated banking act, was formed on 20 th December 2011 to allow the <strong>UBI</strong> <strong>Banca</strong> to implement a<br />
second programme to issue covered bonds on commercial non residential mortgages.<br />
9 Special purpose entities formed in compliance with Law No. 130/1999 for the securitisations performed in 2001 and 2002 by the<br />
former BPB-CV Scrl (Albenza 3 Srl) and by BPU International Finance Plc Ireland – subsequently closed down – (Orio Finance Nr. 3<br />
Plc). They were consolidated because they are in reality controlled, since their assets and liabilities were originated by Group<br />
member companies. The consolidation only concerns those assets subject to securitisation and the relative liabilities issued.<br />
10 A special purpose entity used in compliance with Law No. 130/1999 for the B@nca 24-7 securitisations performed in 2008. It was<br />
consolidated because this company is in reality controlled, since its assets and liabilities were originated by a Group member<br />
company. <strong>UBI</strong> <strong>Banca</strong> holds a 10% stake.<br />
11 A special purpose entity formed in accordance with Law No. 130/1999 when a securitisation was performed in 2005 by SBS<br />
Leasing. It was consolidated because this company is in reality controlled, since its assets and liabilities were originated by a<br />
Group member company. <strong>UBI</strong> <strong>Banca</strong> holds a 10% stake.<br />
12 A special purpose entity used in accordance with Law No. 130/1999 for the securitisation of a portfolio of performing loans<br />
performed by Banco di Brescia at the beginning of 2009. It was consolidated because this company is in reality controlled, since its<br />
assets and liabilities were originated by a Group member company. <strong>UBI</strong> <strong>Banca</strong> holds a 10% stake.<br />
13 A special purpose entity used in accordance with Law No. 130/1999 for the securitisation of a portfolio of performing loans<br />
performed by <strong>Banca</strong> Popolare di Bergamo at the end of 2010. It was consolidated because this company is in reality controlled,<br />
since its assets and liabilities were originated by a Group member company. <strong>UBI</strong> <strong>Banca</strong> holds a 10% stake.<br />
14 A special purpose entity formed in accordance with Law No. 130/1999 for the securitisation of performing loans by <strong>UBI</strong> Leasing in<br />
November 2008. It was consolidated because this company is in reality controlled, since its assets and liabilities were originated by<br />
a Group member company. <strong>UBI</strong> <strong>Banca</strong> holds a 10% stake.<br />
15 A special purpose entity formed in accordance with Law No. 130/1999 for the securitisation of the performing loans to SMEs of<br />
some network banks (Banco di Brescia, <strong>Banca</strong> Popolare Commercio e Industria and <strong>Banca</strong> Popolare di Ancona). They were<br />
consolidated because they are in reality controlled, since their assets and liabilities were originated by Group member companies.<br />
<strong>UBI</strong> <strong>Banca</strong> holds a 10% stake in each of them.<br />
16 The companies in the Aviva Group transferred their registered offices and operating headquarters with effect from 1 st November<br />
<strong>2012</strong>.<br />
78
5. Polis Fondi SGRpA (19.6% interest held)<br />
registered address: Milano, Via Solferino, 7 – share capital: €5,200,000<br />
6. Lombarda China Fund Management Company 17 (49% interest held)<br />
registered address: 8F, No.66, BEA Finance Tower, Huayuanshiqiao Road, Pudong New Area,<br />
Shanghai (China) – share capital: 120,000,000 yuan/renminbi<br />
7. SF Consulting Srl (35% interest held)<br />
operating headquarters: Mantova, Via P.F. Calvi, 40 – share capital: €93,600<br />
8. Sofipo Sa (30% interest held by Banque de Dépôts et de Gestion)<br />
registered address: Via Balestra, 12 - Lugano (Switzerland) – share capital: 2,000,000 Swiss francs<br />
9. SPF Studio Progetti Finanziari Srl (25% interest held by BPA)<br />
registered address: Roma, Via National, 243 – share capital: €92,960<br />
10. Prisma Srl (20% interest held)<br />
registered address: Milano, Via S. Tecla, 5 – share capital: €120,000<br />
11. Siderfactor Spa – in liquidation (27% interest held by <strong>UBI</strong> Factor) 18<br />
registered address: Milano, Via f.lli Gabba, 1/A – share capital: €1,200,000<br />
12. Capital Money Spa (20.6711% interest held)<br />
registered address: Milano, Via Lausanne, 16 – share capital: €2,042,955<br />
13. BY YOU Spa – in liquidation (former Rete Mutui Italia Spa, 10% interest held) 19<br />
registered address: Milan, Viale Vittorio Veneto, 2/A – share capital: €650,000<br />
14. UFI Servizi Srl (23,1667% interest held by Prestitalia)<br />
registered address: Roma, Via G. Severano, 24 – share capital: €150,000<br />
Changes in the consolidation scope<br />
No changes were made to the scope of the consolidation compared to 31 st December 2011,<br />
except for those reported below. Details of the changes are grouped on the one hand into<br />
action taken to rationalise the ownership structure of the Group (consistent with that which<br />
has already been reported in the section “Significant events that occurred during the year”)<br />
and changes which involved shareholdings in banks and other companies.<br />
The following action already announced to rationalise Group structure and activities was<br />
completed in <strong>2012</strong>:<br />
• the creation of a single banking operation in the North West<br />
The merger of Banco di San Giorgio into <strong>Banca</strong> Regionale Europea (decided by the Boards of<br />
Directors of the two banks on 21 st December 2011):<br />
- on 27 th March <strong>2012</strong>, the Management Board of <strong>UBI</strong> <strong>Banca</strong> and, on 2 nd and 3 rd April<br />
<strong>2012</strong>, the Boards of BRE and BSG approved the modifications to the parameters for the<br />
merger to take account of the results of impairment tests conducted at the end of 2011.<br />
Those modifications resulted in a new exchange ratio of 2.33 ordinary shares of BRE for<br />
each ordinary share of BSG;<br />
- on 16 th May <strong>2012</strong> the Bank of Italy (with a subsequent addition on 25th May) issued its<br />
authorisation, in accordance with Art. 57 of Legislative Decree No. 385/1993 (the<br />
consolidated banking act), for this business combination transaction, while on 30 th May<br />
<strong>2012</strong> the merger plan was filed with and entered into the Register of Companies;<br />
- on 23 rd August, BRE acquired all the shares held by <strong>UBI</strong> <strong>Banca</strong> in BSG at a price per<br />
share of €4.344 (as a preliminary step to the merger): 26,001,474 shares (38.1927% of<br />
the share capital) therefore changed hands for €112.9 million;<br />
17 The company will change its name to Zhong Ou Fund Management Co.<br />
18 The company was removed from the Company Register on 3 rd January 2013 following the completion of the liquidation procedures,<br />
for which the accounting allocation took place on 21 st December <strong>2012</strong>.<br />
19 The company is consolidated because <strong>UBI</strong> <strong>Banca</strong> holds 20% of the voting rights and a pledge on a further 10% of the share capital.<br />
79
- on 17 th September, the resolution of an Extraordinary Shareholders' Meeting of Banco di<br />
San Giorgio (held on 7 th September) which approved the bank’s merger into BRE was<br />
filed with the Company Registrar of Genoa.<br />
- in the period from 17 th September to 2 nd October <strong>2012</strong>, a put option, and that is the right<br />
to have one’s shares purchased, was exercised on the basis of valuable consideration<br />
calculated using the same criteria as those used for withdrawal from the company<br />
(article 2437-ter of the Italian Civil Code) and set at €4.40 for each share sold. The put<br />
option, granted by the surviving company in accordance with Art. 2505-bis of the Italian<br />
Civil Code, resulted in the purchase of 1,748,855 shares, with a payout of approximately<br />
€7.7 million, which brought control of BSG by BRE up to 98.2616%. Shareholders who<br />
did not exercise their put option were allotted 2,757,522 newly issued ordinary shares<br />
(inclusive of actual rounded fractions) of the surviving company, on the basis of an<br />
exchange ratio of 2.33 ordinary new BRE shares with a nominal value of €0.65 per<br />
share for each share of BSG held, with a nominal value of €1.50 per share, there being<br />
no provision for cash settlements;<br />
- on 22 nd October <strong>2012</strong> the merger of Banco di San Giorgio into <strong>Banca</strong> Regionale Europea<br />
became effective, while for accounting and tax purposes the transaction took effect from<br />
1 st January <strong>2012</strong>. As a result of the merger, BRE acquired the stakes previously held by<br />
BSG in <strong>UBI</strong> <strong>Banca</strong> International (0,1618% of the share capital) and in <strong>UBI</strong> Sistemi e<br />
Servizi (1,4799%) in its investment portfolio;<br />
- Banco di San Giorgio has no longer been included in the consolidation since 31 st<br />
December <strong>2012</strong>.<br />
<strong>Banca</strong> Regionale Europea Spa: as a result of the above, the share capital of BRE rose by<br />
€1,136,755.75 to €587,892,824.35 (€468,880,348.04 at the end of 2011, with account<br />
taken of the increase in the share capital carried out free of charge described later in this<br />
report), while at the end of the year, the total stake held by <strong>UBI</strong> <strong>Banca</strong> stood at 74.7159%<br />
(74.9437% twelve months before) and in particular at 79.8256% of the ordinary shares, at<br />
26.4147% of the privileged shares and 59.1400% of the savings shares.<br />
During the course of the year, private individual shareholders sold 6,012 savings shares to<br />
<strong>UBI</strong> <strong>Banca</strong>, which increased its percentage stake from 59.1270% as at 31 st December 2011<br />
to 59.1400% at the end of the year.<br />
• rationalisation of the consumer credit sector<br />
The merger of B@nca 24-7 into the Parent (approved by the Board of Directors of the merged<br />
bank on 26 th March <strong>2012</strong> and by the Supervisory Board on 28 th March <strong>2012</strong>) and the<br />
specialisation of Prestitalia in salary backed loans.<br />
Prestitalia Spa:<br />
- on 23 rd May <strong>2012</strong> an extraordinary shareholders’ meeting approved the following:<br />
the replenishment of losses recognised in the balance sheet as at 31 st March <strong>2012</strong>,<br />
amounting to approximately €7 million. While not subject to the provisions of Art.<br />
2446, paragraph one of the Italian Civil Code (reduction of the share capital for losses)<br />
it was nevertheless considered advisable before increasing the share capital to first<br />
reduce it from €46,385,482 to €39,359,617, by cancelling 8,085 shares (nominal<br />
amount of €869 per share);<br />
an increase in the capital by a total of €145 million in order to equip the company<br />
with adequate regulatory capital to support its acquisition of B@nca 24-7’s “salary<br />
and pension-backed loans and deduction authorisation” (hereinafter “salary-backed”)<br />
operations. Consequently, 90,625 shares were issued with a nominal value of €869<br />
each, offered with option rights to B@nca 24-7, the sole shareholder, at a price of<br />
€1,600 per share, which brought the share capital up from €39,359,617 to<br />
€118,112,742 (equivalent to 135,918 shares). The total increase in the capital<br />
(€145,000,000) therefore consisted of €78,753,125 allocated to the share capital and<br />
€66,246,875 recognised within the share premium reserve;<br />
- on 25 th June <strong>2012</strong> an Extraordinary Shareholders’ Meeting passed the following<br />
resolutions:<br />
a further increase in the share capital of €35,884,486, to bring that capital up from<br />
€118,112,742 to €153,997,228, through the issue of 41,294 new ordinary shares for<br />
a nominal amount of €869 each, to be offered with option rights to B@nca 24-7, the<br />
80
sole shareholder and to be paid for in kind by the contribution of its salary-backed<br />
loan operations;<br />
the transfer for operational and organisational purposes of the registered address<br />
from 131/L via Ostiense, Rome, to 15 via Stoppani, Bergamo.<br />
B@nca 24-7 Spa:<br />
- on 25 th June <strong>2012</strong> (with effect, for legal, accounting and tax purposes from 1 st July<br />
<strong>2012</strong>), in full subscription of and payment for the shares issued, B@nca 24-7<br />
contributed to Prestitalia its salary-backed operations, consisting of all the assets,<br />
liabilities and contractual relationships relating to the aforementioned operations,<br />
concerning the processing, approval, completion and after sales management of the<br />
salary-backed loans contributed, on the basis of the value estimated using the dividend<br />
discount model performed by an independent appraiser. In detail, the balance sheet as<br />
at 31 st March <strong>2012</strong> recorded total assets of €3.2 billion, of which €3.060 billion<br />
consisting of loans and advances to customers.<br />
In return for the contribution, B@nca 24-7 was assigned 41,294 new shares with a<br />
nominal value of €869 each in the recipient of the contribution, fully paid-up, with a<br />
total nominal value of €35,884,486;<br />
- on 5 th July <strong>2012</strong>, the deed of merger of B@nca 24-7 into <strong>UBI</strong> <strong>Banca</strong> was signed, in<br />
implementation of resolutions approved by the respective Boards and in compliance with<br />
the legal authorisations obtained. As B@nca 24-7 was wholly owned, the merger fell<br />
within the scope of application of the simplified procedure pursuant to Art. 2505 of the<br />
Italian Civil Code;<br />
- on 23 rd July <strong>2012</strong>, the merger of B@nca 24-7 into <strong>UBI</strong> <strong>Banca</strong> took effect legally, while for<br />
accounting and tax purposes it was effective from 1 st January<strong>2012</strong>.<br />
As a result of the transaction, the Parent acquired in its portfolio the stakes previously<br />
held by the merged bank in Prestitalia (100% of the share capital) and in <strong>UBI</strong> Sistemi e<br />
Servizi (1.4799%);<br />
- this consumer credit bank has not been included in the consolidation since 30 th<br />
September <strong>2012</strong>.<br />
SILF Spa:<br />
- on 17 th October <strong>2012</strong>, the Bank of Italy authorised the merger of Società Italiana Leasing<br />
e Finanziamento Spa (SILF) into <strong>UBI</strong> <strong>Banca</strong> which held full control of it;<br />
- on 23 rd November an extraordinary shareholders’ meeting of SILF and the Supervisory<br />
Board of the Parent approved the business combination transaction, to be carried out by<br />
means of the simplified procedure pursuant to Art. 2505 of the Italian Civil Code;<br />
- on 21 st December <strong>2012</strong> the merger of SILF into <strong>UBI</strong> <strong>Banca</strong> became effective (with effect for<br />
accounting and tax purposes from 1 st January <strong>2012</strong>).<br />
As a result, the Parent acquired the stake previously held by the merged company in <strong>UBI</strong><br />
Sistemi e Servizi (0.074%) in its equity portfolio;<br />
- the company has not been included in the consolidation since 31 st December <strong>2012</strong>.<br />
Barberini Sa – in liquidation:<br />
- on 30 th March <strong>2012</strong>, a Shareholders' Meeting of this Belgian registered company (100%<br />
controlled) passed a resolution to close it down in advance and to put it into liquidation<br />
(deed filed on the 24 th April with the Brussels Court of Commerce). The sole purpose of<br />
Barberini (both in Belgium and abroad) was the management of the equity investment in<br />
Prestitalia Spa, sold in January 2011 to B@nca 24-7. Since it held no other investments<br />
in portfolio, the governing bodies passed a resolution to wind it up and prepared<br />
liquidation financial statements as at and for the period ended 31 st January <strong>2012</strong>. The<br />
company was removed from the Company Register on 25 th October <strong>2012</strong>, with the<br />
preparation by the receiver appointed of a document entitled “Décisions Ecrites de<br />
l’Actionnaire Unique”, which completed the liquidation procedures for the company, on<br />
the basis of the Belgian commercial and company law applicable;<br />
- the company has not been included in the consolidation since 31 st December <strong>2012</strong>.<br />
• optimisation of foreign subsidiary activities<br />
<strong>UBI</strong> <strong>Banca</strong> International acquires <strong>UBI</strong> Capital Singapore Pte (formerly BDG Singapore Pte).<br />
81
On 30 th May <strong>2012</strong>, the acquisition of the former BDG Singapore Pte by the Luxembourg<br />
bank was completed for consideration of 170,000 Singapore dollars, calculated on the basis<br />
of an expert appraisal. In detail:<br />
- <strong>UBI</strong> <strong>Banca</strong> International Sa: on 2 nd April <strong>2012</strong>, an increase in the share capital of<br />
€11,542,830 was performed raising it from €59,070,750 (December 2011) to<br />
€70,613,580. This operation, which saw the issue of a total of 22,633 new shares with a<br />
nominal value of €510 each, was achieved partly as a no cost issue, by freeing up<br />
available reserves (€7,090,530 equivalent to 13,903 new shares, allotted on a pro-rata<br />
basis to all shareholders) and partly through an issue against cash payment fully<br />
subscribed by <strong>UBI</strong> <strong>Banca</strong>, the majority shareholder (for €7,909,380, of which a share<br />
premium of €3,457,080, with the issue of 8,730 new shares – nominal value of €510 per<br />
share and a share premium of €396). Strengthening the capital not only allowed the<br />
bank to maintain a solvency ratio above the minimum level recommended by the<br />
Luxembourg Supervisory Authority (9%), but it was also designed to support the<br />
acquisition of the entire investment in the former BDG Singapore Pte.<br />
Following that ownership transaction, at the end of the year the percentage interests<br />
held by the investors involved had changed as follows: <strong>UBI</strong> <strong>Banca</strong> controlled <strong>UBI</strong> <strong>Banca</strong><br />
International with a 91.1959% interest (90.6031% in December 2011), while BBS held<br />
5.4825% (5.8519% at the end of year), BPB held 3.1598% (down from 3.3723% before)<br />
and BRE held 0.1618% (down from 0.1727%);<br />
- <strong>UBI</strong> Capital Singapore Pte Ltd: on 30 th May <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> International acquired the<br />
entire interest held (100%) in BDG Singapore Pte Ltd from Banque de Dépôts et de<br />
Gestion 20 .<br />
On 5 th June <strong>2012</strong>, following approval by shareholders, the company changed its name<br />
from BDG Singapore Pte Ltd to <strong>UBI</strong> Capital Singapore Pte Ltd. As authorised by<br />
shareholders in the same meeting, the Directors then approved an increase in the share<br />
capital, fully subscribed by the sole shareholder <strong>UBI</strong> <strong>Banca</strong> International, amounting to<br />
five million Singapore dollars, bringing it up from 5,600,000 SGD in December 2011 to<br />
10,600,000 SGD at the end of the year.<br />
• contribution of IW Bank operations to <strong>UBI</strong> Sistemi e Servizi<br />
On 30 th November <strong>2012</strong> the contribution of IW Bank operations took effect. It was approved<br />
on 8 th October <strong>2012</strong> by the Board of IW Bank and on 11 th October <strong>2012</strong> by the Board of the<br />
service company.<br />
<strong>UBI</strong> Sistemi e Servizi SCpA:<br />
- on 26 th November <strong>2012</strong>, an extraordinary shareholders’ meeting took account of the<br />
valuation of the operations (pursuant to Art. 2343 of the Italian Civil Code) performed by<br />
an independent expert and approved an increase in the share capital of €1,013,548.64.<br />
The share capital was therefore raised from €35,136,400 (December 2011) to<br />
€36,149,948.64 (consisting of 69,519,132 shares), by the issue of 1,949,132 ordinary<br />
shares with a nominal value of €0.52 each and a premium per share of €0.24, at the<br />
service of the contribution made by IW Bank of its operations termed “ICT and<br />
Organisation”;<br />
IW Bank Spa:<br />
- on 26 th November, the contribution agreement was signed which involved the<br />
assignment to IW Bank of new shares (1,949,132) issued by <strong>UBI</strong>.S, with full recognition<br />
of the value of the operations contributed within the equity of the company in receipt of<br />
them (share capital and reserves not distributed). On completion of the transactions just<br />
reported, the stake held by the internet bank in the service company had risen from<br />
0.074% in December 2011 to 2.8757% at the end of <strong>2012</strong>.<br />
• share capital increases: use of valuation reserves<br />
Free of charge capital increases were performed in June <strong>2012</strong>, using reserves that had been<br />
formed following property revaluations pursuant to prior year special laws:<br />
20 With regard to Banque de Dépôts et de Gestion, a letter of 21 st December <strong>2012</strong> from the Federal Supervisory Authority for<br />
<strong>Financial</strong> Markets officialised the return of this Swiss bank to ordinary supervision after the implementation of corrective action in<br />
response to recommendations made by that authority in the first half of <strong>2012</strong>.<br />
82
• <strong>Banca</strong> Popolare di Ancona Spa: on 26 th June <strong>2012</strong>, an extraordinary shareholders’<br />
meeting approved an increase in the share capital free of charge by making use of<br />
revaluation reserves amounting to €24,958,090.32. The operation – which did not<br />
involve the issue of new shares, but the increase from €5 to €6.02 of the nominal value<br />
of each of the 24,468,716 outstanding shares – increased the share capital of this<br />
Marches bank to €147,301,670.32 (€122,343,580 as at 31 st December 2011);<br />
• <strong>Banca</strong> Regionale Europea Spa: on 27 th June <strong>2012</strong>, an extraordinary shareholders’<br />
meeting approved an increase in the share capital at no cost by making use of<br />
revaluation reserves amounting to €117,220,087.01. The operation – which did not<br />
involve the issue of new shares, but the increase from €0.52 to €0.65 of the nominal<br />
value of each of the 901,692,977 outstanding shares – increased the share capital of this<br />
Piedmont bank to €586,100,435.05 (468,880,348.04 as at 31 st December 2011).<br />
• increase in securitised assets eligible for refinancing with the ECB<br />
<strong>UBI</strong> SPV BBS <strong>2012</strong> Srl – <strong>UBI</strong> SPV BPCI <strong>2012</strong> Srl – <strong>UBI</strong> SPV BPA <strong>2012</strong> Srl: on 19 th April<br />
<strong>2012</strong> three new special purpose vehicles were formed for the respective network banks. The<br />
companies each have share capital of €10,000 and the Parent holds a 10% stake in each of<br />
them, while the remaining 90% of each is held by three different Dutch registered<br />
foundations (stichting).<br />
The following changes in the percentages of shares held in Group banks occurred during the<br />
year:<br />
• Centrobanca Spa: in the first months of <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> continued to purchase shares<br />
held by non-controlling shareholders (mainly banks), acquiring 173,608 shares for a total of<br />
approximately €300 thousand;<br />
<strong>UBI</strong> <strong>Banca</strong>’s investment therefore rose from 94.2715% as at 31 st December 2011 to<br />
94.3231% at the end of <strong>2012</strong>, while Group control increased over the same period from<br />
99.7427% to 99.7943%;<br />
• <strong>Banca</strong> Popolare di Ancona Spa: <strong>UBI</strong> <strong>Banca</strong> made further purchases from non-controlling<br />
shareholders for a total of 9,071 shares, which brought its controlling interest up from<br />
92.9340% at the end of 2011 to 92.9711% as at 31 st December <strong>2012</strong>;<br />
• <strong>Banca</strong> Carime Spa: over the twelve month period the Parent acquired 54,194 shares from<br />
non-controlling shareholders, bringing its control of the subsidiary up to 92.8371%<br />
(92.8332% at the end of 2011);<br />
• IW Bank Spa: on 3 rd April <strong>2012</strong> Centrobanca and Webstar Sa terminated the contracts they<br />
signed in 2009 and gave instructions, also in the interest of <strong>UBI</strong> <strong>Banca</strong>, to complete the<br />
transfer of ownership of the investment in IW Bank held by Webstar. The Parent therefore<br />
acquired 7,609,144 shares in the online bank from this Luxembourg counterparty,<br />
corresponding to 10.3358% of the share capital of IW Bank, in return for a total payout of<br />
€15.5 million. After that transaction, the investment held by the Parent increased from<br />
65.0392% in December 2011 to 75.3750% at the end of the year (Centrobanca’s investment<br />
was unchanged at 23.4960%).<br />
At the end of the year the Group therefore held 98.8710% control of IW Bank (up from<br />
88.5352% in the previous December). It must also be considered that the percentages<br />
reported do not include the treasury shares held by IW Bank (831,168 shares accounting<br />
for 1.1290% of the total). If these are included, control of the share capital is total.<br />
We report the following with regard to other companies:<br />
• Arca SGR Spa: on 14 th March <strong>2012</strong> the <strong>UBI</strong> <strong>Banca</strong> Group disclosed that it had informed<br />
this company of its desire to withdraw from the share capital of that company, with respect<br />
to all the shares held. The right of withdrawal arose, in accordance with Art 2347 of the<br />
Italian Civil Code, because the Group did not vote in favour of the resolution passed by an<br />
Extraordinary Shareholders’ Meeting which, on 20 th February <strong>2012</strong> (filed with the Company<br />
Registrar of Milan on 5 th March <strong>2012</strong>), had made amendments to the Articles of<br />
Association.<br />
83
On 3 rd September <strong>2012</strong>, the procedures resulting from the exercise of that right were<br />
completed. The withdrawal involved 13,354,000 shares (11,562,000 held by <strong>UBI</strong> <strong>Banca</strong> and<br />
1,792,000 by <strong>Banca</strong> Popolare di Ancona), corresponding to 26.708% of the share capital,<br />
valued at an average of €2.09 per share. Following the exercise of that right, the Group had<br />
the right to cash payment for the shares held, at a price of €2.70 per share, for total<br />
consideration of approximately €36 million, as determined according to the law by the<br />
Board of Directors of Arca SGR. The investment was recognised within assets held for sale<br />
from 31 st March <strong>2012</strong>, while on 30 th September <strong>2012</strong> it ceased to appear in the list of equity<br />
accounted investees and the accounts only recorded movements in the income statement,<br />
quantified as a gain (net of taxes and non-controlling interests) of €7.6 million;<br />
• <strong>UBI</strong> Finance CB 2 Srl: on 20 th March <strong>2012</strong>, following the issue of the authorisation from the<br />
Supervisory Authority for acquisition of control of the Company, <strong>UBI</strong> <strong>Banca</strong>, which already<br />
held 10% of the share capital, acquired a further 50% of <strong>UBI</strong> Finance CB 2. The company –<br />
whose sole purpose is the issue of covered bonds in accordance with Art. 7-bis of Law No.<br />
130 of 30 th April 1999 – was formed in December 2011 for the purpose of commencing a<br />
second programme for the issuance of covered bonds backed by non-residential commercial<br />
mortgages. The remaining part of the share capital (40%) is held by the Dutch registered<br />
company Stichting Viola.<br />
• <strong>UBI</strong> Academy SCRL: this consortium company was formed on 2 nd July <strong>2012</strong> for the<br />
managerial training and development of staff who work in the <strong>UBI</strong> <strong>Banca</strong> Group (corporate<br />
university). The share capital of <strong>UBI</strong> Academy, amounting to €100,000, had initially been<br />
divided as follows: 70% to the Parent, 3% to the network banks (BPB, BBS, BPCI, BPA,<br />
Carime, BRE) and to <strong>UBI</strong>.S and 1.5% to <strong>Banca</strong> di Valle Camonica, <strong>UBI</strong> <strong>Banca</strong> Private<br />
Investment, IW Bank, <strong>UBI</strong> Leasing, <strong>UBI</strong> Factor and <strong>UBI</strong> Pramerica SGR.<br />
On 19 th December <strong>2012</strong>, the Parent transferred 1,500 shares to Prestitalia to allow it to<br />
become a consortium member with a 1.5% stake. The percentage of the share capital<br />
controlled by <strong>UBI</strong> <strong>Banca</strong> had therefore fallen at the end of year to 68.5%;<br />
• InvestNet International Spa: on 17 th July the deed was signed for this company’s merger<br />
into IW Bank and it was filed with the Company Registrar of Milan on 23 rd July <strong>2012</strong>. The<br />
merger became effective on 1 st August <strong>2012</strong>, while it is effective for accounting and tax<br />
purposes from 1 st January <strong>2012</strong>. The company was therefore excluded from the<br />
consolidation from 30 th September <strong>2012</strong>.<br />
• BY YOU Spa: on 13 th August the documents were filed with the Company Register to put<br />
the company into voluntary liquidation, in view of the changed market context.<br />
The Board of Liquidators is considering more appropriate measures to reach agreement on<br />
a solution to the problems of this company, with account also taken of the new instruments<br />
introduced to the Bankruptcy Act with Decree Law No. 83 of 22 nd June <strong>2012</strong>, in a context of<br />
greater satisfaction of creditor interests.<br />
In this respect, in order to ensure better protection of the <strong>UBI</strong> <strong>Banca</strong> Group’s interests, in<br />
relation, amongst other things, to the prior business relations with this company and with<br />
its majority shareholders, negotiations were started with both the latter and with the Board<br />
of Liquidators, designed to seek possible solutions to carry out the liquidation in a positive<br />
manner;<br />
• <strong>UBI</strong> Insurance Broker Srl: on 21 st December, this 100% controlled insurance brokerage was<br />
sold to Marine & Aviation JLT Spa (75% controlled by Marine & Aviation and 25%<br />
controlled by Jardine Lloyd Thompson) for over €19 million, of which approximately €5.8<br />
million consisting of a gross consolidated gain and excluding the €3.2 million of dividends<br />
received.<br />
<strong>UBI</strong> Insurance Broker is still included in the consolidation (but for income statement items<br />
only), because the Group continued to manage operations until the end of the year;<br />
• <strong>UBI</strong> Leasing Spa: in order to streamline the organisational structure of the Group by<br />
centralising, amongst other things, intragroup equity investments, on 21 st December <strong>UBI</strong><br />
<strong>Banca</strong> acquired the stake in <strong>UBI</strong> Leasing held by <strong>Banca</strong> Popolare di Ancona (7,647,921<br />
shares accounting for 18.9965% of the share capital) for €29.9 million. The direct control<br />
exercised over this leasing company by the Parent therefore rose from 79.9962% (December<br />
2011) to 98.9927%.<br />
84
In order to provide a more adequate level of capitalisation, on 30 th November <strong>2012</strong> an<br />
extraordinary shareholders’ meeting of <strong>UBI</strong> Leasing approved an increase in the share<br />
capital up to a maximum limit of €400 million, inclusive of any share premium. On 2 nd<br />
January 2013 the subscription of a tranche of a share capital increase was launched,<br />
offered with option rights to shareholders, but fully subscribed by <strong>UBI</strong> <strong>Banca</strong> for €300<br />
million, with the issue of 50,000,000 new shares with a nominal value of €6 and no share<br />
premium. The new share capital of <strong>UBI</strong> Leasing therefore rose from €241,557,810 as at<br />
31 st December <strong>2012</strong> to the current €541,557,810;<br />
• <strong>UBI</strong> Sistemi e Servizi Scpa: various changes took place in the composition of the<br />
shareholders, resulting mainly from the intragroup ownership transactions reported above:<br />
- 23 rd July: <strong>UBI</strong> <strong>Banca</strong> acquired 1,000,000 shares following the merger of B@nca 24-7;<br />
- 9 th October: the Parent sold 6,757 shares to <strong>UBI</strong> Academy, allowing the company to become a<br />
member of the Consortium which delivers IT and other services to the Group;<br />
- 22 nd October: BRE acquired 1,000,000 shares following the merger of BSG;<br />
- 30 th November: increase of the share capital to €36,149,948.64 through the issue of 1,949,132<br />
new shares, as valuable consideration to IW Bank for the contribution of its operations;<br />
- 21 st December: <strong>UBI</strong> <strong>Banca</strong> acquired 50,000 shares following the merger of SILF;<br />
- 21 st December: the Group sold its stake held in <strong>UBI</strong> Insurance Broker, but that company<br />
nevertheless continued to maintain its interest in the service company (50,000 shares). As a<br />
consequence of that transaction, Group control over <strong>UBI</strong>.S was 98.4896% (while the remaining<br />
1.4385% is held by <strong>UBI</strong> Assicurazioni and 0.0719% is held by <strong>UBI</strong> Insurance Broker).<br />
85
Reclassified consolidated financial<br />
statements, reclassified income statement<br />
net of the most significant non-recurring<br />
items and reconciliation schedules<br />
Reclassified consolidated balance sheet<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 Changes<br />
%<br />
changes<br />
ASSETS<br />
10. Cash and cash equivalents 641,608 625,835 15,773 2.5%<br />
20. <strong>Financial</strong> assets held for trading 4,023,934 2,872,417 1,151,517 40.1%<br />
30. <strong>Financial</strong> assets designated at fair value 200,441 126,174 74,267 58.9%<br />
40. Available-for-sale financial assets 14,000,609 8,039,709 5,960,900 74.1%<br />
50. Held-to-maturity investments 3,158,013 - 3,158,013 -<br />
60. Loans and advances to banks 6,072,346 6,184,000 -111,654 -1.8%<br />
70. Loans and advances to customers 92,887,969 99,689,770 -6,801,801 -6.8%<br />
80. Hedging derivatives 1,478,322 1,090,498 387,824 35.6%<br />
90. Fair value change in hedged financial assets (+/-) 885,997 704,869 181,128 25.7%<br />
100. Equity investments 442,491 352,983 89,508 25.4%<br />
120. Property, plant and equipment 1,967,197 2,045,535 -78,338 -3.8%<br />
130. Intangible assets 2,964,882 2,987,669 -22,787 -0.8%<br />
of which: goodwill 2,536,574 2,538,668 -2,094 -0.1%<br />
140. Tax assets 2,628,121 2,817,870 -189,749 -6.7%<br />
150. Non-current assets and disposal groups held for sale 21,382 22,020 -638 -2.9%<br />
160. Other assets 1,060,390 2,244,343 -1,183,953 -52.8%<br />
Total assets 132,433,702 129,803,692 2,630,010 2.0%<br />
LIABILITIES AND EQUITY<br />
10. Due to banks 15,211,171 9,772,281 5,438,890 55.7%<br />
20. Due to customers 53,758,407 54,431,291 -672,884 -1.2%<br />
30. Debt securities issued 45,059,153 48,377,363 -3,318,210 -6.9%<br />
40. <strong>Financial</strong> liabilities held for trading 1,773,874 1,063,673 710,201 66.8%<br />
60. Hedging derivatives 2,234,988 1,739,685 495,303 28.5%<br />
80. Tax liabilities 666,364 702,026 -35,662 -5.1%<br />
90. Liabilities associated with assets held for sale - - - -<br />
100. Other liabilities 2,391,283 3,139,616 -748,333 -23.8%<br />
110. Post-employment benefits 420,704 394,025 26,679 6.8%<br />
120. Provisions for risks and charges: 340,589 345,785 -5,196 -1.5%<br />
140.+<br />
170.+180.+<br />
190.+ 200.<br />
a) pension and similar obligations 80,563 76,460 4,103 5.4%<br />
b) other provisions 260,026 269,325 -9,299 -3.5%<br />
Share capital, share premiums, reserves, valuation reserves and treasury<br />
shares 9,655,174 10,780,511 -1,125,337 -10.4%<br />
210. Non-controlling interests 839,287 898,924 -59,637 -6.6%<br />
220. Profit (loss) for the year 82,708 -1,841,488 1,924,196 n.s.<br />
Total liabilities and equity 132,433,702 129,803,692 2,630,010 2.0%<br />
86
Reclassified consolidated quarterly balance sheets<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 30.9.<strong>2012</strong> 30.6.<strong>2012</strong> 31.3.<strong>2012</strong> 31.12.2011 30.9.2011 30.6.2011 31.3.2011<br />
ASSETS<br />
10. Cash and cash equivalents 641,608 516,764 509,983 538,617 625,835 568,540 595,685 569,052<br />
20. <strong>Financial</strong> assets held for trading 4,023,934 3,177,832 5,211,059 3,679,925 2,872,417 2,250,881 1,093,974 1,613,809<br />
30. <strong>Financial</strong> assets designated at fair value 200,441 121,026 122,376 123,066 126,174 130,494 468,038 474,114<br />
40. Available-for-sale financial assets 14,000,609 13,483,510 12,837,037 10,794,700 8,039,709 8,365,381 10,223,610 10,252,511<br />
50. Held-to-maturity investments 3,158,013 3,220,200 3,192,239 3,254,437 - - - -<br />
60. Loans and advances to banks 6,072,346 5,286,733 4,843,142 4,925,671 6,184,000 5,314,336 4,384,636 4,510,008<br />
70. Loans and advances to customers 92,887,969 94,843,423 95,333,181 97,105,771 99,689,770 102,765,316 102,774,467 102,702,444<br />
80. Hedging derivatives 1,478,322 1,541,973 1,340,946 1,087,609 1,090,498 995,341 413,389 351,398<br />
90. Fair value change in hedged financial assets (+/-) 885,997 868,601 819,561 722,393 704,869 675,977 254,474 194,086<br />
100. Equity investments 442,491 423,352 406,225 409,499 352,983 351,463 381,376 378,196<br />
120. Property, plant and equipment 1,967,197 1,973,317 2,002,183 2,021,314 2,045,535 2,058,170 2,077,758 2,086,769<br />
130. Intangible assets 2,964,882 2,962,430 2,971,246 2,979,781 2,987,669 5,268,352 5,287,195 5,452,328<br />
of which: goodwill 2,536,574 2,538,668 2,538,668 2,538,668 2,538,668 4,286,210 4,286,210 4,416,659<br />
140. Tax assets 2,628,121 2,525,656 2,631,652 2,641,166 2,817,870 2,604,967 2,312,956 1,704,774<br />
150. Non-current assets and disposal groups held for sale 21,382 19,231 37,748 37,217 22,020 6,874 7,041 6,023<br />
160. Other assets 1,060,390 1,138,807 1,350,560 1,189,953 2,244,343 2,272,277 2,476,298 2,442,098<br />
Total assets 132,433,702 132,102,855 133,609,138 131,511,119 129,803,692 133,628,369 132,750,897 132,737,610<br />
LIABILITIES AND EQUITY<br />
10. Due to banks 15,211,171 14,765,300 14,708,333 15,143,195 9,772,281 8,611,714 4,966,574 7,332,517<br />
20. Due to customers 53,758,407 56,356,021 57,074,877 52,358,466 54,431,291 56,392,736 56,199,737 56,144,592<br />
30. Debt securities issued 45,059,153 43,907,855 45,171,850 47,084,745 48,377,363 47,502,685 49,964,140 48,678,875<br />
40. <strong>Financial</strong> liabilities held for trading 1,773,874 1,479,098 1,274,898 934,366 1,063,673 654,949 844,259 1,040,163<br />
60. Hedging derivatives 2,234,988 2,102,181 1,966,231 1,823,770 1,739,685 1,569,117 953,439 1,020,994<br />
80. Tax liabilities 666,364 632,136 562,709 807,049 702,026 1,389,753 1,309,724 1,083,134<br />
90. Liabilities associated with assets held for sale - - - - - 827 987 -<br />
100. Other liabilities 2,391,283 1,608,626 1,991,859 2,094,393 3,139,616 4,554,208 4,778,011 4,606,189<br />
110. Post-employment benefits 420,704 410,555 400,953 405,062 394,025 389,096 383,467 382,333<br />
120. Provisions for risks and charges: 340,589 332,063 352,369 347,885 345,785 326,203 335,057 321,912<br />
a) pension and similar obligations 80,563 76,601 77,680 75,453 76,460 65,806 67,022 67,317<br />
b) other provisions 260,026 255,462 274,689 272,432 269,325 260,397 268,035 254,595<br />
140.+170.<br />
+180.+190.+ 200. Share capital, share premiums, reserves, valuation reserves and treasury shares 9,655,174 9,401,308 9,075,169 9,497,332 10,780,511 11,105,404 11,821,241 11,088,990<br />
210. Non-controlling interests 839,287 884,960 870,347 909,478 898,924 949,008 942,551 973,302<br />
220. Profit (loss) for the period/year 82,708 222,752 159,543 105,378 -1,841,488 182,669 251,710 64,609<br />
Total liabilities and equity 132,433,702 132,102,855 133,609,138 131,511,119 129,803,692 133,628,369 132,750,897 132,737,610<br />
87
Reclassified consolidated income statement<br />
Figures in thousands of euro<br />
<strong>2012</strong> 2011 Changes<br />
%<br />
changes<br />
4th Quarter<br />
<strong>2012</strong><br />
4th Quarter<br />
2011<br />
Changes<br />
%<br />
changes<br />
A B A-B A/B C D C-D C/D<br />
10.-20. Net interest income 1,863,561 2,018,978 (155,417) (7.7%) 417,494 520,280 (102,786) (19.8%)<br />
of which: effects of the purchase price allocation (36,980) (49,931) (12,951) (25.9%) (8,966) (12,441) (3,475) (27.9%)<br />
Net interest income excluding the effects of the PPA 1,900,541 2,068,909 (168,368) (8.1%) 426,460 532,721 (106,261) (19.9%)<br />
70. Dividends and similar income 15,591 19,997 (4,406) (22.0%) 1,929 89 1,840 -<br />
Profits (losses) of equity-accounted investees 44,426 9,947 34,479 346.6% 10,683 (3,171) 13,854 n.s.<br />
40.-50. Net fee and commission income 1,182,276 1,193,708 (11,432) (1.0%) 310,677 315,142 (4,465) (1.4%)<br />
of which performance fees 19,741 11,728 8,013 68.3% 19,741 11,728 8,013 68.3%<br />
80.+90.+<br />
100.+110. Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities designated at fair value 257,278 7,329 249,949 - 109,016 23,999 85,017 354.3%<br />
220. Other net operating income/expense 163,179 188,380 (25,201) (13.4%) 41,047 47,987 (6,940) (14.5%)<br />
Operating income 3,526,311 3,438,339 87,972 2.6% 890,846 904,326 (13,480) (1.5%)<br />
Operating income excluding the effects of the PPA 3,563,291 3,488,270 75,021 2.2% 899,812 916,767 (16,955) (1.8%)<br />
180.a Staff costs (1,373,719) (1,423,196) (49,477) (3.5%) (336,348) (350,339) (13,991) (4.0%)<br />
180.b Other administrative expenses (701,797) (717,988) (16,191) (2.3%) (188,130) (195,751) (7,621) (3.9%)<br />
200.+210. Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets (191,144) (248,442) (57,298) (23.1%) (49,605) (66,574) (16,969) (25.5%)<br />
of which: effects of the purchase price allocation (20,099) (69,823) (49,724) (71.2%) (5,015) (17,455) (12,440) (71.3%)<br />
Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets<br />
excluding the effects of the PPA (171,045) (178,619) (7,574) (4.2%) (44,590) (49,119) (4,529) (9.2%)<br />
Operating expenses (2,266,660) (2,389,626) (122,966) (5.1%) (574,083) (612,664) (38,581) (6.3%)<br />
Operating expenses excluding the effects of the PPA (2,246,561) (2,319,803) (73,242) (3.2%) (569,068) (595,209) (26,141) (4.4%)<br />
Net operating income 1,259,651 1,048,713 210,938 20.1% 316,763 291,662 25,101 8.6%<br />
Net operating income excluding the effects of the PPA 1,316,730 1,168,467 148,263 12.7% 330,744 321,558 9,186 2.9%<br />
130.a Net impairment losses on loans (847,214) (607,078) 240,136 39.6% (352,535) (208,413) 144,122 69.2%<br />
130. b+c+d Net impairment losses on other financial assets and liabilities (54,810) (135,143) (80,333) (59.4%) (4,078) 3,694 (7,772) n.s.<br />
190. Net provisions for risks and charges (49,212) (31,595) 17,617 55.8% (28,367) (11,812) 16,555 140.2%<br />
240.+270. Profits from the disposal of equity investments 14,714 7,119 7,595 106.7% 6,091 5,616 475 8.5%<br />
Pre-tax profit (loss) from continuing operations 323,129 282,016 41,113 14.6% (62,126) 80,747 (142,873) n.s.<br />
Pre-tax profit (loss) from continuing operations excluding the effects of the PPA 380,208 401,770 (21,562) (5.4%) (48,145) 110,643 (158,788) n.s.<br />
290. Taxes on income for the period/year from continuing operations (121,238) 95,942 (217,180) n.s. 17,570 (48,585) 66,155 n.s.<br />
of which: effects of the purchase price allocation 18,862 39,423 (20,561) (52.2%) 4,620 9,842 (5,222) (53.1%)<br />
310. Post-tax profit from discontinued operations - 248 (248) (100.0%) - 226 (226) (100.0%)<br />
330. Profit for the period/year attributable to non-controlling interests (17,310) (28,833) (11,523) (40.0%) (1,547) (9,477) 7,930 n.s.<br />
of which: effects of the purchase price allocation 3,580 8,687 (5,107) (58.8%) 834 2,132 (1,298) (60.9%)<br />
Profit (loss) for the year/period attributable to the shareholders of the Parent before expenses for leaving incentives and<br />
net impairment losses on goodwill and finite useful life intangible assets excluding the effects of the PPA 219,218 421,017 (201,799) (47.9%) (37,576) 40,833 (78,409) n.s.<br />
Profit (loss) for the year/period attributable to the shareholders of the Parent before expenses for leaving<br />
incentives and net impairment losses on goodwill and finite useful life intangible assets 184,581 349,373 (164,792) (47.2%) (46,103) 22,911 (69,014) n.s.<br />
210.+260. Impairment losses on goodwill and finite useful life intangible assets net of taxes and non-controlling interests - (2,190,861) (2,190,861) (100.0%) - (2,047,068) 2,047,068 (100.0%)<br />
180.a Expenses for leaving incentives net of taxes and non-controlling interests (101,873) - 101,873 - (93,941) - 93,941 -<br />
340. Profit (loss) for the year/period attributable to the shareholders of the Parent 82,708 (1,841,488) 1,924,196 n.s. (140,044) (2,024,157) (1,884,113) (93.1%)<br />
Total impact of the purchase price allocation on the income statement (34,637) (71,644) (37,007) (51.7%) (8,527) (17,922) (9,395) (52.4%)<br />
88
Reclassified consolidated quarterly income statements<br />
Figures in thousands of euro<br />
<strong>2012</strong><br />
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter<br />
2011<br />
10.-20. Net interest income 417,494 466,438 486,311 493,318 520,280 509,868 488,646 500,184<br />
of which: effects of the purchase price allocation (8,966) (9,341) (9,051) (9,622) (12,441) (11,636) (12,018) (13,836)<br />
Net interest income excluding the effects of the PPA 426,460 475,779 495,362 502,940 532,721 521,504 500,664 514,020<br />
70. Dividends and similar income 1,929 980 12,384 298 89 1,243 16,555 2,110<br />
Profits (losses) of equity-accounted investees 10,683 7,984 14,924 10,835 (3,171) 3,496 4,953 4,669<br />
40.-50. Net fee and commission income 310,677 285,544 286,672 299,383 315,142 291,989 294,641 291,936<br />
of which performance fees 19,741 - - - 11,728 - - -<br />
80.+90.+<br />
100.+110.<br />
Net income (loss) from trading, hedging and disposal/repurchase activities and from assets/liabilities<br />
designated at fair value 109,016 42,898 11,397 93,967 23,999 (23,891) (7,391) 14,612<br />
220. Other net operating income/expense 41,047 37,056 49,045 36,031 47,987 45,191 46,196 49,006<br />
Operating income 890,846 840,900 860,733 933,832 904,326 827,896 843,600 862,517<br />
Operating income excluding the effects of the PPA 899,812 850,241 869,784 943,454 916,767 839,532 855,618 876,353<br />
180.a Staff costs (336,348) (348,572) (327,564) (361,235) (350,339) (334,913) (373,217) (364,727)<br />
180.b Other administrative expenses (188,130) (161,445) (176,476) (175,746) (195,751) (165,947) (185,209) (171,081)<br />
200.+210.<br />
Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible<br />
assets (49,605) (45,770) (47,020) (48,749) (66,574) (60,365) (61,779) (59,724)<br />
of which: effects of the purchase price allocation (5,015) (5,020) (5,003) (5,061) (17,455) (17,456) (17,456) (17,456)<br />
Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible<br />
assets excluding the effects of the PPA (44,590) (40,750) (42,017) (43,688) (49,119) (42,909) (44,323) (42,268)<br />
Operating expenses (574,083) (555,787) (551,060) (585,730) (612,664) (561,225) (620,205) (595,532)<br />
Operating expenses excluding the effects of the PPA (569,068) (550,767) (546,057) (580,669) (595,209) (543,769) (602,749) (578,076)<br />
Net operating income 316,763 285,113 309,673 348,102 291,662 266,671 223,395 266,985<br />
Net operating income excluding the effects of the PPA 330,744 299,474 323,727 362,785 321,558 295,763 252,869 298,277<br />
130.a Net impairment losses on loans (352,535) (160,328) (203,181) (131,170) (208,413) (135,143) (158,148) (105,374)<br />
130. b+c+d Net impairment losses on other financial assets and liabilities (4,078) (992) (47,663) (2,077) 3,694 (119,245) (17,959) (1,633)<br />
190. Net provisions for risks and charges (28,367) 34 (16,764) (4,115) (11,812) (5,228) (4,136) (10,419)<br />
240.+270. Profits from the disposal of equity investments 6,091 8,593 9 21 5,616 170 1,152 181<br />
Pre-tax profit (loss) from continuing operations (62,126) 132,420 42,074 210,761 80,747 7,225 44,304 149,740<br />
Pre-tax profit (loss) from continuing operations excluding the effects of the PPA (48,145) 146,781 56,128 225,444 110,643 36,317 73,778 181,032<br />
290. Taxes on income for the period/year from continuing operations 17,570 (62,554) 19,727 (95,981) (48,585) (70,191) 291,636 (76,918)<br />
of which: effects of the purchase price allocation 4,620 4,746 4,643 4,853 9,842 9,575 9,936 10,070<br />
310. Post-tax profit from discontinued operations - (13) - 13 226 22 - -<br />
330. Profit for the period attributable to non-controlling interests (1,547) (1,352) (7,137) (7,274) (9,477) (6,097) (5,046) (8,213)<br />
of which: effects of the purchase price allocation 834 1,002 862 882 2,132 2,114 2,139 2,302<br />
Profit (loss) for the year/period attributable to the shareholders of the Parent before expenses for leaving<br />
incentives and net impairment losses on goodwill and finite useful life intangible assets excluding the<br />
effects of the PPA (37,576) 77,114 63,213 116,467 40,833 (51,638) 348,293 83,529<br />
Profit (loss) for the year/period attributable to the shareholders of the Parent before expenses for<br />
leaving incentives and net impairment losses on goodwill and finite useful life intangible assets (46,103) 68,501 54,664 107,519 22,911 (69,041) 330,894 64,609<br />
210.+260.<br />
Impairment losses on goodwill and finite useful life intangible assets net of taxes and non-controlling<br />
interests - - - - (2,047,068) - (143,793) -<br />
180.a Expenses for leaving incentives net of taxes and non-controlling interests (93,941) (5,292) (499) (2,141) - - - -<br />
340. Profit (loss) for the period attributable to the shareholders of the Parent (140,044) 63,209 54,165 105,378 (2,024,157) (69,041) 187,101 64,609<br />
Total impact of the purchase price allocation on the income statement (8,527) (8,613) (8,549) (8,948) (17,922) (17,403) (17,399) (18,920)<br />
89
Reclassified consolidated income statement net of the most significant non-recurring items<br />
<strong>2012</strong><br />
net of non-recurring<br />
items<br />
2011<br />
net of non-recurring items<br />
Changes<br />
%<br />
changes<br />
Figures in thousands of euro<br />
Net interest income (including the effects of the PPA) 1,863,561 2,018,978 (155,417) (7.7%)<br />
Dividends and similar income 15,591 19,997 (4,406) (22.0%)<br />
Profits of equity-accounted investees 44,426 9,947 34,479 346.6%<br />
Net fee and commission income 1,182,276 1,193,708 (11,432) (1.0%)<br />
Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities designated at fair<br />
value 223,079 7,329 215,750 -<br />
Other net operating income/expense 163,179 191,725 (28,546) (14.9%)<br />
Operating income (including the effects of PPA) 3,492,112 3,441,684 50,428 1.5%<br />
Staff costs (1,373,719) (1,451,128) (77,409) (5.3%)<br />
Other administrative expenses (701,797) (717,988) (16,191) (2.3%)<br />
Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets<br />
(including the effects of PPA) (188,921) (244,969) (56,048) (22.9%)<br />
Operating expenses (including the effects of PPA) (2,264,437) (2,414,085) (149,648) (6.2%)<br />
Net operating income (including the effects of PPA) 1,227,675 1,027,599 200,076 19.5%<br />
Net impairment losses on loans (847,214) (607,078) 240,136 39.6%<br />
Net impairment losses on other financial assets and liabilities 1,334 (9,690) 11,024 n.s.<br />
Net provisions for risks and charges (49,212) (29,232) 19,980 68.3%<br />
Profits from the disposal of equity investments 779 7,119 (6,340) (89.1%)<br />
Pre-tax profit from continuing operations (including the effects of PPA) 333,362 388,718 (55,356) (14.2%)<br />
Taxes on income for the year from continuing operations (224,046) (247,775) (23,729) (9.6%)<br />
Post-tax profit from discontinued operations - 248 (248) (100.0%)<br />
Profit for the year attributable to non-controlling interests (11,992) (29,629) (17,637) (59.5%)<br />
Profit for the year attributable to the shareholders of the Parent 97,324 111,562 (14,238) (12.8%)<br />
90
Reclassified consolidated income statement net of the most significant non-recurring: details<br />
non-recurring items<br />
non-recurring items<br />
Prior year tax<br />
Tax realignment<br />
Tax relief on nonaccounting<br />
deduction for<br />
credit for<br />
<strong>2012</strong><br />
<strong>UBI</strong> <strong>Banca</strong> tax Impact of IRAP<br />
2011<br />
Impairment<br />
pursuant to Law<br />
Impairment<br />
Gain on<br />
Impairment<br />
net of nonrecurring<br />
losses on<br />
accordance with deferred tax Discontinuati<br />
recurring<br />
Impairment<br />
realignment in adjustment for<br />
losses on<br />
No. 111/2011 and<br />
losses on<br />
net of non-<br />
public tender<br />
deductions on corporate Disposal of<br />
loan provisions income tax<br />
losses on<br />
<strong>2012</strong><br />
shares and<br />
Law No. 214/2011<br />
2011<br />
shares and AFS<br />
Release of Write-off of<br />
offer to<br />
Leaving<br />
shareholdings<br />
tangible and items<br />
goodwill and<br />
Law No. 111/2011 provisions on of the <strong>UBI</strong><br />
AFS OICR<br />
of BPA goodwill<br />
OICRs<br />
surplus B@nca 24-7 items<br />
purchase<br />
incentives<br />
of <strong>UBI</strong> <strong>Banca</strong> purposes of and equity<br />
on finite useful<br />
and write-off of recognised as Leasing<br />
(collective<br />
recognised in the<br />
pursuant to Law regional<br />
intangible<br />
(collective<br />
provisions IT platform<br />
preference<br />
investments<br />
life intangible<br />
deferred income at 31st agent network<br />
investment<br />
consolidated<br />
No. 244/2007 production tax<br />
assets A<br />
investment<br />
B<br />
shares<br />
assets<br />
tax assets/deferred December<br />
instruments)<br />
financial<br />
instruments)<br />
(Section EC) on the cost of<br />
IRAP tax assets 2010<br />
statements<br />
Figures in thousands of euro<br />
labour pursuant<br />
to Law No.<br />
Net interest income (including the effects of the PPA) 1,863,561 1,863,561 2,018,978 2,018,978<br />
Dividends and similar income 15,591 15,591 19,997 19,997<br />
Profits (losses) of equity-accounted investees 44,426 44,426 9,947 9,947<br />
Net fee and commission income 1,182,276 1,182,276 1,193,708 1,193,708<br />
Net income (loss) from trading, hedging and<br />
disposal/repurchase activities and from assets/liabilities<br />
designated at fair value 257,278 (20,671) (13,528) 223,079 7,329 7,329<br />
Other net operating income/expense 163,179 163,179 188,380 3,345 191,725<br />
Operating income (including the effects of PPA) 3,526,311 (20,671) - - - - - (13,528) - 3,492,112 3,438,339 - - - - 3,345 - - 3,441,684<br />
Staff costs (1,373,719) (1,373,719) (1,423,196) (27,932) (1,451,128)<br />
Other administrative expenses (701,797) (701,797) (717,988) (717,988)<br />
Depreciation, amortisation and net impairment losses on<br />
property, plant and equipment and intangible assets<br />
(including the effects of PPA) (191,144) 2,223 (188,921) (248,442) 3,473 (244,969)<br />
Operating expenses (including the effects of PPA) (2,266,660) - - - - - - - 2,223 (2,264,437) (2,389,626) - - - - - (27,932) 3,473 (2,414,085)<br />
Net operating income (including the effects of PPA) 1,259,651 (20,671) - - - - - (13,528) 2,223 1,227,675 1,048,713 - - - - 3,345 (27,932) 3,473 1,027,599<br />
Net impairment losses on loans (847,214) (847,214) (607,078) (607,078)<br />
Net impairment losses on other financial assets and<br />
liabilities (54,810) 56,144 1,334 (135,143) 125,453 (9,690)<br />
Net provisions for risks and charges (49,212) (49,212) (31,595) 2,363 (29,232)<br />
Profits from the disposal of equity investments 14,714 (13,935) 779 7,119 7,119<br />
Pre-tax profit from continuing operations (including the<br />
effects of PPA) 323,129 (20,671) 56,144 - - - - (27,463) 2,223 333,362 282,016 - 125,453 - - 5,708 (27,932) 3,473 388,718<br />
Taxes on income for the year from continuing operations (121,238) 5,684 (5,596) (24,992) (8,298) (66,086) (2,835) (685) (224,046) 95,942 (2,292) (352,841) 6,267 (1,407) 7,681 (1,125) (247,775)<br />
Post-tax profit from discontinued operations - - 248 248<br />
Profit for the year attributable to non-controlling interests (17,310) (21) 5,191 181 (33) (11,992) (28,833) (925) 129 (29,629)<br />
Profit for the year attributable to the shareholders of<br />
the Parent before expenses for leaving incentives and<br />
impairment losses on goodwill and on finite useful life<br />
intangible assets 184,581 (14,987) 50,527 - (24,992) (8,298) (60,895) (30,117) 1,505 97,324 349,373 - 123,161 (352,841) 5,342 4,301 (20,122) 2,348 111,562<br />
Impairment losses on goodwill and finite useful life intangible<br />
assets net of taxes and non-controlling interests - - (2,190,861) 2,190,861 -<br />
Expenses for leaving incentives net of taxes and non-controlling interests (101,873) 101,873 - - -<br />
Profit (loss) for the year attributable to the shareholders<br />
of the Parent 82,708 (14,987) 50,527 101,873 (24,992) (8,298) (60,895) (30,117) 1,505 97,324 (1,841,488) 2,190,861 123,161 (352,841) 5,342 4,301 (20,122) 2,348 111,562<br />
ROE 0.9% 1.0% -17.1% 1.0%<br />
Cost/income ratio (including the effects of PPA) 64.3% 64.8% 69.5% 70.1%<br />
Cost/income ratio (excluding the effects of PPA) 63.0% 63.6% 66.5% 67.1%<br />
91
Reconciliation schedule as at 31st December <strong>2012</strong><br />
Ite ms<br />
RECLASSIFIED INCOME STATEMENT <strong>2012</strong> Reclassifications<br />
<strong>2012</strong><br />
Figures in thousands of euro<br />
Mandatory<br />
consolidated<br />
financial<br />
statements<br />
Tax<br />
recoveries<br />
Profit of equityaccounted<br />
investees<br />
Depreciation<br />
for<br />
improvements<br />
to leased<br />
assets<br />
Fast Credit<br />
Processing<br />
fee/ Overdrawn<br />
penalty<br />
Expenses for<br />
leaving<br />
incentives<br />
Reclassified<br />
consolidated<br />
financial<br />
statements<br />
10.-20. Net interest income 1,931,684 (68,123) 1,863,561<br />
70. Dividends and similar income 15,591 15,591<br />
Profits of equity-accounted investees - 44,426 44,426<br />
40.-50. Net fee and commission income 1,181,806 470 1,182,276<br />
80.+90.+<br />
100.+110.<br />
Net income from trading, hedging and disposal/repurchase<br />
activities and from assets/liabilities designated at fair value 257,278 257,278<br />
220. Other net operating income/expense 244,515 (156,473) 7,484 67,653 163,179<br />
Operating income 3,630,874 (156,473) 44,426 7,484 - - 3,526,311<br />
180.a Staff costs (1,525,753) 152,034 (1,373,719)<br />
180.b Other administrative expenses (858,270) 156,473 (701,797)<br />
Depreciation, amortisation and net impairment losses on property,<br />
200.+210. plant and equipment and intangible assets (183,660) (7,484) (191,144)<br />
Operating expenses (2,567,683) 156,473 - (7,484) - 152,034 (2,266,660)<br />
Net operating income 1,063,191 - 44,426 - - 152,034 1,259,651<br />
130.a Net impairment losses on loans (847,214) (847,214)<br />
130. b+c+d Net impairment losses on other financial assets and liabilities (54,810) (54,810)<br />
190. Net provisions for risks and charges (49,212) (49,212)<br />
240.+270. Profits from the disposal of equity investments 59,140 (44,426) 14,714<br />
Pre-tax profit from continuing operations 171,095 - - - - 152,034 323,129<br />
290. Taxes on income for the year from continuing operations (79,429) (41,809) (121,238)<br />
310. Post-tax profit from discontinued operations - -<br />
330. Profit for the year attributable to non-controlling interests (8,958) (8,352) (17,310)<br />
180.a<br />
340.<br />
Profit (loss) for the year attributable to the shareholders of<br />
the Parent before expenses for leaving incentives 82,708 101,873 184,581<br />
Expenses for leaving incentives net of taxes and non-controlling<br />
interests - (101,873) (101,873)<br />
Profit for the year attributable to the shareholders of the<br />
Parent 82,708 - - - - - 82,708<br />
Reconciliation schedule for the year ended 31st December 2011<br />
Ite ms<br />
RECLASSIFIED INCOME STATEMENT 2011 Reclassifications<br />
2011<br />
Figures in thousands of euro<br />
Mandatory<br />
consolidated<br />
financial<br />
statements<br />
Tax<br />
recoveries<br />
Profit of<br />
equityaccounted<br />
investees<br />
Depreciation<br />
for<br />
improvements<br />
to leased<br />
assets<br />
Overdrawn<br />
penalty<br />
Net impairment<br />
losses on<br />
goodw ill and finite<br />
useful life<br />
intangible assets<br />
Reclassified<br />
consolidated<br />
financial<br />
statements<br />
10.-20. Net interest income 2,121,689 (102,711) 2,018,978<br />
70. Dividends and similar income 19,997 19,997<br />
Profits of equity-accounted investees - 9,947 9,947<br />
40.-50. Net fee and commission income 1,191,934 1,774 1,193,708<br />
80.+90.+<br />
100.+110.<br />
Net income from trading, hedging and disposal/repurchase<br />
activities and from assets/liabilities designated at fair value 7,329 7,329<br />
220. Other net operating income/expense 243,065 (163,065) 7,443 100,937 188,380<br />
Operating income 3,584,014 (163,065) 9,947 7,443 - - 3,438,339<br />
180.a Staff costs (1,423,196) (1,423,196)<br />
180.b Other administrative expenses (881,053) 163,065 (717,988)<br />
Depreciation, amortisation and net impairment losses on property,<br />
200.+210. plant and equipment and intangible assets (783,496) (7,443) 542,497 (248,442)<br />
Operating expenses (3,087,745) 163,065 - (7,443) - 542,497 (2,389,626)<br />
Net operating income 496,269 - 9,947 - - 542,497 1,048,713<br />
130.a Net impairment losses on loans (607,078) (607,078)<br />
130. b+c+d Net impairment losses on other financial assets and liabilities (135,143) (135,143)<br />
190. Net provisions for risks and charges (31,595) (31,595)<br />
240.+270. Profits (losses) from the disposal of equity investments (1,856,783) (9,947) 1,873,849 7,119<br />
Pre-tax profit (loss) from continuing operations (2,134,330) - - - - 2,416,346 282,016<br />
290. Taxes on income for the year from continuing operations 271,991 (176,049) 95,942<br />
310. Post-tax profit from discontinued operations 248 248<br />
330. Loss (profit) for the year attributable to non-controlling interests 20,603 (49,436) (28,833)<br />
Profit (loss) for the year attributable to the shareholders of<br />
the Parent before impairment losses on goodwill and on<br />
finite useful life intangible assets (1,841,488) - - - - 2,190,861 349,373<br />
Impairment losses on goodwill and finite useful life intangible<br />
210.+260. assets net of taxes and non-controlling interests - (2,190,861) (2,190,861)<br />
340. Loss for the year attributable to the shareholders of the Parent (1,841,488) - - - - - (1,841,488)<br />
The pre-tax profit from continuing operations in the mandatory financial statements includes the balance of the item 260, net impairment losses on goodwill.<br />
92
Notes to the reclassified consolidated financial statements<br />
The mandatory financial statements have been prepared on the basis of Bank of Italy Circular No. 262 of 22 nd<br />
December 2005 and subsequent updates.<br />
The following rules have been applied to the reclassified financial statements to allow a vision that is more consistent<br />
with a management accounting style:<br />
- the tax recoveries recognised within item 220 of the mandatory financial statements (other net operating income/expenses) were<br />
reclassified as a reduction in indirect taxes included within other administrative expenses;<br />
- the item profits (losses) of equity-accounted investees includes the profits (losses) of equity-accounted investees included within<br />
item 240 in the mandatory financial statements;<br />
- the item other net operating income/expense includes item 220, net of the reclassifications mentioned above;<br />
- the item net impairment losses on property, plant and equipment and intangible assets includes items 200 and 210 (the latter only<br />
partially) in the mandatory financial statements and also the instalments relating to the depreciation of leasehold improvements<br />
classified within item 220;<br />
- the item profits (losses) from the disposal of equity investments includes the item 240, net of profits (losses) of equity-accounted<br />
investees and also item 270 in the mandatory financial statements;<br />
- impairment losses on goodwill and finite useful life intangible assets (net of taxation and non-controlling interests) include items<br />
210 (partially) and 260 in the mandatory financial statements;<br />
- leaving incentives expenses (net of taxation and non-controlling interests) partially include item 180a in the mandatory financial<br />
statements.<br />
The reconciliation of the items in the reclassified financial statements with the figures in the mandatory financial<br />
statements has been facilitated, on the one hand, with the insertion in the margin against each item of the<br />
corresponding number of the item in the mandatory financial statements with which it is reconciled and, on the other<br />
hand, with the preparation of specific reconciliation schedules.<br />
The comments on the performance of the main balance sheet and income statement items are made on the basis of<br />
the reclassified financial statements and of the reclassified financial statements for the comparative periods, and the<br />
tables providing details included in the subsequent sections of this financial report have also been prepared on that<br />
same basis.<br />
The regulatory provisions published by the CICR (interministerial committee for credit and saving) on 4 th July <strong>2012</strong><br />
(pursuant to article 117-bis of the consolidated banking act) required a revision of the commission regime applied to<br />
customers who are past due, with the application of a commission, proportionate to the actual cost incurred by the<br />
Bank to manage past due positions, with a fixed price, entitled a “fast credit processing fee” (FCPF), which is different<br />
for consumer and non-consumer customers. The new regime came into force with effect from 1 st July for new<br />
customers and from 1 st October for customers already existing as at 30 th June <strong>2012</strong>. In consideration of the nature of<br />
the FCPF (related to neither the amount past due, nor the time past due and basically the same as a recovery of<br />
expenses), the relative income from the fee is recognised within item 220 “Other net operating income/expense”<br />
(within the line item “other income and prior year income”). In order to ensure consistent reporting, a reclassification<br />
was performed in the income statement with the transfer of amounts relating (mainly) to the previous past due penalty<br />
out of net interest income and into other operating income. It follows that the comparative figures presented (in the<br />
tables relating to net interest income and operating income and also in the normalised reclassified income statement<br />
and in the quarterly income statements) are different from those previously published (quantitative details of the<br />
reclassification have been given explicitly in the reconciliation schedules).<br />
In order to facilitate analysis of <strong>UBI</strong> <strong>Banca</strong>’s operating performance and in compliance with Consob Communication<br />
No. DEM/6064293 of 28 th July 2006, two special schedules have been included, the first a brief summary (which<br />
provides a comparison of the normalised results for the year) and the second more detailed, which shows the impact<br />
on earnings of the principal non-recurring events and items – since the relative effects on capital and cash flow, being<br />
closely linked, are not significant – which are summarised as follows:<br />
full year <strong>2012</strong>:<br />
- gain on public tender offer to purchase outstanding Group preference shares;<br />
- impairment losses on the Intesa Sanpaolo, A2A and other minor shares as well as on units in AFS units in OICR<br />
(collective investment instruments);<br />
- leaving incentives;<br />
- tax realignment of BPA goodwill recognised in the consolidated financial statements (pursuant to Law No.<br />
111/2011 and Law No. 214/2011);<br />
- tax relief on non-accounting deductions relating to loan provisions and write-downs of <strong>UBI</strong> <strong>Banca</strong> (pursuant to<br />
Law No. 244/2007 – Section EC);<br />
- prior year tax credit for deductions for corporate income tax purposes (IRES) of regional production tax (IRAP) on<br />
the cost of labour (pursuant to Law No. 214/2011);<br />
- partial disposal of Intesa Sanpaolo shares and full disposal of investments in ARCA SGR and <strong>UBI</strong> Insurance<br />
Broker;<br />
- impairment losses on property, plant and equipment and intangible assets;<br />
full year 2011:<br />
- impairment losses on goodwill and on finite useful life intangible assets;<br />
- impairment losses on shareholdings in Intesa Sanpaolo, A2A and Siteba and on units in OICR (collective<br />
investment instruments - AFS);<br />
- <strong>UBI</strong> <strong>Banca</strong> tax realignment in accordance with Law No. 111/2011 and write-off of deferred income tax<br />
assets/deferred IRAP tax assets;<br />
- impact of IRAP adjustment for deferred tax provisions recognised as at 31 st December 2010;<br />
- expenses incurred for restructuring of <strong>UBI</strong> Leasing agent network;<br />
- release of surplus provisions;<br />
- Write-off of B@nca 24-7 IT platform.<br />
93
The consolidated income statement<br />
The income statement figures commented on are based on the reclassified consolidated financial statements<br />
(the income statement, the quarterly income statements and the income statement net of the most significant<br />
non-recurring items, condensed and complete) contained in another section of this report and the tables<br />
furnishing details presented below are also based on those statements. The notes that follow those<br />
reclassified financial statements may be consulted as may the reconciliation schedules for a description of the<br />
reclassification. Furthermore, the commentary examines both changes that occurred in <strong>2012</strong> compared to<br />
2011 and also those occurring in the fourth quarter of <strong>2012</strong> compared to the previous quarter (these comments<br />
are highlighted with a slightly different background colour) in order to bring to light emerging events as they<br />
developed during the year.<br />
After an initial glimmer of an economic recovery in early <strong>2012</strong>, weakness once more became<br />
prevalent and then spread even to those European nations regarded as more solid. The financial<br />
situation, one of the main obstacles to growth, gradually returned to normal late in the year,<br />
with a decline in yields on the government securities of nations subject to the greatest pressures<br />
and an improvement in liquidity and funding conditions on wholesale markets. By contrast, the<br />
economic scenario continued to have an adverse impact on customers’ creditworthiness, in<br />
relation both to the effects of the recession on corporate finances and those of households and to<br />
the considerable increase in deteriorated loans reported by the banking sector (especially in the<br />
second half of the year).<br />
In this context, the <strong>UBI</strong> <strong>Banca</strong> Group ended the year with a profit of €82.7 million 1 , after having<br />
charged €152 million in leaving incentive costs to the income statement in connection with the<br />
trade union agreements of November <strong>2012</strong> and February 2013, aimed at a structural reduction<br />
in operating costs (of which they represent a component, albeit the most significant).<br />
In order to allow a consistent analysis of Group profits and operations, the above costs were stated in a single<br />
separate item net of tax and non-controlling interests, shown in the reclassified consolidated financial statements on<br />
the last line item before profit for the year.<br />
Excluding non-recurring items (presented net of taxes and non-controlling interests) normalised<br />
profit stood at €97.3 million compared to €111.6 million in the previous year. Those nonrecurring<br />
items came to expense of €14.6 million in <strong>2012</strong> – owing to the aforementioned charges<br />
and impairment losses on some financial assets, despite the capital gain from the public tender<br />
offer for the preference shares, the benefits of certain tax measures and the disposal of shares<br />
and equity investments – and they also consisted of expense of €1,953 million in 2011,<br />
primarily due to impairment of goodwill and other intangible assets, although marginally<br />
mitigated by the realignment of tax values.<br />
The fourth quarter of the year – affected by the significant structural measures enabled by<br />
the aforementioned trade union agreements, but also the increase in net impairment losses on<br />
the loan portfolio, despite a significant contribution by financial activities – presented a loss of<br />
€140 million, compared with a loss of €2,024.2 million in the corresponding period of 2011<br />
and the profit of €63.2 million earned in the third quarter of <strong>2012</strong> (-€83 million, +€15.2 million<br />
and +€59.8 million respectively in normalised terms).<br />
During the year, ordinary banking business generated operating income of €3,526.3 million,<br />
up by 2.6% compared with 2011, due above all to the results achieved by financial activities and<br />
by equity-accounted investees, while net interest income was again affected by the generalised<br />
1 In 2011 the <strong>UBI</strong> <strong>Banca</strong> Group had reported a loss of €1,841.5 inasmuch as it had recognised impairment losses on goodwill and<br />
finite useful life intangible assets that had essentially arisen following the merger between the former BPU <strong>Banca</strong> Group and the<br />
former <strong>Banca</strong> Lombarda e Piemontese Group. In other words, it significantly wrote down (by €2,397 million gross, accounting for<br />
44% of the total on the books at the end of 2010) the carrying amounts that had been recognised.<br />
Since those amounts had been generated by a “paper for paper” transaction, that is with no cash payments, the accounting<br />
treatment introduced by IFRS – which does require recognition of the impairment through profit and loss – had yielded effects of an<br />
accounting nature only, which have no impact on the Group’s operations. More specifically, it had no impacts on liquidity, capital<br />
ratios (because these are calculated by deducting all intangible assets) or future profits, which in fact benefited from lower purchase<br />
price allocation amortisation from <strong>2012</strong>. The total charge resulting from the purchase price allocation declined to €34.6 million from<br />
the €71.6 million recognised in 2011.<br />
94
weakness of the context 2 and by de-leveraging and de-risking action taken on the loan portfolio.<br />
Net fee and commission income also performed well, despite the difficult economic and operating<br />
scenario.<br />
Interest and similar income: composition<br />
Figures in thousands of euro<br />
Debt<br />
instruments<br />
Financing<br />
Other<br />
transactions<br />
<strong>2012</strong> 2011<br />
1. <strong>Financial</strong> assets held for trading 54,233 - 26 54,259 42,392<br />
2. <strong>Financial</strong> assets designated at fair value - - - - -<br />
3. Available-for-sale financial assets 454,581 - - 454,581 373,970<br />
3. Held-to-maturity investments 96,150 - - 96,150 -<br />
5. Loans and advances to banks 9,558 15,917 6 25,481 56,327<br />
6. Loans and advances to customers 1,458 3,222,468 785 3,224,711 3,470,274<br />
7. Hedging derivatives - - - - -<br />
8. Other assets - - 1,095 1,095 1,872<br />
Total 615,980 3,238,385 1,912 3,856,277 3,944,835<br />
Interest and similar expense: composition<br />
Figures in thousands of euro<br />
Borrowings<br />
Securities<br />
Other<br />
transactions<br />
<strong>2012</strong> 2011<br />
1. Due to central banks (97,721) - - (97,721) (21,520)<br />
2. Due to banks (28,841) - (194) (29,035) (62,336)<br />
3. Due to customers (483,178) - (112) (483,290) (416,507)<br />
4. Debt securities issued - (1,302,558) - (1,302,558) (1,325,414)<br />
5. <strong>Financial</strong> liabilities held for trading (38,728) - - (38,728) (12,574)<br />
6. <strong>Financial</strong> liabilities designated at fair value - - - - -<br />
7. Other liabilities and provisions - - (595) (595) (728)<br />
8. Hedging derivatives - - (40,789) (40,789) (86,778)<br />
Total (648,468) (1,302,558) (41,690) (1,992,716) (1,925,857)<br />
Net interest income 1,863,561 2,018,978<br />
Net interest income 3 , which included the effects of the purchase price allocation of -€37 million,<br />
compared with the previous -€49.9 million, amounted to €1,863.6 million, down by €155.4<br />
million compared with 2011, the consequence, for each component of the item 4 , of the increased<br />
impact of interest expense in line with market trends for interest rates. In short:<br />
- business with customers generated net interest income of €1,527.2 million (-€246.4<br />
million), impacted above all by both the interest rates for funding (the spread for business<br />
with customers narrowed by 20 basis points compared with 2011) and by volumes of<br />
business (consolidated loans decreased by €6.8 billion over the twelve months). In addition<br />
to the obvious difficulties of the economic situation, the latter was also influenced by a<br />
policy to reduce lending to large corporate clients in favour of non-captive customers<br />
(following the disposal of third party agency networks), as well as by generalised de-risking<br />
of the entire portfolio, despite improvement in the mark-up of approximately 80 basis<br />
points;<br />
- the securities portfolio generated net interest income of €437.2 million, (+€165.4 million),<br />
due to growth in investments in debt instruments over twelve months of €10.5 billion.<br />
Purchases of Italian government securities continued to make a substantial contribution to<br />
net interest income (€454.6 million of interest income from available-for-sale securities –<br />
2 Interest rate trends moved in opposing directions, although to a lesser degree in the final months of the year, with a tendency of the<br />
medium to long-term maturities of the yield curve to rise rapidly, while very short-term maturities fell further (the average<br />
progressive Euribor one month rate fell further from 1.19% in 2011 to 0.338% in <strong>2012</strong>).<br />
3 Following the introduction of the expedited processing fee, a reclassification was conducted within the income statement, separating<br />
out the sums (primarily) relating to the previous overdraft penalty from net interest income and reclassifying them within other<br />
operating income. The comparative figures presented in the tables illustrating net interest income and operating income thus differ<br />
from the published versions. Refer to the notes to the reclassified consolidated financial statements.<br />
4 The calculation of net balances was performed by allocating interest for hedging derivatives and financial liabilities held for trading<br />
within the different areas of business (with customers, financial, with banks).<br />
95
AFS – and €96.2 million from the held-to-maturity – HTM – portfolio), although these<br />
investments incorporate the costs of uncovered short positions and the differentials paid on<br />
hedges on fixed interest rate bonds;<br />
- activity on the interbank market resulted in net interest expense of €101.3 million (net<br />
expense of €27.5 million in 2011), attributable almost entirely to debt with the central<br />
bank, through LTROs in <strong>2012</strong> and full-allotment auctions in 2011, which helped to change<br />
the mix of the sources of funding for the portfolio. Net of that expense (€97.7 million in<br />
<strong>2012</strong> compared with €21.5 million in 2011), the balance on business with other banks<br />
passed from -€6 million in 2011 to the -€3.6 million at present.<br />
Dividends received fell to €15.6 million (from €20 million before) and they related mainly to<br />
securities in the AFS portfolio held by <strong>UBI</strong> <strong>Banca</strong>. The fall in the total reflects a lower<br />
distribution of profits by all companies and on the 186,458,028 ordinary Intesa Sanpaolo shares<br />
in particular (held on the books on the ex dividend date), with a dividend of €0.05 per share,<br />
which paid €9.3 million (compared to €11.6 million in 2011).<br />
Driven by the good performance of the insurance companies, profits of equity-accounted<br />
investees 5 climbed to €44.4 million (+€34.5 million), the result of significant contributions<br />
from: Aviva Vita (€14.4 million compared with €6 million in 2011), Lombarda Vita (€16.1<br />
million, up from €4.5 million before), <strong>UBI</strong> Assicurazioni (€8.6 million, compared with €3.2<br />
million) and Aviva Assicurazioni Vita (€8 million, compared with -€2.4 million).<br />
Fee and commission income: composition<br />
Fee and commission expense: composition<br />
Figures in thousands of euro<br />
<strong>2012</strong> 2011<br />
Figures in thousands of euro<br />
<strong>2012</strong> 2011<br />
a) guarantees granted 50,078 49,793 a) guarantees received (44,171) (807)<br />
c) management, trading and advisory services 636,406 622,140 c) management and trading services: (78,322) (82,257)<br />
1. trading in financial instruments 27,165 38,410 1. trading in financial instruments (14,403) (18,268)<br />
2. foreign exchange trading 7,400 11,868 2. foreign exchange trading (10) (38)<br />
3. portfolio management 251,523 277,518 3. portfolio management (8,526) (6,236)<br />
3.1. individual 67,994 72,042 3.1. own - -<br />
3.2. collective 183,529 205,476 3.2. on behalf of third parties (8,526) (6,236)<br />
4. custody and administration of securities 12,293 13,702 4. custody and administration of securities (7,502) (6,979)<br />
5. depository banking - - 5. 6. placement financial instruments, of financial products instruments and<br />
(4,844) (4,416)<br />
6. placement of securities 133,614 74,538 services<br />
7. receipt and transmission of orders 49,521 40,852 distributed through indirect networks<br />
(43,037) (46,320)<br />
8. advisory activities 6,398 4,855 d) collection and payment services (38,946) (44,141)<br />
8.1 on investments 6,398 4,855 e) other services (26,177) (32,688)<br />
8.2 on financial structure - -<br />
9. distribution of third party services 148,492 160,397 Total (187,616) (159,893)<br />
9.1. portfolio management 37 42<br />
9.1.1. individual 37 42<br />
9.2. insurance products 106,386 119,723<br />
9.3. other products 42,069 40,632<br />
d) collection and payment services 154,047 150,128<br />
f) services for factoring transactions 26,240 26,486<br />
i) current account administration 214,152 216,501<br />
j) other services 288,969 288,553<br />
Total 1,369,892 1,353,601 Net fee and commission income 1,182,276 1,193,708<br />
Net fee and commission income remained basically steady at €1,182.3 million (down by 1% on<br />
the previous year), the aggregate result of different performances within the item:<br />
- management, trading and advisory services rose to €550.7 million 6 (+€22.6 million). They<br />
were driven by the placement of securities (+€58.6 million), and in particular by<br />
subscriptions of the new <strong>UBI</strong> Pramerica Sicav’s (Cedola Certa 2013-2016, Protezione e<br />
Crescita 2017, Focus Italia, Cedola Mercati Emergenti and Cedola Certa 2013-2017) and by<br />
the receipt and placement of orders and advisory services (+€10.2 million), despite<br />
5 The item consists of the profits of the companies recognised on the basis of the percentage interest held by the Group. The item no<br />
longer includes the profit for Arca SGR (-€1.1 million in 2011) following a decision taken by the Group to withdraw from the share<br />
capital of this company. The investment (held by <strong>UBI</strong> <strong>Banca</strong> and by BPA) was disposed of on 3 rd September <strong>2012</strong>.<br />
6 The amount consists of management, trading and advisory services net of the corresponding expense items and is calculated<br />
excluding currency trading.<br />
96
continuing penalisation by portfolio managements (-€28.3 million), custody and<br />
administration of securities (-€1.9 million) and the distribution of third-party services<br />
(-€11.9 million, of which -€13.3 million relating to insurance products and +€1.4 million to<br />
other products). The latter was only partially offset by lower commission expense for<br />
financial instruments and products and services sold through indirect networks (-€3.3<br />
million), in relation to the rationalisation of <strong>UBI</strong> <strong>Banca</strong> Private Investment in progress since<br />
2011;<br />
- fees and commissions on ordinary banking business 7 fell to €631.6 million (-€34.1 million).<br />
The result included growth of collection and payment operations (+€9.1 million) and “other<br />
services” (+€6.9 million, including commitment fees), but also decreases in current account<br />
administration charges (-€2.3 million, due in part to the ongoing shift in customers’<br />
preferences), in foreign exchange business (-€4.4 million) and above all in commissions on<br />
guarantees (-€43.1 million). The item includes the expense (€42.8 million) of the guarantee<br />
from the Italian government on the bonds issued in the first months of the year by <strong>UBI</strong><br />
<strong>Banca</strong> amounting to €6 billion nominal, designed to increase assets eligible for refinancing<br />
with the ECB. The expense consisted of an annual percentage of the nominal amount of the<br />
bonds issued. Because these were issued by the Parent, subscribed by Centrobanca and then<br />
repurchased entirely by <strong>UBI</strong> <strong>Banca</strong>, on the basis of IFRS international accounting standards, like the<br />
interest income and expense attributable to them, they are not recognised in the accounts. However, they<br />
are nevertheless included within the assets eligible for refinancing that form part of the cover pool<br />
available to the ECB.<br />
As a result principally of the disposal of financial assets held for trading consisting of bonds,<br />
the net result for financial activities rose to €257.3 million, a marked recovery compared to the<br />
€7.3 million reported in 2011. In detail:<br />
- trading made a positive contribution of €91.8 million (€10.7 million in 2011 8 ), almost<br />
entirely attributable to the trading in debt instruments: +€101.8 million (net of unwinding<br />
derivatives on assets and liabilities resulting in a loss of €34.2 million) from debt<br />
instruments and derivatives on debt instruments and interest rates, +€4 million from<br />
equity instruments and the relative derivatives and +€18 million from currency trading;<br />
- changes in fair value – relating to investments in Tages funds and a residual position in<br />
hedge funds, as well as the private equity investments held by Centrobanca classified<br />
according to the FVO at the end of <strong>2012</strong> – recorded a profit of €0.9 million, compared to a<br />
loss of €38.8 million in 2011, due to the performance of international markets 9 ;<br />
- hedging activity, which represents the change in the fair value of derivatives and the relative<br />
items hedged, resulted in a profit of €1.1 million (a profit of €8.9 million in 2011) and should<br />
be interpreted in combination with the information reported on trading activity concerning<br />
the unwinding phenomenon;<br />
- the disposal of AFS instruments and the repurchase of financial liabilities generated profits<br />
of €163.5 million (€26.5 million in 2011 10 ), of which: €139.4 million from the disposal of<br />
financial assets and €124.6 million in particular from the sale of €6.4 billion of Italian<br />
government securities (primarily securities held by <strong>UBI</strong> <strong>Banca</strong> maturing from 2013 to<br />
2015); €16.3 million from equity instruments (of which: €14 million 11 non-recurring, from<br />
the partial disposal of Intesa Sanpaolo shares and €1.6 million from the sale of Società per i<br />
Mercati di Varese and of Risparmio e Previdenza); -€2.2 million from the disposal of former<br />
B@nca 24-7 and Centrobanca unsecured non-performing loans and a BPB credit position;<br />
while the remaining €24.1 million was from the repurchase of financial liabilities. The latter<br />
7 All the changes were calculated by subtracting fee and commission expense from the respective fee and commission income.<br />
8 Net of the unwinding phenomenon (-€18.4 million), the result for 2011 was composed of: +€26.4 million from debt instruments and<br />
the related derivative instruments; -€15.9 million from equity instruments and the related derivative instruments (in relation to the<br />
impairment loss on Medinvest International of €12.2 million); and +€13.7 million from foreign currency business.<br />
9 In the comparative year, the result reflected: disposals of <strong>UBI</strong> Pramerica funds in the third quarter with a loss of €22 million, when<br />
a stop-loss mechanism was triggered (in compliance with the limits set by the <strong>Financial</strong> Risks Policy), losses on Tages hedge funds,<br />
formerly Capitalgest (-€11.4 million) and the fair valuation of residual positions in other hedge funds.<br />
10 This sum included €12.1 million from the repurchase of securities issued – by the Parent (€14.1 million), mainly consisting of<br />
securities in the EMTN programme, and by Centrobanca (€4 million), as part of ordinary business with customers – while €14.4<br />
million was from the disposal of financial assets: €6.8 million from the equity investment in the London Stock Exchange (formerly<br />
Borsa Italiana), €1.6 million from other lesser equity investments (including PerMicro), €2.5 million in funds originating primarily<br />
with the former Capitalgest SGR, approximately €1 million in debt instruments, chiefly of IW Bank, and €2.5 million in unsecured<br />
non-performing loans, largely originating with B@nca 24-7.<br />
11 Only the share of the overall capital gain attributable to <strong>UBI</strong> <strong>Banca</strong> (€13.5 million) is subject to normalisation.<br />
97
item also included a €20.7 million non-recurring gain on the public tender offer to purchase<br />
preference shares, repurchases of bonds issued, including a profit of €14.3 million on the<br />
buy-back of notes under the EMTN programme issued by the Parent and a loss of €10.8<br />
million in relation to ordinary business with customer counterparties (mainly by the<br />
network banks).<br />
Net trading income<br />
Gains<br />
Profits from<br />
trading<br />
Losses<br />
Losses from<br />
trading<br />
Net income<br />
<strong>2012</strong><br />
Figures in thousands of euro (A) (B) (C) (D) [(A+B)-(C+D)]<br />
2011<br />
1. <strong>Financial</strong> assets held for trading 112,875 186,923 (3,067) (82,043) 214,688 (67,392)<br />
1.1 Debt instruments 21,928 72,024 (207) (8,763) 84,982 30,332<br />
1.2 Equity instruments 1,675 799 (2,560) (325) (411) (10,488)<br />
1.3 Units in O.I.C.R. (collective investment instruments) 72 133 (300) (4) (99) (265)<br />
1.4 Financing - - - - - -<br />
1.5 Other 89,200 113,967 - (72,951) 130,216 (86,971)<br />
2. <strong>Financial</strong> liabilities held for trading 9,530 16 - (10) 9,536 (1,502)<br />
2.1 Debt instruments 9,530 - - - 9,530 (2,367)<br />
2.2 Payables - - - - - -<br />
2.3 Other - 16 - (10) 6 865<br />
3. <strong>Financial</strong> assets and liabilities: exchange rate differences X X X X 7,308 (5,011)<br />
4. Derivative instruments 328,582 1,620,729 (317,630) (1,651,874) (139,729) 84,616<br />
4.1 <strong>Financial</strong> derivatives 328,582 1,620,729 (317,630) (1,651,874) (139,729) 84,616<br />
- on debt instruments and interest rates 291,999 1,608,832 (290,011) (1,637,661) (26,841) (19,932)<br />
- on equity instruments and share indices 203 5,558 (54) (1,250) 4,457 (5,387)<br />
- on currencies and gold X X X X (119,536) 105,723<br />
- other 36,380 6,339 (27,565) (12,963) 2,191 4,212<br />
4.2 Credit derivatives - - - - - -<br />
Total 450,987 1,807,668 (320,697) (1,733,927) 91,803 10,711<br />
Net hedging income<br />
Figures in thousands of euro <strong>2012</strong> 2011<br />
Net hedging income 1,072 8,938<br />
Profit from disposal or repurchase<br />
Figures in thousands of euro<br />
Profits<br />
Losses<br />
Net profit<br />
<strong>2012</strong><br />
2011<br />
<strong>Financial</strong> assets<br />
1. Loans and advances to banks 16 - 16 -<br />
2. Loans and advances to customers 9,337 (11,484) (2,147) 2,464<br />
3. Available-for-sale financial assets 145,791 (4,235) 141,556 11,929<br />
3.1 Debt instruments 128,421 (3,825) 124,596 1,027<br />
3.2 Equity instruments 16,686 (406) 16,280 8,404<br />
3.3 Units in O.I.C.R (collective investment instruments). 684 (4) 680 2,498<br />
3.4 Financing - - - -<br />
4. Held-to-maturity investments - - - -<br />
Total assets 155,144 (15,719) 139,425 14,393<br />
<strong>Financial</strong> liabilities<br />
1. Due to banks - - - -<br />
2. Due to customers - - - -<br />
3. Debt securities issued 46,964 (22,838) 24,126 12,136<br />
Total liabilities 46,964 (22,838) 24,126 12,136<br />
Total 202,108 (38,557) 163,551 26,529<br />
Net profit (loss) on financial assets and liabilities designated at fair value<br />
Figures in thousands of euro <strong>2012</strong> 2011<br />
Net profit (loss) on financial assets and liabilities designated at fair value 852 (38,849)<br />
Net income from trading, hedging and disposal/repurchase activities and from<br />
assets/liabilities designated at fair value<br />
257,278 7,329<br />
Other net operating income/expense decreased to €163.2 million (-€25.2 million) as a reflection<br />
of the performance of income, which fell to €229.1 million (-€29.1 million), owing to lower<br />
recoveries of expenses on current accounts (partly in light of ongoing regulatory<br />
developments), insurance premiums (to be interpreted in relation to the corresponding cost<br />
item) and finance lease contracts.<br />
98
Under the line “other income and Other net operating income<br />
exceptional receivables,” the item<br />
also includes the new fast credit Figures in thousands of euro<br />
<strong>2012</strong> 2011<br />
processing fee, which from 1 st Other operating income 229,097 258,156<br />
October <strong>2012</strong> replaced the previous<br />
Recovery of expenses and other income on current accounts 14,158 15,458<br />
Recovery of insurance premiums 28,140 31,644<br />
overdraft penalty, reclassified under<br />
Recoveries of taxes 156,473 163,065<br />
this item from net interest income in Rents and other income for property management 7,494 8,158<br />
the interests of consistency of Recovery of expenses on finance lease contracts 12,814 14,181<br />
Other income and prior year income 166,491 188,715<br />
presentation. A comparison between<br />
Reclassification of "tax recoveries" (156,473) (163,065)<br />
the two years shows a decrease of<br />
Other operating expenses (65,918) (69,776)<br />
approximately €12 million due to a Depreciation of leasehold improvements (7,484) (7,443)<br />
reduction in the number of accounts Costs relating to finance lease contracts (7,607) (7,145)<br />
Expenses for public authority treasury contracts (6,604) (6,977)<br />
overdrawn (the result of monitoring<br />
Ordinary maintenance of investment properties - -<br />
action) and to the method used to Other expenses and prior year expense (51,707) (55,654)<br />
calculate the new commission,<br />
based on a fixed price, as opposed to<br />
Reclassification of depreciation of leasehold improvements 7,484 7,443<br />
Other net operating income 163,179 188,380<br />
the overdraft penalty, which was<br />
commensurate to the amount and duration of the overdraft.<br />
Operating expense also decreased slightly to €65.9 million (-€3.9 million), owing to the<br />
changes in prior year expense, which in the previous year included €3 million attributable to<br />
applications for action by the Interbank Deposit Protection Fund and €3.3 million (nonrecurring)<br />
aimed at terminating the contracts of agents of <strong>UBI</strong> Leasing.<br />
In addition, both prior year items (of both income and expense) include on the one hand the<br />
operating loss as a result of a bank robbery and on the other, the related insurance<br />
compensation.<br />
In the fourth quarter, operating income, driven by the disposal of debt instruments and net fee<br />
and commission income, came to €890.8 million, compared with €904.3 million in the fourth<br />
quarter of 2011 and with €840.9 million in the third quarter of <strong>2012</strong> (which had benefited from<br />
the results for financial activities to a lesser extent). The quarter-on-quarter increase in the item<br />
(+€49.9 million) is explained by the following trends:<br />
• a reduction in net interest income to €417.5 million (-€48.9 million), related to a further<br />
decrease in interest rates 12 and the volume effect, which influenced business with customers.<br />
Consequently, interest income on loans decreased by €50.6 million (in relation to a decrease<br />
in outstanding loans of approximately €2 billion during the quarter), while the spread on<br />
business with customers narrowed by more than 10 basis points. By contrast, the net<br />
contribution of the securities portfolio did not change significantly compared with the<br />
previous year (-€8.6 million; the impact was at least partially mitigated by the switch to<br />
longer maturities and the increase in volumes of approximately €1.5 billion). As a result of<br />
the LTRO financing from the ECB, the result for interbank business also remained negative,<br />
with an expense of €25.2 million compared to the previous expense of €26.7 million;<br />
• an increase in dividends to €1.9 million (+€0.9 million), relating to the available-for-sale<br />
portfolio;<br />
• a rise in the profits of equity-accounted investees to €10.7 million (+€2.7 million), primarily<br />
attributable to the life insurance companies;<br />
• an improvement in net fee and commission income to €310.7 million (+€25.1 million). It<br />
should also be noted that the item includes performance commissions of €19.7 million,<br />
entirely attributable to <strong>UBI</strong> Pramerica SGR and recognised in the fourth quarter of the year<br />
alone 13 . If that variable is disregarded, net fee and commission income performed well<br />
compared with the previous quarter (+€5.4 million), owing to an improvement in<br />
management, brokering and advisory services (+€8.5 million, primarily related to the<br />
distribution of insurance policies and order collection and placement), while traditional<br />
banking services declined (by approximately €3 million, associated with the performance of<br />
12 The average one month Euribor rate fell further from 0.167% in the third quarter to 0.112% in the fourth quarter.<br />
13 Performance commissions accounted for 1.7% of net fee and commission income for the year, compared with 1% in 2011, when<br />
performance commissions amounted to €11.7 million.<br />
99
other services, in which commitment fees are classified, only partially offset by an uptrend in<br />
collection and payment services and year-end charges for current account administration);<br />
• a significant improvement in the result for financial activities to €109 million (+€66.1 million),<br />
broken down into the disposal/repurchase of financial assets of €72.2 million (of which €64.7<br />
million as the capital gain on government securities, €11.9 million on the Intesa Sanpaolo<br />
shares, -€1 million from the repurchase of own bonds in business with customers and -€2.9<br />
million from the disposal of a BPB credit position to the group controlling the borrower),<br />
trading (primarily of debt instruments) of €22.3 million, hedging of €12 million (unwinding for<br />
the quarter, amounting to -€14.9 million, should be considered for accurate interpretation)<br />
and measurement at fair value of the units of OICR (collective investment instruments, i.e.,<br />
Tages funds and residual hedge funds) and private equity investments of €2.5 million;<br />
• an increase in other net operating income/expense (+€4 million), partly fostered by expense<br />
recoveries traditionally recognised at year-end on current accounts and finance lease<br />
contracts, but above all by the performance of prior year income and expense, which vary<br />
considerably in amount from one period to another because they consist of components of a<br />
heterogeneous nature and non-structural character.<br />
Operating expenses totalled €2,266.7 million (-5.2%), benefiting from the results of ongoing<br />
efforts to optimise the Group’s cost structure and from lower amortisation of the goodwill<br />
arising from the merger due to the impairment losses recognised at the end of 2011.<br />
Staff costs decreased to €1,373.7<br />
million, compared with the €1,423.2<br />
million reported in 2011.<br />
However, this latter figure included a nonrecurring<br />
component of +€27.9 million, recognised<br />
within the item “expenses for retired personnel”<br />
relating to a release of excess provisions 14 .<br />
Net of this effect, labour costs for the<br />
year decreased by €77.4 million.<br />
As shown in the table, the decrease for<br />
expenses relating to employees was<br />
more significant (-€72.1 million), the<br />
result of a reduction in staff numbers (-<br />
338 in terms of total average staff<br />
numbers), changes in variable<br />
components of remuneration, the impact<br />
of the new national labour contract (for<br />
professional areas and middle<br />
managers) and lower provisions for the<br />
renewal of the national labour contract<br />
signed in January <strong>2012</strong> 15 .<br />
Staff costs: composition<br />
Figures in thousands of euro<br />
<strong>2012</strong> 2011<br />
1) Employees (1,353,539) (1,425,623)<br />
a) Wages and salaries (939,900) (983,736)<br />
b) Social security charges (248,748) (267,619)<br />
c) Post-employment benefits (50,879) (60,928)<br />
d) Pension expense (16) (74)<br />
e) Provision for post-employment benefits (10,196) (9,078)<br />
f) Pensions and similar obligations: (3,042) (3,069)<br />
- defined contribution (113) (139)<br />
- defined service (2,929) (2,930)<br />
g) Payments to external supplementary pension plans: (42,626) (50,431)<br />
- defined contribution (42,165) (50,154)<br />
- defined benefits (461) (277)<br />
h) Expenses resulting from share based payments - -<br />
i) Other employee benefits (58,132) (50,688)<br />
2) Other personnel in service (2,475) (6,504)<br />
- Expenses for agency staff on staff leasing contracts (398) (3,671)<br />
- Other expenses (2,077) (2,833)<br />
3) Directors and statutory auditors (17,705) (19,001)<br />
4) Expenses for retired personnel - 27,932<br />
Total (1,373,719) (1,423,196)<br />
Other administrative expenses fell to<br />
€701.8 million (-€16.2 million).<br />
This decrease is the aggregate result of an increase of €5.4 million in indirect taxation (primarily<br />
due to the introduction of a municipal property tax) and savings of €21.6 million on current<br />
spending, within which opposing trends were recorded. In detail, there were increases in services<br />
in outsourcing (+€4.3 million, relating to the process of insourcing the management of financing<br />
applications by Prestitalia, an activity that had previously been outsourced to specialised outside<br />
firms, with which operating relationships were gradually discontinued), SW and HW license and<br />
maintenance fees and lease instalments (+€2.1 million), tenancy of premises (+€1.1 million),<br />
14 The amount in question related to the release of amounts recognised in previous years due to actuarial recalculations of post<br />
retirement benefits, now no longer considered due. In the third quarter of 2011, the defined benefit obligation and the existing<br />
mathematical reserve were reversed, with a positive impact on the item “administrative expenses: staff costs” of €27.9 million and<br />
the relative portion of the “fair value reserve actuarial gains/losses on defined benefit plans” amounting to approximately €2<br />
million was reclassified within “retained earnings”.<br />
15 Expense items also benefited in the second quarter of <strong>2012</strong> from the recognition of a total of €17 million for the release of<br />
provisions made in prior periods.<br />
100
professional services (+€2 million,<br />
associated with projects aimed at optimising<br />
capital and liquidity – eligible assets – and<br />
intragroup corporate integration<br />
transactions).<br />
The line item “professional and advisory services”<br />
(€92.2 million) groups together a variety of expense<br />
types incurred in the Group’s activities. These expenses<br />
are for the following purposes: commercial and sales<br />
support (€11.7 million), support of issuances and<br />
capital management (€14 million), legal expenses (€12.4<br />
million), technical support (€14 million, inclusive of<br />
auditors’ certifications), strategic and organisational<br />
consulting (€7.8 million) and IT services (€32.3 million).<br />
The latter include expenses relating to extraordinary<br />
corporate integration operations, business support<br />
projects and regulatory projects for compliance with<br />
legislation as well as expenses relating to ordinary<br />
activities.<br />
On the other hand, action taken to contain<br />
costs primarily involved the following:<br />
advertising (-€9.5 million), rent payable<br />
(-€4.4 million, related, amongst other<br />
things, to branch closures carried out in<br />
2011 and February <strong>2012</strong>), telephone and<br />
data transmission expenses (-€3.8 million),<br />
postal expenses (-€2.7 million, partly due to<br />
increased use of online communications),<br />
forms and stationery (-€2.6 million),<br />
information services and land registry<br />
Other administrative expenses: composition<br />
Figures in thousands of euro<br />
<strong>2012</strong> 2011<br />
A. Other administrative expenses (644,748) (666,346)<br />
Rent payable (67,702) (72,060)<br />
Professional and advisory services (92,216) (90,225)<br />
Rentals hardware, software and other assets (41,073) (36,211)<br />
Maintenance of hardware, software and other assets (37,765) (40,483)<br />
Tenancy of premises (55,867) (54,755)<br />
Property maintenance (25,971) (27,245)<br />
Counting, transport and management of valuables (14,529) (16,004)<br />
Membership fees (9,338) (9,468)<br />
Information services and land registry searches (10,660) (12,612)<br />
Books and periodicals (1,659) (1,877)<br />
Postal (23,866) (26,576)<br />
Insurance premiums (43,083) (44,276)<br />
Advertising (16,489) (26,007)<br />
Entertainment expenses (1,735) (2,017)<br />
Telephone and data transmission expenses (54,728) (58,531)<br />
Services in outsourcing (50,699) (46,439)<br />
Travel expenses (23,330) (23,476)<br />
Credit recovery expenses (43,872) (44,000)<br />
Forms, stationery and consumables (8,510) (11,137)<br />
Transport and removals (7,654) (7,354)<br />
Security (8,450) (9,736)<br />
Other expenses (5,552) (5,857)<br />
B. Indirect taxes (57,049) (51,642)<br />
Indirect taxes and duties (31,594) (37,498)<br />
Stamp duty (142,951) (140,749)<br />
Municipal property tax (16,915) (8,806)<br />
Other taxes (22,062) (27,654)<br />
Reclassification of "tax recoveries" 156,473 163,065<br />
Total (701,797) (717,988)<br />
searches (-€2 million) and counting, transport and management of valuables (-€1.5 million).<br />
It must also be considered that all expense items incurred in <strong>2012</strong> were affected by a one percent increase in VAT which<br />
occurred in September 2011, amounting to a total of approximately €4.3 million.<br />
Depreciation, amortisation and net impairment losses on property, plant and equipment and<br />
intangible assets fell to €191.1 million (-€57.3 million). Of this decrease, €49.7 million was due<br />
to a reduction in the effects of the purchase price allocation arising from the merger, following<br />
impairment losses recognised at the end of 2011 (which affected finite useful life intangible<br />
assets, such as brand names, core deposits and assets under management, for a total of €523<br />
million before taxes and non-controlling interests). Net of the effects of the purchase price<br />
allocation, the item (€171 million) decreased by €7.6 million, despite greater amortisation of<br />
software commenced in 2011 (+€6.7 million) and write-offs incurred for branch closures by<br />
BPCI, BPA, BBS, Carime and BRE in <strong>2012</strong> (+€2.1 million), as well as the Centrobanca IT<br />
system and, to a lesser extent, certain properties (for a total of +€2.2 million, classified within<br />
non-recurring components). The decrease in the item also reflected lower depreciation of<br />
hardware (-€4.6 million) and lower depreciation and amortisation of IW Bank and S.B.I.M.<br />
tangible and intangible assets (-€4.4 million) and the absence of amortisation on intangible<br />
assets related to By You, which was fully written-off in the second quarter of 2011 (-€1.5<br />
million). Net impairment losses also included a non-recurring item of €3.5 million for the<br />
write-off of the B@nca 24-7 IT system, which at the time was held for sale.<br />
On a quarterly basis, operating expenses were affected by the seasonal nature of certain<br />
expense items, as also confirmed by the normalised average quarterly figure, which showed a<br />
further, marked reduction: from €618 million in 2009 to €608 million in 2010, €603 million in<br />
2011 and €566 million in <strong>2012</strong>.<br />
In the third quarter, operating expenses rose to €574.1 million, compared with €612.7 million in<br />
the same quarter of 2011 and €555.8 million in the third quarter of <strong>2012</strong>. The quarter-onquarter<br />
increase (+€18.3 million) was the result of the following factors:<br />
• staff costs of €336.3 million were down by €12.2 million compared with the €348.6 million<br />
recognised in the third quarter, partly owing to ongoing processes to increase efficiency;<br />
• other administrative expenses totalled €188.1 million, compared with €161.4 million in the<br />
third quarter, up by €26.7 million, of which €3.5 million was attributable to indirect taxation<br />
(partly in relation to different payment due dates, which tend to concentrate in June and<br />
101
December) and €23.2 million to current expenses (concentrated in professional and advisory<br />
services, advertising, credit recovery expenses, travel expenses, maintenance of properties<br />
and equipment and services in outsourcing), also influenced by the different seasonal nature<br />
of some expense items;<br />
• depreciation, amortisation and net impairment losses on property, plant and equipment and<br />
intangible assets rose by €3.8 million to €49.6 million, reflecting two non-recurring factors,<br />
an initial write-off of €1.3 million of the IT system of Centrobanca in view of migration to the<br />
Group’s target system, as well as certain impairment losses on properties recognised by <strong>UBI</strong>,<br />
<strong>UBI</strong>.S, Prestitalia and BPB Immobiliare (€0.9 million), in addition to write-offs recognised in<br />
connection with the branch-closure process completed in December of approximately €1.3<br />
million.<br />
As a summary of overall performance, net operating income rose to €1,259.7 million, an<br />
improvement of 20.1% compared with 2011.<br />
On a quarterly basis, net operating income stood at €316.8 million, compared with €291.7<br />
million in the same quarter of 2011 and with €285.1 million in the third quarter of <strong>2012</strong>.<br />
The difficulties of the macroeconomic background continued to be reflected in the performance<br />
of net impairment losses on loans, which increased to €847.2 million over the twelve months<br />
(+€240 million compared with 2011), of which €503 million was attributable to the network<br />
banks (+€198 million) and €347 million to the product companies (also including <strong>UBI</strong> <strong>Banca</strong>,<br />
relating to the consumer finance activity acquired with the merger of B@nca 24-7, +€52<br />
million).<br />
Net impairment losses on loans: composition<br />
Figures in thousands of euro<br />
Impairment losses/<br />
reversals of impairment losses, net<br />
A. Loans and advances to banks 2 (68) (66) - (5) (5)<br />
B. Loans and advances to customers (882,628) 35,480 (847,148) (373,308) 20,778 (352,530)<br />
C. Total (882,626) 35,412 (847,214) (373,308) 20,773 (352,535)<br />
<strong>2012</strong><br />
Impairment losses/<br />
reversals of impairment losses, net<br />
Specific Portfolio Specific Portfolio<br />
4th<br />
Quarter<br />
<strong>2012</strong><br />
Figures in thousands of euro<br />
Impairment losses/<br />
reversals of impairment losses, net<br />
Specific Portfolio Specific Portfolio<br />
A. Loans and advances to banks (3) (114) (117) 1 (18) (17)<br />
B. Loans and advances to customers (544,777) (62,184) (606,961) (195,115) (13,281) (208,396)<br />
C. Total (544,780) (62,298) (607,078) (195,114) (13,299) (208,413)<br />
2011<br />
Impairment losses/<br />
reversals of impairment losses, net<br />
4th<br />
Quarter<br />
2011<br />
The total increase in the item of €240 million – of which more than €192 million is attributable<br />
to the fourth quarter, which traditionally also incorporates net impairment losses on positions<br />
brought to light after year-end – is in reality the aggregate result of higher specific impairment<br />
losses of €338 million (of which €226 million relating to the network banks and €108 million<br />
to the product companies) and a decrease in impairment losses on the performing portfolio of<br />
€98 million.<br />
As shown in the table, in <strong>2012</strong>, owing in part to the reduction of the performing portfolio, the<br />
Group recognised net portfolio reversals of €35 million 16 , of which €1.8 million originated with<br />
the network banks and €23.2 million with the product companies. The latter include<br />
approximately €24 million attributable to the former B@nca 24-7 17 (merged into the Parent in<br />
the third quarter), due to two types of reasons. Firstly as a consequence of the rigorous<br />
valuation polices pursued on this bank’s portfolio since 2009 and secondly as a result of<br />
16 Of this figure, €10 million related to the reversal following the release of the guarantee granted by <strong>UBI</strong> <strong>Banca</strong> to the former B@nca<br />
24-7 benefiting Prestitalia, which in the individual accounts was included among reversals on other assets and liabilities.<br />
17 The impairment losses of B@nca 24-7 for 2011 included €19.4 million for impairment relating to the Ktesios Group, of which €8<br />
million recognised as the reclassification of a provision for risks and charges made in the fourth quarter of 2010.<br />
102
changing from collective recognition to more recognition of impairment losses on single<br />
positions for the salary backed lending line of business contributed to Prestitalia, a prudential<br />
change carried out in the second quarter in preparation for the contribution of the operations.<br />
With regard to specific impairment, reversals were recognised in the period (excluding present<br />
value discounts) amounting to €178.8 million (€216.8 million in 2011).<br />
The loan loss rate (calculated as total net impairment losses as a percentage of net loans to<br />
customers) increased at the same time to 0.91% from 0.61% for 2011.<br />
Net impairment losses/reversals of impairment losses on loans: quarterly performance<br />
Figures in<br />
thousands of<br />
euro<br />
1st<br />
2nd<br />
Specific Portfolio Specific Portfolio<br />
Specific<br />
Quarter<br />
Quarter<br />
Portfolio<br />
3rd<br />
Quarter<br />
Specific<br />
Portfolio<br />
4th<br />
Quarter<br />
<strong>2012</strong> (122,221) (8,949) (131,170) (225,562) 22,381 (203,181) (161,535) 1,207 (160,328) (373,308) 20,773 (352,535)<br />
2011 (96,010) (9,364) (105,374) (142,877) (15,271) (158,148) (110,779) (24,364) (135,143) (195,114) (13,299) (208,413)<br />
2010 (105,366) (26,493) (131,859) (184,080) (5,765) (189,845) (124,200) (9,811) (134,011) (217,327) (33,890) (251,217)<br />
2009 (122,845) (36,728) (159,573) (176,919) (58,703) (235,622) (178,354) (18,995) (197,349) (281,668) 9,001 (272,667)<br />
2008 (64,552) 4,895 (59,657) (85,136) (8,163) (93,299) (77,484) (25,384) (102,868) (219,512) (90,887) (310,399)<br />
On a quarterly basis, net impairment losses of €352.5 million were up compared both with the<br />
third quarter of 2011 (when they came to €208.4 million) and the three prior months, during<br />
which they amounted to €160.3 million.<br />
The loan loss rate – annualised – was 1.52% compared with the 0.84% recorded in the same<br />
quarter of <strong>2012</strong> and with 0.68% in the third quarter of <strong>2012</strong>.<br />
The income statement for the year also recorded €54.8 million of net impairment losses on<br />
other financial assets/liabilities, of which €56.1 million of non-recurring items (including €47.1<br />
million already recognised at the end of June) relating to impairment losses on instruments<br />
held in the AFS portfolio: €31.8 million on the Intesa Sanpaolo share (based on the reference<br />
price quoted on 29 th June <strong>2012</strong>, €1.118) €3.5 million on A2A and €20.8 million on other<br />
shares and OICR units (collective investment instruments – including €12.5 million on the<br />
Centrobanca Sviluppo Impresa fund and €4.4 million on the Polis closed-end property fund) 18 .<br />
The value of the Intesa Sanpaolo<br />
shares recovered in the second half of<br />
the year by €21.6 million, which<br />
increased the reserve in equity and<br />
did not change the half year<br />
impairment.<br />
Following the partial disposal of 72,329,014<br />
shares in the final four months of <strong>2012</strong>, the<br />
recovery in the capital amount was calculated on<br />
the new number of shares (114,129,014) and on<br />
the reference price on 28 th December <strong>2012</strong>,<br />
which was €1.3.<br />
Net provisions for risks and charges<br />
Figures in thousands of euro<br />
<strong>2012</strong> 2011<br />
Net provisions for revocation clawback risks (9,806) (2,248)<br />
Net provisions for staff costs (259) (450)<br />
Net provision for bonds in default 71 (286)<br />
Net provisions for litigation (11,285) (10,425)<br />
Other net provisions for risks and charges (27,933) (18,186)<br />
Total (49,212) (31,595)<br />
Net provisions for risks and charges totalled €49.2 million and included €12 million recognised<br />
as part of the restructuring of indirect distribution networks launched in the previous year,<br />
€10 million attributable to Prestitalia, relating to the process of insourcing the loan application<br />
IT processing, which had previously been outsourced to third party companies and €3 million<br />
attributable to B@nca 24-7, allocated in the first six months of the year to account for risks<br />
associated with its business with customers.<br />
18 In 2011 net impairment losses on other financial assets and liabilities amounted to €135.1 million, of which €9.7 million relating to<br />
impairment losses on available-for-sale financial assets and impairment losses on guarantees granted and €125.4 million to<br />
impairment losses on available-for-sale financial assets classified as non-recurring. They consisted of the following: impairment<br />
losses on units in OICR funds (collective investment instruments) (€7.5 million, of which €4.3 million relating to the Polis property<br />
fund) held by <strong>UBI</strong> <strong>Banca</strong> and impairment losses on investments in Banco di Brescia (€1.6 million), as well as a total of €116.3<br />
million of impairment losses on equity investments in A2A (€3.3 million), in Siteba Spa (€0.5 million) and in Intesa Sanpaolo. The<br />
latter incurred a total impairment loss of €112.5 million during the year on the basis of the official share price quoted on 30 th<br />
December 2011 (1.2891 euro). The amount includes the impairment loss recognised in the first half (€15.9 million), together with<br />
the recognition of a further impairment loss that became necessary in the third quarter (€112.9 million), which was then offset by a<br />
recovery in the share price in the fourth quarter (+€16.3 million).<br />
103
Provisions for litigation, primarily related to the network banks and litigation with customers<br />
involving financial investments and compounding of interest, were up by €0.9 million<br />
compared with 2011. By contrast, provisions for revocatory clawback risks rose by €7.6<br />
million and related to a position in the process of being settled, for which the bodies of the<br />
extraordinary administration procedure formulated a settlement proposal, on which the <strong>UBI</strong><br />
<strong>Banca</strong> Group expressed a favourable opinion.<br />
In the previous year, net provisions for risks and charges of €31.6 million, primarily concentrated in the items “for<br />
litigation” and “other provisions,” related, amongst other things, to the following: B@nca 24-7 (€7.5 million, to account<br />
for operating risks associated with the provision of consumer loans and salary backed lending transactions brokered<br />
by financial companies in conditions of objective difficulty, of which €3.6 million pertained to Ktesios SpA, net of a<br />
release of provisions of €8 million, set aside in 2010 in connection with Ktesios, as the transfer to net impairment<br />
losses on loans); IW Bank (€2.1 million, attributable to the closure of transit accounts which failed to balance,<br />
regarding the former legacy platform created at the time of the follow-up to the IT migration carried out in February<br />
2011); and <strong>UBI</strong> Leasing (€2.4 million, non-recurring, of provisions recognised as part of the process of disposing of the<br />
network of agents, due to the termination of contracts, to be interpreted in conjunction with the figure of €3.3 million<br />
recognised within non-recurring operating expenses).<br />
The disposal of equity investments generated a profit of €14.7 million (of which €13.9 million<br />
was non-recurring), attributable to the capital gain of €8.1 million earned on the liquidation of<br />
the equity investment in Arca SGR (following the exercise of the right of withdrawal) and €5.8<br />
million on the disposal in December of the entire equity investment in <strong>UBI</strong> Insurance Broker<br />
(net of consolidation adjustments and excluding dividends received of €3.2 million).<br />
In the case of Arca SGR, the capital gain indicated is significantly different from that recognised by the Parent<br />
(€21.8 million) because the investment had been recognised at historical cost in the accounts of <strong>UBI</strong> <strong>Banca</strong>,<br />
while it has been accounted for according to the equity method in the consolidated financial statements and<br />
therefore the value increased progressively as a result of the profits distributed by the asset management<br />
company over the years, which reduced the final gain.<br />
In 2011 approximately €7.1 million had been realised, approximately €5 million from the sale of two properties (the<br />
historic property of Neuchâtel by Banque de Dépôt et de Gestion for €3.8 million and a property located in Varese by<br />
<strong>Banca</strong> Popolare di Bergamo) and €2.3 million from the capital gain on the partial disposal of the investee By You in<br />
April 2011.<br />
As a result of the performance described above, profit on continuing operations before tax<br />
improved by +14.6% compared with the previous year to €323.1 million.<br />
On a quarterly basis, the loss on continuing operations was €62.1 million, compared with a<br />
profit of €80.7 million in the same quarter of 2011 and a profit of €132.4 million realised in<br />
the third quarter of <strong>2012</strong>.<br />
The income statement for the year presents taxes on income for the year from continuing<br />
operations of €121.2 million 19 , which benefited from certain non-recurring components,<br />
detailed below:<br />
▪<br />
€25 million from the realignment of taxation on goodwill, recognised in the consolidated financial<br />
statements in relation to the purchase of a controlling interest in <strong>Banca</strong> Popolare di Ancona, in<br />
accordance with Art. 23, paragraphs 12-15 of Decree Law No. 98 of 6 th July 2011 (Law No. 111/2011)<br />
19 In the first half of 2011 tax income of €95.9 million was reported, following the recognition of a non-recurring item amounting to<br />
+€352.8 million, relating to the Parent, consisting of:<br />
+€377.8 million from the realignment of taxation on goodwill and other intangible assets in accordance with Decree Law No. 98 of<br />
6 th July 2011, converted with amendments into Law No. 111 of 15 th July 2011. This legislation allowed, in accordance with the<br />
principles of Law No. 2 of 28 th January 2009, the recognition for tax purposes of higher values attributed to controlling interests<br />
acquired through extraordinary transactions. The realignment was performed by the payment of a substitute tax of 16% (€525.6<br />
million paid in November 2011), which allowed tax to be deducted on the amortisation of the amount subject to tax relief<br />
(€3,285.3 million) at constant rates over ten years with effect from 2018 (instead of from 2013, given the deferral effected by Law<br />
No. 228/<strong>2012</strong>). Consequently, in the first half of 2011 deferred tax assets of €903.4 million were recognised within item 290 of<br />
the income statement, corresponding to the future benefit arising from the deduction of amortisation on the intangible assets<br />
subject to tax relief;<br />
-€25 million from the write-off of deferred tax assets for IRAP (local production tax) purposes, already recognised in the financial<br />
statements as at and for the year ended 31 st December 2010. As a result of the tax deductibility of the amortisation of the<br />
amount subject to tax relief mentioned above, the Parent did not have sufficient taxable income for IRAP purposes to recover the<br />
deferred tax assets which had been recognised, since IRAP is not included in the tax consolidation. Consequently the conditions<br />
for its recognition were therefore no longer met.<br />
The increase of 0.75% in the rate for IRAP (regional production tax) introduced by Art. 23, paragraph 5 of Decree Law No. 98/2011<br />
already mentioned, applicable to banks and financial companies and in force with effect from the tax year 2011, resulted in changes in<br />
both current taxation (with the recognition of greater current taxes of -€16.2 million) and deferred taxation, with the recognition of -<br />
€6.3 million (non-recurring) deriving from the adjustment of the deferred tax liabilities allocated in the financial statements as at and<br />
for the year ended 31 st December 2010, primarily relating to intangibles brought to light during the allocation of the cost of the merger<br />
deficit for the former <strong>Banca</strong> Lombarda e Piemontese Group.<br />
104
▪<br />
▪<br />
as amended by Art. 20 of Decree Law No. 201 of 6 th December 2011 (Law No. 214/2011). Following<br />
enactment of the Decreto Salva Italia (“Save Italy Decree”), the payment terms were re-opened with<br />
regard to extraordinary transactions performed in 2010 and in preceding years. As already reported,<br />
in 2011 <strong>UBI</strong> <strong>Banca</strong> had taken advantage of the measures mentioned to obtain tax relief on the higher<br />
amounts recognised on subsidiaries when the former <strong>Banca</strong> Lombarda e Piemontese was merged into<br />
it with regard to goodwill, brands and other intangible assets as stated in the consolidated financial<br />
statements. In consideration of the re-opened terms which allowed a precise evaluation of the<br />
operating and financial impacts of the operation, it was also decided to obtain tax relief in <strong>2012</strong> on<br />
the goodwill recognised in the consolidated financial statements arising from the acquisition of a<br />
controlling interest in BPA by <strong>UBI</strong> <strong>Banca</strong> (formerly BPU <strong>Banca</strong>). In return for the cost of recognising<br />
the substitute tax at a rate of 16% (€34.8 million), it is possible to deduct the amortisation of the<br />
amount subject to tax relief (€217.3 million) at constant rates over ten years with effect from 2018<br />
(instead of 2013, owing to the deferral provided for by Law No. 228/<strong>2012</strong>). Consequently, in the first<br />
half of <strong>2012</strong>, deferred tax assets of €59.8 million were recognised within item 260 of the income<br />
statement, corresponding to the future benefit arising from the deduction of amortisation on the<br />
goodwill subject to tax relief;<br />
€8.3 million resulting from tax relief in relation to non-accounting deductions existing as at 31 st<br />
December 2011, relating to the loan impairment provision of <strong>UBI</strong> <strong>Banca</strong> (section EC of the income tax<br />
return). Law No. 244/2007 repealed, with effect from 2008, the ability to make non-accounting<br />
deductions from income (pursuant to article 109, paragraph 4, letter b) of the <strong>Consolidated</strong> Income<br />
Tax Act) for depreciation and amortisation, provisions and impairment losses of a tax nature, and<br />
introduced the ability to obtain tax relief for those deductions in order to align statutory accounting<br />
amounts with tax accounting amounts existing as at 31 st December 2007. Since the legislation<br />
mentioned made it possible to obtain partial tax relief on uniform categories of deductions and also in<br />
the light of changes to the operating perimeter (with the direct disbursement of loans to customers), it<br />
was decided to take advantage of that opportunity with regard to provisions for impairment losses on<br />
loans, not subject to tax relief in prior years. The income statement therefore included the total<br />
substitute tax due of €11.5 million (16% of the amount of €72.1 million subject to tax relief declared<br />
in section EC of the <strong>2012</strong> income tax return) and also the proceeds from the write-off of deferred<br />
liabilities recognised against the non-accounting deductions from the loan impairment provision as at<br />
31 st December 2011 (€19.8 million). Owing to the foregoing, from <strong>2012</strong> any loan losses are deductible<br />
according to the ordinary tax provisions;<br />
€66.1 million relating to prior year tax credits, in view of the full deduction for corporate income tax<br />
purposes of IRAP (local production tax) on the cost of labour from <strong>2012</strong>, as provided for by Art. 2,<br />
paragraph 1 quater of Decree Law No. 201/2011, converted with amendments into Law No. 214/2011<br />
and subsequently supplemented by Art 4, paragraph 12 of Decree Law No. 16/<strong>2012</strong>, converted with<br />
amendments into Law No. 44/<strong>2012</strong>. The decree on tax deregulation made it possible to file a<br />
corporate income tax refund application, recalculated as a result of the deductibility mentioned above,<br />
for prior years, for which the time limit (on 2 nd March <strong>2012</strong>) of 48 months indicated for the refund of<br />
direct payments had not yet expired (i.e. the tax years 2007-2011). According to the Provision of the<br />
Director of the Tax Authorities of 17 th December <strong>2012</strong>, which establishes the terms and conditions for<br />
filing for such refunds, the amount of the refund for which to apply for the <strong>UBI</strong> <strong>Banca</strong> Group was<br />
recalculated (with respect to the amount originally defined in the half-yearly accounts) for the<br />
aforementioned annual periods.<br />
Net of non-recurring items, taxes came to €224 million from €247.8 million before, to give an<br />
effective tax rate of 67.21% (63.74% in 2011).<br />
Compared to the theoretical tax rate (33.07%), the taxation levied was conditioned by the<br />
combined effect of greater IRES and IRAP, due to:<br />
- the partial non-deductibility of interest expense (4%), introduced by Law No. 133 of 6 th<br />
August 2008 (9.2 percentage points);<br />
- the higher taxation on dividends eliminated in the consolidation (4.4 percentage points);<br />
- non tax deductible expenses, costs and provisions accounting (2.2 percentage points);<br />
- the non-deductibility for IRAP purposes of net impairment losses on loans and staff costs<br />
and the partial non-deductibility of other administrative expenses and depreciation and<br />
amortisation (32.6 percentage points).<br />
These impacts were only partially cushioned by the following: the valuation of equity<br />
investments according to equity method, not significant for tax purposes (4.4 percentage<br />
points), the Aiuto alla crescita economica (“Aid to economic growth”) concessions (2.6<br />
percentage points), the deduction for IRES (corporate income tax) purposes of an amount<br />
equal to the IRAP (regional production tax) corresponding to the taxable portion of employee<br />
and similar personnel expenses and the flat-rate deduction of 10% (4.8 percentage points),<br />
105
and the deduction from the IRAP taxable income of the tax amortisation of goodwill<br />
(approximately one percentage point) and of negative components not deducted in previous<br />
years on loans disposed of during the year (1.5 percentage points).<br />
On a quarterly basis, (normalised) taxes decreased to €14.4 million from the €50.2 million in<br />
the fourth quarter of 2011 and €62.2 million in the third quarter of <strong>2012</strong>. The quarter-onquarter<br />
performance was affected above all by the change in taxable income, which became<br />
negative during the reporting quarter, but also by the different weight assumed during the two<br />
periods by certain components, such as net impairment losses on loans and provisions for<br />
risks and charges, for the purposes of their significance in calculating taxable income or loss<br />
for IRAP (regional production tax).<br />
As a result of the performance already reported and also of the profits earned by Group banks<br />
and companies, profit for the year attributable to non-controlling interests (inclusive of the<br />
effects of consolidation entries) stood at €17.3 million, compared with €28.8 million in 2011.<br />
This change reflects the different results which contributed to the item of the companies in<br />
which non-controlling shareholders hold shares (for example the change from profit in 2011 to<br />
the current loss for Carime, BPA and BRE and the decreases in profits for BPCI and<br />
Centrobanca).<br />
On a quarterly basis, profit attributable to non-controlling interests came to €1.5 million,<br />
compared with €9.5 million in the same quarter of 2011 and €1.4 million in the previous three<br />
months of <strong>2012</strong>.<br />
Staff leaving incentive costs of €101.9 million were presented within a single item, net of taxes<br />
and non-controlling interests. The item originated to a significant degree in the fourth quarter of<br />
the year (€93.9 million), following the signing of the trade union agreements of 29 th November<br />
<strong>2012</strong> and 12 th February 2013.<br />
These costs totalled €152 million (subject to taxes of €41.8 million, whereas the share<br />
attributable to non-controlling interests is €8.3 million), of which:<br />
• -€4 million was charged in connection with the General redundancy incentive offer<br />
implemented in March <strong>2012</strong> and aimed at employees eligible for the benefits provided by the<br />
Salva Italia (“Save Italy”) Decree;<br />
• -€4.5 million 20 (net of the related staff costs for the personnel covered by the redundancy<br />
plan) was recognised in the third quarter in connection with the “Managerial manoeuvre”;<br />
• -€143.5 million is attributable to the contents of the trade union agreements signed on 29 th<br />
November <strong>2012</strong> and 12 th February 2013.<br />
The impairment-testing procedure performed at the end of December 2011, in accordance with IAS 36 (Impairment of<br />
assets), no longer ensured the recoverability of the carrying amounts for goodwill and finite useful life intangibles.<br />
Accordingly, the reclassified income statement presented net impairment losses on goodwill (item 260) and net<br />
impairment losses on finite useful life intangibles (part of item 210) recognised during the year, totalling €2,190.9<br />
million, within a single item stated net of taxes and non-controlling interests. These were composed of €1,865.5<br />
million for impairment losses on goodwill and €305.9 million for impairment losses on finite useful life intangible<br />
assets, while the remaining €19.5 million (recognised in the second quarter of the year) related to the full impairment<br />
loss on intangible assets associated with the investment in BY YOU (partially disposed of in April 2011), following the<br />
renegotiation of distribution agreements.<br />
In detail, the impairment test gave rise to total impairment losses of €2,396.8 million, composed as follows:<br />
<br />
<br />
€1,873.8 million for the total impairment loss recognised on goodwill, of which:<br />
- €521.2 million for the full impairment loss on goodwill recognised by <strong>UBI</strong> <strong>Banca</strong> arising from the business<br />
combination involving the former BPU Group and the former BLP Group, which took effect from 1 st April 2007;<br />
- €1,331 million for reductions in goodwill arising on consolidation, of which €987.5 million relating to the<br />
network banks, €234.5 million to the main product companies, €96.8 million to the other banks and €12.2<br />
million to other minor companies;<br />
- €21.6 million for impairment losses on goodwill recognised in the separate balance sheets arising from<br />
previous merger transactions (€12.1 million for <strong>Banca</strong> Carime, €7.2 million for Centrobanca, €2 million for <strong>UBI</strong><br />
Leasing and €0.3 million for BRE);<br />
€523 million for impairment losses on all the finite useful life intangible assets (except for those relating to assets<br />
under custody and software): €193 million relating to brands, €241.7 million to core deposits and €88.3 million to<br />
assets under management.<br />
20 Estimated costs of €7.6 million had been recognised in the third quarter of <strong>2012</strong>.<br />
106
The following comments are based on items in the consolidated balance sheet contained in the<br />
reclassified consolidated financial statements, on which the relative tables furnishing details are<br />
also based.<br />
The sections “<strong>Consolidated</strong> companies: the principal figures” and “The performance of the main<br />
consolidated companies” may be consulted for information on individual banks and Group<br />
member companies.<br />
General banking business with customers:<br />
funding<br />
The action taken as a whole during the initial months of <strong>2012</strong> freed the Group from all concerns<br />
over liquidity so that it had no need in its financial management to renew maturing medium to<br />
long-term institutional funding.<br />
In fact, during the first quarter of the year, due partly to a temporary easing of sovereign debt<br />
pressures, renewed interest was seen among institutional investors in Italian bank issuers. In this<br />
context, the Group nevertheless preferred not to make new placements, which, moreover were not<br />
strictly necessary for the structural balance of its assets and liabilities, as it considered that<br />
market conditions were still too costly. It was only from October onwards, given reduced pressure<br />
on sovereign spreads and the consequent improvement in cost levels, that <strong>UBI</strong> <strong>Banca</strong> returned to<br />
international markets with a benchmark issue of €750 million, followed by two private placements<br />
for a total of €525 million.<br />
In the short-term institutional segment, in which the Group operates in euro commercial paper and<br />
French certificates of deposit (instruments issued by <strong>UBI</strong> <strong>Banca</strong> International and listed in<br />
Luxembourg), volumes of business were further reduced due to both the specific nature of this<br />
funding (used as a “buffer” for optimising liquidity management and overall funding) and the<br />
impact that Italy risk was having on the yields and the durations of investments. Another factor<br />
was the minimum rating levels stipulated by the internal policies of a number of institutional<br />
operators.<br />
At the same time, commercial attention was increasingly directed towards funding from ordinary<br />
customers, a traditional strategic strength for the Group, and even more important for the future,<br />
although in an increasingly competitve environment. In this situation, commercial action was<br />
organised principally around the range of bond products, with a view, amongst other things, to<br />
stabilising liabilities and around term deposits.<br />
Net of the institutional component (including repurchase agreements with the Cassa di<br />
Compensazione e Garanzia – a central counterparty clearing house), at the end of the year,<br />
funding from households and companies financed 86.5% of loans and advances to customers.<br />
Total funding<br />
Total funding from customers<br />
Figures in thousands o f euro<br />
31.12.<strong>2012</strong><br />
A<br />
%<br />
30.9.<strong>2012</strong><br />
B<br />
%<br />
30.6.<strong>2012</strong><br />
C<br />
%<br />
31.3.<strong>2012</strong><br />
D<br />
%<br />
31.12.2011<br />
E<br />
%<br />
Changes A/E<br />
amount %<br />
Direct funding 98,817,560 58.5% 100,263,876 58.7% 102,246,727 59.7% 99,443,211 57.9% 102,808,654 58.8% -3,991,094 -3.9%<br />
Indirect funding 70,164,384 41.5% 70,665,545 41.3% 69,024,117 40.3% 72,381,158 42.1% 72,067,569 41.2% -1,903,185 -2.6%<br />
of which: assets under<br />
management 38,106,037 22.6% 37,969,326 22.2% 36,490,940 21.3% 37,604,598 21.9% 36,892,042 21.1% 1,213,995 3.3%<br />
Total funding from customers 168,981,944 100.0% 170,929,421 100.0% 171,270,844 100.0% 171,824,369 100.0% 174,876,223 100.0% -5,894,279 -3.4%<br />
Total funding net of CCG and<br />
institutional funding 150,498,750 152,068,364 149,377,124 152,725,529 151,588,548 -1,089,798 -0.7%<br />
Total Group funding, consisting of total amounts administered on behalf of customers,<br />
amounted, as at 31 st December <strong>2012</strong> to €169 billion (-€5.9 billion compared to the end<br />
of 2011), highlighting a progressive reduction during the year, attributable, although<br />
107
at different rates over the various time frames, to both direct funding (-€4 billion) and<br />
indirect funding (-€1.9 billion).<br />
In actual fact, the trend for the<br />
total was influenced by a series of<br />
factors, some technical, which did<br />
not relate to normal banking<br />
business with customers as such,<br />
as follows:<br />
<br />
110,000<br />
100,000<br />
90,000<br />
80,000<br />
on the one hand, for some 70,000<br />
institutional components of 60,000<br />
direct funding, the failure to<br />
50,000<br />
renew medium to long-term<br />
EMTN funding, reduced shortterm<br />
activity in euro 30,000<br />
40,000<br />
commercial paper and French<br />
20,000<br />
CDs, as well as repurchase<br />
10,000<br />
transactions with the Cassa di<br />
Compensazione e Garanzia<br />
0<br />
(CCG) to fund the portfolio of<br />
2009<br />
Italian government securities,<br />
the latter meeting contingent<br />
requirements as part of overall liquidity management;<br />
Direct funding and indirect funding<br />
(end of quarter totals in millions of euro)<br />
1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q<br />
2008 2010 2011<br />
<strong>2012</strong><br />
Direct funding<br />
Indirect funding<br />
<br />
on the other hand, for indirect funding, the volatility which characterised the<br />
financial markets for the whole of the first part of <strong>2012</strong>, with signs of recovery only<br />
firming up from September onwards. This inevitably impacted asset values (the<br />
“market effect”).<br />
Net of the institutional items cited above, direct funding from customers grew (+€0.8<br />
billion), partially offsetting the decline in indirect funding. Compared to December<br />
2011, total direct funding of €150.5 billion fell more moderately as a consequence<br />
(-€1.1 billion).<br />
Direct funding<br />
As already reported above, direct Group funding, amounting to €98.8 billion,<br />
contracted over the twelve-month period, incorporating trends in a number of factors<br />
of an institutional nature (transactions with the Cassa di Compensazione e Garanzia<br />
to fund the proprietary portfolio, failure to renew maturing institutional funding and<br />
reduced activity in short-term institutional markets), net of which, the trend was<br />
positive at +€0.8 billion.<br />
In detail, after reaching €57.1 billion in June, amounts due to customers stood at<br />
€53.8 billion, a reduction of €0.7 billion compared to December 2011.<br />
The main cause of the downward trend is attributable to repurchase agreements, for<br />
both the part relating to business with customers (which progressively fell to €0.3<br />
billion from €1 billion) and that with counterparties through the Cassa di<br />
Compensazione e Garanzia, which over the twelve-month period, fell from €4.6 billion<br />
to €3.9 billion, although with fluctuating performance in the intervening periods,<br />
reflecting the investment/disinvestment choices for the government bond portfolio and<br />
also the improved Group liquidity position from the third quarter onwards.<br />
During the first quarter, business with the CCG had been reduced (from €4.6 billion in December<br />
2011 to €2.4 billion in March <strong>2012</strong>) in parallel with the three-year liquidity acquired through the<br />
two LTRO operations with the ECB (an operation which also provided greater stability to the<br />
balance sheet liability structure). During the second quarter, on the other hand, recourse to the<br />
Cassa di Compensazione e Garanzia was increased again (€7.2 billion in June) in order to<br />
finance short-term investments. From the second half of the year onwards, a new phase of<br />
108
educing these operations began, bringing them down to a total of €3.9 billion in December <strong>2012</strong>,<br />
as a consequence of partial divestments from the trading portfolio (all concentrated during the<br />
third quarter) and the positive liquidity position of the Group<br />
Considered net of repurchase agreements with the Cassa di Compensazione e<br />
Garanzia, amounts due to customers were stable at €49.8 billion year-on-year.<br />
For other forms of funding, a change in the mix of investment choices by customers<br />
occurred, out of current accounts, which fell by €0.9 billion over the twelve-month<br />
period to €45.1 billion, into term deposits (+€1.8 billion to €3.2 billion) partly in<br />
relation to the commercial initiatives already in place from the end of 2011 in order to<br />
exploit fixed term forms of funding, above all from private individual customers.<br />
It should moreover be considered that the trend for current accounts was influenced<br />
by changes, which varied during the year, in liquid assets deposited with <strong>UBI</strong> <strong>Banca</strong><br />
by <strong>UBI</strong> Pramerica 1 , (stable in the fourth quarter but down €0.2 billion compared to<br />
December 2011), by the CCG (-€1.1 billion compared to September, -€0.9 billion<br />
compared to the end of 2011), as well as by corporate customers (-€0.2 billion over the<br />
last three months, +€0.3 billion over the twelve-month period).<br />
Finally, mention must be made of growth in IWBank funding, the Group’s internet<br />
bank (+€1 billion year-on-year), the result, amongst other things, of the growing<br />
appreciation by customers for the products and services provided.<br />
Direct funding from customers<br />
Changes<br />
31.12.<strong>2012</strong> % 31.12.2011 %<br />
Figures in thousands of euro amount %<br />
Current accounts and deposits 45.149.448 45,7% 46.065.651 44,8% -916.203 -2,0%<br />
Term deposits 3.184.368 3,2% 1.396.835 1,4% 1.787.533 128,0%<br />
Financing 4.732.552 4,8% 6.022.955 5,8% -1.290.403 -21,4%<br />
- repurchase agreements 4.273.890 4,3% 5.568.351 5,4% -1.294.461 -23,2%<br />
of which: repos with the CCG 3.944.510 4,0% 4.615.754 4,5% -671.244 -14,5%<br />
- other 458.662 0,5% 454.604 0,4% 4.058 0,9%<br />
Other payables 692.039 0,7% 945.850 0,9% -253.811 -26,8%<br />
Total amounts due to customers (item 20 liabilities) 53.758.407 54,4% 54.431.291 52,9% -672.884 -1,2%<br />
Bonds 41.996.277 42,5% 44.429.027 43,2% -2.432.750 -5,5%<br />
Certificates of deposit 2.449.278 2,5% 2.447.560 2,4% 1.718 0,1%<br />
Other certificates 613.598 0,6% 1.500.776 1,5% -887.178 -59,1%<br />
Total debt securities issued (item 30 liabilities) 45.059.153 45,6% 48.377.363 47,1% -3.318.210 -6,9%<br />
of which:<br />
securities subscribed by institutional customers: 14.538.684 14,7% 18.671.921 18,1% -4.133.237 -22,1%<br />
- The EMTN programme (*) 7.091.040 7,2% 10.292.174 10,0% -3.201.134 -31,1%<br />
- The French certificates of deposit programme 487.838 0,5% 750.616 0,7% -262.778 -35,0%<br />
- The euro commercial paper programme 273.574 0,3% 1.044.055 1,0% -770.481 -73,8%<br />
- The covered b ond programme 6.346.208 6,4% 6.128.355 6,0% 217.853 3,6%<br />
- Preference shares (**) 340.024 0,3% 456.721 0,4% -116.697 -25,6%<br />
bonds subscribed by ordinary customers 28.395.864 28,7% 27.749.274 27,0% 646.590 2,3%<br />
- of the Group:<br />
issued by <strong>UBI</strong> <strong>Banca</strong> 7.812.713 7,9% 6.856.713 6,7% 956.000 13,9%<br />
issued by the network banks 16.654.669 16,8% 16.624.904 16,2% 29.765 0,2%<br />
- external distribution networks:<br />
issued by Centrob anca 3.928.482 4,0% 4.267.657 4,1% -339.175 -7,9%<br />
Total direct funding 98.817.560 100,0% 102.808.654 100,0% -3.991.094 -3,9%<br />
Due to customers net of the CCG 49.813.897 49.815.537 -1.640 0,0%<br />
Total direct funding net of the CCG and institutional funding 80.334.366 79.520.979 813.387 1,0%<br />
(*) The corresponding nominal amounts were €6.995 billion (€182 million subordinated) as at 31 st December <strong>2012</strong> and €10.186 billion (€212<br />
million subordinated) as at 31 st December 2011. The amounts indicated in the table do not include two private placements, for a total of<br />
€88 million, of an “intragroup” nature and therefore eliminated in the consolidation (€93 million as at 31 st December 2011 also due to a<br />
partial repurchase).<br />
(**) The preference shares were issued, in nominal terms, by BPB Capital Trust for €300 million, by <strong>Banca</strong> Lombarda Preferred Securities Trust<br />
for €155 million and by BPCI Capital Trust for €115 million. Following the Public Exchange Offer of 25 th June 2009, the Public Purchase<br />
Offer, concluded on 12 th March <strong>2012</strong> and further repurchases done afterwards, the nominal values of the debt securities issued were<br />
€182.095 million for the issue by BPB Capital Trust, €90.314 million for that by <strong>Banca</strong> Lombarda Preferred Securities Trust and €65.338<br />
million for BPCI Capital Trust.<br />
1 Following an agreement signed in April 2011, the Parent of <strong>UBI</strong> <strong>Banca</strong> Group is the holder of the deposits intended for<br />
the investment requirements of the number of funds managed by the asset management company: Euro Breve Termine,<br />
Euro Cash (both from May 2011 onwards) and Portafoglio Prudente (from August 2011 onwards).<br />
109
Debt securities issued, over 90% of which represent bonds, fell to €45.1 billion, with<br />
a progressive contraction over the first three quarters of <strong>2012</strong> due to the downward<br />
trend in funding from bonds and other securities, with a partial recovery in the final<br />
months of the year.<br />
Bonds amounted to €42 billion, affected by the maturities of the EMTN programme,<br />
which were concentrated above all during the first half of the year, while other<br />
securities (€0.6 billion compared to €1.5 billion outstanding at the end of 2011)<br />
substantially reflected the trend for euro commercial paper.<br />
Certificates of deposit, which were stable at €2.4 billion, almost unchanged compared<br />
to the previous year, actually represented differring trends within the total: the French<br />
certificates component, which is used for short-term institutional funding and liquidity<br />
optimisation requirements, fell by €0.3 billion. Similarly, certificates swapped into yen<br />
(€0.8 billion), fell compared to December 2011 (-€0.3 billion). The remaining types of<br />
funding on the other hand benefited from renewed interest among customers, after<br />
changes in taxation in effect from 1 st January <strong>2012</strong> onwards, reaching a total of €1.1<br />
billion at the end of the financial year, with an increase of €0.6 billion since the start<br />
of the year.<br />
In terms of types of customers, funding from institutional customers totalled €14.5<br />
billion, compared to €18.7 billion at the end of 2011. As already reported previously,<br />
the decrease in the item was affected mainly by the partial renewal in the EMTN<br />
programme (only during the last quarter of the year) of maturing notes, although also<br />
by a progressive reduction in transactions in short-term markets, used as a buffer for<br />
the optimisation of liquidity management, where, moreover, at least until September,<br />
Italy risk influenced the yields and durations of investments, partly in relation to the<br />
the minimum rating levels required by the internal policies of several institutional<br />
operators.<br />
In detail, institutional funding as at 31 st December <strong>2012</strong> was composed as follows:<br />
EMTN instruments (Euro Medium Term Notes) amounting to €7.1 billion (of which<br />
only €0.2 billion subordinated), issued as part of a programme for a maximum<br />
issuance of €15 billion 2 .<br />
These decreased by €3.2 billion over twelve months, which was in fact attributable<br />
to the positive liquidity and structural balance of the Group, which made it possible<br />
not to renew maturing securities, under market conditions which were still<br />
considered too costly.<br />
It was not until October <strong>2012</strong>, after 18 months, that <strong>UBI</strong> <strong>Banca</strong> started to return to<br />
international markets with three new issuances for a total of €1.275 billion<br />
nominal, which partially replaced maturities, redemptions and repurchases during<br />
the year, for total of €4.46 billion nominal.<br />
On 30 th October a benchmark issue of €750 million with a three-year maturity and a fixed<br />
coupon of 3.75% was placed by a public offer. This was followed by two private placements,<br />
the first, for €200 million on 28 th November and the second, for €325 million on 11 th<br />
December, both at a variable rate and maturing in 2013.<br />
<br />
Covered bonds, amounting to €6.3 billion (+€0.2 billion over twelve months, the<br />
result of a change in book value, with no issues made during the year).<br />
As part of the “multioriginator” programme, backed by residential mortgages, with a<br />
maximum ceiling of €10 billion, <strong>UBI</strong> <strong>Banca</strong> has eight covered bonds outstanding for<br />
a nominal value of €5.717 billion, after three amortisations for a total of €33<br />
million 3 . The securities are listed in London.<br />
2 All the securities are traded in London, with the sole exception of the securities issued by the former <strong>Banca</strong> Lombarda e<br />
Piemontese, which are listed in Luxembourg.<br />
3 Considering the large pool of segregated assets available from <strong>UBI</strong> Finance, on 22 nd February <strong>2012</strong> three new issues were<br />
made for an overall amount of €750 million, which were not placed on the market but used to strengthen the pool of<br />
eligible assets with the Central Bank. At the same time, a second covered bond programme backed by commercial<br />
110
As at 31 st December <strong>2012</strong>, assets consisting of residential mortgages transferred to <strong>UBI</strong><br />
Finance to back the issues made, amounted to €11.2 billion, of which 22.9% originated by<br />
<strong>Banca</strong> Popolare di Bergamo, 20.5% by Banco di Brescia, 18.9% by <strong>Banca</strong> Popolare Commercio<br />
e Industria, 15.6% by <strong>Banca</strong> Regionale Europea, 11% by <strong>Banca</strong> Popolare di Ancona, 7% by<br />
<strong>Banca</strong> Carime, 2.4% by <strong>Banca</strong> di Valle Camonica and the remaining 1.7% by <strong>UBI</strong> <strong>Banca</strong><br />
Private Investment.<br />
The cover pool was again highly fragmented, including over 157,000 mortgages with an<br />
average residual debt of €71,200, of which 72.1% in the north of Italy, and in particular, in<br />
Lombardy (51% of the total).<br />
On 1 st February <strong>2012</strong>, a transfer of assets was concluded by <strong>Banca</strong> Popolare di Bergamo,<br />
Banco di Brescia, <strong>Banca</strong> Carime and <strong>UBI</strong> <strong>Banca</strong> Private Investment. They transferred<br />
mortgages already held as assets on their balance sheets for a total of €1.171 billion of<br />
remaining principal debt to the special purpose company.<br />
On 1 st October <strong>2012</strong>, a further transfer of assets was concluded by BRE, the former BSG, BPA,<br />
BPCI and BVC, which transferred mortgages for a total remaining nominal principal debt of<br />
€1.4 billion held on their balance sheets to <strong>UBI</strong> Finance.<br />
<br />
<br />
French certificates of deposit for €488 million, issued by <strong>UBI</strong> <strong>Banca</strong> International<br />
as part of a €5 billion programme, listed in Luxembourg, and euro commercial<br />
paper of €274 million, issued by <strong>UBI</strong> <strong>Banca</strong> International as part of a €6 billion<br />
programme, listed in Luxembourg;<br />
preference shares of €340 million, consisting of shares still in issue after the public<br />
exchange offer of June 2009 and the more recent operation in February and March<br />
<strong>2012</strong>.<br />
Bond funding from ordinary customers, consisting of bonds subscribed by customers of<br />
the network banks, increased over the twelve-month period by €0.6 billion rising to<br />
€28.4 billion, due to an issuance programme by the Parent concentrated above all in<br />
the last part of the year.<br />
Due to 18 new placements for a total nominal amount of €1.8 billion (of which two, for<br />
an amount of €1.2 billion, with a lower tier two subordination clause), at the end of<br />
the year, <strong>UBI</strong> <strong>Banca</strong>’s holding of listed bonds had risen to €7.8 billion, with an annual<br />
increase of around €1 billion (+€1.5 billion in the fourth quarter alone) and an issued<br />
to maturity ratio of 191%. Bond funding from the network banks nevertheless<br />
remained stable at €16.6 billion, reflecting a substantial balance between issuances<br />
(overall €5.6 billion) and redemptions and repurchases.<br />
Centrobanca funding, mainly from non-captive customers, continued to decline in the<br />
absence of new issuance (-€0.3 billion year-on-year).<br />
Excluding Centrobanca, during <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> securities placed by the network<br />
banks totalled €7.4 billion nominal, against maturities, repurchases and amortisation<br />
repayments of €6.5 billion nominal, with an issued to maturity ratio of 113%.<br />
During 2013, a strategic change is planned in the Group’s medium to long-term direct<br />
funding strategy, with the predominant concentration of bond issues by <strong>UBI</strong> <strong>Banca</strong>,<br />
while the network banks will focus primarily on placements with customers. This will<br />
favour the progressive reduction of the number of securities in issue, to the benefit of<br />
their liquidity, as a result of increasing the average size of the issues placed and with<br />
greater efficiency also in the management of hedges where used.<br />
mortgages was structured with the aim of making self-retained issues, i.e. intended to create new eligible assets. At the<br />
end of May, the first issue for a nominal amount of €1.8 billion was made (six-year maturity), while a second issue was<br />
completed at the end of October for a nominal amount of €0.5 million (ten-year maturity). In so far as these were<br />
repurchased by the same Parent, on the basis of IAS/IFRS standards, such liabilities are not recorded in the accounts.<br />
111
Maturities of bonds outstanding as at 31st December <strong>2012</strong><br />
Nominal amounts in millions of euro<br />
1st Quarter<br />
2013<br />
2nd Quarter<br />
2013<br />
3rd Quarter<br />
2013<br />
4th Quarter<br />
2013<br />
2014 2015 2016<br />
Subsequent<br />
years<br />
Total<br />
<strong>UBI</strong> BANCA* 1,557 56 1,366 1,975 4,726 2,476 2,557 5,692 20,405<br />
of which: EMTNs 1,424 - 642 1,663 2,076 965 100 125 6,995<br />
Covered bonds ** - 25 - 25 51 551 1,801 3,264 5,717<br />
Network banks 1,186 1,182 1,441 1,405 5,805 3,401 940 940 16,300<br />
Other banks in the Group 5 7 23 56 422 448 2,304 630 3,895<br />
Total 2,748 1,245 2,830 3,436 10,953 6,325 5,801 7,262 40,600<br />
* The EMTN subordinated loan was placed on the exercise date of the call option (October 2013).<br />
** The first half-yearly repayment, of €11 million, took place in the fourth quarter of 2011 and the second and third repayments, also for €11<br />
million, took place respectively during the second and fourth quarters of <strong>2012</strong>.<br />
Listed securities<br />
Bonds listed on the MOT (electronic bond market)<br />
Nominal amount of<br />
Book value as at<br />
ISIN number issue 31.12.<strong>2012</strong> 31.12.2011<br />
IT0001197083 Centrobanca zero coupon 1998-2018 L. 800 billion € 164,047,404 € 157,100,369<br />
IT0001257333 Centrobanca 1998/2014 reverse floater L. 300 billion € 89,251,808 € 106,581,450<br />
IT0001267381 Centrobanca 1998/2018 reverse floater capped L. 320 billion € 132,468,039 € 121,608,918<br />
IT0001278941 Centrobanca 1998/2013 equity linked coupon L. 100 billion € 38,099,909 € 41,153,616<br />
IT0001300992 Centrobanca 1999/2019 step dow n indicizzato al tasso sw ap euro 10 anni € 170,000,000 € 119,683,666 € 117,189,043<br />
IT0001312708 Centrobanca 1999/2019 step dow n eurostability bond € 60,000,000 € 62,389,248 € 54,765,695<br />
IT0003834832 Centrobanca 2005/2013 inflazione Italia con leva € 16,280,000 € 4,892,524 € 9,826,128<br />
IT0004424435 <strong>UBI</strong> subordinato low er tier 2 a tasso variabile con ammortamento 28.11.2008-2015 € 599,399,000 € 356,528,893 € 474,738,713<br />
IT0004457070 <strong>UBI</strong> subordinato low er tier 2 fix to float con rimborso anticipato 13.3.2009-2019 € 370,000,000 € 381,377,159 € 383,885,598<br />
IT0004457187 <strong>UBI</strong> subordinato low er tier 2 a tasso variabile con ammortamento 13.3.2009-2016 € 211,992,000 € 168,290,705 € 209,976,428<br />
IT0004497043 Unione di Banche Italiane Scpa tasso misto 30.6.2009-2014 € 219,990,000 € 218,273,272 € 217,147,237<br />
IT0004497050 <strong>UBI</strong> subordinato low er tier 2 fix to float con rimborso anticipato 30.6.2009-2019 € 365,000,000 € 372,171,144 € 370,940,321<br />
IT0004497068 <strong>UBI</strong> subordinato low er tier 2 a tasso variabile con ammortamento 30.6.2009-2016 € 156,837,000 € 124,233,447 € 154,914,482<br />
IT0004496557 Unione di Banche Italiane Scpa tasso misto 7.7.2009-2014 € 200,000,000 € 198,834,101 € 198,215,118<br />
IT0004517139 Unione di Banche Italiane Scpa tasso misto 4.9.2009-2013 € 84,991,000 € 84,923,166 € 84,809,448<br />
IT0004572860 <strong>UBI</strong> subordinato low er tier 2 a tasso variabile con ammortamento 23.2.2010-2017 € 152,587,000 € 151,575,804 € 151,473,168<br />
IT0004572878 <strong>UBI</strong> subordinato low er tier 2 a tasso fisso 3,10% con ammortamento 23.2.2010-2017 € 300,000,000 € 314,157,916 € 309,378,048<br />
IT0004626617 IW Bank Obbligazioni agosto 2015 con opzione di tipo call asiatica (*) € 1,054,000 € 1,010,953 € 1,081,021<br />
IT0004642382 IW Bank Obbligazioni ottobre 2015 con opzione di tipo call asiatica - II tranche (*) € 940,000 € 896,115 € 923,710<br />
IT0004645963 <strong>UBI</strong> subordinato low er tier 2 a tasso fisso 4,30% con ammortamento 5.11.2010-2017 € 400,000,000 € 410,797,107 € 397,739,866<br />
IT0004651656 Unione di Banche Italiane Scpa tasso fisso 2,30% 2.12.2010-2013 Welcome Edition € 81,322,000 € 81,264,633 € 81,041,477<br />
IT0004652043 Unione di Banche Italiane Scpa tasso misto 2.12.2010-2014 € 174,973,000 € 174,136,269 € 173,997,117<br />
IT0004710981 Unione di Banche Italiane Scpa tasso fisso 3,65% 20.5.2011-20.11.2013 € 5,787,000 € 5,911,171 € 5,914,831<br />
IT0004713654 Unione di Banche Italiane Scpa tasso misto 10.6.2011-2015 € 120,000,000 € 123,276,629 € 121,935,110<br />
IT0004718489 <strong>UBI</strong> subordinato low er tier 2 tasso fisso 5,50% con ammortamento 16.6.2011-2018 Welcome Edition € 400,000,000 € 423,622,244 € 412,216,859<br />
IT0004723489 <strong>UBI</strong> subordinato low er tier 2 tasso fisso 5,40% con ammortamento 30.6.2011-2018 € 400,000,000 € 423,855,780 € 412,473,438<br />
IT0004767742 <strong>UBI</strong> subordinato low er tier 2 tasso misto 18.11.2011-2018 Welcome Edition € 222,339,000 € 223,629,064 € 219,055,454<br />
IT0004777550 Unione di Banche Italiane Scpa tasso fisso 5% 9.12.2011-9.6.2014 € 203,313,000 € 206,227,976 € 204,273,814<br />
IT0004777568 Unione di Banche Italiane Scpa tasso fisso 5% 30.12.2011-30.6.2014 Welcome Edition € 176,553,000 € 178,073,154 € 176,231,023<br />
IT0004779713 Unione di Banche Italiane Scpa tasso fisso 4,50% 30.12.2011-30.6.2014 € 287,722,000 € 289,994,069 € 286,920,098<br />
IT0004780711 Unione di Banche Italiane Scpa tasso fisso 5% 29.12.2011-29.6.2014 € 95,109,000 € 95,605,512 € 94,660,143<br />
IT0004785876 Unione di Banche Italiane Scpa tasso fisso 4,3% 17.2.<strong>2012</strong>-17.3.2014 € 19,991,000 € 20,358,184 -<br />
IT0004785892 Unione di Banche Italiane Scpa tasso fisso 3,8% 31.1.<strong>2012</strong>-28.2.2014 € 25,000,000 € 25,464,290 -<br />
IT0004796030 Unione di Banche Italiane Scpa tasso variabile 30.3.<strong>2012</strong>-30.3.2014 € 20,000,000 € 20,000,535 -<br />
IT0004796048 Unione di Banche Italiane Scpa tasso fisso step up 3,50% 30.3.<strong>2012</strong>-30.3.2014 € 40,000,000 € 40,388,587 -<br />
IT0004803968 Unione di Banche Italiane Scpa tasso variabile 23.4.<strong>2012</strong>-23.4.2014 € 73,022,000 € 73,285,049 -<br />
IT0004804560 Unione di Banche Italiane Scpa tasso fisso step up 3% 30.4.<strong>2012</strong>-30.4.2014 € 33,438,000 € 34,344,849 -<br />
IT0004815368 Unione di Banche Italiane Scpa tasso fisso 4% 8.6.<strong>2012</strong>-8.6.2015 Welcome Edition € 15,371,000 € 15,481,581 -<br />
IT0004815715 Unione di Banche Italiane Scpa tasso fisso 3,80% 15.6.<strong>2012</strong>-15.6.2016 € 20,224,000 € 20,333,588 -<br />
IT0004841778 <strong>UBI</strong> subordinato low er tier 2 tasso misto 8.10.<strong>2012</strong>-8.10.2019 Welcome Edition € 200,000,000 € 201,603,727 -<br />
IT0004842370 <strong>UBI</strong> subordinato low er tier 2 tasso fisso con ammortamento 6% 8.10.<strong>2012</strong>-8.10.2019 € 970,457,000 € 985,224,678 -<br />
IT0004851710<br />
IT0004851728<br />
IT0004854490<br />
Unione di Banche Italiane Scpa tasso variabile 23.11.<strong>2012</strong>-23.11.2016 Welcome Edition<br />
"<strong>UBI</strong> Comunità per l'imprenditoria sociale del sistema CGM" € 17,552,000 € 17,624,825 -<br />
Unione di Banche Italiane Scpa tasso fisso step up 4,00% 19.10.<strong>2012</strong>-19.10.2016 Welcome Edition<br />
"<strong>UBI</strong> Comunità per la Comunità di Sant'Egidio" € 20,000,000 € 20,361,336 -<br />
Unione di Banche Italiane Scpa tasso misto 7.12.<strong>2012</strong>-7.12.2015 Welcome Edition<br />
"Progetto T2 Territorio per il Territorio <strong>UBI</strong> <strong>Banca</strong> e Assolombarda" € 18,550,000 € 18,601,359 -<br />
IT0004855554 Unione di Banche Italiane Scpa tasso fisso 4% 30.11.<strong>2012</strong>- 30.11.2014 Welcome Edition € 34,966,000 € 35,017,404 -<br />
IT0004855562 Unione di Banche Italiane Scpa tasso fisso 4% 23.11.<strong>2012</strong>-23.12.2014 € 99,991,000 € 100,393,415 -<br />
IT0004865579 Unione di Banche Italiane Scpa tasso fisso 3% 3.12.<strong>2012</strong>-3.12.2014 € 121,440,000 € 121,435,076 -<br />
IT0004867310 Unione di Banche Italiane Scpa tasso fisso 3,50% 7.12.<strong>2012</strong>-7.6.2015 € 68,189,000 € 68,145,376 -<br />
IT0004869860<br />
Unione di Banche Italiane Scpa tasso fisso step up 3,00% 31.12.<strong>2012</strong>-31.12.2015 WE <strong>UBI</strong> Comunità per<br />
Fondazione Umberto Veronesi € 20,000,000 € 20,000,000 -<br />
IT0004874985 Unione di Banche Italiane Scpa tasso fisso step up 3,00% 31.1.2013-31.1.2017 € 157,532,000 - -<br />
IT0004874993 Unione di Banche Italiane Scpa tasso fisso 3,50% 31.1.2013-31.1.2016 Welcome Edition € 54,419,000 - -<br />
IT0004883762 Unione di Banche Italiane Scpa tasso fisso step up 1,50% 8.2.2013-8.2.2016 € 45,230,000 - -<br />
IT0004884208 Unione di Banche Italiane Scpa tasso fisso 1,60% 8.2.2013-8.2.2015 € 43,977,000 - -<br />
IT0004884539 Unione di Banche Italiane Scpa tasso fisso 1,70% 8.2.2013-8.8.2015 € 13,145,000 - -<br />
IT0004884745 Unione di Banche Italiane Scpa tasso misto 8.2.2013-8.2.2016 € 49,045,000 - -<br />
IT0004883770 Unione di Banche Italiane Scpa tasso variabile 8.2.2013-8.2.2015 € 51,120,000 - -<br />
IT0004884729 Unione di Banche Italiane Scpa tasso fisso 2,30% 8.2.2013-8.2.2015 Welcome Edition € 13,249,000 - -<br />
IT0004884679 Unione di Banche Italiane Scpa tasso misto 8.2.2013-8.2.2016 € 102,898,000 - -<br />
(*)The figures relate to bonds outstanding, that is net of repurchases by the company itself. On 9th January 2013 IW Bank launched a public tender purchase offer – concluded on 29th January –on the bonds in issue for the two listed<br />
issues, designed to remove them from the listing. With a provision of 7th January 2013, Borsa Italiana removed them from the listing as of 6th March 2013 and as a consequence the company lost its status as a listed issuer.<br />
112
Listed securities (contd.)<br />
Convertible bonds listed on the MOT (electronic bond market)<br />
ISIN number<br />
Nominal amount of<br />
issue<br />
31.12.<strong>2012</strong> 31.12.2011<br />
IT0004506868 <strong>UBI</strong> 2009/2013 convertibile con facoltà di rimborso in azioni € 639,145,872 € 655,465,003 € 653,777,805<br />
Covered bonds listed on the London Stock Exchange<br />
ISIN number<br />
Nominal amount of<br />
issue<br />
31.12.<strong>2012</strong> 31.12.2011<br />
IT0004533896 <strong>UBI</strong> Covered Bonds due 23 September 2016 3,625% guaranteed by <strong>UBI</strong> Finance Srl € 1,000,000,000 € 1,096,717,624 € 1,068,507,939<br />
IT0004558794 <strong>UBI</strong> Covered Bonds due 16 December 2019 4% guaranteed by <strong>UBI</strong> Finance Srl € 1,000,000,000 € 1,145,948,084 € 1,081,847,471<br />
IT0004599491 <strong>UBI</strong> Covered Bonds due 30 April 2022 floating rate amortising guaranteed by <strong>UBI</strong> Finance Srl € 250,000,000 € 216,118,631 € 239,418,111<br />
IT0004619109 <strong>UBI</strong> Covered Bonds due 15 September 2017 3,375% guaranteed by <strong>UBI</strong> Finance Srl € 1,000,000,000 € 1,078,025,809 € 1,028,594,052<br />
IT0004649700 <strong>UBI</strong> Covered Bonds due 18 October 2015 3,125% guaranteed by <strong>UBI</strong> Finance Srl € 500,000,000 € 523,119,513 € 510,433,699<br />
IT0004682305 <strong>UBI</strong> Covered Bonds due 28 January 2021 5,25% guaranteed by <strong>UBI</strong> Finance Srl € 1,000,000,000 € 1,202,660,589 € 1,131,286,542<br />
IT0004692346 <strong>UBI</strong> Covered Bonds due 22 February 2016 4,5% guaranteed by <strong>UBI</strong> Finance Srl € 750,000,000 € 832,783,878 € 817,037,468<br />
IT0004777444 <strong>UBI</strong> Covered Bonds due 18 November 2021 floating rate amortising guaranteed by <strong>UBI</strong> Finance Srl € 250,000,000 € 250,833,411 € 251,229,559<br />
Innovative equity instruments (preference shares) listed on international markets<br />
ISIN number<br />
Luxembourg<br />
XS0123998394<br />
XS0131512450<br />
London<br />
Nominal amount of<br />
issue<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Non-cumulative Fixed/Floating Rate Guaranteed Trust Preferred Securities<br />
<strong>Banca</strong> Popolare di Bergamo Capital Trust € 300,000,000 € 183,572,879 € 229,648,799<br />
9% Non-cumulative Guaranteed Trust Preferred Securities <strong>Banca</strong> Popolare Commercio e Industria Capital € 115,000,000 € 65,787,479 € 101,929,335<br />
Trust<br />
XS0108805564 Step-Up Non-voting Non-cumulative Trust Preferred Securities <strong>Banca</strong> Lombarda Preferred Securities Trust € 155,000,000 € 90,663,343 € 125,142,835<br />
The list does not include the numerous EMTN issues quoted in London and Luxembourg, nor the securities resulting from securitisations<br />
carried out for internal purposes by <strong>UBI</strong> Leasing, Banco di Brescia, <strong>Banca</strong> Popolare di Bergamo, <strong>Banca</strong> Popolare Commercio e Industria, <strong>Banca</strong><br />
Popolare di Ancona and by the former B@nca 24-7, all listed on the Dublin stock exchange, nor the issuance of French certificates of deposit<br />
and of euro commercial paper, listed in Luxembourg.<br />
***<br />
Geographical distribution of direct funding from<br />
customers by region of location of the branch<br />
(excluding repurchase agreements and bonds) (*)<br />
Percentage of total 31.12.<strong>2012</strong> 31.12.2011<br />
Lombardy 61.77% 59.14%<br />
Piedmont 7.65% 8.02%<br />
Latium 6.90% 8.54%<br />
Apulia 4.42% 4.71%<br />
Calabria 4.35% 4.50%<br />
Marches 3.93% 3.97%<br />
Campania 3.74% 3.88%<br />
Liguria 2.45% 2.42%<br />
Emilia Romagna 1.19% 1.23%<br />
Veneto 1.00% 1.01%<br />
Basilicata 0.97% 0.95%<br />
Umbria 0.53% 0.52%<br />
Abruzzo 0.45% 0.42%<br />
Friuli Venezia Giulia 0.22% 0.26%<br />
Tuscany 0.21% 0.19%<br />
Molise 0.17% 0.18%<br />
Valle d'Aosta 0.03% 0.03%<br />
Trentino Alto Adige 0.02% 0.02%<br />
Total 100.00% 100.00%<br />
Lastly, the table “Geographical distribution<br />
of funding from customers by region of<br />
location of the branch” illustrates the<br />
geographical distribution of traditional<br />
funding (consisting of current accounts,<br />
savings deposits and certificates of deposit)<br />
in Italy. The data shows an increase in the<br />
already significant geographical<br />
concentration of the Group in North-west<br />
regions, where the network banks are most<br />
concentrated (71.9%, compared to 69.6% in<br />
December 2011), and in Lombardy in<br />
particular, with a share which rose to<br />
61.8% (from 59.1%), also by virtue of the<br />
growth in funding by IWBank.<br />
North 74.3% 72.1%<br />
- North West 71.9% 69.6%<br />
- North East 2.4% 2.5%<br />
Central 11.6% 13.2%<br />
South 14.1% 14.7%<br />
(*) The aggregates relate to banks only.<br />
113
Indirect funding and assets under management<br />
Indirect funding from ordinary customers<br />
31.12.<strong>2012</strong> % 31.12.2011 %<br />
Changes<br />
Figures in thousands of euro amount %<br />
Assets under custody 32,058,347 45.7% 35,175,527 48.8% -3,117,180 -8.9%<br />
Assets under management 38,106,037 54.3% 36,892,042 51.2% 1,213,995 3.3%<br />
Customer portfolio management 7,744,074 11.0% 7,898,346 11.0% -154,272 -2.0%<br />
of which: fund based instruments 1,642,689 2.3% 1,699,935 2.4% -57,246 -3.4%<br />
Mutual investment funds and SICAV’s 19,102,247 27.2% 17,250,549 23.9% 1,851,698 10.7%<br />
Insurance policies and pension funds 11,259,716 16.1% 11,743,147 16.3% -483,431 -4.1%<br />
of which: Insurance policies 11,050,312 15.7% 11,545,015 16.0% -494,703 -4.3%<br />
Total indirect funding from ordinary customers 70,164,384 100.0% 72,067,569 100.0% -1,903,185 -2.6%<br />
At the end of December,<br />
indirect funding amounted to<br />
€70.2 billion, down €1.9 billion<br />
compared to the €72.1 billion in<br />
2011 (-2.6%).<br />
The overall trend actually<br />
represents the opposing<br />
performances by assets under<br />
management, which rose to<br />
€38.1 billion (+€1.2 billion) and<br />
assets under custody, which fell<br />
to €32.1 billion (-€3.1 billion, of<br />
which -€2.6 billion in the first<br />
half of the year 4 ), apparently<br />
extending a declining trend,<br />
substantially in place since the<br />
third quarter of 2011.<br />
It should nevertheless be<br />
considered that the performance<br />
of assets under custody was<br />
impacted by customer choices,<br />
50,000<br />
45,000<br />
40,000<br />
35,000<br />
30,000<br />
25,000<br />
20,000<br />
15,000<br />
10,000<br />
5,000<br />
0<br />
Indirect funding<br />
(end of quarter totals in millions of euro)<br />
1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q<br />
2008 2009 2010 2011 <strong>2012</strong><br />
Assets under management<br />
Assets under custody<br />
where these translated into the reallocation of investments towards managed products<br />
or forms of direct funding (listed bonds issued by <strong>UBI</strong> <strong>Banca</strong>).<br />
Assets under management, which recovered during the second part of the year after<br />
the decline between April and June, the share of which rose to 54.3%, were driven by<br />
mutual investment funds and Sicavs (+€1.9 billion to €19.1 billion), which benefited,<br />
on the one hand, from a recovery in financial asset prices that consolidated from<br />
September onwards, and on the other, by the positive results of the placement (overall<br />
€2.7 billion) of five new Sicavs of <strong>UBI</strong> Pramerica: Cedola Certa 2013-2016, Protezione e<br />
Crescita 2017, Focus Italia, Mercati Emergenti and Cedola Certa 2013-2017 5 .<br />
The favourable trend in mutual investment funds and Sicavs, representing half of<br />
assets under management, more than offset the reduction in insurance policies and<br />
pension funds (-€0.5 billion to €11.3 billion), entirely attributable to the insurance<br />
sector, and a modest decline in customer portfolio management (-€0.2 billion to €7.7<br />
billion), mitigated moreover by a partial recovery during the second half of the year<br />
(+€0.1 billion).<br />
4 The negative change in the first half of the year must also be viewed with regard to the departure of a significant private<br />
position.<br />
5 In January 2013 the placement of the “<strong>UBI</strong> Sicav Global Dynamic Allocation” funds were closed for a further €0.3 billion.<br />
114
* * *<br />
With regard to the periodic surveys carried out by Assogestioni, from the “Monthly map of assets<br />
under management” of June <strong>2012</strong> onwards, the figure for assets under management also<br />
includes, in view of their nature, management mandates granted by <strong>UBI</strong> <strong>Banca</strong> Group to<br />
Pramerica <strong>Financial</strong> – a brand used by Prudential <strong>Financial</strong> Inc. (USA) – <strong>UBI</strong> <strong>Banca</strong>’s partner for<br />
assets under management, via <strong>UBI</strong> Pramerica SGR (as at 31 st December <strong>2012</strong>, €3.6 billion in<br />
mutual investment funds and Sicavs, of which €1.5 billion in equity funds and €2.1 billion in bond<br />
funds). This modification ensures a more consistent representation of the actual assets under<br />
management of the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
Relative market shares as at 31 st December 2011 were thus recalculated to make them consistent<br />
with those at the end of <strong>2012</strong>.<br />
With regard to the Mutual Investment Fund and Sicav sector, at the end of December,<br />
the Assogestioni 6 data on the asset management companies of the <strong>UBI</strong> <strong>Banca</strong> Group<br />
indicated the following for ASSETS UNDER DIRECT MANAGEMENT:<br />
• negative net inflows in <strong>2012</strong> of around €90 million, corresponding to -0.5% of<br />
managed assets at the end of 2011 (at sector level, on the other hand, net inflows<br />
were positive by €1.2 million, corresponding to 0.3% of managed assets at the end<br />
of 2011);<br />
• favourable performance of assets under management (+€1.2 billion; +7.1%) which<br />
compares with similar performance at sector level (+€60.5 billion; +14.4%). Both<br />
cases recorded a particularly favourable trend during the second half of the year:<br />
+€1.5 billion (+9.6%) for the <strong>UBI</strong> <strong>Banca</strong> Group and +€54.1 billion (+12.6%) for the<br />
Assogestioni sample;<br />
• net assets under management of €17.7 billion, ensuring the Group seventh place<br />
among sector operators, with a market share of 3.67%, down from 3.91% a year<br />
earlier.<br />
It should nevertheless be recalled that the Assogestioni sample representing the sector also<br />
includes non-banking operators; this resulted in market share figures for the <strong>UBI</strong> <strong>Banca</strong><br />
Group in the assets under management sector which are inherently lower than those<br />
expressed with regard to indirect funding, loans and branches (see the previous<br />
section“Distribution network and market positioning”). Limiting the analysis solely to banks,<br />
the <strong>UBI</strong> <strong>Banca</strong> Group’s market share as at 31 st December <strong>2012</strong> for Mutual Investment<br />
Funds and Sicavs was 5.86% (5.68% at the end of 2011), placing the Group in fourth<br />
position among operators in the sector.<br />
Fund assets (including assets managed for the <strong>UBI</strong> <strong>Banca</strong> Group under a mandate)<br />
<strong>UBI</strong> <strong>Banca</strong> Group<br />
31.12.<strong>2012</strong> % 31.12.2011 %<br />
Changes<br />
Figures in millions of euro amount %<br />
Equities 2,276 12.9% 2,364 14.3% -88 -3.7%<br />
Balanced 1,270 7.2% 1,293 7.8% -23 -1.8%<br />
Bond 11,309 63.9% 9,387 56.9% 1,922 20.5%<br />
Monetary funds 2,214 12.5% 2,782 16.9% -568 -20.4%<br />
Flexible 615 3.5% 612 3.7% 3 0.5%<br />
Hedge funds - - 67 0.4% -67 -100.0%<br />
Total (a) 17,684 100.0% 16,505 100.0% 1,179 7.1%<br />
Sector<br />
31.12.<strong>2012</strong><br />
%<br />
31.12.2011<br />
%<br />
Changes<br />
Figures in millions of euro amount %<br />
Equities 99,198 20.6% 94,001 22.3% 5,197 5.5%<br />
Balanced 20,727 4.3% 20,061 4.8% 666 3.3%<br />
Bond 249,051 51.6% 182,930 43.4% 66,121 36.1%<br />
Monetary funds 32,358 6.7% 48,816 11.6% -16,458 -33.7%<br />
Flexible 67,551 14.0% 61,175 14.5% 6,376 10.4%<br />
Hedge funds 7,088 1.5% 9,495 2.2% -2,407 -25.4%<br />
Unclassified 6,232 1.3% 5,208 1.2% 1,024 19.7%<br />
TOTAL (B) 482,205 100.0% 421,686 100.0% 60,519 14.4%<br />
MARKET SHARE OF THE <strong>UBI</strong> BANCA GROUP (a)/(b) 3.67% 3.91%<br />
6 Assogestioni, “Monthly map of Assets under management”, 4 th quarter <strong>2012</strong>.<br />
115
The summary data given in the table confirms the prudent approach of the Group’s<br />
customers, showing the following over the twelve month period:<br />
• a high and stable share for low-risk categories of funds (monetary and bond funds),<br />
accounting overall for 76.4% of the total, compared to 58.3% for the sector. For the<br />
<strong>UBI</strong> <strong>Banca</strong> Group in particular, as well as for the Assogestioni sample, a lower<br />
percentage of monetary funds was recorded (-4.4% and -4.9% respectively) in<br />
favour of the bond components (+7%; + 8.2% sector);<br />
• a slightly declining share of equity funds, which was consistently below the<br />
reference sample (12.9% against 20.6%);<br />
• reduction to zero of investments in hedge funds during the first quarter (a 1.3%<br />
share at sector level for these latter funds at the end of the year).<br />
* * *<br />
On the other hand, with regard to ASSETS UNDER MANAGEMENT NET OF GROUP FUNDS,<br />
which include collective instruments and customer portfolio management, at the end<br />
of the fourth quarter, the <strong>UBI</strong> <strong>Banca</strong> Group was in eighth position among sector<br />
operators and in seventh among Italian groups, with assets of €27.2 billion, of which<br />
€5.6 billion attributable to institutional customers, and a market share of 2.44%,<br />
down compared to December 2011 (2.97%).<br />
Restricting the analysis solely to banks, <strong>UBI</strong> <strong>Banca</strong> Group’s market share as at 31 st December<br />
<strong>2012</strong> was 5.11% (4.97% at the end of 2011), placing the Group in fourth place among sector<br />
operators.<br />
116
General banking business with customers:<br />
lending<br />
Performance of the loan portfolio<br />
Composition of loans to customers<br />
of which<br />
of which Changes<br />
31.12.<strong>2012</strong> %<br />
31.12.2011 %<br />
Figures in thousands of euro deteriorated<br />
deteriorated amount %<br />
Current account overdrafts 12.875.334 13,9% 1.343.890 12.907.301 13,0% 1.151.331 -31.967 -0,2%<br />
Reverse repurchase agreements 618.901 0,7% - 923.859 0,9% - -304.958 -33,0%<br />
Mortgage loans and other medium to long-term financing 54.226.909 58,4% 3.931.236 56.238.200 56,4% 3.172.375 -2.011.291 -3,6%<br />
Credit cards, personal loans and salary-backed loans 5.058.147 5,4% 472.210 5.527.788 5,6% 206.948 -469.641 -8,5%<br />
Finance leases 7.914.765 8,5% 1.250.191 8.886.514 8,9% 937.571 -971.749 -10,9%<br />
Factoring 2.752.379 3,0% 303.609 3.199.870 3,2% 62.427 -447.491 -14,0%<br />
Other transactions 9.431.048 10,1% 803.035 11.797.162 11,8% 748.232 -2.366.114 -20,1%<br />
Debt instruments: 10.486 0,0% 1.003 209.076 0,2% 1.000 -198.590 -95,0%<br />
- structured instruments - - - 8.893 0,0% - -8.893 -100,0%<br />
- other debt instruments 10.486 0,0% 1.003 200.183 0,2% 1.000 -189.697 -94,8%<br />
Total loans and advances to customers 92.887.969 100,0% 8.105.174 99.689.770 100,0% 6.279.884 -6.801.801 -6,8%<br />
At the end of December, lending to customers amounted to €92.9 billion, down by 6.8% yearon-year<br />
(-€6.8 billion), compared to -1.8% reported by the Bank of Italy for the sector<br />
nationally to the private sector. This comparison was in fact affected by the impacts of actions<br />
which the Group had already started to take to a significant degree from the closing months of<br />
2011 onwards. The contraction in the portfolio continued during the second part of <strong>2012</strong>,<br />
although at levels more in line with those of other Italian banks: loans fell in fact by 2.6% over<br />
six months and by 2.1% in the fourth quarter, compared to changes at sector level of -1.4%<br />
and -0.3% respectively.<br />
The overall trend is still suffering significantly from the adverse economic environment,<br />
characterised by a persistent ongoing recession in the real economy, with a consequent fall in<br />
consumption, production and investments, reflected in a reduction of demand from<br />
households, but above all from businesses.<br />
Actions were undertaken on the Group’s loan portfolio which influenced its performance and<br />
also affected it structurally. These included the following:<br />
• the progressive discontinuation of business with third party networks and the consequent<br />
reductions in loans to non-captive customers, that is affecting all of the product companies<br />
as well as B@nca 24-7 operations merged into the Parent, for the purpose of preserving<br />
credit quality by withdrawing from higher risk businesses (-€1.8 billion over the twelvemonth<br />
period);<br />
• the reorganisation of lending processes, in progress for some time in the leasing division, in<br />
parallel with a change in the focus of business towards the captive market (-€0.5 billion<br />
year-on-year);<br />
• the residual effects of the action taken to reduce exposure to the large corporate segment,<br />
undertaken in the fourth quarter of 2011 (-€0.8 billion year-on-year, of which -€0.5 billion<br />
during the first half of the year);<br />
• a decrease in loans related to specific types of business carried out by the Parent<br />
(-€1 billion).<br />
With regard to segmentation of customers by markets, at the end of December 49.7% of the<br />
consolidated portfolio consisted of loans to the retail market (48.4% at the end of 2011), 31.8%<br />
to the corporate market (32.1%), 0.9% to the private banking market (0.9%), while the<br />
remaining 17.6% consisted of all those types excluded from the commercial portfolios, such as<br />
leasing, factoring and loans by <strong>UBI</strong> <strong>Banca</strong> (18.6%).<br />
117
From the viewpoint of types of lending, the reduction was general, although to a different<br />
degree:<br />
• while mortgages and medium to long-term loans were again the principal form of lending,<br />
with a share of 58.4%, these fell progressively to €54.2 billion (-€2 billion), the result of a<br />
slowdown in new grants.<br />
On the basis of management accounting figures for the network banks, Centrobanca and<br />
<strong>UBI</strong> <strong>Banca</strong> (as the manager of the remaining outstanding loans of the merged B@nca 24-7),<br />
in December performing residential mortgages amounted to €24.5 billion, of which €22.2<br />
billion disbursed to consumer households and €2.3 billion to businesses (€25.3 billion at<br />
the end of 2011, of which €22.8 billion to households and €2.5 billion to businesses). Forty<br />
seven percent of the latter had a loan to value ratio of less than 60%;<br />
• reverse repurchase agreements, which fell to €0.6 billion (-€0.3 billion), reflected the trend<br />
for business specific to <strong>UBI</strong> <strong>Banca</strong> and in particular: lower ordinary business with the<br />
Cassa di Compensazione e Garanzia (CCG – a central counterparty clearing house)<br />
(-0.5 billion) with Italian government bonds as the underlying, carried out to invest liquidity<br />
temporarily, which were offset by the start, from the summer months onwards, of business<br />
with a counterparty belonging to a banking group (+€0.2 billion) to be intepreted in relation<br />
to financial liabilities held for trading (uncovered short positions on European government<br />
bonds);<br />
• finance lease credit, relating almost entirely to <strong>UBI</strong> Leasing, fell to €7.9 billion (-€1 billion,<br />
of which almost half attributable to non-captive business), as a consequence of the action<br />
taken already mentioned;<br />
• factoring loans, granted principally by <strong>UBI</strong> Factor, stood at €2.7 billion 1 , with an overall<br />
decline of €0.4 billion over 12 months, although the trend reversed during the fourth<br />
quarter (+€0.3 billion);<br />
• consumer loans as a whole, which fell to €5.1 billion (-€0.5 billion), were impacted by<br />
rationalisation initiatives regarding business with non-captive customers, for which only<br />
the management of outstanding loans remained at the end of December. The decline over<br />
twelve months involved both the outstanding portfolio of the former B@nca 24-7,<br />
contributed to <strong>UBI</strong> <strong>Banca</strong> (personal loans, special purpose loans, credit cards, current<br />
accounts and other forms of lending; -€0.7 billion) and that of Prestitalia (salary backed<br />
loans; -€0.2 billion), partially offset by an increase in loans managed directly by the<br />
network banks (+€0.4 billion);<br />
• other forms of short-term lending, totalling €22.3 billion, fell by €2.4 billion year-on-year.<br />
While the amount for current accounts remained substantially stable at €12.9 billion,<br />
benefiting from a partial recovery during the last months of the year, “Other transactions”<br />
(loans for advances, portfolio, import/export transactions, very short-term lending, etc.) fell<br />
by €2.4 billion to €9.4 billion, during the first and fourth quarters in particular;<br />
• debt securities fell to €10.5 billion (-€0.2 billion), in relation to the maturity of a security<br />
issued by a bank amounting to €0.2 billion, subscribed by the Parent at the end of 2011.<br />
With regard to maturities, due, amongst other things, to the performance described above, at<br />
the end of the year, the Group’s loan portfolio consisted of €67.2 billion of medium to longterm<br />
loans (-€3.7 billion; -5.2% year-on-year), accounting for 72.4% of the total, and of €25.7<br />
billion of short-term loans (-€3.1 billion; -10.9% over the twelve-month period). The latter<br />
decreased particularly significantly during the first half of the year (-€2.4 billion).<br />
On that same date, the lending to funding ratio was 94%, an improvement compared to the end<br />
of 2011 (97%).<br />
1 The outstanding amount as of 31 st December <strong>2012</strong> included €466 million of loans for factoring granted by <strong>UBI</strong> <strong>Banca</strong> International.<br />
118
Distribution of loans by economic sector (Bank of Italy classification)<br />
(management accounting figures for performing loans of the network banks and Centrobanca)<br />
31.12.<strong>2012</strong> 30.9.<strong>2012</strong> 30.6.<strong>2012</strong> 31.3.<strong>2012</strong> 31.12.2011<br />
Manufacturing and service companies (non-financial companies and<br />
producer households) 60.4% 60.6% 60.8% 61.6% 61.8%<br />
of which: other services destined for sale 16.5% 16.6% 16.6% 17.0% 17.0%<br />
Commerce, recovery and repair services 9.7% 9.6% 9.6% 9.6% 9.5%<br />
Construction and public works (*) 8.7% 8.9% 8.9% 8.9% 9.1%<br />
Energy products 3.6% 3.5% 3.4% 3.5% 3.7%<br />
Agricultural, forestry and fishery products 2.3% 2.3% 2.3% 2.3% 2.3%<br />
Metal products, excluding machines and means of transport 2.2% 2.2% 2.2% 2.3% 2.4%<br />
Foodstuffs, beverages and tobacco products 2.1% 2.0% 1.9% 2.0% 1.9%<br />
Hotels and restaurants 2.0% 2.0% 2.0% 2.0% 2.0%<br />
Agricultural and industrial machinery 1.5% 1.5% 1.4% 1.5% 1.4%<br />
Textiles, leather and footwear, clothing 1.4% 1.5% 1.5% 1.5% 1.5%<br />
Consumer households 34.1% 33.8% 33.4% 32.4% 32.3%<br />
<strong>Financial</strong> companies 2.5% 2.5% 2.7% 2.6% 2.8%<br />
Public administrations 1.2% 1.2% 1.2% 1.3% 1.0%<br />
Other (not-for-profit institutions and the rest of the world) 1.8% 1.9% 1.9% 2.1% 2.1%<br />
Total 100.0% 100.0% 100.0% 100.0% 100.0%<br />
(*) “Construction and public works” refers to category 66. ATECOs [Classification of economic activities] are not considered (item L and item F – property and<br />
construction activities) since they are included in the other categories.<br />
From the management accounting figures presented in the table “Distribution of loans by<br />
economic sector ”, relating to the network banks and to Centrobanca only, an aggregate<br />
representing 66.9% of gross loans, it was found that as of December <strong>2012</strong>:<br />
• 94.5% of outstanding loans were to manufacturing and service companies and consumer<br />
households, a share which had progressively increased from 94.1%, twelve months earlier,<br />
which confirms the traditional attention paid by the Group towards supporting local<br />
markets. Over the same period, a change in composition occured in favour of consumer<br />
households, whose share of loans rose to 34.1% from 32.3% at the end of 2011;<br />
• loans and advances to financial companies as a<br />
percentage of the portfolio as a whole declined from<br />
2.8% to 2.5%;<br />
• the distribution by sector of performing loans to nonfinancial<br />
companies and to producer households<br />
confirmed that the main sectors in receipt of loans<br />
were “other services destined for sale” and “commerce,<br />
recovery and repair services”, which partly due to<br />
their heterogeneous nature, continued to account for<br />
the largest percentage of total lending (26.2%),<br />
although down by one percentage point compared to a<br />
year before (26.5%).<br />
The table “Geographical distribution of loans and<br />
advances to customers by region of location of the<br />
branch” summarises the geographical distribution of<br />
loans within Italy.<br />
The actions taken concerning the Group’s loan portfolio<br />
had a more significant impact within Lombardy, causing<br />
a marginal change in composition among the various<br />
geographical areas.<br />
Geographical distribution of loans to customers<br />
by region of location of the branch (*)<br />
Percentage of total 31.12.<strong>2012</strong> 31.12.2011<br />
Lombardy 69.12% 70.06%<br />
Piedmont 6.24% 6.16%<br />
Latium 4.98% 4.81%<br />
Marches 3.95% 3.84%<br />
Liguria 2.92% 2.91%<br />
Campania 2.42% 2.30%<br />
Apulia 2.24% 2.14%<br />
Emilia Romagna 2.14% 1.98%<br />
Calabria 1.96% 1.92%<br />
Veneto 1.53% 1.45%<br />
Umbria 0.69% 0.68%<br />
Abruzzo 0.64% 0.62%<br />
Basilicata 0.44% 0.43%<br />
Friuli Venezia Giulia 0.25% 0.25%<br />
Molise 0.24% 0.23%<br />
Tuscany 0.22% 0.20%<br />
Valle d'Aosta 0.02% 0.02%<br />
Trentino Alto Adige 0.00% 0.00%<br />
Total 100.00% 100.00%<br />
North 82.2% 82.8%<br />
- North West 78.3% 79.1%<br />
- North East 3.9% 3.7%<br />
Overall, the share at the end of the year for the northern<br />
regions was 82.2% of the total (78.3% in the North West),<br />
with a slight decrease over the twelve-month period,<br />
Central<br />
South<br />
(*) The aggregates relate to banks only.<br />
9.9%<br />
7.9%<br />
9.5%<br />
7.7%<br />
while that for central Italian regions was 9.9% and the remaining 7.9% of lending was to<br />
southern regions.<br />
From the viewpoint of concentration, the table highlights a significant and generalised<br />
improvement, concentrated mainly in the first half of the year, the result, amongst other<br />
things, of action undertaken during the last part of 2011. The improvement resumed during<br />
the last three months of the year.<br />
119
Concentration of risk<br />
(largest customers or groups as a percentage of total loans and guarantees )<br />
Customers or<br />
Groups<br />
31.12.<strong>2012</strong> 30.9.<strong>2012</strong> 30.6.<strong>2012</strong> 31.3.<strong>2012</strong> 31.12.2011<br />
Largest 10 2.9% 3.0% 3.0% 3.3% 3.5%<br />
Largest 20 4.9% 5.1% 5.0% 5.5% 5.6%<br />
Largest 30 6.2% 6.4% 6.5% 7.0% 7.1%<br />
Largest 40 7.2% 7.5% 7.5% 8.1% 8.2%<br />
Largest 50 8.0% 8.3% 8.3% 8.9% 9.1%<br />
securities (€7.8 billion in December 2011);<br />
With regard to “large exposures”, at the end of<br />
the year, only two positions were outstanding<br />
(three at the end of 2011 2 ), totalling €22.6<br />
billion, an increase over the twelve-month<br />
period, although down on June. In particular,<br />
of the €22.6 billion reported:<br />
• €18 billion were attributable to the Ministry<br />
of the Treasury, mainly in relation to<br />
investments by the Parent in government<br />
• around €4.6 billion related to the Cassa di Compensazione e Garanzia due to overall<br />
transactions by the Parent (€6 billion in December 2011).<br />
In consideration of the reduction in Large exposures<br />
the number of counterparties reported<br />
compared to the year before and the<br />
Figures in thousands of euro<br />
application of a weighting factor of<br />
zero to transactions with government,<br />
the Group’s actual risk exposure after<br />
weightings was €141.2 million (on a<br />
single position), down both year-on-year and compared to the other comparative periods.<br />
Each of the positions reported was considerably below the 25% limit set for banking groups as<br />
a percentage of the consolidated regulatory capital.<br />
31.12.<strong>2012</strong> 30.9.<strong>2012</strong> 30.6.<strong>2012</strong> 31.3.<strong>2012</strong> 31.12.2011<br />
Number of positions 2 2 2 2 3<br />
Exposure 22,599,040 22,349,704 25,774,877 17,869,444 15,388,367<br />
Positions at risk 141,175 275,779 169,548 188,934 1,127,147<br />
In line with the trend for on-balance sheet lending, guarantees granted by the Group also<br />
totalled €6.2 billion at the end of the year, a reduction of over 15%, compared to the €7.3<br />
billion in December 2011.<br />
In detail, the change reflects a generalised reduction, more significant for guarantees of a<br />
financial nature, to €2.1 billion (-€0.9 billion) and more contained for guarantees of a<br />
commercial nature, which in December, totalled €4.1 billion (-€0.2 billion).<br />
Risk<br />
The difficult economic background has been progressively affecting the quality of loans and is<br />
continuing to increase gross volumes of deteriorated loans, which at the end of December, had<br />
reached almost €11 billion.<br />
The overall change year-on-year was +€2.37 billion (+27.6%), of which +€0.52 billion<br />
attributable to the first quarter, +€0.35 billion to the second, +€0.89 billion to the third and<br />
+€0.61 billion to the fourth quarter and related mainly to impaired loans (+€1.28 million),<br />
although also to non-performing loans (+€0.77 billion) and exposures past due and/or in<br />
arrears (+€0.48 billion), while there was a reduction in restructured loans (-€0.16 billion).<br />
The annual trend in the different categories of deteriorated loans was also affected by the<br />
following:<br />
• internal reclassifications of some substantial positions which had already been recorded<br />
among deteriorated loans;<br />
• disposals of non-performing unsecured loans during the second quarter of <strong>2012</strong> by B@nca<br />
24-7 (€103.2 million), prior to the merger into the Parent, and by Centrobanca (€5 million);<br />
• the classification as impaired of a portfolio of salary backed loans belonging to B@nca 24-7<br />
and Prestitalia for approximately €240 million.<br />
This action should be considered in relation to the direct aquisition by B@nca 24-7 until 30 th June and<br />
by Prestitalia from 1 st July <strong>2012</strong> of salary-backed operations after the liquidation in April 2011 of the<br />
2 At the end of 2011, the report also included €1.6 billion attributable to different types of transaction outstanding with a major<br />
banking Group.<br />
120
finance company Ktesios Spa (which operated as an agent), with the disappearance as a consequence<br />
of B@nca 24-7’s ability to use the “deducted for non-payment” clause. On the basis of that clause the<br />
agent, Ktesios, guaranteed the repayments on the loans disbursed and was also responsible for all the<br />
credit recovery activities and any enforcement of guarantees that were compulsory by law. The<br />
discontinuation of the indirect distribution channels for salary-backed loans had also continued during<br />
2011. This had involved not only Ktesios, but also other finance companies, whose mandates to operate<br />
were revoked by the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
Therefore, in view of the above, salary-backed lending operations were progressively insourced within<br />
the Group at Prestitalia Spa which specialises in these. This company not only carries out ordinary<br />
collection activities, but also the direct recovery of credit, enforcing compulsory legal guarantees where<br />
applicable and it also classifies positions, where necessary, in the most appropriate categories of<br />
deteriorated loan.<br />
• the extension of reporting to include all positions which, on exceeding the threshold of<br />
significance set by the supervisory regulations, were continuously in arrears for over 90<br />
days and no longer for over 180 days, as permitted until 31 st December 2011.<br />
Those same events also affected the trend for net deteriorated loans, which, at the end of<br />
December, amounted to €8.11 billion, an increase of €1.83 billion (+29.1%), of which +€0.43<br />
million attributable to the first quarter, +€0.31 billion to the second quarter, +€0.75 billion to<br />
the third quarter and +€0.34 billion to the fourth quarter.<br />
Notwithstanding a generalised increase in net impairment losses, total coverage of deteriorated<br />
loans of 26.04%, fell slightly by comparison with the 26.89% recorded at the end of 2011<br />
(although slightly up on September - 24.88% - and June - 25.74%), due to the<br />
aforementioned disposals of non-performing loans 3 , which were almost entirely written down,<br />
and to the increase in the percentage of positions backed by collateral, with less impairment<br />
recognised on them, also the result of prudent loan to value ratios for residential mortgages<br />
granted to private individuals by the Group.<br />
Coverage for performing loans on the other hand was essentially stable at 0.55% (0.58% a year<br />
before).<br />
In terms of type of loan, as shown in the table “Composition of loans and advances to<br />
customers”, around 42% of the annual growth in net deteriorated loans related to the item<br />
“Mortgages loans and other medium to long-term loans”, backed by collateral, which result<br />
automatically in a lower level of coverage, while 30% related to non-banking financial business<br />
and 14.5% to consumer credit lending, partly as a result of the reclassification of salarybacked<br />
loans already mentioned.<br />
NON-PERFORMING LOANS<br />
Gross non-performing loans grew during the twelve-month period from €4.38 billion to €5.14<br />
billion, with a €765 million increase, divided as follows: +€215.7 million in the first quarter,<br />
+€112.9 million in the second quarter, +€176.6 million in the third quarter and +€259.8<br />
million in the fourth quarter 4 .<br />
In percentage terms, the annual change was +17.5%, which compares with +16.6% for loans<br />
to the private sector by the banking sector nationally. During the second part of the year, on<br />
the other hand, the pace of growth for gross non-performing loans in the <strong>UBI</strong> <strong>Banca</strong> Group –<br />
+9.3% over the last six months and +5.3% over the last three months – was less than the<br />
average growth for the sector nationally which was +10.5% and +6.3% respectively.<br />
The annual trend also benefited from the disposal in June of non-performing unsecured loans, with almost<br />
100% coverage, for a total amount of €108.2 million, belonging to the former B@nca 24-7 (€103.2 million)<br />
and residually to Centrobanca (€5 million).<br />
3 If the disposals of non-performing loans made in June are not included, overall coverage at the end of December would have been<br />
26.70% (instead of 26.04%).<br />
4 The new entrance of five significant positions occurred in the fourth quarter, for a total amount of €102 million. These included two<br />
which totalled €67 million (one of which transferred from impaired loans) relating to the non-banking financial sector.<br />
121
Year-on-year change in the total was due principally to the network banks and to <strong>UBI</strong> Leasing.<br />
Loans and advances to customers as at 31st December <strong>2012</strong><br />
Figures in thousands of euro<br />
Gross exposure<br />
Impairment<br />
losses<br />
Carrying amount<br />
Coverage (*)<br />
Deteriorated loans (11.39%) 10,958,381 2,853,207 (8.73%) 8,105,174 26.04%<br />
- Non-performing loans (5.34%) 5,142,308 2,190,369 (3.18%) 2,951,939 42.60%<br />
- Impaired loans (4.29%) 4,123,537 520,995 (3.88%) 3,602,542 12.63%<br />
- Restructured loans (0.80%) 773,934 114,833 (0.71%) 659,101 14.84%<br />
- Past due loans (0.96%) 918,602 27,010 (0.96%) 891,592 2.94%<br />
Performing loans (88.61%) 85,253,156 470,361 (91.27%) 84,782,795 0.55%<br />
Total loans and advances to customers 96,211,537 3,323,568 92,887,969 3.45%<br />
The item as a percentage of the total is given in brackets.<br />
Loans and advances to customers as at 31st December 2011<br />
Figures in thousands of euro<br />
Gross exposure<br />
Impairment<br />
losses<br />
Carrying amount<br />
Coverage (*)<br />
Deteriorated loans (8.38%) 8,589,416 2,309,532 (6.30%) 6,279,884 26.89%<br />
- Non-performing loans (4.27%) 4,377,325 1,895,908 (2.49%) 2,481,417 43.31%<br />
- Impaired loans (2.77%) 2,844,167 310,387 (2.54%) 2,533,780 10.91%<br />
- Restructured loans (0.91%) 933,786 93,096 (0.84%) 840,690 9.97%<br />
- Past due loans (0.43%) 434,138 10,141 (0.43%) 423,997 2.34%<br />
Performing loans (91.62%) 93,951,550 541,664 (93.70%) 93,409,886 0.58%<br />
Total loans and advances to customers 102,540,966 2,851,196 99,689,770 2.78%<br />
The item as a percentage of the total is given in brackets.<br />
(*) Coverage is calculated as the ratio of impairment losses to gross exposure.<br />
Non-performing loans backed by collateral increased by €0.6 billion to €3.3 billion (+23.3%),<br />
with a share of the gross total which rose progressively to 63.6% from 60.6% at the end of<br />
2011.<br />
An analysis of changes in <strong>2012</strong> shows a reduction, compared to the previous year, of around<br />
one quarter in new classifications from performing loans, which was more than offset,<br />
however, by transfers from other categories of deteriorated exposures, mainly from impaired<br />
loans.<br />
Total net non-performing loans rose from €2.48 billion to €2.95 billion, an increase of €470.5<br />
million (+19%), of which +€151.6 million attributable to the first quarter, +€118 million to the<br />
second quarter, +€103.5 million to the third quarter and +€97.4 million to the fourth quarter.<br />
A comparison with data for the sector nationally reveals more moderate rises for the <strong>UBI</strong><br />
<strong>Banca</strong> Group, seen year-on-year (+19% compared to +25.6%), in the second half of the year<br />
(+7.3% compared to +19.5%) and also in the fourth quarter (+3.4% compared to +11.5%).<br />
Only 9.5% of the total outstanding loans at the end of the year were without any type of<br />
backing (collateral/personal guarantees), a lower percentage than the figure of 11% for 2011 .<br />
The combined effect of the trends described above and the reduction in the total loan portfolio<br />
led to a non-performing loans to loans ratio, which increased to 5.34% in gross terms and to<br />
3.18% net of impairment losses. Despite this, the loan quality of the Group continues to<br />
outperform the average for Italian banks nationally, for which the ratios are 7.24% for gross<br />
non-performing loans and 3.35% for net non-performing loans, both to the private sector.<br />
While recovering compared to 41.54% in June and September, coverage for non-performing<br />
loans nevertheless fell year-on-year from 43.31% to 42.60%, reflecting the simultaneous effect<br />
of a series of opposing factors: on the one hand, the increased percentage of positions backed<br />
by collateral, and therefore automatically with less impairment recognised, as well as the<br />
consequences of the already mentioned disposal of non-performing unsecured loans, because<br />
these had already been fully written down 5 ; on the other hand, an increase in the recognition<br />
5 If the disposals of non-performing loans, which occurred in June and which had an impact of 109 basis points, are not included,<br />
coverage as at 31 st December <strong>2012</strong>would have been 43.69% (instead of 42.60%).<br />
122
of impairment, which contributed to the improvement in coverage by approximately 140 basis<br />
points.<br />
If positions charged to the income statement in relation to creditor actions still in progress are<br />
considered, coverage fell from 59.06% to 57.63%.<br />
Lastly, with reference to non-performing loans not backed by collateral, considered gross of the above writeoffs,<br />
coverage for these at the end of the year stood at 77.18% (77.45% at the end of 2011).<br />
Loans to customers: changes in deteriorated gross exposures in <strong>2012</strong><br />
Figures in thousands of euro<br />
Non-performing<br />
loans<br />
Impaired loans<br />
Restructured<br />
exposures<br />
Past-due<br />
exposures<br />
Initial gross exposure as at 1st January <strong>2012</strong> 4,377,325 2,844,167 933,786 434,138<br />
Increases 1,575,306 3,396,208 283,980 2,122,264<br />
transfers from performing exposures 312,131 1,963,721 19,323 2,011,486<br />
transfers from other classes of deteriorated exposures 1,086,415 1,069,543 192,597 7,336<br />
other increases 176,760 362,944 72,060 103,442<br />
Decreases -810,323 -2,116,838 -443,832 -1,637,800<br />
transfers into performing exposures -66,429 -471,808 -54,211 -379,038<br />
write-offs -287,904 -31,880 -2,423 -<br />
payments received -282,159 -365,676 -102,330 -188,455<br />
disposals -106,172 - -4,215 -<br />
transfers to other classes of deteriorated exposure -16,432 -1,056,104 -278,076 -1,005,280<br />
other decreases -51,227 -191,370 -2,577 -65,027<br />
Final gross exposure as at 31st December <strong>2012</strong> 5,142,308 4,123,537 773,934 918,602<br />
Loans to customers: changes in deteriorated gross exposures in 2011<br />
Figures in thousands of euro<br />
Non-performing<br />
loans<br />
Impaired loans<br />
Restructured<br />
exposures<br />
Past-due<br />
exposures<br />
Opening gross exposure as at 1st January 2011 3,780,973 2,320,471 889,070 474,548<br />
Increases 1,491,771 2,172,222 250,048 785,998<br />
transfers from performing exposures 415,216 1,612,768 33,930 759,222<br />
transfers from other classes of deteriorated exposures 873,878 387,217 136,218 3,244<br />
other increases 202,677 172,237 79,900 23,532<br />
Decreases -895,419 -1,648,526 -205,332 -826,408<br />
transfers into performing exposures -37,316 -353,276 -1 -239,867<br />
write-offs -328,588 -2,003 -2,963 -1<br />
payments received -315,552 -368,314 -178,198 -57,097<br />
disposals -174,581 - - -<br />
transfers to other classes of deteriorated exposure -3,482 -897,419 -18,616 -481,040<br />
other decreases -35,900 -27,514 -5,554 -48,403<br />
Final gross exposure as at 31st December 2011 4,377,325 2,844,167 933,786 434,138<br />
IMPAIRED LOANS<br />
Gross impaired loans rose from €2.84 billion to €4.12 billion, an increase of €1.28 billion<br />
(+45%), of which +€63.2 million in the first quarter, +€243.9 million in the second quarter 6 ,<br />
+€348.1 million in the third quarter and +€624.2 million in the fourth quarter. This<br />
progressive growth was also affected by a number of quarterly and technical factors:<br />
• a more rigorous change from January in the rules for the automatic reclassification of <strong>UBI</strong><br />
Leasing’s exposures past due and/or in arrears as impaired, which gave rise in the first<br />
quarter to new positions amounting to approximately €110 million;<br />
• the classification as impaired, already mentioned, of the B@nca 24-7 (now Prestitalia) salary<br />
and pension-backed loan portfolio totalling €240 million (€120 million in both the second<br />
and third quarters) with an average write-down of 13.2%;<br />
6 The change included the new classification as impaired of a large position amounting to €47 million relating to <strong>UBI</strong> Factor, which<br />
was subsequently reclassified as non-performing during the fourth quarter.<br />
123
• the new classification in this category during the year of a series of large positions<br />
amounting to over €650 million, mainly transferred from other categories of deteriorated<br />
loans (loans past due and/or in arrears and also restructured loans). During the fourth<br />
quarter in particular, approximately half of the overall increase of €624 million, related to<br />
the reclassification as impaired of two particularly large positions: €153 million relating to a<br />
<strong>UBI</strong> Factor position and €152 million attributable to the Carlo Tassara position, reclassified<br />
out of restructured loans into impaired loans.<br />
Partly as a result of the above, the annual change in this category of deteriorated loans was<br />
increased by over half by the product companies (Prestitalia, <strong>UBI</strong> Leasing and <strong>UBI</strong> Factor),<br />
while the contribution made by the network banks, which was fairly modest during the first<br />
nine months of the year, was affected during the fourth quarter by the reclassification of the<br />
Tassara position already mentioned.<br />
Gross impaired loans backed by collateral increased over the twelve-month period to €2.6<br />
billion (+€0.8 billion; +41.1%), while their share of the gross outstanding total at the end of the<br />
year was 63.3% 7 (65% in December 2011).<br />
An analysis of changes in <strong>2012</strong> reveals a significant increase in transfers from other categories<br />
of deteriorated loans – above all from exposures past due and/or in arrears, but also from<br />
restructured loans – accompanied by a more modest increase in new classifications from<br />
performing loans, as a reflection of the deterioration in the economy. At the same time,<br />
transfers into performing exposures increased, which confirms the high degree of turnover in<br />
this category, partly in relation to the severity and automatic nature of the classification<br />
procedures which govern classifications in the categories which precede the impaired category.<br />
With a trend similar to that for the gross total, net impaired loans rose from €2.53 billion to<br />
€3.60 billion over the year, an increase of €1.07 billion (+42.2%), of which +€62 million in the<br />
first quarter, +€213.7 million in the second quarter, +€309.8 million in the third quarter and<br />
+€483.3 million in the fourth quarter.<br />
At the end of the year, coverage, which stood at 12.63%, had increased compared to 10.91%<br />
twelve months before, mainly the result of an increase in impairment recognised (+87 basis<br />
points), but also due to the new classification of the Tassara position (+70 basis points).<br />
Lastly, coverage for impaired loans not backed by collateral, which was affected by the new<br />
classification as impaired of the salary backed portfolio, stood at 20.18% 8 (19.04% in<br />
December 2011).<br />
RESTRUCTURED LOANS<br />
Unlike the other categories of deteriorated loans, gross restructured loans fell from €933.8<br />
million to €773.9 million, an annual decrease of €159.8 million (-17.1%), mainly related to the<br />
reclassification of the Tassara position as impaired during the fourth quarter. Quarterly<br />
changes were as follows:<br />
• +€44.4 million in the first quarter, due to the new classification as restructured of a<br />
Centrobanca position;<br />
• -€55.6 million in the second quarter, due partly to the transfer of a number of positions to<br />
the non-performing category;<br />
• +€52.3 million in the third quarter, over 70% of which due to two new positions for large<br />
amounts;<br />
7 Net of the new classification of the salary-backed portfolio, loans backed by collateral as at 31 st December <strong>2012</strong> would have<br />
amounted to 67.3% of the gross total.<br />
8 Net of the new classification of the salary-backed portfolio, coverage for impaired loans not backed by collateral would have been<br />
21.51%.<br />
124
• -€200.9 million in the fourth quarter, of which -€152 million resulting from the already<br />
mentioned transfer of the Tassara position to the impaired category.<br />
In view of the movements reported, an analysis of the changes in <strong>2012</strong> reveals an increase in<br />
transfers from other categories of deteriorated loans, which were more than offset by the<br />
increase in transfers to not only impaired loans and non-performing loans, but also to<br />
performing loans.<br />
The trends described above, together with the increase in adjustments, also due to a number<br />
of write-downs of significant positions, led, during the course of the year, to a progressive<br />
increase in coverage, which rose from 9.97% to 14.84%.<br />
EXPOSURES PAST DUE AND/OR IN ARREARS<br />
Gross exposures past due and/or in arrears more than doubled from €434.1 million to €918.6<br />
million (+111.6%), an annual increase of €484.5 million, of which +€194.6 million in the first<br />
quarter, +€45 million in the second quarter, +€312.1 million in the third quarter and -€67.2<br />
million in the fourth quarter.<br />
The overall change in this item, relating mainly to the network banks and to Prestitalia, is<br />
closely connected with the end of the period (1 st January <strong>2012</strong>) in which Italian banks were<br />
excepted under Basel 2 from reporting positions in arrears, which introduced the obligation to<br />
report them after 90 days (instead of the previous 180 days) also for exposures not backed by<br />
real estate collateral, as already occurred for other European banking systems.<br />
The changes that occurred in the third quarter of <strong>2012</strong> were affected, moreover, by the new<br />
entrance to this category in September of large positions totalling €80 million, most of which<br />
were still classified within this category of deteriorated loans at the end of December.<br />
The reduction in the total between October and December on the other hand mainly reflects<br />
reclassifications of positions as impaired loans.<br />
New classifications in this category from performing loans, which more than doubled<br />
compared to 2011, were affected by the new reporting practices, while a similar increase<br />
occurred at the same time in transfers to other categories of deteriorated loans, which<br />
nevertheless incorporated the already mentioned reclassification into impaired loans relating<br />
to <strong>UBI</strong> Leasing.<br />
Coverage, at 2.94%, had increased compared to December 2011 (2.34%).<br />
125
The interbank market and the liquidity<br />
situation<br />
After flaring up again in the second quarter, pressures on sovereign debt progressively<br />
eased, especially after the European Central Bank defined procedures for carrying out<br />
outright monetary transactions (OMTs). The assurances provided by the ECB, together<br />
with the broad availability of liquidity provided by the Eurosystem (85% of which was<br />
allotted through LTROs - longer-term refinancing operations), had the effect of<br />
stabilising wholesale markets, even if this still fell short of normality, as demonstrated<br />
by an analysis of inflows from foreign funding (negative), interbank transactions<br />
originated by foreign operators (falling) and deposits by non-residents (also falling).<br />
Quarterly changes in net interbank debt<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong><br />
30.9.<strong>2012</strong><br />
30.6.<strong>2012</strong><br />
31.3.<strong>2012</strong><br />
31.12.2011<br />
Loans and advances to banks 6,072,346 5,286,733 4,843,142 4,925,671 6,184,000<br />
of which: loans to central banks 1,191,235 698,769 722,132 577,133 739,318<br />
Due to banks 15,211,171 14,765,300 14,708,333 15,143,195 9,772,281<br />
of which: due to central banks 12,098,917 12,075,917 12,052,000 12,021,667 6,001,500<br />
Net interbank position -9,138,825 -9,478,567 -9,865,191 -10,217,524 -3,588,281<br />
Figures in thousands of euro<br />
31.12.2011<br />
30.9.2011<br />
30.6.2011<br />
31.3.2011<br />
31.12.2010<br />
Loans and advances to banks 6,184,000 5,314,336 4,384,636 4,510,008 3,120,352<br />
of which: loans to central banks 739,318 1,485,674 325,450 345,625 739,508<br />
Due to banks 9,772,281 8,611,714 4,966,574 7,332,517 5,383,977<br />
of which: due to central banks 6,001,500 4,000,333 - 1,255,064 2,219,152<br />
Net interbank position -3,588,281 -3,297,378 -581,938 -2,822,509 -2,263,625<br />
As at 31 st December <strong>2012</strong> the <strong>UBI</strong> <strong>Banca</strong> Group’s net interbank position was one of<br />
net debt of €9.1 billion, with no substantial changes occurring over the course of the<br />
year (-€9.5 billion in September, -€9.9 billion in June and -€10.2 billion in March),<br />
although with an appreciable increase compared to -€3.6 billion as at 31 st December<br />
2011.<br />
The increase in the balance is directly correlated with <strong>UBI</strong> <strong>Banca</strong> Group’s participation<br />
in the second set of refinancing operations (LTRO) carried out by the ECB on 29 th<br />
February <strong>2012</strong>, in which the Group was allotted a further €6 billion (for a total of €12<br />
billion) of three-year funding (currently at an interest rate of 0.75%).<br />
Net of transactions with central banks, the net interbank position was positive and<br />
stable, as shown by the figures for interim periods: +€1.8 billion as at 31 st December<br />
<strong>2012</strong>, +€1.9 billion as at 30 th September, +€1.5 billion as at 30 th June, +€1.2 million<br />
as at 31 st March and +€1.7 billion in December 2011.<br />
The progressive trend towards normalisation of market conditions, together with all of<br />
the actions undertaken out over the last two years, have allowed the Group to first<br />
reach and then maintain positive positioning. This is demonstrated, amongst other<br />
things, by short-term liquidity (liquidity coverage ratio) and structural (net stable<br />
funding ratio) indicators, which have both already exceeded 100% 1 . Moreover, these<br />
have allowed <strong>UBI</strong> <strong>Banca</strong> to return to the international markets after 18 months, on<br />
23 rd October of last year, with a EMTN benchmark issuance of €750 million.<br />
1 On the basis of the Agreement reached by the Basel Committee on 6 th January 2013, the LCR indicator will be<br />
introduced from 1 st January 2015 onwards, although the minimum level required will initially be 60%, with progressive<br />
increases of 10% per year until it reaches 100% on 1 st January 2019.<br />
126
Operations in the interbank market showed the following trends over the twelvemonth<br />
period.<br />
Loans and advances to banks: composition<br />
31.12.<strong>2012</strong> % 31.12.2011 %<br />
Changes<br />
Figures in thousands of euro amount %<br />
Loans to central banks 1,191,235 19.6% 739,318 11.9% 451,917 61.1%<br />
Term deposits - - - - - -<br />
Compulsory reserve requirements 1,172,303 19.3% 738,100 11.9% 434,203 58.8%<br />
Reverse repurchase agreements - - - - - -<br />
Other 18,932 0.3% 1,218 0.0% 17,714 n.s.<br />
Loans and advances to banks 4,881,111 80.4% 5,444,682 88.1% -563,571 -10.4%<br />
Current accounts and deposits 2,081,098 34.3% 2,516,230 40.7% -435,132 -17.3%<br />
Term deposits 118,971 2.0% 455,701 7.4% -336,730 -73.9%<br />
Other financing: 2,468,251 40.6% 1,329,819 21.5% 1,138,432 85.6%<br />
- reverse repurchase agreements 953,977 15.7% 534,373 8.6% 419,604 78.5%<br />
- finance leases 30 0.0% 98 0.0% -68 -69.4%<br />
- other 1,514,244 24.9% 795,348 12.9% 718,896 90.4%<br />
Debt instruments 212,791 3.5% 1,142,932 18.5% -930,141 -81.4%<br />
Total 6,072,346 100.0% 6,184,000 100.0% -111,654 -1.8%<br />
Loans and advances to banks, which stood at €6.1 billion at the end of the year, did<br />
not show any substantial change compared to the €6.2 million as at 31 st December<br />
2011, even if these reflected a certain change in internal composition, above all within<br />
the different forms of funding.<br />
The increase in liquidity held with Central Banks shown in the table – from €0.7<br />
billion to €1.2 billion, relating to the central bank account for the compulsory reserve<br />
– was only an end of year position, because the average Group deposit is normally in<br />
line with requirements.<br />
Over the same period, loans to other banks fell to €4.9 billion from €5.4 million before.<br />
The reduction (-€0.5 billion) was the result of the following:<br />
• on the one hand, a declining trend involving almost all types of lending: current<br />
accounts (-€0.4 billion), term deposits (-€0.3 billion) and debt securities (-€0.9<br />
billion, due to the maturity of investments in securities eligible for refinancing<br />
issued by banks made at the end of 2011, used to increase the pool of assets<br />
eligible for refinancing);<br />
• on the other hand, growth in the item “Other financing” (+€1.1 billion), including<br />
reverse repurchase agreements (which rose from €420 million to approximately €1<br />
billion), entered into with domestic or international counterparties, to be<br />
interpreted in relation to financial liabilities held for trading (uncovered short<br />
positions on European government securities). These transactions took place<br />
during the second part of the year, while at the end of 2011, current activities were<br />
directed towards acquiring securities eligible for refinancing.<br />
Due to banks: composition<br />
Changes<br />
31.12.<strong>2012</strong> % 31.12.2011 %<br />
Figures in thousands of euro amount %<br />
Due to central banks 12,098,917 79.5% 6,001,500 61.4% 6,097,417 101.6%<br />
Due to banks 3,112,254 20.5% 3,770,781 38.6% -658,527 -17.5%<br />
Current accounts and deposits 1,215,750 8.0% 896,512 9.2% 319,238 35.6%<br />
Term deposits 534,610 3.5% 778,119 8.0% -243,509 -31.3%<br />
Financing: 1,144,494 7.5% 1,881,780 19.2% -737,286 -39.2%<br />
- repurchase agreements 416,190 2.7% 1,007,037 10.3% -590,847 -58.7%<br />
- other 728,304 4.8% 874,743 8.9% -146,439 -16.7%<br />
Amounts due for commitments to repurchase own equity<br />
instruments - - - - - -<br />
Other payables 217,400 1.5% 214,370 2.2% 3,030 1.4%<br />
Total 15,211,171 100.0% 9,772,281 100.0% 5,438,890 55.7%<br />
127
Interbank funding, which stood at €15.2 billion at the end of <strong>2012</strong>, compared to €9.8<br />
billion as at 31 st December 2011, consisted of €12.1 billion concentrated in funding<br />
from the ECB, stable since March <strong>2012</strong>, after participation in both of the LTROs (this<br />
stood at €6 billion at the end of the previous year, when only the first operation had<br />
been carried out).<br />
Net of this funding, amounts due to banks stood at €3.1 billion, down by €0.7 billion<br />
compared to twelve months previously.<br />
The change is also due to a reduction in “Financing” and in particular, in the sub-item<br />
consisting of repurchase agreements (-€0.6 billion), following the repayment of assets<br />
borrowed which were not eligible for refinancing and which were outstanding at the<br />
end of 2011, to be interpreted mainly in combination with the asset item: debt<br />
securities.<br />
Again within “Financing”, the sub-item “Others” includes a medium to long-term<br />
transaction with the European Investment Bank, by the Parent for a residual amount,<br />
after repayments for the year, of €523 million (€588 million at the end of 2011).<br />
Again as at 31 st December 2011, the remaining forms of funding recorded more<br />
modest trends: current accounts rose by €319 million, partially offset by the reduction<br />
of €244 million in term deposits which, at the end of 2011, included €570 million<br />
relating to a deposit by the EIB, which was subsequently withdrawn.<br />
Assets eligible for refinancing<br />
***<br />
Figures in billions of euro<br />
nominal<br />
amount<br />
31.12.<strong>2012</strong> 30.9.<strong>2012</strong> 30.6.<strong>2012</strong> 31.3.<strong>2012</strong> 31.12.2011<br />
amount eligible<br />
(net of<br />
haircuts)<br />
nominal<br />
amount<br />
amount eligible<br />
(net of<br />
haircuts)<br />
nominal<br />
amount<br />
amount eligible<br />
(net of<br />
haircuts)<br />
nominal<br />
amount<br />
amount eligible<br />
(net of<br />
haircuts)<br />
nominal<br />
amount<br />
amount eligible<br />
(net of<br />
haircuts)<br />
Securities owned (AFS, HTM and L&R) (*) 14.26 14.32 13.49 13.34 11.33 10.97 13.79 13.48 6.25 5.76<br />
Government backed bonds 6.00 5.79 6.00 5.67 6.00 5.31 6.00 5.56 - -<br />
Covered bonds ("self-retained" issues) 3.05 2.77 2.55 2.31 2.55 2.30 0.75 0.69 - -<br />
Securitisation of residential mortgages of the<br />
former B@nca 24-7 1.32 0.54 1.34 0.72 1.37 0.74 1.40 0.76 1.44 0.76<br />
<strong>UBI</strong> Leasing leased assets securitisation 1.94 1.47 2.29 1.58 2.29 1.67 2.54 1.85 3.44 2.47<br />
Banco di Brescia securitisation of performing<br />
loans to SMEs 0.96 0.64 0.35 0.25 0.41 0.30 0.46 0.33 0.59 0.44<br />
<strong>Banca</strong> Popolare di Bergamo securitisation of<br />
performing loans to SMEs 1.86 1.21 1.86 1.33 1.86 1.31 1.86 1.29 1.86 1.28<br />
<strong>Banca</strong> Popolare Commercio e Industria<br />
securitisation of performing loans to SMEs<br />
0.58 0.38 - - - - - - - -<br />
<strong>Banca</strong> Popolare di Ancona securitisation of<br />
performing loans to SMEs 0.71 0.46 - - - - - - - -<br />
Loans eligible resulting from participation in<br />
ABACO (**) 1.85 1.85 2.37 2.37 1.14 1.14 0.65 0.65 0.65 0.65<br />
Securities acquired through repurchase agreements - - - - - - - - 0.33 0.28<br />
Total 32.53 29.43 30.25 27.57 26.95 23.74 27.45 24.61 14.56 11.64<br />
(*) These include government securities not refinanced with the Cassa di Compensazione e Garanzia (CCG – a central counterparty clearing<br />
house), for the following amounts:<br />
31 st December <strong>2012</strong>: €13.5 billion (net of haircuts), of which €3.2 billion contributed to the pool and €10.3 billion available non-pool.<br />
30 th September <strong>2012</strong>: €12.4 billion (net of haircuts), of which €3.2 billion contributed to the pool and €9.2 million available non-pool.<br />
30 th June <strong>2012</strong>: €10 billion (net of haircuts), of which €3 billion contributed to the pool and approximately €7 billion available non-pool;<br />
31 st March <strong>2012</strong>: €11.9 million (net of haircuts), of which €3.2 billion contributed to the pool and €8.7 billion available non-pool;<br />
31 st December 2011: €3.6 billion (net of haircuts), available non-pool;<br />
(**) ABACO (bank assets eligible as collateral) is the name given to procedures drawn up by the Bank of Italy for the management of loans<br />
eligible for refinancing. In order to qualify as eligible, an asset must meet specific requirements contained in Bank of Italy regulations<br />
concerning the following: type of debtor (public sector, non-financial company, international and supranational institutions), credit rating<br />
(set by external ratings, rating tools of approved providers and internal ratings [for banks authorised by the Bank of Italy to use internal<br />
rating models]), minimum amount (€0.1 million for domestic loans) and type of asset.<br />
The liquidity reserve consisting of the portfolio of assets eligible for refinancing with<br />
the central bank, amounted to €29.4 billion as at 31 st December <strong>2012</strong> (net of<br />
haircuts), compared to €11.6 billion twelve months before. It was composed of €19.1<br />
billion of assets deposited in the collateral pool of the European Central Bank and<br />
€10.3 billion in government securities not refinanced with the Cassa di<br />
Compensazione e Garanzia, available non-pool.<br />
128
Considering the quota which has already been pledged (€12.1 billion at the end of<br />
<strong>2012</strong> and €6 billion at the end of 2011), the liquidity margin amounted to €17.3<br />
million, a clear improvement with respect to the comparative figure of €5.6 billion.<br />
The increase in the assets (+€17.8 billion) is the result of a series of actions<br />
undertaken in the first quarter of the year (+€13 billion) with regard to the more<br />
significant components, which were subsequently reinforced with further measures<br />
designed to ease liquidity risk even further.<br />
The figures for assets eligible for refinancing were also positively influenced in the<br />
second part of the year by the improvement in the financial context connected with<br />
sovereign debt risk, involving not only government securities but also other assets<br />
contributed.<br />
The principal strategic initiatives implemented during <strong>2012</strong> were:<br />
• the issuance by <strong>UBI</strong> <strong>Banca</strong>, of bonds with a government guarantee for a total<br />
nominal amount of €6 billion 2 (€5.8 billion net of haircuts);<br />
• five new issuances (in February, May and October) of covered bonds, which were<br />
not placed on the market (“self-retained”) for a total of €3.05 billion (€2.8 billion net<br />
of haircuts);<br />
• greater availability of owned securities, and of government bonds in particular (see<br />
the following section on financial activities for further information);<br />
• an increase in assets eligible for participation in ABACO (+€1.7 billion net of<br />
haircuts), the result firstly of broadening of the eligibility criteria decided by the<br />
ECB and then, to a greater degree, in the third quarter of the year, of the<br />
authorisation by the Bank of Italy to use the advanced internal system for rating<br />
the creditworthiness of debtors;<br />
• three new self-securitisation operations for a total value net of haircuts of €1.25<br />
billion (€1.9 billion nominal). These are transactions with the underlying loans<br />
transferred to the respective special purpose entities by Banco di Brescia, BPCI and<br />
BPA, with the consequent subsequent issuance of class A notes, which became<br />
eligible for refinancing from December <strong>2012</strong> onwards.<br />
The increases reported more than offset the reductions that occurred during the year<br />
and which mainly related to the following:<br />
• amortisation repayments on the senior tranches of securitisations by <strong>UBI</strong> Leasing (-<br />
€1.5 billion nominal, -€1 million net of haircuts, which also takes account of<br />
changes in price), by Banco di Brescia (-€0.28 billion nominal, -€0.21 billion net of<br />
haircuts) and by the former B@nca 24-7 (-€0.12 billion nominal, -€0.22 billion net<br />
of haircuts);<br />
• the complete elimination of securities acquired through reverse repurchase<br />
agreements (-€0.28 billion net of haircuts);<br />
• the lower contribution by €0.52 billion from ABACO assets, recorded in the fourth<br />
quarter of the year, following the increase in the haircuts on bank loans<br />
contributed to back lending transactions, termed “additional credit claims” (the<br />
increase was decided by the Bank of Italy in November).<br />
On 2 nd August <strong>2012</strong>, Moody’s downgraded the rating of 257 ABS and RMBS Italian<br />
securities following the downgrade of Italian sovereign debt on 13 th July. The securities issued as<br />
part of <strong>UBI</strong> <strong>Banca</strong> Group securitisations were therefore subject to a similar downgrade of their<br />
ratings down to A2, a level which nevertheless remains compatible with the eligibility<br />
requirements set by the ECB.<br />
2 <strong>UBI</strong> <strong>Banca</strong> made use of the government initiative by issuing two bonds on 2 nd January <strong>2012</strong> for a total nominal amount<br />
of €3 billion (€2 billion with a three-year maturity and €1 billion with a five-year maturity), followed by two further<br />
issuances again for a total of €3 billion nominal on 27 th February <strong>2012</strong> (€2 billion, with a three-year maturity and €1<br />
billion with a five-year maturity).<br />
129
<strong>Financial</strong> activities<br />
Italy had another particularly complex and difficult year in <strong>2012</strong>, with the spread between tenyear<br />
Italian BTPs and German bunds returning to the record highs of 2011, causing elevated<br />
volatility on the market.<br />
Against this background, the Parent, <strong>UBI</strong> <strong>Banca</strong>, undertook a series of actions on government<br />
securities, which can be summarised as follows:<br />
<br />
<br />
<br />
during the first quarter, €5 billion nominal were invested in BTPs with maturities of<br />
approximately three years (longest until June 2015) and financed by using part of the<br />
liquidity obtained in the two LTRO operations with the ECB, consistent with internal<br />
policies to balance assets and liabilities. The new investments were classified partly as<br />
available-for-sale (AFS) (€2 billion) and partly as held-to-maturity (HTM) (€3 billion). At the<br />
same time, the maturities on other BTPs in the AFS portfolio were lengthened by means of<br />
switching operations for a total nominal amount of €1.2 billion;<br />
mainly in the second quarter, new investments financed by repurchase agreements with the<br />
Cassa di Compensazione e Garanzia (CCG – a central counterparty clearing house) were<br />
made in short-term Italian government securities, classified partly in the trading portfolio<br />
(€2.6 billion) and partly in the AFS portfolio (€2 billion nominal);<br />
during the second half of the year, with BTP-bund spreads improving to some extent,<br />
trading activity was mostly geared towards a moderate extension of maturities in order to<br />
benefit from the higher yields. Therefore, as the securities reached their natural maturity,<br />
switching operations were carried out involving both the trading portfolio and the AFS<br />
portfolio as follows:<br />
- during the third quarter, a total of €2 billion in short-term securities (BOTs and CTZs)<br />
were sold and simultaneously replaced by purchasing BTPs (€1.5 billion nominal) and<br />
CTZs (€0.5 billion nominal);<br />
- in the fourth quarter, €2 billion nominal of BTPs that had been bought at the start of the<br />
year were sold and a total of €2.4 billion nominal was invested again in BTPs, together<br />
with a further switch amounting to €1 billion nominal.<br />
The Italian government securities purchased were not hedged against interest-rate risk.<br />
<strong>Financial</strong> assets/liabilities<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 30.9.<strong>2012</strong> 30.6.<strong>2012</strong> 31.3.<strong>2012</strong> 31.12.2011<br />
Changes A/E<br />
Total<br />
Total<br />
Total<br />
Total<br />
Total<br />
%<br />
%<br />
%<br />
%<br />
% amount %<br />
A<br />
B<br />
C<br />
D<br />
E<br />
<strong>Financial</strong> assets held for trading 4,023,934 18.8% 3,177,832 15.9% 5,211,059 24.4% 3,679,925 20.6% 2,872,417 26.0% 1,151,517 40.1%<br />
of which: financial derivatives contracts 587,824 2.7% 584,690 2.9% 576,153 2.7% 548,436 3.1% 596,986 5.4% -9,162 -1.5%<br />
<strong>Financial</strong> assets designated at fair value 200,441 0.9% 121,026 0.6% 122,376 0.6% 123,066 0.7% 126,174 1.2% 74,267 58.9%<br />
Available-for-sale financial assets 14,000,609 65.5% 13,483,510 67.4% 12,837,037 60.1% 10,794,700 60.5% 8,039,709 72.8% 5,960,900 74.1%<br />
Held-to-maturity investments 3,158,013 14.8% 3,220,200 16.1% 3,192,239 14.9% 3,254,437 18.2% - - 3,158,013 -<br />
<strong>Financial</strong> assets (a) 21,382,997 100.0% 20,002,568 100.0% 21,362,711 100.0% 17,852,128 100.0% 11,038,300 100.0% 10,344,697 93.7%<br />
of which:<br />
- debt instruments 20,187,669 94.4% 18,735,563 93.7% 20,109,120 94.1% 16,576,565 92.9% 9,687,568 87.8% 10,500,101 108.4%<br />
- of which: Italian government securities 17,965,689 84.0% 16,344,777 81.7% 17,920,680 83.9% 14,749,981 82.6% 7,838,038 71.0% 10,127,651 129.2%<br />
- equity instruments 390,458 1.8% 462,012 2.3% 457,211 2.1% 500,838 2.8% 485,294 4.4% -94,836 -19.5%<br />
- Units in O.I.C.R.<br />
(collective investment instruments). 217,046 1.0% 220,303 1.1% 220,227 1.0% 226,289 1.3% 229,513 2.1% -12,467 -5.4%<br />
<strong>Financial</strong> liabilities held for trading (b) 1,773,874 100.0% 1,479,098 100.0% 1,274,898 100.0% 934,366 100.0% 1,063,673 100.0% 710,201 66.8%<br />
of which: financial derivatives contracts 610,004 34.4% 599,432 40.5% 601,244 47.2% 569,978 61.0% 625,772 58.8% -15,768 -2.5%<br />
Net financial assets (a-b) 19,609,123 18,523,470 20,087,813 16,917,762 9,974,627 9,634,496 96.6%<br />
,<br />
The portfolio consisting of “financial assets held for trading” (€4,023,934 thousand) was smaller than the same portfolio held by the Parent (€4,766,163<br />
thousand), due to the presence of financial derivative contracts entered into by <strong>UBI</strong> <strong>Banca</strong> with the Group network banks and product companies. These<br />
instruments, in addition to being partially and potentially subject to intragroup elimination in the consolidation, were classified by the Parent as held for<br />
trading because the relative assets hedged were recognised in the balance sheets of the Group network banks and product companies. When the<br />
consolidation was prepared, those same instruments, entered into to hedge the underlying assets, were recognised within hedging derivatives.<br />
<strong>Financial</strong> derivatives classified as held for trading held by the Parent amounted to €1,425,977 thousand in December <strong>2012</strong>, while the figure for the Group<br />
was €587,824 thousand.<br />
130
The total financial assets of the Group at the end of <strong>2012</strong> – the aggregate result of all trading<br />
activity throughout the year – amounted to €21.4 billion, having almost doubled over the<br />
twelve months. Net of financial liabilities (34.4% of which consisted of financial derivatives),<br />
net financial assets totalled €19.6 billion (€10 billion at the end of 2011).<br />
As shown in the table, the changes in the item reflect the new investments made, especially in<br />
the first half of the year, which mostly regarded the AFS portfolio (+€6 billion) and the<br />
reconstitution of the HTM portfolio (€3.2 billion)<br />
The trend for assets held for trading was more varied with a total increase of €1.1 billion, the<br />
aggregate result of €2.6 billion of net purchases in short-term Italian government securities<br />
during the first two quarters, €2.1 billion in BTPs, BOTs and CCTs maturing or being<br />
disinvested in the third quarter, and almost €1 billion in new purchases towards the end of<br />
the year.<br />
Management accounting figures 1 as at the 31 st December <strong>2012</strong> show the following:<br />
- in terms of type of financial instrument, the securities portfolio of the Group was composed<br />
as follows: 91.8% of government securities, 7.1% of corporate securities (of which<br />
approximately 79% were issued by major Italian and international banks and financial<br />
institutions and 73% of the investments in corporate securities also carry an “investment<br />
grade” rating), 0.6% of hedge funds and the remainder (0.5%) consisting of funds and<br />
equities;<br />
- from a financial viewpoint, floating rate securities accounted for 24.4% of the portfolio 2 and<br />
fixed rate securities for 70.9%, while the remainder consisted of structured instruments<br />
(present mainly in the AFS portfolio), equities, funds and convertible bonds;<br />
- as regards the currency of denomination, 99.6% of the securities were denominated in euro<br />
and 0.3% in dollars with currency hedges, while in terms of geographical distribution, 98.2%<br />
of the investments (excluding hedge funds) were issued from countries in the euro area and<br />
1% from the USA;<br />
- finally, an analysis by rating (for the bond portfolio only) shows that 97.7% of the portfolio<br />
consisted of “investment grade” securities with an average rating of Baa1 (BAA1 in<br />
December 2011) 3 .<br />
Available-for-sale financial assets<br />
“Available-for-sale financial assets” (AFS), asset item 40, are measured at fair value with the recognition of<br />
changes in a separate fair value reserve in equity, except for losses due to reductions in value that are<br />
considered significant or prolonged. In this case the reduction in value that occurred in the period is<br />
recognised through profit or loss, the amount being transferred from the negative or positive reserve that<br />
may have been recognised in equity previously. Following the recognition of impairment losses, recoveries<br />
in value continue to be recognised in the separate fair value reserve in equity. Any decreases below the<br />
level of the previous impairment losses are recognised through profit and loss.<br />
Definitions relating to the fair value hierarchy (levels one, two and three) are given in Section A.3 of Part A –<br />
Accounting Policies in the Notes to the <strong>Consolidated</strong> <strong>Financial</strong> Statements.<br />
Available-for-sale financial assets: composition<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Changes<br />
Figures in thousands of euro L 1 L 2 L 3 Total L 1 L 2 L 3 Total B amount %<br />
Debt instruments 12,603,798 1,002,549 7,466 13,613,813 6,621,026 920,410 10,296 7,551,732 6,062,081 80.3%<br />
of which: Italian government securities 11,029,798 399,247 - 11,429,045 5,625,881 338,292 - 5,964,173 5,464,872 91.6%<br />
Equity instruments 154,798 26 139,749 294,573 251,226 46,963 88,444 386,633 -92,060 -23.8%<br />
Units in O.I.C.R.<br />
(collective investment instruments) 37,894 54,329 - 92,223 39,064 62,280 - 101,344 -9,121 -9.0%<br />
Financing - - - - - - - - - -<br />
Total 12,796,490 1,056,904 147,215 14,000,609 6,911,316 1,029,653 98,740 8,039,709 5,960,900 74.1%<br />
1 The management accounting figures relate to a smaller portfolio than that stated in the consolidated financial statements, because<br />
they exclude equity investments and some minor portfolios, but nevertheless include transactions that may be performed at the end<br />
of the period with the value date for settlement in the following month.<br />
2 The fixed rate securities purchased as part of asset swaps are also considered as floating rate. They account for 75% of the floating<br />
rate securities.<br />
3 The downgrade in sovereign debt that occurred at the beginning of <strong>2012</strong> had already been incorporated in the average portfolio<br />
ratings at the end of December 2011.<br />
131
At the end of <strong>2012</strong>, available-for-sale financial assets had reached €14 billion and were<br />
composed principally as follows:<br />
- the AFS portfolio of <strong>UBI</strong> <strong>Banca</strong> amounting to €11,955 million (€6,706 million euro in<br />
December 2011);<br />
- the IW Bank portfolio, designed to stabilise the bank’s net interest income given the nature<br />
of its normal operations, amounting to €783 million (€722 million);<br />
- the Centrobanca corporate bond portfolio, which represents activity complementary to and<br />
consistent with the lending approach of that bank, amounting to €370 million (€479<br />
million).<br />
- temporary liquidity investments of €750 million, created through the segregated asset pool<br />
relating to the special purpose entity <strong>UBI</strong> Finance (not in existence in December 2011),<br />
consisting of French and Dutch government securities maturing in January and February<br />
2013.<br />
The increase over the twelve months (+€6 billion) was concentrated mainly in the first half of<br />
the year and is almost entirely attributable to the trend of debt securities brought about, on<br />
the one hand, by improving prices triggered by narrowing ten-year BTP-bund spreads from<br />
September onwards and, on the other hand, by new investments in Italian government<br />
securities (classified within fair value level one) by the Parent as part of the aforementioned<br />
trading activities:<br />
- in February, €2 billion nominal was invested in BTPs maturing by June 2015 4 (switched in<br />
December in order to moderately extend their maturity date);<br />
- in April, €1.5 billion nominal was invested in BOTs and €0.5 billion in CTZs (all sold and<br />
replaced between late August and early September with investments of €1.5 billion in BTPs and<br />
€0.5 billion in CTZs );<br />
- in December, €0.4 billion nominal was invested in BTPs resulting from the switches carried<br />
out at the end of the year.<br />
Total debt securities held 5 as at 31 st December amounted to €13.6 billion and were composed<br />
as follows: €12.6 billion within fair value level one (of which €11 billion in government<br />
securities), €1 billion in level two (including €399 million in Italian treasury securities and<br />
bonds issued mainly by Italian banks), and €7.5 million in level three.<br />
The higher year-end fair values of securities classified within fair value level one helped to<br />
increase the IW Bank portfolio by €61 million (consisting almost entirely of floating rate Italian<br />
government securities), while the Centrobanca portfolio – composed mainly of investment<br />
grade companies almost all classified (€353 million) within fair value level one – decreased in<br />
value by €109 million as a result of the sale of “non-core” securities under a strategy that<br />
prioritised the refocusing of assets on Italian corporate customers.<br />
The relative section in this report may be consulted for information on the impacts on profit and<br />
loss of movements in debt instruments, equity instruments and units in OICRs (collective<br />
investment instruments).<br />
Equity instruments 6 amounted to €294.6 million, mainly the result of sales/disposals of<br />
investments and changes in the value of listed securities.<br />
Regarding fair value level one – which stood at €154.8 million compared with €251.2 million at<br />
December 2011 – the main changes related to:<br />
• the sale of 72,329,014 shares in Intesa Sanpaolo, for which the investment at consolidated<br />
level therefore fell to €148.4 million from €240.4 million at the end of 2011.<br />
4 At the same time as that action was taken, the maturities on other BTPs held in portfolio were lengthened in the first quarter, by<br />
means of a switching operation for a total of €1.2 billion nominal.<br />
5 As at 31 st December <strong>2012</strong>, there were no direct investments in ABS instruments. The only existing investments regarded own<br />
securitisations, eliminated in the consolidation, totalling €29 million (€29.9 million in December 2011), composed as follows:<br />
- Lombarda Lease Finance 4 (ABS instruments classified within AFS financial assets, fair value level one, held by <strong>UBI</strong> <strong>Banca</strong>)<br />
totalling €2.8 million (€3.9 million);<br />
- Orio Finance (RMBS instruments held by the Parent and classified within financial assets held for trading, fair value level three)<br />
totalling €5.2 million (€5 million);<br />
- Lombarda Lease Finance 4 amounting to €21 million, classified within loans and receivables and held by <strong>UBI</strong> Leasing (unchanged<br />
compared with December 2011).<br />
6 Shareholdings that are not classified as companies subject to control, joint control or significant influence are recognised here.<br />
132
The sale was made in successive stages during the last months of the year, as follows: 7,000,000<br />
shares in September, 9,100,000 shares in October and 56,229,014 shares in December. At the end of<br />
<strong>2012</strong>, the Group held a total of 114,129,014 shares, equivalent to 0.74% of the share capital with voting<br />
rights.<br />
The disposal was authorised by the Management Board, bearing in mind the non-strategic importance<br />
of the investment, as part of a wider action to reduce the volatility of investments in listed shares.<br />
The disinvestment programme continued in 2013, with the sale of 33,400,000 shares (of which<br />
30,900,000 in January), further reducing the <strong>UBI</strong> <strong>Banca</strong> Group’s stake to 0.52%;<br />
the decrease in the fair value of A2A, which decreased to €4.9 million from €8.25 million at<br />
the end of 2011, despite a partial recovery in the fourth quarter.<br />
-In the first two months of 2013, 8,700,000 shares were sold, which therefore reduced the stake to<br />
0.08% (i.e. 2,500,000 shares).<br />
the disposal, in September, of Centrobanca’s stake in Greenvision Ambiente Spa (valued at<br />
€2.5 million in December 2011), as a result of taking up the compulsory public tender offer;<br />
the addition to this level of <strong>UBI</strong> <strong>Banca</strong>’s stake in Visa Inc. (€0.9 million) in July, due to the<br />
merger of B@nca 24-7.<br />
Fair value levels two and three 7 , totalling €139.8 million, in which unlisted equity instruments<br />
are classified – almost 80% of which relate to <strong>UBI</strong> <strong>Banca</strong> – increased by €4.4 million, the<br />
aggregate result of:<br />
increases in fair value, relating in particular to S.A.C.B.O. (+€4.2 million), Autostrade<br />
Lombarde (+€0.9 million), Istituto Centrale delle Banche Popolari (+€1.4 million) and SIA<br />
(+€1.7 million);<br />
disposal of equity investments, including: Risparmio e Previdenza (valued at €1.3 million in<br />
December 2011), Siteba (€0.7 million) and Società per i mercati di Varese (€1.5 million).<br />
Units of OICRs (collective investment instruments) – relating almost entirely to <strong>UBI</strong> <strong>Banca</strong> –<br />
amounted to €92.2 million, a decrease of €9.1 million over the year, due mostly to the<br />
impairment of the investment in the Centrobanca Sviluppo Impresa closed-end property fund<br />
(a decrease to €15.3 million from €26.6 million at the end of 2011, the result, amongst other<br />
things, of a partial redemption) and the Polis fund (a decrease from €12.4 million to €8.4<br />
million).<br />
The property funds included in the OICR portfolio totalled €15.5 million (approximately €20<br />
million last year).<br />
Held-to-maturity investments<br />
Asset item 50, “Held-to-maturity investments” (HTM), are comprised of financial instruments that an entity<br />
intends and is able to hold to maturity.<br />
These assets are measured at amortised cost with the recognition of impairment losses, or recoveries in<br />
value when the original reason for the impairment no longer exists, through profit or loss.<br />
Held-to-maturity investments: composition<br />
31.12.<strong>2012</strong><br />
Fair Value<br />
Figure s in thousands of euro Carrying amount L 1 L 2 L 3 Total<br />
31.12.2011<br />
Carrying amount<br />
Debt instruments 3,158,013 3,243,103 - - 3,243,103 -<br />
of which: Italian government securities 3,158,013 3,243,103 - - 3,243,103 -<br />
Financing - - - - - -<br />
Total 3,158,013 3,243,103 - - 3,243,103 -<br />
Held-to-maturity investments – which had not been held since 2009 and which had not been<br />
acquired for two years in compliance with the tainting rule under IAS 39 – had a carrying<br />
value of €3.2 billion as at 31 st December <strong>2012</strong>.<br />
7 For a more accurate reclassification of unlisted equities, instruments classed as fair value level two at 31 st December 2011 were<br />
almost entirely transferred to fair value level three at 31 st December <strong>2012</strong>.<br />
133
This total consists exclusively of BTPs for a nominal amount of €3 billion with maturity in<br />
November 2014. They were purchased in February as part of investments made at the<br />
beginning of year, as outlined above.<br />
<strong>Financial</strong> instruments held for trading<br />
<strong>Financial</strong> assets held for trading<br />
Asset item 20, “<strong>Financial</strong> assets held for trading” (HFT), comprises financial trading instruments “used to<br />
generate a profit from short-term fluctuations in price”. They are recognised at fair value through profit or<br />
loss – FVPL.<br />
Definitions relating to the fair value hierarchy (levels one, two and three) are given in Section A.3 of Part A –<br />
Accounting Policies in the Notes to the <strong>Consolidated</strong> <strong>Financial</strong> Statements.<br />
<strong>Financial</strong> assets held for trading: composition<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Changes<br />
Figures in thousands of euro L 1 L 2 L 3 Total L 1 L 2 L 3 Total amount %<br />
A. On-balance sheet assets<br />
Debt instruments 3,415,759 84 - 3,415,843 2,135,752 84 - 2,135,836 1,280,007 59.9%<br />
of which: Italian government securities 3,378,631 - - 3,378,631 1,873,865 - - 1,873,865 1,504,766 80.3%<br />
Equity instruments 13,455 - 5,370 18,825 12,811 - 85,850 98,661 -79,836 -80.9%<br />
Units in O.I.C.R.<br />
(collective investment instruments) 372 - 1,070 1,442 447 101 1,447 1,995 -553 -27.7%<br />
Financing - - - - - 38,939 - 38,939 -38,939 -100.0%<br />
Total (a) 3,429,586 84 6,440 3,436,110 2,149,010 39,124 87,297 2,275,431 1,160,679 51.0%<br />
B. Derivative instruments<br />
<strong>Financial</strong> derivatives 1,745 586,079 - 587,824 220 596,766 - 596,986 -9,162 -1.5%<br />
Credit derivatives - - - - - - - - - -<br />
Total (b) 1,745 586,079 - 587,824 220 596,766 - 596,986 -9,162 -1.5%<br />
Total (a+b) 3,431,331 586,163 6,440 4,023,934 2,149,230 635,890 87,297 2,872,417 1,151,517 40.1%<br />
As at 31 st December <strong>2012</strong>, financial assets held for trading had risen to €4 billion, an increase<br />
of €1.1 billion over the year, attributable to debt securities and in particular to a net<br />
investment of €1.5 million in Italian government securities classified within fair value level<br />
one, primarily by the Parent.<br />
More specifically, changes in <strong>UBI</strong> <strong>Banca</strong>’s investments in Italian government securities during<br />
<strong>2012</strong> can be summarised as follows:<br />
- the first quarter saw a net investment of €1 billion, the aggregate result of €1.8 billion in<br />
matured and sold BTPs and BOTs outstanding at the end of 2011 and €2.8 billion in<br />
purchases of BOTs;<br />
- in the second quarter, an additional €1.6 billion was invested in short-term securities;<br />
- in the third quarter natural maturities prevailed together with the total disposal of<br />
outstanding instruments in order to partially extend their maturities (-€-2.1 billion in total);<br />
- lastly, in the fourth quarter, as part of a switching operation that made it possible to realise<br />
profits on sales of BTPs and BOTs totalling €1.3 billion, purchases of €2.3 billion were<br />
made (mainly in BOTs).<br />
The debt instruments included residual direct investments in “Asset Backed Securities”, in the portfolio<br />
of the subsidiary, <strong>UBI</strong> <strong>Banca</strong> International Sa, consisting mainly of mortgage backed securities (MBS),<br />
with the underlying principally of European origin amounting to €0.2 million (€0.3 in December 2011).<br />
Equity instruments decreased to €18.8 million (€98.7 million last year) with contrasting and<br />
varying performances within the item: fair value level one increased by €0.6 million to €13.4<br />
million as a result of net new equity investments, while instruments classified within fair value<br />
level three decreased to €80.5 million due mostly to the reclassification within “financial assets<br />
134
designated at fair value” of the entire portfolio held by Centrobanca for private equity and<br />
merchant banking purposes (€79 million at the end of 2011) 8 .<br />
The residual amount as at 31 st December <strong>2012</strong>, amounting to €5.4 million, relates exclusively<br />
to the Parent’s shareholdings for private equity activities, which on aggregate decreased by<br />
€1.4 million due to impairment losses on both Medinvest International (falling €1 million to<br />
€2.3 million) and Manisa Srl (declining to €3.1 million from €3.5 million previously).<br />
Investments in units in OICRs (collective investment instruments) – totalling €1.4 million –<br />
related mainly to hedge funds purchased by <strong>UBI</strong> <strong>Banca</strong> before 30 th June 2007, classified<br />
within fair value level three and amounting to €1.1 million. 9<br />
Finally, financial assets classified as HFT also included derivative instruments amounting to<br />
€588 million (€597 million last year), entirely of a financial nature, whose performance and<br />
amount must be interpreted in strict relation to the corresponding item recognised within<br />
financial liabilities held for trading.<br />
At the end of 2011, loans of €39 million existed relating entirely to the positions pertaining to Prestitalia Spa.<br />
***<br />
Concerning the position with regard to the US-based companies of the Lehman Brothers Group:<br />
- Pursuant to the “Chapter 11” procedure as set forth in the current United States Bankruptcy Code (the<br />
“US Procedure”), <strong>UBI</strong> <strong>Banca</strong> has filed proof of claim applications against Lehman Brothers Holdings Inc.<br />
(“LBHI”) and Lehman Brothers Special Financing Inc. (“LBSF”) in connection with derivatives contracts<br />
which had been entered into with companies in the Lehman Brothers Group;<br />
- Centrobanca has filed proof of claim applications against LBHI and LBSF under the US Procedure in<br />
relation to derivatives contracts which it had entered into with LBSF;<br />
During <strong>2012</strong> discussions were opened with Lehman Brothers representatives regarding the amounts due<br />
according to the aforementioned proofs of claim by <strong>UBI</strong> <strong>Banca</strong> and Centrobanca. Discussions are still<br />
ongoing and are expected ot be finalised in 2013.<br />
As concerns the position with regard to Lehman Brothers International (Europe) (“LBIE”), an English<br />
company belonging to the Lehman Brothers Group and subject to an administration order in the United<br />
Kingdom, as reported in the 2010 and 2011 annual reports, on 17 th September 2010 <strong>UBI</strong> <strong>Banca</strong> filed a<br />
proof of debt for £485,930.71 in relation to derivatives contracts that it had entered into with LBIE. During<br />
<strong>2012</strong> discussions were opened with LBIE administrators in order to come to an agreement over the amount<br />
of the claim to be admitted among creditor claims, which are currently ongoing.<br />
Finally, in relation to that position, as already reported, <strong>UBI</strong> <strong>Banca</strong> has filed a proof of claim under the US<br />
Procedure against LBHI, in its capacity as the guarantor of LBIE according to the terms of the derivatives<br />
contracts.<br />
8 In accordance with the new classification and measurment criteria for shareholdings of less than 50%, as set out by the Parent in<br />
the Board of Directors’ resolution of 17 th December <strong>2012</strong>, on 16 th January 2013 the Board of Directors of Centrobanca resolved – in<br />
view of the increasing heterogeneity of private equity and merchant banking holdings, and the minimal changes over the years – to<br />
reclassify them, as of 31 st December <strong>2012</strong>, in the accounting category “Fair Value Option”, thereby maintaining continuity of method<br />
(fair value) and of impacts on valuations (recognition of changes in profit and loss).<br />
9 The following sub-section, “financial assets designated at fair value”, may be consulted for a full picture of the Group’s investments<br />
in hedge funds.<br />
135
<strong>Financial</strong> liabilities held for trading<br />
<strong>Financial</strong> liabilities held for trading: composition<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Changes<br />
Figures in thousands of euro L 1 L 2 L 3 Total L 1 L 2 L 3 Total amount %<br />
A. On-balance sheet liabilities<br />
Due to banks 1,163,870 - - 1,163,870 335,123 - - 335,123 828,747 247.3%<br />
Due to customers - - - - 102,778 - - 102,778 -102,778 -100.0%<br />
Debt instruments - - - - - - - - - -<br />
Total (a) 1,163,870 - - 1,163,870 437,901 - - 437,901 725,969 165.8%<br />
B. Derivative instruments<br />
<strong>Financial</strong> derivatives 69 609,935 - 610,004 187 625,585 - 625,772 -15,768 -2.5%<br />
Credit derivatives - - - - - - - - - -<br />
Total (b) 69 609,935 - 610,004 187 625,585 - 625,772 -15,768 -2.5%<br />
Total (a+b) 1,163,939 609,935 - 1,773,874 438,088 625,585 - 1,063,673 710,201 66.8%<br />
At the end of <strong>2012</strong>, financial liabilities held for trading totalled €1.8 billion, an increase of €0.7<br />
billion compared to the preceding year, due to the performance of on-balance sheet liabilities<br />
(+€0.7 billion), while financial derivatives remained practically unchanged.<br />
Regarding on-balance sheet liabilities relating entirely to the Parent, the amounts due to<br />
customers were eliminated and there was a significant increase in amounts due to banks,<br />
consisting of uncovered short positions on mainly foreign – French and German – government<br />
securities, totalling €1,110 million (€228 million at the end of 2011), as well as Italian<br />
government securities, totalling €54 million (€210 million twelve months previously).<br />
<strong>Financial</strong> assets designated at fair value<br />
The item “financial assets designated at fair value” is comprised of financial instruments classified as such<br />
in application of the fair value option (FVO). They are composed exclusively of units in OICRs (collective<br />
investment instruments) and include the remaining units in hedge funds subscribed after 1 st July 2007.<br />
These financial assets are recognised at fair value through profit or loss.<br />
Definitions relating to the fair value hierarchy (levels one, two and three) are given in Section A.3 of Part A –<br />
Accounting Policies in the Notes to the <strong>Consolidated</strong> <strong>Financial</strong> Statements.<br />
<strong>Financial</strong> assets designated at fair value: composition<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Changes<br />
Figures in thousands of euro L 1 L 2 L 3 Total L 1 L 2 L 3 Total amount %<br />
Debt instruments - - - - - - - - - -<br />
Equity instruments - 2,812 74,248 77,060 - - - - 77,060 -<br />
Units in O.I.C.R.<br />
(collective investment instruments) 109,664 - 13,717 123,381 104,846 - 21,328 126,174 -2,793 -2.2%<br />
Financing - - - - - - - - - -<br />
Total 109,664 2,812 87,965 200,441 104,846 - 21,328 126,174 74,267 58.9%<br />
As at 31 st December <strong>2012</strong>, financial assets designated at fair value amounted to €200.4<br />
million and consisted of:<br />
- equities amounting to €77.1 million, consisting of the shares held by Centrobanca for<br />
merchant banking and private equity activities (classified in December 2011 under equities<br />
held for trading, totalling €79 million). The equity investment portfolio of the Group’s<br />
Corporate & Investment Bank declined compared with the previous year by over €2 million,<br />
due to the disposal of an asset (valued at €1.6 million at the end of 2011) and the net<br />
impacts of year-end valuations;<br />
136
- units in OICRs (collective investment instruments) classified in levels one and three,<br />
totalling €123.4 million. The result is the aggregate result of opposing trends among the<br />
various components: listed Tages funds classified within level one increased €4.9 million<br />
over the twelve months to €109.7 million, while residual investments in hedge funds<br />
classified within fair value level three fell €7.7 million, partly due to redemptions during the<br />
course of the year.<br />
With regard to hedge funds only, inclusive of the remaining amount of €1.1 million<br />
recognised within financial assets held for trading again in fair value level 3, the portfolio<br />
held by <strong>UBI</strong> <strong>Banca</strong> as at 31 st December <strong>2012</strong> amounted to €14.8 million, compared with<br />
€22.8 million the previous year. Management accounting figures show that redemptions of<br />
more than €4 million were received during the year, net of redemption fees.<br />
As concerns redemption applications, those same management accounting figures again show that at<br />
the end of <strong>2012</strong> four funds, amounting to €6.6 million, were expected to pay and/or had declared that<br />
they were implementing a deferred redemption plan (known as a "gate") – as allowed for in their<br />
respective regulations and another 17 funds have created “side pockets” for an amount of €8.2 million.<br />
***<br />
As concerns the Madoff affair and the court action initiated by <strong>UBI</strong> <strong>Banca</strong> against the fund Thema<br />
International Plc and the relative depository bank, HSBC Institutional Trust Services Ltd, before the<br />
Commercial Court of Dublin, in December <strong>2012</strong> <strong>UBI</strong> <strong>Banca</strong> and HSBC Institutional Trust Services Ltd<br />
signed a settlement agreement under which <strong>UBI</strong> <strong>Banca</strong> received €3 million plus costs and legal fees. As a<br />
result of the agreement of the aforementioned settlement, the proceedings are now continuing exclusively<br />
between <strong>UBI</strong> <strong>Banca</strong> and the fund Thema International Plc.<br />
In the meantime, <strong>UBI</strong> <strong>Banca</strong> is monitoring the class actions brought in the USA and the liquidation<br />
proceedings in progress in the British Virgin Islands brought against three funds attributable to Madoff,<br />
Fairfield Sigma Ltd, Kingate Euro Ltd and Kingate Global Ltd, in order to protect <strong>UBI</strong> <strong>Banca</strong>’s creditor rights<br />
also with respect to these actions.<br />
***<br />
The credit recovery process is still ongoing as concerns the Dynamic Decisions Growth Premium 2X fund, in<br />
liquidation — in which regard an agreement has been signed with the receivers, which gives <strong>UBI</strong> <strong>Banca</strong><br />
preference in the redemption of sums recovered in the liquidation, in return for financing paid to the<br />
receivers.<br />
137
Exposure to sovereign debt risk<br />
<strong>UBI</strong> <strong>Banca</strong> Group: exposures to sovereign debt risk<br />
Country / portfolio of classification<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Figures in thousands of euro<br />
Nominal<br />
amount<br />
Carrying<br />
amount<br />
Fair value<br />
Nominal<br />
amount<br />
Carrying<br />
amount<br />
Fair Value<br />
- Italy 18,241,692 18,804,673 18,889,763 9,201,954 8,512,083 8,512,083<br />
financial assets and liabilities held for trading (net exposure)<br />
3,365,175 3,324,579 3,324,579 1,674,474 1,664,216 1,664,216<br />
available-for-sale financial assets 10,990,625 11,429,045 11,429,045 6,649,895 5,964,173 5,964,173<br />
held-to-maturity investments 3,000,000 3,158,013 3,243,103 - - -<br />
loans and receivables 885,892 893,036 893,036 877,585 883,694 883,694<br />
- Spain 79,234 79,240 79,240 117,470 117,470 117,470<br />
financial assets and liabilities held for trading (net exposure)<br />
200 206 206 - - -<br />
loans and receivables 79,034 79,034 79,034 117,470 117,470 117,470<br />
- Germany -390,408 -422,323 -422,323 15,150 9,189 9,189<br />
financial assets and liabilities held for trading (net exposure)<br />
-390,408 -422,323 -422,323 15,005 9,044 9,044<br />
loans and receivables 145 145 145<br />
- France -168,867 -194,511 -194,511 -1,999 -2,909 -2,909<br />
financial assets and liabilities held for trading (net exposure)<br />
-648,867 -674,536 -674,536 -1,999 -2,909 -2,909<br />
available-for-sale financial assets 480,000 480,025 480,025 - - -<br />
- Holland 270,010 270,033 270,033 10 10 10<br />
available-for-sale financial assets 270,000 270,023 270,023 - - -<br />
loans and receivables 10 10 10 10 10 10<br />
- Argentina 2,591 561 561 2,941 705 705<br />
financial assets and liabilities held for trading (net exposure)<br />
2,591 561 561 2,941 705 705<br />
- Austria 791 946 946 - - -<br />
financial assets and liabilities held for trading (net exposure)<br />
791 946 946 - - -<br />
Total on-balance sheet exposures 18,035,043 18,538,619 18,623,709 9,335,526 8,636,548 8,636,548<br />
On 28 th July 2011, the European Securities and Markets Authority (ESMA) published document No. 2011/266 relating to information on sovereign debt risk<br />
to be disclosed in annual and half year financial reports prepared by listed companies that adopt IFRS.<br />
Details of the exposures of the <strong>UBI</strong> <strong>Banca</strong> Group are given on the basis that, according to the instructions issued by this European supervisory authority,<br />
“sovereign debt” is defined as debt instruments issued by central and local governments and by government entities and also as loans granted to them.<br />
The book value of the sovereign debt risk exposures of <strong>UBI</strong> <strong>Banca</strong> Group as at 31 st December<br />
<strong>2012</strong> had risen to €18.5 billion, a reflection of investments made by the Parent during the<br />
year.<br />
The exposure is almost entirely concentrated in Italy: in addition to financing for Italian public<br />
administrations amounting to €893 million (stable compared with the €883 million in 2011),<br />
the <strong>UBI</strong> <strong>Banca</strong> Group also held Italian government securities amounting to €18.8 billion, of<br />
which €11.4 billion classified within available-for-sale financial assets, €3.2 billion within<br />
held-to-maturity investments and €3.3 billion within financial assets held for trading<br />
(calculated net of uncovered short positions).<br />
Regarding sovereign exposures to other countries, other than the limited exposure to Spain<br />
(€79 million relating to lending activities, above all through factoring operations carried out by<br />
<strong>UBI</strong> <strong>Banca</strong> International in the country), Argentina (€0.6 million) and Austria (€0.9 million),<br />
uncovered positions were found in Germany (-€-422 million) and France<br />
(-€675 million), as part of normal trading activities, as well as investments in Dutch (€270<br />
million) and French (€480 million) government securities maturing in January/February 2013,<br />
by way of temporary use of the liquidity created by the segregated asset pool relating to the<br />
special purpose entity <strong>UBI</strong> Finance.<br />
138
***<br />
The table below shows the distribution by maturity of Italian government securities held in<br />
portfolio, net of the relative uncovered short positions.<br />
The average residual maturity of the AFS portfolio is 7.3 years and that of the HTM portfolio is<br />
1.9 years, while that for Italian government securities classified in the HFT portfolio is 0.9<br />
years.<br />
The comparison with the equivalent figures for 2011 shows the effect of the aforementioned<br />
investments made during <strong>2012</strong>.<br />
Specifically, it shows how the increase in the size of the investment has been accompanied by<br />
the polarisation of maturities up to three years, which accounts for 60% of the entire<br />
government securities portfolio. In detail:<br />
the “six months to one year” category – which mostly relates to the trading portfolio – has<br />
risen from 9.8% to 17.4% due to purchases of securities (mainly BOTs) with maximum<br />
maturities of December 2013;<br />
the “one year to three years” category increased from 24.4% to 41.1% as a result of the new<br />
investments classified as held-to-maturity and the switching operations carried out to<br />
extend maturities in the available-for-sale portfolio during the second half of the year.<br />
Investments with the longest maturities (over five years) – approximately 50% of the AFS<br />
portfolio – include €5.6 billion of BTPs (hedged in part by asset swaps), which account for<br />
around a third of the total portfolio (49% in December 2011).<br />
Maturities of Italian government securities<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Figures in thousands of euro<br />
<strong>Financial</strong><br />
assets held for<br />
trading (*)<br />
Available-forsale<br />
financial<br />
assets<br />
Held-to-maturity<br />
investments<br />
Total %<br />
<strong>Financial</strong><br />
assets held for<br />
trading (*)<br />
Available-forsale<br />
financial<br />
assets<br />
Held-to-maturity<br />
investments<br />
Total %<br />
Up to six months 311,579 252 - 311,831 1.7% 385,154 107,971 - 493,125 6.5%<br />
Six months to one year 2,764,630 351,138 - 3,115,768 17.4% 750,458 - - 750,458 9.8%<br />
One year to three years 246,672 3,961,668 3,158,013 7,366,353 41.1% 451,206 1,409,166 - 1,860,372 24.4%<br />
Three years to five years 1,250 1,472,961 - 1,474,211 8.2% 77,171 711,089 - 788,260 10.3%<br />
Five years to ten years 273 3,216,789 - 3,217,062 18.0% 216 1,786,281 - 1,786,497 23.4%<br />
Over ten years 175 2,426,237 - 2,426,412 13.6% 3 1,949,666 - 1,949,669 25.6%<br />
Total 3,324,579 11,429,045 3,158,013 17,911,637 100.0% 1,664,208 5,964,173 - 7,628,381 100.0%<br />
On 12 th November <strong>2012</strong>, the<br />
European Securities and Markets<br />
Authority (ESMA) published<br />
document No. 725/<strong>2012</strong> designed to<br />
improve the financial information to<br />
be disclosed by listed companies<br />
that adopt IFRS. The European<br />
supervisory authority called for<br />
greater transparency on exposures<br />
to credit risk represented by<br />
securities other than sovereign debt.<br />
Accordingly, a table summarising<br />
the total debt instruments recorded<br />
in <strong>UBI</strong> <strong>Banca</strong> Group’s assets<br />
(available-for-sale financial assets,<br />
financial assets held for trading,<br />
loans and advances to banks, loans<br />
and advances to banks, and loans<br />
and advances to customers) is<br />
provided below.<br />
Debt instruments other than government securities recognised within consolidated<br />
assets<br />
figures in thousands of euro<br />
31.12.<strong>2012</strong><br />
Issuer Nationality Carrying amount Fair Value Nominal amount<br />
Corporate Italy 165,415 165,415 160,918<br />
Corporate Jersey 20,314 20,314 19,150<br />
Corporate Holland 78,741 78,741 78,472<br />
Corporate United States 222,919 223,093 229,632<br />
Corporate Luxembourg 7,366 7,366 14,661<br />
Corporate Argentina 4 4 11<br />
Corporate United Kingdom 10,465 10,465 9,190<br />
Corporate India 17 17 15<br />
Corporate Spain 38,071 38,071 35,065<br />
Corporate Hungary 10,260 10,260 10,000<br />
Corporate France 43,523 43,523 40,000<br />
Corporate Switzerland 6,081 6,081 6,081<br />
Total Corporate 603,176 603,350 603,195<br />
Banking France 79,969 79,969 73,530<br />
Banking Germany 2 2 3<br />
Banking Italy 679,646 679,693 682,537<br />
Banking Luxembourg 52,051 52,051 50,000<br />
Banking United Kingdom 74,374 74,374 70,000<br />
Banking Sweden 37,869 37,869 33,890<br />
Banking Republic of Cyprus 3,818 3,818 9,500<br />
Banking United States 137,787 137,787 142,418<br />
Banking Switzerland 3,125 3,125 3,125<br />
Total Banking 1,068,641 1,068,688 1,065,003<br />
E.I.B. Luxembourg 1,629 1,629 1,485<br />
Total Supranational 1,629 1,629 1,485<br />
Total debt instruments 1,673,446 1,673,667 1,669,683<br />
139
In order to complete the ESMA’s disclosure requirements, in December <strong>2012</strong> (as also in<br />
December 2011), <strong>UBI</strong> <strong>Banca</strong> had no outstanding credit derivative contracts (credit default<br />
products) and was not party to any transactions involving these instruments during the year<br />
to increase its exposure or to acquire protection.<br />
Derivative financial instruments<br />
TRADING ACTIVITIES<br />
As shown in the table “A.1 Supervisory trading portfolio: end of period and average notional<br />
amounts” in the Notes to the <strong>Consolidated</strong> <strong>Financial</strong> Statements, Part E, the notional value of<br />
derivatives recognised in the trading portfolio at the end of the year was €25.3 billion (€34.1<br />
billion at the end of 2011).<br />
Of this, €10.8 billion related to direct transactions with customers wishing to protect<br />
themselves from interest rate or exchange rate risk, which were then “balanced” by entering<br />
into symmetrical contracts with market counterparties. The residual amount relates to trading<br />
on own account.<br />
The measurement at fair value was essentially the same both for contracts entered into with<br />
customers and for those entered into on own behalf: a total of €587 million was recognised as<br />
financial assets held for trading and €610 million as financial liabilities held for trading.<br />
HEDGING ACTIVITIES<br />
As detailed in the table “A.2.1 Banking portfolio: end of period and average notional amounts –<br />
for hedging” in the Notes to the <strong>Consolidated</strong> <strong>Financial</strong> Statements, Part E, the notional value<br />
of hedging derivatives held in December <strong>2012</strong> amounted to €47.5 billion (€49 billion at the end<br />
of 2011).<br />
These mainly consisted of instruments to hedge the interest rate risk linked to debt securities,<br />
and in particular fixed rate bonds and securities classified as available-for-sale.<br />
In order to properly understand overall trading in these instruments, their measurement at<br />
fair value must be considered in combination with the fair value of the corresponding hedged<br />
assets/liabilities.<br />
More specifically, the overall positive fair value of hedging derivatives (€1.5 billion) must be<br />
considered in combination with the delta fair value relating to exchange rate risk on bonds<br />
issued (€1.3 billion); the overall negative fair value shown (€2.2 billion) must, instead, be<br />
linked to the delta fair value relating to the interest rate risk of loans to customers and<br />
available-for-sale securities (approximately €2 billion).<br />
THE EARLY-2013 OPERATION<br />
The Group’s strategy for hedging interest rate risk has traditionally been to use normal fixedrate<br />
hedges for assets and liabilities through interest rate derivatives contracts.<br />
In early 2013 this strategy was altered and changed into a natural hedge model, making it<br />
possible to manage exposure to interest rate risk with less recourse to derivatives contracts. In<br />
the early weeks of 2013 – while essentially maintaining interest rate risk unchanged – hedging<br />
activities were rationalised by simultaneously eliminating hedges of both assets and liabilities.<br />
The result of this rationalisation process was the elimination of approximately 700 interest<br />
rate derivatives out of an original total of 1,500, equivalent to a nominal value of around €18<br />
billion.<br />
The operation described will provide the following benefits:<br />
- significant operational simplification, combined with less variable profit and loss due to the<br />
effect of fair value valuations of hedge accounting relationships;<br />
- an interest rate position that, until 2017 and limited to items that are no longer hedged,<br />
will improve the interest income, especially if the Euribor rate rises (since more fixed-rate<br />
liability items have been eliminated than fixed-rate asset items).<br />
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Exposures to some types of products<br />
This section provides an update of the position of the <strong>UBI</strong> <strong>Banca</strong> Group with regard to some<br />
types of financial instruments, which since the subprime mortgage crisis in 2007, are now<br />
considered at high risk.<br />
Special purpose entities (SPEs)<br />
The involvement of the <strong>UBI</strong> Group in special purpose entities (SPEs 10 ) concerns the following types:<br />
- entities formed to allow the issue of preference shares;<br />
- conventional securitisation transactions 11 performed by Group member companies in accordance with<br />
Law No. 130 of 30 th April 1999;<br />
- the issue of covered bonds, in accordance with Art. 7 bis of Law No.130/1999.<br />
Special purpose entities existed as at 31 st December <strong>2012</strong>, within the <strong>UBI</strong> <strong>Banca</strong> Group for the issue of<br />
preference shares used as innovative equity instruments on international capital markets. These issues,<br />
which current supervisory regulations allow to be included in the consolidated tier one capital, take the<br />
form of non redeemable instruments and they have particularly junior levels of subordination. The<br />
preference shares included in the tier one capital amounted to €337.747 million and they were issued by<br />
a number of the banks which formed the Group prior to the merger.<br />
The list of SPEs used for the securitisations in which the Group is involved is as follows:<br />
Orio Finance Nr. 3 Plc,<br />
Albenza 3 Srl,<br />
Lombarda Lease Finance 4 Srl,<br />
<strong>UBI</strong> Lease Finance 5 Srl,<br />
24-7 Finance Srl,<br />
<strong>UBI</strong> Finance 2 Srl,<br />
<strong>UBI</strong> Finance 3 Srl,<br />
<strong>UBI</strong> SPV BPA <strong>2012</strong> Srl,<br />
<strong>UBI</strong> SPV BPCI <strong>2012</strong> Srl,<br />
<strong>UBI</strong> SPV BBS <strong>2012</strong> Srl.<br />
The 24-7 Finance Srl securitisation relating to personal and special purpose loans was closed in May<br />
<strong>2012</strong>. Only the mortgage operation therefore existed as at 31 st December <strong>2012</strong>.<br />
In the first half, three new securitisations were launched with the transfer to three special purpose<br />
entities named <strong>UBI</strong> SPV BPA <strong>2012</strong> Srl, <strong>UBI</strong> SPV BPCI <strong>2012</strong> Srl and <strong>UBI</strong> SPV BBS <strong>2012</strong> Srl of loans to<br />
small to medium-sized enterprises (according to the EU regulatory definition), held by <strong>Banca</strong> Popolare di<br />
Ancona, <strong>Banca</strong> Popolare Commercio and Industria e Banco di Brescia respectively.<br />
The transfer of the loans has been completed for all three transactions with effect for accounting<br />
purposes from 1 st June <strong>2012</strong> and it involved assets totalling €2.76 billion.<br />
The purchase of the loans by the special purpose entities was financed by deferring payment of the<br />
transfer price, which was paid when the securities were issued, which occurred on 30 th October <strong>2012</strong>.<br />
The total nominal amount of the securities issued amounted to €2.76 billion as at 31 st December <strong>2012</strong>.<br />
The securitisations concerning the special purpose entities, 24-7 Finance Srl, <strong>UBI</strong> Lease Finance 5 Srl,<br />
<strong>UBI</strong> Finance 2 Srl, <strong>UBI</strong> Finance 3 Srl, <strong>UBI</strong> SPV BPA <strong>2012</strong> Srl, <strong>UBI</strong> SPV BPCI <strong>2012</strong> Srl and <strong>UBI</strong> SPV BBS<br />
Srl were performed in order to create a portfolio of assets eligible as collateral for refinancing with the<br />
European Central Bank, consistent with Group policy for the management of liquidity risk.<br />
They were carried out on the following: performing residential mortgages of the former B@nca 24-7 (24-7<br />
Finance Srl); <strong>UBI</strong> Leasing lease contracts (<strong>UBI</strong> Lease Finance 5 Srl); performing loans to small to<br />
medium-sized enterprises of Banco di Brescia (<strong>UBI</strong> Finance 2 Srl); performing loans to businesses of the<br />
<strong>Banca</strong> Popolare di Bergamo (<strong>UBI</strong> Finance 3 Srl); and performing loans to small to medium-sized<br />
enterprises of <strong>Banca</strong> Popolare di Ancona (<strong>UBI</strong> SPV BPA <strong>2012</strong> Srl), <strong>Banca</strong> Popolare Commercio e Industria<br />
(<strong>UBI</strong> SPV BPCI <strong>2012</strong> Srl) and Banco di Brescia (<strong>UBI</strong> SPV BBS <strong>2012</strong> Srl).<br />
In the securitisations in question, the senior securities issued by the entities – assigned a rating – are<br />
listed and can be used for refinancing operations with the ECB.<br />
10 Special Purpose Entities (SPEs) are special companies formed to achieve a determined objective.<br />
11 With normal securitisations the originator sells the portfolio to a special purpose entity which then issues tranches of asset-backed<br />
securities in order to purchase it. With a synthetic securitisation, on the other hand, the originator purchases protection for a pool<br />
of assets and transfers the credit risk attaching to the portfolio – either fully or in part – by using credit derivatives such as CDSs<br />
(credit default swaps) and CLNs (credit-linked notes) or by means of personal guarantees.<br />
141
The special purpose entities listed above are included in the consolidated accounts because these<br />
companies are in reality controlled, since their assets and liabilities were originated by Group member<br />
companies.<br />
Finally, with regard to the issue of covered bonds, the SPEs <strong>UBI</strong> Finance Srl and <strong>UBI</strong> Finance CB 2 Srl<br />
(the latter was created on 20 th December 2011 and consolidated from 31 st March <strong>2012</strong>) were created for<br />
the purchase of loans from banks (residential mortgages for the former and commercial mortgages for the<br />
latter) in order to create cover pools to back the covered bonds issued by the Parent, in accordance with<br />
the structure of these operations.<br />
The issue of covered bonds is designed mainly to diversify sources of funding for the Group and also to<br />
contain its cost (the first programme backed by residential mortgages), although it is also used to create<br />
assets eligible for refinancing (the second programme backed by commercial mortgages). As at 31 st<br />
December <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> had issued covered bonds for a total of €6.5 billion nominal 12 under the first<br />
programme with a maximum issuance of €10 billion, and also for a total of €2.3 billion nominal (all selfretained)<br />
under the second programme with a maximum issuance of €5 billion. The originator banks<br />
issued subordinated loans to the SPE <strong>UBI</strong> Finance Srl and to the SPE <strong>UBI</strong> Finance CB2 Srl, equal to the<br />
value of the loans progressively transferred, in order to fund the purchase. At the end of December these<br />
loans amounted to approximately €11.6 billion (€9.72 billion in December 2011) for <strong>UBI</strong> Finance Srl and<br />
€3 billion for <strong>UBI</strong> Finance CB2.<br />
In this respect, exposures are present in the Group which relate solely to the special purpose entities<br />
formed for the securitisations mentioned and they all fall within the scope of the consolidation.<br />
Ordinary lines of liquidity existed as at 31 st December <strong>2012</strong>, granted by the Parent to the SPE Orio<br />
Finance Nr.3 Plc for a total of €5 million, but not drawn on (nor were they drawn on as at 31 st December<br />
2011). Ordinary lines of liquidity also existed, granted to the entity 24-7 Finance Srl for a total of<br />
approximately €24.4 million fully drawn on (€227.4 million entirely drawn down at the end of 2011).<br />
Following the downgrades by the rating agencies Moody’s and Fitch on 5 th and 11 th October 2011<br />
respectively, <strong>UBI</strong> <strong>Banca</strong> made a liquidity facility amount available to <strong>UBI</strong> Finance 2 of €16.3 million and<br />
to <strong>UBI</strong> Finance 3 of €28 million. On the other hand, the originator <strong>Banca</strong> Popolare di Bergamo had<br />
disbursed a subordinated loan of €50 million, designed to cover potential payouts connected with specific<br />
risks (“set-off risk” relating to the securitised assets): the latter was increased in <strong>2012</strong> by a further €72.5<br />
million to cover the same risks underlying the revolving portfolios transferred in <strong>2012</strong>.<br />
The following subordinated loans were also disbursed by the originator banks for the three transactions<br />
completed in <strong>2012</strong> when the securities were issued: €23 million to <strong>UBI</strong> SPV BBS <strong>2012</strong>, €27 million to<br />
<strong>UBI</strong> SPV BPA <strong>2012</strong> and €26 million to <strong>UBI</strong> SPV BPCI.<br />
The first covered bond programme (<strong>UBI</strong> Finance) and all the securitisations (except for three structured<br />
transactions in <strong>2012</strong>: <strong>UBI</strong> SPV BBS, <strong>UBI</strong> SPV BPA and <strong>UBI</strong> SPV BPCI) are hedged by swap contracts<br />
where the main objective is to normalise the flow of interest generated by the transferred or securitised<br />
portfolio and to concretely protect the special purpose entity from interest rate risk. As a consequence of<br />
the downgrading of <strong>UBI</strong> <strong>Banca</strong> in October 2011, it became necessary to provide margin deposits for the<br />
swap contracts entered into between the Parent or other Group companies and the SPEs for the<br />
securitisations and the covered bond programme.<br />
Margin accounts were opened with an eligible institution which was the London Branch of Bank of New<br />
York Mellon (ratings: Moody’s Aa1 stab/S&P AA- neg/Fitch AA stab). The margin deposits were paid<br />
starting on 26 th October 2011 for an initial total amount of a little more than €1,015 million, of which<br />
€717 million for the covered bond programme and €298 million for the securitisations.<br />
The total balance in December <strong>2012</strong> was €1,075 million, of which €866 million for the covered bond<br />
programme (including approximately €750 million consisting of securities eligible as collateral for the<br />
purposes of the CSA to the Master Agreement for the derivatives contracts underlying the programme)<br />
and €209 million for the internal securitisation transactions.<br />
No exposures exist to special purpose entities or other conduit operations with underlying securities or<br />
investments linked to United States subprime and Alt-A loans.<br />
The total assets of SPEs relating to securitisations and to covered bonds amounted to €24.8 billion<br />
(€21.6 billion at the end of 2011). Details by asset class are given in the table below:<br />
12 Of which €0.75 billion self-retained.<br />
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SPE underlying assets<br />
Figures in millions of euro<br />
Classification of underlying assets of the securitisation 31.12.<strong>2012</strong><br />
31.12.2011<br />
Measurement Gross of Net of Gross of Net of<br />
Entity Total assets Class of underlying asset Accounting criteria impairment impairment impairment impairment<br />
Classification adopted losses losses losses losses<br />
Albenza 3 Srl 12.2 Mortgages L&R CA 11.2 11.2 22.2 22.1<br />
24-7 Finance 1,703.6 Mortgages L&R CA 1,486.4 1,479.3 1,688.2 1,681.4<br />
24-7 Finance - Salary-backed loans L&R CA - - - -<br />
24-7 Finance - Consumer loans L&R CA - - 1,322.0 1,283.9<br />
Lease Finance 4 103.5 Leasing L&R CA 80.0 79.3 143.9 143.4<br />
<strong>UBI</strong> Lease Finance 5 3,440.1 Leasing L&R CA 3,106.9 3,106.9 3,753.3 3,753.3<br />
Orio Finance 3 12.2 RMBS Notes (ALBENZA 3 Srl) L&R CA 12.2 12.2 23.1 23.1<br />
<strong>UBI</strong> Finance 11,258.5 Mortgages L&R CA 11,058.5 11,043.8 9,570.2 9,554.1<br />
<strong>UBI</strong> Finance CB2 2,747.4 Mortgages L&R CA 2,706.1 2,698.9 - -<br />
<strong>UBI</strong> Finance 2 839.7 Loans to SMEs L&R CA 754.9 752.2 949.9 946.8<br />
<strong>UBI</strong> Finance 3 2,248.2 Loans to businesses L&R CA 2,143.1 2,135.3 2,047.0 2,039.6<br />
<strong>UBI</strong> SPV BBS <strong>2012</strong> 779.2 Loans to SMEs L&R CA 771.5 768.3 - -<br />
<strong>UBI</strong> SPV BPA <strong>2012</strong> 890.0 Loans to SMEs L&R CA 885.4 881.0 - -<br />
<strong>UBI</strong> SPV BPCI <strong>2012</strong> 733.3 Loans to SMEs L&R CA 733.8 731.2 - -<br />
Total impaired assets, mortgages and loans 731.3 643.3 668.5 393.6<br />
Total impaired assets, leasing 388.5 353.3 195.6 179.0<br />
TOTAL 24,767.9 24,869.8 24,696.2 20,383.9 20,020.3<br />
The distribution by geographical location and credit rating of the securities issued relating to the<br />
securitisations by the special purpose entities Lombarda Lease Finance 4 and <strong>UBI</strong> Lease Finance 5 are<br />
given below:<br />
Securitisations of <strong>UBI</strong> Leasing: distribution of the underlying assets and of the securities issued<br />
(31 st December <strong>2012</strong>)<br />
DISTRIBUTION BY GEOGRAPHICAL AREA<br />
DISTRIBUTION OF ASSETS BY CREDIT RATING<br />
23.20%<br />
4.04%<br />
5.80%<br />
10.33%<br />
1.35%<br />
4.41%<br />
7.76%<br />
1.97%<br />
51.10%<br />
75.45%<br />
9.88%<br />
4.71%<br />
Lombardy Veneto Piedmont<br />
Latium Trentino Alto Adige Emilia Romagna<br />
Campania Marches Other<br />
AAA BBB unrated<br />
Exposure in ABS, CDO, CMBS and other structured credit products<br />
As at 31 st December <strong>2012</strong>, the <strong>UBI</strong> <strong>Banca</strong> Group held direct investments in ABS instruments for a<br />
residual amount of €0.2 million (€0.3 million in December 2011), consisting of ABS instruments<br />
recognised within financial assets held for trading, relating to the subsidiary <strong>UBI</strong> <strong>Banca</strong> International,<br />
with underlying of European origin.<br />
Own securitisations, eliminated in the consolidation, totalled €10.4 billion and related to ABS<br />
instruments (of which €7.4 billion of senior notes) used as collateral for advances from the ECB. Further<br />
details are provided in the previous section, “The interbank market and the liquidity situation”, which<br />
may be consulted.<br />
In addition to the direct exposures, hedge funds or funds of hedge funds were identified among the<br />
assets present in Group portfolios with exposures to CDO and CMBS structured credit products.<br />
Investment in these funds as at 31 st December <strong>2012</strong> amounted to approximately €124 million (net of<br />
impairment losses/reversals) compared to €105 million at the end of 2011 and presented low<br />
143
percentages of exposure. Total indirect exposure to CDOs and CMBSs amounted to approximately €3.3<br />
million, (€0.3 million in December 2011).<br />
Other subprime, Alt-A and monoline insurer exposures<br />
Again at the end of December <strong>2012</strong>, indirect exposures to subprime and Alt-A mortgages and to monoline<br />
insurers existed that were contained in hedge funds or funds of hedge funds held by the Parent. The<br />
percentages of exposure to subprime and Alt-A mortgages were again low (no fund had a percentage<br />
exposure of greater than 0.4%), with total exposure to subprime and Alt-A mortgages and to monoline<br />
insurers of approximately €0.3 million (€0.3 million as at 31 st December 2011).<br />
Leveraged Finance<br />
The term leveraged finance is used in the <strong>UBI</strong> <strong>Banca</strong> Group to refer to finance provided for a company or<br />
an initiative which has debt that is considered higher than normal on the market and is therefore<br />
considered a higher risk. Usually this finance is used for specific acquisition purposes (e.g. the<br />
acquisition of a company by other companies – either directly or through vehicles/funds – owned by<br />
internal [buy-in] or external [buy-out] management teams). They are characterised by “non investment<br />
grade” credit ratings (less than BBB-) and/or by remuneration that is higher than normal market levels.<br />
Leveraged finance business is performed by Centrobanca and is regulated by the Group Credit Risk<br />
Policy designed to combine the achievement of budget targets in terms of business volumes and profits<br />
with appropriate management of the attached risks. Operations are based on a maximum investment<br />
ceiling, reviewed annually and allocated on the basis of rating classes for operations according to<br />
predefined maximum percentages The system of limits is calculated to seek appropriate diversification<br />
both in terms of sector and the concentration of risk on single company or Group counterparties.<br />
The table below summarises on- and off-balance sheet exposure for leveraged finance by Centrobanca.<br />
That financing as a percentage of total Centrobanca financing was 9.95% (11.78% as at 31 st December<br />
2011). On- and off-balance sheet amounts shown at the end of <strong>2012</strong> relate to 149 positions for an<br />
average net exposure per position of €4.4 million. There were two positions with exposures of greater<br />
than €20 million (all on-balance sheet loans) corresponding to approximately 10.4% of the total.<br />
Centrobanca leveraged finance business<br />
figures in millions of euro<br />
On-balance sheet exposure<br />
gross exposure to customers<br />
Unsecured guarantees<br />
gross exposure to customers<br />
used impairment used impairment<br />
31st December <strong>2012</strong><br />
31st December 2011<br />
644.7 -20.8 27.1 -2.3<br />
857.2 -14.1 46.2 -3.9<br />
The charts below show the distribution of leveraged exposures by geographical area and by sector.<br />
EXPOSURE BY GEOGRAPHICAL AREA<br />
Distribution of Centrobanca leveraged exposures<br />
(the figures as at 31 st December 2011 are given in brackets)<br />
EXPOSURE BY SECTOR<br />
Other<br />
3% (8%)<br />
Europe<br />
21% (18%)<br />
commerce and<br />
services<br />
32% (23%)<br />
Italy<br />
76% (74%)<br />
manufacturing<br />
sector<br />
68% (77%)<br />
Residual exposures also exist within the <strong>UBI</strong> <strong>Banca</strong> Group – approximately €185 million (€218 million as<br />
at 31 st December 2011) – relating to leveraged finance transactions performed before this type of<br />
business was centralised at Centrobanca. They were performed by the network banks relating to a total<br />
of 24 positions with average exposure per transaction of €7.7 million.<br />
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The distribution by bank is as follows: Banco di Brescia (€91 million), <strong>Banca</strong> Popolare di Bergamo (€55.3<br />
million), <strong>Banca</strong> Popolare Commercio e Industria (€8.3 million), <strong>Banca</strong> Regionale Europea (€15.5 million)<br />
and <strong>Banca</strong> di Valle Camonica (€14.6 million).<br />
<strong>Financial</strong> derivative instruments for trading with customers<br />
The analysis performed for internal monitoring purposes confirms that the risks assumed by<br />
customers continue to remain generally low and they outlined a conservative profile for <strong>UBI</strong><br />
Group business in OTC derivatives with customers.<br />
In detail an update of the quantitative data at the end of December <strong>2012</strong> showed the following:<br />
- an increase in the total negative mark-to-market for customers, which stood at 6.95% of<br />
the notional amount of the contracts compared to 4.95% at the end of December 2011. The<br />
worsening of the mark-to-market amounts is closely connected with the European financial<br />
crisis, which caused a generalised reduction in interest rate levels;<br />
- the notional amount for existing contracts, totalling €6.399 billion, was attributable to<br />
interest rate derivatives amounting to €5.882 billion and currency derivatives amounting to<br />
€0.496 billion, plus a marginal notional amount for commodities contracts of €21 million;<br />
- transactions in hedging derivatives account for approximately 98.4% of the notional<br />
amount traded for interest rate derivatives and 93.3% of the notional amount for currency<br />
derivatives;<br />
- the total net mark-to-market (interest rate, currency and commodities derivatives)<br />
amounted to approximately -€438 million. Those contracts with a negative mark-to-market<br />
for customers were valued at -€445 million.<br />
In 2011 the Group incorporated regulations for its business in OTC derivative instruments with<br />
customers in its “Policy for the trading, sale and subscription of financial products” and the relative<br />
regulations to implement it as follows:<br />
• customer segmentation and classes of customers associated with specific classes of products, stating<br />
that the purpose of the derivatives transactions must be hedging and that transactions containing<br />
speculative elements must be of a residual nature;<br />
• rules for assessing the appropriateness of transactions, defined on the basis of the products sold to<br />
each class of customer;<br />
• principles of integrity and transparency on which the range of OTC derivatives offered to customers<br />
must be based, in compliance with the guidelines laid down by the Italian Banking Association (and<br />
approved by the Consob) for illiquid financial products;<br />
• rules and processes for assessing credit exposure, which grant credit lines with maximum limits for<br />
trading in interest rate and currency derivatives and credit lines on each single transaction for<br />
commodities derivatives or derivatives with private individual retail counterparties, while counterparty<br />
risk is assessed on the basis of Bank of Italy circular No. 263/2006;<br />
• rules and processes for managing restructuring operations, while underlining their exceptional<br />
nature;<br />
• the rules and processes for the settlement of transactions in OTC derivative instruments with<br />
customers that are subject to verbal or official dispute;<br />
• the catalogue of products offered to customers and the relative credit equivalents, updated with<br />
respect to previous versions.<br />
145
OTC interest rate derivatives: details of instrument types and classes of customer<br />
Product<br />
class<br />
1<br />
Type of instrument<br />
Customer classification<br />
Number of<br />
transactions<br />
Data as at 31st December <strong>2012</strong><br />
Notional MtM of which negative MtM<br />
Purchase of caps Qualified 21 47,451,311.29 28,266.98 -<br />
3: Professional 48 74,213,734.98 27,315.64 -<br />
2: Non private individual retail 1,430 372,583,177.84 748,569.75 -<br />
1: Private individual retail 1,330 151,506,189.50 304,590.89 -<br />
Purchase of caps Total 2,829 645,754,413.61 1,108,743.26 -<br />
Capped swaps Qualified 35 138,230,671.73 -3,465,151.88 -3,465,151.88<br />
3: Professional 63 255,216,669.91 -8,920,043.55 -8,920,043.55<br />
2: Non private individual retail 1,277 828,744,207.30 -23,381,997.68 -23,381,997.68<br />
1: Private individual retail 2,466 268,195,171.00 -5,504,798.50 -5,504,798.50<br />
Capped swaps Total 3,841 1,490,386,719.94 -41,271,991.61 -41,271,991.61<br />
IRS Plain Vanilla Qualified 41 144,055,641.47 -14,405,952.02 -14,405,952.02<br />
3: Professional 277 1,486,046,271.87 -152,138,394.77 -152,180,741.95<br />
2: Non private individual retail 1,033 1,657,570,462.64 -171,744,288.65 -171,744,288.65<br />
1: Private individual retail 233 45,146,743.36 -2,950,867.99 -2,950,867.99<br />
IRS Plain Vanilla Total 1,584 3,332,819,119.34 -341,239,503.43 -341,281,850.61<br />
IRS Step Up Qualified 3 3,817,079.52 -622,441.54 -622,441.54<br />
3: Professional 19 82,401,540.21 -10,174,875.69 -10,174,875.69<br />
2: Non private individual retail 58 124,831,465.82 -30,519,034.34 -30,528,593.27<br />
1: Private individual retail 2 1,216,764.57 -157,748.20 -157,748.20<br />
IRS Step up Total 82 212,266,850.12 -41,474,099.77 -41,483,658.70<br />
Purchase of collars Qualified 1 6,234,379.90 -526,986.29 -526,986.29<br />
3: Professional 1 7,500,000.00 -362,954.99 -362,954.99<br />
2: Non private individual retail 7 10,101,456.74 -659,464.59 -659,464.59<br />
Purchase of collars Total 9 23,835,836.64 -1,549,405.87 -1,549,405.87<br />
Total Class 1: hedging derivatives 8,345 5,705,062,939.65 -424,426,257.42 -425,586,906.79<br />
Class 1: % of Group total 99.06% 96.98% 97.28% 97.27%<br />
2<br />
Purchase of caps con KI/KO 3: Professional 2 20,845,989.88 -340,876.22 -340,876.22<br />
2: Non private individual retail 4 5,214,272.43 -61,506.64 -61,506.64<br />
Purchase of caps with KI/KO Total 6 26,060,262.31 -402,382.86 -402,382.86<br />
Purchase of collars with KI/KO 3: Professional 1 1,500,000.00 -15,680.78 -15,680.78<br />
2: Non private individual retail 2 5,395,067.69 -1,104,636.73 -1,104,636.73<br />
Purchase of collars with KI/KO Total 3 6,895,067.69 -1,120,317.51 -1,120,317.51<br />
IRS Convertible Qualified 1 8,000,000.00 -747,677.19 -747,677.19<br />
3: Professional 7 14,024,332.91 -577,761.36 -577,761.36<br />
2: Non private individual retail 14 27,980,285.44 -2,178,448.87 -2,178,610.72<br />
IRS Convertible Total 22 50,004,618.35 -3,503,887.42 -3,504,049.27<br />
Total Class 2: hedging derivatives with possible exposure 31 82,959,948.35 -5,026,587.79 -5,026,749.64<br />
to contained financial risks<br />
Class 2: % of Group total 0.37% 1.41% 1.15% 1.15%<br />
3 a<br />
IRS Range 3: Professional 5 15,104,950.73 -961,764.49 -961,764.49<br />
2: Non private individual retail 36 69,460,854.60 -5,595,968.21 -5,595,968.21<br />
1: Private individual retail 1 500,000.00 -11,989.04 -11,989.04<br />
IRS Range Total 42 85,065,805.33 -6,569,721.74 -6,569,721.74<br />
Total Class 3a: partial hedging derivatives and 42 85,065,805.33 -6,569,721.74 -6,569,721.74<br />
maximum pre-established loss<br />
3 b<br />
Gap floater swaps 2: Non private individual retail 2 2,600,345.00 -320,518.41 -324,094.03<br />
Gap floater swaps Total 2 2,600,345.00 -320,518.41 -324,094.03<br />
IRS Range Stability 3: Professional 1 4,500,000.00 36,120.69 -<br />
2: Non private individual retail 3 2,300,000.00 15,050.21 -<br />
IRS Range stability Total 4 6,800,000.00 51,170.90 -<br />
Total Class 3b: speculative derivatives and maximum 6 9,400,345.00 -269,347.51 -324,094.03<br />
unquantifiable loss<br />
Total Class 3: derivatives not for hedging 48 94,466,150.33 -6,839,069.25 -6,893,815.77<br />
Class 3: % of Group total 0.57% 1.61% 1.57% 1.58%<br />
Total <strong>UBI</strong> <strong>Banca</strong> Group 8,424 5,882,489,038.33 -436,291,914.46 -437,507,472.20<br />
146
OTC currency derivatives: details of instrument types and classes of customer<br />
Data as at 31st December <strong>2012</strong><br />
Product<br />
class<br />
1<br />
Type of instrument<br />
Customer classification<br />
Number of<br />
transactions<br />
Notional<br />
MtM<br />
of which negative<br />
MtM<br />
Vanilla currency options purchased by the customer Qualified 10 990,791.70 9,289.46 -<br />
Vanilla currency options purchased by the customer Total 10 990,791.70 9,289.46 -<br />
Forward synthetic Qualified 25 8,618,302.92 -27,711.59 -79,857.65<br />
3: Professional 251 138,606,110.37 1,661,508.39 -831,415.36<br />
2: Non private individual retail 50 19,719,384.42 15,400.45 -315,828.48<br />
Forward synthetic Total 326 166,943,797.71 1,649,197.25 -1,227,101.49<br />
Plafond Qualified 13 6,616,386.00 -115,418.36 -115,458.53<br />
3: Professional 177 119,236,103.51 -776,274.57 -1,792,571.45<br />
2: Non private individual retail 218 83,859,996.27 -1,628,592.12 -2,041,935.29<br />
Plafond Total 408 209,712,485.78 -2,520,285.05 -3,949,965.27<br />
Currency collars 3: Professional 1 2,520,478.89 32,003.10 -<br />
2: Non private individual retail 7 862,005.80 12,463.37 -<br />
Currency collars Total 8 3,382,484.69 44,466.47 -<br />
Total Class 1: hedging derivatives 752 381,029,559.88 -817,331.87 -5,177,066.76<br />
Class 1: % of Group total 73.22% 76.78% - 77.59%<br />
2<br />
Knock in collars 3: Professional 57 8,982,216.85 183,139.22 -<br />
2: Non private individual retail 1 800,000.00 -43,708.83 -43,708.83<br />
Knock in collars Total 58 9,782,216.85 139,430.39 -43,708.83<br />
Knock in forward 3: Professional 99 68,192,133.93 -397,905.96 -1,064,177.08<br />
2: Non private individual retail 15 4,198,599.84 -69,044.19 -94,340.11<br />
Knock in forwards Total 114 72,390,733.77 -466,950.15 -1,158,517.19<br />
Total Class 2: hedging derivatives with possible exposure 172 82,172,950.62 -327,519.76 -1,202,226.02<br />
to contained financial risks<br />
Class 2: % of Group total 16.75% 16.56% - 18.02%<br />
3b<br />
Knock out forward 3: Professional 3 1,484,119.46 -15,719.90 -15,719.90<br />
Knock out forward Total 3 1,484,119.46 -15,719.90 -15,719.90<br />
Knock out knock in forward Qualified 13 2,329,066.44 -55,760.57 -55,760.57<br />
3: Professional 60 24,320,536.18 148,597.76 -69,812.52<br />
Knock out knock in forwards Total 73 26,649,602.62 92,837.19 -125,573.09<br />
Vanilla currency options sold by the customer 3: Professional 27 4,913,491.01 -151,767.82 -151,767.82<br />
Vanilla currency options sold by the customer Total 27 4,913,491.01 -151,767.82 -151,767.82<br />
Total Class 3: derivatives not for hedging 103 33,047,213.09 -74,650.53 -293,060.81<br />
Class 3: % of Group total 10.03% 6.66% - 4.39%<br />
Total <strong>UBI</strong> <strong>Banca</strong> Group 1,027 496,249,723.59 -1,219,502.16 -6,672,353.59<br />
147
OTC commodities derivatives: details of instrument types and classes of customer<br />
Data as at 31st December <strong>2012</strong><br />
Product class<br />
Type of instrument<br />
Customer classification<br />
Number of<br />
transactions<br />
Notional MTM of which negative MtM<br />
2<br />
Commodity swaps Qualified 2 1,941,791.73 128,778.99 -<br />
3: Professional 17 9,096,547.64 -123,599.28 -159,225.57<br />
2: Non private individual retail 1 3,555,000.00 42,305.00 -<br />
Commodity swaps Total 20 14,593,339.37 47,484.71 -159,225.57<br />
Forward synthetic Qualified 1 306,950.00 -7,456.00 -7,456.00<br />
3: Professional 10 5,654,700.00 -180,474.00 -188,866.00<br />
2: Non private individual retail 3 629,125.00 -4,312.00 -4,501.00<br />
Forward synthetic Total 14 6,590,775.00 -192,242.00 -200,823.00<br />
Total Class 2: hedging derivatives with possible exposure 34 21,184,114.37 -144,757.29 -360,048.57<br />
to contained financial risks<br />
Class 2: % of Group total 100.00% 100.00% 100.00% 100.00%<br />
Total <strong>UBI</strong> <strong>Banca</strong> Group 34 21,184,114.37 -144,757.29 -360,048.57<br />
TOTAL <strong>UBI</strong> BANCA GROUP 9,485 6,399,922,876.29 -437,656,173.91 -444,539,874.36<br />
OTC derivatives: first five counterparties by bank (figures in euro)<br />
Data as at 31st December <strong>2012</strong><br />
Bank Classification MtM of which negative MtM<br />
Centrobanca 3: Professional -35,008,246 -35,008,246<br />
3: Professional -30,438,076 -30,438,076<br />
3: Professional -6,605,411 -6,605,411<br />
3: Professional -4,378,782 -4,378,782<br />
2: Non private individual retail -3,170,360 -3,170,360<br />
<strong>Banca</strong> Popolare Commercio & Industria 2: Non private individual retail -7,044,008 -7,044,008<br />
Qualified -4,558,297 -4,558,297<br />
3: Professional -3,095,824 -3,095,824<br />
2: Non private individual retail -2,462,594 -2,462,594<br />
Qualified -1,756,718 -1,756,718<br />
<strong>Banca</strong> Popolare di Ancona 2: Non private individual retail -6,729,045 -6,729,045<br />
2: Non private individual retail -1,848,369 -1,848,369<br />
2: Non private individual retail -1,661,539 -1,661,539<br />
3: Professional -1,653,870 -1,653,870<br />
3: Professional -1,416,310 -1,416,310<br />
<strong>Banca</strong> Regionale Europea 3: Professional -4,662,705 -4,662,705<br />
2: Non private individual retail -2,093,076 -2,093,076<br />
3: Professional -1,081,750 -1,081,750<br />
3: Professional -1,075,262 -1,075,262<br />
3: Professional -986,643 -1,082,994<br />
Banco di Brescia 3: Professional -4,069,764 -4,069,764<br />
Qualified -2,392,171 -2,392,171<br />
3: Professional -2,161,762 -2,161,762<br />
2: Non private individual retail -2,106,842 -2,106,842<br />
2: Non private individual retail -1,845,438 -1,845,438<br />
<strong>Banca</strong> Popolare di Bergamo 3: Professional -3,504,971 -3,504,971<br />
2: Non private individual retail -3,145,367 -3,145,367<br />
3: Professional -1,770,646 -1,770,646<br />
2: Non private individual retail -1,724,272 -1,724,272<br />
2: Non private individual retail -1,724,272 -1,724,272<br />
<strong>Banca</strong> Carime 3: Professional -938,589 -938,589<br />
2: Non private individual retail -544,685 -544,685<br />
2: Non private individual retail -539,348 -539,348<br />
2: Non private individual retail -200,568 -200,568<br />
3: Professional -104,483 -104,483<br />
<strong>Banca</strong> di Valle Camonica 3: Professional -590,215 -590,215<br />
3: Professional -560,608 -560,608<br />
2: Non private individual retail -407,939 -407,939<br />
2: Non private individual retail -393,927 -393,927<br />
2: Non private individual retail -298,644 -298,644<br />
148
Equity and Capital Adequacy<br />
Changes in consolidated shareholders’ equity<br />
Reconciliation between equity and profit for the year of the Parent with consolidated equity as at 31st December <strong>2012</strong> and<br />
profit for the year then ended<br />
Figures in thousands of euro<br />
Equity<br />
of which: Profit for the<br />
year<br />
Equity and profit for the year in the financial statements of the Parent 8,607,721 223,496<br />
Effect of the consolidation of subsidiaries including joint ventures 1,301,369 93,706<br />
Effect of measuring other significant equity investments using the equity method 83,910 45,290<br />
Dividends received during the year - -325,631<br />
Other consolidation adjustments (including the effects of the PPA) -255,118 45,847<br />
Equity and profit for the year in the consolidated financial statements 9,737,882 82,708<br />
The consolidated equity of the <strong>UBI</strong> <strong>Banca</strong> Group as at 31 st December <strong>2012</strong>, inclusive of profit<br />
for the year, amounted to €9,737.9 million, an increase compared to €8,939 million at the end<br />
of 2011.<br />
As shown in the table “Changes in consolidated equity of the Group in <strong>2012</strong> ” as well as in the<br />
statement of changes in equity contained among the mandatory consolidated financial<br />
statements, the following items contributed to the increase of €798.9 million that occurred<br />
over twelve months:<br />
− the appropriation of €51.7 million for dividends (<strong>UBI</strong> <strong>Banca</strong>) and other uses (other Group<br />
banks) drawn from the extraordinary reserve 1 ;<br />
− a reduction of €744.9 Valuation reserves attributable to the Group: composition<br />
million in the negative<br />
balance on the valuation<br />
reserves –generated mainly<br />
by the positive impact of<br />
Figures in thousands of euro<br />
Available-for-sale financial assets<br />
Cash flow hedges<br />
31.12.<strong>2012</strong><br />
-561,244<br />
-4,937<br />
31.12.2011<br />
-1,350,979<br />
-3,217<br />
Currency translation differences -243 -243<br />
comprehensive income of<br />
Actuarial gains/losses for defined benefit pension plans -65,053 -34,155<br />
over €757 million – which Special revaluation laws 60,432 72,729<br />
involved the following: Total -571,045 -1,315,865<br />
+€789.7 million for<br />
available-for-sale financial assets, -€30.8mn for actuarial gains/ losses on defined benefit<br />
plans; -€12.3 million for special revaluation laws (in relation to the free of charge increases<br />
in share capital by BPA and BRE in June <strong>2012</strong> and the change in the percentage of BRE<br />
owned at Group level following the merger into it of Banco di San Giorgio); -€1.7 million for<br />
cash flow hedges;<br />
− an overall increase of €23 million in other reserves of profits, relating mainly to the<br />
following operations:<br />
• +€11.1 million for the share capital increase in BPA performed by drawing on valuation<br />
reserves;<br />
• -€1.5 million for the purchases of shares in IW Bank from non-controlling interests;<br />
• +€0,4 million for exchange rate differences relating to reserves of companies not resident<br />
in Italy;<br />
• the remaining part attributable to the positive impacts on Group reserves produced by<br />
the merger of Banco di San Giorgio into BRE;<br />
− posting of profit for the year of €82.7 million.<br />
1 The loss incurred by the Group in 2011, amounting to €1,841.5 million (compared to €1,862.1 million at consolidated level, inclusive<br />
of non-controlling interests) was replenished by drawing €2,713.1 million from the share premium reserve and allocating the<br />
difference of €871.6 million to reserves of profits.<br />
149
Changes in consolidated equity of the Group in <strong>2012</strong><br />
Figures in thousands of euro<br />
Balances as<br />
at 31.12.2011<br />
Allocation of prior year<br />
profit<br />
Reserves<br />
Dividends<br />
and other<br />
uses<br />
Changes in<br />
reserves<br />
New share<br />
issues<br />
<strong>2012</strong> changes<br />
Equity transactions<br />
Stock<br />
options<br />
<strong>Consolidated</strong><br />
comprehensi<br />
ve income<br />
31.12.<strong>2012</strong><br />
Equity<br />
attributable<br />
to the<br />
shareholders<br />
of the Parent<br />
Share capital: 2,254,367 - - - 1 - - 2,254,368<br />
a) ordinary shares 2,254,367 - - - 1 - - 2,254,368<br />
b) other shares - - - - - - - -<br />
Share premiums 7,429,913 -2,713,054 - - 2 - - 4,716,861<br />
Reserves 2,416,471 871,566 -51,691 23,019 - - - 3,259,365<br />
Valuation reserves -1,315,865 - - -12,297 - - 757,117 -571,045<br />
Treasury shares -4,375 - - - - - - -4,375<br />
Profit/loss for the year -1,841,488 1,841,488 - - - - 82,708 82,708<br />
Equity attributable to the<br />
shareholders of the Parent 8,939,023 - -51,691 10,722 3 - 839,825 9,737,882<br />
Fair value reserves of available-for-sale financial assets attributable to the Group: composition<br />
31.12.<strong>2012</strong><br />
31.12.2011<br />
Figures in thousands of euro Positive reserve Negative reserve Total Positive reserve Negative reserve Total<br />
1. Debt instruments 231,534 -867,565 -636,031 78,744 -1,471,643 -1,392,899<br />
2. Equity instruments 80,216 -4,889 75,327 51,267 -4,127 47,140<br />
3. Units in O.I.C.R.<br />
(collective investment instruments) 11,444 -11,984 -540 6,973 -12,193 -5,220<br />
4. Financing - - - - - -<br />
Total 323,194 -884,438 -561,244 136,984 -1,487,963 -1,350,979<br />
As shown in the table, the increase mentioned above of €789.7 million in the fair value reserve<br />
for available-for-sale financial assets is attributable mainly to debt instruments held in<br />
portfolio (up by €756.9 million to -€636 million net of tax and non-controlling interests) and in<br />
particular to Italian government securities, the reserve for which increased by €585.7 million<br />
(of which +€477.5 million relating to the Parent) to -€588.8 million (-€1,174.5 million as at 31 st<br />
December 2011, -€1,066.8 million as at end June and -€785.1 million as at 30 th September<br />
2011) 2 .<br />
Benefiting from a more favourable environment that has seen a recovery in financial markets<br />
since September, the reserve for debt instruments recorded increases in fair value of €767<br />
million during the year. These included €574.9 million relating to the Parent (over 80% of<br />
which related to Italian government securities), €100.4 million to Lombarda Vita, €41.9 million<br />
to IW Bank (almost entirely attributable to the portfolio of Italian government securities), €30.4<br />
million to Centrobanca and €15 million to <strong>UBI</strong> Assicurazioni.<br />
Increases included transfers of €30.1 million of negative reserves to the income statement,<br />
almost entirely in relation to the sale of securities, predominantly government securities,<br />
included in the <strong>UBI</strong> <strong>Banca</strong> portfolio (€14.5 million), the Lombarda Vita portfolio (€12.1 million)<br />
and the Centrobanca portfolio (€2.5 million).<br />
Equity instruments recorded increases in fair value of €29.3 million, including €27.9 million<br />
relating to <strong>UBI</strong> <strong>Banca</strong>: of which €20.2 million for the investment in Intesa Sanpaolo, €4.1<br />
2 As already reported, the negative available-for-sale reserve for Italian government securities used as a capital filter in the EBA<br />
exercise on capital amounted to -€868 million as at 30 th September 2011.<br />
150
million for S.A.C.B.O., €1.6 million for SIA and €1.4 million for Istituto Centrale delle Banche<br />
Popolari.<br />
The reserve for units in OICR (collective investment instruments) recorded increases of €5.1<br />
million in fair values relating to <strong>UBI</strong> <strong>Banca</strong> (around €3 million) and Lombarda Vita (€2.1<br />
million). Finally, increases also included the transfer of €4.1 million of negative reserves to the<br />
income statement, €2.6 million of which following impairment losses almost entirely related to<br />
<strong>UBI</strong> <strong>Banca</strong>.<br />
Fair value reserves of available-for-sale financial assets attributable to the Group: annual changes<br />
Figures in thousands of euro<br />
Debt<br />
instruments<br />
Equity<br />
instruments<br />
OICR units<br />
(collective investment<br />
instruments)<br />
Financing<br />
Total<br />
1. Opening balances as at 1st January <strong>2012</strong> -1,392,899 47,140 -5,220 - -1,350,979<br />
2. Positive changes 798,416 31,028 9,717 - 839,161<br />
2.1 Increases in fair value 767,006 29,310 5,128 - 801,444<br />
2.2 Transfer to income statement of negative reserves 30,058 1,651 4,075 - 35,784<br />
- following impairment losses 802 1,330 2,569 - 4,701<br />
- from disposal 29,256 321 1,506 - 31,083<br />
2.3 Other changes 1,352 67 514 - 1,933<br />
3. Negative changes -41,548 -2,841 -5,037 - -49,426<br />
3.1 Reductions in fair value -1,653 -1,132 -2,706 - -5,491<br />
3.2 Impairment losses - - - - -<br />
3.3 Transfer to income statement of positive reserves: from disposal -739 -1,455 -648 - -2,842<br />
3.4 Other changes -39,156 -254 -1,683 - -41,093<br />
4. Closing balances as at 31st December <strong>2012</strong> -636,031 75,327 -540 - -561,244<br />
Capital adequacy<br />
Following the official authorisation received from the Bank of Italy on 16 th May <strong>2012</strong>, the <strong>UBI</strong><br />
<strong>Banca</strong> Group now uses, from the 30 th June <strong>2012</strong> consolidated supervisory report onwards,<br />
internal models for calculating capital requirements for credit risk relating to corporate<br />
customers and for operational risk.<br />
Capital ratios had improved appreciably at the end of the year, benefiting from the adoption of<br />
the internal models already mentioned, from action taken to optimise risk weighted assets and<br />
from capital management action (lower tier two issues).<br />
Further benefits in terms of lower risk weighted assets may well come from the validation of<br />
advanced models for retail segment credit risk (private individuals and small businesses),<br />
which is expected in the first half of 2013.<br />
As shown in the table, in December regulatory capital amounted to €12.2 billion, slightly down<br />
on €12.3 billion at the end of 2011 (-€78.5 million), due mainly to deductions related to an<br />
excess of expected losses over total impairment losses, applied following the adoption of the<br />
internal methods already mentioned. These deductions are mainly attributable to the fall in<br />
tier one capital (-€12.6 million), not offset by other increases which did affect the item, while<br />
their impact on tier two capital was greater (-€56.8 million).<br />
At the same time risk weighted assets decreased by €14.4 billion to €76.6 billion, 57.8% of<br />
total assets (compared to 70.1% at the end of 2011).<br />
The core tier one ratio therefore improved by 173 basis points to 10.29%, and the tier one ratio<br />
increased by 170 basis points to 10.79%, while the total capital ratio increased by 251 basis<br />
points to 16.01%.<br />
As already reported in the section “Significant events during the year”, the <strong>UBI</strong> <strong>Banca</strong> Group<br />
has achieved the objective set by the EBA recommendation to achieve a core tier one ratio of<br />
9% inclusive of the “buffer” on sovereign debt (€868 million as at 30 th September 2011). At the<br />
end of December <strong>2012</strong> the core tier one ratio for EBA purposes was 9.16%.<br />
151
Capital ratios<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong><br />
Basel 2 AIRB<br />
31.12.2011<br />
Basel 2 standard<br />
Tier 1 capital before filters 8,124,210 8,075,253<br />
Preference shares and savings/privileged shares attributable to non-controlling interests 382,854 489,191<br />
Tier 1 capital filters -30,471 -137,541<br />
Tier 1 capital after filters 8,476,593 8,426,903<br />
Deductions from tier 1 capital -212,873 -150,625<br />
of which: negative elements for 50% deduction Excess of expected losses over impairment<br />
losses (IRB models) -71,632 -<br />
Tier 1 after filters and specific deductions (Tier 1) 8,263,720 8,276,278<br />
Tier 2 capital after filters 4,310,534 4,305,074<br />
Deductions from tier 2 capital -212,873 -150,625<br />
of which: negative elements for 50% deduction Excess of expected losses over impairment<br />
losses (IRB models) -71,632 -<br />
Tier 2 capital after filters and specific deductions 4,097,661 4,154,449<br />
Deductions from tier 1+tier 2 capital -157,762 -148,574<br />
Total regulatory capital 12,203,619 12,282,153<br />
Credit and counterparty risk 5,611,624 6,746,523<br />
Market risk 78,253 73,545<br />
Operational risk 437,271 460,749<br />
Other prudential requirements - -<br />
Total prudential requirements 6,127,148 7,280,817<br />
Subordinated liabilities tier 3<br />
Amount eligible (*) 55,873 -<br />
With a provision of 18 th May <strong>2012</strong> and a<br />
later communication of 23 rd June 2010<br />
(“Clarification of supervisory measures<br />
concerning regulatory capital – prudential<br />
filters”), the Bank of Italy issued new<br />
supervisory instructions for the treatment<br />
of fair value reserves relating to debt<br />
instruments held in the “available-for-sale<br />
financial assets” portfolio for the purposes<br />
of calculating regulatory capital<br />
(prudential filters). More specifically, as an<br />
alternative to the “asymmetric approach”<br />
(full deduction of net losses from the tier<br />
one capital and inclusion of 50% of the<br />
net gains in the tier two capital) already<br />
provided for by Italian regulations, it was<br />
permitted – in compliance with 2004<br />
CEBS guidelines – to completely<br />
neutralise gains and losses recognised in<br />
the reserves mentioned (“symmetrical<br />
approach”) subsequent to 31 st December<br />
2009, but limited to securities issued by<br />
the central governments of countries<br />
belonging to the European Union. The<br />
Group decided to take advantage of the<br />
option and reported the decision to the<br />
Bank of Italy on 29 th June 2010. It was<br />
therefore applied uniformly by all<br />
members of the banking Group,<br />
commencing with the calculation of<br />
regulatory capital as at 30 th June 2010.<br />
Risk weighted assets 76,589,350 91,010,213<br />
Core tier 1 ratio after specific deductions from tier 1 capital (tier 1 capital net of preference shares/risk<br />
w eighted assets) 10.29% 8.56%<br />
Tier 1 capital ratio<br />
(tier 1 capital/risk w eighted assets) 10.79% 9.09%<br />
Total capital ratio<br />
[(regulatory capital+tier 3 eligible)/risk w eighted assets] 16.01% 13.50%<br />
(*) Excess of tier two subordinated liabilities (lower tier two) over amount that qualifies for inc lusion in tier two c apital. The amount may be used to cover c apital requirements on market risks<br />
up to a maximum of 71.4% of those same requirements.<br />
152
Research & Development<br />
Given that the Group offers chiefly financial and banking services, its research and<br />
development activities - performed centrally by <strong>UBI</strong> Sistemi e Servizi - prevalently tries to<br />
study the possible applications of new technology in customer relations, in order to improve<br />
and augment the Group’s range of products and services, and also in internal corporate<br />
processes, in order to simplify and streamline them.<br />
The areas of greatest interest and/or potential are currently MOBILE INTERNET, especially with<br />
regard to the opportunities offered by the remote payment sector, and by DEMATERIALISATION<br />
(paperless operations), progressively being extended to new operational contexts and to new<br />
functions, although in certain cases, this is still only at the experimental stages.<br />
In <strong>2012</strong>, the Group’s mobile internet business witnessed not only the enhancement of home<br />
banking services, with the introduction of online trading, but also the extension of the<br />
applications that enable these services to inlcude all the main currently available devices and<br />
terminals. A specific application for tablets was introduced (joining the applications already<br />
available for iPhone, Android and BlackBerry) and in 2013 a platform for Windows Mobile is<br />
scheduled to be released.<br />
In future years, the growing diffusion of mobile devices will offer interesting developments in<br />
the field of mobile payments, to the benefit of both consumers and vendors.<br />
Consequently, the <strong>UBI</strong> <strong>Banca</strong> Group has launched its <strong>UBI</strong> Mobile Payments Project, featuring<br />
the experimental phase of payments via mobile telephone (NFC 1 compliant smartphone)<br />
interacting with contactless POS terminals 2 , through the virtualisation of a payment card to a<br />
SIM phone card.<br />
The initiative was embarked upon in partnership with the following: a number of important<br />
operators in the payment system and telephony sectors; with the city of Varese (in the context<br />
of the Varese Smart City initiative); and with the LIUC Università Cattaneo. Launched through<br />
a three-phase pilot project, the first phase was implemented at the beginning 2013, and the<br />
full commercial launch is scheduled for 2014. In the meantime, in order to augment the<br />
number of points of sale accepting NFC mobile payments, a programme for the progressive<br />
migration of operators to contactless POS terminals was launched, in the Bergamo and Varese<br />
areas in particular.<br />
For merchants, in February 2013 the <strong>Banca</strong> Popolare di Bergamo commenced experimentation<br />
of its Mobile POS, a technology which allows a smartphone or tablet to be used as a tool to<br />
accept mobile credit/debit card payments. Due to its cost-effectiveness, the Mobile POS system<br />
will be useful for those vendors with insufficient sales volumes to cover the fixed-costs of<br />
normal POS solutions.<br />
During the course of <strong>2012</strong>, dematerialisation (paperless) initiatives advanced in two principal<br />
directions:<br />
the first involved documents, with the progressive extension of digitalisation to new areas of<br />
operation. Specifically, computerised viewing, filing and transport services for documents<br />
were created for mortgage, advertising campaign management (CRM), credit and real estate<br />
activities. These services were also extended to a number of regular branch counter<br />
activities (in particular to those regarding services such as "multiple bank transfers",<br />
"money orders and bank drafts", "RIBA - cash orders", "RID - permanent direct debit<br />
orders", and "MAV - payment by notice"), with significant results in terms of efficiency and<br />
1 NFC: Near Field Communication. Technology which provides short range two-way wireless connections (up to a maximum of 10 cm).<br />
2 State-of-the-art terminal which, in addition to providing all functions offered by traditional desktop POS devices, also allows the user<br />
to accept credit cards with the same technology by simply bringing the card into close proximity to the POS with an NFC reader<br />
(approximately 4-5 cm). Small transactions do not require a PIN number and the transaction is confirmed by a sound alert and a<br />
flashing light emitted by the POS.<br />
153
process monitoring, also with regard to compliance with time limits established by the PSD<br />
legislation. Non-performing loan management documentation has also now been digitalised;<br />
the second involved digital signatures, allowing documents to be produced digitally from the<br />
outset (also known as dematerialisation ab origine). The experimentation, which began at<br />
the end of 2011 at the five pilot branches of the <strong>Banca</strong> Popolare di Bergamo (Progetto Firma<br />
Grafometrica - Biometric/Graphometric Signature Project 3 ) was gradually extended during the<br />
year <strong>2012</strong>, initially to paying-in and withdrawal operations, and then to all remaining<br />
counter activities.<br />
Finally, remote selling is yet another growth sector on which the Group intends to focus its<br />
research and development activities in 2013. On the strength of the positive reception of the<br />
online subscription of its Enjoy Card, the Group has launched a series of technologicallyadvanced<br />
initiatives based on remote digital signatures 4 which will allow users to sign online<br />
documents with a digital signature, without having to deliver a signed paper document.<br />
The system of internal control<br />
The document “<strong>Report</strong> on the corporate governance and ownership structure of <strong>UBI</strong> <strong>Banca</strong><br />
Scpa” attached to these reports may be consulted for a description of the architecture, rules<br />
and organisational units of the system of internal controls. It also provides specific information<br />
required under Art. 123 bis, paragraph 2b) of the <strong>Consolidated</strong> Finance Act (Legislative Decree<br />
No. 58/1998) concerning the risk management and internal control systems that govern the<br />
financial reporting process.<br />
3 Biometric/graphometric technology is used to place a naturally produced digital signature on documents; this entails placing a<br />
series of graphic strokes (the signature) on a special tablet that is able to “capture” the signature’s five characteristic traits: rhythm,<br />
speed, pressure, acceleration and movement.<br />
4 Remote digital signatures are a type of electronic signature configured as an on-line service (accessed via Intranet and/or Internet),<br />
in which the signer's private key is stored, together with the signature certificate, within a secure remote server by an Accredited<br />
Certifier. The signer is identified by the service and authorises the addition of the digital signature through the use of a security<br />
mechanism.<br />
154
Transactions with related parties<br />
With Resolution No. 17221 of 12 th March 2010 – amended by the subsequent Resolution No.<br />
17389 of 23 rd June 2010 – the Consob (Italian securities market authority) approved a<br />
Regulation concerning related-party transactions. The regulations concern the procedures to<br />
be followed for the approval of transactions performed by listed companies and the issuers of<br />
shares with a broad shareholder base with parties with a potential conflict of interest,<br />
including major or controlling shareholders, members of the management and supervisory<br />
bodies and senior managers including their close family members.<br />
The regulations currently apply within the <strong>UBI</strong> <strong>Banca</strong> Group to the Parent <strong>UBI</strong> <strong>Banca</strong> Scpa<br />
only, as a listed company. In November 2010, the Supervisory Board appointed, from among<br />
its members, a Related Parties Committee to which all transactions falling within the scope of<br />
the regulations must be submitted in advance.<br />
In this respect the <strong>UBI</strong> <strong>Banca</strong> regulations have excluded the following transactions from their<br />
scope of application and these are consequently not subject to the disclosure obligations<br />
required under the Consob regulation, but without prejudice to the provisions of Art. 5,<br />
paragraph 8, where applicable, of the said Consob Regulation:<br />
(a) shareholders’ resolutions concerning the remuneration of the Members of the Supervisory Board passed in<br />
accordance with Art. 2364-bis of the Italian Civil Code, including those concerning the determination of a total<br />
sum for the remuneration of the Members of the Supervisory Board assigned particular offices, powers and<br />
functions;<br />
(b) remuneration schemes based on financial instruments approved by shareholders in accordance with Art. 22, letter<br />
b) of the Articles of Association and in compliance with Art. 114-bis of the <strong>Consolidated</strong> Finance Act and the<br />
relative operations to implement them;<br />
(c) resolutions, other than those referred to under the preceding letter a) of this article, concerning the fees of<br />
Members of the Management Board appointed to special positions and other key management personnel and also<br />
the resolutions with which the Supervisory Board determines the fees of the Members of the Management Board<br />
on condition that:<br />
(i) <strong>UBI</strong> <strong>Banca</strong> has adopted a remuneration policy;<br />
(ii) the Remuneration Committee formed by the Supervisory Board in accordance with Art. 49 of the Articles of<br />
Association has been involved in the definition of that remuneration policy;<br />
(iii) a report setting out the remuneration policy has been submitted for approval or a consultative vote to a<br />
Shareholders' Meeting;<br />
(iv) the remuneration awarded is consistent with that policy;<br />
(d) “transactions of negligible amount” are those related-party transactions for which the amount is less than €250<br />
thousand. If a related-party transaction is concluded with a member of the key management personnel, a close<br />
family member of that person or with companies controlled by or subject to significant influence of those persons,<br />
it will be considered a transaction of negligible amount if the amount of the transaction is not greater than €100<br />
thousand;<br />
(e) transactions which fall within the ordinary performance of operating activities and the related financial activities<br />
concluded under equivalent market or standard conditions;<br />
(f) transactions to be performed on the basis of instructions for the purposes of stability issued by the supervisory<br />
authority, or on the basis of instructions issued by the Parent of the Group to carry out instructions issued by the<br />
supervisory authority in the interests of the stability of the Group;<br />
(g) transactions with or between subsidiaries and also venturers in joint ventures, as well as transactions with<br />
associates, if no significant interests of other related parties exist in the subsidiaries or associates that are<br />
counterparties to the transaction.<br />
Also, in compliance with Consob recommendations, transactions with related-parties of <strong>UBI</strong><br />
<strong>Banca</strong> performed by subsidiaries are subject to the regulations in question if, under the<br />
provisions of the Articles of Association or internal regulations adopted by the Bank, the<br />
Supervisory Board, in response to a proposal of the Management Board, or even an officer of<br />
the Bank on the basis of powers conferred on that officer, must preliminarily examine or<br />
approve a transaction to be performed by subsidiaries.<br />
With reference to Article 5, paragraph 8 of Consob Resolution No. 17221/2010, entitled<br />
“Public disclosures on transactions with related parties”, information regarding transactions<br />
of major importance carried out in <strong>2012</strong> with related parties is reported in the section below.<br />
155
Transactions of Greater Importance<br />
During the period <strong>UBI</strong> <strong>Banca</strong> did not carry out any transactions which can be classified as “of<br />
greater importance”, except for the intragroup transactions cited below, which in accordance<br />
with the aforementioned internal regulations are exempt from the more rigorous decisionmaking<br />
procedure and from the requirement to publish a report for the market (unless other<br />
related parties have a significant interest in the relevant subsidiary).<br />
We report some securitisation transactions and operations for the issuance of covered bonds<br />
as described in Part E of the Notes to the <strong>Consolidated</strong> <strong>Financial</strong> Statements.<br />
Intragroup repurchase agreements were also entered into with securities issued as part of<br />
securitisation transactions as the underlying, all with a duration of one month stipulated<br />
under market conditions.<br />
In relation to the funding requirements of <strong>Banca</strong> Regionale Europea, <strong>UBI</strong> <strong>Banca</strong> disbursed<br />
€605 million of short-term funds to it. This financing is subject to specific regulations which<br />
govern intragroup transfer pricing.<br />
In relation to <strong>UBI</strong> Leasing’s funding requirements, <strong>UBI</strong> <strong>Banca</strong> disbursed short-term funds to it<br />
totalling €10,187 million. This financing is subject to specific regulations which govern<br />
intragroup transfer pricing.<br />
In relation to Prestitalia’s funding requirements, <strong>UBI</strong> <strong>Banca</strong> disbursed short-term funds to it<br />
totalling €2,760 million. This financing is subject to specific regulations which govern<br />
intragroup transfer pricing.<br />
Pursuant to the Salva Italia (Save Italy) Decree Law enacted on 6 th December 2011 (No.<br />
201/2011), <strong>UBI</strong> <strong>Banca</strong> resolved to make use of guarantees offered by the Italian government in<br />
support of its debt instrument issuance activity. It therefore issued bonds for a total nominal<br />
amount of €6 billion and obtained the relative government guarantee. When issued, these were<br />
subscribed by Centrobanca and immediately sold back to <strong>UBI</strong> <strong>Banca</strong> under market conditions.<br />
The financial terms and conditions for those bonds are as follows:<br />
First issue – value date 2 nd January <strong>2012</strong> – nominal amount: €2,000,000,000 ; original duration: 36<br />
months; redemption in a single payment on maturity; interest rate: fixed at 6.5%.<br />
Second issue – value date 2 nd January <strong>2012</strong> – nominal amount: €1,000,000,000; original duration: 60<br />
months; redemption in a single payment on maturity; interest rate: fixed at 7.0%.<br />
Third issue – value date 27 th February <strong>2012</strong> – nominal amount €2,000,000,000; original duration: 36<br />
months; redemption in a single payment on maturity; interest rate: fixed at 4.5%.<br />
Fourth issue – value date 27 th February <strong>2012</strong> – nominal amount: €1,000,000,000; original duration:<br />
60 months; redemption in a single payment on maturity; interest rate: fixed at 5.25%.<br />
We also report that:<br />
- on 17 th February <strong>2012</strong>, the Supervisory Board of <strong>UBI</strong> <strong>Banca</strong> voted in favour of a motion to<br />
merge InvestNet International Spa into IW Bank, in accordance with the merger plan<br />
approved by the competent governing bodies of the companies involved;<br />
- on 28 th March <strong>2012</strong>, the Supervisory Board, in a deed drafted by Mr Armando Santus,<br />
notary in Bergamo, resolved to merge the fully owned subsidiary B@nca 24-7 into the<br />
Parent, <strong>UBI</strong> <strong>Banca</strong>;<br />
- with reference to the plan to merge Banco di San Giorgio (BSG) into <strong>Banca</strong> Regionale<br />
Europea (BRE), as approved by the Supervisory Board of <strong>UBI</strong> <strong>Banca</strong> in a resolution on 14 th<br />
November 2011, the Supervisory Board, in its 28 th March <strong>2012</strong> meeting, resolved – based<br />
on the results of the impairment test performed as at 31 st December 2011 – to change the<br />
price per share at which BRE would purchase BSG shares held by <strong>UBI</strong> <strong>Banca</strong> to €4.344;<br />
- on 23 rd November <strong>2012</strong>, the Supervisory Board, in a deed drafted by Mr Giovanni Battista<br />
Calini, notary in Brescia, resolved to merge the fully owned subsidiary SILF into the its<br />
parent company, <strong>UBI</strong> <strong>Banca</strong>.<br />
Finally, we also report that:<br />
156
- no transactions were performed in the reporting period with other related parties which<br />
influenced the capital position or the results of the Parent Bank, <strong>UBI</strong> <strong>Banca</strong> to a significant<br />
extent;<br />
- there have been no modifications and/or developments of transactions with related parties,<br />
which may have been reported in previous financial reports, that could have a significant<br />
effect on the capital position or the results of the Parent, <strong>UBI</strong> <strong>Banca</strong>.<br />
***<br />
In compliance with IAS 24, Part H of the Notes to the financial statements in both the<br />
separate and the consolidatd report present figures for (a) balance sheet and income<br />
statement transactions between parties related to <strong>UBI</strong> <strong>Banca</strong> and Group companies, and (b)<br />
balance sheet and income statement transactions between <strong>UBI</strong> <strong>Banca</strong> and parties related to<br />
it. The amounts for these transactions are also indicated as percentages of the total for each<br />
relevant item of the consolidated and separate financial statements.<br />
Further information is given in the “<strong>Report</strong> on corporate governance and the ownership<br />
structure of <strong>UBI</strong> <strong>Banca</strong> Scpa” attached to these reports.<br />
That report also contains information on the adoption of the recent Bank of Italy regulations<br />
on transactions with related parties, with particular reference to internal policies regarding the<br />
monitoring of risk activities and conflicts of interest with these parties.<br />
In fact, as already reported, in implementation of article 53, paragraphs 4 et seq of the <strong>Consolidated</strong><br />
Banking Act and the CICR (Inter-ministerial Committee on Credit and Savings) Resolution No. 277 of 29 th<br />
July 2008, the Bank of Italy issued new provisions at the end of 2011 (published in the Official Journal on<br />
16 th January <strong>2012</strong>) regarding the monitoring of risk assets and conflicts of interest with parties connected<br />
to the bank and to the banking group, where “connected parties” are defined as a group consisting of a<br />
related parted and all parties connected to it.<br />
The new regulations contain specific decision-making procedures and also (from 31 st December <strong>2012</strong>)<br />
prudential limits for risk asset exposures to those parties set in proportion to regulatory capital.<br />
157
<strong>Consolidated</strong> companies: the principal<br />
figures<br />
Profit<br />
Figures in thousands of euro <strong>2012</strong> 2011 Change % change<br />
Unione di Banche Italiane Scpa (1) 223,496 (2,713,054) 2,936,550 n.s.<br />
<strong>Banca</strong> Popolare di Bergamo Spa 129,453 171,768 (42,315) (24.6%)<br />
Banco di Brescia Spa 23,198 94,952 (71,754) (75.6%)<br />
<strong>Banca</strong> Popolare Commercio e Industria Spa 24,003 50,010 (26,007) (52.0%)<br />
<strong>Banca</strong> Regionale Europea Spa (2) (26,564) 31,376 (57,940) n.s.<br />
<strong>Banca</strong> Popolare di Ancona Spa (3) (4,443) 2,276 (6,719) n.s.<br />
<strong>Banca</strong> Carime Spa (4) (6,436) 45,981 (52,417) n.s.<br />
<strong>Banca</strong> di Valle Camonica Spa 1,150 728 422 58.0%<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment Spa 3,180 (1,609) 4,789 n.s.<br />
Centrobanca Spa (5) 283 1,225 (942) (76.9%)<br />
Centrobanca Sviluppo Impresa SGR Spa (173) 260 (433) n.s.<br />
Banque de Dépôts et de Gestion Sa (*) (6,315) (6,894) (579) (8.4%)<br />
IW Bank Spa (6) 11,619 928 10,691 1152.0%<br />
<strong>UBI</strong> <strong>Banca</strong> International Sa (*) 2,030 10,307 (8,277) (80.3%)<br />
<strong>UBI</strong> Pramerica SGR Spa 39,523 37,576 1,947 5.2%<br />
<strong>UBI</strong> Leasing Spa (7) (69,810) (30,151) 39,659 131.5%<br />
<strong>UBI</strong> Factor Spa 3,844 8,564 (4,720) (55.1%)<br />
B@nca 24-7 - 18,341 (18,341) (100.0%)<br />
Prestitalia Spa (23,849) 482 (24,331) n.s.<br />
BPB Immobiliare Srl 1,230 700 530 75.7%<br />
Società Bresciana Immobiliare Mobiliare - S.B.I.M. Spa 1,781 1,373 408 29.7%<br />
<strong>UBI</strong> Sistemi e Servizi SCpA - - - -<br />
<strong>UBI</strong> Fiduciaria Spa (193) (186) 7 3.8%<br />
<strong>UBI</strong> Assicurazioni Spa (49,99%) 8,553 2,000 6,553 327.7%<br />
Aviva Assicurazioni Vita Spa (49,99%) 8,000 3,245 4,755 146.5%<br />
Aviva Vita Spa (50%) 14,400 5,500 8,900 161.8%<br />
Lombarda Vita Spa (40%) 16,056 4,507 11,549 256.2%<br />
<strong>UBI</strong> Insurance Broker Srl 3,604 3,594 10 0.3%<br />
<strong>UBI</strong> Trustee Sa 81 23 58 252.2%<br />
CONSOLIDATED (8) 82,708 (1,841,488) 1,924,196 n.s.<br />
(*) The profit shown is from the financial statements prepared for the consolidation according to the accounting policies followed by the<br />
Parent.<br />
(1) The figure for 2011 does not include the result for B@nca 24-7, merged on 23 rd July <strong>2012</strong>, but relates to <strong>UBI</strong> <strong>Banca</strong> only. That<br />
figure included impairment losses of €3,029.8 million on Group equity investments, goodwill and intangible assets (net of tax).<br />
(2) The figure for 2011 includes the profit of Banco di San Giorgio (€1,190 thousand), merged into <strong>Banca</strong> Regionale Europea on 22 nd<br />
October <strong>2012</strong>.<br />
(3) The figure for 2011 included the effects of the recognition of impairment losses on the investments in <strong>UBI</strong> Leasing (€16.2 million)<br />
and in Centrobanca (€11.9 million).<br />
(4) The figure for 2011 included the effects of the recognition of impairment losses of €12.1 million on goodwill.<br />
(5) The figure for 2011 included the effects of the recognition of impairment losses of €7.2 million on goodwill.<br />
(6) The figure for 2011 has been restated for consistency by including the result for InvestNet International Spa, merged on 1 st August<br />
<strong>2012</strong>.<br />
(7) The figure for 2011 included the effects of the recognition of impairment losses of €2 million on goodwill.<br />
(8) The figure for 2011 included the recognition of impairment losses on goodwill and finite useful life intangible assets of €2,190.9<br />
million (net of tax and non controlling interests).<br />
158
Net loans and advances to customers<br />
Figures in thousands of euro 31.12.<strong>2012</strong> 31.12.2011 Change % change<br />
Unione di Banche Italiane Scpa (1) 22,584,747 15,692,663 6,892,084 43.9%<br />
<strong>Banca</strong> Popolare di Bergamo Spa 18,779,934 19,609,764 -829,830 -4.2%<br />
Banco di Brescia Spa 13,177,657 13,561,110 -383,453 -2.8%<br />
<strong>Banca</strong> Popolare Commercio e Industria Spa 8,347,255 8,563,354 -216,099 -2.5%<br />
<strong>Banca</strong> Regionale Europea Spa (2) 9,203,899 9,728,624 -524,725 -5.4%<br />
<strong>Banca</strong> Popolare di Ancona Spa 7,769,649 7,810,341 -40,692 -0.5%<br />
<strong>Banca</strong> Carime Spa 4,730,986 4,865,871 -134,885 -2.8%<br />
<strong>Banca</strong> di Valle Camonica Spa 1,798,703 1,889,840 -91,137 -4.8%<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment Spa 472,038 460,742 11,296 2.5%<br />
B@nca 24-7 - 10,511,749 -10,511,749 -100.0%<br />
Prestitalia Spa 2,882,147 103,979 2,778,168 n.s.<br />
Centrobanca Spa 6,272,078 7,160,450 -888,372 -12.4%<br />
Banque de Dépôts et de Gestion Sa 192,788 205,020 -12,232 -6.0%<br />
<strong>UBI</strong> <strong>Banca</strong> International Sa 981,009 1,087,454 -106,445 -9.8%<br />
IW Bank Spa 287,029 246,010 41,019 16.7%<br />
<strong>UBI</strong> Factor Spa 2,392,499 2,868,344 -475,845 -16.6%<br />
<strong>UBI</strong> Leasing Spa 8,060,482 9,045,465 -984,983 -10.9%<br />
CONSOLIDATED 92,887,969 99,689,770 -6,801,801 -6.8%<br />
Risk indicators<br />
Net non-performing<br />
loans/ Net loans<br />
Net impaired loans/Net<br />
loans<br />
Net non-performing loans +<br />
Net impaired loans/Net<br />
loans<br />
Percentages 31.12.<strong>2012</strong> 31.12.2011 31.12.<strong>2012</strong> 31.12.2011 31.12.<strong>2012</strong> 31.12.2011<br />
Unione di Banche Italiane Scpa (1) 1.01% - 0.83% - 1.84% -<br />
<strong>Banca</strong> Popolare di Bergamo Spa 2.88% 2.29% 3.44% 2.41% 6.32% 4.70%<br />
Banco di Brescia Spa 2.07% 1.62% 3.26% 2.84% 5.33% 4.46%<br />
<strong>Banca</strong> Popolare Commercio e Industria Spa 3.80% 3.60% 2.04% 2.15% 5.84% 5.75%<br />
<strong>Banca</strong> Regionale Europea Spa (2) 2.80% 2.32% 3.87% 3.27% 6.67% 5.59%<br />
<strong>Banca</strong> Popolare di Ancona Spa 4.96% 4.35% 4.48% 3.50% 9.44% 7.85%<br />
<strong>Banca</strong> Carime Spa 2.71% 1.93% 4.11% 3.34% 6.82% 5.27%<br />
<strong>Banca</strong> di Valle Camonica Spa 4.15% 2.79% 2.79% 3.05% 6.94% 5.84%<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment Spa 1.53% 1.45% 2.80% 1.23% 4.33% 2.68%<br />
B@nca 24-7 - 2.18% - 1.05% - 3.23%<br />
Prestitalia Spa 0.19% n.d. 8.99% n.d. 9.18% n.d.<br />
Centrobanca Spa 1.94% 1.48% 4.50% 3.52% 6.44% 5.00%<br />
Banque de Dépôts et de Gestion Sa 0.10% 0.09% 1.76% 1.74% 1.86% 1.83%<br />
<strong>UBI</strong> <strong>Banca</strong> International Sa 0.99% 0.08% 2.03% 2.31% 3.02% 2.39%<br />
IW Bank Spa - - 0.15% 0.14% 0.15% 0.14%<br />
<strong>UBI</strong> Factor Spa 3.30% 1.27% 6.42% 0.16% 9.72% 1.43%<br />
<strong>UBI</strong> Leasing Spa 6.49% 4.52% 6.06% 2.85% 12.55% 7.37%<br />
CONSOLIDATED 3.18% 2.49% 3.88% 2.54% 7.06% 5.03%<br />
(1) The figures as at 31 st December 2011 do not include the result for B@nca 24-7, merged on 23 rd July <strong>2012</strong>, but relate to <strong>UBI</strong> <strong>Banca</strong><br />
only.<br />
(2) The figures as at 31 st December 2011 have been restated for consistency to include the result for Banco di San Giorgio, merged<br />
into <strong>Banca</strong> Regionale Europea on 22 nd October <strong>2012</strong>.<br />
159
Direct funding from customers<br />
Figures in thousands of euro 31.12.<strong>2012</strong> 31.12.2011 Change % change<br />
Unione di Banche Italiane Scpa (1) 29,147,156 31,300,106 -2,152,950 -6.9%<br />
<strong>Banca</strong> Popolare di Bergamo Spa 19,202,234 19,714,160 -511,926 -2.6%<br />
Banco di Brescia Spa 11,491,189 11,980,422 -489,233 -4.1%<br />
<strong>Banca</strong> Popolare Commercio e Industria Spa 7,162,967 7,496,973 -334,006 -4.5%<br />
<strong>Banca</strong> Regionale Europea Spa (2) 6,968,861 7,260,445 -291,584 -4.0%<br />
<strong>Banca</strong> Popolare di Ancona Spa 6,445,102 6,429,378 15,724 0.2%<br />
<strong>Banca</strong> Carime Spa 7,063,930 7,552,126 -488,196 -6.5%<br />
<strong>Banca</strong> di Valle Camonica Spa 1,465,310 1,358,499 106,811 7.9%<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment Spa 639,069 517,020 122,049 23.6%<br />
Centrobanca Spa 4,006,028 4,374,547 -368,519 -8.4%<br />
Banque de Dépôts et de Gestion Sa 313,158 362,182 -49,024 -13.5%<br />
<strong>UBI</strong> <strong>Banca</strong> International Sa (3) 1,740,864 1,060,263 680,601 64.2%<br />
IW Bank Spa (4) 2,883,298 1,903,237 980,061 51.5%<br />
CONSOLIDATED 98,817,560 102,808,654 -3,991,094 -3.9%<br />
Direct funding from customers includes amounts due to customers and debt securities in issue, with the exclusion of bonds<br />
subscribed directly by companies in the Group.<br />
Direct funding for the following banks was therefore adjusted as follows:<br />
Figures in millions of euro 31.12.<strong>2012</strong> 31.12.2011<br />
Unione di Banche Italiane Scpa 2,155.8 3,922.9<br />
<strong>Banca</strong> Popolare di Bergamo Spa - 50.0<br />
Banco di Brescia Spa 651.8 752.3<br />
<strong>Banca</strong> Regionale Europea Spa 892.0 935.0<br />
<strong>Banca</strong> di Valle Camonica Spa 253.4 254.3<br />
Centrobanca Spa 2,323.1 2,326.2<br />
(1) The figure as at 31 st December 2011 does not include the result for B@nca 24-7, merged on 23 rd July <strong>2012</strong>, but relates to <strong>UBI</strong><br />
<strong>Banca</strong> only.<br />
(2) The figure as at 31 st December 2011 have been restated for consistency to include the result for Banco di San Giorgio, merged into<br />
<strong>Banca</strong> Regionale Europea on 22 nd October <strong>2012</strong>.<br />
(3) The figure as at 31 st December <strong>2012</strong> is net of issues of French certificates of deposit and euro commercial paper totalling €2,265.9<br />
million (€5,318.8 million as at 31 st December 2011).<br />
(4) The figure as at 31 st December 2011 has been restated for consistency by including the result for InvestNet International Spa,<br />
merged on 1 st August <strong>2012</strong>.<br />
160
Indirect funding from customers (at market prices)<br />
Figures in thousands of euro 31.12.<strong>2012</strong> 31.12.2011 Change % change<br />
Unione di Banche Italiane Scpa 5 5 - 0.0%<br />
<strong>Banca</strong> Popolare di Bergamo Spa 24,313,879 24,563,676 -249,797 -1.0%<br />
Banco di Brescia Spa 12,450,726 12,893,350 -442,624 -3.4%<br />
<strong>Banca</strong> Popolare Commercio e Industria Spa 9,791,680 10,057,784 -266,104 -2.6%<br />
<strong>Banca</strong> Regionale Europea Spa (1) 8,069,733 8,271,417 -201,684 -2.4%<br />
<strong>Banca</strong> Popolare di Ancona Spa 3,440,984 3,533,775 -92,791 -2.6%<br />
<strong>Banca</strong> Carime Spa 5,664,244 5,375,500 288,744 5.4%<br />
<strong>Banca</strong> di Valle Camonica Spa 1,018,588 1,049,267 -30,679 -2.9%<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment Spa 5,361,049 5,003,443 357,606 7.1%<br />
Banque de Dépôts et de Gestion Sa 669,974 835,893 -165,919 -19.8%<br />
Lombarda Vita Spa 4,507,184 5,007,705 -500,521 -10.0%<br />
Aviva Assicurazioni Vita Spa 2,094,308 2,121,844 -27,536 -1.3%<br />
<strong>UBI</strong> Pramerica SGR Spa 21,679,960 20,288,875 1,391,085 6.9%<br />
<strong>UBI</strong> <strong>Banca</strong> International Sa 2,498,265 2,904,707 -406,442 -14.0%<br />
IW Bank Spa (2) 3,244,644 3,161,568 83,076 2.6%<br />
Aviva Vita Spa 4,340,583 4,234,773 105,810 2.5%<br />
CONSOLIDATED 70,164,384 72,067,569 -1,903,185 -2.6%<br />
Assets under management (at market prices)<br />
Figures in thousands of euro 31.12.<strong>2012</strong> 31.12.2011 Change % change<br />
Unione di Banche Italiane Scpa - - - -<br />
<strong>Banca</strong> Popolare di Bergamo Spa 12,192,817 11,267,911 924,906 8.2%<br />
Banco di Brescia Spa 6,309,441 6,488,943 -179,502 -2.8%<br />
<strong>Banca</strong> Popolare Commercio e Industria Spa 4,338,237 4,132,113 206,124 5.0%<br />
<strong>Banca</strong> Regionale Europea Spa (1) 4,140,316 4,211,543 -71,227 -1.7%<br />
<strong>Banca</strong> Popolare di Ancona Spa 1,597,113 1,562,412 34,701 2.2%<br />
<strong>Banca</strong> Carime Spa 2,982,988 2,894,381 88,607 3.1%<br />
<strong>Banca</strong> di Valle Camonica Spa 413,923 437,371 -23,448 -5.4%<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment Spa 4,098,237 3,659,999 438,238 12.0%<br />
Banque de Dépôts et de Gestion Sa 669,974 835,893 -165,919 -19.8%<br />
Lombarda Vita Spa 4,507,184 5,007,705 -500,521 -10.0%<br />
Aviva Assicurazioni Vita Spa 2,094,308 2,121,844 -27,536 -1.3%<br />
<strong>UBI</strong> Pramerica SGR Spa 21,679,960 20,288,875 1,391,085 6.9%<br />
<strong>UBI</strong> <strong>Banca</strong> International Sa 159,535 181,843 -22,308 -12.3%<br />
IW Bank Spa (2) 570,517 462,063 108,454 23.5%<br />
Aviva Vita Spa 4,340,583 4,234,773 105,810 2.5%<br />
CONSOLIDATED 38,106,037 36,892,042 1,213,995 3.3%<br />
(1) The figures as at 31 st December 2011 have been restated for consistency to include the result for Banco di San Giorgio, merged<br />
into <strong>Banca</strong> Regionale Europea on 22 nd October <strong>2012</strong>.<br />
(2) The figures as at 31 st December 2011 have been restated for consistency to include the result for InvestNet International Spa,<br />
merged on 1 st August <strong>2012</strong>.<br />
161
The performance of the main consolidated<br />
companies<br />
BANCA POPOLARE DI BERGAMO SPA<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 Change<br />
% change<br />
Balance sheet<br />
Loans and advances to customers 18,779,934 19,609,764 -829,830 -4.2%<br />
Direct funding (*) 19,202,234 19,764,170 -561,936 -2.8%<br />
Net interbank debt 1,941,420 1,603,761 337,659 21.1%<br />
<strong>Financial</strong> assets held for trading 67,213 61,943 5,270 8.5%<br />
Available-for-sale financial assets 21,252 20,196 1,056 5.2%<br />
Equity (excluding profit for the year) 2,163,068 2,117,762 45,306 2.1%<br />
Total assets 24,342,749 25,074,514 -731,765 -2.9%<br />
Indirect funding from customers (including insurance) 24,313,879 24,563,676 -249,797 -1.0%<br />
of which: assets under management 12,192,817 11,267,911 924,906 8.2%<br />
Income statement<br />
Net interest income (**) 482,470 479,850 2,620 0.5%<br />
Dividends and similar income - 184 (184) (100.0%)<br />
Net fee and commission income 323,898 316,002 7,896 2.5%<br />
Net income (loss) from trading, hedging and disposal/repurchase activities (5,621) 2,105 (7,726) n.s.<br />
Other net operating income/(expense) (**) 32,570 45,128 (12,558) (27.8%)<br />
Operating income 833,317 843,269 (9,952) (1.2%)<br />
Staff costs (***) (298,363) (272,399) 25,964 9.5%<br />
Other administrative expenses (188,073) (197,029) (8,956) (4.5%)<br />
Depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets (7,263) (7,692) (429) (5.6%)<br />
Operating expenses (493,699) (477,120) 16,579 3.5%<br />
Net operating income 339,618 366,149 (26,531) (7.2%)<br />
Net impairment losses on loans (134,663) (83,114) 51,549 62.0%<br />
Net impairment losses on other assets/liabilities 138 (262) 400 n.s.<br />
Net provisions for risks and charges (****) (3,870) (56) 3,814 n.s.<br />
Profit (loss) on the disposal of equity investments (17) 1,486 (1,503) n.s.<br />
Pre-tax profit from continuing operations 201,206 284,203 (82,997) (29.2%)<br />
Taxes on income for the year for continuing operations (*****) (71,753) (112,435) (40,682) (36.2%)<br />
Profit for the year 129,453 171,768 (42,315) (24.6%)<br />
Other information<br />
Number of branches 353 358 -5<br />
Total work force (actual employees+personnel on leasing contracts) 3,697 3,724 -27<br />
<strong>Financial</strong> ratios<br />
ROE [profit for the year/equity (excluding profit for the year)] 5.98% 8.11%<br />
Cost:income ratio (operating expenses/operating income) 59.25% 56.58%<br />
Net non-performing loans/net loans to customers 2.88% 2.29%<br />
Net impaired loans/net loans to customers 3.44% 2.41%<br />
(*) The figure as at 31 st December 2011 included bonds subscribed by the Parent amounting to €50 million.<br />
(**) The figures reported here for 2011 differ from those reported in the 2011 Annual <strong>Report</strong> due to the reclassification of the “fast credit<br />
processing fee”.<br />
(***) The <strong>2012</strong> figure includes charges for voluntary redundancy incentives amounting to €27.2 million.<br />
(****) The <strong>2012</strong> figure includes provisions amounting to €1.7 million for the risk of revocatory clawback action relating to a counterparty.<br />
(*****) For <strong>2012</strong>, this item includes the positive effects amounting to about €14 million connected with tax credits for the tax years 2007 to 2011,<br />
resulting from the deductibility of the regional production tax (IRAP) relating to staff costs from corporate income tax (IRES).<br />
The share capital of <strong>Banca</strong> Popolare di Bergamo as at 31 st December <strong>2012</strong> was wholly owned by <strong>UBI</strong><br />
<strong>Banca</strong>.<br />
The year <strong>2012</strong> ended with a net profit of €129.4 million, which is €42.3 million (or 24.6%) less<br />
than the €171.8 million recorded for the previous year. Excluding the effects of non-recurring<br />
items net of taxes (-€5.8 million in <strong>2012</strong>, related to voluntary redundancy incentives incurred,<br />
which were only partly offset by the tax benefit for the deductibility of regional production tax<br />
related to staff costs from corporate income tax, compared to +€7.9 million in 2011 connected<br />
162
to the release of excess provisions for staff costs), net profit for <strong>2012</strong> would be €135.2 million<br />
(compared to €163.9 million in 2011).<br />
Net operating income fell to €339.6 million (-€26.5 million or -7.2%) despite operating income<br />
holding steady at €833.3 million (-€10 million or -1.2%), affected by higher operating expenses<br />
at €493.7 million (+€16.6 million or +3.5%).<br />
Revenues included:<br />
− net interest income, up slightly to €482.5 million (+€2.6 million or +0.5%), the aggregate<br />
result, on one hand of a decrease in the customer component (attributable to changes in<br />
volumes of lending and to the overall increase in the cost of funding) and, on the other<br />
hand, of favourable average interest rate trends for managing securitisations and the<br />
relative liquidity;<br />
− net fees and commissions rose €7.9 million or 2.5% to €323.9 million, incorporating: (a) a<br />
€6.8 million increase in revenue from securities placements due to a good contribution from<br />
<strong>UBI</strong> Pramerica’s new Sicavs; (b) a €7.2 million increase in commissions for other services,<br />
including commitment fees; (c) a €4.1 million decrease in commissions on the sale of thirdparty<br />
products and services, two-thirds of which was due to the termination of loan<br />
origination activity by B@nca 24-7 in May <strong>2012</strong> (loans are now disbursed directly by BPB);<br />
and (d) a €2.7 million reduction in income from current account fees;<br />
− financial activities produced an overall loss of €5.6 million (+€2.1 million in 2011), due<br />
mainly to negative impacts of fair value changes in hedges on fixed rate mortgages, to the<br />
unwinding of hedges, to repurchases of financial liabilities, as well as to the disposal of<br />
loans to a corporate counterparty, within the framework of an overall credit restructuring<br />
agreement;<br />
− other operating income, which includes income from the reclassified fast credit processing<br />
fee, fell to €32.6 million (-€12.6 million or -27,8%), partly due to differences in<br />
extraordinary items between the two years, and partly due to lower net income from<br />
securitisation transactions and covered bonds.<br />
Expenses included:<br />
− an increase in staff costs to €298.4 million (+€26 million, +9.5%), essentially attributable to<br />
voluntary redundancy incentives, which resulted in an expense of €27.2 million. Excluding<br />
both this non-recurring component in <strong>2012</strong> and the release of excess reserves in 2011, this<br />
item would be down 4.3% year-on-year due partly to a change in staff numbers;<br />
− a reduction in other administrative expenses to €188.1 million (-€9 million or -4.5%);<br />
specifically, reductions were obtained in fees for services provided by Group companies<br />
(amounting to €3.9 million), rent payable (€1.6 million) and in advertising and promotional<br />
expenses (€1.5 million), while there was a significant increase of €1.3 million in credit<br />
recovery expenses.<br />
The result for the year was also influenced by a substantial increase of €51.5 million (62%) in<br />
net impairment losses on loans to €134.7 million, comprised of €143 million in net<br />
impairment losses on specific non-performing loans, against €8.3 million in net portfolio writebacks,<br />
with a view to reducing lending volumes and to bringing in customers with higher<br />
credit scores. To a lesser extent, the result was affected by net provisions for risks and<br />
charges, which rose to €3.9 million (the difference between €6.8 million in provisions for the<br />
year – mainly for revocatory clawback actions and for litigation related to the compounding of<br />
interest – and the release of €2.9 million of provisions).<br />
Profit from the disposal of equity investments fell to zero in <strong>2012</strong>, from €1.5 million in 2011,<br />
when a property was sold.<br />
Taxes on income for the year amounted to €71.8 million, inclusive of a non-recurring tax<br />
benefit of about €14 million related to credits from the years 2007-2011, resulting from the<br />
deductibility of the regional production tax (IRAP) relating to staff costs from corporate income<br />
tax (IRES).<br />
With regard to the balance sheet, the total loans stood at €18.8 billion, down €0.8 billion (-<br />
4.2%), primarily due to the “large corporate” segment, while lending to “households and local<br />
163
usinesses” remained broadly stable despite the unfavourable economic context, consistent<br />
with the goal of maintaining support and liquidity for the local economies.<br />
Net deteriorated loans rose by €122.3 million to €1.33 billion. In detail:<br />
• net non-performing loans rose by €92.6 million to €541 million, mainly due to transfers<br />
from the impaired loan category;<br />
• net impaired loans, although the rate of increase diminished, reached €645.3 million, up<br />
€173.2 million, of which, however, €116 million related to a single position for a large<br />
amount having been reclassified from the ‘restructured’ category;<br />
• net restructured loans came to €82.8 million, fell as a consequence by €187.2 million, due<br />
partly to €24.7 million of repayments received;<br />
• loans past due and in arrears rose to €65.7 million (+€43.7 million), affected by a new<br />
regulation (in force since 1 st January <strong>2012</strong>) that extends the obligation to reclassify loans<br />
into this category for all loans with arrears exceeding 90 days.<br />
Direct funding dropped by €0.5 billion (-2.8%) to €19.2 billion. This decrease is attributable to<br />
a reduction in securities issued from €6.9 billion to €6.3 billion. The decrease involved both<br />
bonds issued (-€0.3 billion) – mainly due to the maturity in June of a listed subordinated<br />
2001-<strong>2012</strong> upper tier two bond with a nominal value of €250 million and to the early<br />
redemption in September of a subordinated 2007-2017 lower tier two bond subscribed by the<br />
Parent with a nominal value of €50 million – and other securities issued (-€0.3 billion),<br />
especially swaps on certificates of deposit denominated in yen.<br />
By contrast, amounts due to customers increased by €0.1 billion to €12.9 billion (+0.6%) due<br />
to good performance by term deposits (+€0.5 billion), which more than offset a reduction in<br />
other forms of funding.<br />
Indirect funding from private individual customers decreased by €0.3 billion to €24.3 billion (-<br />
1%), as a net result of opposing trends for assets under custody (-€1.2 billion to €12.1 billion,<br />
due in part to the disappearance of a substantial private banking position in the first half of<br />
the year) and managed assets (+€0.9 billion to €12.2 billion, driven by <strong>UBI</strong> Pramerica’s<br />
successful new Sicavs).<br />
At the end of the year, the tier one capital ratio (tier one capital to risk weighted assets) was<br />
20.62% (up from 16.33% at the end of 2011) and the total capital ratio (regulatory capital to<br />
risk weighted assets) was 20.50% (up from 18.48%).<br />
The proposal for the allocation of profit is to distribute dividends of €107.4 million after<br />
allocations in accordance with the law and the articles of association and allocation of the<br />
remaining €13.4 million to the voluntary reserve.<br />
164
BANCO DI BRESCIA SPA<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 Change<br />
% change<br />
Balance sheet<br />
Loans and advances to customers 13,177,657 13,561,110 -383,453 -2.8%<br />
Direct funding (*) 12,143,008 12,732,715 -589,707 -4.6%<br />
Net interbank debt -250,202 167,426 -417,628 n.s.<br />
<strong>Financial</strong> assets held for trading 54,351 64,158 -9,807 -15.3%<br />
Available-for-sale financial assets 33,038 26,690 6,348 23.8%<br />
Equity (excluding profit for the year) 1,390,752 1,373,992 16,760 1.2%<br />
Total assets 15,076,993 15,752,411 -675,418 -4.3%<br />
Indirect funding from customers (including insurance) 12,450,726 12,893,350 -442,624 -3.4%<br />
of which: assets under management 6,309,441 6,488,943 -179,502 -2.8%<br />
Income statement<br />
Net interest income (**) 252,888 303,844 (50,956) (16.8%)<br />
Dividends and similar income 312 1,280 (968) (75.6%)<br />
Net fee and commission income 187,569 199,666 (12,097) (6.1%)<br />
Net income (loss) from trading, hedging and disposal/repurchase activities (3,124) 1,426 (4,550) n.s.<br />
Other net operating income/(expense) (**) 21,721 35,525 (13,804) (38.9%)<br />
Operating income 459,366 541,741 (82,375) (15.2%)<br />
Staff costs (***) (171,546) (173,677) (2,131) (1.2%)<br />
Other administrative expenses (122,627) (128,828) (6,201) (4.8%)<br />
Depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets (10,014) (10,255) (241) (2.4%)<br />
Operating expenses (304,187) (312,760) (8,573) (2.7%)<br />
Net operating income 155,179 228,981 (73,802) (32.2%)<br />
Net impairment losses on loans (112,245) (65,704) 46,541 70.8%<br />
Net impairment losses on other assets/liabilities (****) (1,430) (2,493) (1,063) (42.6%)<br />
Net provisions for risks and charges (489) (5,718) (5,229) (91.4%)<br />
Profit on the disposal of equity investments 206 184 22 12.0%<br />
Pre-tax profit from continuing operations 41,221 155,250 (114,029) (73.4%)<br />
Taxes on income for the year from continuing operations (18,023) (60,298) (42,275) (70.1%)<br />
Profit for the year 23,198 94,952 (71,754) (75.6%)<br />
Other information<br />
Number of branches 322 364 -42<br />
Total work force (actual employees+personnel on leasing contracts) 2,555 2,584 -29<br />
<strong>Financial</strong> ratios<br />
ROE [profit for the year/equity (excluding profit for the year)] 1.67% 6.91%<br />
Cost:income ratio (operating expenses/operating income) 66.22% 57.73%<br />
Net non-performing loans/net loans to customers 2.07% 1.62%<br />
Net impaired loans/net loans to customers 3.26% 2.84%<br />
(*) Includes bonds subscribed by the Parent amounting to €651.8 million as at 31 st December <strong>2012</strong> (€752.3 million as at 31 st December 2011).<br />
(**) The figure reported for 2011 differs from that reported in the 2011 Annual <strong>Report</strong> due to the reclassification of the “fast credit processing<br />
fee”.<br />
(***) The <strong>2012</strong> figure includes voluntary redundancy incentives amounting to €7.2 million.<br />
(****) The 2011 figure included impairment losses on the available-for-sale companies Immobiliare Fiera di Brescia (€1 million) and Risparmio e<br />
Previdenza (€0.6 million).<br />
The share capital of Banco di Brescia as at 31 st December <strong>2012</strong> was wholly owned by <strong>UBI</strong> <strong>Banca</strong>.<br />
The year <strong>2012</strong> ended with a net profit of €23.1 million, down from €95 million in 2011.<br />
Excluding the effects of non-recurring items net of taxes, related to voluntary redundancy<br />
incentive expenses (€5.2 million) that were more than offset by a tax benefit for the<br />
deductibility of regional production tax related to staff costs in corporate income tax (€8.8<br />
million) and by profits from the disposal of AFS equity investments amounting to €1.8 million,<br />
the net result for the year would be €17.8 million (€96.5 million in 2011).<br />
Net operating income fell: the figure of €155.2 million (€73.8 million less than in 2011) is the<br />
combined result of a significant decrease in operating income to €459.4 million (-€82.4 million,<br />
-15.2%) and a more modest reduction in operating expenses to €304.2 million (-€8.6 million, -<br />
2.7%).<br />
165
Revenues included:<br />
− net interest income fell to €252.9 million (-16.8%), mainly because of a decrease in the<br />
volume of loans – both short-term and, to a lesser extent, medium to long-term (mortgages)<br />
– but also due to a higher cost of funding with overall stable volumes of funding;<br />
− net fees and commissions amounted to €187.6 million, a decrease of €12.1 million (-6.1%)<br />
attributable to a drop in income generated from the distribution of insurance products (-<br />
€7.3 million), as well as to the fact that commissions were no longer paid by B@nca 24-7 as<br />
from May <strong>2012</strong> for personal loan origination activity, with the loans now disbursed directly<br />
by the bank (-€3.7 million). In addition, income from securities placements also went down,<br />
by €2.1 million, despite a positive contribution from <strong>UBI</strong> Pramerica’s new Sicavs;<br />
− trading and hedging activity generated a loss of €3.1 million, compared to income of €1.4<br />
million achieved in 2011. This trend was caused by the impact of hedging on fixed rate<br />
mortgages and by repurchases of the bank’s own bonds on the secondary market. These<br />
factors were only partly offset by gains on fair value changes in bond hedges, transactions<br />
involving available-for-sale assets (profits from disposals and redemptions of equity stakes)<br />
and by currency trading;<br />
− other operating income, which includes income from the reclassified fast credit processing<br />
fee, came to €21.7 million, down from €35.5 million the previous year, due partly to a lack<br />
of income from securitisation and covered bond transactions, earned in 2011.<br />
Costs included:<br />
− staff costs of €171.5 million, €2.1 million less than the previous year. Excluding nonrecurring<br />
costs, in the form of voluntary redundancy incentives in <strong>2012</strong> and a marginal<br />
release of excess provisions in 2011, this item would be €9.5 million lower year-on-year;<br />
− other administrative expenses of €122.6 million were down by €6.2 million, with notable<br />
reductions in fees for services provided by Group companies (-€4.4 million), in rent payable<br />
(-€0.9 million), in telephone and data service charges<br />
(-€0.6 million) and in advertising and promotional expenses (-€1.2 million).<br />
Net impairment losses on deteriorated loans rose to €112.2 million from €65.7 million in 2011,<br />
due primarily to higher specific impairment losses recognised on deteriorated loans. Net<br />
impairment losses on other financial assets and liabilities had an impact of €1.4 million, less<br />
than the €2.5 million impact the previous year, which included write-downs of AFS equity<br />
investments totalling €1.6 million.<br />
Net provisions for risks and charges went from €5.7 million to €0.5 million, reflecting lower<br />
provisioning needs for litigation related to the compounding of interest, financial investments<br />
and revocatory clawback actions.<br />
Income taxes for the year amounted to €18 million (compared to €60.3 million in 2011). The<br />
former figure is net of a tax benefit of €8.8 million related to credits from the years 2007-2011,<br />
resulting from the deductibility of the regional production tax (IRAP) relating to staff costs from<br />
corporate income tax (IRES).<br />
With regard to the balance sheet as at the end of <strong>2012</strong>, total loans amounted to €13.2 billion,<br />
a decrease of €0.4 billion (-2.8%) from a year before, attributable to a reduction in both<br />
mortgage loans and short-term loans, only partly offset by increases in current account<br />
balances.<br />
The net deteriorated loans totalled over €1 billion, having risen by €0.2 billion over the course<br />
of the year, due to a widespread increase in every category of deteriorated loan. In detail:<br />
non-performing loans went up from €220.2 million to €273.1 million, led by<br />
reclassifications of positions from other categories;<br />
impaired loans, at €429.6 million, rose €44.7 million due partly to two major loans newly<br />
classified as impaired totalling €29.5 million;<br />
restructured loans rose by €29.6 million to €224.4 million, as four major lending positions<br />
for a total of €44.5 million were added;<br />
loans past due or in arrears amounted to €127.3 million, after an even more substantial<br />
increase of €89 million, as a consequence of both a new regulation (in force since 1 st<br />
January <strong>2012</strong>) that extends the obligation to reclassify loans into this category to all loans<br />
with arrears exceeding 90 days, and, more importantly, to the addition of several major<br />
166
positions in the month of September, the majority of which were still outstanding as of<br />
December.<br />
Direct funding stood at €12.1 billion, €0.6 billion less than in 2011 (-4.6%), reflecting a<br />
decrease in amounts due to customers from €9.2 billion to €8.1 billion. This negative trend<br />
was seen in all types of funding, but especially in current accounts, with the exception of term<br />
deposits. By contrast, the trend for debt securities issued was robust, rising by €0.5 billion to<br />
€4 billion, due especially to positive net inflows from bonds subscribed by customers, as well<br />
as to an increase in certificates of deposit (both euro-denominated deposits and swaps on<br />
deposits into yen).<br />
Indirect funding from private individual customers also decreased, by €0.4 billion to €12.4<br />
billion, as a consequence of reductions in both assets under custody (-€0.3 billion to €6.1<br />
billion) and assets under management (-€0.2 billion to €6.3 billion), despite a favourable trend<br />
for both mutual funds and Sicavs, which benefited from sales of <strong>UBI</strong> Pramerica’s new Sicavs.<br />
As at the end of the year, the tier one capital ratio (tier one capital to risk weighted assets)<br />
was 17.60% (up from 15.43% at the end of 2011) and the total capital ratio (regulatory capital<br />
to risk weighted assets) was 17.60% (up from 15.75%).<br />
The proposal for the allocation of profit is to distribute dividends of €13.4 million after<br />
allocations in accordance with the law and the articles of association.<br />
167
BANCA POPOLARE COMMERCIO E INDUSTRIA SPA<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 Change<br />
% change<br />
Balance sheet<br />
Loans and advances to customers 8,347,255 8,563,354 -216,099 -2.5%<br />
Direct funding 7,162,967 7,496,973 -334,006 -4.5%<br />
Net interbank debt -474,075 -139,265 334,810 240.4%<br />
<strong>Financial</strong> assets held for trading 48,586 41,756 6,830 16.4%<br />
Available-for-sale financial assets 15,501 10,366 5,135 49.5%<br />
Equity (excluding profit for the year) 1,160,471 1,159,664 807 0.1%<br />
Total assets 9,779,685 9,819,351 -39,666 -0.4%<br />
Indirect funding from customers (including insurance) 9,791,680 10,057,784 -266,104 -2.6%<br />
of which: assets under management 4,338,237 4,132,113 206,124 5.0%<br />
Income statement<br />
Net interest income (*) 171,948 205,715 (33,767) (16.4%)<br />
Dividends and similar income 1 - 1 -<br />
Net fee and commission income 141,005 137,313 3,692 2.7%<br />
Net loss from trading, hedging and disposal/repurchase activities (3,158) (832) 2,326 279.6%<br />
Other net operating income/(expense) (*) 13,539 14,884 (1,345) (9.0%)<br />
Operating income 323,335 357,080 (33,745) (9.5%)<br />
Staff costs (**) (132,256) (127,136) 5,120 4.0%<br />
Other administrative expenses (101,015) (106,440) (5,425) (5.1%)<br />
Depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets (6,459) (7,097) (638) (9.0%)<br />
Operating expenses (239,730) (240,673) (943) (0.4%)<br />
Net operating income 83,605 116,407 (32,802) (28.2%)<br />
Net impairment losses on loans (35,208) (25,220) 9,988 39.6%<br />
Net impairment losses on other assets/liabilities (713) (888) (175) (19.7%)<br />
Net provisions for risks and charges (***) (8,881) (2,134) 6,747 316.2%<br />
Loss on the disposal of equity investments - (2) (2) (100.0%)<br />
Pre-tax profit from continuing operations 38,803 88,163 (49,360) (56.0%)<br />
Taxes on income for the year from continuing operations (14,800) (38,153) (23,353) (61.2%)<br />
Profit for the year 24,003 50,010 (26,007) (52.0%)<br />
Other information<br />
Number of branches 219 235 -16<br />
Total work force (actual employees+personnel on leasing contracts) 1,676 1,713 -37<br />
<strong>Financial</strong> ratios<br />
ROE [profit for the year/equity (excluding profit for the year)] 2.07% 4.31%<br />
Cost:income ratio (operating expenses/operating income) 74.14% 67.40%<br />
Net non-performing loans/net loans to customers 3.80% 3.60%<br />
Net impaired loans/net loans to customers 2.04% 2.15%<br />
(*) The figures as at 31 st December 2011 differ from those published in the 2011 Annual <strong>Report</strong> due to the reclassification of the Commissione<br />
di Istruttoria Veloce ("fast credit processing fee").<br />
(**) The figure as at 31 st December <strong>2012</strong> includes leaving incentive expenses in the amount of €12.9 million.<br />
(***) The figure as at 31 st December <strong>2012</strong> includes allocations in the amount of €7.3 million made against the risks of a revocation clawback<br />
action relating to a sole counterparty.<br />
As at 31 st December <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> held 75.077% of the share capital of <strong>Banca</strong> Popolare Commercio, the<br />
<strong>Banca</strong> del Monte di Lombardia Foundation held 16.237% and the remaining 8.686% was held by Aviva<br />
Spa.<br />
This bank ended the year with a profit of €24 million, compared to the €50 million earned in<br />
2011. Excluding non-recurring items (-€1.9 million in <strong>2012</strong>; +0.3 million compared to the<br />
previous year, both net of taxes) the net income for the year amounted to €25.9 million (€49.7<br />
million in 2011).<br />
Net operating income fell to €83.6 million (-€32.8 million), the result of a decrease in operating<br />
income to €323.3 million (-€33.7 million; -9.5%) against essentially unchanged operating<br />
expenses of €239.7 million (-0.9 million; -0.4%).<br />
As regards revenues:<br />
168
− net interest income decreased to €171.9 million (-16.4%), principally due to increased<br />
interest rates on funding and to the reduction in the volume of lending, in both the short<br />
and medium to long-terms, together with a fall in rates, particularly in the mortgage sector;<br />
− net fee and commission income increased slightly to €141 million (+€3.7 million; + 2.7%),<br />
the result of the positive trend for assets under management (+€9.1 million), benefiting<br />
from placements of the new <strong>UBI</strong> Pramerica Sicav and from the positive results for current<br />
accounts (+€2.8 million), which also includes commitment fees. Assets under custody<br />
diminished (- €6.6 million), as did commissions for the sale of third-party products and<br />
services, partially as a result of the termination, in May <strong>2012</strong>, of loan placement business<br />
by B@nca 24-7, now performed directly by the Bank;<br />
− net trading and hedging activity recorded a loss of €3.2 million<br />
(-€0.8 million in December 2011) due to the negative impact of hedges on fixed rate<br />
mortgages and the repurchase of own bonds on the secondary market, which was only<br />
partially offset by gains from fair value changes in hedges on bonds;<br />
− the remaining operating income and expenses, including the reclassified Commissione di<br />
Istruttoria Veloce ("fast credit processing fee") amounted to €13.5 million, as compared to<br />
€14.9 million for the previous year, due partially to the effect of increased expenses<br />
associated with securitisations.<br />
With regard to expenses:<br />
− staff costs rose to €132.3 million, with an increase compared to the previous year of €5.1<br />
million, attributable to leaving incentive expenses amounting to €12.9 million. Net of nonrecurring<br />
components, this item was down by €8.2 million, principally due to changes in<br />
personnel numbers;<br />
− other administrative expenses amounted to €101 million, a significant reduction (-5.4<br />
million) due to cost control and to improved efficiency, in particular with regard to the item<br />
"service fees paid to Group companies" (- €2.3 million).<br />
The net impairment losses on loans increased by approximately €10 million to €35.2 million,<br />
mainly due to a rise in specific impairment losses on deteriorated loans.<br />
Net impairment losses on other assets/liabilities also fell slightly (to €0.7 million from €0.9<br />
million).<br />
The net provisions for risks and charges rose to €8.9 million (compared to €2.1 million at the<br />
end of 2011) principally due to the effect of the provisions (€7.3 million) to meet the risks of a<br />
revocation clawback action relating to a sole counterparty.<br />
Taxes on income for the year amounted to €14.8 million (€38.2 million in 2011) and include<br />
tax credit in the amount of €7.5 for the years 2007-2011, resulting from the tax benefits<br />
connected to the deductibility of the IRAP (local production tax) relating to staff costs (a nonrecurring<br />
item) from corporate income taxes (IRES).<br />
In terms of the balance sheet, loans fell by €0.2 billion to €8.3 billion (- 2.5%), primarily due to<br />
the performance of mortgage business.<br />
Total net deteriorated loans stood again at €557.3 million, substantially unchanged compared<br />
to last year's figure (+€5 million), as a result of a reduction in impaired loans (- €13.9 million<br />
to €170.5 million) against increases in non-performing loans (+€8.6 million to €317.3 million),<br />
in restructured exposures (+€2.5 million to €55.9 million) and in positions past due and/or in<br />
arrears (+€7.8 million to €13.6 million), the latter subject, as of 1 st January <strong>2012</strong>, to the new<br />
regulations that require that all accounts over 90 days past due be placed into this category.<br />
Direct funding amounted to €7.2 billion, falling by €0.3 billion compared to 2011(-4.5%), a<br />
refection of the performance of amounts due to customers, down to €5.5 billion (from €5.8<br />
billion in the preceding year) despite the favourable trend for term deposits (+€0.2 billion).<br />
Debt securities issued remained stable at €1.6 billion (- €28.7 million), evidencing, within this<br />
item, a net decrease in the rate of bond sales (- €44.9 million) and a positive trend for<br />
certificates of deposit (+€16.2 million).<br />
Indirect funding from private clients also decreased, down by €0.3 billion to €9.8 billion,<br />
affected by the reduction in assets under administration (- €0.5 billion to €5.5 billion) only<br />
partially compensated by the positive performance by assets under management (+€0.2 billion<br />
169
to €4.3 billion), driven in particular by the mutual fund and Sicav business, on the strength of<br />
sales of the new <strong>UBI</strong> Pramerica Sicav.<br />
At the end of the year, capital ratios consisted of a tier one ratio (tier one capital to risk<br />
weighted assets) of 24.57% (20.75% at the end of 2011) and a total capital ratio (regulatory<br />
capital/risk-weighted assets) of 24.94% (20.74%).<br />
The proposal for the use of profit is to distribute dividends of €15.4 million after legal and<br />
article of association allocations.<br />
170
BANCA REGIONALE EUROPEA SPA<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 Change<br />
% change<br />
Balance sheet<br />
Loans and advances to customers 9,203,899 9,728,624 -524,725 -5.4%<br />
Direct funding (*) 7,860,910 8,195,466 -334,556 -4.1%<br />
Net interbank debt -463,634 -419,343 44,291 10.6%<br />
<strong>Financial</strong> assets held for trading 28,906 29,972 -1,066 -3.6%<br />
Available-for-sale financial assets 17,580 13,194 4,386 33.2%<br />
Equity (excluding profit for the year) 1,351,491 1,473,446 -121,955 -8.3%<br />
Total assets 10,246,864 10,970,006 -723,142 -6.6%<br />
Indirect funding from customers (including insurance) 8,069,733 8,271,417 -201,684 -2.4%<br />
of which: assets under management 4,140,316 4,211,543 -71,227 -1.7%<br />
Income statement<br />
Net interest income (**) 176,881 209,949 (33,068) (15.8%)<br />
Dividends and similar income 237 412 (175) (42.5%)<br />
Net fee and commission income 123,503 122,916 587 0.5%<br />
Net loss from trading, hedging and disposal/repurchase activities (2,066) (958) 1,108 115.7%<br />
Other net operating income/(expense) (**) 17,017 20,404 (3,387) (16.6%)<br />
Operating income 315,572 352,723 (37,151) (10.5%)<br />
Staff costs (***) (146,921) (137,645) 9,276 6.7%<br />
Other administrative expenses (****) (100,680) (98,366) 2,314 2.4%<br />
Depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets (10,025) (10,092) (67) (0.7%)<br />
Operating expenses (257,626) (246,103) 11,523 4.7%<br />
Net operating income 57,946 106,620 (48,674) (45.7%)<br />
Net impairment losses on loans (93,820) (47,041) 46,779 99.4%<br />
Net impairment losses on other assets/liabilities 708 (1,100) 1,808 n.s.<br />
Net provisions for risks and charges (2,639) (1,070) 1,569 146.6%<br />
Loss on the disposal of equity investments and impairment of goodwill (*****) (4) (226) (222) (98.2%)<br />
Pre-tax profit (loss) from continuing operations (37,809) 57,183 (94,992) n.s.<br />
Taxes on income for the year from continuing operations (******) 11,245 (25,807) 37,052 n.s.<br />
Profit (loss) for the year (26,564) 31,376 (57,940) n.s.<br />
Other information<br />
Number of branches 259 286 -27<br />
Total work force (actual employees+personnel on leasing contracts) 1,899 1,936 -37<br />
<strong>Financial</strong> ratios<br />
ROE [profit for the year/equity (excluding profit for the year)] -1.97% 2.13%<br />
Cost:income ratio (operating expenses/operating income) 81.64% 69.77%<br />
Net non-performing loans/net loans to customers 2.80% 2.32%<br />
Net impaired loans/net loans to customers 3.87% 3.27%<br />
The figures as at 31 st December 2011 have been restated to included the results of the <strong>Banca</strong> di San Giorgio, merged on 22 nd October <strong>2012</strong>.<br />
(*) Inclusive of bonds subscribed by the Parent amounting to €892 million as at 31 st December <strong>2012</strong> (€935 million as at 31 st December 2011).<br />
(**) The figures for 2011 have been revised due to the reclassification of the Commissione di Istruttoria Veloce ("fast credit processing fee").<br />
(**) The figure for <strong>2012</strong> includes leaving incentive expenses in the amount of €17.4 million.<br />
(****) The figure for <strong>2012</strong> includes non-recurring expenses in the amount of €3.7 million resulting from the merger of Banco di San Giorgio.<br />
(*****) In 2011 the item included an impairment loss on the goodwill of the Nice branch amounting to €0.2 million.<br />
(******) In <strong>2012</strong> the item included a positive impact of €7.7 million in tax credits, for the years 2007-2011, resulting from the tax benefits due to<br />
the deductibility of IRAP (local production tax) relating to staff costs from corporate income tax (IRES).<br />
As at 31 st December <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> held 74.716% of the share capital of <strong>Banca</strong> Regionale Europea, the<br />
Cassa di Risparmio di Cuneo Foundation held 24.904% and the remaining 0.380% was held by private<br />
individual shareholders.<br />
On 22 nd October <strong>2012</strong>, the merger of Banco di San Giorgio (BSG) into <strong>Banca</strong> Regionale<br />
Europea (BRE) became effective. For details of the operation, please see the "The consolidation<br />
area" section on this <strong>Report</strong>. In order to facilitate operational analysis, the results for BRE<br />
relative to the year 2011 have been recalculated on a like-for-like basis, taking into account<br />
those of BSG.<br />
The year <strong>2012</strong> ended with a loss of €26.6 million, compared with a profit of €31.4 million in<br />
2011. Excluding non-recurring items (- €7.5 million in <strong>2012</strong> and +€0.2 million in 2011, net of<br />
taxes), the company incurred a loss of €19.1 million in <strong>2012</strong> (compared to a profit of €31.2<br />
million in 2011).<br />
171
Net operating income performed poorly (-€48.7 million to €57.9 million), the aggregate result of<br />
a sharp decrease, to €315.5 million, of operating income (-€37.2 million; -10.5%) and an<br />
increase to €257.6 million of operating costs (+€11.5 million; + 4.7%).<br />
Income performed as follows:<br />
− the net interest income fell by €33.1 million to €176.9 million ( - 15.8%), due principally<br />
increased interest rates on funding and to a reduction in the volume of lending to<br />
customers;<br />
− net fees and commissions remained unchanged, rising only slightly from €122.9 to 123.5<br />
million. Within this component, managed assets grew (+€4.3 million) due to sales of the<br />
new <strong>UBI</strong> Pramerica Sicav and to current accounts (+€3.7 million), which also includes<br />
commitment fees. On the other hand, there was a drop in assets under custody (-€5.3<br />
million) and in commissions on sales of third party products and services, due partially to<br />
the termination, in May <strong>2012</strong>, of loan origination activities by B@nca 24-7, now performed<br />
directly by the Bank;<br />
− trading and hedging activity produced negative results in the amount of -€2.1 million (-€1<br />
million in 2011), due to the negative impact resulting from the change in fair value of<br />
hedges on fixed rate mortgages and on repurchases on the secondary market of own bonds,<br />
only partially offset by gains from fair value changes in hedges on bonds;<br />
− other operating income and costs, including the reclassified Commissione di Istruttoria<br />
Veloce ("fast credit processing fee"), fell by €3.4 million to €17 million also due to greater<br />
costs for securitisations and reduced expense recovery.<br />
With regard to expenses:<br />
− staff costs rose to €146.9 million (+€9.3 million), but this figure includes €17.4 million in<br />
leaving incentive expenses. Net of this non-recurring component, the item fell by 6.1%, in<br />
relation amongst other things to changes in staff numbers;<br />
− other administrative expenses, amounting to €100.7 million (+€2.3 million), include nonrecurring<br />
expenses connected with the merger of the Banco di San Giorgio amounting to<br />
€3.7 million, of which €3.4 million were for fees for services provided by Group companies.<br />
Net of that extraordinary component, the item fell by €1.4 million attributable to savings on<br />
costs, particularly with regard to advertising and promotion expenses (-€1.1 million).<br />
Net impairment losses on loans doubled to €93.8 million (+€46.8 million), as a result of<br />
increased case-by-case recognition of impairment on deteriorated loans, nearly half of which<br />
originated by the former BSG. This was a consequence of higher provisions mainly the result<br />
of a deterioration in nearly all property positions, caused by longer times for the completion or<br />
commencement of creditor proceedings which not only caused a significant reduction in the<br />
value of the credit recovered but also a decrease in the value of the mortgage guarantees<br />
securing the loans.<br />
Net reversals of impairment losses on other assets and liabilities were recognised amounting to<br />
€0.7 million, against net impairment losses amounting to €1.1 million in 2011, due amongst<br />
other things to an increase in unsecured guarantees in the amount of €0.6 million.<br />
Net provisions for risks and charges, up by €1.6 million to €2.6 million, include provisions<br />
charges for the year amounting to €2.3 million in relation to complaints, compounding of<br />
interest, bonds and litigation, the latter includinng a large position amounting to<br />
approximately €0.9 million.<br />
Taxes on income for the year, positive in the amount of €11.2 million, benefited from €7.7<br />
million in tax credits for the years 2007-2011, classified as non-recurring, the result of the tax<br />
benefit from the deductibility of IRAP relating to staff costs from corporate income tax (IRES).<br />
As concerns the balance sheet, loans amounted to €9.2 billion - including €137.3 million<br />
relating to foreign branches – down by €0.5 billion (-5.4%), principally in short-term types of<br />
lending. The difficult economic situation contributed to the deterioration in the quality of<br />
loans and receivables and at the end of the year net deteriorated loans had reached €724.7<br />
million (+110.7%). Non-performing loans increased (+€32 million to €257.3 million), as did<br />
impaired loans (+€38.3 million to €356.6 million) and positions past due and in arrears<br />
172
(+€50.7 million to €78 million), the latter subject, as of 1 st January <strong>2012</strong>, to the new<br />
regulations that requires all accounts over 90 days past due to be placed in this category. On<br />
the other hand, only restructured loans diminished (-€10.3 to €32.8 million), due to the partial<br />
collection of one position and the reclassification into another category of deteriorated loans<br />
relating to another counterparty.<br />
Direct funding totalled €7.9 billion, down €0.3 billion compared to 2011 (-4,1%). The changes<br />
in the item reflect similar changes in amounts due to customers, which fell €0.4 billion to €4.8<br />
billion (including €47.4 million from foreign branches), despite the favourable performance of<br />
time deposits (+€0.2 billion) On the other hand, debt securities issued increased slightly to €3<br />
billion, driven by certificates of deposit (+€77 million), prevalently in euro, while the net flow of<br />
bond placements ended with a loss of €20 million.<br />
Indirect funding from private individual customers decreased by €0.2 billion to €8.1 billion (-<br />
2.4%) as a consequence of the reduction in both assets under custody and assets under<br />
management. In the latter case this was despite the gains in the mutual fund and Sicav<br />
sector, driven by the placement of the new <strong>UBI</strong> Pramerica Sicavs.<br />
Capital ratios at the end of the year consisted of a tier one ratio (tier on capital to risk weighted<br />
assets) of 23.97% (26.19% at the end of 2011) and a total capital ratio (regulatory capital to<br />
risk weighted assets) of 24.32%,(28,52%).<br />
The proposal to replenish the loss of €26.6 million entails drawing entirely on the article of<br />
association reserve.<br />
173
BANCA POPOLARE DI ANCONA SPA<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 Change<br />
% change<br />
Balance sheet<br />
Loans and advances to customers 7,769,649 7,810,341 -40,692 -0.5%<br />
Direct funding 6,445,102 6,429,378 15,724 0.2%<br />
Net interbank debt -882,542 -839,437 43,105 5.1%<br />
<strong>Financial</strong> assets held for trading 60,990 44,342 16,648 37.5%<br />
Available-for-sale financial assets 17,659 19,740 -2,081 -10.5%<br />
Equity (excluding profit for the year) 871,656 874,448 -2,792 -0.3%<br />
Total assets 8,841,812 8,744,167 97,645 1.1%<br />
Indirect funding from customers (including insurance) 3,440,984 3,533,775 -92,791 -2.6%<br />
of which: assets under management 1,597,113 1,562,412 34,701 2.2%<br />
Income statement<br />
Net interest income (*) 172,439 198,050 (25,611) (12.9%)<br />
Dividends and similar income 74 1,025 (951) (92.8%)<br />
Net fee and commission income 114,455 112,157 2,298 2.0%<br />
Net loss from trading, hedging and disposal/repurchase activities (5,778) (1,001) 4,777 477.2%<br />
Other net operating income/(expense) (*) 16,610 18,649 (2,039) (10.9%)<br />
Operating income 297,800 328,880 (31,080) (9.5%)<br />
Staff costs (**) (135,056) (126,647) 8,409 6.6%<br />
Other administrative expenses (85,112) (87,431) (2,319) (2.7%)<br />
Depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets (11,386) (11,489) (103) (0.9%)<br />
Operating expenses (231,554) (225,567) 5,987 2.7%<br />
Net operating income 66,246 103,313 (37,067) (35.9%)<br />
Net impairment losses on loans (73,458) (43,334) 30,124 69.5%<br />
Net impairment losses on other assets/liabilities (123) 726 (849) n.s.<br />
Net provisions for risks and charges (799) (1,282) (483) (37.7%)<br />
Profit (loss) on the disposal of equity investments (***) 5,159 (28,147) 33,306 n.s.<br />
Pre-tax profit (loss) from continuing operations (2,975) 31,276 (34,251) n.s.<br />
Taxes on income for the year from continuing operations (1,468) (29,000) (27,532) (94.9%)<br />
Profit (loss) for the year (4,443) 2,276 (6,719) n.s.<br />
Other information<br />
Number of branches 220 238 -18<br />
Total work force (actual employees+personnel on leasing contracts) 1,675 1,728 -53<br />
<strong>Financial</strong> ratios<br />
ROE [profit for the year/equity (excluding profit for the year)] -0.51% 0.26%<br />
Cost:income ratio (operating expenses/operating income) 77.75% 68.59%<br />
Net non-performing loans/net loans to customers 4.96% 4.35%<br />
Net impaired loans/net loans to customers 4.48% 3.50%<br />
(*) In 2011 the figures differ from those published in the 2011 financial statements due to reclassification of the Commissione di Istruttoria<br />
Veloce (fast credit processing fee).<br />
(**) The figure for <strong>2012</strong> includes leaving incentive costs of €16.6 million.<br />
(***) The figure for <strong>2012</strong> includes the €1.5 million writeback for the investment in Centrobanca and the €3.7 million gain from the sale of the<br />
investment in Arca SGR SpA. In 2011 the item included the effects of the recognition of impairment losses on the investments in <strong>UBI</strong><br />
Leasing (€16.2 million) and in Centrobanca (€11.9 million).<br />
As at 31 st December <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> held 92.97% of the share capital of <strong>Banca</strong> Popolare di Ancona, Aviva<br />
Spa held 6.49% and the remaining 0.54% was held by non-controlling shareholders.<br />
The year <strong>2012</strong> ended with a loss of €4.4 million, compared with a profit of €2.3 million in<br />
2011.<br />
Operating income fell, resulting in net operating income of €66.2 million (down 37.1 million),<br />
due to operating income falling to €297.8 million (down €31.1 million, a decrease of 9.4%),<br />
despite lower operating costs (down €6 million to €231.6 million).<br />
Revenues performed as follows:<br />
− net interest income fell to €172.4 million (down 12.9%), due on the one hand to the<br />
increased cost of funding and on the other to the gradual reduction in volumes of shortterm<br />
lending, only partly offset by the increase in medium to long-term loans (mortgages);<br />
174
−<br />
−<br />
−<br />
net commission income increased to €114.5 million (up €2.3 million, or 2%), the result of<br />
the positive trend for assets under management, which benefited from the placement of the<br />
new <strong>UBI</strong> Pramerica Sicavs and from current accounts, which also include commitment<br />
fees.<br />
Commissions on the placement of products and third-party services fell, in part due to the<br />
discontinuation from May <strong>2012</strong> of the loan origination business by B@nca 24-7, which is<br />
now provided directly by the Bank;<br />
trading and hedging delivered a net loss of €5.8 million (compared with -€1 million in<br />
December 2011) due to the negative impact of hedges on fixed-rate mortgages and the<br />
repurchase of own bonds on the secondary market, only partly offset by hedges on bonds<br />
and forex trading;<br />
other operating income and expenses, including the reclassified commissione di istruttoria<br />
veloce (fast credit processing fee) fell to €16.6 million from €18.6 million the previous year.<br />
As concerns operating expenses:<br />
− staff costs rose to €135.1 million, an increase of €8.4 million due to non-recurring items<br />
such as the cost of leaving incentives, (charged at €16.6 million). Net of these non-recurring<br />
components, the item fell by €8.2 million due partly to changes in staff numbers;<br />
− other administrative expenses fell by €2.3 million to €85.1 million.<br />
The main savings were in "tenancy of premises” (down €0.9 million), “telephone and data<br />
transmission” (down €0.7 million) and "advertising and marketing” (down €0.5 million).<br />
Net impairment losses on loans rose sharply from €43.3 million to €73.5 million, mainly as a<br />
result of an increase in case-by-case recognition of impairment losses on loans.<br />
Net provisions for risks and charges fell slightly to €0.8 million (from €1.3 million the previous<br />
year) and mainly concerned provisions made for the compounding of interest and financial<br />
investments.<br />
The year recorded profits from the disposal of investments and equity investments for a total of<br />
€5.2 million, comprising the writeback for the investment in Centrobanca (€1.5 million) and<br />
the gain from the sale of the investment in Arca SGR (€3.7 million). In 2011 the item (a loss of<br />
€28.1 million) consisted of impairment losses recognised on investments in <strong>UBI</strong> Leasing (€16.2<br />
million) and Centrobanca (€11.9 million), as a result of impairment tests.<br />
Taxes on income for the year totalled €1.5 million (compared with €29 million in 2011) and<br />
includes a tax credit of €6.8 million for 2007-2011, resulting from the tax benefit deriving from<br />
IRES (corporate income tax) being deductible from the IRAP (local production tax) relating to<br />
staff costs (a non-recurring item).<br />
As concerns balance sheet items, loans to customers amounted to €7.8 billion, more or less in<br />
line with the levels at the end of 2011.<br />
Total net deteriorated loans rose to €816.7 million from the €661.6 million in the previous<br />
year. This increase affected all types of exposure, albeit at varying levels:<br />
non-performing loans reached €385,2 million, up 13.4% (an increase of €45.4 million),<br />
mainly due to transfers from components previously classified as impaired loans;<br />
impaired loans rose from €273.5 million to €348.3 million, incorporating transfers from<br />
past-due loans and especially new arrivals from performing loans;<br />
<br />
<br />
restructured loans rose slightly from €28.9 million to €31.2 million;<br />
loans past-due and/or in arrears more than doubled to €52 million (from €19.4 million at<br />
the end of 2011). It should be noted that the latter are subject to the new rules effective<br />
from 1 st January <strong>2012</strong> which extended the obligation of inclusion in this category to all<br />
loans in arrears by more than 90 days.<br />
Direct funding of €6.4 billion remained unchanged from the previous year (up 0.2%) as a<br />
result of a marginal decrease in amounts due to customers, which fell to €4.3 billion (down<br />
€55 million from 2011) – within which item there has been a partial switch from current<br />
accounts to term deposits (up €0.2 billion to €0.3 billion) – and an equally small increase in<br />
debt securities issued, which rose to €2.1 billion (up €71 million, of which €52 million were<br />
bonds and €19 million certificates of deposit).<br />
175
Indirect funding from private individual customers amounted to €3.4 billion, a €0.1 billion fall<br />
from the end of 2011 essentially due to assets under custody (down €0.1 billion to €1.8 billion)<br />
against stable assets under management (€1.6 billion), sustained by the positive performance<br />
of the mutual fund and Sicav sector, due to the placement of the new <strong>UBI</strong> Pramerica Sicavs.<br />
At the end of the year the capital ratios consisted of a tier one ratio (tier one capital to risk<br />
weighted assets) of 18.68% (15.84% at the end of 2011) and a total capital ratio (regulatory<br />
capital to risk weighted assets) of 18.78% (16.27%).<br />
On 26 th June <strong>2012</strong> an Extraordinary General Meeting of the bank passed a resolution for a free-of-charge<br />
capital increase. This is described in the previous section of the report entitled ‘The scope of the<br />
consolidation’.<br />
The proposal to replenish the loss of €4.4 million entails drawing on the taxed profit reserve.<br />
176
BANCA CARIME SPA<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 Change<br />
% change<br />
Balance sheet<br />
Loans and advances to customers 4,730,986 4,865,871 -134,885 -2.8%<br />
Direct funding 7,063,930 7,552,126 -488,196 -6.5%<br />
Net interbank debt 3,130,275 3,555,824 -425,549 -12.0%<br />
<strong>Financial</strong> assets held for trading 3,681 3,395 286 8.4%<br />
Available-for-sale financial assets 18,667 27,661 -8,994 -32.5%<br />
Equity (excluding profit for the year) 1,543,895 1,548,395 -4,500 -0.3%<br />
Total assets 9,184,854 9,684,175 -499,321 -5.2%<br />
Indirect funding from customers (including insurance) 5,664,244 5,375,500 288,744 5.4%<br />
of which: assets under management 2,982,988 2,894,381 88,607 3.1%<br />
Income statement<br />
Net interest income (*) 200,574 235,838 (35,264) (15.0%)<br />
Dividends and similar income 124 122 2 1.6%<br />
Net fee and commission income 110,067 112,158 (2,091) (1.9%)<br />
Net loss from trading, hedging and disposal/repurchase activities (5,359) (928) 4,431 477.5%<br />
Other net operating income/(expense) (*) (**) 14,383 24,325 (9,942) (40.9%)<br />
Operating income 319,789 371,515 (51,726) (13.9%)<br />
Staff costs (***) (168,654) (144,902) 23,752 16.4%<br />
Other administrative expenses (92,341) (94,708) (2,367) (2.5%)<br />
Depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets (13,403) (14,082) (679) (4.8%)<br />
Operating expenses (274,398) (253,692) 20,706 8.2%<br />
Net operating income 45,391 117,823 (72,432) (61.5%)<br />
Net impairment losses on loans (42,965) (22,778) 20,187 88.6%<br />
Net impairment losses on other assets/liabilities (324) (488) (164) (33.6%)<br />
Net provisions for risks and charges (6,269) (2,676) 3,593 134.3%<br />
Profit (loss) on the disposal of equity investments and impairment of goodwill (****) 61 (11,392) 11,453 n.s.<br />
Pre-tax profit (loss) from continuing operations (4,106) 80,489 (84,595) n.s.<br />
Taxes on income for the year for continuing operations (*****) (2,330) (34,508) (32,178) (93.2%)<br />
Profit (loss) for the year (6,436) 45,981 (52,417) n.s.<br />
Other information<br />
Number of branches 255 294 -39<br />
Total work force (actual employees+personnel on leasing contracts) 2,143 2,184 -41<br />
<strong>Financial</strong> ratios<br />
ROE [profit for the year/equity (excluding profit for the year)] -0.42% 2.97%<br />
Cost:income ratio (operating expenses/operating income) 85.81% 68.29%<br />
Net non-performing loans/net loans to customers 2.71% 1.93%<br />
Net impaired loans/net loans to customers 4.11% 3.34%<br />
(*) The figures for 2011 differ from those published in the 2011 Annual <strong>Report</strong> due to the reclassification of the Commissione di Istruttoria<br />
Veloce ("fast credit processing fee").<br />
(**) In <strong>2012</strong> the figure included a payment of €1.7 million relating to the loss on a revocation clawback action concerning a single position. In<br />
2011 the figure included insurance compensation of approximately €4 million following a decision by the Court of Appeal of Catanzaro.<br />
(***) The figure for <strong>2012</strong> included leaving incentive expenses in the amount of €29.3 million. In 2011 the figure included the release of a<br />
provision made previously of €3.7 million.<br />
(****) In 2011 the item included an impairment loss of €12.1 million on the goodwill of the bank.<br />
(*****) In <strong>2012</strong> the item included the positive impact of €7.6 million in tax credits, for the years 2007-2011, resulting from the tax benefits of the<br />
deductibility of IRAP (local production tax) relating to staff costs from corporate income tax (IRES).<br />
As at 31 st December <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> held 92.8371% of the share capital of the <strong>Banca</strong> Carime, Aviva Spa<br />
held 7.1476% and the remaining 0.0153% was held by non-controlling shareholders.<br />
The year <strong>2012</strong> ended with a loss of €6.4 million for <strong>Banca</strong> Carime, compared with a profit of<br />
€46 million in 2011. Net of non-recurring items, net of taxes (-€13.7 million in <strong>2012</strong>, relating<br />
to leaving incentives only partially mitigated by the tax benefits arising from the deductibility<br />
of IRAP [local production tax] relating to staff costs from corporate income taxes [IRES],<br />
and -€8.3 million in 2011 due to impairment losses on goodwill), <strong>2012</strong> ended with a profit of<br />
€7.3 million (a profit of €54.2 the year before).<br />
The decrease in profits is due primarily to a fall in net operating income, which decreased to<br />
€45.4 million (-€72.4 million; -61.5%), reflecting a drop in operating income to €319.8 million<br />
(-€51.7 million; -13.9%) and an increase in operating expenses to €274.4 million (+€20.7<br />
million; +8.2%).<br />
177
As regards revenues:<br />
− net interest income was €200.6 million (-€35.3 million; -15%) affected to a large extent by<br />
the increase in interest rates on funding and by the reduction in volumes of lending;<br />
− the trend for net fee and commission income, which fell to €110.1 million (-€2.1 million; -<br />
1.9%), included: a decline in fee and commission income on the distribution of third party<br />
services (-€5 million) connected on the one hand with the termination by B@nca 24-7, as of<br />
May <strong>2012</strong>, of its loan origination business, now performed directly by <strong>Banca</strong> Carime, and,<br />
on the other, with the sale of insurance policies; lower commissions on the placement and<br />
subscription of securities (-€0.9 million), despite the positive contribution from the new <strong>UBI</strong><br />
Pramerica Sicavs; an increase in other services (+€2.6 million), including commitment fees<br />
and the receipt and placement of orders (+€1 million);<br />
− the net loss from trading, hedging and disposals and repurchases worsened, falling from -<br />
€0.9 million to -€5.3 million, principally due to fair value changes in hedges on fixed-rate<br />
mortgages and to repurchases of own bonds on the secondary market;<br />
− the contribution of other income and expense, including the reclassified Commissione di<br />
Istruttoria Veloce ("fast credit processing fee"), fell to €14.4 million (-€9.9 million; -40.9%)<br />
due, amongst other things, to changing contributions from certain items during the two<br />
years (-€1.7 million due to a loss on a revocation clawback action in <strong>2012</strong>; +€4 million<br />
relating to an insurance reimbursement in 2011).<br />
With regard to expenses:<br />
− the increase in staff costs to €168,7 million (+€23,8 million; +16,4%) is due mainly to<br />
leaving incentive expenses amounting to €29.3 million. Net of this non-recurring<br />
component, the item fell by 3.9%, in relation, amongst other things, to changes in staff<br />
numbers;<br />
− reductions in other administrative expenses to €92.3 million (-€2.4 million; %-2.5) included<br />
€1.1 million in fees for services provided by Group companies.<br />
The year's results were also influenced by a significant increase in net impairment losses on<br />
loans, which amounted to €43 million (+€20.2 million; +88.6%), and to a lesser degree by net<br />
provisions for risks and charges, which more than doubled to €6.3 million (+3.6 million), due<br />
above all to a provision of €7 million made against the risk relating to legal proceedings<br />
regarding compounding of interest.<br />
Taxes on income for the year, positive in the amount of €2.3 million, benefited from €7.6<br />
million in tax credits for the years 2007-2011, classified as non-recurring, deriving from the<br />
deductibility of IRAP (local production tax) relating to staff costs from corporate income taxes<br />
(IRES).<br />
As concerns the balance sheet, total loans amounted to €4,7 billion (-€0.1 billion; -2,8%) as a<br />
consequence of the negative effects brought about by the generally unfavourable economic<br />
situation. Net deteriorated loans rose to €361.4 million (+€90.9 million). This increase was<br />
generalised and involved non-performing loans (+€34.3 million to €128.2 million), impaired<br />
loans (+€32.1 million to €194.4 million), restructured exposures (+€7.7 million to €9.8 million,<br />
relating to five positions) and positions past due and/or in arrears (+€16.8 million to €29<br />
million), the latter subject, as of 1 st January <strong>2012</strong>, to the new regulations that require all<br />
accounts over 90 days past due to be placed in this category.<br />
Direct funding, amounting to €7.1 billion (-€0.5 billion; -6,5%), was principally affected by a<br />
fall of €0.4 billion to €4.8 billion in amounts due to customers – despite the strong<br />
performance of term deposits (+€0.1 billion) – while debt securities issued fell by €0.1 billion to<br />
€2.3 billion, the aggregate result of a partial change in the composition out of bonds (-€0.2<br />
billion 1 ) and into certificates of deposit (+€0.1 billion), principally in euro.<br />
Direct funding from private individual customers increased by approximately €0.3 billion to<br />
€5.7 billion (+ 5.4%). Assets under custody rose by €0.2 billion to €2.7 billion, benefiting from<br />
1 This trend was affected by the maturity, in June, of an upper tier two bond with subordination clause with a nominal value of €164<br />
million.<br />
178
the subscription of bonds by the Parent amounting to €0.26 billion nominal. Assets under<br />
management improved as well, up €0.1 billion to €3 billion, driven by the mutual fund and<br />
Sicav business, on the strength of the positive response to the new <strong>UBI</strong> Pramerica Sicavs.<br />
At the end of the year capital ratios consisted of a tier one ratio (tier one capital to risk<br />
weighted assets) of 33.30%, (27.19% at the end of 2011) and a total capital ratio (regluatory<br />
capital to risk-weighted assets) of 32.52% (31.63%).<br />
The proposal to replenish the loss of €6.4 million entails drawing entirely on the extraordinary<br />
reserve.<br />
179
CENTROBANCA SPA<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 Change<br />
% change<br />
Balance sheet<br />
Loans and advances to customers 6,272,078 7,160,450 -888,372 -12.4%<br />
Direct funding (*) 6,329,156 6,700,750 -371,594 -5.5%<br />
Net interbank debt -98,844 -642,178 -543,334 -84.6%<br />
<strong>Financial</strong> assets held for trading 557,729 520,086 37,643 7.2%<br />
<strong>Financial</strong> assets designated at fair value 77,059 - 77,059 -<br />
Available-for-sale financial assets 377,443 487,522 -110,079 -22.6%<br />
Equity (excluding profit for the year) 576,044 542,566 33,478 6.2%<br />
Total assets 9,919,448 10,672,079 -752,631 -7.1%<br />
Income statement<br />
Net interest income 94,947 86,672 8,275 9.5%<br />
Dividends and similar income 1,320 939 381 40.6%<br />
Net fee and commission income 20,053 33,638 (13,585) (40.4%)<br />
Net income from trading, hedging and disposal/repurchase activities 20,409 15,288 5,121 33.5%<br />
Other net operating income/(expense) 1,786 2,002 (216) (10.8%)<br />
Operating income 138,515 138,539 (24) (0.0%)<br />
Staff costs (**) (31,399) (31,347) 52 0.2%<br />
Other administrative expenses (***) (20,367) (19,512) 855 4.4%<br />
Depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets (996) (1,005) (9) (0.9%)<br />
Operating expenses (52,762) (51,864) 898 1.7%<br />
Net operating income 85,753 86,675 (922) (1.1%)<br />
Net impairment losses on loans (80,003) (60,439) 19,564 32.4%<br />
Net impairment losses on other assets/liabilities 1,378 (3,602) 4,980 n.s.<br />
Net provisions for risks and charges 2,354 (1,040) 3,394 n.s.<br />
Profit (loss) on the disposal of equity investments and impairment of goodwill (****) 2 (7,188) 7,190 n.s.<br />
Pre-tax profit from continuing operations 9,484 14,406 (4,922) (34.2%)<br />
Taxes on income for the year for continuing operations (*****) (9,201) (13,181) (3,980) (30.2%)<br />
Profit for the year 283 1,225 (942) (76.9%)<br />
Other information<br />
Number of branches 6 6 -<br />
Total work force (actual employees+personnel on leasing contracts) 300 316 -16<br />
<strong>Financial</strong> ratios<br />
ROE [profit for the year/equity (excluding profit for the year)] 0.05% 0.23%<br />
Cost:income ratio (operating expenses/operating income) 38.09% 37.44%<br />
Net non-performing loans/net loans to customers 1.94% 1.48%<br />
Net impaired loans/net loans to customers 4.50% 3.52%<br />
(*) Including bonds subscribed by the Parent amounting to €2,323.1 million as at 31 st December <strong>2012</strong> (€2,326.2 million as at 31 st December<br />
2011).<br />
(**) The figure for <strong>2012</strong> includes leaving incentive costs of €2 million.<br />
(***) In <strong>2012</strong> the item includes €1.3 million in costs relating to the write-off of IT assets to be retired following the merger of Centrobanca with<br />
<strong>UBI</strong> <strong>Banca</strong>.<br />
(****) In <strong>2012</strong> the item referred to impairment losses on all the Company’s goodwill.<br />
(*****) In <strong>2012</strong> the item includes the positive impact of €1.8 million in tax credits for the years 2007-2011, resulting from the tax benefit deriving<br />
from IRES (corporate income tax) being deductible from the IRAP (local production tax) relating to staff costs.<br />
As at 31 st December <strong>2012</strong> <strong>UBI</strong> <strong>Banca</strong> held 94.3231% of the share capital of Centrobanca, <strong>Banca</strong> Popolare<br />
di Ancona SpA held 5.4712%, Veneto <strong>Banca</strong> ScpA held 0.008% and the remaining 0.1049%, was held by<br />
three ‘Popular” banks (cooperatives).<br />
On 6 th February 2013, the plan for the merger of Centrobanca into <strong>UBI</strong> <strong>Banca</strong> was approved.<br />
This extraordinary operation had been announced by the Parent in November 2011 as part of<br />
a process to streamline the structure of the Group. The merger will take place within the first<br />
half of 2013 and will take effect from 1 st January 2013 for statutory and taxation purposes.<br />
The severe economic recession in Italy has meant that Centrobanca has had fewer<br />
opportunities to offer new loans to businesses, but has tried to act as a point of reference for<br />
corporate customers seeking new opportunities for expansion in emerging markets (especially<br />
Brazil and China).<br />
180
The year <strong>2012</strong> ended with a profit of €0.3 million, compared with €1.2 million in 2011.<br />
Excluding the effects of non-recurring items, net of taxes (a total of -€1.4 million in <strong>2012</strong> 2 and<br />
-€6.5 million in 2011 all of which relates to the writedown of goodwill), the company made a<br />
profit of €1.7 million compared with €7.7 million in 2011.<br />
Net operating income fell slightly to €85.7 million (down 0.9%, or 1.1%), affected by the<br />
increase to €52.8 million in operating expenses (up €0.9 million, or 1.7%), while operating<br />
income remained stable at €138.5 million.<br />
Revenues performed as follows:<br />
− net interest income rose to €94.9 million (up €8.3 million, or 9.5%), due to improved income<br />
from interest-bearing assets after a careful pricing policy on new transactions carried out<br />
during the year, which more than offset the rise in the cost of liabilities, within which there<br />
has been a change in favour of paper funding (bond loans and certificates of deposit);<br />
− net fees and commissions fell to €20 million (down €13.6 million, or 40.4%), affected by the<br />
appreciable decrease in new lending volumes in the first half, while the contribution made<br />
by investment banking rose;<br />
− the profit from financial activities rose to €20.4 million (up €5.1 million, or 33.5%), boosted<br />
by gains on the securities portfolio and on the buyback of own bonds.<br />
With regard to costs:<br />
− staff costs, which include leaving incentive expenses of €2 million, have remained stable at<br />
€31.4 million as a result of the reduction in the average unit cost per employee and to<br />
changes in staff numbers;<br />
− other administrative costs, which rose to €20.4 million (up 0.9 million, or 4.4%), were<br />
affected by higher charges for intragroup professional services (up €0.4 million), partly<br />
because the deteriorated credit processing activity previously carried out by the company<br />
was centralised in the Parent, but mainly due to higher charges for technology services<br />
relating to the write-off of the IT system in preparation for the merger (up €1.3 million).<br />
Total net deteriorated loans rose to €80 million (up €19.6 million, or 32.4%), including caseby-case<br />
recognition of net impairment losses totalling €82.5 million (up €37.1 million) – which<br />
were particularly affected by five significant items accounting for over half of the amount –<br />
against €2.5 million in collective net reversals of impairment resulting partly from the<br />
reduction in the book value of loans (in 2011 portfolio impairment losses of €15 million were<br />
recognised).<br />
The income statement shows €2.3 million in net reversals of provisions for risks and charges<br />
(-€1 million in 2011), mainly due to the elimination of the risk on two significant items, which<br />
involved the release of provisions for a total of €2.5 million.<br />
The reduction to zero of the profits from the disposal of investments and equity investments<br />
and impairment losses on goodwill should be compared with the loss of €7.2 million in 2011,<br />
which was the result of the total writedown of the bank’s goodwill.<br />
Taxes on income for the year amounted to €9.2 million, including a non-recurring income item<br />
of €1.8 million representing the tax credit for the years 2007-2011 resulting from the tax<br />
benefit of IRES (corporate income tax) being deductible from the IRAP (local production tax)<br />
relating to staff costs.<br />
In terms of the balance sheet, loans fell to €6.3 billion (down €0.9 billion, or 12.4%). With<br />
regard to the type of business, there has been a change in the composition of assets out of the<br />
“Acquisition & Shipping” and “Pool” categories, which fell respectively by 23.3% and 17.7%,<br />
into “Project Finance” which rose 21.9%.<br />
The bank’s actions to support local industry were considerably fewer than in 2011, in terms of<br />
both the number of operations authorised (down 83.7% to €0.4 billion), and the funding<br />
2 In detail: -€1.5 million for leaving incentives, +€1.8 million in tax benefits from the possibility of deducting corporate income tax<br />
(Ires) from the local production tax (Irap) relating to staff costs, -€0,9 million in cost for the IT migration to <strong>UBI</strong> <strong>Banca</strong>, and -€0,8<br />
million of impairment on AFS securities.<br />
181
provided (down 64.3% to €0.7 billion), which continue to be concentrated mainly on captive<br />
customers 3 .<br />
In the course of the year the rising trend in net deteriorated loans affected all the different<br />
categories, rising to €627.5 million (up €104.3 million, or 19.9%): non-performing loans (up<br />
€15.6 million to €121.7 million), essentially due to the addition of a significant position;<br />
impaired loans (up €30.3 million to €282.3 million), including the addition of six significant<br />
positions for a total of €146.3 million; restructured loans (up €33.7 million to €193.5 million),<br />
increased by transfers from impaired loans, of which €67.9 million are for four significant<br />
amounts; loans that are past-due and in arrears increased €24.7 million to €30 million, the<br />
latter subject since 1 st January <strong>2012</strong> to the new regulation requiring all loans in arrears by<br />
more than 90 days to be included in this category.<br />
Direct funding fell to €6.3 billion (down €0.4 billion, or 5.5%), essentially reflecting the trend in<br />
bond loans, after securities worth €204 million in nominal terms reached maturity and there<br />
were repurchases of €111 million nominal, with no new bond issuances.<br />
<strong>Financial</strong> assets held for trading increased from €520.1 million to €557.7 million (up 37.6<br />
million), mainly due to the market value of derivatives resulting from hedging risks on behalf<br />
of Group clients.<br />
Available-for-sale financial assets, down from €487.5 to €377.4 million (down €110.1 million),<br />
were affected by changes in corporate bond portfolio investment policies that shifted the focus<br />
of assets onto Italian corporate clients, which resulted in the sale of €126.6 million in<br />
securities not considered core assets.<br />
<strong>Financial</strong> assets designated at fair value totalled €77.1 million, comprising equity investments<br />
held as part of merchant banking and private equity business, compared with the €79 million<br />
that were classified in December 2011 under financial assets held for trading.<br />
At the end of the year the capital ratios consisted of a tier one ratio (tier one capital to risk<br />
weighted assets) of 9.88% (8.37% at the end of 2011) and a total capital ratio (regulatory<br />
capital to risk weighted assets) of 11.45% (10.24%).<br />
With regard to the imminent merger of the company into <strong>UBI</strong> <strong>Banca</strong>, the proposal for the<br />
appropriation of profit is to allocate €268.8 thousand to retained earnings, after setting aside<br />
€14.1 thousand for the statutory reserve.<br />
3 Loans are mainly granted to non-financial counterparties in the manufacturing, commerce and service industries.<br />
182
IW BANK SPA<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong><br />
31.12.2011 Change<br />
% change<br />
Balance sheet<br />
Loans and advances to customers 287,029 246,010 41,019 16.7%<br />
Direct funding 2,883,298 1,903,237 980,061 51.5%<br />
Net interbank debt 1,866,111 853,274 1,012,837 118.7%<br />
<strong>Financial</strong> assets held for trading 50,488 41,830 8,658 20.7%<br />
Available-for-sale financial assets 783,384 721,772 61,612 8.5%<br />
Equity (excluding profit for the year) 90,749 36,431 54,318 149.1%<br />
Total assets 4,219,206 3,184,143 1,035,063 32.5%<br />
Indirect funding from customers (including insurance) 3,244,644 3,161,568 83,076 2.6%<br />
of which: assets under management 570,517 462,063 108,454 23.5%<br />
Income statement<br />
Net interest income 48,098 35,733 12,365 34.6%<br />
Net fee and commission income 27,993 31,896 (3,903) (12.2%)<br />
Net income (loss) from trading, hedging and disposal/repurchase activities (57) 3,310 (3,367) n.s.<br />
Other net operating income/(expense) (439) 1,514 (1,953) n.s.<br />
Operating income 75,595 72,453 3,142 4.3%<br />
Staff costs (17,543) (19,913) (2,370) (11.9%)<br />
Other administrative expenses (29,824) (32,836) (3,012) (9.2%)<br />
Depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets (4,789) (8,074) (3,285) (40.7%)<br />
Operating expenses (52,156) (60,823) (8,667) (14.2%)<br />
Net operating income 23,439 11,630 11,809 101.5%<br />
Net impairment losses on loans (1,232) (1,472) (240) (16.3%)<br />
Net impairment losses on other assets/liabilities (265) (373) (108) (29.0%)<br />
Net provisions for risks and charges (*) (2,813) (3,729) (916) (24.6%)<br />
Profit on the disposal of equity investments - 25 (25) (100.0%)<br />
Pre-tax profit from continuing operations 19,129 6,081 13,048 214.6%<br />
Taxes on income for the year from continuing operations (7,510) (5,153) 2,357 45.7%<br />
Profit for the year 11,619 928 10,691 n.s.<br />
Other information<br />
Number of branches 2 2 -<br />
Total work force (actual employees+personnel on leasing contracts) 202 281 -79<br />
<strong>Financial</strong> ratios<br />
ROE [profit for the year/equity (excluding profit for the year)] 12.80% 2.55%<br />
Cost:income ratio (operating expenses/operating income) 68.99% 83.95%<br />
Net non-performing loans/net loans to customers - -<br />
Net impaired loans/net loans to customers 0.15% 0.14%<br />
The figures as at 31 st December 2011 have been restated to include the results of InvestNet International Spa, merged on 1 st August <strong>2012</strong>.<br />
(*) In 2011 the figure included provisions amounting to €2.1 million against unreconciled accounts.<br />
As at 31 st December <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> held 75.375% of the share capital of IW Bank, Centrobanca held<br />
23.496%, while the remaining 1.129% consisted of treasury shares held in portfolio by the Bank.<br />
IW Bank is the Group's internet bank which provides both its institutional and retail<br />
customers with banking and financial services almost exclusively via the internet. Its range of<br />
services includes trading in financial instruments, the distribution of OICRs (collective<br />
investment instruments), current accounts, the issue of credit and debit cards, electronic<br />
money, insurance, personal loans and mortgages.<br />
As detailed further in the "Significant events" and "Area of consolidation" sections of this annual report, in<br />
<strong>2012</strong> the bank saw the completion of a number of steps that are part of a more generalised reorganisation<br />
process of the Group's overall structure and activities:<br />
• on 3 rd April the purchase by <strong>UBI</strong> <strong>Banca</strong> of the entire equity investment held by Webstar Spa IW Bank<br />
was concluded;<br />
• the merger of InvestNet International Spa into IW Bank became effective on 1 st August and effective for<br />
accounting and tax purposes as of 1 st January <strong>2012</strong>;<br />
• on 30 th November the contribution to <strong>UBI</strong> Sistemi e Servizi of the "Information Technology”, “Back Office<br />
Trading”, “Security” and “Real Estate” operations took effect against the acquisition of an interest in the<br />
share capital of the above services company.<br />
In January, the company launched a public tender offer to purchase the debt securities issued named “IW<br />
Bank Obbligazioni con opzione di tipo call asiatica” – with maturity on 12 th August 2015 – and “IW Bank<br />
183
Obbligazioni con opzione di tipo call asiatica II tranche” – with maturity on 14 th October 2015 – amounting<br />
to 959 and 878 bonds respectively with a nominal value of €1,000 each. The offer period commenced on<br />
9 th January and concluded on 29 th January with the contribution of 109 bonds (out of 959) and of 54 bonds<br />
(out of 878).<br />
Borsa Italiana, with a provision dated 7 th January 2013, ruled that the two bonds were to be excluded<br />
from the listing as of 6 th March 2013, with the consequent failure of IW Bank to meet the status of listed<br />
issuer.<br />
In <strong>2012</strong> IW Bank further increased the number of active accounts held, up to 121.6 thousand<br />
from 112.1 thousand at the end of 2011. The average daily number of orders received from<br />
customers and executed, however, fell 31.4 thousand from 36.6 thousand in 2011.<br />
It is underlined that the comparative figures in the reclassified balance sheet and income<br />
statement presented for 2011 have been restated on a consistent basis to include the figures<br />
for the merged company InvestNet International Spa.<br />
The bank ended the year with a profit of €11.6 million, an increase of €10.7 million compared<br />
to €0.9 million in 2011, in which non-recurring expenses amounting to €2.1 million figured<br />
heavily.<br />
The increase in profit - mainly due to the improvement in the net operating income, which<br />
more than doubled to €23.4 million (+11.8 million) - reflects an increase in operating income<br />
to €75.6 million (+€3.1 million; +4.3%), together with a significant reduction in operating<br />
expenses to €52.2 million (-€8.7 million; %-14.2).<br />
Income performed as follows:<br />
− growth in net interest income, up €35.7 to €48.1 million (+€12.4 million; +34.6%) is<br />
primarily due to trends for interest rates with a consequent impact on owned available-forsale<br />
securities, consisting principally of variable-rate Italian government securities, and also<br />
on bonds subscribed with the Parent. The item benefited further from decreased interest<br />
rates charged by the ECB during the year, in terms of lower interest to be paid on customer<br />
current accounts, the remuneration of which is indexed to that parameter;<br />
−<br />
net fee and commission income fell to €28 million (-€3.9 million; -12.2%), especially with<br />
regard to the securities trading business, partly in relation to the reduction in the overall<br />
number of transactions performed by customers (-13,2%). On the other hand, the<br />
contributions from assets under management, banking services and the electronic payment<br />
card business were all positive;<br />
− the net result for financial activities was a loss of €0.1 million (+€3.3 million in 2011),<br />
incorporating losses connected with the purchase and sale of BOTs underlying the service<br />
for the IW Power forward product (which in 2011 had generated profits of €1.2 million). The<br />
item was also affected by the absence of gains on the sale of available-for-sale securities<br />
which had been realised in the preceding year.<br />
As regards expenses:<br />
− staff costs fell by €2.4 million to €17.5 million and mainly reflect the reduction in the<br />
average number of staff and the relative average cost;<br />
− other administrative expenses fell by €3 million to €29.8 million due to a reduction in<br />
advertising and promotion expenses (-€2 million) (which in 2011 included the costs of the<br />
advertising campaign for the launch of the high remuneration deposit products IW Power<br />
"Special"), in advisory services (-€1 million) and in rent payable (-€0.9 million), due to the<br />
change in the scope of the lease contract for the bank’s headquarters. On the other hand,<br />
the item "services in outsourcing provided by Group companies" increased significantly (+<br />
2.6 million), including the consideration paid to <strong>UBI</strong>.S, given that it is a consortium, for<br />
services provided from December relating to the operations contributed and inclusive of<br />
staff costs and depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets which were contributed;<br />
− depreciation, amortisation and net impairment losses on property, plant and equipment<br />
and intangible assets also fell by €3.3 million to €4.8 million due to the interruption of the<br />
depreciation and amortisation on the assets contributed.<br />
184
Net provisions for risks and charges totalled €2.8 million - due entirely to litigation and<br />
complaints - compared to €3.7 million in 2011 which included €2.1 million (non-recurring) for<br />
risks related to accounting differences relating to the former legacy IT system.<br />
As regards the balance sheet, direct funding reached €2.9 billion, rising again by<br />
approximately €1 billion (+51.5%), as a result of the contribution of amounts due to customers<br />
in the form of current accounts and deposits, which includes the above-mentioned high yield<br />
products. On the other hand, debt securities issued, consisting of the two bond issues<br />
repurchased in January 2013, fell by €4.1 million to €5.6 million.<br />
The change in indirect funding was more modest, however: the item rose to over €3.2 billion<br />
(+€83.1 million; +2.3%), driven by the assets under management component (+€108 million;<br />
+23.5%).<br />
Loans and advances to customers increased at the end of <strong>2012</strong> to €287 (+€41 million;<br />
+16.7%), consisting of €202.6 million attributable to mortgages, €21.2 million to personal<br />
loans and credit cards, €48.2 million to credit lines for margin trading and for temporary<br />
overdrafts, while the remaining €15 million related to other transactions, mainly guarantee<br />
margins with clearing houses relating to customer derivatives business.<br />
The portfolio of available-for-sale financial assets, amounting to €783.4 million (+61.6 million<br />
resulting from growth in the fair value of the securities), consisted mainly of Italian<br />
government securities, including €778 million in floating rate certificates (CCT).<br />
Capital ratios as at 31 st December <strong>2012</strong> consisted of a tier one ratio (tier 1 capital to risk<br />
weighted assets) of 17.43% (13.02% at the end of 2011) and a total capital ratio (regulatory<br />
capital and reserves to risk weighted assets) of 17.44% (13.01%).<br />
The proposal for the allocation of profit is to allocate €11 million to retained earnings, after<br />
allocating €0.6 million to the legal reserve.<br />
During the year <strong>2012</strong> IW Bank earned numerous awards and accolades:<br />
• first prize "Best Home Banking <strong>2012</strong>" and first prize "Best Deposits <strong>2012</strong>" according to the experts of the<br />
"Osservatore Finanziario";<br />
• second prize “IW Quick Trade” in the category “Trading App” and third prize “IW Loans” in the category<br />
“Personal Loans” at the ’“MF Innovazione Awards <strong>2012</strong>”;<br />
• best on-line broker, "Assosim".<br />
185
<strong>UBI</strong> LEASING SPA<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 Change % change<br />
Balance sheet<br />
Loans and advances to customers 8,060,482 9,045,465 -984,983 -10.9%<br />
Due to customers 315,882 387,638 -71,756 -18.5%<br />
Net interbank debt -7,946,232 -9,532,793 -1,586,561 -16.6%<br />
<strong>Financial</strong> assets available-for trading 66 60 6 10.0%<br />
Available-for-sale financial assets 26 26 - -<br />
Equity (excluding profit for the year) 298,603 329,046 -30,443 -9.3%<br />
Total assets 8,655,300 10,382,757 -1,727,457 -16.6%<br />
Income statement<br />
Net interest income 90,360 96,439 (6,079) (6.3%)<br />
Net fee and commission income (425) (1,879) (1,454) (77.4%)<br />
Net income (loss) from trading, hedging and disposal/repurchase activities (3,583) 1,632 (5,215) n.s.<br />
Other net operating income/(expense) (*) 12,236 31,514 (19,278) (61.2%)<br />
Operating income 98,588 127,706 (29,118) (22.8%)<br />
Staff costs (**) (17,519) (17,376) 143 0.8%<br />
Other administrative expenses (24,523) (27,423) (2,900) (10.6%)<br />
Depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets (1,292) (995) 297 29.8%<br />
Operating expenses (43,334) (45,794) (2,460) (5.4%)<br />
Net operating income 55,254 81,912 (26,658) (32.5%)<br />
Net impairment losses on loans (146,874) (111,556) 35,318 31.7%<br />
Net provisions for risks and charges (***) (761) (2,497) (1,736) (69.5%)<br />
Profit on the disposal of equity investments (****) 28 (1,962) 1,990 n.s.<br />
Pre-tax loss from continuing operations (92,353) (34,103) 58,250 170.8%<br />
Taxes on income for the year from continuing operations 22,543 3,952 18,591 470.4%<br />
Loss for the year (69,810) (30,151) 39,659 131.5%<br />
Other information<br />
Total work force (actual employees+personnel on leasing contracts) 244 255 -11<br />
<strong>Financial</strong> ratios<br />
Cost:income ratio (operating expenses/operating income) 43.95% 35.86%<br />
Net non-performing loans/net loans to customers 6.49% 4.52%<br />
Net impaired loans/net loans to customers 6.06% 2.85%<br />
(*) In 2011 the item included €3.3 million in costs relating to the termination of mandates conferred on <strong>UBI</strong> Leasing agents.<br />
(**) The figure for <strong>2012</strong> includes leaving incentive costs of €0.5 million.<br />
(***) In 2011 the item included €2.4 million in provisions relating to the termination of mandates conferred on <strong>UBI</strong> Leasing agents.<br />
(****) In 2011 the item included goodwill impairment of €2 million.<br />
Following the capital increase approved in December <strong>2012</strong>, entirely subscribed by the Parent in January<br />
2013 and recorded in the companies’ register in the following February, 99.55% of the share capital of <strong>UBI</strong><br />
Leasing is owned by <strong>UBI</strong> <strong>Banca</strong> and the remaining 0.45% by <strong>Banca</strong> Valsabbina ScpA.<br />
The year <strong>2012</strong> saw a continuation of a particularly negative economic situation for the real<br />
economy and a consequent lack of investments by companies, and was an even more difficult<br />
year for the leasing sector than 2011.<br />
According to data from Assilea (Italian Leasing Association), total leasing volumes stipulated in<br />
Italy fell by €8.6 billion from €24.8 billion to €16.2 billion (a decrease of 34.7%).<br />
In terms of segments, the overall decrease affected the property (down €3.4 billion, 48.9%),<br />
energy (down €1.9, 46.4%), machinery and equipment (down €1.5 billion, 21.5%), auto (down<br />
€1.4 billion, 23.6%) and aeronautical segments (down €0.4 billion, 50.8%).<br />
Against this background, <strong>UBI</strong> Leasing was also affected by the effects of the ongoing<br />
reorganisation of credit processes.<br />
As the table shows, the company has effectively halved its operations in terms of both the<br />
number of contracts taken out (from 4,999 to 2.145; down 57.1%) and the total value (down<br />
€0.4 billion to €0.4 billion, a fall of 50.6%). As a result the market share fell 3.13% to 2.37%,<br />
placing <strong>UBI</strong> Leasing thirteenth in the Assilea ranking (it was in tenth place at the end of 2011).<br />
186
Performance by business sector<br />
<strong>2012</strong> 2011 % change<br />
Figures in thousands of euro number amount number amount number amount<br />
Auto 941 31,924 2,901 109,671 -67.6% -70.9%<br />
of which: - motor vehicles 556 16,657 1,685 52,731 -67.0% -68.4%<br />
- commercial vehicles 253 6,218 732 17,117 -65.4% -63.7%<br />
- industrial vehicles 132 9,049 484 39,823 -72.7% -77.3%<br />
Machinery and equipment 1,049 147,805 1,639 169,521 -36.0% -12.8%<br />
Aeronautical 8 14,944 54 17,081 -85.2% -12.5%<br />
Property 126 167,529 335 339,370 -62.4% -50.6%<br />
Energy 21 22,538 70 142,615 -70.0% -84.2%<br />
Total 2,145 384,740 4,999 778,258 -57.1% -50.6%<br />
The most significant steps which continued in <strong>2012</strong> taken to reduce credit risk include:<br />
−<br />
−<br />
recovery of past-due loans by the company’s sales network, working in conjunction with the Problem<br />
Loan Service. As well as recovery of the first instances of arrears, the objective of this activity was also<br />
to assess clients’ actual economic and financial situation, and to introduce contractual adjustments<br />
where necessary and appropriate, in order to help companies overcome temporary difficulties, and at<br />
the same time safeguard <strong>UBI</strong> Leasing’s claims on loans;<br />
the total closure of the agency network, through the gradual termination of the residual agency<br />
mandates. At the same time assistance to the network banks was expanded in line with the new<br />
distribution model, which came into effect on 1 st October 2011 and focuses exclusively on sales to the<br />
Group’s captive clients.<br />
Regarding the outcome of the Bank of Italy inspections which began in June and ended in October, and for<br />
all the information regarding to capital increase approved in December, see the sections “Other information"<br />
and “Scope of consolidation”.<br />
As regards the balance sheet, <strong>UBI</strong> Leasing saw a reduction of approximately €1 billion in<br />
loans, which fell to €8.1 billion (down 10.9%). Over 40% of the existing loans are in the<br />
securitised portfolio as a result of the operations relating to Lombard Lease Finance 4 and <strong>UBI</strong><br />
Lease Finance 5.<br />
The continued worsening of the global economic and financial situation, especially in the<br />
property sector, continued to add to the stock of net deteriorated loans, which by the end of<br />
the year had exceeded €1.2 billion (up 0.3 billion, or 33.3%). In detail:<br />
• net non-performing loans rose from €409.1 million to €523.5 million (up €114.4 million, or<br />
28%), and include the addition of two significant amounts totalling €35 million;<br />
• net impaired loans rose to €488.8 million (up €231 million, or 89.9%), affected by additional<br />
positions for €100 million resulting from the more rigorous updating from January <strong>2012</strong> of<br />
the automatic reclassification of repayments past-due or in arrears as impaired loans;<br />
• restructured loans fell to €16.2 million (down €64.7 million, or 80%);<br />
• exposures past-due and in arrears increased to €221.7 million (up €31.9 million, or 16.8%),<br />
partly the result of the change in the regulations from 1 st January <strong>2012</strong> which extended<br />
mandatory classification in this category to include all payments in arrears by more than<br />
90 days.<br />
The rise in total deteriorated loans was accompanied by an increase in coverage, which rose<br />
over the twelve month period from 20.47% to 23.15%. However, the level is still below the<br />
Group average both because of the guaranteed nature of the loans (ownership of the leased<br />
goods) and because of the predominance of property-related operations. Coverage for<br />
performing loans rose from 0.63% to 0.82% due, amongst other things, to an increase in<br />
impairment losses recognised in the fourth quarter.<br />
As regards operations, there was a significant contraction in net operating income, which fell<br />
to €55.3 million (down €26.6 million, or 32.5%), almost entirely due to the fall in operating<br />
income to €98,6 million (down 29.1 million, or 22.8%), while expenses improved slightly at<br />
€43.3 million (down €2.5 million, or 5.4%).<br />
Revenues performed as follows:<br />
187
−<br />
−<br />
interest income fell by €6.1 million to €90.4 million (down 6.3%), mainly due to a rise in the<br />
cost of funding during the year and a fall in average loan volumes. However, the item<br />
benefited from considerable savings in sales costs achieved as a result of the new strategy<br />
of carrying out business exclusively via the Group’s network banks;<br />
the fall in net income from financial activities consisting of a loss of €3.6 million (compared<br />
with a €1.6 million profit in 2011) mainly reflects fair value changes in derivatives and the<br />
items hedged;<br />
− other operating income and expenses fell to €12.2 million (down €19.3 million, or 61.2%),<br />
primarily due to a decrease in the profitability of the <strong>UBI</strong> Lease Finance 5 securitisation<br />
transaction resulting from the use of the liquidity generated by the securitised portfolio for<br />
redemption of part of the senior notes. At the end of 2011, expenses included €3.3 million<br />
relating to the termination of mandates conferred on <strong>UBI</strong> Leasing agents.<br />
Costs included:<br />
− staff costs, including leaving incentive expenses of €0.5 million, remained more or less<br />
stable at €17.5 million (up 0.8%). Net of the above non-recurring component the item fell,<br />
due to the change in the average number of staff;<br />
− other administrative costs fell €2.9 million to €24.5 million (down 10.6%), mainly due to<br />
savings in the costs of credit recovery (down €0.8 million), professional consultancy costs<br />
(down €0.6 million) and insurance on leased goods (down €0.6 million), despite the increase<br />
in the cost of managing the IT platform (up €0.5 million).<br />
Net impairment losses on loans rose to €146.9 million (up €35.3 million, or 31.7%) as a result<br />
of the continued deterioration of the quality of the loans in the managed portfolio and the<br />
increase in overall coverage mentioned above.<br />
Net provisions for risks and charges – which in 2011 included provisions of €2.4 million for<br />
the termination of agency mandates – fell to €0.8 million (down €1.7 million, or 69.5%) and<br />
mainly related to legal disputes. Following the capital increase carried out in early 2013, the<br />
tier one ratio and the total capital ratio increased respectively to 8.9% and 10.75%.<br />
Losses from the disposal of investments and equity investments, which in 2011 related almost<br />
entirely to the writedown of goodwill for €2 million, were reduced to zero.<br />
Capital ratios as at 31 st December <strong>2012</strong> consisted of a tier one ratio (tier one capital to risk<br />
weighted assets) of 3.82% (4.82% at the end of 2011) and a total capital ratio (regulatory<br />
capital to risk-weighted assets) of 5.67% (6.66%).<br />
The proposal to replenish the €69.8 million loss involves drawing fully on the share premium<br />
reserve (€28.5 million), on the statutory reserve (€9.4 million), on the goodwill arising from the<br />
merger (€27.3 million) and on the former provision for general financial risks (€1.8 million),<br />
bringing forward a loss of €2.8 million.<br />
188
<strong>UBI</strong> PRAMERICA SGR SPA<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 Change % change<br />
OWN "RETAIL CUSTOMERS" 6,861,893 6,782,454 79,439 1.2%<br />
Of which: customer portfolio management 5,219,204 5,082,519 136,685 2.7%<br />
Fund based instruments 1,642,689 1,699,935 -57,246 -3.4%<br />
FUNDS 12,357,098 14,026,614 -1,669,516 -11.9%<br />
of which: Pramerica funds included in fund based instruments 1,048,014 1,190,291 -142,277 -12.0%<br />
Other duplications 90,022 110,961 -20,939 -18.9%<br />
SICAV’s and other (net of duplications) 3,599,005 781,059 2,817,946 360.8%<br />
TOTAL ASSETS UNDER MANAGEMENT 21,679,960 20,288,875 1,391,085 6.9%<br />
Income statement<br />
Net interest income 4,158 1,739 2,419 139.1%<br />
Net fee and commission income 61,229 68,356 (7,127) (10.4%)<br />
Performance fees 19,741 11,728 8,013 68.3%<br />
Net income from trading, hedging and disposal/repurchase activity - 2,073 (2,073) (100.0%)<br />
Other net operating income/(expense) 1,611 69 1,542 n.s.<br />
Operating income 86,739 83,965 2,774 3.3%<br />
Staff costs (14,556) (14,406) 150 1.0%<br />
Other administrative expenses (13,105) (14,383) (1,278) (8.9%)<br />
Depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets (101) (124) (23) (18.5%)<br />
Operating expenses (27,762) (28,913) (1,151) (4.0%)<br />
Net operating income 58,977 55,052 3,925 7.1%<br />
Net provisions for risks and charges (1,049) 20 (1,069) n.s.<br />
Pre-tax profit from continuing operations 57,928 55,072 2,856 5.2%<br />
Taxation for the year (18,405) (17,722) 683 3.9%<br />
Profit from discontinued operations - 226 (226) (100.0%)<br />
Profit for the year 39,523 37,576 1,947 5.2%<br />
Other information<br />
Total work force (actual employees+personnel on leasing contracts) 145 142 3<br />
As at 31 st December <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> held 65% of the share capital of <strong>UBI</strong> Pramerica SGR and the<br />
remaining 35% was held by Prudential International Investments Corporation.<br />
They year <strong>2012</strong> was again one of economic and financial pressures which inevitably influenced<br />
trends for asset management business.<br />
Despite the difficult economic situation, <strong>UBI</strong> Pramerica SGR confirmed its role as a lead player<br />
at the national level, benefiting particularly from the results of six new <strong>UBI</strong> Sicav funds which<br />
resulted in combined funding totalling approximately €2.9 billion. In detail, the range of<br />
products offered during the year included:<br />
• “<strong>UBI</strong> Sicav Cedola Certa 2013-2016” and “<strong>UBI</strong> Sicav Cedola Certa 2013-2017” with total net<br />
inflows of €1.7 billion;<br />
• “<strong>UBI</strong> Sicav Protezione & Crescita 2017” with €0.1 billion in net inflows;<br />
• “<strong>UBI</strong> Sicav Cedola Mercati Emergenti” creating net inflows of €0.6 billion;<br />
• “<strong>UBI</strong> Sicav Focus Italia” with net inflows of €0.3 billion;<br />
• “<strong>UBI</strong> Sicav Global Dynamic Allocation”, placed between December <strong>2012</strong> and January 2013,<br />
with total net inflows of €0.3 billion, €0.2 billion of which in <strong>2012</strong>.<br />
March <strong>2012</strong> also saw the liquidation of the three Italian registered speculative "Single Hedge"<br />
funds: “<strong>UBI</strong> Pramerica Long/Short Euro”, “<strong>UBI</strong> Pramerica Beta Natural” and “<strong>UBI</strong> Pramerica<br />
Managed Futures”. This decision was part of a wider strategic policy to disengage from the<br />
business of directly managing products considered "alternative", which had already resulted in<br />
the transfer of funds of hedge funds operations to Tages SGR in 2011.<br />
<strong>UBI</strong> Pramerica SGR Spa again received important recognition in <strong>2012</strong>:<br />
− in the <strong>2012</strong> “Grands Prix – Fundclass” awards, in March <strong>UBI</strong> Pramerica SGR received the <strong>2012</strong><br />
“European Funds Trophy-Fundclass” prize as the best management company in the category “16-25<br />
funds”;<br />
−<br />
again in March, with regard to the 2011 “High Return Prize”, the “<strong>UBI</strong> Pramerica Obbligazioni Dollari”<br />
fund was again recognised as the “Best American Bond Fund” as a result of its achievements over three<br />
189
−<br />
years, while <strong>UBI</strong> Pramerica Sgr was classified in third place as “The best Italian mutual fund manager<br />
in the BIG category”, reserved for those companies having more than €4 thousand million in assets<br />
under management;<br />
in May, <strong>UBI</strong> Pramerica SGR was recognised by the business journal Milano Finanza as the company<br />
with the “Highest number of Triple A Ratings”. The company received the "Triple A Italian Mutual Fund"<br />
award for the results achieved by its mutual funds <strong>UBI</strong> Pramerica Portafoglio Moderato and <strong>UBI</strong><br />
Pramerica Portafoglio Prudente.<br />
In March 2013, with regard to the <strong>2012</strong> High Return Awards, for the third consecutive year the "<strong>UBI</strong><br />
Pramerica Obbligazioni Dollari" fund was again recognized as the "Best American Bond Fund" while the<br />
"<strong>UBI</strong> Pramerica Azioni Mercati Emergenti" fund was awarded first prize in the “Azionari Emerging”<br />
category. Finally, <strong>UBI</strong> Pramerica again took third place in the "Best Italian Mutual Fund Manager in the BIG<br />
category".<br />
In terms of volumes, despite difficulties in the sector, total assets under management by <strong>UBI</strong><br />
Pramerica relating to ordinary customers amounted as at 31 st December <strong>2012</strong> to €21.7 billion,<br />
an increase compared to 20.3 billion at the end of 2011. If the customer portfolios managed on<br />
behalf of institutional customers are also considered, total assets under management by <strong>UBI</strong><br />
Pramerica at the end of <strong>2012</strong> amounted to €27.2 billion (net of duplications) compared to<br />
€25.6 billion (again net of duplications) twelve months before.<br />
With regard to the income statement, net operating income increased by €3.9 million to €59<br />
million (+7.1%), the aggregate result of a rise in operating income to €86.7 million (+2.8<br />
million; +3.3%) and the containment at the same time of expenses, which decreased to €27.7<br />
million (-€1.2; -4%)<br />
Within operating income:<br />
− net interest income more than doubled to €4.2 million (+€2.4 million) due to a more<br />
efficient allocation of cash and cash equivalents which benefited from favourable interest<br />
rates;<br />
− net fee and commission income, falling to €61.2 million (-€7.1 million; -10.4%), suffered<br />
from the fall in asset management business resulting from the reduction in the average<br />
assets managed in <strong>2012</strong>, due also to the above-mentioned transfer of business operations<br />
relating to funds of hedge funds that took place in 2011. On the other hand, performance<br />
commissions rose significantly to €19.7 million (+€8 million; +68.3%).<br />
With regard to expenses:<br />
− staff costs rose slightly, to €14.6 million (+1%);<br />
− other administrative expenses decreased by €1.3 million to €13,1 million (-8.9%), partly the<br />
result of the above-mentioned transfer of operations. The most significant reductions<br />
included the items "expenses for advertising, marketing and memberships"<br />
(-€0.7 million) and "expenses for professional and consulting services" (-€0.6 million).<br />
Net provisions for risks and charges, amounting to €1 million, include a prudential provision<br />
made of €1.1 million against possible disputes regarding remuneration for services received in<br />
previous years, concerning asset management business.<br />
As a result of the performance reported above, <strong>2012</strong> ended with a profit of €39.5 million,<br />
compared to €37.6 million earned in the previous year. The proposal for the allocation of profit<br />
is to distribute the entire amount as dividends.<br />
190
<strong>UBI</strong> FACTOR SPA<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 Change % change<br />
Balance sheet<br />
Loans and advances to customers 2,392,499 2,868,344 -475,845 -16.6%<br />
Due to customers 1,553 5,161 -3,608 -69.9%<br />
Net interbank debt -2,258,053 -2,732,941 -474,888 -17.4%<br />
Equity (excluding profit for the year) 126,682 121,170 5,512 4.5%<br />
Total assets 2,439,618 2,898,354 -458,736 -15.8%<br />
Income statement<br />
Net interest income 44,203 38,295 5,908 15.4%<br />
Net fee and commission income 11,386 12,637 (1,251) (9.9%)<br />
Other net operating income/(expense) 1,709 3,644 (1,935) (53.1%)<br />
Operating income 57,298 54,576 2,722 5.0%<br />
Staff costs (*) (12,722) (11,750) 972 8.3%<br />
Other administrative expenses (9,313) (12,314) (3,001) (24.4%)<br />
Depreciation, amortisation and net impairment losses on property, plant and<br />
equipment and intangible assets (785) (823) (38) (4.6%)<br />
Operating expenses (22,820) (24,887) (2,067) (8.3%)<br />
Net operating income 34,478 29,689 4,789 16.1%<br />
Net impairment losses on loans (**) (26,807) (14,813) 11,994 81.0%<br />
Net provisions for risks and charges (505) (1) 504 n.s.<br />
Profit on the disposal of equity investments 740 84 656 781.0%<br />
Pre-tax profit from continuing operations 7,906 14,959 (7,053) (47.1%)<br />
Taxation for the year (4,062) (6,395) (2,333) (36.5%)<br />
Profit for the year 3,844 8,564 (4,720) (55.1%)<br />
Other information<br />
Total work force (actual employees+personnel on leasing contracts) 151 153 -2<br />
<strong>Financial</strong> ratios<br />
ROE [Profit for the year/equity (excluding profit for the year)] 3.03% 7.07%<br />
Cost:income ratio (operating expenses/operating income) 39.83% 45.60%<br />
Net non-performing loans/net loans to customers 3.30% 1.27%<br />
Net impaired loans/net loans to customers 6.42% 0.16%<br />
(*) The figure as at 31 st December <strong>2012</strong> includes leaving incentive expenses in the amount of €1.2 million.<br />
(**) As at 31 st December 2011 the item included a provision of €9.5 million for a loan position relating to the Fondazione Centro San Raffaele del<br />
Monte Tabor.<br />
As at 31 st December <strong>2012</strong> the share capital of <strong>UBI</strong> Factor was wholly owned by <strong>UBI</strong> <strong>Banca</strong>.<br />
<strong>UBI</strong> Factor, the <strong>UBI</strong> Group's principal factoring company, performs "captive factoring" activity,<br />
mainly with customers of the network banks, representing nearly 80% of the counterparties.<br />
The company has now ceased to accept any new business with clients selling public<br />
administration invoices, for which only previously existing loans remain 4 . According to Assifact<br />
(The Italian Factoring Association) data, in <strong>2012</strong> the Company was positioned in fourth place<br />
nationally in the sector both in terms of advances with and without recourse, with a market<br />
share of 5.26%, and in terms of outstanding amounts (receivables which have been<br />
purchased, but not yet received), with a market share of 5.05%.<br />
During <strong>2012</strong> the Company continued to focus its activities on captive counterparties<br />
originating from the network banks of the Group, with particular attention paid to these<br />
during this difficult period for the banking credit market 5 .<br />
At the same time, the company has continued to increase its international presence through<br />
factoring for export and import transactions with customers of high standing, good profitability<br />
and normal credit risk. This growth was driven on the one hand by commercial initiatives<br />
within the Factors Chain International network - a global network made up of the leading<br />
factoring companies - in markets traditionally active for exports, such as Turkey, and, on the<br />
other hand, by favourable results from the Polish branch in Krakow.<br />
4 There are only isolated exceptions to this policy of complete disengagement, all of which feature cash flows in favour of <strong>UBI</strong> Factor of<br />
modest amounts, and captive counterparties originated by the network banks, with receivables from public administrations with<br />
good records of paying their debts.<br />
5 The percentage of the <strong>UBI</strong> Factor's volume of business from network banks increased from 19% in 2008 to 42,2% in <strong>2012</strong>.<br />
191
With regard to equity investments, the liquidation of Siderfactor Spa was concluded with the redemption of<br />
shares to shareholders, in accordance with a resolution passed by a shareholders meeting on 20 th<br />
December <strong>2012</strong>. <strong>UBI</strong> Factor therefore derecognised its investment, with a profit of €740 thousand,<br />
recognised within the item "disposal of equity investments".<br />
The year <strong>2012</strong> ended with a profit of €3.8 million, down by €4.7 compared to the previous<br />
year, principally as a result of increased impairment losses recognised during the year.<br />
Net operating income improved considerably, increasing by approximately €4.8 million to<br />
€34.5 million 6 (+16.1%), benefiting from both the good performance of operating income, which<br />
rose to €57.3 million (+€2.7 million; +5%) and by overall containment of expenses, down to<br />
€22.8 million (- €2.1 million; -8,3%).<br />
Revenues were boosted by the positive trend for net interest income, which increased to €44.2<br />
million (+ €5.9 million; +15.4%), in relation to the financial component of the spread, in an<br />
overall short-term context of increased efficiency in lending. The decline in net fee and<br />
commission income, on the other hand, which fell to €11.4 million (- €1.2 million; -9.9%), was<br />
due to the impact of increased fee and commission expenses paid to the network banks by the<br />
Group for their activities on the Group's behalf for new business development.<br />
On the expenses front, the rise in staff costs to €12.7 million (+ €1 million; +8.3%) is<br />
attributable to expenses for leaving incentives amounting to €1.2 million, while the drop in<br />
other administrative expenses to €9.3 million (- €3 million; -24.4%) is primarily due to the<br />
significant reduction in legal costs, incurred in relation to the amounts owed by the health<br />
department of the Regional Government of Latium. 7<br />
The profitability of the company was affected by net impairment losses on loans, which rose by<br />
approximately €12 million to €26.8 million (+81%), principally due to specific impairment<br />
losses on deteriorated loans to the health department of the Regional Government of Latium.<br />
As concerns volumes of business, the turnover for business generated during the year<br />
amounted to €8.1 billion (-1.2%), including €7.4 billion of factoring business (-5.1%).<br />
Consequently, loans and advances to customers amounted to €2.4 billion (5% of which was<br />
from the Polish branch), falling by 16.6% compared to the €2.9 billion in the previous year,<br />
but a recovery compared to the low recorded in September (€2.1 billion).<br />
As a result of the difficult economic situation, net deteriorated assets rose from €63.6 to €289<br />
million, an increase of €225.4 million year-on-year. In detail:<br />
• non-performing loans rose from €36.5 million to €79.1 million (+€42.6 million), mainly due<br />
to the reclassification from the impaired category in the third quarter of a large position<br />
amounting to €43.9 million.<br />
• impaired loans rose from €4.5 million to €153.6 million (+€149.1 million) due to the<br />
transfer to this category of a particularly large position (€153 million) in the fourth quarter;<br />
• exposures past due and/or in arrears, principally to public administrations, rose from<br />
€22.6 million to €56.3 million (+€33.7 million), resulting from the new regulations that<br />
came into effect on 1 st January <strong>2012</strong> requiring all accounts over 90 days past due to be<br />
placed into this category. It is worth noting that the value of past due positions fell by over<br />
15% in January 2013 .<br />
Capital ratios as at 31 st December <strong>2012</strong> consisted of a tier one ratio (tier one capital to risk<br />
weighted assets) of 8.79% (8.81% at the end of 2011) and a total capital ratio (regulatory<br />
capital to risk weighted assets) of 8.76% (8.79%).<br />
The proposal for the use of profits is to distribute dividends of €2.28 million.<br />
6 The Polish branch generated gross operating income of €2.5 million (+€0.9 million compared to 2011).<br />
7 The expenses are in relation to ongoing legal proceedings, which aim to obtain court rulings establishing the existence of the<br />
assigned receivables, with a consequent court order for immediate payment of the amounts due by the debtor public administration.<br />
192
Other information<br />
Treasury shares<br />
In <strong>2012</strong>, the companies included in the consolidation did not hold any treasury shares nor<br />
those of the Parent, with the sole exception of IW Bank which, as at 31 st December <strong>2012</strong>, held<br />
831,168 treasury shares, (corresponding to 1.13% of the share capital), unchanged compared<br />
to twelve months before, for a nominal amount of €207,792 and a value at the purchase price<br />
of approximately €2.6 million.<br />
Litigation<br />
As already reported in the 2011 Annual <strong>Report</strong>, on 11 th October 2011 Centrobanca was served<br />
with a writ of summons from the Burani Designers Holding NV (“BDH”) Receivership (advised<br />
by Prof. Avv. Bruno Inzitari) to appear before the Court of Milan. It claimed Centrobanca was<br />
liable in relation to a public tender offer to purchase launched by Mariella Burani Family<br />
Holding Spa on the shares of Marella Burani Fashion Group Spa (“MBFG”).<br />
According to the writ of summons, the Burani family and the directors of BDH provided an inaccurate<br />
representation of the accounts to non-controlling shareholders and markets and conceived of and promoted<br />
the public tender offer to purchase with the sole purpose of artificially inflating the price of the MBFG share,<br />
in order to delay the bankruptcy of the Burani Group. In this context, Centrobanca is considered responsible<br />
for the abusive grant of loans to support the aforementioned operation, thereby generating, as a<br />
consequence, false confidence in the capital and financial solidity of the Burani Group on the part of<br />
creditors and the market.<br />
The damages claimed against Centrobanca in the writ of summons amount to approximately €134 million.<br />
Centrobanca – which has already been duly accepted as a creditor in all the bankruptcy<br />
proceedings concerning the Burani Group – considers that this claim made through the courts<br />
is without foundation and has applied to the court arguing both on points of law and merit to<br />
defend against the Receiver’s claim and in support of the complete rightfulness of its conduct.<br />
Furthermore, because the evidence used by the Receivership to support its demands applied<br />
in part also to Mediobanca Spa and Equita SIM Spa, Centrobanca decided to extend the<br />
proceedings to include these two companies.<br />
The first hearing, originally scheduled for February <strong>2012</strong>, was postponed until 19 th June and<br />
then again until 29 th January 2013. At that hearing the judge decided to postpone the case<br />
until 6 th May 2013 to allow it to be joined to the second proceedings brought by the Mariella<br />
Burani Family Holding Receivership.<br />
On 1 st March <strong>2012</strong>, Centrobanca was in fact served with a writ of summons from the Mariella<br />
Burani Family Holding Receivership (advised by the lawyers Stefano Ambrosini and Barbara<br />
Rovati), containing a claim for compensation, again in this case too, amounting to<br />
approximately €134 million, based on arguments of fact and law similar to those already<br />
served in the summons served by the BDH Receiver. As a consequence these proceedings were<br />
also extended to include Mediobanca Spa and Equita SIM Spa and the next hearing is set for<br />
30 th April 2013.<br />
Centrobanca is defended by the same team employed in the previous case (Prof. Avv. Antonio<br />
Astolfi and Piero Schlesinger).<br />
As already reported, the total gross exposure of the <strong>UBI</strong> <strong>Banca</strong> Group to the Burani Group<br />
amounts to €74.2 million, on which impairment losses of 95.74%. have been recognised.<br />
193
ANTI MONEY-LAUNDERING NOTIFICATIONS<br />
In <strong>2012</strong> the Guardia di Finanza (Finance Police) served five “Written notifications of findings”<br />
on the <strong>UBI</strong> <strong>Banca</strong> Group for failure to report suspect transactions in accordance with “Anti<br />
Money-Laundering” law relating to three customers for a total of €5 million. The relative<br />
defence documents were filed with the Ministry of the Economy and Finance within the set<br />
time limits.<br />
Furthermore, with regard to those notifications, the Ministry of the Economy and Finance<br />
imposed two fines for failure to report suspect transactions on employees of a bank belonging<br />
to the Group for a total €426 thousand. The repeals filed with the ordinary court have been<br />
accepted.<br />
Inspections<br />
The Bank of Italy conducted inspections into the Group in the period between 15 th December<br />
2011 and 16 th March <strong>2012</strong>, in accordance with articles 54 and 68 of Legislative Decree No.<br />
385/1993 (<strong>Consolidated</strong> Banking Act), designed to assess the adequacy of initiatives taken<br />
following the findings of the September 2010 inspections concerning liquidity risks and also in<br />
view of the particular situation on markets.<br />
On 14 th May <strong>2012</strong>, the Supervisory Body communicated its “Remarks and observations”<br />
concerning the inspections and on 13 th June <strong>UBI</strong> <strong>Banca</strong> furnished precise replies to the single<br />
remarks and observations contained in the inspection report.<br />
With a communication of 15 th June <strong>2012</strong>, the Bank of Italy launched new inspections (again<br />
in accordance with articles 54 and 68 of the <strong>Consolidated</strong> Banking Act already mentioned),<br />
designed to assess a series of questions in relation to the capital levels set in the EBA exercise<br />
consisting of: the results of the initiatives contained in the capital plan; the performance of the<br />
income statement and of risk weighted assets; methods and practices employed to set loan<br />
provision levels. The inspections were concluded on 24 th August <strong>2012</strong>.<br />
On 14 th November <strong>2012</strong> Supervisory Body communicated its “Remarks and observations” on<br />
the inspections. On the following 19 th December <strong>2012</strong>, <strong>UBI</strong> <strong>Banca</strong> furnished precise replies to<br />
the observations formulated in the inspection report<br />
On 8 th October <strong>2012</strong>, the Bank of Italy FIO 1 officially launched inspections into <strong>UBI</strong> <strong>Banca</strong> on<br />
the reporting of suspect transactions (article 47, paragraph 1 of Legislative Decree No. 231 of<br />
21 st November 2007). The inspections were into the organisation of the anti money-laundering<br />
functions and certain products: credit cards, prepaid cards and porn credit.<br />
On site inspections began on 9 th October and were completed on 22 nd November <strong>2012</strong>. On<br />
that date no communications were received concerning shortcomings or irregularities<br />
regarding the overall system of internal controls. However a note was delivered requesting<br />
further details from the “Group Delegate” on operational aspects and an assessment of the<br />
procedures for processing powers of attorney for the release of objects deposited on a porn<br />
basis. On 20 th December the results of those further investigations and assessments were<br />
provided. Subsequently, further requests were received, the last of which was satisfied on 28 th<br />
January 2013.<br />
With a letter of 11 th February 2013, the Bank of Italy communicated that “the inspections are<br />
to be considered completed on 28 th January 2013”, with no mention, to-date, of irregularities<br />
and/or shortcomings.<br />
Furthermore, the Bank of Italy carried out an inspection on the Sanremo branch of <strong>Banca</strong><br />
Regionale Europea from 3 rd until 7 th December <strong>2012</strong> into the adequacy of the organisational<br />
structure and procedures and compliance with anti money-laundering activity concerning the<br />
proceeds of criminal activities and the finance of terrorism (article 53 of Legislative Decree No<br />
231/2007). No communications have been received from the supervisory authority as a result<br />
of the latter inspection.<br />
1 The <strong>Financial</strong> Information Office formed at the Bank of Italy on 1 st January 2008 in accordance with Legislative Decree No.<br />
231/2007.<br />
194
On 6 th November <strong>2012</strong>, the Bank of Italy communicated that it was commencing inspections<br />
into the subsidiary <strong>UBI</strong> Factor pursuant to article 108 of Legislative Decree No. 385/1993.<br />
These were completed 6 th February 2013. On the date of this financial report, the inspection<br />
report had not yet been delivered.<br />
As part of action taken at national level, which involved the main Italian banking groups, on<br />
9 th November <strong>2012</strong>, the Bank of Italy launched inspections into the <strong>UBI</strong> <strong>Banca</strong> Group in<br />
accordance with articles 54 and 68 of Legislative Decree No. 385/1993 in order to assess the<br />
adequacy of impairment losses recognised on non-performing, impaired and restructured<br />
loans, and the relative policies and practices to implement them.<br />
The inspection, which should be completed a few days following the date of this report,<br />
involved the Parent and the network banks, because the product companies that operate in<br />
the non-banking financial sector (<strong>UBI</strong> Factor and <strong>UBI</strong> Leasing) were subject to specific<br />
inspections in the second half of <strong>2012</strong>.<br />
The inspection, which took place in an economic context which led to a consolidated loss loan<br />
of 91 basis points, nevertheless confirmed that the <strong>UBI</strong> <strong>Banca</strong> Group is one of the best in<br />
terms of asset quality.<br />
<strong>UBI</strong> LEASING<br />
On 21 st June <strong>2012</strong> the Bank of Italy announced the launch of inspections into <strong>UBI</strong> Leasing in<br />
accordance with article 108 of Legislative Decree No. 385/1993. The inspections were<br />
concluded on 17 th October <strong>2012</strong>.<br />
The inspection report was delivered on 11 th January 2013, containing remarks and<br />
observations on the basis of which penalty procedures were commenced against officers of <strong>UBI</strong><br />
Leasing (Board of Directors, Board of Statutory Auditors and General Manager at the time,<br />
with the exclusion of board members appointed during the course of <strong>2012</strong>).<br />
The subsidiary and <strong>UBI</strong> <strong>Banca</strong> furnished precise replies and defences to the single remarks<br />
and observations contained in the inspection report, giving details of action implemented and<br />
scheduled to remedy the criticisms made.<br />
FINES<br />
On 20 th August <strong>2012</strong>, the Bank of Italy notified <strong>UBI</strong> <strong>Banca</strong>, as the company into which B@nca<br />
24-7 had been merged, and officers of B@nca 24-7 (members of the Board of Directors, the<br />
Board of Statutory Auditors and the General Management at that time) of a provision<br />
concerning the imposition, pursuant to article 145 of Legislative Decree No. 385/1993, of<br />
administrative fines for a total of €63 thousand in relation to shortcomings found in the<br />
organisation and internal controls of that bank.<br />
The provision was issued following the inspections conducted between 31 st January and 30 th<br />
June 2011, on the basis of the inspection report presented on 23 rd September 2011. That<br />
report officially alleged that those officers of B@nca 24-7 were responsible for various<br />
irregularities and initiated the relative disciplinary procedures, to which that bank had replied<br />
with a letter of 21 st October 2011 to the Supervisory Authority containing its defence.<br />
In accordance with Art. 145 of the <strong>Consolidated</strong> Banking Act, the Parent, as the survivor of the<br />
merger with B@nca 24-7, was civilly liable to make the payment within thirty days of receipt of<br />
the notice, with the obligation to recover the amounts from those responsible.<br />
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Antitrust Authority provisions<br />
On 11 th July <strong>2012</strong>, the Autorità Garante della Concorrenza e del Mercato (AGCM - Antitrust<br />
Authority) issued a penalty provision concerning <strong>UBI</strong> <strong>Banca</strong> for improper commercial practices<br />
pursuant to article 20, paragraphs 2 and 22 of the Consumer Code in relation to the<br />
advertising campaign “3% Sposaci per interesse e poi ti innamorerai di noi” (Marry us out of 3%<br />
interest and then you will fall in love with us), conducted between May and June 2011 by<br />
means of radio commercials and advertising on websites, including Facebook, Google and<br />
Yahoo.<br />
Following a request for information issued to <strong>UBI</strong> <strong>Banca</strong> on 27 th May 2011, the Authority<br />
acquired all the advertising messages broadcast as part of that campaign.<br />
<strong>UBI</strong> <strong>Banca</strong> was informed on 13 th February <strong>2012</strong> of the launch of investigation No. PS7380 for<br />
possible violation of articles 20, paragraphs 2, 21 and 22 of the Consumer Code.<br />
On 1 st March the Bank exercised its right to be given access to the files relating to the<br />
provision and on the following 12 th March, it issued a defence and a reply to the request for<br />
information issued in the notice which launched the provision.<br />
Since the advertising matter addressed by the provision was broadcast via radio and on the<br />
internet, on 18 th May <strong>2012</strong> an opinion was requested from the Antitrust Authority pursuant to<br />
article 27, paragraph 6 of the Consumer Code.<br />
With an opinion received on 12 th June, that Authority held that the advertising practices in<br />
question were improper within the meaning of the above mentioned articles of the Consumer<br />
Code, because they were contrary to professional diligence and were designed to appreciably<br />
distort the financial behaviour of the average consumer in relation to the service provided.<br />
At the same time, the Antitrust Authority held that the arguments put forward by <strong>UBI</strong> <strong>Banca</strong>,<br />
which were based on the briefness of the advertising messages contested, which invited<br />
consumers to read the information sheets available in branches and on the website, and also<br />
on the absence of complaints received by the Bank about the campaign, were inadequate.<br />
The administrative fine imposed of €100 thousand was paid within the time limit of thirty days<br />
following notification of the provision.<br />
On 14 th November <strong>2012</strong>, IW Bank was notified of the start of an investigation by the Antitrust<br />
Authority into the timing of the closure of current accounts, pursuant to article 27, paragraph<br />
3 of Legislative Decree of 6 th September 2006 and subsequent amendments (the Consumer<br />
Code).<br />
This bank submitted a “commitments” proposal to the assessments of the Authority pursuant<br />
to article 27, paragraph 7 of the Consumer Code with a view to refining procedures and raising<br />
the level of transparency. The investigation is still in progress and due to end on 6 th May 2013.<br />
Tax aspects<br />
Summary of changes introduced during the year<br />
Provisions were issued in <strong>2012</strong>, which involved the financial sector. It must be underlined,<br />
that apart from those measures which have a direct impact on banks as taxpayers, many<br />
provisions continue to subject banks to obligations - such as responsibility for levying<br />
withholding taxes or carrying out checks and monitoring activities – and require them to fulfil<br />
roles to assist government with serious repercussions on operations and organisation. They<br />
necessarily affect relations with customers and their nature involves significant work for<br />
compliance, which also translates into operating expense. This constitutes what might be<br />
called an indirect tax expense which government intends to remove by means of tax<br />
“simplification”.<br />
A summary of the contents of the provisions introduced during the year is given below.<br />
196
THE DECRETO “SEMPLIFICAZIONI” (“SIMPLIFICATIONS” DECREE) – DECREE LAW NO. 16/<strong>2012</strong><br />
(CONVERTED INTO LAW NO 44/<strong>2012</strong>)<br />
• IRAP (local production tax): from <strong>2012</strong> the IRAP relating to the cost of labour (net of the<br />
relative deductions) is considered a tax that is fully deductible for corporate income tax –<br />
IRES – purposes, while the 10% lump sum deduction on interest expense remains for<br />
IRAP, where that expense is wholly or partially non-deductible. The law applies<br />
retroactively to the years 2007-2011 for which the Company has filed a special refund<br />
within the time limits and in accordance with the procedures established by the relative<br />
provision issued by the tax authorities on 17 th December <strong>2012</strong>. The tax credit is recognised<br />
in the consolidated balance sheet as at 31 st December <strong>2012</strong> within the item “tax assets”<br />
and amounts to approximately €66.1 million;<br />
• stamp duty on financial products: from 1 st January <strong>2012</strong> a stamp duty of 0.1% (0.15%<br />
from 2013) has been extended to apply to all periodic communications to customers<br />
concerning financial products, including those not subject to a deposit obligation, and they<br />
include bank deposits and postal deposits, even if evidenced by certificates. The long<br />
delayed official interpretations from the financial administration were not issued until last<br />
December. They resolved some doubts and furnished a clearer interpretation for the<br />
intermediaries required to apply the tax (see below). However, because the new tax<br />
measure applies from 1 st January <strong>2012</strong>, the charges already applied to customers during<br />
the year must be recalculated.<br />
THE DECRETO “SVILUPPO” (“GROWTH” DECREE) – DECREE LAW NO. 83/<strong>2012</strong> (CONVERTED INTO LAW<br />
NO 134/<strong>2012</strong>)<br />
This decree introduces important changes not only with regard to tax:<br />
• VAT tax regime for the lease and sale of properties: from 26 th June <strong>2012</strong> the normal regime<br />
for the lease of properties is the VAT exemption regime, regardless of the nature of the user<br />
and landlords may opt to be subject to VAT, clearly on the basis of their overall position for<br />
VAT purposes. That exemption regime also regards in particular the lease of properties<br />
used in operations, defined in cadastral terms.<br />
As far as the Group is concerned, this regime has already been applied where appropriate<br />
for contracts in existence as at 26 th June <strong>2012</strong> and the Group has also been able to benefit<br />
from exemptions granted by landlords.<br />
A similar exemption regime (unless the seller opts to make it subject to tax) also applies<br />
from 26 th June <strong>2012</strong> to the sale of residential and non-residential/operating properties<br />
performed by companies other than construction companies;<br />
• financing instruments for unlisted companies: measures have been introduced to increase<br />
the opportunities for unlisted companies to issue financial instruments, even in<br />
uncertificated centralised form, for the direct issue on the domestic and international<br />
market of short-term debt instruments in the form of financial bills and of medium to longterm<br />
instruments in the form of bonds for placement and circulation exclusively with<br />
qualified investors. These issuances must be endorsed by a “sponsor” consisting of banks,<br />
asset management companies and so forth, which are subject to obligations concerning<br />
capital and guarantees for the securities.<br />
From a strictly tax viewpoint, the legislation places the financial bills under a tax regime<br />
similar to that for bonds and it therefore extends the substitute tax regime pursuant to<br />
Legislative Decree No 239/1996, reserved to-date to bonds issued by banks and listed<br />
companies (“major issuers”), to include bonds and similar securities traded on regulated<br />
markets or on multilateral trading facilities and issued by unlisted companies.<br />
As already reported, the tax regime under Legislative Decree No. 239/1996 allows foreign<br />
investors to benefit from the immediate exemption from all withholding taxes on capital<br />
earnings;<br />
• amendment of the Bankruptcy Act to help companies to continue to operate: the purpose<br />
of the amendments introduced is to improve the efficiency of creditor settlement<br />
procedures for crisis-hit companies. Changes were also made in this direction on the tax<br />
deductibility regime for losses on loans (Art. 101, paragraph 5 of the <strong>Consolidated</strong> Income<br />
Tax Act) with deductions allowed for: (i) losses resulting from loan restructuring<br />
agreements pursuant to article 182-bis of the Bankruptcy Act in addition to the usual<br />
creditor settlement procedures; (ii) losses on statute barred loans and on loans of modest<br />
197
amounts if six months have passed since the due date. For IAS adopters, the certainty and<br />
precision requirements for deduction are also met when loans are derecognised in the<br />
balance sheet, regardless of events to extinguish the debt.<br />
No ministerial interpretations of this legislation have been furnished to-date, above all with<br />
regard to the tax period in which a company may make deductions with respect to the<br />
start of creditor settlement procedures and to the correct interpretation of “events to<br />
extinguish the debt”.<br />
It is in fact precisely on these aspects that a large proportion of existing tax litigation cases<br />
turn.<br />
THE LEGGE DI STABILITÀ (“STABILITY” OR ANNUAL FINANCE ACT) FOR 2013<br />
• VAT: the planned increase in the ordinary VAT rate from 1 st July 2013 from 21% to 22%,<br />
unless the cuts to welfare spending are able to reduce the deficit, is of particular interest to<br />
the Group. Also, individual portfolio management services and the relative brokering<br />
services will be subject to VAT from 1 st January 2013 following a ruling by the EU Court of<br />
Justice;<br />
• tax on financial transactions: a tax on financial transactions is being introduced from 2013<br />
(known as the “Tobin Tax”), which will be levied on transfers of shares and/or equity<br />
instruments and on transactions involving derivative instruments and “high frequency”<br />
trades provided that both relate to shares and/or equity instruments, even if<br />
predominantly and not exclusively.<br />
The tax, set at 0.2% (0.22% for 2013 only) and reduced by 50% if the trade takes place on<br />
regulated markets, applies from 1 st March 2013 and it is levied on the buyer only. The tax<br />
on derivatives is calculated on the basis of the value and the type of contract, as specified<br />
in the table attached to the Decree, and it is levied on both parties to the trade from 1 st<br />
July 2013.<br />
Finally, the tax on “high frequency”, trades set at 0.02%, is levied on the amount cancelled<br />
or modified for certain financial trades in a given period, to be quantified by a Decree to be<br />
issued on 21 st February 2013. The tax enters into force from 1 st March or from 1 st July<br />
depending on the type of transaction as described above.<br />
The measure contains a wide range of exemptions, above all for market makers, and in any<br />
case does on cover bond or similar instruments. Instructions and practical instructions are<br />
naturally expected from the tax authorities given the highly technical nature and large<br />
variety of the financial instruments involved. This will again have strong impacts on<br />
organisation, IT systems and customer relationships;<br />
• deductibility of intangible asset realignments: the deductibility of amortisation on<br />
intangible assets arising from controlling interests, realigned on an optional basis in<br />
accordance with Decree Law No. 98/2011 converted into Law No. 111/2011 as added to<br />
and amended by article 20 of Decree Law No 201/2011 (converted into Law No.<br />
214/2011), has been postponed for five years from 2013 until 2018. The Group made use<br />
of this provision in 2011 and <strong>2012</strong> obtaining tax relief on amounts totalling approximately<br />
€3.5 billion and it would have deducted €348 million per year, which has now been<br />
postponed until 2018.<br />
FATCA LAW<br />
A law enacted on 18 th March 2010 by the USA Senate introduced Chapter 4 of the Federal<br />
Internal Revenue Code (referred to as the Foreign Account Tax Compliance Act – FATCA). The<br />
legislation was last added to by the “final regulations” of the USA Treasury Department and<br />
the USA Internal Revenue Service on 17 th January 2013 and should be finally completed with<br />
a special intergovernment agreement between the United States and Italian governments.<br />
This legislation, which comes into force from 1 st January 2014, is designed to prevent evasion<br />
of United States taxes by USA citizens by strengthening customer identification and<br />
documentation obligations – USA and other – and with a requirement for a declaration to the<br />
USA tax authorities by non-USA intermediaries.<br />
The <strong>UBI</strong> <strong>Banca</strong> Group is currently carrying out activities to implement the regulations in<br />
question, in order to acquire FATCA compliant status.<br />
198
LAW TO REVISE THE TAX SYSTEM<br />
Notwithstanding the efforts made by all forces in the economy, the bill to introduce new<br />
criteria for the interpretation and application of important issues that regard all companies –<br />
e.g. abuse of law, the management of tax risks in large companies, the penalty system, the<br />
deductibility of costs (losses on loans, depreciation and amortisation, relations with foreign<br />
parties, etc.), the doubling of the time limits for assessment, a Group VAT number – was not<br />
passed by Parliament within the set time limit. Therefore various matters subject to litigation<br />
remain open, because further litigation cannot be excluded on these matters since the desired<br />
new law was not enacted.<br />
The following documents are of particular importance with regard to interpretation:<br />
***<br />
Tax Authority Circular No. 11/E of 28 th March <strong>2012</strong><br />
This circular – with effect retroactively from 1 st January <strong>2012</strong> – provides practical clarifications<br />
on the application of the tax reform concerning financial assets introduced by Decree Law No.<br />
138/2011 converted into Law No. 148/<strong>2012</strong>. Basically this is a realignment of the<br />
withholding tax on financial income to 20%.<br />
The document confirmed most of the practices and interpretations that the Group had<br />
proposed and nevertheless required significant efforts to advise customers, especially on the<br />
transition aspects and date of entry into force of the new legislation.<br />
Tax Authority Circular No. 29/E of 5 th July <strong>2012</strong><br />
As the deadline approached – 16 th July – for the payment of the special stamp duty on<br />
segregated assets introduced by the Decreto Salva Italia (the “Save Italy” decree – Decree Law<br />
No. 201/2011), the circular provided the necessary operational details needed by<br />
intermediaries responsible for collecting and paying the tax. As already reported, where<br />
customers do not make the amount due available, the name of the customer will be reported<br />
to the tax authorities.<br />
Tax Authority Circular No. 37/of 28 th September <strong>2012</strong><br />
With the approach of the deadline for filing income tax returns for the tax year 2011, the tax<br />
authorities published the expected circular to explain the procedures for transforming deferred<br />
tax assets recognised into tax credits, in relation to write-downs of loans and receivables not<br />
deducted pursuant to article 106, paragraph 3 of the <strong>Consolidated</strong> Income Tax Act and also to<br />
the value of goodwill and other intangible assets where tax realignments apply. This occurs for<br />
losses recognised in the statutory accounts and also for tax losses attributable to the<br />
aforementioned items (article 2, paragraphs 55 to 58 of Decree Law No. 225/2010.<br />
The circular confirms the tax-concession nature of the provision and the compulsory<br />
application for banks because of the intention behind it to strengthen regulatory capital. With<br />
account taken of the contents of the Bank of Italy/Consob/Isvap Document No. 5 of 15 th May<br />
<strong>2012</strong>, the amount of deferred tax assets transformed into tax credits against the loss incurred<br />
by <strong>UBI</strong> <strong>Banca</strong> for the year ended 31 st December 2011 was €268,550,575, details of which are<br />
given in the Notes to the <strong>Consolidated</strong> <strong>Financial</strong> Statements, Part B, Section 14 of Balance<br />
Sheet Assets.<br />
The Bank of Italy recently made a pronouncement on the matter – Protocol dated 21 st<br />
December <strong>2012</strong> – with regard to the Italian Banking Association and conversely indirectly to<br />
the tax authorities, concerning whether the provision applies to possible deferred tax assets on<br />
IRAP (local production tax). That pronouncement affirmed the qualification of deferred tax<br />
assets on IRAP for inclusion in regulatory capital according the Basel 2, while this will not be<br />
permitted under the different rules for Basel 3. This announcement will have no impacts for<br />
the <strong>UBI</strong> Group because it has no deferred tax assets for IRAP purposes of the type which<br />
would trigger the transformation.<br />
Tax Authority Circular No. 48/E of 21 st December <strong>2012</strong><br />
This circular does not affect corporate income tax directly, but compliance activities which<br />
banks and financial companies are obliged to carry out to apply stamp duties on bank<br />
statements and reports sent to their customers from 1 st January <strong>2012</strong>, as already mentioned<br />
previously.<br />
199
Substantial organisational and administrative changes have arisen with retroactive effect<br />
regarding customer relationships, in terms of recalculating the duty from time to time in the<br />
absence of proper instructions. Particular repercussions resulted from holding foreign assets<br />
under custody or insurance policies for which the number of cases in which the intermediary<br />
must apply a withholding tax increased.<br />
Tax litigation<br />
Like other large companies, the <strong>UBI</strong> Group is subject to constant tax inspections by the<br />
competent regional departments of the tax authorities, as part of the tax “tutelage” carried out<br />
on “large taxpayers”.<br />
The following events occurred in <strong>2012</strong> and until the date of this report.<br />
A) TAX INSPECTIONS – TAX ASSESSMENT REPORTS<br />
• Banco di Brescia: on 12 th April <strong>2012</strong>, the Large Taxpayers Office of the Regional Department for<br />
Lombardy of the tax authorities undertook a general tax inspection for IRES (corporate income tax),<br />
IRAP (local production tax), VAT and withholding tax purposes for the year 2009, subsequently<br />
extended to include the years 2008 and 2010, but limited to transactions to strengthen regulatory<br />
capital through the issue of preference shares. On conclusion of the inspection, on 30 th November<br />
<strong>2012</strong> a tax assessment report was issued alleging solely violation of article 26, paragraph 5, of<br />
Presidential Decree No. 600/1973 (failure to apply the relevant 12.5% withholding tax) in relation to<br />
the interest paid by Banco di Brescia to the Delaware-registered <strong>Banca</strong> Lombarda Preferred Capital<br />
Company LLC through its Luxembourg branch for the years 2008 (€1.5 million of unpaid withholding<br />
taxes), 2009 (€1.5 million) and 2010 (€2.1 million) for a total of €5.3 million.<br />
Given that litigation concerning analogous claims for the years from 2004 to 2007 – about which more<br />
later – is pending before the relevant Tax Commissions, it was decided that it would be best to await<br />
subsequent service of the notices of tax assessment in order to then mount a challenge at that stage.<br />
• <strong>Banca</strong> Carime: on 5 th June <strong>2012</strong>, the Tax Control Office of the Regional Department for Calabria of<br />
the tax authorities undertook a tax inspection, relating to the years 2008, 2009 and 2010 for IRES<br />
and IRAP purposes, with specific regard to certain items of income. On conclusion of the inspection,<br />
on 6 th December <strong>2012</strong> a tax assessment report was issued alleging that loan losses had been<br />
improperly deducted for IRES purposes on the basis that for some of the files examined the relevant<br />
tax requisites of certainty and precision had not been fulfilled. Consequently, the tax authorities<br />
assessed higher IRES of €216 thousand for the year 2008, €18 thousand for the year 2009 and €89<br />
thousand for the year 2010 for a total of €323 thousand.<br />
The Bank felt that it was best to accept the tax assessment report – also bearing in mind the<br />
interpretative uncertainty surrounding the unclear rules governing the deduction of loan losses for<br />
tax purposes – which meant that it became liable for the above mentioned amount plus interest and<br />
penalties reduced to the one sixth minimum. On 21 st December <strong>2012</strong> the Bank paid a total of €410<br />
thousand in respect of the three years concerned.<br />
• <strong>Banca</strong> Popolare di Ancona: on 8 th October <strong>2012</strong>, the Tax Control Office of the Regional Department for<br />
the Marches of the tax authorities sent this bank a questionnaire designed to obtain accounting and<br />
tax documentation relating to certain transactions carried out in the 2009 financial year. That request<br />
forms part of tax “tutelage” activity.<br />
• <strong>Banca</strong> Popolare Commercio e Industria: on 30 th July <strong>2012</strong> the Large Taxpayers Office of the Regional<br />
Department for Lombardy of the tax authorities issued a tax assessment report upon the conclusion<br />
of a tax inspection for VAT purposes (for the 2007 and 2008 financial years limited to activities<br />
carried out as a depositary bank) and for IRES, IRAP and VAT purposes (for the 2009 financial year)<br />
that had commenced on 4 th April. That tax assessment report raised the following matters:<br />
- VAT years 2007-2009: failure to subject payments received for depository banking activity relating<br />
to mutual investment funds to VAT (greater VAT totalling €2.9 million, relating to three years).<br />
That matter is similar to another already assessed for 2006;<br />
- IRES year 2009: improper deduction of losses on loans relating to debtors subject to bankruptcy<br />
proceedings (taxable income €1.4 million), because not relating to the same accounting period;<br />
- IRES year 2009: improper deduction of costs for limited amounts held not to be legitimate<br />
business expenses.<br />
In response to that tax assessment report, on 28 th September <strong>2012</strong> the bank filed its observations<br />
pursuant to article 12 of the Taxpayers’ Charter (Law No. 212/2000), contesting the grounds for all<br />
the matters raised.<br />
• <strong>UBI</strong> <strong>Banca</strong>: the general tax inspection for IRES, IRAP and VAT purposes for the year 2008 – extended<br />
to include the years 2007, 2009, 2010 and 2011 – started by the Bergamo tax unit of the Guardia di<br />
200
Finanza (finance police) in 2011 ended with the issue on 24 th May <strong>2012</strong> of a tax assessment report.<br />
That tax assessment report raised no matters concerning the above taxes, while the only question it<br />
did raise was the failure by <strong>UBI</strong> <strong>Banca</strong> to apply a withholding tax on interest on deposits (article 26,<br />
paragraph 2, of Presidential Decree No. 600/1973), with regard to interest paid to subsidiaries located<br />
in Delaware (USA) in relation to the issuance of instruments used to strengthen regulatory capital<br />
(preference shares), classified by the inspectors as resident for tax purposes in Italy. The withholding<br />
tax in question totalled €55.2 million (for the years from 2007 to 2011). That tax assessment report<br />
was subsequently shelved by the relevant Regional Department of the tax authorities. However, that<br />
same Department did confirm its intention to charge <strong>UBI</strong> <strong>Banca</strong> with violation of its withholding tax<br />
obligations under article 26, paragraph 5 of Presidential Decree No. 600/1973 – financing by foreign<br />
entities.<br />
• Subsidiary issuers of preference shares: as a direct consequence of the tax assessment report issued<br />
to <strong>UBI</strong> <strong>Banca</strong> (see above), on 7 th June <strong>2012</strong> that same Bergamo tax unit of the Guardia di Finanza<br />
issued three tax assessment reports to <strong>Banca</strong> Lombarda Preferred Capital Company LLC, <strong>Banca</strong><br />
Popolare di Bergamo Funding LLC and <strong>Banca</strong> Popolare Commercio e Industria Funding LLC,<br />
reclassified as entities resident for tax purposes in Italy, owners of the interest paid on deposits by<br />
<strong>UBI</strong> <strong>Banca</strong>. The notices of tax assessment subsequently issued by the Bergamo tax authorities were<br />
cancelled internally by them.<br />
• <strong>Banca</strong> Regionale Europea: on 20 th December 2011, on conclusion of inspections relating to 2008, the<br />
Regional Department of Piedmont of the tax authorities sent the relative tax assessment report in<br />
which the tax deduction of losses was alleged for the disposal without recourse of the loans to a<br />
customer in difficulty in 2008 by the bank, together with other banks and finance company creditors<br />
in a broader context of the restructuring of the customer’s debt. More specifically, the inspectors<br />
alleged the absence of the assumptions of certainty and finality of the disposal because of the<br />
existence of guarantees granted to the creditors recognised by the purchaser. As a consequence, the<br />
bank was considered to have greater taxable income for IRES and IRAP purposes of €2.8 million,<br />
which gave rise to increased taxes for IRES and IRAP totalling approximately €916 thousand, in<br />
addition to fines – estimated at between €152 thousand and €305 thousand – plus interest.<br />
The inspectors evidently did not consider the principle known as “reinforced derivation”, which the<br />
bank employs as an entity subject to IFRS where, as in the case in question, the requirements are<br />
met for the derecognition of the loans in question.<br />
In connection with the said tax assessment report, in October <strong>2012</strong> the Provincial Department for<br />
Turin of the tax authorities requested the Bank (and likewise other companies in the Group – <strong>Banca</strong><br />
Popolare di Bergamo and <strong>UBI</strong> Leasing – parties to the above mentioned transaction) for specific<br />
documentation and explanations for the execution abroad of some of the documents pertaining to the<br />
debt restructuring operation in question.<br />
• SILF: in its tax assessment report of 19 th February 2010 the Regional Department for Piedmont of the<br />
tax authorities disputed the deductibility of some costs (especially those linked to fees paid to<br />
financial advisors) and loan losses for the 2008 financial year as well as the quantification of the<br />
recognition of impairment losses on loans for that year. After having filed observations as permitted<br />
by the Taxpayers’ Charter (Law No. 212/2000), on 10 th November 2011 an offer to accept the findings<br />
of the tax assessment report was made following which on 22 nd November <strong>2012</strong> the relevant tax<br />
assessment by consent documents were signed. On 30 th November <strong>2012</strong> a total of €0.486 million was<br />
paid to settle the matter.<br />
• <strong>Banca</strong> Popolare di Bergamo: on 16 th January 2013 the Large Taxpayers Office of the Regional<br />
Department for Lombardy of the tax authorities commenced a tax inspection, (i) general for the year<br />
2010 in relation to IRES, IRAP, VAT and being a withholding tax agent, (ii) targeted for the years 2008<br />
and 2009 in relation to being a depository bank for mutual funds, about which more later, and (iii)<br />
targeted for the 2008 transfer of the Munich branch to <strong>UBI</strong> <strong>Banca</strong> International SA.<br />
• <strong>UBI</strong> Pramerica SGR: on 7 th February 2013 the Milan tax unit of the Guardia of Finanza (finance police),<br />
commenced a tax inspection, still in progress, in relation to corporate income tax for the years 2010 and<br />
2011;<br />
• <strong>Banca</strong> Regionale Europea: on 5 th March 2013 the Large Taxpayers Office of the Regional Department<br />
for Piedmont of the tax authorities commenced a general tax inspection for 2010.<br />
B) NOTICES OF TAX ASSESSMENT<br />
It should be noted that for IRES, IRAP and VAT tax inspections for 2007 onwards, a notice of<br />
assessment replaces and now incorporates what was once a separate demand for payment<br />
(termed an ‘enforceable notice’ under Law Decree No. 78/2010). Accordingly, even in the case<br />
of an appeal, a provisional amount must still be paid by the statutory deadline for filing the<br />
appeal. This is particularly important bearing in mind also the Bank of Italy notice of 7 th<br />
August <strong>2012</strong> on “<strong>Financial</strong> Statements and Supervisory <strong>Report</strong>ing”.<br />
201
Banco di Brescia: on 18 th July <strong>2012</strong> the Large Taxpayers Office of the Regional Department for<br />
Lombardy of the tax authorities served a notice of assessment and the imposition of fines for 2007,<br />
with which it alleged the failure to apply a 12.5% withholding tax (pursuant to article 26, paragraph<br />
5, of Presidential Decree No. 600/1973) by Banco di Brescia on interest paid on the subordinated<br />
deposit made by <strong>Banca</strong> Lombarda Preferred Capital Company LLC. This assessment followed on from<br />
similar assessments already served for the years from 2004 to 2006. The Bank has appealed to the<br />
relevant Tax Commission by the statutory deadline and is awaiting the setting of a date for a hearing<br />
in the matter. In the meantime a provisional sum of €0.611 million has been paid.<br />
<strong>Banca</strong> Popolare Commercio e Industria and <strong>Banca</strong> Popolare di Bergamo: the tax authorities – the<br />
Large Taxpayers Office of the Regional Department for Lombardy – served a notice of assessment on<br />
BPCI on 24 th October 2011 and 11 th December <strong>2012</strong> and on BPB on 6 th December 2011 and 25 th July<br />
<strong>2012</strong>, which challenged them over the treatment applied for VAT purposes to revenues received in the<br />
years 2006 and 2007 for activity performed as a depository bank for mutual investment funds.<br />
In particular the tax authorities are seeking €2.3 million in unpaid taxes and €5.3 million in penalties<br />
from <strong>Banca</strong> Popolare Commercio e Industria and €4.4 million in unpaid taxes and €11.7 million in<br />
penalties from <strong>Banca</strong> Popolare di Bergamo.<br />
This issue is a common one in the banking sector and it arises over the interpretation at national level<br />
of EU Directive 77/388/EEC of 17 th May 1977. The banking sector believes that the consideration for<br />
that activity is exempt from VAT (Italian Banking Association Circular, Tax Series No. 25 of 28 th<br />
December 2010 and Assogestioni – national association of asset management companies – Circular<br />
No. 138 of 10 th December 2010) while the tax authorities consider it subject to VAT in full.<br />
On 21 st November <strong>2012</strong> the Provincial Tax Commission of Milan partially rejected the appeal filed by<br />
<strong>Banca</strong> Popolare Commercio e Industria relating to 2006, ruling, on the one hand, that no penalties<br />
and interest were payable given the objective uncertainty surrounding the rule and, on the other<br />
hand, that the tax itself was payable, in this regard strictly following the European Court of Justice’s<br />
judgment in Case C-169/04 (“Abbey National”) cited by the tax authorities at the time of issuing the<br />
assessment. The Bank will appeal that decision by the statutory deadline therefor.<br />
A similar appeal filed by <strong>Banca</strong> Popolare di Bergamo in relation to 2006 was heard on 5 th December<br />
<strong>2012</strong> and the decision in that case is awaited.<br />
In relation to 2007, at the hearings a motion to adjourn the matter will be submitted considering that<br />
talks are currently being held between the relevant trade associations and the tax authorities with a<br />
view to agreeing that a portion and not all of the entire fees received as a depository bank will be<br />
subject to VAT on the assumption that it is a complex service only part of which concerns custody<br />
and verification, the elements that the tax authorities deemed liable to VAT.<br />
It should also be considered that pursuant to the last paragraph of article 60 of Presidential Decree<br />
No. 633/1972, banks are entitled to recoup from client asset management companies the tax payable<br />
following a tax inspection such that banks remain liable solely for the penalties. This is the Group’s<br />
thinking too.<br />
While awaiting judgment BPCI has paid a provisional amount of €0.4 million (2006) and BPB €0.6<br />
million.<br />
With regard to the litigation in question, in the light, amongst other things, of expert opinions, the<br />
risk of losing is considered unlikely and more specifically it is maintained that the legal basis of the<br />
appeal will be recognised in the courts without prejudice to the outcome of the trade association/tax<br />
authorities talks.<br />
Banco di Brescia: on 16 th November 2011, Banco di Brescia and <strong>UBI</strong> <strong>Banca</strong> (as the consolidating<br />
company) were served with notices of assessment and notified of fines for IRES purposes relating to<br />
2006 for a total of €5.1 million (of which €1.9 million for increased taxation, €272 thousand for<br />
interest and €2.9 million of fines). These notices resulted from a tax assessment report received by<br />
Banco di Brescia on 19 th June 2009, the findings of which are fully accepted, in which a different<br />
criterion is used to calculate the timing of tax deductions for impairment losses on loans. On 6 th<br />
December 2011, an application for tax assessment by consent was filed in order to obtain, as a<br />
reduction in the increased tax demanded, what had already been paid voluntarily in accordance with<br />
Law No. 244/2007 for the realignment of statutory accounts with tax accounts with regard to existing<br />
provisions for risks and charges. This procedure was concluded on 1 st February <strong>2012</strong> without the<br />
parties having reached an agreement. The Bank has appealed to the relevant Tax Commission by the<br />
statutory deadline and is awaiting the setting of a date for a hearing in the matter. In the meantime a<br />
provisional sum of €0.8 million has been paid.<br />
Centrobanca: on 23 rd July 2009, on conclusion of an inspection, this bank received a tax assessment<br />
report, which raised matters concerning the tax treatment criteria for the sales of loans and<br />
receivables to customers, or the write-downs of these, while in the presence of the reinforced<br />
derivation principle, introduced for entities subject to IFRS since 2005. In consideration of the<br />
magnitude of the demands, the inspectors referred the case to the Public Prosecutor’s Office of Milan.<br />
On 8 th June 2011, section nine of the Criminal Court of Milan issued a ruling dismissing the case<br />
because there was “no case to answer”. On 20 th July 2011, a notice of tax assessment was received<br />
from the tax authorities which clearly had taken no consideration whatsoever of the outcome of the<br />
202
criminal proceedings and therefore confirmed the results of the tax assessment report. After an<br />
unsuccessful attempt was made to use compliance by consent procedures in relation to that notice,<br />
an appeal was lodged with the relative Provincial Tax Commission and suspension of the provisional<br />
tax demand was also requested: this occurred by virtue of order of 25 th September <strong>2012</strong>. At the<br />
hearing of 4 th March 2013 the case was postponed until a date not yet set.<br />
With regard to the litigation in question, in the light, amongst other things, of expert opinions, the<br />
risk of losing is considered unlikely and more specifically it is maintained that the legal basis of the<br />
appeal will be recognised in the courts bearing in mind also the above mentioned principle of<br />
“reinforced derivation”.<br />
<strong>UBI</strong> <strong>Banca</strong>: on 28 th November 2011 <strong>UBI</strong> <strong>Banca</strong> was served with a notice of assessment and notified of<br />
fines imposed for corporate income taxes relating to 2003 for a total of €47.1 million (of which €17.9<br />
million for increased corporate income tax, €4 million for interest and €25.2 million of fines). That<br />
notice stems from a tax assessment report served on the Bank on 8 th July 2010, alleging one<br />
irregularity only concerning the transfer in June 2003 of a business unit from BPB-CV Scrl to the<br />
newly incorporated BPB Spa and BPCI Spa within the context of the operation that gave birth to the<br />
BPU <strong>Banca</strong> Group. In particular, the full deduction of the provisions for risks and charges taxed by<br />
the transferor BPB-CV Scrl was disputed, with the tax authorities alleging that those provisions<br />
should have been deducted in the following years by the transferees BPB and BPCI.<br />
The above tax assessment report gave rise to criminal proceedings (fiscal offence of inaccurate income<br />
tax returns) against the legally authorised representative of BPU <strong>Banca</strong>, when the tax returns for<br />
2003 were filed. The case was closed on 21 st July 2010 with an order for no further action by the<br />
Criminal Court of Bergamo, both because of the absence of specific intent and because the statute of<br />
limitations applied to the alleged offence.<br />
The assessment was performed as a result of Ruling No. 247 of 25 th July 2011 of the Constitutional<br />
Court, which doubled the length of the assessment period for fiscal offences, even if the ascertainment<br />
of the criminal offence occurs when the ordinary assessment period has expired. This issue is subject<br />
to broad debate, which is still in progress. In the case in question, the inspection relating to 2003 had<br />
taken place well after the time limit pursuant to article 43 of Presidential Decree No. 600/1973 had<br />
expired.<br />
The Bank has appealed by the statutory deadline and is awaiting the setting of a date for a hearing in<br />
the matter.<br />
With regard to the litigation in question, in the light, amongst other things, of expert opinions, the<br />
risk of losing is considered unlikely and more specifically it is maintained that the legal basis of the<br />
appeal will be recognised in the courts bearing in mind also the non-applicability of the doubling of<br />
the limitation period.<br />
<strong>UBI</strong> <strong>Banca</strong> and Banco di Brescia: in compliance with Supervisory Recommendations issued in Bank<br />
of Italy Circular No. 229/1999, in 1999-2000 the former <strong>Banca</strong> Lombarda e Piemontese Spa, its<br />
subsidiary Banco di Brescia Spa, the former <strong>Banca</strong> Popolare di Bergamo-Credito Varesino Scrl and<br />
the former <strong>Banca</strong> Popolare Commercio e Industria Scrl each individually conducted operations to<br />
strengthen capital, the results of which are still in existence, by issuing preference shares through<br />
special companies located in the State of Delaware (U.S.A.). These operations were authorised by the<br />
Bank of Italy and were conducted in compliance with the authorisation received. As already reported,<br />
at the time (1999-2000) and in any case until the introduction of the company reform pursuant to<br />
Legislative Decree No. 6/2003 (the “Vietti Reform”), the direct issue in Italy of financial instruments<br />
with the characteristics necessary to comply with the requirements of the above supervisory<br />
regulations was forbidden and, in view of that circumstance, those same supervisory<br />
recommendations stated that “the innovative capital instruments, such as preference shares, are<br />
instruments issued by foreign subsidiaries included in the banking group”.<br />
Between 2009 and <strong>2012</strong> the Large Taxpayers Office of the Regional Department for Lombardy of the<br />
tax authorities served specific notices of tax assessment on <strong>UBI</strong> <strong>Banca</strong> and Banco di Brescia for the<br />
years 2004, 2005, 2006 and 2007 in relation to those transactions (for a total of €60.2 million of<br />
which €24 million for increased withholding tax and a fine of €36.2 million in addition to interest)<br />
alleging the failure to apply a withholding tax of 12.5% pursuant to article 26 paragraph 5, of<br />
Presidential Decree No. 600/1973 by the Italian bank (<strong>UBI</strong> <strong>Banca</strong> and BBS) on the interest paid on<br />
the subordinated deposit made by the LLC located in Delaware. The tax authorities’ argument is<br />
based on a change in the classification for tax purposes only of the subordinated deposit from the<br />
foreign company to the Italian company (exempt from withholding tax) as a loan (subject to<br />
withholding tax of 12.5%).<br />
The banks appealed against those notices. After a number of hearings, on 22 nd December 2011<br />
section 25 of the Tax Commission of Milan rejected the appeal presented by <strong>UBI</strong> <strong>Banca</strong> relating to<br />
2004, based on the statements made by the Bank of Italy for regulatory capital purposes, rather than<br />
on the provisions of the Italian Civil Code or tax legislation, as one would have logically expected.<br />
Moreover, that same commission held that fines were not due because of the objective uncertainty<br />
surrounding the regulations.<br />
As regards Banco di Brescia the hearing in relation to the 2004 financial year that had been<br />
scheduled for 25 th October <strong>2012</strong> was postponed to 30 th May 2013. For the 2005 financial year<br />
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hearings are scheduled for 15 th March 2013 (Banco di Brescia) and 8 th May 2013 (<strong>UBI</strong> <strong>Banca</strong>)<br />
whereas no dates have been set yet for hearings in relation to subsequent financial years.<br />
While waiting judgment <strong>UBI</strong> <strong>Banca</strong> has provisionally paid €10 million and Banco di Brescia €3.1<br />
million.<br />
The dispute in question has recently spread to the other banking groups who engaged in the same<br />
type of capital strengthening operations implemented through the binding schemes that the Bank of<br />
Italy had indicated.<br />
With regard to the litigation in question, in the light, amongst other things, of expert opinions given to<br />
the Parent and Banco di Brescia, the risk of losing is considered unlikely and more specifically it is<br />
maintained that the legal basis of the appeal will be recognised in the courts, also because the<br />
operations in question cannot be classified as a so-called “abuse of law” in view of their strict<br />
supervision by the Bank of Italy and the utmost transparency shown in the various financial<br />
statements.<br />
<strong>UBI</strong> <strong>Banca</strong>, BPB Immobiliare and <strong>Banca</strong> Carime – These companies in the <strong>UBI</strong> <strong>Banca</strong> Group have<br />
appealed against notices of tax assessment with which the tax authorities have reclassified<br />
transactions as property disposals, which the companies had considered contributions of property<br />
operations performed in 2003 to Immobiliare Serico, with a consequent demand for increased<br />
corporate income tax and VAT and the relative fines for a total of approximately €82.8 million. The<br />
companies won at first instance and on appeal. However, on 14 th November <strong>2012</strong> and 14 th January<br />
2013 the State Attorney’s Office appealed to the Supreme Court against the judgments in favour of<br />
<strong>UBI</strong> <strong>Banca</strong> and BPB Immobiliare. The companies duly entered an appearance in the proceedings.<br />
With regard to the litigation in question, in the light, amongst other things, of expert opinions given to<br />
the Company, the risk of losing is considered unlikely, bearing in mind also the victories at first<br />
instance and on appeal. In the meantime no demand for actual payment of the taxes has been made.<br />
<strong>UBI</strong> Leasing: on 13 th December <strong>2012</strong> the Regional Department for Lombardy of the tax authorities<br />
served <strong>UBI</strong> Leasing a notice of tax assessment for the year 2007 based on various tax inspection<br />
reports issued in previous years concerning:<br />
- IRAP: alleged non-deductibility of (i) sponsorship reclassified as entertainment expenses, (ii)<br />
amortisation in relation to solar panel leases whose terms were shorter than the minimum laid<br />
down by tax law for deductibility and (iii) allegedly non-existent transactions. The total higher IRAP<br />
was quantified as €11 thousand;<br />
- VAT: improper deduction of VAT as a result of the findings mentioned above in relation to IRAP<br />
and unlawful VAT exemption in relation to boat leases (use of vessels outside territorial waters,<br />
huge rental, rental prior to navigation license, rental prior to delivery of vessel, no VAT liability<br />
under article 8-bis, paragraph 1, of Presidential Decree No. 633/1972 for the transfer of vessels<br />
intended for the carrying on of a business). The total higher VAT was quantified as €604 thousand.<br />
In addition to the higher taxes and interest, a fine of €1.495 million was also imposed. The Company<br />
will appeal the notice of assessment by the statutory deadline therefor.<br />
<strong>UBI</strong> <strong>Banca</strong> and Banque de Depots et de Gestion: in May 2011 the Swiss tax authorities rejected the<br />
appeal by <strong>UBI</strong> <strong>Banca</strong> and Banque de Dépôts et de Gestion against an alleged obligation on the part of<br />
BDG to apply a withholding tax of 35% on dividends paid to the parent <strong>UBI</strong> <strong>Banca</strong> in the years from<br />
2006 to 2008 because, in the view of the Swiss tax authorities, <strong>UBI</strong> <strong>Banca</strong> could not benefit from the<br />
exemption envisaged for joint stock companies since it was actually a co-operative society. The<br />
companies decided to appeal to the courts because they maintained that all of the requisites for the<br />
application of the Swiss-EU agreement on the taxation of savings had been fulfilled in the case in<br />
point meaning the Swiss withholding tax of 35% did not apply. The companies won at first instance<br />
before the Federal Administrative Court and that decision was followed by a further totally favourable<br />
one from the Federal Court in October <strong>2012</strong>, which can no longer be appealed. That has given rise to<br />
a refund of the €6.37 million in withholding taxes already paid on the dividends as well as recognition<br />
of the direct applicability of the withholding tax exemption for future distributions of profits/reserves.<br />
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Investor relations and external communication<br />
Relations with analysts and institutional investors and communication through<br />
the corporate website<br />
Again in <strong>2012</strong> the Investor Relations Office, which reports directly to the Chief Executive<br />
Officer, made particular efforts to manage relations with the financial community attentively<br />
and promptly, aware of the continuous policy and regulatory developments in what was in any<br />
case a difficult year for Italy due to the recession and the slow recovery of confidence in<br />
markets. Continuous and open dialogue allowed prompt replies to be given to demands for<br />
information from equity and debt security investors, analysts and the financial community as<br />
a whole.<br />
More specifically, interaction with the financial community took place by means of the<br />
following:<br />
• conference calls 2 organised when annual and interim results were approved;<br />
• the participation of <strong>UBI</strong> <strong>Banca</strong> as a speaker at seven international conferences for<br />
institutional equity and debt investors;<br />
• periodic meetings with Italian and international investors and with the analysts who cover<br />
the <strong>UBI</strong> share (the share is currently followed by 25 brokerage houses, including 19<br />
international, while the remainder are Italian). Altogether, senior management and/or the<br />
investor relations officer met more than 250 institutional investors (equity and debt) over<br />
the twelve month period, sometimes on more than one occasion;<br />
• the very many occasions on which analysts and investors were provided with information in<br />
response to telephone or email queries, especially in view of the intense reporting activity<br />
required by the situation on markets.<br />
The activity involving direct contact with the financial community described above was<br />
accompanied by the increasingly more important updating and constant expansion of the<br />
corporate website at www.ubibanca.it. This is now a fundamental and also a regulatory tool for<br />
conveying and broadcasting corporate information across the board.<br />
Priority was given during the year to providing full documentation promptly, the process of<br />
implementing new tools and advanced functions having been commenced in previous years.<br />
In <strong>2012</strong>, the <strong>UBI</strong> <strong>Banca</strong> website ranked 15 th place in the Italian league table drawn up<br />
annually by the specialist "web ranking" company Hallvarsson & Halvarsson (KWD Group) and<br />
in third place in the Italian banking segment.<br />
Press relations<br />
As always press relations activities were performed with a maximum of transparency and cooperation<br />
with each publication and with each journalist in order to ensure an accurate<br />
perception of the values and distinguishing features of the Group.<br />
Established practice was continued with the network banks involved in the issue of press<br />
releases at local level in order to attain widespread distribution of information to the public.<br />
Mirroring the communication strategy of <strong>UBI</strong> <strong>Banca</strong>, the network banks themselves work to<br />
obtain coverage in the press and in the local press above all, thereby helping to increase the<br />
visibility of the Parent.<br />
In <strong>2012</strong> <strong>UBI</strong> <strong>Banca</strong> obtained visibility in the Italian press in 8,835 articles, 30.1% of which<br />
(2,660 articles) described the Group and its banks in detail, with a readership (an estimate of<br />
the number of people who read these articles based on an Audipress survey) of almost €1.4<br />
billion readers 3 .<br />
Yet again during the year local newspapers were the media category most attentive to the<br />
activities of <strong>UBI</strong> <strong>Banca</strong>, followed by the financial media.<br />
2 With a view to encouraging the fullest participation of those potentially concerned, all the invitations (prepared in the English<br />
language) are not only sent to a mailing list of analysts and investors, but are also communicated to the Consob and Borsa Italia Spa<br />
through the SDIR-NIS network (the Borsa Italia regulated information network service) and published on the corporate website at the<br />
same time. A copy of the presentation is made available on the Bank’s website, in good time beforehand.<br />
3 Data processed by a company external to the Group.<br />
205
The percentage of positive articles out of total high standing articles was 16.35% (-0.65%<br />
compared to 2011), while negative articles accounted for 9.7% (-3%). As much as 67% of the<br />
positive articles were dedicated entirely to the <strong>UBI</strong> <strong>Banca</strong>.<br />
The percentage of neutral articles increased as a consequence (from 70.3% to 73.95%), to be<br />
considered in relation to both the greater quantity of articles which analysed the sector and<br />
the huge attention paid by the general media to economic and financial issues, which were<br />
given more space as a result of the crisis in progress.<br />
Without doubt the launch of “social bonds” had a positive impact with as many as 78 articles<br />
in the national press, although the effect was above all local.<br />
Events and sponsorships<br />
In order to enhance its brand and support commercial advertising, as it does every year <strong>UBI</strong><br />
<strong>Banca</strong> promoted a series of events on its local markets.<br />
The profitable co-operation with the Einaudi Centre continued for the presentation of the XVII<br />
Einaudi <strong>Report</strong> on the global economy and Italy. Over ten meetings were organised in <strong>2012</strong> in<br />
important towns and cities such as Milan, Bergamo, Brescia, Turin, Varese, Mantua and Jesi<br />
with the final meeting held in Rome.<br />
The partnership with the Accademia Teatro alla Scala (La Scala Theatre Academy) continued,<br />
supported by the publication of announcements in newspapers, especially with regard to the<br />
<strong>UBI</strong> Community project. On the one hand this involved action taken by Group banks to<br />
provide concrete support in training students of the Academy with a range of solutions<br />
designed to meet financing and investment management requirements. On the other hand the<br />
<strong>UBI</strong> <strong>Banca</strong> Group made a direct commitment to the diffusion of Italian artistic excellence in<br />
the world: this year the <strong>UBI</strong> <strong>Banca</strong> Group co-operated with the Italian Consulate General in<br />
Hong Kong to organise an "Italian month" with the sponsorship of a concert for piano and<br />
singers from the Accademia del Teatro alla Scala in the Hong Kong City Hall Theatre. The<br />
participation of artists from the Accademia Teatro alla Scala in the Festival of the Republic in<br />
Hong Kong is now looked forward to greatly by lovers of culture in the local community.<br />
In the first half of <strong>2012</strong>, the network banks again organised a series of meetings in some of the<br />
more important towns and cities in order to advertise the <strong>UBI</strong> Community service model for<br />
the third sector. These saw the involvement of the major protagonists in the nonprofit world.<br />
Again in order to promote the <strong>UBI</strong> Community project, <strong>UBI</strong> <strong>Banca</strong> supported the second<br />
edition of the <strong>2012</strong> Sodalitas Social Innovation Award, organised by the Sodalitas Foundation<br />
to give visibility to nonprofit organisation projects of greater social value. The website<br />
www.socialinnovation.sodalitas.it is the first of its kind in Italy dedicated entirely to forprofitnonprofit<br />
partnerships as a driving force behind the development of innovative social projects.<br />
As concerns sponsorships, although the context was one of attention to costs and therefore of<br />
rationalisation of initiatives, the Group chose to continue longstanding relationships: for <strong>UBI</strong><br />
<strong>Banca</strong> these included its traditional partnership with the Goggi Ski Club in Bergamo, the<br />
International Tennis Tournament in Bergamo and the cycling team TX Active Bianchi, the<br />
mountain bike team led by Felice Gimondi dedicated to the mountain bike and cross-country<br />
fields, a sponsorship that encourages a sport close to nature out in the fresh air.<br />
Again in the field of cultural activities, co-operation continued, now covering a number of<br />
years, with the “Popotus a scuola” project, organised by the daily newspaper Avvenire, the aim<br />
of which is to help children to read and understand newspapers, by introducing them to a<br />
newspaper specially for them.<br />
A new sponsorship during the year consisted of the Parent’s support for a photographic book<br />
entitled Photoansa produced by the Agenzia ANSA press agency. It is a “historical” book which<br />
features important facts which occurred during the past year portrayed with the most<br />
significant photos.<br />
206
Social and environmental responsibility<br />
<strong>UBI</strong> <strong>Banca</strong> pursues the convergence of corporate strategies, policies and objectives with its<br />
values and principles and with the expectations of its stakeholders. The objective is to create<br />
sustainable value through the control of reputational risk, to establish a strong and distinctive<br />
corporate identity and to develop a climate of trust with its staff, its shareholder base and<br />
markets<br />
A summary of the main social responsibility activities performed in <strong>2012</strong>, is given below, while<br />
the Social <strong>Report</strong> may be consulted for further information and in-depth analysis.<br />
CORPORATE GOVERNANCE (Code of Ethics)<br />
The Code of Ethics approved at the end of 2010 by the Management Board and the<br />
Supervisory Board of <strong>UBI</strong> <strong>Banca</strong> and subsequently by all subsidiary banks and companies<br />
constitutes the main point of reference for the Group’s social responsibility policies and<br />
strategies. It was completed at the end of 2011 with the adoption of a Code of Conduct, aimed<br />
at all those in a working relationship with <strong>UBI</strong> <strong>Banca</strong>, both on a continuing and casual basis.<br />
It is designed to furnish a framework of principles and rules of conduct with which to evaluate<br />
concrete situations from time to time and compliance of decisions to be taken with ethical and<br />
regulatory norms.<br />
A training programme on Social Responsibility and the Code of Ethics was completed in <strong>2012</strong>.<br />
It involved a total of over 2,000 managers of central or network bank operating units through<br />
classroom sessions and over 11,000 employees using remote training procedures. The<br />
training programme was designed to communicate the most important aims and contents of<br />
the Group Code of Ethics simply and directly, and to link them with broader corporate social<br />
responsibility issues. The intention was to support the integration of corporate social<br />
responsibility (CRS) in business strategies and to make it a source of innovation and enhanced<br />
competitiveness and reputation.<br />
MARKET<br />
Business management is oriented towards innovation in products and services, marketing<br />
approaches and distribution processes consistent with the ethical, social and environmental<br />
expectations of stakeholders and in implementation of the mutual and community vocation of<br />
the Group.<br />
In addition to the action taken to assist families and businesses described in the section on<br />
commercial activities, the most important new development was the launch of <strong>UBI</strong> Community<br />
social bonds, an important innovation in the sector nationally, which brought Italy into line<br />
with the more evolved European countries in the area of finance for nonprofit organisations.<br />
They provide subscribers with the opportunity to obtain a return on their investment (in line<br />
with the rates offered by the Bank with respect to similar investments) and at the same time to<br />
help support high social value and impact projects organised by public and private sector<br />
organisations in local communities. At Group level a total of 17 social bonds were placed for<br />
€198.54 million.<br />
SOCIAL INTERVENTION<br />
The management of social intervention is designed to strengthen and support those large<br />
numbers of nonprofit organisations which work in the following fields: social, recreational and<br />
sport; welfare and solidarity; education and training; culture: university and research;<br />
restoration of artistic heritage and the protection of the environment.<br />
Taking the Parent, the network banks, the main product companies and foundations together,<br />
the Group disbursed a total of €14 million in <strong>2012</strong> in the form of donations and sponsorships.<br />
Each entity in the Group operates independently in response to the demands it encounters<br />
and considers consistent with its own values and social responsibility objectives.<br />
While the Social <strong>Report</strong> furnishes a full view of the activities performed during the year,<br />
particular mention is made here of the donations to charity of €1 million made thanks to the<br />
funds collected from the <strong>UBI</strong> Community social bonds. The donations were made to assist the<br />
initiatives and projects of institutions and nonprofit organisations operating in the following<br />
sectors: social and welfare (8), public utility infrastructures and services (6), universities and<br />
research (1) and community and economic development (1).<br />
207
ENVIRONMENTAL RESPONSIBILITY<br />
In addition to its pursuit of full and substantial compliance with regulations in force, it is<br />
Group policy to contribute to sustainable economic development, thereby also concretely<br />
implementing the principles of the Global Compact, which it has subscribed to.<br />
The environmental policy approved in December 2008 commits the Group to reducing its<br />
environmental impact through the intelligent and responsible management of both direct<br />
impacts (i.e. impacts generated by its own operating activities through the consumption of<br />
resources, the production of waste and harmful emissions) and also indirect impacts (i.e.<br />
impacts generated by the conduct of third parties with whom the Bank does business, such as<br />
its customers and suppliers). The Group Energy Manager and Mobility Manager are the main<br />
protagonists assigned the duty of promoting and supporting the implementation of the<br />
environmental policy through targeted initiatives, in co-operation with the Group Corporate<br />
Social Responsibility Function.<br />
With regard to direct impacts, the most important data concerns energy and paper<br />
consumption. In <strong>2012</strong> the Group yet again made exclusive use of electricity certified as from<br />
renewable sources (RECS certificates). Total electricity consumption was 118,788,253 kWh,<br />
including 238,128 kWh of electricity generated by the photovoltaic plant installed at Jesi.<br />
Consumption of paper was 1,698,982 kg. As concerns indirect impacts, the Group has been<br />
active for some time in its commercial activities with “green” products, and that is credit lines<br />
provided for investments in energy savings and in the diversification of energy sources, above<br />
all from renewable sources or those with a low environmental impact.<br />
<strong>UBI</strong> <strong>Banca</strong>’s environmental policy was acknowledged with the <strong>2012</strong> Green Globe Banking<br />
Award.<br />
ECONOMIC REPORT<br />
In <strong>2012</strong> the Group generated economic value of €2,743.6 million (-3.7% compared to 2011).<br />
The economic value distributed was €2,381.9 million as follows: 64.1% to employees, 26.6% to<br />
suppliers for purchases of goods and services, 6.7% to public administrations for taxes, 1.9%<br />
to registered and unregistered shareholders, 0.3% to the community in the form of donations<br />
to institutions and nonprofit organisations for social activities and 0.4% to non-controlling<br />
shareholders (see the <strong>2012</strong> Social <strong>Report</strong> for further details).<br />
REPORTING AND CONTROL<br />
The Social <strong>Report</strong>, together with the social responsibility section of the Group corporate<br />
website, is the main instrument for integrated reporting on the economic aspects (the<br />
economic value generated and distributed), social aspects (commitments, objectives and<br />
results achieved in terms of satisfying the legitimate expectations of stakeholders) and<br />
environmental aspects (commitments, objectives and results for controlling direct and indirect<br />
impacts) of operations.<br />
In accordance with requirements expressed by stakeholders in consultation activities<br />
conducted during the year, consisting of the Consultation Project for customers and focus<br />
groups with trade associations and local nonprofit organisations, and with developments in<br />
best practices, it was decided to publish the following for <strong>2012</strong>:<br />
• a summary document, of an informative nature, to involve the broadest possible range of<br />
stakeholders, printed in 30,000 copies, published on the occasion of the Annual General<br />
Meeting and distributed through branches;<br />
• a detailed document, prepared in compliance with the highest level A+ of the “Sustainability<br />
<strong>Report</strong>ing Guidelines G3.1”, accompanied by a “<strong>Financial</strong> Services Sector Supplement” of<br />
the Global <strong>Report</strong>ing Initiative 4 and subject to independent auditing by the independent<br />
auditors Deloitte & Touche Spa. This document is published in electronic format only and<br />
is also translated into English, while hardcopy versions are produced and sent only on<br />
request.<br />
In <strong>2012</strong> the social responsibility section of the Group corporate website, which has been<br />
updated continuously, was awarded 4 th position among banks in the 2011 CSR Online Awards<br />
Italy league table. The classification, drawn up each year by the communication company<br />
4 An independent nonprofit foundation located in Amsterdam which was formed from a project started in 1997 by CERES of Boston (a<br />
coalition of investors, environmental organisations and public interest groups which came together to promote corporate social<br />
responsibility by addressing businesses directly on social and environmental issues). Its mission is to produce global standards for<br />
sustainability reporting, thanks to the contribution of hundreds of experts in a large number of countries throughout the world<br />
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Lunquist, assesses the quality of the online communication of businesses on social and<br />
environmental, ethical and corporate governance issues and on the level of dialogue with<br />
stakeholders.<br />
Compliance with personal data regulations<br />
With a view to simplifying personal data requirements (Art. 45), Decree Law No. 5 of 9 th<br />
February <strong>2012</strong> “urgent measures on simplification and development” (published in the Official<br />
Journal No. 33 on 9 th February <strong>2012</strong>) subsequently converted into Law No. 35 of 4 th April<br />
<strong>2012</strong>, abolished the obligation to prepare an annual update of the “Security Programme<br />
Document” pursuant to Legislative Decree No. 196 of 30 th June 2003 and subsequent<br />
amendments and additions (“Privacy Code”).<br />
Nevertheless, the changes introduced did not remove the obligation to comply with "Security<br />
Measures" required under Title V of the Privacy Code, to be met by each Data Controller. In<br />
this respect, Group banks and companies maintained and updated documents relating to the<br />
following: the list of personal data treatment processings carried out in the course of their<br />
activities; the risk analysis required for that data; the minimum security measures and the<br />
relative improvement plan; the checks and controls in place and/or planned with regard to<br />
compliance with the aforementioned measures in view of the reduction in the risk of data<br />
destruction or loss, of unauthorised access, or of data treatment which is not permitted or not<br />
for the purposes for which it was acquired. Specific training initiatives were also undertaken to<br />
manage the foregoing aspects.<br />
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Principal risks and uncertainties to which<br />
the <strong>UBI</strong> <strong>Banca</strong> Group is exposed<br />
Risks<br />
The <strong>UBI</strong> <strong>Banca</strong> Group attributes primary importance to the measurement, management and<br />
monitoring of risk, as activities necessary to the sustainable creation of value over time and to<br />
the consolidation of its reputation on its markets.<br />
In compliance with the regulations in force for the prudential supervision of banks (Bank of<br />
Italy Circular No. 263/2006), the Group has put a process in place to calculate its capital<br />
adequacy requirement – for the present and the future – to meet all significant risks to which<br />
the Group is or might be exposed (ICAAP - Internal Capital Adequacy Assessment Process).<br />
In this respect very careful identification is performed on a continuous basis of the risks<br />
subject to measurement. Risk identification activity is designed to verify the magnitude of<br />
Group risks already subject to measurement and to detect signals of other types of risk which<br />
may manifest. Identification involves precise conceptual definition of the risks to which the<br />
Group is exposed, an analysis of the factors which combine to generate them and a description<br />
of the relative manner in which they manifest. This activity was achieved by means of a<br />
centralised process of analysis supplemented by self assessment conducted on all the entities<br />
of the Group.<br />
Once the activity to identify significant risks is completed, the ICAAP process involves the<br />
measurement of the risks identified and the calculation of the total capital 1 required to meet it<br />
(capital adequacy), both at present and in the future. Use is also made of specific (by assessing<br />
impacts on a single risk) and global (by assessing impacts on all risks at the same time) stress<br />
tests to perform a better assessment of exposure to risk and of systems for mitigating and<br />
monitoring it and calculating capital requirements.<br />
The <strong>UBI</strong> <strong>Banca</strong> Group has a system of risk governance and management in place which takes<br />
account of organisation, regulations and methods in order to ensure consistency in its<br />
operations and its relative propensity to risk.<br />
In consideration of its mission, the operations of the Group and also the market context in<br />
which it operates, the risks to be subjected to measurement in the ICAAP assessment process<br />
were identified and divided into first pillar and second pillar risks, as required by the relative<br />
regulations.<br />
First pillar risks – already managed under the requirements of supervisory regulations – are as<br />
follows:<br />
• credit risk (including counterparty risk): the risk of incurring losses resulting from the<br />
default of a counterparty with whom a position of credit exposure exists. This also<br />
comprises the definition of counterparty risk, which constitutes a particular type of credit<br />
risk. It is the risk that a counterparty to a transaction involving determined types of<br />
financial instruments defaults before the transaction itself is settled.<br />
market risk: risk of changes in the market value of financial instruments held, due to<br />
unexpected changes in market conditions and in the credit rating of the issuer;<br />
operational risk: the risk of incurring losses resulting from the inadequacy or malfunction<br />
of procedures, human resources and internal events or from exogenous events. This<br />
includes losses resulting from fraud, human error, business disruption, system failure,<br />
non-performance of contracts and natural disasters and it comprises legal risk.<br />
1 See Part F, section 1 of the Notes to the <strong>Consolidated</strong> <strong>Financial</strong> Statements for a definition of total capital.<br />
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In addition to first pillar risks, second pillar risks were identified, consisting of the following:<br />
• risks defined as measurable, for which established quantitative methods have been<br />
identified, which lead to the determination of internal capital or for which useful<br />
quantitative thresholds or limits can be defined which, combined with qualitative<br />
measurements, allow allocation and monitoring processes to be defined;<br />
• risks defined as non measurable, for which policies and measures for control, reduction or<br />
mitigation are considered more appropriate because no established approaches exist for the<br />
measurement of internal capital that are useful for allocation purposes.<br />
The second pillar risks subject to analysis are as follows:<br />
Measurable risks<br />
- concentration risk: risk resulting from exposures to counterparties, groups of connected<br />
counterparties and counterparties in the same economic sector or who carry on the same<br />
business or belong to the same geographical area:<br />
- interest rate risk: the current or future risk of a change in net interest income and in the<br />
economic value of the Group following unexpected changes in interest rates which have an<br />
impact on the banking book;<br />
- business risk: the risk of adverse and unexpected changes in profits and margins with<br />
respect to forecasts, connected with volatility in volumes of business due to competitive<br />
pressures and market conditions;<br />
- equity risk: the risk of losses incurred in equity investments that are not fully consolidated<br />
on a line-by-line basis.<br />
- fixed asset risk: the risk of changes in the value of the tangible fixed assets of the Group.<br />
By convention measurable risks also include those risks for which, although no well<br />
established approaches exist for the estimate of internal capital, operational limits of a<br />
quantitative nature, for which there is a consensus in the literature, can be set to measure,<br />
monitor and mitigate them. These risks are:<br />
- liquidity risk: the risk of the failure to meet payment obligations which can be caused either<br />
by an inability to raise funds or by raising them at higher than market costs (funding<br />
liquidity risk), or by the presence of restrictions on the ability to sell assets (market liquidity<br />
risk) with losses incurred on capital account;<br />
- structural liquidity risk: the risk resulting from a mismatch between the sources of funding<br />
and lending.<br />
Non measurable risks<br />
- compliance risk: the risk of incurring legal or administrative penalties, substantial financial<br />
losses or damage to reputation resulting from violations of laws and mandatory external<br />
regulations or internal regulations (by-laws, codes of conduct and voluntary codes);<br />
- reputational risk: the risk of incurring losses resulting from a negative perception of the<br />
image of the bank by customers, counterparties, shareholders of the bank, investors, the<br />
supervisory authority or other stakeholders;<br />
- residual risk: the risk of incurring losses resulting from the unforeseen ineffectiveness of<br />
established methods of mitigating risk used by the Bank (e.g. mortgage collateral);<br />
- risks resulting from securitisations: the risk that the underlying economic substance of a<br />
securitisation is not fully reflected in decisions made to measure and manage risk;<br />
Details are given below of risks which have significant impacts for the <strong>UBI</strong> <strong>Banca</strong> Group and<br />
the action taken to mitigate them. It is considered that risks other than those reported below,<br />
which are of marginal importance, will not change during the course of the year.<br />
Credit risk<br />
Credit risk constitutes the most important characteristic risk of the <strong>UBI</strong> <strong>Banca</strong> Group:<br />
historically this risk accounts for approximately 90% of the regulatory risk capital.<br />
In <strong>2012</strong> the Italian economy remained in recession suffering from the effects of weak domestic<br />
demand and the impacts of action taken to stabilise public finances. Despite a certain<br />
improvement in foreign demand, 2013 should as a whole be negative again in terms of national<br />
211
income, therefore continuing to exert an unfavourable influence on operating conditions for the<br />
banking sector. The continuing difficulties of the economy in general and the related consumer<br />
crisis have continued to have a negative impact on the ability of businesses and individuals to<br />
meet their obligations, thereby maintaining high levels of credit risk and as a consequence also<br />
high rates of loan impairment.<br />
In this situation of objective difficulty, the Group has continued with initiatives launched in<br />
2011 to improve credit monitoring and recovery. The following in particular are continuing:<br />
• on the one hand the “Loan Quality” activity, with the objective to reduce the size of the<br />
problem and default loan portfolio through the adoption of an approach for the<br />
management of problem loans resulting from portfolio segmentation and the assignment of<br />
strategies and objectives to staff in the distribution network;<br />
• on the other hand the programme “CR2– Credit Recovery and Regularisation” which<br />
involves the following in 2013:<br />
- the full roll-out, having completed the pilot phase commenced at the end of <strong>2012</strong>, of the<br />
new credit monitoring model with the introduction of “PEM - Pratica Elettronica di<br />
Monitoraggio – electronic case monitoring” and of the new “Credit Portal” on the whole of<br />
the distribution network;<br />
- the consolidation of the new credit recovery model launched in the second half of <strong>2012</strong><br />
which involves specialist units and staff, based on the size and type of the nonperforming<br />
loans to be recovered. Activities to perfect the functioning of the IT system for<br />
credit recovery will also continue.<br />
Liquidity risk<br />
The problems of confidence on institutional and interbank markets, caused primarily by fears<br />
for the solvency of some sovereign states, in a context of a slowdown in trends for traditional<br />
funding, due to lower household disposable income, has led to the risk of shortfalls in the<br />
liquidity required for banking activity. In this context the Group has addressed its liquidity<br />
management by pursuing a number of lines of action. These include participation in two<br />
Eurosystem refinancing operations with a three-year maturity (longer-term refinancing<br />
operation – LTRO) and the issuance of three bonds on the institutional market for a total of<br />
€1.275 billion nominal, to thereby guarantee greater stability to the liability structure of its<br />
balance sheet in a market context still far from “normality”. We report that as at 31 st<br />
December <strong>2012</strong>, the net stable funding ratio and liquidity coverage ratio indicators met Basel<br />
3 requirements.<br />
As concerns the risk of failure to comply with capital requirements set by the supervisory<br />
authority (9% for EBA purposes), at present the Group has a capital ratio (core tier 1 ratio) of<br />
greater than 9%. This indicator may increase further following the validation of advanced retail<br />
models currently in progress.<br />
Detailed information on financial risk management objectives and policies and also on the<br />
exposure of the Group to price risk, credit risk, liquidity risk and the risk of changes in cash<br />
flows – pursuant to article 2428 of the Italian Civil Code – is given in Part E of the notes to the<br />
consolidated financial statements, which may be consulted.<br />
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Uncertainties<br />
An uncertainty is defined as a possible event for which the potential impact, attributable to one<br />
of the risk categories just mentioned, cannot be determined and therefore quantified at present.<br />
The Group is currently operating in a highly uncertain macroeconomic environment.<br />
Pressures on the sovereign debts of the “peripheral” countries of Euroland and the consequent<br />
measures to balance public accounts taken by the governments hit hardest by the crisis have<br />
deepened the recessionary phase in terms of both the size of the contraction in gross domestic<br />
product and the duration of the period of economic crisis.<br />
In detail, domestic demand is particularly weak in terms of: (i) public spending, due to fiscal<br />
consolidation action taken by governments designed to comply with EU deficit targets; (ii)<br />
consumer spending in light of the progressive rise in unemployment rates (which rose in<br />
December to 11.2%, from 9.5% in the same period of 2011) and the fall in disposable income;<br />
(iii) spending on investment, which reflects the modest rate of use of production capacity and<br />
action taken by businesses to contain costs during the recession.<br />
Nevertheless, some support for Italian GDP is coming from net exports, which reflects growing<br />
foreign demand from the expansion of the world economy. Further positive signs are to be<br />
seen in the agreements reached at EU level to support countries in difficulty, with particular<br />
reference to the restructuring of Greek debt and the tranches of international aid to Athens,<br />
resulting from the fiscal compact agreement – designed to stabilise public accounts and bring<br />
the debt to GDP ratio down to 60% over the next twenty years – and from action taken by the<br />
ECB. On the one hand, the latter provided banks with liquidity through refinancing operations<br />
with full allotment of bids and on the other, it helped relax pressures on financial markets by<br />
introducing outright monetary transactions (OMT), a programme for the purchase of<br />
government securities designed to restore the proper mechanisms for the transmission of<br />
monetary policy stimuli. OMTs require specific conditions to be met, including an official<br />
request from a government and the signing of a memorandum of understanding at the same<br />
time.<br />
The outlook for the future still contains many uncertainties which could manifest with impacts<br />
basically attributable to credit, interest rate, business and reputational risk, without, however,<br />
compromising the capital strength of the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
In detail, the main uncertainties identified for 2013 are linked to the following aspects:<br />
- developments in the macroeconomic situation. The outlook for the Italian economy is again<br />
weak for the current year, with GDP expected to contract further. The recovery could begin<br />
in the second half, but the pace could be particularly modest. The ambitious budget targets<br />
set by the EU will be reflected in cuts to government spending and household spending<br />
could also fall, consistent with downward pressures on income and the absence of<br />
expectations that high unemployment will fall. A best scenario would be one of investment<br />
by businesses, especially in the machinery, equipment and means of transport sectors,<br />
where – partly due to a basic statistical comparison with particularly weak periods in the<br />
past and the need to replace obsolete plant – an inversion of short-term (but not long-term)<br />
economic trends might occur by the end of the year. In this sense some economic indicators<br />
(SMEs, consumer and business confidence) have recently shown signs of stabilising at<br />
modest levels, which might be the prelude to the start of a new economic upturn, although<br />
at a moderate pace.<br />
Particular attention will be paid to trends on financial markets, whose performance will<br />
have significant impacts – positive or negative – on the real economy. A possible progressive<br />
reduction in turbulence on financial markets in terms of government securities spreads<br />
would have an indirect positive impact on the real economy, partly through an<br />
improvement in the conditions for access to credit.<br />
The macroeconomic environment in 2013 should therefore still be weak and subject to<br />
considerable factors of uncertainty, some of which could be of exogenous origin. Dangers<br />
exist for Italian exports – which at present constitute the biggest driver of growth in GDP –<br />
resulting both from possible pressures on foreign exchange markets, with particular regard<br />
to a substantial and long lasting appreciation of the euro and from a slowdown in<br />
213
international demand in the wake of the more moderate pace of growth in the world<br />
economy. To conclude, the weakness of the macroeconomic environment should persuade<br />
the ECB to maintain a strongly accommodating monetary policy with interest rates at very<br />
low record levels, which could result in a contraction in net interest income compared to<br />
last year. Default rates are also expected to remain stable in 2013 at the high rates reached<br />
during the crisis;<br />
- uncertainty of the political context. The results of the recent political elections have<br />
generated concerns among the major rating agencies. Moody’s in particular judged the<br />
scene resulting from the urns negatively both in terms of public debt and structural and<br />
fiscal reforms. The scenario depicted is one of high uncertainty and the possibility of a<br />
return to the polls shortly. What happened had no immediate effects on Italy’s rating for<br />
Standard & Poor’s. This United States agency nevertheless underlined the presence of<br />
numerous factors of uncertainty and considered that negotiations to reach an agreement<br />
for a new executive will last around one month. The base scenario assumes that the fiscal<br />
consolidation process will not deviate from its current path. The greatest risk is that a new<br />
government will lack the strength to implement important structural reforms able to<br />
improve the growth prospects for the country. The results have also impacted on<br />
government securities spreads, with repercussions, although not dramatic at present, on<br />
the value of portfolios.<br />
- developments in the regulatory context. The regulatory context is subject to various<br />
processes of change following both the issue of a number of provisions at European and<br />
national level, with the introduction of the relative regulations to implement them, relating<br />
to the provision of banking services (Tobin tax, stamp duty, etc.) and also to the related<br />
jurisprudence (e.g. the form, content and modification of contracts, interest, other items of<br />
remuneration for credit lines and overdrafts and the sale of insurance policies). This<br />
scenario requires particular effort both in terms of interpretation and implementation and<br />
has at times directly affected the profits of banks, and/or costs for customers.<br />
The <strong>UBI</strong> <strong>Banca</strong> Group continuously studies action to soften the impacts of measures, which<br />
includes constant and attentive monitoring of operating costs and a constant search for<br />
greater efficiency in internal processes.<br />
***<br />
The risks and uncertainties described above were subject to a process of assessment designed,<br />
amongst other things, to examine the impacts of changes in market parameters and conditions<br />
on corporate performance. The Group does in fact possess instruments to measure the possible<br />
impacts of risks and uncertainties on its operations (sensitivity analysis and stress tests in<br />
particular), which allow it to rapidly and continuously adapt its strategies – in terms of its<br />
distribution, organisation and cost management systems – to changes in the operating context.<br />
Risks and uncertainties are also under constant observation through the implementation of the<br />
policies and regulations to manage risk adopted by the Group: policies are updated in relation to<br />
changes in strategy, context and market expectations. Periodic monitoring of policies is designed<br />
to verify their state of implementation and their adequacy. The findings of the analyses<br />
performed show that the Group is able to meet the risks and uncertainties to which it is exposed,<br />
which therefore confirms the assumption that it is a going concern.<br />
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Risks relating to health and safety at the workplace (Legislative<br />
Decree No. 81 of 9 th April 2008)<br />
These issues are overseen directly by a unit at the Parent – on the staff of the Chief Operating<br />
Officer – which has the following duties: (i) to oversee the proper implementation of regulations<br />
concerning health and safety at the workplace; (ii) to officially fill the role of the Prevention and<br />
Protection Service for Group companies for which a specific service provision contract is in<br />
place; (iii) to process and maintain risk assessment documents and; (iv) to fill the role of<br />
“compliance oversight specialist” in order to ensure compliance with the relative regulations.<br />
Activity was focused in <strong>2012</strong> on the following aspects:<br />
• the identification of innovative criteria for the management over time of the compliance<br />
levels achieved, in order to formulate improvement programmes and action priorities with<br />
an approach which is increasingly linked to the actual accidents that occur;<br />
• implementation of a health and safety at the workplace management system project based<br />
on UNI-INAIL (Italian standards authority and Italian national accident insurance institute)<br />
guidelines, through a risk assessment of corporate process compliance, the formulation of a<br />
system manual and a set of procedures;<br />
• development of the work-related stress assessment process which, once the objective data<br />
acquisition, analysis and comparison stage was complete (the “alarm bell” events),<br />
addressed the area of subjective perception;<br />
• analysis of criminal phenomena (robberies) which have a direct impact on the mental and<br />
physical well-being of personnel;<br />
• changes to the Group training programme for compliance with the provisions of the Accordo<br />
della Conferenza Stato Regioni (State-Regions Conference Agreement);<br />
in order to ensure that the Group has a level of compliance sufficient to reduce operational,<br />
reputational and compliance risks connected with the complex and interdisciplinary subject of<br />
health and safety.<br />
RISK ASSESSMENT, IMPROVEMENT PROGRAMME AND ACCIDENT PHENOMENA<br />
The campaign for the prompt elimination of the highest level risks (16 and 12) reported by the Prevention<br />
and Protection Service, carried out since 2011, has produced significant results and has helped the<br />
Group to achieve very appreciable average compliance and absence of serious health risk levels.<br />
It was therefore possible to address the subject of the progressive elimination of residual risk and to<br />
move away from the methodology used today consisting of rules and tables based essentially on<br />
statistical criteria adopted by INAIl (national insurance institute for accidents at the workplace) for all<br />
sectors of production, in order to seek to link it more closely to the accidents which actually occur, year<br />
by year, in the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
An experimental planning process was therefore set in motion in <strong>2012</strong> for action to be taken concerning<br />
minor risks. It is designed to reduce or eliminate those situations - independently of the absolute risk<br />
level - for which a cause and effect relationship may be assumed between the accident phenomena<br />
actually measured, based on frequency statistics acquired and the seriousness of the accidents in which<br />
employees and/or customers and suppliers are involved.<br />
On the basis of statistics over the previous three years, particular importance was attributed to risks<br />
which may result in falls or tripping (46% of accidents occurring at the workplace), compared to less<br />
significant data for knocking against furnishings (16%) and being crushed (19%). The units responsible<br />
in the Group’s consortium company focused their attention on eliminating these risks and on types of<br />
design which would prevent these risks from arising in the first place.<br />
As concerns the phenomenon of accidents travelling to and from work, which again last year accounted<br />
for approximately 80% of the total accidents in which employees were involved, it must be underlined<br />
that the Group has little or no power to reduce these. One reason is due to the degree to which the<br />
banking sector is spread geographically and the lack of an integrated public transport network to cover<br />
the entire country. Nevertheless, specific policies are pursued to reduce road accident risks at source,<br />
giving priority to the use of public transport for work travel and making collective means of transport<br />
available where significant geographical mobility has been caused by corporate restructuring processes.<br />
UNI-INAIL PROJECT (Italian standards authority and Italian national accident insurance institute)<br />
The “UNI-INAIL project” for the compliance of the health and safety at the workplace management system<br />
with UNI-INAIl guidelines involves the adoption of an organisation and management system for<br />
prevention based on the principles of effectiveness and reality-matching with respect to the<br />
215
organisational reality of the Group and the legislation. It is designed to achieve not only – as its primary<br />
objective – greater protection from the risk of crimes being committed in terms of prevention (Legislative<br />
Decree No. 231/2001), but also significant savings on the costs of annual accident insurance policy<br />
premiums, resulting from the lower tariffs which INAIL charges companies which demonstrate that they<br />
have adopted virtuous practices on prevention and protection from risks at the workplace.<br />
A preventative risk assessment was completed in <strong>2012</strong> on areas and activities considered vulnerable in<br />
terms of compliance. It was conducted in co-operation with a consulting firm by means of interviews with<br />
the managers of Group units involved in the management of these issues. This activity made it possible<br />
to introduce improvements to procedures already in progress and to educate all those involved in<br />
company procedures which have an impact on prevention in a general sense. This risk assessment did<br />
not find any situations of actual non-compliance with regulations, but underlined the need to make a<br />
series of practices already in place official, in order to reach the level required by UNI INAIl guidelines<br />
from the viewpoint of records and documents. Documentation was also prepared which will constitute<br />
the future Group regulations on health and safety (the manual for the health and safety at the workplace<br />
system and a set of procedures), already submitted to the relevant units for approval (compliance, legal<br />
and organisation), before submission to senior management bodies for a final decision.<br />
DEVELOPMENT OF THE WORK-RELATED STRESS ASSESSMENT METHODOLOGY<br />
Assessment of work-related stress involves the implementation of a methodological process commenced<br />
in 2011, consisting of two connected and sequential stages.<br />
The first of these (the "prevention” stage), consisting of the acquisition and comparison of objective and<br />
numerically significant data ("alarm bell" events, context and working content indicators), was generally<br />
completed in 2011.<br />
The data acquisition was updated in <strong>2012</strong> to make a longer time base available. Where workers’ safety<br />
representatives were present, meetings were organised using focus group methods, led by a professional<br />
psychologist to investigate - through representatives of the working populations - subjective perceptions,<br />
amongst other things, of work-related stress.<br />
Given the poor statistical significance of the sample, a project was started, in co-operation with a major<br />
consulting firm that assists the Group, which involves the use of a web platform that can be used to put<br />
one or more questionnaires to every employee, with compilation being voluntary. It was designed to<br />
acquire data used to assess perceived stress. Designed in this way, on the one hand the process ensured<br />
the anonymity of the participants in the initiative and on the other it acquired data for homogeneous<br />
groups (males and females, age groups, type of work, etc.), in line with the provisions of the law, with a<br />
view to analysing phenomena which diverge significantly from the average level of acceptable risk.<br />
DEVELOPMENT OF ROBBERY RISK ASSESSMENT<br />
The trend for bank robbery crime has been positive not only for our Group, but also for the entire sector,<br />
with a considerable reduction in the number of both attempts and actual robberies (-70% in the period<br />
2008-<strong>2012</strong>, and -20% in <strong>2012</strong> alone).<br />
While this trend is encouraging, the result to a large degree of the widespread use of evolved cash<br />
equipment with timers (“cash machines") and the reduction in the amount of immediately available cash<br />
when robberies occur, there is however – also due to a different type of criminal, working increasingly<br />
more often in “professional” organised gangs – a constant increase in robberies carried out using<br />
methods which result in the need for psychological assistance. These are long affairs with personnel<br />
taken hostage for long periods. The trend for robberies considered “serious” in terms of the impact on the<br />
mental and physical well-being of staff has in fact reversed, with an increase inversely proportional to the<br />
overall phenomenon. The ratio of “serious” robberies to total robberies which was approximately 21% in<br />
2008, has progressively risen to 30% in 2009, 38% in 2010 and 50% in 2011 to reach 64% in <strong>2012</strong>. The<br />
data cited is for robberies only (not thefts from automatic telling machines or other equipment) with the<br />
actual entrance of robbers into branches. Fortunately, however, no incidents have occurred involving<br />
physical violence which involved our staff.<br />
Co-operation is continuing on this matter between Group units responsible for managing safety issues,<br />
in order to identify and inform people of new solutions – of a technical and organisational nature – which<br />
act primarily as a deterrent to criminals, in order to effectively supplement what has already been put in<br />
place over the years to maintain the positive results achieved to-date.<br />
DEVELOPMENT OF THE HEALTH AND SAFETY TRAINING PROGRAMME<br />
Training on health and safety matters plays a role of primary importance in risk prevention. New<br />
legislation was enacted in <strong>2012</strong> (Agreement on health and safety training signed at a State-Regions<br />
Conference to implement the powers conferred on the Permanent Conference by article 37 of Legislative<br />
Decree No. 81/2008), which involved adding to the existing Group training programmes for compliance,<br />
in terms of subjects and the length of the courses, with the new legislation on prevention. Preliminary to<br />
the final entrance into force of that "Agreement”, scheduled for the beginning of 2013, in addition to the<br />
classroom courses already programmed, initiatives were adopted for the education of all personnel. These<br />
will differ according to the different exposure to risk or the roles of responsibility occupied in the<br />
216
company and they will be delivered using e-learning methods. The courses were selected from the<br />
Group's trade association’s catalogue of training programmes, which is particularly suited to the<br />
operating reality of the banking sector.<br />
In consideration of the delicacy of the role of safety officers in decentralised organisational units, the full<br />
day course scheduled from the catalogue has been accompanied by an online course from the Italian<br />
Banking Association training catalogue (“The role of the safety officer in company safety”). The Group<br />
training catalogue has also been supplemented by a classroom session specially designed for central<br />
management units.<br />
In order to facilitate the dissemination of knowledge and awareness on the part of staff on the actual<br />
scope of the legislation on work-related stress (and not on the phenomenon of stress in general), a web<br />
based information course has been provided for all personnel, specifically prepared for the banking<br />
sector, by a leading member of the academic world in co-operation with the Italian Banking Association<br />
training department;<br />
With a view to increasing personnel awareness of the importance of behaviour consistent with respect for<br />
their own health and those of others – also in implementation of the principles and contents of the Code<br />
of Ethics – a section has been created on the Group intranet portal dedicated specifically to health and<br />
safety in which the following can easily be found: references to legislation and Group regulations; news<br />
on Group safety organisation (e.g. emergency plans and exit routs to follow); all the material used in<br />
classroom training initiatives; advice and information on correct life-styles to remain in good physical<br />
and mental condition.<br />
217
Subsequent events and the business outlook<br />
for consolidated operations<br />
Part A, Section 4 of the Notes to the <strong>Financial</strong> Statements may be consulted for significant<br />
events occurring after the end of the year.<br />
***<br />
With regard to the business outlook for operations, we report the forecasts given below on the<br />
basis of information currently available.<br />
Yet again no growth is forecast for the Italian economy, with a consequent negative impact on<br />
economic reference factors as a whole. The management policies adopted to-date by the Group,<br />
which are enbabling it to weather the crisis with reasonable prudence, will therefore be<br />
continued.<br />
The low level of market interest rates, which hit net interest income in the fourth quarter of<br />
<strong>2012</strong> to an even greater extent than in previous quarters, will continue to affect 2013,<br />
especially in the first half, while the pressure is expected to ease in the second half of the year,<br />
partly in relation to the repricing of the roll-over of medium to long-term loans.<br />
It is considered that the good performance by net fees and commissions in <strong>2012</strong> may continue<br />
in 2013.<br />
The continuing uncertainty over the future of sovereign debt risk makes it impossible to<br />
assume that the excellent performance of the finance area in the past year will continue again<br />
in 2013.<br />
The “Group rationalisation” plan will enable pursuit of the policy for the structural reduction of<br />
operating expenses to continue further.<br />
Given the current context, loan losses are under control, as a result, amongst other things, of<br />
stronger management of problem loans and it is expected that in the current year the loss on<br />
loans in absolute terms will be contained below the <strong>2012</strong> level.<br />
Bergamo, March 2013<br />
THE MANAGEMENT BOARD<br />
218
STATEMENT OF THE CHIEF<br />
EXECUTIVE OFFICER AND OF THE<br />
SENIOR OFFICER RESPONSIBLE<br />
FOR PREPARING THE COMPANY<br />
ACCOUNTING DOCUMENTS<br />
219
Certification of the consolidated financial statements pursuant to Art. 81-ter of the<br />
Consob Regulation 14 th May 1999, No.11971 and subsequent modifications and<br />
integrations<br />
1. The undersigned Victor Massiah, Chief Executive Officer, and Elisabetta Stegher, Senior Officer<br />
Responsible for preparing the company accounting documents of <strong>UBI</strong> <strong>Banca</strong> Scpa, having taken account<br />
of the provisions of paragraphs 3 and 4 of article 154 bis of Legislative Decree No. 58 of 24 th February<br />
1998, hereby certify:<br />
the adequacy in relation to the characteristics of the company and<br />
the effective application<br />
of the administrative and accounting procedures for the preparation of the consolidated financial<br />
statements during the course of <strong>2012</strong>.<br />
2. The model employed<br />
The assessment of the adequacy of the administrative and accounting procedures for the preparation of<br />
the consolidated financial statements as at and for the year ended 31 st December <strong>2012</strong> was based on an<br />
internal model defined by <strong>UBI</strong> <strong>Banca</strong> Scpa and developed in accordance with the framework drawn up<br />
by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) and with the<br />
framework Control Objectives for IT and related technology (COBIT) which represent the generally<br />
accepted international standards for internal control systems.<br />
3.Furthermore, it is certified that:<br />
3.1 the consolidated financial statements:<br />
a) were prepared in compliance with the applicable international financial reporting standards<br />
recognised by the European Community in accordance with the Regulation No. 1606/2002<br />
(EC) issued by the European Parliament on 19 th July 2002;<br />
b) correspond to the records contained in the accounting books;<br />
c) give a true and fair view of the capital, operating and financial position of the issuer and of<br />
the group of companies included in the consolidation.<br />
3.2 the management report comprises a reliable analysis of the performance, operating results and<br />
position of the issuer and of the companies included in the consolidation, together with a description,<br />
insofar as they are known, of the main risks and uncertainties to which they are exposed.<br />
Bergamo, 12 th March 2013<br />
Victor Massiah<br />
Chief Executive Officer<br />
(signed on the original)<br />
Elisabetta Stegher<br />
Senior Officer Responsible for<br />
preparing the company accounting<br />
(signed on the original)<br />
220
INDEPENDENT AUDITORS’ REPORT<br />
221
<strong>Consolidated</strong><br />
<strong>Financial</strong><br />
Statements
<strong>Consolidated</strong> Balance Sheet<br />
ASSET ITEMS (figures in thousand euro) 31.12.<strong>2012</strong> 31.12.2011<br />
10. Cash and cash equivalents 641,608 625,835<br />
20. <strong>Financial</strong> assets held for trading 4,023,934 2,872,417<br />
30. <strong>Financial</strong> assets designated at fair value 200,441 126,174<br />
40. Available-for-sale financial assets 14,000,609 8,039,709<br />
50. Held-to-maturity investments 3,158,013 -<br />
60. Loans and advances to banks 6,072,346 6,184,000<br />
70. Loans and advances to customers 92,887,969 99,689,770<br />
80. Hedging derivatives 1,478,322 1,090,498<br />
90. Fair value change in hedged financial assets 885,997 704,869<br />
100. Equity investments 442,491 352,983<br />
120. Property, plant and equipment 1,967,197 2,045,535<br />
130. Intangible assets 2,964,882 2,987,669<br />
of which:<br />
goodwill 2,536,574 2,538,668<br />
140. Tax assets: 2,628,121 2,817,870<br />
a) current 616,684 459,282<br />
b) deferred 2,011,437 2,358,588<br />
- of which pursuant to Law No. 214/2011 1,451,279 1,428,849<br />
150. Non current assets and disposal groups held for sale 21,382 22,020<br />
160. Other assets 1,060,390 2,244,343<br />
Total assets 132,433,702 129,803,692<br />
Table 1: 100O|1 - NOTA1<br />
ai “Criteri di redazione” .<br />
LIABILITIES AND EQUITY (figures in thousand euro) 31.12.<strong>2012</strong> 31.12.2011<br />
10. Due to banks 15,211,171 9,772,281<br />
20. Due to customers 53,758,407 54,431,291<br />
30. Debt securities issued 45,059,153 48,377,363<br />
40. <strong>Financial</strong> liabilities held for trading 1,773,874 1,063,673<br />
60. Hedging derivatives 2,234,988 1,739,685<br />
80. Tax liabilities: 666,364 702,026<br />
a) current 317,506 383,364<br />
b) deferred 348,858 318,662<br />
100. Other liabilities 2,391,283 3,139,616<br />
110. Post employment benefits 420,704 394,025<br />
120. Provisions for risks and charges: 340,589 345,785<br />
a) pension and similar obligations 80,563 76,460<br />
b) other provisions 260,026 269,325<br />
140. Valuation reserves (571,045) (1,315,865)<br />
170. Reserves 3,259,365 2,416,471<br />
180. Share premiums 4,716,861 7,429,913<br />
190. Share capital 2,254,368 2,254,367<br />
200. Treasury shares (4,375) (4,375)<br />
210. Non-controlling interests 839,287 898,924<br />
220. Profit (loss) for the year 82,708 (1,841,488)<br />
Total liabilities and equity 132,433,702 129,803,692 ldi di<br />
confronto al 31 dicembre 2006 si riferiscono al solo ex Gruppo BPU <strong>Banca</strong>.ai “Criteri di redazione” .<br />
225
<strong>Consolidated</strong> Income Statement<br />
figures in thousands of euro<br />
<strong>2012</strong> 2011<br />
10. Interest and similar income 3,924,400 4,047,546<br />
20. Interest expense and similar (1,992,716) (1,925,857)<br />
30. Net interest income 1,931,684 2,121,689<br />
40. Fee and commission income 1,369,422 1,351,827<br />
50. Fee and commission expense (187,616) (159,893)<br />
60. Net fee and commission income 1,181,806 1,191,934<br />
70. Dividends and similar income 15,591 19,997<br />
80. Net trading income 91,803 10,711<br />
90. Net hedging income 1,072 8,938<br />
100. Income from disposal or repurchase of: 163,551 26,529<br />
a) loans and receivables (2,131) 2,464<br />
b) available-for-sale financial assets 141,556 11,929<br />
d) financial liabilities 24,126 12,136<br />
110. Net income (loss) on financial assets and liabilities designated at fair value 852 (38,849)<br />
120. Gross income 3,386,359 3,340,949<br />
130. Net impairment losses on: (902,024) (742,221)<br />
a) loans and receivables (847,214) (607,078)<br />
b) available-for-sale financial assets (56,145) (128,182)<br />
d) other financial transactions 1,335 (6,961)<br />
140. Net financial income 2,484,335 2,598,728<br />
170. Net income from banking and insurance operations 2,484,335 2,598,728<br />
180. Administrative expenses (2,384,023) (2,304,249)<br />
a) staff costs (1,525,753) (1,423,196)<br />
b) other administrative expenses (858,270) (881,053)<br />
190. Net provisions for risks and charges (49,212) (31,595)<br />
200. Net impairment losses on property, plant and equipment (102,543) (110,888)<br />
210. Net impairment losses on intangible assets (81,117) (672,608)<br />
220. Other net operating income/(expense) 244,515 243,065<br />
230. Operating expenses (2,372,380) (2,876,275)<br />
240. Profits of equity investments 52,650 10,248<br />
260. Net impairment losses on goodwill - (1,873,849)<br />
270. Profits on disposal of investments 6,490 6,818<br />
280. Pre-tax profit (loss) from continuing operations 171,095 (2,134,330)<br />
290. Taxes on income for the year from continuing operations (79,429) 271,991<br />
300. Post-tax profit (loss) from continuing operations 91,666 (1,862,339)<br />
310. Post-tax profit from discontinued operations - 248<br />
320. Profit (loss) for the year 91,666 (1,862,091)<br />
330. (Profit) loss attributable to non-controlling interests (8,958) 20,603<br />
340. Profit (loss) for the year attributable to the Parent 82,708 (1,841,488)<br />
In considerazione dell’allineamento delle prassi contabili resesi necessarie a seguito della fusione tra gli ex Gruppi BPU e<br />
Bana Lombarda, nonché della variazione del principio contabile relativo ai piani a benefici definiti per i dipendenti, i<br />
rispetto a quelli già pubosito si rimanda a quanto I<br />
Iesposto nella sezione relativa ai “Criteri di redazione” .<br />
icembre 2006 si riferiscono al solo ex Gruppo BPU <strong>Banca</strong>.<br />
226
<strong>Consolidated</strong> statement of comprehensive income<br />
Fig u re s in th o u s a n d s o f e u ro <strong>2012</strong> 2011<br />
10. PROFIT (LOSS) FOR THE YEAR 91,666 (1,862,091)<br />
Other comprehensive income net of taxes<br />
20. Available-for-sale financial assets 708,764 (981,503)<br />
60. Cash flow hedges (1,849) (2,694)<br />
90. Actuarial gains (losses) on defined benefit plans (33,942) (21,435)<br />
100. Share of valuation reserves of equity-accounted investees 90,169 (62,742)<br />
110. Total other comprehensive income (loss) net of taxes 763,142 (1,068,374)<br />
120. TOTAL COM PREHENSIVE INCOM E (LOSS) (item 10 + 110) 854,808 (2,930,465)<br />
CONSOLIDATED COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO NON-<br />
130.<br />
130.<br />
CONTROLLING INTERESTS 14,983 (27,256)<br />
CONSOLIDATED COM PREHENSIVE INCOM E (LOSS) ATTRIBUTABLE TO THE<br />
SHAREHOLDERS OF THE PARENT 839,825 (2,903,209)<br />
227
Statement of Changes in <strong>Consolidated</strong> Equity<br />
• to 31/12/<strong>2012</strong><br />
(figures in thousands of euro)<br />
Changes during the year<br />
Allocation of prior year<br />
Balances as at 31/12/2011<br />
Restatement of opening balances<br />
profit<br />
Equity transactions<br />
Balances as at 01/01/<strong>2012</strong><br />
Reserves<br />
Dividends and other uses<br />
Changes in reserves<br />
New share issues<br />
Repurchase of treasury shares<br />
Extraordinary distribution of<br />
dividends<br />
Change in equity instruments<br />
Derivatives on treasury shares<br />
Stock options<br />
<strong>Consolidated</strong> comprehensive income<br />
Equity as at 31/12/<strong>2012</strong><br />
Equity attributable to the shareholders<br />
of the Parent as at 31/12/<strong>2012</strong><br />
Equity attributable to non-controlling<br />
interests as at 31/12/<strong>2012</strong><br />
Share capital: 2,758,122 - 2,758,122 - - 6,772 1 - - - - - - 2,764,895 2,254,368 510,527<br />
a) ordinary shares 2,722,032 - 2,722,032 - - (2,245) 1 - - - - - - 2,719,788 2,254,368 465,420<br />
b) other shares 36,090 - 36,090 - - 9,017 - - - - - - - 45,107 - 45,107<br />
Share premiums 7,506,086 - 7,506,086 (2,713,054) (20,320) 2 - - - - - 4,772,714 4,716,861 55,853<br />
Reserves 2,734,888 - 2,734,888 850,963 (87,122) 28,515 - - - - - - 3,527,244 3,259,365 267,879<br />
Valuation reserves (1,294,683) - (1,294,683) - - (43,434) - - - - - - 763,142 (574,975) (571,045) (3,930)<br />
Equity instruments - - - - - - - - - - - - - - - -<br />
Treasury shares (4,375) - (4,375) - - - - - - - - - - (4,375) (4,375) -<br />
Profit for the year (1,862,091) - (1,862,091) 1,862,091 - - - - - - - 91,666 91,666 82,708 8,958<br />
Equity: 9,837,947 - 9,837,947 - (87,122) (28,467) 3 - - - - - 854,808 10,577,169 9,737,882 839,287<br />
- attributable to shareholders<br />
of the Parent 8,939,023 - 8,939,023 - (51,691) 10,722 3 - - - - - 839,825 9,737,882 X X<br />
- attributable to noncontrolling<br />
interests 898,924 - 898,924 - (35,431) (39,189) - - - - - - 14,983 839,287 X X<br />
The figures presented in this statement of changes in equity correspond to those reported in Table B.1 (<strong>Consolidated</strong> equity by type of company)<br />
contained in Part F of the Notes to the <strong>Financial</strong> Statements.<br />
Details of valuation reserves:<br />
31-Dec-11 31-Dec-11 31-Dec-12 31-Dec-12<br />
Shareholder<br />
s of Parent<br />
Noncontrolling<br />
interests<br />
Shareholder<br />
s of Parent<br />
Noncontrolling<br />
interests<br />
a) available-for-sale<br />
b) cash flow hedge<br />
c) foreign currency differences<br />
d) actuarial gains/losses<br />
e) special revaluation laws<br />
-1,350,979 -9,115 -561,244 83<br />
-3,217 -128 -4,937 -257<br />
-243 0 -243 0<br />
-34,155 -3,482 -65,053 -6,526<br />
72,729 33,907 60,432 2,770<br />
-1,315,865 21,182 -571,045 -3,930<br />
228
(figures in thousands of euro)<br />
• to 31/12/2011<br />
Balances as at 31/12/2010<br />
Restatement of opening balances<br />
Balances as at 01/01/2011<br />
Allocation of prior year<br />
Reserves<br />
profit<br />
Dividends and other uses<br />
Changes in reserves<br />
Share capital: 2,112,552 - 2,112,552 - - (10,932) 656,502 - - - - - - 2,758,122 2,254,367 503,755<br />
a) ordinary shares 2,076,462 - 2,076,462 - - (10,932) 656,502 - - - - - - 2,722,032 2,254,367 467,665<br />
b) other shares 36,090 - 36,090 - - - - - - - - - - 36,090 - 36,090<br />
Share premiums 7,179,155 - 7,179,155 - (2,604) 329,535 - - - - - 7,506,086 7,429,913 76,173<br />
Reserves 2,690,200 - 2,690,200 69,885 - (25,197) - - - - - - 2,734,888 2,416,471 318,417<br />
Valuation reserves (225,851) - (225,851) - - (458) - - - - - - (1,068,374) (1,294,683) (1,315,865) 21,182<br />
Equity instruments - - - - - - - - - - - - - - - -<br />
T reasury shares - - - - - - - (4,375) - - - - - (4,375) (4,375) -<br />
P rofit for the year 185,723 - 185,723 (69,885) (115,838) - - - - - - (1,862,091) (1,862,091) (1,841,488) (20,603)<br />
Equity: 11,941,779 - 11,941,779 - (115,838) (39,191) 986,037 (4,375) - - - - (2,930,465) 9,837,947 8,939,023 898,924<br />
- attributable to shareholders<br />
of<br />
the Parent 10,979,019 - 10,979,019 - (102,236) (16,213) 986,037 (4,375) - - - - (2,903,209) 8,939,023 X X<br />
- attributable to noncontrolling<br />
interests 962,760 - 962,760 - (13,602) (22,978) - - - - - - (27,256) 898,924 X X<br />
New share issues<br />
Changes during the year<br />
Equity transactions<br />
Repurchase of treasury shares<br />
Extraordinary distribution of<br />
dividends<br />
Change in equity instruments<br />
Derivatives on treasury shares<br />
Stock options<br />
<strong>Consolidated</strong> comprehensive income<br />
Equity as at 31/12/2011<br />
Equity attributable to the shareholders<br />
of the Parent as at 31/12/2011<br />
Equity attributable to non-controlling<br />
interests as at 31/12/2011<br />
T he figures presented in this statement of changes in equity correspond to those reported in Table B.1 (<strong>Consolidated</strong> equity by type of company)<br />
contained in Part F of the Notes to the <strong>Financial</strong> Statements.<br />
Details of valuation reserves:<br />
31-Dec-10 31-Dec-10 31-Dec-11 31-Dec-11<br />
Shareholders<br />
of Parent<br />
Noncontrolling<br />
interests<br />
Shareholders<br />
of Parent<br />
Noncontrolling<br />
interests<br />
a) available-for-sale<br />
b) cash flow hedge<br />
c) foreign currency differences<br />
d) actuarial gains/losses<br />
e) special revaluation law s<br />
-311,493 -4,355 -1,350,979 -9,115<br />
-619 -32 -3,217 -128<br />
-243 0 -243 0<br />
-14,518 -1,684 -34,155 -3,482<br />
73,146 33,947 72,729 33,907<br />
-253,727 27,876 -1,315,865 21,182<br />
229
<strong>Consolidated</strong> Statement of Cash Flows (Indirect method)<br />
Figures in thousands of euro 31.12.<strong>2012</strong> 31.12.2011<br />
A. OP ERATING ACTIVITIES<br />
1. Ordina ry a c tivitie s 9 8 2 ,8 0 8 6 5 4 ,17 7<br />
- profit (loss) for the yea r (+/-) 91,666 (1,862,091)<br />
- gains/losses on financial a ssets held for trading and on financial a ssets/liabilities at fair value (-/+) (92,655) 28,138<br />
- gains/losses on hedging activities (-/+) (1,072) (8,938)<br />
- net impa irment losses on loans (+/-) 902,024 742,221<br />
- net impa irment losses on property, plant a nd equipme nt and intangible a ssets (+/-) 183,660 2,657,343<br />
- net provisions for risks and charges and other expense/income (+/-) 49,212 31,595<br />
- net premiums not received (-) - -<br />
- other insurance income/expense not rec eived (+/-) - -<br />
- outstanding taxes and duties (+) (74,799) (860,402)<br />
- net impa irment losses on disposal groups held for sale after tax (+/-) - -<br />
- other adjustments (+/-) (75,228) (73,689)<br />
2 . Ne t c a s h flo ws fro m/us e d by fina nc ia l a s s e ts 4 5 4 ,5 7 2 (3 ,0 15 ,4 6 6 )<br />
- financial assets held for trading (1,138,754) (128,955)<br />
- financial assets a t fair va lue 4,443 (18,919)<br />
- a vailable-for-sale financial assets (4,848,205) 2,084,728<br />
- loans to banks: repa yable on de mand - -<br />
- loans to banks: othe r loa ns 111,654 (4,065,648)<br />
- loans to customers 5,954,587 1,495,981<br />
- other assets 370,847 (2,382,653)<br />
3 . Ne t c a s h flo ws fro m/us e d by fina nc ia l lia bilitie s 1,8 7 7 ,0 3 3 1,6 0 8 ,7 2 3<br />
- a mounts due to banks re payable on demand - -<br />
- a mounts due to banks: other payables 5,438,890 4,388,304<br />
- due to customers (672,884) (4,234,866)<br />
- debt securities issued (3,318,210) 283,475<br />
- financial liabilities held for trading 710,201 109,250<br />
- financial liabilities designated at fair value - -<br />
- other liabilities (280,964) 1,062,560<br />
Ne t c a s h flo ws fro m/us e d in o pe ra ting a c tivitie s 3 ,3 14 ,4 13 (7 5 2 ,5 6 6 )<br />
B. INVES TING ACTIVITIES<br />
1. Ca s h flo ws g e ne ra te d by 7 0 ,16 1 3 9 ,4 2 9<br />
- disposals of equity investments 50,588 2,704<br />
- dividends received on equity inve stments 15,591 19,997<br />
- disposals of held-to-maturity investments - -<br />
- disposals of property, plant and equipment 1,569 9,662<br />
- disposals of intangible assets 2,413 -<br />
- disposals of lines of businesses - 7,066<br />
2 . Ca s h flo ws us e d in (3 ,2 8 1,6 8 2 ) (14 9 ,4 9 4 )<br />
- purchases of equity investme nts - (36,000)<br />
- purchases of held-to-maturity investments (3,188,072) -<br />
- purchases of property, plant and equipme nt (32,724) (48,992)<br />
- purchases of inta ngible assets (60,886) (64,502)<br />
- purchases of lines of business - -<br />
Ne t c a s h flo ws fro m/us e d in inve s ting a c tivitie s (3 ,2 11,5 2 1) (110 ,0 6 5 )<br />
C. FINANCING ACTIVITIES - -<br />
- issues/repurchases of treasury shares 3 981,662<br />
- issues/purchases of equity instruments - -<br />
- distribution of divide nds and othe r uses (87,122) (102,236)<br />
Ne t c a s h flo ws fro m/us e d in fina nc ing a c tivitie s (8 7 ,119 ) 8 7 9 ,4 2 6<br />
CAS H FLOWS GENERATED/US ED DURING THE YEAR 15 ,7 7 3 16 ,7 9 5<br />
Ke y: (+) gene rated (-) absorbed<br />
230
Reconciliation<br />
Figures in thousands of euro 31.12.<strong>2012</strong> 31.12.2011<br />
Cash and cash equivalents at beginning of year 625,835 609,040<br />
Total net cash flows generated/used during the year 15,773 16,795<br />
Cash and cash equivalents at end of year 641,608 625,835<br />
231
PART A – Accounting policies<br />
A.1 – General Part<br />
A.2 – The main items in the financial statements<br />
A.3 – Information on F.V.<br />
PART B – Notes to the consolidated balance sheet<br />
Assets<br />
Liabilities<br />
Other information<br />
PART C – Notes to the consolidated income statement<br />
PART D – <strong>Consolidated</strong> statement of comprehensive<br />
income<br />
PART E – Information on risks and the relative<br />
hedging policies<br />
Notes to the<br />
<strong>Consolidated</strong><br />
<strong>Financial</strong><br />
Statements<br />
PART F – Information on consolidated equity<br />
PART G – Business combination transactions<br />
concerning companies or lines of business<br />
PART H – Transactions with related parties<br />
PART I – Share based payments<br />
PART L – Segment <strong>Report</strong>ing<br />
232
Part A – Accounting policies<br />
A.1 – GENERAL PART<br />
Section 1 Statement of compliance with IFRS<br />
This consolidated financial report of Unione di Banche Italiane has been prepared in<br />
compliance with the international financial reporting standards (IFRS) issued by the<br />
International Accounting Standards Board (IASB) and with the relative interpretations of the<br />
International <strong>Financial</strong> <strong>Report</strong>ing Interpretations Committee (IFRIC) 1 as endorsed by the<br />
European Commission and in force as at 31 st December <strong>2012</strong>, implemented in Italian law by<br />
Legislative Decree No. 38/2005, which exercised the option under EC Regulation 1606/2002<br />
concerning international accounting standards. No exceptions have been made in the<br />
application of IFRS international accounting standards.<br />
The consolidated financial statements, containing the balance sheet, income statement,<br />
statement of comprehensive income, statement of cash flows, statement of changes in equity,<br />
notes to the financial statements, accompanied by the consolidated management report,<br />
include the Parent <strong>UBI</strong> <strong>Banca</strong> S.c.p.A. and its subsidiaries included in the scope of<br />
consolidation. They have been prepared on the basis of the positions of the single companies<br />
included in the consolidation, corresponding to the relative individual company financial<br />
statements, examined and approved by their respective governing bodies and appropriately<br />
modified and reclassified, where necessary, for compliance with the accounting policies<br />
adopted by the Group.<br />
The proposed consolidated annual financial statements approved by the Management Board<br />
on 12 th March 2013 and submitted to the Supervisory Board for approval on 27 th March 2013,<br />
contain a statement by the Chief Executive Officer and the Senior Officer Responsible<br />
pursuant to Art. 154 bis of Legislative Decree No. 58/1998 and they have been subjected to<br />
audit by the independent auditors Deloitte & Touche S.p.A.<br />
Section 2 Basis of preparation<br />
These financial statements have been prepared in accordance with measurement criteria<br />
adopted on the basis of a going concern assumption and in compliance with the accrual<br />
accounting principles, the relevance of the information and the predominance of substance<br />
over form.<br />
The financial statements have been clearly stated and give a true and fair view of the capital<br />
and financial position, the result for the year, the changes in equity and the cash flows.<br />
Unless otherwise indicated, the information contained in this annual report is expressed in<br />
euro as the accounting currency and the financial information, the balance sheet and income<br />
statement, the notes and comments and the explanatory tables are presented in thousands of<br />
euro. The relative rounding of the figures has been performed on the basis of Bank of Italy<br />
instructions.<br />
The mandatory financial statements used in this annual report comply with those defined in<br />
Bank of Italy Circular No. 262/2005 and subsequent amendments and additions. In addition<br />
to information on the accounts as at and for the period ended 31 st December <strong>2012</strong>, they also<br />
provide the same comparative information as at and for the year ended 31 st December <strong>2012</strong><br />
(which did not require adjustments with respect to the figures published in those financial<br />
statements) and they do not include items for which there was no data for the current and the<br />
previous year.<br />
1<br />
See the “List of IAS/IFRS standards endorsed by the European Commission”. The standards listed there and the<br />
relative interpretations are applied on the basis of events occurring that are disciplined by them from the date on<br />
which their application becomes compulsory, unless specified otherwise.<br />
233
For the purposes of preparing this report, the Bank complied with the provisions indicated in<br />
the following “addendum” letters issued by the Bank of Italy, with which the supervisory body<br />
provided replies to requests for clarifications received and also required further reporting<br />
obligations:<br />
letter No. 0125853/12 of 10 th February <strong>2012</strong>;<br />
letter No. 0204858/12 of 7 th March <strong>2012</strong>;<br />
letter No. 0263122/12 of 23 rd March <strong>2012</strong>;<br />
letter No. 0677311/12 of 7 th August <strong>2012</strong>;<br />
letter No. 046586/13 of 15 th January 2013.<br />
With particular reference to the provisions contained in letter No. 0677311/12 of 7 th August<br />
<strong>2012</strong> on the question of contingent assets, in compliance with the provisions of IAS 37, as in<br />
previous years, the <strong>UBI</strong> Group has assessed the possible risk of losing legal cases for which<br />
payment must be made to the tax authorities as a result of a temporary payment order, by<br />
recognising sums within provisions for risks and charges within the balance sheet liability<br />
item 120 “Provisions for risks and charges”, thereby not considering the contra entry for the<br />
payments as contingent assets, as defined by the accounting standard mentioned.<br />
This interpretation is based, amongst other things, on the grounds that following the tax<br />
collection reform 2 , the receipt of a payment order is an “automatic” occurrence, which<br />
generates an obligation to pay regardless of whether the tax claim is valid, and therefore has<br />
no bearing in itself on the assessment made of the risk. As a consequence, in preparing these<br />
financial statements, the contra entry for the sums paid temporarily are considered as a<br />
cautionary deposit recognised in the balance sheet within asset item 160 “Other assets”,<br />
unless that payment is made for a liability which is considered probable. In this case it is<br />
recognised in the income statement within the item 190 “Net provisions for risks and charges”<br />
or as use of the provision for risks and charges where provision has already been made.<br />
To complete the information, account was also taken of the following documents in the<br />
preparation of this separate annual report:<br />
joint document No. 5 issued by the Bank of Italy/Consob/Isvap on 15 th May <strong>2012</strong> on the<br />
accounting treatment for tax assets resulting from Law No. 214/2011;<br />
the ESMA 3 document of 12 th November <strong>2012</strong>, “European common enforcement priorities<br />
for <strong>2012</strong> financial statements”, designed to promote uniform application of IFRS by<br />
identifying subjects considered particularly significant for the financial statements of<br />
listed European companies, in consideration, amongst other things, of current market<br />
conditions.<br />
2<br />
The reference is to Art. 29 of Decree Law No. 78/2010.<br />
3<br />
European Securities Market Authority.<br />
234
Accounting policies<br />
The accounting policies contained in Part A.2 concerning the classification, measurement and<br />
derecognition stages are the same as those adopted for the preparation of the 2011 annual<br />
financial statements except for possible changes reported under “Other aspects”.<br />
Where it is impossible to measure items in the financial statements with precision, the<br />
application of those policies involves the use of estimates and assumptions which may even<br />
have a significant effect on the amounts recognised in the balance sheet and in the income<br />
statement.<br />
The use of reasonable estimates forms an essential part of the preparation of financial<br />
statements and we have listed here those items in the financial statements in which the use of<br />
estimates and assumptions is most significant:<br />
measurement of loans and receivables;<br />
measurement of financial assets not listed on active markets;<br />
measurement of indefinite useful life intangible assets and equity investments;<br />
quantification of provisions for risks and charges;<br />
quantification of deferred taxes;<br />
definition of the depreciation and amortisation charges for property, plant and<br />
equipment and intangible assets with finite useful lives;<br />
valuation of the provision for post-employment benefits.<br />
An adjustment may be made to an estimate following a change in the circumstances on which<br />
it was based or if new information is acquired or yet again on the basis of greater experience. A<br />
change in an estimate is applied prospectively and it therefore generates an impact on the<br />
income statement in the year in which it is made and, if it is the case, also in future years.<br />
No changes were made in <strong>2012</strong> to the criteria previously employed for estimates in the<br />
financial statements as at and for the year ended 31 st December 2011.<br />
The following is reported with regard to changes in IFRS accounting standards.<br />
International accounting standards in force from <strong>2012</strong><br />
In <strong>2012</strong> the application of EU Regulation No. 1205/2011 became compulsory. This amended<br />
IFRS 7 “<strong>Financial</strong> instruments: disclosures” with particular regard to disclosures relating to<br />
transfers of financial assets. These amendments, which were concretely applied in the<br />
preparation of the financial statements as at and for the period ended 31 st December <strong>2012</strong>,<br />
only have an impact in terms of additional disclosures in financial reports.<br />
International accounting standards application of which is compulsory after the <strong>2012</strong><br />
annual report<br />
In <strong>2012</strong>, on conclusion of the “endorsement” process for international financial standards by<br />
the European Commission, the following EU regulations were issued:<br />
1. Regulation EU 475/<strong>2012</strong> 4 :<br />
makes amendments to IAS 1 “Presentation of financial statements” with regard to the<br />
“statement of comprehensive income”, the items of which were divided into:<br />
items which will be transferred subsequently to the income statement (e.g. the cash<br />
flow hedge reserve and the available-for-sale fair value reserve); and<br />
items which will not be transferred to the income statement (e.g. reserve for<br />
actuarial gains and losses on post employment benefit plans);<br />
basically introduces a new version of IAS 19 “Employee benefits”, which, amongst other<br />
things, involves the elimination of the “corridor method” to account for actuarial gains<br />
and losses, changes to the method for calculating interest on plan assets, recognition of<br />
the “service cost” and the introduction of new disclosure requirements;<br />
2. Regulation EU 1254/<strong>2012</strong> 5 :<br />
4<br />
Application of the relative provisions is compulsory from 1/1/2013.<br />
235
introduces IFRS 10 “<strong>Consolidated</strong> financial statements”, IFRS 11 “Joint arrangements”<br />
and IFRS 12 “Disclosure of interests in other entities”; and<br />
amends IAS 27 “<strong>Consolidated</strong> and separate financial statements” and IAS 28<br />
“Investments in associates”.<br />
It introduces changes to the rules for the preparation of and compulsory disclosures for<br />
consolidated and separate financial statements.<br />
3. Regulation EU 1255/<strong>2012</strong> 6 :<br />
introduces accounting standard IFRS 13 “Fair value measurement” applicable to assets<br />
and liabilities to be measured at fair value (apart from some specific exceptions<br />
provided for in application of the standard 7 ) or in other words balance sheet disclosures<br />
on their fair value. The standard represents a common guide for all fair value items in<br />
compliance with the provisions of IFRS. It introduces a standard framework for the<br />
procedures by which fair value must be measured and it requires further disclosures<br />
with respect to the provisions already contained in other accounting standards;<br />
amends IAS 12 “Income taxes” by introducing an exception to the measurement<br />
principle set by IAS 12 regarding deferred taxes in the form of relative presumption, by<br />
which the accounting value of an investment property (i.e. former IAS 40 properties)<br />
measured on a fair value basis would be recovered by its sale. Consequently an entity<br />
would be required to make use of the tax rate applicable to the sale of the asset in<br />
question;<br />
amends FRS 1 “First-time adoption of international financial reporting standards”;<br />
introduces IFRIC 20 “Stripping costs in the production phase of a surface mine”.<br />
4. Regulation EU 1256/<strong>2012</strong>:<br />
amends IFRS 7 “<strong>Financial</strong> instruments: disclosures” 8 concerning disclosures on<br />
offsetting financial assets and liabilities with particular regard to:<br />
all financial instruments subject to offsetting according to IAS 32;<br />
those financial instruments which are subject to “master netting arrangements” –<br />
or similar arrangements – in order to be able to indicate the impacts, or potential<br />
impacts, to users of them on the financial position of the entity;<br />
amends IAS 32 “<strong>Financial</strong> instruments: presentation” 9 in order to provide additional<br />
guidelines to reduce inconsistencies in the practical application of the standard on the<br />
question of offsetting financial assets and liabilities.<br />
Finally, Regulation EU 183/2013, which was issued on 5 th March 2013, makes amendments<br />
to IFRS 1 “First time adoption of International <strong>Financial</strong> <strong>Report</strong>ing Standards” 10 on exemptions<br />
granted to new adopters of IFRS on the subject of government loans granted at below market<br />
interest rates.<br />
For full information with regard to the adoption of new accounting standards and<br />
amendments for which application is compulsory from 1/1/2013, it is considered that these<br />
should not have any significant impacts on the financial statements of the Group. More<br />
specifically, with regard to the estimate of the impacts of the adoption of the new version of<br />
IAS 19, information is given in Section 12 of Part B of these notes to the financial statements,<br />
which may be consulted.<br />
Amendments to IAS 39<br />
The process of the full revision of IAS 39, is still in progress and at present no documents<br />
issued by the IASB have been endorsed by the European Commission. As already reported<br />
with regard to the compulsory adoption of the new accounting rules, on 16 th December 2011<br />
the IASB issued the amendment “Mandatory Effective Date of IFRS 9 and Transition<br />
5<br />
Application of the relative provisions is compulsory from 1/1/2014.<br />
6<br />
Application of the relative provisions is compulsory from 1/1/2013.<br />
7<br />
For example, the provisions of IFRS 13 do not apply to share-based payments (IFRS 2), to lease transactions (IAS 17)<br />
and to similar fair value measurements (such as, for example, the net realisable value of inventories according to IAS 2<br />
and the value in use in IAS 36).<br />
8<br />
Application of the relative provisions is compulsory from 1/1/2013.<br />
9<br />
Application of the relative provisions is compulsory from 1/1/2014.<br />
10<br />
Application of the relative provisions is compulsory from 1/1/2013.<br />
236
Disclosures”, which postponed the date in question until 1 st January 2015. We report the<br />
following with regard to the three phases of the project:<br />
Phase 1 – Classification and Measurement<br />
An exposure draft was published in December <strong>2012</strong> which involves limited amendments to the<br />
previous versions of the standard, issued in November 2009 and October 2010 respectively.<br />
The exposure draft proposes the introduction of a third classification for financial assets – fair<br />
value-OCI – for debt instruments which a company may hold with both the intention to receive<br />
contracted cash flows from them and also the intention of selling them.<br />
Phase 2 – Impairment methodology<br />
Publication of a new exposure draft is expected in the first quarter of 2013 on the basis of the<br />
analyses and decisions taken by the IASB following the publication of a supplementary<br />
document in January 2011. This impairment methodology should be applied to all financial<br />
assets measured at amortised cost, to financial assets which will be recognised in the new fair<br />
value-OCI class and to commitments to make payments and to financial guarantees not<br />
measured at fair value through profit or loss.<br />
Phase 3 – Hedge Accounting<br />
On 7 th September <strong>2012</strong>, following the consultation process to which the exposure draft issued<br />
in December 2010 was subject, a “staff draft” was published on general hedge accounting, the<br />
provisions of which were basically designed both to align accounting treatments with risk<br />
management approaches and to introduce a standard that is more focused on the objective to<br />
be achieved using hedges and on the procedures for achieving that objective.<br />
In short, the changes presented by the staff draft can be summarised as follows:<br />
elimination of the compulsory nature of quantitative tests for effectiveness in favour of<br />
the choice by entities of a qualitative rather than a quantitative method, which is then<br />
applied constantly on the basis of what is considered most appropriate to capture the<br />
most important aspects of a hedge (and also the underlying reasons for its<br />
ineffectiveness);<br />
<br />
<br />
the need, in the event of ineffectiveness, to rebalance the relations of a hedge by acting<br />
on the item hedged or on the hedging instrument if the risk management strategy which<br />
established the hedge is unchanged, instead of discontinuing the hedge;<br />
the possibility of hedging net positions.<br />
For full information we report that the publication of a discussion paper is expected in 2013<br />
on “Macro hedge accounting”, a subject with the IASB intends to address in a separate issue,<br />
subsequent to the entire project from which the new IFRS 9 will be triggered.<br />
237
SECTION 3 Consolidation scope and methods<br />
The consolidated financial statements include the financial and operating results of <strong>UBI</strong> <strong>Banca</strong><br />
Scpa and the companies either directly or indirectly controlled by it, including within the<br />
scope of the consolidation also those companies which operate in sectors different from that to<br />
which the Parent belongs and the special purpose entities, when the conditions of effective<br />
control exist, even in the absence of an equity stake, but in relation to what is termed<br />
“business”.<br />
The following principal changes occurred in the composition of the consolidation as compared<br />
with the situation as at 31 st December 2011.<br />
Changes in the consolidation scope<br />
- the formation, on 19 th April <strong>2012</strong>, of three new special purpose entities: <strong>UBI</strong> SPV BBS<br />
Srl , <strong>UBI</strong> SPV BPCI Srl and <strong>UBI</strong> SPV BPA Srl;<br />
- the establishment, on 2 nd July <strong>2012</strong>, of <strong>UBI</strong> Academy Scrl, a consortium company for<br />
the managerial training and development of staff who work in the <strong>UBI</strong> <strong>Banca</strong> Group;<br />
- the procedures were completed on 3 rd September <strong>2012</strong> resulting from the exercise of<br />
the right of withdrawal of all the shares held in Arca SGR S.p.A.. The company has<br />
been excluded from the consolidation since that date;<br />
- on 25 th October <strong>2012</strong>, the procedure for the liquidation of the company Barberini Sa<br />
was completed. The company has been excluded from the consolidation since that<br />
date;<br />
- the disposal of the company <strong>UBI</strong> Insurance Broker S.p.A. was completed on 21 st<br />
December <strong>2012</strong>. Since the <strong>UBI</strong> <strong>Banca</strong> Group continued to manage the company until<br />
the end of the year, the consolidated income statement contains the income statement<br />
items relating to the company disposed of.<br />
The following extraordinary transactions were recorded as taking place within the Group in<br />
<strong>2012</strong>.<br />
- the merger of Banco di San Giorgio S.p.A. into <strong>Banca</strong> Regionale Europea S.p.A;<br />
- the merger of <strong>Banca</strong> 24-7 into <strong>UBI</strong> <strong>Banca</strong> Scpa;<br />
- the merger of Società Italiana Leasing e Finanziamenti S.p.a (SILF) into <strong>UBI</strong> <strong>Banca</strong>;<br />
- the merger of Investnet International S.p.A. into IW Bank S.p.A.<br />
A series of transactions to purchase shares or subscribe share issuances also took place,<br />
which resulted in changes in the percentage shareholdings of some Group companies. These<br />
transactions did not determine changes in the consolidation methods.<br />
Further information on the changes described above is given in the section “The consolidation<br />
scope” contained in the Management <strong>Report</strong>, which may be consulted.<br />
With regard to the consolidation methods used, companies subject to control are consolidated<br />
using the line-by-line method, those subject to joint control are proportionately consolidated,<br />
while those interests over which the Group exercises significant influence are measured using<br />
the equity method.<br />
The line-by-line consolidation method<br />
Subsidiaries subject to control are consolidated using the full line-by-line method. The concept<br />
of control goes beyond a majority percentage interest in the share capital of the company<br />
invested in and is defined as the power to determine the financial and operating policies of the<br />
entity in question for the purpose of obtaining the benefits from its activities.<br />
The line-by-line consolidation method involves summing the items of the income statements<br />
and balance sheets of subsidiaries on a line-by-line basis. The following adjustments are made<br />
for this purpose:<br />
238
(a) the carrying amounts of the subsidiaries held by the Parent and the corresponding part of<br />
the equity are eliminated;<br />
(b) the proportion of equity and of profit or loss for the year attributable to other shareholders<br />
is stated under a separate item.<br />
If the results of the above adjustments are positive, then they are recognised (after first<br />
allocating them if possible to the assets or liabilities of the subsidiary) as goodwill within item<br />
130 “Intangible assets” on the date of the first consolidation, if the necessary conditions apply.<br />
If the resulting differences are negative they are normally charged to the income statement.<br />
Intragroup balances and transactions, including revenues, costs and dividends are completely<br />
eliminated.<br />
The operating results of a subsidiary that is acquired during the period are included in the<br />
consolidated balance sheet starting from the date on which it is acquired Similarly, the<br />
operating results of a subsidiary that is disposed of are included in the consolidated balance<br />
sheet until the date on which control over the company is released.<br />
The accounts used in the preparation of consolidated financial statements are stated as of the<br />
same date.<br />
The consolidated financial statements have been prepared using uniform accounting policies<br />
for like transactions and events.<br />
If a subsidiary uses different accounting policies from those employed in the consolidated<br />
financial statements for like transactions and other events in similar circumstances,<br />
adjustments are made to its accounts for the purposes of the consolidation.<br />
The proportionate method<br />
An equity investment is considered as subject to joint control even in the absence of equal<br />
voting rights, if control over the operating activities and strategic policies of the company<br />
invested in is shared with others on the basis of contractual agreements.<br />
For these companies IAS 31 allows the possibility of consolidation according to the<br />
proportional method or, alternatively, by adopting the simpler equity method.<br />
As at 31 st December <strong>2012</strong>, no investments had been comsolidated using the proportional<br />
method.<br />
The equity method<br />
Equity investments over which the Group exercises significant influence, which is the power to<br />
participate in the financial and operating policy decisions but not to control or have joint<br />
control over them are measured using the equity method.<br />
Under this method an equity investment is initially recorded at cost and the carrying amount<br />
is increased or decreased to reflect the investor's share of the profit or loss of the associate<br />
after the acquisition date. The proportion of the profit or loss for the year made by the investee<br />
attributable to the investor is stated in the income statement of the latter. Dividends received<br />
from an investee reduce the carrying value of the investment; adjustments to the carrying<br />
amount may also be required arising from a change in the portion of the investee's equity<br />
attributable to the investor that have not been recognised in the income statement. These<br />
changes include changes arising from the revaluation of property, plant and equipment from<br />
exchange rate differences on items in foreign currency. The portion of those changes<br />
attributable to the investor are recorded directly in its equity.<br />
Where potential voting rights exist, the investor's share of profit or loss of the investee and of<br />
changes in the investee's equity is determined on the basis of present ownership interests and<br />
does not reflect the possible exercise or conversion of potential voting rights.<br />
Where the investee incurs continued losses, if these exceed the carrying value of the investee,<br />
the carrying value is written off and further losses are only recognised if the investor has<br />
contracted legal or implicit obligations or has made payments on behalf of the investee. If the<br />
investee subsequently realises a profit, the investor resumes recognition of its share of the<br />
profits only after reaching the share of the profit which was previously not recognised.<br />
For the purposes of consolidating investments in associates, the figures from the financial<br />
statements prepared and approved by the boards of directors of the individual companies are<br />
used. Where accounts prepared according to international standards are not available those<br />
239
prepared according to national accounting standards are used after first verifying that there<br />
are no significant differences.<br />
The consolidating entity ceases use of the equity method from the date on which it ceases to<br />
exercise significant influence over the associate and the investment is classified within either<br />
“financial assets held for trading” or “available-for-sale financial assets”, according to the case,<br />
starting from that date on condition that the associate does not become a subsidiary or<br />
subject to joint control.<br />
240
1. Equity investments in companies subject to exclusive control and to joint control (proportionately consolidated)<br />
D e ta ils o f inv e s tm e nt<br />
N a m e<br />
He a dqua rte rs<br />
S ha re c a pita l<br />
% o f v o te s<br />
Inv e s ting c o m pa ny<br />
% he ld<br />
A .1 Line -by-line c o ns o lida te d c o m pa nie s<br />
1. Unio ne di Banche Italiane Scpa - <strong>UBI</strong> Ba nca Bergamo<br />
P A R ENT<br />
2. 24-7 Fina nce Srl Bre s cia e uro 10,000 4 UB I B anca Scpa 10.000% 10.000%<br />
3. Albenza 3 Srl Milan e uro 10,000 4 X X X<br />
4. <strong>UBI</strong> Ca pital Singapo re P te Ltd Singapo re Singapo re do llars 10,600,000 1 UB I B anca Internatio na l Sa 100.000% 100.000%<br />
5. B anca Carime Spa Co s enza euro 1,468,208,505.92 1 UB I B anca Scpa 92.837% 92.837%<br />
6. B anca di Va lle C amo nic a Spa Bre no (BS) euro 2,738,693 1 UB I B anca Scpa 74.244% 82.960%<br />
Banc o di B res c ia Spa 8.716%<br />
7. B anca Lo mba rda P refe rre d Capital Co mpa ny LLC Delaware (USA) euro 1,000 1 UB I B anca Scpa 100.000% 100.000%<br />
8. B anca Lo mba rda P refe rre d Securities Trus t Delaware (USA) euro 1,000 1 UB I B anca Scpa 100.000% 100.000%<br />
9. B anca P o po lare Co mmercio e Indus tria Ca pital Trus t Delaware (USA) euro 1,000 1 BP CI Funding Llc - USA 100.000% 100.000%<br />
10. Banc a P o po lare Co mme rcio e Indus tria Funding LLC Delaware (USA) euro 1,000,000 1 UB I B anca Scpa 100.000% 100.000%<br />
11. <strong>Banca</strong> P o po lare C o mmercio e Indus tria Spa Milan euro 934,150,467.60 1 UB I B anca Scpa 75.077% 75.077%<br />
12. Banc a P o po lare di Anco na Spa J es i ( AN) euro 147,301,670.32 1 UB I B anca Scpa 92.971% 92.971%<br />
13. Banc a P o po lare di B erga mo Spa Bergamo e uro 1,350,514.252 1 UB I B anca Scpa 100.000% 100.000%<br />
14. Banc a Regio na le Euro pea Spa Cune o e uro 587,892,824.35 1 UB I B anca Scpa 74.716% 75.800%<br />
15. Banc o di B res c ia Spa Bre s cia euro 615,632,230.88 1 UB I B anca Scpa 100.000% 100.000%<br />
16. Banque de Depo ts e t de Ge s tio n Sa Laus anne (Switzerland) Swis s fra ncs 10,000,000 1 UB I B anca Scpa 100.000% 100.000%<br />
17. BP B Ca pital Trus t Delaware (USA) euro 1,000 1 BP B Funding Llc - USA 100.000% 100.000%<br />
18. BP B Funding LLC Delaware (USA) euro 1,000,000 1 UB I B anca Scpa 100.000% 100.000%<br />
19. BP B Immo biliare Srl Bergamo euro 185,680,000 1 UB I B anca Scpa 100.000% 100.000%<br />
20. Centro banca Spa Milan euro 369,600,000 1 UB I B anca Scpa 94.323% 99.794%<br />
Banc a P o po lare di Anco na Spa 5.471%<br />
21. Centro banca Sviluppo Impre s a SGR Spa Milan euro 2,000,000 1 Centro banca Spa 100.000% 100.000%<br />
22. Co ralis Re nt Srl Milan e uro 400,000 1 UB I B anca Scpa 100.000% 100.000%<br />
23. IW Ba nk Spa Milan euro 18,404,795 1 UB I B anca Scpa 76.236% 100.000%<br />
Centro banca Spa 23.764%<br />
24. Lo mbarda Leas e Finance 4 Srl Bre s cia e uro 10,000 4 UB I B anca Scpa 10.000% 10.000%<br />
25. Orio Finance Nr. 3 P lc Dublin (Ireland) e uro 10,000 4 X X X<br />
26. P res tita lia Spa Bergamo euro 153,997,228 1 UB I B anca Scpa 100.000% 100.000%<br />
27. So cie tà Bres ciana Immo biliare - Mo bilia re SBIM Spa Bre s cia euro 35,000,000 1 UB I B anca Scpa 100.000% 100.000%<br />
28. So cie tà Lo mbarda Immo biliare Srl - SOLIM M Bre s cia euro 100,000 1 UB I B anca Scpa 100.000% 100.000%<br />
29. UB I B anca Internatio na l Sa Luxembo urg euro 70,613,580 1 UB I B anca Scpa 91.196% 100.000%<br />
Banc o di B res c ia Spa 5.483%<br />
Banc a Regio na le Euro pea Spa 0.162%<br />
Banc a P o po lare di B erga mo Spa 3.160%<br />
30. UB I B anca P rivate Inve s tment Spa Bre s cia euro 67,950,000 1 UB I B anca Scpa 100.000% 100.000%<br />
31. <strong>UBI</strong> Fac to r Spa Milan euro 36,115,820 1 UB I B anca Scpa 100.000% 100.000%<br />
32. UB I Fiduc iaria Spa Bre s cia euro 1,898,000 1 UB I B anca Scpa 100.000% 100.000%<br />
33. UB I Finance Srl Milan e uro 10,000 1 UB I B anca Scpa 60.000% 60.000%<br />
34. UB I Finance 2 Srl Bre s cia e uro 10,000 4 UB I B anca Scpa 10.000% 10.000%<br />
35. UB I Finance 3 Srl Bre s cia e uro 10,000 4 UB I B anca Scpa 10.000% 10.000%<br />
36. UB I Ges tio ni Fiducia rie Sim Spa Bre s cia euro 1,040,000 1 UB I Fiduciaria Spa 100.000% 100.000%<br />
37. UB I Leas e Fina nce 5 Srl Bre s cia e uro 10,000 4 UB I B anca Scpa 10.000% 10.000%<br />
38. UB I Leas ing Spa Bre s cia e uro 241,557,810 1 UB I B anca Scpa 98.993% 98.993%<br />
39. UB I Ma nage me nt Co mpany Sa Luxembo urg euro 125,000 1 UB I P rameric a SGR Spa 100.000% 100.000%<br />
241
40. <strong>UBI</strong> P ramerica SGR Spa Milan euro 19,955,465 1 <strong>UBI</strong> <strong>Banca</strong> Scpa 65.000% 65.000%<br />
41. <strong>UBI</strong> Sis temi e Servizi Scpa Bres cia euro 36,149,948.64 1 <strong>UBI</strong> <strong>Banca</strong> Scpa 70.359% 98.490%<br />
<strong>Banca</strong> Carime Spa 2.877%<br />
<strong>Banca</strong> P o po lare Co mmercio e Indus tria Spa 2.877%<br />
<strong>Banca</strong> P o po lare di Anco na Spa 2.877%<br />
<strong>Banca</strong> P o po lare di Bergamo Spa 2.877%<br />
<strong>Banca</strong> Regio nale Euro pea Spa 4.315%<br />
Banco di Bres cia Spa 2.877%<br />
<strong>Banca</strong> di Valle Camo nica Spa 1.438%<br />
Centro banca Spa 1.438%<br />
<strong>UBI</strong> <strong>Banca</strong> P rivate Inves tment Spa 1.438%<br />
<strong>UBI</strong> P ramerica SGR Spa 1.438%<br />
<strong>UBI</strong> Facto r Spa 0.719%<br />
IW Bank Spa 2.876%<br />
<strong>UBI</strong> Academy 0.010%<br />
P res titalia Spa 0.072%<br />
42. <strong>UBI</strong> Trus tee Sa Luxembo urg euro 250,000 1 <strong>UBI</strong> <strong>Banca</strong> Internatio nal Sa 100.000% 100.000%<br />
43. <strong>UBI</strong> Finance CB 2 Srl Milan euro 10,000 4 <strong>UBI</strong> <strong>Banca</strong> Scpa 60.000% 60.000%<br />
44. <strong>UBI</strong> SP V BBS <strong>2012</strong> Srl Milan euro 10,000 4 <strong>UBI</strong> <strong>Banca</strong> Scpa 10.000% 10.000%<br />
45. <strong>UBI</strong> SP V BP CI <strong>2012</strong> Srl Milan euro 10,000 4 <strong>UBI</strong> <strong>Banca</strong> Scpa 10.000% 10.000%<br />
46. <strong>UBI</strong> SP V BP A <strong>2012</strong> Srl Milan euro 10,000 4 <strong>UBI</strong> <strong>Banca</strong> Scpa 10.000% 10.000%<br />
47. <strong>UBI</strong> Academy Scrl Bergamo euro 100,000 <strong>UBI</strong> <strong>Banca</strong> S.c.p.a. 68.500% 100.000%<br />
<strong>Banca</strong> P o po lare di Bergamo SpA 3.000%<br />
Banco di Bres cia SpA 3.000%<br />
<strong>Banca</strong> P rivate Inves tment SpA 1.500%<br />
<strong>UBI</strong> Facto r SpA 1.500%<br />
IW Bank S.p.A. 1.500%<br />
<strong>UBI</strong> P ramerica SGR S.p.A. 1.500%<br />
<strong>Banca</strong> Valle Camo nica SpA 1.500%<br />
<strong>Banca</strong> P o po lare Co mmercio & Indus tria S.p.A. 3.000%<br />
<strong>Banca</strong> Regio nale Euro pea SpA 3.000%<br />
<strong>Banca</strong> Carime SpA 3.000%<br />
<strong>Banca</strong> P o po lare di Anco na SpA 3.000%<br />
<strong>UBI</strong> Sis temi e Servizi SpA 3.000%<br />
<strong>UBI</strong> Leas ing SpA 1.500%<br />
P res titalia Spa 1.500%<br />
N a m e He a dqua rte rs S ha re c a pita l<br />
D e ta ils o f inv e s tm e nt<br />
Inv e s ting c o m pa ny<br />
% he ld<br />
% o f v o te s<br />
Key<br />
Type of ownership:<br />
1 = majority of voting rights in ordinary general meetings<br />
2 = dominating influence over ordinary general meetings<br />
3 = agreements with other shareholders<br />
4 = other forms of control<br />
5 = “unitary management” control under Art. 26, paragraph 1, of “Legislative Decree No. 87/92”<br />
6 = “unitary management” control under Art. 26, paragraph 2, of “Legislative Decree No. 87/92<br />
7 = joint control<br />
242
2. Other information<br />
Companies in which no equity investment is held, but for which shares have been received as<br />
pledges are excluded from the scope of the consolidation, in consideration of the purpose of<br />
possession, which is to secure the loan granted and not to exercise control and determine<br />
financial and operating policies in order to obtain the economic benefits deriving from them.<br />
The balance sheet, income statement and statement of cash flows of consolidated companies<br />
which operate with a reference currency other than the euro are translated at the exchange<br />
rate ruling at the end of the year. All the exchange rate differences resulting from the<br />
translation are recognised in a separate reserve in equity. If an investment is disposed of, this<br />
reserve is eliminated with a simultaneous profit or loss in the income statement at the time of<br />
disposal.<br />
International financial reporting standards require the recognition in the financial statements<br />
of corporate events in a manner which reflects the underlying economic substance of them.<br />
No equity investments held directly or indirectly by the Parent with an interest of less than<br />
20%, or for which voting rights below that threshold were held, over which it is considered it<br />
exerted significant influence existed as at the balance sheet date. Furthermore, with the<br />
exception of equity investments held for merchant banking activities classified within item 20<br />
“<strong>Financial</strong> assets held for trading” and item 30 “Assets designated at fair value”, no equity<br />
investments held directly or indirectly by the Parent Bank with an interest of more than 20%<br />
existed as at the balance sheet date over which it is considered it did not exert significant<br />
influence.<br />
No significant restrictions existed as at the balance sheet date on the capacity of associate<br />
companies to transfer funds to the investing company in payment of dividends or repayment of<br />
loans or advances.<br />
The balance sheet dates of the companies valued according to the equity method were the<br />
same as that of the Parent.<br />
SECTION 4 Subsequent events<br />
With regard to the provisions of IAS 10, between 31 st December <strong>2012</strong>, the reporting date, and<br />
28 th March 2013, the date on which the Annual <strong>Report</strong> was approved by the Management<br />
Board for submission to the Supervisory Board, no events occurred to make adjustments to<br />
the figures presented in the report necessary.<br />
For information purposes, the following events are mentioned:<br />
▪<br />
▪<br />
▪<br />
▪<br />
2 nd January 2013: <strong>UBI</strong> <strong>Banca</strong> fully subscribed to the first €300 million tranche of the <strong>UBI</strong><br />
Leasing capital increase voted for by a resolution of the extraordinary shareholders’ meeting<br />
of the Company on 30 th November <strong>2012</strong> (see the section “Scope of consolidation” in the<br />
consolidated management report);<br />
9 th January-29th January 2013: during this period the public tender offer was made by IW<br />
Bank on all the outstanding bonds (“IW BANK bonds with Asian call option” - maturity<br />
date 12 th August 2015; “IW BANK bonds with Asian call option 2 nd tranche” – maturity<br />
date 14 th October 2015), in order to delist them. In a measure on 7 th January 2013, Borsa<br />
Italiana excluded them from listing from 6 th March 2013, meaning that IW Bank is no<br />
longer a listed issuer;<br />
6 th February 2013: as already reported in the consolidated management report, which<br />
should be consulted for details, the relevant bodies of Gruppo <strong>UBI</strong> <strong>Banca</strong> launched the<br />
project for the merger of Centrobanca into <strong>UBI</strong> <strong>Banca</strong>. On 28 th February 2013 the relevant<br />
trade union procedures began;<br />
12 th February 2013: the talks with the trade unions to confirm the redundancy incentive<br />
plan and reduction in working hours and temporary lay-offs from work pursuant to the<br />
framework agreement signed on 29 th November <strong>2012</strong> ended. Given the applications for<br />
voluntary redundancy received, a supplement was signed to the agreement with the trade<br />
unions extending the number of applications from the 650 originally provided for to a total<br />
of 736 within the first quarter of 2013. Based on the higher number of leavers, 43 staff will<br />
be hired alongside the 240 already scheduled for the period from 2013 to 2015 (see the<br />
243
▪<br />
section “Significant events that occurred during the year” in the consolidated management<br />
report, which also includes information about the forecast cost and benefits of the<br />
agreements signed);<br />
28 th February 2013: <strong>UBI</strong> <strong>Banca</strong> implemented the board resolution of 28 th April <strong>2012</strong> on the<br />
purchase of own shares for the Group’s top management incentive scheme, buying a total<br />
of 500,000 own shares. The purchases were made at an average price of €3.4911 per share.<br />
The transactions took place on the regulated market in compliance with the limits set by<br />
the shareholders' authorisation, with the provisions of the law including Commission<br />
Regulation (EC) No. 2273/2003 and with permissible market practices. As a result of these<br />
buy-backs, <strong>UBI</strong> <strong>Banca</strong> now holds a total of 1,700,000 of its own shares, the equivalent of<br />
approximately 0.19% of its share capital.<br />
Section 5 Other aspects<br />
Impairment losses on available-for-sale equity instruments<br />
The fair valuation of available-for-sale securities in <strong>2012</strong> resulted in recognition of impairment<br />
losses through profit and loss of €56.1 million, in accordance with accounting standard IAS<br />
39.<br />
With regard to shareholdings in particular, for which impairment losses of €36.7 million were<br />
recognised, the main write-downs related to the following shares:<br />
Intesa Sanpaolo €31.8 million;<br />
A2A €3.5 million.<br />
The remaining write-downs totalling €19.4 million were attributable mainly to investments in<br />
O.I.C.R.s (collective investment instruments) held by <strong>UBI</strong> <strong>Banca</strong> and in the Fondo<br />
Centrobanca Sviluppo Impresa in particular.<br />
To complete the information, in compliance with the above-mentioned accounting standard,<br />
any reversals of losses are recognised in a separate valuation reserve in equity.<br />
Leaving incentives – Company reorganisation<br />
The plan to revise the organisational structure is described in the section “Significant events<br />
that occurred during the year” in the management report.<br />
As far as the purely accounting-related aspects of the operation are concerned, the procedure<br />
relating to the trade union negotiations ended on 29 th November <strong>2012</strong>, with an agreement<br />
containing previsions that basically involve a reduction in staff numbers and recourse to<br />
flexible working hours, reductions in working hours and temporary lay-offs from work, with<br />
the latter financed partially by use of the “National Income Support Fund”.<br />
Subsequently, the talks with the trade unions to confirm the redundancy incentive plan and<br />
reduction in working hours and temporary lay-offs from work pursuant to the above<br />
agreement ended on 13 th February 2013, and a supplement was signed to the agreement<br />
extending the number of applications from that originally provided for.<br />
As far as the complex operation involving staff is concerned, after a discounting effect of €1.9<br />
million, an expense totalling a net value of €152 million was recognised under “Staff costs” in<br />
the income statement for <strong>2012</strong>. The figure was normalised given its non-recurrent nature.<br />
Accounting for the “fast credit processing fee”<br />
The “fast credit processing fee”, regulated by paragraph 2 of the Law of 22 nd December 2011,<br />
the Salva Italia (Save Italy) Law 11 , is a charge payable by customers that have exceeded their<br />
maximum credit limit without the Bank’s authorisation. This charge, which is payable<br />
11<br />
Further amended by Decree Law No. 1 of 24th January <strong>2012</strong>, the Liberalisation Decree, and by Decree Law No. 29<br />
of 24 th March <strong>2012</strong>, subsequently converted by Law No. 62 of 18 th May <strong>2012</strong>.<br />
244
exclusively in cases in which the Bank carries out a brief investigation 12 in accordance with its<br />
internal procedures before giving authorisation for the limit to be exceeded, essentially<br />
replaces the “excess penalty” introduced in 2010 before a broader review of the terms and<br />
conditions applied to customers was carried out, and is effective from 1st October <strong>2012</strong>.<br />
The relative amount is calculated as a fixed sum, expressed in absolute terms, proportionate<br />
to the costs incurred and pursuant to CICR (interministerial committee for credit and savings)<br />
Resolution No. 644 of 30 th June <strong>2012</strong>, “does not exceed the average costs incurred by the<br />
intermediary for carrying out the brief investigation and is directly related to it”; in other terms<br />
the income from the “fast credit processing fee" is essentially simply a recovery of costs.<br />
The accounting treatment for the fee in question is specified in the Bank of Italy’s service<br />
instructions ("addendum letter”) No. 46586/13 of 15 th January 2013, which explain that the<br />
income should be recognised in the income statement under item 220 “Other operating income<br />
and expenses” in the bank’s financial statements. Therefore, in the financial statements as at<br />
and for the year ended 31 st December <strong>2012</strong>, the fast credit processing fee is recognised in the<br />
income statement from 1 st October <strong>2012</strong> under “Other operating income and expenses”.<br />
Conversely, the income statement for the year ended 31 st December 2011, published for<br />
comparative purposes, includes the excess penalty under “Interest and similar income”, which<br />
in the reclassified income statement, has been moved to “Other operating income and<br />
expenses” in order to allow a comparison of the two financial years.<br />
Transformation of deferred tax assets (DTA) into tax credits<br />
As already reported in the interim report as at and for the year ended 30 th June <strong>2012</strong>, under<br />
specific operating and financial conditions – i.e. losses in the statutory financial statements –<br />
Decree Law No. 225/2010, converted with amendments into Law No. 10/2011, allows<br />
companies to transform deferred tax assets recognised in their financial statements into tax<br />
credits, but only in the following cases:<br />
deferred assets relating to excesses in the write-downs of loans and receivables (article<br />
106 of the <strong>Consolidated</strong> Income Tax Act);<br />
deferred assets relating to realignments of intangible assets such as goodwill and brands<br />
(article 15, paragraphs 10. 10-bis and 10-ter of Decree Law No. 185/2008).<br />
The above-mentioned law was subsequently added to by Law No. 214/2011, which extended<br />
the ability to convert deferred tax assets to include situations of tax losses, although following<br />
different procedures, even where the statutory accounts showed profits.<br />
The matter is regulated from an accounting viewpoint by joint document No. 5 issued by the<br />
Bank of Italy/Consob/Isvap on 15 th May <strong>2012</strong> 13 , which states that the tax rules cited basically<br />
confer certainty on the recovery of the deferred tax assets, by considering that the probability<br />
test mentioned in IAS 12, paragraph 24 is automatically passed. According to that test<br />
deferred tax assets may only be recognised if it is probable that taxable income will be earned<br />
against which the asset may be used.<br />
As a consequence, the effects of the tax rules do not cause any change in the accounting<br />
classification of the deferred tax assets, which continue to be recognised within tax assets for<br />
prepaid taxes until the time of conversion, which transforms them into “Current tax assets” in<br />
accordance with the provisions of Decree Law No. 225/2010 and without generating any<br />
impacts on the income statement.<br />
12<br />
Generally the fast credit processing fee is applied in the following circumstances:<br />
• loan facilities are granted on a current account in which the client can use and pay back the amount of<br />
available credit;<br />
• overdrafts on current accounts when there is no loan facility;<br />
• credit and overdraft facilities on payment accounts, granted in accordance with the provisions of article 114-<br />
octies, paragraph 1, letter a) of the <strong>Consolidated</strong> Banking Act.<br />
• overdrawn on credit cards.<br />
13<br />
In this regard, in Letter No. 1093994/12 of 21st December <strong>2012</strong>, the Bank of Italy also provided clarifications about<br />
the treatment of prepaid taxes for regulatory capital purposes in the light of the rules governing the conversion of tax<br />
credits in question.<br />
245
In view of the above, at consolidated level as a result of the loss on the financial statements in<br />
2011, some of the Group companies transformed deferred tax assets into tax credits in <strong>2012</strong>.<br />
In terms of the most significant conversions of amounts, <strong>UBI</strong> <strong>Banca</strong> and <strong>UBI</strong> Leasing<br />
transformed €268.5 million and €6.4 million in deferred tax assets respectively into tax<br />
credits.<br />
The credits resulting from the transformation were partly used during the year to offset<br />
payments due to the tax authorities totalling €188.8 million.<br />
The residual amount of tax credit resulting from the conversion of deferred tax assets stated<br />
under item 140 of the balance sheet “Tax assets – a) current” in the financial statements as at<br />
and for the year ended 31 st December <strong>2012</strong> was €86.1 million.<br />
Recognition of credit for the corporate income tax (IRES) refund of local production tax<br />
(IRAP) relating to the cost of labour<br />
As mentioned in the interim report as at and for the half year ended 30 th June <strong>2012</strong>, Decree<br />
Law No. 201 of 6 th December 2011, the Salva Italia (Save Italy) Decree Law, converted with<br />
amendments by Law No. 214 of 22 nd December 2011, and Decree Law No. 16 of 2 nd March<br />
<strong>2012</strong>, the Tax Simplifications Decree, respectively made it possible:<br />
a) to fully deduct the IRAP due in relation to expenses for employees and other staff, net<br />
of the relevant deductions, from the income subject to IRES for the <strong>2012</strong> tax year;<br />
b) to apply for IRES refunds, recalculated as a result of the deductibility of IRAP relating<br />
to the cost of labour, for prior years (2007-2011).<br />
On 17 th December <strong>2012</strong> the tax authorities issued provision No. 2101/140973 approving the<br />
procedure and instructions for applying for refunds for tax periods prior to the current period<br />
ending on 31 st December <strong>2012</strong>, pursuant to article 2, paragraph 1-quater of Decree Law No.<br />
201/2011.<br />
In view of the above, in the <strong>2012</strong> financial statements, a credit was recognized under balance<br />
sheet item 140 “Tax assets”, against the recognition of lower taxation amounting to €66.08<br />
million in item 290 of the income statement (of which €5.2 million attributable to noncontrolling<br />
interests). This represents the amount that it will be possible to claim back as a<br />
refund for the 2007-2011 tax years.<br />
To complete the information, the credit in question has not been discounted to present values<br />
because the relative refund dates are not known.<br />
Government-backed bonds<br />
The above-mentioned Salva Italia Decree (converted by Law No. 22 of December 2011)<br />
introduced the possibility until 30 th June <strong>2012</strong> for Italian banks to receive a government<br />
guarantee underwriting bonds issued with maturities of between three months and five years,<br />
or from 1 st January <strong>2012</strong> of up to seven years for covered bonds.<br />
<strong>UBI</strong> <strong>Banca</strong> took up the government initiative, issuing four bond issues with government<br />
guarantees for a nominal amount of six billion, of which four billion were three-year bonds and<br />
the remaining two billion were five-year bonds.<br />
After the bond issue, <strong>UBI</strong> <strong>Banca</strong> bought back the securities, which have the requisites to be<br />
used as assets eligible for refinancing with the European Central Bank. This buy-back meant<br />
that the bonds issued were derecognised in the financial statements.<br />
The issue of a government guarantee involved payment of commission amounting to €42.8<br />
million recognised under item 50 “Commission expenses”.<br />
Classification of financial assets as “Held-to-maturity investments”<br />
This year, as part of the asset liability management strategy, government securities meeting<br />
the requirements of IAS 39 for financial assets in the held-to-maturity portfolio (HTM) were<br />
246
purchased. These financial instruments were recorded in the financial statements under item<br />
50 "Held-to-maturity investments”, for an amount of approximately €3,158 million, as this<br />
more accurately reflects the Group’s aims.<br />
The category in question became newly available after the two-year period specified by the<br />
tainting rule in force since 31 st December 2009, the date on which a considerable part of the<br />
HTM portfolio was sold. This involved reclassifying the assets in the HTM portfolio that were<br />
not sold under AFS, pursuant to the provisions of IAS 39, and meant that no financial<br />
instruments could be classified in the HTM portfolio until 31 st December 2011.<br />
Option for tax consolidation<br />
The <strong>Consolidated</strong> Income Tax Act allows companies belonging to the same group to calculate<br />
a single overall global income, which corresponds generally speaking with the sum of the<br />
taxable income of the various companies (parent companies and companies directly and/or<br />
indirectly majority owned according to specific requirements), and therefore to calculate a<br />
single income tax payment for Group companies ("national tax consolidation”, as regulated by<br />
articles 117-129 of the <strong>Consolidated</strong> Income Tax Act ).<br />
By virtue of this option, the Italian companies in the Group were included in national tax<br />
consolidation under the parent company <strong>UBI</strong> <strong>Banca</strong> and their tax liabilities were calculated by<br />
transferring their taxable income to the parent company.<br />
List of the main IFRS standards endorsed by the European Commission<br />
IAS/IFRS ACCOUNTING STANDARDS ENDORSEMENT<br />
IAS 1 Presentation of financial statements Reg. 1274/08, 53/09,<br />
70/09, 494/09, 243/10,<br />
149/11, 475/12,<br />
1254/12, 1255/12<br />
IAS 2 Inventories Reg. 1126/08, 1255/12<br />
IAS 7 Statement of cash flows Reg. 1126/08, 1274/08,<br />
70/09, 494/09, 243/10,<br />
1254/12<br />
IAS 8 Accounting policies, changes in accounting estimates and errors Reg. 1126/08, 1274/08,<br />
70/09, 1255/12<br />
IAS 10 Events after the reporting date Reg. 1126/08, 1274/08,<br />
70/09, 1142/09,<br />
1255/12<br />
IAS 11 Construction contracts Reg. 1126/08, 1274/08<br />
IAS 12 Income taxes Reg. 1126/08, 1274/08,<br />
495/09, 475/12,<br />
1254/12, 1255/12<br />
IAS 16 Property, plant and equipment Reg. 1126/08, 1274/08,<br />
70/09, 495/09, 1255/12<br />
IAS 17 Leases Reg. 1126/08, 243/10,<br />
1255/12<br />
IAS 18 Revenue Reg. 1126/08, 69/09,<br />
1254/12, 1255/12<br />
IAS 19 Employee benefits Reg. 1126/08, 1274/08,<br />
70/09, 475/12, 1255/12<br />
IAS 20 Accounting for government grants and disclosure of government<br />
assistance<br />
Reg. 1126/08, 1274/08,<br />
70/09, 475/12, 1255/12<br />
IAS 21 The effects of changes in foreign exchange rates Reg. 1126/08, 1274/08,<br />
69/09, 494/09, 149/11,<br />
475/12, 1254/12,<br />
1255/12<br />
IAS 23 Borrowing costs Reg. 1260/08, 70/09<br />
IAS 24 Related party disclosures Reg. 632/10, 475/12,<br />
1254/12<br />
IAS 26 Retirement benefit plans Reg. 1126/08<br />
IAS 27 (*) <strong>Consolidated</strong> and separate financial statements Reg. 1254/12<br />
IAS 28 (*) Investments in associates and joint ventures Reg. 1254/12<br />
247
IAS 29 <strong>Financial</strong> reporting in hyperinflationary economies Reg. 1126/08, 1274/08,<br />
70/09<br />
IAS 31 (**) Interests in joint ventures Reg. 1126/08, 70/09,<br />
494/09, 149/11,<br />
1255/12<br />
IAS 32 <strong>Financial</strong> instruments: presentation Reg. 1126/08, 1274/08,<br />
53/09, 70/2009, 495/09,<br />
1293/09, 149/11,<br />
475/12, 1254/12,<br />
1255/12, 1256/12<br />
IAS 33 Earnings per share Reg. 1126/08, 1274/08,<br />
495/09, 475/12,<br />
1254/12, 1255/12<br />
IAS 34 Interim financial reporting Reg. 1126/08, 1274/08,<br />
70/09, 495/09, 149/11,<br />
475/12, 1255/12<br />
IAS 36 Impairment of assets Reg. 1126/08, 1274/08,<br />
69/09, 70/09, 495/09,<br />
243/10, 1254/12,<br />
1255/12<br />
IAS 37 Provisions, contingent liabilities and contingent assets Reg. 1126/08, 1274/08,<br />
495/09<br />
IAS 38 Intangible assets Reg. 1126/08, 1274/08,<br />
70/09, 495/09, 243/10,<br />
1254/12, 1255/12<br />
IAS 39 <strong>Financial</strong> instruments: recognition and measurement Reg. 1126/08, 1274/08,<br />
53/2009, 70/09, 494/09,<br />
495/09, 824/09, 839/09,<br />
1171/09, 243/10,<br />
149/11, 1254/12,<br />
1255/12<br />
IAS 40 Investment property Reg. 1126/08, Reg.<br />
1274/08, Reg. 70/09,<br />
1255/12<br />
IAS 41 Agriculture Reg. 1126/08, 1274/08,<br />
70/09, 1255/12<br />
IFRS 1 First-time adoption of international financial reporting standards Reg. 1126/09, 1164/09,<br />
550/10, 574/10, 662/10,<br />
149/11, 475/12,<br />
1254/12, 1255/12<br />
IFRS 2 Share-based payment Reg. 1126/08, 1261/08,<br />
495/09, 243/10, 244/10,<br />
1254/12, 1255/12<br />
IFRS 3 Business combinations Reg. 495/09, 149/11,<br />
1254/12, 1255/12<br />
IFRS 4 Insurance contracts Reg. 1126/08, 1274/08,<br />
1165/09, 1255/12<br />
IFRS 5 Non-current assets held for sale and discontinued operations Reg. 1126/08, 1274/08,<br />
70/09, 494/09, 1142/09,<br />
243/10, 475/12,<br />
1254/12, 1255/12<br />
IFRS 6 Exploration for and evaluation of mineral resources Reg. 1126/08<br />
IFRS 7 <strong>Financial</strong> instruments: disclosures Reg. 1126/08, 1274/08,<br />
53/09, 70/2009, 495/09,<br />
824/09, 1165/09,<br />
574/10, 149/11,<br />
1205/11, 475/12,<br />
1254/12, 1255/12,<br />
1256/12<br />
IFRS 8 Operating segments Reg. 1126/08, 1274/08,<br />
243/10, 632/10, 475/12<br />
IFRS 10 <strong>Consolidated</strong> financial statements Reg. 1254/12<br />
IFRS 11 Joint arrangements Reg. 1254/12<br />
IFRS 12 Disclosure of interests in other entities Reg. 1254/12<br />
IFRS 13 Fair value measurement Reg. 1255/12<br />
248
SIC/IFRIC INTERPRETATION DOCUMENTS ENDORSEMENT<br />
IFRIC 1<br />
Changes in existing decommissioning, restoration and similar<br />
liabilities<br />
IFRIC 2 Members' Shares in co-operative entities and similar instruments<br />
IFRIC 4<br />
IFRIC 5<br />
IFRIC 6<br />
IFRIC 7<br />
Determining whether an arrangement contains a lease<br />
Rights to interests arising from decommissioning, restoration<br />
and environmental rehabilitation funds<br />
Liabilities arising from participating in a specific market - waste<br />
electrical and electronic equipment<br />
Applying the restatement approach under IAS 29 “<strong>Financial</strong><br />
reporting in hyperinflationary economies”<br />
Reg. 1126/08, 1274/08<br />
Reg. 1126/08, 53/09,<br />
1255/12<br />
Reg. 1126/08, 70/09,<br />
1255/12<br />
Reg. 1126/08, 1254/12<br />
Reg. 1126/08<br />
Reg. 1126/08, 1274/08<br />
IFRIC 9 Reassessment of embedded derivatives<br />
Reg. 1126/08, 495/09,<br />
1171/09, 243/10,<br />
1254/12<br />
IFRIC 10 Interim financial reporting and impairment Reg. 1126/08, 1274/08<br />
IFRIC 12 Service concession arrangements Reg. 254/09<br />
IFRIC 13<br />
Reg. 1262/08, 149/11,<br />
Customer loyalty programmes<br />
1255/12<br />
IFRIC 14<br />
Reg. 1263/08, Reg.<br />
Prepayments of a minimum funding requirement<br />
1274/08, 633/10,<br />
475/12<br />
IFRIC 15 Agreements for the construction of real estate Reg. 636/09<br />
IFRIC 16<br />
Reg. 460/09, Reg.<br />
Hedges of a net investment in a foreign operation<br />
243/10, 1254/12<br />
IFRIC 17<br />
Reg. 1142/09, 1254/12,<br />
Distributions of non-cash assets to owners<br />
1255/12<br />
IFRIC 18 Transfers of assets from customers Reg. 1164/09<br />
IFRIC 19 Extinguishing financial liabilities with equity instruments Reg. 662/10, 1255/12<br />
IFRIC 20 Stripping costs in the production phase of a surface mine Reg. 1255/12<br />
Reg. 1126/08, 1274/08,<br />
SIC 7 Introduction of the euro<br />
494/09<br />
Government assistance – no specific relation to operating Reg. 1126/08, 1274/08<br />
SIC 10<br />
activities<br />
SIC 12 (**) Consolidation – special purpose entities Reg. 1126/08<br />
Jointly controlled entities – non-monetary contributions by Reg. 1126/08, 1274/08<br />
SIC 13<br />
venturers<br />
SIC 15 Operating leases – incentives Reg. 1126/08, 1274/08<br />
SIC 21<br />
(***)<br />
SIC 25<br />
SIC 27<br />
Income taxes – Recovery of revalued non-depreciable assets<br />
Income taxes – Changes in the tax status of an enterprise or its<br />
shareholders<br />
Evaluating the substance of transactions in the legal form of a<br />
lease<br />
Reg. 1126/08<br />
Reg. 1126/08, 1274/08<br />
Reg. 1126/08<br />
SIC 29 Service concession arrangements: disclosures<br />
Reg. 1126/08, 1274/08,<br />
70/09<br />
SIC 31 Revenue – Barter transactions involving advertising services Reg. 1126/08<br />
SIC 32 Intangible assets – Website costs Reg. 1126/08, 1274/08<br />
(*) The version of the standards applicable today remain applicable until the date of the first application of standards<br />
IFRS 10, IFRS 11 and IFRS 12.<br />
(**) Standards applicable until the date of the first application of standards IFRS 10, IFRS 11 and IFRS 12; those<br />
standards are to be considered repealed from that date.<br />
(***) That interpretation is considered repealed from 1/1/2013, the date of the last compulsory application of IAS 12<br />
as amended by Reg. EU 1255/12.<br />
249
A.2 – The main items in the financial statements<br />
1. <strong>Financial</strong> assets and liabilities held for trading and<br />
financial assets and liabilities designated at fair value<br />
This category includes:<br />
1.1. Definition of financial assets and liabilities held for trading<br />
A financial asset or liability is classified as held for trading (at fair value through profit or loss<br />
– FVPL) and is stated within either item 20 “<strong>Financial</strong> assets held for trading” or item 40<br />
“<strong>Financial</strong> liabilities held for trading”, if it is:<br />
acquired or incurred for sale or repurchase in the short term;<br />
part of a portfolio of identified financial instruments which are managed together and for<br />
which there is evidence of a recent and effective strategy of short term profit taking;<br />
a derivative (except for derivatives designated and effective as a hedging instrument – see<br />
the relative section below).<br />
1.1.1. Derivative financial instruments<br />
A “derivative” is defined as a financial instrument or other contract with the following<br />
characteristics:<br />
its value changes in response to the change in an interest rate, in the price of a financial<br />
instrument, in a commodity price, in a foreign currency exchange rate, in a price, interest<br />
rate or credit rating index, or credit worthiness index or other specific variable;<br />
it requires no initial investment, or a net initial investment that is smaller than would be<br />
required for other types of contract from which a similar response to changes in market<br />
factors would be expected;<br />
it is settled at a future date.<br />
The <strong>UBI</strong> Group holds derivative financial instruments for both trading and for hedging<br />
purposes (see the relative section below for information on the latter).<br />
1.1.2. Embedded derivative financial instruments<br />
An "embedded derivative financial instrument" is defined as a component of a hybrid<br />
(combined) instrument which also includes a “host” non derivative contract such that some of<br />
the cash flows of the combined instrument behave in a way similarly to the derivative as a<br />
stand-alone instrument. The embedded derivative is separated from the host contract and<br />
treated in the accounts as a stand-alone derivative if and only if:<br />
the economic risks and characteristics of the embedded derivative are not closely related to<br />
the economic risks and characteristics of the host contract;<br />
a separate instrument with the same conditions as the embedded derivative would satisfy<br />
the definition of a derivative;<br />
the hybrid (combined) instrument is not recognised within financial assets or liabilities held<br />
for trading.<br />
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1.2. Definition of financial assets and liabilities designated at fair<br />
value<br />
<strong>Financial</strong> assets and liabilities may be designated on initial recognition within “financial assets<br />
and liabilities at fair value” and recorded within items 30 “<strong>Financial</strong> assets designated at fair<br />
value” and 50 “<strong>Financial</strong> liabilities designated at fair value”.<br />
A financial asset/liability is designated at fair value through profit or loss on initial recognition<br />
only when:<br />
a) it is a hybrid contract containing one or more embedded derivatives and the embedded<br />
derivative significantly alters the cash flows that would otherwise be generated by the contract;<br />
b) the designation at fair value through profit or loss allows better information to be provided<br />
because:<br />
it eliminates or considerably reduces an asymmetry in the valuation or in the<br />
recognition, which would otherwise result from the valuation of assets or liabilities or<br />
from recognition of the relative profits and losses on a different basis;<br />
or<br />
a group of financial assets, financial liabilities or of both is managed and its<br />
performance is valued on the basis of its fair value according to a documented risk<br />
management procedure or investment strategy and the information on the group is<br />
provided internally on that basis to senior managers with strategic responsibilities.<br />
1.3. Recognition criteria<br />
The financial instruments “<strong>Financial</strong> assets and liabilities held for trading and financial assets<br />
and liabilities designated at fair value” are recognised either:<br />
at the time of settlement if they are debt or equity instruments; or,<br />
on the trade date if they are derivative contracts.<br />
Measurement on initial recognition is at cost considered to be the fair value of the instrument<br />
without considering any transaction costs or income directly attributable to the instruments<br />
themselves.<br />
1.4. Measurement criteria<br />
Subsequent to initial recognition, the financial instruments in question are measured at fair<br />
value with changes recognised in the income statement within item 80 “Net trading income<br />
(loss)”, for assets/liabilities held for trading and within item 110 “Net income/expense on<br />
financial assets and liabilities designated at fair value” for financial assets/liabilities<br />
designated at fair value”. The measurement of the fair value of the assets and liabilities in<br />
question is based on prices quoted on active markets or on internal valuation models which<br />
are generally used in financial practice as described in greater detail in Part A.3.2 of the Notes<br />
to the financial statements “Fair Value Hierarchy”.<br />
1.5. Derecognition criteria<br />
“<strong>Financial</strong> assets and liabilities held for trading and financial assets and liabilities designated<br />
at fair value” are derecognised in the accounts when the rights to the cash flows from the<br />
financial assets or liabilities expire or when the financial assets or liabilities are transferred<br />
with the substantial transfer of all the risks and rewards deriving from ownership of them.<br />
The result of the transfer of financial assets or liabilities held for trading is recognised in the<br />
income statement within item 80 “Trading income (loss)”, while the result of the transfer of<br />
financial assets or liabilities designated at fair value is recognised within item 110 “Net<br />
income/expense on financial assets and liabilities designated at fair value”.<br />
251
2. Available-for-sale financial assets<br />
2.1 Definition<br />
Available-for-sale financial assets (AFS) are defined as non-derivative financial assets<br />
designated on initial recognition as such or that are not classified as:<br />
(1) loans and receivables (see section below);<br />
(2) financial investments held until maturity (see section below);<br />
(3) financial assets held for trading and measured at fair value recognised through profit or<br />
loss (see section below).<br />
These financial assets are recognised within item 40 “Available-for-sale financial assets”.<br />
2.2 Recognition criteria<br />
Available-for-sale financial assets are recognised initially when, and only when, the company<br />
becomes a party in the contract clauses of the instrument and that is on the date of<br />
settlement, at fair value which generally coincides with the cost of them. This value includes<br />
costs or income directly connected with the instruments themselves.<br />
The recognition of available-for-sale financial assets may result also from the reclassification<br />
out of “held-to-maturity investments” or, but only and only in rare circumstances and in any<br />
case only if the asset is no longer held for sale or repurchase in the short term, out of<br />
“financial assets held for trading”; in this case the recognition value is the same as the fair<br />
value at the moment of reclassification<br />
2.3 Measurement criteria<br />
Subsequent to initial recognition, available-for-sale financial assets continue to be recognised<br />
at fair value with interest (resulting from application of the amortised cost) recognised through<br />
profit or loss and changes in fair value recognised in equity within item 140 “Valuation<br />
reserves”, except for losses due to impairment, until the financial asset is derecognised, at<br />
which time the profit or loss previously recognised in equity must be recognised through profit<br />
or loss. Equity instruments for which the fair value cannot be reliably measured according to<br />
the methods described are recognised at cost.<br />
The measurement of the fair value of available-for-sale financial assets is based on the prices<br />
quoted on active markets or on internal measurement models which are generally used in<br />
financial practice as described in greater detail in Part A.3.2 of the Notes to the financial<br />
statements “Fair Value Hierarchy”.<br />
At the end of each financial year or interim reporting period, objective evidence of impairment<br />
is assessed, which in the case of equity instruments is also held to be significant or prolonged.<br />
As concerns the significance of the impairment, significant indications of impairment exist<br />
where the market value of an equity instrument is less than 35% of its historical cost of<br />
acquisition. In this case impairment is recognised through profit or loss without further<br />
analysis. If the impairment is less then it is recognised only if the measurement of the<br />
instrument performed on the basis of its fundamentals does not confirm the soundness of the<br />
company and that is its earning prospects.<br />
As concerns the permanence of the impairment, it is defined as prolonged when the fair value<br />
remains continuously below its historical cost of purchase for a period of longer than 18<br />
months. In this case the impairment is recognised through profit or loss without further<br />
analysis. If the fair value continues to remain below its historical purchase cost for periods<br />
shorter than 18 months, then the impairment to be recognised through profit or loss is<br />
determined by considering, amongst other things, whether the impairment is attributable to<br />
general negative performance by stock markets rather than to the specific performance of the<br />
individual counterparty.<br />
252
If there is permanent impairment, the cumulative change, including that previously recognised<br />
in equity under the aforementioned item, is recognised directly in the income statement within<br />
item 130 “Net impairment losses on b) available-for-sale financial assets”.<br />
Permanent impairment loss is recognised when the acquisition cost (net of any repayments of<br />
principal and amortisation) of an available-for-sale financial asset exceeds its recoverable<br />
amount. Any recoveries of value, which are only possible when the causes of the original<br />
permanent impairment no longer exist are treated as follows:<br />
if they relate to investments in equity instruments, then with a balancing entry directly in<br />
the equity reserve;<br />
if they relate to investments in debt instruments, they are recognised in the income<br />
statement within item 130 b) “Net impairment losses on available-for-sale financial assets”.<br />
The amount of the reversal of the impairment loss may not in any case exceed the amortised<br />
cost which, in the absence of previous impairment losses, the instrument would have had at<br />
that time.<br />
Because the <strong>UBI</strong> Group applies IAS 34 “Interim financial reporting” to its half year interim<br />
reports with consequent identification of a half year “interim period”, any impairment<br />
incurring is recognised historically at the end of the half year.<br />
2.4 Derecognition criteria<br />
Available-for-sale financial assets are derecognised in the accounts when the contractual<br />
rights to the cash flows from the financial assets expire or when the financial assets are sold<br />
with the substantial transfer of all the risks and benefits deriving from ownership of them.<br />
The result of the disposal of available-for-sale financial assets is recognised in the income<br />
statement within item 100 “Income/expense from the disposal or repurchase of b) availablefor-sale<br />
financial assets”. Upon derecognition, any corresponding amount of what was<br />
previously recognised in equity under item 140 “Valuation reserves” is written off against the<br />
income statement”.<br />
253
3. Held-to-maturity investments<br />
3.1 Definition<br />
Held-to-maturity investments (HTM) are defined as non-derivative financial assets with fixed or<br />
determinable payments and fixed maturity that an entity intends and is able to hold to<br />
maturity. Exception is made for those:<br />
(a) held for trading and those designated upon initial recognition at fair value through profit<br />
or loss (see previous section);<br />
(b) designated as available for sale (see previous section);<br />
(c) which satisfy the definition of loans and receivables (see section below).<br />
When annual and interim reports are prepared the intention and ability to hold financial<br />
assets until maturity is assessed.<br />
The assets in question are recognised under item 50 “Held-to-maturity investments”.<br />
3.2 Recognition criteria<br />
Held-to-maturity investments are recognised initially when, and only when, the company<br />
becomes a party in the contract clauses of the instrument and that is on the date of<br />
settlement, measured at cost inclusive of any costs and income directly attributable to it. If the<br />
recognition of assets in this category is the result of the reclassification out of “available-forsale<br />
financial assets” or, but only and only in rare circumstances if the asset is no longer held<br />
for sale or repurchase in the short-term, out of the “financial assets held for trading”, the fair<br />
value of the assets as measured at the time of the reclassification is taken as the new measure<br />
of the amortised cost of the assets.<br />
3.3 Measurement criteria<br />
Held-to-maturity investments are valued at amortised cost using the criteria of the effective<br />
interest rate (see the section below “loans and receivables” for a definition). The result of the<br />
application of this method is recognised in the income statement within item 10 “Interest and<br />
similar income”.<br />
When annual financial statements or interim reports are prepared, objective evidence of the<br />
existence of an impairment of the value of the assets is assessed. If there is permanent<br />
impairment, the difference between the recognised value and the present value of expected<br />
future cash flows discounted at the original effective interest rate is included in the income<br />
statement under the item 130 “Net impairment losses on c) held-to-maturity investments”.<br />
Any recoveries of value recorded, should the cause that gave rise to the previous recognition of<br />
impairment loss no longer exist, are recognised under the same item in the income statement.<br />
The fair value of held-to-maturity investments is measured for disclosure purposes or where<br />
effective currency or credit risk hedges exist (in relation to the risk hedged) and it is estimated<br />
as described in greater detail in Part A.3.2 of the Notes to the financial statements “Fair Value<br />
Hierarchy”.<br />
254
3.4 Derecognition criteria<br />
Held-to-maturity investments are derecognised when the rights to the cash flows from the<br />
financial assets expire or when the financial assets are sold with the substantial transfer of all<br />
the risks and rewards deriving from ownership of them. The result of the disposal of held-tomaturity<br />
financial assets is recognised in the income statement under the item 100 c)<br />
“Income/expense from disposal or repurchase of held-to-maturity investments”.<br />
4. Loans and receivables<br />
4.1 Definition<br />
Loans and receivables (L&R) are defined as non-derivative financial assets with fixed or<br />
determinable payments that are not quoted in an active market. The following are exceptions:<br />
(a) those which it is intended to sell immediately or in the short-term, that are classified as<br />
held for trading and those that may have been designated on initial recognition as at fair<br />
value through profit or loss;<br />
(b) those designated upon initial recognition as available for sale;<br />
(c) those for which the holder may not recover substantially all of its initial investment, other<br />
than because of credit deterioration; in this case they are classified as available-for-sale.<br />
Loans and receivables are recognised under the items 60 “Loans and advances to banks” and<br />
70 “Loans and advances to customers”.<br />
4.2 Recognition criteria<br />
Loans and receivables are initially recognised in the accounts when the company becomes part<br />
of a loan contract, which is to say when the creditor acquires the right to the payment of the<br />
sums agreed in the contract. That moment corresponds to the date on which the loan is<br />
granted.<br />
Recognition in this category may result also from the reclassification out of “available-for-sale<br />
financial assets” or, but only and only in rare circumstances if the asset is no longer held for<br />
sale or repurchase in the short term, out of “financial assets held for trading”.<br />
The amount initially recognised is that of the fair value of the financial instrument which is<br />
the same as the amount granted inclusive of costs or income directly attributable to it and<br />
determinable from the outset, independently of when they are paid. The amount of the initial<br />
recognition does not include all those expenses that are reimbursed by the debtor<br />
counterparty or that are attributable to internal expenses of an administrative character.<br />
If the recognition is the result of reclassification, the fair value of the asset recognised at the<br />
time of the reclassification is taken as the new measure of the amortised cost of the assets.<br />
For loans not granted under market conditions, the initial fair value is calculated by using<br />
special measurement techniques described below; in these circumstances the difference<br />
between the fair value that is calculated and the amount granted is included directly in the<br />
income statement within the item interest.<br />
Contango and repo agreements with the obligation or right to repurchase or resell at term are<br />
recognised in the accounts as funding or lending transactions. For transactions with a spot<br />
sale and forward repurchase, the spot cash received is recognised in the accounts as<br />
borrowings, while the spot purchase transactions with forward resale are recognised as<br />
lending for the spot amount paid.<br />
4.3 Measurement criteria<br />
Loans are measured at amortised cost using the criteria of effective interest.<br />
255
The amortised cost of a financial asset or financial liability is the amount at which the<br />
financial asset or financial liability was measured upon initial recognition net of principal<br />
repayments, plus or minus the cumulative amortisation using the effective interest criterion<br />
on any difference between that initial amount and the maturity amount, minus any reduction<br />
(arising from an impairment or uncollectability).<br />
The effective interest criterion is a method of calculating amortised cost of an asset or liability<br />
(or group of assets and liabilities) and of distributing the interest income or expense over its<br />
relative life. The effective interest rate is the rate that exactly discounts the estimated flow of<br />
future cash payments or receipts until the expected maturity of the financial instrument. To<br />
determine the effective interest rate, the cash flows must be estimated taking into<br />
consideration all the contractual conditions of the financial instrument (e.g. payment in<br />
advance, a purchase option or similar), but future impairments of the loan are not considered.<br />
The computation includes all fees and basis points paid or received between parties to the<br />
contract which are integral parts of the effective interest, the transaction costs and all other<br />
premiums or discounts.<br />
At each reporting date or when interim reports are prepared, any objective evidence that a<br />
financial asset or group of financial assets has suffered impairment loss is assessed. This<br />
circumstance occurs when it is probable that a company may not be able to collect amounts<br />
due on the basis of the original contracted conditions or, for example, in the presence of:<br />
(a) significant financial difficulties of the issuer or debtor;<br />
(b) an infringement of the contract such as default or failure to pay interest or repay<br />
principal;<br />
(c) the lender, because of the economic or legal factors relating to the financial difficulties of<br />
the debtor, granting a concession to the latter which the lender would not otherwise have<br />
considered;<br />
(d) the probability of the beneficiary declaring procedures for loan restructuring;<br />
(e) the disappearance of an active market for that financial asset due to financial difficulties;<br />
(f) available data which indicate a substantial decrease in expected future cash flows for a<br />
similar group of financial assets since the time of the initial recognition of those assets,<br />
although the decrease cannot yet be identified with the single financial assets of the group.<br />
The measurement of non-performing loans (loans which, according to the definitions<br />
formulated by the supervisory regulations in force issued by the Bank of Italy, are nonperforming,<br />
impaired, restructured or past due) is performed on a case-by-case basis. The<br />
remaining loans are measured using, collective, statistical methods which group uniform<br />
classes of risk together.<br />
The method for calculating the impairment losses recognised on non-performing loans is<br />
based on discounting expected future cash flows for principal and interest, taking account of<br />
any guarantees attached to positions and of any advances received. The basic elements for<br />
determining the present value of cash flows are the identification of the estimated receipts, the<br />
relative maturity dates and the discount rate to apply. The amount of the loss is equal to the<br />
difference between the recognised value of the asset and the present value of expected future<br />
cash flows, discounted at the original effective interest rate.<br />
The measurement of performing loans relates to asset portfolios for which no objective<br />
evidence of impairment exist and which are therefore valued collectively. Percentage rates of<br />
loss calculated from historical data series are applied to the estimated cash flows from the<br />
assets, grouped into uniform classes with similar characteristics in terms of credit risk for the<br />
network banks of the Group, according to Basel 2 regulations, to which appropriate corrective<br />
factors are applied to give a measurement consistent with the relative accounting standard.<br />
If a loan is subject to individual measurement and shows no objective impairment loss, it is<br />
placed in a class of financial assets with similar credit risk characteristics and subjected to<br />
collective measurement.<br />
Permanent impairment that is found is immediately recognised in the income statement under<br />
the item 130 a) “Net impairment losses on loans” as are reversals of part or all of the<br />
impairment losses previously recognised. Reversals of impairment losses are recognised where<br />
256
there is an improvement in credit quality sufficient to provide reasonable certainty of prompt<br />
collection of the principal and the interest according to the original conditions of the original<br />
loan contract, or in the presence of a progressive reversal of the present value calculated at the<br />
time of recognising the impairment loss. Where loans are measured on a collective basis, any<br />
upward value adjustments or reversals of impairment losses are recalculated as differences in<br />
relation to each performing loan at the measurement date.<br />
The fair value of medium and long-term loans is measured by considering future cash flows<br />
discounted at the replacement rate or the market rate existing at the measurement date and<br />
relating to a position with the same characteristics as the loan measured.<br />
The fair value is measured for all loans for information purposes only. For loans subject to<br />
effective hedging, the fair value is calculated in relation to the risk that is hedged for<br />
measurement purposes.<br />
4.4 Derecognition criteria<br />
Loans are derecognised from the balance sheet when the rights to the cash flows from the<br />
financial assets expire or when the financial assets are sold with the substantial transfer of all<br />
the risks and rewards deriving from ownership of them and also when events to extinguish the<br />
debt occur, in accordance with the definition provided in the supervisory regulations in force.<br />
Otherwise loans continue to be recognised on the balance sheet for an amount equal to the<br />
remaining involvement, even if legal title has been transferred to a third party.<br />
The assets in question are derecognised in the balance sheet even when the Bank maintains<br />
the contractual right to receive cash flows from them, but when at the same time it has a<br />
contractual obligation to pay those cash flows to a third party.<br />
If it results from disposals, the profit or loss from the derecognition of loans and receivables is<br />
recognised in the income statement within item 100 a) “Income (loss) from the disposal or<br />
repurchase of loans”, or if it results from the aforementioned events to extinguish debt, within<br />
item 130 a) “Net impairment losses on loans and receivables”. In the latter case the events to<br />
extinguish debt consist of either official actions taken by the competent bodies of the Bank<br />
from which the total or partial non-recoverability of the financial asset results or the waiver of<br />
recovery activities for reasons of financial expediency.<br />
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5. Hedging derivatives<br />
5.1 Definition<br />
Hedging transactions are designed to neutralise potential losses on a specific item (or group of<br />
items) attributable to a determined risk, by means of the gains realised on another instrument<br />
or group of instruments if that particular risk should actually result in losses.<br />
The <strong>UBI</strong> Group uses the following type of hedging transactions, appropriately represented in<br />
the accounts and described below:<br />
a fair value hedge: the objective is to offset adverse changes in the fair value of the asset or<br />
liability hedged;<br />
a cash flow hedge: the objective is to hedge against the exposure to variability in expected<br />
cash flows with respect to the initial expectations.<br />
Derivative contracts stipulated with external counterparties are designated as hedging<br />
instruments.<br />
5.2 Recognition criteria<br />
As with all derivatives, derivative financial instruments used for hedging are initially<br />
recognised and subsequently measured at fair value and are classified in the balance sheet<br />
under assets within item 80 “Hedging derivatives” and under liabilities within item 60<br />
“Hedging derivatives”.<br />
A relationship qualifies as a hedge and is appropriately represented in the accounts if, and<br />
only if, all the following conditions are satisfied:<br />
at the start of the hedging transaction the relationship is formally designated and<br />
documented, including the company’s risk management objective and strategy for<br />
undertaking the hedge. This documentation includes identification of the hedging<br />
instrument, the item or transaction hedged, the nature of the risk being hedged, and how<br />
the entity will assess the hedging instrument's effectiveness in offsetting the exposures to<br />
changes in the fair value of the item hedged or in the cash flows attributable to the risk<br />
hedged;<br />
the hedging is expected to be highly effective;<br />
the planned transaction hedged, for hedging cash flows, is highly probable and presents an<br />
exposure to changes in cash flows that could have effects on the income statement;<br />
the effectiveness of the hedging can be reliably measured;<br />
the hedging is measured on an ongoing basis and is considered highly effective for all the<br />
financial years in which it was designated.<br />
5.2.1 Methods for testing effectiveness<br />
A hedge relationship is judged effective, and as such is appropriately represented in the<br />
accounts, if at its inception and during its life the changes in the fair value or cash flows of the<br />
hedged item attributable to the hedged risk are expected and have almost always been<br />
completely offset by the changes in the fair value or cash flows of the hedging instrument. This<br />
conclusion is reached when the actual result falls within a range of between 80% and 125%.<br />
The effectiveness of a hedge is tested at inception and at each reporting date by means of a<br />
prospective test designed to demonstrate the expected effectiveness of the hedge during its life.<br />
Further retrospective tests are conducted monthly on a cumulative basis where the objective is<br />
to measure the degree of effectiveness of the hedge in the reporting period and therefore to<br />
verify whether the hedge has actually been effective in the period.<br />
Derivative financial instruments that are considered hedges from a profit and loss viewpoint<br />
but which do not satisfy the requirements to be considered effective instruments for hedging<br />
are recognised under item 20 “<strong>Financial</strong> assets held for trading” or under item 40 “<strong>Financial</strong><br />
liabilities held for trading” and the profits and losses under the corresponding item 80<br />
“Trading income (loss)”.<br />
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If the above tests do not confirm the effectiveness of the hedge, then if it is not derecognised,<br />
the derivative contract is reclassified within derivatives held for trading and the instrument<br />
hedged is again measured according to the criterion applied for its balance sheet classification.<br />
5.3 Measurement criteria<br />
5.3.1 Fair value hedging<br />
Fair value hedging is treated as follows:<br />
the profit or loss resulting from measuring a hedging instrument at fair value is included in<br />
the income statement under item 90 “Net hedging income (loss)”;<br />
the profit or loss on the item hedged attributable to the hedged risk adjusts the value in the<br />
accounts of the hedged item and is recognised immediately, regardless of the type of asset<br />
or liability hedged, in the income statement within the aforementioned item.<br />
Hedge accounting is discontinued prospectively in the following cases:<br />
1. the hedging instrument expires or is sold, terminated, or exercised;<br />
2. the hedge no longer meets the hedge accounting criteria described above;<br />
3. the entity revokes the designation.<br />
If the asset or liability hedged is measured at amortised cost, the higher or lower value<br />
resulting from measuring them at fair value as a result of the hedge becoming ineffective is<br />
recognised through profit or loss, according to the effective interest rate method or at constant<br />
rates in the event of a hedge on a portfolio of assets and liabilities where that method is not<br />
feasible, or in a single amount if the hedge has been derecognised.<br />
The methods used for measurement of the fair value of the risk hedged in the assets or<br />
liabilities subject to hedging are described in Part A.3.2 of the Notes to the financial<br />
statements, “Fair value hierarchy”.<br />
5.3.2 Cash flow hedging<br />
When a derivative is designated as a hedge of exposure to changes in expected cash flows from<br />
an asset or liability in the balance sheet or a future transaction considered highly probable,<br />
the accounting treatment of the hedge is as follows:<br />
the profits or losses (from the valuation of the hedging derivative) attributable to the<br />
effective portion of the hedge are recognised in a special reserve in equity termed 140<br />
“Valuation reserves”;<br />
the profits or losses (from measurement of the hedging derivative) attributable to the<br />
ineffective portion of the hedge are recognised directly in the income statement under item<br />
90 “Net hedging income (loss)”;<br />
the asset or liability hedged is measured according to the class of asset or liability to which<br />
it belongs.<br />
If a future transaction occurs which involves recognising non financial assets and liabilities,<br />
the corresponding profits or losses initially recognised under item 140 “Valuation reserves” are<br />
then transferred from that reserve and included as an initial cost of the asset or liability that is<br />
recognised. If the future hedged transaction subsequently involves recognition of a financial<br />
asset or liability, the associated profits or losses that were originally recognised under the item<br />
140 “Valuation reserves” are reclassified to the income statement in the same reporting period<br />
or periods during which the assets acquired or liabilities incurred have an effect on the income<br />
statement. If a portion of the profits or losses recognised in the aforementioned reserve are not<br />
considered recoverable, it is reclassified into the income statement within item 80 “Net trading<br />
income (loss)”.<br />
In all cases other than those already described, the profits or losses initially recognised under<br />
the item 140 “Valuation reserves” are transferred to the income statement to reflect the time<br />
and manner in which the future transaction is recognised in the income statement.<br />
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An entity must discontinue hedge accounting prospectively in each of the following<br />
circumstances:<br />
(a) the hedging instrument expires or is sold, terminated, or exercised (for this purpose the<br />
replacement or exchange of one hedging instrument with another hedging instrument is<br />
not a conclusion or termination if that replacement or exchange forms part of an entity’s<br />
documented hedging strategy). In this case the total profit (or loss) on the hedging<br />
instrument continues to be recognised directly in equity until the reporting period in<br />
which the hedge became effective and it continues to be recognised separately until the<br />
programmed hedging transaction occurs;<br />
(b) the hedge no longer satisfies the criteria for hedge accounting. In this case the total profit<br />
or loss on the hedging instrument continues to be recognised directly in equity starting<br />
from the reporting period in which the hedge became effective and it continues to be<br />
recognised separately in equity until the programmed hedging transaction occurs;<br />
(c) it is no longer considered that the future transaction should occur, in which case any<br />
related total profit or loss on the hedging instrument recognised directly in equity starting<br />
from the reporting period in which the hedge became effective must be recognised through<br />
profit or loss;<br />
(d) the entity revokes the designation. For hedges of a programmed transaction, total profits<br />
or losses on the hedging instrument recognised directly in equity starting from the<br />
reporting period in which the hedge became effective continues to be recognised separately<br />
in equity until the programmed transaction occurs or it is expected that it will no longer<br />
occur.<br />
If it is expected that the transaction will no longer occur the total profit (or loss) that had been<br />
recognised directly in equity is transferred to the income statement.<br />
5.3.3 Hedging portfolios of assets and liabilities<br />
Hedging of portfolios of assets and liabilities (“macrohedging”) and appropriate accounting<br />
treatment is possible after first:<br />
- identifying the portfolio to be hedged and dividing it by maturity dates;<br />
- designating the risk to be hedged;<br />
- identifying the interest rate risk to be hedged;<br />
- designating the hedging instruments;<br />
- determining the effectiveness.<br />
The portfolio for which the interest rate risk is hedged may contain both assets and liabilities.<br />
This portfolio is divided on the basis of expected maturity or repricing dates of interest rates<br />
after first analysing the structure of the cash flows.<br />
Changes in the fair value of the hedged instrument are recognised in the income statement<br />
under item 90 “Net hedging income (loss)” and in the balance sheet under item 90 “Fair value<br />
change in hedged financial assets” or under item 70 “Fair value change in hedged financial<br />
liabilities”.<br />
Changes occurring in the fair value of the hedging instrument are recognised in the income<br />
statement within item 90 “Net hedging income (loss)” and under assets in the balance sheet<br />
within item 80 “Hedging derivatives” or under liabilities side within item 60 “Hedging<br />
derivatives”.<br />
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6. Equity investments<br />
6.1 Definition<br />
6.1.1 Associates<br />
An “associate” is defined as a company in which at least 20% of the voting rights are held or<br />
over which the investing company exercises significant influence and which is neither a<br />
subsidiary nor a company subject to joint control by the investing company. Significant<br />
influence is the power to participate in the financial and operating policy decisions of the<br />
company invested in but not to control or have joint control of it.<br />
6.1.2 Companies subject to joint control<br />
A “company subject to joint control” is defined as a company governed by a contractual<br />
arrangement whereby two or more parties undertake an economic activity that is subject to<br />
joint control.<br />
6.2 Recognition criteria<br />
Equity investments in associates or joint ventures are recognised at cost of purchase plus any<br />
accessory costs.<br />
6.3 Measurement criteria<br />
Investments in associates are measured using the equity method. Investments in companies<br />
subject to joint control are measured by adopting either the equity method or the<br />
proportionate method<br />
Any objective evidence that an equity investment has been subject to impairment is assessed<br />
as at each annual or interim reporting date. The recoverable amount is then calculated,<br />
considering the present value of the future cash flows which may be generated by the<br />
investment, including the final disposal value. If the recoverable amount calculated in this way<br />
is less than the carrying value, the difference is recognised in the income statement under 240<br />
“Profits (losses) of equity investments (valued at equity)”. Any future reversals of impairment<br />
are also included in the item where the reasons for the original impairment no longer apply.<br />
6.4 Derecognition criteria<br />
Equity investments are derecognised in the balance sheet when the contractual rights to the<br />
cash flows from the financial assets expire or when the financial assets are sold with the<br />
substantial transfer of all the risks and rewards deriving from ownership of them. The result of<br />
the disposal on investments valued using the equity method recognised in the income<br />
statement under item 240 “Profits (losses) of equity investments (valued at equity)”; the result<br />
of the disposal of equity investments other than those valued using the equity method is<br />
recognised in the income statement under item 270 “Profits (losses) on the disposal of<br />
investments”.<br />
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7. Property, plant and equipment<br />
7.1 Definition of assets for functional use<br />
“Assets for functional use” are defined as tangible assets possessed to be used for the purpose<br />
of carrying on a company’s business and where the use is planned to last longer than one<br />
year.<br />
Assets for functional use also include properties rented to employees, ex employees and their<br />
heirs, as well as works of art.<br />
7.2 Definition of investment property<br />
“Investment property” is defined as properties held in order to earn rentals or for capital<br />
appreciation. As a consequence, investment property is to be distinguished from assets held<br />
for the use of the owner because they generate cash flows that are very different from the other<br />
assets held by the banking group.<br />
Finance lease contracts are also included within tangible assets (for functional use and held<br />
for investment) even if the legal title to the assets remains with the leasing company.<br />
7.3 Recognition criteria<br />
Tangible assets, functional and other, are initially recognised at cost (item 120 “Property, plant<br />
and equipment”), inclusive of all costs directly connected with bringing it to working condition<br />
for the use of the assets and of purchase taxes and duties that are not recoverable. This<br />
amount is subsequently increased to include expenses incurred from which it is expected<br />
future benefits will be obtained. The costs of ordinary maintenance are recognised in the<br />
income statement at the time at which they are incurred, while extraordinary maintenance<br />
costs (improvements) from which future benefits are expected are capitalised by increasing the<br />
value of the relative asset.<br />
Improvements and expenses incurred to increase the value of leased assets from which future<br />
benefits are expected are recognised:<br />
– under the most appropriate category of item 120, “Property, plant and<br />
equipment” if they are independent and can be separately identified, whether<br />
they are leased assets the property of others or whether they are held under a<br />
financial leasing contract;<br />
– under item 120 “Property, plant and equipment” if they are not independent<br />
and cannot be separately identified as an increase to the type of assets<br />
concerned if held by means of a financial lease contract or under item 160<br />
“Other assets” if they are held under an ordinary lease contract.<br />
The cost of property, plant and equipment is recognised as an asset if, and only if:<br />
it is probable that the future economic benefits associated with the asset will flow to the<br />
enterprise;<br />
the cost of the asset can be reliably determined.<br />
7.4 Measurement criteria<br />
Subsequent to initial recognition, items of property, plant and equipment for use in operations<br />
are recognised at cost, as defined above, net of accumulated depreciation and any permanent<br />
cumulative impairment. The depreciable amount, equal to cost less the residual value (i.e. the<br />
amount that would be normally obtained from disposal, less disposal costs, if the asset was<br />
normally in the conditions, including age, expected at the end of its useful life), should be<br />
allocated on a systematic basis over the asset's useful life by adopting the straight line method<br />
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of depreciation. The useful life of an asset, which is reviewed periodically to detect any<br />
significant change in estimates compared to previous figures, is defined as:<br />
the period of time over which it is expected that the asset can be used by a company or,<br />
the quantity of products or similar units that an entity expects to obtain from the use of the<br />
asset.<br />
Since property, plant and equipment may consist of items with different useful lives, land,<br />
whether by itself or as part of the value of a building is not depreciated since it constitutes a<br />
fixed asset with an indefinite life. The value attributable to the land is deducted from the total<br />
value of a property for all buildings in proportion to the percentage of ownership. Buildings, on<br />
the other hand, are depreciated according to the criteria described above.<br />
Works of art are not depreciated because they generally increase in value over time.<br />
Depreciation of an asset starts when it is available for use and ceases when the asset is<br />
written off the accounts, which is the most recent of when it is classified as for sale and the<br />
date of elimination from the accounts. As a consequence depreciation does not stop when an<br />
asset is left idle or is no longer in use, unless the asset has already been fully depreciated.<br />
Improvements and expenses which increase the value are depreciated as follows:<br />
if they are independent and can be separately identified, according to the presumed useful<br />
life as described above;<br />
if they are not independent and cannot be separately identified, then if they are held under<br />
an ordinary leasing contract, over the shorter of the period in which the improvements and<br />
expenses can be used and that of the remaining life of the contract taking account of any<br />
individual renewals, or if the assets are held under a finance lease contract, over the<br />
expected useful life of the assets concerned.<br />
The depreciation of improvements and expenses to increase the value of leased assets<br />
recognised under item 160 “Other assets” is recognised under item 220 “Other operating<br />
income (expense)”.<br />
At the end of each annual or interim reporting period the existence of indications that<br />
demonstrate the impairment of the value of an asset are assessed. The loss is determined by<br />
comparing the carrying amount of the tangible asset with the lower recoverable amount. The<br />
latter is the greater of the fair value, net of any sales costs, and the relative use value intended<br />
as the present value of future cash flows generated by the asset. The loss is immediately<br />
recognised in the income statement under item 200 “Net impairment losses on property,<br />
equipment and investment property”; the item also includes any future recovery in value if the<br />
causes of the original write down no longer exist.<br />
7.4.1 Definition and measurement of fair value<br />
7.4.1.1 Properties<br />
The fair value is measured on the basis of the market value intended as meaning the best<br />
price at which the sale of a property might reasonably be expected to have been completed<br />
unconditionally for cash consideration on the date of valuation, assuming:<br />
− that the seller and the purchaser are independent counterparties;<br />
− the intention of the seller to sell the assets is real;<br />
− that there is a reasonable period (having regard to the nature of the property and the<br />
state of the market) for the proper marketing of the property and for the agreement of<br />
price and terms necessary to complete the sale;<br />
− that the market trend, level of values and other circumstances were, at the date of<br />
signing the preliminary contract of purchase and sale, identical to those existing at the<br />
date of valuation;<br />
− that no account is taken of bids by purchasers for whom the property has<br />
characteristics which make it “outside the market range”.<br />
The procedures adopted for determining the market value are based on the following methods:<br />
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the direct comparative or market method, based on a comparison between the asset in<br />
question and other similar asset subject to sale or currently on sale on the same market or<br />
competing markets;<br />
the income method based on the present value of potential market incomes for a similar<br />
property, obtained by capitalising the income at a market rate.<br />
The above methods are applied individually and the values obtained are appropriately<br />
averaged.<br />
7.4.1.2 Determination of the value of land<br />
The method used for identifying the percentage of the market value attributable to land is<br />
based on an analysis of the location of the property, taking account of the type of construction,<br />
the state of conservation and the cost of rebuilding the entire building.<br />
7.5 Property, plant and equipment acquired through finance leases<br />
A finance lease is a contract that substantially transfers all the risks and rewards incident to<br />
ownership of an asset. Legal title may or may not be transferred at the end of the lease term.<br />
The beginning of the lease term is the date on which the lessee is authorised to exercise his<br />
right to use the asset leased and therefore corresponds to the date on which the lease is<br />
initially recognised.<br />
When the contract commences, the lessee recognises the financial lease transactions as assets<br />
and liabilities in its balance sheet at the fair value of the asset leased or, if lower, at the<br />
present value of the minimum payments due. To determine the present value of the minimum<br />
payments due, the discount rate used is the contractual interest rate implicit in the lease, if<br />
practicable, or else the lessee’s incremental borrowing rate is used. Any initial direct costs<br />
incurred by the lessee are added to the amount recognised for the asset.<br />
The minimum payments due are apportioned between the finance charges and the reduction<br />
of the residual liability. The former are allocated over the lease term so as to produce a<br />
constant rate of interest on the residual liability.<br />
The finance lease contract involves recognition of the depreciation charge for the asset leased<br />
and of the finance charges for each financial year. The depreciation policy used for assets<br />
acquired under finance leases is consistent with that adopted for owned assets. See the<br />
relative paragraph for a more detailed description.<br />
7.6 Derecognition criteria<br />
Property, plant and equipment are derecognised in the balance sheet when they are disposed<br />
of or when they are permanently retired from use and no future economic benefits are<br />
expected from their disposal. Any gains or losses resulting from the retirement or disposal of<br />
the property, equipment and investment property, calculated as the difference between the net<br />
consideration on the sale and the carrying amount of the asset are recognised in the income<br />
statement under item 270 “Profit (loss) on the disposal of investments”.<br />
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8. Intangible assets<br />
8.1 Definition<br />
An intangible asset is defined as an identifiable non-monetary asset without physical<br />
substance that is used in carrying on a company’s business.<br />
The asset is identifiable when:<br />
it is separable, which is to say capable of being separated and sold, transferred, licensed,<br />
rented, or exchanged;<br />
it arises from contractual or other legal rights, regardless of whether those rights are<br />
transferable or separable from other rights and obligations.<br />
An asset possesses the characteristic of being controlled by the enterprise as a result of past<br />
events and the assumption that its use will cause economic benefits to flow to the enterprise.<br />
An entity has control over an asset if it has the power to obtain future economic benefits<br />
arising from the resource in question and may also limit access by others to those benefits.<br />
Future economic benefits arising from an intangible asset might include receipts from the sale<br />
of products or services, savings on costs or other benefits resulting from the use of the asset<br />
by an enterprise.<br />
An intangible asset is recognised if, and only if:<br />
(a) it is probable that the expected future economic benefits attributable to the asset will flow<br />
to the entity;<br />
(b) the cost of the asset can be measured reliably.<br />
The probability of future economic benefits occurring is assessed on the basis of reasonable<br />
and supportable assumptions that represent the best estimate of the economic conditions that<br />
will exist over the useful life of the asset.<br />
The degree of probability attaching to the flow of economic benefits attributable to the use of<br />
the asset is assessed on the basis of the sources of information available at the time of initial<br />
recognition, giving greater weight to external sources of information.<br />
In addition to goodwill and software used over several years, brands, core deposits, assets<br />
under management and assets under management recognised following the merger of the<br />
former BPU <strong>Banca</strong> and the former <strong>Banca</strong> Lombarda e Piemontese are also considered as<br />
intangible assets.<br />
8.1.1 Intangible assets with a finite useful life<br />
An asset has a finite useful life where it is possible to estimate a limit to the period over which<br />
the related economic benefits are expected to be produced.<br />
Intangible assets considered as having a finite useful life include software, core deposits,<br />
assets under management and brands.<br />
8.1.2 Intangible assets with an indefinite useful life<br />
An asset has an indefinite useful life where it is not possible to estimate a predictable limit to<br />
the period over which the asset is expected to generate economic benefits for the Bank. The<br />
attribution of an indefinite useful life to an asset does not arise from having already<br />
programmed future expenses which restore the standard level of performance of the asset over<br />
time and prolong its useful life.<br />
Intangible assets considered as having an indefinite useful life include goodwill.<br />
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8.2 Recognition criteria<br />
Assets recognised under the balance sheet item 130 “Intangible assets” are stated at cost and<br />
any expenses subsequent to the initial recognition are only capitalised if they are able to<br />
generate future economic benefits and only if those expenses can be reliably determined and<br />
attributed to the assets.<br />
The cost of an intangible asset includes:<br />
the purchase price including any non recoverable taxes and duties on purchases after<br />
commercial discounts and bonuses have been deducted;<br />
any direct costs incurred in bringing the asset into use.<br />
8.3 Measurement criteria<br />
Subsequent to initial recognition intangible assets with a finite useful life are recognised at<br />
cost net of total amortisation and any losses in value that may have occurred. Amortisation is<br />
calculated on a systematic basis over the estimated useful life of the asset (see definition<br />
included in the section “Property, equipment and investment property”) using the straight line<br />
method for all intangible assets with the exception of intangible assets relating to customer<br />
accounts recognised following the purchase price allocation resulting from the merger of the<br />
former BPU <strong>Banca</strong> and the former <strong>Banca</strong> Lombarda e Piemontese. In this case the<br />
amortisation is calculated using percentage rates of amortisation which represent the<br />
probability of the customer accounts ending over time.<br />
Amortisation begins when the asset is available for use and ceases on the date on which the<br />
asset is eliminated from the accounts.<br />
Intangible assets with an indefinite useful life (see, goodwill, as defined in the section below if<br />
positive) are recognised at cost net of any impairment loss resulting from periodic reviews<br />
when tests are performed to verify the appropriateness of the carrying amount of the assets<br />
(see section below). As a consequence amortisation of these assets is not calculated.<br />
No intangible assets arising from research (or from the research phase of an internal project)<br />
are recognised. Research expenses (or the research phase of an internal project) are recognised<br />
as expenses at the time at which they are incurred.<br />
An intangible asset arising from development (or from the development phase of an internal<br />
project) is recognised if, and only if the following can be demonstrated:<br />
(a) the technical feasibility of completing the intangible asset so that it becomes available for<br />
sale or use;<br />
(b) the intention of the company to complete the intangible asset to use it or sell it;<br />
(c) the capacity of the company to use or sell the intangible asset.<br />
At the end of each annual or interim reporting period the existence of potential impairment of<br />
the value of intangible assets is assessed. The impairment is given by the difference between<br />
the carrying value of the assets and the recoverable amount and is recognised, as are any<br />
recoveries of value, under the item 210 “Net impairment losses on intangible assets”, with the<br />
exception of impairment losses on goodwill which are recognised under item 260 “Net<br />
impairment losses on goodwill”.<br />
8.4 Goodwill<br />
Goodwill is defined as the difference between the purchase cost and the fair value of assets<br />
and liabilities acquired as part of a business combination which consists of the union of<br />
separate enterprises or businesses in a single entity required to prepare financial statements.<br />
The result of almost all business combinations consists in the fact that a sole entity, an<br />
acquirer, obtains control over one or more separate businesses of the acquiree. When an entity<br />
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acquires a group of activities or net assets that do not constitute a business it allocates the<br />
cost of the group to individual assets and liabilities identified on the basis of their relative fair<br />
value at the date of acquisition.<br />
A business combination may give rise to a holding relationship between a parent company and<br />
a subsidiary in which the acquirer is the parent company and the acquiree is the subsidiary.<br />
All business combinations are accounted for using the purchase method of accounting.<br />
The purchase method involves the following steps:<br />
(a) identification of the acquirer (the acquirer is the combining enterprise that obtains control<br />
of the other combining enterprises or businesses);<br />
(b) determination of the acquisition date;<br />
(c) determination of the cost of the business combination, intended as the consideration<br />
transferred by the purchaser to the shareholders of the acquiree;<br />
(d) the allocation, as at the acquisition date, of the cost of the business combination by means<br />
of the recognition, classification and measurement of the identifiable assets acquired and<br />
the identifiable liabilities assumed;<br />
(e) recognition of any existing goodwill.<br />
Business combinations performed with subsidiary undertakings or with companies belonging<br />
to the same group are recognised on the basis of the significant economic substance of the<br />
transactions.<br />
In application of that principle, the goodwill arising from those transactions in the separate<br />
financial statements is recognised:<br />
(a) within asset item 120 of the balance sheet if significant economic substance is found;<br />
(b) as a deduction from equity if it is not found.<br />
These transactions are eliminated from the consolidated financial statements and are therefore<br />
recognised solely as the relative costs incurred in relation to parties external to the Group.<br />
The goodwill recognised in the consolidated financial statements of the Group (“goodwill<br />
arising on consolidation” resulting from the elimination of the equity investments in<br />
subsidiaries) is the result of all the goodwill and positive consolidation differences relating to<br />
some of the companies controlled by the Parent.<br />
Any changes in the share of ownership which do not result in the loss or acquisition of control<br />
are to be considered, in compliance with IAS 27, as transactions between shareholders and as<br />
a consequence the relative effects must be recognised as either an increase or a decrease in<br />
equity.<br />
8.4.1. Allocation of the cost of a business combination to assets and liabilities and<br />
contingent liabilities<br />
The acquirer:<br />
(a) recognises the goodwill acquired in a business combination as assets;<br />
(b) measures that goodwill at its cost to the extent that it is the excess of the cost of the<br />
business combination over the acquirer's share of interest in the net fair values of the<br />
acquiree's identifiable assets, liabilities and contingent liabilities.<br />
Goodwill acquired in a business combination represents a payment made by the acquirer in<br />
the expectation of receiving economic future benefits from the asset which cannot be identified<br />
individually and recognised separately.<br />
After initial recognition, the acquirer values the goodwill acquired in a business combination<br />
at the relative cost net of cumulative impairment.<br />
The goodwill acquired in a business combination must not be amortised. The acquirer tests<br />
the asset for impairment annually or more frequently if specific events or changed<br />
circumstances indicate that it may have suffered a reduction in value, according to the relative<br />
accounting standard.<br />
The standard states that an asset (including goodwill) has suffered an impairment loss when<br />
the amount recognised in the accounts exceeds the recoverable amount understood as the<br />
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greater of the fair value, net of any sales expenses and its value in use, defined by section 6 of<br />
IAS 36.<br />
In order to test for impairment, goodwill must be allocated to cash generating units or to<br />
groups of cash generating units, in observance of the maximum aggregation limit which<br />
cannot exceed the operating segment identified in accordance with IFRS 8.<br />
8.4.2. Negative goodwill<br />
If the acquirer’s share of the net fair value of the identifiable assets, liabilities and contingent<br />
liabilities exceeds the cost of the business combination the acquirer:<br />
(a) reviews the identification and measurement of the identifiable assets, liabilities and<br />
contingent liabilities of the acquiree and the determination of the cost of the business<br />
combination;<br />
(b) immediately recognises any excess existing after the new measurement in the income<br />
statement.<br />
8.5 Derecognition criteria<br />
Intangible assets are derecognised in the balance sheet following disposal or when no<br />
economic future benefit is expected from its use or disposal.<br />
9. Liabilities, debt securities issued (and subordinated<br />
liabilities)<br />
The various forms of interbank and customer funding are recognised within the balance sheet<br />
items 10 “Due to banks”, 20 “Due to customers” and 30 “Debt securities issued”. These items<br />
also include liabilities recognised by a lessee in financial leasing operations.<br />
9.1 Recognition criteria<br />
The liabilities in question are recognised in the balance sheet at the time when the funding is<br />
received or when the debt securities are issued.<br />
The amount initially recognised is the fair value, which is normally the same as either the<br />
consideration received or the issue price, inclusive of any additional expenses or income that<br />
are directly attributable to the transaction and determinable from the outset, regardless of<br />
when they are paid.<br />
The amount of the initial recognition does not include all those costs that are reimbursed by<br />
the creditor counterparty or that are attributable to internal costs of an administrative<br />
character.<br />
9.2 Measurement criteria<br />
After initial recognition medium to long-term financial liabilities are measured at amortised<br />
cost using the effective interest method as defined in previous paragraphs.<br />
Short-term liabilities, for which the time factor is insignificant, are measured at cost.<br />
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9.3 Derecognition criteria<br />
<strong>Financial</strong> liabilities are derecognised in the balance sheet when they mature or are<br />
extinguished.<br />
The repurchase of own securities issued results in derecognition of the securities with the<br />
consequent redefinition of the liability for debt instruments issued. Any difference between the<br />
repurchase value of the own securities and the corresponding carrying value of the liabilities is<br />
recognised in the income statement under the item 100 “Income from the disposal or<br />
repurchase of d) financial liabilities”. Any subsequent re-issue of the securities previously<br />
subject to derecognition in the accounts constitutes a new issue for accounting purposes with<br />
the consequent recognition at the new issue price without any effect in the income statement.<br />
10. Tax assets and liabilities<br />
Tax assets and liabilities are stated in the balance sheet under the items 140 “Tax assets” and<br />
80 “Tax liabilities”.<br />
10.1. Current tax assets and liabilities<br />
Current tax for the current and prior periods is recognised as a liability to the extent that it<br />
has not yet been settled; any excess compared to the amount due is recognised as an asset.<br />
Current tax liabilities (assets) for the current and prior years, are measured at the amount<br />
expected to be paid to/recovered from taxation authorities, using the tax rates and tax laws in<br />
force.<br />
Current tax assets and liabilities are derecognised in the accounts in the year in which the<br />
assets are realised or the liabilities are extinguished.<br />
10.2. Deferred tax assets and liabilities<br />
Deferred tax liabilities are recognised for all taxable temporary differences unless the deferred<br />
tax liability arises from:<br />
goodwill for which amortisation is not deductible for tax purposes or<br />
the initial recognition of an asset or a liability in a transaction which:<br />
− is not a business combination and<br />
− at the time of the transaction, affects neither the accounting nor the taxable profit.<br />
Deferred tax assets are not calculated for higher values of assets for which the tax regime has<br />
been suspended relating to equity investments and to reserves for which the tax regime has<br />
been suspended because it is considered to-date there are no reasonable grounds to assume<br />
they will be taxed in future.<br />
Deferred tax liabilities are recognised within the balance sheet item 80 b) “Tax liabilities<br />
deferred”.<br />
A deferred tax asset is recognised for all deductible temporary differences if it is probable that<br />
a taxable income will be used against which it will be possible to use the deductible temporary<br />
difference, unless the deferred tax asset arises from:<br />
negative goodwill which is treated as deferred income;<br />
the initial recognition of an asset or liability in a transaction which:<br />
− is not a business combination and<br />
− affects neither the accounting profit nor the taxable profit at the time of the transaction.<br />
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Assets for prepaid taxes are recognised under the balance sheet item 140 b) “Tax assets,<br />
deferred”.<br />
Deferred tax assets and deferred tax liabilities are subject to constant monitoring and are<br />
measured using the tax rates that it is expected will apply in the period in which the tax asset<br />
will be realised or the tax liability will be extinguished on the basis of the tax regulations<br />
established by laws currently in force.<br />
Deferred tax assets and deferred tax liabilities are derecognised in the accounts in the year in<br />
which:<br />
the temporary difference which gave rise to them becomes payable with regard to<br />
deferred tax liabilities or deductible with regard to deferred tax assets;<br />
the temporary difference which gave rise to them is no longer valid for tax purposes.<br />
Deferred tax assets and deferred tax liabilities must not normally be discounted to present<br />
values nor offset one against the other,<br />
11. Non-current assets and disposal groups held for sale –<br />
Liabilities associated with disposal groups held for sale<br />
Non-current assets and liabilities and groups of non-current assets and liabilities for which it<br />
is presumed that the carrying value will recovered by selling them rather than by continued<br />
use are classified respectively under items 150 “Non-current assets and disposal groups held<br />
for sale” and 90 “Liabilities associated with disposal groups held for sale”.<br />
In order to be classified within these items the assets or liabilities (or disposal groups) must be<br />
immediately available for sale and there must be active, concrete programmes to sell the<br />
assets or liabilities in the short term.<br />
These assets or liabilities are measured at the lower of the carrying amount and their fair<br />
value net of disposal costs. Profits and losses attributable to groups of assets or liabilities held<br />
for sale are recognised in the income statement under item 310 “Pre-tax profit from<br />
discontinued operations”. Profits and losses attributable to individual assets held for disposal<br />
are recognised in the income statement under the most appropriate item.<br />
12. Provisions for risks and charges<br />
12.1. Definition<br />
A provision is defined as a liability of uncertain timing or amount.<br />
A contingent liability, however, is defined as:<br />
a possible obligation, the result of past events, the existence of which will only be confirmed<br />
by the occurrence or (non occurrence) of future events that are not totally under the control<br />
of the enterprise;<br />
a present obligation that is the result of past events, but which is not recognised in the<br />
accounts because:<br />
− it is improbable that financial resources will be needed to settle the obligation;<br />
− the amount of the obligation cannot be measured with sufficient reliability.<br />
Contingent liabilities are not recognised in the accounts, but are only reported, unless they are<br />
considered a remote possibility.<br />
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12.2. Recognition criteria and measurement<br />
A provision is recognised if and only if:<br />
there is a present obligation (legal or implicit) that is the result of a past event; and<br />
it is probable that the use of resources suitable for producing economic benefits will be<br />
required to fulfil the obligation; and<br />
a reliable estimate can be made of the amount arising from fulfilment of the obligation.<br />
The amount recognised as a provision represents the best estimate of the expenditure required<br />
to settle the present obligation at the reporting date and reflects the risks and uncertainties<br />
that inevitably characterise a number of facts and circumstances. The amount of a provision is<br />
measured by the present value of the expenditure that it is assumed will be necessary to settle<br />
the obligation where the effect of the present value is a substantial aspect. Future events that<br />
might affect the amount required to settle the obligation are only taken into consideration if<br />
there is sufficient objective evidence that they will occur.<br />
Provisions made for risks and charges include those for the risk attaching to any existing tax<br />
litigation.<br />
12.3. Derecognition criteria<br />
The provision is reversed when it becomes improbable that the use of resources suitable for<br />
producing economic benefits will be required to settle the obligation.<br />
13. Foreign currency transactions<br />
13.1. Definition<br />
A foreign currency is a currency other than the functional currency of the entity, which is the<br />
currency of the primary economic environment in which an entity operates.<br />
13.2. Recognition criteria<br />
A foreign currency transaction is recorded at the time of initial recognition in the functional<br />
currency applying the spot exchange rate between the functional currency and the foreign<br />
currency ruling on the date of the transaction.<br />
13.3. Measurement criteria<br />
At each reporting date:<br />
(a) foreign currency monetary 14 amounts are translated using the closing rate;<br />
(b) non-monetary items 15 measured at historical cost in foreign currency are translated using<br />
the exchange rate at the date of the transaction;<br />
14<br />
“Monetary” items are defined as relating to determined sums in foreign currency, which is to say to assets and<br />
liabilities which must be received or paid for a determined amount in foreign currency. The defining characteristic of a<br />
monetary item is therefore the right to receive or an obligation to pay a set or calculable number of foreign currency<br />
units. See the note on “monetary” items for the contrary.<br />
15 See the note on “monetary” items for the contrary.<br />
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(c) non-monetary items carried at fair value in a foreign currency are translated using the<br />
exchange rates that existed on the dates when the fair values were determined.<br />
Exchange rate differences arising from the settlement of monetary items, or from the<br />
translation of monetary items at rates different from those at which they were translated when<br />
initially recognised during the year or in previous financial statements, are recognised in the<br />
income statement for the period except for exchange rate differences arising on monetary<br />
items that form part of a net investment in a foreign operation.<br />
Exchange rate differences arising from a monetary item that forms part of a net investment in<br />
a foreign operation of an entity that prepares financial statements are recognised in the<br />
income statement of the individual company financial statements of the entity that prepares<br />
the financial statements or the individual company financial statements of the foreign<br />
operation. These exchange rate differences in the financial statements that include the foreign<br />
operation (e.g. in the consolidated accounts when the foreign operation is a subsidiary) are<br />
initially recognised as a separate component in equity and are recognised in the income<br />
statement at the time of the disposal of the net investment.<br />
When a profit or loss on a non-monetary item is recognised directly in equity, each change in<br />
that profit or loss is also recognised directly in equity. However, when a profit or loss on a nonmonetary<br />
item is recognised in the income statement each change in that profit or loss is<br />
recognised in the income statement.<br />
The financial statements of foreign subsidiaries and associates which employ an accounting<br />
currency that is different from that of the Parent are translated using the exchange rates<br />
ruling at the reporting date<br />
14. Other information<br />
14.1 Treasury shares<br />
Treasury shares if present in the <strong>UBI</strong> Group portfolio are deducted from equity. No profit or<br />
loss arising from the purchase, sale, issue or cancellation of treasury shares is recognised in<br />
the income statement.<br />
The differences between the purchase and sale price arising from these transactions are<br />
recorded in equity reserves.<br />
14.2 Provisions for guarantees granted and commitments<br />
Provisions made on a cases by case and collective basis to estimate possible payments to be<br />
made connected with the assumption of credit risks attaching to guarantees granted and<br />
commitments assumed are calculated by applying the same criteria as that reported for loans.<br />
These provisions are recognised within the item 100 “Other liabilities” against the item in the<br />
income statement 130d “Net impairment losses on: other financial transactions”.<br />
14.3 Employee benefits<br />
14.3.1 Definition<br />
Employee benefits are defined as all forms of consideration given by an enterprise in exchange<br />
for services rendered by employees. Employee benefits can be classified as follows:<br />
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short-term employee benefits (not including benefits due to employees for severance<br />
payments and benefits paid in the form of equity instruments) due entirely within twelve<br />
months after the service is rendered by employees;<br />
post-employment benefits due after the contract of employment has terminated;<br />
post-employment benefit plans subsequent to the termination of the employment contract<br />
and that is agreements whereby the enterprise provides benefits subsequent to the<br />
termination of the employment contract;<br />
long-term benefits, other than the previous, due entirely within the twelve months<br />
subsequent to the end of the financial year in which employee rendered the relative service.<br />
14.3.2 Post employment benefits and defined benefit plans<br />
14.3.2.1 Recognition criteria<br />
Following the reform of supplementary pensions pursuant to Legislative Decree No. 252/2005,<br />
portions of post-employment benefit funds maturing from 1 st January 2007 constitute a<br />
“defined benefit plan”.<br />
The liability relating to those portions is measured on the basis of the contributions due<br />
without the application of any actuarial methods.<br />
However, post-employment benefits maturing up until 31 st December 2006 continue to<br />
constitute a “post-employment benefit” belonging to the “defined benefit plan” series and as<br />
such require the amount of the obligation to be determined on an actuarial basis and to be<br />
discounted to present values because the debt may be extinguished a long time after the<br />
employees have rendered the relative service.<br />
The amount is accounted for as a liability amounting to:<br />
(a) the present value of the defined benefit obligation as at the reporting date;<br />
(b) plus any actuarial gains (less any actuarial losses) recognised in a separate reserve in<br />
equity;<br />
(c) less any pension costs relating to past service rendered not yet recognised;<br />
(d) less the fair value at the reporting date of any assets at the service of the plan.<br />
14.3.2.2 Measurement criteria<br />
As concerns the accounting treatment for actuarial gains/losses, the <strong>UBI</strong> Group has opted for<br />
direct recognition of these items within fair value reserves in equity.<br />
“Actuarial gains/losses” comprise adjustments arising from the reformulation of previous<br />
actuarial assumptions as a result of actual experience or from changes in the actuarial<br />
assumptions themselves.<br />
The “Projected Unit Credit Method” is used to calculate the present value. This considers each<br />
single period of service as giving rise to an additional unit of severance payment and therefore<br />
measures each unit separately to arrive at the final obligation. This additional unit is obtained<br />
by dividing the total expected service by the number of years that have passed from the time<br />
service commenced until the expected payment date. Application of the method involves<br />
making projections of future payments based on historical analysis of statistics and of the<br />
demographic curve and discounting these flows on the basis of market interest rates. The rate<br />
used for discounting to present value is calculated with reference to market interest rates<br />
published on the reporting date of bonds issued by major companies, as the average of the<br />
swap, bid and ask rates appropriately interpolated for intermediate maturity dates.<br />
14.3.2.3 Stock Options/Stock Grants<br />
Stock option and stock grant plans are defined as personnel remuneration schemes where the<br />
service rendered by an employee (or a third party) is remunerated by using equity instruments<br />
(including options on shares).<br />
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The cost of these transactions is measured at the fair value of equity instruments granted and<br />
is recognised in the income statement under item 180 a) “Administrative expenses, staff costs”<br />
on a straight line basis over the original life of the plan.<br />
The fair value determined relates to the equity instruments granted at the time of grant and<br />
takes account of market prices, if available, and the terms and conditions upon which the<br />
instruments were granted.<br />
14.4 Segment reporting<br />
Segment reporting is defined as the manner in which financial information on an enterprise is<br />
reported by operating segment.<br />
An operating segment is intended as a component of an entity:<br />
<br />
<br />
<br />
that engages in business activities that generate revenues and expenses;<br />
whose operating results are reviewed regularly by the entity’s chief operating decision<br />
maker, to make decisions about the resources to be allocated to the segment and<br />
assess its performance;<br />
for which discrete financial information is available.<br />
Segment reporting is based on elements that senior management uses to make operating<br />
decisions (a “management approach”) and consequently the identification of operating<br />
segments is performed on the basis of the current system of reporting to management which is<br />
based primarily on management analysis of legally recognised entities.<br />
Segment reporting is completed by information on the geographical areas in which revenues<br />
are produced and assets are held.<br />
14.5 Revenues<br />
14.5.1 Definition<br />
Revenues are the gross inflow of economic benefits resulting from business arising from the<br />
ordinary operating activities of an enterprise when these inflows create an increase in equity<br />
other than an increase resulting from payments made by shareholders.<br />
14.5.2 Recognition criteria<br />
Revenues are measured at the fair value of the consideration received or due and are<br />
recognised in the accounts when they can be reliably estimated.<br />
The result of the rendering of services can be reliably estimated when the following conditions<br />
are met:<br />
the amount of revenue can be measured reliably;<br />
it is probable that the economic benefits arising from the transaction will flow to the<br />
company;<br />
the stage of completion of the operation as at the reporting date can be measured reliably;<br />
the costs incurred, or to be incurred, to complete the transaction can be measured reliably.<br />
Revenue recognised in return for services rendered is recognised by reference to the stage of<br />
completion of the transaction.<br />
Revenue is only recognised when it is probable that the economic benefits arising from the<br />
transaction will be enjoyed by the company. Nevertheless when the recoverability of an<br />
amount already included within revenues is uncertain, the amount not recoverable or the<br />
amount for which recovery is no longer probable is recognised as a cost, instead of adjusting<br />
the revenue originally recognised.<br />
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Revenue arising from the use by third parties of the company’s assets which generate interest<br />
or dividends are recognised when:<br />
it is probable that the economic benefits arising from the transaction will be received by the<br />
enterprise;<br />
the amount of the revenue can be reliably measured.<br />
Interest is recognised on an accruals basis that takes into account the effective yield of the<br />
asset. In detail:<br />
interest income includes the amortisation of any discounts, premiums or other differences<br />
between the initial carrying amount of a security and its value at maturity;<br />
arrears of interest that are considered recoverable are recognised within the item 10<br />
“Interest and similar income”, but only the part considered recoverable.<br />
Dividends are recognised when shareholders acquire the right to receive payment.<br />
Expenses or revenues resulting from the sale or purchase of financial instruments, determined<br />
by the difference between the amount paid or received for the transaction and the fair value of<br />
the instrument are recognised in the income statement on initial recognition of the financial<br />
instrument when the fair value is determined:<br />
by making reference to current and observable market transactions in the same<br />
instrument;<br />
by using measurement techniques which use, as variables, only data from observable<br />
markets.<br />
14.6 Expenses<br />
Expenses are recognised in the accounts at the time at which they are incurred, while<br />
following the criteria of matching expenses to revenues that result directly and jointly from the<br />
same transactions or events. Expenses that cannot be associated with revenues are recognised<br />
immediately in the income statement.<br />
Expenses directly attributable to financial instruments measured at amortised cost and<br />
determinable from the outset, regardless of the time at which they are settled, flow to the<br />
income statement by applying the effective interest rate, a definition of which is given in the<br />
section “Loans and receivables”.<br />
Impairment losses are recognised through profit and loss in the year in which they are<br />
measured.<br />
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A.3 – INFORMATION ON FAIR VALUE<br />
A Information on fair value<br />
A.3.1 Transfers between portfolios<br />
No reclassifications have been performed in the <strong>UBI</strong> <strong>Banca</strong> Group either in the current year, or<br />
in the previous year in financial asset portfolios from asset classes recognised at fair value into<br />
classes recognised at amortised cost, with regard to the possibilities introduced by EC<br />
Regulation No. 1004/2008 of the European Commission.<br />
To complete the information, we report the following with regard to shares held in <strong>2012</strong> as part<br />
of private equity and merchant banking business. In order to provide a better view of the<br />
nature of this portfolio, the investments of which are managed and monitored by the Group<br />
using a fair value approach designed to represent the Group’s intention to draw benefit from<br />
an increase in the value in the medium to long-term of the companies invested in, these<br />
shares have been recognised within balance sheet asset item 30 “<strong>Financial</strong> assets designated<br />
at fair value” instead of within item 20 “<strong>Financial</strong> assets held for trading”. This improved<br />
accounting treatment has not made any impact on the income statement nor on Group equity.<br />
A.3.2 Fair value hierarchy<br />
The fair value used for measuring financial instruments is determined on the basis of criteria,<br />
listed below, which involve the use of what are termed observable or unobservable inputs.<br />
Observable inputs are parameters developed on the basis of available market data and they<br />
reflect the assumptions that market participants should use when they price financial<br />
instruments. On the other hand, unobservable inputs are parameters for which market data<br />
are not available and which are therefore developed on the basis of the best available<br />
information on the assumptions that market participants should use when they price financial<br />
instruments.<br />
Fair value determined on the basis of level one inputs:<br />
the measurement is based on observable inputs, i.e. prices listed on active markets for<br />
identical financial instruments to which the entity can gain access on the valuation date of the<br />
instrument. A market is defined as active when the prices quoted reflect normal market<br />
transactions, are regularly and readily available and if those prices represent actual and<br />
regular market trading.<br />
Fair value determined on the basis of level two inputs:<br />
the measurement is performed using methods that are used if the instrument is not listed on<br />
an active market and is therefore based on inputs that are different from those of level one.<br />
The measurement of the financial instrument is based on prices inferred from market<br />
quotations for similar assets or by using measurement techniques for which all the significant<br />
factors – credit spreads and liquidity spreads – are inferred from observable market variables.<br />
Although this is the application of a measurement technique, there is basically no element of<br />
discretion in the resulting price, because the most important parameters used are drawn from<br />
markets and the calculation methods used replicate quotations existing on active markets.<br />
Fair value determined on the basis of level three inputs:<br />
the measurement is performed using methods which consist of measuring unlisted<br />
instruments by employing significant inputs not inferable from markets and which therefore<br />
involve the use of estimates and assumptions made by management.<br />
The choice of the method of measuring fair value is not optional, because the methods must<br />
be applied in hierarchical order.<br />
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Level 1<br />
Equity instruments quoted on regulated markets, bonds quoted on the EuroMot circuit and<br />
those for which prices that represent actual and regular market transactions continuously<br />
available from the main contribution platforms occurring on the basis of a normal reference<br />
period with price fluctuations over the last five days which occur at intervals considered<br />
normal are considered as quoted on an active market.<br />
The fair value of these instruments is given by the reference price recorded on the last working<br />
day of the reference month on the respective markets on which they are listed, where available<br />
and considered reliable. Otherwise the official price is considered first and then the opening<br />
stock market price in that order.<br />
Those derivatives for which a quotation on an active reference market (e.g. IDEM) are also<br />
considered as quoted, to the extent that the markets are considered highly liquid. Their fair<br />
value is the official closing price recorded on the last day of the month on the respective<br />
markets on which they are quoted.<br />
As concerns OICR units (collective investment instruments), mutual funds, Sicav’s and hedge<br />
funds, the fair value is level one if given by the net asset value (NAV) provided by a fund<br />
administrator as at the valuation date, or on the basis of contractually established periodic<br />
dates. Fair value level one is only given by the closing price on the respective listed markets for<br />
exchange trade funds (ETFs) and listed funds (including listed property funds).<br />
As concerns private equity funds, the fair value is only considered level one in the presence of<br />
a quoted price on an active market.<br />
Level 2<br />
Where no prices are available on active markets, the fair value of the financial instruments is<br />
measured by using measurement models which make use of market inputs. The resulting<br />
measurement is therefore based on factors inferred from official quotations, essentially similar<br />
in terms of risk factors, by applying a determined method of calculation.<br />
With regard to derivatives, almost all these consist of over the counter instruments and they<br />
are therefore measured using internal models that use market inputs. The options implicit in<br />
structured bonds and in the respective hedging derivatives are measured using appropriate<br />
pricing models which make use of directly observable market inputs (e.g. interest rate curves,<br />
volatility matrices and correlations, exchange rates). The calculation methodologies used<br />
replicate the prices of financial instruments listed on active markets without making<br />
discretionary assumptions which might influence the final price.<br />
Stakes in private equity funds are included in level two, where the fair value is calculated on<br />
the basis of the NAV provided by the manager and updated if necessary on the basis of<br />
communications received from the fund (dividend distributions, redemptions, etc.), since the<br />
date of the communication of the last NAV available as at the valuation date.<br />
As concerns equity instruments recognised within the available-for-sale portfolio, these are<br />
classified within level two if they are measured on the basis of measurement methods (direct<br />
transactions method and the comparable transactions method) which consider transactions<br />
occurring in the instrument in a reasonable period of time with respect to the date of<br />
measurement or, in some cases, by means of the stock market multiples method for<br />
comparable companies and if the value calculated using these measurement methods is not<br />
adjusted, for example, to eliminate the possible effect of a control premium present in the<br />
aforementioned transactions considered for measurements purposes.<br />
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Level 3<br />
Level three is defined as the fair value determined using measurement models which use<br />
inputs that are not directly observable on markets and which involve the use of estimates and<br />
assumptions by management.<br />
This level includes hedge funds for which adjustments have been made to the official NAV<br />
prices communicated by the management company in order to take account of liquidity<br />
and/or counterparty risk. For private equity funds too, any adjustment made to the NAV<br />
prices to take account of particular risk positions results in a classification in this fair value<br />
hierarchy level.<br />
Complex OTC derivatives (not comprised within level two) are measured using internal models<br />
that use implicit assumptions; the credit risk component is also considered explicitly for these.<br />
The remaining part of the equity instruments classified as available-for-sale are measured<br />
using methods based on an analysis of the fundamentals of the company in question and, as<br />
an alternative of last resort, at cost. Shareholdings are also classified within level three for<br />
which the fair value, even if calculated using the measurement methods described for level<br />
two, has been adjusted to eliminate for example the possible effect of a control premium<br />
present in the comparable transactions considered for measurement purposes.<br />
It is necessary to use measurement models to measure the level three fair value of options<br />
with underlying equity instruments that involve the use of market inputs that are not directly<br />
observable and which involve the use of estimates and assumptions in the measurement. More<br />
specifically the measurement instruments are designed using appropriate calculation methods<br />
based on specific assumptions that regard:<br />
• the performance of future cash flows affected by future events, to which probabilities are<br />
assigned based on historical experience or on behavioural assumptions;<br />
• determined input parameters not observable on active markets which are estimated from<br />
financial instruments observable on the market but not identical to the instruments<br />
measured.<br />
Information on the measurement models used for securities and derivatives<br />
The target instrument used for pricing securities and derivatives in the <strong>UBI</strong> Group is the<br />
software application Mxg2000 by Murex. This software takes account of all market factors in<br />
measuring the value of financial instruments.<br />
The majority of the market data is acquired through the information provider Reuters, partly<br />
in real time (i.e. prices, yield curves and exchange rates) and partly at preset times (ATM<br />
volatility for swaptions and ATM volatility and smile curves for caps and floors). The<br />
application is also fed “on demand” with a series of market parameters supplied by the<br />
provider Bloomberg: correlations, dividend yields, index and forex volatility.<br />
Fair value is calculated daily as follows:<br />
• the market parameters acquired in real time by Mxg2000 (prices, yield curves and<br />
exchange rates) are crystallised at 4.45 p.m. and used as reference data for calculating<br />
the mark-to-market. The last update of the day for the volatilities of swaptions and<br />
caps/floors (and the other market data acquired on demand if necessary) is performed<br />
at 4.45 p.m.;<br />
• at the end of the day closure (which occurs at 9.00 p.m.), a series of software<br />
procedures are performed which extract various information from Mxg2000 including<br />
the reference mark-to-market for the day.<br />
The pricing of unlisted financial assets is currently calculated using the software application<br />
Risk Watch by Algorithmics. For these instruments the future cash flows are discounted to<br />
present values using interest rates which take into account the specific nature of the issuer<br />
(credit spread).<br />
OTC derivatives on interest rates and exchange rates and derivatives used to hedge bonds<br />
(with interest rates and currencies as the underlying) are measured using the Mxg2000 target<br />
software. Values are measured for all contracts which can be priced using closed formula<br />
models. In detail, the main pricing models used in Mxg2000 for OTC derivatives are: Black<br />
278
Yield, Black Fwd, Black Swap Yield, Cox Fwd, Trinomial, Lnormal and CMS Convexity<br />
Analytical.<br />
Derivative instruments that are not managed in Murex, relating to embedded options in<br />
structured bonds issued and in the respective derivative hedges are measured using internal<br />
models (stochastic models with MonteCarlo simulations).<br />
Pricing for unlisted “plain vanilla” liabilities securities and the “plain vanilla” component of<br />
structured securities is currently calculated on the Front Office Mxg2000 target system.<br />
The pricing models employed for securities and derivatives are used continuously over time<br />
and are only modified when substantial market changes occur.<br />
A.3.2.1 Accounting portfolios: distribution by fair value level<br />
<strong>Financial</strong> assets/liabilities measured at fair<br />
value<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3<br />
1. <strong>Financial</strong> assets held for trading 3,431,331 586,164 6,440 2,149,230 635,890 87,297<br />
2. <strong>Financial</strong> assets designated at fair value 109,664 2,812 87,965 104,846 - 21,328<br />
3. Available-for-sale financial assets 12,796,489 1,056,904 147,215 6,911,316 1,029,653 98,740<br />
4. Hedging derivatives - 1,478,322 - - 1,090,498 -<br />
Total 16,337,484 3,124,202 241,620 9,165,392 2,756,041 207,365<br />
1. <strong>Financial</strong> liabilities held for trading 1,163,939 609,935 - 438,088 625,585 -<br />
2. <strong>Financial</strong> liabilities designated at fair value - - - - - -<br />
3. Hedging derivatives - 2,234,989 - - 1,739,685 -<br />
Total 1,163,939 2,844,924 - 438,088 2,365,270 -<br />
A.3.2.2 Annual changes in financial assets recognised at fair value (Level 3)<br />
1. Opening balances 87,297 21,328 98,740 -<br />
2. Increases 2,614 86,549 64,522 -<br />
2.1. Purchases 60 5,573 -<br />
2.2. Profits recognised in:<br />
2.2.1. Income statement 414 7,359 515 -<br />
- of w hich gains 306 5,612 - -<br />
2.2.2. Equity X X 10,034 -<br />
2.3. Transfers from other levels 1,819 79,040 47,812 -<br />
2.4. Other increases 381 90 588 -<br />
3. Decreases (83,471) (19,912) (16,047) -<br />
3.1.Sales (1,875) (1,690) (11,796) -<br />
3.2. Redemptions (3,817) -<br />
3.3. Losses recognised in:<br />
held for trading<br />
FINANCIAL ASSETS<br />
designated at fair<br />
value<br />
available-for-sale<br />
hedges<br />
3.3.1. Income statement (2,071) (8,582) (1,428) -<br />
- of w hich losses (2,071) (8,577) (1,298) -<br />
3.3.2. Equity X X (969) -<br />
3.4. Transfers to other levels (79,040) (5,525) (1,306) -<br />
3.5. Other decreases (485) (298) (548) -<br />
4. Closing balances 6,440 87,965 147,215 -<br />
In application of the Parent’s classification and measurement criteria for shareholdings, the<br />
subsidiary, Centrobanca S.p.A., reclassified its merchant banking equity investments out of<br />
“<strong>Financial</strong> assets held for trading” and into “<strong>Financial</strong> assets designated at fair value”. The<br />
total amount of €79,040 thousand was already classified within level three as at 31 st<br />
December 2011 and in this sense this was just a transfer between financial asset classes. In<br />
compliance with the methodology described in point A.3.2., the transfers reported in item 2.3<br />
almost entirely regarded equity investments in SACBO Società per l’Aeroporto Civile Orio al<br />
Serio, Sia S.p.A. and Siteba S.p.A and CYPRUS Bank obligations.<br />
279
The losses reported in item 3.3.1 relate mainly to hedge funds amounting to €5,827 thousand<br />
and the equity interests in Gatto Astucci S.p.A (€2,250 thousand), Medinvest International Sca<br />
(€1,025 thousand) and Biocel Center (€400 thousand).<br />
A.3.2.2 Annual changes in financial liabilities recognised at fair value (level three)<br />
No financial liabilities recognised at fair value level three exist in the <strong>UBI</strong> Group.<br />
A.3.3 Information on “day one profit/loss”<br />
The information relates to paragraph 28 of the IFRS which concerns differences between<br />
transaction prices and the value obtained by using measurement techniques that emerge on<br />
initial recognition and that are not immediately recognised through profit and loss on the<br />
basis of paragraphs AG76 and AG76A of IAS 39.<br />
Where this type of event occurs, indication must be given of the accounting policies adopted by<br />
the bank for recognition through profit or loss of the differences that arise in this manner<br />
subsequent to initial recognition of the instrument.<br />
<strong>UBI</strong> <strong>Banca</strong> has not performed any transactions for which a difference between the purchase<br />
price and the value of the instrument obtained using internal measurement techniques has<br />
arisen on initial recognition.<br />
280
Part B – Notes to the consolidated balance<br />
sheet<br />
ASSETS<br />
SECTION 1 Cash and cash equivalents – Item 10<br />
1.1 Cash and cash equivalents: composition<br />
3 1.12 .2 0 12 3 1.12 .2 0 11<br />
a) Cash in hand 641,608 625,835<br />
b) Deposits with central banks -<br />
To ta l 6 4 1,6 0 8 6 2 5 ,8 3 5<br />
SECTION 2 <strong>Financial</strong> assets held for trading – Item 20<br />
2.1 <strong>Financial</strong> assets held for trading: composition by type<br />
Ite ms /Amo u nts<br />
3 1.12 .2 0 12<br />
3 1.12 .2 0 12<br />
3 1.12 .2 0 11<br />
3 1.12 .2 0 11<br />
L 1 L 2 L 3 L 1 L 2 L 3<br />
A. O n-ba la nc e s h e e t a s s e ts<br />
1. Debt instruments 3,415,759 84 - 3,415,843 2,135,752 84 - 2,135,836<br />
1.1 Structured instruments 111 111 173 - - 173<br />
1.2 Other debt instruments 3,415,648 84 3,415,732 2,135,579 84 - 2,135,663<br />
2. Equity instruments 13,455 5,370 18,825 12,811 - 85,850 98,661<br />
3. Units in O.I.C.R.<br />
(collective investment instruments) 372 1,070 1,442 447 101 1,447 1,995<br />
4. Financing - - - - - 38,939 - 38,939<br />
4.1 Reverse repurchase agreements - - - - -<br />
4.2 Other - - 38,939 - 38,939<br />
Total A 3 ,4 2 9 ,5 8 6 8 4 6 ,4 4 0 3 ,4 3 6 ,110 2 ,14 9 ,0 10 3 9 ,12 4 8 7 ,2 9 7 2 ,2 7 5 ,4 3 1<br />
B. De riva tive in s trume nts<br />
1. <strong>Financial</strong> derivatives 1,745 586,079 - 587,824 220 596,766 - 596,986<br />
1.1 for trading 1,745 586,079 587,824 220 596,766 - 596,986<br />
1.2 connected with fair value options - - - - -<br />
1.3 other - - - - -<br />
2. Credit derivatives - - - - - - - -<br />
2.1 for trading - - - - - - - -<br />
2.2 connected with fair value options - - - - - - - -<br />
2.3 other - - - - - - - -<br />
Total B 1,7 4 5 5 8 6 ,0 7 9 - 5 8 7 ,8 2 4 2 2 0 5 9 6 ,7 6 6 - 5 9 6 ,9 8 6<br />
Total (A+B) 3 ,4 3 1,3 3 1 5 8 6 ,16 3 6 ,4 4 0 4 ,0 2 3 ,9 3 4 2 ,14 9 ,2 3 0 6 3 5 ,8 9 0 8 7 ,2 9 7 2 ,8 7 2 ,4 17<br />
As opposed to the previous year, level three equity instruments no longer include equity<br />
investments relating to merchant banking business carried out mainly by Centrobanca Spa.<br />
The assets in question have been reclassified as financial assets designated at fair value.<br />
Item 3 “OICR units (collective investment instruments)” relates exclusively to remaining<br />
investments in hedge funds.<br />
281
2.2 <strong>Financial</strong> assets held for trading: composition by debtors/issuers<br />
2.2 <strong>Financial</strong> assets hel d for trading: composition by debtors/issuers<br />
3 1.12 .2 0 12 3 1.12 .2 0 11<br />
A. ASSETS<br />
1. D e bt ins trum e nts 3,415,843 2 ,13 5 ,8 3 6<br />
a) Go vernments and Central Banks 3,393,213 2,108,953<br />
b) Other public autho rities - 7<br />
c) Banks 7,616 7,377<br />
d) Other is s uers 15,014 19,499<br />
2 . Equity ins trum e nts 18,825 9 8 ,6 6 1<br />
a) Banks 4,176 2,598<br />
b) Other is s uers : 14,649 96,063<br />
- ins urance co mpanies -<br />
- financial ins titutio ns 5,296 85,848<br />
- no n financial ins titutio ns 9,344 6,415<br />
- o ther 9 3,800<br />
3 . Units in O.I.C .R . (co llective inves tment ins truments ) 1,442 1,9 9 5<br />
4 . F ina nc ing - 3 8 ,9 3 9<br />
a) Go vernments and Central Banks -<br />
b) Other public autho rities -<br />
c) Banks -<br />
d) Other 38,939<br />
To ta l A 3,436,110 2 ,2 7 5 ,4 3 1<br />
B. DERIVATIVE INSTRUM ENTS<br />
a) Banks - -<br />
- fair value 117,473 72,409<br />
b) Cus to mers - -<br />
- fair value 470,351 524,577<br />
Total B 587,824 5 9 6 ,9 8 6<br />
Total (A+B) 4,023,934 2 ,8 7 2 ,4 17<br />
2.3 <strong>Financial</strong> assets held for trading: annual changes<br />
Cha ng e s /Unde rlying a s s e ts De bt ins trume nts Equity ins trume nts<br />
Units in O.I.C.R.<br />
(c olle c tive in ve stme n t<br />
in stru me nts)<br />
Fina nc ing<br />
To ta l<br />
A. Ope ning ba la nc e s 2 ,13 5 ,8 3 6 9 8 ,6 6 1 1,9 9 5 3 8 ,9 3 9 2 ,2 7 5 ,4 3 1<br />
B. Inc re a s e s 3 5 ,18 4 ,6 8 1 3 0 ,4 2 0 4 6 4 - 3 5 ,2 15 ,5 6 5<br />
B.1 Purchases 33,905,079 28,085 260 - 33,933,424<br />
B.2 Positive changes in fair value 29,933 1,514 96 - 31,543<br />
B.3 Other changes 1,249,669 821 108 - 1,250,598<br />
C. De c re a s e s (3 3 ,9 0 4 ,6 7 4 ) (110 ,2 5 6 ) (1,0 17 ) (3 8 ,9 3 9 ) (3 4 ,0 5 4 ,8 8 6 )<br />
C.1 Sales (31,804,734) (23,909) (293) - (31,828,936)<br />
C.2 Redemptions (1,637,020) (4,421) (397) - (1,641,838)<br />
C.3 Negative changes in fair value (246) (2,560) (300) - (3,106)<br />
C.4 Transfers to other portfolios - (79,040) - - (79,040)<br />
C.5 Other changes (462,674) (326) (27) (38,939) (501,966)<br />
D. Fina l ba la nc e s 3 ,4 15 ,8 4 3 18 ,8 2 5 1,4 4 2 - 3 ,4 3 6 ,110<br />
Within debt instruments, item B.3 “Other changes” (increases), the amount of €1.16 million<br />
relates to uncovered short positions existing at the end of the year. Similarly, item C.5,<br />
“Other changes” (decreases) includes an amount of €438 million relating to the total<br />
uncovered short positions existing at the end of the year before.<br />
Item C.4 “Transfers to other portfolios” shows the transfer made by Centrobanca to the<br />
financial assets designated at fair value of own equity investments connected with merchant<br />
banking business, totalling €79.04 million.<br />
282
SECTION 3 <strong>Financial</strong> assets designated at fair value –Item 30<br />
3.1 <strong>Financial</strong> assets designated at fair value: composition by type<br />
Ite ms /Amo unt s 3 1.12 .2 0 12 To t a l 3 1.12 .2 0 11<br />
To t a l<br />
L 1 L 2 L 3 L 1 L 2 L 3<br />
1. Debt instruments - - - - - - - -<br />
1.1 Structured instruments - - - - - - - -<br />
1.2 Other debt instruments - - - - - - - -<br />
2. Equity instruments 2,812 74,248 77,060 - - - -<br />
3. Units in O.I.C.R. (c o lle c tive inve s tme n t in stru me nts ) 109,664 13,717 123,381 104,846 - 21,328 126,174<br />
4. Financing - - - - - - - -<br />
4.1 Structured - - - - - - - -<br />
4.2 Other - - - - - - - -<br />
To ta l 10 9 ,6 6 4 2,812 8 7 ,9 6 5 2 0 0 ,4 4 1 104,846 - 21,328 126,174<br />
Co s t 10 9 ,6 6 4 2 ,8 12 8 7 ,9 6 5 2 0 0 ,4 4 1 10 4 ,8 4 6 - 2 1,3 2 8 12 6 ,17 4<br />
: 103000O|1 – NOTA<br />
With regard to units in O.I.C.R.s (collective investment instruments), level one investments<br />
consisted of a hedge fund of the company Tages Capital SGR. The amount shown for level<br />
three relates to the residual value of non-Group hedge funds. Further information on this<br />
item is given at the foot of Table 7.1 in income statement Section 7 – “Net value change in<br />
financial assets/liabilities designated at fair value”, which may be consulted.<br />
In application of the Parent’s classification and measurement criteria for shareholdings,<br />
Centrobanca reclassified the following shareholdings out of balance sheet item 20 “<strong>Financial</strong><br />
assets held for trading” into item 30 “<strong>Financial</strong> assets designated at fair value”. The<br />
amounts transferred relate to the fair value of the single shareholdings as at 1 st January<br />
<strong>2012</strong>:<br />
- Humanitas S.p.A €28,593 thousand<br />
- Immobiliare Mirasole Ord. €24,122 thousand<br />
- Immobiliare Mirasole Priv. €13,625 thousand<br />
- Pama S.p.A. €5,525 thousand<br />
- Ecas €2,292 thousand<br />
- Gatto Astucci €2,250 thousand<br />
- Fratelli Maritime Gr €1,600 thousand<br />
- Biocell €1,000 thousand<br />
- Straight Video Srl €33 thousand<br />
Consequently, all the results of the operations of those shareholdings have been recognised<br />
within item 110 of the income statement “Net profit on financial assets and liabilities<br />
designated at fair value“.<br />
283
3.2 <strong>Financial</strong> assets designated at fair value: composition by debtors/issuers<br />
Ite m s / A m o unts 3 1.12 .2 0 12 3 1.12 .2 0 11<br />
1. D e bt ins trum e nts - -<br />
a) Go vernments and Central Banks - -<br />
b) Other public autho rities - -<br />
c) Banks - -<br />
d) Other is s uers - -<br />
2 . Equity ins trum e nts 77,060 -<br />
a) Banks - -<br />
b) Other is s uers : 77,060 -<br />
- ins urance co mpanies - -<br />
- financial co mpanies 33,559 -<br />
- no n financial co mpanies 43,501 -<br />
- o ther - -<br />
3 . Units in O.I.C .R . (c o lle c tiv e inv e s tm e nt ins trum e nts ) 123,381 126,174<br />
4 . F ina nc ing - -<br />
a) Go vernments and Central Banks - -<br />
b) Other public autho rities - -<br />
c) Banks - -<br />
d) Other - -<br />
To ta l 200,441 126,174<br />
3.3. <strong>Financial</strong> assets designated at fair value: annual changes<br />
De bt ins trume nts<br />
Equity ins trume nts<br />
Units in O.I.C.R.<br />
(c o lle c tive in ve stme n t<br />
in stru me n ts)<br />
Fina nc ing<br />
To ta l<br />
A. Ope ning ba la nc e s - - 12 6 ,17 4 - 12 6 ,17 4<br />
B. Inc re a s e s - 8 4 ,2 14 2 7 ,15 4 - 111,3 6 8<br />
B.1 Purchases - 60 20,000 - 20,060<br />
B.2 Positive changes in fair value - 5,023 4,464 - 9,487<br />
B.3 Other changes - 79,131 2,690 - 81,821<br />
C. De c re a s e s - (7 ,15 4 ) (2 9 ,9 4 7 ) - (3 7 ,10 1)<br />
C.1 Sales - (1,690) - - (1,690)<br />
C.2 Redemptions - - (23,697) - (23,697)<br />
C.3 Negative changes in fair value - (5,464) (5,827) - (11,291)<br />
C.4 Other changes - - (423) - (423)<br />
D. Fina l ba la nc e s - 7 7 ,0 6 0 12 3 ,3 8 1 - 2 0 0 ,4 4 1<br />
Per<br />
The item B.3 “Other changes” (increases) includes the amount of €79.04 million referred to in the note at the<br />
foot of table 3.1.<br />
284
SECTION 4 Available-for-sale financial assets – Item 40<br />
4.1 Available-for-sale financial assets: composition by type<br />
Ite ms /Amo unts 3 1.12 .2 0 12 To ta l 3 1.12 .2 0 11<br />
To ta l<br />
L 1 L 2 L 3 L 1 L 2 L 3<br />
1. Debt instruments 12,603,798 1,002,549 7,466 13,613,813 6,621,026 920,410 10,296 7,551,732<br />
1.1 Structured instruments 166,558 - 2,069 168,627 73,426 - 3,773 77,199<br />
1.2 Other debt instruments 12,437,240 1,002,549 5,397 13,445,186 6,547,600 920,410 6,523 7,474,533<br />
2. Equity instruments 154,798 26 139,749 294,573 251,226 46,963 88,444 386,633<br />
2.1 At fair value 154,798 - 121,687 276,485 251,226 46,937 54,467 352,630<br />
2.2 At cost - 26 18,062 18,088 - 26 33,977 34,003<br />
3. Units in O.I.C.R.<br />
(collective investment instruments) 37,894 54,329 - 92,223 39,064 62,280 - 101,344<br />
4. Financing - - - - - - - -<br />
To ta l 12 ,7 9 6 ,4 9 0 1,0 5 6 ,9 0 4 14 7 ,2 15 14 ,0 0 0 ,6 0 9 6 ,9 11,3 16 1,0 2 9 ,6 5 3 9 8 ,7 4 0 8 ,0 3 9 ,7 0 9<br />
Equity instruments are recognised within “Level three” if, for example, in the absence of a<br />
price quoted on an active market, their fair value is estimated by assuming the value at cost<br />
or the quota of the equity corresponding to the interest held.<br />
In consideration of the particular nature of the shareholding, the equity investment held by<br />
<strong>Banca</strong> Carime Spa and by <strong>Banca</strong> Regionale Europea Spa in the Bank of Italy of<br />
approximately €2,246 thousand is recognised at cost. Amounts recognised at cost also<br />
include all the equity investments held by the Group for the purposes of a more solid<br />
presence on its local markets and for the development of commercial agreements.<br />
Equity instruments measured at fair value level one consist primarily of Intesa San Paolo<br />
(€148.4 million ) and A2A (€4.9 million).<br />
The units in O.I.C.R.s – Level one relate almost exclusively to investments in the Polis<br />
Portafoglio Immobiliare fund amounting to €8.4 million, to the Trackers EURSTOXX50 ETF<br />
amounting to €19.5 million and to the Lyxor EU ST 50 ETF amounting to €9.9 million.<br />
The units classified within level two relate to investments in private equity funds.<br />
4.2 Available-for-sale financial assets: composition by debtors/issuers<br />
Ite m s / A m o unts 3 1.12 .2 0 12 3 1.12 .2 0 11<br />
1. D e bt ins trum e nts 13 ,6 13 ,8 13 7 ,5 5 1,7 3 2<br />
a) Go vernments and Central Banks 12,179,093 5,964,174<br />
b) Other public autho rities - -<br />
c) Banks 848,232 914,064<br />
d) Other is s uers 586,488 673,494<br />
2 . Equity ins trum e nts 2 9 4 ,5 7 3 3 8 6 ,6 3 3<br />
a) Banks 184,833 275,412<br />
b) Other is s uers : 109,740 111,221<br />
- ins urance co mpanies 2,825 4,131<br />
- financial co mpanies 13,470 14,877<br />
- no n financial co mpanies 92,793 91,579<br />
- o ther 652 634<br />
3 . Units in O.I.C .R . (co llective inves tment ins truments ) 9 2 ,2 2 3 10 1,3 4 4<br />
4 . F ina nc ing - -<br />
a) Go vernments and central banks - -<br />
b) Other public autho rities - -<br />
c) Banks - -<br />
d) Other - -<br />
To ta l 14 ,0 0 0 ,6 0 9 8 ,0 3 9 ,7 0 9<br />
Equity instruments include the following shares acquired by the network banks following<br />
partial conversions of restructured loans (figures as at 31/12/<strong>2012</strong>):<br />
• Aedes Ordinary €550 thousand;<br />
• Gabetti cat. B €659 thousand<br />
• GGP Green Field (A1-A3) €3,845 thousand<br />
• Limoni €2,321 thousand.<br />
285
|1 - NOTA<br />
4.3 Available-for-sale financial assets: hedged assets<br />
Ite ms /Co mpo ne nts 3 1.12 .2 0 12 3 1.12 .2 0 11<br />
1. <strong>Financial</strong> assets subject to fair value specific hedge -<br />
a) interest rate risk 4,093,830 3,913,760<br />
b) price risk - -<br />
c) currency risk - -<br />
d) credit risk - -<br />
e) multiple risks - -<br />
2. <strong>Financial</strong> assets subject to cash flow specific hedge -<br />
a) interest rate risk - -<br />
b) currency risk - -<br />
c) other - -<br />
To ta l 4 ,0 9 3 ,8 3 0 3 ,9 13 ,7 6 0<br />
4.4 Available-for-sale financial assets: annual changes<br />
De bt ins trume nts<br />
Equity ins trume nts<br />
Units in O.I.C.R.<br />
(c olle c tive inve stme nt<br />
instrume nts )<br />
Fina nc ing<br />
To ta l<br />
A. Ope ning ba la nc e s 7 ,5 5 1,7 3 2 3 8 6 ,6 3 3 10 1,3 4 4 - 8 ,0 3 9 ,7 0 9<br />
B. Inc re a s e s 13 ,0 4 7 ,7 3 1 4 9 ,4 6 5 2 7 ,3 0 4 - 13,124,500<br />
B.1 Purcha ses 11,709,233 3,511 18,708 - 11,731,452<br />
B.2 Positive cha nge s in fair value 1,135,717 28,961 4,162 - 1,168,840<br />
B.3 Reve rsal of impa irment losses - 442 3,622 - 4,064<br />
- recognise d in the income statement - - - - -<br />
- recognise d in e quity - 442 3,622 - 4,064<br />
B.4 Transfers from other portfolios - 243 - - 243<br />
B.5 Othe r change s 202,781 16,308 812 - 219,901<br />
C. De c re a s e s (6 ,9 8 5 ,6 5 0 ) (14 1,5 2 5 ) (3 6 ,4 2 5 ) - (7 ,16 3 ,6 0 0 )<br />
C.1 Sales (6,698,645) (103,266) (11,977) - (6,813,888)<br />
C.2 Rede mptions (256,326) - (3,687) - (260,013)<br />
C.3 Nega tive c hanges in fair value (5,317) (969) (1,817) - (8,103)<br />
C.4 Impairme nt losses (265) (37,117) (18,886) - (56,268)<br />
- recognise d in the income statement (265) (37,117) (18,763) - (56,145)<br />
- recognise d in e quity - - (123) - (123)<br />
C.5 Transfers to other portfolios - - - - -<br />
C.6 Othe r change s (25,097) (173) (58) - (25,328)<br />
D. Fin a l ba la nc e s 13 ,6 13 ,8 13 2 9 4 ,5 7 3 9 2 ,2 2 3 - 14 ,0 0 0 ,6 0 9<br />
Purchases of debt instruments consisted mainly of investments in government securities<br />
(approximately €11.4 billion), while the remaining part consisted of purchases of bonds<br />
issued by major banks.<br />
The effects of the narrowing of the BTP-BUND spread led to an improvement in market<br />
prices for debt instruments which had a positive impact on the valuation reserve with a net<br />
increase in fair value of €757 million (net of taxes).<br />
Sales of equity instruments included an amount relating to Intesa San Paolo totalling<br />
€79.213 million.<br />
Impairment losses charged to the income statement relate mainly to shares held in Intesa<br />
Sanpaolo S.p.A. amounting to €31,766 thousand.<br />
Income statement table 8.2 “Net impairment losses on available-for-sale financial assets:<br />
composition” may be consulted for further information.<br />
286
The schedule below shows changes and the effects in the income statement of the shares<br />
held in Intesa Sanpaolo S.p.A..<br />
historical values<br />
amounts<br />
31.12.2011<br />
movements in reserves and in the<br />
income statement as at 31.12.2011<br />
number of<br />
shares<br />
cost<br />
price<br />
per<br />
share<br />
fair<br />
value<br />
reversal of share<br />
to reserve (gross<br />
of tax)<br />
recognition in<br />
the income<br />
statement<br />
(impairment)<br />
186,458,028 881,325 1.2891 240,363 0 (112,542)<br />
new historical<br />
amounts<br />
number of<br />
shares<br />
cost<br />
amounts<br />
31.12.<strong>2012</strong><br />
price<br />
per<br />
share<br />
fair<br />
val ue<br />
movements in reserves and in the income<br />
fair val ue of<br />
share in<br />
reserve (gross<br />
of tax)<br />
statement as at 31.12.<strong>2012</strong><br />
recognition<br />
in the<br />
income<br />
statement<br />
(impairment)<br />
recognition<br />
in the<br />
income<br />
statement<br />
114,129,014 786,371 1.3000 148,368 21,571 (31,766) 14,022<br />
Purchases of O.I.C.R. units amounting to €9.9 million relate to the ETF LYXOR EU ST 50<br />
and to units in private equity funds.<br />
Impairment losses charged to the income statement regarded the Centrobanca Sviluppo<br />
Impresa Fund amounting to €12.5 million, the Polis Portafoglio Immobiliare Fund<br />
amounting to €4.4 million and other private equity funds amounting to €1.8 million.<br />
SECTION 5 Held-to-maturity investments – Item 50<br />
5.1 Held-to-maturity investments: composition by type<br />
3 1.12 .2 0 12<br />
3 1.12 .2 0 11<br />
Type o f tra ns a c tio n / Gro up ite ms<br />
Ca rrying<br />
Amo unt<br />
Fa ir va lu e<br />
L 1 L 2 L 3<br />
To ta l fa ir va lu e<br />
L 1 L 2 L 3<br />
To ta l fa ir<br />
va lu e<br />
1. De bt instruments 3,158,013 3,243,103 - - 3,243,103 - - - - -<br />
1.1 Structured - - - - - - - - - -<br />
1.2 Other de bt instruments 3,158,013 3,243,103 - - 3,243,103 - - - - -<br />
2. Fina ncing - - - - - - - - - -<br />
To ta l 3,158,013 3,243,103 - - 3,243,103 - - - - -<br />
Ca rrying<br />
Amo u nt<br />
Fa ir va lue<br />
These are securities purchased during the year to support net interest income.<br />
287
5.2. Held-to-maturity investments: debtors/issuers<br />
Type o f tra ns a c tio n/ A m o unts 3 1.12 .2 0 12 3 1.12 .2 0 11<br />
1. D e bt ins trum e nts 3 ,15 8 ,0 13 -<br />
a) Go vernments and Central Banks 3,158,013 -<br />
b) Other public autho rities - -<br />
c) Banks - -<br />
d) Other is s uers - -<br />
2 . F ina nc ing - -<br />
a) Go vernments and Central Banks - -<br />
b) Other public autho rities - -<br />
c) Banks - -<br />
d) Other - -<br />
To ta l 3 ,15 8 ,0 13 -<br />
To ta l fa ir v a lue 3 ,2 4 3 ,10 3 -<br />
5.3 Held-to-maturity investments: hedged<br />
No items of this type exist in the <strong>UBI</strong> Group.<br />
5.4 Held-to-maturity investments: annual changes<br />
5.4 Held-to-maturity investments: annual changes<br />
De bt ins trume nts Fina nc ing To ta l<br />
A. Ope ning ba la nc e s - - -<br />
B. Inc re a s e s 3 ,18 8 ,3 6 3 - 3 ,18 8 ,3 6 3<br />
B.1 Purc hases 3,188,072 3,188,072<br />
B.2 Re ve rsa ls of impairme nt losses -<br />
B.3 Transfe rs from othe r portfolios -<br />
B.4 Othe r changes 291 291<br />
C. De c re a s e s (3 0 ,3 5 0 ) - (3 0 ,3 5 0 )<br />
C.1 Sales -<br />
C.2 Re demptions -<br />
C.3 Ne t impairme nt losse s -<br />
C.4 Transfe rs to other portfolios -<br />
C.5 Othe r changes (30,350) (30,350)<br />
D. Fina l ba la nc e s 3 ,15 8 ,0 13 - 3 ,15 8 ,0 13<br />
Table 2: 105030O|1 - NOTA<br />
288
SECTION 6 Loans and advances to banks – Item 60<br />
6.1 Loans and advances to banks: composition by type<br />
Type o f tra ns a c tio n/ A m o unts 3 1.12 .2 0 12 3 1.12 .2 0 11<br />
A . Lo a ns to C e ntra l B a nks 1,19 1,2 3 5 7 3 9 ,3 18<br />
1. Term depo s its - -<br />
2. Co mpuls o ry res erve requirement 1,172,303 738,100<br />
3. Revers e repurchas e agreements - -<br />
4. Other 18,932 1,218<br />
B . Lo a ns to ba nks 4 ,8 8 1,111 5 ,4 4 4 ,6 8 2<br />
1. Current acco unts and depo s its 2,081,098 2,516,230<br />
2. Term depo s its 118,971 455,701<br />
3. Other lo ans 2,468,251 1,329,819<br />
3.1 Revers e repurchas e agreements 953,977 534,373<br />
3.2 Finance leas es 30 98<br />
3.3 o ther 1,514,244 795,348<br />
4. Debt ins truments 212,791 1,142,932<br />
4.1 Structured ins truments - -<br />
4.2 Other debt ins truments 212,791 1,142,932<br />
To ta l (c a rrying a m o unt) 6 ,0 7 2 ,3 4 6 6 ,18 4 ,0 0 0<br />
To ta l (fa ir v a lue ) 6 ,0 7 2 ,4 15 6 ,18 4 ,3 5 0<br />
Item 3.3.3 “Other loans – other” consists mainly of mortgages, cheques drawn on third<br />
parties and pooled financing.<br />
6.2 Loans and advances to banks: assets subject to specific hedging<br />
Type o f tra ns a c tio n/Amo unts 3 1.12 .2 0 12 3 1.12 .2 0 11<br />
1. Loans subject to fair value specific hedge:<br />
a) interest rate risk - 31,143<br />
c) currency risk - -<br />
d) credit risk - -<br />
e) multiple risks - -<br />
2. Loans subject to cash flow specific hedge:<br />
a) interest rate - -<br />
b) exchange rate - -<br />
c) expected transactions - -<br />
c) other - -<br />
To ta l - 3 1,14 3<br />
The amount recognised as at 31 st December 2011 relates to a position without recourse<br />
which was closed during the year.<br />
6.3 Finance leases<br />
Duration<br />
deteriorated<br />
exposures<br />
minimum payments<br />
quota of principal<br />
of which secured<br />
remaining amount<br />
quota of<br />
interest<br />
gross investment<br />
of which unsecured<br />
remaining amount<br />
on demand - - - - - -<br />
up to 3 months - 18 - - 18 -<br />
between 3 months and 1 year - 12 - - 12 -<br />
from 1 year to 5 years - - - - - -<br />
more than 5 years - - - - - -<br />
indeterminate maturity - - - - - -<br />
total gross value - 30 - - 30 -<br />
289
SECTION 7 Loans and advances to customers – Item 70<br />
7.1 Loans and advances to customers: composition by type<br />
3 1.12 .2 0 12<br />
3 1.12 .2 0 11<br />
Type o f tra ns a c tio n/Amo unts<br />
P e rfo rming<br />
De te rio ra te d<br />
De te rio ra te d<br />
P e rfo rming<br />
P urc ha s e d Othe r P urc ha s e d Othe r<br />
1. Current account overdrafts 11,531,444 - 1,343,890 11,755,970 - 1,151,331<br />
2. Reverse repurchase agreements 618,901 - - 923,859 - -<br />
3. Long-term loans 50,295,673 - 3,931,236 53,065,825 - 3,172,375<br />
4. Credit cards, personal loans and salary-backed loans 4,585,937 - 472,210 5,320,840 - 206,948<br />
5. Finance leases 6,664,574 - 1,250,191 7,948,943 - 937,571<br />
6. Factoring 2,448,770 - 303,609 3,137,443 - 62,427<br />
7. Other financing 8,628,013 - 803,035 11,048,930 - 748,232<br />
8. Debt instruments 9,483 - 1,003 208,076 - 1,000<br />
8.1 Structured instruments - - - 8,893 - -<br />
8.2 Other debt instruments 9,483 - 1,003 199,183 - 1,000<br />
To ta l (c a rrying a mo unt) 8 4 ,7 8 2 ,7 9 5 - 8 ,10 5 ,17 4 9 3 ,4 0 9 ,8 8 6 - 6 ,2 7 9 ,8 8 4<br />
To ta l (fa ir va lue ) 8 8 ,9 2 9 ,2 6 4 - 8 ,10 5 ,17 4 9 6 ,3 9 3 ,3 6 1 - 6 ,2 4 0 ,6 3 6<br />
Reverse repurchase agreement transactions amounting to €0.46 million were performed<br />
with Cassa di Compensazione e Garanzia (a central counterparty clearing house).<br />
Other transactions included a security deposit with the Cassa di Compensazione e Garanzia<br />
amounting to €144 million.<br />
Table 3: 107000O|1 - NOTA2_ASS<br />
7.2 Loans and advances to customers: composition by borrowers/issuers<br />
3 1.12 .2 0 12 3 1.12 .2 0 11<br />
Type o f tra ns a c tio n/ A m o unts<br />
P e rfo rm ing<br />
D e te rio ra te d<br />
D e te rio ra te d<br />
P e rfo rm ing<br />
P urc ha s e d Othe r P urc ha s e d Othe r<br />
1. D e bt ins trum e nts 9 ,4 8 3 - 1,0 0 3 2 0 8 ,0 7 6 - 1,0 0 0<br />
a) Go vernments - - - - - -<br />
b) Other public autho rities 7,181 - - 7,637 - -<br />
c) Other is s uers 2,302 - 1,003 200,439 - 1,000<br />
- no n financial ins titutio ns 1,262 - 3 1,256 - -<br />
- financial ins titutio ns 1,040 - 1,000 199,183 - 1,000<br />
- ins urance co mpanies - - - - - -<br />
- o ther - - - - - -<br />
2 . F ina nc ing to 8 4 ,7 7 3 ,3 12 - 8 ,10 4 ,17 1 9 3 ,2 0 1,8 10 - 6 ,2 7 8 ,8 8 4<br />
a) Go vernments 229,835 - 15,312 180,989 - -<br />
b) Other public autho rities 791,256 - 39,447 869,391 - 18,857<br />
c) Other 83,752,221 - 8,049,412 92,151,430 - 6,260,027<br />
- no n financial co mpanies 47,428,328 - 5,624,819 52,452,519 - 4,506,570<br />
- financial co mpanies 3,014,778 - 91,334 4,418,276 - 94,053<br />
- ins urance co mpanies 130,485 - 187 134,419 - 197<br />
- o ther 33,178,630 - 2,333,072 35,146,216 - 1,659,207<br />
T o ta l 8 4 ,7 8 2 ,7 9 5 - 8 ,10 5 ,17 4 9 3 ,4 0 9 ,8 8 6 - 6 ,2 7 9 ,8 8 4<br />
7.3 Loans and advances to customers: assets subject to specific hedging<br />
Type o f tra ns a c tio n/Amo unts 3 1.12 .2 0 12 3 1.12 .2 0 11<br />
1. Loans subject to fair value specific hedge:<br />
a) interest rate risk 623,713 640,551<br />
c) currency risk - -<br />
d) credit risk - -<br />
e) multiple risks - -<br />
2. Loans subject to cash flow specific hedge:<br />
a) interest rate risk - -<br />
b) currency risk - -<br />
c) other - -<br />
To ta l 6 2 3 ,7 13 6 4 0 ,5 5 1<br />
290
7.4 Finance leases<br />
Duration<br />
deteriorated<br />
exposures<br />
minimum payments<br />
quota of principal<br />
of which<br />
secured<br />
remaining<br />
amount<br />
quota of<br />
interest<br />
gross investment<br />
of which<br />
unsecured<br />
remaining<br />
amount<br />
on demand 98,223 30,052 - - - -<br />
up to 3 months 16,820 219,660 15,664 70,490 291,113 -<br />
between 3 months and 1<br />
year 46,436 624,714 50,650 198,708 826,134 -<br />
from 1 year to 5 years 186,423 2,206,034 220,480 786,972 3,003,752 -<br />
more than 5 years 395,162 3,393,371 812,946 793,077 4,197,276 -<br />
indeterminate maturity 507,127 190,743 - - 190,743 -<br />
total 1,250,191 6,664,574 1,099,740 1,849,247 8,509,018 -<br />
Net loans to customers for finance leases, net of intercompany eliminations and<br />
consolidation entries, totalled €7,914,765 thousand of which €1,250,191 thousand were<br />
“deteriorated assets” and €79,361 thousand “assets transferred not derecognised”.<br />
The lending portfolio for the finance leases of <strong>UBI</strong> leasing consisted of 60,071 contracts,<br />
composed, by remaining debt, as follows:<br />
- 74% property sector;<br />
- 12% machinery and equipment sector;<br />
- 8% energy sector;<br />
- 3% auto sector;<br />
- 3% aeronautical sector.<br />
The ten largest exposures had a total remaining value of €274,887,330 thousand.<br />
A negative balance for potential lease instalments (relating to the index value of the<br />
instalments) was recognised during the year amounting to €94,496 thousand.<br />
SECTION 8 Hedging derivatives – Item 80<br />
8.1 Hedging derivatives: composition by type of contract and underlying assets<br />
Type o f de riva t ive /Unde rlying<br />
a s s e t s<br />
L 1 L 2 L 3 To t a l<br />
3 1.12 .2 0 12 3 1.12 .2 0 11<br />
NOMINAL<br />
AMOUNT<br />
L 1 L 2 L 3 To ta l<br />
NOMINAL<br />
AMOUNT<br />
A) Fina nc ia l de riva tive s - 1,4 7 8 ,3 2 2 - 1,4 7 8 ,3 2 2 2 6 ,16 4 ,8 0 8 - 1,0 9 0 ,4 9 8 - 1,0 9 0 ,4 9 8 2 7 ,9 7 5 ,9 15<br />
1) Fair value - 1,478,322 - 1,478,322 26,164,808 - 1,010,954 - 1,010,954 26,887,383<br />
2) Cash flow - - - - - - 79,544 - 79,544 1,088,532<br />
3) Foreign investments - - - - - - - - - -<br />
B) Cre dit de riva tive s - - - - - - - - - -<br />
1) Fair value - - - - - - - - - -<br />
2) Cash flow - - - - - - - - - -<br />
To ta l - 1,4 7 8 ,3 2 2 - 1,4 7 8 ,3 2 2 2 6 ,16 4 ,8 0 8 - 1,0 9 0 ,4 9 8 - 1,0 9 0 ,4 9 8 2 7 ,9 7 5 ,9 15<br />
291
8.2 Hedging Derivatives: composition by portfolios hedged and type of hedge<br />
Fa ir Va lue<br />
Ca s h flo w<br />
Tra ns a c tio ns /Type o f<br />
h e dg ing<br />
In te re s t ra te<br />
ris k<br />
Cu rre nc y<br />
ris k<br />
S pe c ific Ma c ro -he dg e S pe c ific Ma c ro -he dg e<br />
Cre dit ris k<br />
P ric e ris k<br />
Multiple<br />
ris ks<br />
Fo re ig n<br />
inve s tme nts<br />
1. Ava ilable -for-sale financ ial<br />
assets<br />
X X X<br />
2. Loans X X X X<br />
3. Held-to-maturity investments X X X X X<br />
4. P ortfolio X X X X X X X<br />
5. Othe r transa ctions X X<br />
To ta l a s s e ts - - - - - - - - -<br />
1. <strong>Financial</strong> liabilities 1,478,322 X X X X<br />
2. P ortfolio X X X X X X X<br />
To ta l lia bilitie s 1,4 7 8 ,3 2 2 - - - - - - - -<br />
1. Expected tra nsa ctions X X X X X X X X<br />
2. P ortfolio of financial assets and<br />
liabilities<br />
X X X X X X<br />
SECTION 9 Fair value change in hedged financial assets – Item 90<br />
9.1 Fair value change in hedged assets: composition by portfolios hedged<br />
Fa ir va lue c ha ng e in he dg e d a s s e ts /Gro up c o mpo ne nts 3 1.12 .2 0 12 3 1.12 .2 0 11<br />
1. P o s itive c ha ng e s<br />
1.1 of specific portfolios: 885,997 704,869<br />
a) loans and receivables 885,997 704,869<br />
b) available-for-sale assets - -<br />
1.2 general - -<br />
2 . Ne g a tive c ha ng e s<br />
2.1 of specific portfolios - -<br />
a) loans and receivables - -<br />
b) available-for-sale assets - -<br />
2.2 general - -<br />
To ta l 8 8 5 ,9 9 7 7 0 4 ,8 6 9<br />
09000O|1 - NOTA<br />
9.2 Assets of the banking group subject to interest rate risk macro hedge:<br />
composition<br />
He dg e d a s s e ts 3 1.12 .2 0 12 3 1.12 .2 0 11<br />
1. Loans 6,463,896 7,383,359<br />
2. Available-for-sale assets - -<br />
3. Portfolio - -<br />
To ta l 6 ,4 6 3 ,8 9 6 7 ,3 8 3 ,3 5 9<br />
292
SECTION 10 Equity investments – Item 100<br />
10.1 Equity investments in companies subject to joint control (accounted for using<br />
the equity method) and in companies subject to significant influence:<br />
information on investments<br />
Name Headquarters Type of ow nership<br />
Details of investment<br />
Investing company<br />
B. Companies<br />
1. Aviva Assicurazioni Vita Spa Milan euro 49,721,776 significant influence <strong>UBI</strong> <strong>Banca</strong> Scpa 49.999% 49.999%<br />
2. Aviva Vita Spa Milan euro 155,000,000 significant influence <strong>UBI</strong> <strong>Banca</strong> Scpa 50.000% 50.000%<br />
3. By You Spa in liquidation Milan euro 650,000 significant influence <strong>UBI</strong> <strong>Banca</strong> Scpa 10.000% 20.000%<br />
4. Capital Money Spa Milan euro 2,042,955 significant influence <strong>UBI</strong> <strong>Banca</strong> Scpa 21.185% 20.671%<br />
4. Zhong Ou Fund Management Shenzen (China) renminbi 120,000,000 significant influence <strong>UBI</strong> <strong>Banca</strong> Scpa 49.000% 49.000%<br />
6. Lombarda Vita Spa Brescia euro 185,300,000 significant influence <strong>UBI</strong> <strong>Banca</strong> Scpa 40.000% 40.000%<br />
7. Polis Fondi SGR Milan euro 5,200,000 significant influence <strong>UBI</strong> <strong>Banca</strong> Scpa 19.600% 19.600%<br />
7. Prisma Srl Milan euro 120,000 significant influence <strong>UBI</strong> <strong>Banca</strong> Scpa 20.000% 20.000%<br />
8. SF Consulting Srl Mantua euro 93,600 significant influence <strong>UBI</strong> <strong>Banca</strong> Scpa 35.000% 35.000%<br />
9. Sider Factor Spa Milan euro 1,200,000 significant influence <strong>UBI</strong> Factor Spa 27.000% 27.000%<br />
10. Sofipo Sa<br />
Lugano<br />
CHF 1,200,000 significant influence Banque de Depots et de Gestion Sa 30.000% 30.000%<br />
(Sw itzerland)<br />
11. SPF Studio Progetti Finanziari Srl Rome euro 92,960 significant influence <strong>Banca</strong> Popolare di Ancona Spa 25.000% 25.000%<br />
13. <strong>UBI</strong> Assicurazioni Spa Milan euro 32,812,000 significant influence <strong>UBI</strong> <strong>Banca</strong> Scpa 49.999% 49.999%<br />
14. UFI Servizi Srl Rome euro 150,000 significant influence Prestitalia Spa 23.167% 23.167%<br />
The balance sheet as at 31 st December <strong>2012</strong> includes equity-accounted investees only.<br />
The larger equity investments were subjected to impairment testing, using the average of<br />
the multiples of a sample of comparable companies.<br />
Greater information is given here on the market values relating to the more significant<br />
equity investments recognised in the consolidated financial statements of the <strong>UBI</strong> <strong>Banca</strong><br />
Group. More specifically, the market value for the insurance companies Aviva Assicurazioni<br />
Vita Spa, Aviva Vita Spa and Lombarda Vita Spa was calculated on the basis of a sample of<br />
companies quoted on active European stock markets considering the multiple price/book<br />
value (P/BV) adjusted for non-controlling interests and for intangible assets. The source for<br />
the amounts used was Bloomberg. The equity value was compared with the carrying<br />
amount of the equity investments in the consolidated financial statements.<br />
- Aviva Vita Assicurazioni Spa: – the equity attributable to the Parent, amounting to €59.1<br />
million, inclusive of profit for <strong>2012</strong> and also of a positive consolidation difference amounting<br />
to €2.6 million, compared with an equity value (pro rata) of €84.0 million;<br />
- Aviva Vita Assicurazioni Spa: – the equity attributable to the Parent, amounting to<br />
€116.8 million, inclusive of profit for <strong>2012</strong> and also of a positive consolidation difference<br />
amounting to €0.1 million, compared with an equity value (pro rata) of €177.5 million;<br />
- Lombarda Vita Spa: – the equity attributable to the Parent, amounting to €198.9 million,<br />
inclusive of profit for <strong>2012</strong> and a positive consolidation difference amounting to €29.4<br />
million compared with an equity value (pro rata) of €266.6 million.<br />
For further details “Part A. Accounting policies – Section 3 – Consolidation scope and<br />
methods” of this report may be consulted.<br />
% held<br />
% of votes<br />
293
10.2 Equity investments in companies subject to joint control and in companies<br />
subject to significant influence: accounting information<br />
Name Total assets Total revenues Profit (Loss) Equity<br />
<strong>Consolidated</strong><br />
carrying<br />
amount<br />
A. Equity accounted investees<br />
1. Aviva Assicurazioni Vita Spa 2,371,200 584,100 16,000 112,988 59,104<br />
2. Aviva Vita Spa 4,659,000 1,049,900 28,800 233,483 116,792<br />
3. Capital Money Spa (1) 7,187 12,372 (228) 3,422 -<br />
4. Lombarda China Fund Management Co. 14,133 1,017 (2,381) 10,707 5,247<br />
5. Lombarda Vita Spa 5,216,962 1,069,588 40,139 423,942 198,943<br />
6. Prisma Srl 885 851 (61) 136 27<br />
7. SF Consulting Srl 7,069 6,205 106 813 284<br />
8. Sofipo Fiduciarie Sa 4,818 3,182 36 2,467 729<br />
9. SPF Studio Progetti e Servizi Finanziari Srl 1,071 1,352 8 152 38<br />
10. <strong>UBI</strong> Assicurazioni Spa 712,992 215,744 17,105 106,257 58,721<br />
11. UFI Servizi Srl (2) 234 289 3 170 40<br />
12. Polis Fondi SGR Spa (3) 9,692 3,032 472 8,109 1,665<br />
13. By You Spa (4) 6,626 24,079 (6,625) (3,557) 901<br />
TOTAL 13,011,869 2,971,711 93,374 899,089 442,491<br />
(1) The figures relate to the financial statements as at and for the year ended 31st December 2011. The <strong>UBI</strong> Group wrote-off the investment as at 31st December <strong>2012</strong>.<br />
(2) The figures relate to the financial statements as at and for the year ended 31st December 2011.<br />
(3) The figures relate to the financial statements as at and for the period ended 30th June <strong>2012</strong>.<br />
(4) The figures relate to the financial statements as at and for the year ended 31st December 2011. The company was place in voluntary liquidation on 31st July <strong>2012</strong><br />
No information on fair value is given because they are investments in companies that are<br />
not listed on active markets.<br />
10.3 Annual changes in equity investments<br />
31.12.<strong>2012</strong> 31.12.2011<br />
A Opening balances 352,983 368,894<br />
B Increases 123,650 53,869<br />
B.1 Purchases 36,000<br />
B.2 Reversals of impairment losses<br />
B.3 Revaluations<br />
B.4 Other changes 123,650 17,869<br />
C Decreases (34,142) (69,780)<br />
C.1 Sales (27,964)<br />
C.2 Impairment losses<br />
C.3 Other changes (6,178) (69,780)<br />
D Final balances 442,491 352,983<br />
E Total revaluations<br />
F Total impairment losses<br />
The amount recognised on line B.4 “Other changes” is composed as follows:<br />
- an amount of €76,451 thousand of which €282 thousand for positive exchange<br />
rate differences and €76,169 thousand due to changes in the valuation reserve<br />
(€61,197 thousand attributable to Lombarda Vita S.p.A. and €14,972 thousand<br />
to <strong>UBI</strong> Assicurazioni S.p.A.);<br />
- total profits of the year of €47,199 thousand. In detail:<br />
Lombarda Vita S.p.A.<br />
€16,056 thousand<br />
Aviva Vita S.p.A.<br />
€14,400 thousand<br />
<strong>UBI</strong> Assicurazioni S.p.A.<br />
€8,553 thousand<br />
Aviva Vita Assicurazioni S.p.A. €8,000 thousand<br />
The amount recognised on line C.1 “Sales” relates to the total disposal of the interest held in<br />
Arca S.G.R. S.p.A..<br />
294
The amount recognised on line C.3 “Other changes” is composed as follows:<br />
- dividends of €2,230 thousand;<br />
- other decreases of €1,175 resulting almost totally from the liquidation of the<br />
company Sider Factor S.p.A.;<br />
- losses for the period totalling €2,773 thousand, of which €1,572 thousand for<br />
Capital Money S.p.A. and €1,167 thousand for Lombarda China Fund<br />
Management Co..<br />
10.4 Commitments relating to equity investments in subsidiaries<br />
Commitments relating to the possible exercise of options<br />
<strong>Banca</strong> Popolare Commercio e Industria/<strong>Banca</strong> Carime/<strong>Banca</strong> Popolare di Ancona –<br />
bancassurance agreement with the Aviva Group: this agreement between <strong>UBI</strong> <strong>Banca</strong> and<br />
Aviva involves three call options granted to <strong>UBI</strong> on equity investments in banks (BPCI,<br />
Carime and Popolare di Ancona) for which the trigger events are connected with the<br />
performance of the joint-venture or the termination of the distribution agreement or the<br />
exclusive distribution condition. If <strong>UBI</strong> fails to exercise the call options, Aviva will have the<br />
right from 30 th September 2016 (from 1 st January 2020 in the case of the investment in<br />
<strong>Banca</strong> Popolare di Ancona), to exercise a put option on the same investments at a price<br />
equal to the fair value at the time of exercise.<br />
10.5 Commitments relating to equity investments in companies subject to joint<br />
control<br />
Commitments connected with the possible payment of further tranches of the price<br />
Nothing to report.<br />
10.6 Commitments relating to equity investments in companies subject to significant<br />
influence<br />
Commitments relating to the possible exercise of options<br />
Lombarda Vita Spa: as part of the renewal of life bancassurance agreements with the<br />
Cattolica Assicurazioni Group concluded on 30 th September 2010, the options on the<br />
respective investments in the Lombarda Vita joint venture were reformulated with purchase<br />
options only, exercisable on the basis of the occurrence of predetermined conditions.<br />
Lombarda China Fund Management Company: the partnership agreement signed between<br />
<strong>UBI</strong> <strong>Banca</strong> and Goudu Securities <strong>Banca</strong> Ltd. in the asset management sector, focused on<br />
the Chinese market, involves a series of intersecting put/call options which can be<br />
exercised if determined trigger events occur concerning the respective investments held in<br />
Lombarda China Fund Management Company.<br />
295
Recapitalisation commitments<br />
Aviva Vita Spa: on 13 th February <strong>2012</strong>, a shareholders meeting of Aviva Vita passed a<br />
resolution to increase the share capital by a total of €15 million (€7.5 million attributable to<br />
<strong>UBI</strong> <strong>Banca</strong>), in order to provide a more adequate solvency margin, which could be eroded by<br />
possible fluctuations in the prices of government securities held in portfolio. It granted the<br />
Board of Directors a mandate to request the payment if the solvency margin should fall<br />
below the stability threshold of 120%.<br />
SECTION 11 Technical reserves of reinsurers – Item 110<br />
No items of this type exist.<br />
SECTION 12 Property, plant and equipment – Item 120<br />
12.1 Property, plant and equipment: composition of assets measured at cost<br />
Assets/amounts 31.12.<strong>2012</strong> 31.12.2011<br />
A. Assets used in operations<br />
1.1 ow ned 1,748,302 1,822,888<br />
a) land 870,547 875,524<br />
b) buildings 734,926 774,081<br />
c) furnishings 39,184 45,265<br />
d) electronic equipment 43,667 56,909<br />
e) other 59,978 71,109<br />
1.2 acquired through finance leases 40,681 40,127<br />
a) land 20,844 20,914<br />
b) buildings 19,837 19,143<br />
c) furnishings - -<br />
d) electronic equipment - -<br />
e) other - 70<br />
Total A 1,788,983 1,863,015<br />
B. Assets held for investment - -<br />
2.1 ow ned 177,906 182,520<br />
a) land 107,365 109,843<br />
b) buildings 70,541 72,677<br />
2.2 acquired through finance leases 308 -<br />
a) land 47 -<br />
b) buildings 261 -<br />
Total B 178,214 182,520<br />
Total (A+B) 1,967,197 2,045,535<br />
12.2 Property, plant and equipment: composition of the assets at fair value or<br />
revalued<br />
No property, plant and equipment at fair value are held.<br />
296
12.3 Property, plant and equipment used in operations: annual changes<br />
Land Buildings Furnishings<br />
Electronic<br />
equipment<br />
A. Gross opening balances 914,342 1,274,274 149,915 361,260 286,690 2,986,481<br />
A.1 Total net reductions in value (17,904) (481,050) (104,650) (304,351) (215,511) (1,123,466)<br />
A.2 Net opening balances 896,438 793,224 45,265 56,909 71,179 1,863,015<br />
B. Increases 816 10,358 3,763 9,450 12,151 36,538<br />
B.1 Purchases 13 4,082 3,488 9,444 12,059 29,086<br />
B.2 Capitalised improvement expenses - 5,090 - - - 5,090<br />
B.3 Reversal of impairment losses - - - - - -<br />
B.4 Positive changes in fair value recognised in: - - - - - -<br />
a) equity - - - - - -<br />
b) income statement - - - - - -<br />
B.5 Positive exchange rate differences 113 205 1 6 - 325<br />
B.6 Transfers from properties held for investment<br />
45 31 - - - 76<br />
B.7 Other changes 645 950 274 - 92 1,961<br />
- business combinations - - - - - -<br />
- other changes 645 950 274 - 92 1,961<br />
C. Decreases (5,863) (48,819) (9,844) (22,692) (23,352) (110,570)<br />
C.1 Sales (367) (590) (273) (57) (105) (1,392)<br />
C.2 Depreciation - (42,311) (9,525) (22,497) (23,030) (97,363)<br />
C.3 Impairment losses recognised in: (158) (664) - (1) (27) (850)<br />
a) equity - - - - - -<br />
b) income statement (158) (664) - (1) (27) (850)<br />
C.4 Negative changes in fair value - - - - - -<br />
a) equity - - - - - -<br />
b) income statement - - - - - -<br />
C.5 Negative exchange rate differences - - - - - -<br />
C.6 Transfers to: (4,173) (4,752) - - - (8,925)<br />
a) tangible assets held for investment (884) (631) - - - (1,515)<br />
b) assets held for sale (3,289) (4,121) - - - (7,410)<br />
C.7 Other changes (1,165) (502) (46) (137) (190) (2,040)<br />
- business combinations - - - - - -<br />
- other changes (1,165) (502) (46) (137) (190) (2,040)<br />
D. Final net balances 891,391 754,763 39,184 43,667 59,978 1,788,983<br />
D.1 Total net reductions in value (29,529) (513,587) (117,562) (325,924) (238,149) (1,224,751)<br />
D.2 Final gross balances 920,920 1,268,350 156,746 369,591 298,127 3,013,734<br />
Other<br />
Total<br />
12.4 Annual changes in tangible assets held for investment (investment property)<br />
Total<br />
Land<br />
Buildings<br />
A. Opening balances 109,843 72,677<br />
B. Increases 2,111 3,623<br />
B.1 Purchases 1,220 2,418<br />
B.2 Capitalised improvement expenses - 500<br />
B.3 Positive changes in fair value - -<br />
B.4 Reversals of impairment losses - -<br />
B.5 Positive exchange rate differences - -<br />
B.6 Transfers from properties used in operations 884 631<br />
B.7 Other changes 7 74<br />
C. Decreases (4,542) (5,498)<br />
C.1 Sales (36) (141)<br />
C.2 Depreciation - (4,258)<br />
C.3 Negative changes in fair value - -<br />
C.4 Impairment losses (59) (13)<br />
C.5 Negative exchange rate differences - -<br />
C.6 Transfers to other asset portfolios (4,441) (1,086)<br />
a) properties for use in operations (45) (31)<br />
b) non current assets held for disposal (4,396) (1,055)<br />
C.7 Other changes (6) -<br />
D. Final balances 107,412 70,802<br />
E. Fair value 130,116 124,130<br />
Since land and buildings are recognised at cost, the Parent arranged for expert external<br />
appraisers to estimate the fair value of all property assets for the purposes of the annual<br />
impairment test on the carrying amounts.<br />
The estimate was based on generally accepted valuation principles, by applying the<br />
following measurement criteria:<br />
• the direct comparative or market method, based on a comparison between the asset in<br />
question and other similar assets subject to sale or currently on sale on the same<br />
market or competing markets;<br />
• the income method, based on the present value of potential market incomes for a<br />
property, obtained by capitalising the income at a market rate.<br />
297
The measurement methods just described were performed individually and the values<br />
obtained were appropriately averaged.<br />
The appraisals performed basically confirmed the appropriateness of the carrying amounts.<br />
12.5 Commitments for the purchase of property, plant and equipment<br />
Assets/amounts 31.12.<strong>2012</strong> 31.12.2011<br />
A. Assets used in operations - -<br />
1.1 owned 2,908 1,506<br />
- land - -<br />
- buildings 2,422 1,191<br />
- furnishings 7 21<br />
- electronic equipment - -<br />
- other 479 294<br />
1.2 Finance lease - -<br />
- land - -<br />
- buildings - -<br />
- furnishings - -<br />
- electronic equipment - -<br />
- other - -<br />
Total A 2,908 1,506<br />
B. Assets held for investment - -<br />
2.1 owned - -<br />
- land - -<br />
- buildings - -<br />
2.2 Finance lease - -<br />
- land - -<br />
- buildings - -<br />
Total B - -<br />
Total (A+B) 2,908 1,506<br />
298
SECTION 13 Intangible assets – Item 130<br />
13.1 Intangible assets: composition by type of asset<br />
Assets/amounts<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Finite<br />
useful life<br />
Indefinite<br />
useful life<br />
Finite<br />
useful life<br />
Indefinite<br />
useful life<br />
A.1 Goodw ill X 2,536,574 X 2,538,668<br />
A.2 Other intangible assets 428,271 37 448,964 37<br />
A.2.1 Assets measured at cost: 428,271 37 448,964 37<br />
a) Internally generated intangible assets 173 - 249 -<br />
b) Other assets 428,098 37 448,715 37<br />
A.2.2 Assets at fair value: - - - -<br />
a) Internally generated intangible assets - - - -<br />
b) Other assets - - - -<br />
Total 428,271 2,536,611 448,964 2,538,705<br />
Details of the item “Goodwill” are given below.<br />
Figures in thousands of euro<br />
31.12.<strong>2012</strong> 31.12.2011 changes<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa - - -<br />
Banco di Brescia Spa 671,960 671,960 -<br />
<strong>Banca</strong> Carime Spa 649,240 649,240 -<br />
<strong>Banca</strong> Popolare di Ancona Spa 249,049 249,049 -<br />
<strong>Banca</strong> Popolare Commercio e Industria Spa 209,258 209,258 -<br />
<strong>Banca</strong> Regionale Europea Spa (*) 307,189 307,189 -<br />
<strong>UBI</strong> Pramerica SGR Spa 170,284 170,284 -<br />
<strong>Banca</strong> Popolare di Bergamo Spa 100,045 100,045 -<br />
IW Bank Spa (*) 68,565 68,565 -<br />
<strong>Banca</strong> di Valle Camonica Spa 43,224 43,224 -<br />
Prestitalia Spa 24,895 24,895 -<br />
<strong>UBI</strong> Factor Spa 20,554 20,554 -<br />
<strong>UBI</strong> <strong>Banca</strong> Private Investment Spa 20,189 20,189 -<br />
<strong>UBI</strong> Sistemi e Servizi SCpA 2,122 2,122 -<br />
<strong>UBI</strong> Insurance Broker Srl 2,094 ( 2,094)<br />
TOTAL 2,536,574 2,538,668 ( 2,094)<br />
(*) T he goodwill previously recognised for Banco Di San Giorgio Spa and InvestNet International Sa has been<br />
attributed to <strong>Banca</strong> Regionale Europea spa and IW Bank Spa respectively, following the mergers into those<br />
companies that occurred during <strong>2012</strong>.<br />
The goodwill recognised in the consolidated financial statements of <strong>UBI</strong> <strong>Banca</strong> Group<br />
(“goodwill arising on consolidation” resulting from the elimination of the equity investments<br />
in subsidiaries) is the result of all the goodwill items relating to some of the companies<br />
controlled by <strong>UBI</strong> <strong>Banca</strong>.<br />
Following the introduction of EU Regulation No. 494/2009, which became compulsory from<br />
the financial year 2010, IAS 27 requires any changes in percentage ownership which do not<br />
result in the loss or acquisition of control to be considered as transactions between<br />
shareholders and as a consequence the relative effects must be recognised as either an<br />
increase or a decrease in equity. In this respect, only changes in the consolidation scope<br />
which have resulted in the acquisition or loss of control determine the appearance or<br />
disappearance of goodwill.<br />
299
In compliance with IAS 36, an impairment test is performed at the end of each year (or more<br />
frequently if an analysis of internal or external circumstances should give rise to doubts<br />
that the value of the assets can be recovered).<br />
The result of the impairment test as at 31 st December <strong>2012</strong> did not find any impairment<br />
loss on the item goodwill. The result of the impairment test as at 31 st December 2011<br />
determined an impairment loss on goodwill of €1,873,849 thousand. The only decrease in<br />
the item goodwill, amounting to €2,094 thousand, related to the total disposal at the end of<br />
the reporting year of the company <strong>UBI</strong> Insurance Broker Srl.<br />
“Other finite useful life intangible assets” amounting to €428,271 thousand were comprised<br />
mainly of the following:<br />
- “brands” totalling €118,624 thousand. This amount relates to the value of the<br />
brands of the banks in the former <strong>Banca</strong> Lombarda Group subject to<br />
amortisation since 2010 (residual life of 16 years). The amortisation for the year<br />
amounted to €7,414 thousand with a large decrease compared to €18,770<br />
thousand the year before. As already reported, the result of the impairment test<br />
as at 31 st December 2011 had determined an impairment loss on goodwill of<br />
€193,053 thousand. Net of ordinary amortisation and of impairment losses, the<br />
value of the brands of the single banks was as follows:<br />
Banco di Brescia S.p.A.<br />
€85,153 thousand<br />
<strong>Banca</strong> Regionale Europea S.p.A./Banco Di San Giorgio S.p.A. €30,863 thousand<br />
<strong>Banca</strong> Di Valle Camonica S.p.A.<br />
€2,608 thousand<br />
Totale<br />
€118,624 thousand<br />
- “core deposits”, i.e. intangible assets associated with customer relationships<br />
totalling €48,938 thousand. In view of their close dependence on customer<br />
relationships, these assets, arising from business combinations, are by definition<br />
finite useful life assets and are subject to systematic amortisation according to a<br />
schedule that takes account of the probability of current accounts being closed.<br />
Amortisation for the year totalled €4,288 thousand (€29,107 thousand in 2011).<br />
As already reported, the result of the impairment test as at 31 st December 2011<br />
had determined an impairment loss of €241,679 thousand.<br />
- “asset under management” consisting both of the actual management and the<br />
relative distribution activities totalled €58,452 thousand. These assets are<br />
amortised over the useful remaining life of the customer relationships. The<br />
amortisation for the year was €3,871 thousand (€14,437 thousand in 2011). As<br />
already reported, the result of the impairment test as at 31 st December 2011 had<br />
determined an impairment loss of €88,248 thousand.<br />
- “assets under custody” business totalled €45,739 thousand with total<br />
amortisation of €3,210 thousand (€5,148 thousand in 2011). As already<br />
reported, the result of the impairment test as at 31 st December 2011 had<br />
determined no impairment loss.<br />
- The remaining balance consists almost exclusively of software, allocated mainly<br />
to <strong>UBI</strong>SS S.c.p.a, the service company of the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
Finite useful life intangible assets have not been subjected to impairment testing, because:<br />
a) with regard to the brand name, the estimate of the total value of the <strong>UBI</strong> brand<br />
carried out by independent experts, and on which the previous measurements used<br />
for impairment testing of the brand were based, were revised upwards during the<br />
year;<br />
300
) the amounts relating to core deposits and to assets under management and under<br />
custody (which determine the value of the intangible assets associated with them),<br />
did not decrease by an amount greater than the amortisation of the intangible assets<br />
themselves.<br />
13.2 Annual changes in intangible assets<br />
Goodwill<br />
Other intangible assets:<br />
internally generated<br />
Finite useful<br />
life<br />
Indefinite<br />
useful life<br />
Other intangible assets: other<br />
Finite useful<br />
life<br />
Indefinite<br />
useful life<br />
Bal ances as at<br />
31.12.<strong>2012</strong><br />
A Opening gross balances 2,719,196 4,358 - 1,305,822 37 4,029,413<br />
A.1 Total net reductions in value ( 180,528) ( 4,109) - ( 857,107) - ( 1,041,744)<br />
A.2 Net opening balances 2,538,668 249 - 448,715 37 2,987,669<br />
B. Increases - - - 61,047 - 61,047<br />
B.1 Purchases - - - 60,886 - 60,886<br />
B.2 Increases in intangible internal assets X - - - - -<br />
B.3 Reversal of impairment losses X - - - - -<br />
B.4 Positive changes in fair value - - - - - -<br />
- in equity X - - - - -<br />
- in the income statement X - - - - -<br />
B.5 Positive exchange rate differences - - - - - -<br />
B.6 Other changes - - - 161 - 161<br />
C. Decreases ( 2,094) ( 76) - ( 81,664) - ( 83,834)<br />
C.1 Sales ( 2,094) - - ( 319) - ( 2,413)<br />
C.2 Impairment losses - ( 76) - ( 79,513) - ( 79,589)<br />
- Amortisation X ( 76) - ( 79,513) - ( 79,589)<br />
- Impairment losses - - - - - -<br />
+ equity X - - - - -<br />
+ income statement - - - - - -<br />
C.3 Negative changes in fair value - - - ( 1,528) ( 1,528)<br />
- in equity X - - - - -<br />
- in the income statement X - - ( 1,528) - ( 1,528)<br />
C.4 Transfers to non current assets held for<br />
sale.<br />
- - - - - -<br />
C.5 Negative exchange rate differences - - - - - -<br />
C.6 Other changes - - - ( 304) - ( 304)<br />
D. Final net balances 2,536,574 173 - 428,098 37 2,964,882<br />
D.1 Total net impairment losses ( 180,528) ( 4,185) - ( 926,522) - ( 1,111,235)<br />
E. Final gross balances 2,717,102 4,358 - 1,354,620 37 4,076,117<br />
F. Value at cost - - - - - -<br />
13.3 Other information<br />
Software<br />
The useful life of software considered for the purposes of amortisation is five years.<br />
The figure for contracted commitments to purchase intangible assets amounted to €26,371<br />
thousand for the acquisition of software.<br />
Impairment tests on goodwill<br />
The goodwill recognised in the consolidated balance sheet of <strong>UBI</strong> <strong>Banca</strong> is the result of all<br />
the goodwill items arising from positive consolidation differences relating to some of the<br />
subsidiaries controlled by <strong>UBI</strong> <strong>Banca</strong>, reduced by prior year impairment losses.<br />
In order to test goodwill for impairment, the criterion followed in allocating it considers the<br />
minimum level at which it is monitored for the purposes of internal management control,<br />
which coincides with the legal entities of the Group. As concerns the goodwill that arose<br />
from the merger between the BPU and <strong>Banca</strong> Lombarda e Piemontese groups, the allocation<br />
for the purposes of impairment testing followed the same logic as that employed for the<br />
purchase price allocation. In detail, the goodwill attributable to synergies from which the<br />
companies in the former acquiring group (BPU Group) benefit was allocated to the<br />
individual units of the acquiring group, while the goodwill arising from the difference<br />
between the fair value of the former equity investments of the <strong>Banca</strong> Lombarda e<br />
Piemontese and their equity adjusted for the fair value of loans, properties and bonds was<br />
allocated to the single cash generating units (CGUs). The goodwill of the CGUs of the former<br />
BPU Group not affected by synergies created by that merger was tested for impairment<br />
along the same lines as in previous years.<br />
For CGUs that are not wholly owned, for impairment purposes goodwill was restated on a<br />
notional basis including the goodwill attributable to non-controlling interests (not<br />
301
ecognised in the consolidated financial statements) by means of “grossing up” (goodwill<br />
attributable to the Group/percentage ownership attributable to the Group) in consideration,<br />
amongst other things, of example seven in IAS 36. The value measurement used to calculate<br />
the recoverable amount of the business units to which goodwill was allocated was that of<br />
their value in use. The fair value less cost to sell was not estimated for the main companies,<br />
consisting of the network banks, because no comparable transactions designed to obtain<br />
control were carried out during the reporting year. The value in use was estimated on the<br />
basis of the financial criterion and the book value of the CGUs was determined on the basis<br />
of the criterion used to estimate the recoverable value. The notional carrying amount of<br />
each CGU to which goodwill was allocated corresponded to the sum of the following:<br />
1) equity inclusive of the profit of the legal entity and of goodwill, net of dividends currently<br />
being paid, calculated on the profit earned in <strong>2012</strong> and the carrying amounts of the equity<br />
investments;<br />
2) adjustments to the purchase price allocation (PPA), consisting of the revaluation of<br />
properties, loans and receivables and obligations and intangible assets identified in the PPA;<br />
3) any consolidation differences there may be, “grossed up” on a notional basis.<br />
The impairment test, for which the procedure was defined prior to the approval of the<br />
financial statements, made use of methodological support from an external appraiser of<br />
high standing and with account taken of the following factors:<br />
(i) reasonable and consistent assumptions, which represent the best estimate that can be<br />
made by management of the possible economic conditions that may manifest over the<br />
useful life of the asset in question;<br />
(ii) the cash flows for the various CGUs used for the purpose of the measurements were<br />
based on the 2013 budget and on 2014 – 2017 projections based in turn on best<br />
management estimated and they are grounded on the current market context. The budget<br />
and the projections were drawn up with account taken of differences between preliminary<br />
and budgeted <strong>2012</strong> figures and the causes of those differences. With regard to the network<br />
banks, to which 88% of the total goodwill is allocated, we report the following:<br />
a) the estimated short-term interest rates (Euribor one month) was held below 1%<br />
until 2015, to then rise to higher levels, but still below 3% in 2017. The<br />
magnitude of the rise in rates will ensure a progressive return to normality for<br />
markups and markdowns, although still below historical levels observed before<br />
the crisis;<br />
b) the scenario for projections of growth in direct funding is one of a progressive<br />
change in the composition of the ratio of lending to direct funding in favour of<br />
the latter;<br />
c) operating expenses remain substantially constant during the forecast period;<br />
d) the cost of risk (net impairment losses on loans as a percentage of loans to<br />
customers) is forecast to fall compared to the figures for <strong>2012</strong>.<br />
(iii) the discounted cash flow criterion was used to estimate the value in use. This considers<br />
the value of each CGU as the result of the sum of the following: 1) the present value of the<br />
cash flows forecast over the period covered by the projections (2013 – 2017), discounted at a<br />
rate that expresses the risk for those flows (the opportunity cost of the equity); and 2) the<br />
present value of the cash flows that can be generated beyond the explicit forecast period,<br />
(which determines the terminal value) obtained by capitalising the cash flow achievable<br />
beyond the explicit forecast period (from 2018) at a rate that represents the difference<br />
between the opportunity cost of the capital and the expected long-term growth rate for the<br />
cash flows. For the network banks the cash flows that can be generated beyond the explicit<br />
forecast period are based on the cash flows for the last year (2017) adjusted: (a) upwards to<br />
take account of a complete change in the composition of the loan portfolio at remunerative<br />
conditions in line with those obtained in <strong>2012</strong>; (b) downwards to consider the lost income in<br />
the years following 2017 until loans subject to interest rates lower than current market<br />
rates are fully repaid. More specifically, the cash flows were calculated considering the<br />
annual capital requirement generated by risk weighted assets consistent with the long-term<br />
supervisory ratio objectives of the Group and with the minimum capital requirements<br />
requested. The discounted cash flow criterion was applied after:<br />
302
a) verifying the nature of the differences between the 2011 budget figures and the<br />
preliminary figures;<br />
b) verifying the projections by comparing them with inputs from external sources<br />
(consensus macroeconomic forecasts, consensus forecasts made by equity<br />
analysts), with emphasis placed on inputs from external sources referred to for<br />
impairment testing purposes in IAS 36 (section 33 letter a);<br />
c) verifying the consistency between the implied risk in discount rates and the<br />
implementation risk of the plan;<br />
d) making growth rate assumptions for all CGUs up to 2% (expected long-term<br />
inflation rate).<br />
iv) Because the <strong>UBI</strong> Group presents costs that were not allocated to single CGUs, a general<br />
impairment test (second level test) was performed on the Group as a whole in accordance<br />
with sections 101 and 103 of IAS 36 (example 8 of IAS 36). The second level impairment test<br />
was carried out by comparing the total recoverable amount for the <strong>UBI</strong> <strong>Banca</strong> Group with<br />
consolidated equity.<br />
v) The discount rates, defined as the opportunity cost of capital (cost of equity – coe), were<br />
estimated in compliance with the provisions of IAS 36 and the “Guidelines for impairment<br />
tests on goodwill in contexts of financial and real crisis” issued by the Organismo Italiano di<br />
Valutazione (OIV – Italian Valuation Body) on the basis of a capital asset pricing model,<br />
according to the following formula.<br />
cost of equity = Risk Free + Beta x Equity Risk Premium<br />
The opportunity cost of capital is therefore equal to the sum of the risk free rate and a risk<br />
premium corresponding to the product of the beta of the share and the overall market risk<br />
premium (equity risk premium).<br />
a) The specific yield to maturity of the interbank rate for each year of the forecast was<br />
assumed as the risk free rate, in accordance with paragraph A21 of IAS 36. The risk<br />
free rate used to estimate the cost of equity is consistent with future interest rates<br />
forecast by management and assumed for the estimate of future cash flows used in the<br />
measurement. The risk free rate assumed in the terminal value is 2.44%, which is<br />
consistent with the estimates for risk free rates used by management for long-term<br />
forecasts of net interest income.<br />
b) For the network banks and for the Group as a whole (second level impairment test), the<br />
beta was obtained on the basis of the most recent volatilities implicit in options on the<br />
<strong>UBI</strong> share and on the Stoxx 600 index. The beta estimate was 1.66x, an increase<br />
compared to that used the year before. The estimate of the beta lies in the upper range<br />
of the beta estimates obtained from daily historical returns for the <strong>UBI</strong> share and the<br />
Stoxx 600 market index. More specifically the beta estimate based on historical returns<br />
for the share over one year was 1.88x, that for two years was 1.55x and that for five<br />
years was 1.11x. A beta estimate of 1.66x guarantees alignment of the estimate of the<br />
opportunity cost of capital with that given by the median of the equity analysts’<br />
estimates.<br />
For the other companies, the beta was estimated using the same method as that used<br />
in the previous year, on the basis of the returns for comparable European companies.<br />
c) The equity risk premium was considered to be 5%.<br />
On the basis of the above parameters, the opportunity cost of own equity is 10.74%,<br />
compared to 11.45% the year before. The reduction in the cost of equity (coe) is attributable<br />
303
almost entirely to the reduction in the estimate of the risk free rate, which fell from 3.11%<br />
the year before to 2.44%. The year before (impairment test as at 31.12.2011), the risk<br />
premium was 8.34% (obtained from the product of a beta coefficient of 1.39x and an equity<br />
risk premium of 6%). This year (impairment test as at 31.12.<strong>2012</strong>) the risk premium is<br />
8.30% (obtained from the product of a higher beta coefficient of 1.66x and a lower equity<br />
risk premium of 5%). The fall in the equity risk premium from 6% to 5% is less than the fall<br />
in the country risk as measured by ten-year Italian CDS which was 114 basis points (CDS<br />
Italy as at 31.12.2011 of 368 basis points compared to CDS Italy as at 31.12.<strong>2012</strong> of 254<br />
basis points). The beta coefficients are calculated using volatilities implicit in the options on<br />
the <strong>UBI</strong> share. If the beta coefficient is held constant (i.e. if the <strong>UBI</strong> beta coefficient had not<br />
risen from 1.39x to 1.66x), then the risk premium would have fallen by 139 basis points<br />
(6.95% - 8.34%) instead of just 4 basis points (8.30% – 8.34%).<br />
The growth rate assumed for long-term income was 2%, unchanged with respect to that<br />
used for the impairment test as at 31.12,2011. Therefore the rate of capitalisation (coe – g)<br />
as at 31.12.<strong>2012</strong> was 8.74%, down by 0.71% compared to the measure assumed for the<br />
2011 impairment test.<br />
d) The following were assumed for the purposes of estimating the rate of capitalisation of<br />
income for the estimate of the terminal value: growth rates aligned with future inflation<br />
of 2% for the network banks and similar companies in terms of business risk; growth<br />
rates of a fundamental nature, i.e. calculated as the product of the rate of profit<br />
retention and expected income in the last year of the plan, for the other companies; the<br />
growth rate used did not exceed future expected inflation of 2% for any of the CGUs.<br />
The table below shows estimates of the opportunity cost of equity and of growth for the<br />
different CGUs to which goodwill was allocated. The same measures assumed for the<br />
impairment test as at 31.12.2011 are given in brackets and in italics.<br />
CGU<br />
Initial discount rate<br />
net of taxes<br />
Final discount rate<br />
net of taxes<br />
Nominal growth rate in<br />
income for the<br />
calculation of the<br />
terminal value<br />
Network banks, <strong>UBI</strong> Private Investment, 8.40%<br />
(8.93%)<br />
10.74%<br />
(11.45%)<br />
2.00%<br />
(2.00%)<br />
IW Bank<br />
Prestitalia<br />
<strong>UBI</strong> Factor<br />
<strong>UBI</strong> Pramerica<br />
6.15%<br />
(6.55%)<br />
5.92%<br />
(6.86%)<br />
6.97%<br />
(7.89%)<br />
7.53%<br />
(8.41%)<br />
8.49%<br />
(9.07%)<br />
8.26%<br />
(9.38%)<br />
9.31%<br />
(10.41%)<br />
9.87%<br />
(10.93%)<br />
1.95%<br />
(2.00%)<br />
0.00%<br />
(1.89%)<br />
0.00%<br />
(0.00%)<br />
0.00%<br />
(0.00%)<br />
The recoverable amount for all the CGUs calculated on the basis of the method and<br />
parameters described above was greater than their carrying amount.<br />
Finally, a sensitivity analysis was performed in compliance with IAS 36 to identify the<br />
variation in key variables (cost of equity, cost of risk, income growth rate in the terminal<br />
value, cost/income ratio) that would render the recoverable amount of the different CGUs<br />
equal to their carrying amounts in the consolidated financial statements. The analysis<br />
shows that in the case of the network bank CGUs, the lowest margins of tolerance regarded<br />
the <strong>Banca</strong> Carime CGU, for which an increase of 0.22% in the cost of risk, a rise in the cost<br />
of equity of 0.84%, a fall in the income growth rate in the terminal value of 0.65%, or finally<br />
304
a rise of 2.91% in the cost/income ratio (operating expenses divided by operating income)<br />
would bring the recoverable amount into line with the carrying amount.<br />
Rise in the cost of<br />
risk required to<br />
align the value in<br />
use with the<br />
carrying amount<br />
Rise in the<br />
cost:income ratio<br />
required to align<br />
the value in use<br />
with the carrying<br />
amount<br />
Growth rate in the<br />
terminal value<br />
required to align<br />
the value in use<br />
with the carrying<br />
amount<br />
Rise in the<br />
opportunity cost of<br />
capital required to<br />
align the value in use<br />
with the carrying<br />
amount<br />
Banco di Brescia 0.28% 6.27% -1.23% 1.61%<br />
<strong>Banca</strong> Regionale Europea 0.28% 6.40% -2.17% 1.86%<br />
<strong>Banca</strong> di Valle Camonica 0.26% 6.33% -2.46% 1.92%<br />
<strong>Banca</strong> Popolare di Bergamo 1.43% 30.50% n.s. 22.68%<br />
<strong>Banca</strong> Pop. Comm. e Ind. 0.54% 11.37% -10.04% 4.28%<br />
<strong>Banca</strong> Popolare di Ancona 0.52% 11.28% -9.48% 4.28%<br />
<strong>Banca</strong> Carime 0.26% 3.43% 0.39% 1.00%<br />
<strong>UBI</strong> Pramerica n,s, 1.66% -0.39% 0.28%<br />
<strong>UBI</strong> Private Investment 0.92% 12.25% -6.76% 5.18%<br />
<strong>UBI</strong> Factor 0.01% 0.86% -0.25% 0.19%<br />
Prestitalia 0.25% 15.93% -1.66% 1.30%<br />
IW Bank 0.10% 0.33% 1.77% 0.14%<br />
305
SECTION 14 Tax assets and tax liabilities – Asset item 140 and Liability<br />
item 80<br />
14.1 Deferred tax assets: composition<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Balancing entry in the income statement 1,729,173 1,831,151<br />
Balancing entry in equity 282,264 527,437<br />
Total 2,011,437 2,358,588<br />
for the follow ing reasons:<br />
- impairment loss on loans to banks and customers and unsecured guarantees not deducted 628,501 516,236<br />
- losses 2,181 2,165<br />
- post employment benefits 6,332 7,285<br />
- maintenance expenses 4,063 1,924<br />
- application of IFRS (amortised cost in particular) 111,196 85,110<br />
- advance depreciation and amortisation 5,683 8,705<br />
- property, plant and equipment 36,180 33,584<br />
- personnel expense 18,843 19,591<br />
- entertainment expenses - 11<br />
- provisions for risks and charges not deducted 67,227 63,535<br />
- sales price adjustments, long term costs and non recurring transactions 4,072 5,291<br />
- intangible assets and goodwill 858,046 1,085,288<br />
- fair value change in securities and equity investments 263,042 514,943<br />
- impairment losses on properties - 149<br />
- purchase price allocation of bonds - 10<br />
- revaluation of hedged subordinated liabilities - -<br />
- non recurring expenses not deducted 248 1,011<br />
- cash flow hedges 2,504 1,617<br />
- other 3,319 12,133<br />
14.2 Deferred tax liabilities: composition<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Balancing entry in the income statement 180,688 145,418<br />
Balancing entry in equity 168,170 173,244<br />
Total 348,858 318,662<br />
O|1 - NOTA<br />
14.3 Changes in deferred tax assets (balancing entry in the income statement)<br />
31.12.<strong>2012</strong> 31.12.2011<br />
1. Opening balance 1,831,151 885,951<br />
2. Increases 299,028 1,091,400<br />
2.1 Deferred tax assets arising during the year 297,028 1,058,319<br />
a) relating to previous years 3,257 6,950<br />
b) due to changes in accounting policies - -<br />
c) reversals of impairment losses - 6<br />
d) other 293,771 1,051,363<br />
2.2 New taxes or increases in tax rates - 10,081<br />
2.3 Other increases 2,000 23,000<br />
3. Decreases (401,006) (146,200)<br />
3.1 Deferred tax assets derecognised during the year (126,074) (132,905)<br />
a) reversals of temporary differences (126,074) (107,248)<br />
b) impairment losses on non-recoverable items - (25,657)<br />
c) due to changes in accounting policies - -<br />
d) other - -<br />
3.2 Reductions in tax rates - -<br />
3.3 Other decreases (274,932) (13,295)<br />
a) transformation in tax credits pursuant to Law 214/2011 (274,912) -<br />
b) other changes (20) (13,295)<br />
Final amount 1,729,173 1,831,151<br />
Deferred tax assets are recognised on the basis of the probability of there being sufficient<br />
future taxable income and also taking into account the consolidated tax regime adopted in<br />
accordance with articles 117 et seq of Presidential Decree No. 917/86.<br />
No deferred tax assets were recognised for impairment losses on equity investments which<br />
satisfied the requirements for participation exemption.<br />
306
The rates used to calculate deferred tax assets for IRES (corporation tax) and IRAP (local<br />
production tax) purposes are 27.50% and 5.57%.<br />
The increases shown in line item 2.1 d) include an amount of €59,764 thousand due<br />
primarily to the Parent taking advantage of an option to realign tax accounts with statutory<br />
accounts relating to the goodwill and other intangible assets of the subsidiary <strong>Banca</strong><br />
Popolare di Ancona S.p.A., recognised separately in the consolidated financial statements,<br />
in accordance with paragraphs 12 to 15 of article 23 of Decree Law No. 98 of 6 th July 2011<br />
as amended and added to by article 20 of Decree Law No. 201 of 6 th December 2011 (Law<br />
No. 214/2011).<br />
The amount of €274,912 thousand shown in “other decreases” relates to the transformation<br />
of deferred tax assets into tax credits as a result of the loss recognised for the year 2011 by<br />
the Parent, <strong>UBI</strong> Leasing S.p.A and <strong>UBI</strong> Private S.p.A. in accordance with Law No. 214/2011.<br />
14.3.1 Changes in deferred tax assets pursuant to Law No. 214/2011 (balancing<br />
entry in the income statement)<br />
31.12.<strong>2012</strong> 31.12.2011<br />
1. Opening balance 1,428,849 499,596<br />
2. Increases 331,268 971,623<br />
3. Decreases (308,838) (42,370)<br />
3.1 Reversals of temporary differences (33,918) (39,113)<br />
3.2 Transformation in tax credits (274,920) (3,257)<br />
a) resulting from losses for the year (274,920) (3,257)<br />
b) resulting from tax losses - -<br />
3.3 Other decreases - -<br />
4. Final balance 1,451,279 1,428,849<br />
14.4 Changes in deferred tax liabilities (balancing entry in the income statement)<br />
31.12.<strong>2012</strong> 31.12.2011<br />
1. Opening balance 145,418 188,200<br />
2. Increases 65,206 39,666<br />
2.1 Deferred tax liabilities arising during the year 65,200 37,850<br />
a) relating to previous years 339 3,702<br />
b) due to changes in accounting policies - -<br />
c) other 64,861 34,148<br />
2.2 New taxes or increases in tax rates - 800<br />
2.3 Other increases 6 1,016<br />
3. Decreases (29,936) (82,448)<br />
3.1 Deferred tax liabilities derecognised during the year (29,268) (74,079)<br />
a) reversals of temporary differences (29,233) (70,060)<br />
b) due to changes in accounting policies - -<br />
c) other (35) (4,019)<br />
3.2 Reductions in tax rates - -<br />
3.3 Other decreases (668) (8,369)<br />
4. Final balance 180,688 145,418<br />
14040O|1 - NOTA<br />
Deferred taxes are recognised on the basis of temporary differences between the financial<br />
accounting value of an asset or liability and its value for tax purposes. That recognition was<br />
made on the basis of the tax legislation in force.<br />
307
No deferred tax liabilities were recognised on untaxed reserves because no uses of the<br />
reserves were planned to affect the regime of tax exemption.<br />
The difference between the “increases” and the “decreases” of the “deferred tax liabilities”<br />
recognised in the income statement does not correspond to the item “change in deferred tax<br />
liabilities”, in table 20.1 of the income statement section “Taxes on income for the year from<br />
continuing operations“ amounting to approximately €1,846 thousand. That amount is<br />
entirely the result of the transfer of deferred tax liabilities relating to the post employment<br />
benefit provision which arose in prior years with the balancing entry in the income<br />
statement and which were transferred during the year, with the balancing entry in equity.<br />
These were increases in the post employment benefit provision due to non-deductible<br />
actuarial losses.<br />
14.5 Changes in deferred tax assets (balancing entry in equity)<br />
31.12.<strong>2012</strong> 31.12.2011<br />
1. Opening balance 527,437 187,103<br />
2. Increases 12,527 386,259<br />
2.1 Deferred tax assets arising during the year 12,416 385,192<br />
a) relating to previous years - -<br />
b) due to changes in accounting policies - -<br />
c) other 12,416 385,192<br />
2.2 New taxes or increases in tax rates - 908<br />
2.3 Other increases 111 159<br />
3. Decreases (257,700) (45,925)<br />
3.1 Deferred tax assets derecognised during the year (232,711) (7,164)<br />
a) reversals of temporary differences (232,705) (7,148)<br />
b) impairment losses on non-recoverable items (6) (16)<br />
c) due to changes in accounting principles - -<br />
3.2 Reductions in tax rates - -<br />
3.3 Other decreases (24,989) (38,761)<br />
4. Final balance 282,264 527,437<br />
14.6 Changes in deferred tax liabilities (with balancing entry in equity)<br />
31.12.<strong>2012</strong><br />
31.12.2011<br />
1. Opening balance 173,244 363,756<br />
2. Increases 15,126 30,779<br />
2.1 Deferred tax liabilities arising during the year 14,940 19,810<br />
a) relating to previous years - 3<br />
b) due to changes in accounting policies - -<br />
c) other 14,940 19,807<br />
2.2 New taxes or increases in tax rates 152 10,820<br />
2.3 Other increases 34 149<br />
3. Decreases (20,200) (221,291)<br />
3.1 Deferred tax liabilities derecognised during the year (20,160) (217,088)<br />
a) reversals of temporary differences (20,084) (216,680)<br />
b) due to changes in accounting policies - -<br />
c) other (76) (408)<br />
3.2 Reductions in tax rates - -<br />
3.3 Other decreases (40) (4,203)<br />
4. Final bal ance 168,170 173,244<br />
308
14.7 Other information<br />
The tables above contain the aggregate figures giving all the information on the single<br />
companies and banks fully consolidated line-by-line. The tables 14.3 “Changes in deferred<br />
tax assets (balancing entry in income statement)” and 14.4 “Changes in deferred tax<br />
liabilities (balancing entry in income statement)” recorded movements due to the<br />
consolidation entries which determined changes in the consolidated profit.<br />
Finally, taxes of €6,890 thousand in respect of dividends that will be paid by subsidiaries in<br />
2013 have been recognised within deferred tax liabilities with the balancing entry in the<br />
income statement (€2,882 thousand as at 31 st December 2011).<br />
Probability test on deferred taxes<br />
As reported in Part A – Accounting Policies in these notes to the financial statements – the<br />
recognition of deferred tax liabilities and assets is performed in compliance with the criteria<br />
of IAS 12, as follows:<br />
– considering all taxable temporary differences, for deferred tax liabilities, except in<br />
some specific cases;<br />
– considering all taxable temporary differences, for deferred tax assets, if it is probable<br />
that future taxable income will be earned, against which the temporary difference<br />
may be used. The effects, amongst other things, of article 117 et seq of the<br />
<strong>Consolidated</strong> Income Tax Act are taken into consideration in the calculation of<br />
taxable income.<br />
Tax assets are measured on the basis of the tax rates that it is expected will apply in<br />
the year in which the tax asset will be realised. These assets are tested periodically<br />
to measure the degree of recoverability and to verify the level of the rates applicable<br />
as well as the obligation to measure assets not recognised or derecognised because<br />
they do not satisfy the requirements (“reassessment”).<br />
At the date of this report, deferred tax assets recognised within the item “130 Tax assets b)<br />
deferred” totalled €2,011 million and were generated by the following:<br />
- excess recognition of impairment losses on loans pursuant to article 106 paragraph 3 of<br />
the <strong>Consolidated</strong> Income Tax Act: €629 million;<br />
- goodwill and other intangible assets, subject, amongst other things, to tax relief in<br />
accordance with the law, for which the amortisation is deductible in subsequent years:<br />
€858 million, with regard to the amounts reported in both the separate and the<br />
consolidated financial statements (article 15 paragraph 10 bis of Decree Law No.<br />
185/2008 introduced by Decree Law No. 98/2011 converted by Law No. 111/2011);<br />
- write downs of securities in the AFS portfolio amounting to €264 million and other<br />
generating events amounting to €287 million.<br />
As concerns deferred tax assets involving write downs of loans and receivables and the<br />
amortisation of goodwill and intangible assets, it must be considered that Decree Law No.<br />
225/2010, subsequently added to by Decree Law No. 201/2011 converted by article 9 of<br />
Law No. 214/2011, gave companies (banks in particular) the right to convert those assets<br />
into tax credits when losses for the year are recognised in separate financial statements<br />
and/or tax losses are recognised, where those assets contributed to those losses.<br />
These new procedures for recovering taxes are therefore in addition to and supplementary<br />
to the ordinary criteria for recognition (i.e. the probability test), designed to ensure the<br />
recovery of tax assets, independently of the future profits of a company. As reported in the<br />
Bank of Italy, Consob and Isvap Document No. 5 issued on 15 th May <strong>2012</strong>, the normal<br />
recovery by transferring amounts when they become due is now accompanied by recovery<br />
procedures that are certain when predetermined circumstances occur, which make passing<br />
probability tests automatic.<br />
Changes introduced by article 84 paragraph 1 of the <strong>Consolidated</strong> Income Tax Act must<br />
also be considered in the presence of tax losses, which enables them to be carried forward<br />
with no time limits applied.<br />
On the basis of those assumptions, the <strong>UBI</strong> <strong>Banca</strong> Group has carried out the following<br />
tests:<br />
309
– identification of different types of deferred tax assets potentially and/or actually<br />
recognised and of the ordinary recovery period;<br />
– identification of the tax rates forecast on the respective due dates;<br />
– forecasts of future income both with regard to the separate financial statements and<br />
to the tax results for IRES (corporate income tax) and IRAP (local production tax)<br />
purposes, which also take account of the automatic transformation into tax credits<br />
when specific circumstances are met.<br />
The calculations carried out, which also considered the expected positive impacts of Group<br />
reorganisation and restructuring, resulted in a broad tax base able to reabsorb taxes<br />
recognised as at 31 st December <strong>2012</strong>.<br />
310
SECTION 15 Non current assets and liabilities and groups of assets and<br />
the associated liabilities held for disposal – Asset item 150 and Liability<br />
item 90<br />
15.1 Non current assets and disposal groups held for sale: composition by type of<br />
asset<br />
A. Singl e assets<br />
31.12.<strong>2012</strong> 31.12.2011<br />
A.1 <strong>Financial</strong> assets - 12,750<br />
A.2 Equity investments - -<br />
A.3 Property, plant and equipment 21,382 9,270<br />
A.4 Intangible assets - -<br />
A.5 Other non current assets - -<br />
Total A 21,382 22,020<br />
B. Groups of assets (discontinued operating units) - -<br />
B.1 <strong>Financial</strong> assets held for trading - -<br />
B.2 <strong>Financial</strong> assets designated at fair value - -<br />
B.3 Available-for-sale financial assets - -<br />
B.4 Held-to-maturity investments - -<br />
B.5 Loans and advances to banks - -<br />
B.6 Loans and advances to customers - -<br />
B.7 Equity investments - -<br />
B.8 Property, plant and equipment - -<br />
B.9 Intangible assets - -<br />
B.10 Other assets - -<br />
Total B - -<br />
C. Liabilities associated w ith non current assets held<br />
for disposal.<br />
- -<br />
C.1 Borrow ings - -<br />
C.2 Securities - -<br />
C.3 Other liabilities - -<br />
Total C - -<br />
D. Liabilities associated w ith assets held for sale - -<br />
D.1 Due to banks - -<br />
D.2 Due to customers - -<br />
D.3 Debt securities issued - -<br />
D.4 <strong>Financial</strong> liabilities held for trading - -<br />
D.5 <strong>Financial</strong> liabilities designated at fair value - -<br />
D.6 Provisions - -<br />
D.7 Other liabilities - -<br />
Total D - -<br />
The increase is due to transfers from the item “Property, plant and equipment” of properties<br />
attributable almost entirely to the companies <strong>Banca</strong> Carime S.p.A. and <strong>UBI</strong> <strong>Banca</strong> S.p.A.<br />
311
15.2 Other information<br />
Nothing to report.<br />
15.3 Information on equity investments in companies subject to significant<br />
influence not accounted for using the equity method<br />
Nothing to report.<br />
SECTION 16 Other assets - Item 160<br />
16.1 Other assets: composition<br />
Description/Amounts 31.12.<strong>2012</strong> 31.12.2011<br />
Tax credits relating to prior years and related interest - 2,827<br />
VAT tax credits and payments on account 7,472 2,254<br />
Credits for w ithholding taxes paid on behalf of third parties 4,143 11,723<br />
Payments on account for stamp duty on banking documents and deeds 135,897 160,578<br />
Tax credits for personal income tax and post-employment benefits on account 359 389<br />
Tax credits on w ithholding tax 4,560 2,972<br />
Items in transit 248,612 177,709<br />
Debtor items in transit not yet posted to destination accounts 289,422 335,092<br />
Bills, securities, coupons and fees to be debited to customers and correspondents 82,328 92,187<br />
Cheques draw n on the bank 3,018 3,676<br />
Improvements to third party leased assets 36,335 39,516<br />
Accrued income not attributed to specific items 7,785 11,409<br />
Prepaid expenses not attributed to specific items 180,346 90,534<br />
Sundry debtor items 60,113 1,313,477<br />
Total 1,060,390 2,244,343<br />
312
LIABILITIES<br />
SECTION 1 Due to banks – Item 10<br />
1.1 Amounts due to banks: composition by type<br />
Description/Amounts 31.12.<strong>2012</strong> 31.12.2011<br />
1. Due to central banks 12,098,917 6,001,500<br />
2. Due to banks 3,112,254 3,770,781<br />
2.1 Current accounts and deposits 1,215,750 896,512<br />
2.2 Term deposits 534,610 778,119<br />
2.3 Financing 1,144,494 1,881,780<br />
2.3.1 Repurchase agreements 416,190 1,007,037<br />
2.3.2 Other 728,304 874,743<br />
2.4 Amounts due for commitments to repurchase ow n equity instruments - -<br />
2.5 Other payables 217,400 214,370<br />
Total 15,211,171 9,772,281<br />
Fair value 15,905,552 9,769,928<br />
ab<br />
The item 1 “Due to central banks” consists of the carrying amount of the financing received<br />
from the ECB.<br />
ella 1:<br />
1.2 Details of the item 10 “Due to banks”: subordinated liabilities<br />
No subordinated liabilities due to banks have been recognised.<br />
1.3 Details of the item 10 “Due to banks”: structured debts<br />
No structured debts due to banks have been recognised.<br />
1.4 Amounts due to banks subject to specific hedge<br />
Description/Amounts 31.12.<strong>2012</strong> 31.12.2011<br />
1. Liabilities subject to fair value specific hedge: - 165,866<br />
a) interest rate risk - 165,866<br />
b) currency risk - -<br />
c) multiple risks - -<br />
2. Liabilities subject to specific cash flow hedge: - -<br />
a) interest rate risk - -<br />
b) currency risk - -<br />
c) other - -<br />
Total - 165,866<br />
1.5 Amounts due for finance leases<br />
No amounts due to banks for finance leases have been recognised.<br />
313
SECTION 2 Due to customers – Item 20<br />
2.1 Amounts due to customers: composition by type<br />
Description/Amounts 31.12.<strong>2012</strong> 31.12.2011<br />
1. Current accounts and deposits 45,149,448 46,065,651<br />
2. Term deposits 3,184,368 1,396,835<br />
3. Financing 4,732,552 6,022,955<br />
3.1 repurchase agreements 4,273,890 5,568,351<br />
3.2 other 458,662 454,604<br />
4. Amounts due for commitments to repurchase own equity instruments - -<br />
5. Other payables 692,039 945,850<br />
Total 53,758,407 54,431,291<br />
Fair value 53,758,447 54,431,314<br />
<strong>Financial</strong> liabilities for repurchase agreements include a transaction with the Cassa di<br />
Compensazione e Garanzia (a central counterparty clearing house) amounting to €3.9<br />
billion.<br />
Other financial liabilities include €441 million with the Cassa Deposito e Prestiti (CDP –<br />
state controlled fund and deposit institution).<br />
Tabel<br />
2.2 Details of item 20 “Due to customers”: subordinated liabilities<br />
No subordinated liabilities due to customers have been recognised.<br />
2.3 Details of item 20 “Due to customers”: structured debts<br />
No structured debts due to customers have been recognised.<br />
2.4 Amounts due to customers subject to specific hedge<br />
No amounts due to customers subject to specific hedge have been recognised.<br />
Tabella 2: 202030O|1 - NOTA<br />
2.5 Amounts due for finance leases<br />
No amounts due to customers for finance leases have been recognised.<br />
314
SECTION 3 Debt securities issued – Item 30<br />
3.1 Debt securities issued: composition by type<br />
Typ e o f s e c uritie s /<br />
Amo u nts<br />
A. S e c uritie s<br />
Ca rrying<br />
Amo unt<br />
3 1.12 .2 0 12 3 1.12 .2 0 11<br />
Fa ir Va lue<br />
Ca rrying<br />
Fa ir Va lue<br />
Le ve l 1 Le ve l 2 Le ve l 3 Amo unt Le ve l 1 Le ve l 2 Le ve l 3<br />
1. bonds 41,996,277 19,036,598 22,189,192 193,815 44,429,027 19,040,937 18,480,913 4,180,132<br />
1.1 structured 7,205,978 871,686 5,961,792 189,545 8,193,086 1,358,001 6,161,199 239,665<br />
1.2 other 34,790,299 18,164,912 16,227,400 4,270 36,235,941 17,682,936 12,319,714 3,940,467<br />
2. other securities 3,062,876 - 2,888,738 176,226 3,948,336 - 3,731,633 218,802<br />
2.1 structured - - - - - - - -<br />
2.2 other 3,062,876 - 2,888,738 176,226 3,948,336 - 3,731,633 218,802<br />
To ta l 4 5 ,0 5 9 ,15 3 19 ,0 3 6 ,5 9 8 2 5 ,0 7 7 ,9 3 0 3 7 0 ,0 4 1 4 8 ,3 7 7 ,3 6 3 19 ,0 4 0 ,9 3 7 2 2 ,2 12 ,5 4 6 4 ,3 9 8 ,9 3 4<br />
Structured bonds listed on an active market (Level 1) include a convertible bond issued on<br />
10 th July 2009 by the Parent for €655.5 million, inclusive of amounts accrued.<br />
At the end of the year bonds issued in relation to covered bond operations amounted to €5.8<br />
billion (the carrying amount inclusive of the fair value delta hedge amounting to €555.2<br />
million was €6.3 billion).<br />
Bond issues consisting of issues on the EMTN market totalled €7.1 billion.<br />
3.2 Details of item 30 “Debt securities issued”: subordinated securities<br />
Description/Amount 31.12.<strong>2012</strong> 31.12.2011<br />
Subordinated securities issued 5,306,027 4,825,306<br />
315
Details of item A.1 “Subordinated securities” are also given.<br />
316
3.3 Debt securities issued subject to specific hedge<br />
31.12.<strong>2012</strong> 31.12.2011<br />
1. Securities subject to specific fair value hedge: 29,956,681 29,575,882<br />
a) interest rate risk 29,954,774 29,573,877<br />
A<br />
b) currency risk - -<br />
c) multiple risks 1,907 2,005<br />
2. Securities subject to specific cash flow hedge: 826,354 1,128,268<br />
a) interest rate risk - -<br />
b) currency risk 826,354 1,128,268<br />
c) other - -<br />
317
SECTION 4 <strong>Financial</strong> liabilities held for trading – Item 40<br />
4.1 <strong>Financial</strong> liabilities held for trading: composition by type<br />
Type o f tra ns a c tio n / Gro up ite ms<br />
A. On-ba la nc e s he e t lia bilitie s<br />
3 1.12 .2 0 12<br />
FV<br />
FV<br />
NA FV* NA<br />
L1 L2 L3 L1 L2 L3<br />
1. Due to banks 1,100,000 1,163,870 - - 1,163,870 325,000 335,123 - - 335,123<br />
2. Due to customers - - - - - 105,000 102,778 - - 102,778<br />
3. Debt instruments - - - - - - - - - -<br />
3.1 Bonds - - - - - - - - - -<br />
3.1.1 Structured - - - - X - - - - X<br />
3.1.2 Other bonds - - - - X - - - - X<br />
3.2 Other securities - - - - - - - - - -<br />
3.2.1 Structured - - - - X - - - - X<br />
3.2.2 Other - - - - X - - - - X<br />
To ta l A 1,10 0 ,0 0 0 1,16 3 ,8 7 0 - - 1,16 3 ,8 7 0 4 3 0 ,0 0 0 4 3 7 ,9 0 1 - - 4 3 7 ,9 0 1<br />
B. De riva tive ins trume nts - - - - - - - - - -<br />
1. <strong>Financial</strong> derivatives - 69 609,935 - 610,004 - 187 625,585 - 625,772<br />
1.1 For trading X 69 609,242 - X X 187 624,184 - X<br />
1.2 Connected with fair value options X - - - X X - - - X<br />
1.3 Other X - 693 - X X - 1,401 - X<br />
2. Credit derivatives - - - - - - - - - -<br />
2.1 For trading X - - - X X - - - X<br />
2.2 Connected with fair value options X - - - X X - - - X<br />
2.3 other X - - - X X - - - X<br />
To ta l B X 6 9 6 0 9 ,9 3 5 - X X 18 7 6 2 5 ,5 8 5 - X<br />
To ta l (A+B) X 1,16 3 ,9 3 9 6 0 9 ,9 3 5 - X X 4 3 8 ,0 8 8 6 2 5 ,5 8 5 - X<br />
bella 3:<br />
Items 1 “Due to banks” and 2 “Due to customers”, relate to outstanding uncovered short positions of which €54 million with Italian<br />
government securities as the underlying and €1,110 million with government securities of other European countries as the underlying.<br />
Key<br />
FV = fair value<br />
FV* = Fair value calculated excluding changes in value resulting from a change in the credit rating of the issuer since the date of issue<br />
NA = nominal or notional amount<br />
3 1.12 .2 0 11<br />
FV*<br />
318
4.2 Details of item 40 “<strong>Financial</strong> liabilities held for trading”: subordinated<br />
liabilities<br />
No subordinated financial liabilities held for trading have been recognised.<br />
4.3 Details of item 40 “<strong>Financial</strong> liabilities held for trading”: structured debt<br />
No structured debt financial liabilities held for trading have been recognised.<br />
4.4 <strong>Financial</strong> liabilities held for trading (excluding “uncovered short positions”):<br />
annual changes<br />
No financial liabilities held for trading have been recognised.<br />
SECTION 5 <strong>Financial</strong> liabilities designated at fair value – Item 50<br />
The <strong>UBI</strong> Group has not applied the option under IFRS to designate financial liabilities at fair<br />
value (fair value option).<br />
SECTION 6 Hedging derivatives – Item 60<br />
6.1 Hedging derivatives: composition by type of hedge and hierarchical level<br />
Type o f de riva tive /<br />
Unde rlying a s s e t s<br />
Fa ir Va lue 3 1.12 .2 0 12 No mina l<br />
Fa ir Va lue 3 1.12 .2 0 11<br />
L1 L2 L3<br />
a mo unt<br />
L1 L2 L3<br />
No mina l<br />
a mo unt<br />
A. Fina nc ia l de riva tive s - 2 ,2 3 4 ,9 8 8 - 13 ,8 4 8 ,9 2 5 - 1,7 3 9 ,6 8 5 - 17 ,6 0 4 ,19 6<br />
1) Fair value - 2,129,499 - 13,052,146 - 1,739,328 - 17,564,103<br />
2) Cash flow - 105,489 - 796,779 - 357 - 40,093<br />
3) Foreign investments - - - - - - - -<br />
B. Cre dit de riva tive s - - - - - - - -<br />
1) Fair value - - - - - - - -<br />
2) Cash flow - - - - - - - -<br />
To ta l - 2 ,2 3 4 ,9 8 8 - 13 ,8 4 8 ,9 2 5 - 1,7 3 9 ,6 8 5 - 17 ,6 0 4 ,19 6<br />
319
6.2 Hedging derivatives: composition by portfolios hedged and type of hedge<br />
F a ir V a lu e<br />
C a s h flo w<br />
Tra n s a c t io n s /Ty p e o f h e d g e<br />
In t e re s t ra t e<br />
ris k<br />
C u rre n c y<br />
ris k<br />
S p e c ific<br />
C re d it<br />
ris k<br />
P ric e<br />
ris k<br />
F o re ig n<br />
Mu lt ip le Ma c ro - h e d g eS p e c ificMa c ro - h e d g ein<br />
ve s t me n t s<br />
ris ks<br />
1. Ava ila b le -for-sa le fina nc ia l a sse ts 1,133 ,949 - - - - X - X X<br />
2. Loa ns 154,972 - - X - X - X X<br />
3. He ld-to-ma tu rity in ve stme n ts X - - X - X - X X<br />
4. P o rtfolio X X X X X 834 ,519 X - X<br />
5. O th e r tra nsa c tions - - - - - X - X -<br />
To t a l a s s e t s 1, 2 8 8 , 9 2 1 - - - - 8 3 4 , 5 19 - - -<br />
1. Fina nc ia l lia bilitie s 11,4 13 - - X - X 105,489 X X<br />
2. P o rtfolio - - - - - - - - X<br />
To t a l lia b ilit ie s 11, 4 13 - - - - - 10 5 , 4 8 9 - -<br />
1. E xpe c te d tra nsa c tions X X X X X X - X X<br />
2. P o rtfolio of fina nc ia l a sse ts a n d lia b ilitie s X X X X X - X - -<br />
SECTION 7 Fair value change in macro-hedged financial liabilities –<br />
Item 70<br />
No items of this type exist.<br />
SECTION 8 Tax liabilities – Item 80<br />
Details of tax liabilities are reported in assets section 14.<br />
SECTION 9 Liabilities associated with assets held for disposal – Item 90<br />
See assets section 15 for details.<br />
320
SECTION 10 Other liabilities – Item 100<br />
10.1 Other liabilities: composition<br />
Description/Amounts 31.12.<strong>2012</strong> 31.12.2011<br />
Balance of illiquid portfolio items 177,704<br />
Credit items in transit in departments or branches pending posting to accounts 291,680 291,153<br />
Sums available to customers and banks for transactions in the course of payment 79,866 139,587<br />
Items payable to tax authorities on behalf of third parties 38,866 29,488<br />
Items in transit 265,733 120,528<br />
Sums due to customers but not available due to various restrictions 50<br />
Tax w ithheld on income paid to third parties 101,341 129,800<br />
Indirect taxes payable 18,974 6,336<br />
Social security contributions for third parties in the course of payment 1,861 1,944<br />
Dividends and sums due to shareholders 168 286<br />
Amounts due to staff pension funds, inclusive of accessory costs 14,728 13,620<br />
Accrued expenses not attributed to specific items 20,852 62,320<br />
Deferred income not attributed to specific items 117,570 145,097<br />
Payables for educational, cultural, charitable and social purposes 9,547 11,220<br />
Debt for post-employment benefit/w elfare schemes 27,013 12,707<br />
Doubtful overall outcomes on guarantees granted and commitments 52,679 62,252<br />
Due to personnel 187,718 89,500<br />
Residual creditor items 1,162,687 1,846,024<br />
Total 2,391,283 3,139,616<br />
210000O|1 - NOTA<br />
SECTION 11 Post-employment benefits – Item 110<br />
11.1 Annual changes in post-employment benefits<br />
31.12.<strong>2012</strong> 31.12.2011<br />
A. Opening balances 394,025 393,163<br />
B. Increases 57,026 20,702<br />
B.1 Allocation for the year 6,341 3,955<br />
B.2 Other changes 50,685 16,747<br />
C. Decreases (30,347) (19,840)<br />
C.1 Payments made (22,918) (17,528)<br />
C.2 Other changes (7,429) (2,312)<br />
D. Final balances 420,704 394,025<br />
321
11.2 Other information<br />
The demographic and actuarial hypotheses adopted to value the post-employment benefit provision and<br />
leaving entitlements as at 31/12/<strong>2012</strong><br />
Mortality rate<br />
The “RGS48” tables (prepared by the State General Accounting Office) were used<br />
appropriately modified on the basis of historical data for the Group.<br />
Post-employment benefit The probability of advance payments, calculated on the basis of historical data for<br />
advances<br />
the Group, is 2% while the average amount requested is between 45% and 100% of<br />
the available provision.<br />
Inflation rates Long term forecasts of the scenario for inflation led to the use of a rate of 2%.<br />
Discount rates<br />
A discount rate of 2,4481%, was used, calculated as the weighted average of the<br />
EUR Composite A curve as at 31.12.<strong>2012</strong>, using, as weights, the ratios between the<br />
amount paid and advanced for each maturity date and the total amount to be paid<br />
and advanced until the extinction of the population considered. This was performed<br />
because IAS 19 states that reference should be made to the market yields of “high<br />
quality corporate bonds”, or to yields on securities with a low credit risk. By making<br />
reference to the definition of “investment grade” securities, where a security<br />
qualifies for that classification if its rating is equal to or higher than BBB for S&P or<br />
Baa2 for Moodys, it was decided to consider only securities issued by corporate<br />
issuers with a class “A” rating with the assumption that this class identifies an<br />
average level for “investment grade” securities and thereby excludes higher risk<br />
securities. Since IAS 19 makes no explicit reference to a specific market sector for the<br />
bonds, it was decided to opt for a “composite” market curve which therefore<br />
summarises the prevailing market conditions on the valuation date for securities<br />
issued by companies belonging to different sectors, including utilities, telephone,<br />
financial, banking and industrial sectors. The area was used for the geographical<br />
area.<br />
The demographic and actuarial hypotheses adopted to value the post-employment benefit provision and<br />
leaving entitlements as at 31/12/2011<br />
Mortality rate<br />
The “RGS48” tables (prepared by the State General Accounting Office) were used<br />
appropriately modified on the basis of historical data for the Group.<br />
Post-employment benefit The probability of advance payments, calculated on the basis of historical data for<br />
advances<br />
the Group, is 2% while the average amount requested is between 45% and 100% of<br />
the available provision.<br />
Inflation rates Long term forecasts of the scenario for inflation led to the use of a rate of 2%.<br />
Discount rates<br />
A discount rate of 3.9573%, was used, calculated as the weighted average of the<br />
EUR Composite A curve as at 31.12.2011, using, as weights, the ratios between the<br />
amount paid and advanced for each maturity date and the total amount to be paid<br />
and advanced until the extinction of the population considered. This was performed<br />
because IAS 19 states that reference should be made to the market yields of “high<br />
quality corporate bonds”, or to yields on securities with a low credit risk. By making<br />
reference to the definition of “investment grade” securities, where a security<br />
qualifies for that classification if its rating is equal to or higher than BBB for S&P or<br />
Baa2 for Moodys, it was decided to consider only securities issued by corporate<br />
issuers with a class “A” rating with the assumption that this class identifies an<br />
average level for “investment grade” securities and thereby excludes higher risk<br />
securities. Since IAS 19 makes no explicit reference to a specific market sector for the<br />
bonds, it was decided to opt for a “composite” market curve which therefore<br />
summarises the prevailing market conditions on the valuation date for securities<br />
issued by companies belonging to different sectors, including utilities, telephone,<br />
financial, banking and industrial sectors. The area was used for the geographical<br />
area.<br />
322
SECTION 12 Provisions for risks and charges – Item 120<br />
12.1 Provisions for risks and charges: composition<br />
Items/Components 31.12.<strong>2012</strong> 31.12.2011<br />
1. Company pension funds 80,563 76,460<br />
2. Other provisions for risks and charges 260,026 269,325<br />
2.1 litigation 116,049 108,612<br />
2.2 costs for staff 43,979 70,932<br />
2.3 other 99,998 89,781<br />
Total 340,589 345,785<br />
Provisions for staff costs consisted of <strong>2012</strong> provisions for the company bonus and trade<br />
union agreements.<br />
12.2 Provisions for risks and charges: annual changes<br />
Items/Components<br />
Pension funds<br />
Total<br />
Other provisions<br />
A. Opening balances 76,460 269,325<br />
B. Increases 11,642 118,134<br />
B.1 Allocation for the year 171 114,668<br />
B.2 Changes due to passage of time 2,841 1,088<br />
B.3 Changes due to changes in discount rate 458<br />
B.4 Other changes 8,630 1,920<br />
C. Decreases (7,539) (127,433)<br />
C.1 Use for the year (7,539) (69,886)<br />
C.2 Changes due to changes in discount rate (2)<br />
C.3 Other changes (57,545)<br />
D. Final balances 80,563 260,026<br />
12.3 Defined benefit company pension funds<br />
The balance in the accounts for defined benefit company pension funds was composed of<br />
<strong>Banca</strong> Carime Spa funds amounting to €52,581 thousand, <strong>Banca</strong> Regionale Europea Spa<br />
funds amounting to €26,882 thousand and Centrobanca Spa funds amounting to €1,100<br />
thousand.<br />
12.3.1 Description of the funds<br />
BANCA CARIME SPA<br />
<strong>Banca</strong> Carime SpA recognised liabilities relating to internal pension funds set aside to cover<br />
supplementary INPS (national insurance institute) pension obligations within liability item<br />
120a “provisions for risks and charges: pension and similar obligations”.<br />
The liabilities in question constitute a defined benefit plan and are subject to periodic<br />
actuarial measurement in compliance with IAS 19 “Employee benefits”.<br />
The following was performed in <strong>2012</strong>, with regard to the measurement of these liabilities:<br />
the measurement methods employed were brought into line with those already in use<br />
in the rest of the <strong>UBI</strong> <strong>Banca</strong> Group with regard to the variables for the following:<br />
the discount rate curve;<br />
<br />
<br />
demographic tables;<br />
the characteristics of the prediction model with regard to the disbursement of<br />
the returns;<br />
323
the accounting procedures employed for actuarial gains and losses 1 were aligned with<br />
those in use in the <strong>UBI</strong> Group which involves the recognition of these items in a<br />
special valuation reserve in equity instead of recognising them through profit or loss.<br />
The alignments described above had no impacts on the income statement, but only impacts<br />
on equity consisting of the recognition, in a separate valuation reserve against the item<br />
“Provisions for risks and charges: pension and similar obligations”, of <strong>2012</strong> actuarial losses<br />
amounting to approximately €5.1 million.<br />
To complete the information, because the above amounts were not significant with respect<br />
to Group equity, no restatement of the comparative figures for 2011 was performed.<br />
As at 31.12,<strong>2012</strong> three defined benefit funds existed:<br />
1. the fund to supplement I.N.P.S. (national insurance institute) benefits for compulsory<br />
invalidity, old age and survivors insurance for retired staff of the former Cassa di Risparmio<br />
di Calabria e Lucania (Reg. No. 9059 in the Pension Fund Register);<br />
2. the fund to supplement I.N.P.S. (national insurance institute) benefits for compulsory<br />
invalidity, old age and survivors insurance for retired staff of the former Cassa di Risparmio<br />
di Puglia (Reg. No. 9124 in the Pension Fund Register);<br />
3. the fund to supplement I.N.P.S. (national insurance institute) benefits for compulsory<br />
invalidity, old age and survivors insurance for retired staff of the former Cassa di Risparmio<br />
Salernitana (Reg. No. 9053 in the Pension Fund Register);<br />
The funds pay the following welfare benefits as a direct pension for:<br />
• old age, when the participants have reached 60 years of age if men and 55 years of age if<br />
women, provided that they have participated in the fund for at least 15 years;<br />
• length of service, at any age when the participants have participated in the fund for 35<br />
years if men and 30 years if women;<br />
• invalidity at any age when permanently and completely unable to work through disability<br />
and participating in the fund (in addition, for the fund of the former Cassa di Risparmio di<br />
Puglia, the invalidity must be caused by work and for the fund of the former Cassa di<br />
Risparmio Salernitana, participation for at least five years is required).<br />
Furthermore, survivors of participants receive an ‘indirect pension’ if a participant dies while<br />
in service and a surviving dependent’s pension if a participant dies, provided a direct<br />
pension has been paid.<br />
Description of the main actuarial assumptions<br />
The defined benefit plan funds were subjected to actuarial valuation which in the technical<br />
audit as at 31.12.<strong>2012</strong> resulted in an amount for the mathematical reserve which on<br />
average, in the actuarial sense, will allow the pensions granted to pensioners and their<br />
surviving dependents to be paid.<br />
The valuations were performed in compliance with accounting standard IAS 19, with the<br />
legislation governing the relative pensions schemes and with company regulations. More<br />
specifically, the criterion used to calculate the liability is consistent with the projected unit<br />
credit method required under IAS 19.<br />
1 In accordance with IAS 19, actuarial gains and losses represent changes in the liability which occur in the period<br />
generated:<br />
differences between the assumptions used in the calculation model and the actual changes in the<br />
magnitudes subjected to verification;<br />
changes that occur in the assumptions in the period in question.<br />
324
The following demographic assumptions were assumed:<br />
• for the probability of the death of pensioners, the RGS48 tables prepared by the State<br />
General Accounting Office, separately by gender;<br />
• for the probability of leaving a family, those adopted in the INPS (national insurance<br />
institute) model for projections to 2011; separately by gender;<br />
• for the probability of the death of a spouse, the RGS48” tables prepared by the State<br />
General Accounting Office, separately by gender.<br />
The economic and financial assumptions used in the actuarial valuation were as follows:<br />
Former<br />
Carical<br />
pension fund<br />
Former<br />
Caripuglia<br />
pension fund<br />
Former<br />
Carisal<br />
pension fund<br />
a) Discount rate* 2.41% 2.41% 2.41%<br />
b) Annual pension revaluation rate 1.50% 1.50% 1.50%<br />
c) Inflation rate 2.00% 2.00% 2.00%<br />
* Calculated a s the weighted avera ge of the EUR Composite A interest rate c urve a s a t 31.12,<strong>2012</strong>, using, as weights, the ratios between the amount paid for each maturity<br />
date a nd the total amount to be paid until the extinction of the population considered.<br />
Actuarial valuations<br />
The table below gives the results of the actuarial valuations performed as at 31 st December<br />
<strong>2012</strong> in relation to the different groups.<br />
Changes in liabilities in <strong>2012</strong> for IAS 19 purposes<br />
Former<br />
Carical<br />
pension fund<br />
Former<br />
Caripuglia<br />
pension fund<br />
Former<br />
Carisal<br />
pension fund<br />
Total<br />
A. Opening balances 39,509 10,652 692 50,853<br />
B. Increases 5,808 1,013 88 6,909<br />
B.1 Interest expense balancing entry in the income statement<br />
"staff costs"<br />
1,435 389 25 1,849<br />
B.2 Actuarial losses balancing entry in "valuation reserves" 4,373 624 63 5,060<br />
B.3 Provisions - - - -<br />
B.4 Other changes - - - -<br />
C. Decreases (4,118) (985) (78) (5,181)<br />
C.1 Pension benefits paid (4,118) (985) (78) (5,181)<br />
C.2 Actuarial gains balancing entry in "valuation reserves" - - - -<br />
C.3 Other changes - - - -<br />
D. Final balances 41,199 10,680 702 52,581<br />
The average present value of pensions currently being paid (immediate costs) was identified<br />
as constituting the economic commitments of the fund as at 31 st December <strong>2012</strong>,<br />
A sufficiently prudent system of financial capitalisation was adopted that is able to<br />
guarantee the full cover of the benefits to be paid to the group of pensioners existing as at<br />
31 st December <strong>2012</strong> with the accumulated reserves at any moment.<br />
325
CENTROBANCA SPA<br />
This is a supplementary pension fund in which there are now 9 remaining pensioners from<br />
Centrobanca participating. No changes in the population of the participants has occurred<br />
since the previous year.<br />
The contribution for the <strong>2012</strong>, as specified by the “Fund Regulations” was calculated on the<br />
basis of the weighted average rate used in the valuation performed 2.7%).<br />
Against that contribution the Bank benefited from the returns on using the assets of the<br />
fund. The sums in the fund are not invested in specific assets.<br />
Except for the amount recognised within liability item 120 a), no other liabilities and/or<br />
assets were recognised in the financial statements of the bank<br />
The main actuarial hypotheses on which the valuation of the fund as at 31.12.<strong>2012</strong> was<br />
based are as follows:<br />
- demographic assumptions deduced from the RG48 mortality tables prepared by the State<br />
General Accounting Office, separately by gender;<br />
- a discount rate calculated as the weighted average of the EUR Composite A interest rate<br />
curve as at 31.12.<strong>2012</strong>, using, as weights, the ratios between the amount paid for each<br />
maturity date and the total amount to be paid until the extinction of the population<br />
considered.<br />
The present value of the fund, calculated on the basis of those hypotheses, resulted in an<br />
“actuarial loss” of €106 thousand (point C.3).<br />
Changes in liabilities in <strong>2012</strong> for IAS 19 purposes<br />
CENTROBANCA PENSION FUND<br />
A. Opening balances 1,023<br />
B. Increases 146<br />
B.1 Interest expense balancing entry in the income statement "staff costs" 40<br />
B.2 Actuarial losses balancing entry in "valuation reserves" 106<br />
B.3 Provisions -<br />
B.4 Other changes -<br />
C. Decreases (69)<br />
C.1 Pension benefits paid (69)<br />
C.2 Actuarial gains balancing entry in "valuation reserves" -<br />
C.3 Other changes -<br />
D. Final balances 1,100<br />
BANCA REGIONALE EUROPEA SPA<br />
As at 31.12.<strong>2012</strong> there was a fund to supplement compulsory invalidity, old age and<br />
survivors insurance for the staff of <strong>Banca</strong> Regionale Europea originally from the former<br />
Cassa del Monte di Lombardia and from the former Cassa di Risparmio di Cuneo.<br />
The fund pays the following welfare benefits as a direct pension for:<br />
• old age, when the participants have reached the age limits set in the contracts in force at<br />
the time, provided that they have participated in the fund for at least 15 years;<br />
• length of service, when the participants have reached the minimum age limits set in the<br />
contracts in force at the time;<br />
• invalidity when, having obtained acknowledgement of the condition of invalidity and<br />
whatever the age, a length of service of at least five years has been served, or whatever the<br />
length of service, if the invalidity is permanent and caused by work.<br />
Furthermore, survivors of participants receive an ‘indirect pension’ if a participant dies while<br />
in service after one year of participation in the fund or after any period if death was caused<br />
by work and a surviving dependent’s pension if a participant dies, provided a direct pension<br />
has been paid.<br />
Description of the main actuarial assumptions<br />
326
The defined benefit plan fund was subjected to actuarial valuation which in the technical<br />
audit as at 31.12.2011 resulted in an amount for the mathematical reserve which on<br />
average, in the actuarial sense, will allow the pensions granted to pensioners and their<br />
surviving dependents to be paid.<br />
The valuations were performed in compliance with accounting standard IAS 19, with the<br />
legislation governing the relative pensions schemes and with company regulations. More<br />
specifically, the criterion used to calculate the liability is consistent with the projected unit<br />
credit method required under IAS 19.<br />
The following demographic assumptions were assumed:<br />
• for the probability of death of pensioners, direct and/or indirect, those for the Italian<br />
population taken from “RGS48” tables prepared by the State General Accounting Office,<br />
separately by gender;<br />
• for the probability of death of a spouse, those for the Italian population taken from<br />
“RGS48” tables prepared by the State General Accounting Office, separately by gender;<br />
• for the probability of leaving a family, those adopted in the INPS (national insurance<br />
institute) model for projections to 2011 separately by gender.<br />
The economic and financial assumptions used in the actuarial valuation were as follows:<br />
• discount rate of 3%<br />
• expected rate of pension revaluation of 1.50%<br />
• annual inflation rate of 2.00%.<br />
Actuarial valuations<br />
The table below gives the results of the actuarial valuations performed as at 31 st December<br />
<strong>2012</strong> in relation to the different groups:<br />
Changes in liabilities in <strong>2012</strong> for IAS 19 purposes<br />
Former B.M .L.<br />
pension fund<br />
Former C.R.C.<br />
pension fund<br />
Total<br />
A. Opening balances 11,230 13,354 24,584<br />
B. Increases 1,743 2,845 4,588<br />
B.1 Interest expense balancing entry in the income statement "staff costs" 460 532 992<br />
B.2 Actuarial losses balancing entry in "valuation reserves" 1,152 2,313 3,465<br />
B.3 Provisions 131 131<br />
B.4 Other changes -<br />
C. Decreases (722) (1,568) (2,290)<br />
C.1 Pension benefits paid (722) (1,568) (2,290)<br />
C.2 Actuarial gains balancing entry in "valuation reserves" -<br />
C.3 Other changes -<br />
D. Final balances 12,251 14,631 26,882<br />
The average present value of pensions currently being paid (immediate costs) was identified<br />
as constituting the economic commitments of the fund as at 31 st December <strong>2012</strong>,<br />
A sufficiently prudent system of financial capitalisation was adopted that is able to<br />
guarantee the full cover of the benefits to be paid to the group of pensioners existing as at<br />
31 st December <strong>2012</strong> with the accumulated reserves at any moment.<br />
327
12.4 Provisions for risks and charges – other provisions<br />
31.12.<strong>2012</strong> 31.12.2011<br />
1. Provision for revocation claw back risks 30,284 27,657<br />
2. Provision for bonds and default 8,127 9,637<br />
3. Other provisions for risks and charges 61,587 52,487<br />
Total 99,998 89,781<br />
Other provisions for risks and charges include €12 million set aside as part of the process<br />
for the restructuring of indirect distribution networks commenced in 2011 and €10 million<br />
related with risks related to salary backed lending operations managed by third party<br />
companies.<br />
12.5 Contingent liabilities<br />
31.12.<strong>2012</strong> 31.12.2011<br />
for personnel litigation 873 499<br />
for revocation risks 2,603 2,210<br />
for bonds in default 80 11<br />
for compounding of interest 3,392 1,127<br />
for claim risks 47 547<br />
for tax litigation 319,549 238,260<br />
for other litigation 400,604 73,506<br />
Total 727,148 316,160<br />
The increase relates to litigation attributable primarily to Centrobanca for the bankruptcy of<br />
Burani Holding N.V. (BDH) and the bankruptcy of Mariella Burani Family Holding (MBFH).<br />
The Management <strong>Report</strong> may be consulted for further information.<br />
The liabilities regulated by IAS 37, characterised by the absence of certainty over the timing<br />
or the amount of future expense required to settle presumed liabilities, can be classified as<br />
being of two types:<br />
<br />
<br />
probable liabilities;<br />
contingent liabilities (possible or remote).<br />
The correct identification of the nature of liabilities is of fundamental importance because it<br />
determines whether or not the risk deriving from an obligation must be recognised in the<br />
financial statements.<br />
The recognition of a provision for risks and charges in the financial statements represents a<br />
probable liability of uncertain timing or amount 2 and the amount recognised in the accounts<br />
represents the best estimate of the expenditure required to settle the obligation existing as<br />
at the reporting date and reflects the risks and uncertainties that inevitably characterise a<br />
number of different facts and circumstances.<br />
The amount of a provision is measured by the present value of the expenditure that it is<br />
assumed will be necessary to settle the obligation where the effect of the present value is<br />
significant.<br />
Future events that might affect the amount required to settle the obligation are only taken<br />
into consideration if there is sufficient objective evidence that they will occur.<br />
The measurement of provisions is periodically reviewed to verify that they are reasonable.<br />
2 Details of the criteria for recognising provisions are given in Part A.2 of the notes to the financial statements “The<br />
main items in the financial statements”, sub-section 12 “Provisions for risks and charges”, which may be consulted.<br />
328
The general and theoretical legal parameters which govern the process of determining the<br />
present value of provisions, which is performed for each single case of litigation and for the<br />
relative residual life, are given below:<br />
• type/nature of the litigation, to be assessed in the light of the legal claims formulated by<br />
the counterparty. Various “macro-families” are identifiable in this respect such as corporate<br />
litigation, labour law cases, financial intermediation litigation, litigation generically definable<br />
as compensation for damages (resulting from non-performance of contract obligations,<br />
illegal actions, violation of regulations) etc.;<br />
• degree of “innovation” in the litigation, to be assessed by considering whether the<br />
issues turn on matters already known and “weighed” by the Bank or on completely new<br />
matters which therefore require study (e.g. resulting from a change in the legislation or in<br />
legal orientations);<br />
• degree of “strategic importance” of the litigation to the bank: for commercial reasons<br />
the Bank might for example decide to end a case very rapidly even if it had grounds of<br />
defence that would allow it to resist in court for a long time;<br />
• average length of litigation, to be weighted taking account of geographical factors, which<br />
is to say the location of the jurisdiction in which the case is tried and the state of progress of<br />
the trial. In this respect a decision must be taken on the source of the statistics from which<br />
data is obtained and assistance can be obtained from the lawyers who represent the Bank in<br />
litigation and who have direct knowledge of the jurisdictions concerned for each case;<br />
• the “nature” of the counterparty (e.g. a private individual or a legal entity, a professional<br />
operator or not, a consumer or not, etc.).<br />
A contingent liability is defined as:<br />
a possible obligation, the result of past events, the existence of which will only be<br />
confirmed by the occurrence or (non occurrence) of future events that are not totally<br />
under the control of the enterprise;<br />
a present obligation that is the result of past events, but which is not recognised in the<br />
accounts because:<br />
− it is improbable that financial resources will be needed to settle the obligation;<br />
− the amount of the obligation cannot be measured with sufficient reliability.<br />
Contingent liabilities are not recognised in the financial statements but are only reported,<br />
unless they are considered a remote possibility. In the latter case, in compliance with IAS<br />
37, no information is given on them in the notes to the financial statements.<br />
Amounts for contingent liabilities are also subject to periodic verification because it is<br />
possible that events may occur which make them remote or probable with the possible need,<br />
in the latter case, to make a provision for them in the financial statements.<br />
With regard to contingent liabilities of a tax nature a list of notices of tax assessment,<br />
written notification of findings and other tax litigation matters is given in the Management<br />
<strong>Report</strong> which may be consulted.<br />
329
SECTION 13 Technical reserves – Item 130<br />
No amounts were recognised within item 130 “Technical reserves”, neither as at<br />
31/12/<strong>2012</strong> nor as at 31/12/2011.<br />
SECTION 14 Redeemable shares – Item 150<br />
14.1 Redeemable shares: composition<br />
No shares have been issued with redemption clauses.<br />
SECTION 15 Equity attributable to the Parent – Items 140, 160, 170,<br />
180, 190, 200 and 220<br />
15.1 “Share capital” and “Treasury shares”: composition<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Number of ordinary shares 901,747,005 901,746,759<br />
nominal value per share in euro 2.50 2.50<br />
Number of treasury shares 1,200,000 1,200,000<br />
nominal value per share in euro 2.50 2.50<br />
- NOTA<br />
330
15.2 Share capital – Number of shares of the Parent: annual changes<br />
Items/type Ordinary Other<br />
A. Shares existing at the beginning of the year 901,746,759 -<br />
- fully paid up 901,746,759 -<br />
- not fully paid up - -<br />
A.1 Treasury shares (-) (1,200,000) -<br />
B.2 Outstanding shares: initial number 902,946,759 -<br />
B. Increases 246 -<br />
B.1 New issues 246 -<br />
- by payment: 246 -<br />
- business combinations - -<br />
- conversion of bonds 246 -<br />
- exercise of w arrants - -<br />
- other - -<br />
- free of charge: - -<br />
- in favour of employees - -<br />
- in favour of directors - -<br />
- other - -<br />
B.2 Sale of treasury shares - -<br />
B.3 Other changes - -<br />
C. Decreases - -<br />
C.1 Cancellation - -<br />
C.2 Purchase of treasury shares - -<br />
C.3 Company disposal operations - -<br />
C. 4 Other changes - -<br />
D. Outstanding shares: closing balances 902,947,005 -<br />
D.1 Treasury shares (+) 1,200,000 -<br />
D.2 Shares outstanding at the end of the year 901,747,005 -<br />
- fully paid up 901,747,005 -<br />
- not fully paid up - -<br />
15.3 Share capital: other information<br />
Convertible bond issue “<strong>UBI</strong> 2009/2013 convertibile con facoltà di rimborso in<br />
azioni”<br />
On 18 th June 2009, the Management Board of <strong>UBI</strong> <strong>Banca</strong>, following the decisions taken on<br />
27 th May 2009 and in implementation of the authorisation granted by a shareholders’<br />
meeting of 9 th May 2009, approved the final conditions for the convertible bond “<strong>UBI</strong><br />
2009/2013 convertibile con facoltà di rimborso in azioni”, offered as a rights issue to the<br />
shareholders of <strong>UBI</strong> <strong>Banca</strong>.<br />
The issuance of the convertible bonds was performed for a total nominal amount of<br />
€639,145,872, through the issue of 50,129,088 convertible bonds for a nominal amount of<br />
€12.75 each, offered as a rights issue to the shareholders of <strong>UBI</strong> <strong>Banca</strong> at a ratio of four<br />
convertible bonds for every 51 ordinary shares of <strong>UBI</strong> <strong>Banca</strong> possessed. The issue price of<br />
each convertible bond was €12.75.<br />
The convertible bonds confer the right on the holders to the payment of a fixed coupon equal<br />
to 5.75% gross per annum of the nominal amount of the convertible bonds to be paid<br />
annually and which will have a term running from 10 th July 2009 until 10 th July 2013.<br />
The Management Board also decided to increase the share capital at the service of the<br />
convertible bonds by a maximum amount of €639,145,872 through the issue of a maximum<br />
of 255,658,348 ordinary shares of <strong>UBI</strong> <strong>Banca</strong>, with a nominal value of €2.50 each, normal<br />
dividend entitlement and having the same characteristics of the ordinary shares of <strong>UBI</strong><br />
<strong>Banca</strong> outstanding on the date of issue.<br />
As concerns the conversion and redemption rights attaching to the convertible bonds, when<br />
18 months have elapsed since the issue date of the convertible bonds:<br />
• bondholders have the right to convert the convertible bonds into <strong>UBI</strong> <strong>Banca</strong> shares at a<br />
ratio of one ordinary share for every one convertible bond held. If the conversion right is<br />
exercised, <strong>UBI</strong> <strong>Banca</strong> shall have the right to pay a sum of money in place of the shares, not<br />
331
less than the nominal amount of the bonds, calculated on the basis of the stock market<br />
share price of the <strong>UBI</strong> <strong>Banca</strong> shares;<br />
• <strong>UBI</strong> <strong>Banca</strong> has the right to call the convertible bonds by payment in cash and/or in <strong>UBI</strong><br />
<strong>Banca</strong> shares, with the addition of a premium equal to 10% of the nominal amount of the<br />
convertible bonds.<br />
The convertible bonds shall be redeemed at par on the maturity date. <strong>UBI</strong> <strong>Banca</strong> shall have<br />
the right to perform the redemption by payment in cash and/or ordinary shares of <strong>UBI</strong><br />
<strong>Banca</strong>, in an amount not less than the nominal value of the convertible bonds.<br />
Also, with regard to the conversion right, <strong>UBI</strong> <strong>Banca</strong> has set a cap on the value of its share<br />
at €12.80, above which, redemption of the liability will be performed by repayment in<br />
shares.<br />
With regard to conversions performed during the year, details of all the movements in<br />
shares is given in the table below.<br />
Share capital increase and repurchase of treasury shares<br />
Details of changes in the number of shares, in the share capital and in the share premiums<br />
that occurred in <strong>2012</strong> are given below.<br />
Date Reason Number of shares Share capital<br />
Share premium<br />
reserve<br />
31.12.2011 901,746,759 2,254,366,898 7,429,912,824<br />
04.07.<strong>2012</strong> Conversion Convertible bonds July <strong>2012</strong> 246 615 2,496<br />
Replenishment of loss - 2,713,053,965<br />
31.12.<strong>2012</strong> 901,747,005 2,254,367,513 4,716,861,355<br />
No repurchases of treasury shares were made during the year.<br />
15.4 Reserves of profits: other information<br />
Reserves of profits in the consolidated financial statements decreased by €51,691 thousand<br />
due to the distribution of the 2011 dividend and to allocations of profits made by the<br />
governing bodies of the Bank and its subsidiaries.<br />
332
SECTION 16 Non-controlling interests – Item 210<br />
16.1 Non-controlling interests: composition<br />
Non-controlling interests net of valuation reserves and profits (losses) for the year decreased<br />
by approximately €64,085 thousand. The changes were due primarily to extraordinary<br />
transactions performed during the year, which have already been reported in full in the<br />
<strong>Consolidated</strong> Management <strong>Report</strong> (merger of <strong>Banca</strong> Di San Giorgio S.p.A into <strong>Banca</strong><br />
Regionale Europea S.p.A., increase in the share capital of <strong>Banca</strong> Popolare di Ancona S.p.A.<br />
and of <strong>Banca</strong> Regionale Europea S.p.A. by drawing on valuation reserves) and also to<br />
purchases from non-controlling shareholders of remaining outstanding shares of IW Bank<br />
S.p.A and the purchase by the Parent of the entire stake held by <strong>Banca</strong> Popolare di Ancona<br />
S.p.A. in <strong>UBI</strong> Leasing S.p.A. The impacts on non-controlling interests were as follows:<br />
Share capital: increase of approximately €6.8 million of which:<br />
<strong>Banca</strong> Regionale Europea S.p.A.<br />
+ €12,048 thousand<br />
<strong>Banca</strong> Popolare di Ancona S.p.A.<br />
+ €1,758 thousand<br />
<strong>UBI</strong> leasing S.p.A.<br />
- €3,227 thousand<br />
IW Bank S.p.A. and its former subsidiary Investnet - €3,542 thousand<br />
With regard to <strong>Banca</strong> Regionale Europea S.p.A., the increase in the share capital by drawing<br />
on the valuation reserves resulted in an increase of approximately €29.4 million. An<br />
increase of approximately €1.8 million also occurred due to the increase in the share capital<br />
at the service of the merger of Banco San Giorgio S.p.A. together with a decrease of<br />
approximately €19.1 million as a consequence of cancelling the share capital of the merged<br />
bank.<br />
The positive impact of <strong>Banca</strong> Popolare di Ancona S.p.A. is entirely due to the increase in the<br />
share capital performed by drawing on the valuation reserves.<br />
The negative impacts of <strong>UBI</strong> Leasing S.p.A. and IW Bank S.p.A. are due to the increase in<br />
the percentage of ownership by the Group.<br />
Non-controlling interests include €12,300 thousand consisting of savings shares and<br />
€32,808 thousand consisting of the privileged shares of <strong>Banca</strong> Regionale Europea S.p.A.<br />
Share premiums decreased by approximately €20.3 million of which:<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Share capital 510,527 503,755<br />
Share premiums 55,853 76,173<br />
Reserves 267,879 318,417<br />
Treasury shares<br />
Valuation reserves (3,930) 21,182<br />
Equity instruments<br />
Profit for the year attributable to non-controlling interests 8,958 (20,603)<br />
Total 839,287 898,924<br />
former Banco di San Giorgio S.p.A.<br />
IW Bank S.p.A. and its subsidiary Investnet<br />
<strong>UBI</strong> leasing S.p.A.<br />
- €14,995 thousand<br />
- €4,078 thousand<br />
- €1,091 thousand<br />
The changes are due to the operations already described. The decrease for <strong>UBI</strong> Leasing<br />
S.p.A. of approximately €1.1 million included €0.7 million due to the replenishment of<br />
losses incurred the year before.<br />
Reserves decreased by approximately €50.5 million. That decrease was determined<br />
primarily by a decrease of €20 million (2011 loss) and by the distribution of<br />
dividends and other outgoings amounting to €35.4 million. On the other hand, an<br />
333
increase was recorded of approximately €6 million due primarily to the merger<br />
already mentioned and to the changes in the percentage holdings in IW Bank S.p.A.<br />
and <strong>UBI</strong> Leasing S.p.A..<br />
The remaining differences relate to residual changes in percentage holdings due to the<br />
purchase or sale of shares from or to non- controlling shareholders during the year.<br />
The effect of the transfer to the income statement of asset items when the purchase<br />
price allocation was performed had a negative impact on profit attributable to noncontrolling<br />
interests amounting to approximately €3,665 thousand (€55,378<br />
thousand in 2011, of which €45,605 thousand due to impairment losses recognised<br />
on intangible assets as a result of impairment tests performed).<br />
334
OTHER INFORMATION<br />
1. Guarantees granted and commitments<br />
Transactions 31.12.<strong>2012</strong> 31.12.2011<br />
1) Guarantees granted of a financial nature 3,725,888 3,239,645<br />
a) Banks 1,657,403 242,523<br />
b) Customers 2,068,485 2,997,122<br />
2) Guarantees granted of a commercial nature 4,309,603 4,462,468<br />
a) Banks 191,694 133,237<br />
b) Customers 4,117,909 4,329,231<br />
3) Irrevocable commitments to pay funds 3,602,463 4,982,031<br />
a) Banks 69,681 253,441<br />
i) of certain use 69,473 253,344<br />
ii) of uncertain use 208 97<br />
b) Customers 3,532,782 4,728,590<br />
i) of certain use 196,757 318,599<br />
ii) of uncertain use 3,336,025 4,409,991<br />
4) Commitments underlying credit derivatives: protection sales - -<br />
5) Assets pledged to guarantee obligations to third parties - -<br />
6) Other commitments 4,011,628 4,408,578<br />
Total 15,649,582 17,092,722<br />
bella 4: 301000O|1 – NOTA<br />
2. Assets pledged to secure own liabilities and commitments<br />
Portfolios 31.12.<strong>2012</strong> 31.12.2011<br />
1. <strong>Financial</strong> assets held for trading 293,167 1,151,894<br />
2. <strong>Financial</strong> assets designated at fair value - -<br />
3. Available-for-sale financial assets 4,867,111 5,225,541<br />
4. Held-to-maturity investments 3,158,013 -<br />
5. Loans and advances to banks 50,068 1,138,914<br />
6. Loans and advances to customers 13,981,274 9,882,100<br />
7. Property, plant and equipment - -<br />
Total 22,349,633 17,398,449<br />
The table summarises assets recognised in the balance sheet pledged by the <strong>UBI</strong> Group to<br />
secure its liabilities.<br />
The amount shown in line item 6 “Loans and advances to customers" includes €13,953,702<br />
thousand relating to the mortgages transferred to the special purpose entities <strong>UBI</strong> Finance<br />
Srl and <strong>UBI</strong> Finance CB2 Srl as part of the programme to issue covered bonds as reported<br />
below:<br />
- <strong>UBI</strong> Finance Srl 11,207,995 9,646,931<br />
- <strong>UBI</strong> Finance CB2 Srl 2,745,707 -<br />
- Total 13,953,702 9,646,931<br />
335
The financial assets contained in the table relate to securities and loans pledged by the<br />
banks in the Group as reported in detail below:<br />
Portfolios<br />
Guarantees of liabilities or commitments<br />
<strong>Financial</strong> assets held for trading<br />
Repurchase agreements 293,167<br />
293,167<br />
Available-for-sale financial assets<br />
Bank of Italy advances 900,314<br />
Repurchase agreements 3,930,902<br />
Issue of bankers' drafts 1,380<br />
Interbank market collat. 6,902<br />
Other transactions 27,613<br />
4,867,111<br />
Held-to-maturity investments<br />
Repurchase agreements 3,158,013<br />
3,158,013<br />
Loans and advances to banks<br />
Bank of Italy advances 50,068<br />
50,068<br />
Loans to customers<br />
Mortgages 27,572<br />
Mortgages to back covered bonds 13,953,702<br />
13,981,274<br />
In addition to the assets reported above, securities acquired through reverse repurchase<br />
agreements were also pledged as guarantees as follows:<br />
To guarantee<br />
Nominal amount of securities<br />
Liabilities or commitments<br />
issued by third parties<br />
issued by group banks and<br />
companies<br />
Bank of Italy advances 7,366,822 9,050,000<br />
7,366,822 9,050,000<br />
The securities issued by Group companies are notes – senior tranches – issued by the<br />
special purpose entities for securitisations of the following originators:<br />
• <strong>UBI</strong> Leasing: €4,114 million nominal;<br />
• <strong>Banca</strong> Popolare di Ancona: €710 million nominal;<br />
• Banco di Brescia: €665 million nominal;<br />
336
• <strong>Banca</strong> Popolare Commercio e Industria: €576 million nominal;<br />
• <strong>UBI</strong> <strong>Banca</strong> (former <strong>Banca</strong> 24-7): €1,322 million nominal.<br />
The securities issued by the Bank consisted of fixed rate bonds backed by the government<br />
for a nominal amount of €6,000 million and other floating rate bonds for a nominal amount<br />
of €3,050 million.<br />
3. Information on operating leases<br />
No items of this type exist.<br />
4. Composition of investments for unit-linked and index-linked policies<br />
No items of this type exist.<br />
5. Management and intermediation on behalf of third parties<br />
Type of services<br />
Amounts<br />
1. Execution of orders on behalf of customers 149,660,022<br />
a) Purchases 74,291,039<br />
1. Settled 73,818,477<br />
2. Not settled 472,562<br />
b) Sales 75,368,983<br />
1. Settled 74,878,880<br />
2. Not settled 490,103<br />
2. Portfolio managements 29,276,424<br />
a) Individual 12,894,968<br />
b) Collective 16,381,456<br />
3. Custody and administration of securities 226,518,064<br />
a) Securities of third parties held on deposit: connected w ith depository bank activity (not including portfolio management) -<br />
1. Securities issued by companies included in the consolidation<br />
2. Other securities<br />
b) Other third party securities held on deposit (not including portfolio managements): other 120,668,687<br />
1. Securities issued by companies included in the consolidation<br />
2. Other securities 120,668,687<br />
c) Securities belonging to third parties, deposited w ith third parties 79,144,946<br />
d) Ow n securities deposited with third parties 26,704,431<br />
4. Other transactions 43,372,920<br />
337
Part C – Notes to the consolidated income<br />
statement<br />
SECTION 1 Interest – Items 10 and 20<br />
1.1 Interest income and similar: composition<br />
Items/Type<br />
Debt<br />
instruments<br />
Financing<br />
Other<br />
transactions<br />
<strong>2012</strong> 2011<br />
1. <strong>Financial</strong> assets held for trading 54,233 - 26 54,259 42,392<br />
2. <strong>Financial</strong> assets designated at fair value - - - - -<br />
3. Available-for-sale financial assets 454,581 - - 454,581 373,970<br />
4. Held-to-maturity investments 96,150 - - 96,150 -<br />
5. Loans and advances to banks 9,558 15,917 6 25,481 56,327<br />
6. Loans and advances to customers 1,458 3,290,591 785 3,292,834 3,572,985<br />
7. Hedging derivatives X X - - -<br />
8. Other assets X X 1,095 1,095 1,872<br />
Total 615,980 3,306,508 1,912 3,924,400 4,047,546<br />
Interest on impaired assets relates almost entirely to loans to customers and totalled<br />
€195,307 thousand.<br />
As already reported in Part A of the Notes to the financial statements, interest income from<br />
customers includes €67,653 thousand, relating to overdraft penalties recognised until the<br />
end of September. With effect from 1 st October <strong>2012</strong>, the overdrawn penalty was replaced by<br />
a fast credit processing fee (amounting to €21,622 thousand for <strong>2012</strong>), recognised within<br />
“Other operating income”, in compliance with the Bank of Italy “addendum letter” No.<br />
46586/13 of 15 th January 2013.<br />
As already reported, the amount for the “overdraft penalties” for the whole of 2011 was<br />
€100,937 thousand.<br />
1.2 Interest income and similar: hedging differentials<br />
The interest balance for hedging differentials to 31 st December <strong>2012</strong> was negative.<br />
Details are given in Table 1.5 later in this section.<br />
1.3 Interest and similar income: other information<br />
Items/Amounts <strong>2012</strong> 2011<br />
Interest income on financial assets held in foreign currency 57,755 44,063<br />
Interest income on finance lease transactions 229,794 300,126<br />
ble 4: 501030O|1 - NOTA<br />
338
1.4 Interest expense and similar: composition<br />
Items/Type Borrow ings Securities<br />
Other<br />
transactions<br />
'<strong>2012</strong> '2011<br />
1. Due to central banks (97,721) - - (97,721) (21,520)<br />
2. Due to banks (28,841) X (194) (29,035) (62,336)<br />
3. Due to customers (483,178) X (112) (483,290) (416,507)<br />
4. Debt securities issued X (1,302,558) - (1,302,558) (1,325,414)<br />
5. <strong>Financial</strong> liabilities held for trading (38,728) - - (38,728) (12,574)<br />
6. <strong>Financial</strong> liabilities designated at fair value - - - - -<br />
7. Other liabilities and provisions X X (595) (595) (728)<br />
8. Hedging derivatives X X (40,789) (40,789) (86,778)<br />
Total (648,468) (1,302,558) (41,690) (1,992,716) (1,925,857)<br />
e 5: 502000O|1 - NOTA3_ALTRE<br />
1.5 Interest expense and similar: hedging differentials<br />
able 6: 502010O|1 - NOTA<br />
Items <strong>2012</strong> 2011<br />
A. Positive differentials on hedging transactions 955,791 1,086,381<br />
B. Negative differentials on hedging transactions (996,580) (1,173,159)<br />
C. Balance (A-B) (40,789) (86,778)<br />
1.6 Interest expense and similar: other information<br />
Items/Amounts <strong>2012</strong> 2011<br />
Interest expense on liabilities held in foreign currency (28,731) (30,360)<br />
Interest expense on finance lease transactions (653) (759)<br />
Table 7: 502020O|1 - NOTA<br />
339
SECTION 2 Commissions – Items 40 and 50<br />
2.1 Fee and commission income: composition<br />
Type of services/Segments <strong>2012</strong> 2011<br />
a) guarantees granted 50,078 49,793<br />
b) credit derivatives - -<br />
c) management, trading and advisory services: 636,406 622,140<br />
1. trading in financial instruments 27,165 38,410<br />
2. foreign exchange trading 7,400 11,868<br />
3. portfolio management 251,523 277,518<br />
3.1. individual 67,994 72,042<br />
3.2. collective 183,529 205,476<br />
4. custody and administration of securities 12,293 13,702<br />
5. depository banking - -<br />
6. placement of securities 133,614 74,538<br />
7. receipt and transmission of orders 49,521 40,852<br />
8. advisory activities 6,398 4,855<br />
8.1 on investments 6,398 4,855<br />
8.2 on financial structure - -<br />
9. distribution of third party services 148,492 160,397<br />
9.1. portfolio management 37 42<br />
9.1.1. individual 37 42<br />
9.1.2. collective - -<br />
9.2. insurance products 106,386 119,723<br />
9.3. other products 42,069 40,632<br />
d) collection and payment services 154,047 150,128<br />
e) servicer activities for securitisation transactions - -<br />
f) services for factoring transactions 26,240 26,486<br />
g) tax collection and payment services - -<br />
h) management of multilateral trading systems - -<br />
i) current account administration 213,682 216,501<br />
j) other services 288,969 286,779<br />
Total 1,369,422 1,351,827<br />
The sub item j) “Other services” for <strong>2012</strong> includes “Other commission income” consisting of:<br />
- Loans to customers €211,251 thousand<br />
- foreign transactions €10,558 thousand<br />
During the year Centrobanca performed transactions which led to the recognition within<br />
commission income of “day one profit” amounting to €700 thousand (these commissions<br />
totalled €141 thousand in 2011). These are transactions for which a difference between the<br />
transaction price and the value of the instrument obtained using internal valuation<br />
techniques arises on initial recognition.<br />
Compared to the previous year, commissions for the placement of third party securities<br />
increased by approximately €59 million, the result above all of the component related to the<br />
subscription of the new <strong>UBI</strong> Pramerica Sicav’s (Cedola Certa, Protezione Crescita, Focus<br />
Italia, Mercati Emergenti and Global Dynamic Allocation).<br />
340
2.2 Commission expense: composition<br />
Services/Segments <strong>2012</strong> 2011<br />
a) guarantees received (44,171) (807)<br />
b) credit derivatives - -<br />
c) management and trading services: (78,322) (82,257)<br />
1. trading in financial instruments (14,403) (18,268)<br />
2. foreign exchange trading (10) (38)<br />
3. portfolio management (8,526) (6,236)<br />
3.1. own - -<br />
3.2. on behalf of third parties (8,526) (6,236)<br />
4. custody and administration of securities (7,502) (6,979)<br />
5. placement of financial instruments (4,844) (4,416)<br />
6. financial instruments, products and services distributed through indirect netw orks (43,037) (46,320)<br />
d) collection and payment services (38,946) (44,141)<br />
e) other services (26,177) (32,688)<br />
Total (187,616) (159,893)<br />
Table 8: 505000O|1 - NOTA1_BANCHE<br />
As already reported in Part A of the Notes to the financial statements, fee and commission<br />
expense for guarantees received includes €42.8 million paid by the Parent for the issue of<br />
guarantees by the government on debt issued and used for refinancing operations with the<br />
European Central Bank.<br />
Table 9: 505000O|1 - NOTA3_ALTRE<br />
SECTION 3 Dividends and similar income – Item 70<br />
3.1 Dividend and similar income: composition<br />
Items/Income<br />
Dividends<br />
<strong>2012</strong> 2011<br />
Income from<br />
OICR units<br />
(c o lle c tive in ve stme nt<br />
ins trume nts)<br />
Dividends<br />
Income from<br />
OICR units<br />
(c o lle c tive in ve stme nt<br />
ins trume nts)<br />
A. <strong>Financial</strong> assets held for trading 38 - 1,037 18<br />
B. Available-for-sale financial assets 11,287 3,224 16,079 2,863<br />
C. <strong>Financial</strong> assets at fair value 1,042 - - -<br />
D. Equity investments - X - X<br />
Total 12,367 3,224 17,116 2,881<br />
Dividends recognised within “available-for-sale financial assets”, included those received on<br />
the Intesa Sanpaolo Spa shares, which amounted to approximately €9.3 million, while<br />
dividends on “financial assets designated at fair value” relate to Centrobanca merchant<br />
banking equity investments, which have been transferred this year from “financial assets<br />
held for trading” to “financial assets designated at fair value”.<br />
Table 10: 507000O|1 - NOTA<br />
341
SECTION 4 Net trading income (loss) – Item 80<br />
4.1 Net trading income (loss): composition<br />
Transactions/Components of income<br />
Gains<br />
(A)<br />
Income from<br />
trading<br />
(B)<br />
Losses<br />
(C)<br />
Losses from<br />
trading<br />
(D)<br />
Net income<br />
[(A+B) - (C+D)]<br />
1. <strong>Financial</strong> assets held for trading 112,875 186,923 (3,067) (82,043) 214,688<br />
1.1 Debt instruments 21,928 72,024 (207) (8,763) 84,982<br />
1.2 Equity instruments 1,675 799 (2,560) (325) (411)<br />
1.3 Units in O.I.C.R. (collective investment instruments) 72 133 (300) (4) (99)<br />
1.4 Financing - - - - -<br />
1.5 Other 89,200 113,967 - (72,951) 130,216<br />
2. <strong>Financial</strong> liabilities held for trading 9,530 16 - (10) 9,536<br />
2.1 Debt instruments 9,530 - - - 9,530<br />
2.2 Payables - - - - -<br />
2.3 Other - 16 - (10) 6<br />
3. Other financial assets and liabilities: exchange rate<br />
X X X X 7,308<br />
differences<br />
4. Derivative instruments 328,582 1,620,729 (317,630) (1,651,874) (139,729)<br />
4.1 <strong>Financial</strong> derivatives 328,582 1,620,729 (317,630) (1,651,874) (139,729)<br />
- on debt instruments and interest rates 291,999 1,608,832 (290,011) (1,637,661) (26,841)<br />
- on equity instruments and share indices 203 5,558 (54) (1,250) 4,457<br />
- on currencies and gold X X X X (119,536)<br />
- other 36,380 6,339 (27,565) (12,963) 2,191<br />
4.2 Credit derivatives - - - - -<br />
Total 450,987 1,807,668 (320,697) (1,733,927) 91,803<br />
The amount shown in line 1.5 “Other” relates principally to the exchange rate differences for<br />
certificates of deposit denominated in yen and it is linked to the amount shown in line 4.1<br />
“<strong>Financial</strong> derivatives on currencies and gold”.<br />
SECTION 5 Net hedging income (loss) – Item 90<br />
5.1 Net hedging income (loss): composition<br />
Income components/Amounts <strong>2012</strong> 2011<br />
A. Relative income<br />
A.1 Fair value hedge derivatives 490,397 873,414<br />
A.2 Hedged financial assets (fair value) 427,730 800,569<br />
A.3 Hedged financial liabilities (fair value) 62,995 116,520<br />
A.4 Cash flow hedge financial derivatives - -<br />
A.5 Assets and liabilities in foreign currency - 1,152<br />
Total income from hedging activity (A) 981,122 1,791,655<br />
B. Relative expense<br />
B.1 Hedging derivatives designated at fair value (469,600) (935,417)<br />
B.2 Hedged financial assets (fair value) (26,461) (141,837)<br />
B.3 Hedged financial liabilities (fair value) (483,989) (705,430)<br />
B.4 Cash flow hedge financial derivatives - (33)<br />
B.5 Assets and liabilities in foreign currency - -<br />
Total expense from hedging activity (B) (980,050) (1,782,717)<br />
C. Net hedging income (A-B) 1,072 8,938<br />
342
SECTION 6 Income (loss) from disposals/repurchases – Item 100<br />
6.1 Income (loss) from disposals/repurchases: composition<br />
<strong>2012</strong> 2011<br />
Items/Income components<br />
Profits Losses Net result Profits Losses Net result<br />
<strong>Financial</strong> assets<br />
1. Loans and advances to banks 16 - 16 - - -<br />
2. Loans and advances to customers 9,337 (11,484) (2,147) 7,848 (5,384) 2,464<br />
3. Available-for-sale financial assets 145,791 (4,235) 141,556 12,372 (443) 11,929<br />
3.1 Debt instruments 128,421 (3,825) 124,596 1,407 (380) 1,027<br />
3.2 Equity instruments 16,686 (406) 16,280 8,467 (63) 8,404<br />
3.3 Units in O.I.C.R (collective investment instruments) 684 (4) 680 2,498 - 2,498<br />
3.4 Financing - - - - - -<br />
4. Held-to-maturity investments - - - - - -<br />
Total assets 155,144 (15,719) 139,425 20,220 (5,827) 14,393<br />
<strong>Financial</strong> liabilities<br />
1. Due to banks - - - - - -<br />
2. Due to customers - - - - - -<br />
3. Debt securities issued 46,964 (22,838) 24,126 21,198 (9,062) 12,136<br />
Total liabilities 46,964 (22,838) 24,126 21,198 (9,062) 12,136<br />
As concerns equity instruments, the most significant transaction was the disposal of the<br />
interest held in Intesa Sanpaolo SpA, which generated a profit of approximately €14 million.<br />
With regard to financial assets consisting of debt instruments, the profits were mainly<br />
attributable to disposals of government securities and amounted to €124 million.<br />
The profit shown in the table above on financial liabilities is attributable to the sale and<br />
redemption of own issue bonds, of which €20.7 million consisted of the gain on the public<br />
tender offer to purchase preference shares.<br />
SECTION 7 Net income (loss) on financial assets and liabilities<br />
designated at fair value – Item 110<br />
7.1 Net change in financial assets/liabilities designated at fair value: composition<br />
Transactions/Components of income<br />
Gains<br />
(A)<br />
Income from<br />
trading<br />
(B)<br />
Losses<br />
(C)<br />
Losses from<br />
trading<br />
(D)<br />
Net income<br />
[(A+B) - (C+D)]<br />
1. <strong>Financial</strong> assets 9,486 2,781 (11,290) (125) 852<br />
1.1 Debt instruments - - - - -<br />
1.2 Equity instruments 5,022 90 (5,463) - (351)<br />
1.3 Units in O.I.C.R. (collective investment instruments) 4,464 2,691 (5,827) (125) 1,203<br />
1.4 Financing - - - - -<br />
2. <strong>Financial</strong> liabilities held for trading - - - - -<br />
2.1 Debt instruments - - - - -<br />
2.2 Due to banks - - - - -<br />
2.3 Due to customers - - - - -<br />
3. Other financial assets and liabilities: exchange rate<br />
X X X X -<br />
differences<br />
4. Credit and financial derivatives - - - - -<br />
Total 9,486 2,781 (11,290) (125) 852<br />
From <strong>2012</strong>, the item has incorporated the effects on the income statement of the securities<br />
transferred by Centrobanca into the portfolio of financial assets designated at fair value,<br />
reported in greater detail in the corresponding section on the balance sheet.<br />
The following table gives the changes that occurred in the hedge fund portfolio in <strong>2012</strong>:<br />
343
de s c riptio n<br />
o pe ning<br />
ba la nc e s<br />
purc ha s e s<br />
s a le s /<br />
re de mptio ns<br />
pro fits /<br />
lo s s e s<br />
g a ins /lo s s e s<br />
e xc ha ng e<br />
ra te e ffe c ts<br />
c lo s ing<br />
ba la nc e<br />
Madison Funds 10,777 - - - (5,037) (208) 5,532<br />
Corinthian Funds 951 - (1,880) 1,351 (422) - -<br />
Tages Funds 104,846 20,000 (19,880) 824 3,874 - 109,664<br />
Other hedge funds 9,600 - (1,937) 391 221 (90) 8,185<br />
To ta l 12 6 ,17 4 2 0 ,0 0 0 (2 3 ,6 9 7 ) 2 ,5 6 6 (1,3 6 4 ) (2 9 8 ) 12 3 ,3 8 1<br />
344
SECTION 8 Net impairment losses on loans – Item 130<br />
8.1 Net impairment losses on loans: composition<br />
Im pa irm e nt lo s s e s<br />
R e v e rs a ls o f im pa irm e nt lo s s e s<br />
Tra n s a c tio ns / C o m p o ne nts o f<br />
inc o m e<br />
Write -o ffs<br />
S p e c ific<br />
Othe r<br />
P o rtfo lio<br />
Of inte re s t<br />
S p e c ific<br />
Othe r<br />
re v e rs a ls<br />
Of inte re s t<br />
P o rtfo lio<br />
Othe r<br />
re v e rs a ls<br />
2 0 12 2 0 11<br />
A . Lo a ns a nd a dv a n c e s to ba nks - - (6 8 ) - 2 - - (6 6 ) (117 )<br />
- Financing - - (68) - 2 - - (66) (117)<br />
- Debt ins truments - - - - - - - - -<br />
B . Lo a ns a nd a dv a n c e s to c u s to m e rs (13 0 ,4 3 8 ) (9 8 1,6 6 4 ) (3 5 ,8 9 4 ) 5 0 ,6 2 7 17 8 ,8 4 7 - 7 1,3 7 4 (8 4 7 ,14 8 ) (6 0 6 ,9 6 1)<br />
Deterio rated lo ans purchas ed - - - - - - - - -<br />
- Financing - - X - - - X - -<br />
- Debt ins truments - - X - - - X - -<br />
Other lo ans and receivables (130,438) (981,664) (35,894) 50,627 178,847 - 71,374 (847,148) (606,961)<br />
- Financing (130,438) (981,587) (35,894) 50,627 178,847 - 71,374 (847,071) (606,884)<br />
- Debt ins truments - (77) - - - - - (77) (77)<br />
C . To ta l (13 0 ,4 3 8 ) (9 8 1,6 6 4 ) (3 5 ,9 6 2 ) 5 0 ,6 2 7 17 8 ,8 4 9 - 7 1,3 7 4 (8 4 7 ,2 14 ) (6 0 7 ,0 7 8 )<br />
Table 11: 514000O|1 - NOTA1_BANCHE<br />
Table 12: 514000O|1 - NOTA3_ALTRE<br />
345
8.2 Net impairment losses on available-for-sale financial assets: composition<br />
Tra ns a c tio ns / C o m po ne nts o f<br />
inc o m e<br />
Im pa irm e nt lo s s e s<br />
R e v e rs a ls o f im pa irm e nt lo s s e s<br />
S pe c ific<br />
S pe c ific<br />
Write -o ffs Othe r o f inte re s t o the r re v e rs a ls<br />
2 0 12 2 0 11<br />
A. De bt ins truments - (288) - - (288) (373)<br />
B. Equity ins truments - (37,117) X X (37,117) (119,733)<br />
C. Units in O.I.C.R.<br />
(co llec tive inves tment ins truments ) - (18,740) X - (18,740) (8,076)<br />
D. Lo ans to ba nks - - - - - -<br />
E. Lo ans to cus to mers - - - - - -<br />
To ta l - (5 6 ,14 5 ) - - (5 6 ,14 5 ) (12 8 ,18 2 )<br />
The main impairment losses on equity instruments related to <strong>Banca</strong> Intesa Sanpaolo Spa, for which the valuation on 31 st December <strong>2012</strong><br />
resulted in recognition of impairment of €31.8 million (€112.5 million as at 31/12/2011). An impairment loss was also recognised on the<br />
investment in A2A Spa of €3.5 million (€3.3 million as at 31/12/2011).<br />
Impairment losses on units held in OICRs (collective investment instruments) included those relating to the following: the Centrobanca<br />
Sviluppo Impresa fund amounting to €12.5 million, the Polis fund (Portafoglio F. immobiliare C.) amounting to €4.4 million, the ITAL. Inv. -<br />
Port fund amounting to €0.5 million and the GGP Greenfield A1 and A3 fund amounting to €0.8 million. These impairment losses, the result<br />
of the adoption of a policy for the impairment testing of available-for-sale financial assets reported in part A.2 of the notes to the consolidated<br />
financial statements, were recognised in relation to the continued lower value of the units with respect to the historical cost of purchase.<br />
8.3 Net impairment losses on held-to-maturity investments: composition<br />
This type of item is not present for the <strong>UBI</strong> Group.<br />
346
8.4 Net impairment losses on other financial transactions: composition<br />
Tra ns a c tio ns /<br />
C o m po ne nts o f inc o m e<br />
Im pa irm e nt lo s s e s<br />
R e v e rs a ls o f im pa irm e nt lo s s e s<br />
S pe c ific S pe c ific<br />
po rtfo lio<br />
2 0 12 2 0 11<br />
po rtfo lio<br />
Write -o ffs Othe r o f inte re s t o the r re v e rs a ls o f inte re s t o the r re v e rs a ls<br />
A. Guarantees granted (150) (12,752) (3,179) - 12,268 - 4,367 554 (6,256)<br />
B. Credit derivatives - - - - - - - - -<br />
C. Co mmitments to pay funds - - (476) - - - 1,352 876 (366)<br />
D. Other trans actio ns - (97) - - 2 - - (95) (339)<br />
To ta l (15 0 ) (12 ,8 4 9 ) (3 ,6 5 5 ) - 12 ,2 7 0 - 5 ,7 19 1,3 3 5 (6 ,9 6 1)<br />
347
SECTION 9 Net premiums – Item 150<br />
9.1 Net premiums: composition<br />
This item no longer exists in the <strong>UBI</strong> <strong>Banca</strong> Group, because <strong>UBI</strong> Assicurazioni has been<br />
excluded from the consolidation since 1 st January 2010.<br />
13: 516000O|1 - NOTA<br />
SECTION 10 Other income/expense of insurance operations – Item 160<br />
10.1 Balance of other income/expense of insurance operations: composition<br />
This item does not exist in the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
10.2 Composition of the sub-item “Net change in technical reserves”<br />
This item does not exist in the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
10.3 Composition of the sub-item “Claims paid during the year”<br />
This item does not exist in the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
14: 517020O|1 - NOTA<br />
SECTION 11 Administrative expenses – Item 180<br />
11.1 Staff costs: composition<br />
Type of expense/Sectors <strong>2012</strong> 2011<br />
1) Employees (1,505,574) (1,425,623)<br />
a) Wages and salaries (951,619) (983,736)<br />
b) Social security charges (250,702) (267,619)<br />
c) Post-employment benefits (50,879) (60,928)<br />
d) Pension expense (1,152) (74)<br />
e) Provision for post-employment benefits (10,196) (9,078)<br />
f) Provision for pension and similar: (3,042) (2,930)<br />
- defined contribution (113) (139)<br />
- defined benefits (2,929) (2,930)<br />
g) Payments to external supplementary pension plans: (43,142) (50,431)<br />
- defined contribution (42,681) (50,154)<br />
- defined benefits (461) (277)<br />
h) Expenses resulting from share based payments - -<br />
i) Other employee benefits (194,842) (50,688)<br />
2) Other personnel in service (2,474) (6,504)<br />
3) Directors and statutory auditors (17,705) (19,001)<br />
4) Expenses for retired personnel - 27,932<br />
Total (1,525,753) (1,423,196)<br />
The amount recognised within line item 4 as at 31 st December 2011 relates to the release of<br />
amounts recognised in prior years due to actuarial recalculations of post retirement<br />
benefits, now no longer considered due.<br />
348
11.2 Average number of employees by category<br />
<strong>2012</strong> 2011<br />
EM PLOYEES 18,360 18,645<br />
a) senior managers 452 468<br />
b) middle managers 7,517 7,482<br />
c) remaining employees 10,391 10,695<br />
OTHER PERSONNEL 374 476<br />
“Other personnel” also includes the directors and statutory auditors of Group member<br />
companies. 15: 519010O|1 - NOTA<br />
11.3 Defined benefit company pension funds: total expenses<br />
See section 12.3 “Defined benefit company pension funds” in the balance sheet liabilities<br />
section.<br />
11.4 Other benefits for employees<br />
The item “Other benefits for employees” consists mainly of expenses relating to the leaving<br />
incentive plan amounting to €152 million, expenses for luncheon vouchers amounting to<br />
€19.4 million and insurance expenses of €17.0 million.<br />
Details of redundancy plans are given in the “Management <strong>Report</strong>” in the section “Human<br />
resources”, which may be consulted.<br />
11.5 Other administrative expenses: composition<br />
Table 16: 519000bO|1 - NOTA<br />
<strong>2012</strong> 2011<br />
A. Other administrative expenses (644,748) (666,346)<br />
Rent payable (67,702) (72,060)<br />
Professional and advisory services (92,216) (90,225)<br />
Rentals hardw are, softw are and other assets (41,073) (36,211)<br />
Maintenance of hardware, software and other assets (37,765) (40,483)<br />
Tenancy of premises (55,867) (54,755)<br />
Property maintenance (25,971) (27,245)<br />
Counting, transport and management of valuables (14,529) (16,004)<br />
Membership fees (9,338) (9,468)<br />
Information services and land registry searches (10,660) (12,612)<br />
Books and periodicals (1,659) (1,877)<br />
Postal (23,866) (26,576)<br />
Insurance premiums (43,083) (44,276)<br />
Advertising (16,489) (26,007)<br />
Entertainment expenses (1,735) (2,017)<br />
Telephone and data transmission expenses (54,728) (58,531)<br />
Services in outsourcing (50,699) (46,439)<br />
Travel expenses (23,330) (23,476)<br />
Credit recovery expenses (43,872) (44,000)<br />
Forms, stationery and consumables (8,510) (11,137)<br />
Transport and removals (7,654) (7,354)<br />
Security (8,450) (9,736)<br />
<strong>UBI</strong> Group merger expenses - -<br />
Other expenses (5,552) (5,857)<br />
B. Indirect taxes (213,522) (214,707)<br />
Indirect taxes and duties (31,594) (37,498)<br />
Stamp duty (142,951) (140,749)<br />
Municipal property tax (16,915) (8,806)<br />
Other taxes (22,062) (27,654)<br />
Total (858,270) (881,053)<br />
349
SECTION 12 Net provisions for risks and charges – Item 190<br />
12.1 Net provisions for risks and charges: composition<br />
Provisions<br />
Releases<br />
Net provisions<br />
in <strong>2012</strong><br />
Net provisions<br />
in 2011<br />
Additions to and uses of revocation provisions (11,440) 1,634 (9,806) (2,248)<br />
Additions to and uses of staff cost provisions (271) 12 (259) (450)<br />
Additions to and uses of provisions for bonds in<br />
default<br />
(147) 218 71 (286)<br />
Additions to and uses of litigation provisions (29,546) 18,261 (11,285) (10,425)<br />
Other additions to and uses of provisions for risks<br />
and charges<br />
(35,306) 7,373 (27,933) (18,186)<br />
Total (76,710) 27,498 (49,212) (31,595)<br />
Table 17: 520000O|1 - NOTA<br />
Table 12.2 “Provisions for risks and charges – annual changes” in the balance sheet<br />
liabilities section may be consulted for provisions and uses of provisions for risks and<br />
charges<br />
SECTION 13 Net impairment losses on property, plant and equipment –<br />
Item 200<br />
13.1 Net impairment losses on property, plant and equipment: composition<br />
Assets/Components of income<br />
Depreciation<br />
(a)<br />
Impairment<br />
losses<br />
(b)<br />
Reversals of<br />
impairment<br />
losses (c)<br />
Net result<br />
(a+b-c)<br />
A. Property, plant and equipment<br />
A.1 Ow ned (100,859) (922) - (101,781)<br />
- for operational use (96,608) (850) - (97,458)<br />
- for investment (4,251) (72) - (4,323)<br />
A.2 Acquired through finance lease (762) - - (762)<br />
- for operational use (755) - - (755)<br />
- for investment (7) - - (7)<br />
Total (101,621) (922) - (102,543)<br />
: 521000O|1 - NOTA3_ALT<br />
350
SECTION 14 Net impairment losses on intangible assets – Item 210<br />
14.1 Net impairment losses on intangible assets: composition<br />
Assets/Components of income<br />
Amortisation<br />
(a)<br />
Impairment<br />
losses<br />
(b)<br />
Reversals of<br />
impairment<br />
losses (c)<br />
Net result<br />
(a+b-c)<br />
A. Intangible assets<br />
A.1 Ow ned (79,589) (1,528) - (81,117)<br />
- Internally generated by the company (76) - - (76)<br />
- other (79,513) (1,528) - (81,041)<br />
A.2 Acquired through finance lease - - - -<br />
Total (79,589) (1,528) - (81,117)<br />
Details are given in the footnote to Table 13.2 in the balance sheet assets section, which<br />
may be consulted.<br />
SECTION 15 Other net operating income/expense – Item 220<br />
15.1 Other operating expense: composition<br />
<strong>2012</strong> 2011<br />
Other operating expenses (73,402) (77,219)<br />
Fines and charges for late tax payments (51) (219)<br />
Depreciation of improvements to third party leased assets (7,484) (7,443)<br />
Ordinary maintenance of investment properties - -<br />
Other expenses and prior year expense (65,867) (69,557)<br />
- of which costs relating to finance lease contracts (7,145)<br />
Table 18: 523000O|1 - NOTA1<br />
15.2 Other operating income: composition<br />
<strong>2012</strong> 2011<br />
Other operating income 317,917 320,284<br />
Charges to third parties for expenses on deposit and current accounts 14,158 15,458<br />
Recovery of insurance premiums 28,140 31,644<br />
Other income for property management 1,508 1,633<br />
Recovery of taxes 156,473 163,065<br />
Rent income 5,986 6,525<br />
Other income, expense recoveries and prior year income 111,652 101,959<br />
- of which recoveries on lease contracts 12,814 14,181<br />
Table 19: 523000O|1 - NOTA2<br />
From 1 st October <strong>2012</strong>, “Recoveries of other expenses” include “Fast credit processing fees”,<br />
which came to €21,622 thousand.<br />
351
SECTION 16 Profits (losses) of equity investments – Item 240<br />
16.1 Profits (losses) of equity investments: composition<br />
Income components/sectors 31.12.<strong>2012</strong> 31.12.2011<br />
1) Jointly controlled entities<br />
A. Income - 301<br />
1. Revaluations - -<br />
2. Profits on sale - 301<br />
3. Reversals of impairment losses - -<br />
4. Other income - -<br />
B. Expense - -<br />
1. Write-downs - -<br />
2. Impairment losses - -<br />
3. Losses on sale - -<br />
4. Other expense - -<br />
Net result - 301<br />
2) Companies subject to significant influence<br />
A. Income 55,472 14,143<br />
1. Revaluations - -<br />
2. Profits on sale 8,273 -<br />
3. Reversals of impairment losses - -<br />
4. Other income 47,199 14,143<br />
B. Expense (2,822) (4,196)<br />
1. Write-downs - -<br />
2. Impairment losses due to deterioration - -<br />
3. Losses on sale - -<br />
4. Other expense (2,822) (4,196)<br />
Net result 52,650 9,947<br />
Total 52,650 10,248<br />
Table 20: 525000O|1 - NOTA<br />
The amount in line item A.2 of section 2 “Profits on sale” relates to the gain on the total<br />
disposal of Arca S.G.R. S.p.A. carried out in September <strong>2012</strong>.<br />
The amounts in lines A.4 “Other income” and B.4 “Other expense” of section 2 represent the<br />
profits and losses respectively of equity-accounted investees. More specifically, item B.4<br />
includes €2,773 thousand of losses of equity accounted companies and €49 thousand for<br />
the expense due for the liquidation of the company Sider Factor S.p.a.<br />
Details are given in the note at the foot of Table 10.3 “Equity investments: annual changes”<br />
in the balance sheet section.<br />
352
SECTION 17 Net result of changes in the fair value of property, plant<br />
and equipment and intangible assets – Item 250<br />
17.1 Net result of changes in the fair value (or at revalued amount) of property,<br />
plant and equipment and intangible assets<br />
No “Net result of changes in the fair value of property, plant and equipment and intangible<br />
assets” was recognised.<br />
SECTION 18 Net impairment losses on goodwill – item 260<br />
18.1 Net impairment losses on goodwill: composition<br />
No net impairment losses on goodwill have been recognised. The impairment test performed<br />
as at 31 st December 2011 resulted in recognition of impairment losses of €1,873,849<br />
thousand.<br />
SECTION 19 Profits (losses) on disposal of investments – Item 270<br />
19.1 Profits (losses) on disposal of investments: composition<br />
Income components/sectors 31.12.<strong>2012</strong> 31.12.2011<br />
A. Properties 711 6,793<br />
- Profits on sale 711 6,915<br />
- Losses on sale - (122)<br />
B. Other assets 5,779 25<br />
- Profit on sale 5,907 120<br />
- losses on sale (128) (95)<br />
Net result 6,490 6,818<br />
Profits on the sale of “Other assets” includes the gain on the total disposal of the interest<br />
held in <strong>UBI</strong> Insurance Broker Srl, performed in December <strong>2012</strong>, of approximately €5.8<br />
million.<br />
353
SECTION 20 Taxes on profit for the year from continuing operations –<br />
Item 290<br />
20.1 Taxes on profit from continuing operations for the year: composition<br />
Income components/sectors <strong>2012</strong> 2011<br />
1. Current taxes (-) (290,521) (702,119)<br />
2. Change in current taxes of prior years (+/-) 75,061 3,119<br />
3. Reduction in current taxes for the year (+) - -<br />
3.a Reduction in current taxes for the year for tax credits pursuant to Law 214/2011 (+) 274,912 -<br />
4. Change in deferred tax assets (+/-) (101,765) 927,399<br />
5. Change in deferred tax liabilities (+/-) (37,116) 43,592<br />
6. Taxes for the year (-) (-1+/-2+3+/-4+/-5) (79,429) 271,991<br />
The reduction in current taxes, by €274,912 thousand, is shown to highlight the<br />
transformation of deferred tax assets resulting from the losses incurred by the Parent, <strong>UBI</strong><br />
Leasing S.p.A and <strong>UBI</strong> Private S.p.A. in 2011 into tax credits, as requested by the<br />
“addendum” letter of 7 th August <strong>2012</strong> issued by the Bank of Italy. This reduction was fully<br />
offset by movements in tax assets (with the balancing entry in the income statement)<br />
because the transformation of deferred tax assets into tax credits had no impact on the<br />
income statement, in compliance with the instructions in the addendum letter cited and in<br />
Document No. 5 of 15 th May <strong>2012</strong>, issued as a result of co-ordination between the Bank of<br />
Italy, Consob (Italian securities market authority) and Isvap (Italian insurance authority).<br />
354
20.2 Reconciliation between theoretical taxation and actual taxation recorded in<br />
the accounts<br />
IRES (CORPORATE INCOM E TAX)<br />
Taxable<br />
income<br />
IRES %<br />
Theoretical IRES payable 333,362 (91,675) 27.50%<br />
Permanent increases<br />
- Non deductible interest expense 89,872 (24,715) 7.41%<br />
- Taxes on dividends of <strong>UBI</strong> subsidiaries - (15,201) 4.56%<br />
- Other minor impacts 26,785 (7,366) 2.21%<br />
Permanent decreases<br />
- Valuation of equity-accounted investees (44,426) 12,217 -3.66%<br />
- deduction of IRAP (local production tax) relating to staff costs (49,440) 13,596 -4.08%<br />
- Allow ance for Corporate Equity (31,470) 8,654 -2.60%<br />
- 10% IRAP deduction (9,562) 2,630 -0.79%<br />
Effective IRES payable 315,121 (101,860) 30.56%<br />
IRAP (LOCAL PRODUCTION TAX)<br />
taxable<br />
income<br />
IRAP %<br />
Theoretical IRAP payable 333,362 (18,568) 5.57%<br />
Permanent increases<br />
- Staff costs + administrative expenses not deductible for IRAP purposes 1,035,801 (57,694) 17.31%<br />
- Net impairment losses on loans not deductible for IRAP purposes 847,214 (47,190) 14.16%<br />
- Non deductible interest expense 108,329 (6,034) 1.81%<br />
- Provisions for risks and charges not deductible for IRAP purposes 49,212 (2,741) 0.82%<br />
- Impairment of tangible and intangible assets not deductible for IRAP purposes 18,892 (1,052) 0.32%<br />
Permanent decreases<br />
- Impairment losses on loans in prior years for disposal (90,023) 5,014 -1.50%<br />
- Tax amortisation of <strong>UBI</strong> <strong>Banca</strong> goodw ill (56,906) 3,170 -0.95%<br />
- Valuation of equity-accounted investees (44,426) 2,475 -0.74%<br />
- Dividends (7,796) 434 -0.13%<br />
Effective IRAP payable 2,193,659 (122,186) 36.65%<br />
Total effective IRES and IRAP tax expense<br />
333,362 (224,046) 67.21%<br />
355
SECTION 21 Profit (loss) after tax from discontinued operations – Item<br />
310<br />
21.1 Profit (loss) after tax from discontinued operations: composition<br />
Income components/sectors <strong>2012</strong> 2011<br />
Asset/liability group<br />
1. Income - -<br />
2. Expense - -<br />
3. Results of change in fair value of assets and associated liabilities - -<br />
4. Profit (loss) on sale - 256<br />
5. Taxes and duties - (8)<br />
Profit - 248<br />
Table 21: 532000O|1 - NOTA<br />
21.2 Details of taxes on income in relation to discontinued operations<br />
<strong>2012</strong> 2011<br />
1. Current taxation (-) - (8)<br />
2. Change in deferred tax assets (+/-) - -<br />
3. Change in deferred tax liabilities (-/+) - -<br />
4. Taxes on income for the year (-1+/-2+/-3) - (8)<br />
able 22: 530010O|1 - NOTA<br />
SECTION 22 Profit (loss) for the year attributable to non-controlling<br />
interests – Item 330<br />
22.1 Details of the item 330 “Profit for the year attributable to non-controlling<br />
interests”<br />
Profit attributable to non-controlling interests, inclusive of the effects of consolidation<br />
entries, totalled €20,771 thousand and was composed as follows:<br />
<strong>2012</strong> 2011<br />
<strong>UBI</strong> Pramerica 13,453 -<br />
<strong>Banca</strong> Popolare Commercio e Industria Spa 5,780 5,354<br />
<strong>Banca</strong> Carime Spa - 3,165<br />
<strong>Banca</strong> Popolare di Ancona Spa - 2,117<br />
Other companies 1,538 899<br />
Total 20,771 11,535<br />
356
22.2 Details of the item 330 “Loss for the year attributable to non-controlling<br />
interests”<br />
Losses attributable to non-controlling interests, inclusive of the effects of consolidation<br />
entries, totalled €11,813 thousand and were composed as follows:<br />
<strong>2012</strong> 2011<br />
<strong>Banca</strong> Regionale Europea S.p.A. (9,760) (24,442)<br />
<strong>UBI</strong> Leasing Spa (868) (826)<br />
<strong>Banca</strong> di Valle Camonica Spa (232) (4,202)<br />
<strong>UBI</strong> Pramerica S.G.R. S.p.A. - (2,365)<br />
Other companies (953) (303)<br />
Total (11,813) (32,138)<br />
SECTION 23 Other information<br />
No situations exist which require further information.<br />
SECTION 24 Earnings per share<br />
Introduction<br />
With the adoption of international accounting standards, all listed companies, or companies<br />
for which listing is in progress, which are required to prepare separate company and/or<br />
consolidated financial statements in compliance with IFRS (Legislative Decree No. 38/2005),<br />
must report the calculation of their earnings per share (EPS) in their financial statements in<br />
accordance with IAS 33.<br />
More specifically the standard requires both basic earnings per share and diluted earnings<br />
per share to be reported:<br />
(i) basic EPS is calculated by dividing the profit attributable to the ordinary equity<br />
holders of the Parent (numerator) by the weighted average number of ordinary<br />
outstanding shares (denominator) during the year;<br />
(ii) diluted EPS is calculated by taking into account the dilutive effect of potential<br />
ordinary shares, i.e. financial instruments and/or contracts which assign rights<br />
to the holders to acquire ordinary shares.<br />
Earnings per share for the year ended 31 st December <strong>2012</strong><br />
Calculation of basic EPS<br />
On the basis of what has been stated above, the numerator for calculating basic EPS<br />
amounts to €82,708 thousand.<br />
With regard to the denominator of this indicator, the weighted average number of<br />
outstanding ordinary shares as at 31 st December <strong>2012</strong> was 900,546,881.<br />
In this respect:<br />
(i) as at 1 st January <strong>2012</strong> the outstanding ordinary shares of <strong>UBI</strong> <strong>Banca</strong> numbered<br />
900,546,759;<br />
(ii) on 4 th July <strong>2012</strong>, 246 shares were issued for the conversion of a convertible<br />
bond issue;<br />
(iii)<br />
(iv)<br />
as at 31 st December 2010 <strong>UBI</strong> <strong>Banca</strong> held 1,200,000 treasury shares in portfolio;<br />
as a result of the above changes, the ordinary shares outstanding of <strong>UBI</strong> <strong>Banca</strong><br />
numbered 900,547,005 as at 31 st December 2011.<br />
357
Calculation of diluted EPS<br />
For the purposes of calculating diluted EPS, as already stated, account must be taken of the<br />
dilutive effect on the ordinary shares of the Parent resulting from the presence of “potential”<br />
ordinary shares that are outstanding, such as for example:<br />
(i) instruments representing debt or equity, including preference shares, that are<br />
convertible into ordinary shares;<br />
(ii) options and warrants;<br />
(iii) shares to be issued if the conditions defined in contractual agreements are met.<br />
As already reported in the balance sheet section 15 “Equity attributable to the Parent”,<br />
potential ordinary shares of <strong>UBI</strong> <strong>Banca</strong> existed as at 31 st December <strong>2012</strong> for the possible<br />
conversion of a convertible bond issue (a maximum of 255,657,498 new ordinary shares).<br />
The right to convert the convertible bonds into ordinary shares of <strong>UBI</strong> <strong>Banca</strong> was exercised<br />
in <strong>2012</strong> for at total of 246 new shares.<br />
To summarise:<br />
EPS <strong>2012</strong> 2011<br />
<strong>Consolidated</strong> profit attributable to the Parent (thousands of euro) 84,342 (1,831,333)<br />
Weighted average number of ordinary shares outstanding 900,546,881 774,891,234<br />
Basic earnings per share (in euro) 0.0937 (2.3633)<br />
Diluted earnings per share (in euro) 0.0937 (2.3633)<br />
The table that follows contains: (i) a reconciliation of consolidated profit attributable to the<br />
Parent and profit attributable to ordinary equity holders and also (ii) the dilutive effect on<br />
the average number of outstanding ordinary shares.<br />
EPS <strong>2012</strong> 2011<br />
EPS with recognised profits<br />
<strong>Consolidated</strong> net profit attributable to the Parent (thousands of euro) 82,708 (1,841,488)<br />
Profit not attributable to owners of ordinary equity instruments (thousands of euro) (1,634) (10,155)<br />
<strong>Consolidated</strong> profit attributable to the Parent (thousands of euro) 84,342 (1,831,333)<br />
Number of shares existing at the beginning of the year 900,546,759 639,145,902<br />
Number of shares issued during the year 246 262,600,857<br />
Weighted average shares issued during the year - 135,745,332<br />
Weighted average number of ordinary shares outstanding 900,546,881 774,891,234<br />
Weighted dilutive effect resulting from the exercise of potential ordinary shares - -<br />
Weighted average number of ordinary shares for diluted capital 900,546,881 774,891,234<br />
Basic earnings per share (in euro) 0.0937 (2.3633)<br />
Diluted earnings per share (in euro) 0.0937 (2.3633)<br />
358
PART D – <strong>Consolidated</strong> statement of comprehensive<br />
income<br />
Items<br />
31.12.<strong>2012</strong><br />
Gross amount Tax on income Net amount<br />
10. Profit (loss) for the year X X 91,666<br />
Other comprehensive income<br />
20. Available-for-sale financial assets: 962,104 (253,340) 708,764<br />
a) changes in fair value 935,327 (246,734) 688,593<br />
b) transfer to income statement 26,128 (6,477) 19,651<br />
- impairment losses 2,443 (707) 1,736<br />
- profits (losses) on sale 23,685 (5,770) 17,915<br />
c) other changes 649 (129) 520<br />
30. Property, plant and equipment -<br />
40. Intangible assets -<br />
50. Foreign investment hedges - - -<br />
a) changes in fair value -<br />
b) transfer to income statement -<br />
c) other changes -<br />
60. Cash flow hedges: (2,766) 917 (1,849)<br />
a) changes in fair value (2,766) 917 (1,849)<br />
b) transfer to income statement -<br />
c) other changes -<br />
70. Currency translation differences: - - -<br />
a) changes in fair value -<br />
b) transfer to income statement -<br />
c) other changes -<br />
80. Non current assets held for sale: - - -<br />
a) changes in fair value -<br />
b) transfer to income statement -<br />
c) other changes -<br />
90. Actuarial gains (losses) on defined benefit plans: (46,496) 12,554 (33,942)<br />
100.<br />
Portion of fair value reserves attributable to equity-accounted<br />
investees:<br />
119,248 (29,079) 90,169<br />
a) changes in fair value 154,060 (37,533) 116,527<br />
b) transfer to income statement 17,644 (4,322) 13,322<br />
- impairment losses 180 (56) 124<br />
- profits (losses) on sale 17,464 (4,266) 13,198<br />
c) other changes (52,456) 12,776 (39,680)<br />
110. Total other comprehensive income items 1,032,090 (268,948) 763,142<br />
120. Comprehensive income (items 10+110) 854,808<br />
130. <strong>Consolidated</strong> comprehensive income attributable to non-controlling<br />
140.<br />
interests<br />
<strong>Consolidated</strong> comprehensive income attributable to the shareholders<br />
of the Parent<br />
14,983<br />
839,825<br />
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Part E - Information on risks and the relative<br />
hedging policies<br />
Section 1 - Banking Group Risks<br />
In compliance with current regulations, the <strong>UBI</strong> Group has adopted a risk control system which<br />
disciplines and integrates the organisational, regulatory and methodological guidelines of the system<br />
of internal controls with which all Group member companies must comply in order to allow the<br />
Parent to perform its activities of strategic, management and operational control in an effective and<br />
economical manner.<br />
Group member companies co-operate pro-actively in identifying risks to which they are subject and<br />
in defining the relative criteria for measuring, managing and monitoring them.<br />
The key principles on which Group risk analysis and management are based for the pursuit of an<br />
increasingly more knowledgeable and efficient allocation of economic and supervisory capital are as<br />
follows:<br />
- rigorous containment of financial and credit risks and strong management of all types of risk;<br />
- the use of a sustainable value creation approach to the definition of risk appetite and the<br />
allocation of capital;<br />
- definition of the Group’s risk appetite with reference to specific types of risk and/or specific<br />
activities in a set of policy regulations for the Group and for the single entities within it.<br />
The appetite for risk helps to define the strategic positioning of the Group and it is defined in<br />
compliance with its mission and its strategy and its business and value creation objectives.<br />
The definition of the <strong>UBI</strong> Group’s appetite for risk includes quantitative and qualitative factors:<br />
• from a quantitative viewpoint, the risk appetite is given by the amount of capital that the<br />
Bank is willing to put at risk and it helps to define the strategic positioning of the Group;<br />
• from a qualitative viewpoint, risk appetite relates to the Group’s desire to strengthen its<br />
management and monitoring systems and the efficiency and effectiveness of its system of<br />
internal controls.<br />
With Provision No. 423940 of 16 th May <strong>2012</strong>, the Bank of Italy authorised the <strong>UBI</strong> <strong>Banca</strong> Group to<br />
use advanced internal rating based (AIRB) systems to calculate capital requirements to meet credit<br />
risk – “exposures to businesses” (“corporate”) segment – and operational risks, from the supervisory<br />
report as at 30 th June <strong>2012</strong>. With specific reference to credit risk, the authorisation allows the use of<br />
internal estimates for probability of default (PD) and loss given default (LGD) parameters for the<br />
corporate portfolio.<br />
Therefore for all the other portfolios, the standardised approach is used, to be applied in accordance<br />
with the roll-out plan delivered to the Supervisory Authority.<br />
As at the reporting date, the scope of application, in terms of companies, for the approaches<br />
authorised is as follows:<br />
• AIRB: <strong>Banca</strong> Popolare di Bergamo, Banco di Brescia, <strong>Banca</strong> Popolare Commercio e Industria,<br />
<strong>Banca</strong> Popolare di Ancona, <strong>Banca</strong> Regionale Europea, <strong>Banca</strong> Carime, Banco San Giorgio, <strong>Banca</strong><br />
Valle Camonica (the “Network Banks”), <strong>UBI</strong> <strong>Banca</strong> Private Investment and Centrobanca;<br />
• the remaining legal entities in the Group will continue to use the standardised approach.<br />
The output of the models consists of nine rating classes that correspond to the relative PDs which are<br />
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mapped on the Master Scale to 14 classes (comparable with the ratings of the main external rating<br />
agencies) exclusively for reporting purposes.<br />
With regard to the second pillar, the ICAAP report as at 31 st December <strong>2012</strong> is to be filed with the<br />
supervisory body in April 2013 and it will include first pillar risks, second pillar risks specified by<br />
regulations and risks identified independently by the Group. The structure of the report gives details<br />
of the following: strategic lines of development and the forecast horizon considered by the Group<br />
business plan; a description of corporate governance, organisational structures and systems of<br />
control related to ICAAP; exposure to risks, methods of measuring and aggregating them and stress<br />
tests; the components, estimates and methods of allocating internal capital; the relationship between<br />
internal capital, supervisory requirements and supervisory capital; and finally the self assessment of<br />
ICAAP, which identifies areas for further growth in the methodological model as well as process areas<br />
where improvement is possible.<br />
When the ICAAP report is filed, a report will be made available to the public at the same time on the<br />
<strong>UBI</strong> <strong>Banca</strong> website (www.ubibanca.it), in the investor relations sector, in compliance with the third<br />
pillar requirements. The regulations introduce obligations to publish information on capital<br />
adequacy, exposure to risks and the general characteristics of the systems designed to identify,<br />
measure and manage them.<br />
The information to be provided favours greater transparency in the ways in which banks manage<br />
risk. The Bank of Italy has made special tables available in this respect in which the quantitative and<br />
qualitative information which banks must publish is classified, thereby making the data comparable.<br />
This part – sections 1 to 4 1 - provides information on the risk profiles listed below, on the relative<br />
management and hedging policies pursued by the Group and its activities relating to financial<br />
derivative instruments:<br />
a) credit risk;<br />
b) market risks:<br />
− interest rates,<br />
− price,<br />
− currency;<br />
c) liquidity risk;<br />
d) operational risks.<br />
Sections 5 and 6 also provide information on the risks pertaining to the insurance companies and<br />
other companies in the consolidation.<br />
A report on the general framework of the risks and uncertainties to which the <strong>UBI</strong> Group is exposed<br />
is given in a special section of the Management <strong>Report</strong>, prepared in compliance with Legislative<br />
Decree No. 32 of 2 nd February 2007, which implements EC Directive No. 2003/51/EC.<br />
1 Sections 1 to 4 provide information for the banking group only, except in cases where explicit reference is made to all the<br />
companies in the consolidation.<br />
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1. CREDIT RISK<br />
Qualitative information<br />
1.1 General aspects<br />
The strategies, policies and instruments for the assumption and management of credit risk are<br />
defined at the Parent by the Risk Officer in co-operation with the Chief Lending Officer, with the<br />
support and co-ordination of the relative specialist units.<br />
There is a particular focus in the formulation of policies to manage credit risk on maintaining an<br />
appropriate risk-yield profile and on assuming risks that are consistent with the risk appetite defined<br />
by senior management and, more generally, with the mission of the <strong>UBI</strong> Group.<br />
The priorities in the orientation of the Group's credit management policies are to support local<br />
economies, families, businessmen, professionals and small to medium-sized enterprises.<br />
The particular attention paid to maintaining relationships established with customers and to<br />
developing them over the years is one of the strong points of the Group and it helps to eliminate<br />
information asymmetries and offers continuity in customer relationships with a view to long term<br />
support.<br />
Even in the continuing and difficult current economic situation, the Bank is ensuring that the<br />
economy has adequate access to credit by participating, amongst other things, in “Agreements”<br />
stipulated between the Italian Banking Association, the Ministry of Finance and trade associations,<br />
while preserving the quality of its assets and by employing an extremely selective approach to “noncore”<br />
exposures.<br />
With regard to “business” customers in particular, lending rules have been formulated and are being<br />
followed for the disbursement and management of loans, which in operational terms translate into<br />
action which ranges from the development to the containment of exposures. These rules are based on<br />
a number of drivers as follows:<br />
• internal counterparty rating (average weighted rating for Groups of companies), linked to the<br />
degree of protection provided by any accessory guarantees there may be;<br />
• degree of engagement of the <strong>UBI</strong> Group with the counterparty or Group of companies;<br />
• the economic sector to which the counterparty or Group of companies belongs with a view to:<br />
− the level of sector risk;<br />
− the overall level of concentration of the <strong>UBI</strong> Group in the individual economic sector (with<br />
verification also of the concentration at individual bank or company level).<br />
Finally, particular attention is paid to the definition of guidelines for the treatment of new products,<br />
with adequate reporting to senior management concerning observance of risk-yield objectives, the<br />
calculation of minimum interest rates for granting loans, the quality of borrowers, guarantees<br />
received and expected rates of recovery in cases of insolvency.<br />
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1.2 Policies for the management of credit risk<br />
1.2.1 Organisational aspects<br />
In the performance of its traditional banking business, the Group is exposed to the risk that the<br />
loans it grants will not be repaid by borrowers when they are due and that partial or full impairment<br />
losses must be recognised on them. More specifically the risk profile for lending is sensitive to the<br />
performance of the economy as a whole, to the deterioration in the financial position of<br />
counterparties (shortage of liquidity, insolvency, etc.), or to changes in their competitiveness, to<br />
structural or technological changes in corporate debtors and to other external factors (e.g. changes in<br />
legislation, deterioration in the value of financial guarantees and mortgages connected with market<br />
performance). A further risk factor to which the Group pays particular attention is the degree of<br />
diversification in the lending portfolio among different borrowers and among the different sectors in<br />
which they operate.<br />
The organisational model on which the units which manage lending activity is based is as follows:<br />
• Parent units for centralised monitoring and co-ordination;<br />
• the General Managements of banks and Group companies, to which the following report:<br />
- Credit Departments;<br />
- Local Credit Centres,<br />
- Branches;<br />
- Corporate Banking Units (CBUs);<br />
- Private Banking Units (PBUs).<br />
Reorganisation was launched in the network banks in January 2013, in order to combine personal<br />
services with a specialist approach to corporate customers. This led to the creation of units entitled<br />
“Private Banking & Corporate Unity” specifically for the management of both corporate and private<br />
banking customers. Furthermore, in view of the merger of B@nca 24/7, specific units have been<br />
created in the Credit Area at the Parent to manage loans from that company’s operations.<br />
As a whole the characteristics of the organisational model ensure strong standardisation between the<br />
units of the Parent and the corresponding units in the network banks, with consequent linearity in<br />
the processes and the optimisation of information flows. Loan granting activity is also differentiated,<br />
at local level, by customer segment (retail/private banking/corporate and institutional) and<br />
specialised by the status of the loan: “performing” (managed by retail, private banking and corporate<br />
lending units) and “default” (managed by problem loan units).<br />
Furthermore, with regard to banks, the introduction of decentralised Local Credit Units to support<br />
retail branches and corporate banking and private banking units, ensures effective co-ordination and<br />
liaison between units operating on their respective markets. The Parent oversees policy management,<br />
overall portfolio monitoring, the refinement of assessment systems, problem loan management and<br />
compliance with regulations through the units that report to the Chief Lending Officer and the Risk<br />
Control and the Strategic Development and Planning units and the Audit Function of the Parent and<br />
the Group.<br />
For all those entities (individual companies or groups) with authorised credit from banks and<br />
companies in the Group (including risk activities involving issuer and related risks), which totals<br />
more than €50 million, the Parent must set an operational limit which is the maximum credit that<br />
may be authorised for the counterparty at <strong>UBI</strong> Group level. The Management Board of the Parent is<br />
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esponsible for granting, changing and renewing operational limits on the proposal of the <strong>UBI</strong> Credit<br />
Area after first consulting the <strong>UBI</strong> Credit Committee.<br />
The banks and companies of the Group must also request a prior, consultative, non-binding opinion<br />
from the Parent for combinations of a) amounts of authorised credit and b) determined internal rating<br />
classes. It is the Parent’s duty to assess whether it is consistent with the credit policies of the Group,<br />
according to the criteria and parameters laid down in the credit authorisation regulations of the<br />
Group. A prior opinion is not required for credit authorisations for single counterparties or groups of<br />
companies which fall within the operational limits that have been set.<br />
In consideration of the specific federal organisation of the <strong>UBI</strong> Group, the Parent decided to adopt a<br />
“focused” model for the management of corporate customers common to more than one network bank<br />
on the basis of which, briefly:<br />
- decisions relating to credit risk management, pricing and the formulation of commercial policies for<br />
customers common to two or more banks are centred on a lead bank, termed the pivot bank, thereby<br />
avoiding the generation of a decrease in the overall profitability on the counterparty;<br />
- non pivot banks abstain from opening new accounts and/or from granting new credit facilities.<br />
A Pivot Bank may be defined as the bank which has the best chances, with its own business units, of<br />
arranging new business and/or intensifying existing business with the customer in common, in order<br />
to draw the greatest possible benefit for the whole banking Group. It therefore directs the other banks<br />
involved with regard to the most appropriate conduct to follow to improve business with the customer<br />
as a whole.<br />
The various organisational units in banks and product companies are responsible for credit and<br />
commercial activities and they also hold responsibility for monitoring both the activity they perform<br />
directly and that performed by those units which report to them. More specifically, responsibility for<br />
managing and monitoring performing loans lies in the first instance with the account managers who<br />
handle daily relationships with customers and who have an immediate perception of any<br />
deterioration in credit quality. Nevertheless, all employees of Group member companies are required<br />
to promptly report all information that might allow difficulties to be identified at an early stage or<br />
which might recommend different ways of managing accounts, by concretely participating in the<br />
monitoring process.<br />
In the second instance, the organisational unit responsible for monitoring credit risk is the Credit<br />
Quality Management and Monitoring Unit, which carries out monitoring, supervision and analysis of<br />
performing positions on both a case by case and a collective basis, where the intensity and degree of<br />
detail of the analysis is a function of the risk class attributed to the counterparties and the<br />
seriousness of the performance problems. This unit, not involved in loan approval procedures, either<br />
on its own initiative or on submission of a proposal, may assess a position and decide (or propose to<br />
a superior decision-making unit when the decision does not lie within its powers), to change the<br />
classification of performing counterparties to a more serious status. In these cases it asks, through<br />
its Credit Department, the Credit Area of <strong>UBI</strong> <strong>Banca</strong> to issue a prior non-binding opinion in those<br />
cases where Credit Authorisation Regulations require it. The Portfolio Policies and Quality Service in<br />
the unit that reports to the Chief Lending Officer is responsible for co-ordinating and defining<br />
guidelines for monitoring the lending portfolio, overseeing the development of monitoring tools,<br />
monitoring credit policies and preparing management reports.<br />
Furthermore an “arrears management” system is operational, designed to preserve and protect<br />
customer relationships through the prompt resolution of lending irregularities (late<br />
repayments/unauthorised overdrafts) detected on performing private individual and “small economic<br />
operator” customers by providing centralised support contact with customers to normalise problem<br />
loan positions.<br />
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Management of the “non-performing” positions of the network banks and of Centrobanca (the latter<br />
from January <strong>2012</strong>) is entrusted to the Problem Loan and Credit Recovery Area of <strong>UBI</strong> <strong>Banca</strong>, within<br />
the unit reporting to the Chief Lending Officer.<br />
This unit underwent substantial organisational change (completed in December), as part of the<br />
implementation of the new model for the management of non-performing loans, designed to improve<br />
credit recovery processes, by means of the following:<br />
– the introduction of segmentation approaches and division into portfolios of non-performing<br />
positions, on the basis of the size and complexity of the loan;<br />
– the specialisation of recovery processes and the units responsible for it, consistent with the<br />
segments and portfolios identified;<br />
– monitoring of processes for the management of positions;<br />
– the assignment of recovery objectives to managers and assessment of results;<br />
– the introduction of strategies designed to optimise recovery on specific portfolios, such as for<br />
example, recourse to property operators to value the properties which back mortgage loans.<br />
As part of that initiative, three specialist services on specific segments have been created within the<br />
above mentioned areas:<br />
– Small Sum Recovery Service, to manage non-performing unsecured loans to private<br />
individuals for amounts of less than €25,000;<br />
– Large Loan Recovery Service, specialising in the management of non-performing loans to both<br />
private individuals and businesses for amounts of over €1 million, or with a net book value of<br />
over €500,000. Particularly complex types of position are also managed by this service (e.g.<br />
pool financing, etc.);<br />
– Private Individual and Corporate Recovery Service, for the management of other types of loan<br />
which are not included within the scope of the two services just mentioned. This unit is<br />
organised into six specialist functions according to geographical criteria.<br />
The Risk Management Area in the unit that reports to the Chief Risk Officer, performs the following<br />
through its Credit Risk function:<br />
– it defines criteria and methodologies for the development of internal rating models –<br />
probability of default (PD), loss given default (LGD) and exposure at default (EAD) – in line<br />
with regulatory requirements and best practices;<br />
– it works with the Group Rating Unit on the definition of corporate methods for assigning<br />
counterparty ratings;<br />
– it produces periodic analyses which illustrate the risk profile of the total lending portfolio and<br />
the commercial sub-portfolios at Group level and at the level of individual legal entities, in<br />
terms of distribution by rating class, LGD and expected loss, loan impairment rates and<br />
concentration in the largest customers;<br />
– it develops methods, in co-operation with the unit that reports to the Chief <strong>Financial</strong> Officer,<br />
for calculating collective provisions to be recognised in the financial statements on the basis of<br />
internal credit ratings for the network banks and Centrobanca and loan impairment rates for<br />
the other banks and product companies;<br />
– it calculates loan impairment rates for the Group and defines the relative calculation methods<br />
for individual legal entities;<br />
– it provides input parameters (PD and LGD) for product pricing activities.<br />
Furthermore, the Credit Risk Function plays a key role within the Basel 2 project:<br />
– it formulates guidelines on credit risk matters generally and also with regard to periodic<br />
reporting to the Supervisory Authority;<br />
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– it draws up roll-out plans for models implemented at the Parent;<br />
– it monitors the extent to which regulatory provisions are covered by internal rating models;<br />
– it co-ordinates activities for the development and maintenance of internal rating processes<br />
and systems;<br />
– it formulates policies for the assumption and management of credit risk.<br />
More specifically, the Function formulates the operational details of policies by preparing regulations<br />
to implement them and also detailed documents, both for the Parent and for single banks and<br />
companies, which illustrate aspects relating to the definition, use, monitoring and reporting of risk in<br />
relation to compliance with the guidelines and the indicators that are set.<br />
These documents are implemented by the Group banks and companies, which must have a<br />
knowledge of the risk profile and the risk management policies defined by the senior management of<br />
the Parent and which must contribute, each within the scope of their responsibilities, to the<br />
implementation, consistent with the reality of their companies, of the risk management strategies and<br />
policies decided by the senior management of the Parent.<br />
Finally, the Function also provides specialist support for the operational implementation of the<br />
policies and regulations for them, concerning the assumption and management of credit risk and it<br />
periodically monitors their consistency with Group operations, and proposes corrective action if<br />
necessary.<br />
Finally, the unit that reports to Chief Risk Officer then defines in detail, and undertakes, active credit<br />
portfolio management action designed to optimise the creation of value on the loan portfolio and also<br />
takes initiatives to mitigate, monitor and transfer credit risk (e.g. securitisations), assessing the<br />
impact on economic capital and on supervisory capital requirements. As concerns the production and<br />
distribution of products which involve the assumption of credit risk by Group member companies, it<br />
participates, together with the Commercial Macro Area, in the definition of the relative convention<br />
agreements.<br />
1.2.2 Management, measurement and control systems<br />
The Credit Risk Function is responsible for Group reporting on credit risk in order to monitor<br />
changes in the risk attached to lending for individual banks and commercial portfolios. The reports<br />
are submitted quarterly to the Boards of Directors of the individual network banks. For the network<br />
banks and Centrobanca the reports describe distributions by internal rating classes, LGD and<br />
expected loss and for the network banks they also give changes in average risk for the corporate<br />
market, the small business portfolio in the retail market and for the affluent and mass market<br />
portfolios again in the retail market. <strong>Report</strong>ing for the product companies is based on the specific risk<br />
for the various types of lending and products marketed. Special reports on specific matters are also<br />
prepared on the main components of credit risk.<br />
The set of models which constitute the internal rating system of the Group is managed by the Risk<br />
Management Area with support from the Credit Area.<br />
The system at present involves the use of automatic models for medium to large-size businesses,<br />
private individuals and small-sized businesses.<br />
The rating and LGD models for medium to large-sized companies were submitted for validation by the<br />
Supervisory Authority in the first half of <strong>2012</strong>. Estimates for a new generation of rating and LGD<br />
models for the “retail exposures” regulatory portfolio are in progress for private individuals and small-<br />
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sized businesses as part of the Basel 2 project. These are accompanied by the necessary interaction<br />
with the Supervisory Authority, designed to obtain authorisation in 2013 for the adoption of these<br />
models for the calculation of regulatory capital using the advanced internal rating based approach.<br />
The validation perimeter for these models comprises the network banks, <strong>UBI</strong> <strong>Banca</strong> and<br />
Centrobanca.<br />
The main features of this new generation of rating models are as follows:<br />
• the development of new quantitative models for monitoring and granting loans, which assess<br />
the creditworthiness of small-sized businesses which integrate the following assessments:<br />
geo-sectoral; economic-financial; external and internal performance;<br />
• the development of a new quantitative model for monitoring, which assesses the<br />
creditworthiness of private individuals supplementing it with personal data and external and<br />
internal performance assessments;<br />
• the development of a new quantitative model for the grant of mortgages to private individuals,<br />
which assesses counterparty risk, supplementing it with personal data and product<br />
assessments.<br />
As concerns retail LGD, new models for the network banks were estimated, based on updated<br />
historical data series references and on re-estimated or updated estimate components.<br />
Credit processes within the network banks work with information channelled from the rating system<br />
as described in detail below.<br />
The operational units involved in the loan disbursement and renewal process use internal credit<br />
ratings, which constitute necessary and essential evaluation factors for credit authorisations when<br />
these are assessed and revised. Powers to authorise loans are based on the risk profiles of the<br />
customers or the transactions as given by the credit rating and by the expected loss, while they are<br />
managed using Pratica Elettronica di Fido (electronic credit authorisation) software. The credit ratings<br />
are used, amongst other things, to monitor loans both by the management reporting system and in<br />
the information made available to units in banks involved in the lending process.<br />
The assignment to rating classes that are different from those calculated by the internal rating<br />
system on the basis of the models adopted is made by proposing an override on the rating for which<br />
the methods of presentation, examination and validation are different for cases of:<br />
• higher rating override;<br />
• lower rating override.<br />
These changes are made on the basis of information not already considered by the rating model, not<br />
adequately weighted by the model or where it is intended to anticipate the future influence of the<br />
information.<br />
In addition to the process for the disbursement, renewal and monitoring of credit and to the<br />
departmental reporting process just described, the processes directly affected by internal ratings or in<br />
which internal estimates of PD and LGD are described below.<br />
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The calculation of collective impairment losses on performing loans<br />
The calculation methodologies used for the calculation of collective impairment losses on performing<br />
loans in the network banks and in Centrobanca are different from those used by the main product<br />
companies of the Group.<br />
More specifically a method is employed for loans (and guarantees) to customers in network banks<br />
and in Centrobanca based on internal estimates of PD (probability of default) associated with internal<br />
ratings and estimates of LGD (loss given default). The latter uses operational corrective factors with<br />
respect to the parameters used for regulatory purposes. It should be noted that the percentages of<br />
impairment resulting from the application of the PD and LGD are also used for “irrevocable<br />
commitments of uncertain use” to which the supervisory credit conversion coefficient is also applied.<br />
The approach currently used for those product companies most subject to credit risk and for <strong>UBI</strong><br />
<strong>Banca</strong> (in relation to former B@nca 24/7 business acquired operationally from July <strong>2012</strong> due to its<br />
merger into the Parent) is that based on impairment rates for loans calculated internally which uses a<br />
broader definition of default that includes changes of classification from performing to impaired and<br />
non-performing classes (<strong>UBI</strong> <strong>Banca</strong> – former B@nca 24/7 and <strong>UBI</strong> Leasing) and internal estimates of<br />
LGD.<br />
As concerns LGD, different internal estimates are used at <strong>UBI</strong> Leasing for different types of product<br />
and marketing, while expert values are applied for <strong>UBI</strong> <strong>Banca</strong> – former B@nca 24/7, estimated on the<br />
bank’s own data where significant and in other cases values are borrowed from similar products sold<br />
by the network banks. Special “danger rates” need to be applied to render the definitions of default<br />
used for impairment rates and estimates of LGD consistent. For both <strong>UBI</strong> Leasing and <strong>UBI</strong> <strong>Banca</strong> –<br />
former B@nca 24/7, these are estimated on internal data and differentiated by product. Further<br />
refinements and updates of parameters were performed within this methodological framework in<br />
<strong>2012</strong>. For <strong>UBI</strong> Leasing they involved an update of the historical data series and for Prestitalia a<br />
specific development of the management of the salary backed loans portfolio.<br />
The calculation of risk adjusted pricing levels<br />
Risk adjusted pricing is the break-even price which ensures remuneration of lending risk such as<br />
expected loss and unexpected loss, or in other words the cost of the capital absorbed in accordance<br />
with prudential supervisory regulations (Basel 2.5). Consistent with value creation approaches, risk<br />
adjusted pricing will generate a level of profit adjusted for risk, which will ensure the creation of<br />
value.<br />
Creation of value, capital allocation and incentive schemes<br />
As part of its capital management processes, the <strong>UBI</strong> Group applies methodologies to assess risk<br />
adjusted performance that are designed to measure and summarise the effects of economic, asset,<br />
risk (recognition of impairment) and capital (risk weighted assets and expected loss net of impairment<br />
losses recognised) variables that impact the creation of wealth for shareholders. The creation of value<br />
is fully incorporated in incentive schemes as a determining factor in triggering incentives.<br />
Stress tests<br />
Stress tests for credit risk are performed in relation to the ICAAP <strong>Report</strong>, as support in the<br />
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preparation of business plans or budgets and in response to specific requests by the Bank of Italy or<br />
other supervisory authorities. More specifically, stress tests are performed on those exposure classes<br />
that can present greater variability in the ratio between risk weighted assets (RWA) and the<br />
corresponding amount of the exposure.<br />
The scenarios analysed involve an increase in the average ratio between the amount of the exposure<br />
and RWAs of differing dimensions, estimating the impact on capital ratios. Stresses are created by<br />
acting on PD (probability of default) and LGD (loss given default) parameters, hypothesising scenarios<br />
of differing levels of seriousness for both risk parameters and estimating the impacts in terms of<br />
capital ratios.<br />
Activity also continued in <strong>2012</strong> to revise, update and adopt policies and regulations for credit risk<br />
management.<br />
Existing policies are listed below together with the principal contents.<br />
Credit risk management policy<br />
Policies exist within the <strong>UBI</strong> Group to manage Group credit risk, the relative regulations to<br />
implement it and documents to set limits both for the Group and for single banks and companies.<br />
This regulation allows a common approach to be followed for the assumption of risk and procedures<br />
to manage it across the entire Group and it standardises risk indicators, while taking account of the<br />
specifics of each class of risk.<br />
The policy gives details of limits and it defines the procedures for assuming risk for the following<br />
types of risk:<br />
- credit risk (including counterparty risk): the risk of incurring losses resulting from the default of a<br />
counterparty with whom a position of credit exposure exists. Credit risk can be divided into the<br />
following two types:<br />
- credit risk relating to business with ordinary customers, with a specific focus on credit risk for<br />
Centrobanca structured finance operations;<br />
- credit risk relating to business with institutional customers and with ordinary customers<br />
resident in high risk countries;<br />
- concentration risk: risk resulting from the existence of large exposures to single counterparties (or<br />
groups) or resulting from exposures to groups of counterparties which operated in the same<br />
economic sector or which are located in the same geographical area. Concentration risk is divided<br />
into two types:<br />
− single name concentration risk;<br />
− sector concentration risk.<br />
Ordinary customers<br />
Standards, principles and limits to manage credit risk are set for ordinary customers both at<br />
consolidated level and for individual legal entities, on the basis of the availability of risk drivers<br />
generated by the internal rating model (rating class, probability of default and loss given default). The<br />
definition of the limits is based on a series of indicators expressed in terms of: capital allocation,<br />
values for maximum risk (i.e. target and maximum expected loss and cost of credit), limits on the<br />
assumption of risks in terms of the distribution of exposures by credit rating class and the<br />
management of credit quality.<br />
369
The Credit Risk Function prepares quarterly reports on compliance with the indicators set for all the<br />
Areas concerned and for the governing bodies of the Parent and the individual banks and companies<br />
in the Group.<br />
Structured Finance<br />
A specific focus was placed on structured finance business performed by Centrobanca.<br />
The term structured finance operations refers to non-standard finance operations, formulated on the<br />
basis of the specific requirements of customers, usually performed for industrial or infrastructure<br />
investments, or to acquire listed and unlisted companies. It may be promoted by institutional<br />
investors.<br />
Specific limits are set for this business which combine the achievement of budget targets in terms of<br />
volumes disbursed and profitability with appropriate management in terms of distribution by rating<br />
and transaction classes, concentration for single exposures and maximum duration.<br />
The Centrobanca Credit Monitoring Service introduced a target process for monitoring limits, with the<br />
relative monthly reporting.<br />
Institutional counterparty and country risk<br />
For institutional and ordinary customers resident in high risk countries, the risk management policy,<br />
the relative regulations to implement it and the documents containing the limits set standards,<br />
principles and limits designed to ensure proper management of the entire process of the assumption,<br />
management and monitoring of credit risk in this area.<br />
Limits are set for maximum exposure to credit risk as follows:<br />
− maximum exposure limits: maximum limits on total authorised credit for the different risk<br />
classes of the exposures (combinations of counterparty ratings and country ratings) at Group<br />
and individual company level;<br />
− single name concentration limits: maximum limits on total authorised credit for each borrower<br />
for the different risk classes (combinations of counterparty ratings and country of residence<br />
ratings) defined at Group level;<br />
− country concentration limits: maximum limits on total authorised credit for each country defined<br />
at Group and individual company level.<br />
Concentration risk<br />
Geo-sectoral concentration risk is dealt with as part of second pillar risks. The policy sets a specific<br />
capital requirement to take account of the higher sensitivity of a more concentrated portfolio.<br />
Single name concentration risk is addressed by setting maximum exposure limits on single<br />
counterparties in order to limit risks of instability that would arise from high rates of concentration<br />
for loans to major borrowers if one of these should default. The limits set are based on counterparty<br />
ratings and the type of transaction.<br />
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Risk-adjusted pricing<br />
The risk adjusted price setting process involves a detailed process of defining and using prices to<br />
ensure that:<br />
− the prices approved become the reference used by the Credit Committee of the Parent and the<br />
loan approval units of the individual banks and they must be given in all loan approval<br />
proposals;<br />
– appropriate operational and IT procedures are defined to implement the pricing framework.<br />
The contents of the policy have been set out in regulations and in a document which gives details of<br />
the limits approved by the Management Board.<br />
Policy for the distribution of mortgages through brokers<br />
This policy regulates the procedures for the use of external distribution networks for granting<br />
mortgages to non-captive customers in order to mitigate potential credit, operational and reputational<br />
risks.<br />
The policy defines the following:<br />
− minimum capitalisation limits for the brokerage companies and a prohibition on direct<br />
agreements with mortgage brokers and real estate agents;<br />
− minimum contents for agreements between distribution networks and banks or companies in the<br />
<strong>UBI</strong> Group including, for example, the specification of a minimum list of risk indicators to be<br />
monitored for which there must be a provision in the agreement that requires the network to<br />
remain within certain limits. Once those limits are exceeded penalties are applied (if maximum<br />
risk limits are exceeded) or bonuses are paid (if particularly low levels of risk are achieved) to the<br />
distribution network;<br />
− an obligation by banks entering into agreements to put a process in place to monitor changes in<br />
the risk indicators just mentioned, with support from the Parent.<br />
Policy on the portability, renegotiation, substitution and early repayment of the mortgages of direct<br />
customers of the network banks<br />
The policy on the portability, renegotiation, substitution and early repayment of mortgages of the <strong>UBI</strong><br />
Group furnishes guidelines for portability (in both directions), the renegotiation (including the<br />
rescheduling of instalments as regulated by the agreement between the Ministry of the Economy and<br />
Finance and the Italian Banking Association), the substitution and early repayment (partial or total)<br />
of mortgages. It is designed (by setting minimum standards of service amongst other things) to<br />
minimise processing times, conditions and related costs and also to equip the Group with appropriate<br />
processes and instruments to manage the relative risks (credit, operational and reputation).<br />
The policy also defines objectives for the maximum time limits for responding to customers for which<br />
a specific monitoring process has been launched.<br />
Policy on the portability, renegotiation, substitution and early repayment of mortgages granted through<br />
brokers<br />
As was defined for the mortgages of direct customers of the network banks, the policy on the<br />
portability, renegotiation, substitution and early repayment of brokered mortgages sets, for this<br />
371
specific type of business, maximum time limits for responding to customers for which the necessary<br />
monitoring process must be put in place.<br />
Policy on risks resulting from securitisations<br />
The “Policy on risks resulting from securitisations” sets guidelines for the Group to manage risks<br />
relating to securitisations defined as “the risk that the underlying economic substance of a<br />
securitisation is not fully reflected in decisions made to measure and manage risk”. This risk relates<br />
to both conventional and synthetic securitisations originated by the Group which involve the transfer,<br />
at least partial, of the risk attaching to the securitised assets.<br />
The process of implementing a securitisation must involve stating the objective of the transaction and<br />
the role played by the <strong>UBI</strong> <strong>Banca</strong> Group in it and verification that it is fully compliant with the<br />
requirements contained in Bank of Italy Circular 263 “New regulations for the prudent supervision of<br />
banks” of 27 th December 2006.<br />
The <strong>UBI</strong> Group will make sole use of agencies recognised by the Bank of Italy (ECAI – External Credit<br />
Assessment Institution) when assigning ratings to bonds and/or the tranches issued.<br />
Policy on residual risk<br />
The “Policy on residual risk” formulates strategic orientations relating to the management of “residual<br />
risk”, defined as the risk of incurring losses resulting from the unforeseen ineffectiveness of<br />
established methods of mitigating credit risk used by the <strong>UBI</strong> Group.<br />
The policy contains a definition of the process of control over the acquisition and use of techniques to<br />
reduce credit risk in order to mitigate that risk.<br />
That process is centred on the definition of appropriate risk management processes designed firstly to<br />
ensure the verification of compliance with supervisory regulations, distinguishing between:<br />
• “general requirements”, such as “legal certainty”, the “speed of implementation” and<br />
“organisational requirements”;<br />
• “specific requirements”, with particular attention to revaluation and monitoring of collateral<br />
and guarantees and verification of the absence of substantial correlation between the ability of<br />
the debtor to repay and the collateral.<br />
Policy on internal controls to manage risk assets and conflicts of interest with regard to connected<br />
parties.<br />
The “Policy on internal controls to manage risk assets and conflicts of interest with regard to<br />
connected parties”, which implements Bank of Italy recommendations on “risk weighted assets and<br />
conflicts of interest with regard to connected parties”. Connected counterparty risk arises from the<br />
fact that “the closeness of persons to the decision-making centres of a bank might compromise the<br />
objectivity and impartiality of decisions concerning the grant of loans to, and other transactions with,<br />
those persons, which may result in possible distortions in the resource allocation process, the<br />
exposure of the bank to inadequately measured or monitored risks, and potential harm to depositors<br />
and shareholders”<br />
The policy defines guidelines and criteria for the adoption by the Group as a whole and by individual<br />
Group banks and companies of appropriate organisational structures, internal control systems and<br />
specific internal policies to manage that risk within two areas defined by the regulations: prudential<br />
limits and approval procedures;<br />
372
Finally, in order to take account of potential risks of conflicts of interest caused by counterparties<br />
that do not, strictly speaking, fall under the definition of connected parties but whose work could in<br />
any case have a significant impact on the bank’s risk appetite (e.g. “significant personnel”), the <strong>UBI</strong><br />
Group has adopted – in line with provisions on connected counterparties – appropriate processes to<br />
manage transactions in which such parties could have a direct or indirect interest, personally or<br />
otherwise.<br />
Policy to manage equity risk<br />
The “Policy to manage equity risk”, for which procedures were concluded in January 2013, completes<br />
the adoption of policies to manage the various risks to which the <strong>UBI</strong> Group is exposed in terms of its<br />
operating and organisations characteristics and it incorporates provisions recently issued by the<br />
Bank of Italy on the subject of “Equity investments that may be held”.<br />
Equity risk is defined as the risk of losses incurred in equity investments that are not fully<br />
consolidated on a line-by-line basis.<br />
With the adoption of this policy the Group has put appropriate controls in place designed to:<br />
- contain the risk of locking up too much liquidity as a result of making equity investments in<br />
financial and non-financial companies;<br />
- with specific reference to non-financial companies, promote risk and conflicting interest<br />
management that complies with the criterion of sound and prudent management.<br />
Finally, a specific focus was placed on private equity business which consists of acquiring stakes in a<br />
target company either by purchasing existing shares from third parties or by subscribing new share<br />
issues to bring new capital to the target company. More specifically the mission and relative<br />
strategies are specified, distinguishing between the acquisition of direct interests and the<br />
subscription of units in private equity funds formed by entities within the Group or outside it.<br />
1.2.3 Techniques for mitigating credit risk<br />
The Group employs standard risk mitigation techniques used in the banking sector by acquiring<br />
collateral such as properties and financial instruments as well as personal guarantees from<br />
counterparties for some types of loan. Determination of the total amount of credit that can be granted<br />
to a given customer and/or group of companies to which the customer belongs takes account of<br />
special criteria for assigning weightings to the different categories of risk and to guarantees. Prudent<br />
"haircuts" are applied to the estimated value of collateral depending on the type of security.<br />
The main types of security accepted by the Group are as follows:<br />
- real estate mortgage<br />
- pledge.<br />
In the case of mortgage collateral, a distinction is made between specially regulated “land” mortgage<br />
loans and ordinary mortgage loans with regard to the amount of the loan, which in the former case<br />
must comply with limits set in relation to the value or the cost of the assets used as collateral.<br />
Pledges represent the second general class of collateral used and different possible types of pledge<br />
exist within the Group depending on the instrument which is used as the collateral. They are as<br />
follows:<br />
373
- pledges on dematerialised financial instruments such as for example government securities,<br />
bonds and shares in listed companies, customer portfolio managements, bonds of the Group,<br />
etc.;<br />
- pledges of material securities, e.g. valuables and/or sums deposited on current accounts or<br />
bearer or named savings accounts, certificates of deposit, units in mutual funds, shares and<br />
bonds issued by unlisted companies;<br />
- pledges on insurance policies;<br />
- pledges of quotas held in limited liability companies, which by law must be formed by a<br />
notarial deed and are subject to registration.<br />
A pledge on the value of financial instruments is performed using defined measurement criteria and<br />
special “haircuts” which reflect the variability in the value of the security pledged. In the case of<br />
financial instruments denominated in foreign currency, the “haircut” applied for the volatility of the<br />
exchange rate must be added to that for the volatility of the security.<br />
As concerns pledges on rights arising from insurance policies, these may only be constituted on life<br />
insurance policies for which the regulations expressly allow the possibility of a pledge in favour of the<br />
Bank and only if determined conditions are met (e.g. once the time limit for exercising redemption<br />
rights has expired, policies which pay only in “case of death” must be excluded, and so forth). Special<br />
measurement criteria and “haircuts” are also defined for insurance policies.<br />
In order to ensure that general and specific requirements are met for recognition of collateral, as part<br />
of its credit risk mitigation techniques (CRM) (in accordance with Bank of Italy Circular No. 263 of<br />
27/12/2006 and subsequent updates), for prudent purposes the <strong>UBI</strong> Group has performed the<br />
following:<br />
- redefined credit processes relating to the acquisition and management of collateral. With<br />
particular regard to mortgages, in network banks it is compulsory to enter all data on a<br />
property needed to render collateral eligible in account manager software systems. Particular<br />
attention was paid to the compulsory nature of expert appraisals and to the prompt recovery<br />
of the relative information, including notarial information (details of registrations), essential<br />
for guarantees to be accepted;<br />
- acquired, for existing mortgages, all the information required to ensure that they are<br />
admissible, in line with the provisions of Basel 2 in terms of specific requirements.<br />
1.2.4 Deteriorated financial assets<br />
The classification of the problem loan portfolio complies with official regulations and can be<br />
summarised as follows:<br />
• exposures past due and/or continuously in arrears;<br />
• restructured positions;<br />
• impaired loans;<br />
• non-performing loans.<br />
In addition to those classes, there remains a type of problem loan in respect of “country risk” for<br />
unsecured exposures to institutional and ordinary customers belonging to countries considered as<br />
“at risk” as defined by the supervisory authority. With regard to “impaired” loans, in order to optimise<br />
management and solely for operational purposes, these are divided into positions for which it is<br />
considered that the temporary situation of objective difficulty can be overcome in a very short period<br />
374
of time (nine months) and the remaining positions, for which it is felt best to disengage from the<br />
account with credit recovery out of court over a longer period of time. Additionally, loans past due<br />
and/or continuously in arrears are subject to controls to decide, within a maximum operational<br />
period of 120 days, whether to reclassify them as either “performing” or into another non-performing<br />
loan class.<br />
The management of problem loans is performed on the basis of the level of risk. It is performed by the<br />
organisational units responsible for the management of problem loans of individual banks and<br />
product companies. For non-performing loan positions of the network banks (limited to those<br />
positions for which the management centralisation process has been completed) and Centrobanca<br />
(from January <strong>2012</strong> for the latter), management is by the Credit and Credit Recovery Area of the<br />
Parent. As already mentioned in the preceding pages, this unit underwent substantial organisational<br />
change designed to make credit recovery processes more effective through the specialisation of both<br />
credit recovery processes and units.<br />
Assessment of the appropriateness of impairment losses recognised is performed on a case by case<br />
basis for individual positions to ensure adequate levels of cover for expected losses.<br />
The analysis of deteriorated exposures is performed continuously by the single operational units<br />
which manage risks and by the Parent.<br />
The resolution of difficulties by counterparties is a determining factor for the return of positions to<br />
“performing” status. This event occurs principally and above all for accounts which are past due<br />
and/or continuously in arrears and for impaired accounts.<br />
375
Quantitative information<br />
A. Credit quality<br />
A.1 Deteriorated and performing credit exposures: amounts, impairment losses,<br />
changes, economic and geographical distribution<br />
A.1.1 Distribution of financial assets by portfolio and according to credit quality<br />
P o rtfo lio s /qua lity<br />
No n-<br />
pe rfo rming<br />
lo a ns<br />
Impa ire d<br />
lo a ns<br />
Ba nking g ro up<br />
Re s truc ture<br />
d e xpo s ure s<br />
P a s t-due<br />
e xpo s ure s<br />
Othe r c o mpa nie s<br />
Othe r a s s e ts De te rio ra te d Othe r a s s e ts<br />
1. Fina ncial assets held for trading 1,346 10,317 2,005 312 3,989,687 4 ,0 0 3 ,6 6 7<br />
2. Ava ilable-for-sale financial assets 2,069 13,611,745 13 ,6 13 ,8 14<br />
3. He ld-to-ma turity investments 3,158,013 3 ,15 8 ,0 13<br />
4. Loa ns a nd advances to banks - 5,912,081 160,265 6 ,0 7 2 ,3 4 6<br />
5. Loa ns a nd advances to customers 2,951,130 3,602,339 659,101 891,561 84,771,614 1,043 11,181 9 2 ,8 8 7 ,9 6 9<br />
6. Financ ial a ssets de signa te d a t fa ir va lue -<br />
7. Financ ial a ssets he ld for disposal -<br />
8. He dging deriva tives 1,478,322 1,4 7 8 ,3 2 2<br />
3 1.12 .2 0 12 2 ,9 5 2 ,4 7 6 3 ,6 12 ,6 5 6 6 6 3 ,17 5 8 9 1,8 7 3 112 ,9 2 1,4 6 2 1,0 4 3 17 1,4 4 6 12 1,2 14 ,13 1<br />
3 1.12 .2 0 11 2 ,4 8 1,8 0 5 2 ,5 4 1,15 0 8 4 2 ,12 5 4 2 5 ,9 6 6 110 ,9 6 2 ,6 16 9 6 8 3 3 ,13 3 117 ,2 8 7 ,7 6 3<br />
To ta l<br />
376
A.1.2 Distribution of credit exposures by portfolio and by credit quality (gross and net<br />
amounts)<br />
P o rtfo lio s /qua lity<br />
G ro s s e xpo s ure<br />
De te rio ra te d a s s e ts<br />
S pe c ific<br />
impa irme nt lo s s e s<br />
Ne t e xpo s ure<br />
G ro s s e xpo s ure<br />
Othe r a s s e ts<br />
P o rtfo lio<br />
impa irme nt lo s s e s<br />
Ne t e xpo s ure<br />
To ta l<br />
(ne t e xpo s ure )<br />
A. Ba nking g ro up<br />
1. Financ ial assets he ld for trading 16,206 (2,226) 13,980 3,989,687 3,989,687 4 ,0 0 3 ,6 6 7<br />
2. Available-for-sa le financ ial assets 2,069 - 2,069 13,611,745 13,611,745 13 ,6 13 ,8 14<br />
3. Held-to-ma turity investments - - - 3,158,013 3,158,013 3 ,15 8 ,0 13<br />
4. Loans a nd advances to ba nks - - - 5,912,298 (217) 5,912,081 5 ,9 12 ,0 8 1<br />
5. Loans a nd advances to customers 11,276,176 (3,172,045) 8,104,131 85,241,956 (470,342) 84,771,614 9 2 ,8 7 5 ,7 4 5<br />
6. Financia l a ssets designated at fair value - - - - - -<br />
7. Financia l a ssets held for disposal - - - - - -<br />
8. Hedging derivative s - - - 1,478,322 1,478,322 1,4 7 8 ,3 2 2<br />
To ta l A 11,2 9 4 ,4 5 1 (3 ,17 4 ,2 7 1) 8 ,12 0 ,18 0 113 ,3 9 2 ,0 2 1 (4 7 0 ,5 5 9 ) 112 ,9 2 1,4 6 2 12 1,0 4 1,6 4 2<br />
B. Othe r c o ns o lida te d unde rta king s<br />
1. Financ ial assets he ld for trading -<br />
2. Available-for-sa le financ ial assets -<br />
3. Held-to-ma turity investments -<br />
4. Loans a nd advances to ba nks - - - 160,265 - 160,265 16 0 ,2 6 5<br />
5. Loans a nd advances to customers 1,173 (130) 1,043 11,200 (19) 11,181 12 ,2 2 4<br />
6. Financia l a ssets designated at fair value -<br />
7. Financia l a ssets held for disposal -<br />
8. Hedging derivative s -<br />
To ta l B 1,17 3 (13 0 ) 1,0 4 3 17 1,4 6 5 (19 ) 17 1,4 4 6 17 2 ,4 8 9<br />
3 1.12 .2 0 12 11,2 9 5 ,6 2 4 (3 ,17 4 ,4 0 1) 8 ,12 1,2 2 3 113 ,5 6 3 ,4 8 6 (4 7 0 ,5 7 8 ) 113 ,0 9 2 ,9 0 8 12 1,2 14 ,13 1<br />
3 1.12 .2 0 11 8 ,8 9 7 ,5 2 8 (2 ,6 0 5 ,5 14 ) 6 ,2 9 2 ,0 14 111,5 3 7 ,5 6 2 (5 4 1,8 13 ) 110 ,9 9 5 ,7 4 9 117 ,2 8 7 ,7 6 3<br />
A.1.2.1 Distribution of renegotiated and non-renegotiated performing credit exposures by<br />
portfolio (total for the "Banking Group" and "Other consolidated undertakings ")<br />
Portfolios/time past due<br />
Exposures subject to renegotiation as part of collective agreements<br />
Past due for Past due over Past due over Past due<br />
up to 3 months 3 months 6 months over 1<br />
Not past due<br />
Past due<br />
for up to 3<br />
Past due<br />
over 3<br />
Other exposures<br />
Past due Past due<br />
over 6 over 1 year<br />
Not past due<br />
Total<br />
(net<br />
exposure)<br />
1. <strong>Financial</strong> assets held for trading - - - - - - - - - 3,989,687 3,989,687<br />
2. Available-for-sale financial assets - - - - - - - - - 13,611,745 13,611,745<br />
3. Held-to-maturity investments - - - - - - - - - 3,158,013 3,158,013<br />
4. Loans and advances to banks - - - - - 13,006 - - - 6,059,340 6,072,346<br />
5. Loans and advances to customers 202,344 813 190 - 1,279,992 4,995,080 98,016 47,234 1,356 78,157,770 84,782,795<br />
6. <strong>Financial</strong> assets designated at fair value - - - - - - - - - - -<br />
7. <strong>Financial</strong> assets held for disposal - - - - - - - - - - -<br />
8. Hedging derivatives - - - - - - - - - 1,478,322 1,478,322<br />
Total (T) 202,344 813 190 - 1,279,992 5,008,086 98,016 47,234 1,356 106,454,877 113,092,908<br />
Total (T-1) 15,256 4,416 4,168,498 - 126,439 45,269 1,203 106,634,668 110,995,749<br />
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A.1.3 Banking Group - On- and off-balance sheet credit exposures to banks: gross and net<br />
amounts<br />
Type o f e xpo s ure /a mo unts<br />
G ro s s e xpo s ure<br />
S pe c ific<br />
impa irme nt lo s s e s<br />
P o rtfo lio<br />
impa irme nt lo s s e s<br />
Ne t e xpo s ure<br />
A. O n-ba la nc e s he e t e xpo s ure<br />
a) non-performing loans X -<br />
b) Impaired loans X -<br />
c) Restructured exposures X -<br />
d) Past due exposures X -<br />
e) Other assets 7,518,194 X (217) 7,517,977<br />
To ta l A 7 ,5 18 ,19 4 - (2 17 ) 7 ,5 17 ,9 7 7<br />
B. O ff-ba la nc e s he e t e xpo s ure s<br />
a) Deteriorated - X -<br />
b) Other 2,389,526 X (397) 2,389,129<br />
To ta l B 2 ,3 8 9 ,5 2 6 - (3 9 7 ) 2 ,3 8 9 ,12 9<br />
To ta l A+B 9 ,9 0 7 ,7 2 0 - (6 14 ) 9 ,9 0 7 ,10 6<br />
A.1.4 Banking Group - On-balance sheet credit exposures to banks: changes in gross<br />
deteriorated exposures<br />
De s c riptio n/c a te g o rie s<br />
No n-pe rfo rming<br />
lo a ns<br />
Impa ire d lo a ns<br />
Re s truc ture d<br />
e xpo s ure s<br />
P a s t-due<br />
e xpo s ure s<br />
A. Initia l g ro s s e xpo s ure 17 9 - - -<br />
- of which: exposures transferred not derecognised - - - -<br />
B. Inc re a s e s - - - -<br />
B.1 transfers from performing exposures - - - -<br />
B.2 transfers from other categories of deteriorated exposures - - - -<br />
B.3 other increases - - - -<br />
C. De c re a s e s (17 9 ) - - -<br />
C.1 transfers to performing exposures - - - -<br />
C.2 write-offs - - - -<br />
C.3 payments received (179) - - -<br />
C.4 from disposals - - - -<br />
C.5 transfers to other categories of impaired exposures - - - -<br />
C.6 other decreases - - - -<br />
D. Fina l g ro s s e xpo s ure - - - -<br />
- of which: exposures transferred not derecognised - - - -<br />
378
A.1.5 Banking Group - On-balance sheet credit exposures to banks: changes in total net<br />
impairment losses<br />
De s c riptio n/c a te g o rie s<br />
No n-pe rfo rming<br />
lo a ns<br />
Impa ire d lo a ns<br />
Re s truc ture d<br />
e xpo s ure s<br />
P a s t-due<br />
e xpo s ure s<br />
A. To ta l initia l ne t impa irme nt (112 ) - - -<br />
- of which: exposures transferred not derecognised - - - -<br />
B. Inc re a s e s (6 8 ) - - -<br />
B.1 impairment losses (68) - - -<br />
B.1.a losses on disposal - - - -<br />
B.2 transfers from other categories of deteriorated exposures - - - -<br />
B.3 other increases - - - -<br />
C. De c re a s e s 18 0 - - -<br />
C.1 unrealised reversals of impairment losses 2 - - -<br />
C.2 realised reversals of impairment losses - - - -<br />
C.2.a profits on the disposal - - - -<br />
C.3 write-offs - - - -<br />
C.4 transfers to other categories of impaired exposures - - - -<br />
C.5 other decreases 178 - - -<br />
D. To ta l c lo s ing ne t impa irme nt - - - -<br />
- of which: exposures transferred not derecognised - - - -<br />
A.1.6 Banking Group - On- and off-balance sheet credit exposures to customers: gross and net<br />
amounts<br />
Type o f e xpo s ure /a mo unts<br />
G ro s s e xpo s ure<br />
S pe c ific<br />
impa irme nt lo s s e s<br />
P o rtfo lio<br />
impa irme nt lo s s e s<br />
Ne t e xpo s ure<br />
A. O n-ba la nc e s he e t e xpo s ure<br />
a) non-performing loans 5,461,243 (2,509,245) X 2,951,998<br />
b) Impaired loans 4,123,304 (520,966) X 3,602,338<br />
c) Restructured exposures 776,003 (114,833) X 661,170<br />
d) Past due exposures 918,563 (27,002) X 891,561<br />
e) Other assets 103,820,790 X (470,338) 103,350,452<br />
To ta l A 115 ,0 9 9 ,9 0 3 (3 ,17 2 ,0 4 6 ) (4 7 0 ,3 3 8 ) 111,4 5 7 ,5 19<br />
B. O ff-ba la nc e s he e t e xpo s ure s<br />
a) Deteriorated 243,656 (19,660) X 223,996<br />
b) Other 15,133,932 X (31,329) 15,102,603<br />
To ta l B 15 ,3 7 7 ,5 8 8 (19 ,6 6 0 ) (3 1,3 2 9 ) 15 ,3 2 6 ,5 9 9<br />
To ta l A+B 13 0 ,4 7 7 ,4 9 1 (3 ,19 1,7 0 6 ) (5 0 1,6 6 7 ) 12 6 ,7 8 4 ,118<br />
379
A.1.7 Banking Group - On-balance sheet credit exposures to customers: changes in gross<br />
deteriorated exposures<br />
De s c riptio n/c a te g o rie s<br />
No n-pe rfo rming<br />
lo a ns<br />
Impa ire d lo a ns<br />
Re s truc ture d<br />
e xpo s ure s<br />
P a s t-due<br />
e xpo s ure s<br />
A. Init ia l g ro s s e xpo s ure 4 ,6 6 8 ,8 9 8 2 ,8 4 6 ,0 8 1 9 3 3 ,7 7 6 4 3 4 ,15 8<br />
- of which: exposures transferred not derecognised - - - -<br />
B. Inc re a s e s 1,5 7 5 ,9 7 1 3 ,3 9 4 ,6 9 4 2 8 5 ,2 5 5 2 ,12 2 ,18 4<br />
B.1 transfers from performing exposures 312,097 1,963,532 18,520 2,078,775<br />
B.2 transfers from other categories of deteriorated exposures 1,087,165 1,069,520 192,597 7,337<br />
B.3 other increases 176,709 361,642 74,138 36,072<br />
C. De c re a s e s (7 8 3 ,6 2 6 ) (2 ,117 ,4 7 1) (4 4 3 ,0 2 8 ) (1,6 3 7 ,7 7 9 )<br />
C.1 transfers to performing exposures (44,546) (471,787) (54,211) (375,959)<br />
C.2 write-offs (288,055) (6,780) (2,423) (3,079)<br />
C.3 payments received (282,036) (390,704) (102,330) (138,608)<br />
C.4 from disposals (106,172) - (4,215) -<br />
C.5 transfers to other categories of impaired exposures (16,432) (1,056,854) (278,076) (1,005,257)<br />
C.6 other decreases (46,385) (191,346) (1,773) (114,876)<br />
D. Fina l g ro s s e xpo s ure 5 ,4 6 1,2 4 3 4 ,12 3 ,3 0 4 7 7 6 ,0 0 3 9 18 ,5 6 3<br />
- of which: exposures transferred not derecognised - - - -<br />
A.1.8 Banking Group - On-balance sheet credit exposures to customers: changes in total net<br />
impairment losses<br />
De s c riptio n/c a te g o rie s<br />
No n-pe rfo rming<br />
lo a ns<br />
Impa ire d lo a ns<br />
Re s truc ture d<br />
e xpo s ure s<br />
P a s t-due<br />
e xpo s ure s<br />
A. To t a l initia l ne t impa irme nt (2 ,18 8 ,0 6 5 ) (3 11,6 5 2 ) (9 3 ,0 9 5 ) (10 ,15 2 )<br />
- of which: exposures transferred not derecognised<br />
B. Inc re a s e s (9 10 ,6 8 9 ) (4 14 ,5 4 1) (6 4 ,8 3 8 ) (2 9 ,2 5 9 )<br />
B.1 impairment losses (748,015) (343,652) (31,544) (18,889)<br />
B.1.a losses on disposal (510) - (3,139) -<br />
B.2 transfers from other categories of deteriorated exposures (122,535) (13,602) (23,675) (1,067)<br />
B.3 other increases (39,629) (57,287) (6,480) (9,303)<br />
C. De c re a s e s 5 8 9 ,5 0 9 2 0 5 ,2 2 7 4 3 ,10 0 12 ,4 0 9<br />
C.1 unrealised reversals of impairment losses 82,343 15,696 2,719 1,911<br />
C.2 realised reversals of impairment losses 84,417 40,781 10,474 2,764<br />
C.2.a profits on the disposal - - - -<br />
C.3 write-offs 288,055 6,780 2,423 3,079<br />
C.4 transfers to other categories of impaired exposures 17,766 114,172 24,345 4,596<br />
C.5 other decreases 116,928 27,798 3,139 59<br />
D. To t a l c lo s ing ne t impa irme nt (2 ,5 0 9 ,2 4 5 ) (5 2 0 ,9 6 6 ) (114 ,8 3 3 ) (2 7 ,0 0 2 )<br />
- of which: exposures transferred not derecognised - - - -<br />
380
A.2 Classification of exposures on the basis of external and internal ratings<br />
A.2.1 Banking Group - Distribution of on- and off-balance sheet exposures by class of external rating<br />
Exposures External rating classes Unrated Total<br />
Class 1 Class 2 Class 3 Class 4 Class 5 Class 6<br />
A. On-balance sheet exposure 1,017,544 2,291,219 13,065,800 1,109,478 293,183 424,623 100,774,557 118,976,404<br />
B. Derivatives 67,208 33,300 215,732 - - - (62,335) 253,905<br />
B.1 <strong>Financial</strong> derivatives 67,208 33,300 215,732 - - - (60,050) 256,190<br />
B.2 Credit derivatives - - - - - - (2,285) (2,285)<br />
C. Guarantees granted 2,724 119,614 118,241 - - - 7,762,052 8,002,631<br />
D. Commitments to grant funds - 42,617 280,285 36,438 1,042 1,928 3,240,153 3,602,463<br />
E. Other - - - - - - - -<br />
Total 1,087,476 2,486,750 13,680,058 1,145,916 294,225 426,551 111,714,427 130,835,403<br />
A.2.2 Banking Group - Distribution of on- and off-balance sheet exposures by class of internal rating<br />
Exposures Internal rating classes<br />
unrated TOTAL<br />
Rating 1 Rating 2 Rating 3 Rating 4 Rating 5 Rating 6 Rating 7 Rating 8 Rating 9 Rating 10 Rating 11 Rating 12 Rating 13 Rating 14<br />
A. On-balance sheet exposure 552,112 1,818,982 3,883,851 4,331,927 18,280,246 1,639,479 8,069,221 12,730,443 3,159,706 6,753,509 3,168,308 1,699,869 1,053,487 483,195 34,390,562 102,014,897<br />
B. Derivatives 1,177 6,607 40,149 23,533 35,834 10,117 103,768 76,786 9,101 69,125 8,747 2,894 663 2,057 2,508,341 2,898,899<br />
B.1 <strong>Financial</strong> derivatives 1,177 6,607 40,149 23,533 35,834 10,117 103,768 76,786 9,101 69,125 8,747 2,894 663 2,057 2,506,056 2,896,614<br />
B.2 Credit derivatives 2,285 2,285<br />
C. Guarantees granted 96,705 574,051 84,102 1,253,926 1,895,264 60,501 602,601 684,895 87,398 159,221 39,544 20,500 5,920 7,162 29,449,883 35,021,673<br />
D. Commitments to grant funds 32,579 74,078 73,846 204,591 519,771 136,628 246,601 299,438 71,783 150,040 24,927 8,421 2,742 13,559 1,607,621 3,466,625<br />
E. Other - - - - - - - - - - - - - - - -<br />
Total 682,573 2,473,718 4,081,948 5,813,977 20,731,115 1,846,725 9,022,191 13,791,562 3,327,988 7,131,895 3,241,526 1,731,684 1,062,812 505,973 67,956,407 143,402,094<br />
The classes on the “Master Scale” consist of probability of default (PD) intervals within which PDs corresponding to the single class of<br />
the different internal rating models are mapped. The rating classes are presented in decreasing order of creditworthiness: the best<br />
creditworthiness in rating class 1; the worst creditworthiness in rating class 14.<br />
The distribution shows the aggregates of exposures (i.e. net of intercompany eliminations) to the ordinary customers to which internal<br />
credit ratings have been assigned by <strong>UBI</strong> <strong>Banca</strong>, the network banks of the Group (<strong>Banca</strong> Popolare di Ancona Spa, <strong>Banca</strong> Carime Spa,<br />
<strong>Banca</strong> Popolare di Bergamo Spa, <strong>Banca</strong> Popolare Commercio e Industria Spa, <strong>Banca</strong> di Valle Camonica Spa, <strong>UBI</strong> <strong>Banca</strong> Private<br />
Investment Spa, <strong>Banca</strong> Regionale Europea Spa, Banco di Brescia Spa) and Centrobanca Spa (“specialised lending” exposures are also<br />
given for the latter).<br />
381
A.3 Distribution of guaranteed/secured credit exposures by type of guarantee<br />
A.3.1 Banking Group – Guaranteed/secured credit exposures to banks<br />
Amount of net exposure<br />
Properties<br />
Secured (1)<br />
Securities<br />
Other collateral<br />
CLN<br />
Personal guarantees (2)<br />
Credit derivatives<br />
Unsecured guarantees<br />
Other derivatives<br />
Governments<br />
and central<br />
Other public<br />
authorities<br />
Banks<br />
Other<br />
Governments and<br />
central banks<br />
Other public<br />
authorities<br />
Banks<br />
Other<br />
Total (1)+(2)<br />
1. on-balance sheet secured/guaranteed credit exposures:<br />
1.1. fully guaranteed/secured 3,998,757 49,839 3,996,934 - - - - - - - - 6 24,424 4,071,203<br />
- of which deteriorated - - - - - - - - - - - - - -<br />
1.2. partially guaranteed/secured 917,641 - 912,215 - - - - - - - - - - 912,215<br />
- of which deteriorated - - - - - - - - - - - - - -<br />
2. Off-balance sheet guaranteed/secured credit exposures:<br />
2.1. fully guaranteed/secured 701,002 - - 716,737 - - - - - - - - - 716,737<br />
- of which deteriorated - - - - - - - - - - - - - -<br />
2.2. partially guaranteed/secured 169,445 - - 167,490 - - - - - - - - - 167,490<br />
- of which deteriorated - - - - - - - - - - - - - -<br />
382
A.3.2 Banking Group – Guaranteed/secured credit exposures to customers<br />
Amount of net exposure<br />
Properties<br />
Secured (1)<br />
Securities<br />
Other collateral<br />
CLN<br />
Credit derivatives<br />
Other derivatives<br />
Governments<br />
and central<br />
Other public<br />
authorities<br />
Banks<br />
Other<br />
Personal guarantees (2)<br />
Unsecured guarantees<br />
Governments and<br />
central banks<br />
Other public<br />
authorities<br />
Banks<br />
Other<br />
Total (1)+(2)<br />
1. on-balance sheet secured/guaranteed credit exposures:<br />
1.1 fully guaranteed secured 59,356,094 129,885,887 3,997,199 356,846 - - - - - 397,710 319,585 199,022 57,097,170 192,253,419<br />
- of which deteriorated 4,748,107 11,155,160 124,824 27,365 - - - - - 28,377 46,380 12,368 7,645,668 19,040,142<br />
1.2 partially guaranteed/secured 12,600,424 228,446 738,816 4,561,371 - - - - - 135,406 58,603 128,444 4,389,950 10,241,036<br />
- of which deteriorated 1,648,155 50,250 58,129 352,333 5,740 6,023 2,740 997,991 1,473,206<br />
2. Off-balance sheet guaranteed/secured credit exposures:<br />
2.1 fully guaranteed secured 2,655,599 2,463,718 164,381 59,599 - - - - - 1,655 5,410 13,167 3,037,589 5,745,519<br />
- of which deteriorated 68,197 76,610 3,278 881 - - - - - - 17 448 110,324 191,558<br />
2.2 partially guaranteed/secured 237,272 14,991 29,957 8,045 - - - - - 775 195 35,865 20,725 110,553<br />
- of which deteriorated 4,312 - 189 104 - - 400 1,298 1,991<br />
383
B. Distribution and concentration of credit exposures<br />
B.1 Banking group - Distribution of on- and off-balance sheet exposures to customers by sector (carrying amount)<br />
Governments and Central Banks Other public authorities <strong>Financial</strong> companies Insurance companies Non financial companies<br />
Other<br />
Exposures/Counterparties<br />
Net exposure<br />
Specific impairment losses<br />
Portfolio impairment losses<br />
Net exposure<br />
Specific impairment losses<br />
Portfolio impairment losses<br />
Net exposure<br />
Specific impairment losses<br />
Portfolio impairment losses<br />
Net exposure<br />
Specific impairment losses<br />
Portfolio impairment losses<br />
Net exposure<br />
Specific impairment losses<br />
Portfolio impairment losses<br />
Net exposure<br />
Specific impairment losses<br />
Portfolio impairment losses<br />
A. On-balance sheet exposure<br />
A.1 Non-performing loans 75 - X 3,927 (1,798) X 13,212 (50,772) X 163 (1,781) X 2,069,830 (1,614,284) X 864,791 (840,610) X<br />
A.2 Impaired loans - - X 274 (19) X 59,708 (30,967) X 24 (6) X 2,351,216 (349,970) X 1,191,116 (140,004) X<br />
A.3 Restructured exposures - - X 7 - X 10,795 (5,529) X - - X 642,758 (107,976) X 7,610 (1,328) X<br />
A.4 Past due exposures 15,312 - X 35,238 - X 8,810 (24) X - - X 560,756 (17,607) X 271,445 (9,371) X<br />
A.5 Other exposures 18,208,738 X (37) 799,934 X (2,710) 3,092,097 X (11,879) 149,632 X (9) 47,689,544 X (301,812) 33,410,507 X (153,891)<br />
TOTAL A 18,224,125 - (37) 839,380 (1,817) (2,710) 3,184,622 (87,292) (11,879) 149,819 (1,787) (9) 53,314,104 (2,089,837) (301,812) 35,745,469 (991,313) (153,891)<br />
B. Off-bal ance sheet<br />
exposures<br />
B.1 Non-performing loans - - X - - X 3,640 - X - - X 11,381 (9,922) X 162 (21) X<br />
B.2 Impaired loans - - X - - X 28,210 (35) X - - X 100,280 (4,794) X 1,926 (72) X<br />
B.3 Other deteriorated assets - - X - - X 422 (3) X - - X 77,374 (4,808) X 601 (5) X<br />
B.4 Other exposures 256,744 X (1) 1,132,041 X (1,269) 1,504,463 X (3,856) 41,198 X (61) 10,973,490 X (14,059) 1,194,667 X (12,083)<br />
TOTAL B 256,744 - (1) 1,132,041 - (1,269) 1,536,735 (38) (3,856) 41,198 - (61) 11,162,525 (19,524) (14,059) 1,197,356 (98) (12,083)<br />
31.12.<strong>2012</strong> 18,480,869 - (38) 1,971,421 (1,817) (3,979) 4,721,357 (87,330) (15,735) 191,017 (1,787) (70) 64,476,629 (2,109,361) (315,871) 36,942,825 (991,411) (165,974)<br />
31.12.2011 8,569,767 - (90) 2,168,047 (1,232) (5,191) 5,500,713 (96,399) (15,045) 591,489 (1,960) (28) 68,483,238 (1,626,786) (345,974) 38,204,292 (895,859) (219,964)<br />
384
B.2 Banking group – Geographical distribution of on- and off-balance sheet exposures to customers (carrying<br />
amount)<br />
ITALY<br />
OTHER EUROPEAN<br />
COUNTRIES<br />
AMERICA ASIA REST OF THE WORLD<br />
Exposures/Geographical areas<br />
Net exposure<br />
Total<br />
impairment<br />
losses<br />
Net exposure<br />
Total<br />
impairment<br />
losses<br />
Net exposure<br />
Total<br />
impairment<br />
losses<br />
Net exposure<br />
Total<br />
impairment<br />
losses<br />
Net exposure<br />
Total<br />
impairment<br />
losses<br />
A. On-balance sheet exposure<br />
A.1 Non-performing loans 2,935,685 (2,476,867) 14,088 (21,385) 2,033 (5,820) - (4,737) 192 (436)<br />
A.2 Impaired loans 3,555,562 (506,113) 43,372 (14,720) 51 (20) - (1) 3,353 (112)<br />
A.3 Restructured exposures 640,544 (109,678) 20,549 (5,154) 32 (1) - - 45 -<br />
A.4 Past due exposures 875,778 (26,985) 15,780 (16) - - - - 3 (1)<br />
A.5 Other exposures 100,185,083 (457,332) 2,298,327 (9,551) 659,552 (3,426) 6,012 (14) 201,478 (15)<br />
TOTAL 108,192,652 (3,576,975) 2,392,116 (50,826) 661,668 (9,267) 6,012 (4,752) 205,071 (564)<br />
B. Off-balance sheet exposures<br />
B.1 Non-performing loans 15,183 (4,250) - - - - - - - -<br />
B.2 Impaired loans 130,213 (10,588) 203 (6) - - - - - -<br />
B.3 Other deteriorated assets 77,577 (4,808) 820 (8) - - - - - -<br />
B.4 Other exposures 13,695,828 (30,868) 1,208,587 (454) 183,893 (4) 2,484 (2) 11,811 (1)<br />
TOTAL 13,918,801 (50,514) 1,209,610 (468) 183,893 (4) 2,484 (2) 11,811 (1)<br />
31.12.<strong>2012</strong> 122,111,453 (3,627,489) 3,601,726 (51,294) 845,561 (9,271) 8,496 (4,754) 216,882 (565)<br />
31.12.2011 118,820,414 (3,145,707) 3,730,866 (44,919) 734,236 (12,232) 15,808 (4,541) 216,222 (1,129)<br />
385
B.3 Banking group – Geographical distribution of on- and off-balance sheet exposures to banks (carrying amount)<br />
ITALY<br />
OTHER EUROPEAN<br />
COUNTRIES<br />
AMERICA ASIA REST OF THE WORLD<br />
Exposures/Geographical areas<br />
Net exposure<br />
Total<br />
impairment<br />
losses<br />
Net exposure<br />
Total<br />
impairment<br />
losses<br />
Net exposure<br />
Total<br />
impairment<br />
losses<br />
Net exposure<br />
Total<br />
impairment<br />
losses<br />
Net exposure<br />
Total<br />
impairment<br />
losses<br />
A. On-balance sheet exposure<br />
A.1 Non-performing loans - - - - - - - - - -<br />
A.2 Impaired loans - - - - - - - - - -<br />
A.3 Restructured exposures - - - - - - - - - -<br />
A.4 Past due exposures - - - - - - - - - -<br />
A.5 Other exposures 2,874,626 (217) 3,666,615 - 891,048 - 28,053 - 57,635 -<br />
TOTAL 2,874,626 (217) 3,666,615 - 891,048 - 28,053 - 57,635 -<br />
B. Off-balance sheet exposures<br />
B.1 Non-performing loans - - - - - - - - - -<br />
B.2 Impaired loans - - - - - - - - - -<br />
B.3 Other deteriorated assets - - - - - - - - - -<br />
B.4 Other exposures 1,081,043 (2) 1,202,339 (228) 36,044 (12) 62,156 (126) 7,547 (29)<br />
TOTAL 1,081,043 (2) 1,202,339 (228) 36,044 (12) 62,156 (126) 7,547 (29)<br />
31.12.<strong>2012</strong> 3,955,669 (219) 4,868,954 (228) 927,092 (12) 90,209 (126) 65,182 (29)<br />
31.12.2011 4,671,953 (160) 4,372,103 (440) 416,030 (20) 62,040 (213) 216,300 (80)<br />
386
B.4 Large exposures<br />
On the basis of updates to Bank of Italy Circular No. 263 of 27 th December 2006 and subsequent<br />
regulatory clarifications issued by the supervisory authority, the number of large risks presented in<br />
the table was determined by making reference to the non-weighted “exposures”, including those<br />
towards Group counterparties, with a nominal value equal to or greater than 10% of the regulatory<br />
capital, where “exposures” are defined as the sum of on-balance sheet risk assets and off-balance<br />
sheet commitments (excluding those deducted from regulatory capital) towards a customer or a group<br />
of connected customers, without the application of weighting factors.<br />
Due to such exposure criteria, the balance sheet table relative to Large risk positions encompass also<br />
subjects which – although have weighting of 0% -present a non–weighted exposure equal to or greater<br />
than 10% of the equity capital valid for the purposesof Large risks.<br />
31.12.<strong>2012</strong><br />
Number of positions 2<br />
Exposure 22,599,040<br />
Risk position 141,175<br />
“Large exposures” consisted of the following:<br />
• €17,975 million to the Ministry of the Treasury (€0 million considering weighting factors)<br />
mainly in relation to investments in government securities by the Parent;<br />
• €4,625 million to the CCG (a central counterparty clearing house) (€141.2 million considering<br />
weighting factors), principally as a result of overall transactions by the Parent.<br />
The percentage of consolidated regulatory capital is well below the limit of 25% set for banking<br />
groups for each of the exposures reported.<br />
387
C. Securitisations and transfer of assets<br />
C.1 Securitisation transactions<br />
Qualitative information<br />
Underlying objectives, strategies and processes of securitisations<br />
Own securitisations<br />
The “own” securitisations of the <strong>UBI</strong> Group are of the following two types:<br />
i) conventional securitisations of the assets of Group member companies which allow direct<br />
access to capital markets, with the objective of narrowing the liquidity gap between<br />
medium-to-long term lending and short term funding, diversifying the sources of financing<br />
at a competitive cost of funding and reducing risk assets calculated for the purposes of<br />
solvency ratios, without excluding the originator (transferor) from the management of<br />
customer relationships;<br />
ii) conventional securitisations of own assets in order to generate assets eligible as collateral<br />
for refinancing with the European Central Bank (termed self-securitisations). These<br />
transactions, which are structured in exactly the same way as those in the preceding<br />
point i), are performed to strengthen the liquidity position of the Group, in compliance<br />
with internal policies, in order to maintain a high level of counterbalancing capacity.<br />
Law No. 130/99 “Measures on the securitisation of loans” introduced into national legislation<br />
the possibility of performing securitisation transactions using specially formed Italian<br />
registered companies (termed special purpose entities), which allow an entity to acquire<br />
funding by securitising part of the assets which it owns. Generally the assets (usually loans)<br />
recognised in the balance sheet of an entity are transferred to an SPE, which issues securities<br />
sold on the market in order to fund the purchase and pay back the amount received to the<br />
transferor. The redemption and return on the securities issued depend on the cash flows<br />
generated by the loans transferred. In conventional securitisation transactions of its own<br />
assets, designed to generate assets eligible as collateral, <strong>UBI</strong> fully subscribes two tranches of<br />
the securities issued by the SPE in order to finance the purchase of the loans. The senior<br />
securities assigned a rating are listed and can be used for refinancing operations with the<br />
ECB.<br />
The following companies in the <strong>UBI</strong> Group have taken advantage of Law No. 130 for<br />
securitisations: <strong>UBI</strong> Finance 2 Srl, <strong>UBI</strong> Finance 3 Srl, Lombarda Lease Finance 4 Srl, <strong>UBI</strong><br />
Lease Finance 5 Srl, Albenza 3 Società per la Cartolarizzazione Srl – Orio Finance nr 3 Plc, ,<br />
24-7 Finance Srl, <strong>UBI</strong> SPV BPA <strong>2012</strong> Srl, <strong>UBI</strong> SPV BPCI <strong>2012</strong> Srl, <strong>UBI</strong> SPV BBS <strong>2012</strong> Srl.<br />
***<br />
Downgrades performed in the last quarter of 2011 in the wake of the lowering of Italy’s credit<br />
rating by Moody's and Fitch, had the consequence, amongst other things, of making it<br />
necessary to restructure the securitisations originated and held on the books as owned by the<br />
Group (“self securitisations”), in order to ensure continuity to the investments of the special<br />
purpose entities without compromising the eligibility of the senior notes issued.<br />
More specifically, on the one hand the ratings on the financial instruments invested in by the<br />
special purpose entities had to be redefined and on the other hand collateral had to be lodged<br />
on behalf of those entities for the swaps which back those securitisations, where <strong>UBI</strong> <strong>Banca</strong> is<br />
a direct counterparty.<br />
The new ratings assigned did not compromise their eligibility for refinancing operations with<br />
the European Central Bank.<br />
The downgrade of <strong>UBI</strong> <strong>Banca</strong>’s ratings by Fitch in 2010 made it necessary to take action again<br />
with further restructuring of the three securitisations rated by Fitch (<strong>UBI</strong> Finance 2, <strong>UBI</strong><br />
Finance 3 and <strong>UBI</strong> Lease Finance 5).<br />
The action described above helped to reduce the link between the discussed securitisations<br />
with the Parent, <strong>UBI</strong> <strong>Banca</strong>, making them less vulnerable to possible further downgrades<br />
caused by changes in the Parent’s rating.<br />
388
In 2009 the <strong>UBI</strong> Group set a specific policy for the management of securitisation risk in<br />
compliance with supervisory regulations (Circular No. 263/06). Sub-section 1 of Section 1,<br />
“Credit Risk”, in these Notes to the financial statements may be consulted for further<br />
information.<br />
Third party securitisation transactions<br />
As an investor the <strong>UBI</strong> Group holds a residual position in instruments relating to<br />
securitisations (ABS and other structured credit products) with a market value of €0.2 million<br />
as at 31 st December <strong>2012</strong>, which was classified within financial assets held for trading.<br />
More specifically direct investment in the instruments in question consisted exclusively of ABS<br />
instruments relating to the subsidiary <strong>UBI</strong> <strong>Banca</strong> International, with the underlying mainly of<br />
European origin.<br />
Securitisations: characteristics<br />
The <strong>UBI</strong> Finance 2 Srl transaction which holds a <strong>UBI</strong> Banco di Brescia securitisation was<br />
concluded in the first few months of 2009. On 13 th January 2009 the contract for the transfer<br />
of a loan portfolio was signed, which consisted of €2,093,238,616.49 of performing loans to<br />
small-to-medium sized businesses, while the issuance of the relative notes, fully subscribed by<br />
the originator (<strong>UBI</strong> Banco di Brescia), was performed on 27 th February 2009.<br />
The main characteristics of the <strong>UBI</strong> Finance 2 securities issued in 2009 are as follows:<br />
• class A notes (senior tranches): nominal amount €1,559,500,000.00 at floating rate, made<br />
available to the Parent, <strong>UBI</strong> <strong>Banca</strong>, by means of repurchase agreements, to be used as<br />
collateral in refinancing transactions with the ECB or to guarantee intraday transactions with<br />
the Bank of Italy. Following the action described above, the notes were downgraded by Moody's<br />
from “Aaa” to “A2” and by Fitch from “Aaa” to “A-” (from 15 th January 2013 from “A-” to “A+”);<br />
• class B notes (junior tranches): nominal amount €519,850,000.00 unrated and with a yield<br />
equal to the additional return on the transaction, which allow the originator, Banco di Brescia,<br />
to benefit from the excess spread on the underlying portfolios.<br />
From 20 th July 2011, the progressive amortisation of the class A notes commenced, amounting<br />
to approximately €1,210 million. Therefore as at 31 st December <strong>2012</strong>, the senior tranches<br />
amounted to €311,042,587, nominal while the amount of the class B notes, which because of<br />
their subordination received no amortisation payment, remained unchanged. On 20 th January<br />
2013 a further €43 million approximately was repaid on the class A notes.<br />
In the second half of 2011 a new securitisation transaction was performed by transferring<br />
loans to small and medium-sized enterprises, classified as performing and held by the<br />
subsidiary <strong>Banca</strong> Popolare di Bergamo Spa, to the special purpose entity <strong>UBI</strong> Finance 3 Srl.<br />
The transaction was performed in two stages:<br />
• the transfer of the loans by the originator <strong>Banca</strong> Popolare di Bergamo to the special purpose<br />
entity <strong>UBI</strong> Finance 3 on 6 th December 2010, for an amount of approximately €2.8 billion;<br />
• the issue of notes by <strong>UBI</strong> Finance 3 (performed in July 2011).<br />
The main characteristics of the <strong>UBI</strong> Finance 3 notes issued in 2011 are as follows:<br />
• class A notes (senior tranches): original nominal amount €1,863,600,000.00 at floating rate<br />
with maturity in 2050. Following the action described above, the notes were downgraded by<br />
Moody's from “Aaa” to A2 and by Fitch from “Aaa” to “A-”;<br />
• class B notes (junior tranches): nominal amount €897,300,000.00 unrated and with a yield<br />
equal to the additional return on the transaction.<br />
When the mortgages were transferred, servicing and sub-servicing contracts were signed by<br />
which <strong>UBI</strong> <strong>Banca</strong> as the Parent performs the role of servicer, while the collection of payments<br />
and the management of relations with customers for the securitised assets were delegated to<br />
389
the originator, <strong>Banca</strong> Popolare di Bergamo, as the sub-servicer (here too, except for those<br />
positions reclassified as non-performing, which will be handled by the Problem Loan and<br />
Credit Recovery Area of the Parent).<br />
The Lombarda Lease Finance 4 Srl securitisation was performed by means of a number of<br />
interconnected contracts, with the following structure:<br />
• on 11.05.2005 a contract was signed for the periodic transfer without recourse by the <strong>UBI</strong><br />
Leasing Spa to Lombarda Lease Finance 4 S.r.l. (LLF4) of loans relating to leasing contracts,<br />
against payment of the nominal value of the loans transferred by the special purpose entity<br />
(LLF4). On 19.10.2005, <strong>UBI</strong> leasing transferred to LLF4, under the transfer contract signed,<br />
loans relating to leasing contracts for an amount equal to the loans transferred which had<br />
expired;<br />
• the amount of the loans transferred in the first transfer was €1,100,007,686 and the amount<br />
for the first transfer scheduled under the “revolving” programme was €63,637,298;<br />
• collection of the repayments was managed by the “originator” as the “servicer” of the<br />
transaction, on specific mandate of the transferee;<br />
• on 15.06.2005, LLF4 issued notes with different redemption characteristics in order to fund<br />
the transaction;<br />
• subscription of class A1-A2-B “Senior and Mezzanine” notes by institutional investors;<br />
• subscription of class D “Junior” securities by the originator.<br />
The <strong>UBI</strong> Lease Finance 5 Srl securitisation was performed by means of a number of<br />
interconnected contracts, with the following structure:<br />
on 13.11.2008 a contract was signed for the transfer without recourse by <strong>UBI</strong> Leasing Spa to<br />
<strong>UBI</strong> Lease Finance 5 S.r.l. (LF5) of the principal of implicit performing loans recognised in the<br />
accounts as at 31.10.2008 relating to leasing contracts, against payment of the nominal<br />
amount of the loans transferred by the SPE (LF5);<br />
• the amount of the loans transferred was €4,024,051,893.21;<br />
• collection of the repayments was managed by the “originator” as the “servicer” of the<br />
transaction, on specific mandate of the transferee;<br />
• on 28.11.2009 LF5 issued notes with differing redemption characteristics;<br />
• subscription of class A-B “senior and junior” notes by the originator. Following the events<br />
described above, the senior notes were downgraded by Moody's from “Aaa” to “A2” and by<br />
Fitch from “Aaa” to “A-”.<br />
The securitisation Albenza 3 Società per la Cartolarizzazione Srl was performed in 2001 on<br />
performing loans resulting from mortgages granted to private individuals resident in Italy. The<br />
transfer contract was structured as follows:<br />
• the transfer without recourse of the loans to the special purpose entity Albenza 3 Società per<br />
la Cartolarizzazione S.r.l., in which the <strong>UBI</strong> <strong>Banca</strong> Group holds no interest, amounting to<br />
€389,532,000;<br />
• funding of the operation by the issue of a single Albenza 3 Società per la Cartolarizzazione<br />
S.r.l. note (unrated);<br />
• the note was purchased by BPB International Finance Plc (liquidated in 2004) and<br />
securitised again with the assistance of the Irish registered SPV Orio Finance nr. 3 Plc.<br />
The Orio Finance nr 3 plc securitisation was performed in 2002 on the securities present in<br />
the BPB International Finance plc portfolio amounting to €390,000,000 and on the Albenza 3<br />
notes already mentioned, together with other MBS securities (Holmes Funding nr 1 Plc;<br />
Holmes Funding nr 2 Plc).<br />
The transfer contract was structured as follows:<br />
• transfer of securities to the special purpose vehicle Orio Finance nr 3 plc, in which the <strong>UBI</strong><br />
<strong>Banca</strong> Group holds no interest;<br />
• funding of the operation by the issue of notes divided into three classes:<br />
- class A notes (senior notes): floating rate notes equal to the Euribor three month + 0.260%<br />
for an amount of €427,200,000;<br />
- class B notes (mezzanine notes): floating rate notes equal to the Euribor three month +<br />
0.70% for an amount of €17,800,000;<br />
- class C notes (junior securities): floating rate notes equal to the Euribor three month +<br />
1.00%, for an amount of €21,600,000;<br />
390
• the different classes were assigned a different degree of subordination in the definition of<br />
payment priorities for both the interest and principal components. The class C notes were<br />
recognised within the trading portfolio of <strong>UBI</strong> <strong>Banca</strong> Scpa and were eliminated in the<br />
consolidation against the junior securities recognised within liabilities in the balance sheet of<br />
Orio Finance nr 3 Plc.<br />
The 24-7 Finance Srl securitisation was performed in 2008 on:<br />
• performing loans resulting from mortgages granted to private individuals resident in Italy,<br />
secured by prime grade mortgages on residential properties located in Italy all fully built;<br />
• performing loans resulting from salary backed loans to private individuals resident in Italy,<br />
secured by a “deducted for non payment” clause and by a loss of employment insurance<br />
policy;<br />
• performing loans resulting from personal loans and dedicated loans to private individuals<br />
resident in Italy.<br />
The transfer contract was structured as follows:<br />
• the transfer without recourse of the loans to the special purpose entity 24/7 Finance Srl in<br />
which <strong>UBI</strong> <strong>Banca</strong> Spa holds a 10% interest;<br />
• funding of the transaction by the issue of notes divided according to the sub-transaction as<br />
follows:<br />
- mortgages:<br />
class A notes (senior notes): floating rate bond equal to the Euribor three months + 0.02 % for<br />
an original amount of €2,279,250,000. Following the action described previously, the senior<br />
notes were downgraded by Moody's from “Aaa” to “A2”, while the DBRS “A high” rating was<br />
confirmed;<br />
class B notes (junior notes): bonds with a yield equal to the “additional return”, for an<br />
amount of €225,416,196;<br />
- salary backed loans:<br />
class A notes (senior notes): floating rate bonds equal to the Euribor three months for<br />
an original amount of €722,450,000;<br />
class B notes (junior notes): bonds with a yield equal to the “additional return”, for an<br />
amount of €113,728,307;<br />
- consumer loans:<br />
class A notes (senior notes): floating rate bonds equal to the Euribor six month + 0.35%<br />
for an original amount of €2,128,250,000.<br />
class B notes (junior notes): bonds with a yield equal to the “additional return”, for an<br />
amount of €435,940,122.<br />
On 20 th December 2011, the entire salary backed loan securitisation was wound up with the<br />
consequent repurchase of the loans by <strong>Banca</strong> 24/7 for a total of €298,451,078.94 (equal to<br />
the entire residual debt). Consequently, on receipt of the sales price the special purpose entity<br />
redeemed all the securities issued. Finally, on 21 st May <strong>2012</strong> the consumer loan transaction<br />
was wound up with the repurchase of the loans by the originator for €1,410,363,588.22, with<br />
the subsequent redemption of the notes issued by the special purpose entity.<br />
Therefore only the mortgage securitisation was still in progress as at 31 st December <strong>2012</strong>.<br />
The class A note, amortised from February 2010, was worth €1,322,386,049 nominal as at<br />
that date, while the class B note has not been amortised, because of the subordination clause.<br />
On 20 th February 2013 a further €21 million approximately was repaid on the class A notes.<br />
Three new securitisations were launched in the first half of <strong>2012</strong>, with the transfer to three<br />
new special purpose entities named <strong>UBI</strong> SPV BPA <strong>2012</strong> S.r.l., <strong>UBI</strong> SPV BPCI <strong>2012</strong> S.r.l. and<br />
<strong>UBI</strong> SPV BBS <strong>2012</strong> S.r.l. of loans to small and medium-sized enterprises classified as<br />
performing, held by <strong>Banca</strong> Popolare di Ancona, <strong>Banca</strong> Popolare Commercio and Industria ed<br />
Banco di Brescia respectively.<br />
The transfer of the mortgages was completed for all three transactions, with effect for<br />
accounting purposes from 1 st June <strong>2012</strong>. The portfolio transferred consisted of assets totalling<br />
approximately €2.76 billion, was distributed as follows among the three originator banks:<br />
391
Originator<br />
Bank<br />
Remaining<br />
principal debt<br />
<strong>Banca</strong> Pop. di Ancona €1,016,844,683 36.88%<br />
<strong>Banca</strong> Pop. Comm. e Industria €852,086,254 30.90%<br />
Banco di Brescia €888,575,097 32.22%<br />
%<br />
€2,757,506,034 100.00%<br />
When the mortgages were transferred, servicing and sub-servicing contracts were signed, by<br />
which <strong>UBI</strong> <strong>Banca</strong> as the Parent performs the role of servicer, while the collection of payments<br />
and the management of relations with customers for the securitised assets were delegated to<br />
the three originator banks, as the sub-servicers (here too, except for those positions<br />
reclassified as non-performing, which will be handled by the Credit Area of the Parent).<br />
The main characteristics of the securities issued in <strong>2012</strong> for each securitisation are as follows:<br />
1) Securitisation <strong>UBI</strong> SPV BPA <strong>2012</strong><br />
• class A notes (senior tranches): nominal amount €709,800,000 at floating rate,<br />
maturity in 2057, assigned ratings A- by Standard & Poor’s and A low by DBRS at<br />
the time of issue;<br />
• class B notes (junior tranches): nominal amount €307,800,000, maturity 2057,<br />
unrated and with a yield equal to the additional return on the transaction.<br />
2) Securitisation <strong>UBI</strong> SPV BPCI <strong>2012</strong><br />
• class A notes (senior tranches): nominal amount €575,600,000 at floating rate,<br />
maturity in 2057, assigned ratings A- by Standard & Poor’s and A low by DBRS at<br />
the time of issue;<br />
• class B notes (junior tranches): nominal amount €277,100,000, maturity 2057,<br />
unrated and with a yield equal to the additional return on the transaction.<br />
3) Securitisation <strong>UBI</strong> SPV BBS <strong>2012</strong><br />
• class A notes (senior tranches): nominal amount €644,600,000 at floating rate,<br />
maturity in 2057, assigned ratings A- by Standard & Poor’s and A low by DBRS at<br />
the time of issue;<br />
• class B notes (junior tranches): nominal amount €244,400,000, maturity 2057,<br />
unrated and with a yield equal to the additional return on the transaction.<br />
These securitisations were structured with the objective of creating collateral for the Group<br />
eligible for refinancing with central banks, according to the model described above. As a<br />
consequence on this occasion too, the originator banks fully subscribed the entire amount<br />
of the securitised notes when they were issued and then made only the class A notes<br />
available to <strong>UBI</strong> <strong>Banca</strong>, by means of repurchase agreements. Here too, the new ratings<br />
assigned to the above securities are compatible with the eligibility requirements for<br />
refinancing operations with the central bank.<br />
The transactions in question are “revolving” operations and therefore it is possible for<br />
further transfers of mortgages within 18 months of issue by the originators, to be financed<br />
by the three special purpose entities with the receipts of each securitised portfolio.<br />
Securitisations: entities and roles<br />
The entities of the <strong>UBI</strong> <strong>Banca</strong> Group involved in the securitisation transactions and the<br />
respective roles played are listed below:<br />
<strong>UBI</strong> Finance 2<br />
Originator<br />
Issuer<br />
Servicer<br />
Subservicer<br />
<strong>UBI</strong> Banco di Brescia Spa<br />
<strong>UBI</strong> Finance 2 Srl<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa<br />
<strong>UBI</strong> Banco di Brescia Spa<br />
392
Calculation Agent<br />
Italian Account Bank<br />
English Account Bank<br />
Cash Manager<br />
<strong>UBI</strong> Finance 3<br />
Originator<br />
Issuer<br />
Servicer<br />
Subservicer<br />
Calculation Agent<br />
Italian Account Bank<br />
English Account Bank<br />
Cash Manager<br />
Lombarda Lease Finance 4<br />
Originator<br />
Issuer<br />
Servicer<br />
Collection Account Bank<br />
Investment Account Bank<br />
Cash Manager<br />
<strong>UBI</strong> Lease Finance 5<br />
Originator<br />
Issuer<br />
Servicer<br />
Italian Account Bank<br />
Cash Manager<br />
Paying Agent<br />
English Account Bank<br />
Albenza 3<br />
Originator<br />
Issuer<br />
Servicer<br />
Collection Account Bank<br />
Calculation Agent<br />
Orio Finance 3<br />
Originator<br />
Issuer<br />
Servicer<br />
Collection Account Bank<br />
Cash Manager<br />
24-7 Finance<br />
Originator<br />
Issuer<br />
Servicer<br />
Collection Account Bank<br />
Cash Manager<br />
Calculation Agent<br />
Investment Account Bank<br />
<strong>UBI</strong> SPV BPA <strong>2012</strong> S.r.l.<br />
Originator<br />
Issuer<br />
Servicer<br />
Subservicer<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa<br />
The Bank of New York Mellon<br />
The Bank of New York Mellon<br />
<strong>UBI</strong> <strong>Banca</strong> Popolare di Bergamo Spa<br />
<strong>UBI</strong> Finance 3 Srl<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa<br />
<strong>UBI</strong> <strong>Banca</strong> Popolare di Bergamo Spa<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa<br />
The Bank of New York Mellon<br />
The Bank of New York Mellon<br />
<strong>UBI</strong> Leasing Spa<br />
Lombarda Lease Finance 4 Srl<br />
<strong>UBI</strong> Leasing Spa<br />
<strong>UBI</strong> <strong>Banca</strong> International Sa<br />
<strong>UBI</strong> <strong>Banca</strong> International Sa<br />
<strong>UBI</strong> <strong>Banca</strong> International Sa<br />
<strong>UBI</strong> Leasing Spa<br />
<strong>UBI</strong> Lease Finance 5 Srl<br />
<strong>UBI</strong> Leasing Spa<br />
The Bank of New York Mellon<br />
The Bank of New York Mellon<br />
The Bank of New York Mellon<br />
The Bank of New York Mellon<br />
<strong>UBI</strong> <strong>Banca</strong> Popolare di Bergamo Spa<br />
Albenza 3 Società per la Cartolarizzazione Srl<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa<br />
<strong>UBI</strong> <strong>Banca</strong> Popolare di Bergamo Spa<br />
Centrobanca Spa<br />
<strong>UBI</strong> <strong>Banca</strong> (former BPB Inte Fin – Dublin)<br />
Orio Finance nr 3 Plc<br />
Citibank N.A.<br />
Citibank N.A.<br />
Citibank N.A.<br />
B@nca 24-7 Spa now merged into <strong>UBI</strong> <strong>Banca</strong> Scpa<br />
24-7 Finance Srl<br />
B@nca 24-7 Spa now merged into <strong>UBI</strong> <strong>Banca</strong> Scpa<br />
The Bank of New York<br />
The Bank of New York Mellon<br />
The Bank of New York Mellon<br />
The Bank of New York<br />
<strong>UBI</strong> <strong>Banca</strong> Popolare di Ancona Spa<br />
<strong>UBI</strong> SPV BPA <strong>2012</strong> S.r.l.<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa<br />
<strong>UBI</strong> <strong>Banca</strong> Popolare di Ancona Spa<br />
393
Cash Manager<br />
English Account Bank<br />
<strong>UBI</strong> SPV BPCI <strong>2012</strong> S.r.l.<br />
Originator<br />
Issuer<br />
Servicer<br />
Subservicer<br />
Cash Manager<br />
English Account Bank<br />
<strong>UBI</strong> SPV BBS <strong>2012</strong> S.r.l.<br />
Originator<br />
Issuer<br />
Servicer<br />
Subservicer<br />
Cash Manager<br />
English Account Bank<br />
The Bank of New York Mellon<br />
The Bank of New York Mellon<br />
<strong>UBI</strong> <strong>Banca</strong> Popolare Commercio e Ind. Spa<br />
<strong>UBI</strong> SPV BPCI <strong>2012</strong> S.r.l.<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa<br />
<strong>UBI</strong> <strong>Banca</strong> Popolare Commercio e Ind. Spa<br />
The Bank of New York Mellon<br />
The Bank of New York Mellon<br />
<strong>UBI</strong> Banco di Brescia Spa<br />
<strong>UBI</strong> SPV BBS <strong>2012</strong> S.r.l.<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa<br />
<strong>UBI</strong> Banco di Brescia Spa<br />
The Bank of New York Mellon<br />
The Bank of New York Mellon<br />
Internal risk measurement and monitoring systems connected with securitisation transactions<br />
including measurement, for those transactions originated by the Group, where risks were<br />
transferred to third parties. Illustration of the organisational structure for managing<br />
securitisation transactions including systems for reporting to senior management or to a<br />
similar body.<br />
It was decided to outsource corporate servicing to TMF Management Italy Srl for these<br />
securitisations described above: <strong>UBI</strong> Finance 2, <strong>UBI</strong> Finance 3, Lombarda Lease Finance 4,<br />
<strong>UBI</strong> Lease Finance 5, <strong>UBI</strong> SPV BPA <strong>2012</strong> S.r.l., <strong>UBI</strong> SPV BPCI <strong>2012</strong> S.r.l. and <strong>UBI</strong> SPV BBS<br />
<strong>2012</strong> S.r.l. A professional firm of consultants was appointed for the remaining securitisations<br />
with the exception of 24-7 Finance, for which corporate servicing was performed by Zenith<br />
Service.<br />
It was decided not to outsource IT and accounting operations related to servicer activities.<br />
Continuous cash collection activities were performed by the originators making use, amongst<br />
other things, of the main Group accounting system. This was also useful for reconstructing<br />
movements in the accounts of the securitisation companies and therefore for providing them<br />
with the information needed by the corporate servicers for preparing financial statements.<br />
In order to ensure continuity and effectiveness in the performance of their servicer functions,<br />
appropriate technical and organisational units were created to monitor the various phases of<br />
the securitisation process. Accounting and reporting systems in particular were designed,<br />
which took account of the need to be able to reconstruct all transactions at any moment.<br />
The main organisational units responsible for managing the securitisations were the Finance<br />
Area and the units under the Chief <strong>Financial</strong> Officer and the Chief Risk Officer. The roles and<br />
tasks relating to the performance of the various operational phases of servicing and to<br />
monitoring performance data were defined in those units. More specifically, a set of quarterly<br />
reports are prepared to monitor each individual securitisation transaction.<br />
Description of the hedging policies adopted to mitigate risks connected with securitisations,<br />
including the strategies and processes adopted to continuously monitor the effectiveness of<br />
these policies.<br />
All the securitisations carried out until the end of 2011 are hedged by swap derivative<br />
contracts where the main objective is to stabilise the flow of interest generated by the<br />
securitised portfolio and to protect the special purpose entity from interest rate risk.<br />
Swap contracts were concluded for each securitisation between the respective SPEs and the<br />
respective swap counterparties who, in order to be able to “close” the risk with the originators,<br />
signed contracts identical in form but opposite in their effects with <strong>UBI</strong> <strong>Banca</strong> which in turn<br />
renegotiated further mirror swaps with the respective originators. The following constituted<br />
exceptions to that practice: the <strong>UBI</strong> Lease Finance 5, <strong>UBI</strong> Finance 2 and <strong>UBI</strong> Finance 3<br />
transactions, where the special purpose entity entered into swap contracts directly with <strong>UBI</strong><br />
394
<strong>Banca</strong> (which then renegotiated mirror swaps with the originators <strong>UBI</strong> Leasing, <strong>UBI</strong> Banco<br />
Brescia and <strong>Banca</strong> Popolare Bergamo).<br />
The last three securitisations <strong>UBI</strong> SPV, BBS <strong>2012</strong>, <strong>UBI</strong> SPV BPA <strong>2012</strong> and <strong>UBI</strong> SPV BPCI <strong>2012</strong><br />
have been structured without the use of swaps. This method of structuring the securitisations<br />
was possible because of the lower ratings assigned at the time of issue - A- by S&P and A low<br />
by DBRS, compared to the AAA ratings required in the past for eligibility with the European<br />
Central Bank – the central bank having lowered the eligibility criteria.<br />
Further information on Group activities concerning securitisation transactions is given in the<br />
Management <strong>Report</strong> which may be consulted.<br />
395
Quantitative information<br />
C.1.1 Exposures resulting from securitisation transactions by quality of the underlying assets<br />
On-balance sheet exposures Guarantees granted Credit lines<br />
Senior Mezzanine Junior Senior Mezzanine Junior<br />
Senior Mezzanine Junior<br />
Quality of underlying<br />
assets/Exposures<br />
Gross exposure<br />
Net exposure<br />
Gross exposure<br />
Net exposure<br />
Gross exposure<br />
Net exposure<br />
Gross exposure<br />
Net exposure<br />
Gross exposure<br />
Net exposure<br />
Gross exposure<br />
Net exposure<br />
Gross exposure<br />
Net exposure<br />
Gross exposure<br />
Net exposure<br />
Gross exposure<br />
Net exposure<br />
A. W ith ow n underlying assets:<br />
a) Deteriorated - - - - - - - - - - - - - - - - - -<br />
b) Other - - - - - - - - - - - - - - - - - -<br />
B. W ith underlying assets of others:<br />
a) Deteriorated - - - - - - - - - - - - - - - - - -<br />
b) Other 233 233 - - - - - - - - - - - - - - - -<br />
190060O|1 - NOTA<br />
C.1.2 Exposures resulting from the principal “own” securitisation transactions by type of securitised assets and by type of exposure<br />
No exposures resulting from “own” securitisation transactions to report.<br />
396
C.1.3 Exposures resulting from the principal “third party” securitisation transactions by type of securitised assets and by type of exposure<br />
On-balance sheet exposures Guarantees granted Credit lines<br />
Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior<br />
Type of underlying assets/Exposures<br />
Carrying amount<br />
Impairment losses/reversals<br />
Carrying amount<br />
Impairment losses/reversals<br />
Carrying amount<br />
Impairment losses/reversals<br />
Carrying amount<br />
Impairment losses/reversals<br />
Carrying amount<br />
Impairment losses/reversals<br />
Carrying amount<br />
Impairment losses/reversals<br />
Carrying amount<br />
Impairment losses/reversals<br />
Carrying amount<br />
Impairment losses/reversals<br />
Carrying amount<br />
Impairment losses/reversals<br />
A.1 Securitisation FTA UCI 6 A - 00/30 - Company UCI<br />
ABS instruments 233 - - - - - - - - - - - - - - - - -<br />
C.1.4 Exposures to securitisations by financial asset portfolio and by type<br />
Exposure/portfolio<br />
Trading<br />
Designated at Available-forsalmaturity<br />
receivables<br />
Held-to-<br />
Loans and<br />
fair value<br />
31.12.<strong>2012</strong> 31.12.2011<br />
1. On-balance sheet exposures 233 - - - - 233 -<br />
- Senior 233 - - - - 233 -<br />
- Mezzanine - - - - - - -<br />
- Junior - - - - - - -<br />
2. Off-balance sheet exposures - - - - - - -<br />
- Senior - - - - - - -<br />
- Mezzanine - - - - - - -<br />
- Junior - - - - - - -<br />
397
Tabella 5: 190080O|1 - NOTA<br />
C.1.5 Total amount of the securitised assets underlying the junior securities or other forms of lending support<br />
A. Ow n underlying assets:<br />
A.1 Subject to full derecognition<br />
Assets/amounts<br />
Traditional<br />
securitisations<br />
Synthetic<br />
securitisations<br />
1. Non-performing loans - X<br />
2. Impaired loans - X<br />
3. Restructured exposures - X<br />
4. Past due exposures - X<br />
5. Other assets - X<br />
A.2 Subject to partial derecognition<br />
1. Non-performing loans - X<br />
2. Impaired loans - X<br />
3. Restructured exposures - X<br />
4. Past due exposures - X<br />
5. Other assets - X<br />
A.3 Not derecognised<br />
1. Non-performing loans - -<br />
2. Impaired loans - -<br />
3. Restructured exposures - -<br />
4. Past due exposures - -<br />
5. Other assets - -<br />
B. Underlying assets of others: 233<br />
B.1 Non-performing loans - -<br />
B.2 Impaired loans - -<br />
B.3 Restructured exposures - -<br />
B.4 Past due exposures - -<br />
B.5 Other assets 233 -<br />
398
Tabella 6: 190090O|1 - NO<br />
C.1.6 Interests in special purpose entities<br />
Name Registered address % interest<br />
Lombarda Lease Finance 4 Srl Via XX Settembre, 8 - Brescia 10%<br />
<strong>UBI</strong> Lease Finance 5 Srl Via Foro Bonaparte, 70 - Milan 10%<br />
24-7 Finance Srl Via XX Settembre, 8 - Brescia 10%<br />
<strong>UBI</strong> Finance Srl Via Foro Bonaparte, 70 - Milan 60%<br />
<strong>UBI</strong> Finance 2 Srl Via XX Settembre, 8 - Brescia 10%<br />
<strong>UBI</strong> Finance 3 Srl Via XX Settembre, 8 - Brescia 10%<br />
<strong>UBI</strong> Finance CB 2 Via Foro Bonaparte, 70 - Milan 60%<br />
<strong>UBI</strong> SPV BBS <strong>2012</strong> Srl Via Foro Bonaparte, 70 - Milan 10%<br />
<strong>UBI</strong> SPV BPCI <strong>2012</strong> Srl Via Foro Bonaparte, 70 - Milan 10%<br />
<strong>UBI</strong> SPV BPA <strong>2012</strong> Srl Via Foro Bonaparte, 70 - Milan 10%<br />
399
C.1.7 Servicer activity – payments received on securitised loans and redemptions of securities issued by the special purpose entity<br />
Servicer<br />
Special purpose entity<br />
Securitised assets (end<br />
of period figure)<br />
Payments received on<br />
loans during year<br />
Percentage of securities redeemed (end of period figure)<br />
Senior Mezzanine Junior<br />
Deteriorate Performing Deteriorate Performin Deteriorat Performin Deteriorat Performin Deteriorat Performin<br />
d assets assets d assets g assets ed assets g assets ed assets g assets ed assets g assets<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa Albenza 3 Società per la cartolarizzazione Srl 1,043 11,176 105 10,675 0.17% 96.01% - - - -<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa <strong>UBI</strong> Finance 2 Srl (1) - - - - - - - - - -<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa <strong>UBI</strong> Finance 3 Srl (1) - - - - - - - - - -<br />
<strong>UBI</strong> <strong>Banca</strong> Scpa 24-7 Finance Srl (1) - - - - - - - - - -<br />
<strong>UBI</strong> Leasing Spa Lombarda Lease Finance 4 Srl 20,107 79,361 3,065 57,826 - 97.46% - 46.69% - -<br />
<strong>UBI</strong> Leasing Spa <strong>UBI</strong> Lease Finance 5 Srl 333,228 3,106,897 30,042 689,661 - 43.62% - - - -<br />
<strong>UBI</strong> Banco di Brescia Spa <strong>UBI</strong> SPV BBS <strong>2012</strong> Srl (1) - - - - - - - - - -<br />
<strong>UBI</strong> <strong>Banca</strong> Popolare di Ancona Spa <strong>UBI</strong> SPV BPA <strong>2012</strong> Srl (1) - - - - - - - - - -<br />
<strong>UBI</strong> <strong>Banca</strong> Popolare Commercio & Industria Spa <strong>UBI</strong> SPV BPCI <strong>2012</strong> Srl (1) - - - - - - - - - -<br />
(1) These transactions are not reported in detail in these notes to the financial statements in view of the repurchase by the originator of all the<br />
liabilities issued by the special purpose entity.<br />
C.1.8 Special purpose entities belonging to the banking group<br />
No special purpose entities belonging to the banking group to report.<br />
400
C.2 Transfers<br />
C.2.1. <strong>Financial</strong> assets transferred not derecognised<br />
Tabella 7: 190120O|1 - NOTA<br />
Legend:<br />
A = <strong>Financial</strong> assets transferred and fully recognised (carrying amount)<br />
B = <strong>Financial</strong> assets transferred and partially recognised (carrying amount)<br />
C = <strong>Financial</strong> assets transferred and partially recognised (entire amount)<br />
401
C.2.2 <strong>Financial</strong> liabilities resulting from financial assets transferred not derecognised<br />
Liabilities / Portfolio activities<br />
<strong>Financial</strong> assets<br />
held for trading<br />
<strong>Financial</strong><br />
assets<br />
designated at<br />
fair value<br />
Available-for-sale<br />
financial assets<br />
Held-tomaturity<br />
investments<br />
Loans to banks<br />
Loans to<br />
customers<br />
Total<br />
31.12.<strong>2012</strong><br />
1. Due to customers 286,993 - 3,326,472 - - - 3,613,465<br />
a) against fully recognised assets 286,993 - 3,326,472 - - - 3,613,465<br />
b) against partially recognised assets - - - - - - -<br />
2. Due to banks - - 280,151 - - - 280,151<br />
a) against fully recognised assets - - 280,151 - - - 280,151<br />
b) against partially recognised assets - - - - - - -<br />
3. Debt securities issued - - - - - - -<br />
a) against fully recognised assets - - - - - - -<br />
b) against partially recognised assets - - - - - - -<br />
31.12.<strong>2012</strong> 286,993 - 3,606,623 - - - 3,893,616<br />
31.12.2011 1,126,052 - 3,524,349 - - - 4,650,401<br />
C.2.3 Transfers with liability backed exclusively by the assets transferred: fair value<br />
<strong>Financial</strong> assets held for<br />
fully<br />
recognised<br />
trading<br />
partially<br />
recognised<br />
<strong>Financial</strong> assets<br />
designated at fair value<br />
fully<br />
recognised<br />
partially<br />
recognised<br />
Available-for-sale<br />
financial assets<br />
fully<br />
recognised<br />
partially<br />
recognised<br />
Held-to-maturity<br />
investments (fair value)<br />
fully<br />
recognised<br />
(FV)<br />
partially<br />
recognised<br />
(FV)<br />
Loans to banks (fair<br />
fully<br />
recognised<br />
(FV)<br />
value)<br />
partially<br />
recognised<br />
(FV)<br />
Loans to customers (fair<br />
fully<br />
recognised<br />
(FV)<br />
value)<br />
partially<br />
recognised<br />
(FV)<br />
31.12.<strong>2012</strong><br />
A. On-balance sheet assets 293,167 - - - 3,930,902 - - - - - - - 4,224,069<br />
1. Debt instruments 293,167 - - - 3,930,902 - - - - - - - 4,224,069<br />
2. Equity instruments - - - - - - X X X X X X -<br />
3. O.I.C.R.<br />
Type of asset / Portfolio<br />
(collective investment<br />
- - - - - - X X X X X X -<br />
instruments)<br />
4. Financing - - - - - - - - - - - - -<br />
B. Derivative instruments - - X X X X X X X X X X -<br />
Total assets 293,167 - - - 3,930,902 - - - - - - - 4,224,069<br />
C. Associated liabilities 286,993 - - - 3,606,623 - - - - - - - 3,893,616<br />
1. Due to customers 286,993 - - - 3,326,472 - - - - - - - 3,613,465<br />
2. Due to banks - - - - 280,151 - - - - - - - 280,151<br />
3. Debt securities issued - - - - - - - - - - - - -<br />
Total liabilities 286,993 - - - 3,606,623 - - - - - - - 3,893,616<br />
Net value 31.12.<strong>2012</strong> 6,174 - - - 324,279 - - - - - - - 330,453<br />
Net value 31.12.2011 11,925 - - - (33,481) - - - - - - - X<br />
Total<br />
402
C.3 Banking Group – Covered bond operations<br />
Objectives<br />
In 2008 the Management Board of <strong>UBI</strong> <strong>Banca</strong> passed a resolution to proceed to implement a<br />
structured programme for the issue of covered bonds designed to produce benefits in terms of<br />
funding while containing the cost at the same time.<br />
In detail, the Management Board performed the following:<br />
• it identified the objectives of the programme;<br />
• it identified the basic structure of an operation to issue covered bonds in the light of the<br />
legislation and explained and examined the main elements, including the portfolio of<br />
loans, the criteria for selecting them, the structure of the financial transaction and the<br />
relative tests;<br />
• it assessed and approved the impacts and the organisational, IT and accounting changes<br />
that would be required. These changes were performed to ensure proper risk management<br />
by the Parent and also by the single banks participating. Account was also taken, in<br />
drawing up the procedures, of the requirements set by regulations issued by the Bank of<br />
Italy;<br />
• it assessed the risks connected with the operation to issue covered bonds;<br />
• it assessed the organisational and operating structure of the special purpose entity<br />
concerned in order to ensure that the contracts involved in the operation contained<br />
clauses that would guarantee the proper and efficient performance of the functions of the<br />
special purpose entity itself;<br />
• it assessed the legal aspects through an in-depth examination of the parties and contract<br />
documents used, with particular attention paid to the nature of the guarantees given by<br />
the special purpose entity and the relations between the issuing bank, the originator<br />
banks and the special purpose entity.<br />
The structure<br />
The basic structure of the operation to issue covered bonds involved the performance of the following<br />
activities:<br />
• one bank (the originator) transfers a set of assets with determined characteristics to a special<br />
purpose entity to form a separate set of assets termed a “cover pool”;<br />
• the originator bank (acting here as a financing bank) grants a subordinated loan to the special<br />
purpose entity designed to fund the purchase of the assets by the entity;<br />
• the bank (the issuing bank) issues covered bonds backed by a primary, unconditional and<br />
irrevocable guarantee given by the special purpose entity to the sole benefit of the holders of<br />
the covered bonds and the hedging counterparties involved in the transaction. The guarantee<br />
is backed by all the assets transferred to the special purpose entity and which form part of the<br />
cover pool.<br />
As part of the structure described above, the <strong>UBI</strong> <strong>Banca</strong> Group has launched a programme for issues<br />
of ten billion euro of covered bonds. The structure that was adopted also allows the transfer of the<br />
portfolios which constitute the segregated assets of the special purpose entity from more than one<br />
originator bank, which are not issuer banks.<br />
To achieve this, a special purpose entity, <strong>UBI</strong> Finance S.r.l. was formed, which as the guarantor of<br />
the issue performed by <strong>UBI</strong> <strong>Banca</strong> acquired a portfolio of residential mortgages transferred to it from<br />
network banks of the Group, which participated in the programme both as originator banks and as<br />
financing banks.<br />
403
The roles of master servicer, calculation agent and cash manager of the transaction were performed<br />
by the Parent, while that of paying agent was performed by Bank of New York (Luxembourg) Sa. The<br />
representative of the bondholders is BNY Corporate Trustee Services Limited.<br />
<strong>UBI</strong> <strong>Banca</strong> then delegated responsibility for servicing activity, consisting of collecting payments and<br />
managing relations with customers for the portfolio transferred by each originator, to the originator<br />
banks as sub-servicers. The originator banks also perform the role of swap counterparties in the<br />
“balance guarantee swaps” stipulated with the special purpose entity in order to normalise the cash<br />
flows generated by the mortgage portfolio.<br />
A summary of the main features of the structure of <strong>UBI</strong> <strong>Banca</strong>’s covered bond programme is given<br />
below.<br />
Asset<br />
Monitor<br />
Loan granted<br />
Interest on loan<br />
(monthly)<br />
Annual Coupon<br />
(fixed)<br />
Covered Bond<br />
Funding from<br />
covered<br />
bond issue<br />
Covered bond investors<br />
Guarantee<br />
Sellers<br />
Interest on subordinated loan<br />
Euribor + spread<br />
Asset SWAP<br />
Interest on Cover Pool<br />
Subordinated Loan Granted<br />
<strong>UBI</strong> Finance SRL<br />
SPE<br />
Euribor + spread<br />
floating (monthly)<br />
LIABILITY SWAPS<br />
Coupon (fixed)<br />
Mortgage<br />
cover pool<br />
A). Covered bonds. <strong>UBI</strong> <strong>Banca</strong> S.c.p.a. issues covered bonds under the programme;<br />
B). Bond Loan. In order to allow the funding acquired on institutional markets from the issue of<br />
covered bonds to flow back to the originator banks, these banks may issue bonds and the right to<br />
require subscription of them by <strong>UBI</strong> <strong>Banca</strong>, within the limits of their quota of participation in the<br />
programme. These bonds shall have the same maturity as the covered bonds and a yield equal to (or<br />
slightly higher than) that of the covered bonds.<br />
C). Subordinated Loan. In order to fund the purchase of mortgages by the special purpose entity, the<br />
originator banks grant subordinated loans to it. The yield on these loans is calculated as a “premium”<br />
or “extra spread” equal to the amount of the interest received, which remains in the accounts of the<br />
special purpose entities once priority amounts in the chain of payments have been deducted, relating<br />
to items such as the expenses incurred by the entity, payments to swap counterparties and<br />
allocations to “reserve accounts”.<br />
D). Swaps to hedge interest rate risk. If the covered bonds are issued at a fixed rate, <strong>UBI</strong> <strong>Banca</strong><br />
hedges the interest rate risk by entering into swap contracts with market counterparties, thereby<br />
transforming the exposure to a variable rate. These swaps lie outside the perimeter of the covered<br />
bond programme and are entered into with a view to interest rate risk management as part of the<br />
Parent’s ALM.<br />
E). Asset Swaps. Asset swap contracts are entered into between the originator banks and the special<br />
purpose entity to normalise the cash flows consisting of the interest instalments on the portfolios<br />
404
transferred. Each of these swaps has an initial notional value equal to the value of the portfolios<br />
transferred to <strong>UBI</strong> Finance by each originator. This notional amount is then adjusted monthly on the<br />
basis of the contraction of the portfolio and increases due to the addition of new mortgages. The<br />
duration of the swaps are related to the maturities of the mortgages in each portfolio transferred.<br />
Since the individual originator banks are not assigned ratings themselves and as a consequence<br />
would not comply as swap counterparties with the criteria set by the rating agencies to rate the<br />
programme, <strong>UBI</strong> <strong>Banca</strong> backs the payments between the originator banks and <strong>UBI</strong> Finance by<br />
signing a guarantee.<br />
The swap contracts involve the monthly flow back to the originator banks of the interest received on<br />
the loans present in each portfolio (net of the expenses of the special purpose entity and of provisions<br />
in its accounts as indicated in the chain of payments) against the payment of a sum equal to the<br />
notional return indicated at the Euribor rate plus a spread.<br />
F). Liability Swaps. A liability swap contract is entered into between <strong>UBI</strong> <strong>Banca</strong> and <strong>UBI</strong> Finance for<br />
each fixed rate issue. These are designed to protect against interest rate risk, which might affect the<br />
cash flows received from the special purpose entity (including those from the asset swaps) and the<br />
amounts due from the special purpose entity to investors (fixed rate coupons on the covered bonds)<br />
in the event of default by <strong>UBI</strong> <strong>Banca</strong>.<br />
The structure of the liability swaps only requires the exchange of cash flows between <strong>UBI</strong> <strong>Banca</strong> and<br />
the special purpose entity in the event of default by <strong>UBI</strong> <strong>Banca</strong> or when <strong>UBI</strong> <strong>Banca</strong> assigns a swap<br />
contract to another eligible counterparty. Both the asset and the liability swaps are structured in a<br />
manner to comply with all the conditions required by the rating agencies and they incorporate all the<br />
standard provisions required by the market for a downgrade.<br />
The total hedging using derivatives contracts was a necessary condition for obtaining an “AAA” rating<br />
on the programme. <strong>UBI</strong> <strong>Banca</strong>’s rating levels at the time when the programme was structured were<br />
sufficiently high to allow it to be the direct counterparty in these swaps with the special purpose<br />
entity (directly on the liability Swaps and indirectly on the asset swaps, providing a guarantee to the<br />
transferring banks). In view of the downgrades of <strong>UBI</strong> <strong>Banca</strong>, which occurred in the year just ended,<br />
<strong>UBI</strong> <strong>Banca</strong> and the transferring banks are today in a position where they are contractually obliged to<br />
transfer the derivatives contracts entered into under the programme (asset swaps and liability swaps)<br />
to third party counterparties.<br />
A restructuring process is in progress at the time of writing these notes to the financial statements<br />
and is subject to assessments by the rating agencies and by the representative of the holders of the<br />
covered bonds.<br />
G). Current accounts. The operation involves a complex system of current accounts to pay and receive<br />
the cash flows involved in the operation. A series of accounts were opened in the name of the special<br />
purpose entity for each originator bank as follows:<br />
<br />
<br />
<br />
Collection account at <strong>UBI</strong> <strong>Banca</strong> S.c.p.a. linked to each originator bank into which sums<br />
received are paid consisting of interest and principal on the portfolios of each originator, and,<br />
where applicable, other assets transferred to the special purpose entity under the programme<br />
(e.g. eligible assets and top-up assets);<br />
Interest account with Bank of New York Mellon, London Branch linked to each originator<br />
bank into which all interest paid into the collections accounts will be paid on a daily basis and<br />
also all amounts paid to the special purpose entity by the counterparties of the swap<br />
contracts.<br />
Principal account with Bank of New York Mellon, London Branch linked to each originator<br />
bank into which all the principal repayment amounts paid into the collection account will be<br />
paid on a daily basis;<br />
405
a Reserve Fund Account, with Bank of New York Mellon, London into which interest accruing<br />
on the covered bonds is paid monthly in order to guarantee the payment of current coupons;<br />
an Expense account, into which the amounts required to meet the expenses of the special<br />
purposes entity will be paid, drawn from interest accounts, in proportion to the quota of<br />
participation in the programme of each originator bank.<br />
Effectiveness tests<br />
Effectiveness tests are performed monthly on the whole cover pool and separately on the portfolios<br />
transferred by each originator, in order to determine the financial integrity of each bank’s portfolio.<br />
As required by the regulations, because it is a multioriginator programme, with cross-collateralisation<br />
of the originator banks’ portfolios, the only valid test for investors is that performed on the whole<br />
cover pool, while the tests performed on the individual portfolios are used to determine the integrity<br />
of each originator’s portfolio for the purposes of cross-collateralisation between the different<br />
originator banks.<br />
In detail:<br />
<br />
<br />
<br />
<br />
<br />
the nominal value test verifies whether the nominal value of the loans in the transferred<br />
portfolio is greater than the nominal value of the covered bonds issued. In order to ensure an<br />
adequate degree of over-collateralisation in the portfolio, while the covered bonds are<br />
considered at their nominal value, the loans in the portfolio are weighted on the basis of the<br />
relative collateral backing them and the total amount is further reduced by an asset<br />
percentage;<br />
the net present value test verifies whether the present value of the loans remaining in the<br />
portfolio is greater than the present value of the covered bonds issued;<br />
the interest cover test verifies whether the interest received and held in accounts and the cash<br />
flows from interest to be received net of the entity’s expense is greater than the interest to be<br />
paid to the holders of the covered bonds;<br />
amortisation test (similar to the nominal value test, but only performed if <strong>UBI</strong> <strong>Banca</strong> is<br />
downgraded by rating agencies);<br />
the top-up assets test verifies whether, before <strong>UBI</strong> <strong>Banca</strong> defaults, the total amount of<br />
additional assets and liquidity is not 15% greater than the nominal value of the loans<br />
remaining in the portfolio transferred, in compliance with the Ministry of the Economy and<br />
Finance and Bank of Italy instructions.<br />
If all the tests are passed simultaneously then the special purpose entity may proceed to pay all the<br />
parties involved in the programme, including the originator banks as the lenders of the subordinated<br />
loan, in the order indicated in the “payment chain”.<br />
However, if the results of the tests are negative, then the contract states that the <strong>UBI</strong> <strong>Banca</strong> Group<br />
must increase the collateral of the portfolio by transferring new mortgages to it and that is “top up”<br />
with extra assets. Failure to pass the tests, once the time limit allowed for the Group to add assets<br />
has passed, results in an “issuer event of default” with a consequent enforcement of the guarantee<br />
issued by <strong>UBI</strong> Finance. In this event the originator banks would only receive the repayments of the<br />
subordinated loans granted after the redemption of the covered bonds by the special purpose entity<br />
and within the limits of the remaining funds.<br />
Organisational action and control procedures<br />
As part of an organisational analysis process, four general processes were identified to which the<br />
main activities of the programme were assigned. In detail:<br />
1. identification of the liquidity requirements and approval of the operation by the competent<br />
bodies. This general process involves assessment of proposals for the issue of covered<br />
bonds by the Finance Committee of <strong>UBI</strong> <strong>Banca</strong> and approval of the basic outline by the<br />
Management Board. Subsequently the network banks involved are informed, which assess<br />
406
the proposals and their involvement in the issues on the basis of the information received.<br />
In this context an “arranger” is identified who will supervise the operation and the internal<br />
organisational units involved are also brought in;<br />
2. planning and arrangement of the transaction: this general process involves verifying the<br />
criteria for extracting and validating the assets which form part of the portfolio which is to<br />
cover the issue. It interfaces with the rating agencies and external auditors and<br />
preparatory work is done for proper segregation of the asset portfolio and for transfer to<br />
the special purpose entity and all the relative contracts are prepared by internal units of<br />
the bank and external advisors;<br />
3. management of the operations: this general process involves opening current accounts for<br />
the operations of the special purpose entity, granting the subordinated loan, entering into<br />
derivatives contracts between the network banks and the special purpose entity, once the<br />
“chain of payments” has been determined, performing tests on the effectiveness of the<br />
portfolio and identifying the mortgage loans to top-up the cover pool which backs the<br />
covered bonds issued. These activities are performed on a continuous basis;<br />
4. regulatory controls: this general process involves putting internal and external controls<br />
required by regulations in place to: analyse and monitor obligations to ensure the quality<br />
and integrity of the assets transferred to back the portfolio; to define effectiveness tests<br />
and to produce summary reports; to verify compliance with limits set on the transfer of<br />
eligible assets; to verify cover for financial risks; to verify compliance by the special<br />
purpose entities with the obligations resulting from the guarantee given; to verify the<br />
contract documents employed; and to verify the completeness of the controls to be<br />
performed by the Parent. External controls are also put in place to ensure compliance of<br />
the measurement criteria applied by the bank with those required for the preparation of<br />
annual financial statements and also to guarantee the proper performance of the<br />
transaction and the validity of the guarantee given to back redemption of the covered<br />
bonds.<br />
This organisational model, drawn up in 2008 to govern the first issuance of covered bonds under the<br />
residential programme still remains valid and applicable even for the regulation of subsequent<br />
issuances. For complete information, we report that a series of organisational activities is in progress<br />
carried out by the competent units of the <strong>UBI</strong> Group designed to define a project to develop the<br />
current processes for the issuance and management of the covered bonds described above, in<br />
consideration of the following:<br />
- the growing complexity and pervasiveness in Group units of the activities to manage the issuance<br />
of covered bonds;<br />
- the structuring of a second programme concluded during the year just ended, an account of which<br />
is given in the following pages.<br />
The risks connected with the operation<br />
In <strong>2012</strong> the Bank revised its analysis of the risks identified with the programme when it was<br />
approved in June 2008 and it prepared a new map of those risks. The risks identified, listed below,<br />
are derived from the current regulatory framework (EU and Italian) and they are based on the current<br />
methodologies used by rating agencies.<br />
The different types of risk are attributable to the following four general categories:<br />
1. Risk of <strong>UBI</strong> <strong>Banca</strong> downgrade, which includes the risk relating to the swap contracts to<br />
which <strong>UBI</strong> <strong>Banca</strong> is a counterparty and the risk relating to the account bank activities<br />
performed by <strong>UBI</strong> <strong>Banca</strong>;<br />
2. Risk attached to the underlying mortgages (collateral). The issuance of covered bonds<br />
bases its rating on the credit enhancement provided by the portfolio of mortgages transferred to<br />
back the special purpose entity. A decrease in the level of over-collateralization would lead<br />
primarily to a downgrade of the operation and, in the most serious cases, to a default of the<br />
407
issuer, if the minimum level provided for in the contracts were not guaranteed and/or the<br />
regulatory tests were not passed. Various mechanisms are provided within the programme to<br />
address these risk. They include the following: a nominal value test and the overcollateralization,<br />
designed to ensure that the special purpose entity is able to fully guarantee the<br />
covered bonds issued even in the event of some defaults on the underlying assets; the ability to<br />
inject liquidity in order to guarantee the issues (within the limits of 15% of the total amount of<br />
the assets held by the special purpose entity); the ability to also insert assets with a higher<br />
rating in the cover pool such as RMBSs with a higher rating in compliance with regulations or<br />
government securities and finally, with regard to redemption by the special purpose entity (or by<br />
<strong>UBI</strong> <strong>Banca</strong> in the event of its default) of the capital maturing, the maturity of the covered bonds<br />
may be extended by one year (termed a “soft bullet maturity”).<br />
In any event, the units responsible at <strong>UBI</strong> <strong>Banca</strong> periodically verify the adequate availability of<br />
mortgages in order to ensure the necessary over-collateralization for covered bonds already<br />
issued and for those to be issued in the coming year.<br />
3. Risks connected with continuous management of the programme: the programme involves<br />
various third parties (asset monitors, bank account providers, trustees, possible swaps<br />
providers), for each of which there is a risk of insolvency. Counterparty replacement rules have<br />
been put in place to limit that risk if determined events occur. The programme also requires<br />
continuous management of matters which include servicing activities, investment activities, the<br />
management of possible swap contracts, the calculation of regulatory tests and the production<br />
of reports. In order to manage the related risks, the Bank initially adopted the tools and<br />
processes described above, which are undergoing further revision and update.<br />
4. Legal risks, which, due to the particular multi-originator structure of the <strong>UBI</strong> <strong>Banca</strong><br />
programme, include the risk of cross-collateralization. The participation of a number of<br />
originator banks in the programme mean that all the transferor banks are subordinated<br />
creditors on an equal basis, of the special purpose entity and above all, they assume the<br />
obligation to “remedy” the tests if they are not passed, even if the shortcoming is not due to<br />
their portfolios. To mitigate that risk, the contract documents state that if the transferor bank<br />
required to restore assets does not meet that obligation, in the first instance the Parent will be<br />
required to restore the cover pool until the required level of over-collateralization is reached,<br />
while the transferor banks will only be required to restore the cover pool if the Parent should fail<br />
to do so.<br />
The history of the <strong>UBI</strong> <strong>Banca</strong>’s residential mortgage covered bond programme<br />
In the context of the procedures described above, the <strong>UBI</strong> <strong>Banca</strong> Group launched a ten billion euro<br />
programme for the issue of covered bonds in July 2008, with the first transfers of mortgages<br />
performed by two banks in the Group, Banco di Brescia and <strong>Banca</strong> Regionale Europea, for a total<br />
amount, as at that time, of approximately two billion euro.<br />
Subsequently, in the years 2008 – 2010, all the Group’s network banks joined the programme<br />
progressively transferring portions of their assets. Further transfers of assets were then concluded in<br />
each of the following years.<br />
In <strong>2012</strong> in particular two transfers of assets were made: the first concluded on 1 st February <strong>2012</strong>, for<br />
a total of €1.171 billion, of which approximately €347 million transferred by Banco di Brescia,<br />
approximately €452 million by <strong>Banca</strong> Popolare di Bergamo, approximately €280 million by <strong>Banca</strong><br />
Carime and approximately €92 million by <strong>UBI</strong> <strong>Banca</strong> Private Investment. The second was on 1 st<br />
October <strong>2012</strong> for a total €1.411 billion, of which approximately €225 million transferred by <strong>Banca</strong><br />
Regionale Europea, approximately €141 million transferred by Banco di San Giorgio (subsequently<br />
merged into <strong>Banca</strong> Regionale Europea), approximately €603 million by <strong>Banca</strong> Popolare Commercio ed<br />
Industria, approximately €94 million by <strong>Banca</strong> di Valle Camonica and approximately €348 million by<br />
<strong>Banca</strong> Popolare di Ancona.<br />
As at 31 st December <strong>2012</strong>, the cover pool of mortgages for the issues, which for accounting purposes<br />
is recognised within the assets of each originator bank, amounted to a total of over €11 billion.<br />
408
The table below gives the distribution of the portfolio (remaining principal debt) for each originator<br />
bank and the total by class of credit quality as at 31.12.<strong>2012</strong>.<br />
TYPE OF LOAN<br />
TOTAL<br />
PORTFOLIO<br />
originated<br />
by BRE<br />
originated<br />
by Banco<br />
di Brescia<br />
originated by<br />
<strong>Banca</strong><br />
Popolare di<br />
Bergamo<br />
originated by<br />
<strong>Banca</strong><br />
Popolare di<br />
Ancona<br />
originated by<br />
<strong>Banca</strong><br />
Popolare di<br />
Commercio e<br />
Industria<br />
originated<br />
by <strong>Banca</strong><br />
Carime<br />
originated by<br />
<strong>Banca</strong> di Valle<br />
Camonica<br />
originated<br />
by <strong>UBI</strong><br />
<strong>Banca</strong><br />
Private<br />
(Remaining principal debt – figures in<br />
thousands of euro)<br />
Performing<br />
9,623,411 1,501,944 1,859,876 2,241,142 1,068,919 1,879,089 685,356 224,333 162,752<br />
loans<br />
Delinquent loans 1,377,407 214,985 387,368 267,803 152,683 212,735 78,645 35,632 27,557<br />
Cover pool<br />
(1+2)<br />
11,000,818 1,716,929 2,247,244 2,508,945 1,221,602 2,091,823 764,001 259,966 190,309<br />
Defaulted loans 207,177 35,701 49,477 52,692 15,352 27,385 17,804 3,979 4,786<br />
Total <strong>UBI</strong><br />
Finance<br />
portfolio<br />
11,207,995 1,752,630 2,296,720 2,561,637 1,236,954 2,119,208 781,805 263,945 195,094<br />
In <strong>2012</strong> this portfolio generated total payments received of approximately €1.3 billion, distributed as<br />
follows among the portfolios of the different originators:<br />
TYPE OF LOAN<br />
TOTAL<br />
PORTFOLIO<br />
originated<br />
by BRE (*)<br />
originated<br />
by Banco di<br />
Brescia<br />
originated by<br />
<strong>Banca</strong><br />
Popolare di<br />
Bergamo<br />
originated<br />
by <strong>Banca</strong><br />
Popolare di<br />
Ancona<br />
originated by<br />
<strong>Banca</strong><br />
Popolare di<br />
Commercio e<br />
Industria<br />
originated<br />
by <strong>Banca</strong><br />
Carime<br />
originated<br />
by <strong>Banca</strong> di<br />
Valle<br />
Camonica<br />
originated<br />
by <strong>UBI</strong><br />
<strong>Banca</strong><br />
Private<br />
(figures in thousands of euro)<br />
payments<br />
received in <strong>2012</strong><br />
1,333,856 192,133 271,184 358,813 136,982 210,100 117,181 26,191 21,272<br />
As part of the €10 billion of issues allowed under the programme, in the preceding years <strong>UBI</strong> <strong>Banca</strong><br />
issued covered bonds for a total of €5,750,000,000. The tables give details of the individual issues:<br />
409
Number in<br />
order ISIN Name Issue date<br />
Maturity<br />
date<br />
Principal(*)<br />
Coupon<br />
(**)<br />
1 (public) IT0004533896 <strong>UBI</strong> BANCA 3.625% CB due 23/9/2016 23/09/2009 23/09/2016 1,000,000,000 36,250,000<br />
2 (public) IT0004558794 <strong>UBI</strong> BANCA 4.000% CB due 16/12/2019 16/12/2009 16/12/2019 1,000,000,000 40,000,000<br />
3 (private) IT0004599491 <strong>UBI</strong> BANCA TV CB due 30/04/2022 30/04/2010 30/04/2022 215,909,092 1,010,766<br />
4 (public) IT0004619109 <strong>UBI</strong> BANCA 3.375% CB due 15/09/2017 15/09/2010 15/09/2017 1,000,000,000 33,750,000<br />
5 (public) IT0004649700 <strong>UBI</strong> BANCA 3.125% CB due 18/10/2015 18/10/2010 18/10/2015 500,000,000 15,625,000<br />
6 (public) IT0004682305 <strong>UBI</strong> BANCA 5.250% CB due 28/01/2021 28/01/2011 28/01/2021 1,000,000,000 52,500,000<br />
7 (public) IT0004692346 <strong>UBI</strong> BANCA 4.500% CB due 22/02/2016 22/02/2011 22/02/2016 750,000,000 33,750,000<br />
8 (private) IT0004777444 <strong>UBI</strong> BANCA TV CB due 18/11/2022 18/11/2011 18/11/2022 250,000,000 3,900,100<br />
(*) For issues subject to amortisation the remaining principal is given as at the reporting date.<br />
(**) For floating rate issues, the amount of the current coupon as at the reporting date is given.<br />
When issued all the bonds indicated above had received the highest ratings from Fitch (AAA) and<br />
Moody’s (Aaa).<br />
Three new issuances of floating rate covered bonds were made in the first quarter of <strong>2012</strong> for €250<br />
million each, which were repurchased by the Parent in order to use them as eligible collateral in<br />
operations with the central bank. These new issues initially received ratings of AA+ (Fitch) and Aa2<br />
(Moody’s).<br />
Details of these latest issues are given below:<br />
Number in<br />
order ISIN Name Issue date<br />
Maturity<br />
date Principal Coupon(*)<br />
9 (private) IT0004799331 <strong>UBI</strong> BANCA TV CB due 17/02/2014 22/02/<strong>2012</strong> 17/02/2014 250,000,000 1,700,563<br />
10 (private) IT0004799349 <strong>UBI</strong> BANCA TV CB due 18/02/2014 22/02/<strong>2012</strong> 18/02/2014 250,000,000 1,700,563<br />
11 (private) IT0004799091 <strong>UBI</strong> BANCA TV CB due 19/02/2014 22/02/<strong>2012</strong> 19/02/2014 250,000,000 1,719,250<br />
(*) The coupons are quarterly floating rate and the amount indicated relates to the coupons maturing as at the reporting date.<br />
From the second half of 2011 onwards, the three agencies, Moody’s, Fitch and Standard and Poor’s,<br />
repeatedly downgraded the Bank’s rating as a consequence of the progressive downgrades of the<br />
rating for Italy. The rating for the covered bond programme was reduced from AAA to AA- by Fitch<br />
and to A2 by Moody’s.<br />
410
The <strong>UBI</strong> <strong>Banca</strong> five billion euro – “retained” – commercial mortgage covered bond programme<br />
In the first half of <strong>2012</strong>, a new covered bond programme was structured for the issue of new covered<br />
bonds to be retained, and that is to be subscribed by <strong>UBI</strong> <strong>Banca</strong> itself, which will be used as<br />
collateral for posting with the European Central Bank in order to strengthen the pool of assets eligible<br />
for refinancing available to the Group.<br />
To achieve this, a specific new special purpose entity, named <strong>UBI</strong> Finance CB2 S.r.l. was formed, to<br />
function as the guarantor of the issues of the new series of covered bonds. Mainly commercial<br />
mortgages and, in addition, residential mortgages eligible according to national legislation and<br />
regulations, but not covered by the rating agency methodologies for the first programme, are<br />
transferred by Group banks to <strong>UBI</strong> Finance CB2 S.r.l. In fact, as opposed to the procedures applied<br />
for the residential programme, the retained programme is not assessed by the rating agencies, but<br />
benefits solely from the senior rating of the Parent, <strong>UBI</strong> <strong>Banca</strong>. <strong>UBI</strong> <strong>Banca</strong> will be able to issue<br />
covered bonds under that programme for a total amount, from time to time, of not greater than €5<br />
billion.<br />
Again, for this second programme, the Management Board has:<br />
• identified the objectives of the programme and the issues;<br />
• identified the basic structure of the operation, examining the initial loan portfolio and the<br />
criteria used to select it as well as the financial structure of the transaction and the tests;<br />
• assessed and approved the impacts and the organisational, IT and accounting changes<br />
that would be required, considering that those actions had already been carried out to<br />
ensure proper risk management for the first programme;<br />
• assessed the risks connected with the operation to issue covered bonds;<br />
• assessed the organisational and operating structure of the special purpose entity;<br />
• assessed the legal aspects of the programme.<br />
We refer to what has already been reported above concerning the residential programme for that<br />
which regards the structural, organisational and risk aspects of the operation, while here we report<br />
only those points where the €5 billion programme differs from that which has already been reported:<br />
A. asset swaps: in consideration of the retained nature of the programme and the absence of a<br />
specific rating on the issues, no swap contracts have been taken out at present on the portfolio;<br />
B. liability swaps: at present no fixed rate issuances have been made and therefore no liability swap<br />
contracts exist between the special purpose entity and third party counterparties;<br />
C. current accounts: interest and principal collection accounts have been opened for the second<br />
programme with <strong>UBI</strong> <strong>Banca</strong> International;<br />
D. the liquidity generated by the programme. In consideration of the type of operation performed by<br />
the Group with the retained programme, designed to increase the quantity of assets available for<br />
refinancing operations with the Eurosystem, no issuance of bonds is put in place, in this case, to<br />
channel funds back to the originator banks.<br />
History of the <strong>UBI</strong> <strong>Banca</strong> Retained Covered Bond Programme<br />
The portfolio to back the retained programme was transferred in two tranches: on 1 st March <strong>2012</strong> the<br />
first assets were transferred by <strong>Banca</strong> Regionale Europea (approximately €356 million), <strong>Banca</strong><br />
Popolare di Ancona (€512 million approx.), <strong>Banca</strong> Popolare Commercio ed Industria (€332 million<br />
approx.) and <strong>Banca</strong> di Valle Camonica (€101 million approx.), while on the following 1 st April assets<br />
were transferred by <strong>Banca</strong> Popolare di Bergamo (€562 million approx.), Banco di Brescia (€628<br />
million approx.), Banco di San Giorgio (€209 million approx.) and <strong>Banca</strong> Carime (€310 million<br />
approx.).<br />
The portfolio transferred, which – as already was the case for the first programme – continued to be<br />
recognised as assets on the books of each originator bank, totalled €2.7 billion as at 31 st December<br />
<strong>2012</strong>.<br />
411
The table below gives the distribution of the portfolio (remaining principal debt) for each originator<br />
bank and the total by class of credit quality as at 31.12.<strong>2012</strong>.<br />
TYPE OF LOAN<br />
TOTAL PORTFOLIO<br />
originated<br />
by BRE<br />
(*)<br />
originated<br />
by Banco di<br />
Brescia<br />
originated<br />
by <strong>Banca</strong><br />
Popolare di<br />
Bergamo<br />
originated<br />
by <strong>Banca</strong><br />
Popolare di<br />
Ancona<br />
originated<br />
by <strong>Banca</strong><br />
Popolare di<br />
Commercio<br />
e Industria<br />
originated<br />
by <strong>Banca</strong><br />
Carime<br />
originated<br />
by <strong>Banca</strong> di<br />
Valle<br />
Camonica<br />
(Remaining principal debt – figures in thousands of euro)<br />
Performing loans<br />
Delinquent loans<br />
Cover pool (1+2)<br />
Defaulted loans<br />
2,316,044 447,207 455,304 455,536 362,115 269,052 251,609 75,221<br />
385,137 62,957 106,447 51,413 98,829 24,873 30,476 10,140<br />
2,701,181 510,164 561,751 506,950 460,944 293,925 282,084 85,362<br />
44,526 5,341 9,938 10,675 8,811 1,907 3,708 4,146<br />
Total <strong>UBI</strong> Finance<br />
2,745,707 515,505 571,689 517,625 469,755 295,832 285,793 89,508<br />
CB2 portfolio<br />
(*) The column includes the figures for <strong>Banca</strong> San Giorgio merged into BRE during the year.<br />
Also for the portfolio transferred to <strong>UBI</strong> Finance CB 2, the master servicer, <strong>UBI</strong> <strong>Banca</strong>, delegated<br />
responsibility for servicing activity, consisting of collecting payments and managing relations with<br />
customers for the portfolio transferred by each originator (except for positions reclassified as nonperforming,<br />
handled by the Credit Area of the Parent), to the originator banks as sub-servicers.<br />
The total sums received in payments on the portfolio in <strong>2012</strong> are given below:<br />
TYPE OF<br />
LOAN<br />
TOTAL<br />
PORTFOLIO<br />
originated<br />
by BRE (*)<br />
originated by<br />
Banco di<br />
Brescia<br />
originated by<br />
<strong>Banca</strong><br />
Popolare di<br />
Bergamo<br />
originated by<br />
<strong>Banca</strong><br />
Popolare di<br />
Ancona<br />
originated by<br />
<strong>Banca</strong><br />
Popolare di<br />
Commercio e<br />
Industria<br />
originated<br />
by <strong>Banca</strong><br />
Carime<br />
originated by<br />
<strong>Banca</strong> di<br />
Valle<br />
Camonica<br />
(figures in thousands of )<br />
payments<br />
received in<br />
324,030 60,350 68,278 54,364 53,164 42,732 32,059 13,082<br />
<strong>2012</strong><br />
(*) The column includes the figures for <strong>Banca</strong> San Giorgio merged into BRE during the year.<br />
412
In the first year of the life of the second programme, two covered bond issuances were made, both<br />
retained, for a total €2.3 billion, details of which are given in the following table:<br />
Number in<br />
order ISIN Name Issue date<br />
Maturity<br />
date Principal Coupon (*)<br />
1 (retained) IT0004818701 <strong>UBI</strong> BANCA TV CB2 due 28/05/2018 28/05/<strong>2012</strong> 28/05/2018 1,800,000,000 10,074,060<br />
2 (retained) IT0004864663<br />
<strong>UBI</strong> BANCA TV CB2 due 29/01/2013 29/10/<strong>2012</strong> 29/10/2013 500,000,000 3,453,833<br />
(*) The coupons are floating rate and the amount indicated relates to the coupons maturing as at the reporting date.<br />
D. Banking group - Models for the measurement of credit risk<br />
With regard to the measurement of credit risk, the Group has developed a portfolio credit risk model<br />
using the Algorithmics PCRE calculation engine. The model, which includes PD and LGD used for<br />
supervisory purposes among its input variables, considers the total risk for a loan portfolio by<br />
modelling and capturing the component resulting from the correlation of counterparty defaults,<br />
calculating credit losses and the capital at credit risk at portfolio level. This involves the use of a<br />
complex method for measuring the total risk of the entire portfolio, designed to capture mutually<br />
dependent phenomena in changes in counterparty creditworthiness and to determine the distribution<br />
of total losses for the whole portfolio as the basis for calculating risk.<br />
Calculation of the correlation between defaults therefore makes it possible to establish the<br />
concentration of risk within a portfolio, which can be used as a basis both for managing and<br />
mitigating total risk by employing an appropriate diversification strategy and also for implementing<br />
efficient pricing policies.<br />
The model proposed uses an approach similar to that of the Merton model (1974). Counterparty<br />
creditworthiness is given by an intermediate variable, the Credit Worthiness Index (affected by two<br />
components: a system and a specific component). The future level of this variable determines<br />
creditworthiness on the basis of specially calculated thresholds and therefore also any corresponding<br />
losses.<br />
The analysis of changes in counterparty creditworthiness can be performed over a time period of<br />
longer than one year with intermediate steps.<br />
413
2. BANKING GROUP - MARKET RISK<br />
2.1 Interest rate risk and price risk – supervisory trading portfolio<br />
Qualitative information<br />
A. General aspects<br />
The considerations that follow relate exclusively to the “trading book”, as defined by supervisory<br />
regulations. Transactions designed to affect sensitivity at Group level and equity investments in other<br />
companies classified as for trading according to IAS are excluded.<br />
Management of Group financial risk is centralised in general in the Parent and is performed by the<br />
Finance Area. Exception is made for the portfolios managed directly by Centrobanca, IW Bank, BDG<br />
and <strong>UBI</strong> <strong>Banca</strong> International.<br />
B. Management and measurement of interest rate risk and price risk<br />
The guidelines for the assumption and monitoring of financial risk in the <strong>UBI</strong> <strong>Banca</strong> Group are<br />
defined in the Policy to Manage <strong>Financial</strong> Risks of the <strong>UBI</strong> <strong>Banca</strong> Group and in the relative documents<br />
to implement it (Regulations and document setting operational limits) with particular reference to<br />
market risk on the trading book and to interest rate, currency and liquidity risks on the banking<br />
book.<br />
More specifically the policy defines the capital allocated (maximum acceptable loss) to trading book<br />
activities, equal to 1% of the available first and second level financial resources (with an early<br />
warning threshold for amounts greater than 80% of the capital allocated), and it sets an early<br />
warning threshold on VaR, which must not exceed 20% of the capital allocated.<br />
Within the trading book, the monitoring of the consistency of the risk profiles of Group portfolios with<br />
respect to risk-return objectives is based on a system of limits which involves the combined use of<br />
various indicators. The following are defined for each portfolio of the Group:<br />
• Mission,<br />
• maximum acceptable loss limit<br />
• VaR limit<br />
• possible limits on the type of financial instruments permitted,<br />
• possible limits on composition.<br />
Consistent with the limits set by the policy, the Document setting operational limits defines operational<br />
limits for the trading book of the <strong>UBI</strong> Group in <strong>2012</strong>, both at general level and for counterparties and<br />
single portfolios.<br />
The main operational limits for <strong>2012</strong> (including reallocations and any new limits set in the second<br />
half of the year) are as follows:<br />
• Maximum acceptable loss for the <strong>UBI</strong> Group trading book<br />
• early warning threshold on maximum acceptable loss (MAL)<br />
• One day VaR limit for the <strong>UBI</strong> Group trading book<br />
• early warning threshold on VaR<br />
€104.53 million<br />
70% MAL<br />
€21 million<br />
80% VaR<br />
Observance of the limits set for each portfolio is monitored daily.<br />
414
The summary measurement used to assess the exposure of the Bank to financial risks is value at<br />
risk (VaR). It is a statistical measurement used to estimate the loss that might occur following<br />
adverse changes in risk factors.<br />
The VaR of the <strong>UBI</strong> <strong>Banca</strong> Group is measured using a confidence interval of 99% and a holding<br />
period of one day. This value is defined in terms of limits consistent with the time horizon for the<br />
possible disinvestment of the portfolios. The VaR gives the “threshold” of the daily loss which, on the<br />
basis of probability hypotheses could only be exceeded in 1% of cases.<br />
The method used for calculating VaR is that of historical simulation. With this approach the portfolio<br />
is revalued by applying all the changes in risk factors recorded in the two previous years (500<br />
observations). The values thus obtained are compared with the present value of the portfolio to give a<br />
hypothetical series of gains or losses. The VaR corresponds to the sixth worst result (confidence<br />
interval of 99%) of those obtained.<br />
The Group employs a stress testing programme to identify events or factors which could have a<br />
significant effect on positions to supplement the risk indicators obtained from the use of VaR.<br />
Stress tests are by nature both quantitative and qualitative and they consider not just market risks<br />
but also the effects on liquidity generated by market turbulence. They are based on both specially<br />
created theoretical shocks and market shocks actually observed in a predetermined historical period.<br />
The predictive power of the model adopted for risk measurement is currently monitored using daily<br />
backtesting analysis, which uses an actual P&L calculated by the front office systems of the Group.<br />
Retrospective tests consider changes in the value of the portfolio resulting from the front office<br />
systems of the Group, determined on day t with respect to positions present at t-1. The actual P&L is<br />
generated from all the transactions opposite in sign to the initial position for a total amount less than<br />
or equal to the total of the position t-1 without considering transactions of the same sign as the initial<br />
position that may have arisen during the day.<br />
The risk of losses caused by unfavourable changes in the price of traded financial instruments due to<br />
factors related to the issuer can be the result of daily trading activity (idiosyncratic risk) or of a<br />
sudden change in price with respect to general market trends (event risk, such as the risk of default<br />
by the issuer caused by a change in the market’s expectation that an issuer itself will default).<br />
The <strong>UBI</strong> model for monitoring specific risk for debt securities is capable of detecting the first of the<br />
two components (idiosyncratic risk) because it considers spread curves by economic sector and rating<br />
as risk factors.<br />
Total risk on equity instruments (and OICR – collective investment instruments) is measured by<br />
considering single shares as risk factors and it includes both the generic risk component (i.e. the risk<br />
of losses caused by unfavourable trends in the prices of the financial instruments traded in general)<br />
and a specific component relating to the situation of the issuer.<br />
415
Quantitative information<br />
1.1 Supervisory trading portfolio: distribution of on-balance sheet financial assets and liabilities and financial derivatives by<br />
residual maturity (repricing date). Denominated in: Euro<br />
Type/Residual maturity On demand Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL EURO<br />
1. On-balance sheet assets 346 26.000 304.057 2.766.801 339.065 2.812.110 404 - 6.248.783<br />
1.1 Debt instruments 121 14.435 304.057 2.765.501 304.287 2.812.081 404 - 6.200.886<br />
- w ith early redemption option 312 169 481<br />
- other 121 14.435 304.057 2.765.501 303.975 2.811.912 404 - 6.200.405<br />
1.2 Other assets 225 11.565 - 1.300 34.778 29 - - 47.897<br />
2. On-balance sheet liabilities - 11.664 - 671.073 470.825 - - - 1.153.562<br />
2.1 Repurchase agreements - - - - - - - - -<br />
2.2 Other liabilities - 11.664 - 671.073 470.825 - - - 1.153.562<br />
- - - - - - -<br />
3 <strong>Financial</strong> derivatives (83.050) (9.429.602) (17.068) 427.626 3.034.563 3.005.249 4.106.953 (21.406) 1.023.265<br />
3.1 With underlying security - (803) 656 1.506 19.922 265 (1) (21.406) -<br />
- Options - - - - 18.156 - - (18.156)<br />
+ Long positions - 23.147 4.991 28.138<br />
+ Short positions - 4.991 23.147 28.138<br />
- Other - (803) 656 1.506 1.766 265 (1) (3.250)<br />
+ Long positions - 87.455 72.310 1.845 2.433 265 164.308<br />
+ Short positions - 88.258 71.654 339 667 1 3.250 164.169<br />
3.2 Without underlying security (83.050) (9.428.799) (17.724) 426.120 3.014.641 3.004.984 4.106.954 - 7.852<br />
- Options - 75.733 3.342 (1.515) (15.499) (5.569) (48.640) -<br />
+ Long positions - 521.295 176.706 157.268 105.824 75.217 164.877 1.201.187<br />
+ Short positions - 445.562 173.364 158.783 121.323 80.786 213.517 1.193.335<br />
- Other (83.050) (9.504.532) (21.066) 427.635 3.030.140 3.010.553 4.155.594 -<br />
+ Long positions 96.792 10.846.735 3.373.487 791.055 5.935.233 4.091.559 4.980.538 30.115.399<br />
+ Short positions 179.842 20.351.267 3.394.553 363.420 2.905.093 1.081.006 824.944 29.100.125<br />
416
1.2 Supervisory trading portfolio: distribution of on-balance sheet financial assets and liabilities and financial derivatives by<br />
residual maturity (repricing date). Denominated in: USD<br />
Type/Residual maturity On demand Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL USD<br />
1. On-balance sheet assets - - - - - - - - -<br />
1.1 Debt instruments - - - - - - - - -<br />
- with early redemption option -<br />
- other - 3,741 27 - 3,822 - - - 7,590<br />
1.2 Other assets - - - - - - - - -<br />
2. On-balance sheet liabilities - - - - - - - - -<br />
2.1 Repurchase agreements - - - - - - - - -<br />
2.2 Other liabilities - - - - - - - - -<br />
- - - - - - -<br />
3 <strong>Financial</strong> derivatives - 236 (158,962) 6,697 4,430 (379) - - (147,978)<br />
3.1 With underlying security - - - - - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
3.2 Without underlying security - 236 (158,962) 6,697 4,430 (379) - - 3,839<br />
- Options - 3,839 - - - - - -<br />
+ Long positions - 133,593 115,752 145,355 13,047 407,747<br />
+ Short positions - 129,754 115,752 145,355 13,047 403,908<br />
- Other - (3,603) (158,962) 6,697 4,430 (379) - -<br />
+ Long positions - 724,975 19,080 10,527 35,309 37,896 - 827,787<br />
+ Short positions - 728,578 178,042 3,830 30,879 38,275 - 979,604<br />
417
1.3 Supervisory trading portfolio: distribution of on-balance sheet financial assets and liabilities and financial derivatives by<br />
residual maturity (repricing date). Denominated in: CHF<br />
Type/Residual maturity On demand Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL CHF<br />
1. On-balance sheet assets - - - - - - - - -<br />
1.1 Debt instruments - - - - - - - - -<br />
- with early redemption option -<br />
- other - - - - - - - - -<br />
1.2 Other assets - - - - - - - - -<br />
2. On-balance sheet liabilities - - - - - - - - -<br />
2.1 Repurchase agreements - - - - - - - - -<br />
2.2 Other liabilities - - - - - - - - -<br />
- - - - - - -<br />
3 <strong>Financial</strong> derivatives - (488,856) (158,377) (456) - - - - (647,689)<br />
3.1 With underlying security - - - - - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
3.2 Without underlying security - (488,856) (158,377) (456) - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - 3,108 1,103 384 991 5,586<br />
+ Short positions - 3,108 1,103 384 991 5,586<br />
- Other - (488,856) (158,377) (456) - - - -<br />
+ Long positions - 161,272 55 - - - - 161,327<br />
+ Short positions - 650,128 158,432 456 - - - 809,016<br />
418
1.4 Supervisory trading portfolio: distribution of on-balance sheet financial assets and liabilities and financial derivatives by<br />
residual maturity (repricing date). Denominated in: GBP<br />
Type/Residual maturity On demand Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL GBP<br />
1. On-balance sheet assets - - - - - - - - -<br />
1.1 Debt instruments - - - - - - - - -<br />
- with early redemption option -<br />
- other - - - - - - - - -<br />
1.2 Other assets - - - - - - - - -<br />
2. On-balance sheet liabilities - - - - - - - - -<br />
2.1 Repurchase agreements - - - - - - - - -<br />
2.2 Other liabilities - - - - - - - - -<br />
- - - - - -<br />
3 <strong>Financial</strong> derivatives - (2,522) (10,577) 3,761 - - - - (9,338)<br />
3.1 With underlying security - - - - - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - - - - - - - - -<br />
+ Short positions - - - - - - - - -<br />
- Other - - - - - - - -<br />
+ Long positions - - - - - - - - -<br />
+ Short positions - - - - - - - - -<br />
3.2 Without underlying security - (2,522) (10,577) 3,761 - - - - 26,529<br />
- Options - 15,450 7,318 3,761 - - - -<br />
+ Long positions - 15,450 7,318 3,761 - - - - 26,529<br />
+ Short positions - - - - - - - - -<br />
- Other - (17,972) (17,895) - - - - -<br />
+ Long positions - 91,794 1,186 - - - - - 92,980<br />
+ Short positions - 109,766 19,081 - - - - - 128,847<br />
419
1.5 Supervisory trading portfolio: distribution of on-balance sheet financial assets and liabilities and financial derivatives by<br />
residual maturity (repricing date). Denominated in: YEN<br />
Type/Residual maturity On demand Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL YEN<br />
1. On-balance sheet assets - - - - - - - - -<br />
1.1 Debt instruments - - - - - - - - -<br />
- with early redemption option -<br />
- other - - - - - - - - -<br />
1.2 Other assets - - - - - - - - -<br />
2. On-balance sheet liabilities - - - - - - - - -<br />
2.1 Repurchase agreements - - - - - - - - -<br />
2.2 Other liabilities - - - - - - - - -<br />
- - - - - - -<br />
3 <strong>Financial</strong> derivatives - (38,849) (5) - - - - - (38,854)<br />
3.1 With underlying security - - - - - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
3.2 Without underlying security - (38,849) (5) - - - - - (3,573)<br />
- Options - (3,573) - - - - - -<br />
+ Long positions - 5,798 2,981 1,331 598 10,708<br />
+ Short positions - 9,371 2,981 1,331 598 14,281<br />
- Other - (35,276) (5) - - - - -<br />
+ Long positions - 144,895 15,060 - - - - 159,955<br />
+ Short positions - 180,171 15,065 - - - - 195,236<br />
0.00<br />
420
1.6 Supervisory trading portfolio: distribution of on-balance sheet financial assets and liabilities and financial derivatives by<br />
residual maturity (repricing date). Denominated in: other currencies<br />
Type/Residual maturity On demand Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL OTHER<br />
CURRENCIES<br />
1. On-balance sheet assets - - - - - - - - -<br />
1.1 Debt instruments - - - - - - - - -<br />
- with early redemption option -<br />
- other - - - - - - - - -<br />
1.2 Other assets - - - - - - - - -<br />
2. On-balance sheet liabilities - - - - - - - - -<br />
2.1 Repurchase agreements - - - - - - - - -<br />
2.2 Other liabilities - - - - - - - - -<br />
- - - - - - -<br />
3 <strong>Financial</strong> derivatives - (153,676) - - - - - - (153,676)<br />
3.1 With underlying security - - - - - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
3.2 Without underlying security - (153,676) - - - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - 6,665 5,074 3,245 14,984<br />
+ Short positions - 6,665 5,074 3,245 14,984<br />
- Other - (153,676) - - - - - -<br />
+ Long positions - 101,733 19,574 320 1,602 - - 123,229<br />
+ Short positions - 255,409 19,574 320 1,602 - - 276,905<br />
0.00<br />
421
2. Supervisory trading portfolio: internal models and other methods of sensitivity analysis<br />
The graph below shows the changes in VaR in <strong>2012</strong>, for the <strong>UBI</strong> Group trading portfolios.<br />
Change in market risk: daily market VaR for the <strong>UBI</strong> Group in <strong>2012</strong><br />
14.000.000<br />
12.000.000<br />
10.000.000<br />
8.000.000<br />
6.000.000<br />
4.000.000<br />
2.000.000<br />
0<br />
VaR by risk factor calculated on the total <strong>UBI</strong> Group trading book as at 31 st December <strong>2012</strong> is given<br />
below.<br />
Trading book of the <strong>UBI</strong> <strong>Banca</strong> Group 31.12.<strong>2012</strong> Average Minimum Maximum<br />
Currency risk 329,002 301,265 180,789 401,754<br />
Interest rate risk 316,522 484,136 167,928 888,959<br />
Equity risk 1,620,044 594,676 114,886 1,674,922<br />
Credit risk 11,973,823 6,935,178 3,664,030 13,004,255<br />
Volatility risk 255,568 145,412 96,258 265,732<br />
Diversification effect (1) (1,877,018)<br />
Total (2) 12,617,940 7,331,761 3,807,270 13,068,147<br />
(1) The diversification effect is due to the imperfect correlation between the different risk factors present in the Group’s portfolio.<br />
(2) The maximum VaR was recorded on 13/11, the minimum VaR on 10/02<br />
Backtesting analyses<br />
Backtesting analysis is designed to test the predictive power of the VaR model adopted. It uses an<br />
actual profit and loss calculated on the basis of returns on positions in the portfolio on the previous<br />
day.<br />
The backtesting analysis for the trading book of <strong>UBI</strong> Group for <strong>2012</strong> is given below.<br />
422
<strong>UBI</strong> Group trading book: backtesting for <strong>2012</strong><br />
Millions Profit & Loss VaR<br />
8<br />
5<br />
2<br />
-1<br />
-4<br />
-7<br />
-10<br />
-13<br />
02/01 24/01 15/02 08/03 30/03 21/04 13/05 04/06 26/06 18/07 09/08 31/08 22/09 14/10 05/11 27/11 19/12<br />
Actual backtesting analysis of the supervisory portfolios of the <strong>UBI</strong> Group identified no overshoots,<br />
i.e. days when the profit and loss was worse than the VaR calculated by the risk management<br />
system.<br />
Theoretical stress tests<br />
The Group has a stress testing programme designed to analyse the reaction of portfolios to risk factor<br />
shocks with the objective of verifying the ability of the regulatory capital to absorb very large potential<br />
losses and to identify possible measures needed to reduce risks and conserve the capital itself.<br />
Stress tests based on theoretical shocks consist of specially created extreme shifts in interest rate<br />
(short, medium and long-term), credit spread, exchange rate, equity price and volatility curves. A<br />
brief description of the most significant stress tests is given below.<br />
• Bull/Bear Steepening: a shock on the yield curve where the decrease/increase in short term<br />
interest rates is greater/smaller than that for long term rates.<br />
• Bull/Bear Flattening: a shock on the yield curve where the decrease/increase in short term<br />
interest rates is smaller/greater than that for long term rates.<br />
• Shock Credit Spread: a widening in the credit spread of 100 basis point for corporate and<br />
government securities with a rating of less than AAA.<br />
• Flight to quality: this simulates a shift from investment in high risk to low risk assets. The<br />
shock applied is a decrease of 100bp in the interest rates for AAA government securities, an<br />
increase of 100bp in the credit spread on corporate and banking securities, and a<br />
depreciation in equity instruments of 10%.<br />
423
The table below gives the results of the theoretical stress tests performed on the <strong>UBI</strong> Group’s<br />
portfolios.<br />
The effect of theoretical shocks on the trading and banking book of the <strong>UBI</strong> Group<br />
Data as at 31/12/12<br />
<strong>UBI</strong> GROUP TRADING BOOK<br />
31/12/12<br />
<strong>UBI</strong> GROUP BANKING BOOK<br />
31/12/12<br />
TOTAL <strong>UBI</strong> GROUP<br />
31/12/12<br />
Change in NAV Change in NAV Change in NAV<br />
Risk Factors IR<br />
Shock Shock +1bp -177,998 -0.01% -1,212,621 -0.01% -1,390,620 -0.01%<br />
Risk Factors IR<br />
Shock Shock -1bp 177,903 0.01% 1,211,477 0.01% 1,389,380 0.01%<br />
Risk Factors IR<br />
Shock Shock +100bp -18,020,068 -1.22% -126,989,292 -1.13% -145,009,360 -1.14%<br />
Risk Factors IR<br />
Shock Shock -100bp 3,272,589 0.22% 30,085,573 0.27% 33,358,162 0.26%<br />
Risk Factors IR<br />
Shock Bear Steepening -243,540 -0.02% 79,373,164 0.71% 79,129,624 0.62%<br />
Risk Factors IR<br />
Shock Bull steepening 1,519,901 0.10% -4,997,991 -0.04% -3,478,090 -0.03%<br />
Risk Factors IR<br />
Shock Bear Flattening -1,546,336 -0.10% 3,853,927 0.03% 2,307,592 0.02%<br />
Risk Factors IR<br />
Shock Bull Flattening -9,268 0.00% -107,311,888 -0.96% -107,321,155 -0.85%<br />
Risk Factors Equity<br />
Shock +10% 4,160,707 0.28% 4,977,297 0.04% 9,138,004 0.07%<br />
Risk Factors Equity<br />
Shock -10% -3,235,235 -0.22% -4,977,297 -0.04% -8,212,532 -0.06%<br />
Risk Factors Volatility<br />
Shock +20% 473,766 0.03% 3,205,860 0.03% 3,679,626 0.03%<br />
Risk Factors Volatility<br />
Shock -20% -454,555 -0.03% -3,609,230 -0.03% -4,063,785 -0.03%<br />
Risk Factors Forex<br />
Shock +15% -2,743,597 -0.19% -1,277,377 -0.01% -4,020,974 -0.03%<br />
Risk Factors Forex<br />
Shock -15% 2,743,597 0.19% 1,277,377 0.01% 4,020,974 0.03%<br />
Risk Factors Credit Spread<br />
Shock -22,351,259 -1.51% -617,324,251 -5.51% -639,675,510 -5.04%<br />
Flight to quality scenario -29,488,033 -2.00% -622,301,548 -5.55% -651,789,581 -5.14%<br />
The analysis shows the heightened sensitivity of the <strong>UBI</strong> Group’s portfolios to credit spread shocks<br />
(consistent with the presence of Italian government securities and corporate securities, which are<br />
present in the <strong>UBI</strong> available-for-sale, the Centrobanca Corporate and the <strong>UBI</strong> International<br />
Luxembourg portfolios), to interest rate shocks (consistent with the presence of bonds and interest<br />
rate derivatives in Group portfolios).<br />
The limits set for the trading book are also used for the portfolios in the banking book, which contain<br />
assets classified for IFRS purposes as available-for-sale (the <strong>UBI</strong> available-for-sale portfolio, the<br />
424
Centrobanca corporate portfolio and the IW Bank available-for-sale portfolio) and under the fair value<br />
option (<strong>UBI</strong> hedge funds portfolio). The main operational limits for the banking book of the <strong>UBI</strong><br />
Group decided for <strong>2012</strong>, including the reallocations and the new limits set in the second half of the<br />
year, are given below.<br />
maximum loss for <strong>UBI</strong> banking book portfolios<br />
€2,998.07 million<br />
one day VaR limit for <strong>UBI</strong> banking book portfolios<br />
€238.48 million<br />
The graph below shows the changes in VaR that occurred in <strong>2012</strong> for the <strong>UBI</strong> Group banking book<br />
portfolios.<br />
Market VaR does not include VaR on hedge funds, instruments for which a specific investment policy is employed.<br />
VaR by risk factor calculated on the entire <strong>UBI</strong> Group banking book as at 31 st December <strong>2012</strong> is<br />
given below.<br />
Banking book of the <strong>UBI</strong> <strong>Banca</strong> Group 31.12.<strong>2012</strong> Average Minimum Maximum<br />
Currency risk 116,154 134,506 89,242 158,741<br />
Interest rate risk 9,716,142 11,326,516 8,191,383 17,321,584<br />
Equity risk 1,692,096 1,857,853 1,410,477 3,696,651<br />
Credit risk 221,430,360 185,885,223 127,345,160 225,106,889<br />
Volatility risk 872,048 851,340 702,327 938,448<br />
Diversification effect (1) (10,914,559)<br />
Total (2) 222,912,241 187,750,657 132,215,497 226,774,064<br />
(1) The diversification effect is due to the imperfect correlation between the different risk factors present in the Group’s portfolio.<br />
(2) The maximum VaR was recorded on 19/12, the minimum VaR on 06/01,<br />
2.2 Interest rate risk and price risk – banking portfolio<br />
Qualitative information<br />
A. General aspects, management and measurement of interest rate risk and price risk<br />
Interest rate risk consists of changes in interest rates which have the following effects:<br />
• on net interest income and consequently on the profits of the bank (cash flow risk);<br />
• on the net present value of assets and liabilities, which has an impact on the present value of<br />
future cash flows (fair value risk).<br />
The control and management of structural interest rate risk - fair value and cash flow – is performed<br />
in a centralised manner by the Parent within the framework, defined annually, of the Policy to<br />
Manage <strong>Financial</strong> Risks of the <strong>UBI</strong> <strong>Banca</strong> Group, which identifies measurement methods and models<br />
and limits or early warning thresholds in relation to net interest income and the economic value of<br />
the Group.<br />
Measurement, monitoring and reporting of interest rate risk exposure is performed at consolidated<br />
and individual level by the Risk Management Area of the Parent, which performs the following on a<br />
monthly basis:<br />
• a sensitivity analysis designed to measure changes in the value of assets on the basis of<br />
parallel shocks on interest rate levels for all the time buckets of the curve;<br />
• a simulation of the impact on net interest income for the current year by means of a static gap<br />
425
analysis (i.e. assuming that the positions remain constant during the period), considering the<br />
effect of elasticity on demand deposits.<br />
On the basis of the periodic reports produced, the ALM service of the Parent Bank takes appropriate<br />
action to prevent the limits and early warning thresholds from being exceeded.<br />
Exposure to interest rate risk is measured by using gap analysis and sensitivity analysis models on<br />
all those financial instruments, assets and liabilities, not included in the trading book, in accordance<br />
with supervisory regulations.<br />
Sensitivity analysis of economic value includes an estimate of the impacts resulting from the early<br />
repayment of mortgages and long-term loans, regardless of whether early repayment options are<br />
contained in the contracts.<br />
This is accompanied by an estimate of the change in net interest income. The analysis of the impact<br />
on net interest income is over a time horizon of twelve months, with account taken of both the<br />
variation in the profit on demand items (inclusive of viscosity phenomena) and that variation for<br />
items to held to maturity. This analysis also includes an estimate of the impact of<br />
reinvesting/refinancing maturing interest flows.<br />
The <strong>2012</strong> Policy to Manage <strong>Financial</strong> Risks of the <strong>UBI</strong> <strong>Banca</strong> Group defines a system of early warning<br />
thresholds on exposure to interest rate risk based on indicators measured in a scenario of a +/-100<br />
bp change in interest rates. More specifically, a sensitivity early warning threshold is set of 4% of first<br />
and second level available financial resources along with an early warning threshold of a 2% change<br />
in consolidated net interest income. The Management Board has also set an early warning threshold<br />
on sensitivity of €430 million.<br />
At individual level the <strong>2012</strong> Policy to Manage <strong>Financial</strong> Risks of the <strong>UBI</strong> <strong>Banca</strong> Group sets a<br />
sensitivity early warning threshold of 1% of the separate company regulatory capital for maturing<br />
items only. By including on demand items (including the performance model) in the sensitivity<br />
calculation, an early warning threshold is set for which the risk assumed by single entities cannot be<br />
greater than 10% of individual regulatory capital (a threshold set by the Supervisory Authority for<br />
interest rate risk in the banking book).<br />
Both at consolidated and individual level, the amount to compare with the early warning threshold is<br />
the absolute figure for the negative sensitivity resulting from the application of two different interest<br />
rate scenarios (parallel shock of +/-100 b.p. on the yield curve).<br />
Compliance with individual limits is pursued by Group member companies by means of hedging<br />
derivative contracts entered into with the Parent. <strong>UBI</strong> <strong>Banca</strong> may then close the position with<br />
counterparties outside the Group, acting in accordance with strategic policies and within the<br />
consolidated limits set by the governing bodies.<br />
B. Fair value hedging<br />
Specific and macro-hedges were performed at Group level using financial derivative instruments, in<br />
order to reduce exposure to adverse changes in fair value due to interest rate risk. More specifically<br />
the following are hedged: fixed interest rate securities in the available for sale portfolio (specific<br />
hedges) loans to ordinary customers on fixed and mixed interest rate schedules (macro-hedges),<br />
mortgages with cap options (macro-hedges) and fixed rate bond and covered bond issues (specific<br />
hedges).<br />
The derivative contracts used are of the interest rate swap and interest rate cap type.<br />
The hedging transactions entered into in <strong>2012</strong> were for the following:<br />
• fixed rate bond issues (specific hedges) of approximately €5.9 billion.<br />
Tests for effectiveness are performed prospectively when a hedge is first implemented and this is<br />
generally followed by monthly retrospective tests.<br />
426
Prospective effectiveness tests are performed by the Finance Area. Retrospective tests are performed<br />
by the Risk Management Area, which keeps official records of effectiveness over time for each hedging<br />
transaction.<br />
The interest rate risk hedging policy pursued in the <strong>UBI</strong> Group consists mainly of normal hedges on<br />
fixed rate asset items, by taking out derivatives contracts. While on the one hand this activity ensures<br />
the elimination of interest rate risk on differences resulting from different maturities on balance sheet<br />
items (yield curve risk), on the other hand it has led to a proliferation and stratification of derivative<br />
contracts over the years.<br />
In compliance with <strong>UBI</strong> Group Policy to manage financial risks, it was decided from 2013 to<br />
accompany the ordinary hedging described with natural hedging techniques. Consequently hedges<br />
existing at the end of the year were rationalised by closing the following:<br />
• all asset hedge derivatives (macro-hedges) except for those with interest rate options as the<br />
underlying;<br />
• asset hedge derivatives on available-for-sale financial assets (specific hedges), with maturities<br />
between 1 st January 2016 and 31 st December 2019;<br />
• liability hedge derivatives (bond issues) with maturities after 31 st December 2014.<br />
This action also involved a reduction in the <strong>UBI</strong> Group’s exposure to interest rate risk.<br />
C. Cash flow hedging<br />
Details of cash flow hedges are reported in the financial statements of the <strong>UBI</strong> Group in relation to<br />
issues of certificates of deposit denominated in Japanese currency (JPY), which are hedged by<br />
domestic currency swaps (DCS).<br />
427
Quantitative information<br />
1.1 Banking portfolio: distribution of the financial assets and liabilities by residual life (repricing date). Denominated in: Euro<br />
On demand<br />
Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL EURO<br />
1. On-balance sheet assets 21,998,638 49,760,016 10,213,436 2,800,046 15,122,510 8,284,609 5,366,926 91,716 113,637,897<br />
1.1 Debt instruments 256,130 595,117 1,353,015 422,743 8,368,258 2,819,111 2,395,375 - 16,209,749<br />
- with early redemption option 989 660 - - 21,955 5,106 - - 28,710<br />
- other 255,141 594,457 1,353,015 422,743 8,346,303 2,814,005 2,395,375 - 16,181,039<br />
1.2 Financing to banks 1,108,541 2,408,422 2,120,356 60,753 34,778 29 - - 5,732,879<br />
1.3 Customer finance 20,633,967 46,756,477 6,740,065 2,316,550 6,719,474 5,465,469 2,971,551 91,716 91,695,269<br />
- current accounts 12,122,408 2,571 4,806 24,683 27,273 490,333 - - 12,672,074<br />
- other financing 8,511,559 46,753,906 6,735,259 2,291,867 6,692,201 4,975,136 2,971,551 91,716 79,023,195<br />
- w ith early redemption option 4,666,712 38,566,899 3,609,099 1,462,873 4,247,242 2,391,057 2,923,679 91,716 57,959,277<br />
- other 3,844,847 8,187,007 3,126,160 828,994 2,444,959 2,584,079 47,872 - 21,063,918<br />
2. On-balance sheet liabilities 48,204,008 32,165,284 5,368,361 7,266,709 18,452,625 3,217,277 510 - 114,674,774<br />
2.1 Due to customers 45,516,830 5,362,947 808,337 822,693 4,215 8,135 - - 52,523,157<br />
- current accounts 43,049,335 - - - - - - - 43,049,335<br />
- other 2,467,495 5,362,947 808,337 822,693 4,215 8,135 - - 9,473,822<br />
- w ith early redemption option 2 63,283 33 193 2,789 4,519 - - 70,819<br />
- other 2,467,493 5,299,664 808,304 822,500 1,426 3,616 - - 9,403,003<br />
2.2 Due to banks 2,307,627 12,525,046 280,163 1,831,657 947,896 - - - 17,892,389<br />
- current accounts 888,577 - - - - - - - 888,577<br />
- other payables 1,419,050 12,525,046 280,163 1,831,657 947,896 - - - 17,003,812<br />
2.3 Debt instruments 379,508 14,224,893 4,279,861 4,612,359 17,500,514 3,209,142 510 - 44,206,787<br />
- with early redemption option 5,642 827,387 379,388 9,808 40,813 80,076 - - 1,343,114<br />
- other 373,866 13,397,506 3,900,473 4,602,551 17,459,701 3,129,066 510 - 42,863,673<br />
2.4 Other liabilities 43 52,398 - - - - - - 52,441<br />
- with early redemption option - - - - - - - - -<br />
- other 43 52,398 - - - - - - 52,441<br />
3 <strong>Financial</strong> derivatives (170,161) (11,033,236) (5,374,905) 2,345,329 16,044,888 1,735,682 (5,149,150) - (1,601,553)<br />
3.1 With underlying security - - - - (208,101) (335,848) (112,783) - (656,732)<br />
- Options - - - - (208,101) (335,848) (112,783) -<br />
+ Long positions - - 639,135 1,865 34 1,299,666 1,940,700<br />
+ Short positions - - 639,135 209,966 335,848 112,817 1,299,666 2,597,432<br />
- Other - - - - - - - - -<br />
+ Long positions - - - - - - - - -<br />
+ Short positions - - - - - - - - -<br />
3.2 Without underlying security (170,161) (11,033,236) (5,374,905) 2,345,329 16,252,989 2,071,530 (5,036,367) - (944,821)<br />
- Options (452,063) (1,666,992) (224,546) (356,779) 1,828,083 1,090,306 (247,131) - (29,122)<br />
+ Long positions 31,052 2,548,110 68,497 421,890 2,730,406 1,371,725 2,244,189 - 9,415,869<br />
+ Short positions 483,115 4,215,102 293,043 778,669 902,323 281,419 2,491,320 - 9,444,991<br />
- Other 281,902 (9,366,244) (5,150,359) 2,702,108 14,424,906 981,224 (4,789,236) - (915,699)<br />
+ Long positions 284,393 13,042,527 2,930,083 3,367,154 17,856,803 3,098,853 - - 40,579,813<br />
+ Short positions 2,491 22,408,771 8,080,442 665,046 3,431,897 2,117,629 4,789,236 - 41,495,512<br />
4 Other off-balance sheet transactions (49,120) 2,497 175 4,781 13,616 7,314 23,097 - 2,360<br />
+ Long positions 1,704,192 2,497 175 4,781 13,616 7,314 23,097 - 1,755,672<br />
+ Short positions 1,753,312 - - - - - - - 1,753,312<br />
428
1.2 Banking portfolio: distribution of the financial assets and liabilities by residual life (repricing date). Denominated in: USD<br />
On demand<br />
Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL USD<br />
1. On-balance sheet assets 108,793 333,525 15,514 87 26,680 - - - 484,599<br />
1.1 Debt instruments 205 10,079 - - - - - - 10,284<br />
- with early redemption option - - - - - - - - -<br />
- other 205 10,079 - - - - - - 10,284<br />
1.2 Financing to banks 9,490 4,866 1,983 31 59 - - - 16,429<br />
1.3 Customer finance 99,098 318,580 13,531 56 26,621 - - - 457,886<br />
- current accounts 19,843 - - - - - - - 19,843<br />
- other financing 79,255 318,580 13,531 56 26,621 - - - 438,043<br />
- w ith early redemption option - - - - - - - - -<br />
- other 79,255 318,580 13,531 56 26,621 - - - 438,043<br />
2. On-balance sheet liabilities 335,995 203,708 14,763 574 379 - - - 555,419<br />
2.1 Due to customers 323,279 67,618 7,322 531 379 - - - 399,129<br />
- current accounts 321,555 621 379 531 379 - - - 323,465<br />
- other 1,724 66,998 6,943 - - - - - 75,665<br />
- w ith early redemption option - 14,503 - - - - - - 14,503<br />
- other 1,724 52,494 6,943 - - - - - 61,161<br />
2.2 Due to banks 11,956 124,051 808 - - - - - 136,815<br />
- current accounts 1,805 - - - - - - - 1,805<br />
- other payables 10,151 124,051 808 - - - - - 135,010<br />
2.3 Debt instruments 760 12,039 6,633 43 - - - - 19,475<br />
- with early redemption option - 4,908 - - - - - - 4,908<br />
- other 760 7,131 6,633 43 - - - - 14,567<br />
2.4 Other liabilities - - - - - - - - -<br />
- with early redemption option - - - - - - - - -<br />
- other - - - - - - -<br />
3 <strong>Financial</strong> derivatives - 44,338 - - (45,096) - - - (758)<br />
3.1 With underlying security - - - - - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
3.2 Without underlying security - 44,338 - - (45,096) - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other - 44,338 - - (45,096) - - -<br />
+ Long positions - 45,096 45,096<br />
+ Short positions - 758 45,096 45,854<br />
4 Other off-balance sheet transactions (551) 551 - - - - - - -<br />
+ Long positions 689 551 1,240<br />
+ Short positions 1,240 - - - - - - 1,240<br />
429
1.3 Banking portfolio: distribution of the financial assets and liabilities by residual life (repricing date). Denominated in: CHF<br />
On demand<br />
Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL CHF<br />
1. On-balance sheet assets 10,221 621,314 16,880 3,092 - - 338 - 651,845<br />
1.1 Debt instruments - - - - - - - - -<br />
- w ith early redemption option - - - - - - - - -<br />
- other - - - - - - - - -<br />
1.2 Financing to banks 8,462 - - - - - - - 8,462<br />
1.3 Customer finance 1,759 621,314 16,880 3,092 - - 338 - 643,383<br />
- current accounts 54 - - - - - - - 54<br />
- other financing 1,705 621,314 16,880 3,092 - - 338 - 643,329<br />
- with early redemption option - - - - - - - - -<br />
- other 1,705 621,314 16,880 3,092 - - 338 - 643,329<br />
2. On-balance sheet liabil ities 57,658 107 3,463 104 - 38 - - 61,370<br />
2.1 Due to customers 57,119 - - - - 38 - - 57,157<br />
- current accounts 56,204 - - - - 38 - - 56,242<br />
- other 915 - - - - - - - 915<br />
- with early redemption option - - - - - - - - -<br />
- other 915 - - - - - - - 915<br />
2.2 Due to banks 469 - - - - - - - 469<br />
- current accounts 469 - - - - - - - 469<br />
- other payables - - - - - - - - -<br />
2.3 Debt instruments 70 107 3,463 104 - - - - 3,744<br />
- with early redemption option - - - - - - - - -<br />
- other 70 107 3,463 104 - - - - 3,744<br />
2.4 Other liabilities - - - - - - - - -<br />
- with early redemption option - - - - - - - - -<br />
- other - - - - - - - - -<br />
3 <strong>Financial</strong> derivatives - 78,546 (2,444) (29,018) (37,765) (9,319) - - -<br />
3.1 With underlying security - - - - - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
3.2 Without underlying security - 78,546 (2,444) (29,018) (37,765) (9,319) - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other - 78,546 (2,444) (29,018) (37,765) (9,319) - -<br />
+ Long positions - 90,342 90,342<br />
+ Short positions - 11,796 2,444 29,018 37,765 9,319 90,342<br />
4 Other off-bal ance sheet transactions (39,990) - 39,899 - - - - - (91)<br />
+ Long positions - 39,899 39,899<br />
+ Short positions<br />
39,990 - - - - - - 39,990<br />
430
1.4 Banking portfolio: distribution of the financial assets and liabilities by residual life (repricing date). Denominated in: GBP<br />
On demand<br />
Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL GBP<br />
1. On-balance sheet assets 15,196 8,657 552 - - - - - 24,405<br />
1.1 Debt instruments 17 380 - - - - - - 397<br />
- w ith early redemption option - - - - - - - - -<br />
- other 17 380 - - - - - - 397<br />
1.2 Financing to banks 2,379 - - - - - - - 2,379<br />
1.3 Customer finance 12,800 8,277 552 - - - - - 21,629<br />
- current accounts 1,652 - - - - - - - 1,652<br />
- other financing 11,148 8,277 552 - - - - - 19,977<br />
- w ith early redemption option - - - - - - - - -<br />
- other 11,148 8,277 552 - - - - - 19,977<br />
2. On-bal ance sheet liabilities 18,904 4,164 86 - - - - - 23,154<br />
2.1 Due to customers 18,884 3,765 - - - - - - 22,649<br />
- current accounts 18,678 - - - - - - - 18,678<br />
- other 206 3,765 - - - - - - 3,971<br />
- w ith early redemption option - 713 - - - - - - 713<br />
- other 206 3,052 - - - - - - 3,258<br />
2.2 Due to banks 19 - - - - - - - 19<br />
- current accounts 19 - - - - - - - 19<br />
- other payables - - - - - - - - -<br />
2.3 Debt instruments 1 399 86 - - - - - 486<br />
- w ith early redemption option - - - - - - - - -<br />
- other 1 399 86 - - - - - 486<br />
2.4 Other liabilities - - - - - - - - -<br />
- w ith early redemption option - - - - - - - - -<br />
- other - - - - - - -<br />
3 <strong>Financial</strong> derivatives (3) 26,957 - - (17,154) (9,803) - - (3)<br />
3.1 With underlying security - - - - - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
3.2 Without underlying security (3) 26,957 - - (17,154) (9,803) - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other (3) 26,957 - - (17,154) (9,803) - -<br />
+ Long positions - 26,957 26,957<br />
+ Short positions 3 17,154 9,803 26,960<br />
4 Other off-balance sheet transactions - - - - - - - - -<br />
+ Long positions -<br />
+ Short positions<br />
- - - - - - -<br />
431
1.5 Banking portfolio: distribution of the financial assets and liabilities by residual life (repricing date). Denominated in: YEN<br />
On demand<br />
Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL YEN<br />
1. On-balance sheet assets 2,559 25,599 572 131 - - - - 28,861<br />
1.1 Debt instruments - - - - - - - - -<br />
- w ith early redemption option - - - - - - - - -<br />
- other - - - - - - - - -<br />
1.2 Financing to banks 1,834 - - - - - - - 1,834<br />
1.3 Customer finance 725 25,599 572 131 - - - - 27,027<br />
- current accounts - - - - - - - - -<br />
- other financing 725 25,599 572 131 - - - - 27,027<br />
- with early redemption option - - - - - - - - -<br />
- other 725 25,599 572 131 - - - - 27,027<br />
2. On-bal ance sheet liabil ities 4,137 395,942 262,626 158,496 - - - - 821,201<br />
2.1 Due to customers 2,182 - - - - - - - 2,182<br />
- current accounts 2,181 - - - - - - - 2,181<br />
- other 1 - - - - - - - 1<br />
- with early redemption option - - - - - - - - -<br />
- other 1 - - - - - - - 1<br />
2.2 Due to banks - - - - - - - - -<br />
- current accounts - - - - - - - - -<br />
- other payables - - - - - - - - -<br />
2.3 Debt instruments 1,955 395,942 262,626 158,496 - - - - 819,019<br />
- w ith early redemption option - - - - - - - - -<br />
- other 1,955 395,942 262,626 158,496 - - - - 819,019<br />
2.4 Other liabilities - - - - - - - - -<br />
- w ith early redemption option - - - - - - - - -<br />
- other - - - - - - - - -<br />
3 <strong>Financial</strong> derivatives 1,748 396,874 265,194 162,844 - - - - 826,660<br />
3.1 With underlying security - - - - - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
3.2 Without underlying security 1,748 396,874 265,194 162,844 - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other 1,748 396,874 265,194 162,844 - - - -<br />
+ Long positions 1,748 396,874 265,194 162,844 826,660<br />
+ Short positions - -<br />
4 Other off-balance sheet transactions (92) - - 92 - - - - -<br />
+ Long positions - - 92 92<br />
+ Short positions 92 - - - - - - - 92<br />
432
1.6 Banking portfolio: distribution of the financial assets and liabilities by residual life (repricing date). Denominated in:<br />
other currencies<br />
On demand<br />
Up to 3 months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
5 years to 10<br />
years<br />
Over ten years<br />
Indeterminate<br />
maturity<br />
TOTAL OTHER<br />
CURRENCIES<br />
1. On-balance sheet assets 40,333 103,807 27,264 15,096 22 809 - - 187,331<br />
1.1 Debt instruments - - - - - - - - -<br />
- w ith early redemption option - - - - - - - - -<br />
- other - - - - - - - - -<br />
1.2 Financing to banks 18,287 2,740 - - - - - - 21,027<br />
1.3 Customer finance 22,046 101,067 27,264 15,096 22 809 - - 166,304<br />
- current accounts 2,254 - - - - - - - 2,254<br />
- other financing 19,792 101,067 27,264 15,096 22 809 - - 164,050<br />
- w ith early redemption option 142 11,205 36 4 22 - - - 11,409<br />
- other 19,650 89,862 27,228 15,092 - 809 - - 152,641<br />
2. On-balance sheet liabilities 19,505 10,283 1,259 10 - - - - 31,057<br />
2.1 Due to customers 9,515 4,831 1,259 - - - - - 15,605<br />
- current accounts 9,240 - - - - - - - 9,240<br />
- other 275 4,831 1,259 - - - - - 6,365<br />
- w ith early redemption option - - - - - - - - -<br />
- other 275 4,831 1,259 - - - - - 6,365<br />
2.2 Due to banks 9,990 5,452 - - - - - - 15,442<br />
- current accounts 446 - - - - - - - 446<br />
- other payables 9,544 5,452 - - - - - - 14,996<br />
2.3 Debt instruments - - - 10 - - - - 10<br />
- w ith early redemption option - - - - - - - - -<br />
- other - - - 10 - - - - 10<br />
2.4 Other liabilities - - - - - - - - -<br />
- w ith early redemption option - - - - - - - - -<br />
- other - - - - - - -<br />
3 <strong>Financial</strong> derivatives - - - - (2,317) - - 2,317 -<br />
3.1 With underlying security - - - - (2,317) - - 2,317 -<br />
- Options - - - - (2,317) - - 2,317<br />
+ Long positions - 2,317 2,317<br />
+ Short positions - 2,317 2,317<br />
- Other - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
3.2 Without underlying security - - - - - - - - -<br />
- Options - - - - - - - -<br />
+ Long positions - -<br />
+ Short positions - -<br />
- Other - - - - - - - -<br />
+ Long positions - - -<br />
+ Short positions - - - -<br />
4 Other off-balance sheet transactions 1,277 (1,277) - - - - - - -<br />
+ Long positions 1,725 448 2,173<br />
+ Short positions 448 1,725 - - - - - - 2,173<br />
YEAH!!!<br />
433
2. Banking portfolio: internal models and other methods of sensitivity analysis.<br />
The exposure of the Group to interest rate risk, measured in terms of core sensitivity in a scenario of<br />
an increase in interest rates of +100 bp, on items as at 31 st December <strong>2012</strong>, amounted to<br />
approximately +€46.28 million (-€243.78 million as at 31 st December 2011).<br />
The relevant scenario for internal monitoring is that associated with a negative shock of -100 bp on<br />
the yield curve. In this case the exposure, net of early mortgage repayments and of the AFS portfolio<br />
for which specific limits are set, amounted to -€186.55 million compared with an early warning<br />
threshold on that indicator of -€430 million.<br />
The total level of exposure includes an estimate, consistent with the provisions of the <strong>Financial</strong> Risks<br />
Policy, of the impact of the early repayment of loans (approximately +€163.09 million in terms of<br />
sensitivity) and also the effect of structural ALM action taken using derivatives, even if subject to a<br />
capital requirement for market risk, with the objective of acting on the individual sensitivity of Group<br />
companies.<br />
In detail, the core sensitivity originated by the network banks amounted to approximately -€353.21<br />
million, while approximately +€79.46 million is attributable to the activities of the product<br />
companies. The Parent contributes a total of approximately +€87.21 million, including +€3.77 million<br />
from structural and sensitivity action relating to Group member companies. In fact <strong>UBI</strong> <strong>Banca</strong><br />
operates as the sole counterparty for Group member companies in hedging derivatives contracts and,<br />
if necessary, it then closes the positions on the market on the basis of positioning with respect to the<br />
limits set by the <strong>Financial</strong> Risks Policy and expected scenarios for future interest rate trends.<br />
The table below reports the exposure, measured in terms of economic value sensitivity in a scenario<br />
of an increase in reference interest rates of +200 bp, recorded in <strong>2012</strong>, given as a percentage of the<br />
tier one capital and the regulatory capital as at 31 st December <strong>2012</strong>.<br />
Risk indicators - average amounts <strong>2012</strong> 2011<br />
parallel shift of +200 bp<br />
sensitivity/tier one capital 2.50% 6.90%<br />
sensitivity/regulatory capital 1.74% 4.65%<br />
Risk indicators - end of period values 31/12/<strong>2012</strong> 31/12/2011<br />
parallel shift of +200 bp<br />
sensitivity/tier one capital 1.33% 5.66%<br />
sensitivity/regulatory capital 1.74% 3.81%<br />
Sensitivity analysis of net interest income focuses on changes in profits resulting from a parallel<br />
shock on the yield curve measured over a time horizon of 12 months. The overall determination of<br />
exposure contributes to the analysis of the viscosity of on-demand items. The <strong>UBI</strong> Group exposure to<br />
interest rate risk, estimated in terms of an impact on net interest income of an increase in the<br />
reference interest rates of 100 bp, amounted to -€9.79 million as at 31 st December <strong>2012</strong>.<br />
The impact on that income shows the effects of changes in interest rates on the portfolio monitored,<br />
excluding hypotheses of future changes in the mix of assets and liabilities. These factors mean that<br />
the indicator cannot be used to assess the Bank’s future strategy.<br />
434
2.3 Currency risk<br />
Qualitative information<br />
A. General aspects, management and measurement of currency risk<br />
Currency risk is calculated on the basis of mismatches existing between assets and liabilities in<br />
foreign currency (spot and forward), relating to each currency other than euro. The main sources of<br />
risk are as follows:<br />
• lending and funding in foreign currency with corporate and retail customers;<br />
• holding financial instruments denominated in foreign currency;<br />
• holding units in O.I.C.R. (collective investment instruments) for which, even if they are<br />
denominated in euro, it is not possible to determine the composition in foreign currency of the<br />
underlying investments and/or for which the maximum limit on investment in foreign<br />
currency is not known and binding;<br />
• dealing in foreign bank notes.<br />
Foreign currency risk in the <strong>UBI</strong> Group regards banking book exposures originated by the network<br />
banks and/or by the product companies – resulting from their commercial activities – and their<br />
positions relating to trading in foreign currency.<br />
Trading on foreign exchange markets is performed by the Group treasury function which operates by<br />
using instruments such as forward trades, forex swaps, domestic currency swaps and currency<br />
options, thereby optimising risks resulting from Group positions in foreign currency.<br />
Exposure to currency risk is calculated starting from the net foreign currency position using a<br />
method based on supervisory regulations. Equity investments and tangible assets are not included in<br />
the calculation of the net foreign currency position.<br />
B. Currency risk hedging<br />
Foreign currency risk arising from exposures in the banking book is mitigated by systematically<br />
hedging them with funding and lending transactions in the same currency as the original<br />
transaction. This activity to contain risk is also performed by the product companies for their own<br />
banking book positions. The remaining exposures and trading portfolio exposures are fully and<br />
precisely hedged with spot forex positions.<br />
For some network banks in the Group (<strong>Banca</strong> Popolare di Bergamo S.p.A. and <strong>Banca</strong> Popolare di<br />
Ancona S.p.A), issues of certificates of deposit in foreign Japanese currency (JPY) are hedged by<br />
simultaneously entering into DCS contracts with customers, as already mentioned in the sub-section<br />
on interest rate risk. The accounting treatment employed for these transactions is that for cash flow<br />
hedging.<br />
435
Quantitative information<br />
1. Distribution of assets, liabilities and derivatives by foreign currency in which they are<br />
denominated<br />
Items<br />
Currencies<br />
US Dol lars UK sterling Yen Canadian Doll ar Sw iss Francs Other currencies<br />
A. <strong>Financial</strong> assets 739,023 67,889 30,812 11,088 865,230 201,349<br />
A.1 Debt instruments 41,176 30,361 - - 5,705 -<br />
A.2 Equity instruments 888 - - - 10 -<br />
A.3 Financing to banks 45,602 12,565 2,065 5,322 2,561 38,294<br />
A.4 Financing to customers 638,447 24,963 28,747 5,766 856,954 163,055<br />
A.5 Other financial assets 12,910 - - - - -<br />
B. Other assets 7,503 3,972 379 649 7,871 1,593<br />
C. <strong>Financial</strong> l iabilities 798,713 63,607 823,855 11,095 249,990 55,756<br />
C.1 Due to banks 349,663 31,865 2,549 60 31,318 29,600<br />
C.2 Due to customers 429,575 31,255 2,287 11,035 210,894 26,147<br />
C.3 Debt instruments 19,475 487 819,019 - 7,778 9<br />
C.4 Other financial liabilities - - - - - -<br />
D. Other liabilities 1,192 762 - - 3,746 933<br />
E. <strong>Financial</strong> Derivatives (138,106) (35,011) 787,806 (79) (647,689) (152,949)<br />
E.1 Options 3,839 - (3,573) - - -<br />
E.1.1 Long positions 407,747 26,529 10,708 7,065 5,586 7,919<br />
E.1.2 Short positions 403,908 26,529 14,281 7,065 5,586 7,919<br />
E.2 Other derivatives (141,945) (35,011) 791,379 (79) (647,689) (152,949)<br />
E.2.1 Long positions 668,087 93,837 986,615 22,327 161,327 97,521<br />
E.2.2 Short positions 810,032 128,848 195,236 22,406 809,016 250,470<br />
Total assets 1,822,360 192,227 1,028,514 41,129 1,040,014 308,382<br />
Total l iabilities 2,013,845 219,746 1,033,372 40,566 1,068,338 315,078<br />
Bal ance (+/-) (191,485) (27,519) (4,858) 563 (28,324) (6,696)<br />
2. Internal models and other methods of sensitivity analysis.<br />
The absorption of capital for currency risk as at 31 st December <strong>2012</strong> was nil, given a general net open<br />
position in foreign currency of less than two per cent of supervisory capital.<br />
Exposure to currency risk benefited during the year from a reduction in investments in hedge funds.<br />
436
2.4 Derivative financial instruments<br />
A. <strong>Financial</strong> derivatives<br />
A.1 Supervisory trading portfolio: end of period and average notional amounts<br />
Underlying assets/type of derivative<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Over the counter Central counterparties Over the counter Central counterparties<br />
1. Debt instruments and interest rates 19,674,568 693,493 28,658,326 623,007<br />
a) Options 5,638,399 7,765,102 -<br />
b) Swaps 14,036,169 20,893,224 -<br />
c) Forwards - -<br />
d) Futures 693,493 - 623,007<br />
e) Other - -<br />
2. Equity instruments and share indices 54,913 54,704 59,681 1,440<br />
a) Options 54,913 42,601 59,681 100<br />
b) Swaps - -<br />
c) Forwards - -<br />
d) Futures 12,103 - 1,340<br />
e) Other - -<br />
3. Currencies and gold 4,799,924 - 5,342,657 -<br />
a) Options 1,926,580 2,030,499 -<br />
b) Swaps - -<br />
c) Forwards 2,873,344 3,312,158 -<br />
d) Futures - -<br />
e) Other - -<br />
4. Commodities 29,908 5,785 -<br />
5. Other underlying 1,076 - - -<br />
Total 24,560,389 748,197 34,066,449 624,447<br />
Average amounts 29,313,419 686,322 41,363,171 1,640,207<br />
437
A.2 Banking portfolio: notional, end of period and average amounts<br />
A.2.1 For hedging<br />
Underlying assets/type of derivative<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Over the counter Central counterparties Over the counter Central counterparties<br />
1. Debt instruments and interest rates 46,637,562 - 47,902,850 -<br />
a) Options 5,896,021 5,230,386 -<br />
b) Sw aps 40,741,541 42,672,464 -<br />
c) Forw ards - -<br />
d) Futures - -<br />
e) Other - -<br />
2. Equity instruments and share indices - - - -<br />
a) Options - -<br />
b) Sw aps - -<br />
c) Forw ards - -<br />
d) Futures - -<br />
e) Other - -<br />
3. Currencies and gold 826,659 - 1,128,625 -<br />
a) Options - -<br />
b) Sw aps 826,659 1,128,625 -<br />
c) Forw ards - -<br />
d) Futures - -<br />
e) Other - -<br />
4. Commodities - -<br />
5. Other underlying - -<br />
Total 47,464,221 - 49,031,475 -<br />
Average amounts 48,247,799 46,398,792 -<br />
A.2.2 Other derivatives<br />
Underlying assets/type of derivative<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Over the counter Central counterparties Over the counter Central counterparties<br />
1. Debt instruments and interest rates 97,194 - 126,494 -<br />
a) Options 9,094 19,094 -<br />
b) Sw aps - -<br />
c) Forw ards - -<br />
d) Futures - -<br />
e) Other 88,100 107,400 -<br />
2. Equity instruments and share indices 1,812,715 - 2,167,983 -<br />
a) Options 1,812,715 2,167,983 -<br />
b) Sw aps - -<br />
c) Forw ards - -<br />
d) Futures - -<br />
e) Other - -<br />
3. Currencies and gold - - - -<br />
a) Options - -<br />
b) Sw aps - -<br />
c) Forw ards - -<br />
d) Futures - -<br />
e) Other - -<br />
4. Commodities - -<br />
5. Other underlying - -<br />
Total 1,909,909 - 2,294,477 -<br />
Average amounts 2,102,193 5,615,810 -<br />
438
A.3 <strong>Financial</strong> derivatives: gross positive fair value – by type of product<br />
Positive fair value<br />
Portfolio/type of derivative<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Over the counter Central counterparties Over the counter Central counterparties<br />
A. Supervisory trading portfolio 585,406 1,745 595,567 220<br />
a) Options 34,683 1,676 61,106 35<br />
b) Interest rate sw aps 523,805 489,384 -<br />
c) Cross currency sw aps 23 -<br />
d) Equity sw aps - -<br />
e) Forw ards 26,163 44,024 -<br />
f) Futures 69 - 185<br />
f) Other 755 1,030 -<br />
B. Banking portfolio - for hedging 1,478,322 - 1,090,498 -<br />
a) Options - -<br />
b) Interest rate sw aps 1,478,322 1,010,954 -<br />
c) Cross currency sw aps -<br />
d) Equity sw aps -<br />
e) Forw ards - -<br />
f) Futures - -<br />
f) Other 79,544 -<br />
C. Banking portfolio - other derivatives 673 - 1,199 -<br />
a) Options 673 1,199 -<br />
b) Interest rate sw aps - -<br />
c) Cross currency sw aps - -<br />
d) Equity sw aps - -<br />
e) Forw ards - -<br />
f) Futures - -<br />
f) Other - -<br />
Total 2,064,401 1,745 1,687,264 220<br />
A.4 <strong>Financial</strong> derivatives: gross negative fair value – by type of product<br />
Negative fair value<br />
Portfolio/type of derivative<br />
31.12.<strong>2012</strong> 31.12.2011<br />
Over the counter Central counterparties Over the counter Central counterparties<br />
A. Supervisory trading portfolio 609,206 69 624,066 187<br />
a) Options 29,890 49,123 -<br />
b) Interest rate sw aps 552,987 522,968 -<br />
c) Cross currency sw aps 47 -<br />
d) Equity sw aps - -<br />
e) Forw ards 25,695 50,889 -<br />
f) Futures 69 - 187<br />
f) Other 634 1,039<br />
B. Banking portfolio - for hedging 2,234,988 - 1,739,685 -<br />
a) Options - -<br />
b) Interest rate sw aps 2,129,499 1,739,328 -<br />
c) Cross currency sw aps - -<br />
d) Equity sw aps - -<br />
e) Forw ards - -<br />
f) Futures - -<br />
f) Other 105,489 357 -<br />
C. Banking portfolio - other derivatives 729 - 1,413 106<br />
a) Options 634 1,413 -<br />
b) Interest rate sw aps - -<br />
c) Cross currency sw aps - -<br />
d) Equity sw aps - -<br />
e) Forw ards - -<br />
f) Futures - -<br />
f) Other 95 - 106<br />
Total 2,844,923 69 2,365,164 293<br />
439
A.5 OTC financial derivatives: supervisory trading portfolio – notional amounts, gross positive and negative fair<br />
values by counterparty – contracts not covered by clearing agreements<br />
Contracts not covered by clearing<br />
agreements<br />
Governments and<br />
central banks<br />
Other public<br />
authorities<br />
Banks<br />
<strong>Financial</strong> companies<br />
Insurance companies<br />
Non financial<br />
companies<br />
Other<br />
1) Debt instruments and interest rates<br />
- notional amount - 14,993 102,702 48,077 - 5,253,626 801,508<br />
- positive fair value - - - 1,919 - 412,113 9,683<br />
- negative fair value - 4 471 1 - 898 316<br />
- future exposure - 4 50 162 - 16,943 695<br />
2) Equity instruments and share indices<br />
- notional amount - - - - - - 54,913<br />
- positive fair value - - - - - - -<br />
- negative fair value - - - - - - -<br />
- future exposure - - - - - - 649<br />
3) Currencies and gold<br />
- notional amount - - 1,703,746 1,035,152 315 1,068,529 17,444<br />
- positive fair value - - 21,780 3,358 - 7,793 116<br />
- negative fair value - - 1,804 22,999 13 6,445 118<br />
- future exposure - - 17,037 10,321 3 7,084 174<br />
4) Other securities<br />
- notional amount - - - - - 16,033 -<br />
- positive fair value - - - - - 1,436 -<br />
- negative fair value - - - - - 215 -<br />
- future exposure - - - - - 1,672 -<br />
440
A.6 OTC financial derivatives: supervisory trading portfolio – notional amounts, gross positive and negative fair<br />
values by counterparty – contracts covered by clearing agreements<br />
Contracts not covered by clearing<br />
agreements<br />
Governments and<br />
central banks<br />
Other public<br />
authorities<br />
Banks<br />
<strong>Financial</strong> companies<br />
Insurance companies<br />
Non financial<br />
companies<br />
Other<br />
1) Debt instruments and interest rates<br />
- notional amount - - 13,003,874 449,788 - - -<br />
- positive fair value - - 105,672 8,748 - - -<br />
- negative fair value - - 541,804 21,372 - - -<br />
2) Equity instruments and share indices<br />
- notional amount - - - - - - -<br />
- positive fair value - - - - - - -<br />
- negative fair value - - - - - - -<br />
3) Currencies and gold<br />
- notional amount - - 841,236 133,502 - - -<br />
- positive fair value - - 10,569 1,845 - - -<br />
- negative fair value - - 10,159 2,236 - - -<br />
4) Other securities<br />
- notional amount - - 14,951 - - - -<br />
- positive fair value - - 374 - - - -<br />
- negative fair value - - 351 - - - -<br />
441
A.7 OTC financial derivatives: banking portfolio – notional amounts, gross positive and negative fair values by<br />
counterparty – contracts not covered by clearing agreements<br />
Contracts not covered by clearing<br />
agreements<br />
Governments and<br />
central banks<br />
Other public<br />
authorities<br />
Banks<br />
<strong>Financial</strong> companies<br />
Insurance companies<br />
Non financial<br />
companies<br />
Other<br />
1) Debt instruments and interest rates<br />
- notional amount - - 73,995 163,691 4,050 3,500 11,747<br />
- positive fair value - - 7,677 - - - -<br />
- negative fair value - - 331 4,059 - - -<br />
- future exposure - - 471 329 - - -<br />
2) Equity instruments and share indices<br />
- notional amount - - 649,397 137,909 682,821 256,833 46,496<br />
- positive fair value - - 75 - - - -<br />
- negative fair value - - - - - - 36<br />
- future exposure - - 38,537 13,789 33,854 23,956 451<br />
3) Currencies and gold<br />
- notional amount - 196 - 17,467 - 22,945 786,051<br />
- positive fair value - - - - - - -<br />
- negative fair value - 4 - 2,676 - 2,863 99,946<br />
- future exposure - 2 - 175 - 232 7,971<br />
4) Other securities<br />
- notional amount - - - - - - -<br />
- positive fair value - - - - - - -<br />
- negative fair value - - - - - - -<br />
- future exposure - - - - - - -<br />
442
A.8 OTC financial derivatives: banking portfolio – notional amounts, gross positive and negative fair values by<br />
counterparty – contracts covered by clearing agreements<br />
Contracts not covered by clearing<br />
agreements<br />
Governments and<br />
central banks<br />
Other public<br />
authorities<br />
Banks<br />
<strong>Financial</strong> companies<br />
Insurance companies<br />
Non financial<br />
companies<br />
Other<br />
1) Debt instruments and interest rates<br />
- notional amount - - 43,638,368 2,839,405 - - -<br />
- positive fair value - - 1,430,959 39,687 - - -<br />
- negative fair value - - 1,919,344 205,860 - - -<br />
2) Equity instruments and share indices<br />
- notional amount - - 39,259 - - - -<br />
- positive fair value - - 598 - - - -<br />
- negative fair value - - 598 - - - -<br />
3) Currencies and gold<br />
- notional amount - - - - - - -<br />
- positive fair value - - - - - - -<br />
- negative fair value - - - - - - -<br />
4) Other securities<br />
- notional amount - - - - - - -<br />
- positive fair value - - - - - - -<br />
- negative fair value - - - - - - -<br />
443
A.9 Residual maturity of OTC financial derivatives: notional amounts<br />
Underlying asset/Residual maturity Up to 1 year 1 year to 5 years More than 5 years Total<br />
A. Supervisory trading portfolio 10,821,848 7,869,126 5,869,415 24,560,389<br />
A.1 <strong>Financial</strong> derivatives on debt instruments and interest rates 6,057,606 7,748,623 5,868,339 19,674,568<br />
A.2 <strong>Financial</strong> derivatives on equity instruments and share indices - 54,913 - 54,913<br />
A.3 <strong>Financial</strong> derivatives on exchange rates and gold 4,735,826 64,098 - 4,799,924<br />
A.4 <strong>Financial</strong> derivatives on other securities 28,416 1,492 1,076 30,984<br />
B. Banking portfolio 11,049,753 25,693,470 12,630,907 49,374,130<br />
B.1 <strong>Financial</strong> derivatives on debt instruments and interest rates 9,502,266 25,238,383 11,994,107 46,734,756<br />
B.2 <strong>Financial</strong> derivatives on equities and share indices 720,828 455,087 636,800 1,812,715<br />
B.3 <strong>Financial</strong> derivatives on exchange rates and gold 826,659 - - 826,659<br />
B.4 <strong>Financial</strong> Derivatives on other securities - - - -<br />
Total 31.12.<strong>2012</strong> 21,871,601 33,562,596 18,500,322 73,934,519<br />
Total 31.12.2011 27,970,227 36,984,785 20,437,389 85,392,401<br />
A.10 OTC financial derivatives: counterparty risk/financial risk – Internal models<br />
The <strong>UBI</strong> <strong>Banca</strong> Group does not use internal models to measure counterparty risk and financial risk for OTC financial derivatives.<br />
444
B. Credit derivatives<br />
B.1 Credit derivatives: end of period and average notional amounts<br />
No items of this type exist in the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
B.2 OTC credit derivatives: gross positive fair value – by type of product<br />
No items of this type exist in the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
B.3 OTC credit derivatives: gross negative fair value – by type of product<br />
No items of this type exist in the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
B.4 OTC credit derivatives: gross fair value (positive and negative) by counterparty –<br />
contracts not covered by clearing agreements<br />
No items of this type exist in the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
B.5 OTC credit derivatives: gross fair value (positive and negative) by counterparty –<br />
contracts covered by clearing agreements<br />
No items of this type exist in the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
B.6 Residual maturity of credit derivatives: notional amounts<br />
No items of this type exist in the <strong>UBI</strong> <strong>Banca</strong> Group.<br />
B.7 Credit derivatives: counterparty risk/financial risk – internal models<br />
The <strong>UBI</strong> <strong>Banca</strong> Group does not use internal models to measure counterparty and financial risk for<br />
credit derivatives.<br />
C. <strong>Financial</strong> and credit derivatives<br />
C.1 OTC financial and credit derivatives: net fair value and future exposure by<br />
counterparty<br />
No OTC financial and credit derivatives with contracts covered by clearing agreements were<br />
recognised.<br />
445
3 BANKING GROUP - LIQUIDITY RISK<br />
Qualitative information<br />
A. General aspects, management and measurement of liquidity risk<br />
Liquidity risk is defined in the <strong>UBI</strong> Group as the risk of the failure to meet payment obligations,<br />
which can be caused either by an inability to raise funds, by raising them at higher than market<br />
costs (funding liquidity risk), or by the presence of restrictions on the ability to sell assets (market<br />
liquidity risk) with losses incurred on capital account.<br />
Structural liquidity risk is defined as the risk resulting from a mismatch between the sources of<br />
funding and lending.<br />
The primary objective of the liquidity risk management system is to enable the Group to meet its<br />
payment obligations and to raise additional funding at a minimum cost and without prejudice to<br />
potential future income.<br />
The general principles on which liquidity management within the Group is based are as follows:<br />
• the adoption of a centralised management system run by Group Treasury;<br />
• diversification of the sources of funding and limits on exposure to institutional counterparties;<br />
• protection of Group capital in liquidity crisis situations;<br />
• a proper financial balance between assets and liabilities;<br />
• a proper level of eligible and/or liquid assets, sufficient to meet liquidity requirements even under<br />
stress conditions.<br />
The reference framework for the measurement, monitoring and management of exposure to liquidity<br />
risk is defined annually as part of the Policy to Manage <strong>Financial</strong> Risks of the <strong>UBI</strong> <strong>Banca</strong> Group and<br />
the relative regulations to implement it and the document setting operational limits approved by the<br />
corporate governance bodies.<br />
Corporate risk policies are supplemented by a contingency funding plan (CFP), an emergency plan for<br />
liquidity management, the main aim of which is to protect the Bank’s assets in situations of liquidity<br />
drainage, by putting in place crisis management strategies and procedures to find sources of funding<br />
in cases of emergency.<br />
These documents set out rules for the pursuit and maintenance of an adequate degree of<br />
diversification in the sources of funding and a proper structural balance between the sources and<br />
uses of funds for the network banks and the product companies, through the pursuit of co-ordinated<br />
and efficient funding and lending policies.<br />
The following are responsible for liquidity risk management:<br />
• the units that report to the Chief <strong>Financial</strong> Officer (1 st level management), which monitor liquidity<br />
daily and manage risk on the basis of defined limits;<br />
• the Risk Management Area (2 nd level management), responsible for periodically verifying that limits<br />
are observed.<br />
The system for the management of liquidity risk defined by the Policy to Manage <strong>Financial</strong> Risks of<br />
the <strong>UBI</strong> <strong>Banca</strong> Group and supplemented by the Contingency Funding Plan is based on a system of<br />
early warning thresholds and limits consistent with the general principles on which liquidity<br />
management within the Group is based.<br />
446
More specifically, liquidity risk is managed by means of the measurement, monitoring and<br />
management of the expected liquidity requirement, using a net liquidity balance model of analysis at<br />
consolidated level, supplemented with stress tests designed to assess the Group’s ability to withstand<br />
crisis scenarios characterised by an increasing level of severity.<br />
The net liquidity balance is obtained from the daily liquidity ladder by comparing expected cash flow<br />
projections with counterbalancing capacity over a time horizon of up to three months. The cumulative<br />
sum of expected cash flows and of the counterbalancing capacity, for each time bucket, quantifies<br />
liquidity risk measured under different stress scenarios. The <strong>UBI</strong> <strong>Banca</strong> Group reports that indicator<br />
to the Bank of Italy on a daily basis, following standard procedures set by that supervisory authority.<br />
The liquidity position is supplemented, on request by the Bank of Italy, on a weekly basis with the<br />
following information:<br />
• the principal maturities, forecast over a time horizon of twelve months, both on the institutional<br />
and the retail market, with details according to the type of funding instrument (e.g. bond issues,<br />
repurchase agreements, commercial paper);<br />
• details of assets available for refinancing transactions with the central bank and of liquid assets;<br />
• the main providers of funds on the interbank market.<br />
The objectives of stress tests are to measure the vulnerability of the Group to exceptional but<br />
plausible events and they provide a better assessment of exposure to liquidity risk, the systems for<br />
mitigating and monitoring them and the length of the survival period under hypotheses of adverse<br />
scenarios. The following risk factors that can alternatively affect the cumulative imbalance of cash<br />
inflows and outflows or the liquidity reserve are considered in the definition of stress scenarios,<br />
divided into base stress and internal scenarios:<br />
• wholesale funding risk: shortage of unsecured and secured funding on the institutional market;<br />
• retail funding risk: volatility of on demand liabilities relating to ordinary customers and<br />
redemptions of own securities;<br />
• off-balance sheet liquidity risk: use of margins available on irrevocable credit lines granted;<br />
• market liquidity risk: fall in the value of securities which constitute a liquidity reserve and an<br />
increase in the margins requested for positions in financial derivative instruments.<br />
Monitoring the level of cover to meet expected liquidity requirements through an adequate reserve of<br />
liquidity is accompanied by daily monitoring of exposure on the interbank market.<br />
A “contingency funding plan” is triggered if the preceding limits and early warning thresholds are<br />
exceeded.<br />
In compliance with supervisory provisions, the system for the management of liquidity risk employed<br />
by the Group also involves monitoring sources of funding both at consolidated and individual<br />
company level, by using a system of indicators. In this respect specific thresholds are set both for the<br />
maximum level of funding from institutional markets, considered more volatile under stress<br />
conditions, and the minimum levels of cover for lending activity with funding from ordinary<br />
customers or with medium to long-term funding from institutional customers.<br />
Finally the management of structural balance is performed by using models which measure the<br />
degree of stability of liabilities and the degree of liquidity of assets in order to mitigate risk associated<br />
with the transformation of maturities within a tolerance threshold considered acceptable by the<br />
Group. The model employed by the Group to monitor structural balance is designed to incorporate<br />
the general lines currently being defined in the process to revise supervisory regulations for liquidity<br />
risk with specific reference to medium to long-term indicators. Measurement of the degree of stability<br />
447
of liabilities and the degree of liquidity of assets is based principally on criteria of residual life and on<br />
the classification of the counterparties which contribute to the definition of the weightings of assets<br />
and liabilities.<br />
Further information on Group activities on the interbank market is given in the Management <strong>Report</strong><br />
which may be consulted.<br />
448
Quantitative information<br />
1.1 Distribution over time of financial assets and liabilities by residual contractual maturity– Denominated in euro<br />
On demand 1 to 7 days 7 to 15 days<br />
15 days to 1<br />
month<br />
1 month to 3<br />
months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
More than 5<br />
years<br />
Indeterminate<br />
maturity<br />
TOTAL EURO<br />
On-balance sheet assets 20,723,146 946,420 1,280,148 3,940,531 4,165,841 4,206,708 9,218,274 34,010,163 38,330,842 1,685,834 118,507,907<br />
A.1 Government securities 1,467 69 18,162 - 70,187 485,012 3,327,083 8,616,800 5,333,006 49 17,851,835<br />
A.2 Other debt instruments 388,105 4 50 935,528 46,035 26,085 109,172 463,915 387,059 59,332 2,415,285<br />
A.3 Units in OICR<br />
(collective investment instruments)<br />
204,137 - - - - - - - - - 204,137<br />
A.4 Financing 20,129,437 946,347 1,261,936 3,005,003 4,049,619 3,695,611 5,782,019 24,929,448 32,610,777 1,626,453 98,036,650<br />
- Banks 2,805,749 9,248 231,254 769,225 55,331 65,877 113,914 899,358 9,541 851,251 5,810,748<br />
- Customers 17,323,688 937,099 1,030,682 2,235,778 3,994,288 3,629,734 5,668,105 24,030,090 32,601,236 775,202 92,225,902<br />
On-balance sheet liabilities 48,459,504 3,960,161 392,393 2,276,113 5,196,160 2,747,610 7,958,656 37,100,321 5,322,453 198,392 113,611,763<br />
B.1 Deposits e current account overdrafts 46,686,041 383,844 69,515 160,611 962,875 580,126 639,277 5,207 3,578 - 49,491,074<br />
- Banks 2,122,269 5,231 30,008 127 1,135 - 91 4,007 - - 2,162,868<br />
- Customers 44,563,772 378,613 39,507 160,484 961,740 580,126 639,186 1,200 3,578 - 47,328,206<br />
B.2 Debt instruments 39,115 40,242 183,971 2,029,048 3,580,331 1,823,926 6,999,443 24,339,769 5,227,077 184,674 44,447,596<br />
B.3 Other liabilities 1,734,348 3,536,075 138,907 86,454 652,954 343,558 319,936 12,755,345 91,798 13,718 19,673,093<br />
Off-balance sheet transactions (1,533,807) 91,218 28,289 238,361 465,852 727,245 (603,897) 368,400 (66,619) 865,558 580,600<br />
C.1 <strong>Financial</strong> derivatives with<br />
exchange of principal<br />
- 48,463 15,981 187,043 415,071 332,841 (1,243,910) (190,915) (448,380) 646,908 (236,898)<br />
- Long positions - 368,064 29,910 1,136,743 516,308 527,450 142,929 45,825 286 674,455 3,441,970<br />
- Short positions - 319,601 13,929 949,700 101,237 194,609 1,386,839 236,740 448,666 27,547 3,678,868<br />
C.2 <strong>Financial</strong> derivatives without<br />
exchange of principal<br />
(22,088) 24,295 24 (4,003) (38,011) 71,195 63,854 - - - 95,266<br />
- Long positions 525,260 26,757 481 2,917 85,214 151,462 299,180 - - - 1,091,271<br />
- Short positions 547,348 2,462 457 6,920 123,225 80,267 235,326 - - - 996,005<br />
C.3 Deposits and financing to be received - - - - - - - - - - -<br />
- Long positions - - - - - - - - - -<br />
- Short positions - - - - - - - - - - -<br />
C.4 Irrevocable commitments to<br />
disburse funds<br />
(1,522,653) 18,456 11,706 31,206 65,125 318,828 563,638 453,127 287,081 197,454 423,968<br />
- Long positions 434,343 18,456 11,706 31,206 65,125 318,828 563,638 453,127 287,081 205,897 2,389,407<br />
- Short positions 1,956,996 - - - - - - - - 8,443 1,965,439<br />
C.5 <strong>Financial</strong> guarantees issued 10,934 4 578 24,115 23,667 4,381 12,521 106,188 94,680 21,196 298,264<br />
C.6 <strong>Financial</strong> guarantees received - - - - - - - - - - -<br />
C.7 Credit derivatives w ith<br />
exchange of principal<br />
- - - - - - - - - - -<br />
- Long positions - - - - - - - - - -<br />
- Short positions - - - - - - - - - -<br />
C.8 Credit derivatives w ithout<br />
exchange of principal<br />
- - - - - - - - - - -<br />
- Long positions - - - - - - - - - - -<br />
- Short positions - - - - - - - - - - -<br />
449
1.2 Distribution over time of financial assets and liabilities by residual contractual maturity– Denominated in USD<br />
On demand 1 to 7 days 7 to 15 days<br />
15 days to 1<br />
month<br />
1 month to 3<br />
months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
More than 5<br />
years<br />
Indeterminate<br />
maturity<br />
TOTAL USD<br />
On-balance sheet assets 133,113 31,182 30,627 133,374 147,419 20,564 21,323 146,989 78,064 27 742,682<br />
A.1 Government securities 80 156 312 144 27 719<br />
A.2 Other debt instruments 2 737 3 36,265 153 37,160<br />
A.3 Units in OICR<br />
(collective investment instruments)<br />
12,910 12,910<br />
A.4 Financing 120,203 31,182 30,627 133,372 146,682 20,481 21,167 110,412 77,767 - 691,893<br />
- Banks 20,084 2,356 9,229 3,627 2,928 5,040 2,305 59 45,628<br />
- Customers 100,119 28,826 21,398 129,745 143,754 15,441 18,862 110,353 77,767 646,265<br />
On-balance sheet liabilities 348,358 145,281 6,623 29,660 28,697 20,673 2,017 5,287 - - 586,596<br />
B.1 Deposits e current account overdrafts 335,820 145,153 6,196 29,383 21,503 13,197 1,974 379 - - 553,605<br />
- Banks 1,881 120,892 2,274 635 125,682<br />
- Customers 333,939 24,261 3,922 29,383 21,503 12,562 1,974 379 427,923<br />
B.2 Debt instruments 748 128 64 277 6,669 6,664 43 4,908 19,501<br />
B.3 Other liabilities 11,790 - 363 - 525 812 - - 13,490<br />
Off-balance sheet transactions 591 1,640 19,650 2,615 (10,881) (152,774) 8,539 14,106 - - (116,514)<br />
C.1 <strong>Financial</strong> derivatives with<br />
- 1,640 19,650 2,595 (10,800) (156,903) 6,696 4,431 - - (132,691)<br />
exchange of principal<br />
- Long positions 51,836 38,563 603,351 89,954 112,133 136,818 16,402 1,049,057<br />
- Short positions 50,196 18,913 600,756 100,754 269,036 130,122 11,971 1,181,748<br />
C.2 <strong>Financial</strong> derivatives without<br />
exchange of principal<br />
(468) - - - (1,041) 57 (979) - - - (2,431)<br />
- Long positions 13,817 57 63 13,937<br />
- Short positions 14,285 1,041 1,042 16,368<br />
C.3 Deposits and financing to be received - - - - - - - - - - -<br />
- Long positions - - - - - - - - - - -<br />
- Short positions - - - - - - - - - - -<br />
C.4 Irrevocable commitments to<br />
disburse funds<br />
(551) - - 20 531 3,760 1,746 4,448 - - 9,954<br />
- Long positions 689 20 531 3,760 1,746 4,448 11,194<br />
- Short positions 1,240 1,240<br />
C.5 <strong>Financial</strong> guarantees issued 1,610 429 312 1,076 5,227 8,654<br />
C.6 <strong>Financial</strong> guarantees received<br />
C.7 Credit derivatives w ith<br />
exchange of principal<br />
- Long positions<br />
- Short positions<br />
C.8 Credit derivatives w ithout<br />
exchange of principal<br />
- Long positions<br />
- Short positions<br />
450
1.3 Distribution over time of financial assets and liabilities by residual contractual maturity– Denominated in CHF<br />
On demand 1 to 7 days 7 to 15 days<br />
15 days to 1<br />
month<br />
1 month to 3<br />
months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
More than 5<br />
years<br />
Indeterminate<br />
maturity<br />
TOTAL CHF<br />
On-bal ance sheet assets 64,553 26,016 9,669 8,527 34,149 7,648 11,726 90,262 652,024 - 904,574<br />
A.1 Government securities -<br />
A.2 Other debt instruments 1,192 830 915 1,256 1,248 5,441<br />
A.3 Units in OICR<br />
(collective investment instruments)<br />
-<br />
A.4 Financing 64,553 24,824 9,669 7,697 33,234 7,648 11,726 89,006 650,776 - 899,133<br />
- Banks 37,124 37,124<br />
- Customers 27,429 24,824 9,669 7,697 33,234 7,648 11,726 89,006 650,776 862,009<br />
On-bal ance sheet liabilities 216,988 102 103 251 1,100 3,983 1,463 1,370 394 - 225,754<br />
B.1 Deposits e current account overdrafts 215,968 - - 20 766 119 150 - 38 - 217,061<br />
- Banks 7,072 10 7,082<br />
- Customers 208,896 20 756 119 150 38 209,979<br />
B.2 Debt instruments 105 102 103 231 334 3,864 1,313 1,370 356 7,778<br />
B.3 Other liabilities 915 915<br />
Off-balance sheet transactions (40) (16,023) (163) (73,032) (399,453) (1,158,283) (1,850) - - - (1,648,844)<br />
C.1 <strong>Financial</strong> derivatives w ith<br />
exchange of principal<br />
- (16,023) (165) (73,032) (399,345) (1,158,377) (455) - - - (1,647,397)<br />
- Long positions 159,287 2,616 3,171 1,158 384 991 167,607<br />
- Short positions 175,310 165 75,648 402,516 1,159,535 839 991 1,815,004<br />
C.2 <strong>Financial</strong> derivatives w ithout<br />
- - 2 - (108) (85) (1,395) - - - (1,586)<br />
exchange of principal<br />
- Long positions 2 19 28 159 208<br />
- Short positions 127 113 1,554 1,794<br />
C.3 Deposits and financing to be received - - - - - - - - - - -<br />
- Long positions -<br />
- Short positions -<br />
C.4 Irrevocable commitments to<br />
disburse funds<br />
(40) - - - - 179 - - - - 139<br />
- Long positions 179 179<br />
- Short positions 40 40<br />
C.5 <strong>Financial</strong> guarantees issued - - - - - - - - - -<br />
C.6 <strong>Financial</strong> guarantees received<br />
C.7 Credit derivatives w ith<br />
exchange of principal<br />
- Long positions<br />
- Short positions<br />
C.8 Credit derivatives w ithout<br />
exchange of principal<br />
- Long positions<br />
- Short positions<br />
451
1.4 Distribution over time of financial assets and liabilities by residual contractual maturity– Denominated in GBP<br />
On demand 1 to 7 days 7 to 15 days<br />
15 days to 1<br />
month<br />
1 month to 3<br />
months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
More than 5<br />
years<br />
Indeterminate<br />
maturity<br />
TOTAL GBP<br />
On-balance sheet assets 15,568 1,505 3,719 3,771 3,497 1,362 7,843 14,172 13,478 - 64,915<br />
A.1 Government securities -<br />
A.2 Other debt instruments 15 1,006 199 13,479 13,478 28,177<br />
A.3 Units in OICR<br />
-<br />
(collective investment instruments)<br />
A.4 Financing 15,553 1,505 3,719 3,771 2,491 1,163 7,843 693 - - 36,738<br />
- Banks 3,323 3,697 5,546 12,566<br />
- Customers 12,230 1,505 22 3,771 2,491 1,163 2,297 693 24,172<br />
On-balance sheet liabilities 27,476 713 7 - 3,452 150 - - - - 31,798<br />
B.1 Deposits e current account overdrafts 27,298 713 7 - 3,052 64 - - - - 31,134<br />
- Banks 9 47 56<br />
- Customers 27,289 713 7 3,052 17 31,078<br />
B.2 Debt instruments 400 86 486<br />
B.3 Other liabilities 178 178<br />
Off-bal ance sheet transactions - (19,978) (61) 2,384 50 (17,851) (888) 55 - - (36,289)<br />
C.1 <strong>Financial</strong> derivatives w ith<br />
exchange of principal<br />
- (19,978) (61) 2,384 31 (17,895) - - - - (35,519)<br />
- Long positions 21,544 674 75,846 7,781 4,848 3,586 114,279<br />
- Short positions 41,522 735 73,462 7,750 22,743 3,586 149,798<br />
C.2 <strong>Financial</strong> derivatives w ithout<br />
exchange of principal<br />
- - - - 5 44 (888) - - - (839)<br />
- Long positions 109 75 44 101 329<br />
- Short positions 109 70 989 1,168<br />
C.3 Deposits and financing to be received - - - - - - - - - - -<br />
- Long positions - - - - - - - - - - -<br />
- Short positions - - - - - - - - - - -<br />
C.4 Irrevocable commitments to disburse<br />
funds<br />
- - - - 7 - - - - - 7<br />
- Long positions - - - - 7 - - - - - 7<br />
- Short positions - - - - - - - - - - -<br />
C.5 <strong>Financial</strong> guarantees issued 7 55 62<br />
C.6 <strong>Financial</strong> guarantees received<br />
C.7 Credit derivatives w ith exchange of<br />
principal<br />
- Long positions<br />
- Short positions<br />
C.8 Credit derivatives w ithout<br />
exchange of principal<br />
- Long positions<br />
- Short positions<br />
452
1.5 Distribution over time of financial assets and liabilities by residual contractual maturity– Denominated in YEN<br />
On demand 1 to 7 days 7 to 15 days<br />
15 days to 1<br />
month<br />
1 month to 3<br />
months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
More than 5<br />
years<br />
Indeterminate<br />
maturity<br />
TOTAL YEN<br />
On-bal ance sheet assets 2,228 10,737 4,647 5,590 6,626 584 135 - - - 30,547<br />
A.1 Government securities - - - - - - - - - - -<br />
A.2 Other debt instruments - - - - - - - - - - -<br />
A.3 Units in OICR<br />
- - - - - - - - - - -<br />
(collective investment instruments)<br />
A.4 Financing 2,228 10,737 4,647 5,590 6,626 584 135 - - - 30,547<br />
- Banks 1,628 1,628<br />
- Customers 600 10,737 4,647 5,590 6,626 584 135 28,919<br />
On-bal ance sheet liabilities 4,610 28,991 30,958 77,232 258,799 262,739 158,617 - - - 821,946<br />
B.1 Deposits e current account overdrafts 2,767 - - - - 27 - - - - 2,794<br />
- Banks 508 508<br />
- Customers 2,259 27 2,286<br />
B.2 Debt instruments 1,843 28,991 30,958 77,232 258,799 262,712 158,617 819,152<br />
B.3 Other liabilities -<br />
Off-balance sheet transactions (92) (7,365) (12,617) (14,645) (4,196) (4) 92 - - - (38,827)<br />
C.1 <strong>Financial</strong> derivatives w ith<br />
exchange of principal<br />
- (7,365) (12,617) (14,645) (4,196) (4) - - - - (38,827)<br />
- Long positions 1,645 143,909 4,970 16,094 1,331 598 168,547<br />
- Short positions 9,010 12,617 158,554 9,166 16,098 1,331 598 207,374<br />
C.2 <strong>Financial</strong> derivatives w ithout<br />
exchange of principal<br />
- - - - - - - - - - -<br />
- Long positions 100 100<br />
- Short positions 100 100<br />
C.3 Deposits and financing to be received - - - - - - - - - - -<br />
- Long positions -<br />
- Short positions -<br />
C.4 Irrevocable commitments to<br />
disburse funds<br />
(92) - - - - - 92 - - - -<br />
- Long positions 92 92<br />
- Short positions 92 92<br />
C.5 <strong>Financial</strong> guarantees issued -<br />
C.6 <strong>Financial</strong> guarantees received<br />
C.7 Credit derivatives with<br />
exchange of principal<br />
- Long positions<br />
- Short positions<br />
C.8 Credit derivatives without<br />
exchange of principal<br />
- Long positions<br />
- Short positions<br />
453
1.6 Distribution over time of financial assets and liabilities by residual contractual maturity– Denominated in other currencies<br />
On demand 1 to 7 days 7 to 15 days<br />
15 days to 1<br />
month<br />
1 month to 3<br />
months<br />
3 months to 6<br />
months<br />
6 months to 1<br />
year<br />
1 year to 5 years<br />
More than 5<br />
years<br />
Indeterminate<br />
maturity<br />
TOTAL OTHER<br />
CURRENCIES<br />
On-balance sheet assets 38,258 3,739 2,973 36,641 54,413 28,985 16,227 13,250 - - 194,486<br />
A.1 Government securities -<br />
A.2 Other debt instruments -<br />
A.3 Units in OICR<br />
-<br />
(collective investment instruments)<br />
A.4 Financing 38,258 3,739 2,973 36,641 54,413 28,985 16,227 13,250 - - 194,486<br />
- Banks 35,563 3,579 2,484 918 762 268 43,574<br />
- Customers 2,695 160 489 35,723 54,413 28,223 15,959 13,250 150,912<br />
On-balance sheet liabilities 40,610 5,606 39 1,300 4,963 11 - - - - 52,529<br />
B.1 Deposits e current account overdrafts 30,797 5,606 39 1,300 4,963 11 - - - - 42,716<br />
- Banks 350 5,453 5,803<br />
- Customers 30,447 153 39 1,300 4,963 11 36,913<br />
B.2 Debt instruments -<br />
B.3 Other liabilities 9,813 9,813<br />
Off-balance sheet transactions (440) (8,833) (22,495) (122,458) 173 - - (2,317) - 3,558 (152,812)<br />
C.1 <strong>Financial</strong> derivatives w ith<br />
exchange of principal<br />
- (9,281) (22,495) (122,458) 133 - - (2,317) - 2,317 (154,101)<br />
- Long positions 2,075 759 99,650 1,656 19,072 2,443 2,317 127,972<br />
- Short positions 11,356 23,254 222,108 1,523 19,072 2,443 2,317 282,073<br />
C.2 <strong>Financial</strong> derivatives w ithout<br />
exchange of principal<br />
3 - - - - - - - - - 3<br />
- Long positions 442 442<br />
- Short positions 439 439<br />
C.3 Deposits and financing to be<br />
received<br />
- - - - - - - - -<br />
- Long positions - -<br />
- Short positions - -<br />
C.4 Irrevocable commitments to<br />
disburse funds<br />
(448) 448 - - - - - - - - -<br />
- Long positions 448 448<br />
- Short positions 448 448<br />
C.5 <strong>Financial</strong> guarantees issued 5 40 1,241 1,286<br />
C.6 <strong>Financial</strong> guarantees received<br />
C.7 Credit derivatives with<br />
exchange of principal<br />
- Long positions<br />
- Short positions<br />
C.8 Credit derivatives without<br />
exchange of principal<br />
- Long positions<br />
- Short positions<br />
Details of the securitisations in which Group member companies (originators) subscribe the liabilities issued by special purpose<br />
entities, at the time of issue, are given in section 1, sub-section 1 – Credit risk, part C “Securitisations and the transfer of assets” in<br />
these notes and in the Management <strong>Report</strong>, which may be consulted.<br />
454
4 BANKING GROUP - OPERATIONAL RISKS<br />
Qualitative information<br />
A. General aspects, management and measurement of operational risk<br />
Operational risk is defined as the risk of loss resulting from inadequate or failed procedures, human<br />
resources and internal systems or from external events. 1 This definition comprises legal 2 and<br />
compliance 3 risk, while it excludes reputational 4 and strategic 5 risk.<br />
In order to ensure a risk profile consistent with the risk appetite defined by the Strategic Supervisory<br />
Body, the Group has defined an organisational model based on the combination of various<br />
components identified according to the role filled and by the responsibility assigned in the<br />
organisation chart. The different components are identified centrally at the Parent and locally in the<br />
individual legal entities consistent with the Group’s federal model of organisation.<br />
The model involves centralisation at the Parent of policy-setting functions and of second and third<br />
level internal controls as described below:<br />
the Operational Risks Committee (ORC): is the consultation and reporting body for the<br />
entire operational risk management process. Its composition, functional rules, duties and<br />
powers are governed by the General Corporate Regulations;<br />
Second Level Control Functions: consistent with the regulations in force 6 , these<br />
activities are delegated to the Operational Risks and Internal Validation Functions;<br />
Third Level Control Functions: consistent with Bank of Italy recommendations, these<br />
activities are delegated to the internal audit function.<br />
Various levels of responsibility have been identified in each legal entity, listed below, assigned on the<br />
basis of the operating area:<br />
Operational Risks Officer (ORO): this is the General Manager for the Parent. In other<br />
legal entities it is either the Managing Director or the General Manager, depending on<br />
their corporate regulations. The Operational Risk Officer is responsible, within his/her<br />
legal entity for implementing the entire operational risk management system as defined<br />
by Group policy;<br />
Local Operational Risk Support Officer (LORSO): this role is the figure responsible for<br />
the unit in charge of local risk control. Within his/her legal entity, this officer supports<br />
the Operational Risks Officer in the implementation and co-ordination of the operational<br />
risk management system as defined by Group policy 7 ;<br />
Risk Champion (RC): this role is responsible for units which report directly to the<br />
General Management, to Department Managers (including Local Departments where<br />
present) and to the managers of units who are responsible for specialists activities<br />
including the following operations:<br />
– logical security<br />
– physical security<br />
1<br />
2<br />
Defined as the risk of losses resulting from violations of laws and regulations and from contractual or non contractual<br />
responsibilities or from other litigation.<br />
3<br />
Defined as the risk of incurring legal or administrative penalties, or substantial financial losses as a consequence of violations<br />
of compulsory rules (laws or regulations) or internal regulations (e.g. articles of association, codes of conduct and voluntary<br />
codes).<br />
4 Defined as the present or future risk of incurring loss of profits or capital resulting from a negative perception of the image of<br />
the Bank by customers, counterparties, shareholders, investors or supervisory authorities.<br />
5 Defined as the risk attaching to errors in decision-making concerning business strategies or bad timing in decisions relating<br />
to markets.<br />
6<br />
Bank of Italy Circular No. 263/2006 and subsequent updates.<br />
455
– disaster recovery and operational continuity<br />
– prevention and protection at work as defined by the legislation 81/2008<br />
– anti money-laundering and anti-terrorism activities<br />
– accounting controls as defined by legislation 262/2005<br />
– complaints<br />
– securities brokering<br />
– legal and tax matters.<br />
–<br />
They are assigned responsibility for operational supervision of the proper performance of<br />
the operational risk management process in relation to the activity for which they are<br />
responsible and for co-ordinating the Risk Owners that report to them;<br />
Risk Owner (RO): this role is that of the managers of the units which report hierarchically to a Risk<br />
Champion. Their task is to recognise and report loss events, both actual and/or potential,<br />
attributable to operational risk factors which occur in the course of everyday operations.<br />
The measurement system<br />
The measurement system takes account of internal and external operational loss data, operational<br />
context factors and the system of internal controls, in a manner whereby it detects the main<br />
determinants of risk (especially those which impact on the distribution tail) and incorporates<br />
changes that occur in the risk profile. The model implemented by the <strong>UBI</strong> <strong>Banca</strong> Group takes<br />
account of operating context factors and of the system of internal controls through the use of self<br />
risk assessment techniques. The Operational Risk Management System of the Group is composed of<br />
the following:<br />
– Loss Date Collection (LDC): is a decentralised process for collecting data on operational<br />
losses designed for integrated and systematic detection of damaging events that occur<br />
which result in an actual loss, almost a loss (a “near miss”) or a profitable event;<br />
– Self Risk Assessment (SRA): is a process of self-diagnosis of exposure to potential risk<br />
of future losses, of the effectiveness of the control system and of the mitigation<br />
measures in place;<br />
– Italian Database of Operational Losses (IDOL): the measurement systems makes use<br />
of external data in order to compensate for shortage of internal data and to assess risks<br />
from new operating segments for which historical data series are not available. In this<br />
respect the <strong>UBI</strong> Group has participated since 2003 in Italian Banking Association’s<br />
Italian Database of Operational Losses (IDOL) in order to gain access to loss data for the<br />
Italian banks that participate.<br />
Further details on the functioning of the calculation model are given in the following section on the<br />
capital requirement which may be consulted.<br />
The reporting system<br />
Monitoring of the operational risks assumed is carried out by means of a standard reporting system<br />
organised on the basis of the same levels of responsibility present in the organisational model.<br />
Management reporting activities are carried out in service by the operational risk control function of<br />
the Parent which periodically prepares the following:<br />
– an analysis of changes in operating losses detected by the loss data collection system;<br />
456
– benchmark analyses using the Italian Database of Operational Losses;<br />
– a summary of assessments of exposure to potential risks;<br />
– details of areas of vulnerability identified and the mitigation action undertaken.<br />
On conclusion of the assessment of exposure to potential operational risks for each area of activities<br />
analysed, or as a result of operational losses detected historically by the loss date collection process,<br />
appropriate corrective actions are identified.<br />
As a further form of mitigation, the <strong>UBI</strong> <strong>Banca</strong> Group has taken out adequate insurance policies to<br />
cover the principal transferable operational risks with due account taken of the requirements of<br />
supervisory regulations. The policies were taken out by <strong>UBI</strong> <strong>Banca</strong> Scpa in its own name and on<br />
behalf of the network banks and product companies of the Group concerned.<br />
Legal risk<br />
The companies in the Group are party to a number of legal proceedings arising from the ordinary<br />
performance of their business. In order to meet the claims received, the companies have made<br />
appropriate provisions on the basis of a reconstruction of the amounts potentially at risk and an<br />
assessment of the risk in terms of the degree of “probability” and/or “possibility” as defined in the<br />
accounting standard IAS 37. Therefore, while it is not possible to predict final outcomes with<br />
certainty, it is considered that an unfavourable conclusion of these proceedings, both taken singly or<br />
as a whole, would not have a significant effect on the financial and operating position of the <strong>UBI</strong><br />
<strong>Banca</strong> Group.<br />
Significant litigation (claims of greater than or equal to €5 million) for which the probable risk has<br />
been estimated by Group banks and companies are as follows:<br />
1. revocation bankruptcy clawback actions against <strong>Banca</strong> Popolare di Bergamo, <strong>Banca</strong> Popolare<br />
Commercio e Industria and Banco di Brescia, brought by companies related to Giacomelli<br />
Sport S.p.A.;<br />
2. revocation bankruptcy clawback actions against <strong>Banca</strong> Popolare di Ancona, brought by Napoli<br />
Calcio Spa and by Romeo Andrea Francesco;<br />
3. a revocation bankruptcy clawback action against <strong>Banca</strong> Popolare Commercio e Industria,<br />
brought by FDG Spa;<br />
4. a revocation bankruptcy clawback action against <strong>Banca</strong> Carime, brought by Società<br />
Cooperativa Costruire a r.l.;<br />
5. two actions brought against <strong>UBI</strong> <strong>Banca</strong>:<br />
- litigation resulting from a damages claim for non-contractual liability;<br />
- request for recognition of end of contract indemnity following the revocation of an agency<br />
mandate for just cause;<br />
6. two actions brought against <strong>Banca</strong> Carime:<br />
- a summons served for compounding of interest;<br />
- damages claim for failure to report the extinction of a guarantee to Centrale Rischi (a<br />
central credit register);<br />
7. two actions brought against Centrobanca:<br />
457
- one action with a government counterparty concerning the restitution of a payment<br />
collected following the enforcement of a guarantee granted;<br />
- a compensation action for claimed damages brought by the official receiver of a company<br />
concerning the content of declarations made by Centrobanca to third parties regarding the<br />
availability of securities held on deposit at that bank;<br />
8. two actions brought against <strong>Banca</strong> Popolare di Bergamo:<br />
- an action relating to a number of combined claims, regarding an appeal against an<br />
injunction, compounding of interest and compensation for damages following a<br />
mistaken protest of cheques (case halted following the bankruptcy of the<br />
counterparty, subsequently revoked and then resumed within the legal time limits).<br />
The judgement is pending;<br />
- action concerning the purchase of covered warrants and Olivetti warrants (the latter<br />
via internet banking). The counterparty, not only alleges failure to receive proper<br />
information on the risks attaching to covered trades, but also disowned the signatures<br />
on the contract documents, required by regulations governing financial instruments<br />
and on the capital in question. Investigations performed by the internal audit function<br />
into the affair found no evidence of liability of the Bank in the transactions in<br />
question. Later the counterparty accepted that the signatures were his, but claimed<br />
that he had signed blank forms which had subsequently been filled in abusively by<br />
the bank. A ruling by the court of first instance has been given in favour of the Bank;<br />
9. two actions brought against <strong>Banca</strong> Popolare di Ancona:<br />
- various actions brought by Salumificio Vito sas claiming damages for contractual and<br />
non contractual liability;<br />
- claim for damages for pre-contractual and contractual liability in relation to a<br />
financing transaction brought by Eden Costruzioni.<br />
Significant litigation (claims of greater than or equal to €5 million) for which a contingent liability has<br />
been estimated by Group banks and companies are as follows:<br />
<strong>UBI</strong> <strong>Banca</strong><br />
Centrobanca<br />
- claim for damages for contractual liability, resulting from withdrawal from a contract<br />
concerning software;<br />
- Mariella Burani Group. As already reported in the 2011 Annual <strong>Report</strong>, on 11 th October 2011<br />
Centrobanca was served with a writ of summons from the Burani Designers Holding NV<br />
(“BDH”) Receivership to appear before the Court of Milan. It claimed Centrobanca was liable<br />
in relation to a public tender offer to purchase launched by Mariella Burani Family Holding<br />
Spa on the shares of Marella Burani Fashion Group Spa (“MBFG”). On 1 st March <strong>2012</strong>, a<br />
similar writ of summons was served by the Mariella Burani Family Holding Receivership,<br />
based on arguments of fact and law similar to those already made in the summons served by<br />
BDH Receiver. Further details are given in the section “Other information” in the<br />
<strong>Consolidated</strong> Management <strong>Report</strong>;<br />
458
- a summons served by a private individual claiming damages allegedly caused by Centrobanca<br />
for enforcing guarantees received in relation to a company of which the person was a<br />
shareholder and guarantor, which defaulted and then went bankrupt;<br />
- a summons for the alleged illegitimate termination of a financing contract;<br />
Banco di Brescia<br />
- a summons served by a former director of CIT Spa on Banco di Brescia, on five other<br />
banks, on other directors, on the statutory auditors of CIT and on the independent auditors<br />
of CIT, with the intention of ascertaining the responsibilities of the other members of the<br />
board of directors and statutory auditors of CIT and also of the banks which, by<br />
participating in a company turnaround plan, had enabled the company to continue to<br />
operate, causing damages to the company and to its creditors, with the consequent<br />
aggravation of the capital and operating situation and strengthening of the guarantees given<br />
to back loans. This writ followed on from litigation directly between the court appointed<br />
receiver of CIT and the former director for responsibility over the failure of the company. On<br />
15 th June <strong>2012</strong> the Ordinary Court of Milan ruled that the plaintiff lacked title to sue and<br />
rejected the applications for a declaratory judgment (therefore deciding in favour of the<br />
Bank). The decision will shortly become definitive;<br />
- a summons served by the company Programma Edile Srl, with a bankruptcy case which<br />
began in 1999 and is still in progress, which in the person of the receiver has requested the<br />
return of amounts drawn/used in the period September 1997-June 1998 by the sole director<br />
who ceased to be a director in September 1997 without the Bank being informed. In<br />
December <strong>2012</strong> the Judge accepted the objections raised by the Bank and dismissed the<br />
case, which is now pending the deadline for possible resumption;<br />
<strong>Banca</strong> Popolare di Ancona<br />
- revocation bankruptcy clawback actions: Elmarc Spa and Antonio Merloni Spa;<br />
- claim for damages from Calzaturificio MCR srl;<br />
- action for compounding of interest brought by Corderia Napoletana Spa;<br />
<strong>Banca</strong> Popolare Commercio e Industria<br />
- litigation for claims concerning trading in securities;<br />
<strong>Banca</strong> Carime<br />
- a revocation bankruptcy clawback action brought by Siprio spa;<br />
459
With respect to the information reported in the previous Notes to the financial statements in the 2011<br />
Annual <strong>Report</strong>, we report that the significant revocation clawback action brought against Banco di<br />
Brescia by Alcado Spa has been concluded.<br />
The specific sections of this report may be consulted for information on corporate litigation not<br />
directly related to ordinary business operations and on tax litigation.<br />
460
Quantitative information<br />
The graphs below show that the main sources of operational risk for the Bank in the period from<br />
January 2008 to December <strong>2012</strong> were “processes” (21% of frequencies and 48% of the total impacts<br />
detected) and “external causes” (76% of frequencies and 43% of the total impacts detected).<br />
The “external causes” risk driver included, amongst other things, human actions performed by third<br />
parties and not directly under the control of the Bank. The “process” risk driver included<br />
unintentional errors and incorrect application of regulations.<br />
Percentage of operational losses by risk driver (detection 1 st January 2008 - 31 st December <strong>2012</strong>)<br />
Number of events<br />
Impact on profit<br />
21.47%<br />
1.46%<br />
6.74%<br />
48.39%<br />
1.53%<br />
75.54%<br />
42.58%<br />
2.29%<br />
Operational losses during the year were again concentrated on<br />
the following risk factors: “processes” (43% of frequencies<br />
and 54% of the total impacts detected) and “external causes” (52% of frequencies and 37% of the total<br />
impacts detected).<br />
Percentage of operational losses by risk driver (detection 1 st January <strong>2012</strong> - 31 st December <strong>2012</strong>)<br />
Number of events<br />
Impact on profit<br />
42.5%<br />
1.9%<br />
8.0%<br />
54.1%<br />
51.7%<br />
3.9%<br />
36.8%<br />
1.1%<br />
461
The types of event which recorded the greatest concentration of operational losses during the period<br />
examined were “external fraud” (71% of frequencies and 40% of the total impacts detected),<br />
“customers, products and professional practices” (8% of frequencies and 25% of the total impacts<br />
detected) and “execution, delivery and process management” (14% of frequencies and 23% of the total<br />
impacts detected).<br />
Percentage of operational losses by type of event (detection from 1 st January 2008 to 31 st December <strong>2012</strong>)<br />
Number of events<br />
Impact on profit<br />
0.3%<br />
1.4% 4.4%<br />
7.9%<br />
1.3%<br />
13.8%<br />
40.4%<br />
2.5%<br />
2.3%<br />
5.3%<br />
25.4%<br />
70.9%<br />
23.1%<br />
0.9%<br />
Operational losses incurred during the year were concentrated mainly in the following types of event:<br />
“external fraud” (43% of frequencies and 34% of the total impacts detected), “customers, products<br />
and professional practices” (22% of frequencies and 31% of the total impacts detected), “external<br />
fraud” (55% of frequencies and 14% of the total impacts detected) and “execution, delivery and<br />
process management” (20% of frequencies and 23% of the total impacts detected).<br />
Percentage of operational losses by type of event (detection from 1 st January <strong>2012</strong> to 31 st December <strong>2012</strong>)<br />
Number of events<br />
Impact on profit<br />
0.7%<br />
1.7% 8.0%<br />
22.4%<br />
1.4%<br />
1.1% 8.6%<br />
30.6%<br />
3.5%<br />
43.4%<br />
20.3%<br />
33.7%<br />
2.0%<br />
22.6%<br />
462
The operational losses detected during the year were concentrated in the “retail banking” (77% of the<br />
total impacts detected) and “retail brokerage” (12% of the total impacts detected) lines of business.<br />
Capital requirements<br />
With Provision No. 423940 of 16 th May <strong>2012</strong>, the <strong>UBI</strong> <strong>Banca</strong> Group was authorised by the Bank of<br />
Italy to use the advanced internal model (advanced measurement approach – AMA) to calculate the<br />
capital requirement for operational risks. The first consolidated supervisory report submitted on the<br />
basis of this model was made for the report as at and for the period ended 30 th June <strong>2012</strong>.<br />
More specifically, the <strong>UBI</strong> <strong>Banca</strong> Group adopted the advanced measurement approach (AMA) used in<br />
combination with the “traditional standardised approach” (TSA) and the “basic indicator approach”<br />
(BIA)<br />
The scope of application for the AMA includes the Parent, <strong>UBI</strong> <strong>Banca</strong>, the Network Banks (Banco di<br />
Brescia, <strong>Banca</strong> Regionale Europea, <strong>Banca</strong> di Valle Camonica, <strong>Banca</strong> Popolare di Bergamo, <strong>Banca</strong><br />
Popolare Commercio e Industria, <strong>Banca</strong> Popolare di Ancona and <strong>Banca</strong> Carime), <strong>UBI</strong> <strong>Banca</strong> Private<br />
Investment, Centrobanca and <strong>UBI</strong> Sistemi e Servizi. The scope of application for the TSA comprises<br />
IW Bank, <strong>UBI</strong> Factor, <strong>UBI</strong> Pramerica and <strong>UBI</strong> International, while the remaining companies use the<br />
BIA.<br />
The measurement of operational risk using the AMA methodology is performed using an extreme<br />
value theory (EVT) approach, based on operational losses measured internally (loss data collection –<br />
LDC), empirical data acquired from outside the Group (IDOL - “Italian database of operational losses”)<br />
and potential losses evaluated using self risk assessment (SRA) scenarios. The first two information<br />
sources represent the quantitative component of the measurement model and furnish a historical<br />
view of the internal risk profile and of the Italian banking sector. On the other hand, the scenario<br />
analyses constitute a qualitative and quantitative information component, because they are derived<br />
from risk assessments provided as part of the internal self risk assessment process, where the<br />
purpose is to provide a forward looking view of the internal risk profile, operational context factors<br />
and the system of internal controls.<br />
The model developed follows the loss distribution approach and it involves estimating severity<br />
distributions for each class of risk on two distinct components: a generalised pareto distribution<br />
(GPD) for the tail and an empirical distribution for the body. The estimates of severity obtained on the<br />
tails are subsequently integrated, by applying credibility theory, with risk information evaluated by<br />
means of a self risk assessment (SRA) process. The probabilities of events occurring are described by<br />
using Poisson curves. The estimate of capital at risk is obtained by cutting the annual loss curve<br />
resulting from a convolution between the curve of the probabilities of events occurring and the<br />
integrated severity curve at the 99.9 th percentile. The consolidated capital requirement is calculated<br />
as the sum of the capital at risk estimated on each risk class. The robustness of the model and of the<br />
underlying assumptions is tested by employing a stress testing process, which provides an estimate<br />
of the impacts on measurements of expected loss and of VaR when particular stress conditions occur.<br />
463
The capital requirement calculated according to the TSA is the product of the multiplication of gross<br />
income (the “significant indicator”), divided into supervisory lines of business, by the specific “beta”<br />
coefficients defined in the supervisory regulations (see Bank of Italy circulars No. 263 of 27 th<br />
December 2006 and No. 155 of 18 th December 1991).<br />
Finally, the capital requirement according to the BIA is calculated by multiplying average gross<br />
income for the last three years by the “alpha” coefficient defined by supervisory regulations.<br />
The capital requirement calculated using a combined AMA, TSA and BIA approach was €437 million<br />
(about 4% less than the €456 million calculated using the combined TSA and BIA approaches) and it<br />
was calculated on the following three components:<br />
– the AMA component: the capital requirement net of expected losses for which provisions<br />
have been made, estimated on the legal entities within the AMA perimeter only was<br />
€349 million (it was €382 million gross and represented 80% of the total) and it was<br />
determined principally by the risk classes “execution, delivery and process<br />
management” (27%), “customers, products and professional practices” (21%) “internal<br />
fraud” (21%) and “external fraud” (17%);<br />
– the TSA component: the capital requirement calculated for legal entities within the BIA<br />
perimeter only was €33 million (8% of the total);<br />
– the BIA component: the capital requirement calculated for legal entities within the BIA<br />
perimeter only was €55 million (12% of the total).<br />
The main changes recorded compared to the preceding half year were as follows:<br />
1. an increase in the VaR estimated by the AMA calculation method: an increase was<br />
recorded (+5%, up from €364.0 million to €382.6 million) determined mainly by an<br />
average annual number of events higher that the significance threshold observed in the<br />
period of analysis (see the following points);<br />
2. a reduction in the capital requirement calculated using the TSA+BIA method: a decrease<br />
was recorded (-2%, down from €462.7 million to €455.6 million) determined by a drop in<br />
average gross income (GI) over the last three years (the calculation included GI <strong>2012</strong> = €3.4<br />
billion - in line with GI 2011 – and excluded GI 2009 = €3.8 billion);<br />
3. an increase in the deductible provisions made: an increase was recorded (+7%, up from<br />
€31.7 million to €33.5 million) determined by the combined effect of an increase in the<br />
expected loss estimated by the method (which sets the maximum deductible amount for<br />
this) and growth in the provisions made for events which determine operational risk.<br />
When the <strong>UBI</strong> Group applied for validation of its first use of the AMA, it did not take up the option<br />
available under the regulations in force 8 to deduct the effects of insurance policies and other risk<br />
transfer mechanisms from the capital requirement.<br />
8 See Bank of Italy Circular No. 263 of 27 th December 2006, Title II, Chapter 5, Part three, Section IV.<br />
464
Section 2 - Risks for insurance companies<br />
The Group holds interest in the share capital of insurance companies as part of banc assurance<br />
agreements with major insurance groups 9 .<br />
In terms of risks, these equity investments are deducted from regulatory capital and account for less<br />
than 0.3% of consolidated assets.<br />
Section 3 - Risks for other companies<br />
No significant risks are reported for the remaining companies included in the consolidation which are<br />
not part of the banking Group and are not insurance companies.<br />
9<br />
The section “the scope of consolidation” in the consolidated management report may be consulted for details.<br />
465
PART F – Information on consolidated<br />
equity<br />
Section 1 – <strong>Consolidated</strong> equity<br />
A. Qualitative information<br />
Equity is defined by international financial reporting standards in a residual manner as<br />
“what remains of an entity’s assets after all the liabilities have been deducted”. From a<br />
financial viewpoint, equity is the means, measured in monetary form, contributed by the<br />
owners or generated by the entity.<br />
Operational levers are developed on a broader base, consistent with the supervisory<br />
aggregate, which are characterised not just by equity in the strict sense but also by<br />
intermediate instruments such as innovative instruments and subordinated liabilities.<br />
As the Parent of the Group, <strong>UBI</strong> <strong>Banca</strong> performs supervision and co-ordination activities for<br />
the companies in the Group and, without prejudice to the independence of each of them in<br />
terms of their business and articles of association, lays down appropriate policies for them.<br />
The Parent assesses capitalisation requirements in both the strict sense and also through<br />
the issue of subordinated liabilities by subsidiaries. The senior management of the Parent<br />
submits proposals to its governing bodies which decide accordingly.<br />
The proposals, once approved by the governing bodies of the Parent, are then submitted to<br />
the competent bodies of the subsidiaries.<br />
In compliance with regulatory constraints and internal objectives, the Parent analyses and<br />
co-ordinates capital requirements on the basis of the business plan, the budget and the<br />
related risk profiles and it acts as a privileged counterparty in gaining access to capital<br />
markets applying an integrated approach to optimising capital strength.<br />
The following analysis metrics are used from the viewpoint of capital management to cover<br />
risks:<br />
• regulatory capital, defined as a supervisory measurement of capital – specified in<br />
supervisory regulations – to be held to cover capital requirements (Pillar 1 risks);<br />
• total capital, or available financial resources (AFR), defined as the sum of capital<br />
elements that the Group considers can be used to cover internal capital and total<br />
internal capital 1 requirements (Pillar 2 risks).<br />
Capital adequacy management is designed to govern the current and future capital strength<br />
of the Group by verifying compliance with the supervisory requirements of Pillar 1 and by<br />
continuously monitoring the adequacy of the total capital to meet Pillar 2 risks. This activity<br />
regards above all an analysis of capital requirements in relation to budget and business<br />
plan objectives and it is carried out at both consolidated and single legal entity level.<br />
1<br />
“Internal capital” is defined as risk capital, the capital requirement for a determined risk that the bank considers<br />
necessary to cover losses above a given expected level. “Total internal capital” is defined as internal capital required<br />
for all significant risks assumed by the bank, including possible internal capital requirements due to considerations<br />
of a strategic character.<br />
466
B. Quantitative information<br />
Please refer to the information given in Part B of these Notes to the financial statements in<br />
Liabilities Section 15 – Equity attributable to the Parent.<br />
B.1 <strong>Consolidated</strong> equity by type of company<br />
Consolidation<br />
Equity items<br />
Banking<br />
group<br />
Insurance<br />
companies<br />
Other<br />
companies<br />
eliminations<br />
and<br />
adjustments<br />
31.12.<strong>2012</strong><br />
1. Share capital 8,618,231 - 489 (5,853,825) 2,764,895<br />
2. Share premiums 5,568,610 - - (795,896) 4,772,714<br />
3. Reserves 5,338,176 - (2,159) (1,808,773) 3,527,244<br />
4. Equity instruments - - - -<br />
5. (Treasury shares) (6,971) - - 2,596 (4,375)<br />
a) parent (6,971) - - 2,596 (4,375)<br />
b) subsidiaries - - - - -<br />
6. Valuation reserves: (560,826) 15,442 - (29,591) (574,975)<br />
- Available-for-sale financial assets (576,520) - - (83) (576,603)<br />
- Property, plant and equipment 35,917 - - (6,583) 29,334<br />
- Intangible assets - - - - -<br />
- Foreign investment hedges - - - - -<br />
- Cash flow hedges (5,451) - - 257 (5,194)<br />
- Foreign currency differences (243) - - - (243)<br />
- Non current assets held for disposal - - - - -<br />
- Actuarial gains (losses) on defined benefit plans (72,414) - - 835 (71,579)<br />
- Share of fair value reserves of equity accounted investees - 15,442 - - 15,442<br />
- Special revaluation law s 57,885 - - (24,017) 33,868<br />
7. Profit (loss) for the year attributable to the Parent and<br />
to non-controlling interests<br />
325,519 47,008 3,636 (284,497) 91,666<br />
Total 19,282,739 62,450 1,966 (8,769,986) 10,577,169<br />
For greater clarity and comprehension of the amounts relating to consolidated equity by<br />
type of company, we have included the following reconciliation between total equity and non<br />
controlling interests and the equity attributable to the Parent.<br />
Reconcil iation schedul e Group Non-control ling interests Total<br />
Share capital 2,254,368 510,527 2,764,895<br />
Share premiums 4,716,861 55,853 4,772,714<br />
Reserves 3,259,365 267,879 3,527,244<br />
Equity instruments 0 0 0<br />
(Treasury shares) ( 4,375) 0 ( 4,375)<br />
Valuation reserves ( 571,045) ( 3,930) ( 574,975)<br />
Profit (loss) for the year (+/-) attributable to the Parent and<br />
to non-controlling interests<br />
82,708 8,958 91,666<br />
Equity 9,737,882 839,287 10,577,169<br />
467
B.2 Valuation reserves of available-for-sale financial assets: composition<br />
Assets/amounts<br />
Banking group<br />
Insurance<br />
companies<br />
Other companies<br />
31.12.<strong>2012</strong><br />
Positive reserve<br />
Negative reserve<br />
Positive reserve<br />
Negative reserve<br />
Positive reserve<br />
Negative reserve<br />
Positive reserve<br />
Negative reserve<br />
Positive reserve<br />
Negative reserve<br />
Consolidation<br />
eliminations and<br />
adjustments<br />
1. Debt instruments 32,941 (684,451) 198,703 (183,573) - - (198,757) 183,802 32,887 (684,222)<br />
2. Equity instruments 77,584 (2,326) 2,981 (2,565) - - (3,074) 2,567 77,491 (2,324)<br />
3. Units in O.I.C.R.<br />
(collective investment<br />
2,255 (2,523) 9,358 (9,462) - - (9,525) 9,462 2,088 (2,523)<br />
instruments)<br />
4. Financing - - - - - - - - - -<br />
Total al 31.12.<strong>2012</strong> 112,780 (689,300) 211,042 (195,600) - - (211,356) 195,831 112,466 (689,069)<br />
Total al 31.12.2011 52,365 (1,345,979) 85,699 (160,427) - - (86,672) 169,648 51,392 (1,336,758)<br />
B.3 Valuation reserves of available-for-sale financial assets: annual changes<br />
Debt<br />
instruments<br />
Equity<br />
instruments<br />
Units in<br />
O.I.C.R<br />
(c o lle c tive<br />
in ve stme n t<br />
in stru me nts)<br />
Financing<br />
A. Opening balances (1,327,638) 47,047 (4,775) -<br />
2. Positive changes 679,090 30,465 6,037 -<br />
2.1 Increases in fair value 660,632 28,821 3,016 -<br />
2.2 Transfer to income statement of negative reserves 17,142 1,643 3,021 -<br />
- following impairment losses 12 1,307 2,572 -<br />
- from disposal 17,130 336 449 -<br />
2.3 Other changes 1,316 1 - -<br />
3. Negative changes (2,787) (2,345) (1,697) -<br />
3.1 Decrease in fair value (1,550) (966) (1,360) -<br />
3.2 Impairment losses - - - -<br />
3.3 Transfer to income statement of positive reserves:<br />
from disposal<br />
(445) (1,373) (337)<br />
3.4 Other changes (792) (6) -<br />
4. Closing balances (651,335) 75,167 (435) -<br />
468
Section 2 – Capital and banking supervisory ratios<br />
2.1 Scope of the regulations<br />
Regulatory capital and the relative ratios are calculated on the basis of Circular No. 263/06<br />
(New regulations for the prudent supervision of banks) and Circular No. 155/91 (Instructions<br />
for compiling regulatory capital reports and capital ratios), both issued by the Bank of Italy,<br />
as amended by the 13 th update of 29 th May <strong>2012</strong> and by the 14 th update of 21 st December<br />
2011 respectively.<br />
More specifically, Circular No. 263 sets out prudent principles of a general nature for the<br />
calculation of regulatory capital and the absorption of capital.<br />
The <strong>UBI</strong> Group in particular has adopted the regulations cited following the advanced<br />
approach. After obtaining authorisation from the supervisory authority 2 , the Group now<br />
uses the advanced internal rating based (AIRB) approach for the calculation of capital<br />
requirements – from the supervisory report as at 30 th June <strong>2012</strong> – for the “credit exposures<br />
to businesses (corporate)” segment for the network banks, <strong>UBI</strong> Private Investment and<br />
Centrobanca. The remaining legal entities of the Group use the standardised approach. For<br />
operational risks the Group uses an internal model, the advanced measurement approach<br />
(AMA) in combined use with the traditional standardised approach (TSA) and the basic<br />
indicator approach (BIA). The scope of the AMA includes the Parent, <strong>UBI</strong> <strong>Banca</strong>, the network<br />
banks, <strong>UBI</strong> <strong>Banca</strong> Private Investment, Centrobanca and <strong>UBI</strong> Sistemi e Servizi. The scope of<br />
the TSA comprises IW Bank, <strong>UBI</strong> Factor, <strong>UBI</strong> Pramerica and <strong>UBI</strong> International, while the<br />
remaining companies use the BIA 3 .<br />
The consolidation scope used for regulatory capital and capital ratio (the “Banking Group”)<br />
purposes differs from the statutory accounting scope of consolidation used to prepare the<br />
financial reports in accordance with IFRS. More specifically the consolidation scope for<br />
statutory accounting purposes includes non-banking, non-financial and service companies<br />
which are excluded from the banking supervisory consolidation scope. Furthermore, the<br />
latter employs proportionate consolidation of banking, financial and operating companies<br />
which are jointly controlled, while these are consolidated using the equity method in the<br />
statutory financial statements.<br />
There are no hindrances within the Group, either legal or substantial, which might prevent<br />
the rapid transfer of capital resources or funds.<br />
2 Bank of Italy provision No. 423940 of 16 th May <strong>2012</strong>.<br />
3<br />
Further information on the advanced methods is given in Part E of these Notes to financial statements.<br />
469
2.2 Banking regulatory capital<br />
A. Qualitative information<br />
Regulatory capital is determined on the basis of the figures for capital and profit and loss<br />
resulting from the application of IFRS and it is calculated as the algebraic sum of a series of<br />
positive and negative items, which are considered eligible for inclusion – with or without<br />
limitations - in relation to the ‘quality’ of the capital. The amount of those items is<br />
considered net of any tax expenses. Positive components of the capital must be fully<br />
available to the Bank, so that they can be used without restrictions to cover risks to which<br />
the intermediary is exposed.<br />
Regulatory capital is composed of tier one capital and tier two capital net of “prudential<br />
filters” 4 and some deductions.<br />
1. Tier one capital<br />
The tier one capital includes the paid up share capital, share premiums, reserves<br />
(considered prime quality items), innovative capital instruments, profit for the period, net of<br />
the part potentially available for distribution as dividends and other forms of distribution,<br />
positive prudent filters of tier one capital and instruments subject to transition provisions<br />
(grandfathering). Treasury shares held in portfolio, goodwill, other intangible fixed assets,<br />
prior and current year losses, other negative items and negative prudent filters for tier one<br />
capital (termed negative elements of tier one capital) are deducted from the total of the items<br />
mentioned previously (termed positive elements of tier one capital). The algebraic sum of the<br />
positive and negative components of the tier one capital constitutes the “tier one capital<br />
before items to be deducted”. The tier one capital is constituted by the difference between<br />
the “tier one capital before items to be deducted” and “items to be deducted from tier one<br />
capital”.<br />
2. Tier two capital<br />
The tier two capital comprises – with some limits on eligibility for inclusion – the valuation<br />
reserves, tier two subordinated liabilities, other positive elements and positive prudential<br />
filters (termed positive elements of tier two capital). Other negative items and negative tier<br />
two prudential filters (termed negative elements of tier two capital) are deducted from the<br />
total of those items.<br />
Details of innovative equity instruments eligible for inclusion in the tier one capital and of<br />
tier two subordinated liabilities included in the supplementary capital are given in Part B of<br />
these notes to the financial statements, under Liabilities, Section 3, Debt securities issued –<br />
item 30.<br />
4 Prudent filters are corrections made to equity items in the balance sheet made to safeguard the quality of the<br />
regulatory capital and to reduce potential volatility induced by the application of IFRS.<br />
With regard to those prudent filters that are most important to the <strong>UBI</strong> Group, the regulations state that unrealised<br />
gains and losses on available-for-sale financial assets are divided between equity instruments (inclusive of collective<br />
investment instruments) and debt instruments. For each of these aggregates, if the reserve in question is negative it<br />
reduces the tier one capital and if it is positive the tier two capital is increased by 50% of the reserve.<br />
470
3. Tier three capital<br />
Tier three capital includes the part of the tier two subordinated liabilities not eligible for<br />
inclusion in the supplementary capital because it exceeds 50% of the “tier one capital before<br />
items to be deducted”. The amount may be used to cover capital requirements on market<br />
risks up to a maximum of 71.4% of those requirements. As at 31 st December <strong>2012</strong> this item<br />
amounted to approximately €55.9 million.<br />
B. Quantitative information<br />
In the calculation of the regulatory capital as at 31 st December <strong>2012</strong> – in compliance with<br />
provisions issued by the Bank of Italy in May 2010 5 – of the possibility of completely<br />
neutralising the impacts on regulatory capital of gains and losses recognised in the fair<br />
value reserves relating to government securities issued by EU member states held in the<br />
“available-for-sale financial assets” portfolio. This approach is in addition to that already<br />
contained in regulations, which requires losses to be deducted entirely from regulatory<br />
capital and gains to be only partially included. The option in question has been applied to<br />
equal extent by all members of the banking group from 30 th June 2010.<br />
The consolidated regulatory capital of <strong>UBI</strong> as at 31 st December <strong>2012</strong> amounted to €12,204<br />
million (€12,259 million including the tier three capital), slightly down compared to 31 st<br />
December 2011 (€12,282 million).<br />
As compared to measurement as at 31/12/2011 – following the adoption of the internal<br />
rating based approach for the calculation of the capital requirement for credit risk (AIRB,<br />
see above) – the difference between the expected loss and total net impairment losses is<br />
deducted from the tier one capital. This deduction is attributable to the fall in tier one<br />
capital of approximately €12 million, not offset by other increases in the item. The<br />
deductions due to that same difference between the expected losses and total net<br />
impairment losses had a greater impact on tier two capital, down by €57 million.<br />
5 With a provision of 18 th May 2010 and a later communication of 23 rd June 2010 (“Clarification of supervisory<br />
measures concerning regulatory capital – prudential filters”), the Bank of Italy issued new instructions for the<br />
treatment of valuation reserves relating to debt instruments held in the “available-for-sale financial assets” portfolio<br />
for the purposes of calculating regulatory capital (prudential filters). More specifically, as an alternative to the<br />
“asymmetric approach” (full deduction of net losses from the tier one capital and partial inclusion of net gains in<br />
the tier two capital) already provided for by Italian regulations, it is now permitted – in compliance with 2004 CEBS<br />
guidelines –, limited to securities issued by the central governments of countries belonging to the European Union,<br />
to completely neutralise gains and losses in the reserves mentioned (“symmetrical approach”). The measure is<br />
designed to prevent unjustified volatility in regulatory capital, caused by sudden changes in the prices of securities<br />
that are not related to changes in the credit ratings of the issuers.<br />
471
31.12.<strong>2012</strong> 31.12.2011<br />
A. Tier 1 capital before the application of prudent filters 8,507,064 8,564,444<br />
B. Tier 1 capital prudent filters: (30,471) (137,541)<br />
B.1 IFRS positive prudent filters (+) 240 579<br />
B.2 IFRS negative prudent filters (-) (30,711) (138,120)<br />
C. Tier 1 capital before items to be deducted (A+B) 8,476,593 8,426,903<br />
D. Items to be deducted from tier 1 capital (212,873) (150,625)<br />
E. Total tier 1 capital (C-D) 8,263,720 8,276,278<br />
F. Supplementary capital before the application of prudent filters 4,322,532 4,312,934<br />
G. Supplementary capital prudent filters: (11,998) (7,860)<br />
G.1 IFRS positive prudent filters (+) - -<br />
G.2 IFRS negative prudent filters (-) (11,998) (7,860)<br />
H. Supplementary capital before items to be deducted (F+G) 4,310,534 4,305,074<br />
I. Items to be deducted from supplementary capital (212,873) (150,625)<br />
L. Total supplementary capital (tier 2) (H-I) 4,097,661 4,154,449<br />
M. Items to be deducted from total tier 1 and supplementary capital (157,762) (148,574)<br />
N. Regul atory capital (E+L-M ) 12,203,619 12,282,153<br />
O. Tier three capital 55,873 -<br />
P. Regulatory capital inclusive of tier 3 (N+O) 12,259,492 12,282,153<br />
2.3 Capital adequacy requirement<br />
A. Qualitative information<br />
Capital adequacy is monitored constantly from present and future point of view to maximise<br />
its efficiency and, at the same time, to ensure that the Group achieves its capitalisation<br />
objectives and complies with minimum limits set by supervisory regulations.<br />
Compliance with capitalisation objectives is also monitored at both individual company and<br />
consolidated level and corrective action is immediately taken when objectives change to<br />
bring the various lines of business back into line with optimum risk/yield profiles<br />
B. Quantitative information<br />
The table below shows the absorption of regulatory capital as a function of the total capital<br />
adequacy requirement.<br />
Compliance with that requirement at the end of the year required capital of €6,127 million<br />
(total requirements), against which the Group recorded actual regulatory capital of €12,204<br />
million (€12,259 million inclusive of tier three capital).<br />
Finally, the table that follows summarises compliance with requirements in terms of ratios.<br />
Capital ratios as at 31 st December <strong>2012</strong> had improved appreciably due to the adoption of<br />
internal models, a contraction in volumes of business and action taken to optimise risk<br />
weighted assets. These factors more than offset the recognition of the difference between the<br />
expected loss and provisions of -€143 million, of which 50% deducted from the tier one<br />
capital and 50% from the tier two capital. To summarise, the core tier one ratio rose<br />
compared to 31 st December 2011 by 173 bps (up from 8.56% to 10.29%), the tier one ratio<br />
by 170 bps (from 9.09% to 10.79%) and the total capital ratio by 251 bps (up from 13.50%<br />
to 16.01%).<br />
472
On 31 st December <strong>2012</strong> the <strong>UBI</strong> Group again satisfied the requirement set by the EBA<br />
recommendation designed to reach a core tier one ratio of 9% inclusive of the “buffer” on<br />
sovereign debt of €868 million as at 30 th September 2011. The core tier one ratio of the <strong>UBI</strong><br />
Group for EBA purposes was 9.16%.<br />
Categories/Amounts<br />
Amounts not w eighted<br />
Weighted amounts/requirements<br />
31.12.<strong>2012</strong> 31.12.2011 31.12.<strong>2012</strong> 31.12.2011<br />
A. RISK ASSETS<br />
A.1 Credit and counterparty risk 135,348,523 138,669,242 70,145,305 84,331,533<br />
1. Standardised approach 93,346,140 138,665,393 43,976,288 84,328,842<br />
2. Method based on internal ratings 41,999,577 - 26,166,417 -<br />
2.1 Basic - -<br />
2.2 Advanced 41,999,577 - 26,166,417 -<br />
3. Securitisations 2,806 3,849 2,600 2,691<br />
B. SUPERVISORY CAPITAL REQUIREM ENTS<br />
B.1 Credit and counterparty risk 5,611,624 6,746,523<br />
B.2 M arket risk 78,253 73,545<br />
1. Standard methodology 78,253 73,545<br />
2.Internal models - -<br />
3. Concentration risk - -<br />
B.3 Operational risk 437,271 460,749<br />
1. Basic indicator approach 54,753 48,965<br />
2. Standardised approach 33,446 411,784<br />
3. Advanced measurement approach 349,072 -<br />
B.4 Other prudent requirements -<br />
B.5 Other calculations -<br />
B.6 Total prudent requirements 6,127,148 7,280,817<br />
C. RISK ASSETS AND SUPERVISORY RATIOS<br />
C.1 Risk w eighted assets 76,589,350 91,010,213<br />
C.2 Tier 1 capital/Risk w eighted assets (tier 1 capital ratio)<br />
C.3 Regulatory capital including tier 3/risk w eighted assets (Total capital ratio)<br />
10.79% 9.09%<br />
16.01% 13.50%<br />
Section 3 – Insurance capital and supervisory ratios<br />
No items of this type exist.<br />
473
PART G – Business combination<br />
transactions concerning companies or<br />
lines of business<br />
SECTION 1 - TRANSACTIONS PERFORMED DURING THE YEAR<br />
No business combinations involving companies or lines of business were performed by the<br />
<strong>UBI</strong> <strong>Banca</strong> Group in <strong>2012</strong>.<br />
SECTION 2 - TRANSACTIONS PERFORMED AFTER THE END OF THE<br />
YEAR<br />
No business combinations were performed after the end of the year.<br />
474
PART H – Transactions with related parties<br />
1.Information on the remuneration of directors and senior managers<br />
Information is provided in the notes to the separate company financial statements of Banche<br />
Popolare Unite Scpa, which may be consulted.<br />
2. Information on transactions with related parties<br />
In compliance with IAS 24, information is provided below on balance sheet and income<br />
statement transactions between related parties of <strong>UBI</strong> <strong>Banca</strong> and Group member<br />
companies, as well as those items as a percentage of the total for each item in the<br />
consolidated financial statements.<br />
According to IAS 24, a related party is a person or entity that is related to the entity that is preparing its financial<br />
statements (the “reporting entity”).<br />
(a) A person or close family member of that person is related to the reporting entity if that person:<br />
(i) has control or joint control over the reporting entity:<br />
(ii) has significant influence over the reporting entity; or<br />
(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.<br />
(b) An entity is related to a reporting entity if any of the following conditions apply:<br />
(i) the entity and the reporting entity are members of the same group (which means that each parent, subsidiary<br />
and fellow subsidiary is related to the others);<br />
(ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of<br />
a group of which the other entity is a member);<br />
(iii) both entities are joint ventures of the same third party;<br />
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;<br />
(v) the entity is a post-employment defined benefit plan for the benefit of employees of either the reporting entity<br />
or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring<br />
employers are also related to the reporting entity;<br />
(vi) the entity is controlled or jointly controlled by a person identified in (a);<br />
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management<br />
personnel of the entity (or of a parent of the entity).<br />
In compliance with the regulations in force, we report that all transactions carried out by<br />
the Group member companies with related parties were conducted in observance of correct<br />
principles both in substance and form, under conditions analogous to those applied for<br />
transactions with independent parties.<br />
More specifically, the Parent and its subsidiary <strong>UBI</strong> Sistemi e Servizi SCpA provide Group<br />
member companies with a series of services, governed by intragroup contracts drawn up in<br />
accordance with the principles of consistency, transparency and uniformity in line with the<br />
organisational model of the Group. Under this model, strategic, and management activities<br />
are centralised at <strong>UBI</strong> <strong>Banca</strong> and technical and operational activities in <strong>UBI</strong> Sistemi e<br />
Servizi SCpA.<br />
The prices agreed for the services provided under the contracts were determined on the<br />
basis of market prices or, where appropriate reference parameters could not be found in the<br />
marketplace, in accordance with the particular nature of the services provided and also in<br />
relation to the service contracts signed by <strong>UBI</strong>.S with its consortium shareholders, on the<br />
basis of the costs incurred for the services provided.<br />
The main intragroup contracts existing at the end of the year included those which<br />
implement the centralisation of activities in the Governance and Business Areas of the<br />
Parent and they involved the Parent and the main banks in the Group (<strong>Banca</strong> Popolare di<br />
Bergamo Spa, <strong>Banca</strong> Popolare Commercio e Industria Spa, <strong>Banca</strong> Popolare di Ancona Spa,<br />
<strong>Banca</strong> Carime Spa, Banco di Brescia Spa, <strong>Banca</strong> Regionale Europea Spa, <strong>Banca</strong> di Valle<br />
Camonica Spa, Banco di San Giorgio Spa, <strong>UBI</strong> <strong>Banca</strong> Private Investment Spa) and also<br />
475
contracts to implement the “national tax consolidation” (in accordance with articles 117 to<br />
129 of Presidential Decree No. 917/1986, the consolidated income tax act) concluded by the<br />
Parent. There were also all the intragroup contracts which implement the centralisation in<br />
<strong>UBI</strong> Sistemi e Servizi of support activities for the principal companies in the <strong>UBI</strong> Group.<br />
We report with regard to transactions between companies in the Group and all of its related<br />
parties that no atypical and/or unusual transactions were performed; furthermore, no<br />
transactions of that type were even performed with counterparties that were not related<br />
parties.<br />
Atypical and/or unusual transactions, as indicated in Consob Communications No.<br />
98015375 of 27 th February 1998 and No. 1025564 of 6 th April 2001, defined as all those<br />
transactions which, because of their significance/importance, the nature of the<br />
counterparties, the content of the transaction (even in relation to ordinary operations), the<br />
way in which the transfer price is decided and the timing of the event (close to the end of<br />
the financial year) might give rise to doubts concerning: the correctness/completeness of<br />
the information in the accounts, a conflict of interests, the security of the companies assets<br />
and the rights of non-controlling shareholders.<br />
Further information is given in the “<strong>Report</strong> on corporate governance and the ownership<br />
structure of <strong>UBI</strong> <strong>Banca</strong> Scpa” attached to these reports.<br />
476
Transactions with related parties – principal balance sheet items<br />
<strong>Financial</strong><br />
<strong>Financial</strong><br />
Loans and Loans and<br />
Debt<br />
Available-for-sale <strong>Financial</strong><br />
Due to<br />
liabilities Guarantees<br />
assets held for<br />
advances to advances to Due to banks<br />
securities<br />
financial assets assets FVO<br />
customers<br />
held for granted<br />
trading<br />
banks customers<br />
issued<br />
Figure s in thousa nds of e uro<br />
trading<br />
Associates - 8,428 - - 62,624 - 332,291 - 13 24,950<br />
Senior managers (1) - - - - 2,742 - 8,187 933 - -<br />
Other related parties 30,438 0 37,780 - 308,339 17 124,701 1,775 - -<br />
Total 30,438 8,428 37,780 - 373,705 17 465,179 2,708 13 24,950<br />
(1) A “senior manager” is defined as “a member of the key management personnel, where key management personnel are those w ho have pow er and responsibility for the planning, management and control<br />
of the activities of the entity and they include its directors”.<br />
Transactions with related parties - percentage<br />
<strong>Financial</strong><br />
<strong>Financial</strong><br />
Loans and Loans and<br />
Debt<br />
Available-for-sale <strong>Financial</strong><br />
Due to<br />
liabilities Guarantees<br />
assets held for<br />
advances to advances to Due to banks<br />
securities<br />
financial assets assets FVO<br />
customers<br />
held for granted<br />
trading<br />
banks customers<br />
issued<br />
Figure s in thous a nds of e uro<br />
trading<br />
With related-parties (a) 30,438 8,428 37,780 - 373,705 17 465,179 2,708 13 24,950<br />
Total (b) 4,023,934 14,000,609 200,441 6,072,346 92,887,969 15,211,171 53,758,407 45,059,153 1,773,874 8,035,491<br />
Percentage (a/b*100) 0.756% 0.060% 18.848% 0.000% 0.402% 0.000% 0.865% 0.006% 0.001% 0.310%<br />
Summary of principal income statement transactions with related parties<br />
Dividends and Net fee and<br />
Operating<br />
Other<br />
Net interest<br />
Staff costs<br />
Figure s in thousa nds of e uro<br />
similar income commission<br />
income/expens administrative<br />
Associates (820) 6,135 income 87,630 1,184 3,069 es expenses (10,676)<br />
Senior managers (1) (183) - 260 (16,479) (15) (95)<br />
Other related parties 2,819 - 942 (183) 9 (331)<br />
Total 1,816 6,135 88,832 (15,478) 3,063 (11,102)<br />
(1) A “senior manager” is defined as “a member of the key management personnel, w here key management personnel are those w ho have pow er and<br />
responsibility for the planning, management and control of the activities of the entity and they include its directors”.<br />
Percentage of income statement transactions with related parties in respect of the consolidated financial statements<br />
Dividends and Net fee and<br />
Operating<br />
Other<br />
Net interest<br />
Staff costs<br />
Figure s in thousa nds of e uro<br />
similar income commission<br />
income/expens administrative<br />
With related-parties (a) 1,816 6,135 income 88,832 (15,478) 3,063 es expenses (11,102)<br />
Total (b) 1,931,684 15,591 1,181,806 (1,525,753) 244,515 (858,270)<br />
Percentage (a/b*100) 0.094% 39.350% 7.517% 1.014% 1.253% 1.294%<br />
477
Principal balance sheet items with associate companies subject to significant influence<br />
<strong>Financial</strong><br />
Loans and<br />
<strong>Financial</strong><br />
Available-for-sale<br />
Due to Debt securities<br />
Guarantees<br />
assets held for<br />
advances to Due to banks<br />
liabilities held<br />
financial assets<br />
customers issued<br />
granted<br />
trading<br />
customers<br />
for trading<br />
Importi in miglia ia di e uro<br />
Arca SGR Spa - - - - - - - -<br />
Aviva Assicurazioni Vita Spa - - 17,960 - 189,032 - 13 -<br />
Aviva Vita Spa - - 24,263 - 50,841 - - -<br />
Capital Money Spa - - 40 - 6 - - -<br />
Ge.Se.Ri. Spa in liquidazione - - - - - - - -<br />
Lombarda China Fund Management Company - - - - - - - -<br />
Lombarda Vta Spa - - 8,921 - 75,844 - - 24,950<br />
Polis Fondi - 8,424 261 - 18 - - -<br />
Prisma Srl - - - - 696 - - -<br />
S.P.F. Studio Progetti Finanziari srl - - 142 - 441 - - -<br />
SF Consulting Srl - - 901 - 135 - - -<br />
Siderfactor Spa - - - - - - - -<br />
Sofipo Fiduciaire Sa - - - - - - - -<br />
Tex Factor Spa in liquidazione - - - - - - - -<br />
<strong>UBI</strong> Assicurazioni Spa - - 9,775 - 15,277 - - -<br />
UFI Servizi Srl - - - - - - -<br />
Total - 8,424 62,263 - 332,290 - 13 24,950<br />
478
Principal income statement items with associate companies subject to significant influence<br />
Net fee and<br />
Operating<br />
Dividends and<br />
Net interest<br />
commission Staff costs income/expens<br />
similar income<br />
Fig u re s in th o u s a n d s o f e u ro<br />
income<br />
es<br />
Other<br />
administrative<br />
expenses<br />
Arca SGR Spa - - 1,673 - - -<br />
Aviva Assicurazioni Vita Spa (302) - 5,932 (9) 1 (616)<br />
Aviva Vita Spa (506) - 35,531 - 50 -<br />
Capital Money Spa - - (2,820) - - -<br />
Ge.Se.Ri. Spa in liquidazione - - - - - -<br />
Lombarda China Fund Management Company - - - - - -<br />
Lombarda Vta Spa (103) 3,905 28,539 - 1,523 (6,398)<br />
Polis Fondi 117 168 261 - - -<br />
Prisma Srl (1) - 20 - 31 -<br />
S.P.F. Studio Progetti Finanziari srl (2) - 37 - 8 (236)<br />
SF Consulting Srl - - 407 - 16 -<br />
Siderfactor Spa 103 - 2 - 110 -<br />
Sofipo Fiduciaire Sa - - - - - -<br />
Tex Factor Spa in liquidazione - - - - - -<br />
<strong>UBI</strong> Assicurazioni Spa (125) 2,062 18,047 359 1,330 (3,308)<br />
UFI Servizi Srl - - - - - (118)<br />
Total (819) 6,135 87,629 350 3,069 (10,676)<br />
479
Part I – Share based payments<br />
A. Qualitative information<br />
In implementation of the update of “<strong>UBI</strong> <strong>Banca</strong> Group remuneration and incentive policies”<br />
(the “Policy”) for <strong>2012</strong>, which was approved by the Supervisory Board on 28 th March <strong>2012</strong>,<br />
after prior consultation with the Remuneration Committee, in compliance with “Supervisory<br />
provisions on the remuneration and incentive policies and practices of banks and banking<br />
groups” issued by the Bank of Italy, on 28 th April <strong>2012</strong> an ordinary shareholders meeting of<br />
<strong>UBI</strong> <strong>Banca</strong> approved the payment of the variable component of bonuses to be made by the<br />
use of shares for top management and the highest management level of the control<br />
functions.<br />
Incentive schemes for <strong>2012</strong> are described in the “<strong>2012</strong> Annual report to the shareholders<br />
meeting on remuneration and incentives policies” which may be consulted. They are subject<br />
to specific trigger conditions which guarantee the capital stability (core tier one) and<br />
liquidity (net stable funding ratio) of the <strong>UBI</strong> <strong>Banca</strong> Group, as well as the ability to generate<br />
value by the Group and the single companies belonging to it (economic value added). The<br />
calculation of bonuses is related to the degree to which set objectives are achieved, each<br />
being weighted on the basis of their importance.<br />
The following was confirmed, following on from 2011, with regard to top management and<br />
the highest management level of the control functions:<br />
- deferment of payment of a portion (according to the role performed) of between 40% and<br />
60% of annual bonuses if they are due;<br />
- the grant of financial instruments, by the assignment of ordinary shares of the Parent, <strong>UBI</strong><br />
<strong>Banca</strong>, for a portion equal to at least 50% of variable remuneration, setting an adequate<br />
period of personnel retention for this, in order to align the incentives to the Bank' s medium<br />
to long-term interests.<br />
As a consequence of the above, the first portion of share-based bonuses should be assigned<br />
in the third year following the reporting year, while the second portion should be assigned<br />
in the fifth year following the reporting year. In order to ensure the Group's value generation<br />
capability over time, the second deferred portion is also subject to the achievement of set<br />
conditions relating to the creation of value corrected for risk, and that is to profit.<br />
Therefore:<br />
- the assignment of a first portion of shares is scheduled for 2014 in relation to<br />
bonuses earned in 2011;<br />
- the assignment of a first portion of shares is scheduled for 2015 in relation to<br />
bonuses earned in <strong>2012</strong>;<br />
- the assignment of the second portion of shares is scheduled for 2016 in relation to<br />
bonuses which may have been earned in 2011;<br />
- the assignment of the second portion of shares is scheduled for 2017 in relation to<br />
bonuses which may have been earned in <strong>2012</strong>.<br />
480
B. Quantitative information<br />
According to IFRS 2 “share-based payments”, the scheme in question constitutes an “equity<br />
settled” operation where payment is based on shares and made using equity instruments.<br />
On this basis, because the objective of IFRS 2 is to recognise the impact on profit and loss<br />
of the remuneration paid by means of equity instruments in the income statement in the<br />
form of staff costs, <strong>UBI</strong> <strong>Banca</strong> and the subsidiaries involved in the scheme recognised the<br />
cost for the year within the item 150a “Administrative expenses: staff costs” against an<br />
increase in equity made by posting the amount to a separate reserve in equity because the<br />
obligation of the company will be extinguished by the delivery of equity instruments and<br />
that obligation will be settled in any event by the Parent.<br />
As concerns the quantification of the cost of the scheme, since it is impossible to measure<br />
the value of the services provided by employees with precision, in compliance with IFRS 2, it<br />
is calculated on the basis of the fair value of the <strong>UBI</strong> share on the grant date 33 multiplied by<br />
the number of shares that it is estimated will be vested.<br />
More specifically, the fair value of the equity instruments granted is calculated considering<br />
the timing of their delivery, which, as planned, will start in 2014 and will last until 2017.<br />
Those estimates, based on the market price of the shares, does not include the effect of any<br />
dividends that may be distributed in the period and in general it adequately weights the<br />
terms and conditions governing the grant of the instruments.<br />
The total cost total of the scheme estimated on that basis is €1,390 thousand, divided as<br />
follows:<br />
- an up-front portion consisting of:<br />
• 229,302 shares to be granted in 2014, equivalent to €653 thousand;<br />
• 61,174 shares to be granted in 2015, equivalent to €207 thousand;<br />
- deferred portions (if the conditions to which the deferment is subject are met) consisting<br />
of:<br />
• 152,869 shares to be granted in 2016, equivalent to €401 thousand;<br />
• 40,783 shares to be granted in 2017, equivalent to €129 thousand;<br />
In accordance with the vesting conditions hypothesised, the cost of the scheme is dispersed<br />
over the whole of its vesting period, with the portion for the year recognised in the income<br />
statement, which for the reporting year amounted to €342 thousand. Furthermore, any<br />
change in the cost will only occur if the vesting requirements are not met because the<br />
services and/or result conditions set by the plan on the basis of which the number of<br />
shares that will actually be delivered is decided are not satisfied, while changes will not be<br />
based on changes in the fair value of the <strong>UBI</strong> shares.<br />
33 In this case this is the date on which the treasury shares are repurchased, because it is only on that date that<br />
the number of financial instruments needed to meet the obligation assumed by the company can be estimated.<br />
481
PART L – Segment <strong>Report</strong>ing<br />
Three segments have been identified in the presentation of the results and the financial<br />
position for 2011, termed banking, non-banking financial and other companies, as opposed<br />
to the four segments presented in prior years.<br />
The banking segment comprises the nine network banks of the Group, IW Bank Spa,<br />
Banque de Depots et de Gestione Sa and <strong>UBI</strong> International Sa.<br />
The “non-banking financial sector” comprises Centrobanca Spa, Ubi Leasing Spa, Ubi<br />
Factor Spa, Ubi Pramerica SGR Spa, <strong>Banca</strong> 24-7 Spa, Silf Spa, Prestitalia Spa, Ubi<br />
Fiduciaria Spa and <strong>UBI</strong> Gestioni Fiduciarie SIM Spa.<br />
The “other companies” segment comprises <strong>UBI</strong> <strong>Banca</strong> Scpa, Ubi Sistemi e Servizi Scpa and<br />
all the remaining Group member companies. That segment also includes all the<br />
consolidation entries including all the intercompany eliminations with the exception of<br />
those relating to the purchase price allocations made to the relative individual segments.<br />
The algebraic sum of the three segments identified in this manner represents the income<br />
statement and balance sheet of the <strong>UBI</strong> <strong>Banca</strong> Group as at and for the year ended 31 st<br />
December 2011.<br />
Distribution by business segment: income statement<br />
Corporate Centre<br />
item/business segment<br />
Banking<br />
(Aggregate)<br />
Non-banking<br />
financial<br />
(Aggregate)<br />
(<strong>UBI</strong>, <strong>UBI</strong>S,<br />
Property companies<br />
+ all intercompany<br />
and consolidation<br />
entries)<br />
To ta l<br />
Net interest income (expense) 1,612,092 262,549 57,043 1,931,684<br />
Net fee and commission income 1,097,276 129,144 -44,614 1,181,806<br />
Other expense/income -24,074 16,499 280,444 272,869<br />
Gross income 2,685,294 408,192 292,873 3,386,359<br />
Net impairment losses on loans and financial assets<br />
-512,975 -277,675 -111,374 -902,024<br />
Net financial income 2,172,319 130,517 181,499 2,484,335<br />
Net income from insurance operations 0<br />
Net income from banking and insurance operations 2,172,319 130,517 181,499 2,484,335<br />
Administrative expenses -1,900,444 -180,508 -146,601 -2,227,553<br />
Net provisions for risks and charges -27,119 -10,893 -11,200 -49,212<br />
Depreciation, amortisation and net impairment losses on<br />
property, plant and equipment and intangible assets -87,730 -5,966 -97,448 -191,144<br />
Other net operating income/expense 53,192 12,556 29,781 95,529<br />
Operating expenses -1,962,101 -184,811 -225,468 -2,372,380<br />
Profits of equity investments 2,044 740 49,866 52,650<br />
Net impairment losses on goodw ill - - - 0<br />
Profits on disposal of investments 224 501 5,765 6,490<br />
Pre-tax profit from continuing operations 212,486 - 53,053<br />
11,662 171,095<br />
Taxes on income for the year from continuing operations - 95,112<br />
499 15,184 -79,429<br />
Post-tax profit (loss) from discontinued operations - - - 0<br />
Profit for the period attributable to non-controlling interests 1,294 - 13,200<br />
2,948 -8,958<br />
Profit for the period 118,668 - 65,754<br />
29,794 82,708<br />
482
Distribution by business segment: balance sheet<br />
Corporate Centre<br />
item/business segment<br />
Banking<br />
(Aggregate)<br />
Non-banking<br />
financial<br />
(Aggregate)<br />
(<strong>UBI</strong>, <strong>UBI</strong>S,<br />
Property companies<br />
+ all intercompany<br />
and consolidation<br />
entries)<br />
Loans and advances to banks 7,895,998 0<br />
Due to banks 11,860,057 5,174,766<br />
Net financial assets 1,848,145 672,406 14,059,890<br />
Loans and advances to customers 65,915,538 23,646,491 3,325,940<br />
Due to customers 47,089,531 264,095 6,404,781<br />
Debt securities issued 22,638,076 10,184,224 12,236,853<br />
Equity-accounted investees 523 35 441,933<br />
Non-controlling interests 820,643 47,378 -28,734<br />
Profit for the year 106,141 -67,895 44,462<br />
The items "loans to banks" and "due to banks" have been stated in the three segments on<br />
the basis of the prevailing balance.<br />
The item "non-controlling interests" in the "banking" and "non-banking financial" segments<br />
relates only to the portion of equity and of the profit for the year of the companies not<br />
wholly owned. It does not include non controlling interests and the part of consolidated<br />
items attributable to non-controlling interests which have been attributed to the "corporate<br />
centre".<br />
483
Attachment to the consolidated financial statements<br />
Disclosures concerning the fees for independent auditing and other<br />
services in compliance with Art. 149 duodieces of Consob Issuers’<br />
Regulations<br />
In accordance with Art. 149 duodieces of Consob Issuers’ Regulations, information<br />
concerning payments made to the independent auditors Deloitte & Touche Spa and<br />
companies belonging to the same network for the following services is given in the table<br />
below.<br />
1) Auditing services which include:<br />
audit of the annual accounts for the purposes of expressing a<br />
professional opinion;<br />
review of the interim accounts.<br />
2) Certification services which include appointments where the auditor assesses a<br />
specific element, the determination of which is performed by another who is<br />
responsible for it, by employing appropriate criteria in order to furnish a conclusion<br />
which gives the recipient a measure of the reliability of that specific element.<br />
3) Tax consultancy services.<br />
4) Other services.<br />
The fees presented in the table relating to the financial year <strong>2012</strong>, are those contractually<br />
agreed, inclusive of any indexing (but not of out-of-pocket expenses, nor of supervisory<br />
authority contributions and VAT).<br />
Pursuant to the regulations cited, payments made to possible secondary auditors or to firms<br />
belonging to the respective networks are not included.<br />
484
Type of service<br />
Firm providing the<br />
service<br />
Recipient of the service Fees (€000)<br />
Audit of the accounts<br />
Deloitte & Touche Spa,<br />
Deloitte SA, Deloitte &<br />
(*) 2,459<br />
Touche LLP<br />
Certification services<br />
Deloitte & Touche Spa,<br />
Deloitte SA, Deloitte ERS<br />
(**) 1,079<br />
Srl<br />
Tax consultancy services -<br />
Other services: 1,207<br />
Administrative and methodological<br />
support for audit activities<br />
preparatory to the project for the<br />
adoption and development and for<br />
Deloitte Consulting Spa Prestitalia Spa 469<br />
the stabilisation process of the<br />
Creditolab procedures<br />
Methodological support for the<br />
design of the IT platform for<br />
Deloitte Consulting Spa IW Bank Spa 182<br />
financial consulting<br />
Methodological support for mapping<br />
rating systems<br />
Deloitte Consulting Spa <strong>UBI</strong> <strong>Banca</strong> Scpa 179<br />
Methodological support for the gap<br />
analysis stage in the corporate<br />
project to analyse the<br />
organisational impacts of the<br />
Deloitte Consulting Spa <strong>UBI</strong> <strong>Banca</strong> Scpa 160<br />
merger of <strong>Banca</strong> 24-7 Spa into <strong>UBI</strong><br />
<strong>Banca</strong> S.c.p.a.<br />
Methodological support for<br />
recognition of incentive schemes<br />
Deloitte Consulting Spa <strong>UBI</strong> <strong>Banca</strong> Scpa 105<br />
Other services<br />
Deloitte & Touche Spa,<br />
Deloitte ERS Srl, Deloitte<br />
SA,<br />
<strong>UBI</strong> Sistemi e Servizi Scpa,<br />
Banque de Depots et de<br />
Gestion Sa<br />
Total 4,745<br />
112<br />
(*) <strong>UBI</strong> <strong>Banca</strong> Scpa, <strong>Banca</strong> Popolare di Bergamo Spa, <strong>Banca</strong> Popolare di Ancona Spa, <strong>Banca</strong> Carime Spa, <strong>Banca</strong><br />
Popolare Commercio e Industria Spa, <strong>UBI</strong> Sistemi e Servizi Scpa, BPB Immobiliare Srl, <strong>UBI</strong> Pramerica SGR Spa,<br />
Centrobanca Spa, Centrobanca Sviluppo Impresa SGR Spa, SBIM Spa, Solimm Spa, Coralis Rent Srl, <strong>UBI</strong><br />
Academy, IW Bank Spa, Banque de Depots et de Gestion Sa, <strong>UBI</strong> Capital Singapore Pte Ltd, <strong>UBI</strong> <strong>Banca</strong><br />
International Sa, <strong>UBI</strong> Management Company Sa, <strong>UBI</strong> Trustee Sa, <strong>UBI</strong> Finance Srl, <strong>UBI</strong> Finance 2 Srl, <strong>UBI</strong> Finance<br />
CB 2 Srl, 24-7 Finance Srl, <strong>UBI</strong> SPV BBS <strong>2012</strong> Srl, <strong>UBI</strong> SPV BPCI <strong>2012</strong> Srl, <strong>UBI</strong> SPV BPA <strong>2012</strong> Srl.<br />
(**) <strong>UBI</strong> <strong>Banca</strong> Scpa, <strong>Banca</strong> Popolare di Ancona Spa, Banque de Depots et de Gestion Sa<br />
485