UBI Banca Group

Joint stock co-operative company 

Registered office: Bergamo, Piazza Vittorio Veneto 8 

Operating offices: Bergamo, Piazza Vittorio Veneto 8; Brescia, Via Cefalonia 74 

Member of the Interbank Deposit Protection Fund and the National Guarantee Fund 

Tax Code, VAT No. and Bergamo Company Registration No. 03053920165 

ABI (Italian Banking Association) 3111.2 Register of Banks No. 5678 Register of banking groups No. 3111.2 

Parent of the Unione di Banche Italiane Banking Group 

Share capital as at 31 st December 2011: euro 2,254,366,897.50 fully paid up 

www.ubibanca.it

Contents 

Letter from the chairmen ........................................................................................................ 5 

UBI Banca: company officers .................................................................................................. 8 

UBI Banca Group: branch network as at 31 st December 2011 ...................................................... 9 

UBI Banca Group: the main investments as at 31 st December 2011 ............................................ 10 

UBI Banca Group: principal figures and performance indicators .................................................. 12 

The rating ............................................................................................................................................. 13 

Notice of call ........................................................................................................................................ 15 

CONSOLIDATED FINANCIAL STATEMENTS OF THE UBI BANCA GROUP AS AT AND FOR 

THE YEAR ENDED 31 ST DECEMBER 2011 

CONSOLIDATED MANAGEMENT REPORT ............................................................................................ 18 

▪ The macroeconomic scenario ....................................................................................................... 19 

▪ Significant events that occurred during the year ....................................................................... 30 

▪ Commercial activity ........................................................................................................... 42 

▪ The distribution network and market positioning ..................................................................... 57 

▪ Human resources ......................................................................................................................... 65 

▪ The consolidation scope ................................................................................................................ 74 

▪ Reclassified consolidated financial statements, reclassified income statement 

net of the most significant non-recurring items and reconciliation schedules ..................... 83 

- Reclassified consolidated balance sheet ..................................................................................... 83 

- Reclassified consolidated quarterly balance sheets ..................................................................... 84 

- Reclassified consolidated income statement ............................................................................... 85 

- Reclassified consolidated quarterly income statements ............................................................... 86 

- Reclassified consolidated income statement net of the most significant 

non-recurring items ................................................................................................................... 87 

- Reconciliations schedules .......................................................................................................... 88 

- Notes to the reclassified consolidated financial statements ......................................................... 89 

▪ The consolidated income statement ............................................................................................ . 90 

▪ General banking business with customers: funding ................................................................. 103 

- Funding policies ........................................................................................................................ 103 

- Total funding ............................................................................................................................. 105 

- Direct funding ........................................................................................................................... 106 

- Indirect funding and assets under management ......................................................................... 112 

▪ General banking business with customers: lending .................................................................. . 115 

- Performance of the loan portfolio ............................................................................................... 115 

- Risk .......................................................................................................................................... 121 

▪ The interbank market and the liquidity situation ...................................................................... 126 

▪ Financial assets ............................................................................................................................. . 132 

▪ Equity and capital adequacy ........................................................................................................ 151 

▪ Reasearch & Development ............................................................................................................ . 155 

▪ The system of internal control ................................................................................................... 156 

▪ Transactions with related parties ...................................................................................... 157 

▪ Consolidated companies: the principal figures ................................................................... 160 

▪ The performance of the main consolidated companies ....................................................... 164 

▪ Other information ............................................................................................................. 199 

- Treasury shares ......................................................................................................................... 199 

- Litigation ................................................................................................................................... 199 

- Inspections ................................................................................................................................ 200 

- Tax aspects ............................................................................................................................... 201 

- Investor relations and external communication .......................................................................... 209 

- Social and environmental responsibility ..................................................................................... 211 

- Legislation on the protection of personal data ............................................................................ 214 

1

▪ Principal risks and uncertainties to which the UBI Banca Group is exposed ...................... 215 

▪ Subsequent events occurring and the business outlook 

for consolidated operations ................................................................................................ 221 

STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER 

RESPONSIBLE FOR PREPARING THE COMPANY ACCOUNTING DOCUMENTS .................. 222 

INDEPENDENT AUDITORS’ REPORT .......................................................................................... 226 

CONSOLIDATED FINANCIAL STATEMENTS .................................................................... 230 

▪ Consolidated balance sheet ............................................................................................... 231 

▪ Consolidated income statement. ........................................................................................ 232 

▪ Consolidated statement of comprehensive income .................................................................... 233 

▪ Statement of changes in consolidated equity ..................................................................... 234 

▪ Consolidated statement of cash flows ................................................................................ 236 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ......................................................... 238 

▪ PART A – Accounting policies ............................................................................................ 239 

▪ Part B – Notes to the consolidated balance sheet ............................................................... 283 

▪ Part C – Notes to the consolidated income statement ......................................................... 347 

▪ Part D – Consolidated comprehensive income .................................................................... 367 

▪ Part E – Information on risks and the relative hedging policies .......................................... 368 

▪ PART F – Information on consolidated equity ..................................................................... 451 

▪ Part G – Business combination transactions concerning companies or lines of business .... 458 

▪ Part H – Transactions with related parties ......................................................................... 459 

▪ PART I – Share-based payments ........................................................................................ 465 

▪ Part L – Segment Reporting ............................................................................................... 467 

ATTACHMENT ....................................................................................................................................... 469 

▪ 

Disclosures concerning the fees of the independent auditors and services other than 

auditing in compliance with Art. 149 duodecies of the Consob Issuers’ Regulations ........... 469 

SEPARATE FINANCIAL STATEMENTS OF UBI BANCA SCPA AS AT AND FOR THE YEAR 

ENDED 31 ST DECEMBER 2011 

MANAGEMENT REPORT ........................................................................................................... 1* 

▪ UBI Banca: principal figures and performance indicators .................................................. 2* 

▪ The UBI Banca organisation chart ..................................................................................... 3* 

▪ The macroeconomic scenario ............................................................................................. 5* 

▪ Human resources .............................................................................................................. 5* 

▪ Reclassified financial statements, reclassified income statement net 

of the most significant non-recurring items and reconciliation schedules ............................. 7* 

- Reclassified balance sheet ......................................................................................................... 7* 

- Reclassified quarterly balance sheets ......................................................................................... 8* 

- Reclassified income statement ................................................................................................... 9* 

- Quarterly reclassified income statements ................................................................................... 10* 

- Reclassified income statement net of the most significant 

non recurring items ................................................................................................................... 11* 

- Reconciliation schedules ............................................................................................................ 12* 

- Notes to the financial statements ............................................................................................... 13* 

▪ The income statement ....................................................................................................... 14* 

▪ General banking business ................................................................................................. 24* 

- Funding .................................................................................................................................... 24* 

2

- Lending ..................................................................................................................................... 26* 

- Operations on the interbank market .......................................................................................... 28* 

▪ Financial assets ................................................................................................................ 31* 

▪ Equity and capital adequacy ............................................................................................. 39* 

▪ Relations with Group member companies .......................................................................... 41* 

▪ Research & Development ................................................................................................... 41* 

▪ The system of internal control ........................................................................................... 41* 

▪ Transactions with related parties ................................................................................................ 42* 

▪ Share performance and shareholder structure ................................................................... 44* 

- Share performance .................................................................................................................... 44* 

- Report on corporate governance and the ownership structure .................................................... 44* 

- Treasury shares ......................................................................................................................... 46* 

- Report on the admission of new registered shareholders ............................................................. 46* 

- Report on mutual objects ........................................................................................................... 48* 

- De jure and delegated powers of the corporate bodies ................................................................. 50* 

▪ Other information ............................................................................................................. 51* 

- Litigation ................................................................................................................................... 51* 

- Legislation on the protection of personal data ............................................................................ 52* 

▪ Principal risks and uncertainties to which UBI Banca is exposed ....................................... 52* 

▪ Subsequent events and the business outlook .................................................................... 52* 

▪ Proposal to replenish the loss for the year and to declare a dividend .................................. 53* 

STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER 

RESPONSIBLE FOR PREPARING THE COMPANY ACCOUNTING DOCUMENTS ................................ 55* 

INDEPENDENT AUDITORS’ REPORT .......................................................................................... 58* 

SEPARATE FINANCIAL STATEMENTS ........................................................................................ 62* 

▪ Balance sheet .................................................................................................................... 63* 

▪ Income statement .............................................................................................................. 64* 

▪ Statement of comprehensive income .................................................................................. 65* 

▪ Statement of changes in equity .......................................................................................... 66* 

▪ Statement of cash flows. .................................................................................................... 68* 

NOTES TO THE ACCOUNTS ...................................................................................................... 70* 

▪ Part A – Accounting policies .............................................................................................. 71* 

▪ Part B – Notes to the balance sheet ................................................................................... 105* 

▪ Part C – Notes to the income statement ............................................................................. 163* 

▪ Part D – Comprehensive income ........................................................................................ 186* 

▪ Part E – Information on risks and the relative hedging policies .......................................... 188* 

▪ Part F – Information on equity ........................................................................................... 269* 

▪ Part G – Business combination transactions concerning companies or lines of business .... 276* 

▪ Part H – Transactions with related parties ......................................................................... 277* 

▪ Part I – Share based payments .......................................................................................... 285* 

▪ Part L – Segment Reporting ............................................................................................... 286* 

ATTACHMENTS TO THE SEPARATE FINANCIAL STATEMENTS .................................................... 288* 

▪ List of real estate properties .............................................................................................. 289* 

▪ Convertible bonds ............................................................................................................. 294* 

▪ List of significant equity investments held in unlisted companies as at 31 st December 2011 

in compliance with Art. 126 of Consob Resolution No. 11971/1999 ................................... 295* 

▪ Disclosures concerning the fees of the independent auditors and services other than 

auditing in compliance with Art. 149 duodecies ..................................................................... 300* 

3

REPORT ON CORPORATE GOVERNANCE AND THE OWNERSHIP STRUCTURE OF UBI BANCA SCPA .. 1** 

REPORT OF THE SUPERVISORY BOARD TO THE SHAREHOLDERS’ MEETING 

in compliance with Art.153, paragraph 1 of Legislative Decree No. 58 of 24 th February 1998 

and Art. 46, paragraph 1, letter h) of the corporate by-laws ......................................................... 59** 

REPORTS ON THE OTHER ITEMS ON THE AGENDA OF THE SHAREHOLDERS’ MEETING ................... 73** 

REPORT ON REMUNERATION ........................................................................................................ 78** 

GLOSSARY .................................................................................................................................. 113** 

BRANCH NETWORK OF THE UBI BANCA GROUP 

CALENDAR OF CORPORATE EVENTS OF UBI BANCA FOR 2012 

RESOLUTIONS PASSED BY THE ANNUAL GENERAL MEETING HELD ON ..... 2012 

CONTACTS 

Key 

The following abbreviations are used in the tables: 

- dash (-): when the item does not exist; 

- not significant (n.s.): when the figure is insufficient to reach the minimum level in question or is in any case not 

significant; 

- not available (n.a.): when the information is not available 

- a cross “X”: when no amount is to be given for the item (in compliance with Bank of Italy instructions). 

All figures are given in thousands of euros, unless indicated otherwise. 

4

Letter from the chairmen 

Dear registered and non registered shareholders, 

In 2011, the financial crisis, which never died down completely, was stoked by a 

dangerous new source of difficulty in the euro area, which, with unforeseeable 

intensity, gradually affected the sovereign debts of countries with high debt and weak 

development prospects in the medium-term, including Italy. Growing fears of insolvency 

for sovereign issuers had repercussions on the banking industry and caused a sudden 

deterioration in the terms and conditions for wholesale funding offered to Italian banks, 

which were trapped between requests to strengthen capital and demands to support 

small and medium-sized businesses, the backbone of the country’s economy. 

In this context, thanks to the strategic policies pursued over the years and in particular 

to the adequacy of the increase in the share capital concluded in July 2011, UBI Banca 

was again able to continue to benefit from good capital strength, a well-balanced capital 

structure and low levels of risk, without prejudice to its focus on service to customers 

(small to medium-sized businesses and families), the key strength of the Group’s 

companies. 

These are results which assume even more importance in the light of the difficulties 

which arose during the year and they enable the UBI Banca Group to take its place as 

one of the soundest in Italy. 

Adequate capitalisation 

All the capital ratios, calculated on the basis of the “standardised approach”, showed 

improvement: a core tier one ratio of 8.56% (up from 6.95% at the end of 2010) and a 

total capital ratio of 13.5% (up from 11.17% before). 

The Group therefore has no plans whatsoever of performing any new operation to 

increase its share capital on the market. 

Any capital requirements needed to reach the core tier one ratio of 9% recommended by 

the European Banking Authority (EBA), which may remain on the basis of assessments 

made as at 30 th June 2012, will be met, if substantial, by the partial conversion of 

outstanding convertible bonds. 

Well-balanced capital structure 

Maintenance of high standards of structural balance was ensured by consolidation and 

growth in funding from ordinary (non institutional) customers, which represents over 

80% of total direct funding for the UBI Banca Group and also by a change in the 

composition of funding with a preference for longer-term funding through the placement 

of bonds. Total Group funding as at 31 st December 2011, consisting of total amounts 

administered on behalf of customers, reached almost €175 billion, of which 

approximately €103 billion was direct funding and €72 billion indirect funding (the latter 

figure having been penalised by price trends on financial markets). 

On the lending front, with demand for loans affected by the deterioration of the 

economic environment, the management policy pursued was designed to guarantee full 

support for businesses and households, with a reduction in exposure to the large 

corporate segment and rationalisation of disbursements to customers outside the Group. 

At the end of December loans to customers are close to €100 billion (77% of total assets) 

with a ratio of lending to funding of 97% (95.4% at the end of 2010). 

5

A low risk profile 

The Group has no sovereign debt exposure to countries at risk. 

The quality of Group loans continues to be high with a ratio of non-performing loans to 

loans, both gross and net of impairment losses, of 4.27% and 2.49% respectively, 

compared to data for the Italian banking sector as a whole of 6.24% for gross nonperforming 

loans and 3.09% for net non-performing loans. 

The loan loss rate has improved and now stands at 0.61% (0.69% at the end of 2010). 

Risk weighted assets, which consist of credit and counterparty risk, fell to €91 billion, 

accounting for approximately 70% of balance sheet assets, while financial assets 

accounted for 8.5%, with Italian government securities in particular representing 

approximately 6% of total balance sheet assets. 

Appropriate liquidity 

Sound liquidity management was ensured during the year by several lines of action 

which were pursued. The liquidity reserve, consisting of assets eligible for refinancing 

with European Central Bank, was increased and the Bank participated in two 

refinancing operations conducted by the ECB with a three year maturity (with the 

allotment of €12 billion). The liquidity reserve, consisting of the portfolio of assets 

eligible for refinancing with the central bank, calculated net of haircuts, amounted to 

€11.6 billion at the end of 2011, with a margin still available of €5.6 billion. Total Group 

assets eligible for refinancing had risen to €24.5 billion as at 20 th March 2012, with a 

margin of liquidity still available of €12.2 billion, a more than twofold increase 

compared to December. 

Results for the year 

The management of operations in 2011 was yet again (and even more severely) affected 

by the economic situation and by foreseeable future scenarios. 

The UBI Banca Group adopted normal prudent criteria and recognised impairment 

losses on finite useful life intangible assets that had arisen following the merger 

between the former BPU Banca Group and the former Banca Lombarda e Piemontese 

Group. In other words it significantly impaired (by €2,397 million gross, accounting for 

44% of the total on the books at the end of 2010) the carrying amounts that had been 

recognised. 

Since these amounts had been generated by a “paper for paper” transaction, with no 

cash payments involved, the treatment introduced by IFRS requires recognition of the 

impairment through profit and loss – with a loss of €1.8 billion recognised in the income 

statement as a consequence – even if that impairment generated effects of an 

accounting nature only, with no impact on the Group’s operations, or repercussions on 

its liquidity, capital ratios (because these are calculated after deducting all intangible 

assets) or future profits. 

Replenishment of the loss, caused by the impairment loss, will be carried out by 

drawing on the share premium reserve, which had received the amounts resulting from 

the increase in the share capital at the service of the merger of Banca Lombarda e 

Piemontese into the Bank. 

Following the replenishment of the loss, the equity of the Group (inclusive of non 

controlling interests) will amount to €9,838 million. 

The year 2011 ended with consolidated profit before impairment of €349 million, an 

increase of 97% compared to €177 million the year before, as a result of good 

performance by revenues, notwithstanding the variable market conditions. The Group 

also continued to progressively contain costs, partly in relation to action designed to 

rationalise and simplify the corporate structure, already decided and currently being 

implemented. 

6

More specifically, in the fourth quarter of the year, during which the crisis of confidence 

in the country reached its peak, the trends in progress seemed to be confirmed with 

total ordinary revenues of €904 million and operating expenses (normalised) of €609 

million. The effectiveness of the constant action taken to contain current spending is 

also confirmed by average quarterly figures (normalised), which fell progressively from 

€618 million in 2009, to €608 million in 2010 and €603 million in 2011. 

In consideration of the Group’s sound capital structure and as a sign of appreciation for 

the support that our registered and unregistered shareholders continue to show the UBI 

Banca Group, the Management Board will propose to shareholders the declaration of a 

dividend of 0.05 euro per share on the 900,546,759 ordinary shares outstanding. This 

dividend, if approved in the amount proposed, will be paid on 21 st May 2012 with value 

date 24 th May 2012. The total dividend payment will amount to €45 million and will be 

drawn from extraordinary reserves. 

At the end of a year which was one of the most complex in our history, we feel obliged 

to convey our sincerest and warmest thanks to the personnel of the Group who have 

worked so hard and to our registered and unregistered shareholders who have 

supported us and the strategic policies of the Group. We also wish in particular to thank 

all our customers for whom we have the greatest consideration and to whom we give 

maximum attention in order to provide them with the highest quality of service. 

The Chairman 

of the Management Board 

Emilio Zanetti 

The Chairman 

of the Supervisory Board 

Corrado Faissola 

April 2012 

7

UBI Banca: company officers 

Honorary Chairman 

Supervisory Board (appointed by a Shareholders’ Meeting on 24 th April 2010) 

Chairman 

Senior Deputy Chairman 

Deputy Chairman 


Management Board (appointed by the Supervisory Board on 27 th April 2010) 

Chairman 


Chief Executive Officer 

Giuseppe Vigorelli 

Corrado Faissola 

Giuseppe Calvi 

Alberto Folonari 

Mario Mazzoleni 

Battista Albertani 

Giovanni Bazoli (*) 

Luigi Bellini 

Mario Cattaneo 

Silvia Fidanza 

Enio Fontana 

Carlo Garavaglia 

Alfredo Gusmini 

Pietro Gussalli Beretta 

Giuseppe Lucchini 

Italo Lucchini 

Federico Manzoni 

Toti S. Musumeci 

Sergio Orlandi 

Alessandro Pedersoli (*) 

Giorgio Perolari 

Sergio Pivato 

Roberto Sestini 

Giuseppe Zannoni 


Flavio Pizzini 

Victor Massiah 

Giampiero Auletta Armenise 

Giuseppe Camadini 

Mario Cera 

Giorgio Frigeri 

Gian Luigi Gola (**) 

Guido Lupini 

Andrea Moltrasio 

Franco Polotti 

General Management 

General Manager Graziano Caldiani (***) 

Senior Deputy General Manager Francesco Iorio (****) 

Deputy General Manager 

Rossella Leidi 


Giovanni Lupinacci 


Ettore Medda 


Pierangelo Rigamonti 

Deputy General Manager Elvio Sonnino (*****) 

Senior Officer Responsible in accordance with 

Art. 154 bis of the Consolidated Finance Act 

Independent auditors 

Elisabetta Stegher 

KPMG Spa 

(*) Resigned with effect from 29 th March 2012 

(**) Appointed by the Supervisory Board on 30 th June 2010 

(***) He occupies the position until 30 th April 2012. 

(****) He occupies the position from 1 st February 2012 until 30 th April 2012. He will be appointed to the position of General Manager on 

1 st May 2012. 

(*****) He occupies the position from 1 st February 2012 until 30 th April 2012. He will be appointed to the position of Senior Deputy 

General Manager on 1 st May 2012. 

8

UBI Banca Group: branch network as at 31 st 

December 2011 

9

UBI Banca Group: the main investments as 

at 31 st December 2011 

10

UBI Banca Group: 

principal figures and performance 

indicators 1 

31.12.2011 31.12.2010 31.12.2009 31.12.2008 

STRUCTURAL INDICATORS 

Net loans to customers/total assets 76.8% 78.0% 80.1% 79.0% 

Direct funding from customers/total liabilities 79.2% 81.8% 79.5% 80.0% 

Net loans to customers/direct funding from customers 97.0% 95.4% 100.8% 98.7% 

Equity (including profit for the year)/total liabilities 5.5% 8.5% 9.3% 9.1% 

Assets under management/indirect funding from private customers 51.2% 54.6% 53.2% 53.1% 

Leverage ratio 

(total assets - intangible assets) /(equity inclusive of profit (loss) + equity attributable to non-controlling interests - 

intangible assets) 25.3 18.8 16.5 17.1 

PROFIT INDICATORS 

ROE (Profit for the year/equity excluding profit (loss) for the year) 4.9% 1.5% 2.3% 0.6% 

ROTE [profit for the year/tangible equity (inclusive of profit (loss), net of intangible assets)] 8.5% 3.0% 4.4% 1.2% 

ROA (Profit for the year/total assets) 0.27% 0.13% 0.22% 0.06% 

Cost/income ratio (operating expenses/operating income) 69.5% 70.6% 64.4% 63.9% 

Personnel expense/operating income 41.4% 41.5% 37.5% 38.8% 

Net impairment losses on loans/net loans to customers (loan losses) 0.61% 0.69% 0.88% 0.59% 

Net interest income/operating income 61.7% 61.3% 61.5% 68.7% 

Net commission income/operating income 34.7% 33.9% 31.1% 33.3% 

Net result on financial activities/operating income 0.2% 1.0% 3.2% -5.9% 

RISK INDICATORS 

Net non-performing loans/net loans to customers 2.49% 1.91% 1.36% 0.88% 

Net impairment losses on non-performing loans/gross non-performing loans 

(coverage for non-performing loans) 43.31% 48.69% 51.57% 54.58% 

Net non-performing + net impaired loans/net loans to customers 5.03% 3.91% 3.24% 2.08% 

Net impairment losses on non-performing and impaired loans/gross non-performing loans+impaired 

loans (coverage) 30.55% 34.89% 35.93% 38.22% 

CAPITAL RATIOS Basel 2 standard 

Tier 1 ratio (tier 1 capital/total risk weighted assets) 9.09% 7.47% 7.96% 7.73% 

Core tier 1 ratio after specific deductions to tier 1 capital 

(tier 1 capital net of preference shares and savings shares or privileged shares of non controlling interests/total 

risk weighted assets) 8.56% 6.95% 7.43% 7.09% 

Total capital ratio [(supervisory capital+tier 3/total risk weighted assets]] 13.50% 11.17% 11.91% 11.08% 

Supervisory capital (in thousands of euro) 12,282,153 10,536,200 10,202,555 9,960,812 

of which: Tier one capital after the application of prudential filters and specific deductions 8,276,278 7,047,888 6,816,876 6,944,723 

Risk weighted assets 91,010,213 94,360,909 85,677,000 89,891,825 

INCOME STATEMENT, BALANCE SHEET FIGURES (in thousands of euro), 

STRUCTURAL DATA (numbers) 

Profit (loss) for the year attributable to the Parent (1,841,488) 172,121 270,099 69,001 

Profit (loss) for the year attributable to the Parent normalised 111,562 105,116 173,380 425,327 

Operating income 3,438,339 3,496,061 3,906,247 4,089,739 

Operating expenses (2,389,626) (2,468,564) (2,514,347) (2,611,348) 

Net loans to customers 99,689,770 101,814,829 98,007,252 96,368,452 

of which: net non-performing loans 2,481,417 1,939,916 1,332,576 848,671 

net impaired loans 2,533,780 2,032,914 1,845,073 1,160,191 

Direct funding from customers 102,808,654 106,760,045 97,214,405 97,591,237 

Indirect funding from customers 72,067,569 78,078,869 78,791,834 74,288,053 

of which: assets under management 36,892,042 42,629,553 41,924,931 39,430,745 

Total funding from customers 174,876,223 184,838,914 176,006,239 171,879,290 

Equity (including profit (loss) for the year) 8,939,023 10,979,019 11,411,248 11,140,207 

Intangible assets 2,987,669 5,475,385 5,523,401 5,531,633 

Total assets 129,803,692 130,558,569 122,313,223 121,955,685 

Branches in Italy 1,875 1,892 1,955 1,944 

Total personnel at the end of year (actual employees in service + workers on agency leasing contracts) 19,405 19,699 20,285 20,680 

Average total personnel (actual employees in service + workers on agency leasing contracts) (*) 18,828 19,384 20,185 20,606 

Financial advisors 713 786 880 924 

The profit indicators for 2011 were calculated on profit before impairment losses on goodwill and finite life intangible assets, which 

amounted to €349,373 thousand. 

1 The indicators have been calculated using the reclassified figures contained in the section “Reclassified consolidated financial statements, reclassified 

income statement net of the most significant non-recurring items and reconciliation schedules” in the Consolidated Management Report. 

Information on the share is reported in the relative section of the UBI Banca Management Report. 

(*) Part-time employees have been calculated within total average personnel numbers according to convention on a 50% basis. 

12

The rating 

As the sovereign debt crisis worsened since the summer, all the agencies have reviewed their 

ratings for Italy several times. The downgrade of the Republic of Italy’s debt then gave rise to 

generalised downgradings of the ratings assigned to Italian banks, including UBI Banca. 

On 19 th September, after the review commenced on 20 th May had come to an end, Standard & Poor’s 

lowered its sovereign rating for Italy by 1 notch from A+ to A with a negative outlook. Then as part of a 

more general review of 16 eurozone countries on credit watch with possible downgrading since December 

2011, on 13 th January 2012 the agency lowered its long term rating for Italy by two notches from A to 

BBB+, again with a negative outlook. 

Following its first downgrade, on 18 th October 2011 S&P announced that it was downgrading its BICRA 

rating (Bank Industry Country Risk) for Italy, which summarises its vision of the strengths and 

weaknesses of each banking system, bringing it down from two to three (on a scale where one is the 

best). This downgrade gave rise to a series of measures involving a large number of Italian banks and 

financial institutions. For UBI Banca in particular, its long term rating was downgraded from A to A- with 

a stable outlook, while its short-term rating fell from A-1 to A-2. 

As a result of a further sovereign debt downgrade and a consequent lowering of the Italian BICRA rating 

(from three to four), on 10 th February 2012 the agency took a series of negative measures involving 37 

Italian financial institutions, including UBI Banca whose long term rating was again downgraded from A- 

to BBB+, with a negative outlook. 

On 4 th October 2011, when Moody’s concluded its review started on 23 rd June, it reduced its rating on 

Italian government debt by three notches from Aa2 to A2, with a negative outlook. Then as part of a 

broader review of European sovereign ratings, Italy’s rating was again downgraded on 13 th February 

2012 from A2 to A3, again with a negative outlook. 

This first action had been followed on 5 th October, by widespread medium and long-term downgradings 

of Italian banks, ranging from between one and three notches, partly in relation to a revision of the 

assumptions of systemic support incorporated within those ratings following Italy’s sovereign debt 

downgrade. In this context, the rating on UBI Banca’s long term deposits had fallen from A2 to A3 (-1 

notch), with a stable outlook, while the short-term rating had been lowered from P-1 to P-2. On the other 

hand, the Bank Financial Strength Rating remained unchanged. It had been lowered from C to C- on 1 st 

September 2011 with a stable outlook 1 , to reflect the impact of the difficult operating context in Italy for 

company profits and more specifically the chance of a significant improvement in the short-term. 

In consideration of a background context made difficult by the prolonged and adverse impacts of the euro 

crisis, on 15 th February 2012 Moody’s announced a general review for possible downgrading of the 

ratings of 114 financial institutions operating in 16 European countries, one of which was UBI Banca. 

On 7 th October 2011, Fitch Ratings reduced its long-term rating for the Republic of Italy by 1 notch 

from AA- to A+ with a negative outlook. As part of action taken on six eurozone countries (placed on 

negative rating watch on 16 th December), on 27 th January 2012, this agency reduced its rating for Italy 

from A+ to A- (-2 notches), again with a negative outlook. 

After its first Italian downgrade, on 11 th October the agency made a series of cuts to the ratings of five 

major Italian banks. As part of this operation, UBI Banca’s long-term rating was reduced from A to A-, 

with a negative outlook, its viability rating was lowered from a to a- and its short-term rating from F1 to 

F2. 

Following a further downgrade for Italy, on 6 th February 2012 Fitch removed its negative rating watches 

assigned on 20 th December and made a series of cuts to the ratings of the main Italian banks. For UBI 

Banca, its long-term and the viability ratings were reduced from A-/a- to BBB+/bbb+ with a negative 

outlook. 

The tables below summarise the ratings currently assigned to the Group by the three 

international agencies. 

1 The reduction in the Bank Financial Strength Rating was accompanied by a downgrade of ratings on long-term deposits from A1 to 

A2 with a negative outlook. 

13

STANDARD & POOR’S 

Short-term Counterparty Credit Rating (i) A-2 

Long-term Counterparty Credit Rating (i) 

Stand Alone Credit Profile (SACP) (ii) 

Outlook 

RATINGS ON ISSUES 

Senior unsecured debt 

BBB+ 

bbb+ 

Negative 

BBB+ 

Subordinated debt (Lower Tier 2) 

BBB 

Preference shares (former BPB-CV and 

former BPCI) 

BB+ 

French Certificats de Dépôt Programme A-2 

(i) The issuer credit rating reflects the agency’s opinion of the 

intrinsic creditworthiness of the bank combined with an 

assessment of the potential for future support that the bank 

might receive in the event of default (from government or from 

the group to which it belongs). 

Short-term: ability to repay short term debt with a maturity of 

less than one year (A-1: best rating – C: worst rating) 

Long-term: ability to pay interest and principal on debt with a 

maturity of longer than one year (AAA: best rating – C: default) 

(ii) The SACP is a rating of the intrinsic creditworthiness of the bank 

in the absence of external support (from government or from the 

group to which it belongs). It is calculated on the basis of an 

“anchor SACP” which summarises economic and industry risk 

for the Italian banking sector. This is then adjusted to take 

account of bank-specific factors such as capitalisation, market 

positioning, exposure to risk and the funding and the liquidity 

situation, which are also assessed from a comparative viewpoint. 

MOODY'S 

Long-term debt and deposit rating (I) 

Short-term debt and deposit rating (II) 

Bank Financial Strength Rating (BFSR) (III) 

Baseline Credit Assessment (BCA) (IV) 


Senior unsecured LT 

Lower Tier 2 subordinated 

Preference shares 

(former BPB-CV and Banca Lombarda) 

Euro Commercial Paper Programme 

Covered Bond 

A3 

on review for 

possible 

downgrade 

Prime-2 

on review for 

possible 

downgrade 

C- 

on review for 

possible 

downgrade 

Baa1 

on review for 

possible 

downgrade 

A3 

on review for 

possible 

downgrade 

Baa1 

on review for 

possible 

downgrade 

Ba1(hyb) 

on review for 

possible 

downgrade 

Prime-2 

on review for 

possible 

downgrade 

Aa2 

on review for 

possible 

downgrade 

(I) The ability to repay long-term debt (maturing after one year) in 

local currency. By using the JDA method (Joint Default 

Analysis), this rating associates the financial strength rating 

(BFSR – Bank Financial Strength Rating) with the probability of 

intervention if needed by external support (shareholders, the 

group to which it belongs or official institutions) (AAA: best 

rating – C: default). 

(II) The ability to repay debt in local currency maturing in the short 

term (due in less than one year). 

(Prime -1: highest quality – not prime: speculative grade) 

(III) This rating does not relate to the ability to repay debt, but 

considers the bank’s intrinsic financial strength (by analysing 

factors such as its geographical market presence, the 

diversification of its activities, the financial basics) in the 

absence of external support (A: best rating– E: worst rating). 

(IV) The Baseline Credit Assessment represents the equivalent of the 

Bank Financial Strength Rating on the traditional scale of the 

long term rating. 

FITCH RATINGS 

Short-term Issuer Default Rating (1) 

Long-term Issuer Default Rating (2) 

Viability Rating (3) 

F2 

BBB+ 

bbb+ 

Support Rating (4) 2 

Support Rating Floor (5) 

Outlook (Long-term Issuer Default Rating) 


Senior unsecured debt 

Lower Tier 2 subordinated 

Preference shares 

Euro Commercial Paper Programme 

Covered Bond 

BBB 

Negative 

BBB+ 

BBB 

BB 

F2 

AA+ 

Rating Watch 

Negative 

(1) The ability to repay debt in the short term (maturity less than 13 

months) (F1: best rating – C: worst rating). 

(2) The ability to meet financial commitments in the long term, 

independently of the maturity of individual obligations. This 

rating is an indicator of the probability that an issuer will default 

(AAA: best rating – D: default). 

(3) An assessment of a bank’s intrinsic strength in the event that it 

cannot rely on forms of external support (a: best rating - d: 

default). The Viability Rating has replaced the Bank Individual 

Rating since 20 th July 2011. 

(4) A rating of the possibility of concrete and timely external support 

(from the state or large institutional investors) if the bank finds 

itself in difficulty (1: best rating – 5: worst rating). 

(5) This rating gives additional information, closely linked to the 

Support Rating, in that for each level of the Support Rating it 

identifies the minimum level which the Issuer Default Rating 

could reach if negative events were to occur. 

14

Notice of call 1 

An Ordinary General Meeting of the Shareholders of Unione di Banche Italiane S.c.p.A is 

convened in first call on Friday 27 th April 2012 at 5:00 p.m. in the Conference Room of UBI 

Banca at No. 11 Piazza Mons. Almici, Brescia and in second call on Saturday 28 th April 2012 

at 9:30 a.m. in the premises of the Brescia Trade Fair at No. 5 Via Caprera, Brescia to discuss 

and vote on the following 

Agenda 

1 Presentation of the separate and consolidated financial statements as at and for the year 

ended 31 st December 2011; proposal for the distribution of a dividend drawn from the 

extraordinary reserves. 

2 Appointments to fill places on the Supervisory Board in accordance with the provisions of 

Art. 36 of Decree Law No. 201 of 6 th December 2011 converted into law with Law No. 

214/2011. 

3 Appointment of the Board of Arbitration. 

4 Report on remuneration 

5 2012 incentive scheme based on financial instruments: 

- proposal to pay a portion of the variable remuneration of “top management” and the 

“highest management level of the control functions” by assigning ordinary shares of the 

Parent UBI Banca to them; 

- proposal to authorise the Management Board to purchase treasury shares for use in 

incentive schemes. 

*** 

The subscribed and paid up share capital of UBI Banca Scpa amounts to € 2,254,366,897.50 

consisting of 901,746,759 shares with a nominal value of € 2.50 each. At the date of this 

notice UBI Banca possesses 1,200,000 treasury shares. 

The total number of registered shareholders with the right to vote is 82,840. 

Persons wishing to participate in Shareholders Meetings, to exercise voting rights and to be 

eligible for election to corporate bodies must have been a registered shareholder for at least 90 

(ninety) days from the date of registration in the shareholders’ register. 

Legitimate entitlement to participate in Shareholders’ Meetings and to exercise voting rights is 

certified by a communication to the Bank, performed – pursuant to Art. 83-sexies of 

Legislative Decree No. 58 of 24 th February 1998 – by the relative intermediary, a member of the 

Monte Titoli Spa centralised management system, on the basis of its accounting records, in 

favour of the party holding the right to vote. In this regard, Registered Shareholders for whom 

the said communication has been made to the Bank by the end of the third market trading 

day prior to that set for the Shareholders’ Meeting in first call may attend the Shareholders’ 

Meeting, in accordance with the law. The legitimate right to attend and vote nevertheless 

remains, should the communications be received by the Bank later than the aforementioned 

time limit, provided they are received before the commencement of the proceedings of each 

single session of the shareholders’ meetings. 

Registered shareholders holding shares that have not yet been dematerialised pursuant to the 

legislation and regulations in force must deliver them in good time to an approved 

intermediary in order to perform the dematerialisation procedure required and to make the 

communication mentioned above. 

The communication performed by the intermediary shall contain a special section which may 

be used to authorise a proxy by signing the said section. In compliance with the procedures 

and the time limits set by law, a number of registered shareholders equal to not less than one 

fortieth of the total number of registered shareholders entitled on the date of the request, may 

make an application in writing for additions to be made to the agenda to be dealt with in the 

meeting, as it results from the notice of call, with the indication in the request of the additional 

1 Published in the Official Journal No. 41 of 5 th April 2012. 

15

items proposed. The signature of each Registered Shareholder on the application must be 

authenticated either in accordance with the law or by employees of the Bank or its 

subsidiaries specifically authorised for that purpose. The legitimacy of that right is given by 

the validity of the documentation testifying to the possession of the shares on the date of the 

presentation of the application. 

Each registered shareholder has the right to one vote only no matter how many shares are 

held and it may not be exercised by correspondence. 

Each Registered Shareholder has the right to be represented by written proxy issued to 

another Registered Shareholder entitled to attend the Meeting. Proxies may not be granted to 

any members of the Management Board or the Supervisory Board, or to employees of the 

Bank, or to any of its subsidiaries or to any member of the management or control bodies, or 

employees of the aforesaid subsidiaries, or to the firm of external statutory auditors appointed 

or to the person responsible for the statutory audit of the Bank, or to parties to whom one of 

the other conditions of incompatibility apply according to the law. 

Each registered shareholder may act as a proxy for not more than 3 (three) other registered 

shareholders. 

The procedure that will be followed for the purpose of making appointments to fill places on 

the Supervisory Board will comply with Art. 45 of the Corporate By-Laws which states as 

follows “(…) If, during the course of the financial year, the Board lacks one or more members, 

where it is a case of replacing members elected in the majority list, the first candidate not elected 

on that list shall be appointed. In the absence of such a candidate, the appointment shall be by a 

relative majority vote with no list obligation, since the Supervisory Board itself may present 

candidacies, if necessary, on the basis of proposals from the Appointments Committee. 

(...) 

If, however, board members belonging to the minority list must be replaced the following 

procedure is employed: 

- if only one board member has been appointed from the minority list, then the first candidate not 

elected on the list from which the member to be replaced was drawn shall be appointed, or, in 

the absence of such a candidate, the first candidate on any other minority lists there may be 

shall be taken on the basis of the number of votes received in descending order. Should this not 

be possible, the Shareholders’ Meeting shall make the replacement in compliance with the 

principle of the necessary representation of minorities; 

(...) 

The replacement candidates, identified in accordance with the provisions of this article, must 

confirm that they accept their appointment and also make declarations that no cause for 

ineligibility and incompatibility exists and that they possess the requirements prescribed by law 

and by these Corporate By-Laws for the office. 

A member of the Supervisory Board called upon to replace a previous member remains in office 

until the original mandate of the replaced member expires.” 

In compliance with Bank of Italy recommendations concerning regulations governing the 

organisation and corporate governance of banks, the ideal profiles of candidates for 

membership of the Supervisory Board are made available at the Bank and on the corporate 

website www.ubibanca.it. 

The documentation relating to the items on the agenda will be deposited and made available to 

the public at the registered address of the Bank and on the website www.ubibanca.it and it 

will be filed with Borsa Italiana SpA within the time limits and according to the procedures of 

the Law and regulations. 

Registered Shareholders may view and obtain copies of the aforementioned documentation in 

accordance with the law by applying in advance to the Management Board Support and 

Registered Shareholders Department. 

Bergamo, 27 th March 2012 

The Chairman of the Management Board 


(signed on the original) 

16

The macroeconomic scenario 

In a general context already characterised by growing difficulty in overcoming the great 2008- 

2009 crisis, the year just ended was distinguished by a marked worsening of the sovereign 

debt crisis which, starting with Greece 1 , rapidly spread to a fair number of countries in the 

euro area (especially Italy and Spain). 

It resulted in increased volatility and a “flight to quality” to United States and German 

government securities, which gave rise in the summer to sharp falls in share and corporate 

bond prices – especially in the banking sector, due to its exposure to sovereign risk because of 

the government securities held – and to outflows of capital from emerging countries. At the 

same time conditions on interbank markets in the euro area became problematic again, a sign 

of renewed short-term funding difficulties for banks, with an increase in resort to financing 

and liquidity deposits with the ECB. The spreads between the yields of government securities 

in the euro area and those of the German bund reached new record highs since the 

introduction of the euro for Greece, Portugal, Italy, Spain, Belgium and France, despite huge 

purchases made by the ECB as part of its securities markets programme. 

Pressures on Italy caused a sharp increase in November in the spread between ten year BTPs 

Basis 

points 

600 

550 

500 

450 

400 

350 

300 

250 

200 

150 

100 

50 

Ten-year BTP-Bund spread 

Graph No 1 

0 

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 

and the German bund equivalents 

to 550 basis points, a reflection of 

uncertainties firstly over the 

approval of the second public 

finance act in August and then 

over the presentation of the plan 

to revive the economy 2 . The 

installation of a new government 

and measures taken to 

consolidate public debt and 

liberalise markets helped to 

reduce the risk premium, but this 

did not become really clear for ten 

year maturities until the second 

half of January 2012 3 . 

2010 2011 

2012 The confidence crisis brought to 

light a series of structural flaws in 

the construction of the original single currency area and as a consequence of the European 

Union. More specifically, damage was done by the lack of a clear establishment of the 

sovereignty of European bodies and the inability to convince public opinion in member 

countries of the project to unite Europe. Although important measures were decided in 2011 

to strengthen integration, the new provisions were limited from a fiscal viewpoint, still along 

the original lines defined by the stability pact rules, with greater penalties and a stronger 

compulsory nature. The positions of different countries on the issue of eurobonds, European 

bonds guaranteed jointly by all member countries of the eurozone, are still very far apart. 

In detail: 

1 Greece’s position hit crisis levels again during the spring of 2011 when its delays in implementing fiscal consolidation compromised 

the disbursement of a tranche of aid needed to repay maturing securities. At the end of June, the concrete risk of imminent debt 

restructuring persuaded the Greek parliament to approve a new medium term fiscal austerity plan and the European Union and the 

International Monetary Fund to prepare a second package of aid. 

2 All three of the main rating agencies (Standard & Poor’s, Moody’s and Fitch Ratings) reduced their ratings for Italy and set negative 

outlooks between the middle of September and the first half of October, and they also downgraded the ratings on a number of banks. 

At the end of the year those same agencies placed the credit ratings of almost all the sovereign states in the euro area under review, 

including those with an AAA rating like Germany, France and the Netherlands. On 13 th January 2012 S&P’s then downgraded the 

sovereign debt of nine countries, including France (from AAA to AA+), Spain (from AA- to A) and Italy (from A to BBB+) and three 

days later it also lowered the rating on the European Financial Stability Fund. On 27 th January Fitch also reduced its rating on five 

countries including Italy (from A+ to A-) and Spain (from AA- to A), followed by Moody’s which cut its rating on six countries on 13 th 

February, including Italy (from A2 to A3) and Spain (from A1 to A3). 

3 At the beginning of March the spread between BTPs and German bund allowed that spread to reach and fall below the same spread 

between Spanish bonos and German bund for the first time since August 2011. 

19

• the European semester was introduced for the first time in the Ecofin meeting held in 

September 2010 4 ; 

• temporary funds (European Financial Stability Facility, EFSF) and permanent funds 

(European Stability Mechanism, ESM) were created in March to support countries in 

financial difficulty. They replaced the bilateral loans used previously; 

• the European Parliament approved a reform of the stability and growth pact in June 

designed to increase the weighting attributed to the debt indicator with respect to net debt, 

with the introduction of a severe repayment programme and matching penalty mechanisms; 

• in summit meetings held on 26 th October, 9 th December and 30 th January 2012, the heads 

of state and government of the area gradually made further decisions designed: 

to improve European Governance 

The commitment, already agreed in March 2011, to implement budget rules at constitutional or 

equivalent level in national legislations, consistent with those set at European level with the Stability 

Pact, was reaffirmed. It was also decided in the summit held in December that those rules should 

include an automatic mechanism to correct any deviations and that the European Union Court of 

Justice would be responsible for judging the compliance of national legislation with European rules 5. 

On that same occasion European institutions were requested to examine regulatory proposals 

submitted by the European Commission at the end of November. These provide for greater coordination 

for euro area countries when preparing budgets by defining a common calendar for the 

presentation of budgets to the Commission before they are approved by the respective national 

parliaments and by granting the Commission greater supervisory powers over countries in receipt of 

financial assistance or which are in any case in serious financial difficulty. 

to clarify the role of private sector investors in the solution of the Greek crisis 

The Greek government and private sector investors (banks and insurance companies) have been 

urged to reach a voluntary agreement in order to facilitate the return of public debt to 120% of GDP 

by 2020, by reducing the nominal value of Greek government securities held by the private sector by 

50% 6. It was also decided that any future involvement of private sector investors in the solution of 

sovereign debt crises will be based on IMF principles and practices, that the decisions concerning 

Greece are to be considered as one-off and exceptional and that uniform collective action clauses 

would be introduced for all new issues of government securities in the euro area. 

to strengthen financial stabilisation instruments 

It was decided to increase the capacity of the EFSF to intervene, by increasing its financial impact 

using two options which could be used simultaneously if necessary. These involve in the one case 

the granting of partial guarantees on new issues of government securities by countries in the area 

and in the other the establishment of one or more special purpose vehicles (co-investment funds, CIF) 

which would purchase government securities on the primary and secondary market, using funds 

supplied by private sector investors and by the EFSF. In both cases the intervention would be 

dependent on the acceptance by beneficiaries of stringent conditions on the policies to be pursued to 

re-establish financial stability. The process to approve the treaty to set up the ESM was then 

accelerated with the objective of bringing forward the date on which it comes into force to July 2012. 

The EFSF will remain active to finance programmes started before the middle of 2013, working 

alongside the ESM for one year, while the total lending capacity of the two bodies was confirmed at 

€500 billion. The adequacy of those funds will be reviewed in March 2012. 

to increase the capital of banks to facilitate access to longer term funding 

With a view to increasing confidence in the banking system, the European Banking Authority (EBA) 

approved a recommendation which involves the creation of a temporary capital buffer for the larger 

banks. This will allow them to achieve a capital ratio of 9% (in terms of the highest quality capital), 

on the basis of the market value of government securities held in portfolio at the end of September 

2011. In order to ease medium to long-term funding difficulties, the European Commission 

established uniform rules for all EU countries concerning access by banks to national government 

guarantees (in terms of conditions and costs). 

to increase the funds available to the International Monetary Fund (IMF) to support 

countries in difficulty 

EU countries are committed to assessing the possibility of providing the IMF with additional funds of 

up to €200 billion, to bring the funds available into line with the requirements caused by the crisis. 

4 The new procedure led to the harmonisation of time schedules for the enactment of budget laws in member countries and its aim is 

to lead to greater co-ordination of tax policies through improved policy co-ordination. 

5 The reduction of public debt above a threshold of 60% of GDP is assessed using a numerical parameter and must be equal to one 

twentieth of the difference with respect to that threshold. This measure is in addition to that by which the structural deficit must not 

exceed 0.50% of GDP during each economic cycle. If it does, then automatic penalties apply if the deficit exceeds 3% of GDP. 

6 It was only agreement on a larger cut (53.5%) to the nominal amount of securities held by the private sector that made it possible to 

unlock the second package of aid on 21 st February 2012, amounting to €130 billion, as a result of which the default of the Greek 

Republic was avoided, ensuring that a public debt to GDP ratio of 120.5% could be reached in 2020. 

20

Monetary policy action taken by the European Central Bank (ECB) at the same time as the 

intervention described above also became particularly incisive. 

With increasing tensions on financial markets, an unfavourable outlook for growth and inflationary 

pressures slackening, the new governing council of the ECB reduced the interest rate on principal 

refinancing operations by 25 basis points in each of its meetings at the beginning of November and the 

beginning of December, bringing it down to 1% thereby eliminating the effect of the two increases made in 

April and July 7 . 

New measures were decided in December to support the liquidity of banks and their lending to households 

and businesses consisting of two refinancing operations with a maturity of 36 months, full allotment of bids 

and rates equal to the average of the principal refinancing rate over the duration of the operation, for which 

an early redemption option was provided after one year 8 . It was also decided to broaden the range of 

assets eligible as collateral for refinancing operations, by reducing the rating requirements for some ABS 

instruments and by allowing national central banks the autonomy to accept bank loans which meet precise 

conditions of eligibility. Finally, starting from the first maintenance period in 2012, the compulsory reserve 

requirement for banks was reduced by 2% to 1% in order to free up liquidity and support money market 

activities. The programme to purchase covered bonds issued by banks up to a total of €40 billion was also 

resumed in November. 

* * * 

The difficult path to normal 

market conditions will firstly 

require concrete application of 

the new economic governance 

rules recently approved by the 

EU. At the same time it will be 

important to rapidly render the 

mprovements to European 

financial stability tools, such as 

the EFSF and ESM, operational, 

increasing their effectiveness 

and quickly exploiting their 

power. 

1,62 

1,58 

1,54 

1,50 

1,46 

1,42 

1,38 

1,34 

1,30 

1,26 

1,22 

1,18 

1,14 

Euro-dollar and dollar-yen exchange rates (2009-2011) 

€/$ $/Yen (scala dx.) 

Graph No.2 

103 

101 

99 

97 

95 

93 

91 

89 

87 

85 

83 

81 

79 

By raising doubts over the 

future of the single currency, 

the sovereign debt crisis has 

caused the euro to depreciate 

against all the main 

international currencies. As 

shown in Graph No. 2, after a 

temporary recovery when it 

exceeded 1.48 dollars to the 

euro, the single currency has 

fallen sharply, especially since 

August. In the first few weeks of 

the new year it showed signs of 

recovery as pressures on 

financial markets eased. 

1,10 

1,06 

J G F M A M GJ LJ A S O N D GJ F M A M GJ J L A S O N D J G F M A M J G J L A S O N D 

2009 2010 

2011 

The main exchange rates and oil (Brent) and commodities prices at the end of 

the period 

Dec-11 

A 

Sept-11 

B 

Jun-11 

C 

Mar-11 

D 

Dec-10 

E 

% change 

A/E 

Euro/Dollar 1.2945 1.3384 1.4504 1.4165 1.3377 -3.2% 

Euro/Yen 99.57 103.11 116.79 117.77 108.60 -8.3% 

Euro/Yuan 8.1449 8.5363 9.3747 9.2757 8.8148 -7.6% 

Euro/Franc CH 1.2133 1.2151 1.2185 1.3009 1.2486 -2.8% 

Euro/Sterling 0.8328 0.8587 0.9037 0.8833 0.8572 -2.8% 

Dollar/Yen 76.94 77.04 80.52 83.15 81.15 -5.2% 

Dollar/Yuan 6.2939 6.3780 6.4635 6.5483 6.5900 -4.5% 

Futures - Brent (in $) 107.38 102.76 112.48 117.36 94.75 13.3% 

CRB Index (commodities) 305.30 298.15 338.05 359.43 332.80 -8.3% 

Source: Thomson Financial Reuters 

77 

75 

7 Outside the euro area monetary policies in the main advanced economies remained strongly expansionary. The Federal Reserve 

announced its intention to maintain the interest rate on federal funds unchanged at 0-0.25% until the end of 2014 and it continued 

to change the composition of its government securities portfolio, designed to lengthen average maturities, and to reinvest the 

proceeds of mortgage-backed securities in similar instruments. Both the Bank of England and the Bank of Japan left their 

reference interest rates unchanged at 0.5% and 0-0.1% respectively and continued with their securities purchasing programmes. 

The central banks of the main emerging countries started to gradually slacken monetary conditions in the last few months of 2011. 

At the beginning of December China reduced its compulsory reserve requirements by 50 basis points to 21% after six rises 

performed in the first part of the year when bank lending rates were also raised three times to 6.56%. The reference rate in Brazil, 

which now stands at 9.75%, was cut five times by in August, October, November, January and February 2012, after five increases 

made between January and July 2011. In Russia the reference rate fell by 25 bp in December to 8%, after two rises in February and 

May. On the other hand the Indian central bank, concerned over continuing high levels of inflation, progressively increased its 

reference rate to 8.50%, with seven consecutive rises. 

8 A total of 523 banks took part in the first operation conducted on 21 st December 2011 and they obtained funds of approximately 

€490 billion. The actual injection of new liquidity by the Eurosystem, net of maturing operations, amounted to approximately €210 

billion. In the second operation performed on 29 th February 2012, the ECB made loans of €529.5 billion to 800 banks who made 

bids. 

21

The macroeconomic framework 

The recovery at world level progressively weakened during 2011 9 , due to the strong 

slowdown that is occurring in industrialised countries, particularly in the euro area and in 

Japan, and also to the moderate deceleration in emerging economies, while the United States 

benefited from fiscal stimulus measures implemented in recent years. The economic situation 

was characterised by high levels of unemployment, while the inflationary pressures that 

emerged over the summer weakened as a result of a fall in commodity prices. 

After rising in the first quarter, the prices of the main non energy resources fell generally, 

pricing in lower expectations of growth. On the other hand, having risen to over 125 dollars 

per barrel when the war in Libya broke out, Brent oil then stabilised at between 100 dollars 

and 120 dollars – held up by geopolitical tensions in North Africa and the Middle East – only to 

rise again above 125 dollars in February 2012, following the worsening of the Iranian nuclear 

experiments crisis. 

Having recorded almost zero first quarter growth, the United States economy then showed 

signs of recovery. The last quarter ended with an annualised increase in output over three 

months of 3% (+1.8% in the third quarter and +1.3% in the second), driven by household 

consumption and the reconstitution of inventories, while fixed investments weakened. On the 

other hand, the balance of trade made a zero contribution to growth, affected, amongst other 

things, by the slowdown in 

progress in the euro area. 

Overall United States GDP 

improved by 1.7% during the 

year compared to +3% in 

2010. 

The labour market showed 

encouraging signals towards 

the end of the year with the 

unemployment rate down 

from 8.9% in October to 8.5% 

in December, after remaining 

stable at around 9% in the 

months before. A further fall 

to 8.3% in January 2012 

brought this statistic to the 

same levels as in February 

2009. While remaining high 

historically (8.9%), the 

average for 2011 appears to 

130 

125 

120 

115 

110 

105 

100 

95 

90 

85 

80 

75 

70 

65 

60 

55 

50 

45 

40 

Brent oil prices (2009-2011) Graph No. 3 

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 

35 

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 

2009 2010 2011 

have decreased compared to the previous year (9.6%). 

After increasing progressively until it peaked in September (3.9%), inflation rapidly fell in the 

months that followed to end the year at 3% (1.5% at the end of 2010). Core inflation (net of 

food and energy products) seems on the other hand, to have stabilised at 2.2% in November 

and December (0.8% in December 2010), the highest level since the autumn of 2008. 

The balance of trade deficit grew over twelve months to 558 billion dollars (+11.6%), due 

mainly to trade with OPEC countries, China and the euro area. 

Having now established itself as the second largest economic power, China maintained strong 

growth, although this slowed progressively with GDP increasing by 9.2% (10.4% in 2010). All 

components of domestic demand made significant contributions to growth. Fixed investments 

were up by 23.9% with particularly high peaks in the manufacturing sector (+44.6% for 

electrical machinery and equipment), retail sales of consumer goods were up 17.1% and 

industrial production was up 13.9%, driven again by heavy industry with increases of over 

15% in some manufacturing sectors. Despite a further reduction in the balance of trade 

surplus to 155.1 billion dollars (-15.3% compared to 2010) – the result of stronger growth in 

9 According to the most recent IMF updates (World Economic Outlook update, January 2012), world GDP grew by 3.8% in the year 

that has just ended (5.2% in 2010). 

22

imports (+24.9%) than in exports (+20.3%) – currency reserves had risen in December to 3,181 

billion dollars (2,847 billion dollars at the end of 2010). Over one third of the total currency 

reserves, which have remained basically stable since June, continues to be invested in United 

States treasuries. 

After peaking in July (6.5%) inflation fell to 4.1% in December (5.4% on average over the year) 

– the result of repeated action taken to tighten monetary policy by the Chinese central bank in 

the first seven months of the year – only to climb back to 4.5% in January 2012. 

Actual and forecast data: the principal emerging countries 

Gross domestic product 

Consumer prices 

(average annual rate) 

Unemployment 


Reference interest 

rates 

Percentages 2010 2011 2012 (1) 2010 2011 2012 (1) 2010 2011 2012 (1) Dec 10 Dec 11 

China 10.4 9.2 8.1 3.3 5.4 3.3 4.1 4.0 4.0 5.81 6.56 

India 10.3 7.3 6.8 12.0 10.6 8.6 n.a. n.a. n.a. 6.25 8.50 

Brazil 7.5 2.7 3.0 5.0 6.6 5.2 6.7 6.7 7.5 10.75 11.00 

Russia 4.0 4.1 3.3 6.9 8.9 7.3 7.5 7.3 7.1 7.75 8.00 

(1) Forecasts Source: Prometeia, IMF and official statistics 

Growth also tended to ease off in the other major emerging countries. GDP grew by 6.9% year-on-year in 

India in the third quarter, affected by a fall in investment – caused by weak foreign demand and tighter 

monetary policies – while exports again performed very strongly. Consumption slowed marginally due to 

continuing high levels of inflation (9.1% in November). 

Economic activity in Brazil was slowed by the combined effect of several factors: a particularly tight 

monetary policy was pursued, foreign demand decelerated and the prices of raw materials, which the 

country exports, fell. 

The Russian economy on the other hand appeared to grow further (4.8% growth in GDP year-on-year in 

the third quarter) – although not as fast as in the pre-crisis years – due to good performance by 

consumption and investments, while inflation – 6.1% in December – had decreased compared to the high at 

the beginning of 2011 (9.6% in January) partly the result of the relaxation of pressures on food prices. 

Economic activity weakened again in Japan in the fourth quarter, after the recovery seen over 

the summer. The quarterly fall in GDP of 0.2% (-1.8%, -0.3% and +1.7% respectively in the 

three previous periods) reflected a negative contribution made by the balance of trade – 

affected by a slowdown in world demand and the appreciation of the yen – and weaker 

domestic demand for consumer goods, offset by a sharp increase in non residential 

investments. Industrial output contracted in the last quarter by 0.4% compared to the 

previous quarter, despite greater than expected performance in December (+3.8% compared to 

November), which confirmed the uncertainty of the situation recorded in the Tankan report. 

On the labour market the unemployment rate, which had fallen to 4.2% in September, climbed 

back to 4.5% in December (4.9% at the end of 2010). On the prices front, the Japanese 

economy remains in a condition of basic deflation which has now lasted since 2009 (-0.1% in 

December 2011). 

Actual and forecast data: industrialised countries 

Percentages 

Gross domestic product 

Consumer prices 


Unemployment 


Public Sector Deficit 

(% of GDP) 

Reference interest 

rates 

2010 2011 2012 (1) 2010 2011 2012 (1) 2010 2011 2012 (1) 2010 2011 (1) 2012 (1) Dec-10 Dec-11 

United States 3.0 1.7 1.5 1.6 3.2 2.1 9.6 8.9 8.4 10.7 8.3 7.6 0-0,25 0-0,25 

Japan 4.4 -0.7 1.8 -0.7 -0.3 0.4 5.0 4.5 4.3 8.4 11.1 9.4 0-0,10 0-0,10 

Euro Area 1.9 1.4 -0.3 1.6 2.7 2.2 10.1 10.1 10.7 6.2 4.3 2.7 1.00 1.00 

Italy 1.8 0.4 -1.3 1.6 2.9 2.6 8.4 8.2 8.4 4.6 3.9 2.5 - - 

Germany 3.7 3.0 0.6 1.2 2.5 2.0 7.1 5.9 6.0 4.3 1.3 0.1 - - 

France 1.5 1.7 0.4 1.7 2.3 2.1 9.8 9.8 10.0 7.1 5.7 4.3 - - 

Portugal 1.4 -1.6 -3.3 1.4 3.6 2.4 12.0 12.7 13.5 9.8 5.7 5.9 - - 

Ireland -0.4 0.9 0.5 -1.6 1.2 1.4 13.7 14.5 14.5 31.3 9.9 8.5 - - 

Greece -3.5 -6.8 -4.4 4.7 3.1 2.0 12.5 16.5 21.0 10.6 9.6 7.1 - - 

Spain -0.1 0.7 -1.0 2.0 3.1 1.7 20.1 21.7 23.1 9.3 8.0 5.0 - - 

United Kingdom 2.1 0.8 0.6 3.3 4.5 2.1 7.9 7.8 8.2 10.3 9.6 7.7 0.50 0.50 

(1) Forecasts Source: Prometeia and official statistics 

Economic activity slowed progressively in the euro area during 2011 with a fall in GDP in the 

fourth quarter of 0.3% in quarterly terms (+0.8%, +0.1% and +0.1% respectively in the 

preceding periods), due mainly to a sharp slowdown by Germany and Italy going into 

recession. The result reflects a weakening in all components and in net foreign demand in 

23

particular where a sharp drop in exports occurred against an equally sharp recovery in 

imports. 

On aggregate average annual GDP increased by 1.5% (+1.9% in 2010). 

The trend for industrial output has been negative since September on a monthly basis (-1.1% 

in December), in line with the response of key confidence indicators. Consequently the 

unemployment rate, which was stable at 10% until June, rose again in the second half of the 

year to 10.6% in December with very critical conditions in Spain (23.1%) and Greece (19.9% in 

November). 

Inflation, as measured by the harmonised consumer price index, was more volatile rising to 

3% from September to November, the highest levels seen since the autumn of 2008, before 

ending the year at 2.7% (2.2% twelve months before). Even net of foodstuffs, energy products, 

alcohol and tobacco, the index almost doubled in the first nine months of the year, to then 

stabilise at 2% (1.1% at the end of 2010) 10 . 

The outlook for the euro area is affected by the tight pro-cyclical budgetary policies pursued by 

many countries to balance budgets in deficit, with a possible increase in credit restrictions due 

to the need for banks to recapitalise as required by the EBA and to a marked deterioration in 

confidence by businesses. 

Italy has been heavily affected by a confidence crisis at international level since the summer 

and this made it absolutely essential to take a number of financial and legislative initiatives 

which will affect Italy’s potential for future growth. 

In the last quarter of the year, the Italian economy went into a technical recession with a 

quarterly fall in GDP of 0.7%, after a fall of 0.2% in the previous quarter. 

In 2011 output increased overall by 0.4% (+1.8% in 2010), benefiting mainly from the result 

for the balance of trade, with an increase in exports and stationary imports, while investments 

and inventories fell. 

However, the fall recorded in the last quarter was to be expected from the performance of 

industrial production (as seasonally adjusted), which after eight months of albeit modest 

month-on-month growth, saw the trend reverse since September (-1.8% in December after - 

4.1% in November). Industrial production remained unchanged on average over the year 

compared to 2010, with decreases in almost all sectors including “Textiles” (-7.3%), 

“Chemicals” (-5.8%) and “Electrical equipment ” (-4.9%), while “Fabrication of machinery and 

plant” (+8.6%), “Metallurgy” (+3.9%) and “Mineral extraction” (+2.1%) were among the few to go 

against the trend. 

The unemployment rate, which had fallen to 7.9% in August (8.3% at the end of 2010), also 

rose rapidly again to 8.9% in December with a peak of 30% for young people. This figure 

increased further to 9.2% in January 2012. On the other hand a generalised reduction was 

recorded in the use of state lay-off and redundancy benefits, which was greater for the 

extraordinary component, with 953 million hours authorised compared to 1,203 million in 

2010 (-20.8%). 

On the prices front, after rising suddenly in March to around 3% and falling temporarily in 

July and August, the harmonised consumer price index has accelerated sharply since 

September with rises not seen since the Autumn of 2008 (3.7% in December 2011 compared 

to 2.1% twelve months before), mainly a reflection of the rise in indirect taxation 11 . Average 

annual inflation was 2.9% (1.6% in 2010). 

The Italian balance of trade deficit totalled €24.3 billion over twelve months, an improvement 

compared to €30 billion recorded in 2010 despite an increased energy deficit. The performance 

by exports (+11.4%) exceeded that for imports (+8.9%) and was greater in both cases for trade 

with non EU countries. 

With regard to public finances, the drastic deterioration in financing conditions made further 

legislative intervention necessary in November to balance government accounts for the years 

2012-14, the third since July. The “Save Italy” bill 12 , passed in December, was designed to 

10 The rises in energy product prices came in addition to the impact of indirect tax increases (Greece, Portugal, Ireland, Spain and 

Italy) and to the statistical effects of the new treatment of seasonal products (Italy, Greece and Portugal). The maximum and 

minimum inflation recorded in all the single currency countries therefore differed greatly from the average for the euro area. 

11 The high volatility recorded during the year was also a result of methodological changes introduced since the beginning of the year 

to the measurement of prices for seasonal products, the effects of which are more pronounced in months in which promotional 

sales are concentrated and in those which immediately follow them. Comparisons with the previous year are distorted as a 

consequence. 

12 Decree Law No. 201 of 6 th December 2011, converted into Law No. 214 of 22 nd December 2011. According to official figures, the 

legislation will generate funds of €32.1 billion in 2012, €34.8 billion in 2013 and €36.7 billion in 2014. These funds will be used to 

reduce net debt by over €20 billion (1.3 percentage points of GDP) in each of the next three years, to finance a package of measures 

designed to increase growth and reduce the contribution needed to contain the deficit which will come from tax and welfare reform. 

24

permanently balance public accounts and to comply with commitments made at European 

level to balance the budget in 2013. 

In order to create the conditions necessary to revive the Italian economy, the legislation was 

followed in 2012 by new liberalisation and deregulation measures and the start at the same 

time of negotiations with trade unions and employers to reform the labour market. 

The most recent ISTAT (national office for statistics) estimates for 2011 show the deficit to 

GDP ratio falling to 3.9% (4.6% in 2010) and a debt to GDP ratio of 120.1% (118.7% in 2010). 

Financial markets 

During the second half of the year the United States and European yield curves both shifted 

downwards for maturities of over one year, a reflection of a move by investors towards lower 

risk, United States and German securities. While in the United States the trend was affected, 

amongst other things, by weaker expectations of growth and the consequent continuation of 

particularly accommodative monetary polices, the change in the European yield curve was the 

result of two cuts to the reference rate made by the ECB and of the expectation of a further cut 

in the light of reduced pressures on inflation. For the short term, however, the European yield 

curve is much higher than the American curve, incorporating a higher perception of risk. 

After a positive start, the equity markets of major world economies started to feel the effects 

of the growing sovereign debt crisis, with heavy losses over the summer, which affected the 

performance measured over the whole twelve months to a large extent, despite the signs of 

recovery seen in the last quarter. 

As shown in the table, almost all the main stock markets ended the year with significant 

losses except for the United States share indices which, because of their lower volatility, 

remained basically unchanged compared to the end of 2010. 

Turbulence over the summer also affected emerging markets (-20.4% for the MSCI index). 

Downward pressures seemed to ease in the first few weeks of 2012 due to measures taken by 

the ECB and corrective action taken on public accounts in some countries in the euro area, 

including Italy. 

Taken together, the three finance laws enacted since the summer of 2011 should reduce the deficit by three percentage points of 

GDP in 2012 and 4.7 points on average in 2013 and 2014. 

25

Equity markets managed by Borsa Italiana were more penalised than other major European 

stock markets, ending 2011 with losses of approximately 25% year-on-year. They were 

attributable even more than in the recent past to the substantial impact of the banking sector 

which, despite the soundness of Italian banks, were particularly affected by the multiple 

shocks generated by the 

progressive spread of the 

sovereign debt crisis. 

Trade in shares increased 

in terms of the number of 

contracts (€68.5 million; 

+10.1%), but the value fell 

compared to the previous 

year (€709.7 billion; -5.1%). 

Despite the difficult context, 

the markets managed by 

Borsa Italiana nevertheless 

managed to set further new 

The principal share indices in local currency 

records: new record highs for trading on the ETF Plus market on which ETFs (exchange traded 

funds) and ETCs (exchange traded commodities) are traded, with a value of €85.8 billion and 

over 3.6 million contracts; new record highs for fixed income trades (MOT and ExtraMOT) for a 

total of 4.7 million contracts (a value of €206.8 billion); record trades for equities derivatives 

on the IDEM (Italian Derivatives Market), with a daily average of 187 thousand standard 

contracts and a total of 47.8 million contracts entered into (a record high for the third 

consecutive year); continued European leadership for contracts on electronic markets for both 

ETFs and the MOT (electronic bond market). 

At the end of the year listed companies on the Milan stock exchange numbered 328, down 

compared to 332 twelve months before as a result of ten new listings and 14 delistings. The 

total market capitalisation of listed companies also fell to €332.4 billion from €425.1 billion at 

the end of 2010, equivalent to approximately one fifth of Italy’s GDP. 

As a consequence of the increase in the value of equity trades, while capitalisation was lower, 

turnover velocity 13 increased from 176% to 214% over twelve months. 

Dec-11 

A 

Sept-11 

B 

Jun-11 

C 

Mar-11 

D 

Dec-10 

E 

% change 

A/E 

Ftse Mib (Milan) 15,090 14,836 20,187 21,727 20,173 -25.2% 

FTSE Italia All Share (Milan) 15,850 15,570 20,913 22,454 20,936 -24.3% 

Xetra Dax (Frankfurt) 5,898 5,502 7,376 7,041 6,914 -14.7% 

Cac 40 (Paris) 3,160 2,982 3,982 3,989 3,805 -17.0% 

Ftse 100 (London) 5,572 5,128 5,946 5,909 5,900 -5.6% 

S&P 500 (New York) 1,258 1,131 1,321 1,326 1,258 0.0% 

DJ Industrial (New York) 12,218 10,913 12,414 12,320 11,578 5.5% 

Nasdaq Composite (New York) 2,605 2,415 2,774 2,781 2,653 -1.8% 

Nikkei 225 (Tokyo) 8,455 8,700 9,816 9,755 10,229 -17.3% 

Topix (Tokyo) 729 761 849 869 899 -18.9% 

MSCI emerging markets 916 880 1,146 1,171 1,151 -20.4% 

Principal long-term interest rates (2010-2011) 

Graph No. 6 

7.5 

7 

6.5 

US Treasury 10 years BTP 10 years Bund 10 years 

6 

5.5 

5 

4.5 

4 

3.5 

3 

2.5 

2 

1.5 

GGGGFFFMMMMAAAAMMMGGGGL J F M A M J LJ L LAAASSSSOOONNNNDDDDGGGFFFFMMMMAAAMMMMGGGL A S O N D J F M A M J L LJ LAAAASSSOOOONNNNDDDA S O N D 

2010 2011 

On 29 th June 2011, the London Stock Exchange Group, the company which controls Borsa Italiana, and the 

TMX Group, the owner of the Toronto stock exchange, announced in a joint press release that the merger 

agreement reported on 9 th February 2011 would not go ahead. 

13 An indicator which, as the ratio of the value of the shares traded electronically to the capitalisation, gives a measure of the turnover 

of the shares traded. 

26

In the light of the very serious crisis affecting financial markets, 2011 was a particularly 

unfavourable year for the mutual fund sector notwithstanding the entrance into force on 1 st 

July of the expected reform of the tax regime which introduced taxation on gains “realised” 

and that is on the gain or loss recorded when units are sold, rather than on the “mark-tomarket” 

value, thereby bringing the tax treatment into line with that for foreign funds. 

Net inflows for the year were negative by €33.3 billion 14 (positive by €5.7 billion in 2010), the 

result of a decrease for Italian registered funds (-€34.5 billion) against an increase for foreign 

registered funds (+€1.2 billion), which account for almost 64% of assets. 

The outflow was generalised in terms of the type of fund and mostly affected monetary funds 

(-€12.2 billion), bond funds (-€9.2 billion), equity funds (-€4.3 billion) and flexible funds (-€4 

billion), while decreases were more moderate for hedge funds (-€2.1 billion) and balanced 

funds (-€1.5 billion). 

At the end of the December assets under management had therefore fallen to €419.1 billion 

from €460.4 billion at the end of 2010, with a change in composition into bond funds (up from 

41.6% to 43.3%) and flexible funds (from 13.4% to 14.5%) compared to a fall in the percentage 

of monetary funds (from 13.7% to 11.6%). 

The banking system 

Pressures on the government securities market and the consequent uncertainty that spread 

on financial markets affected bank funding and wholesale funding in particular, although the 

phenomenon reduced as a result of the ability of banks to resort to refinancing operations with 

the Eurosystem. Lending to the economy slowed progressively affected by demand factors 

linked to the economic situation and also to supply factors associated with liquidity conditions 

and a deterioration in credit quality. 

On the basis of Bank of Italy figures 15 , at the end of December the annual rate of change in 

direct funding (deposits of residents and bonds) was +3.3%, a recovery compared to the lows of 

+1.2% reached in June and +1.4% in November (+3.3% in December 2010 also). The trend for 

the aggregate was driven by bonds (up 13.4% from -1.6% twelve months before) for which the 

total also benefited in December from issues with government guarantees made possible by 

the “Save Italy” decree in order to facilitate the participation of Italian banks in the three year 

refinancing operations performed by the ECB 16 . On the other hand other types of funding fell 

on aggregate (down 2.6% from +6.6% at the end of 2010), caused by a substantial contraction 

in repurchase agreements (-39%), and also by current account deposits, only partially offset by 

the increase in term deposits. 

As, however, concerns loans to private sector residents, after peaking in the first half (+6.7% in 

February; +6.1% in May), the rate of growth slackened to a low in December (+1.8% compared 

to +4.2% twelve months before). 

As concerns the type of borrower, Bank of Italy figures show a generalised weakening of 

lending to households (+4.3%; +19.4% in December 2010), which was particularly marked for 

home purchases (+4.4%; +25.6% at the end of 2010) and was also seen in the consumer credit 

sector (up 2.1% from +8.5%) and for other loans (+4.9% from +12.3%). 

The year-on-year trend for loans to businesses, which slowed over the summer compared to 

the high reached in May (+6.1%), returned in December to the same levels recorded at the end 

of 2010 (+3.1% compared to +2.1% twelve months before), partly in relation to a fall in total 

volumes, which seems to have occurred in December, attributable mainly to the short term 

component (less than one year). 

14 Assogestioni (national association of asset management companies), “Map of assets under management (collective instruments and 

customer portfolio management) 4 th quarter 2011, February 2012 edition. 

15 Bank of Italy, Supplement to the Statistics Bulletin Moneta e Banche, March 2012. 

16 Net of securities repurchased and supplied to guarantee the refinancing operations mentioned, the year-on-year change for bonds 

was +8.4% while the trend for total funding was +1.3% (Italian Banking Association Monthly Outlook, Annual Report, Evoluzione dei 

Mercati Finanziari e Creditizi, February 2012. 

27

From the viewpoint of risk, in December non-performing loans to the private sector gross of 

impairment losses had exceeded €106.8 billion (+17.7% compared to €90.8 billion in 

January 17 ), including €36 billion relating to households and €70.2 billion to businesses. The 

ratio of gross non-performing private sector loans to private sector loans was 6.24% (4.61% at 

the end of 2010), while the ratio of gross non-performing private sector loans to capital and 

reserves was 28.16% (22.20%). 

On the other hand, net non-performing loans totalled €59.4 billion, an increase of €10.5 billion 

compared to €48.9 billion in January (+21.5%), with a ratio of net non-performing loans to total 

loans up to 3.09% from 2.43% in December 2010 and a ratio of net non-performing loans to 

capital and reserves of 15.65% (13.31%) 18 . 

At the end of the year, securities issued by residents in Italy held in the portfolios of Italian 

banks had increased year-on-year by 20.9% to €670.6 billion (+€115.8 billion), driven by 

growth in the total in progress since April, which increased in December (+€60.2 billion 

compared to the month before), assisted by investments in the bonds already mentioned, 

backed by government guarantees. The increase was mainly in “other certificates” (+€99.2 

billion over twelve months including +€55.1 billion in the last month) and more specifically in 

bank bonds (+€88.5 billion of which +€52.2 billion in December alone), which now account for 

64% of the total (57.1% at the end of 2010). 

On the other hand, the year-on-year increase in Italian government securities was more 

modest (+8.6%), driven by both short term securities (BOTs and CTZs; +17%) and by 

government securities with longer maturities (BTPs and CCTs; +5.1%) despite the fall in the 

latter between September and November when the crisis of confidence in Italy worsened. 

At the end of December, the average weighted interest rate on bank funding from customers 

calculated by the Italian Banking Association 19 (which includes the yield on deposits, bonds 

and repurchase agreements in euro for households and non-financial companies) had risen to 

1.97% (1.50% twelve months before). The average weighted interest rate on lending to 

households and non financial companies on the other hand had risen to 4.23% (3.62% at the 

end of 2010). 

* * * 

In addition to the developments in progress in international regulations already mentioned, a 

number of changes were introduced into the legislative framework for Italian banks in 2011 

and in the first few weeks of 2012: 

• Law No. 120 was enacted on 12 th July and came into force on the following 12 th August, 

with which as in other European countries, gender quotas were introduced in Italy for the 

composition of the management bodies of listed companies and unlisted government 

controlled companies. The new regulations on female quotas require companies to appoint 

at least one third of places on management and control bodies to the least represented 

gender. These measures apply with effect from the first renewal to occur one year after the 

law came into force. As a transitory measure the gender quota for the first mandate must 

be at least one fifth of the least represented sex on elected corporate bodies; 

• Law No. 217 of 15 th December 2011 (2010 EC Law) in force since 17 th January 2012, 

increased the Bank of Italy’s powers on bank supervision. Additions were made to the 

consolidated banking act enabling the central bank to issue provisions of a general nature 

concerning the following: corporate governance; administrative and accounting 

organisation; internal control, remuneration and incentive systems. The Bank of Italy may 

also adopt specific measures with regard to single banks on those matters concerning the 

following: the restriction of activities or structure geographically; a prohibition on 

performing determined operations, including ownership operations and on the distribution 

of profits or other components of equity also with reference to financial instruments eligible 

for inclusion in supervisory capital; a ban on paying interest. It may also set limits on the 

17 From January 2011, the figures relating to gross and net non-performing loans are not statistically comparable with past figures 

following corporate ownership operations by some banking groups. As a consequence, the annual rates of change for both items are 

no longer significant. 

18 The trend for deteriorated loans should also be affected from 2012 by the expiry of the concession granted by Basel 2 to Italian 

banks to report past due loans after 180 days, making it compulsory to report them after 90 days as already occurs for other 

European banking systems. 

19 Italian Banking Association, Monthly Outlook, Annual Report, Evoluzione dei Mercati Finanziari e Creditizi, March 2012. 

28

total of the variable component of remuneration in a bank, when this is necessary to 

maintain a solid capital base. For banks which benefit from exceptional government 

support, the Bank of Italy may also set limits on the total remuneration of corporate 

personnel. 

• Decree Law No. 201 of 6 th December 2011, (the “Save Italy” decree), converted with 

Law No. 214 of 22 nd December 2011 and published in the Official Journal on 27 th 

December 2011 not only reformed the pension system 20 , and a series of matters regarding 

tax 21 , but it also introduced other important changes which concern the banking sector. It 

included the following: 

the application of a single all-inclusive commission on contracts which grant credit, 

calculated proportionally in relation to the sum of the credit granted and to the duration 

of the authorisation and a rate of interest payable on the sums withdrawn. The amount 

of the commission may not exceed 0.5%, per quarter of the sum made available to a 

customer. For overdrafts in the absence of authorisation or for amounts in excess of an 

authorisation, the only charge to be borne by a customer is a processing fee and a rate of 

interest payable on the amount in excess of the authorisation; 

the ability of Italian banks to benefit until 30 th June 2012 from a bank guarantee on 

liabilities with maturities of from three months to five years and from 1 st January 2012 

to seven years for covered bonds, issued after the decree comes into force. The amount of 

the guarantees granted is limited to that which is strictly necessary to restore the 

medium to long term funding capacity of the beneficiary banks and may not exceed the 

supervisory capital inclusive of the tier three capital for individual banks; 

the reduction from €2,500 to €1,000 of the limit on the legal use of cash and bearer 

instruments as a means of payment 22 and a related reduction in the interbank 

commissions borne by retailers on transactions performed using electronic payment 

cards; 

as measures to safeguard competition in the credit sector, the introduction of a 

prohibition for those occupying positions on management, supervisory and control 

bodies in companies operating in the credit, insurance and financial markets on 

accepting and occupying positions in competing companies. 

• to complete the contents of the “Save Italy” decree, Decree Law No. 1 of 20 th January 

2012 (liberalisations measure) states that when banks, credit institutions and financial 

institutions make the grant of a mortgage dependent of signing a life insurance contract, 

they are required to submit at least two estimates from two different insurance groups to 

the customer. That same decree, converted into law with Law No. 28 of 24 th March 2012 

established, amongst other things, the creation of a new “basic” bank account, the features 

of which will be set by a decree of the Ministry of the Economy in consultation with the 

Bank of Italy. This will also put a cap on bank commissions on withdrawals made from the 

ATMs of a bank which is not that of the cardholder; 

• with regard to bank commissions, Decree Law No. 29 of 24 th March 2012 restored the 

provisions initially contained in the “Save Italy” decree following the approval of a 

parliamentary amendment, when the measures on liberalisations, which had abolished 

them completely, where passed; 

• with regard to the supervision of banks and brokerage companies, the Directives 

2006/48/EC and 2006/49/EC were amended on 24 th November 2010 by Directive 

2010/76/EC of the European Parliament and the Council (“CRD III”), the provisions of 

which apply, starting with the supervisory reporting relating to 31 st December 2011. The 

new measures concern the rules for supervisory capital, remuneration policies and 

incentives, credit risk, securitisations, market risk and disclosures to the public. More 

specifically, CRD III completed the implementation in Europe of the recommendations given 

by the Basel Committee in the document “Enhancements to the Basel II framework” of July 

2009. 

20 For which the following section “Human Resources” may be consulted. 

21 For which the following section “Other information” may be consulted. 

22 In this respect the Italian Banking Association in a circular of 11 th January 2012 and the Ministry of the Economy and Finance in 

Circular No. 2 of 16 th January 2012 specified that the limit on cash cannot be applied to payments and withdrawals made in banks. 

29

Significant events that occurred during the 

year 

The organisational changes planned in the 2011-2015 Business 

Plan of the UBI Banca Group 

On 13 th May 2011, the Management Board and the Supervisory Board of UBI Banca approved 

the Group Business Plan containing strategic guidelines and operating, financial and capital 

targets for the period 2011-2013/2015 1 . 

The plan, consisting of 16 business projects with a substantial impact on the achievement of 

the objectives set, groups organisational changes into three focus areas: business, governance 

and support, and product companies and special projects. 

The business area includes the largest number of projects, which are also the most important: 

the reorganisation of commercial activity (distribution model), changes to service models and 

also plans to accelerate commercial results, to be achieved through enhancing the Group’s 

distribution capacity and customer base by means of the following: 

▪ 

▪ 

▪ 

▪ 

▪ 

a new “hour-glass” shaped distribution model, which combines the best features of the 

conventional “hierarchical” and “portfolio” models to create synergies from interaction 

between the different markets and different supply chains, generated by the co-ordination 

of new Local Headquarters; 

a more effective market segmentation and greater variety in the range of value added 

services, with the development of customised products and services, such as a modular 

current account, and a wide range of advisory services; 

a “mass market machine”, with the introduction in retail branches of a joint pool of account 

managers and operational staff for mass market customers and the selection of retail 

account managers to work on commercial development; 

a “pricing excellence project” to improve the structured management of pricing and to close 

gaps with the sector nationally, found by studies; 

acceleration of the integrated multi-distribution channel project. 

At the same time specific organisational and technological initiatives were identified with 

regard to problem loan management: 

▪ pro-active management of non-performing loans with: 

- the implementation of a new technologically advanced IT platform to manage the life 

cycle of deteriorated loans; 

- a revision of the organisational model to refine operating processes, differentiated by 

exposure and type of loan; 

- segmentation and division of positions into portfolios assigned to account managers who 

are allocated specific credit recovery budgets; 

▪ the optimisation of problem loan management through a new “by objectives” approach, 

which allocates a budget for the management of problem loan portfolios at the branch or 

corporate centre level of each network bank; 

▪ extension to the main product companies of the credit monitoring model to structurally 

reduce loan impairment rates. 

At the same time, the Business Plan also included a significant effort to streamline and/or 

automate internal operational and management processes and sales processes in order to 

shorten customer response times and improve transparency and clarity in contracts and 

regulations. This is also focused on reducing costs. 

1 The Business Plan was approved before the European sovereign debt crisis and the Italian crisis in particular manifested with an 

intensity which rendered internationally co-ordinated institutional action urgently necessary. This had inevitable repercussions on 

the expected performance of the real economy and on economic and financial market trends. 

30

The “hour glass” shaped distribution model 

The revision of the distribution model of the Group’s network banks continued as an 

organisational requirement designed to strengthen the Group’s “local banking” identity by 

redefining departmental and network bank units and streamlining commercial, credit and loan 

approval processes at the same time. 

The “hour glass” model, which was already operational at the time of this report, introduced 

“Local Headquarters”, the main points of reference for “Local Banks” as key units in the 

commercial process for all customer segments and markets (branches, CBUs and PBUs), with 

a twofold organisational interconnection: cross market (retail, private banking, corporate) and 

cross process (commercial and credit). The new headquarters will be responsible for the most 

significant commercial, credit and operational risk aspects, developing relationships with local 

customers and with major clients and opinion leaders (“local social capital”). 

The establishment of “micro-areas” within local areas was continued and strengthened with 

the extension of the retail branch co-ordination model based on “head branches” and “grouped 

branches”. 

The first implementation action – in the commercial sphere – commenced on 1 st August 2011 

(Stage 1) with the introduction of the new “hour glass” model, applied on a flexible basis to 

take account of local differences, customer portfolios and the characteristics of individual 

network banks. The introduction involved the following: 

- the revision of the structures of the Commercial Areas of the network banks (with the 

creation of specialist units to support Commercial Department Heads); 

- the start-up of Local Headquarter units with a consequent revision of the distribution 

structure; 

- the revision of commercial processes (approval of interest rates and conditions) consistent 

with the new organisational units; 

- the refinement of customer segmentation criteria with a view to the following: expanding the 

retail business segment by grouping it with the lower corporate segment (managed by the 

Retail Market since 2012); a stronger focus on the more complex affluent (Premium) 

customers and on SMEs; more active management of SEO customers (small economic 

operators) not allocated, assigned to affluent/mass market team account managers; finally; 

more effective specialisation for the large corporate segment (only for BPB, BBS, BPCI and 

BRE); 

- the revision of the overall structure of local private and corporate banking facilities (CBUs, 

PBUs and the relative “corners”), which was completed in January 2012. 

The completion of the changes in credit operations (Stage 2), which took place in January 

2012, with the revision of network bank credit units and a new loan approval process, which 

involved the following: 

- the revision of the organisation of Credit Departments in the standard model, adopted by 

the larger network banks of the Group, with the introduction of Local Credit Units (the 

former local loan approval centres), specialist local units, physically close to Local 

Headquarters; 

- the introduction of customer contacts for Credit Quality in Local Headquarters; 

- the creation of Local Loan Approval Committees (LLACs), bodies which approve loans with a 

joint commercial/credit signature, designed to increase synergies between both processes 

and to “develop a credit culture”. 

Mass market team/Developers 

The “hour glass” model is completed at branch level by the mass market team (responsible for 

the management of branch mass market portfolios) and by the presence of developers (who 

report directly to Local Headquarters). 

In fact a standard branch has two quite separate areas of commercial operations: specialist 

(small business and affluent) and pooled operations (reserved to mass market operations). 

The creation of mass market teams (MMTs), using a pool approach, is designed to optimise the 

use of human resources previously dedicated to operating activities and the management of 

mass market customers. It involves branch personnel and simplifies the relative products and 

improves service costs at the same time, as the result of exploiting “interchannel” management 

31

(branch, contact centre and direct channels), with the migration of “low value” transactions on 

the one hand and the strengthening of cross selling on the other. 

From an organisational viewpoint, in their full version MMTs are composed of the following: 

- a customer contact, focused primarily on the sale of the more complex products, on credit and risk management 

activities, and also on post sales assistance and management (and, where necessary, on support to accounting 

and administrative processes); 

- a customer assistant, who mainly performs various cashier functions and sells simple products, while also 

providing support to back-office activities; 

- an operations area assistant who performs mainly back-office activities. 

The team manages the mass market by reacting to customer flows from the contact centre and 

to spontaneous customer flows making strong resort to complementary channels for both 

development activities and for the migration of business. 

Preparatory activities (analysis, definition and revision of branch activities affected, setting the 

size of network units, management and selection of staff, carrying out a pilot test, job 

shadowing, publication of rule books) were completed in 2011, while team operating activities 

started in 2012. 

At the same time the retraining of selected staff from network branches allowed the 

“Developers Project” to be launched, the creation of a significant developer force to focus on 

the “high value” segments (affluent, SEOs and SMEs with up to €15 million of turnover) and 

on high potential growth geographical areas. Development follows a systematic “businessbusiness 

person” approach (based on business-family relationships) and it benefits from 

specific marketing initiatives, designed to enhance local relationships. 

Developers operate within the branch to which they are assigned with the task of acquiring 

new customers. The management of customers acquired continues to be performed by 

developers themselves for a period of between 12 and 24 months before being handed over to 

ordinary branch management. 

The stages for the launch of the programme (with the identification of the branches allocated, 

communication to the network branches, motivational initiatives) and the selection of the 

candidates (with the formation of catchment areas on which to draw from, fuelled by selfcandidates 

and supplemented with personnel proposed by the network banks) were concluded 

in December 2011. The first appointments to the position were made in January and February 

and training for qualification began. The programme will involve a workforce of approximately 

700 developers, when fully operational. 

The management of problem loans 

The Business Plan contains four projects – the pro-active management of non-performing 

loans, problem credit quality, a non-performing loan platform, a new monitoring model – the 

implementation of which took place firstly in the network banks as follows: 

• a new governance model, with the overall revision of models and units at UBI Banca and in 

network branches. With the launch of LLACs (local loan approval committees), the cross 

process perimeter in the credit recovery sphere was extended at the same time, with the 

introduction of a customer contact role operating locally on problem loans. Like the local 

customer contacts for the credit quality of performing loans, this is a specialist role which 

monitors portfolios of impaired customers, supports the heads of Local Headquarters in the 

management and monitoring of distribution network activities and directly manages the 

positions assigned to them. They work with customers in taking action to correct problem 

loan positions; 

• active management of the credit quality of performing loans designed to prevent problems 

from arising, through a local commercial approach overseen by Local Headquarters which, 

supported by a horizontally integrated IT platform across commercial and credit processes, 

performs pro-active monitoring of portfolios, translating information into action to be taken 

by commercial account managers; 

• segmentation of problem loans (past-due, operationally impaired and repayable) on the 

basis of the customer segment to which they belong, the amount of the sums involved and 

the consequent implicit risks, and a cluster approach with specialist roles at Local 

Headquarters; 

• pro-active management of non-performing loans based on an industrialised and centralised 

credit approach, which involves the following: the segmentation of the portfolio on the basis 

of either outsourced or internal strategies (with outsourcing of structured, automated and 

32

dynamic use of credit recovery services in the field for the management of small amounts 

and periodic disposals where recovery has failed, or internal management specialised by 

type with the assignment of portfolios to non performing loan account managers at UBI 

Banca); the assignment of recovery objectives and the management and valuation of 

property guarantees. 

The “simplicity” objective 

This project, which had already been commenced when the Business Plan was approved and 

was incorporated within it because of its importance and the new areas identified for its 

development, consists of three lines of action: 

a) the simplification and streamlining of distribution network processes. 

Twenty two initiatives were already completed in 2011 concerning the “easy sale of banking 

products” (integration and automation of contract forms, the introduction of checklists for 

documentation to be acquired), the “easy sale of financial and investment products and loans” 

(the revision of processes for the sale of bonds, the automation of forms for the subscription of SICAVs 

and the creation of a multi-SICAV form for switches, redemptions and additional payments, an 

electronic diary of financial movements, the automation/integration of forms for loans to small 

businesses and private individuals) and “Easy Work” (a new UBI Desk work station, circular editing 

of customer directories, optimisation of the management of portfolio receipts, the integration of remote 

banking movements in a series of procedures, the automation of utility statements and cheque book 

supplies, new design for financial profile questionnaires). An additional twelve initiatives to 

simplify branch operations have been planned for 2012 in both the commercial and the 

operational spheres; 

b) the use of signatures on tablets (a technology that can be used to sign forms and 

documents by placing a signature directly on the screen of a tablet). 

In the second half of 2011, the experimental pilot stage of current account paying in and 

withdrawal transactions was commenced for private individual customers in selected 

branches with high volumes of business, in view of extending the technology to all 

operational outlets of the Groups and just as soon as regulations will allow, it will be 

extended to a larger number of branch processes (the paperless banking project); 

c) streamlining of internal regulations, by means of a new dedicated intranet site, “The 

Regulations Portal”. 

Activities to “rationalise” regulations (on a mass basis or when regulation booklets were 

issued) has been virtually completed (regulations have been reduced from approximately 

100,000 documents existing in November 2010 to a little more than 4,600 circulars). The 

new portal is also now online and accessible by all the network banks and product 

companies, with a simple and functional interface that can be customised on the basis of 

user requirements. 

33

Further simplification of the customer service model 

Although not comprised within the original Business Plan, subsequent decisions taken by the 

Management Board on 14 th November 2011 concerning the simplification of the customer 

service model, constitute a completion of the achievement of the objectives of the UBI Banca 

Group. They facilitate shorter decision-making processes, strengthen risk management and 

internal synergies and improve clarity and organisational simplicity. 

The process in progress is leading to the redefinition of the service models for the large 

corporate and consumer credit segments and of some network banks with regard to 

geographical market coverage, activities which will also involve corporate ownership operations 

to be performed in 2012 and the first half of 2013. 

Large corporate customers and investment banking 

The new service model involves the creation of a new “Large Corporate and Investment 

Banking” division at UBI Banca, which will operate in: 

- the management and development of business with a limited number of large corporate 

clients not directly related to local areas covered by the network banks; 

- the structuring and grant of complex finance both with Group and non-captive clients; 

- the provision of value added services (e.g. advisory) to both Group and non-captive clients. 

In order to optimise operations, it was decided to merge Centrobanca into UBI Banca and 

incorporate its current business and finance activity within the Parent. More specifically, with 

regard to the latter, this centralisation will take place in the context of a new finance model 

which involves the following: clear separation between finance for customers and finance for 

the Bank; the unification of trading rooms (access to markets, product structuring); the 

creation of a market hub on which all customer requests will be concentrated. 

Completion of the merger is planned for the first half of 2013. 

Streamlining of “consumer credit” business: 

In relation to the higher risk of some lines of business and the need to focus lending 

operations, the Group has decided to reposition the activities performed by B@nca 24-7 in the 

consumer credit sector. The action undertaken – some currently being implemented – is as 

follows: 

- new grants of special purpose and personal loans to non-captive customers cease and 

activities are limited to the management of outstanding loans; 

- the disbursement of mortgages to non-captive customers through external networks was 

transferred to the network banks of the UBI Group in May 2011, with a view to the 

acquisition of new customers and a more balanced management of funding and risk 

control. No use of additional credit brokerage companies is planned; 

- distribution of personal loans to captive customers by the network banks; 

- the specialisation of the company Prestitalia (100% UBI Banca Group), appropriately 

expanded, in salary backed loan business. Approximately €3.3 billion of outstanding salary 

backed loans held at present by B@nca 24-7 will be transferred to that company. 

The reorganisation of activities gave rise to the start of procedures for the contribution to 

Prestitalia of salary backed loan operations and the subsequent merger of B@nca 24-7 into 

UBI Banca. 

In this respect UBI Sistemi e Servizi was tasked with implementing a special project for the 

migration of the IT system to the UBI Banca target platform and with providing operational coordination 

and technical implementation services required to carry out the merger. In addition 

to the specific costs for the migration, derecognitions of impairment losses on intangible assets 

were performed in relation to the retirement of the B@nca 24-7 IT system, amounting to €3.5 

million (charged to income statement in 2011). 

34

The contribution of the outstanding salary backed loans and the merger into UBI Banca will 

take place after 1 st May 2012, with effect for accounting and tax purposes from 1 st January 

2012. 

The creation of a single banking operation in the North West 

Again with a view to Group simplification and local market focus, the creation of a single North 

West banking operation is planned through the merger of Banca Regionale Europea and 

Banco di San Giorgio. 

Before going ahead with the merger of Banco di San Giorgio into BRE, the latter, which 

already holds 57.50% of the share capital of the Liguria bank will acquire all the shares of 

Banco di San Giorgio held by UBI Banca (over 38% of the share capital). Also the following was 

planned in order to preserve the ties between Banco di San Giorgio and the local markets on 

which it operates after the merger: 

• the brand is maintained; 

• a foundation will be created to maintain links with local communities in Liguria. The 

foundation will be formed with an initial endowment from the “new” Banca Regionale 

Europea and its capital will be added to annually through the allocation of the main part of 

a provision made for initiatives and institutions with charitable, humanitarian, social, 

cultural and artistic purposes to be written into the corporate by-laws of Banca Regionale 

Europea. 

The size of BRE’s supervisory capital will allow the merger to take place without affecting its 

capital strength. The new entity will also perform centralised management of funding and 

lending in order to achieve a better structural balance. 

On 21 st December 2011, the Boards of Directors of the two banks approved the project to 

merge Banco di San Giorgio into Banca Regionale Europea. 

On 27 th March 2012 the Management Board of UBI Banca approved changes to the 

parameters for the merger, following the results of the impairment test performed at the end of 

December by an external appraiser. 

BRE will purchase the ordinary shares held by UBI Banca (26,001,474 shares) at a price per share of €4.344 on the 

basis of the parameters set by the Italian Civil Code and with the application of the dividend discount model method 

as at 31 st December 2011. 

Shareholders other than BRE (4.31% of the share capital of the merged bank is held by non-Group, non controlling 

shareholders who number approximately 3,300) have the right to sell their shares. The new price at which that right 

may be exercised will be set by the Board of Directors of BRE, having received the opinion of the Board of Statutory 

Auditors and of the external statutory auditors of BRE. 

The exchange ratio, calculated on the basis of the dividend discount model was set at 2.33 ordinary shares of BRE for 

one ordinary share of BSG. On the basis of that exchange ratio, the non-controlling shareholders may be allotted a 

maximum of 6,832,310 new ordinary shares of Banca Regionale Europea with a nominal value of 0.52 euro each and 

a maximum total value of 3,552,801.20 euro. The new shares shall have the same dividend entitlement as the 

ordinary shares outstanding on the date on which the merger takes effect for non controlling interests. 

The share capital of BRE will be increased if necessary from 468,880,348.04 euro to a maximum amount of 

472.433.149,24 euro. 

It is estimated that the project may be completed by July 2012, effective for accounting and 

tax purposes from 1 st January 2012. 

*** 

On the basis of what are only very preliminary estimates, which will be further refined, the three 

projects should involve one-off integration costs in 2012 of approximately €27 million and require 

investments to be capitalised of approximately €17 million, while it is expected that it will 

generate annual synergies conservatively estimated, on a pro-rata basis in the year of 

implementation and entirely in future years, at over €36 million. 

35

Strengthening capital 

The share capital increase 

In the spring of 2011, UBI Banca performed a large increase in its share capital of one billion 

euro in order to anticipate changes underway in the regulatory context and, thanks to the 

traditional solidity of the Group, also to grasp opportunities for endogenous growth. A 

summary is given below of the stages of the operation announced on 28 th March 2011. 

13 th May 2011 

The Management Board, after receiving authorisation from the Supervisory Board, passed a 

resolution to implement the authorisation conferred on it by the Shareholders’ Meeting of 30 th 

April 2011 to increase the share capital, in more than one issuance and for payment in cash, 

by a maximum amount of 1 billion euro inclusive of the share premium with option rights for 

shareholders and holders of the convertible bonds “UBI 2009/2013 convertibile con facoltà di 

rimborso in azioni”. It also provided for the presentation of a prospectus to the Consob (Italian 

securities market authority) for prior authorisation to publish it. 

1 st June 2011 

The governing bodies of the bank decided to issue a maximum number of 262,580,944 

ordinary shares with a par value of 2.50 euro each, of the same class as those in issue and 

with normal dividend entitlement, to be offered as an option to shareholders and to the 

holders of the convertible bonds “UBI 2009/2013 convertibile con facoltà di rimborso in azioni”, 

at a price of 3.808 euro per share, inclusive of a share premium of 1.308 euro, for a maximum 

nominal amount of 656,452,360 euro and for a total maximum amount (inclusive of the share 

premium) of 999,908,234.75 euro. 

The shares were offered at a ratio of eight new shares for every 21 shares owned and/or every 

21 “UBI 2009/2013 convertibile con facoltà di rimborso in azioni” convertible bonds owned. The 

subscription price was calculated by applying a discount of approximately 22.43% on the 

theoretical ex-rights price of UBI Banca shares, calculated on the basis of the official stock 

market price on 1 st June 2011. 

Following the issue of authorisation from the Consob (memorandum No. 11050124), the 

prospectus was published in accordance with the law and made available to the public at the 

registered offices of the Bank, on the corporate website (www.ubibanca.it) and on the Borsa 

Italiana website (www.borsaitaliana.it). 

It was filed with the Consob on 3 rd June 2011. 

5 th June 2011 

In implementation of Art. 7 of the regulations for the “Warrant azioni ordinarie UBI Banca 

2009/2011” warrants an adjustment to the exercise price was announced following the 

increase in the share capital. The price for the exercise of the warrants fell from 12.30 euro per 

share to 11.919 euro per share 2 . 

6 th -24 th June 2011 (rights offer period) 

6 th -17 th June 2011 (option rights are traded) 

During the rights offer period, 636,120,051 rights were exercised and therefore a total of 

242,331,448 shares were subscribed (92.3% of the total shares offered) for a total amount of 

922,798,153.98 euro. 

Also the Banca del Monte di Lombardia Foundation and the Cassa Risparmio di Cuneo 

Foundation received authorisation from the Ministry of the Economy and participated in the 

share capital increase by exercising all the option rights due to them. 

At the end of the period, 53,154,927 rights for the subscription of 20,249,496 shares (7.7% of 

the shares offered) had not been exercised for a total amount of 77,110,080.77 euro. 

2 Art. 7, letter a) of the Regulations stated that if between the issue date of the warrants and 7 th July 2011, a resolution were passed 

and implemented to increase the share capital by payment in cash through the issue of new shares, the exercise price must be 

reduced by an amount calculated according to the provisions contained in those Regulations. 

36

4 th -7 th July 2011 (offer period of option rights not exercised) 

In compliance with paragraph three of article 2441 of the Italian Civil Code, the unexercised 

rights were offered on the stock exchange. In the first five days of the offer (4 th July 2011), all 

the 53,154,927 unexercised options rights were sold through Mediobanca at an auction price 

of 0.04 euro, with proceeds for UBI Banca of 2,126,197.08 euro, recognised within the share 

premium reserve. 

11 th July 2011 

At the end of the period for the subscription of unexercised rights, 5,706,984 shares (2.17% of 

the total newly issued shares offered) were subscribed, for a total of 21,732,195.07 euro. 

Therefore. 14,542,512 shares (5.54% of the shares offered) remained that had not been 

subscribed for a total amount of 55,377,885.70 euro, which on the following 18 th July were 

made available to the underwriting syndicate 3 , in accordance with the underwriting agreement 

signed on 1 st June 2011. The increase in the share capital of 999,908,234.75 euro, which was 

fully subscribed for a total of 262,580,944 new shares was therefore completed on that date. 

Share capital - number of shares: changes occurring during 2011 

Date 

Number of 

shares issued 

Reason Number of shares Share capital Share premium reserve 

31.12.2010 639,145,902 1,597,864,755.0 7,100,378,060 

3.3.2011 268 Bond conversion February 2011 639,146,170 1,597,865,425.0 7,100,380,807 

3.6.2011 96 Bond conversion May 2011 639,146,266 1,597,865,665.0 7,100,381,791 

24.6.2011 242,331,448 Exercise of rights for share capital increase 881,477,714 2,203,694,285.0 7,417,351,325 

24.6.2011 

Recognition of the expenses incurred for the increase in 

the share capital net of tax 7,401,115,955 

30.6.2011 881,477,714 2,203,694,285.0 7,401,115,955 

5.7.2011 240 Bond conversion June 2011 881,477,954 2,203,694,885.0 7,401,118,415 

5.7.2011 Sale of unexercised rights (*) 7,403,244,612 

7.7.2011 19,309 Conversion of w arrants June 2011 881,497,263 2,203,743,157.5 7,403,426,483 

11.7.2011 5,706,984 Exercise of unexercised rights 887,204,247 2,218,010,617.5 7,410,891,218 

18.7.2011 14,542,512 Subscription by the syndicate 901,746,759 2,254,366,897.5 7,429,912,824 

Bonds: "UBI 2009/2013 Convertibile con facoltà di rimborso in azioni" - w arrants: "Warrant azioni ordinarie UBI Banca 2009/2011" 

(*) The sale of 53,154,927 unexercised rights at 0.04 euro each gave rise to proceeds of €2,126,197.08. 

Other changes affecting the share capital of UBI Banca 

Conversion of the bond “UBI 2009/2013 convertibile con facoltà di rimborso in azioni” 4 

A total of 604 shares were issued against the presentation of bonds for a nominal amount of 

7,701 euro in the period from 10 th January 2011 (date from which the right was exercisable) 

until the date of this report for the exercise of conversion rights held by bondholders in 

accordance with article 5 of the regulations. 

More specifically, 240 new ordinary shares were issued on 5 th July (in relation to bonds for a 

nominal amount of 3,060 euro presented for conversion in June). On 3 rd June, 96 shares were 

issued against requests received in May (for a nominal amount of 1,224 euro presented), while 

268 shares were issued on 3 rd March (for a nominal amount of 3,417 euro in relation to 

applications presented in February). 

3 The share issue was underwritten by a syndicate of banks co-ordinated and led by Mediobanca – Banca di Credito Finanziario S.p.A. 

and Centrobanca – Banca di Credito Finanziario e Mobiliare S.p.A., as joint global co-ordinators, and by Morgan Stanley as co-global 

co-ordinator. Mediobanca – Banca di Credito Finanziario Sps, Morgan Stanley, Barclays Capital, BNP Paribas, Citi, Deutsche Bank 

AG London Branch and ING as joint bookrunners, together with the co-bookrunners, agreed to subscribe – under the usual terms 

and conditions for this type of operation – those shares not taken up at end of the offer period on the stock exchange. Crédit Agricole 

Corporate & Investment Bank, EQUITA S.I.M. Spa, HSBC, Intermonte, Natixis, Nomura, Société Générale Corporate & Investment 

Banking and The Royal Bank of Scotland participated in the consortium as co-bookrunners. 

4 UBI Banca did not take advantage of its right to settlement in cash under article seven of the regulations for the bond, nor did it 

announce its intention to call the bonds under article 12 of the regulations. 

37

Exercise of “Warrant azioni ordinarie UBI Banca 2009/2011” warrants 

On 30 th June 2011, the exercise period came to an end for the warrants which gave the right 

to subscribe newly issued ordinary shares of UBI Banca (with a par value of 2.50 euro each) at 

a conversion ratio of one share for every 20 warrants at an adjusted subscription price of 

11,919 euro per share. In compliance with article four of the regulations for the warrants, 

following the exercise of 386,180 warrants, 19,309 shares with normal dividend entitlement 

and of the same class as outstanding shares were made available on 7 th July to rights holders. 

All rights attaching to the warrants which had not been exercised by the expiry date of 30 th 

June 2011 expired and had no validity to all effects and purposes. 

Repurchase of treasury shares 

In implementation of a shareholders’ resolution of 30 th April 2011, which involved the 

purchase of treasury shares to be assigned to the senior management of the Group as part of 

the Group incentive schemes, on 12 th and 13 th July 2011 UBI Banca proceeded to repurchase 

1,200,000 treasury shares on the market (corresponding to the number purchasable) at an 

average price of 3.6419 euro per share for a total amount of €4.37 million, less than the total 

maximum amount set in the shareholders’ authorisation (€5.5 million). 

The purchase transactions were performed on the regulated market in compliance with the 

limits set in the shareholders’ resolution, by the provisions of the law and EC Directive 

2273/2003 and by admissible market practices. 

UBI Banca currently holds 1,200,000 treasury shares (0.13% of the share capital). 

European Banking Authority (EBA) requests 

In view of the substantial increase in systemic risk caused by the sovereign debt crisis in the 

euro area, as part of a broader package of measures approved by the European Council, on 

26 th October the European Banking Authority (EBA) decided to create an exceptional and 

temporary capital “buffer” for the banking system in the area. 

This buffer, to be created using primary quality capital, is not designed to meet losses on 

sovereign debt, but is of a prudent nature, intended to reassure markets of the ability of banks 

to withstand shocks, by maintaining adequate levels of capital. 

More specifically, banks are requested to recapitalise to a level where their core tier one ratio 

reaches 9% by the end of June 2012. This is to be achieved principally through the use of 

private sector funds (share capital increases of the highest quality, retained profits, 

restrictions on company bonuses, etc.). 

The possible extra capital requirement was calculated on the basis of balance sheet figures as 

at 30 th September 2011. The underlying methodology for the exercise was set out in advance 

by the EBA, in order to ensure uniform implementation in all the 71 European banks 

participating in it. 

The final results of the exercise, conducted in co-operation with the competent national 

authorities were disclosed on 8 th December 2011: the total recapitalisation requested at 

European level should amount to €114.7 billion, including €15.4 billion relating to four of the 

five Italian banking groups involved, one of which is UBI Banca. On the basis of the exercise, 

UBI Banca has an increased capital requirement amounting to €1,393 million. 

The EBA has asked all banks for which the above exercise resulted in increased capital 

requirements to submit a plan to national supervisory authorities by 20 th January 2012 to 

reach a core tier one ratio of 9% by the end of June 2012. 

In consideration of the temporary nature of the requested increase, the UBI Banca plan does 

not include any possibility of new resort to the market following the substantial operation 

conducted in the spring of 2011. It relies substantially on the adoption by the end of the first 

half 2012 of advanced internal models for the calculation of capital requirements on corporate 

credit risk, on further action to optimise risk weighted assets and on self funding. Any 

requirement remaining as at 30 th June 2012, will be met, if substantial, by the partial 

conversion of outstanding convertible bonds. 

38

Action undertaken on the branch network of the Group 

At the same time as it introduced the new “hour glass” distribution model in 2011, the UBI 

Banca Group also conducted a gradual and progressive rationalisation and reorganisation of 

its geographical market coverage, which followed on from action that accompanied and 

followed the branch switching operations carried out in January 2010. 

Action taken on the Group branch network in Italy in the 2011 

Opening of: Transformation Closures of: 

Transformation of Transformation of 

of treasury 

branches into minibranches 

branches 

mini-branches into 

branches mini-branches branches into branches mini-branches 

mini-branches 

Banca Popolare di Bergamo Spa 1 1 - 3 6 2 1 

Banco di Brescia Spa - 2 - - - - - 

Banca Popolare Commercio e Industria Spa - 1 - - - - - 

Banca Regionale Europea Spa 3 2 - 2 3 1 - 

Banca Popolare di Ancona Spa 1 1 4 6 10 9 - 

Banca Carime Spa 1 - - - 1 - - 

Banca di Valle Camonica Spa - - 2 - - - - 

Banco di San Giorgio Spa 1 - - - 1 1 - 

UBI Banca Private Investment Spa - - - 5 - - - 

TOTAL 7 7 6 16 21 13 1 

In the spring of 2011, the Parent and the network banks involved approved a package of 

measures designed to eliminate geographical overlap between branches and to improve 

efficiency in customer relationships. These actions, which involved Banca Popolare di 

Bergamo, Banca Regionale Europea, Banca Popolare di Ancona and UBI Banca Lombarda 

Private Investment, took effect from 18 th April 2011 and can be summarised as follows: 

• the closure of 16 branches and 12 mini-branches; 

• 13 small branches transformed into mini-branches and one mini-branch into a branch. 

This mass operation was reinforced by further closures of mini-branches performed by some 

banks during the year. 

The Group did not abandon internal growth, but opened 13 new branches 5 and transformed 

six units formerly operated as “treasury” branches into mini-branches. 

Changes to the distribution structure were also made in the first half of the year with the 

introduction of new “head branches” and “group branches” 6 and the consequent creation of a 

level of co-ordination between retail units, based on head branches required to co-ordinate one 

or more grouped branches. Although to differing degrees of implementation, the process 

involved a total of 552 units (391 grouped branches and 161 head branches) belonging to four 

network banks (Banco di Brescia, Banca Carime, Banca di Valle Camonica and Banca 

Regionale Europea) 

The further worsening of the economic environment that occurred in the second half of the 

year, which was particularly severe for the banking sector, required an even more heavily 

weighted assessment across the entire banking sector of the “cost-to-serve” customers in 

branches and of operations to implement business plans already formulated. 

After the end of the year, the UBI Banca Group therefore announced and carried out new 

initiatives, effective from 27 th February 2012, which involved almost all the network banks, 

designed to further streamline geographical market coverage in areas where markets are 

5 The figure does not include the transfer between Group banks of a mini-branch, which was closed and then reopened, which is 

included among the 2011 changes reported in the table. 

6 Grouped branches have a manager and are independent from accounting, credit (approval of credit authorisations and unauthorised 

overdrafts) and commercial (authorisations and powers on interest rates, conditions and repayments) viewpoints. Head branches are 

larger in size and have greater approval powers on commercial and credit matters and they are more structured (because all 

commercial roles are present). They are therefore able to act as a point of reference in local areas and to support the operations of 

grouped branches. 

39

saturated or have limited margins for growth. Action was taken on units with insufficient 

current and/or potential profitability and at the same time branches close to those where 

action was taken and also those with the best prospects for growth were expanded. The mass 

operation – which will also result in contained operating expenses through the termination of 

expensive rental contracts – involved the following: 

• the closure of 32 branches 7 and 46 mini-branches; 

• the transformation of 40 branches into mini-branches and one mini-branch into a branch; 

• the partial transfer of customers belonging to one branch and changes to a parent unit for 

three mini-branches. 

Action taken in February 2012 also includes the extension of the “head branch-grouped 

branch” model to include the branch network of Banca Popolare Commercio e Industria in 

Emilia. 

Action taken on the Group branch network in Italy up until 27th March 2012 

Opening of: 

Closures of: 

branches mini-branches branches mini-branches 

Transformation of 

branches into minibranches 

Transformation of 

mini-branches into 

branches 

Banca Popolare di Bergamo Spa 1 - 1 - 2 - 

Banco di Brescia Spa - - 16 6 - - 

Banca Popolare Commercio e Industria Spa - - 9 1 20 1 

Banca Regionale Europea Spa - 1 - 5 7 - 

Banca Popolare di Ancona Spa 1 - 4 9 11 - 

Banca Carime Spa - - 1 23 - - 

Banco di San Giorgio Spa - - - 2 - - 

UBI Banca Private Investment Spa - - 1 - - - 

TOTAL 2 1 32 46 40 1 

The above action was taken at a time when the short and long-term strategy for new branch 

openings was being revised along more prudential lines. They will now be limited to real 

commercial opportunities which arise from time to time on local markets, while the policy to 

develop alternatives to physical channels will continue. The logistical transfer of operating 

units within the towns and cities where they are currently located is also planned with a view 

to a more appropriate size for units and also to optimising costs. 

A detailed report on closures and openings in the branch network of the Group that occurred in 2011 and 

the first few months of 2012 is given in the subsequent section “The distribution network and positioning”, 

which may be consulted. 

7 For logistics and organisational reasons, the closure of two Banca Popolare di Bergamo branches may not be performed until after 

the preparatory stage for the transformation into mini-branches. These branches have therefore been counted among 

transformations into mini-branches in the table for 2012 changes. 

40

Disposal of UBI Pramerica SGR operations consisting of 

alternative fund managements 

On 15 th June 2011, UBI Pramerica signed an agreement with an independent asset 

management company, Tages Capital SGR, for UBI Pramerica to contribute alternative fund 

management operations to Tages. These operations consist of three hedge funds (Capitalgest 

Alternative Conservative, Capitalgest Alternative Dynamic and Capitalgest Alternative Equity 

Hedge) with assets under management as at 31 st December 2010, which totalled 

approximately €290 million. 

The contribution – which occurred on 4 th October with effect from 1 st October 2011 – also 

regarded the personnel involved, the assets and liabilities and the service and outsourcing 

contracts. 

On completion of the operation, UBI Pramerica acquired a 10% stake in the share capital of 

Tages Capital 8 . An agreement was signed for the distribution on the UBI Banca distribution 

network over a number of years of all the alternative funds (hedge and UCITS) managed by 

Tages. 

The agreement reached will allow UBI Pramerica to focus strategically on its mutual 

investment funds and customer portfolio managements, which already represent the core 

business of the company today. Moreover, on the basis of the partnership, the UBI Banca 

Group will be able to continue to offer its customers a broad range of hedge funds and to 

benefit from Tages’ high level of international specialisation. 

Banque de Dépôts et de Gestion 

While this bank was penalised by the unfavourable performance of financial and securities 

markets in 2011, only partially offset by the gain realised on the sale of the historic Neuchâtel 

property, from a strategic viewpoint the various initiatives designed to reposition the bank in 

the private banking segment and to further significantly contain and reduce costs continued. 

A search was commenced at the beginning of the current year for a new General Manager, 

which led, on 1 st March 2012, to the appointment of Thierry De Loriol who replaced Gianluca 

Trombi, who occupied the position previously. 

Again in the first quarter of 2012, BDG promptly launched a plan of corrective action designed 

to provide a rapid solution to issues raised in relation to the results of supplementary audit 

activities required by the Swiss supervisory authorities. 

8 The stake fell to 7.74% at the end of 2011 as a result of capital operations performed by Tages SGR after the contribution. 

41

Commercial activity 

Commercial policies in 2011 and the outlook for 2012 

In 2011 the UBI Banca Group completed Business Plan action designed to optimise the 

distribution network and to improve customer service models. In detail: 

- the new “hour-glass” shaped distribution model was introduced in the network banks on 1 st 

August, together with “Local Departments” for improved co-ordination of the different 

customer segments (retail, private banking and corporate) in specific local areas; 

- preparatory and preliminary work began in October on “Mass market team” and “Developer” 

projects (operational since January 2012), which revised customer segmentation and the 

relative service models. 

The commercial performance of the Group in 2011 was affected by a context of high volatility 

on markets and by substantial liquidity problems on the interbank market, especially in the 

fourth quarter. This made it extremely important to increase direct funding in a manner 

consistent with maintaining high standards of structural balance. 

The following initiatives were designed to achieve that objective: the campaigns “Half an hour 

for your savings” (designed to acquire new financial wealth in any form, with enhancement at 

the same time of the advisory service) and “Zero zero UBI for three” (a promotional offer 

consisting of a charge free, zero interest current account, a certificate of deposit with a 

promotional interest rate and a points accelerator in the “Formula UBI” fidelity programme) 

and the initiative “Brilliant savings” (which allowed customers who had provided new funding 

to take part in a competition, with diamonds as prizes). 

These initiatives for private individual customers were accompanied by action taken to 

improve funding products for businesses, especially in the corporate segment. 

Initiatives concerning direct funding were accompanied by a strategy to manage lending 

designed to ensure full support for medium to small-size and core corporate businesses, by 

developing customer relations across a broad spectrum with re-pricing actions, the 

consequence of severe worsening of funding conditions. Additional action was also taken to 

rationalise lending to the large corporate segment, with careful management of trends for 

volumes and pricing. 

During the year, the Group also maintained a strong focus on the supply of advisory services 

to both businesses (“corporate advisory” for mid and large corporate customers) and private 

individuals (“pro-active wealth advisory" and “family business advisory” for private banking 

customers; the new evolved service and advisory model UBI Gold for “top affluent” customers 

as well as the normal investment advisory services provided by the financial planning and 

advisory platform in the UBI Light version). 

Work continued at the same time to improve the multi-channel strategy, with the launch of 

the online sale of the Enjoy and Qui UBI cards, the expansion of the platform for private 

individual and small business customers enhanced with new information and payment 

functions, the release of a mobile application for BlackBerry. Direct marketing initiatives 

through the Contact Centre were also intensified. 

Numerous new changes were also made in the payment cards sector, including the following: 

the completion of the migration to chip technology; various initiatives launched with the Enjoy 

card (including the “Enjoy special edition” initiative) and the launch of the debit card ‘I WANT 

TUBI’ for minors. 

Work also continued to upgrade payment systems to comply with the European directive on 

payment services (PSD) and the relative subsequent provisions and migration to SEPA 

payment instruments was commenced. 

42

Finally, the UBI Banca Group increased its commitment to support the third sector by 

launching a new service model dedicated to the church and non-church nonprofit world, 

named UBI Community. 

Recent legislation is having a significant impact both in terms of supply processes and prices 

on strategies to develop the Group’s commercial activities: the revision of tax rates from 1 st 

January 2012, with standardisation of treatment for bonds, current accounts and term 

deposits makes new short term funding products that accompany existing products more 

attractive. 

The impacts on the remuneration of credit authorisations and unauthorised overdrafts are 

also substantial, requiring the revision of the commissions applied. The new regulations on the 

sale of insurance policies on mortgages and on auto liability policies and possible further 

regulations on payment cards are also having an impact. 

The retail market 

The retail market includes a total of 3.7 million customers, consisting of 3.3 million private 

individuals (mass market and affluent), 354 thousand businesses (small economic operators – 

SEO 1 and small to medium-sized enterprises – SME 2 ) and approximately 30 thousand 

authorities and associations. Following the process to revise the customer segmentation 

thresholds concluded in January 2012, approximately 3,800 businesses have been transferred 

from the corporate to the small business segment. 

These customers are served by 6,900 staff consisting of account and branch managers. 

“Anti Crisis” measures to support small to medium-size enterprises and 

families 

During the year the banks in the Group participated in new initiatives organised at national 

and local level and continued measures launched since 2009 to help families and businesses 

in their respective local markets, co-operating with public institutions (chambers of commerce, 

regional and provincial governments) and guarantee bodies. 

With regard to action for SMEs, the UBI Banca Group adhered on 21 st March 2011 to the 

“Agreement on Loans to Small to medium-size enterprises” (the “moratorium”) signed on 16 th 

February 2011 by the Italian Banking Association, the Ministry of the Economy and Finance 

and by other business associations 3 . 

That agreement involved: 

- the extension from 31 st January 2011 until 31 st July 2011 of the time limit for the 

presentation of applications to defer loans to banks by SMEs that had not already taken 

advantage of a similar benefit, under the same conditions as the 2009 “Joint 

Announcement”; 

- the extension of the repayment schedules for medium to long-term loans which had 

benefited from the deferral under the Joint Announcement by up to a maximum of two 

years (three years for secured loans). 

By signing that agreement, the Group is committed to maintaining the contractually agreed 

interest rate if, amongst the other conditions, the extension had benefited from the 

intervention by the Cassa Deposito e Prestiti (CDP – state controlled fund and deposit 

institution) with the use of funds made available by that institution. To achieve that a special 

agreement with the CDP was signed along the same lines as that signed previously by the 

Italian Banking Association. 

1 Businesses with a turnover of less than €300 thousand. 

2 Businesses with a turnover of more than €300 thousand. 

3 An extension to the validity of the “Joint Announcement” for medium to long-term loans for the whole of 2012 was signed on 28 th 

February 2012. 

43

The grant of loans by banks in the Group to strengthen the capital of SMEs, again in 

accordance with the Agreement, continued. 

From the start of the initiative until 31 st December 2011, the Group had received 

approximately 16,800 applications to benefit from the intervention provided under the “Joint 

Announcement” – basically attributable to medium to long-term loans – for a total of €4.8 

billion, of which over 14,500 had already been processed for a quota of deferred repayment on 

capital amounting to €585 million. Almost all the applications meeting the requirements for 

eligibility were accepted. 

In accordance with the “Agreement on Loans to Small to medium-size Enterprises”, again as at 

31 st December 2011, 85 applications to extend repayment schedules on loans had been 

processed, for which the remaining debt, in terms of the principal, amounted to approximately 

56 million euro. 

Again as part of “anti crisis” action taken, the Group continued with the grant of loans to 

SMEs through the use of funding from the Cassa Deposito e Prestiti (CDP) resulting from post 

office savings. 

In detail, with regard to the first convention agreement of May 2009, which involved the 

assignment to the banking sector of €3 billion with a duration of the loans of five years only, 

Group banks have approved around 1,200 applications for intervention with over €107 million 

of loans disbursed. 

With regard to the second convention agreement of 17 th February 2010, which made €5 billion 

available with greater flexibility in terms of duration (three, five and seven years), the banks in 

the Group supported approximately 3,000 applications for intervention with over €225 million 

of loans disbursed. 

On 17 th December 2010, the Italian Banking Association and the CDP signed the third 

convention agreement which sets out the criteria for the distribution and use of funds 

amounting to €8 billion. Compared to the previous agreements, the main changes concern 

greater opportunities offered with the allocation of: 

- a “ten year budget” usable for loans with a maturity of from seven to ten years, with 

funding to the banking sector nationally of one billion euro; 

- a “stable budget” to finance the growth of SMEs, into which the funds not fully used by the 

previous budgets are gradually flowing, and which offers all maturities (three, five, seven 

and ten years). 

With regard to the third convention, as at 31 st December 2011 the Group had disbursed 

approximately 3,000 loans for an amount of €215 million. 

Finally, UBI Banca adhered to the “Memorandum of Intent” signed on 22 nd September 2011, 

by the Italian Banking Association Regional Commission with Assolombarda (a regional 

employers’ association) in relation to regulations on matters relating to reporting accounts 

past due. The Group was thereby committed to examining applications submitted by 

businesses that are members of Assolombarda to examine their position should they fall 

within those defined as “past-due” after 31 st December 2011, following the reduction of the 

time limit for reporting to 90 days. The examination is designed to verify the relationship 

between credit lines granted and drawing, showing amounts past-due with particular 

reference to their size and duration. 

A similar agreement was reached at national level when a “Memorandum of Intent” was signed 

on 23 rd November 2011 between the Italian Banking Association and various employers’ 

associations: Alleanza delle Cooperative Italiane (Alliance of Italian Co-operatives, Assoconfidi 

(association of loan guarantee consortiums), Confagricoltura (the farmers association), 

Confedilizia (confederation of builders), CIA (Italian farmers confederation), Coldiretti (the 

direct small farmers’ association), Confapi (the SMEs’ association), Confindustria 

(confederation of industry) and Rete Imprese Italia. The Group also promptly adhered to this 

initiative on 12 th January 2012. 

In consideration of the continuing difficulties in gaining access to credit and in meeting the 

relative costs, initiatives to support families hit by the economic crisis in 2011 consisted 

above all of carrying forward the institutional initiatives already commenced in previous years. 

In detail: 

44

• the “Italian Banking Association moratorium”, which forms part of the “Families 

Programme 4 ”, extended until 31 st July 2012. At the end of year Group customers who had 

benefited numbered approximately 2.500, for a residual debt of €230 million; 

• the “solidarity fund for the purchase of a main dwelling 5 ”, which was created as the result 

of an initiative by the Ministry of the Economy and Finance and became operational at the 

end of 2010; 

• the “Loans of hope” 6 which as a result of amendments made in 2010 by the Italian Banking 

Association and the Italian Episcopal Conference, increased its effectiveness with the 

disbursement of 72 loans for a total of €417 thousand, approximately four times the 

amount disbursed the year before; 

• the “New babies loan”, which involves the creation of a guarantee fund to facilitate access to 

credit for families with a child born or adopted between 2009 and 2011. It has allowed 438 

families to obtain a guaranteed loan for a total of over €2.2 million; 

• the agreement signed between the Italian Banking Association and the CDP for the grant of 

loans to support Abruzzo families hit by the 2009 earthquake. 

In September 2011, the Group adhered to the “Give them a future” programme, set up by the 

Italian Banking Association and the Youth Ministry, to disburse subsidised loans to young 

students, by means of a loan of the same name, which follows on from the previous “Give 

them credit” programme. The Group has already received the first applications and an 

assessment of the success of the initiative will become possible as the year progresses. 

Adhesion to another Italian Banking Association initiative, the “Young Couples’ Fund” is also 

in progress to provide the guarantees needed to obtain a mortgage for young couples or even 

single parent families with young children with “atypical” or temporary employment contracts 

to purchase a first home. 

To confirm the Group’s closeness to its traditional local markets, it intervened, through Banco 

di Brescia and Banco di San Giorgio, to support towns in the Veneto and Liguria regions 

respectively, hit by flooding in October 2010 and November 2011, by adhering promptly – both 

for families and for SMEs – to the measures of the Ordinances of the President of the Council 

of Ministers No. 3906 of 13 th November 2010 and No. 3974 of 5 th November 2011 (deferral of 

mortgage repayments). 

Private individuals 

The commercial strategy for the private individual segment in 2011 was designed to attract 

new financial wealth and more specifically to attract new direct funding in order to provide 

adequate support for the maintenance of overall structural balance. 

Commercial action included specific initiatives focused primarily on enhancing the Group 

advisory approach as the main distinctive feature of the Group with respect to the competition. 

Examples included the “Half an hour for your savings” campaign and promotional initiatives 

on products, some of which linked to competitions with prizes, such as the “Marry us out of 

interest” and “Brilliant savings”. These commercial initiatives were supported by specific 

advertising activities in all branches and by a carefully designed advertising campaign in all 

the main national and local media channels (press releases, radio commercials, poster and 

internet campaigns). 

4 The agreement involves the deferment for at least twelve months of repayments on mortgages of up to €150,000 taken out for the 

purchase, construction or renovation of a main dwelling even with arrears in payments of up to 180 consecutive days for customers: 

- with taxable annual income of up to €40,000; 

- who have suffered from particularly negative events (death, job-loss, becoming non self-sufficient, becoming eligible for state 

redundancy benefits). 

5 For mortgage contracts for the purchase of a main dwelling for borrowers, the fund gives the possibility for a customer, if certain 

conditions are met, to apply for the deferral of repayments not more than twice for a maximum period of not longer than 18 months 

in the life of the mortgage. 

6 For families that have lost all income from work, have no unearned income or income other than that generated by the ownership of 

a home or ordinary or extraordinary state redundancy benefits. It is designed to implement projects for the return to work or the 

start of small businesses. 

45

In the fourth quarter of 2011, the Group launched a new service model for high income 

bracket “affluent” customers (over €300 thousand), in accordance with the guidelines defined 

in the Business Plan. It was named UBI Gold and oriented on three key spheres: the adoption 

of an advisory approach structured on investment and protection areas, scheduled financial 

check-ups during the year and the provision of specialist products and fidelity initiatives. The 

new model was publicised by means of press campaigns, maxi poster campaigns, direct 

marketing and events held in co-operation with the Accademia del Teatro della Scala (La Scala 

opera house academy). A presentation road-show was also organised in major towns and cities 

in which all the main branch and affluent account managers were involved. 

At the same time the functions of the financial advisory platform were also developed to 

increase their capacity to formulate appropriate investment proposals, which take account of 

both financial optimisation approaches and the professionalism of the account managers and 

their ability to assist customer-investors with the optimum allocation of assets in their 

portfolio. 

The advisory approach was also extended to other spheres and to lending in particular, where 

a tool was implemented which supports the commercial network when making proposals to 

customers. This also simplifies all the processing work involved in mortgage applications. 

With a view to increasing fidelity, the Group launched an important initiative in 2011 with the 

new programme “Formula UBI”, dedicated to holders of Libra credit cards and Enjoy prepaid 

cards. The programme contains a distinctive feature compared to conventional fidelity 

programmes employed in the sector because it not only rewards use of the card, but also a 

wide range of Group products and services (e.g. loans, non life insurance policies, etc.). 

DEVELOPMENT OF PRODUCTS AND SERVICES: CURRENT ACCOUNTS 

On 8 th September 2011 the new offer, “I WANT TUBI”, targeted at teenagers aged 13 to 17, was 

launched with which UBI Banca has conquered first place in the category of accounts for 

children and young people in the special class for the best banking products chosen by the 

financial daily Milano Finanza. 

“I WANT TUBI” is an original promotion which involves products and services specially designed for this 

customer segment, presented on a special young and innovative website. The brand was chosen to 

represent the world of teenagers facing the stimulating challenge of becoming adults, winning their own 

independence and establishing their own personalities in all aspects of life. 

The account I WANT TUBI is completely free of charge and includes a “Bancomat” debit card, to make 

secure cash withdrawals and purchases in Italy, online and while on vacation abroad. The debit card is 

fitted with an innovative on/off function which allows the card to be activated and deactivated at any 

moment according to need. A Qui UBI Internet Banking information service is also provided so that 

customers can check all their spending. The account also offers gross interest earned on the account of 

1%. New customers immediately receive a prize awarded to the young account holders, who also gain 

access to a mix of true and genuine opportunities, the result of co-operation agreements with partners 

and brands of interest to the target customers. A competition is also held with valuable prizes and the 

opportunity to be selected for a study scholarship. 

Advertising and customer relationship activity continued, again for the young target segment, 

dedicated to Clubino, the savings book for children aged from 0 to 12, which has received two 

prestigious awards (“GrandPrix Relational Strategies” and the Premio Freccia d’Oro 

Assocomunicazione). 

UBI Banca has also renewed the terms and conditions for the Duetto Basic account, 

eliminating charges for branch withdrawals to make this account even more suited to the over 

65 target segment. 

This action has also partially met the requirements of Decree Law No. 201/2011, which 

requires the existence of a dedicated current account for “socially disadvantaged” groups that 

is totally exempt from bank charges and expenses. 

Work on a project is in progress on the products front for the renewal of the range of current 

accounts with the definition of a new modular current account, better able to meet demands 

resulting from the following factors: 

46

- the global financial crisis, which has reduced the size of markets substantially and rendered 

customers increasingly more demanding in their requirements for simplicity, clarity, 

customised services, assistance and stability; 

- the changed regulatory context which in responding to consumers demands, requires a 

stronger focus on issues such as the simplicity of product ranges and transparency in the 

terms and conditions that apply. 

Small Businesses 

The Group renewed its commitment to support small to medium-size enterprises in 2011, 

especially with regard to businesses able to show good prospects for growth. 

The growing cost of funding nevertheless required the use of attentive pricing policies, 

extremely carefully gauged to match the risk profile of corporate customers. Activity was 

therefore commenced and organised for the constant monitoring of pricing and to bring price 

levels into line with company credit ratings and the cost of funding. 

Initiatives were launched during the year as part of the SME project, designed to improve 

performance and to increase the capacity to assist businesses in four areas: the development 

of foreign related activities, as a result of increased co-operation between branches and 

specialist foreign services units; approved growth in short term lending; the ability to attract 

and manage the liquidity of businesses; the ability to acquire new customers and serve them 

fully. 

The importance of further reinforcing the role of small business account managers became 

evident so that they can become true partners to businesses, able to assist them in the choice 

of sources of funding, treasury management, internationalisation processes and in acquiring 

knowledge of opportunities for subsidised loans and guarantees. A training project was 

therefore started which will continue throughout 2012. It is designed to spread best practices 

on the subjects identified, throughout the whole distribution network. 

PRODUCT DEVELOPMENT FOR THE SEGMENT: 

CURRENT ACCOUNTS 

Marketing of Utilio Click&Go was launched during the year, a bundled product, which provides the use 

of a set of products and services under special terms and conditions for the payment of a fixed monthly 

charge. It is targeted at shop-keepers, free-lance professionals and trades persons who prefer to use 

electronic channels such as internet banking, POS terminals and ordinary and evolved ATMs. Customers 

are also given the opportunity to customise the range of products and services according to their own 

need, by adding further product combinations, such as a POS terminal or a credit card with special 

terms. 

Utilio Click&Go won the “Innovation Award” prize in the “Business accounts and cards” category, 

awarded by the financial daily Milano Finanza in co-operation with Accenture. The prize was awarded for 

the innovative features of the bundle offered. 

LOANS 

Guarantee fund for SMEs (pursuant to Law No. 662/1996) 

The use of public sector, credit risk mitigation instruments, such as the Guarantee fund for SMEs 

(pursuant to Law No. 662/1996), continued, in order to facilitate access to credit for SMEs. 

Businesses may benefit from intervention by the fund for any type of operation, provided it is directly 

related to a business’s activities. The guarantee generally covers between 50% and 70% of the amount of 

the loan up to a total maximum amount guaranteed per company of €1,500,000 euro, depending on the 

nature of the eligible operations, the type of beneficiaries and their location. 

Banca Carime and Banca Popolare di Ancona are among the main banks involved in the use of the fund 

in the sector in terms of volumes. Total loans granted amounted to €725 million, of which €331 million in 

2010 and €346 million in 2011. These figures should increase because in 2011 the internal process for 

guarantee applications became fully operational in the other network banks. 

UBI Banca and SF Consulting, a company controlled by the Finservice Group and in which a 35% 

interest is held by the Group, signed a convention for the provision of support and advisory activities in 

relation to formalities for the issue of guarantees from the fund, valid for all the network banks (except 

for Carime and BPA, already operational). The aims of the convention are to support account managers 

in numerous activities ranging from the assessment of the feasibility of an operation (including 

verification of the subjective and objective requirements of a business) to the acquisition of the guarantee 

47

certification. As part of the convention, SF Consulting has created a special IT platform, implemented by 

the Group, which allows account managers to interact with the company while applications are being 

processed. 

Direct guarantee from SGFA - Società di Gestione Fondi per l’Agroalimentare Srl 

The Group commenced operations using the “direct” first level guarantees which SGFA is able to issue in 

order to acquire an additional means to protect against risk towards farming businesses and at the same 

time to satisfy requests from trade associations to facilitate access to credit by these businesses. 

This guarantee is the same as a standard unsecured bank guarantee issued to the bank on behalf of the 

borrowing business, after independent risk assessment has been performed. 

The “direct” guarantee issued by SGFA covers 70-80% of the amount of the loan and is recognised as an 

appropriate credit risk mitigation instrument because that company is covered by a guarantee of last 

resort from the Italian government. 

Subsidised loans 

In order to facilitate access by customers to the main forms of subsidised loans provided by regional, 

national and EC legislation, the UBI Banca Group, assisted by SF Consulting, a company specialised in 

the supply of consulting services in the subsidised loans sector, is able to offer companies full support as 

follows: assessment of the eligibility of companies for subsidies, the preparation of investment projects, 

the assessment of investment plans and general assistance in making and processing applications for 

subsidised loans right through until disbursements are actually received. 

SECTOR PRODUCTS 

Agreement with Assofranchising 

During the year the Group also concluded a commercial co-operation agreement with 

Assofranchising – the Italian Franchising Association, designed to develop the franchising 

sector. 

The franchising sector is one which stands out for its fast growth over the last two years and 

the Group intends to support it further, by continuing to work at the side of local business 

communities. 

The agreement involves the willingness of the Group, for franchisors, to support investments 

and worthwhile financial operations relating to affiliated brands. For franchisees, in addition 

to access to basic banking services, a dedicated credit line is offered to meet the investment 

needs of both franchisees who are already operational and those at the start-up stage. 

This line was designed in co-operation with the main commercial guarantee consortiums with 

whom solid relationships have been established over many years. 

Authorities, Associations and the third sector 

The year 2011 saw the progressive establishment of service models for authorities and third 

sector associations performed with the following objectives: to meet the specific demands of 

these customers more efficiently and effectively; to grasp opportunities provided by market 

trends; to exploit developments in the legislative and regulatory contexts of the sectors 

concerned. 

New types of portfolio were created to help achieve these objectives, currently being added to, 

which will become fully operational in the first half of 2012, once details of accounts had been 

examined and reclassified following the issue in August 2011 of a new more accurate 

classification of the different types of authority (based on the different types of legal status and 

organisational models). This action will make it possible to improve the detection of specific 

needs, the definition of targeted commercial strategies, the development of dedicated products 

and services and therefore the management of the respective business areas. 

ASSOCIATIONS AND GUARANTEE BODIES 

In the context of policies to provide financial support to SMEs on the Group’s local markets 

and with a view to facilitating access to credit under competitive conditions, even in the 

current difficult economic environment, a central role has always been played by guarantee 

consortiums and trade associations as well as by public sector instruments to mitigate credit 

risk. The latter include the Guarantee fund for SMEs (pursuant to Law No. 662/1996) and the 

fund managed by SGFA (Fund Management Company for the agricultural and food sectors) for 

farms. 

48

As a result of new loan disbursements – €1,666 million for over 20,800 loans – total 

outstanding loans backed by guarantee bodies and guarantee funds amounted at year-end to 

almost €4 billion. 

The broad range of existing products was updated to incorporate the main initiatives organised 

in co-operation with trade associations (e.g. Assofranchising) and local public institutions 

(chambers of commerce, regions and provinces), in addition to specific initiatives launched at 

local level by individual Group banks. During the year the range of services and products was 

also reviewed to simplify and update the rates and charges applied to convention agreement 

credit lines to bring them more into line with the increased cost of funding and credit risk and 

with the actual value of the guarantees acquired in terms of compliance with the requirements 

set by the Bank of Italy supervisory regulations for the purposes of reducing capital 

requirements. With regard to the latter, in order to able to benefit from the smaller capital 

requirements made possible by the measures mentioned, changes were made in the last 

quarter of the year to IT and reporting systems designed to identify guarantees acquired on the 

basis of the following factors: the legal status of the guarantor (guarantee bodies registered 

pursuant to Art. 106 or Art. 107 of the consolidated banking act), type of guarantee (direct or 

first request or subsidiary), the possible presence of suitable counter guarantees. 

In the light of the growing Group business with guarantee bodies and the corporate changes in 

progress concerning these (company reorganisations and mergers between guarantee bodies 

and the transformation of some guarantee bodies into intermediaries supervised by the Bank 

of Italy), a new service model was adopted during the year designed to standardise the 

processes for stipulating conventions, for assessing guarantee bodies and monitoring 

operations for all the banks in the Group. 

In order to support that business, the internet platform “UBI-Confidi Web” (with registrations 

to-date by over 125 guarantee bodies) was implemented with new functions designed to 

facilitate information exchange between the Bank and guarantee bodies with which 

agreements are held and also to manage business. 

Finally, with a view to supporting local businesses and providing a concrete answer to 

worrying concerns over credit rationing for the real economy, initiatives are being studied for 

specific “local aggregations” (represented for example by trade associations), designed to 

acquire liquidity to be “recycled” by making credit lines available under competitive conditions 

destined to business communities in the local markets of the Group. 

THIRD SECTOR 

Changes in the quantitative and qualitative nature of the demand for welfare, resulting from 

the growing differentiation in social needs, have made standard responses provided by public 

sector provision insufficient, especially in consideration of the continuous and structural 

contraction of its finances. In this context new space has opened up for intervention by the 

third sector, which is now called upon to play a fundamental role in society in Italy. 

In order to meet this challenge, nonprofit organisations must rethink their activities to address 

the emergency of the growing need for resources in a context of progressively diminishing 

public and private sector finance caused by the economic crisis. The role of the banking sector 

is therefore central because it can make an important contribution in assisting the third sector 

on its path to social innovation and sustainable growth. 

In July 2011 the banks in the Group started to market products and services under the brand 

name UBI Community, a new service model dedicated to the church and non-church, 

nonprofit world. The model was identified and developed as part of a project launched in 2010, 

designed to further develop the good positioning of the UBI Banca Group in the sector 

(strengthened by a share of deposits and loans historically higher than the average for the 

banking sector, thanks to a traditional presence in regions in which nonprofit organisations 

are more numerous) and to furnish concrete answers to the needs mentioned above. 

The network banks organised a series of meetings for the launch of UBI Community, designed 

mainly for operators in the sector in the principal towns and cities in which they operate. The 

road-show got off the ground in Milan on 10 th November 2011, moving to Pavia, Jesi, Genoa 

and Bergamo. It will continue in 2012 to reach other important towns and cities: Brescia, 

Turin, Varese, Rome. 

The requirement on which the UBI Community service model is based is the presence in 

branches of willing and qualified personnel who are able to understand the specific nature of 

nonprofit realities. The network banks therefore started a dedicated training programme for 

49

specific professional roles, designed to transfer the necessary skills to the distribution network 

needed to establish effective and virtuous relationships. So far approximately 600 employees 

have been trained, mainly branch managers and commercial and credit liaison officers as well 

as personnel from central units and local areas. 

The commercial range offered for nonprofit organisations is composed of solutions for everyday 

operations and for growth, to support not only liquidity requirements that arise during 

ordinary operations, but also and above all investments in new initiatives and of a project 

nature. Our products and services, which will gradually grow in time, include the following 

- a low charge dedicated current account with a base number of transactions free of 

charge; 

- financial solutions for advances on donations and income from public and private 

sector institutions; 

- a range of loans for development and growth; 

- products and services supplied with subsidised terms and conditions for stakeholders 

(employees, associate workers, volunteers, association members and users of the 

services provided by the organisations themselves). 

Tools were also designed for a more accurate assessment of the creditworthiness of nonprofit 

organisations, with the objective of valuing them on the basis of their specific characteristics, 

by acquiring information of a non accounting and qualitative nature. 

AUTHORITIES 

The “authorities” segment comprises public authorities and those institutions for which the 

banks in the Group provide treasury and cash services (at the end of the year, 2,174 services 

of this type were managed). 

In November the Group was subject to an audit in accordance with regulations for the renewal 

of its certification for the quality of treasury services provided to public authorities (UNI EN 

ISO standard 9001:2008) issued by an accredited certification institute. 

The audit was concluded successfully and the quality certification for the provision of treasury 

services was renewed for the three year period 2012-2014, allowing the Group to continue to 

improve its operations in order to increase the quality of the products and services provided 

and to increase customer satisfaction. 

Procedures were introduced at the beginning of 2012 to renew the direct authorisation for the 

service for the “payment of pension instalments in Italy on behalf of the INPS (national 

insurance institute)” which will allow the Group to manage the payment of over 500,000 

pensions each month. 

PattiChiari Consortium: commitments to quality 

Work to rationalise the quality commitments promoted by the PattiChiari Consortium was 

concluded in 2011. The objective was to both make them clearer and easier to communicate to 

customers and to align the general voluntary regulatory framework with changes that have 

since occurred in compulsory regulations, in order to avoid unnecessary overlap. 

The dynamic nature of the project led to the exclusion of some initial commitments from the 

scope of the PattiChiari initiative and to incorporate others (comparison of current accounts; 

transfer of services; home banking and payment card security and assistance; assistance with 

loans) in uniform areas, while basically maintaining the entire contents of the existing service 7 . 

All the standards defined as part of the PattiChiari project to allow customers to make more 

aware and informed choices are currently applied as standard practice in all the network 

banks. The most important commitment for 2012 is to consolidate knowledge of them and to 

ensure they are functioning properly, partly through constant monitoring of the results 

achieved. 

7 The perimeter of the project currently comprises eleven quality commitments (current accounts compared, basic account, average 

times for closing current accounts, transferability of payment services, transferability of mortgage information, transferability of 

securities dossiers, transferability of collection orders, FARO – ATM function services, home banking security, payment card 

security, certification of mortgage expenses and interest charges) and two optional initiatives (list of services provided on an account, 

information for access to credit for small-to-medium sized enterprises). 

50

Again with regard to financial education, the commitment of banks in the Group to the 

organisation of teaching programmes for schools continued in the local markets in which the 

Group operates. The quality and overall success of the results led the PattiChiari Consortium 

to write an official letter of appreciation to underline its merits within the sector. 

The Private Banking Market 

Private Banking service of the UBI Banca Group is a specialist service available throughout the 

country, provided through network banks which operate with 350 “private bankers” in more 

than 100 dedicated units. 

UBI Private Banking is the third largest private banking operator nationally in Italy with €35 

billion of assets under management and 29,000 relationships (around 63,000 customers). 

Again in 2011 the UBI private banking service model underwent intense development in 2010 

with the expansion of advisory services at the same time in the following areas: 

1. the “Pro-Active Wealth Advisory Service” (a customised financial advisory service which 

performs thorough assessments of the characteristics and needs of family groups, 

analysing estates and proposing the best investment solutions available on the market) 

was further developed in terms of the following: 

- synergies with UBI Pramerica SGR; 

- systematic comparison with the major international investment houses; 

- professionalism and team commitment (over 2,000 meetings with customers and 

over 4,000 customised reports delivered); 

- a tested and systematically updated quantitative method with the development of 

performance attribution (analysis for each customer of the impact of strategies 

proposed by the ProAWA service); 

- expansion of the procedures employed to verify the appropriateness of customer 

portfolios and the investment proposals submitted with the adoption of a 

multivariate approach; 

- broadening the sphere of service activities to include strategy implementation 

(recommendations on one or more financial instruments); 

- advanced investment and support tools; 

2. the “Family Business Advisory Service” – designed to meet specific customer 

requirements for generation turnover, capital protection, family and corporate 

governance and estate control structures – has been gradually consolidated by means 

of an in-depth training programme and the organisation of meetings with customers; 

3. the functional evolution of the Planning and financial consulting platform which, on 

the basis of customer profile analyses acquired from answers to the MiFID 

questionnaire, is used to formulate financial solutions which constitute increasingly 

closer matches to a customer’s requirements. 

The following progress was made with the product range in 2011 

• the “UBI Pramerica asset management” range of products was broadened: 

- the number of indices underlying the open, customer portfolio management products 

was increased to give greater customisation of the product; 

- the range of Sicav classes dedicated to the private banking market was enlarged (Sicav 

cedola certa); 

• the range of banc assurance products was revised by: 

- the modification, within the broad range of products, of two private banking products 8 , 

with lower entrance thresholds to make the products available to retail customers also. 

The products were also modified with the reduction of the redemption penalties and the 

ability to redeem them from the first year. 

8 Soluzione Unit Tar. UB1 and Soluzione Unit Tar. UB13. 

51

Advertising and marketing initiatives to support the market comprised a variety of activities 

including editorial supervision of special private banking articles published in major national 

daily newspapers and periodicals and also an initiative was organised in co-operation with 

Radio 24. This involved commercials and answers to listeners questions provided by 

professionals from UBI Private Banking. Finally, two important partnerships were formed with 

Porsche Italia and Rotary, with similar target customers to those of UBI Private Banking, to 

organise local co-marketing initiatives and events. 

The Corporate Market 

In order to introduce its new distribution model, the corporate distribution network developed 

organisational changes in 2011 to focus the service model more carefully on client needs. It 

created operational units at the level of the Parent’s Commercial Department to specialise 

specifically in non local “top large” and “large” clients, while maintaining the management of 

local corporate clients with the Corporate Banking Units, which report directly to the heads of 

local departments. 

This change in the organisational structure of the commercial distribution network was 

designed to provide better management of lending (both with regard to volumes and pricing) 

and funding from large corporate clients, in order to be able to guarantee constant 

maintenance of structural balance, a requirement felt particularly in the last months of the 

year, when the Group was obliged to manage liquidity difficulties which manifested at system 

level. 

After the revision of the distribution model, at the end of 2011, the corporate market (with the 

access threshold raised from a turnover of €5 million to €15 million and the transfer of these 

clients to retail branches) numbered 31,500 clients, divided into segments and assisted on the 

basis of operational complexity and financial needs. 

Clients are assisted by 700 account managers and assistants, working in 64 Corporate 

Banking Units (of which four for the management of “top large” clients) and 34 “corners”, 

supported, for “foreign commercial” activities, by 300 specialists operating in 37 foreign 

centres. 

The distinctive approach to corporate clients is based on the concept of an integrated range of 

products and services, further strengthened by the creation of Corporate Advisory Teams 

working within the Commercial Departments of the network banks. The task of these teams, 

composed of product support personnel, is to develop synergies between network bank 

customers and the product companies in order to significantly increase the quality and variety 

of the UBI Banca range of products and services with a particular focus on high value added 

services. The Corporate Advisory Teams in network banks are also required to manage the 

demands of businesses on the basis of guidelines already formulated in 2010, which involve 

specific programmes as follows: 

• Mid Corporate Advisory: systematic activity to analyse the future needs of small to mediumsize 

businesses by means of the joint bank-client formulation of a three-year commercial 

plan (Corporate Active View); 

• Large Corporate Advisory: formulation and implementation of a detailed commercial plan 

for “large corporate” counterparties with the involvement of the main areas of expertise in 

the Group for the segment (network banks, foreign centres, product companies and centres 

of excellence). 

From the viewpoint of the development of commercial activity, the negative performance by the 

economy and markets resulted in the need in the second half of the year to formulate a 

commercial strategy differentiated by customer segment. This involved selective growth of 

loans to non local large corporate counterparties and the maintenance of support for local core 

corporate counterparties, with resort to subsidised credit instruments or subsidised funding 

for the Group where possible in order to maintain the competitivenes of the solutions 

notwithstanding the impact of the liquidity crisis. 

52

As concerns the Foreign-Commercial Sector, the Group strengthened its market position 

within the context of a general crisis, which nevertheless recorded progress for both Italian 

exports (+11.4%) and imports (+8.9%) compared to the year before. 

The commitment and effort in this area allowed the network banks to increase the quantity 

and quality of their volumes of business with corporate clients, with positive returns also in 

terms of customer satisfaction. 

The increases represent significant results above all for the non EU markets, areas on which 

the Group has a particular focus. The policy to locate representative offices on each of the 

BRIC markets is now being seen as a winning strategy and an excellent tool for increasing the 

level of service and advice provided to clients. 

The focus on business with emerging economies (Turkey, India, China, Brazil, Russia, Middle 

East) is therefore continuing in order to identify – with the assistance of commercial 

agreements and partnerships with major international operators – business areas with high 

valued added connected with the world of trade finance. 

The Group also continues to invest in: 

a) initiatives designed to strengthen its image and that of its individual local banks. After the 

success of the initiative “U will Be International” organised in 2010 at the Kilometro Rosso 

venue in Bergamo, “UBI International Open Day” was organised in Brescia in 2011, a 

genuine international trade fair open to businesses, which saw the participation as 

exhibitors of professional firms operating directly on emerging markets; 

b) constant monitoring of the quality of the service provided to clients by the dedicated 

distribution network, combined with the search for new technical and organisational 

solutions to render processes increasingly more efficient. The efforts made were rewarded 

by customer satisfaction surveys which recorded an extremely flattering opinion from the 

corporate clients interviewed; 

c) an increase in the professionalism of personnel, achieved as a result of a continuing 

commitment to the commercial and technical training of the personnel involved in the 

delivery of foreign commercial services. 

INITIATIVES IN CO-OPERATION WITH THE EUROPEAN INVESTMENT BANK (EIB) 

During the year, the UBI Banca Group fully used the first tranche of an EIB covered bond loan 

of €250 million, subscribed in April 2010 to fund businesses operating in industrial, 

agricultural, tourism and service sectors, to implement investment projects in Italy and the 

European Union. The companies funded (some in the form of finance leases) are SMEs with 

personnel numbering fewer than 250 employees or in any event businesses with employees 

numbering between a minimum of 250 and a maximum of 2,999 (mid caps). A total of 229 

loans and finance transactions were disbursed from that tranche, of which 209 to SMEs (for a 

total of €161 million) and 20 to mid caps (€89 million). 

On 11 th November 2011 the Group renewed its framework agreement with the European 

Investment Bank, which allowed it to create an additional lending budget of €250 million 

reserved to SMEs and mid caps. At the end of the year, finance of €27 million had been 

disbursed and finance of a further €20 million was at the approval or grant stage. 

Again with regard to initiatives with the EIB, as part of the credit line of €100 million granted 

by the Marches Region to BPA, the maximum amount of the investments that may be financed 

for appropriate development programmes by SMES was raised from €1.6 million to €2.5 

million in May. At the end of December financing totalling €65 million had been disbursed. 

Customer Care 

The Consultation Project 

In consideration of the attention given and the key importance attributed to customers by the 

UBI Banca Group, the “consultation” project continued into its third year of activity. The 

53

objective of the customer satisfaction survey is recognised as increasingly more central, which 

means that it now plays an operational rather than a mere reporting role. 

One of the main aims of the survey is in fact to improve the quality of services provided and to 

develop commercial and customer relationship strategies. As a consequence, the consultation 

project is losing its character as a project and is becoming a process, while consultation has 

turned into dialogue. 

Approximately 134,000 customers were interviewed in 2011 in three markets. This allowed a 

satisfaction score (TRI*M INDEX* 9 ) to be assigned to each organisational unit involved in 

customer relationships. 

During that same period approximately 21,000 interviews were carried out on the customers 

of competing banks (in order to define a benchmark), a large sample, because of the need for 

comparative data at local 

level and benchmark 

Group satisfaction index 

readings for each province 58 

in which the Group 

57 57 

operates and also to 57 

improve the accuracy of the 

56 56 

56 56 

56 56 56 56 

56 

analysis. 

The results of this survey, 

which requires extensive 

customer involvement, 

rewarded the work which 

the Group carries out with 

retail counterparties: the 

satisfaction score for UBI 

Banca 10 was 56 points, 

three points above the 

benchmark. 

The Group also succeeded in increasing the degree of corporate client satisfaction in a delicate 

period historically for the market and for relationships with the banking sector: the TRI*M 

INDEX actually increased by two points compared to 2010, with a score of 54 points. 

The score for private banking customers implicitly confirmed the difficulties caused by a crisis 

that has not yet ended, with a confidence level of 52 points for this customer segment (down 

by three points compared to 2010). 

Having reached the third year of 

the surveys and data analysis, it 

is now known that the 

destruction or creation of 

customer satisfaction hinges on 

the relationship which is 

establised with the customers 

themselves. 

55 

54 

53 

52 

51 

53 

52 

2009 

index 

55 55 55 55 

53 53 53 

52 52 

Jul-10 Sep-10 Oct-10 Nov-10 2010 

Index 

55 55 55 55 55 55 

55 

With average satisfaction (on a scale of one to ten) of eight, which rises to 8.6 for relationships 

with habitual contacts, customers recognise the following qualities in the UBI Banca Group: 

the ability to keep its promises; it allows customers to speak to habitual contacts in the bank; 

it is precise with its transactions; it pays attention to safeguard a customer’s interests. 

The survey also provides information on areas for improvement requested by customers: more 

proposal making; more post sales attention; and when problems arise (even if only 10% of our 

customers declare they have had any), more effective management of them. 

53 

53 53 

54 54 54 54 54 54 54 54 54 

53 

52 

53 

52 52 52 52 52 

Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 2011 

Index 

Retail Corporate Private 

How satisfied are you with your contact? 

Base: total sample 

AVERAGE 8.6 

6 11 82 

Score 1‐6 Score 7 

1 

9 The score measures the level of customer satisfaction as the weighted sum of the judgements which interviewees make of the Bank 

on the basis of four variables: two linked to the degree of satisfaction (overall satisfaction and recommendability) and the other two 

which measure fidelity (probability of repeat purchases and advantage over the competition). 

10 The scores for 2009 and 2010 are different from those published in the 2010 Annual Report, because they have been recalculated 

following changes to the reference scale, which was enlarged to improve the accuracy and to therefore refine the analysis. 

54

This dialogue with customers is not only used to create a satisfaction score to monitor the 

perceived quality of services, but it is also an indispensible tool for acquiring the opinions of 

customers on a large number of variables involved in relationships and products and services. 

In-depth focus groups (on products and services, commercial image, institutional image, social 

responsibility, etc.) were used to investigate the requirements and expectations of those 

involved, with corrective action taken to constantly improve the service. 

Complaints 

The focal point of the Group’s capacity to manage complaints is to consider a complaint as an 

opportunity to improve the quality of services and as an instrument needed to monitor the 

level of customer satisfaction. A virtuous process can be commenced on the basis of the 

opinion of a customer or potential customer expressed through official dispute channels or 

simply as a complaint. The presentation of a complaint can in fact be experienced as the 

manifestation of an act of direct and constructive participation, which expresses basic trust in 

our organisation and which therefore differs from more radical reactions to leave the bank 

immediately. 

Distribution of complaints received by network banks in 

2011 by channel of receipt 

Hardcopy 66.1% 

Email 23.1% 

Verbal/telephone 

0.1% 

Website 10.7% 

It is UBI Banca’s objective to 

strengthen and progressively refine its 

complaints management system by 

increasing capacities to consult and 

involve customers and to correct 

inefficiencies. This led it again in 2011 

to make investments designed to make 

it easier for customers to inform it of 

failings and to educate personnel on 

the proactive management of 

inefficiencies. Action was therefore 

taken to improve the sections of the 

websites dedicated to these subjects 

designed to further simplify access to the Bank through remote channels (use of the website 

and electronic mail represents 34% of the channels through which official complaints are 

made). Investment in personnel was made in terms of classroom training, with sessions on 

specialist subjects and with modules for integration in already existing courses. A total of 

1,655 employees were involved during the year. 

The process for the active management of complaints, introduced with operational units in 

2009, continues to produce positive results. A further reduction was recorded in 2011 in the 

main type of complaint which was inefficiencies in the execution of transactions (-8.9% and a 

percentage of the total which fell from 41.8% in 2009 to 32.4% in 2011), with faster response 

times (24.8 days on average) and a decrease in the amounts reimbursed to customers. 

A total of 4,518 complaints were processed in absolute terms by the network banks with a 

percentage resolved in favour of the complainants of 39%. The reduction in complaints due to 

operational inefficiencies was accompanied by a numerical increase in problems relating to the 

application of terms and conditions and compounding of interest (+40.5% accounting for 7.4% 

of total complaints), caused partly by regulations which are far from clear. 

In this context, as a result of Legislative Decree No. 28/2010, which came into force in March, 

a compulsory mediation system has come into operation in Italy as a necessary condition for 

taking legal action and that now includes action involving banking and insurance contracts. 

This system was welcomed by the UBI Banca Group, because it enables a direct dialogue to be 

opened up with customers on points in dispute. Consequently solutions can be sought, with 

the chance to re-establish relationships before appearing before a judge with opposing 

positions. 

Over twelve months, 278 applications for mediation have been presented by customers, to 

which particular attention was paid. Only those which were clearly without grounds and 

which assumed no common ground for discussion were rejected. As many as 215 of the 278 

55

applications received were processed during the year with only 39 settled in favour of the 

customer. 

The data for complaints contested in 2011 is as follows: 78 applications to the Financial 

Banking Arbitrator; five applications to the Banking Ombudsman; four applications to the 

Consob Chamber of Reconciliation and 

Arbitration. 

Distribution of complaints received in 2011 by network 

distribution unit of the network banks 

Less than 60% of network bank outlets 11 

were involved in official complaints: 

- 41% received no complaints during the 

whole of the year; 

- 18% received one complaint only; 

- 14% received two complaints; 

- 27% received an average of 6.07 

complaints annually. 

18% 

41% 

14% 

27% 

Again in 2011 data on complainants 

Oultets with over two complaints per year 

Outlets with two complaints per year 

showed that over 94% were from 

Outlets with one complaint per year 

Outlets with no complaints 

customers with active accounts with the 

Group’s network banks, while the remaining portion were presented by non customers. What 

emerges is an indicator of the frequency of complaints from existing customers of a little over 

eleven complaints for every 10,000 customer relationships. The figures available for the sector 

nationally (source: Italian Banking Association) show a percentage of complaints for the 

network banks of the UBI Banca Group of a little over 3%, significantly less than the market 

share of the Group in terms of branches (5.6%). 

11 Bank outlets: branches, mini-branches, corporate banking units, private banking units, company branches, treasury branches 

and other operating units at the service of customers. 

56

The distribution network and 

positioning 

The branch network of the Group 

As at 31 st December 2011 the UBI Banca Group had 1,884 branches (reduced to 1,809 at the 

date of this report) compared to 1,901 at the end of 2010. 

The branch network of the UBI Banca Group in Italy and abroad 

number of branches 

31.12.2011 31.12.2010 Change 27.3.2012 

UBI Banca Scpa 2 2 - 2 

Banca Popolare di Bergamo Spa (1) 358 365 -7 358 

Banco di Brescia Spa 364 362 2 342 

Banca Popolare Commercio e Industria Spa (2) 235 234 1 225 

Banca Regionale Europea Spa (3) 229 229 - 225 

Banca Popolare di Ancona Spa 238 248 -10 226 

Banca Carime Spa 294 294 - 270 

Banca di Valle Camonica Spa 66 64 2 66 

Banco di San Giorgio Spa 57 57 - 55 

UBI Banca Private Investment Spa 26 31 -5 25 

Centrobanca Spa 6 6 - 6 

IW Bank Spa 2 2 - 2 

B@nca 24-7 Spa 1 1 - 1 

Banque de Dépôts et de Gestion Sa - Svizzera 3 3 - 3 

UBI Banca International Sa - Lussemburgo 3 3 - 3 

TOTAL 1,884 1,901 -17 1,809 

Total Branches in Italy 1,875 1,892 -17 1,800 

Financial advisors 713 786 -73 

ATMs 2,451 2,470 -19 

POS terminals 61,224 61,220 4 

(1) The figure as at 31 st December 2010 included a temporary mini-branch for the launch of the prepaid card Enjoy. 

(2) The figures do not include nine units dedicated exclusively to pawn credit operating under the Banca Popolare Commercio e 

Industria brand. 

(3) The figures include three foreign branches. 

As already reported in the previous section “Significant events that occurred during the year”, 

the changes that occurred compared to the end of 2010 mainly reflect further reorganisation of 

geographical market coverage, performed between 2011 and 2012. In detail: 

- the action taken with effect from 18 th April 2011 led to the closure of 16 branches and 12 

mini-branches affected by geographical overlap, along with the transformation of 13 smaller 

branches into mini-branches and one mini-branch into a branch; 

- action taken after the end of the year, effective from 27 th February 2012, involved the 

closure of 32 branches and 46 mini-branches, as well as the transformation of 40 branches 

into mini-branches and one mini-branch into a branch. 

A detailed summary is given below of the changes that occurred in 2011 and until the date of 

this report, which affected the Group presence in Italy: 

• BANCA POPOLARE DI BERGAMO closed a mini-branch in March 2011, temporarily opened in 

Viale Vittorio Emanuele II in Bergamo for the commercial launch of the prepaid card Enjoy, 

and opened one new branch at Casatenovo (Lecco) in May, while it closed six branches in 

57

April 1 . It closed down a mini-branch in Viale Vittorio Emanuele II in Bergamo on 1 st July 

located in the national insurance offices and opened a new mini-branch in Cagliari in 

August. In November it transferred a mini-branch in Via Rizzoli (at the company RCS), 

Milan to BPCI and a Como branch was closed in February 2012, while a new Rome branch 

was opened in March 2012 in Via dello Statuto; 

• BANCO DI BRESCIA opened two mini-branches in March in Brescia in Via Volturno and at 86 

Via Orzinuovi, while it closed a total of 22 branches in February 2012 2 ; 

• BANCA POPOLARE COMMERCIO E INDUSTRIA in November opened a mini-branch in Via Rizzoli 

(at the company RCS), Milan while in February 2012 it closed a total of ten units 3 ; 

• BANCA REGIONALE EUROPEA opened new branches between February and March 2011 at 

Ovada (Alessandria) and in Turin, in Corso Regina Margherita and also two new minibranches 

at Casale Monferrato and Tortona in the public health centre premises, while it 

closed two mini-branches again at Casale Monferrato in Via Hugues and at Rivoli (Turin) in 

Piazza Martiri della Libertà. On the other hand it closed three units in April 4 , while in June 

it opened a branch at Chieri (Turin). In January 2012, a new mini-branch opened in 

Alessandria at the Santi Antonio e Biagio hospital, while five mini-branches closed in 

February 2012 5 ; 

• BANCA POPOLARE DI ANCONA opened a total of one branch in May at Faenza (Ravenna) and 

five new mini-branches: in January 2011 at Frosinone at the air and naval base and 

between April and June at Torre San Patrizio (Fermo), Acquasanta Terme (Ascoli Piceno), 

Limatola (Benevento) and Riardo (Caserta) by transforming four existing treasury branches. 

It performed 14 closures in April 6 . At the end of 2011 two mini-branches closed in Naples in 

Via Acton at the naval base and in Via Salvator Rosa, while total closures in February 2012 

numbered 13 7 . Finally a branch was opened in March 2012 at San Salvo (Chieti); 

• BANCA CARIME opened a second branch at Brindisi in April in Via Commenda, while in 

March 2011 it closed a mini-branch at Vibo Valentia in Corso Vittorio Emanuele III. On the 

other hand 24 closures occurred in February 2012 8 ; 

• BANCA DI VALLE CAMONICA transformed two former treasury branches at Castione della 

Presolana (Bergamo) and Provaglio d’Iseo (Brescia) in the district of Provezze into minibranches 

in June; 

• BANCO DI SAN GIORGIO opened a new branch in June at Finale Ligure (Savona) and closed a 

mini-branch in March 2011 in Via alla Porta degli Archi in Genoa. On the other hand, in 

February 2012, two mini-branches ceased operations in Via Nazionale, La Spezia and in Via 

Pietro Gori, Sarzana (La Spezia); 

• UBI BANCA PRIVATE INVESTMENT closed five branches in April in Cagliari, at Castellammare 

di Stabia (Naples), at Macerata, in Naples in Via Alvino and in Rome in Via Anicio Gallo, 

while the branch in Via Ricasoli, Florence closed in February 2012. 

A full list of all Group branches in Italy and abroad is given in the final pages of this publication. 

1 Monza at 27 Via Cavallotti; Varese at 146 Viale Borri and in Via Magenta; Gallarate (Varese) in Via Verdi; Saronno (Varese) in Via San 

Giuseppe; Olgiate Comasco (Como) at 39 Via Roma. 

2 Barghe, Chiari in Via Maffoni, Gussago in Via Richiedei, Leno in Via Garibaldi, Lumezzane in Via Montini in the San Sebastiano 

district and in Via Bixio in the district of Pieve, Manerbio in Via Cremona, Ospitaletto in Via Rizzi, Salò (Brescia) in Piazza Vittoria; 

Soncino (Cremona) in Largo Manzella; Lodi in Via Fissiraga; Codogno (Lodi) in Via Rome; Mantua in Via Bertani; Quistello (Mantua) 

in Via Europa in the Nuvolato district; Cologno Monzese (Milan) in Via Cavallotti; Paderno Dugnano (Milan) in Via Tripoli; Arta Terme 

(Udine); Viterbo in Via Cattaneo ed in Via San Lorenzo; Venezia; Verona in Piazza Simoni; Storo (Trento) in the Lodrone district. 

3 Milan in Viale Pirelli, in Piazza Siena and in Via Saffi; Gorgonzola (Milan); Brallo di Pregola (Pavia); Voghera (Pavia) in Via 

Sant’Ambrogio; Imola and San Giovanni in Persiceto (Bologna); Formigine (Modena); Colorno (Parma). 

4 Novara at 5 Largo Don Minzoni, Pinerolo (Turin) in Piazza Vittorio Veneto; Borgosesia (Vercelli) in Via Duca d’Aosta. 

5 Cuneo in Via Margarita; Casteldelfino and Crissolo (Cuneo); Valenza (Alessandria) in Via Lega Lombarda; Ghiffa (Verbania) 

6 Ancona in Via Trieste; Osimo (Ancona) in Via Marco Polo; Jesi (Ancona) in Via Gallodoro; Pesaro on the Adriatica state road and Via 

Strada delle Marche; Urbino in Borgo Mercatale; Novafeltria (Pesaro Urbino) in Piazza Cappelli in the Secchiano District; Civitanova 

Marche (Macerata) in Via Pellico in the Santa Maria Apparente District; Ascoli Piceno in Via Angelini; Montappone (Fermo); Rome in 

Via Milano; San Gregorio da Sassola (Rome); Naples in Via Schipa; Bacoli (Naples). 

7 Belvedere Ostrense and Ostra Pianello (Ancona); Appignano (Macerata); Pennabilli and Piobbico (Pesaro Urbino); Riardo (Caserta); 

Naples in Piazza del Gesù Nuovo; Terzigno (Naples); Rimini in Via Caduti di Marzabotto; Guidonia Montecelio (Rome) in Piazza 

Buozzi; Perugia in Via dei Filosofi; Collazzone and Fossato di Vico (Perugia). 

8 Carolei, Francavilla Marittima, Grimaldi, Rocca Imperiale Marina (Cosenza); Squillace (Catanzaro); Cutro (Crotone); Bovalino, 

Delianuova, Gioiosa Ionica, Molochio (Reggio Calabria); Briatico (Vibo Valentia); Matera in Via Dante Alighieri; Maratea (Potenza); 

Atena Lucana and Sapri (Salerno); Bari in Corso Italy and in Via M. Cristina di Savoia; Fasano (Brindisi) in Via National in the Pezze 

di Greco district and in Teano in the Montalbano district; San Pietro Vernotico (Brindisi); San Severo (Foggia) in Corso Garibaldi; 

Gallipoli and Ruffano (Lecce); Taranto in Via Battisti. 

58

The Italian distribution network of the Group is completed by units dedicated specifically to 

private banking customers (private banking units and the associated “corners”) and to 

corporate customers (corporate banking units and the associated “corners”). These were also 

affected by a series of organisational changes in parallel with the changes to the distribution 

model. 

As can be seen from the table, at the 

end of the year, 107 private banking 

facilities were operational together with 

98 corporate banking facilities 9 , an 

increase of four units. 

The organisational changes were 

concluded in January 2012: Banco di 

Brescia opened a new corporate banking 

unit (CBU) in Brescia, and transformed 

CBUs into “corners” at Iseo (Brescia) 

and Bergamo, while Banca Regionale 

Europea opened a new CBU in Turin. 

Consequently, at the date of this report 

corporate banking facilities numbered 

100 (64 CBUs and 36 “corners”). 

The distribution network of the Group is 

also supported by a network of 713 

financial advisors reporting to UBI 

Banca Private Investment, consisting of 

383 operating in the Central and 

Northern Division and 330 in the 

Central and Southern Division. The 

decrease compared to 786 financial 

advisors operating at the end of 2010 

forms part of the rationalisation process 

started in the second half of 2008 and 

concluded during the year, designed to 

increase the average per capita portfolio 

of financial advisors 10 and to improve 

the quality of the network. 

Private banking and corporate units 

31.12.2011 31.12.2010 Change 

Private Banking Units 107 107 - 

Private Banking Units (PBU) 58 58 - 

Banca Popolare di Bergamo 14 14 - 

Banco di Brescia 7 12 -5 

Banca Popolare Commercio e Industria 8 8 - 

Banca Regionale Europea 6 6 - 

Banca Carime 5 3 2 

Banca Popolare di Ancona 7 5 2 

Banca di Valle Camonica 2 1 1 

Banco di San Giorgio 3 3 - 

UBI Banca Private Investment 6 6 - 

Private corners 49 49 - 

Banca Popolare di Bergamo 21 18 3 

Banco di Brescia 6 3 3 



Banca Carime 7 11 -4 

Banca Popolare di Ancona 9 11 -2 

Banco di San Giorgio - - - 

Corporate Banking Units 98 94 4 

Corporate Banking Units (CBU) 64 66 -2 


Banco di Brescia 11 15 -4 



Banca Carime 5 5 - 


Banca di Valle Camonica 2 2 - 

Banco di San Giorgio 3 3 - 

Corporate corners 34 28 6 


Banco di Brescia 11 8 3 

Banca Popolare Commercio e Industria 5 4 1 

Banca Regionale Europea 2 3 -1 

Banca Carime 3 3 - 


Banca di Valle Camonica 2 1 1 

Banco di San Giorgio - 1 -1 

In an increasingly more concentrated sector (the four largest companies occupy approximately 64% of the 

market), the data for December published by Assoreti (national association of stock brokerage companies) 

place UBI Banca Lombarda Private Investment in tenth place in terms of total assets (ninth in terms of 

banking groups), with a market share of close to 2.20%, almost unchanged compared to the end of 2010. 

9 The following changes occurred during 2011: 

- with regard to private banking facilities, in January Banco di Brescia streamlined its presence in Milan and Brescia unifying the four units previously 

operating in the two Lombard cities into just two PBUs, while in April it opened two separate corners at Cremona and Mantua, following the closure of its 

Cremona and Mantua PBU. In October it closed its Verona and Mantua PBU and its Mantua corner, but opened a new corner at Treviso and transformed its 

Lodi PBU into a corner. Banca Carime, on the other hand, closed a corner at Vibo Valentia in March and a corner at Lagonegro (Potenza) in August, while it 

transformed two corners at Reggio Calabria and Lecce into PBUs. In August Banca di Valle Camonica opened a new PBU in Brescia. In that same month 

Banca Popolare di Bergamo transformed two PBUs at Grumello del Monte and Ponte San Pietro (Bergamo) into corners, opening two new PBUs in Bergamo 

and at Varese and a new corner in Milan. Again in August Banca Popolare di Ancona transformed two corners at Ascoli Piceno and Caserta into PBUs; 

- as concerns corporate banking facilities, in January Banco di Brescia unified two units operating previously in Milan into one single CBU and it transformed 

its Cremona CBU into a corner, while opening a new corner in Milan at Lambrate. In October this bank closed its CBU at Vicenza and transformed its CBU at 

Montichiari (Brescia) into a corner, while opening a new corner at Verona. Finally two corners were closed in December at Mestre (Venice) and Lumezzane 

(Brescia). Banco di San Giorgio closed a corner at Imperia in January, while in the same month Banca Carime transformed a corner at Lecce into a CBU and 

opened a new corner at Martina Franca (Taranto). In August that same bank closed a CBU at Andria and a corporate corner at Lamezia Terme (Catanzaro), 

while it opened a new corner at Foggia. In May Banca Regionale Europea closed a corner at Vercelli and in August Banca Popolare di Ancona opened three 

corners at Civitanova Marche (Macerata), Campobasso and Osimo (Ancona) and transformed a corner at Aversa (Caserta) into a CBU. Again in August Banca 

di Valle Camonica and Banca Popolare Commercio e Industria opened two new corners at Brescia and Assago (Milan) respectively. In October Banca 

Popolare di Bergamo opened a new CBU at Palazzolo sull’Oglio (Brescia) and a corner at Tradate (Varese). 

10 The average size of financial advisors’ portfolios increased from approximately €6 million to €6.2 million of total assets over twelve 

months. 

59

The international presence 

The international presence of the UBI Banca Group at the date of this report was structured 

as follows: 

• two foreign banks: Banque de Dépôts et de Gestion Sa (with branches in Switzerland at 

Lausanne, Geneva and Lugano) and UBI Banca International Sa (with headquarters in 

Luxembourg and branches in Munich and Madrid); 

• three foreign branches of Banca Regionale Europea in France (at Nice, Menton and 

Antibes); 

• representative offices in Sao Paolo in Brazil, Mumbai, Shanghai, Hong Kong and Moscow 11 ; 

• equity investments (mainly controlling interests) in four foreign companies: UBI Trustee Sa, 

Lombarda China Fund Management Co., UBI Management Co. Sa and BDG Singapore 

Private Ltd 12 . 

• a Branch of UBI Factor Spa in Krakow in Poland; 

• 37 commercial co-operation agreements with foreign banks (covering more than 50 

countries), two “Trade Facilitation” agreements with the European Bank for Reconstruction 

and Development (EBRD) and with the International Financial Corporation (IFC) and also a 

“product partnership” in the Middle East and in Asia with Standard Chartered Bank to 

guarantee effective assistance on all the principal markets in those areas. 

In the first few weeks of 2012, Centrobanca signed a co-operation agreement on merger & 

acquisition and advisory operations with Banco Votorantim 13 , the third largest privately 

held Brazilian bank, in order to support extraordinary operations of our corporate clients 

abroad and to support Brazilian investments in Italy. 

During the year the UBI Banca Group sponsored events of national and international 

importance in order to strengthen its brand in Italy and abroad and to consolidate its 

closeness to customers who operate on international markets. It also organised conventions, 

meetings and events, in co-operation with other Group companies 14 . 

11 Just three years after opening, in July our representative office in Moscow received an award from the Association of Regional 

Russian banks as the best foreign bank present in Russia on the basis of the quality of its contacts with Russian counterparties, 

the activity performed with these and also the professional esteem which these have for the UBI Banca team. 

12 The transfer of the latter is currently in progress from its present parent, Banque de Dépôts et de Gestion Sa, to UBI Banca International Sa, subject to receipt 

of the relative authorisations. The operation was decided by the Parent in the autumn and will be completed by the end of the first half. 

13 Banco Votorantim, jointly controlled equally by the Votorantim Group (a major Latin American industrial group) and Banco do 

Brasil, it is the seventh largest bank in Brazil with assets of 112 billion Brazilian reais and the sixth largest loan portfolio with 59 

billion reais. 

14 The very many activities included the following: 

- the organisation of three different stages of the ”International Open Day” initiative designed to promote the internationalisation 

of Italian businesses. The event was held in Turin on 21 st June, at Jesi on 23 rd June and in Brescia on 21 st and 22 nd November 

and it was attended by representatives of the Group’s international network. An important new feature of the Brescia edition was 

the presence of 25 stands of professional exhibitors from all over the world, known to the UBI Group in various international 

financial centres. A total of 400 persons, representing 250 businesses, attended during the two day event which was partnered by 

the financial daily Il Sole 24 Ore; 

- the fifth edition of the International Banking Forum, held in Brescia on 16 th and 17 th June, entitled “Risk and Trade in the new 

Emerging Markets: the CIVETS” (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa). The initiative, which was organised 

to consolidate correspondent banking business and relationships with foreign banks, was attended by 57 counterparties 

consisting of foreign banks, international bodies and supranational institutions from 23 countries to give a total of 130 

participants; 

- participation for the second year running as the exclusive banking sponsor in the eighth edition of the China Trader Award, an 

important and prestigious prize for Italian companies that have excelled – in terms of determination, dynamism, innovation and 

creativity – in the development of business relations with Hong Kong and China; 

- the launch of a privileged partnership with the La Scala Theatre Academy on the occasion of the celebrations for the 150 th 

anniversary of the unification of Italy, which resulted in the organisation in 2011 of an international tournée in ten foreign cities 

in which the Group is present with its foreign network (Mumbai, Madrid, Moscow, Luxembourg, Munich, Singapore, Hong Kong 

and Shanghai, Lausanne and San Paolo in Brazil). 

60

Remote channels 

Market coverage by the Group is integrated by IT functions to give information and manage 

accounts for use by network bank customers using multi-channel services. These concentrate 

all the direct channels available to private individuals and businesses on one technological 

platform: internet and mobile banking, contact center, interbank corporate banking, self 

service branches such as ATMs and kiosks, cards and evolved payment systems, POS 

terminals. 

Integrated multi-channel services help achieve key objectives to acquire new customers, 

develop the existing customer base, reduce operating costs and exploit technological 

innovation. They improve the services provided to customers in terms of convenience, security, 

24-7 accessibility and the ability to customise them to meet customer requirements. 

Channels available to private individual customers include: 

• the QUI UBI internet banking service for information on banking positions (current 

accounts, securities deposits, payment cards, mortgages, insurance policies, etc.) and to 

perform numerous payment and investment transactions autonomously, with maximum 

security, speed and savings. The “business” version for small business clients provides 

specific functions for single bank management of a company, which include the payment of 

single or multiple bills of exchange and the management of commercial portfolios; 

• the QUI UBI Contact Centre service, contactable on a toll free number even outside normal 

branch opening times, available to customers less likely to use the internet or who do not 

have a connection; 

• the Mobile Banking service for customers who wish to use the main internet banking 

functions while mobile, directly from their smartphones in both the optimised version of the 

website or by using dedicated applications for iPhones and Androids; 

• a network consisting of approximately 2,500 self service branches (ATMs and kiosks), 

including over 300 able to receive payments in cash and cheques using a “Bancomat” debit 

card or free-of-charge VersaQuick card (evolved ATMs). 

At the end of the year customers of the QUI UBI Internet Banking service exceeded 775 

thousand (+20% over twelve months). Use of the QUI UBI Affari service was equally popular, 

having reached 90 thousand users at the end of 2011 from over 65 thousand in December 

2010 (+38%). 

Mobile banking recorded approximately 100 thousand accesses per month to the site 

optimised for cell phone navigation (approximately 15 thousand in 2010), while 50 thousand 

downloads of applications for iPhones and Androids were performed. 

The popularity with customers was also confirmed by the results for use over twelve months: 

• +32%, to over 6 million, for payment and reload transactions; 

• over 52% of securities trades on regulated markets performed via internet (55% excluding 

branch transactions for the sale and purchase of rights related to the share capital 

increase); 

• over 17% of payments made using evolved ATMs. 

These results were also assisted by continuous improvements, as follows: 

• the platform for private individual and small business customers was improved with new 

consultation functions (full capital gain position and display of existing losses, POS 

terminal movements, automated collection orders due for payment, etc.), payment functions 

(payment into postal accounts, receipt of email advice for use of payment cards, bank 

transfers for home renovation/energy savings) and dedicated functions to increase the 

security of payment cards (selection of approved foreign countries); 

• increase of “My accounts” services with the receipt via email of documents relating to 

mortgages, other loans and savings books; 

• the launch of free-of-charge internet banking consultation services for teenagers aged 13 to 

17 named “I WANT TUBI” designed to help the very young to use the internet; 

61

• the release of a mobile application for BlackBerry; 

• the release for the Contact Center of an upgrade to the software applications used by 

operators and the “Branch Manager Diary” designed to improve the scheduling of 

appointments with customers and general commercial support and development activity for 

both existing and potential customers; 

• the launch of a series of marketing initiatives as follows: “Enjoy Your World” to support the 

roll-out of the online sales platform and “Activate my accounts and win” to support the 

distribution of the service for the electronic receipt of mail 15 . 

Action is also planned during the current year to enhance internet banking products: the 

release of an application for tablet PCs (iPads and Android tablets) and a new version for 

smartphones (iPhones, Androids and BlackBerrys); the development of a virtual assistant 

(avatar) available in the Qui UBI Internet Banking reserved area and on public websites in 

order to launch marketing support activities and facilitate customer navigation; the 

development of the online sales platform with a wider range of products on sale (current 

accounts, debit, credit and prepaid cards); the introduction of a remote digital signature for 

internet banking customers; new payment functions for QUI UBI and QUI UBI Affari 16 . 

The service QUI UBI Imprese also exists for corporate clients, the UBI Banca Group corporate 

banking interbank (CBI) platform. It is available in a variety of configurations (single 

company/multi-company and single bank/multi-bank) and allows corporate clients to consult 

movements on accounts remotely and to make payments with many advantages. These 

include considerable savings in time, the optimisation of cash flows, improved organisation of 

administrative activities, the automation of record making processes and the verification and 

reconciliation of bank transactions. 

The process to transfer some small economic operator (SEO) customers to the QUI UBI Affari 

service continued in 2011, which is more appropriate to the requirements of these 

counterparties, while service provision for corporate and SME clients was focused on QUI UBI 

Imprese, the Group’s CBI multi-bank product. Consequently at the end of December 

companies connected to the CBI channel had fallen to 123 thousand euro, which nevertheless 

confirmed the growth in the number of payment and receipt instructions communicated on 

electronic channels. 

Cards 

Notwithstanding the difficult economic environment, the UBI Group has also been active in the 

payment card sector. It has worked on the distribution of the prepaid card Enjoy and to 

complete the process to replace magnetic strip cards, without, however neglecting action to 

increase customer security 17 . 

At the end of 2011, a total of 752 thousand Libra credit cards issued by B@nca 24-7 and 

CartaSì were in issue, a decrease compared to 840 thousand cards twelve months before 18 . 

The downwards trend is due partially to the effects of the mass migration to microchip cards, 

which meant that with inactive cards either no request for replacement was received from 

customers or a request was received for the debit card component only (Libramat) of 

multifunction cards. 

The range currently offered by the UBI Group is differentiated by type of user: 

15 The number of customers who agreed to forgo hardcopy correspondence in 2011 more than doubled to 404 thousand. At the same 

time the number of current and deposit accounts linked to the “My accounts” service increased significantly (+82% to 554 thousand 

in December 2011). 

16 Other important initiatives include: an inter-channel platform for sending SMSs to inform customers of the latest news on services 

provided and to improve marketing initiatives resulting from interaction with Contact Center operators; the launch of a new 

software application named “QUI Multibanca plus” to help develop new information and payment services on ATMs with the ability 

to send marketing messages calibrated to match customer profiles. 

17 It is planned to consolidate the “3D Secure” system in 2012, which adds a further level of security to online transactions and which 

will make it possible to make purchases online even using debit cards. 

18 Considered net of duplications due to the replacement process in progress on that date. 

62

• private individual customers can choose between charge card, revolving or flexible cards 

(with repayment either of the balance or in instalments) of different varieties according to 

the market (retail or private banking); 

• companies, on the other hand, are offered business and corporate cards which vary 

according to the credit limit and the services. 

Some types of card are issued as part of a bundle with Duetto and Utilio accounts and with 

mechanisms linked to the amount spent the year before (rebate programme), which eliminates 

the subscription charge. 

A marketing initiative with prizes, named “Formula UBI”, was launched in February 2011 to 

increase customer loyalty, reserved to holders of the Libra MasterCard and managed on the 

multi-channel platform (branches, QUI UBI, Contact Center and SMS). 

The year 2011 was particularly successful for prepaid cards with the total increasing by 25% 

to 220 thousand, mainly as a result of the success of the Enjoy card and marketing initiatives 

linked to it. In detail: 

• various partnerships were created with universities, local authorities, businesses and 

associations. The success of these initiatives was facilitated by the ability to customise the 

graphics of the card (e.g. by inserting the logo of a partner or images selected by it on the 

card) and also the functions, so that the card could be used not only for purely banking 

transactions, but also to use specific services provided by the partner; 

• the ability to purchase the Enjoy cards online was introduced in October either through the 

internet sites of the network banks or directly from QUI UBI and the web site 

www.ubibanca.com; 

• The Enjoy Special Edition card was launched in December 2011, an Enjoy card reserved to 

employees of the UBI Banca Group, with customised graphics and the ability to select 

charity projects to which a portion of the proceeds resulting from spending at POS 

terminals using the card could be donated; 

• the prize initiative “Formula UBI”, already mentioned was extended to include holders of the 

Enjoy card in December. 

The following important developments are planned for 2012: a prepaid card linked to an IBAN 

for retired customers to which their pension can be credited; a new prepaid card with 

microchip technology, available for adults and also for minors under the age of 18, which in 

addition to normal functions will also allow high levels of customisation already available with 

the Enjoy card; a new version of the Enjoy card (named One Card) which will enable 

customers to customise the graphics directly, by using an application available on the 

internet. 

The main news concerning debit cards is the completion of the process to replace magnetic 

strip cards with new microchip cards launched in the second half of 2010. 

The total number of Libramat cards (debit cards used on the Bancomat-Pagobancomat and 

Maestro networks) was affected in part by the activity just mentioned, with a reduction in the 

total of approximately 2% 19 to 1,346,000 cards, which, however, mainly concerned inactive 

cards. 

The trend for use of the card was positive overall (+4.7% for the Bancomat network; +4% for 

the Pagobancomat network). 

As with other cards, the UBI Banca Group did not fail to innovate with debit cards too in 

2011: 

• a process was commenced in July to unify the PINs on the Bancomat-Pagobancomat and 

Maestro networks with the objective of further simplifying use for customers; 

• again in July, innovations were introduced to increase security. On-off functions and 

“geographical activation” were introduced to allow a cardholder to autonomously 

temporarily deactivate a card or to extend its use to include non European countries, while 

the email alarm service guarantees constant monitoring of purchases made and provides 

weekly or monthly statements of card use. All the new functions are accessible through the 

multi-channel platform (branches, telephone, internet banking); 

• the sale of the “I WANT TUBI” card was launched in the second half, the Libramat card 

reserved for teenagers between the age of 13 and 17. 

19 The change calculated compared to the 2010 figure considered net of duplications due to the replacement process in progress on 

that date. 

63

The Group also has over 61 thousand POS terminals installed in retail outlets, unchanged 

compared to twelve months before. In 2012 the sector should benefit, both in terms of units 

installed and volumes of business, from the new measures introduced by the government to 

limit the use of cash for amounts below one thousand euro only. More widespread acceptance 

of payments using cards is expected by retailers for which average payments are for small 

amounts and who therefore currently accept almost exclusively payments in cash. 

The positioning of the Group 

The table summarises the market 

positioning of the UBI Group in 

terms of branches, conventional 

funding (excluding bonds) and 

lending in provinces, where it has 

a more significant presence – on 

the basis of the latest available 

data from the Bank of Italy (30 th 

September for branches and 30 th 

June for the balance sheet data on 

the basis of the location of the 

branch) – both with respect to the 

national market and for the main 

areas in which the banks in the 

Group operate. 

Despite the reorganisation 

performed in April 2011, the 

positions at the end of September 

and at the end of June did not 

record any significant changes 

compared to the data as at the 

end of 2010. 

In terms of branches, the Group 

can continue to count on a market 

share of at least 10% in 19 Italian 

provinces and also on an 

important presence in Milan (over 

9%) and Rome (around 4%). 

As a result of the characteristics of 

the two original groups, in some 

areas where the Group’s local 

presence is stronger, it has a 

market share of traditional 

funding and/or lending that is 

greater than the percentage of 

branches. 

UBI Banca Group: market share (*) 

30.9.2011 30.6.2011 

31.12.2010 

Branches 

Branches 

Funding 

(**) (***) 

Lending 

(***) 

Funding 

(**) (***) 

Lending 

(***) 

North Italy 6.4% 6.3% 7.2% 6.4% 6.1% 7.3% 

Lombardy 12.9% 10.8% 10.8% 12.9% 10.7% 10.9% 

Prov. of Bergamo 21.0% 31.5% 43.1% 21.0% 32.2% 43.5% 

Prov. of Brescia 22.7% 36.3% 35.0% 22.6% 33.3% 35.9% 

Prov. of Como 5.9% 5.5% 8.2% 6.2% 5.9% 8.5% 

Prov. of Lecco 5.8% 4.9% 7.0% 5.4% 4.8% 6.5% 

Prov. of Sondrio 8.1% 1.7% 3.6% 8.1% 1.6% 3.6% 

Prov. of Mantua 5.6% 3.7% 4.3% 5.7% 3.6% 4.7% 

Prov. of Milan 9.2% 5.3% 4.5% 9.1% 5.3% 4.5% 

Prov. of Monza Brianza 8.3% 8.4% 9.3% 8.5% 7.9% 9.1% 

Prov. of Pavia 15.5% 16.8% 12.0% 15.6% 16.6% 12.4% 

Prov. of Varese 23.1% 30.3% 21.7% 23.7% 30.4% 23.2% 

Piedmont 8.4% 5.4% 7.1% 8.4% 4.9% 6.7% 

Prov. of Alessandria 11.8% 8.4% 10.5% 11.1% 8.8% 9.7% 

Prov. of Cuneo 24.4% 22.8% 20.5% 24.5% 23.6% 19.4% 

Prov. of Novara 4.6% 3.1% 8.3% 5.1% 2.4% 8.0% 

Liguria 6.0% 5.5% 8.3% 6.0% 5.0% 8.2% 

Prov. of Genoa 4.8% 5.1% 7.8% 5.0% 4.3% 7.8% 

Prov. of Imperia 5.8% 3.8% 9.2% 5.8% 3.5% 9.3% 

Prov. of Savona 6.3% 3.4% 10.1% 5.9% 3.2% 10.0% 

Prov. of La Spezia 10.1% 12.2% 7.0% 10.3% 12.6% 6.7% 

Central Italy 3.5% 2.9% 2.6% 3.6% 3.0% 2.5% 

Marches 8.1% 9.3% 8.9% 8.8% 9.3% 9.0% 

Prov. of Ancona 10.0% 13.8% 11.1% 10.6% 13.1% 10.6% 

Prov. of Macerata 8.8% 11.5% 10.4% 9.5% 11.3% 10.9% 

Prov. of Fermo 10.8% 10.3% 15.1% 10.6% 10.0% 15.1% 

Prov. of Pesaro and Urbino 6.9% 4.1% 4.8% 8.1% 5.0% 5.2% 

Latium 4.2% 3.0% 2.7% 4.3% 3.2% 2.5% 

Prov. of Viterbo 14.8% 13.0% 11.3% 14.8% 13.3% 11.3% 

Prov. of Rome 3.9% 3.0% 2.6% 4.0% 3.2% 2.3% 

South Italy 8.3% 6.7% 5.3% 8.3% 6.5% 5.3% 

Campania 6.0% 4.1% 4.2% 6.1% 4.0% 4.1% 

Prov. of Caserta 9.0% 6.7% 7.0% 8.6% 6.3% 6.7% 

Prov. of Salerno 8.0% 5.2% 6.2% 8.1% 4.8% 6.3% 

Prov. of Naples 5.0% 3.7% 3.3% 5.5% 3.7% 3.2% 

Calabria 22.1% 21.1% 14.2% 22.2% 21.0% 13.8% 

Prov. of Catanzaro 14.2% 17.5% 9.7% 14.3% 16.1% 9.5% 

Prov. of Cosenza 25.7% 27.3% 19.3% 25.7% 27.9% 19.0% 

Prov. of Crotone 18.9% 11.8% 7.2% 18.9% 12.2% 6.9% 

Prov. of Reggio Calabria 22.4% 15.8% 11.5% 22.1% 16.2% 10.7% 

Prov. of Vibo Valentia 26.3% 28.5% 18.7% 28.2% 28.2% 19.0% 

Basilicata 14.3% 11.5% 8.9% 14.4% 12.0% 8.8% 

Prov. of Matera 15.7% 10.0% 7.4% 15.7% 10.0% 7.3% 

Prov. of Potenza 13.6% 12.4% 9.9% 13.8% 13.4% 9.7% 

Apulia 8.2% 7.1% 4.9% 8.2% 6.9% 4.8% 

Prov. of Brindisi 12.1% 9.1% 5.9% 11.5% 9.1% 5.9% 

Prov. of Bari 10.0% 8.5% 5.4% 10.1% 8.4% 5.5% 

Prov. of Barletta Andria Trani 6.3% 7.1% 5.7% 6.4% 6.6% 5.2% 

Prov. of Taranto 8.4% 7.2% 5.3% 8.5% 7.1% 5.1% 

Total Italy 5.6% 5.2% 5.7% 5.6% 5.1% 5.8% 

(*) The financial dat a is t aken f rom Bank of It aly st at ist ics. From 30t h June 2011, the Bank of It aly st at istics relat ed t o t ot al ordinary cust omers excluding 

f inancial and monet ary inst itut ions. This change, which with respect t o t he past excludes t hree sub groupings of economic act ivit ies of marginal 

importance bot h f or deposits and loans, does not produce any signif icant discont inuit ies in t he dat a in t he comparison wit h December. 

(**) Current accounts, certificates of deposit, savings deposits. 

(***) M arket share by locat ion of the branch. 

64

Human resources 

The composition of Group personnel and changes in 2011 

Group personnel 

Employees actually in service 

Employees on the payroll 

31.12.2011 31.12.2010 Changes 31.12.2011 31.12.2010 Changes 

Number A B A-B C D C-D 

Banca Popolare di Bergamo Spa 3,723 3,761 -38 3,795 3,808 -13 

Banco di Brescia Spa 2,584 2,632 -48 2,594 2,625 -31 

Banca Carime Spa 2,182 2,221 -39 2,319 2,363 -44 

Banca Popolare Commercio e Industria Spa 1,713 1,756 -43 1,896 1,952 -56 

Banca Popolare di Ancona Spa 1,710 1,715 -5 1,797 1,795 2 

Banca Regionale Europea Spa 1,513 1,552 -39 1,577 1,585 -8 

UBI Banca Scpa 1,250 1,367 -117 2,170 2,171 -1 

Banco di San Giorgio Spa 419 417 2 419 418 1 

Banca di Valle Camonica Spa 348 346 2 345 346 -1 

Centrobanca Spa 316 325 -9 316 316 - 

IW Bank Spa 275 291 -16 289 312 -23 

B@nca 24-7 Spa 206 227 -21 166 172 -6 

UBI Banca Private Investment Spa 165 167 -2 153 163 -10 

UBI Banca International Sa 98 98 - 93 92 1 

Banque de Dépôts et de Gestion Sa 68 102 -34 67 100 -33 

TOTAL FOR BANKS 16,570 16,977 -407 17,996 18,218 -222 

UBI Sistemi e Servizi SCpA 2,021 1,860 161 676 665 11 

UBI Leasing Spa 255 242 13 245 250 -5 

UBI Factor Spa 153 153 - 144 145 -1 

UBI Pramerica SGR Spa 142 142 - 120 122 -2 

Prestitalia Spa 104 105 -1 96 102 -6 

UBI Insurance Broker Srl 38 40 -2 34 36 -2 

UBI Fiduciaria Spa 24 23 1 17 17 - 

Silf Spa 9 14 -5 23 25 -2 

BPB Immobiliare Srl 9 9 - 4 4 - 

UBI Gestioni Fiduciarie Sim Spa 7 7 - 4 4 - 

InvestNet International Sa 5 7 -2 7 8 -1 

Centrobanca Sviluppo Impresa SGR Spa 6 6 - 2 2 - 

Coralis Rent Srl 5 6 -1 - - - 

UBI Trustee Sa 4 4 - 4 4 - 

BDG Singapore Pte Ltd 18 14 4 16 12 4 

UBI Management Company Sa 3 2 1 3 2 1 

S.B.I.M. Spa 1 1 - - - - 

TOTAL 19,374 19,612 -238 19,391 19,616 -225 

Workers on personnel leasing contracts 31 87 -56 31 87 -56 

TOTAL PERSONNEL 19,405 19,699 -294 

On secondment outside the Group 

- out 25 17 8 

- in 8 13 -5 

TOTAL WORKFORCE 19,430 19,716 -286 19,430 19,716 -286 

The table above gives details for each company of the actual distribution of ordinary employees (workers on permanent and temporary 

contracts and on apprenticeship contracts) within the Group as at 31 st December 2011, adjusted to take account of secondments to and 

from other entities within or external to the Group (column A) compared with the position at the end of 2010 (column B) restated on a 

consistent basis. Column C, on the other hand, gives details for each company of the number of employees on the payroll as at 31 st 

December 2011 compared with the end of 2010 restated on a consistent basis (column D). 

Compared to the figures published in the 2010 Annual Report, the personnel of Banque de Dépôts et de Gestion as at 31 st December 

2010 reported in the Table: 

• includes six personnel (of which five are employees) from Gestioni Lombarda (Swiss) merged in December 2010; 

• does not include 14 personnel (of which 12 are employees) of BDG Singapore Pte Ltd, now reported separately. As already reported, 

at the end of 2010, the company was still at the start-up stage of its asset management business, having just obtained a license to 

operate from the local authorities in October. 

65

At the end of 2011, the total personnel of the UBI Banca Group numbered 19,405 compared to 

19,699 in December 2010, a decrease over twelve months of 294, which reflects less use of 

flexible contracts (agency leasing contracts and temporary contracts at the Parent and the 

other Group banks and companies). However, this is above all the combined result of 

personnel turnover and the remaining persons leaving on redundancy schemes which 

regarded ordinary employee personnel. 

Greater synergies were created in the network banks (-254 personnel, of which 208 employees 

and 46 on agency leasing contracts). 

Numbers also fell for the rest of the Group consisting of other banks and Group companies 

(-40, of which 30 employees and 10 on agency leasing contracts), although they related to 

different trends in individual companies in relation to their specific organisational and market 

contexts. 

In this respect, the significant increase in personnel numbers at UBI Sistemi e Servizi (+161) is 

attributable to the centralisation of contact centre activities at the company (performed by UBI 

Banca until 31 st December 2010) and to the expansion of units to support mortgage 

disbursement. 

Employees on the payroll 

Number 31.12.2011 31.12.2010 Change 

Total employees 19,391 19,616 -225 

of whichpermanent 19,270 19,419 -149 

on temporary contracts 104 172 -68 

apprentices (*) 17 25 -8 

(*) Contract regulated by Legislative Decree No. 276/2003 (Biagi Law) for young 

people between the ages of 18 and 29, by which they acquire a qualification through 

training at work which provides them with specific occupational skills. The duration 

varies from a minimum of 18 months to a maximum of 48 months. 

The table gives details of changes in the type 

of employee contract, with a total decrease in 

numbers over twelve months of 225 1 . 

In detail, 583 persons left – of which 60 for 

access to the “solidarity fund”, 11 for 

retirement and 203 for end of contract – 

compared to 358 new appointments. The 

latter were distributed as follows: 

New appointments Q1 Q2 Q3 Q4 Total 2011 

permanent 40 35 31 30 136 

temporary 36 96 64 26 222 

As can be seen, appointments on temporary contracts were concentrated in the middle of the 

year in relation to seasonal activity by BPB Immobiliare and to the need to ensure the regular 

operation of branches during the main vacation periods. 

Intragroup mobility involved 472 personnel consisting of 404 on secondment and 68 leaving 

and being re-appointed in a new Group member company. This mobility relates primarily to 

processes to reallocate personnel as a consequence of the initiative to increase efficiency 

performed in implementation 

Composition of personnel in Group Banks by rank 

of the trade union agreement 

of 20 th May 2010 and also as 

Number 31.12.2011 % 31.12.2010 % 

a result of a programme to 

Senior managers 389 2.2% 408 2.2% 

enhance human resources by 

Middle managers 3rd and 4th level 3,262 18.1% 3,207 17.6% 

providing intragroup 

Middle managers 1st and 2nd level 3,877 21.5% 3,873 21.3% 

experience. 

3rd Professional Area (office staff) 10,236 56.9% 10,491 57.6% 

1st and 2nd Professional Area (other personnel) 232 1.3% 239 1.3% 

TOTAL FOR BANKS 17,996 100.0% 18,218 100.0% 

The difference between the total as at 31st December 2010 reported in the table and that published in the 2010 

Annual Report (18,225) is attributable to Banque de Dépôts et de Gestion. See the footnote to the table on Group 

personnel in this respect. 

As shown in the table no 

significant changes in the 

composition of personnel by 

rank occurred. 

The average age of Group employees as at 31 st December 2011 was 44 years and four months 

compared to 43 years and five months at the end of 2010, while the average length of service 

was 17 years and seven months compared to 16 years and nine months a year before. 

1 In terms of actual personnel, the reduction in employees was greater during the year (-238) due to the combined effect of increased 

secondments outside the Group (+8), mainly to UBI Assicurazioni, and less use of personnel from outside the Group (-5). 

66

The percentage of part-time employees was 7.9% (7.3% at the end of 2010). Female personnel 

accounted for 36.8% of the total, unchanged compared to 36.7% the year before. 

Further details in trends and in the composition of Group personnel are given in the 2011 

Social Report, which may be consulted. 

*** 

As concerns the fourth quarter, total personnel fell by 110, consisting mainly of employees 

(down by a total of 82) partly as a result of temporary contracts coming to an end (50). 

Personnel on agency leasing contracts were also affected by contracts ending, with a reduction 

of 28 in the quarter. 

The redundancy scheme pursuant to the agreement of 14 th 

August 2007 

The redundancy scheme implemented by the UBI Banca Group on the basis of the trade union 

agreement of 14 th August 2007 was concluded in 2011. The last 60 employees left during the 

year with access to the sector “solidarity fund” (of which seven in the 4 th quarter) – postponed 

in relation to measures introduced by Decree Law No. 78/2010 converted into Law No 

122/2010 – which brought the total number of redundancies to 960. 

The numerous changes that have occurred in the legislation since 2010 involving the pension 

system - the latest contained in the “Save Italy” decree 2 – had no significant impact on those 

who had already gained access to the “solidarity fund” formed with Ministerial Decree No. DM 

158/2000 on the basis of redundancy schemes implemented in the Group. 

Renewal of the national labour agreement and changes to the 

pension system 

An agreement was signed on 19 th January 2012 to renew the national labour agreement of 8 th 

December 2007 – which had expired on 31 st December 2010 – for middle management and 

personnel employed in “professional areas”, which will be subject to approval by workers, the 

regulatory and economic effects of which will be effective from 2012. 

The agreement was concluded in an extremely complex context due to the worsening of the 

macroeconomic environment and of economic and financial conditions in Italy. Consequently 

the parties to the agreement made the responsible decision to take corrective action to counter 

the potential competitive decline of banks and to support a recovery in profitability, the growth 

of productivity and the creation of new permanent employment. 

A “National fund to support employment in the credit sector” was created to achieve the latter 

aim, a unique new development in trade union relations in Italy. The fund will be financed by 

contributions from all employees and will be used to facilitate the appointment of young 

people, disadvantaged persons or laid-off workers to permanent positions and to transform 

contracts from temporary to permanent. 

Again in order to encourage new employment, it was agreed that workers appointed since 1 st 

February 2012 to the first level of the 3 rd Professional area on permanent contracts, including 

apprenticeship contracts, should receive a lower wage for a period of four years, but that at 

the same time employers will pay a contribution of 4% to supplementary pensions for the 

same period of time. 

2 See the following sub-section. 

67

The Group is also considering the application of the new provisions concerning branch 

opening hours contained in the renewal agreement, designed to support the rationalisation of 

operating costs. Companies will in fact have the freedom, subject to consulting with trade 

unions, to set branch opening hours between 8:00 a.m. and 8:00 p.m. with the ability to 

extend that period from 7:00 a.m. to 10:00 p.m. by agreement with trade unions. 

An agreement was also signed on 29 th January 2012 to extend the national labour agreement 

for the senior management of banking, financial and production companies, whereby the 

parties agreed to extend the validity of the legal and financial terms of the national labour 

contract signed on 10 th January 2008 until 30 th June 2014. 

*** 

On 1 st January 2012, Decree Law No. 201 of 6 th December 2011 – the “Save Italy” decree – 

converted into Law No. 214 of 22 nd December 2011 introduced substantial changes to the 

pension system, designed to strengthen long term sustainability in terms of pensions as a 

percentage of government spending. 

The new welfare system involves three types of treatment only: 

a) the “old age pension” granted exclusively on the basis of age requirements (62 for women 

and 66 for men, with harmonisation at 67 in 2021); 

b) “early retirement pension” granted exclusively on the basis of contribution requirements (42 

years and one month for men in 2012 and 41 years and one month for women both 

increased by one month in each year following 2012); 

c) as an exception for those meeting the old length of service (level 96 for workers on employee 

contracts) and age (60 and at least 20 years of contributions for women) requirements for a 

pension in 2012, a pension can be granted when the age of 64 is reached. 

Furthermore, the requirements specified in a) and b) above, must be updated every three years 

from 2013 on the basis of life expectation data. 

The sudden and unprogrammed increase in pension age requirements summarised above 

resulted in substantial changes to potential redundancies scheduled in the Business Plan of 

the UBI Banca Group for the two year period 2014-2015, the concrete conditions of which are 

still being defined. This considerably reduces the number of employees who could be retired. 

The “General Leaving Incentive Proposal” made by the Group in March 2012 falls within this 

context. It is designed for employees who are covered by the safeguards provided for by the 

aforementioned “Save Italy” decree for those who met pension requirements by 31 st December 

2011. 

Remuneration and incentive policies 

Details of remuneration and incentive policies are given in the remuneration report which is 

given in another part of this document. It was prepared pursuant to the “Provisions on 

remuneration and incentive policies and practices in banks and banking groups” issued by the 

Bank of Italy on 30 th March 2011 and to articles 123-ter of the Consolidated Finance Act and 

84-quater of the Issuers’ Regulations. 

Further information is given on the matter in the UBI Banca report on corporate governance, 

again in an attachment to this document. 

68

Personnel management policies and instruments 

In a particularly difficult economic context like that of the present, the Group’s policies are 

still strongly focused on the enhancement and growth of its “human capital” in terms of 

professional abilities. 

Personnel management policies and tools are reviewed and updated annually on the basis of 

objectives and strategies. 

Almost all Group member companies have now adopted a role system, skill assessment, 

performance assessment, measurement of potential and managerial appraisal (assessment 

using structured interviews), tools that are all used to increase knowledge of human resources 

and to define action consistent with supporting their career growth and development. 

A new software application was released in 2011 to manage performance assessment which 

required a more flexible configuration to address increasing intragroup mobility. 

Performance assessment and skill assessment is used for all personnel, with the sole 

exception of General Management positions. Combined interpretation of the results provides 

valuable information on personnel that can be used to define career growth paths, training 

requirements and remuneration. 

Work on the management of the potential measurement and managerial appraisal is 

increasing progressively with a view to drawing maximum benefit from the aptitudes of each 

person and to defining career paths to match their characteristics. 

Measurement of potential was performed on 343 staff in 2011 (+30% compared to the previous 

year) and obtaining this data was introduced as a compulsory step in the careers of future 

branch managers. Ninety one of these measurements regarded mass market account 

managers, young personnel on average who had recently joined the Group. 

Managerial appraisal was extended at the same time to include senior management. Over 180 

interviews were carried out during the year with two objectives: to map key Group personnel 

(with a view to enhancement and development) and to provide personnel – through feedback 

interviews – with self-awareness tools with which to take self-training and self-determination 

action. 

Trade union relations 

Work on trade union relations was intense in 2011 with agreements signed at both Group and 

individual company level and also to complete procedures concerning the new Group Business 

Plan. 

A memorandum of intent was signed in February concerning the transfer of new mortgages 

originated by external distribution networks, previously managed by B@nca 24-7, to the 

network banks, while a memorandum of intent concerning the tax relief on productivity for 

2011 was signed in April. 

At company level, an agreement was signed in March regarding the rationalisation of Banca 

Popolare di Ancona’s branch network, a project which did not have any significant impact on 

personnel. 

An agreement was signed on the reorganisation of UBI Leasing in April. This initiative, which 

did not give rise to any employment problems, was designed primarily to improve the efficiency 

and effectiveness of risk management processes and to better identify centres of responsibility 

with regard to the activities performed by individual units. 

A trade union procedure was commenced in June for the rationalisation of B@nca 24-7 

operations in local centres and the centralisation of some activities in the Tax and 

Administration Area of UBI Banca. It was concluded with an agreement signed on 25 th July. 

69

The operation required the adoption of limited geographical and occupational mobility 

measures for the workers concerned. 

A procedure was commenced again in June relating to the action to streamline the distribution 

network of the network banks in accordance with the 2011-2015 Group Business Plan. This 

involved the roll out of the new “hour glass” distribution model started on 1 st August and the 

start in October of preparatory and preliminary activities necessary for the implementation of 

the “mass market team” and “developers” projects to run from 2012. 

Discussions were commenced in October on company bonuses for 2010 and were concluded 

with the signing of the relative trade union agreements in all Group banks and companies. 

Contract negotiations, started on 21 st September 2011 were also concluded with a trade union 

agreement in November concerning changes to the organisational structure of Centrobanca 

and the transfer of the management of non-performing loans to the “Problem Loans and Credit 

Recovery” Area at UBI Banca. The operation involved the adoption of limited geographical 

mobility measures. 

Finally, to complete the picture of discussions and negotiations with trade unions, mention 

must be made of agreements reached on specific company issues, normally involving second 

level negotiations, signed at UBI Banca, Banca Popolare di Bergamo, Banca Regionale 

Europea, Banco di Brescia, Banco di San Giorgio and Banca di Valle Camonica. 

Negotiations were commenced at the start of the new year on a series of actions to streamline 

the branch network of the Group and to revise the distribution model at Banca Popolare 

Commercio e Industria, with the introduction of a “Head Branch” and “Group Branch” model 

already in operation in other Group banks 3 . Here too, the repercussions involved the adoption 

of limited geographical mobility measures. 

Finally negotiations were commenced on 9 th March 2012, concerning the merger of B@nca 

24-7 into UBI Banca and the contribution of assets consisting of salary or pension backed 

loans from B@nca 24-7 to Prestitalia 3 . Naturally the most appropriate solutions will be 

sought in the trade union negotiations required under labour agreements to reduce social 

repercussions on the working conditions of employees, by making use of the instruments 

provided for in the labour agreements and the relative law. 

Training 

Training activities are traditionally designed to develop and enhance the technical and 

professional knowledge, managerial experience and abilities and the ethical and cultural 

behaviours present in the Group. In 2011 they involved the delivery of over 103 thousand 

training days (inclusive of 

classroom, job experience and 

remote training), an increase of 

7% compared to the previous 

year and an average of 

approximately 5.6 training days 

per person (5.2 in 2010). 

Training activity by subject areas in 2011 

Subject area 

Classroom 

Remote 

training 

Total 

ob experienc person/days of 

training 

Insurance 14,726 14,990 - 29,716 28.7% 

Commercial 9,248 - 161 9,409 9.1% 

Finance 4,351 290 195 4,836 4.7% 

Credit 8,412 447 2,521 11,380 11.0% 

Managerial-Behavioural 9,732 - - 9,732 9.4% 

Regulatory 6,260 20,624 7 26,891 26.0% 

Operational and other subjects 4,214 3,570 3,692 11,476 11.1% 

TOTAL 56,943 39,921 6,576 103,440 100.0% 

The main initiatives carried 

forward during the year included: 

• the completion of the “ValoRe in Rete”, training workshop started in 2010, designed to 

stimulate and enhance the role of existing Branch Managers; 

% 

3 See the section “Significant events that occurred during the year” for further information. 

70

• the implementation of the “Value at the Centre” and “Value at UBI.S” projects, carried out 

in line with the previous project designed for central unit managers to strengthen a culture 

of service to the distribution network and an orientation towards internal customers; 

• the consolidation of the new compulsory training programme for the qualification of 

potential branch managers. The examination sessions led to the qualification of 150 new 

potential Branch Managers (a total of 260 in the two year period 2010-2011). 

• the completion of the “Excellence in Corporate Banking” programme, a highly specialist two 

year programme designed to provide all the Corporate Account Managers in the Group with 

a high level of specific expertise and excellence; 

• the implementation of the CSR – corporate social responsibility – project: an initiative 

targeted at all personnel to promote a culture and the principles and content of CSR and to 

encourage a knowledge and the dissemination of Group values (ethics code) and the 

adoption of responsible actions by individuals; 

• the launch, in the last quarter, of a qualification and retraining programme for customer 

service and customer contact staff involved in the introduction of the new branch “mass 

market team” unit (operational since January 2012). 

Over a third of all activity was devoted to improving the technical and professional abilities 

(operational, commercial, credit and financial) of distribution network personnel. With regard 

to credit in particular, this included the initiative “internal rating systems and the credit 

process”, for small business and corporate segment supervisors. 

The subject of insurance continued to account for a significant proportion (29%) of the training 

delivered during the year through programmes specialised by market and by customer 

segment (private individuals, corporate). They were designed to qualify personnel to sell 

insurance products and to update them, in compliance with ISVAP (Insurance Authority) 

regulation No. 5/2006. 

Updates on regulations and legislation (26% of the total) involved banking operations and 

included those on “transparency”, “health and safety at the workplace” and “anti money 

laundering”. This last project improved knowledge on the part of all distribution network 

personnel on up-to-date procedures for managing suspect transactions, appropriate 

verification of customers and record-keeping obligations; 

The managerial training programme continued again in 2011, designed for roles with greater 

responsibility in which the various initiatives included participation at intercompany events to 

create opportunities for cultural exchange with others in different professional fields 

The in-house instructor corps consists of over 400 personnel who delivered almost 13,200 

training hours (approximately 60% of total classroom training). The 2011 “Facilitatori di 

Valore” convention of the UBI Banca Group instructor corps and school for instructors was 

held on 20 th October. Over 140 internal instructors took part, in the presence of top managers, 

in an important event for the sharing of experiences and discussion on the fundamental role of 

training in the development of human capital in the Group. 

Programmes for 2012 involve no less than 92,000 training days, in line with 2011-2015 

Business Plan programming (90,000 person/days on average annually for a total of 450,000 

person/days in the five year period), net of any new extraordinary training projects which may 

be decided during the year. 

Planned initiatives include the following: 

- completion of the occupational retraining programme for personnel involved in the new 

branch “mass market team” project; 

- the implementation of the training course to support “Developers” (core unit in the new 

distribution network service model, which will involve 700 staff when fully operational), 

both in terms of qualification training and refinement and supervision over time of the skills 

required for the role; 

- extension of the “ValoRe in Rete” method already implemented for branch managers to 

other key business roles and specialists operating in the retail, private and corporate 

banking sectors; 

- the revision of compulsory role qualification programmes; 

71

- courses to increase knowledge and educate on the subjects of customer satisfaction and 

pricing excellence. 

THE “VALORE IN RETE” TRAINING PROGRAMME FOR BRANCH MANAGERS 

The important strategic project “ValoRe in Rete”, started in 2010, was completed during the 

year. It was designed to stimulate and enhance the professional skills of existing Branch 

Managers as key figures in local market coverage and in the development of complex 

commercial activities. 

The “ValoRe in Rete” project is an innovative and structured training programme, a genuine 

“workshop” in which Branch Managers worked and addressed the challenge of the “virtuous 

behaviour” – whether commercial, credit, organisational or HR management – needed to “make 

a difference” in the excellent management of branch teams and in relationships with 

customers and the community. A total of almost 1,500 managers were involved in the two year 

period, led by a select team of 45 branch managers working in the delicate role of “teacherfacilitator”. 

The results of the workshop confirmed the validity and success of this innovative approach, 

designed also to share best experiences and practices employed within the Group. 

As a result of this positive outcome, the 2011-2015 Business Plan identified the methodology 

of this training approach as a model on which to base action to enhance and stimulate other 

important business roles. Consequently the programme will be gradually extended in 2012 

and 2013 to include Corporate Account Managers, Small Business Account Managers, Private 

Bankers and Affluent Market Account Managers. 

UBI ACADEMY 

The foundation of UBI Academy, the new corporate university of the UBI Banca Group is 

planned for the second quarter of 2012. It is a service consortium company and its business 

purpose will be the planning and provision of services for life long learning and the 

professional and managerial development of the personnel of the UBI Banca Group. 

On the one hand, by centralising Group training activity, UBI Academy is designed to provide 

support to develop and enhance the technical and professional knowledge and the managerial 

experience and skills of UBI Banca Group personnel. On the other hand, the new company 

intends to make use of the academic world and the best social and cultural institutions in 

local communities in order to incorporate the capacity to innovate inherent in these 

institutions. 

Internal communication 

The main commitment during the year concerning internal communication was the 

development and subsequent relaunch of the new Group corporate portal (October 2011). 

Many new features were introduced beginning with the editorial layout, which was completely 

renewed and enhanced with simple and effective new graphics. 

The home page of the portal is focused on the constant supply of information on the most 

important Group initiatives. New interactive tools and environments were introduced with the 

objective of making corporate communication and information an increasingly more 

participatory and circular activity. These included a “survey” area to allow employees to 

express their opinions on determined issues, an “ideas box” to collect suggestions from 

colleagues on the specific subjects proposed, a “my profile” area in which each employee can 

put their photos and give a description of their main interests outside work and finally a FAQ 

area with a series of answers to frequently asked questions, accessible and always available 

from every page of the portal. 

Some pages on specific professional subjects are independently maintained and edited by 

company different teams. 

The new portal contains an entire section dedicated to the new online magazine YOUBI live, 

which has replaced the Group’s traditional hardcopy house organ YOUBI (the last three 

72

editions were published in 2011). An annual almanac will be published in a hardcopy version 

with the most important news that has occurred in the life of the Group. 

The new online magazine is divided into different sections and sub-sections rich in information 

and variety on both strictly work oriented subjects and those of a broader nature. It is also 

designed to encourage active participation by all personnel. Comments may be made on each 

article published to create a natural blog in order to be able to share ideas, opinions and 

individual experiences. 

The Internal Communication unit took advantage during the year of multimedia functions 

introduced in 2010 as follows: 

• the production of videos on important key issues. These included the traditional UBI Click 

with the involvement of top management and numerous videos with the participation of the 

managers of important projects (the new service model, the developers project, the new 

regulatory portal, the multichannel platform, internal customers); 

• the organisation – following on from the two organised previously – of three “UBIPods” (a 

tool modelled on the style of a radio broadcast) with the direct involvement of branch 

managers who participated on the training course “ValoRe in Rete”; 

• updates on the main issues brought up during the Annual General Meeting of UBI Banca in 

e-book format – an easy to consult electronic magazine – able to manage different types of 

media (texts, images. audio and video recordings) in an environment with uniform graphics. 

Finally the Internal Communication unit worked on the organisation of a convention dedicated 

to the new Business Plan. The meeting was held on 30 th May 2011 in Milan with the 

participation of approximately 3,000 personnel from different realities within the Group. 

The work environment 

The section “Principal risks and uncertainties to which the UBI Banca Group is exposed” may 

be consulted for information on matters regulated by Legislative Decree No. 81 of 9 th April 

2008 (health and safety at the workplace), while information on environmental responsibility is 

given as part of the information on corporate social and environmental responsibility 

contained in the section “other information”. 

Welfare 

The main initiatives carried forward in the field of welfare are reported as part of the 

information given on corporate social responsibility contained in the section “Other 

information”. 

73

Consolidation scope 

The companies that formed part of the consolidation as at 31 st December 2011 are listed 

below, divided into subsidiaries (consolidated line-by-line) and associates (consolidated using 

the equity method). 

The percentage of control or ownership attributable to the Group (direct or indirect), their 

headquarters (registered address or operating headquarters) and the share capital is also 

indicated for each of them. 

Companies consolidated on a line-by-line basis (control is by the Parent of the Group where no 

other indication is given): 

1. Unione di Banche Italiane Scpa – UBI Banca (Parent) 

registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: 2,254,366,897.50 euro 1 

2. Banca Popolare di Bergamo Spa (100% controlled) 

registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: 1,350,514,252 euro 

3. Banco di Brescia San Paolo CAB Spa (100% controlled) 

registered address: Brescia, Corso Martiri della Libertà, 13 – share capital: 615,632,230.88 euro 

4. Banca Popolare Commercio e Industria Spa (75.0769% controlled) 

registered address: Milano, Via della Moscova, 33 – share capital: 934,150,467.60 euro 

5. Banca Regionale Europea Spa (74.9437% controlled) 2 

registered address: Cuneo, Via Roma, 13 – share capital: 468,880,348.04 euro 

6. Banca Popolare di Ancona Spa (92.9340% controlled) 

registered address: Jesi (Ancona), Via Don A. Battistoni, 4 – share capital: 122,343,580 euro 

7. Banca Carime Spa (92.8332% controlled) 

registered address: Cosenza, Viale Crati snc – share capital: 1,468,208,505.92 euro 

8. Banca di Valle Camonica Spa (74.2439% controlled and Banco di Brescia holds 8.7156%) 

registered address: Breno (Brescia), Piazza Repubblica, 2 – share capital: 2,738,693 euro 

9. Banco di San Giorgio Spa (the Parent holds 38.1927% and 57.5001% controlled by BRE) 

registered address: Genova, Via Ceccardi, 1 – share capital: 102,119,430 euro 

10. Banque de Dépôts et de Gestion Sa (100% controlled) 

registered address: Avenue du Théâtre, 14 - Lausanne (Switzerland) – share capital: 10,000,000 

Swiss francs 

11. BDG Singapore Pte Ltd (100% controlled by Banque de Dépôts et de Gestion) 

registered address: 391B Orchard Road # 15-01 Ngee Ann City Tower B – Singapore – share capital: 

5,600,000 Singapore dollars 

12. UBI Banca International Sa (90.6031% controlled and Banco di Brescia holds 5.8519%, BPB 

3.3723% and Banco di San Giorgio 0.1727%) 

registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: 59,070,750 euro 

13. UBI Trustee Sa (100% controlled by UBI Banca International) 

registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: 250,000 euro 

14. B@nca 24-7 Spa (100% controlled) 

operating headquarters: Bergamo, Via A. Stoppani, 15 – share capital: 316,800,000 euro 

1 The share capital as at 31 st December 2010 was 1,597,864,755 euro. See the section “Significant events that occurred during the year” for further information. 

2 The percentage of control relates to the total share capital held. The Group does in fact possess 80.1054% of the ordinary shares, 

26.4147% of the privileged shares and 59.127% of the savings shares. 

74

15. Barberini Sa (100% controlled) 

registered address: Woluwe-Saint-Pierre, Avenue de Tervueren, 237 – Brussels (Belgium) – share 

capital: 3,000,000 euro 3 

16. Prestitalia Spa (100% controlled by B@nca 24-7) 

registered address: Roma, Via Ostiense, 131/L – share capital: 46,385,482 euro 

17. Silf Società Italiana Leasing e Finanziamenti Spa (100% controlled) 

registered address: Cuneo, Via Roma, 13 – share capital: 2,000,000 euro 

18. IW Bank Spa (65.0392% controlled and Centrobanca holds 23.496%) 

registered address: Milano, Via Cavriana, 20 – share capital: 18,404,795 euro 

19. InvestNet International Spa (100% controlled by IW Bank) 

registered address: Milano, via Cavriana, 20 – share capital: 12,478,465 euro 

20. UBI Banca Lombarda Private Investment Spa (100% controlled) 

registered address: Brescia, Via Cefalonia, 74 – share capital: 67,950,000 euro 

21. Centrobanca Spa (94.2715% controlled and BPA holds 5.4712%) 

registered address: Milano, Corso Europe, 16 – share capital: 369,600,000 euro 

22. Centrobanca Sviluppo Impresa SGR Spa (100% controlled by Centrobanca) 

registered address: Milano, Corso Europe, 16 – share capital: 2,000,000 euro 

23. UBI Pramerica SGR Spa (65% controlled) 

operating headquarters: Milano, Via Monte di Pietà, 5 – share capital: 19,955,465 euro 

24. UBI Management Company Sa (100% controlled by UBI Pramerica SGR) 

registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: 125,000 euro 

25. UBI Insurance Broker Srl (100% controlled) 

registered address: Bergamo, Via f.lli Calvi, 15 – share capital: 3,760,000 euro 

26. UBI Leasing Spa (79.9962% controlled and BPA holds 18.9965%) 


27. Unione di Banche Italiane per il Factoring Spa - UBI Factor Spa (100% controlled) 

registered address: Milano, Via f.lli Gabba, 1/a – share capital: 36,115,820 euro 

28. BPB Immobiliare Srl (100% controlled) 

registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: 185,680,000 euro 

29. Società Bresciana Immobiliare Mobiliare - S.B.I.M. Spa (100% controlled) 

registered address: Brescia, Via A. Moro, 13 – share capital: 35,000,000 euro 

30. Società Lombarda Immobiliare Srl - SOLIMM (100% controlled) 

registered address: Brescia, Via Cefalonia, 74 – share capital: 100,000 euro 

31. BPB Funding Llc (100% controlled) 

registered address: One Rodney Square, 10 th floor, Tenth and King Streets, Wilmington, New Castle 

County, Delaware, USA – share capital: 1,000,000 euro 

32. BPB Capital Trust (100% controlled by BPB Funding Llc) 


County, Delaware, USA – share capital: 1,000 euro 

33. Banca Lombarda Preferred Capital Company Llc (100% controlled) 

registered address: 1209, Orange Street the Corp. Trust Center, Wilmington, New Castle County, 

Delaware, USA – share capital: 1,000 euro 

34. Banca Lombarda Preferred Securities Trust (100% controlled) 

registered address: 1209, Orange Street the Corp. Trust Center, Wilmington, New Castle County, 

Delaware, USA – share capital: 1,000 euro 

35. BPCI Funding Llc (100% controlled) 


County, Delaware, USA – share capital: 1,000,000 euro 

3 UBI Banca also holds 92,784 financial instruments termed “parts bénéficiaires” issued by the company which do not form part of the 

share capital. 

75

36. BPCI Capital Trust (100% controlled by BPCI Funding Llc) 


County, Delaware, USA – share capital: 1,000 euro 

37. UBI Fiduciaria Spa (100% controlled) 

registered address: Brescia, Via Cefalonia, 74 4 – share capital: 1,898,000 euro 

38. UBI Gestioni Fiduciarie Sim Spa (100% controlled by UBI Fiduciaria) 


39. Coralis Rent Srl (100% controlled) 

registered address: Milano, Via f.lli Gabba, 1 – share capital: 400,000 euro 

40. UBI Sistemi e Servizi SCpA 5 – Consortium Stock Company (70.8453% controlled and 2.9599% 

held by: Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria, 

Banca Popolare di Ancona, Banca Carime and Banca Regionale Europea; 1.4799% held by: Banco di 

San Giorgio, Banca di Valle Camonica, UBI Banca Private Investment, UBI Pramerica SGR, 

Centrobanca and B@nca 24-7; 0.74% held by UBI Factor; 0.074% held by: IW Bank, UBI Insurance 

Broker, SILF and Prestitalia) 


41. UBI Finance Srl 6 (60% controlled) 

registered address: Milano, Foro Bonaparte, 70 – share capital: 10,000 euro 

42. UBI Finance CB 2 Srl (10% interest held) 

registered address: Milano, Foro Bonaparte, 70 – share capital: 10,000 euro 

43. Albenza 3 Srl 7 

44. Orio Finance Nr. 3 Plc 7 

45. 24-7 Finance Srl 8 

46. Lombarda Lease Finance 4 Srl 9 

47. UBI Finance 2 Srl 10 

48. UBI Finance 3 Srl 11 

49. UBI Lease Finance 5 Srl 12 

4 With effect from 1 st January 2011, UBI Fiduciaria and UBI Gestioni Fiduciarie Sim transferred their registered addresses in Brescia 

from 70, via Cefalonia to 74, via Cefalonia in the new UBI Banca management centre. 

5 The Group holds a controlling 98 . 52% interest in the share capital of UBI.S; the remaining 1 . 48% is held by UBI Assicurazioni. 

6 A special purpose entity in accordance with Law No. 130/1999, this company, enrolled on the general list of intermediaries 

pursuant to Art. 106 of the consolidated banking act, was formed on 18 th March 2008 to allow the Parent to implement a 

programme to issue covered bonds. 

7 Special purpose entities formed in compliance with Law No. 130/1999 for the securitisations performed in 2001 and 2002 by the 

former BPB-CV Scrl (Albenza 3 Srl) and by BPU International Finance Plc Ireland, subsequently closed down – (Orio Finance Nr. 3 

Plc). They were included in the consolidated financial statements because they are in reality controlled, since their assets and 

liabilities were originated by Group member companies. The consolidation only concerns those assets subject to securitisation and 

the relative liabilities issued. 

8 A special purpose entity (formerly Lombarda Lease Finance 1 Srl) used in compliance with Law No. 130/1999 for the B@nca 24-7 

securitisations performed in 2008. It was included in the consolidated financial statements because this company is in reality 

controlled, since its assets and liabilities were originated by a Group member company. UBI Banca holds a 10% stake. 

9 A special purpose entity formed in accordance with Law No. 130/1999 when a securitisation was performed in 2005 by SBS 

Leasing. It was included in the consolidated financial statements because this company is in reality controlled, since its assets and 

liabilities were originated by a Group member company. UBI Banca holds a 10% stake. 

10 A special purpose entity formed in accordance with Law No. 130/1999 for the securitisation performed in 2001 by Banco di 

Brescia and completed in the meantime. The company (formerly “Lombarda Mortgage Finance 1 Srl”) was used as an SPE (special 

purpose entity) for the securitisation of a portfolio of performing loans performed by Banco di Brescia at the beginning of 2009. It 

was included in the consolidated financial statements because this company is in reality controlled, since its assets and liabilities 

were originated by a Group member company. UBI Banca holds a 10% stake. 

11 A special purpose entity formed in accordance with Law No. 130/1999 for the securitisation performed by SBS Leasing in 2002 

and completed in the meantime. The company (formerly Lombarda Lease Finance 2 Srl) was used as an SPE (special purpose 

entity) for the securitisation of a portfolio of performing loans performed by Banca Popolare di Bergamo at the end of 2010. It was 

included in the consolidated financial statements because this company is in reality controlled, since its assets and liabilities were 

originated by a Group member company. UBI Banca holds a 10% stake. 

12 A special purpose entity formed in compliance with Law No. 130/1999 and used as an SPE for the securitisation of performing 

loans by UBI Leasing in November 2008. It was included in the consolidated financial statements because this company is in 

reality controlled, since its assets and liabilities were originated by a Group member company. UBI Banca holds a 10% stake. 

76

Companies consolidated using the equity method (the investment is by the Parent where no 

other indication is given): 

1. Aviva Vita Spa (50% controlled) 

registered address: Milan, Viale Abruzzi, 94 – share capital: 155,000,000 euro 

2. Aviva Assicurazioni Vita Spa (formerly UBI Assicurazioni Vita Spa) 

(49.9999% interest held) 

registered address: Milano, Viale Abruzzi, 94 – share capital: 49,721,776 euro 

3. Lombarda Vita Spa (40% interest held) 

registered address: Brescia, Corso Martiri della Libertà, 13 – share capital: 185,300,000 euro 

4. UBI Assicurazioni Spa (49.9999% interest held) 

registered address: Milano, via Tolmezzo, 15 13 – share capital: 32,812,000 euro 

5. Polis Fondi SGRpA (19.6% interest held) 

registered address: Milano, Via Solferino, 7 – share capital: 5,200,000 euro 

6. Lombarda China Fund Management Company (49% interest held) 

registered address: 47, Sin Mao Tower, 88 Century Boulevard, Pudong Area 200121, Shanghai 

(China) – share capital: 120,000,000 yuan/renminbi 

7. SF Consulting Srl (35% interest held) 

operating headquarters: Mantova, Via P.F. Calvi, 40 – share capital: 93,600 euro 

8. Sofipo Sa 14 (30% interest held by Banque de Dépôts et de Gestion) 

registered address: Via Balestra, 22B - Lugano (Switzerland) – share capital: 2,000,000 Swiss francs 

9. Arca SGR Spa (23.1240% interest held by the Parent and 3.5840% by BPA) 

registered address: Milano, Via M. Bianchi, 6 – share capital: 50,000,000 euro 

10. S.P.F. Studio Progetti Finanziari Srl (25% interest held by BPA) 

registered address: Roma, Via National, 243 – share capital: 92,960 euro 

11. Prisma Srl (20% interest held) 

registered address: Milano, Via S. Tecla, 5 – share capital: 120,000 euro 

12. Siderfactor Spa – in liquidation (27% interest held by UBI Factor) 

registered address: Milano, Via f.lli Gabba, 1/A – share capital: 1,200,000 euro 

13. Capital Money Spa (20.6711% interest held) 

registered address: Milano, Via Lausanne, 16 – share capital: 2,042,955 euro 

14. BY YOU Spa (formerly Rete Mutui Italia Spa, 10% interest held ) 15 

registered address: Milano, Corso Venezia, 37 – share capital: 650,000 euro 

15. UFI Servizi Srl (23.1667% interest held by Prestitalia) 

registered address: Roma, Via G. Severano, 24 – share capital: 150,000 euro 

Changes in the consolidation scope 

No changes were made to the consolidation scope compared to 31 st December 2010, except for 

those reported below. The descriptions of the changes are grouped into those for banks and 

those for other companies for which details of the rationalisation process and action taken to 

strengthen capital are given. 

Network banks: 

• Banca Popolare di Ancona Spa: UBI Banca made further purchases during the year from 

non controlling shareholders, for a total of 8,744 shares (a small fraction amounting to 

13 In a meeting of 20 th May the Board of Directors of UBI Assicurazioni Spa passed a resolution to transfer the registered address from 

12 Piazzale Zavattari to 15 Via Tolmezzo (still in Milan) from 20 th June 2011. 

14 The company changed its name (from Sofipo Fiduciaire Sa to Sofipo Sa), effective from 30 th May 2011 (date of publication by the 

Swiss Commercial Register). 

15 This company, which has 100% control of By You Piemonte Srl – in liquidation, By You Liguria Srl – in liquidation, By You Mutui 

Srl (which controls Sintesi Mutuo Srl) and By You Adriatica Srl – in liquidation, is consolidated because UBI Banca holds 20% of 

the voting rights. 

77

0.0357% of the share capital), which brought its controlling interest up from 92.8983% at 

the end of 2010 to 92.9340% as at 31 st December 2011; 

• Banca Carime Spa: in the first three months of the year the Parent acquired 14,630 shares 

from non controlling shareholders which changed its control of the subsidiary to 92.8332% 

(92.8322% in December); 

• Banco di San Giorgio Spa: after 31 st December 2010, UBI Banca continued with purchases 

from private individual shareholders and acquired a total of 1,203,424 shares during the 

year in this Liguria bank. In the meantime the bank was recapitalised, which resulted in 

the issue of 4,981,435 new shares on 12 th October 2011. 

More specifically, on the basis of a specific authorisation from an extraordinary 

Shareholders’ Meeting held on 8 th January 2010 and subsequent resolutions passed by the 

Board of Directors: in the period between 1 st August and 16 th September 2011, option 

rights and pre-emption rights were exercised on the increase in the share capital from 

94,647,277.50 euro to 102,119,430.00 euro, which involved the issue of a maximum of 

4,981,435 ordinary shares, with normal dividend entitlement and a par value of 1.50 euro 

per share, to be offered as an option right to shareholders at a ratio of three new ordinary 

shares for every 38 ordinary shares owned at a price of 4.00 euro per share (of which 2.50 

euro as a share premium). 

A total of 4,783,365 new shares were subscribed by rights holders (96.02% of the total 

shares offered in the share issue), as follows: 2,856,015 shares subscribed by BRE, 

1,885,383 by UBI Banca and 41,967 by non-controlling shareholders. The portion on which 

rights were not exercised (198,070 shares) were allotted as follows: 9,493 shares were 

applied for under pre-emption rights by non-controlling shareholders, while the remaining 

188,577 shares went to the majority shareholders (74,986 to the Parent and 113,591 to 

Banca Regionale Europea). 

On completion of the operation, Banco di San Giorgio therefore had share capital of 

€102,119,430, composed of 68,079,620 shares. With account taken of the purchases made, 

control by the UBI Banca Group had risen to 95.6928%, of which 57.5001% held by BRE 

and 38.1927% by UBI Banca (as at 31 st December 2010 the Group held 93.5271%, with 

57.3332% held by BRE and 36.1939% by UBI Banca); 

On 14 th November 2011, the creation of a single North West banking operation was 

announced through the merger of Banco di San Giorgio into Banca Regionale Europea 

planned for July 2012, with a view to Group simplification and local market focus. 

Other Banks: 

• IW Bank: as a result of transactions which occurred during the year, which led to the 

delisting of the Company, control by the Group rose from 78.77% at the end of 2010 

(55.2740% held by UBI Banca and 23.4960% by Centrobanca) to 88.5352% as at 31 st 

December 2011 (65.0392% held by the Parent and 23.4960% by Centrobanca). These 

stakes reported do not include the treasury shares held by IW Bank accounting for 

1.1290% of the share capital, while Webstar holds the remaining 10.3358%. 

A summary of the main stages of the change is given below: 

- 27 th October 2010: after an interest of greater than 90% of the share capital with voting 

rights came to be held (a threshold which determines the obligation to purchase the 

remaining shares of the issuer), UBI Banca and Webstar (bound by a shareholders’ 

agreement) jointly announced, in compliance with Art. 50 of the Issuers’ Regulations 

(residual public tender offer), their intention not to restore the free float, but to comply 

with the obligation to purchase the floating shares; 

- 16 th February 2011: with Resolution No. 17669, the Consob (Italian securities market 

authority) set the share price at 1.988 euro per share for the purchase, in accordance 

with Art. 108, paragraph 2 of the Consolidated Finance Act, of the ordinary shares of IW 

Bank by the offerors; 

78

- 22 nd February 2011: UBI Banca decided to pay an increase on the price set by the 

Consob, thereby bringing it up to 2.043 euro 16 for each share offered for sale, if it came 

to hold at least 95% of the share capital; 

- 15 th March 2011: with Note No. 11019656 the Consob authorised the publication of the 

information document in relation to the operation for the obligation to purchase 

7,189,039 ordinary shares of IW Bank (9.8767% of the share capital with voting rights 

and 9.7652% of the total share capital) in compliance with Art 108, paragraph 2 of the 

Consolidated Finance Act; 

- 21 st March 2011: start of the period for the presentation of applications to sell on the 

Mercato Telematico Azionario (electronic stock exchange); 

- 7 th April 2011: UBI Banca disclosed that applications to sell had been received 

representing 4,007,842 ordinary shares of IW Bank, equal to 5.5062% of the share 

capital with voting rights and 5.4440% of the total share capital and that as a 

consequence, the threshold of 95% of the share capital (calculated net of treasury shares 

held in portfolio) had been exceeded. The conditions set by law had therefore been met 

for compliance with the purchase obligation pursuant to Art. 108, paragraph 1 of the 

Consolidated Finance Act, and for the exercise of the right to purchase the remaining 

shares in circulation, pursuant to Art. 111 of the Consolidated Finance Act, by means of 

a joint operation agreed with the Consob and Borsa Italiana; 

- 8 th April 2011: end of the period for the presentation of applications to sell. The UBI 

Banca Group disclosed that it held (with account taken of the IW Bank shares held by 

Webstar S.A. and the treasury shares held in portfolio by IW Bank itself) a total of 

70,398,647 ordinary shares, accounting for 96.7174% of the share capital with voting 

rights (95.6254% of the total share capital); 

- 12 th April 2011: UBI Banca published the results of the purchase obligation operation in 

compliance with articles 108, paragraph 2, and 109 of the Consolidated Finance Act and 

details of the manner of compliance with the obligation and of the right to purchase in 

accordance with articles 108 and 111 of the Consolidated Finance Act. 

In the period from 21 st March until 8 th April, 4,799,674 shares of IW Bank were offered 

under the purchase obligation operation, accounting for approximately 67% of the total 

remaining shares subject to the operation and for 6.5940% of the share capital with 

voting rights (6.5196% of the total share capital), for a total price of €9.8 million (date of 

payment: 13 th April). 

After the end of the period for the presentation of applications to sell, the joint operation 

for the purchase of the remaining 2,389,365 ordinary shares of IW Bank still in 

circulation (3.2826% of the share capital with voting rights and 3.2456% of the total 

share capital) commenced. These were purchased at a price of 2.043 euro per share for a 

total of €4.9 million (date of execution of the operation and payment: 19 th April); 

- 19 th April 2011: after the suspension of the IW Bank share from trading in the sessions 

of 14 th , 15 th and 18 th April, Borsa Italiana removed the share from the listing on the 

Mercato Telematico Azionario (electronic stock exchange) with effect from that date; 

• Centrobanca Spa: in November, at the same time as the announcement of the merger of this 

corporate bank into UBI Banca (planned for the first half of 2013 and designed to streamline 

operations), the Parent proceeded to purchase shares held by non-controlling shareholders 

(mainly banking counterparties). During the year the Parent purchased a total of 6,349,434 

shares (including the 24,322 shares acquired on 21 st April 2011) for consideration of 

approximately €11 million. The investment held by UBI Banca therefore rose from 

92.3818% at the end of 2010 to 94.2715% as at 31 st December 2011, while Group control 

increased at the same time over twelve months from 97.8530% to 99.7427%. 

Subsequent to 31 st December 2011, a further 139,565 shares were purchased for 

consideration of approximately €243 thousand, which brought the percentage control of the 

Group to 99.7842%. 

• B@nca 24-7 Spa: as part of Group reorganisation activity, procedures were started to be 

begin the merger of this bank into UBI Banca, as announced on 14 th November 2011 when it 

was approved by the Management Board. It is forecast to be completed in 2012. 

16 The highest official market price of the IW Bank share in the preceding 12 months. 

79

Other companies: 

• Lombarda Lease Finance 3: following the early close down of the securitisation transaction 

in the summer of 2010 and the redemption of all the notes issued, the underlying business 

was removed from the consolidation on 1 st January 2011 (although the company remains 

operational). Only the items in the income statement relating to the assets and liabilities of 

the company recognised during the preceding twelve months and no longer present at year 

end, still appeared in the accounts for the year ended 31 st December 2010; 

• UBI Sistemi e Servizi Scpa: on 13 th January 2011, UBI Pramerica SGR sold 50,000 shares 

of UBI.S to IW Bank for €38 thousand euro. This allowed this internet bank to become a 

shareholder of the consortium company with 0.074%, while the interest held by UBI 

Pramerica SGR fell from 1.5539% at the end of 2010 to 1.4799%; 

On 30 th November 2011, UBI Banca transferred 50,000 UBI.S shares to Prestitalia for €38 

thousand. The Parent’s investment therefore fell from 70.9193% at the end of 2010 to 

70.8453%, thereby allowing Prestitalia to acquire a 0.074% stake; 

• Polis Fondi SGRpA: on 14 th February 2011 an agreement was completed, signed on 28 th 

July 2010 by the principal shareholders: Sopaf on the one hand (which held 49% of the 

share capital) and UBI Banca together with Banco Popolare, BPER, Banca Popolare di 

Sondrio and Banca Popolare di Vicenza on the other, five “popular” bank shareholders who 

together also held 49%. The purpose of the agreement was to acquire the investment held 

by Sopaf for consideration of € 8 million. Following the issue of the authorisation by the 

Bank of Italy (on 18 th January 2011), the planned transactions commenced. In this context 

UBI Banca acquired a further 9.8% of the share capital (50,960 shares) for payment of €1.6 

million. The interest held by UBI Banca therefore rose from 9.8% at the end of 2010 to 

19.6% as at 31 st December 2011. 

The five “popular” banks and Unione Fiduciaria (original shareholder, with a 2% stake) then 

signed a new five year shareholders’ agreement, the contents of which determined a change 

in the method of consolidation. Since it was no longer able by itself to influence decisions 

on significant matters in terms of joint control, UBI Banca no longer qualified as possessing 

control, although it does meet the conditions for significant influence. This meant that it 

was no longer consolidated with the proportionate method (applied as at 31 st December 

2010) and is now an equity-accounted investee; 

• Sintonia Finance Srl: the multi-originator securitisation performed on 23 rd December 2002 

– which saw the involvement of Centrobanca and another bank outside the Group in this 

securitisation of performing loans, mainly residential mortgages granted to private 

individuals with the remaining commercial mortgages granted to companies resident in 

Italy – was redeemed in advance on 25 th November 2011 (with the close down of the entity 

on the same date). 

The securitisation was initially on loans of €324 million transferred (of which €166.3 million 

relating to Centrobanca), funded through the issue of class A (€302.8 million nominal) and 

Class B (€21 million) asset backed securities together with a junior Class C tranche (€17.4 

million, of which €8 million repurchased by Centrobanca). On conclusion of the operation, 

loans remained of approximately €40 million, of which €19.3 million related to 

Centrobanca, against senior securities (Class A and Class B), subject to early redemption 

for €22 million and €15.6 million respectively; 

• UBI Finance CB 2 Srl: the company was formed on 20 th December 2011 for the sole 

purpose of the issue of covered bonds pursuant to Art.7 bis of Law No. 130 of 30 th April 

1999. The company was formed in view of the commencement of a second programme of 

covered bond issues on commercial non residential mortgages scheduled for April 2012. 

Ten percent of the share capital (€10,000) is held by UBI Banca and 90% by the Dutch 

registered company Stichting Viola. 

Other companies: organisational simplification 

• Prestitalia Spa: on 10 th January 2011, Barberini Sa sold its entire investment held in 

Prestitalia (53,378 shares accounting for 100% of the share capital) to B@nca 24-7 for a 

80

total price of €77 million. Consequently, as at 31 st December 2011 this bank, which 

specialises in consumer credit, possessed full and direct control of the company. 

On 24 th March 2011, in connection with the agreements to purchase the entire share 

capital of Barberini Sa and Prestitalia Spa, UBI Banca paid Medinvest International and 

Pharos Sa the last instalment of the amount relating to Barberini: €1.6 million, which was 

subject to determined conditions concerning the agency network of Presitalia being met, 

and €74 thousand as the final balance on the purchase of 92,784 financial instruments 

termed "parts bénéficiaires"; 

• UBI Trust Company Ltd: on 10 th February 2011 the local monetary authority – Jersey 

Financial Services Commission Companies Registry – announced that it had removed UBI 

Trust Company from the companies register. Following the geographical repositioning of 

trustee services to Luxembourg, the company was closed down with effect from 30 th June 

2010 (99.9980% controlled by UBI Banca International); 

• Invesclub Srl: on 2 nd March 2011, a Shareholders’ Meeting of the company passed a 

resolution to wind it up by placing it into voluntary liquidation in accordance with Art. 

2484 of the Italian Civil Code. This was in consideration of its non strategic importance 

both for its parent, IW Bank, and for the Group. This company, which was excluded from 

the Group consolidation at the end of 2011, was removed from the register of companies on 

12 th March 2012; 

• Tex Factor Srl – in liquidation: on 31 st March 2011 the voluntary liquidation of the company 

was completed with its removal from the consolidation and, on 13 th April 2011, also from 

the company register; 

• InvestNet International Spa: on 14 th April 2011 a shareholders’ meeting of InvestNet 

International Sa – a Luxembourg registered company – passed a resolution to transfer the 

registered address of the company to Italy (to Milan, at 20 Via Cavriana), with the 

consequent transformation of the company into an Italian registered joint stock company 

named InvestNet International Spa. It was enrolled in the companies register on 19 th 

September2011. 

The company will be merged into its Parent, IW Bank, which wholly owns it, as part of the 

process to simplify Group structure. The Boards of Directors of InvestNet International and 

of the merging bank approved the relative merger project on 16 th December 2011. 

• BY YOU Spa: on 27 th April 2011, UBI Banca, a shareholder with a 40% stake, sold 30% of 

the share capital of BY YOU (accounting for 195,000 shares) to Bluestar, Linea Mutui and 

Promozione Mutui for a price of €5 million to be paid at a later date, except for a sum of 

€195 thousand paid immediately in cash. As part of that sale, the shareholders also signed 

a five year shareholders agreement by which reciprocal put and call options are held on the 

remaining 10% stake held by UBI Banca in BY YOU. 

As a result of the sale, the necessary conditions for joint control of the company (and its 

subsidiaries) ceased to exist as at 31 st December 2011, although it continues to be included 

within the consolidation using the equity method. This is because of the existence of a 

pledge on shares representing a further 10% of the share capital with voting rights for UBI 

Banca, which therefore holds 20% of the voting rights; 

• Ge.Se.Ri. – Gestione Servizi di Riscossione Spa in liquidation: on 24 th May 2011 the 

Management Board of UBI Banca approved a project for the merger of the company into its 

parent which wholly owns it, Banca Regionale Europea, to be performed by merger on an 

acquisition basis and on the basis of the simplified procedure pursuant to article 2505 of 

the Italian Civil Code. The transaction – authorised by the Bank of Italy on 20 th September 

2011 – became effective on 29 th December 2011 and is effective for accounting and tax 

purposes from 1 st January 2011. Consequently Ge.Se.Ri. has no longer been included in 

the consolidation since the end of December; 

• Investnet Italy Srl: on 17 th June 2011 the merger of the company into its parent according 

to the simplified procedure pursuant to Art. 2505 of the Italian Civil Code was approved by 

a shareholders’ meeting of Investnet Italia and by the Board of Directors of IW Bank, which 

wholly owned the company. The operation, authorised by the Bank of Italy on the preceding 

30 th May, forms part of a broader process to simplify and streamline the organisational 

structure of Group. The merger took effect from 1 st August 2011, while it is effective for 

81

accounting and tax purposes from 1 st January 2011. The company has not been included 

in the consolidation scope since 30 th September 2011; 

• FinanzAttiva Servizi Srl: on 26 th July 2011, the Management Board of UBI Banca decided 

(in accordance with Art. 2501 ter of the Italian Civil Code) a project for the merger of 

FinanzAttiva Servizi (approved by the Board of Directors of the latter on 29 th July), by 

means of the simplified procedure pursuant to Art. 2505 of the Italian Civil Code, since the 

company is wholly owned by the Parent. The transaction, authorised by the Bank of Italy 

on 19 th October 2011, is effective from 30 th December 2011 (and for accounting and tax 

purposes from 1 st January 2011). The company has no longer been included in the 

consolidation since the end of December; 

• Siderfactor Spa – in liquidation: on 12 th December 2011 a shareholders’ meeting voted for 

the early winding up of the company and to put it into voluntary liquidation, with effect 

from the date on which the decision was registered (11 th January 2012). The company 

performed all transactions designed to facilitate the receipt and payment of receivables 

owed to and by companies in the Marcegaglia Spa Group. As a consequence of changes in 

the regulatory and operating environment, the viability of these operations and the ability to 

generate future profits was prejudiced as shown by the findings of analyses conducted in 

2011. It was therefore decided to close it down. 

Other companies: share capital increases 

• BDG Singapore Pte Ltd: following the start-up of operations (asset management), on 19 th 

January 2011 the parent company, Banque de Dépôts et de Gestion, made a payment of 

5,275,000 Singapore dollars to strengthen the capital of the company, in accordance with a 

shareholders’ resolution of 10 th December 2010. The share capital therefore rose to 

5,600,000 Singapore dollars (from 325,000 Singapore dollars before); 

• Aviva Vita Spa: on 23 rd February 2011, UBI Banca (which holds 50% of the company) paid 

up its part (€5 million) of the first tranche of a share capital increase for a total of €20 

million, approved by a shareholders’ meeting on that same date. This increase was designed 

to provide Aviva Vita with adequate resources for its solvency margin, now and in the 

future, in view of the growth in its premium income and the redemption of a subordinated 

loan. 

On 26 th July 2011, the Board of Directors of Aviva Vita decided to ask the shareholders to 

pay a second tranche of the share capital increase (a total of €10 million, including €5 

million from UBI Banca, which made the payment on the following 29 th July). 

On the following 15 th December 2011, a Shareholders’ Meeting of the company passed a 

resolution for a further increase in the share capital for a total of €20 million, designed to 

reconstitute a more adequate solvency margin, which had been eroded by price fluctuations 

involving government securities held in portfolio. UBI Banca paid its share of the increase 

on that same date (€10 million). 

As a result of the operations performed during the year, the share capital rose from 

€115,000,000 at the end of 2010 to €155,000,000 as at 31 st December 2011; 

• UBI Leasing Spa: on 6 th April 2011 the shareholders of the company passed a resolution to 

increase the equity of the company by €60 million. The operation gave rise to an increase in 

the share capital of €45 million from the previous €196,557,810 to the new amount of 

€241,557,810, through the issue of 7.5 million new ordinary shares, with a par value of € 6 

each, at a price of €8 per share. The difference of €15 million between the par value of the 

share and the issue price – the latter designed to take account of the increase in the capital 

value of the company – was recognised in the share premium reserve. The increase in own 

funds – a consequence of changes in the supervisory context, the need to maintain 

adequate levels of capitalisation and to fund future investments and comply with regulatory 

capital ratios – was supported on a pro rata basis by UBI Banca and Banca Popolare di 

Ancona, with no change in the respective percentage interests held. 

82

Reclassified consolidated financial 

statements, reclassified income statement 

net of the most significant non-recurring 

items and reconciliation schedules 

Reclassified consolidated balance sheet 

Figures in thousands of euro 

31.12.2011 31.12.2010 Changes % changes 

ASSETS 

10. Cash and cash equivalents 625,835 609,040 16,795 2.8% 

20. Financial assets held for trading 2,872,417 2,732,751 139,666 5.1% 

30. Financial assets at fair value 126,174 147,286 -21,112 -14.3% 

40. Available-for-sale financial assets 8,039,709 10,252,619 -2,212,910 -21.6% 

60. Loans to banks 6,184,000 3,120,352 3,063,648 98.2% 

70. Loans to customers 99,689,770 101,814,829 -2,125,059 -2.1% 

80. Hedging derivatives 1,090,498 591,127 499,371 84.5% 

90. Fair value change in hedged financial assets (+/-) 704,869 429,073 275,796 64.3% 

100. Equity investments 352,983 368,894 -15,911 -4.3% 

120. Property, equipment and investment property 2,045,535 2,112,664 -67,129 -3.2% 

130. Intangible assets 2,987,669 5,475,385 -2,487,716 -45.4% 

of which: goodwill 2,538,668 4,416,660 -1,877,992 -42.5% 

140. Tax assets 2,817,870 1,723,231 1,094,639 63.5% 

150. Non-current assets and disposal groups held for sale 22,020 8,429 13,591 161.2% 

160. Other assets 2,244,343 1,172,889 1,071,454 91.4% 

Total assets 129,803,692 130,558,569 -754,877 -0.6% 

LIABILITIES AND EQUITY 

10. Due to banks 9,772,281 5,383,977 4,388,304 81.5% 

20. Due to customers 54,431,291 58,666,157 -4,234,866 -7.2% 

30. Securities issued 48,377,363 48,093,888 283,475 0.6% 

40. Financial liabilities held for trading 1,063,673 954,423 109,250 11.4% 

60. Hedging derivatives 1,739,685 1,228,056 511,629 41.7% 

80. Tax liabilities 702,026 993,389 -291,363 -29.3% 

90. Liabilities associated with activities under disposal - - - - 

100. Other liabilities 3,139,616 2,600,165 539,451 20.7% 

110. Post-employment benefits 394,025 393,163 862 0.2% 

120. Provisions for risks and charges: 345,785 303,572 42,213 13.9% 

a) pension and similar obligations 76,460 68,082 8,378 12.3% 

b) other provisions 269,325 235,490 33,835 14.4% 

140.+170. 

Share capital, share premiums, reserves, fair value reserves 

+180.+190.+ 200. and treasury shares 10,780,511 10,806,898 -26,387 -0.2% 

210. Non-controlling interests 898,924 962,760 -63,836 -6.6% 

220. Profit (loss) for the year -1,841,488 172,121 -2,013,609 n.s. 

Total liabilities and equity 129,803,692 130,558,569 -754,877 -0.6% 

83

Reclassified consolidated quarterly balance sheet 


31.12.2011 30.9.2011 30.6.2011 31.3.2011 31.12.2010 30.9.2010 30.6.2010 31.3.2010 

ASSETS 

10. Cash and cash equivalents 625,835 568,540 595,685 569,052 609,040 586,075 632,183 637,113 

20. Financial assets held for trading 2,872,417 2,250,881 1,093,974 1,613,809 2,732,751 2,836,561 2,640,330 1,990,806 

30. Financial assets at fair value 126,174 130,494 468,038 474,114 147,286 153,951 155,143 159,658 

40. Available-for-sale financial assets 8,039,709 8,365,381 10,223,610 10,252,511 10,252,619 10,954,989 12,501,312 7,123,883 

60. Loans to banks 6,184,000 5,314,336 4,384,636 4,510,008 3,120,352 3,427,795 3,290,637 2,996,834 

70. Loans to customers 99,689,770 102,765,316 102,774,467 102,702,444 101,814,829 101,195,034 100,157,746 97,805,640 

80. Hedging derivatives 1,090,498 995,341 413,389 351,398 591,127 816,673 916,055 743,946 

90. Fair value change in hedged financial assets (+/-) 704,869 675,977 254,474 194,086 429,073 796,414 621,964 450,741 

100. Equity investments 352,983 351,463 381,376 378,196 368,894 375,800 406,789 419,289 

120. Property, equipment and investment property 2,045,535 2,058,170 2,077,758 2,086,769 2,112,664 2,071,976 2,097,820 2,087,323 

130. Intangible assets 2,987,669 5,268,352 5,287,195 5,452,328 5,475,385 5,478,993 5,475,662 5,497,679 

of which: goodwill 2,538,668 4,286,210 4,286,210 4,416,659 4,416,660 4,413,791 4,397,766 4,401,911 

140. Tax assets 2,817,870 2,604,967 2,312,956 1,704,774 1,723,231 1,379,250 1,362,428 1,616,739 

150. Non-current assets and disposal groups held for sale 22,020 6,874 7,041 6,023 8,429 48,256 40,285 134,769 

160. Other assets 2,244,343 2,272,277 2,476,298 2,442,098 1,172,889 1,622,444 1,801,061 2,351,971 

Total assets 129,803,692 133,628,369 132,750,897 132,737,610 130,558,569 131,744,211 132,099,415 124,016,391 

LIABILITIES AND EQUITY 

10. Due to banks 9,772,281 8,611,714 4,966,574 7,332,517 5,383,977 7,126,257 9,252,062 4,612,141 

20. Due to customers 54,431,291 56,392,736 56,199,737 56,144,592 58,666,157 57,412,547 58,534,315 52,754,329 

30. Securities issued 48,377,363 47,502,685 49,964,140 48,678,875 48,093,888 46,463,566 44,828,119 45,670,177 

40. Financial liabilities held for trading 1,063,673 654,949 844,259 1,040,163 954,423 978,064 896,016 948,995 

60. Hedging derivatives 1,739,685 1,569,117 953,439 1,020,994 1,228,056 1,827,144 1,560,152 1,130,958 

80. Tax liabilities 702,026 1,389,753 1,309,724 1,083,134 993,389 908,091 814,057 1,277,497 

90. Liabilities associated with activities under disposal - 827 987 - - - - 803,894 

100. Other liabilities 3,139,616 4,554,208 4,778,011 4,606,189 2,600,165 4,288,484 3,697,804 3,859,410 

110. Post-employment benefits 394,025 389,096 383,467 382,333 393,163 402,921 405,118 414,667 

120. Provisions for risks and charges: 345,785 326,203 335,057 321,912 303,572 295,747 271,353 277,233 

a) pension and similar obligations 76,460 65,806 67,022 67,317 68,082 69,560 70,464 70,982 

b) other provisions 269,325 260,397 268,035 254,595 235,490 226,187 200,889 206,251 

140.+170.+ 

180.+190.+ 200. Share capital, share premiums, reserves, fair value reserves and treasury shares 10,780,511 11,105,404 11,821,241 11,088,990 10,806,898 10,886,557 10,867,923 11,351,150 

210. Non-controlling interests 898,924 949,008 942,551 973,302 962,760 957,099 870,422 877,815 

220. Profit for the period/year -1,841,488 182,669 251,710 64,609 172,121 197,734 102,074 38,125 

Total liabilities and equity 129,803,692 133,628,369 132,750,897 132,737,610 130,558,569 131,744,211 132,099,415 124,016,391 

84

Reclassified consolidated income statement 


2011 2010 Changes % changes 4th Quarter 4th Quarter Changes % changes 

2011 

2010 

A B A-B A/B C 

D 

C-D C/D 

10.-20. Net interest income 2,119,915 2,142,526 (22,611) (1.1%) 544,614 548,555 (3,941) (0.7%) 

of which: effects of the purchase price allocation (49,931) (61,141) (11,210) (18.3%) (12,441) (14,598) (2,157) (14.8%) 

Net interest income excluding the effects of the PPA 2,169,846 2,203,667 (33,821) (1.5%) 557,055 563,153 (6,098) (1.1%) 

70. Dividends and similar income 19,997 24,099 (4,102) (17.0%) 89 3,531 (3,442) (97.5%) 

Profits (losses) of equity-accounted investees 9,947 17,613 (7,666) (43.5%) (3,171) (1,867) 1,304 69.8% 

40.-50. Net commission income 1,193,708 1,185,297 8,411 0.7% 315,142 313,767 1,375 0.4% 

of which performance fees 11,728 15,384 (3,656) (23.8%) 11,728 15,384 (3,656) (23.8%) 

80.+90.+ 

100.+110. 

Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities 

at fair value 7,329 34,044 (26,715) (78.5%) 23,999 20,573 3,426 16.7% 

220. Other net operating income 87,443 92,482 (5,039) (5.4%) 23,653 25,893 (2,240) (8.7%) 

Operating income 3,438,339 3,496,061 (57,722) (1.7%) 904,326 910,452 (6,126) (0.7%) 

Operating income excluding the effects of the PPA 3,488,270 3,557,202 (68,932) (1.9%) 916,767 925,050 (8,283) (0.9%) 

180.a Personnel expense (1,423,196) (1,451,584) (28,388) (2.0%) (350,339) (344,469) 5,870 1.7% 

180.b Other administrative expenses (717,988) (769,744) (51,756) (6.7%) (195,751) (201,335) (5,584) (2.8%) 

200.+210. Net impairment losses on property, equipment and investment property and intangible assets (248,442) (247,236) 1,206 0.5% (66,574) (63,996) 2,578 4.0% 

of which: effects of the purchase price allocation (69,823) (74,889) (5,066) (6.8%) (17,455) (18,722) (1,267) (6.8%) 

excluding the effects of the PPA (178,619) (172,347) 6,272 3.6% (49,119) (45,274) 3,845 8.5% 

Operating expenses (2,389,626) (2,468,564) (78,938) (3.2%) (612,664) (609,800) 2,864 0.5% 

Operating expenses excluding the effects of the PPA (2,319,803) (2,393,675) (73,872) (3.1%) (595,209) (591,078) 4,131 0.7% 

Net operating income 1,048,713 1,027,497 21,216 2.1% 291,662 300,652 (8,990) (3.0%) 

Net operating income excluding the effects of the PPA 1,168,467 1,163,527 4,940 0.4% 321,558 333,972 (12,414) (3.7%) 

130.a Net impairment losses on loans (607,078) (706,932) (99,854) (14.1%) (208,413) (251,217) (42,804) (17.0%) 

130.b+c+d Net impairment losses on other assets and liabilities (135,143) (49,721) 85,422 171.8% 3,694 (31,529) 35,223 n.s. 

190. Net provisions for risks and charges (31,595) (27,209) 4,386 16.1% (11,812) (15,204) (3,392) (22.3%) 

240.+270. Profits from disposal of equity investments 7,119 95,872 (88,753) (92.6%) 5,616 12,346 (6,730) (54.5%) 

Pre-tax profit from continuing operations 282,016 339,507 (57,491) (16.9%) 80,747 15,048 65,699 436.6% 

Pre-tax profit from continuing operations excluding the effects of the PPA 401,770 475,537 (73,767) (15.5%) 110,643 48,368 62,275 128.8% 

290. Taxes on income for the year/period from continuing operations 95,942 (231,980) 327,922 n.s. (48,585) (34,693) 13,892 40.0% 

of which: effects of the purchase price allocation 39,423 43,770 (4,347) (9.9%) 9,842 10,720 (878) (8.2%) 

310. Post-tax profit (loss) from discontinued operations 248 83,368 (83,120) (99.7%) 226 (1) 227 n.s. 

330. Profit for the year/period attributable to non-controlling interests (28,833) (13,602) 15,231 112.0% (9,477) (5,967) 3,510 58.8% 

of which: effects of the purchase price allocation 8,687 10,034 (1,347) (13.4%) 2,132 2,503 (371) (14.8%) 

Profit (loss) for the year/period attributable to the shareholders of the Parent before impairment 

losses on goodwill and finite useful life intangible assets excluding the effects of the PPA 421,017 259,519 161,498 62.2% 40,833 (5,516) 46,349 n.s. 

Profit (loss) for the period/year attributable to the shareholders of the Parent before 

impairment losses on goodwill and finite useful life intangible assets 349,373 177,293 172,080 97.1% 22,911 (25,613) 48,524 n.s. 

210,+260, 

Impairment losses on goodwill and finite useful life intangible assets net of taxes and non 

controlling interests (2,190,861) (5,172) 2,185,689 n.s. (2,047,068) - (2,047,068) n.s. 

340. Profit (loss) for the year/period attributable to the shareholders of the Parent (1,841,488) 172,121 (2,013,609) n.s. (2,024,157) (25,613) 1,998,544 n.s. 

Total impact of the purchase price allocation on the income statement (71,644) (82,226) (10,582) (12.9%) (17,922) (20,097) (2,175) (10.8%) 

85

Reclassified consolidated quarterly income statements 

2011 2010 


4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 

10.-20. Net interest income 544,614 534,185 513,579 527,537 548,555 543,197 517,441 533,333 

of which: effects of the purchase price allocation (12,441) (11,636) (12,018) (13,836) (14,598) (14,060) (15,934) (16,549) 

Net interest income excluding the effects of the PPA 557,055 545,821 525,597 541,373 563,153 557,257 533,375 549,882 

70. Dividends and similar income 89 1,243 16,555 2,110 3,531 2,331 16,862 1,375 

Profits (losses) of equity-accounted investees (3,171) 3,496 4,953 4,669 (1,867) 8,414 6,043 5,023 

40.-50. Net commission income 315,142 291,989 294,641 291,936 313,767 263,973 313,929 293,628 

of which performance fees 11,728 - - - 15,384 - - - 

80.+90.+ 

100.+110. 

Net income (loss) from trading, hedging and disposal/repurchase activities and from 

assets/liabilities at fair value 23,999 (23,891) (7,391) 14,612 20,573 19,357 (964) (4,922) 

220. Other net operating income 23,653 20,874 21,263 21,653 25,893 25,327 17,170 24,092 

Operating income 904,326 827,896 843,600 862,517 910,452 862,599 870,481 852,529 

Operating income excluding the effects of the PPA 916,767 839,532 855,618 876,353 925,050 876,659 886,415 869,078 

180.a Personnel expense (350,339) (334,913) (373,217) (364,727) (344,469) (359,587) (376,496) (371,032) 

180.b Other administrative expenses (195,751) (165,947) (185,209) (171,081) (201,335) (183,844) (199,730) (184,835) 

200.+210. Net impairment losses on property, equipment and investment property and intangible assets (66,574) (60,365) (61,779) (59,724) (63,996) (60,425) (61,729) (61,086) 

of which: effects of the purchase price allocation (17,455) (17,456) (17,456) (17,456) (18,722) (18,723) (18,722) (18,722) 

Net impairment losses on property, equipment and investment property and intangible assets 

excluding the effects of the PPA (49,119) (42,909) (44,323) (42,268) (45,274) (41,702) (43,007) (42,364) 

Operating expenses (612,664) (561,225) (620,205) (595,532) (609,800) (603,856) (637,955) (616,953) 

Operating expenses excluding the effects of the PPA (595,209) (543,769) (602,749) (578,076) (591,078) (585,133) (619,233) (598,231) 

Net operating income 291,662 266,671 223,395 266,985 300,652 258,743 232,526 235,576 

Net operating income excluding the effects of the PPA 321,558 295,763 252,869 298,277 333,972 291,526 267,182 270,847 

130.a Net impairment losses on loans (208,413) (135,143) (158,148) (105,374) (251,217) (134,011) (189,845) (131,859) 

130.b+c+d Net impairment losses on other assets and liabilities 3,694 (119,245) (17,959) (1,633) (31,529) (147) (18,660) 615 

190. Net provisions for risks and charges (11,812) (5,228) (4,136) (10,419) (15,204) (5,383) (4,407) (2,215) 

240.+270. Profits from disposal of equity investments 5,616 170 1,152 181 12,346 80,498 2,936 92 

Pre-tax profit from continuing operations 80,747 7,225 44,304 149,740 15,048 199,700 22,550 102,209 

Pre-tax profit from continuing operations excluding the effects of the PPA 110,643 36,317 73,778 181,032 48,368 232,483 57,206 137,480 

290. Taxes on income for the period from continuing operations (48,585) (70,191) 291,636 (76,918) (34,693) (103,144) (34,285) (59,858) 

of which: effects of the purchase price allocation 9,842 9,575 9,936 10,070 10,720 10,545 11,153 11,352 

310. Post-tax profit (loss) from discontinued operations 226 22 - - (1) 12 83,035 322 

330. Profit for the period attributable to non-controlling interests (9,477) (6,097) (5,046) (8,213) (5,967) (908) (2,179) (4,548) 

of which: effects of the purchase price allocation 2,132 2,114 2,139 2,302 2,503 2,395 2,622 2,514 

Profit (loss) for the period attributable to the shareholders of the Parent before impairment 

losses on goodwill and finite useful life intangible assets excluding the effects of the PPA 40,833 (51,638) 348,293 83,529 (5,516) 115,503 90,002 59,530 

Profit (loss) for the period/year attributable to the shareholders of the Parent before 

impairment losses on goodwill and finite useful life intangible assets 22,911 (69,041) 330,894 64,609 (25,613) 95,660 69,121 38,125 

210,+260, 

Impairment losses on goodwill and finite useful life intangible assets net of taxes and non 

controlling interests (2,047,068) - (143,793) - - - (5,172) - 

340. Profit (loss) for the period attributable to the shareholders of the Parent (2,024,157) (69,041) 187,101 64,609 (25,613) 95,660 63,949 38,125 

Total impact of the purchase price allocation on the income statement (17,922) (17,403) (17,399) (18,920) (20,097) (19,843) (20,881) (21,405) 

86

Reclassified consolidated income statement net of the most significant non-recurring items 


2011 

Impairment 

losses on 

goodwill and 

on finite useful 

life intangible 

assets 

Impairment 

losses on 

available-forsale 

equity 

securities 

Intesa 

Sanpaolo, A2A 

and Siteba 

and on OICR 

units (AFS) 

non-recurring items 

UBI Banca tax 

realignment in 

accordance with 

Law No. 

111/2011 and 

write off of 

deferred income 

tax 

assets/deferred 

IRAP tax assets 

Impact of IRAP 

adjustment for 

deferred tax 

provisions 

recognised as 

at 31st 

December 2010 

Discontinuation 

of the UBI 

Leasing agent 

network 

Release of 

excess 

provisions 

Write-off of 

B@nca 24-7 

IT system 

held for 

disposal 

2011 

net of nonrecurring 

items 

A 

2010 

Impairment 

losses on 

available-forsale 

equity 

securities 

Intesa 

Sanpaolo, 

A2A and 

TLcom fund 

(AFS) 

Contribution 

of depository 

banking 

operations 

Net 

impairment 

losses on 

goodwill of 

Gestioni 

Lombarda 

(Switzerland) 

Leaving 

incentives 

non-recurring items 

Tax effect of 

branch 

switching 

operations 

Partial 

disposal 

partial of the 

interest held in 

Lombarda Vita 

Disposal 

of BDG 

branches 

Write-off 

of IT 

systems 

Disposal of 

property in 

via Solferino, 

Milan 

2010 

net of nonrecurring 

items 

B 

Changes 

A-B 

% changes 

A/B 

Net interest income (including the effects of PPA) 2,119,915 2,119,915 2,142,526 2,142,526 (22,611) (1.1%) 

Dividends and similar income 19,997 19,997 24,099 24,099 (4,102) (17.0%) 

Profits of equity-accounted investees 9,947 9,947 17,613 17,613 (7,666) (43.5%) 

Net commission income 1,193,708 1,193,708 1,185,297 1,185,297 8,411 0.7% 

of which performance fees 11,728 11,728 15,384 15,384 (3,656) (23.8%) 

Net income from trading, hedging and disposal/repurchase 

activities and from assets/liabilities at fair value 7,329 7,329 34,044 1,374 35,418 (28,089) (79.3%) 

Other net operating income 87,443 3,345 90,788 92,482 (957) 91,525 (737) (0.8%) 

Operating income (including the effects of PPA) 3,438,339 - - - - 3,345 - - 3,441,684 3,496,061 - (957) - - - - 1,374 - - 3,496,478 (54,794) (1.6%) 

Personnel expense (1,423,196) (27,932) (1,451,128) (1,451,584) 33,233 (1,418,351) 32,777 2.3% 

Other administrative expenses (717,988) (717,988) (769,744) (769,744) (51,756) (6.7%) 

Net impairment losses on property, equipment and investment 

property and intangible assets (including the effects of PPA) (248,442) 3,473 (244,969) (247,236) 4,455 (242,781) 2,188 0.9% 

Operating expenses (including the effects of PPA) (2,389,626) - - - - - (27,932) 3,473 (2,414,085) (2,468,564) - - - 33,233 - - - 4,455 - (2,430,876) (16,791) (0.7%) 

Net operating income (including the effects of PPA) 1,048,713 - - - - 3,345 (27,932) 3,473 1,027,599 1,027,497 - (957) - 33,233 - - 1,374 4,455 - 1,065,602 (38,003) (3.6%) 

Net impairment losses on loans (607,078) (607,078) (706,932) (706,932) (99,854) (14.1%) 

Net impairment losses on other assets and liabilities (135,143) 125,453 (9,690) (49,721) 41,111 (8,610) 1,080 12.5% 

Net provisions for risks and charges (31,595) 2,363 (29,232) (27,209) (27,209) 2,023 7.4% 

Profits from disposal of equity investments 7,119 7,119 95,872 (81,095) (6,596) (5,442) 2,739 4,380 159.9% 

Pre-tax profit from continuing operations 

(including the effects of PPA) 282,016 - 125,453 - - 5,708 (27,932) 3,473 388,718 339,507 41,111 (957) - 33,233 - (81,095) (5,222) 4,455 (5,442) 325,590 63,128 19.4% 

Taxes on income for the year from continuing operations 95,942 (2,292) (352,841) 6,267 (1,407) 7,681 (1,125) (247,775) (231,980) (609) 263 (9,139) 18,294 20,201 1,566 (1,444) 1,759 (201,089) 46,686 23.2% 

Post-tax profit (loss) from discontinued operations 248 248 83,368 (83,356) 12 236 n.s. 

Profit for the period attributable to minority interests (28,833) (925) 129 (29,629) (13,602) 173 (1,711) (2,951) (279) (18,370) 11,259 61.3% 

Profit for the year attributable to the shareholders of the 

Parent before impairment losses on goodwill and finite useful 

life intangible assets 349,373 - 123,161 (352,841) 5,342 4,301 (20,122) 2,348 111,562 177,293 40,502 (83,877) - 22,383 15,343 (60,894) (3,656) 2,732 (3,683) 106,143 5,419 5.1% 

Impairment losses on goodwill and finite useful life intangible 

assets net of taxes and non controlling interests (2,190,861) 2,190,861 - (5,172) 4,145 (1,027) 1,027 - 

Profit (loss) for the year attributable to the Parent (1,841,488) 2,190,861 123,161 (352,841) 5,342 4,301 (20,122) 2,348 111,562 172,121 40,502 (83,877) 4,145 22,383 15,343 (60,894) (3,656) 2,732 (3,683) 105,116 6,446 6.1% 

ROE -17.1% 1.0% 1.6% 1.0% 

Cost / Income ratio (including the effects of PPA) 69.5% 70.1% 70.6% 69.5% 

Cost / Income ratio (excluding the effects of PPA) 66.5% 67.1% 67.3% 66.2% 

87

Reconciliation schedule to 31st December 2011 

RECLASSIFIED INCOM E STATEM ENT 2011 reclassifications 

2011 

depreciation 

Net impairment 

Items 

mandatory 

reclassified 

profit of equityaccounted 

improvements 

goodw ill and finite 

for 

losses on 

consolidated tax 

Consolidation 

consolidated 

financial recoveries 

reclassification 

financial 

investees to leased 

useful life 

statements 

statements 


assets 

intangible assets 

10.-20. Net interest income 2,121,689 (1,774) 2,119,915 

70. Dividends and similar income 19,997 19,997 

Profits of equity-accounted investees - 9,947 9,947 

40.-50. Net commission income 1,191,934 1,774 1,193,708 

80.+90.+ 

100.+110. 

Net income from trading, hedging and disposal/repurchase activities 

and from assets/liabilities at fair value 7,329 7,329 

220. Other net operating income 243,065 (163,065) 7,443 87,443 

Operating income 3,584,014 (163,065) 9,947 7,443 - - 3,438,339 

180.a Personnel expense (1,423,196) (1,423,196) 

180.b Other administrative expenses (881,053) 163,065 (717,988) 

200.+210. 


property and intangible assets (783,496) (7,443) 542,497 (248,442) 

Operating expenses (3,087,745) 163,065 - (7,443) - 542,497 (2,389,626) 

Net operating income 496,269 - 9,947 - - 542,497 1,048,713 

130.a Net impairment losses on loans (607,078) (607,078) 

130.b+c+d Net impairment losses on other assets and liabilities (135,143) (135,143) 

190. Net provisions for risks and charges (31,595) (31,595) 

240.+270. Profits (loss) from disposal of equity investments (1,856,783) (9,947) 1,873,849 7,119 

Pre-tax profit from continuing operations (2,134,330) - - - - 2,416,346 282,016 

290. Taxes on income for the year from continuing operations 271,991 (176,049) 95,942 

310. Post-tax profit from discontinued operations 248 248 

330. Profit (loss) for the year attributable to minority interests 20,603 (49,436) (28,833) 

Profit (loss) for the year attributable to the shareholders of the 

Parent before impairment losses on goodwill and finite useful life 

intangible assets (1,841,488) 349,373 

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) 

340. Loss for the year attributable to the Parent (1,841,488) - - - - - (1,841,488) 

Reconciliation schedule to 31st December 2010 

RECLASSIFIED INCOME STATEMENT 2010 reclassifications 

2010 

Items 

mandatory 

consolidated 

financial 

statements 

tax 

recoveries 

net impairment 

losses on 

goodwill 

profit of equityaccounted 

investees 

depreciation for 

improvements 

to leased 

assets 

maximum 

overdraft 

charge 

reclassification 

reclassified 

consolidated 

financial 

statements 


10.-20. Net interest income 2,146,598 (4,072) 2,142,526 


Profits of equity-accounted investees - 17,613 17,613 

40.-50. Net commission income 1,181,225 4,072 1,185,297 

80.+90.+ 

100.+110. 

Net income from trading, hedging and disposal/repurchase activities and from 

assets/liabilities at fair value 34,044 34,044 

220. Other net operating income 239,430 (153,846) 6,898 92,482 

Operating income 3,625,396 (153,846) - 17,613 6,898 - 3,496,061 

180.a Personnel expense (1,451,584) (1,451,584) 

180.b Other administrative expenses (923,590) 153,846 (769,744) 

200.+210. 

Net impairment losses on property, equipment and investment property and 

intangible assets (240,338) (6,898) (247,236) 

Operating expenses (2,615,512) 153,846 - - (6,898) - (2,468,564) 

Net operating income 1,009,884 - - 17,613 - - 1,027,497 

130.a Net impairment losses on loans (706,932) (706,932) 

130.b+c+d Net impairment losses on other assets and liabilities (49,721) (49,721) 


240.+270. Profits from disposal of equity investments 108,313 5,172 (17,613) 95,872 

Pre-tax profit from continuing operations 334,335 - 5,172 - - - 339,507 

290. Taxes on income for the year from continuing operations (231,980) (231,980) 

310. Post-tax profit from discontinued operations 83,368 83,368 

330. Profit for the year attributable to non-controlling interests (13,602) (13,602) 

Profit for the year attributable to the Parent before net impairment losses 

on goodwill 172,121 - 5,172 - - - 177,293 

260. Impairment on goodwill net of taxes and non controlling interests - (5,172) (5,172) 

340. Profit for the year attributable to the Parent 172,121 - - - - - 172,121 

88

Notes to the reclassified consolidated financial statements 

The mandatory financial statements have been prepared on the basis of Bank of Italy Circular No. 262 of 22 nd December 2005 

and subsequent updates. 

The contribution of the depository banking operations was completed on 31 st May 2010. 

With regard to the balance sheet, this involved the disposal on that date of all the assets and liabilities associated with these 

operations, and of direct funding in particular – the most significant component consisting of the accounts for the 

management of the UBI Pramerica investment funds – which had been reclassified from 30 th September 2009 and until 31 st 

March 2010 within “liabilities associated with assets held for sale”. 

With regard to the income statement, in addition to the gain resulting from that contribution, the interim figures for 2010 

included the income and expense relating to assets held for sale, for the first five months only. 

The following rules have been applied to the reclassified financial statements to allow a vision that is more consistent with a 

management accounting style: 

- the tax recoveries recognised within item 220 of the mandatory financial statements (other net operating income/expenses) were 

reclassified as a reduction in indirect taxes included within other administrative expenses; 

- the item profits (losses) of equity-accounted investees includes the profits (losses) of equity-accounted investees included within 

item 240 of the mandatory financial statements; 

- the item other net operating income/expense includes item 220, net of the reclassifications mentioned above. 

- the item net impairment losses on property, equipment and investment property and intangible assets includes items 200 and 210 

(the latter only partially) in the mandatory financial statements and also the instalments relating to the depreciation of leasehold 

improvements classified within item 220; 

- the item profits (losses) from the disposal of equity investments includes the item 240, net of profits (losses) of equity-accounted 

investees and also item 270 in the mandatory financial statements; 

- impairment losses on goodwill and finite useful life intangible assets (net of taxation and non-controlling interests) include items 

210 (partially) and 260 in the mandatory financial statements. 

The reconciliation of the items in the reclassified financial statements with the figures in the mandatory financial statements 

has been facilitated, on the one hand, with the insertion in the margin against each item of the corresponding number of the 

item in the mandatory financial statements with which it is reconciled and, on the other hand, with the preparation of specific 

reconciliation schedules. 

The comments on the performance of the main balance sheet and income statement items are made on the basis of the 

reclassified financial statements and of the reclassified financial statements for the comparative periods, and the tables 

providing details included in the subsequent sections of this financial report have also been prepared on that same basis. 

In order to facilitate analysis of the Group’s performance and in compliance with Consob Communication No. DEM/6064293 

of 28 th July 2006, a special schedule has been included in the reclassified financial statements to show the impact on 

earnings only of the principal non-recurring events and items – since the relative effects on capital and cash flow, being 

closely linked, are not significant – which are summarised as follows: 

full year 2011: 

- impairment losses on goodwill and finite useful life intangible assets (net of taxation and non-controlling interests); 

- impairment losses on AFS equity investments in Intesa Sanpaolo, A2A and Siteba; 

- Impairment losses on AFS units in OICRs (collective investment instruments); 

- write-off of the B@nca 24-7 IT system held for disposal; 

- tax realignment in accordance with Decree Law No. 98/2011 converted with amendments into Law No. 111 of 15 th July 2011 and 

write-off of deferred income tax assets/deferred IRAP tax assets; 

- impact of IRAP adjustment for deferred tax provisions recognised as at 31 st December 2010; 

- expenses incurred for restructuring of UBI Leasing agent network; 

- release of excess provisions; 

full year 2010: 

- impairment losses on AFS equity investments in Intesa Sanpaolo and A2A and also in the AFS fund TLcom; 

- the contribution of depository banking operations; 

- impairment losses on goodwill of Gestioni Lombarda (Switzerland); 

- leaving incentives (trade union agreement of 20 th May 2010); 

- tax impact of the branch switching operation; 

- partial disposal (9.9%) of the investment held in the Lombarda Vita Spa joint venture; 

- disposal of two branches by BDG; 

- write-off of some components of IT systems by UBI.S and IW Bank; 

- disposal by the Parent of a property located in via Solferino, Milan 

89

The consolidated income statement 

The income statement figures commented on are based on the reclassified consolidated financial 

statements (the income statement, the quarterly income statements and the income statement net of the 

principal non-recurring items) contained in another section of this report and the tables furnishing details 

presented below are also based on those statements. The notes that follow those reclassified financial 

statements may be consulted as may the reconciliation schedules for a description of the reclassification. 

Furthermore, the commentary examines both changes that occurred over twelve months (2011 compared to 

the year before) and those occurring in the last quarter of the year (this, which is highlighted with a slightly 

different background colour, is compared with the previous quarter in order to bring to light trends 

underlying progressive changes in interim results during the year). 

The financial crisis has been stoked for two years now by a new and dangerous source of 

difficulty in the euro area. After Greece, Ireland, Portugal and Spain, the turmoil has now 

involved Italy with its high levels of public debt and weak prospects for growth in the medium 

term. On their part financial markets have gradually attributed an excessive likelihood of 

insolvency to sovereign issuers in the area, which had a sudden negative impact on the terms 

and conditions for wholesale funding offered to Italian banks, which are squeezed between: 

demands to strengthen capital, increase transparency and customer services and to improve 

the terms and conditions they offer businesses consistent with risk and to support the local 

economies on which they operate. 

In consideration of the unfavourable economic environment and probable future scenarios, the 

UBI Banca Group has adopted extremely prudential criteria and has recognised impairment 

on its goodwill and finite useful intangible assets – recognised principally following the merger 

between the former BPU Banca Group and the former Banca Lombarda e Piemontese Group – 

with significant write-downs (€2,397 million gross, accounting for 44% of the total on the 

books at the end of 2010) of the carrying amounts which had been recognised for those assets. 

Since those amounts had been generated by a “paper for paper” transaction, that is with no 

cash payments, the accounting treatment introduced by IFRS – which requires recognition of 

the impairment loss through profit and loss – generated effects of an accounting nature only, 

which have no impact on the Group’s operations. More specifically, it had no impacts on 

liquidity, capital ratios (because these are calculated by deducting all intangible assets) or 

future profits, which will in fact benefit from lower PPA amortisation from 2012. 

Consequently, in order to allow a consistent analysis of Group profits and operations, the impairment 

losses relating to this treatment have been stated separately (a detailed analysis is given in the Notes to 

the Consolidated Financial Statements) in a single separate item net of tax and non-controlling interests, 

shown in the reclassified consolidated financial statements on the last line item before net profit for the 

year. 

The UBI Banca Group, ended 2011 with consolidated net profit before impairment of 

€349.4 million, +97.1% compared to €177.3 million the year before. 

In the fourth quarter of the year, the crisis of confidence in the country reached its peak and 

at the same time structural reforms, a necessary condition for economic and financial 

recovery, were commenced. A profit for the period before impairment of €22.9 million was 

recorded in the quarter, compared with a loss of €25.6 million in the same quarter of 2010, 

and an even greater loss incurred in the second quarter of 2011 (-€69 million). 

Operating difficulties experienced during the year are summarised by the performance of 

operating income, which totalled €3,438.3 million (-1.7% compared to 2010). This item, 

which included all income from ordinary activities, seemed to be recovering progressively in 

the first part of the year, but repeated turbulence on markets then put a break on business in 

the banking sector and this brought operating income down to levels lower than the already 

low results recorded in 2010. 

On a quarterly basis, operating income earned between 1 st October and 31 st December 2011 

amounted to €904.3 million, slightly down compared to €910.5 million in the fourth quarter of 

2010 – the result of improvements by net commissions and financial activities – but showing a 

90

marked improvement compared to €827.9 million in the preceding third quarter, penalised by 

the loss incurred on those same financial activities (-€23.9 million). 

Net interest income, which included the expense of the purchase price allocation of €49.9 

million, amounted to €2,119.9 million (-€22.6 million compared to 2010), the consequence, for 

each component of the item 1 , of the increased impact of interest expense in line with market 

trends for interest rates 2 : 

• the net balance on business with customers was down by 5% to €1,874.5 million, (-€94.9 

million of which resulting from greater interest payments to the Cassa di Compensazione e 

Garanzia - a central counterparty clearing house 3 ), despite the partial widening of the 

spread on business with customers (+12 basis points for network banks). affected by the 

cost of funding and interest rates, especially for medium to long-term lending (due also to a 

delay in repricing floating rate items). 

As concerns volumes of business, lending grew slightly over twelve months (+2.2% for the 

network banks), held back by short-term loans, while funding remained more or less 

steady, the composition of which changed partially in favour of the longer term maturities 

of bonds. 

The net balance also benefited from €45.2 million (€105.8 million in 2010) of positive 

differentials earned on fix rate bond hedges; 

Interest and similar income: composition 


Debt 

instruments 

Financing 

Other 

transactions 

2011 2010 

1. Financial assets held for trading 40,910 1,482 - 42,392 31,634 

2. Financial assets at fair value - - - - - 

3. Available-for-sale financial assets 373,970 - - 373,970 328,149 

3. Held-to-maturity investments - - - - - 

5. Loans to banks 2,993 53,174 160 56,327 29,782 

6. Loans to customers 1,270 3,562,559 7,382 3,571,211 3,129,890 

7. Hedging derivatives - - - - - 

8. Other assets - - 1,872 1,872 1,785 

Total 419,143 3,617,215 9,414 4,045,772 3,521,240 

Interest and similar expense: composition 


Borrowings 

Securities 

Other 

transactions 

2011 2010 

1. Due to central banks (21,520) - - (21,520) (14,115) 

2. Due to banks (62,117) - (219) (62,336) (29,972) 

3. Due to customers (412,256) - (4,251) (416,507) (196,582) 

4. Securities issued - (1,325,414) - (1,325,414) (1,069,742) 

5. Financial liabilities held for trading (12,574) - - (12,574) (9,108) 

6. Financial liabilities at fair value - - - - - 

7. Other liabilities and provisions - - (728) (728) (789) 

8. Hedging derivatives - - (86,778) (86,778) (58,406) 

Total (508,467) (1,325,414) (91,976) (1,925,857) (1,378,714) 

Net interest income 2,119,915 2,142,526 

• financial assets held in the owned securities portfolio generated net interest income of 

€271.8 million, (+€85.3 million), despite disinvestments in debt instruments over twelve 

months amounting to €1.9 billion. However, total debt instruments (consisting mainly of 

Italian government securities) continued to make an important contribution to net interest 

income (€374 million of interest income earned on available-for-sale assets). 

1 The calculation of net balances was performed by allocating interest for hedging derivatives and financial liabilities held for trading 

within the different areas of business (financial, with banks, with customers). 

2 The average progressive one month Euribor rate practically doubled in the comparison between the two years from 0.573% in 2010 

to 1.190% in 2011. 

3 In relation to transactions employed to fund investments in government securities. 

91

Generally, however, these investments were impacted by the cost of hedging fixed interest 

rate securities (differentials paid on derivatives), although these decreased; 

• the net balance on interbank business showed net expense of €27.5 million (-€14.3 million 

in 2010), reflecting a relative increase in average debt and the related expense, in a context 

of rising interest rates, although growth in average loans to banks was recorded at the same 

time. 

The changes in interest rates in the fourth quarter – after the vertical rises over the summer – 

partly favoured the growth and also the composition of interest income, which rose to €544.6 

million, up by 2% compared to the third quarter (+€10.4 million). This performance was driven 

by a greater contribution from financial activities (up by €10.7 million, even though total 

bonds held in portfolio remained unchanged during the quarter) and by basic stability for 

business with customers (up by €2.4 million, the aggregate result of greater interest income, 

but a higher cost of amounts due to customers, as a result of the different forms of funding 

employed), while the interbank balance worsened (held down by growth in interest expense, 

+€5 million). 

Dividends of €20 million (€24.1 million in 2010), relate mainly to securities held in the AFS 

portfolio of UBI Banca and included €11.6 million relating to the ordinary shares of Intesa 

Sanpaolo, which were remunerated by the same amount in the comparative year (0.08 euro 

per share). 

The profits of equity-accounted investees 4 €9.9 million compared to €17.6 million in 2010 were 

generated by: Aviva Vita (€6 million compared to €2 million before), Lombarda Vita (€4.5 

million compared to €14.3 million), UBI Assicurazioni (a profit of €3.2 million compared to a 

loss of €2.2 million), Aviva Assicurazioni Vita (a loss of €2.4 million compared to profit of €1.5 

million before) and Arca SGR (a loss of €1.1 million compared to a profit of €2 million before). 

Commission income: composition 

Commission expense: composition 


2011 2010 


2011 2010 

a) guarantees granted 49,793 42,648 a) guarantees received (807) (809) 

c) management, trading and advisory services 622,140 683,743 c) management and trading services: (82,257) (90,276) 

1. trading in financial instruments 38,410 39,462 1. trading in financial instruments (18,268) (16,368) 

2. foreign exchange trading 11,868 12,259 2. foreign exchange trading (38) (281) 

3. portfolio management 277,518 273,077 3. portfolio management (6,236) (5,772) 

3.1. individual 72,042 72,968 3.1. own - (5,083) 

3.2. collective 205,476 200,109 3.2. on behalf of third parties (6,236) (689) 

4. custody and administration of securities 13,702 15,788 4. custody and administration of securities (6,979) (8,569) 

5. depository banking - 7,751 5. placement of financial instruments (4,416) (4,942) 

6. placement of securities 74,538 105,533 6. financial instruments, products and services 

7. receipt and transmission of orders 40,852 43,565 distributed through indirect networks 

(46,320) (54,344) 

8. advisory activities 4,855 6,062 d) collection and payment services (44,141) (60,899) 

8.1 on investments 4,855 5,958 e) other services (32,688) (44,908) 

8.2 on financial structure - 104 

9. distribution of third party services 160,397 180,246 Total (159,893) (196,892) 

9.1. portfolio management 42 68 

9.1.1. individual 42 68 

9.2. insurance products 119,723 127,927 

9.3. other products 40,632 52,251 

d) collection and payment services 150,128 146,820 

f) services for factoring transactions 26,486 26,995 

i) current account administration 216,501 213,902 

j) other services 288,553 268,081 

Total 1,353,601 1,382,189 Net commission income 1,193,708 1,185,297 

Net commission income totalled €1,193.7 million (+€8.4 million compared to 2010). In detail: 

• commission income on ordinary banking business performed positively as follows: +€7.1 

million from guarantees granted, +€20.1 million from collection and payment services (in 

4 The item consists of the net profits of the companies recognised on the basis of the percentage interest held by the Group. 

92

elation to higher volumes of business), +€2.6 million from “current account administration” 

and +€32.7 million from “other services” (which include commitment fees) 5 ; 

• management, trading and advisory services 6 , on the other hand, decreased by €53.4 million 

to €528.1 million (accounting for 44.2% of total net commission income compared to 49.1% 

before). The change is the aggregate result on the one hand of an increase in portfolio 

management commissions (+€4 million, the result, amongst other things, of a realignment 

of commissions on collective asset management instruments) and on the other hand of falls 

in the following items: placement of securities (-€30.5 million, in relation to lower orders for 

“third party securities”); distribution of insurance products (-€8.2 million); depository 

banking (-€7.7 million following the contribution of these operations in May 2010); receipt 

of orders and investment advisory services (-€3.9 million, as volatility on markets increased 

and customers adopted a prudent approach). 

A reduction in commission expense also occurred in relation to the distribution of financial 

instruments, products and services through indirect networks (-€8 million), due largely to 

the rationalisation of UBI Banca Lombarda Private Investment’s network of financial 

advisors. 

Even net of performance fees 7 (relating entirely to UBI Pramerica SGR and recognised in the 

fourth quarter, amounting to €11.7 million in 2011, compared to €15.4 million in 2010), 

quarterly net commission income held up well compared to previous interim periods and 

totalled €303.4 million (€292 million in the third quarter of 2011, €294.6 million in the second 

quarter and €291.9 million in the first). Changes within the item partially replicated annual 

trends and more specifically a comparison with the third quarter shows the following: an 

improvement in income from securities (+€3.1 million, attributable partly to customer portfolio 

managements, but above all to the distribution of insurance products, in the presence of lower 

securities brokerage and trading income) accompanied by good performance from 

commissions of a strictly banking nature (+€7.8 million). 

The performance during the year of assets classified under the fair value option affected the 

net result for financial activities, which was €7.3 million, compared to €34 million in 2010. In 

detail: 

• trading activities generated €10.7 million, compared to a loss previously of -€56.9 million, 

due almost entirely to the unwinding and ineffectiveness of hedging derivatives, used on a 

macro-hedge basis, for fixed rate mortgages subject to either early repayment or 

renegotiation. It is a phenomenon which had a greater impact in 2010 and which reduced 

considerably in 2011. 

Net of that unwinding phenomenon (-€18.4 million in 2011 and -€55.8 million in 2010), 

normal activities generated the following: +€26.4 million (-€14.6 million) from debt 

instruments (inclusive of financial liabilities held for trading) and the related derivative 

instruments; -€15.9 million (-€2.7 million) from equity instruments and the related 

derivative instruments, which incorporates the impairment loss on Medinvest International 8 

of €12.2 million; -€0.3 million (+€0.4 million) from investments in hedge funds; and +€13.7 

million (+€14.7 million) from foreign currency business; 

• the result for financial assets and liabilities at fair value – a loss of €38.8 million, compared 

to a profit of €6.7 million in 2010 – incorporated disposals of UBI Pramerica funds in the 

third quarter with a loss of €22 million, when a stop-loss 9 mechanism was triggered (in 

compliance with the limits set by the Financial Risks Policy) losses on Tages hedge funds, 

formerly Capitalgest (-€11.4 million) and the fair valuation of residual positions in other 

hedge funds; 

5 All the changes were calculated by subtracting commission expense from the respective commission income. 

6 The amount consists of management, trading and advisory services net of the corresponding expense items and is calculated 

excluding currency trading. 

7 The item accounts for 1% of total net commission income compared to 1.3% before. 

8 Medinvest International Sca (Luxembourg), classified within private equity investments and in which a 19.57% interest is held, is a 

merchant bank which invests in companies and also provides financial advisory services to SMEs. The impairment loss was 

recognised in relation to the poor performance of the main investment held in its portfolio. 

9 The losses incurred on the mutual fund portfolio caused UBI Pramerica SGR to firstly change the composition of the mix of products 

used for the Parent’s investments, with preference given to strictly monetary funds and then, in consideration of the continuing 

adverse conditions on markets, to sell all units held in funds at the end of September (€329.3 million as at 30 th June 2011). 

93

• net hedging income – which represents the change in the fair value of hedging derivatives 

and the relative items hedged – was €8.9 million (+€67.2 million in 2010). Both results 

should be interpreted in combination with the information reported on trading activity 

concerning the unwinding of hedges; 

Net trading income (loss) 

Gains 

Profits from 

trading 

Losses 

Losses from 

trading 

Net income 

(loss) 2011 

Figures in thousands of euro (A) (B) (C) (D) [(A+B)-(C+D)] 

2010 

1. Financial assets held for trading 25,564 168,696 (126,008) (135,644) (67,392) (204,553) 

1.1 Debt instruments 21,020 56,096 (16,287) (30,497) 30,332 (20,392) 

1.2 Equity instruments 4,486 3,586 (16,429) (2,131) (10,488) (4,374) 

1.3 Units in O.I.C.R. (collective investment instruments) 19 26 (158) (152) (265) 387 

1.4 Financing - - - - - - 

1.5 Other 39 108,988 (93,134) (102,864) (86,971) (180,174) 

2. Financial liabilities held for trading 2,520 7 (4,027) (2) (1,502) 10,479 

2.1 Debt instruments 1,662 - (4,027) (2) (2,367) 10,410 

2.2 Payables - - - - - (8) 

2.3 Other 858 7 - - 865 77 

3. Financial assets and liabilities: exchange rate differences X X X X (5,011) 2,204 

4. Derivative instruments 541,790 2,174,634 (597,976) (2,139,555) 84,616 134,979 

4.1 Financial derivatives 541,790 2,174,634 (597,976) (2,139,555) 84,616 135,768 

- on debt instruments and interest rates 525,882 2,143,116 (573,906) (2,115,024) (19,932) (60,417) 

- on equity instruments and share indices 199 6,346 (130) (11,802) (5,387) 1,635 

- on currencies and gold X X X X 105,723 192,668 

- other 15,709 25,172 (23,940) (12,729) 4,212 1,882 

4.2 Credit derivatives - - - - - (789) 

Total 569,874 2,343,337 (728,011) (2,275,201) 10,711 (56,891) 

Net hedging income 

Figures in thousands of euro 2011 2010 

Net hedging income 8,938 67,209 

Profit from disposal or repurchase 


Profits Losses Net profit 2011 2010 

Financial assets 

1. Loans to banks - - - 1,463 

2. Loans to customers 7,848 (5,384) 2,464 (5,313) 

3. Available-for-sale financial assets 12,372 (443) 11,929 31,245 

3.1 Debt instruments 1,407 (380) 1,027 19,089 

3.2 Equity instruments 8,467 (63) 8,404 10,120 

3.3 Units in O.I.C.R (collective investment instruments). 2,498 - 2,498 2,036 

3.4 Financing - - - - 

4. Held-to-maturity investments - - - - 

Total assets 20,220 (5,827) 14,393 27,395 

Financial liabilities 

1. Due to banks - - - - 

2. Due to customers - - - - 

3. Securities issued 21,198 (9,062) 12,136 (10,338) 

Total liabilities 21,198 (9,062) 12,136 (10,338) 

Total 41,418 (14,889) 26,529 17,057 

Net profit (loss) on financial assets and liabilities at fair value 


Net profit (loss) on financial assets and liabilities at fair value (38,849) 6,669 

Net income from trading, hedging and disposal/repurchase activities and from 

assets/liabilities at fair value 

7,329 34,044 

• net income from the disposal/repurchase of financial assets and liabilities totalled €26.5 

million and included €12.1 million from the repurchase of securities issued – by the Parent 

(€14.1 million), mainly consisting of securities in the EMTN programme, and by 

Centrobanca (€4 million), as part of ordinary business with customers – while €14.4 million 

was from the disposal of financial assets. 

The latter consisted of €6.8 million from the total disposal of the investment in the London 

Stock Exchange (formerly Borsa Italiana), €1.6 million from the disposal of other minor 

94

equity investments (including PerMicro), €2.5 million from the redemption of units in funds 

(of which €2.2 million managed by UBI Pramerica SGR resulting from the disposal of funds 

owned by the former Capitalgest SGR), approximately €1 million from debt instruments (of 

which €1.2 million relating to IW Bank) and €2.5 million from disposals of unsecured nonperforming 

loans (the main operation concerned B@nca 24-7 which disposed of two 

portfolios and realised a profit of €2.1 million). 

In 2010 the item amounted to €17.1 million and consisted of the following: €19.1 million from debt instruments, 

€10.1 million from equity instruments (of which €9.1 million relating to the disposal of the interest held in CartaSi 

Spa), €2 million from units in monetary and bond mutual funds, -€10.3 million from the repurchase of securities 

issued as part of ordinary business with customers, -€5.3 million from disposals of impaired loans by Centrobanca 

and +€1.5 million from the disposal by UBI Banca International of a loan to banks. 

The result for financial activities in the fourth quarter was a profit of €24 million (a profit of 

€20.6 million in the same quarter in 2010), compared to -€23.9 million in the previous three 

months. 

Trading activity contributed €14.1 million (-€5.3 million in the third quarter 2011), 

attributable primarily to trading in debt instruments and the relative derivatives and in 

interest rate derivatives (+€17.6 million, excluding -€2.6 million for hedge unwinding in the 

period) and foreign currency trading (+€4.3 million), while a loss was incurred on equity 

instruments and the relative derivatives (-€5.9 million), in connection mainly with a further 

impairment loss incurred on the equity investment in Medinvest (-€4.5 million). 

Financial assets designated at fair value recorded a loss of €4.4 million (the result of losses on 

remaining hedge funds). Hedging activity gave rise to a loss of €1.9 million, while profits from 

disposals and repurchases amounted to €16.2 million, including €12.8 million in relation to 

repurchases of securities issued already mentioned, €2 million to the gain on the disposal of 

unsecured non-performing loans by B@nca 24-7 and €1.4 million to the disposal of equity 

investments (Banca Valsabbina and PerMicro). 

Other net operating income amounted to €87.4 million (-€5 million) as a result of a reduction in 

revenues and in the item prior year income in particular (-€8.2 million), offset, but to a lesser 

extent, by a reduction in prior year expenses (-€3 million). The item included €3 million 

relating to requests for intervention by the Interbank Deposit Protection Fund and €3.3 million 

(non-recurring) allocated for the 

termination of UBI Leasing 

agent contracts (see also net 

provisions for risks and 

charges). 

While income included lower 

recoveries for insurance 

premiums (-€1.5 million, to be 

interpreted in relation to the 

corresponding expense item), an 

improvement was recorded in 

the item “recovery of expenses 

and other income on current 

accounts” (+€1.7 million), 

consistent with the volumes of 

business with customers during 

the year. 

Other net operating income and expense 


2011 2010 

Other operating income 157,219 165,869 

Recovery of expenses and other income on current accounts 15,458 13,745 

Recovery of insurance premiums 31,644 33,125 

Recoveries of taxes 163,065 153,846 

Rents and other income for property management 8,158 8,959 

Recovery of expenses on finance lease contracts 14,181 14,020 

Other income and prior year income 87,778 96,020 

Reclassification of "tax recoveries" (163,065) (153,846) 

Other operating expenses (69,776) (73,387) 

Depreciation of leasehold improvements (7,443) (6,898) 

Costs relating to finance lease contracts (7,145) (7,169) 

Expenses for public authority treasury contracts (6,977) (7,542) 

Ordinary maintenance of investment properties - - 

Other expenses and prior year expense (55,654) (58,676) 

Reclassification of depreciation of leasehold improvements 7,443 6,898 

Other net operating income and expense 87,443 92,482 

In 2010 the item included the following: a payment of €2.5 million to IW Bank for the final settlement of 

the litigation that had arisen with former officers of that bank; €1.7 million relating to a recovery from a 

network bank clawback revocation action and approximately € 1 million (non-recurring) for the disposal 

of BPCI’s correspondent banking operations (as part of the contribution of depository banking 

operations). 

Operating expenses decreased by €78.9 million (-3.2% compared to 2010), to €2,389.6 

million. If non-recurring items are excluded, expenses fell by €16.8 million (-0.7%). 

Personnel expense amounted to €1,423.2 million, down by €28.4 million, because they 

included non-recurring income of €27.9 million recognised in the third quarter within the line 

95

item “expenses for retired personnel” relating to a release of excess provisions 10 . In 2010 on the 

other hand, leaving incentives of €33.2 million (non-recurring) were charged to the income statement within the item 

“other employee benefits” in relation to a 

trade union agreement of 20 th May. 

Net of those items the personnel 

expense increased over twelve 

months by €32.8 million. This 

increase relates above all to variable 

components of wages (company 

bonuses and incentive schemes), net 

of which, despite normal growth 

(length of service increases, 

promotions and national labour 

contract increases), personnel 

expense was unchanged compared 

to 2010. 

The total expense continued to 

benefit from savings (approximately 

€39 million) in relation to a 

reduction in average personnel 

numbers (556), which includes the 

decrease in expense for workers on 

personnel leasing contracts (-€10.5 

million) and lower payments made 

to directors and statutory auditors (-€3.1 million). 

Personnel expense: composition 

2011 2010 


1) Employees (1,425,623) (1,411,084) 

a) Wages and salaries (983,736) (948,075) 

b) Social security charges (267,758) (250,714) 

c) Post-employment benefits (60,928) (62,432) 

d) Pension expense (74) (105) 

e) Provision for post-employment benefits (9,078) (10,817) 

f) Pensions and similar obligations: (2,930) (4,144) 

- defined contribution - - 

- defined service (2,930) (4,144) 

g) Payments to external supplementary pension plans: (50,431) (50,411) 

- defined contribution (50,154) (50,363) 

- defined benefits (277) (48) 

h) Expenses resulting from share based payments - - 

i) Other employee benefits (50,688) (84,386) 

2) Other personnel in service (6,504) (18,130) 

- Expenses for agency personnel on staff leasing 

contracts (3,671) (14,216) 

- Other expenses (2,833) (3,914) 

3) Directors and statutory auditors (19,001) (22,118) 

4) Expenses for retired personnel 27,932 (252) 

Total (1,423,196) (1,451,584) 

Other administrative expenses – €718 million – fell by €51.7 million (of which €5.2 million due 

to lower indirect taxes). 

Savings on current spending over twelve months (€46.5 million), included action to contain 

spending as follows: 

• professional and advisory services, down by €12.4 million, including -€5.2 million of 

savings on strategic and organisational advisory services linked to projects, -€4.3 million on 

professional IT services and -€2.9 million on other advisory services; 

• telephone and data transmission expenses, down by €11.4 million, including €4 million of 

savings in relation to the provision to manage IT fraud on credit cards, following the 

completion of the changeover to microchip technology, -€4.5 million on telephone expenses, 

-€2.1 million on information providers and -€0.8 million on data transmission expenses; 

• rent payable (-€5.8 million, due mainly to the renegotiation of existing contracts), postal 

expenses (-€5.3 million, partly in relation to lower volumes of hardcopy communication), 

outsourced services (-€4.8 million), to be interpreted in conjunction with the trend for 

postal expense), SW license and maintenance fees and HW lease instalments (-€2.8 million), 

printed stationery and consumables (-€2.2 million), credit recovery expenses (-€2.1 million), 

insurance premiums in relation to commercial products (-€1.5 million) and membership 

fees (-€1.4 million). 

Increases in expenses, on the other hand, involved the tenancy of premises (+€3.0 million, of 

which +€5.9 million for higher utilities expenses partially offset by lower condominium 

expenses) and advertising (+€1.3 million). 


totalled €248.4 million and included a non recurring item of €3.5 million for the write-off of 

the B@nca 24-7 IT system held for sale. If the figure is normalised (€245 million), no 

significant change was recorded in impairment losses with respect to the comparative year 

10 This was the release of amounts recognised in previous years due to actuarial recalculations of post-retirement benefits, now no 

longer considered due. In the third quarter of 2011, the defined benefit obligation and the existing mathematical reserve were 

eliminated as a consequence with a positive impact on the item “administrative expenses: personnel expense” of approximately 

€27.9 million and the relative portion of the “fair value reserve actuarial gains/losses on defined benefit plans” amounting to 

approximately €2 million was reclassified within “retained earnings”. In consideration of the non-recurring nature of the event, the 

effects were subject to normalisation in the income statement. 

96

(+0.9%). The changes summarise the increased cost in relation to new software introduced in 

2010, which was partially offset by the reduction at the same time in depreciation for 

peripheral hardware (work stations). 

In 2010 the item (€247.2 million) included a non-recurring amount of €4.5 million for the write-off of 

some components of the UBI.S IT system (€3.1 million, related mainly to retirements for end of service 

contract and for replacement of products) and of IW Bank (€1.4 million, mainly for the retirement of the 

bank’s previous legacy system and to a lesser extent for the Twice Sim and InvestNet software). 

On a quarterly basis, normalised operating expenses totalled €609.2 million, (€605.3 million in 

the same period of 2010), compared to €589.2 million in the third quarter of 2011). 

While the figures for the two corresponding quarters were unchanged, the growth observed 

with respect to the third quarter of 2011 is the result of seasonal effects for some factors of 

expense, as was also confirmed by the average normalised quarterly data, which fell 

progressively from €618 million in 2009 to €608 million in 2010 and to €603 million in 2011. 

In detail, the following trends emerged in the composition: 

- personnel expense fell by €12.5 million Other administrative expenses: composition 

to 

€350.3 million, as a result of different 

timings in the provisions made for 

variable remuneration, but above all 

due to the release of provisions made 

in relation to the signing of the 

national labour contract; 

- other administrative expenses rose by 

€29.8 million to €195.8 million, as a 

result of the particular characteristics 

of the two periods compared, which 

present opposing seasonal trends for 

some expense items, which were 

nevertheless partially reduced by the 

policy to contain spending 

implemented precisely in the fourth 

quarter of the year. The greatest 

increases in spending were for 

professional and advisory services 

(+€15.3 million), insurance premiums 

(+€3.9 million), property maintenance 

(+€3.6 million), credit recovery services 

(+€3 million), outsourced services 

(+€1.6 million), travel expenses (+€1.4 

million) and telephone and data 

transmission services (+€1.3 million); 

- net impairment losses on property, 

equipment and investment property 

2011 2010 


A. Other administrative expenses (666,346) (712,876) 

Rent payable (72,060) (77,847) 

Professional and advisory services (90,225) (102,647) 

Rentals of hardware, software and other assets (36,211) (38,679) 

Maintenance of hardware, software and other assets (40,483) (40,842) 

Tenancy of premises (54,755) (51,748) 

Property maintenance (27,245) (27,816) 

Counting, transport and management of valuables (16,004) (16,503) 

Membership fees (9,468) (10,818) 

Information services and land registry searches (12,612) (13,168) 

Books and periodicals (1,877) (1,901) 

Postal (26,576) (31,906) 

Insurance premiums (44,276) (45,806) 

Advertising (26,007) (24,663) 

Entertainment expenses (2,017) (2,099) 

Telephone and data transmission expenses (58,531) (69,934) 

Services in outsourcing (46,439) (51,223) 

Travel expenses (23,476) (23,476) 

Credit recovery expenses (44,000) (46,103) 

Forms, stationery and consumables (11,137) (13,304) 

Transport and removals (7,354) (6,987) 

Security (9,736) (9,651) 

Other expenses (5,857) (5,755) 

B. Indirect taxes (51,642) (56,868) 

Indirect taxes and duties (37,498) (40,467) 

Stamp duty (140,749) (129,567) 

Municipal property tax (8,806) (9,029) 

Other taxes (27,654) (31,651) 

Reclassification of "tax recoveries" 163,065 153,846 

Total (717,988) (769,744) 

and intangible assets also rose (+€2.7 million) to €63.1 million, incorporating depreciation 

and amortisation for new IT investments. 

As a result of action taken to contain costs, net operating income rose to €1,048.7 million in 

2011 (+2.1%). 

On a quarterly basis the result was €291.7 million, a decrease (-3%) compared to the fourth 

quarter of 2010, but a marked improvement (+9.4%) on the previous quarter. 

Net impairment losses on loans fell to €607.1 million in 2011 from €706.9 million before (-€100 

million approximately), the aggregate result of an almost general reduction for both the 

network banks and the product companies. 

Particular improvements were recorded for B@nca 24-7 (-€44.5 million), as a result of action 

taken to bring its credit quality up to Group standards, and also for the network banks (-€52.6 

million). 

The loan loss rate – total net impairment losses as a percentage of net loans to customers – fell 

as a consequence to 0.61% from 0.69% in 2010. 

97

Net impairment losses on loans: composition 


Impairment losses/reversals of 

impairment losses, net 

2011 



Specific Portfolio Specific Portfolio 

4th Quarter 

2011 

A. Loans to banks (3) (114) (117) 1 (18) (17) 

B. Loans to customers (544,777) (62,184) (606,961) (195,115) (13,281) (208,396) 

C. Total (544,780) (62,298) (607,078) (195,114) (13,299) (208,413) 




impairment losses, net 4th Quarter 

2010 

2010 



A. Loans to banks - 23 23 (2) 42 40 

B. Loans to customers (630,973) (75,982) (706,955) (217,325) (33,932) (251,257) 

C. Total (630,973) (75,959) (706,932) (217,327) (33,890) (251,217) 

In detail, net impairment losses on the performing loan portfolio fell as a whole to €62.3 

million (-€13.7 million compared to the previous year), while specific impairment losses on 

deteriorated loans – down to €544.8 million – improved by €86.2 million, including €27.7 

million relating to the network banks only and €56.5 million to the product companies and 

Centrobanca. 

The improvement by B@nca 24-7 in particular should be underlined (-€37 million), although 

the impairment losses of the company included €19.4 million for impairment relating to the 

Ktesios Group 11 , of which €8 million recognised as the reclassification of a provision for risks 

and charges made in the fourth quarter of 2010. 

Reversals during the year (net of present value discounting) remained high at €216.8 million, 

compared to €196.2 million in 2010. 

Net impairment losses/reversals of impairment losses on loans: quarterly performance 

Figures in 

thousands of 

euro 

1st 

2nd 


Specific 

Quarter 

Quarter 

Portfolio 

3rd 

Quarter 

Specific 

Portfolio 

4th 

Quarter 

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) 

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) 

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) 

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) 

In quarterly terms, net impairment losses of €208.4 million fell by €42.8 million compared to 

the same quarter in 2010 and increased by €73.3 million compared to €135.1 million in the 

third quarter of 2011, consisting of -€11 million of portfolio impairment losses and +€84.3 

million of specific impairment losses. The latter included a specific impairment loss on a UBI 

Factor exposure to Fondazione Centro San Raffaele del Monte Tabor (gross exposure of €31 

million) of €9.5 million, after a reversal of impairment amounting to €6 million recognised last 

December in relation to the acceptance of an improved offer on the disposal of this hospital. 

Consequently the loan loss rate for the quarter (annualised) was 0.84% (0.99% in the fourth 

quarter of 2010 and 0.53% in the third quarter of 2011). 

Net impairment losses on other financial assets and liabilities amounted to €135.1 million for 

the year, of which €9.7 million relating to impairment losses on available-for-sale financial 

assets and impairment losses on guarantees granted and €125.4 million to impairment losses 

on available-for-sale financial assets classified as non-recurring. 

In detail these consisted of the following: €7.5 million of impairment losses on units in OICR 

funds (collective investment instruments) (of which €4.3 million relating to the Polis property 

fund) held by UBI Banca, €1.6 million of impairment losses on investments in Banco di 

11 See the section “General banking business with customers: lending” for further information. 

98

Brescia and €116.3 million of impairment losses on investments in A2A (€3.3 million), in 

Siteba Spa 12 (€0.5 million) and in Intesa Sanpaolo. The 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 

December 2011 (1.2891 euro) 13 . The amount actually incorporates the impairment loss 

recognised in the first half (€15.9 million, recognised on the basis of the share price quoted at 

the end of June of 1.8075 euro), together with the recognition of a further impairment loss 

that became necessary in the third quarter (€112.9 million), which was then offset by a 

recovery in the share price in the fourth quarter (+€16.3 million). 

Impairment losses of €49.7 million were recognised in 2010 including €41.1 million classified as non-recurring, of 

which: €36.8 million resulting from impairment losses on the investment in Intesa Sanpaolo, €2.6 million relating to 

the company A2A and €1.7 million to the impairment loss on units held in the British TLcom fund. 

Net provisions for risks and charges rose to €31.6 million 14 and were concentrated mainly in 

the items “litigation” (all relating to the network banks and to legal action regarding financial 

investments and compounding of interest, down by €6.5 million compared to 2010) and “other 

provisions”, which, however, increased during the year by €9.4 million, and included the 

following: 

▪ B@nca 24-7 amounting to €7.5 

million, net of the release of 

provisions amounting to +€8 

million, made in 2010 for Ktesios 

Spa, as a transfer to impairment 

losses on loans. The provisions 

were made principally to meet 

operating risks attaching to the 

disbursement of consumer loans 

and salary backed loan 

▪ 

▪ 

Net provisions for risks and charges 

2011 2010 


Net provisions for risks and charges for revocations (2,248) (1,440) 

Provisions for personnel (450) (79) 

Net provision for bonds in default (286) 46 

Net provisions for litigation (10,425) (16,924) 

Other provisions for risks and charges (18,186) (8,812) 

Total (31,595) (27,209) 

transactions brokered by financial companies in conditions of objective difficulty (of which - 

€3.6 million relating to Ktesios); 

IW Bank amounting to €2.1 million in relation to the closure of transit accounts which 

failed to balance, regarding the former legacy platform and created at the time of the followup 

performed following the IT migration carried out in February; 

UBI Leasing amounting to €2.4 million, a non-recurring item. These provisions were made 

as part of the discontinuation of the network of agents, to terminate their contracts (to be 

interpreted in conjunction with non-recurring operating costs already mentioned 

amounting to €3.3 million). 

The income statement contains an aggregate item, profits from the disposal of investments (item 

270) and from equity investments (item 240, excluding profits from equity-accounted investees) 

amounting to €7.1 million, composed as follows: 

• approximately €5 million from the sale of two properties: the historic property of Neuchâtel 

by Banque de Dépôts et de Gestion (€3.8 million) and a property located in Varese by Banca 

Popolare di Bergamo; 

• €2.3 million from the gain on the partial disposal of the equity investment in BY YOU in 

April 2011, although this was offset by the negative impact of its removal from the 

consolidation (-€4.1 million, as a decrease in goodwill). 

The item consisted of a profit of €95.9 million in 2010 and was mainly of a non-recurring nature. It included the 

following significant gains: €81.1 million on the partial disposal of Lombarda Vita to a joint venture partner (Società 

Cattolica di Assicurazione), €6.6 million on the disposal by BDG of its Yverdon and Neuchâtel branches and €5.4 

million on the disposal of property belonging to the Parent located in Milan. 

12 Sistemi Telematici Bancari is an interbank company specialising in outsourced technical support services to banks and acquirers 

of payment cards. UBI Banca holds close to 7% of the share capital. The impairment loss was recognised as a result of a loss in 

value of greater than 35%. 

13 The impairment loss was recognised on the basis of the new number of ordinary shares of Intesa Sanpaolo (186,458,028) held by 

the UBI Banca Group following the increase in the share capital (when 41,435,116 new ordinary shares were subscribed at a price 

per share of 1.369 euro). 

14 Net provisions for risks and charges amounted to €27.2 million in 2010 and included the following: a provision of €8 million made 

by B@nca 24-7, relating to the company Ktesios, which operated in the salary backed loan sector as the agent of B@nca 24-7, 

performing servicing activities for the collection of debts, by itself and through and associate; a provision of €2 million made by 

Centrobanca to meet the costs of a possible clawback revocation action against the Burani Group; a provision of €2.3 million made 

by IW Bank to meet future risks and charges connected with differences found when inspections were performed (increased and 

further intensified for the migration of the IT system) relating to transit accounts. 

99

As a result of the performance described above, pre-tax profit from continuing operations 

fell to €282 million from €339.5 million in the year before. 

On a quarterly basis pre-tax profit increased to €80.8 million. It had remained at €15 million 

in the fourth quarter of 2010 and at €7.2 million in the previous three months. 

Taxes on income for the year for continuing operations showed tax income of €95.9 million, 

compared to tax expense of €232 million 15 in 2010. 

The item included a non-recurring component of +€352.8 million, relating to the Parent, 

consisting of: 

• +€377.8 million from the realignment of taxation on goodwill and other intangible assets in 

accordance with Decree Law No. 98 of 6 th July 2011, converted with amendments into Law No. 111 of 

15 th July 2011. This legislation allowed, in accordance with the principles of Law No. 2 of 28 th 

January 2009 16 , the recognition for tax purposes of higher values attributed to controlling interests 

acquired through extraordinary transactions. The realignment is performed by the payment of a 

substitute tax of 16% (€525.6 million paid in November 2011), which allows tax to be deducted on the 

amortisation of the amount subject to tax relief (€3,285.3 million) at constant rates over ten years 

with effect from 2013. Consequently, from the first half of 2011 deferred tax assets of €903.4 million 

were recognised within item 290 of the income statement, corresponding to the future benefit arising 

from the deduction of amortisation on the intangible assets subject to tax relief; 

• -€25 million from the derecognition of deferred tax assets for IRAP (local production tax) purposes, 

already recognised in the financial statements as at and for the year ended 31 st December 2010. As a 

result of the tax deductibility of the amortisation of the amount subject to tax relief mentioned above, 

the Parent does not have sufficient taxable income for IRAP purposes to recover the deferred tax 

assets which had been recognised, since IRAP is not included in the tax consolidation. Consequently 

the conditions for its recognition were no longer met. 

With the increase of 0.75% in the rate for IRAP introduced by Art. 23, paragraph 5 of Decree 

Law No. 98/2011 already mentioned, applicable to banks and financial companies and in 

force with effect from the tax year 2011, changes arose in both current taxation (with the 

recognition of greater current taxes of -€16.2 million) and deferred taxation. The latter 

amounted to -€6.3 million (non-recurring), resulting from the adjustment of deferred tax 

liabilities recognised in the financial statements as at and for the year ended 31 st December 

2010, which related principally to intangible assets arising from the purchase price allocation 

for the merger of the former Banca Lombarda e Piemontese Group (and therefore classified as 

non-recurring). 

The negative impact of the rise in the IRAP rate (local production tax) was partially offset by 

the benefit resulting from the concessions introduced by Art. 1 of Decree Law No. 201 of 6 th 

December 2011, converted with amendments by Law No. 214 of 22 nd December 2011 (“aid to 

economic growth”). In order to provide incentives to strengthen the balance sheets of 

businesses, this measure introduced a reduction, effective from 2011, in taxable income (IRES 

– corporate income tax) in relation to the new capital injected into the business in the form of 

cash contributions from shareholders or the allocation of profits to reserves. 

The overall effect, connected mainly with the increase in the share capital decided in 2011 by 

the Parent, resulted in the recognition of a reduction in current taxation of €6.1 million. 

In normalised terms, taxes of €247.8 million were recognised in 2011 (€201.1 million in 2010) 

to give a tax rate of 63.74% (up from 61.76% previously). Compared to the theoretical tax rate 

(33.07%), the taxation levied was affected by the combined effect of greater IRES (corporate 

income tax) and IRAP, due to: 

- the non-deductibility of impairment losses on equity investments, accounting for one 

percentage point; 

15 The tax expense in 2010 included the impacts of extraordinary events including the following: the reorganisation of equity 

investments resulting from the “branch switching” operation (€18.3 million) and, as part of the renewal of partnership agreements 

with the Cattolica Group, the taxation on the gain from the partial disposal of Lombarda Vita (€20.2 million), having benefited only 

marginally from the participation exemption regime. 

16 Some companies in the UBI Banca Group had taken advantage of the law mentioned in their 2008 income tax returns to obtain tax 

relief on goodwill not acknowledged for tax purposes recognised in their separate financial statements (UBI Banca for €569 million, 

BRE for €68.6 million, BPA for €10.2 million and Carime for €23.3 million). The operation involved the recognition of higher 

current taxation (substitute tax of 16%) in the consolidated financial statements amounting to €107.4 million and lower taxation 

for deferred taxes of €216.8 million, with a net positive impact, net of non controlling interests, of €104.4 million (the difference 

between the rate of the substitute tax and the ordinary tax rate). 

100

- the partial non deductibility of interest expense (4%), introduced by Law No. 133 of 6 th 

August 2008 accounting for 6.2 percentage points; 

- non-tax deductible expenses, costs and provisions accounting for 1.6 percentage points; 

- the total non-deductibility for IRAP purposes of net impairment losses on loans, provisions 

for risks and charges and personnel expense and the partial non deductibility of other 

administrative expenses and depreciation and amortisation, accounting for 26.1 percentage 

points. 

These impacts were only partially offset by the effect of the “aid to economic growth” 

concessions (1.6 percentage points), by the effect of tax exemption on dividends (1.1 

percentage points), by the valuation of equity investments according to the equity method, not 

significant for tax purposes (0.9 percentage points) and by the disposal of equity investments 

covered by the participation exemption regime (0.5 percentage points). 

On a quarterly basis, taxes (normalised) fell to €50.2 million from €63.4 million in third 

quarter of 2011 (€33.3 million in the fourth quarter of 2010) to give a tax rate of 67.25% 

compared to 66.24% in the previous quarter. These changes reflect both developments in the 

tax base and the different structure of income in the two periods, as well as different trends 

relating to taxable components for IRAP purposes. 

Finally in 2010 a post-tax profit from discontinued operations of €83.4 million (non-recurring) was 

recognised in relation to the contribution of the “depository banking operations” in May 2010 by the 

Parent to RBC Dexia Investor Services (over €1 million, approximately, related to BPCI, recognised within 

operating income and expense, resulting from the disposal at the same time of correspondent banking 

contracts). 

As a result of the performance already reported and as a result of the greater profits earned by 

the principal banks in the Group, profit for the period attributable to non-controlling interests 

(inclusive of the effects of consolidation entries) rose to €28.8 million from €13.6 million in 

2010. 

In compliance with IAS 36 (Impairment of Assets), the recoverability of the carrying amounts 

for indefinite useful life intangible assets (goodwill) and finite useful life intangible (brands, 

core deposits and assets under management), recognised following the merger of the former 

BPU Group and the former BLP Group must be tested annually. 

On the basis of the impairment tests carried out at the end of December 2011, that 

recoverability was no longer guaranteed. This was due, on the one hand, to lower future 

income flows in the light of the significant deterioration in the economic environment 

compared to assumptions made in the 2011-2015 Business Plan, which were used as a basis 

for the impairment tests conducted in June 2011, and on the other hand to a higher discount 

rate used to estimate the final amounts (opportunity cost of capital), penalised by country risk. 

The reclassified income statement contains a single item, stated net of taxes and noncontrolling 

interests, for net impairment losses on goodwill (item 260) and impairment losses on 

finite useful life intangible assets (part of item 210) recognised for the year, which totalled 

€2,190.9 million (€5.2 million in 2010 17 ). They were composed of €1,865.5 million for 

impairment losses on goodwill and €305.9 million for impairment losses on finite useful life 

intangible assets, while the remaining €19.5 million (recognised in the second quarter of the 

year) relates to the full impairment loss on intangible assets associated with the investment in 

BY YOU (partially disposed of in April 2011), following the renegotiation of distribution 

agreements. 

In detail, the impairment test gave rise to total impairment losses of €2,396.8 million, 

composed as follows: 

• €1,873.8 million for the total impairment loss recognised on goodwill, of which: 

17 The preceding comparative periods have also been restated on a consistent basis, with the recognition of these impairment losses 

on the same line. The amount of €5.2 million for 2010, consisted of €4.1 million from the impairment loss on the goodwill of 

Gestioni Lombarda Suisse and a little more than €1 million from the Barberini impairment loss. 

101

- €521.2 million for the full impairment loss on goodwill recognised by UBI Banca arising 

from the business combination involving the former BPU Group and the former BLP 

Group, which took 

effect from 1 st April 

2007; 

- €1,331 million for 

reductions in goodwill 

arising 

on 

consolidation, of which 

€987.5 million relating 

to the network banks, 

€234.5 million to the 

Total 

main 

product 

companies, €96.8 

million to the other 

banks and €12.2 

million to other minor companies; 

Net impairment losses on goodwill and finite useful life intangible assets net of taxes 

and non controlling interests - 2011 

Finite useful life 

Figures in thousands of euro Goodwill Total 

intangible assets 

Impairment 2011: gross amounts 522,980 1,873,849 2,396,829 

Impairment 2011: taxes -171,506 -4,543 -176,049 

Impairment 2011: non controlling interests -45,605 -3,831 -49,436 

Impairment 2011: net amounts 305,869 1,865,475 2,171,344 

Impairment of intangible assets in relation to the interest held in BY YOU 19,517 

2,190,861 

The difference between total goodwill as at 31st December 2011 and as at 31st December 2010 (€1,877,992 

thousand) is the result, in addition to the gross impairment reported in the table (€1,873,849 thousand), of the 

effect of the removal of BY YOU, partially disposed of in that month, from the consolidation. 

- €21.6 million for impairment losses on goodwill recognised in the separate balance 

sheets arising from previous merger transactions (€12.1 million for Banca Carime, €7.2 

million for Centrobanca, €2 million for UBI Leasing and €0.3 million for BRE); 

• €523 million for impairment losses on all the finite useful life intangible assets (except for 

those relating to assets under custody and software): €193 million relating to brands, 

€241.7 million to core deposits and €88.3 million to assets under management. 

As a result of the above, the consolidated income statement recorded a net loss of -€1,841.5 

million, compared to a net profit of €172.1 million recognised in 2010 18 . 

Consequently the net loss for the fourth quarter was -€2,024.2 million; -€25.6 million in the 

same quarter of 2010 and a loss of -€69 million in the third quarter 2011. 

18 Expenses were recognised in both periods compared as a consequence of the purchase price allocation for the merger amounting to 

€71.6 million in 2011 and to €82.2 million in 2010. 

Net of non-recurring items, profit for the year was €111.6 million compared to €105.1 million the year before. Non-recurring 

expense amounted to €1,953 million, net of tax and non-controlling interests (mainly the result of impairment losses on goodwill 

and other intangible assets, although marginally offset by tax realignments), while in 2010 non-recurring items consisted of income 

of €67 million, again net of tax and non-controlling interests (principally in relation to the contribution of the depositary banking 

operations and the partial disposal of Lombarda Vita, although this was offset by impairment losses on available-for-sale equity 

investments and leaving incentives payments). 

102

The comments that follow are based on items in the consolidated balance sheet contained in the 

reclassified consolidated financial statements on which the relative tables furnishing details are also 

based. 

The sections “Consolidated companies: the principal figures” and “The performance of the main 

consolidated companies” may be consulted for information on individual banks and Group member 

companies. 

General banking business with customers: 

funding 

Funding policies 

The year 2011 was one of severe financial turmoil, especially in the second half of the year, 

when the heightened perception of country risk for Italy by investors – in the context of the 

broader crisis which affected the sovereign debt of some countries in the euro area – resulted 

in an unprecedented widening of the yield spreads between Italian and German securities. 

This caused a significant increase in the cost of funding, affected also by repeated downgrades 

performed by the main rating agencies, while international institutional funding and interbank 

monetary markets became inaccessible for Italian banks. 

In this scenario the UBI Banca Group benefited from its decision to move forward and 

concentrate important international placements to cover its requirement for the whole year in 

the first few months of 2011. A modest resumption of activity only occurred towards the end of 

the year with a few private placements for small amounts. 

The total nominal amount of securities subscribed by institutional investors in 2011 

accounted for approximately 140% of items that matured. 

Preference was given to covered bonds with longer maturities, in relation to the lower cost with 

respect to senior EMTN issues for the same maturities, while the EMTN programme was 

reserved for three year maturities. 

UIB Banca made three covered bond issuances: 

- a public placement in January for one billion euro with a ten year maturity (28 th January 

2021) and a coupon of 5.25%; 

- a second public offering in February of €750 million with a fifteen year maturity (22 nd 

February 2016) and a coupon of 4.5%. 

- a private issuance in November for €250 million with the European Investment Bank, 

consisting of a second tranche under an agreement signed in April 2010 to finance Italian 

SMEs. 

At the date of publishing this report, UBI Banca had eight issuances of covered bonds in issue 

for a total nominal amount of €5.75 billion (including €11 million already amortised) 1 . 

Two public placements made performed under the EMTN programme: the first in February for 

€700 million, with a two year maturity (28 th February 2013) at a fixed rate of 3.875%; the 

second in April for €1 billion with a two and a half year maturity (21 st October 2013) at a fixed 

rate of 4.125%. Following those, only private placements for smaller amounts were performed 

(€50 million in June and €105 million in December). 

Volumes of funding in the short-term institutional sector – where the Group operates using 

euro commercial paper and French certificates of deposit (instruments listed in Luxembourg 

1 In consideration of the large pool of segregated assets available at UBI Finance, three new issuances for a total €750 million were 

made on 22 nd February 2012. These were not placed on the market but used to strengthen the pool of assets eligible for refinancing 

with the central bank. 

103

and issued by UBI Banca International) – reduced progressively: in the first half of the year as 

a consequence of the significant medium and long-term funding acquired (where short-term 

funding is used as a “buffer” to optimise liquidity management and total funding) and in the 

second half, due to the effects of country risk for Italy which affected asset flows strongly and 

shortened the maturities of investments, even if a partial recovery occurred towards the end of 

the year. 

It must also be stated that, even if the repeated downgrades by rating agencies brought the 

ratings on ECP and French CD programmes to levels more consistent with the internal 

investment policies of some institutional operators, the UBI Banca Group still has outstanding 

issues in the current year, that are virtually unchanged compared the end of 2011 and it is 

succeeding in renewing all maturing issues. 

Finally, following the revision of supervisory regulations concerning redemptions and the 

repurchase of liabilities eligible for inclusion in supervisory capital – which eliminated the 

replacement obligation that put limits on the ability to manage and optimise liabilities – the 

UBI Banca Group performed a repurchase operation in February and March 2012 by 

launching a public offer on its own institutional liabilities, consisting of preference shares. 

The offer was taken up for a total nominal amount of €109 million, equivalent to 

approximately one fourth of the nominal amount of the securities issued, and it generated a 

net gain of approximately €15.8 million recognised in the first quarter of 2012. This also made 

it possible to generate higher quality capital in line with Basel 3 recommendations and to 

benefit from lower interest expense of over €7 million per year. 

The difficult conditions on funding markets have led to a focus on funding from ordinary 

customers, which has also been a factor of relative strategic strength for the Group and will 

be increasingly more important in the future, although in a context of growing 

competitiveness. 

Bond issues subscribed by customers amounted to €9.36 billion in 2011 compared to 

maturities of €8.7 billion. 

In reality, with the exception of Centrobanca – in relation to the nature of its business (non 

captive customers) and because it had net maturities of €1 billion during the year – the 

Group’s ability to place issuances with its own captive customers was even stronger. 

In fact total issuances by the network banks and UBI Banca amounted to €9.34 billion 

compared to maturities of €7.67 billion, with a ratio of new issuances to maturities of 122%. 

In this context, placements by UBI Banca – nine listed issuances for a nominal amount of €1.9 

billion, three of which, totalling over €1 billion, with a lower tier two subordination clause – 

concentrated above all in the second quarter and towards the end of the year, have gradually 

replaced issuances by the network banks which recorded a slightly negative balance on the 

ratio of new issuances to maturities. 

104

Total funding 

Total group funding, consisting of total amounts administered on behalf of customers, stood at 

€174.9 billion a decrease of almost €10 billion over twelve months. This was attributable, on 

the one hand, to the negative trend for indirect funding (-7.7%), penalised in the second half by 

the impact on prices of the progressive deterioration on financial markets, and on the other to 

the fall in direct funding (-3.7%), affected by the contractions in repurchase agreements with 

the Cassa di Compensazione e Garanzia (CCG – a central counterparty clearing house) taken 

out to fund the owned securities portfolio (-€4.6 billion). 

Net of repos with the CCG, total Group funding fell by €5.4 billion (-3.1%) which basically reflects 

the effect of market prices on indirect funding. 

Total funding from customers 

31.12.2011 % 31.12.2010 % 

Changes 

Figures in thousands of euro amount % 

Direct funding 102,808,654 58.8% 106,760,045 57.8% -3,951,391 -3.7% 

Indirect funding 72,067,569 41.2% 78,078,869 42.2% -6,011,300 -7.7% 

of which: assets under management 36,892,042 21.1% 42,629,553 23.1% -5,737,511 -13.5% 

Total funding from customers 174,876,223 100.0% 184,838,914 100.0% -9,962,691 -5.4% 

As concerns market segmentation by customer 2 , management accounting figures for end of 

year volumes of total funding for the network banks and for UBI Banca Private Investment 

show that at the end of the year 66.1% 

of the total came from the retail market 

(65.9% in December 2010), 26.4% from 

the private banking market (26.8%), 

5.8% from the corporate market (6%) 

and 1.7% from institutional customers 

(1.4%). 

120,000 

100,000 

Direct funding and indirect funding 

(end of quarter totals in millions of euro) 

In terms of annual changes, those same 

management accounting figures show 

generalised negative trends. 

In detail, the retail market fell as a 

whole by 4.2%, attributable primarily to 

private individual customers (-3.9%) 

and to a lesser extent to small 

businesses (-2.6%) and to the BPI 

network of financial advisors (-8.2%); 

the private banking market contracted 

by 5.7%, while the reduction for the 

corporate market was 6.4%, due 

primarily to the large corporate segment 

(-11.1%). 

Only the institutional market moved in 

the opposite direction (+16.9%). 

80,000 

60,000 

40,000 

20,000 

0 

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 

2008 

2009 

2010 

2011 

Direct funding Indirect funding 

2 Retail: comprises mass market customers (private individuals with financial wealth – direct and indirect funding – of less than €50 

thousand), affluent customers (private individuals with financial wealth – direct and indirect funding - of between €50 thousand and 

€500 thousand) and small businesses (firms with a turnover of up to €15 million); 

Corporate: comprises corporate clients (firms with a turnover of between €15 million and €250 million) and large corporate clients 

(groups of firms and firms with turnover of over €250 million). 

Private banking: comprises customers consisting of private individuals with financial wealth (direct and indirect funding) of greater 

than €500 thousand. 

105

Direct funding 

The direct funding of the Group amounted to €102.8 billion, down by approximately €4 billion 

over twelve months (-3.7%), the aggregate result of different and at times opposing trends for 

individual items. 

With a view to stabilising liabilities, policies were pursued in the last part of the year to give 

preference to funding from bonds over shorter term forms of funding. 

In detail the item AMOUNTS DUE TO CUSTOMERS amounted to €54.4 billion, down by €4.2 billion 

(-7.2%), attributable almost entirely to the item “Financing”. 

Changes in the item were affected to a significant extent by the trend for funding from 

repurchase agreements, both with customers (down to a little less than €1 billion from €1.8 

billion at the end of 2010) and in particular with the Cassa di Compensazione e Garanzia (a 

central counterparty clearing house), used to fund investments by the Parent in Italian 

government securities. 

Total repurchase agreements with the CCG were almost halved (€4.6 billion compared to €9.2 

billion at the end of 2010), a reflection of disposals and maturities in the first few months of 

the year of investments in Italian government securities, followed towards the end of the year 

by the termination of the outstanding transactions amounting to €2.8 billion, without 

disposing of the underlying securities but using the three-year liquidity obtained from the ECB 

in the auction on 21 st December 2011 (an operation which gave greater stability to balance 

sheet liability structure). 

Net of repurchase agreements with the CCG, amounts due to customers and also direct funding 

increased slightly year-on-year by 0.7% and 0.6% , respectively. 

The fall in repurchase agreements was only partly offset by positive growth in funding from 

current accounts (+€0.9 billion to €46.1 billion), facilitated, amongst other things, by the 

significant increase in deposits of liquidity by UBI Pramerica with the Parent (on the basis of 

an agreement signed in April 2011, UBI Banca became the holder of deposits used to meet the 

investment requirements of some funds managed by this asset management company). 

In reality time deposits, which were more or less unchanged at €1.4 billion, actually recorded 

growth of €0.5 billion in the last quarter of the year, as a result of marketing initiatives 

implemented in the period with private individual customers in order to exploit fixed term 

forms of funding. 

SECURITIES ISSUED, of which 90% were bonds, amounted to €48.4 billion (+€0.3 billion). 

Different trends were recorded within the item for different types and forms of funding. 

As a consequence of the significant institutional issuances made in the first four months of 

the year, which covered maturities for the entire year, bond funding increased over twelve 

months by €1.5 billion, which more than offset the decrease in “Other certificates”, which 

includes institutional funding from euro commercial paper. 

Certificates of deposit, on the other hand, remained unchanged at €2.4 billion, the result of 

opposing trends by the institutional component, consisting of French certificates of deposit (- 

€0.4 billion) and the ordinary customer component, consisting of certificates denominated in 

yen, which rose from €0.77 billion to €1.12 billion. 

In terms of type of customer, securities subscribed by institutional customers amounted to 

€18.7 billion, only slightly down on December 2010 (-€0.1 billion), after reaching almost €20 

billion at the end of the first half of the year. 

Institutional funding was affected by a heightened perception of “Italy risk” in the second half 

of the year, which made the EMTN and covered bond markets inaccessible for Italian banks 

and caused a significant contraction in business on monetary markets. 

In this context the UBI Banca Group benefited from the decision mentioned above to move 

forward and concentrate important medium and long-term placements in the first few months 

of the year. 

As a result of three placements totalling a nominal amount of €2 billion, funding in covered 

bonds reached €6.1 billion, an increase of €2.4 billion. 

106

On the other hand, while significant amounts were issued under the EMTN programme (€1.86 

billion nominal), they did not fully cover maturities, redemptions and repurchases during the 

year (€2.8 billion nominal): total outstanding EMTN funding fell as a consequence to €10.3 

billion (-€0.9 billion). 

Funding from French certificates of deposit and euro commercial paper on monetary markets 

reduced progressively, with a partial recovery in the last quarter. At first this reflected lower 

Group requirements when medium to long-term institutional issuances were made and 

subsequently the decreased propensity of investors to lend as country risk for Italy worsened. 

In total terms, funding obtained using these instruments amounted to €1.8 billion, down from 

€3.4 billion at the end of 2010. 

Direct funding from customers 

31.12.2011 31.12.2010 

Changes 

% 

% 


Current accounts and deposits 46,065,651 44.8% 45,209,037 42.3% 856,614 1.9% 

Time deposits 1,396,835 1.4% 1,341,501 1.3% 55,334 4.1% 

Financing 6,022,955 5.8% 11,152,853 10.4% -5,129,898 -46.0% 

- repurchase agreements 5,568,351 5.4% 11,011,766 10.3% -5,443,415 -49.4% 

of which: repos with Cassa di Compensazione e Garanzia 4,615,754 4.5% 9,190,455 8.6% -4,574,701 -49.8% 

- other 454,604 0.4% 141,087 0.1% 313,517 222.2% 

Other payables 945,850 0.9% 962,766 1.0% -16,916 -1.8% 

TOTAL AMOUNTS DUE TO CUSTOMERS (item 20 Liabilities) 54,431,291 52.9% 58,666,157 55.0% -4,234,866 -7.2% 

Bonds 44,429,027 43.2% 42,880,256 40.2% 1,548,771 3.6% 

Certificates of deposit 2,447,560 2.4% 2,475,557 2.3% -27,997 -1.1% 

Other certificates 1,500,776 1.5% 2,738,075 2.5% -1,237,299 -45.2% 

TOTAL SECURITIES ISSUED (item 30 Liabilities) 48,377,363 47.1% 48,093,888 45.0% 283,475 0.6% 

of which: 

securities subscribed by institutional customers: 18,671,921 18.2% 18,797,662 17.6% -125,741 -0.7% 

- The EMTN programme (*) 10,292,174 10.0% 11,158,751 10.5% -866,577 -7.8% 

- The French certificates of deposit programme 750,616 0.7% 1,148,017 1.1% -397,401 -34.6% 

- The euro commercial paper programme 1,044,055 1.0% 2,260,184 2.1% -1,216,129 -53.8% 

- The covered bond programme 6,128,355 6.0% 3,752,819 3.5% 2,375,536 63.3% 

- Preference shares (**) 456,721 0.4% 477,891 0.4% -21,170 -4.4% 

bonds subscribed by ordinary customers 27,749,274 27.0% 27,581,980 25.8% 167,294 0.6% 

- of the Group: 

issued by UBI Banca 6,856,713 6.7% 5,035,176 4.7% 1,821,537 36.2% 

issued by the network banks 16,624,904 16.2% 17,336,752 16.2% -711,848 -4.1% 

- external distribution networks: 

issued by Centrobanca 4,267,657 4.2% 5,210,052 4.9% -942,395 -18.1% 

Total direct funding 102,808,654 100.0% 106,760,045 100.0% -3,951,391 -3.7% 

(*) The corresponding nominal amounts were €10,186 million (€212 million subordinated) as at 31 st December 2011 and €11,128 million (€502 million 

subordinated) as at 31 st December 2010. The amount as at 31 st December 2011 reported in the table does not include two private placements and a 

partial repurchase of senior securities for a total of €93 million, which were eliminated in the consolidation because they were intragroup. 

(**) The preference shares were issued for nominal amounts by BPB Capital Trust of €300 million, by Banca Lombarda Preferred Securities Trust of €155 

million and by BPCI Capital Trust of €115 million. Following the public exchange offer concluded on 25 th June 2009, the remaining nominal amounts 

consisted of €227,436 million for the BPB Capital Trust issue, €124,636 million for that of Banca Lombarda Preferred Securities Trust and €101,388 

million for the BPCI Capital Trust issue. 

107

Listed securities 

Bonds listed on the MOT (electronic bond market) 

Nominal amount 

Book value as at 

ISIN number of issue 31.12.2011 31.12.2010 

IT0001197083 Centrobanca zero coupon 1998-2018 L. 800 billion € 157,100,369 € 154,479,568 

IT0001257333 Centrobanca 1998/2014 reverse floater L. 300 billion € 106,581,450 € 120,874,797 

IT0001267381 Centrobanca 1998/2018 reverse floater capped L. 320 billion € 121,608,918 € 120,200,696 

IT0001278941 Centrobanca 1998/2013 equity linked coupon L. 100 billion € 41,153,616 € 42,938,603 

IT0001300992 Centrobanca 1999/2019 step dow n indicizzato al tasso sw ap euro 10 anni € 170,000,000 € 117,189,043 € 117,297,396 

IT0001312708 Centrobanca 1999/2019 step dow n eurostability bond € 60,000,000 € 54,765,695 € 53,656,336 

IT0003834832 Centrobanca 2005/2013 inflazione Italia con leva € 16,280,000 € 9,826,128 € 9,779,702 

IT0003210074 Banca Popolare di Bergamo-CV 2001/2012 a tasso variabile subordinato ibrido - upper tier 2 € 250,000,000 € 250,191,408 € 250,161,359 

IT0004424435 UBI subordinato low er tier 2 a tasso variabile con ammortamento 28.11.2008-2015 € 599,399,000 € 474,738,713 € 591,835,287 


IT0004457070 UBI subordinato low er tier 2 fix to float con rimborso anticipato 13.3.2009-2019 € 370,000,000 € 383,885,598 € 381,946,207 

IT0004497050 UBI subordinato low er tier 2 fix to float con rimborso anticipato 30.6.2009-2019 € 365,000,000 € 370,940,321 € 366,190,696 


IT0004497043 Unione di Banche Italiane Scpa tasso misto 30.6.2009-2014 € 219,990,000 € 217,147,237 € 216,057,808 




IT0004572878 UBI subordinato low er tier 2 a tasso fisso con ammortamento 23.2.2010-2017 € 300,000,000 € 309,378,048 € 301,729,015 

IT0004624547 Unione di Banche Italiane Scpa tasso fisso 2,30% 31.8.2010-2012 Welcome Edition € 278,646,000 € 280,204,675 € 278,908,777 

IT0004632680 Unione di Banche Italiane Scpa tasso fisso 2,15% 28.9.2010-2012 € 450,000,000 € 450,650,823 € 448,161,421 

IT0004626617 IW Bank Obbligazioni agosto 2015 con opzione di tipo call asiatica (*) € 1,103,000 € 1,081,021 € 1,115,514 

IT0004642382 IW Bank Obbligazioni ottobre 2015 con opzione di tipo call asiatica - II tranche (*) € 954,000 € 923,710 € 944,346 

IT0004645963 UBI subordinato low er tier 2 a tasso fisso con ammortamento 5.11.2010-2017 € 400,000,000 € 397,739,866 € 380,788,851 

IT0004651656 Unione di Banche Italiane Scpa tasso fisso 2,30% 2.12.2010-2013 Welcome Edition € 81,322,000 € 81,041,477 € 80,835,676 


IT0004710981 Unione di Banche Italiane Scpa tasso fisso 3,65% 20.5.2011-20.11.2013 € 5,787,000 € 5,914,831 5,914,831 

IT0004713654 Unione di Banche Italiane Scpa tasso misto 10.6.2011-2015 € 120,000,000 € 121,935,110 - 

IT0004718489 UBI subordinato low er tier 2 tasso fisso con ammortamento 5,50% 16.6.2011-2018 Welcome Edition € 400,000,000 € 412,216,859 - 

IT0004723489 UBI subordinato low er tier 2 tasso fisso con ammortamento 5,40% 30.6.2011-2018 € 400,000,000 € 412,473,438 - 

IT0004767742 UBI subordinato low er tier 2 tasso misto 18.11.2011-2018 Welcome Edition € 222,339,000 € 219,055,454 - 

IT0004777550 Unione di Banche Italiane Scpa tasso fisso 5% 9.12.2011-9.6.2014 € 203,313,000 € 204,273,814 - 

IT0004777568 Unione di Banche Italiane Scpa tasso fisso 5% 30.12.2011-30.6.2014 Welcome Edition € 176,553,000 € 176,231,023 - 

IT0004779713 Unione di Banche Italiane Scpa tasso fisso 4,50% 30.12.2011-30.6.2014 € 287,722,000 € 286,920,098 - 

IT0004780711 Unione di Banche Italiane Scpa tasso fisso 5% 29.12.2011-29.6.2014 € 95,109,000 € 94,660,143 - 

IT0004785876 Unione di Banche Italiane Scpa tasso fisso 4,3% 17.2.2012-17.3.2014 € 19,991,000 - - 

IT0004785892 Unione di Banche Italiane Scpa tasso fisso 3,8% 31.1.2012-28.2.2014 € 25,000,000 - - 

(*) The figures relate to bonds outstanding, that is net of repurchases by the company itself. 

Convertible bonds listed on the MOT (electronic bond market) 

ISIN number 


of issue 31.12.2011 31.12.2010 

IT0004506868 UBI 2009/2013 convertibile con facoltà di rimborso in azioni € 639,145,872 € 653,777,805 € 652,263,445 

Covered bonds listed on the London Stock Exchange 

ISIN number 


of issue 31.12.2011 31.12.2010 

IT0004533896 UBI Covered Bonds due 23 September 2016 3,625% guaranteed by UBI Finance Srl € 1,000,000,000 € 1,068,507,939 € 1,028,582,677 

IT0004558794 UBI Covered Bonds due 16 December 2019 4% guaranteed by UBI Finance Srl € 1,000,000,000 € 1,081,847,471 € 1,011,116,295 

IT0004599491 UBI Covered Bonds due 30 April 2022 floating rate amortising guaranteed by UBI Finance Srl € 250,000,000 € 239,418,111 € 250,543,687 

IT0004619109 UBI Covered Bonds due 15 September 2017 3,375% guaranteed by UBI Finance Srl € 1,000,000,000 € 1,028,594,052 € 971,231,814 

IT0004649700 UBI Covered Bonds due 18 October 2015 3,125% guaranteed by UBI Finance Srl € 500,000,000 € 510,433,699 € 491,344,223 

IT0004682305 UBI Covered Bonds due 28 January 2021 5,25% guaranteed by UBI Finance Srl € 1,000,000,000 € 1,131,286,542 - 

IT0004692346 UBI Covered Bonds due 22 February 2016 4,5% guaranteed by UBI Finance Srl € 750,000,000 € 817,037,468 - 

IT0004777444 UBI Covered Bonds due 18 November 2021 floating rate amortising guaranteed by UBI Finance Srl € 250,000,000 € 251,229,559 - 

Innovative equity instruments (preference shares) listed on international markets 

ISIN number 


of issue 31.12.2011 31.12.2010 

Luxembourg 

XS0123998394 

Non-cumulative Fixed/Floating Rate Guaranteed Trust Preferred Securities 

Banca Popolare di Bergamo Capital Trust € 300,000,000 € 229,648,799 € 244,086,637 

XS0131512450 

9% Non-cumulative Guaranteed Trust Preferred Securities 

Banca Popolare Commercio e Industria Capital Trust € 115,000,000 € 101,929,335 € 106,899,082 

London 

XS0108805564 

Step-Up Non-voting Non-cumulative Trust Preferred Securities 

Banca Lombarda Preferred Securities Trust € 155,000,000 € 125,142,835 € 126,904,945 

The list does not include the numerous EMTN issues listed in London and in Luxembourg, nor the securities generated by securitisations performed for 

internal purposes by B@nca 24-7, UBI Leasing, Banco di Brescia and Banca Popolare di Bergamo, all listed on the Dublin stock exchange, nor the issues of 

French certificates of deposit and of euro commercial paper, listed in Luxembourg. 

108

In detail, institutional funding was composed as follows as at 31 st December 2011: 

• EMTN securities (Euro Medium Term Notes) amounting to €10.3 billion (€212 million subordinated), 

issued by UBI Banca as part of a programme for a maximum issuance of €15 billion. All the securities 

are admitted for trading on the London stock exchange with the sole exception of those which had 

been issued by the former Banca Lombarda e Piemontese listed in Luxembourg; 

• covered bonds amounting to €6.1 billion, consisting of eight issues by UBI Banca for a total nominal 

amount of €5.75 billion (including €11 million already ammortised), as part of a multi-originator 

programme for a maximum issuance of €10 billion euro. The securities are listed in London; 

• French certificates of deposit amounting to €0.8 billion, issued by the UBI Banca International as part 

of a programme for a maximum issuance of €5 billion euro, listed in Luxembourg; 

• euro commercial paper amounting to €1 billion euro, issued by UBI Banca International as part of a 

programme for a maximum issuance of €6 billion euro, listed in Luxembourg; 

• preference shares amounting to €0.5 billion composed of the securities still in issue following the 

public exchange offer of June 2009. These consist of three issuances for a total €0.453 billion 

nominal, two of which listed in Luxembourg and one in London. At the date of this report, following 

the voluntary public tender offer to purchase, which took place between 7 th February and 12 th March 

2012, the nominal amount had fallen to €0.344 billion. 

The downgrades of UBI Banca by Moody's and Fitch performed in the last part of 2011 in the wake of the 

lowering of Italy’s credit rating had the consequence, amongst other things, of making it necessary for UBI 

Banca and other national banking groups to take a series of actions on its programme for the issue of 

covered bonds. 

In order to prevent probable downgrades of the programme, accounts had to be opened with a third party 

counterparty (Bank of New York Mellon, also the paying agent) in order to collateralise the swap contracts 

between UBI Banca and UBI Finance, the special purpose entity for the programme. Margins were paid into 

these accounts, calculated on the basis of the provisions of the swap contract originally entered into (asset 

swaps and liability swaps). At the same time, the liquidity accounts of the entity UBI Finance were 

transferred from UBI Banca International Luxembourg to Bank of New York Mellon, in relation to the 

minimum rating level requested by the two agencies for the bank used for them. 

At the end of 2011 the ratings for the programme were “Aaa” for Moody’s and “AAA” for Fitch, under 

review in both cases for possible negative impacts. In the weeks that followed, when further downgrades of 

the rating were performed on the Republic of Italy and on national banking Groups, the ratings for UBI 

Banca’s covered bond programme were also downgraded: from “Aaa” to “Aa2” by Moody’s (16 th January 

2012) and from “AAA” to “AA+” by Fitch (8 th February 2012). The new ratings were, however, maintained 

under review for possible negative impacts. 

As at 31 st December 2011 the segregated portfolio of residential mortgages (cover pool), created at UBI 

Finance to cover issuances totalled approximately €9.647 billion, of which 24.8% originated by Banca 

Popolare di Bergamo, 22.3% by Banco di Brescia, 17.4% by Banca Popolare Commercio e Industria, 11% by 

Banca Regionale Europea, 10.3% by Banca Popolare di Ancona, 6.1% by Banca Carime, 4.9% by Banco di 

San Giorgio, 2% by Banca di Valle Camonica and the remaining 1.2% by UBI Banca Private Banking 

Investment. 

The segregated portfolio again also had a high degree of fragmentation, including over 136 thousand 

mortgages with average residual debt of €70.9 thousand, distributed with approximately 75% in North 

Italy. 

On 1 st February 2012 a new transfer of assets was made by Banca Popolare di Bergamo, Banco di 

Brescia, Banca Carime and UBI Banca Private Investment who transferred mortgages already held on their 

books to the special purpose entity for a total of €1.171 billion consisting of the remaining principal 3 . 

A second UBI Banca covered bond programme is currently being organised. This programme, which will 

probably be completed by April 2012, is designed for issuances which will be subscribed by UBI Banca 

itself in order to be able to have assets eligible for refinancing. A pool of mainly commercial mortgages and, 

in addition, residential mortgages eligible according to national legislation, but not considered in the rating 

agencies’ methodologies for the first programme (residential), will be transferred to UBI Finance CB 2 Srl, to 

back the issues of this new series of covered bonds. The programme will in fact have no specific rating, but 

will benefit exclusively from the senior rating of the Parent, UBI Banca. The issuances made under this 

second programme will be entirely subscribed by UBI Banca itself and they will add to the available pool of 

assets eligible for refinancing. 

On 1 st March 2012, the first transfer of assets was completed by Banca Popolare Commercio e Industria, 

Banca Popolare di Ancona, Banca Regionale Europea and Banca di Valle Camonica which transferred 

3 Another two transfers of assets were performed in 2011 for use in the covered bond programme as follows: 

- on 1 st May Banca Popolare di Bergamo and Banco di Brescia transferred mortgages already held on their books to UBI Finance for 

a total of €1.377 billion consisting of the remaining principal owed; 

- on 31 st October Banca Popolare Commercio and Industria, Banca Regionale Europea, Banca Popolare di Ancona and Banco di San 

Giorgio transferred mortgages already held on their books to the special purpose entity for a total of €1.587 billion consisting of 

the remaining principal on the loans. 

109

mortgages already held on their books to UBI Finance CB 2 for a total of €1.3 billion of the remaining 

principal. Banco di Brescia, Banca Popolare di Bergamo, Banca Carime e Banco di San Giorgio will also 

make their first transfer with value date of 1 st April 2012 for a total estimated amount of approximately 

€1.8 billion. 

Funding from bonds issued to ordinary customers amounted to €27.8 billion, essentially 

unchanged compared to the previous year (+€0.2 billion), although changes for individual 

items were in opposite directions. 

More specifically listed bonds issued by UBI Banca destined to network bank customers 

reached almost €7 billion, an improvement of €1.8 billion. New placements by the Parent – 

nine issuances for a total of €1.9 billion nominal concentrated in the second quarter and 

towards the end of the year, including three totalling over €1 billion, with a lower tier two 

subordination clause – were used mainly to replace bonds maturing issued through 

Centrobanca’s non captive channel (-€0.9 billion) and to a lesser extent network banks issues 

that matured (-€0.7 billion). 

Maturities of bonds outstanding as at 31st December 2011 

Nominal amounts in millions of euro 

1st Quarter 

2012 

2nd Quarter 

2012 

3rd Quarter 

2012 

4th Quarter 

2012 

2013 2014 

Subsequent 

years 

Total 

UBI BANCA* 1,542 1,566 799 1,131 4,673 4,413 8,625 22,749 

of which: EMTNs 1,500 1,495 70 1,000 3,447 2,234 440 10,186 

Covered bonds ** - 11 - 11 51 51 5,615 5,739 

Network banks 1,378 1,217 1,183 999 5,562 3,376 2,626 16,341 

Other banks in the Group 7 1 5 173 102 431 3,594 4,313 

Total 2,927 2,784 1,987 2,303 10,337 8,220 14,845 43,403 

* The EMTN subordinated bonds were placed on the date of the maturity or the exercise of a call option. Preference shares have not been included. 

** The first half year amortisation, amounting to €11 million, took place in the fourth quarter 2011. 

As concerns market segmentation, management accounting figures for end of period volumes 

of direct funding for the network banks and for UBI Banca Private Investment show that in 

Geographical distribution of direct funding from 

customers by region of location of the branch 

(excluding repurchase agreements and bonds) (*) 

Percentage of total 31.12.2011 31.12.2010 

December 76.2% of funding came from the retail 

market (77% in December 2010), 10.6% from the 

private banking market (10.7%), 9.6% from the 

corporate market (9.2%) and 3.6% from institutional 

customers (3.1%). 

Lombardy 59.14% 59.07% 

Latium 8.54% 8.70% 

Piedmont 8.02% 7.62% 

Apulia 4.71% 4.78% 

Calabria 4.50% 4.77% 

Marches 3.97% 4.01% 

Campania 3.88% 3.88% 

Liguria 2.42% 2.49% 

Emilia Romagna 1.23% 0.98% 

Veneto 1.01% 1.14% 

Basilicata 0.95% 1.01% 

Umbria 0.52% 0.49% 

Abruzzo 0.42% 0.41% 

Friuli Venezia Giulia 0.26% 0.25% 

Tuscany 0.19% 0.16% 

Molise 0.18% 0.20% 

Valle d'Aosta 0.03% 0.01% 

Trentino Alto Adige 0.02% 0.02% 

Sardinia 0.00% 0.01% 

Total 100.00% 100.00% 

North 72.14% 71.59% 

- North West 69.62% 69.19% 

- North East 2.52% 2.40% 

Central Italy 13.22% 13.36% 

South 14.64% 15.05% 

In terms of annual changes, those same 

management accounting figures show basic stability 

for the retail market (-0.8%) and for the main 

components of it: -0.4% for private individual 

customers and -0.1% for small businesses. No 

change was recorded for the private banking 

market, while the corporate market improved 

(+2.9%), as a result of action taken to improve 

funding products for businesses, as did funding 

from the institutional market (+16.9%). 

The table, “Geographical distribution of direct 

funding from customers by region of location of the 

branch”, gives the geographical distribution of 

traditional funding (consisting of current accounts, 

savings deposits and certificates of deposit) in Italy. 

The figures show an increase in the already 

significant geographical concentration of the Group 

in northern regions (up to 72.1% from 71.6% in 

2010) and more specifically in the North West where 

the network banks have their greatest presence. 

(*) The aggregates relate to banks only. 

110

The public tender offer to purchase tier one instruments (preference shares) in issue 

In order to optimise the structure of the consolidated supervisory capital with particular reference to the 

highest quality component (common equity in accordance with Basel 3), UBI Banca made a public tender 

offer to purchase the entire amount of the Group’s tier one instruments in circulation, with an offer of 80% of 

the nominal amount. 

The offer, authorised by the Bank of Italy, took place as follows: 

• the “institutional offer” for qualified Italian and international investors [as defined by Art. 34-ter, 

paragraph 1, letter b) of the issuers’ regulations] took place between 7 th and 16 th February 2012. It was 

held under an exemption regime in accordance with the laws and regulations governing public purchase 

and exchange offers. In addition to the price, those accepting the offer were paid interest accruing up to 

the settlement date (22 nd February); 

• the “retail offer” on the other hand took place between 24 th February and 12 th March 2012 in 

accordance with Art. 102 and following of the consolidated finance act. It was destined to preference 

shareholders resident or domiciled in Italy who are not qualified investors. This offer, authorised by the 

CONSOB (Italian securities market authority) with Resolution No. 18111 of 22 nd February 2012, was on 

the securities in issue on conclusion of the institutional offer. In this case too, those accepting the offer 

were paid interest accruing up to the payment date (16 th March); 

The public tender offer to purchase tier one instruments (preference shares) of the Group 

ISIN number 

Issuer 


of the securities 

in issue on the 

date of the offer 

Consideration 

as a 

percentage of 

the nominal 

amount 

Nominal amount of the 

securities repurchased 

Institutional 

Offer 

Retail Offer 


of the securities 

in issue 

subsequent to 

the offer 

XS0123998394 Banca Popolare di Bergamo Capital Trust € 227,436,000 80% € 40,966,000 € 852,000 € 185,618,000 

XS0131512450 Banca Popolare Commercio e Industria Capital Trust € 101,388,000 80% € 28,746,000 € 5,284,000 € 67,358,000 

XS0108805564 Banca Lombarda Preferred Securities Trust € 124,636,000 80% € 29,117,000 € 4,057,000 € 91,462,000 

Total € 453,460,000 € 98,829,000 € 10,193,000 € 344,438,000 

From an earnings and capital viewpoint, on conclusion of the two offers the UBI Banca Group will recognise 

a net gain in the first quarter of 2012 of €15.8 million (€21.8 million before tax), corresponding to 

approximately two basis points in terms of the core tier one ratio, calculated on the basis of risk weighted 

assets as at 31 st December 2011. The repurchase will also result in a benefit in terms of a decrease in 

interest expense of over €7 million per year. 

111

Indirect funding and assets under management 

Indirect funding from ordinary customers 

Changes 

31.12.2011 % 31.12.2010 % 


Assets under custody 35,175,527 48.8% 35,449,316 45.4% -273,789 -0.8% 

Assets under management 36,892,042 51.2% 42,629,553 54.6% -5,737,511 -13.5% 

Customer portfolio management 7,898,346 11.0% 9,112,815 11.7% -1,214,469 -13.3% 

of which: fund based instruments 1,699,935 2.4% 2,065,172 2.6% -365,237 -17.7% 

Mutual investment funds and SICAV’s 17,250,549 23.9% 21,189,141 27.1% -3,938,592 -18.6% 

Insurance policies and pension funds 11,743,147 16.3% 12,327,597 15.8% -584,450 -4.7% 

of which: Insurance policies 11,545,015 16.0% 12,124,734 15.5% -579,719 -4.8% 

Total indirect funding from ordinary customers 72,067,569 100.0% 78,078,869 100.0% -6,011,300 -7.7% 

Group indirect funding from ordinary 

customers amounted to €72.1 billion 

as at 31 st December 2011, a decrease 

of €6 billion compared to €78.1 

billion at the end of 2010 (-7.7%). If 

the estimated impact of the 

unfavourable performance of the 

market prices of the different 

components is excluded, the fall in 

the total over twelve months was 

slight. 

As can be seen from the graph, the 

trend for the total over the last three 

years was basically stable for assets 

under custody, while that for assets 

under management was more 

volatile, still far from the pre-crisis 

levels of 2008. The latter was 

particularly penalised in the second 

half of 2011 by the progressive 

deterioration of conditions on 

financial markets. 

50,000 

45,000 

40,000 

35,000 

30,000 

25,000 

20,000 

15,000 

10,000 

5,000 

0 

Indirect funding 

(end of quarter totals in millions of euro) 

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 

2008 2009 2010 2011 

Assets under management 

Assets under custody 

This therefore explains why the contraction in indirect funding over twelve months (-€6 billion) 

is attributable almost entirely to assets under management (down by €5.7 billion to €36.9 

billion; -13.5%). Seventy percent of the negative trend for this item was due to mutual funds 

and Sicav’s (-€3.9 billion; -18.6%) and also to customer portfolio managements (-€1.2 

billion; -13.3%), while the fall in insurance products was less (-€0.6 billion; -4.7%). 

The annual performance of assets under custody, which was more or less unchanged at €35.2 

billion (-€0.3 billion; -0.8%), was affected by the strong contraction that occurred over the 

summer which wiped out the increases recorded during the other quarters of the year. 

* * * 

112

As concerns mutual investment funds and Sicav’s, at the end of December the Assogestioni 

(national association of asset management companies) figures 4 for asset management 

companies of the UBI Banca Group reported the following for 2011: 

• net negative inflows of €3.7 billion, corresponding to -17.7% of ASSETS UNDER MANAGEMENT 

ORIGINATED at the end of 2010 (the fall for the sector nationally was €33.3 billion, -7.2% of 

the assets originated twelve months before); 

• assets originated of €16.5 billion – inclusive of assets entrusted under a management 

mandate to Prudential totalling €2.73 billion (€1.50 billion of equity funds and €1.23 billion 

of bond funds) 5 – a decrease of 21.3% compared to approximately €21 billion at the end of 

2010, which places the UBI Group in sixth place in the Assogestioni 6 classification with a 

market share of 4% (4.56% at the end of 2010); 

• a reduction in assets originated by a greater percentage than that for the sector nationally 

(-21.3% compared to -10.2%). 

Fund assets originated 

UBI Banca Group 

Changes 

31.12.2011 % 31.12.2010 % 

Figures in millions of euro amount % 

Equities 2,362 14.3% 2,734 13.1% -372 -13.6% 

Balanced 1,293 7.8% 1,512 7.2% -219 -14.5% 

Bond 9,387 56.9% 11,784 56.2% -2,397 -20.3% 

Monetary funds 2,782 16.9% 3,715 17.7% -933 -25.1% 

Flexible 612 3.7% 840 4.0% -228 -27.1% 

Hedge funds 68 0.4% 378 1.8% -310 -82.0% 

TOTAL (a) 16,504 100.0% 20,963 100.0% -4,459 -21.3% 

Sector 

Changes 

31.12.2011 % 31.12.2010 % 

Figures in millions of euro amount % 

Equities 94,580 22.9% 107,423 23.4% -12,843 -12.0% 

Balanced 18,277 4.4% 21,305 4.6% -3,028 -14.2% 

Bond 180,040 43.6% 189,212 41.1% -9,172 -4.8% 

Monetary funds 48,720 11.8% 62,333 13.5% -13,613 -21.8% 

Flexible 62,051 15.0% 67,089 14.6% -5,038 -7.5% 

Hedge funds 9,353 2.3% 12,686 2.8% -3,333 -26.3% 

Total (b) 413,021 100.0% 460,048 100.0% -47,027 -10.2% 

MARKET SHARE OF THE UBI 

BANCA GROUP (a)/(b) 4.00% 4.56% 

The summary figures in the table confirm the prudent approach of UBI Group customers as 

follows: 

a constantly higher percentage of lower risk funds (monetary funds and bonds) 

compared to sector figures, accounting as a whole for 73.8% of the total (55.4% for the 

Assogestioni sample), despite greater decreases, especially for bond funds (-20.3% 

compared to -4.8%); 

a percentage of equity funds that is increasingly smaller as a consequence than that for 

the sector (14.3% compared to 22.9%), while the class has decreased more over twelve 

months compared to the Assogestioni sample (-13.6% compared to -12%); 

a relatively larger percentage of balanced funds (7.8% compared to 4.4%), while 

investments in hedge funds almost disappeared (-82% year-on-year, compared to - 

26.3% for the sector). 

With regard to periodic surveys performed by Assogestioni (national association of asset 

management companies), since August the new “Monthly map of assets under management” 

4 “Map of assets under management (collective instruments and customer portfolio management)” for the 4 th quarter of 2011. 

5 Funds managed under a mandate by Prudential as at 31 st December 2010 amounted to €2.65 billion (€1.71 billion of equity funds 

and €0.94 billion of bond funds). 

6 The Group fell by three places compared to December 2010, overtaken by Am Holding – a new asset management company created 

in 2011 from an alliance between Anima SGR and Prima SGR, two asset management companies which, considered singly, have 

lower assets under management and market share than those of the UBI Banca Group, – by the Mediolanum Group and by Franklin 

Templeton Investment. 

113

only provides an update of ASSETS UNDER DIRECT MANAGMENT 7 for mutual investment funds and 

Sicavs – calculated net of assets managed under a mandate by third parties – which are 

therefore to be considered less in line with the actual assets under management originated by 

the UBI Banca Group. 

On the basis of those surveys the UBI Group recorded the following performance as at 31 st 

December 2011: 

• negative net inflows for assets actually under management of €3.9 billion, down by 21.5% 

compared to assets managed at the end of 2010 (net inflows for the sector nationally were 

negative by €33 billion, down by 7.2% over assets managed twelve months before). 

However, it must be considered that this data does not include funds managed under a 

mandate by Prudential, which recorded positive net inflows year-on-year of €0.2 billion; 

• assets under management of €13.8 billion – again net of over €2.7 billion of assets managed 

by Prudential – which placed the Group in eighth position among operators in the sector 

with a market share of 3.29%, down compared to 3.98% at the end of 2010; 

• a reduction in assets under management of €4.5 billion (-24.8%) compared to a fall of €41.4 

billion for the Assogestioni sample (-9%). 

* * * 

If all assets under management are considered (collective instruments and customer portfolio 

managements), at the end of the fourth quarter the UBI Banca Group was positioned in eighth 

place in the sector 8 – sixth among Italian groups – with assets under management, net of 

Group funds and mutual funds managed under a mandate by Prudential, of €22.8 billion – 

including €2.5 billion relating to institutional customers – and a fall in market share 2.66% 

(3.19% at the end of 2010). 

* * * 

For a more appropriate reading of annual changes in net inflows for mutual funds and sicavs 

and in the relative market shares, it must be considered that as difficulties increased in the 

financial context, Italian banks were faced with a liquidity crisis which reached systemic levels 

in the fourth quarter. This led them to give preference to commercial policies which ensured 

priority was given to support the various forms of direct funding. 

It must also be considered that Assogestioni’s representative sample of the sector also includes 

non banking operators. Consequently, market shares for the UBI Banca Group are naturally 

smaller than those for direct funding, lending and number of branches (see the preceding 

section, “The distribution network and market positioning”, in this respect). 

7 Assets originated to which assets received for management under a mandate from another manager are added and from which 

assets entrusted under mandate to another manager for management are subtracted. 

8 Source: Assogestioni (national association of asset management companies), “Map of assets under management (collective 

instruments and customer portfolio management) 4 th quarter 2011. The UBI Group fell by two places in the Assogestioni 

classification compared to December 2010 overtaken by Am Holding and by the BNP Paribas Group. Since this classification is 

based on assets under management net of Group funds, the market share calculated using Assogestioni data does not take account 

of the €2.73 billion of mutual fund assets managed under a mandate by Prudential. 

114

General banking business with customers: 

lending 

Performance of the loan portfolio 

Composition of loans to customers 

of which 

of which 

Changes 

31.12.2011 % 

31.12.2010 % 

Figures in thousands of euro deteriorated 

deteriorated amount % 

Current account overdrafts 12,907,301 13.0% 1,151,331 13,723,925 13.5% 1,067,391 -816,624 -6.0% 

Reverse repurchase agreements 923,859 0.9% - 323,597 0.3% - 600,262 185.5% 

Mortgage loans and other medium to longterm 

financing 56,238,200 56.4% 3,172,375 53,943,966 53.0% 2,512,658 2,294,234 4.3% 

Credit cards, personal loans and salary 

backed loans 5,527,788 5.6% 206,948 6,344,773 6.2% 144,009 -816,985 -12.9% 

Finance leases 8,886,514 8.9% 937,571 9,590,800 9.4% 769,279 -704,286 -7.3% 

Factoring 3,199,870 3.2% 62,427 2,988,697 2.9% 16,946 211,173 7.1% 

Other transactions 11,797,162 11.8% 748,232 14,846,953 14.6% 749,846 -3,049,791 -20.5% 

Debt instruments: 209,076 0.2% 1,000 52,118 0.1% 1,000 156,958 301.2% 

- structured instruments 8,893 0.0% - 3,409 0.0% - 5,484 160.9% 

- other debt instruments 200,183 0.2% 1,000 48,709 0.1% 1,000 151,474 311.0% 

Total loans to customers 99,689,770 100.0% 6,279,884 101,814,829 100.0% 5,261,129 -2,125,059 -2.1% 

Lending to customers at the end of 

December amounted to €99.7 

billion, a decrease of €2.1 billion 

compared to €101.8 billion twelve 

months before (-2.1% compared to 

+1.8% for the banking sector 

nationally to the private sector). 

10% 

9% 

8% 

7% 

6% 

Year‐on‐year rate of change in loans to the private sector (*) 

Sector 

Nationally 

UBI Group 

5% 

After a positive start, which saw the 

4% 

portfolio reach a peak of €102.8 

billion at the end of June (+€1 3% 

billion in the first half), total loans 2% 

remained stable over the summer, 

1% 

but declined sharply (-€3.1 billion) 

0% 

in the last few months of the year, 

‐1% 

as pressures worsened on financial 

‐2% 

markets and generalised and 

growing difficulty was experienced ‐3% 

by the banking sector in obtaining 

funding. As a result, an operation 

(*) Net of loans to public administrations 

was performed on the Group loan 

portfolio to reduce exposures, which affected the “large corporate” segment in a context of a 

general deterioration in the real economy which dampened the demand for credit by other 

categories of businesses. 

If the large corporate segment is excluded, the annual change in lending was positive by 0.9%. 

Furthermore, the Group also took action in 2011 to rationalise its lending to non-captive 

customers, belonging mainly to B@nca 24-7, but also to Centrobanca and UBI Factor, but only 

marginally. 

Net also of this last category of loans, the annual change in the consolidated loan portfolio was an increase 

of 2%. 

1 Q 08 

2 Q 08 

In terms of origin, the performance of the consolidated portfolio was attributable basically to 

the network banks, which accounted for 66% of the consolidated aggregate. As a result of 

3 Q 08 

4 Q 08 

1 Q 09 

2 Q 09 

3 Q 09 

4 Q 09 

1 Q 10 

2 Q 10 

3 Q 10 

4 Q 10 

1 Q 11 

2 Q 11 

3 Q 11 

4 Q 11 

116

processes to improve credit quality which affected the non-captive market, the contribution 

made by the product companies was also negative overall, although it was offset to a 

substantial degree by growth in lending by UBI Banca to counterparties outside the Group. 

The performance by the different types of lending over twelve months was not uniform: 

• mortgages and other medium to long-term lending progressively increased to over €56.2 

billion (+€2.3 billion; +4.3%), which confirmed it as the main form of lending, accounting for 

over 56% of the total. 

On the basis of management accounting figures for the network banks, Centrobanca and 

B@nca 24-7, performing residential mortgages totalled €22.8 billion in December (€21.8 

billion in December 2010), of which 46% with a loan to value ratio (LTV) of less than 60%; 

• reverse repurchase agreements almost tripled to €924 million, (+€0.6 billion), a reflection of 

increased business by the Parent with the Cassa di Compensazione e Garanzia (CCG – a 

central counterparty clearing house) in the last part of the year. This business must be 

interpreted in relation to changes in financial liabilities held for trading (uncovered short 

positions on securities) and also to intermediation performed during the period in 

consideration of the favourable market conditions; 

• other debt instruments increased by €0.2 billion as a result of a new banking investment 

made by the Parent towards the end of 2011, which as a result of its eligibility 

qualifications, was added to the pool of assets eligible for refinancing with the central bank; 

• factoring loans granted by UBI Factor reached €3.2 billion (+€0.2 billion; +7.1%), having 

grown progressively after a decrease in the first quarter; 

• on the other hand, finance leases decreased to €8.9 billion (-€0.7 billion; -7.3%), partly in 

relation to the reorganisation of lending processes completed by UBI Leasing in 2011, in 

parallel with a change of focus in its business towards the captive market; 

• similarly the other forms of consumer credit also decreased to €5.5 billion (-€0.8 

billion; -12.9%). This trend basically reflects the performance of B@nca 24-7’s lending 

portfolio (down by €0.6 billion to approximately €5.5 billion; -10%) in the light of precise 

decisions to strategically reposition business, taken in order to improve credit quality. 

These led to the progressive discontinuation of high risk business segments consisting of 

special purpose loans and consumer credit to non captive customers, for which only 

operations for the servicing of existing loans remain. 

In terms of types of lending a decrease was recorded in special purpose loans (down by €0.3 

billion to €0.4 billion) brokered by SILF and in other personal loans (down by €0.3 billion to 

€1.9 billion) – originated mainly through the network banks. The reduction in the latter 

affected both the captive component and the residual component originated by the SILF 

network in equal measure. 

While outstanding loans remained unchanged at €3.1 billion, salary and pension backed 

loans – originated almost entirely by external distribution networks – came to account for 

56% of B@nca 24-7’s total outstanding consumer loans. Although the company was 

affected by a change in the focus of this lending business in the second quarter towards 

captive customers through the Group subsidiary Prestitalia Spa, while external distribution 

networks were discontinued (i.e., Ktesios Spa) at the same time, total salary backed loans 

did not record any significant changes; 

• taken together, other types of short-term lending recorded a decrease to €3.8 billion (-€3 

billion for “Other transactions”, -€0.8 billion for current account overdrafts), concentrated 

mainly in the last quarter of the year. More specifically, after growth of €0.7 billion in the 

first three quarters, current account overdrafts decreased by €1.5 billion in the fourth 

quarter to €12.9 billion. “Other transactions” (loans for advances, portfolio, import/export 

transactions, very short term lending, etc.) amounted to €11.8 billion at the end of the year, 

as the progressive decrease that had occurred in the first nine months (-€0.8 billion) 

worsened in the last quarter (-€2.2 billion). 

In terms of maturities (and also as a result of the performance reported above), at the end of 

the year the Group portfolio consisted of medium to long-term loans totalling €70.7 billion (up 

1% year-on-year, despite a fall of 1.1% in the third quarter), accounting for 71% of the total, 

and of short term loans amounting to €29 billion (-9% year-on-year; -7.3% over the last three 

months). 

117

The ratio of lending to funding in the December was 97%, an increase compared to the end of 

2010 (95.4%), but down with respect to 98.9% in September. If funding is considered net of 

repurchase agreements with the CCG, the ratio was 101.5% (104.4% in December 2010 and 

106.5% in September 2011). 

As concerns customer market segmentation, end of period management accounting figures for 

lending by network banks and by UBI Banca Private Investment show that at the end of the 

year 58.8% was destined to the retail market (55.4% in December 2010), 39.5% to the 

corporate market (43.2%), 1.4% to the private banking market (1.1%), while the remaining 

0.3% was to institutional customers (0.3%). 

In terms of annual trends, those same management figures show an improvement for the retail 

market (+1.3%) – driven by the private individuals segment (+2.3%), while the small business 

segment remained almost unchanged (-0.3%) – and a marked decrease for the corporate 

market (-12.6%), of which 80% attributable to the large corporate segment (-27.6%) and the 

remaining part to the core segment (-3.9%). 

Distribution of loans by economic sector 

(management accounting figures for performing loans of the network banks and Centrobanca) 

31.12.2011 30.9.2011 30.6.2011 31.3.2011 31.12.2010 

Manufacturing and service companies 

(non financial companies and producer households) 61.8% 62.9% 63.2% 62.8% 62.8% 

of which: other services destined for sale 17.0% 16.7% 17.2% 17.0% 17.7% 

Commerce, recovery and repair services 9.5% 9.9% 10.0% 10.3% 9.9% 

Construction and public works 9.1% 9.0% 9.1% 9.2% 9.3% 

Energy products 3.7% 4.5% 4.4% 3.3% 3.6% 

Metal products, excluding machines and means of transport 2.4% 2.5% 2.5% 2.5% 2.4% 

Agricultural, forestry and fishery products 2.3% 2.2% 2.2% 2.2% 2.1% 

Hotels and restaurants 2.0% 1.9% 2.0% 2.0% 2.0% 

Foodstuffs, beverages and tobacco products 1.9% 1.9% 1.9% 2.0% 1.6% 

Textiles, leather and footwear, clothing 1.5% 1.7% 1.7% 1.6% 1.6% 

Agricultural and industrial machinery 1.4% 1.5% 1.5% 1.5% 1.4% 

Consumer households 32.3% 30.3% 30.0% 29.5% 29.4% 

Financial companies 2.8% 3.7% 3.6% 4.5% 4.6% 

Public administrations 1.0% 1.0% 1.0% 0.8% 0.9% 

Other (not-for-profit institutions and the rest of the world) 2.1% 2.1% 2.2% 2.4% 2.3% 

Total 100.0% 100.0% 100.0% 100.0% 100.0% 

Again on the basis of management figures, the results given in the table for network banks 

and Centrobanca only – an aggregate which represents approximately 67% of gross loans – 

showed the following in December 2011: 

 

 

94.1% of outstanding loans are destined to manufacturing and service companies and 

consumer households, a proportion which had increased further compared to 92.2% twelve 

months before), which confirms the traditional mission of the Group to support 

communities in its markets; 

the distribution by sector of performing loans to non financial companies and to producer 

households also confirmed the fragmentation of the portfolio with “Other services destined 

for sale” and “Commerce, recovery and repair services”, which are by nature heterogeneous, 

continuing to account for the largest percentage of total lending (26.5%), although slightly 

down compared to December 2010 (27.6%). 

118

Details of the geographical distribution of lending in 

Italy are given in the table “geographical distribution of 

loans to customers by region of location of the branch”. 

The total share of loans to northern regions amounted 

to 82.8% of the total, (of which 79.1% to the North- 

West), slightly less than twelve months before, while 

that granted to central regions was 9.5%. The 

remaining 7.7% was destined to southern regions. 

Concentration of risk 

(largest customers or groups as a percentage of total loans and guarantees ) 

Customers or 

Groups 

31.12.2011 30.9.2011 30.6.2011 31.3.2011 31.12.2010 

Largest 10 3.5% 3.9% 4.0% 4.1% 4.1% 

Largest 20 5.6% 6.4% 6.5% 6.7% 6.8% 

Largest 30 7.1% 8.0% 8.2% 8.5% 8.5% 

Largest 40 8.2% 9.1% 9.3% 9.5% 9.6% 

Largest 50 9.1% 10.1% 10.3% 10.4% 10.5% 

From the viewpoint of the concentration, a significant 

and generalised improvement was recorded with 

respect to all the comparative periods, which increased 

in the last quarter in particular, partly in relation to the 

action already mentioned which was taken. 

Geographical distribution of loans to customers 

by region of location of the branch (*) 

Percentage of total 31.12.2011 31.12.2010 

Lombardy 69.59% 70.37% 

Piedmont 6.63% 6.39% 

Latium 4.81% 4.62% 

Marches 3.84% 3.84% 

Liguria 2.91% 2.82% 

Campania 2.30% 2.17% 

Apulia 2.14% 2.07% 

Emilia Romagna 1.98% 1.97% 

Calabria 1.92% 1.82% 

Veneto 1.45% 1.59% 

Umbria 0.68% 0.64% 

Abruzzo 0.62% 0.61% 

Basilicata 0.43% 0.40% 

Friuli Venezia Giulia 0.25% 0.24% 

Molise 0.23% 0.24% 

Tuscany 0.20% 0.20% 

Valle d'Aosta 0.02% 0.01% 

Trentino Alto Adige 0.00% 0.00% 

Sardinia - 0.00% 

Total 100.00% 100.00% 

North 82.8% 83.4% 

- North West 79.1% 79.6% 

- North East 3.7% 3.8% 

Central Italy 9.5% 9.3% 

South 7.7% 7.3% 

(*) The aggregates relate to banks only. 

As concerns “large exposures” on the other hand, according to the new regulations introduced 

in December 2010 by the Bank of Italy, these are now measured on the basis of the nominal 

value, instead of the amount weighted for counterparty risk. 

Consequently, at the end of 2011, the Group had three positions which exceeded 10% of the 

supervisory capital (five at the end of 2010) for a total €15.4 billion, generally down compared 

to both €22.2 billion twelve months before and to all the other comparative periods: 

• €7.8 billion to the Ministry of the Treasury, mainly in relation to investments in government 

securities by the Parent (€8.3 billion twelve months before); 

• €6 billion with the CCG, relating to all the operations by the Parent (€10.2 billion at the end 

of 2010); 

• €1.6 billion attributable to different types of transactions outstanding with a major banking 

group (only one banking Group was reported at the end of 2010, not the same as that 

reported here, for an exposure of €1.4 billion). 

Exposures of €2.3 billion had also been reported in December 2010 consisting of authorised 

credit to two major corporate counterparties, as part of ordinary lending business with 

customers. 

In consideration of the reduction in the number of counterparties reported with respect to the 

comparative periods and the 

Large exposures 

application of a zero weighting 

factor for transactions with 

31.12.2011 30.9.2011 30.6.2011 31.3.2011 31.12.2010 


the government, the only two 

actual risk positions for the Number of positions 3 5 5 6 5 

Exposure 15,388,367 20,595,725 22,775,787 25,270,584 22,164,767 

UBI Group existed after 

Positions at risk 1,127,147 2,460,896 4,486,718 4,668,018 1,782,442 

weightings, down significantly 

to €1.1 billion from €1.8 billion in 2010. 

The percentage of consolidated supervisory capital is well below the limit of 25% set for 

banking groups for each of the exposures reported. 

At the end of the year guarantees granted by the UBI Group totalled €7.3 billion, an increase 

of 20% compared to €6.1 billion in December 2010. 

119

The change recorded was caused by a large increase in financial guarantees, which almost 

doubled to €3 billion (+€1.4 billion), compared to a slight fall for commercial guarantees of 

€4.3 billion (-€0.2 billion). 

* * * 

A report is given below on some of the product companies and/or external networks with 

which the Group operated or has operated. 

B@nca 24-7: Ktesios Spa 

The financial company Ktesios (hereinafter also “the Company”), placed in voluntary liquidation on 14 th 

April 2011, operated in the brokering of salary backed loans and the deduction of loan repayments from 

salary. More specifically Ktesios operated as an agent for numerous banks, including B@nca 24-7, using its 

own distribution network consisting of agents, brokers and financial intermediaries (indirect channels). 

Ktesios is controlled in Italy by CQS Holding Srl, which is in turn a subsidiary of KTP Global Finance Sca, a 

Luxembourg holding company of which 47.45% of the share capital is held by the CIR Group, 47.45% by 

Merrill Lynch - Bank of America Group and 5.1% by minority investors (mainly management). 

B@nca 24-7 had total outstanding salary backed loans on its books as at 31 st December 2011 of €3,067 

million, of which €883 million 1 were originated through the finance company Ktesios. However, this amount 

did not constitute a direct exposure of the UBI Banca Group to Ktesios, but represented receivables held by 

B@nca 24-7 from customers making payments from their salaries or pensions. In other words it represented 

receivables from the end beneficiaries of the loans (over 70,000 positions, 60% of which public sector, 

government or retired employees). 

These loans were: 

guaranteed by the transfer to B@nca 24-7 (transferee) of the receivables consisting of the transferable 

portions of salaries or pensions which the customers (transferors) of the bank are owed by the 

transferring debtors, which is to say their employers (central government administrations, local public 

authorities, private sector companies, etc.) or pension funds (INPS – national insurance institute, INPDAP 

– public administration institute, etc.); 

guaranteed by compulsory insurance to cover cases of predecease and loss of employment for the 

employees who are the beneficiaries of the loan. 

Following the liquidation already mentioned, the Company, the owners and banks signed a general 

agreement on 24 th October 2011 designed to wind up the company without losses. On the basis of that 

agreement, the banks, which had made credit facilities available to the Company to fund its salary backed 

loan business, waived their right to enforce the “deducted for non payment” clause and assumed all 

responsibility resulting from the direct management of the business, while the shareholders agreed to 

provide the Company with the financial means necessary to meet its other commitments and to allow the 

successful completion of the liquidation. In addition, B@nca 24-7 was asked to waive its right to enforce the 

pledge which backed any losses which might have arisen on the loans. 

Under the terms of the agreement signed the receiver, who from May 2011 only paid to B@nca 24-7 

amounts resulting from early repayments, paid funds received in the meantime to repay the loans to B@nca 

24-7 (approximately €68 million). The outstanding loans will be repaid over the next five years. 

The impact of the agreement on the income statement involved a loss of €19.4 million on the receivables 

recognised in the balance sheet in relation to the Ktesios Group, including approximately €11.4 million 2 

recognised through profit and loss in 2011 and €8 million resulting from the reclassification of a previous 

provision for risks and charges made in the fourth quarter of 2010. 

1 €46 million of the €883 million was brokered through the subsidiary Kema. 

2 €10.4 million relating to Ktesios and €1 million to its subsidiary Kema. 

120

Agreement between BPCI and Altachiara Italia Spa 

Consistent with the policies contained in the new Business Plan to limit the use of external distribution 

networks in the residential mortgage sector, a co-operation agreement signed in 2007 with Altachiara came 

to an end in August. That company operated as a financial intermediary pursuant to Art. 106 of the 

Consolidated Banking Act and the agreement was for the distribution of Banca Popolare Commercio e 

Industria mortgages to non Group private individual customers. It is underlined that in order to guarantee 

the quality of the loans granted, the agreement required the loans to be processed, approved and concluded 

directly by BPCI – which entered into the contract directly with the customer – after verifying the existence 

of the necessary documentation produced by the agents and brokers, inclusive of declarations relating to 

anti-money laundering, criminal activities and privacy laws. 

The total amount in euro of the mortgages brokered by Altachiara currently held on the books of BPCI is 

approximately €700 million, accounting for less than 10% of total lending by the bank (approximately €8.6 

billion). 

Risk 

Loans to customers as at 31st December 2011 


Gross exposure 

Impairment 

losses 

Carrying amount 

Coverage (*) 

Deteriorated loans (8.38%) 8,589,416 2,309,532 (6.30%) 6,279,884 26.89% 

- Non-performing loans (4.27%) 4,377,325 1,895,908 (2.49%) 2,481,417 43.31% 

- Impaired loans (2.77%) 2,844,167 310,387 (2.54%) 2,533,780 10.91% 

- Restructured loans (0.91%) 933,786 93,096 (0.84%) 840,690 9.97% 

- Past due loans (0.43%) 434,138 10,141 (0.43%) 423,997 2.34% 

Performing loans (91.62%) 93,951,550 541,664 (93.70%) 93,409,886 0.58% 

Total loans to customers 102,540,966 2,851,196 99,689,770 2.78% 

The item as a percentage of the total is given in brackets. 

Loans to customers as at 31st December 2010 



Impairment 

losses 

Carrying amount 

Coverage (*) 

Deteriorated loans (7.14%) 7,465,062 2,203,933 (5.17%) 5,261,129 29.52% 

- Non-performing loans (3.62%) 3,780,973 1,841,057 (1.91%) 1,939,916 48.69% 

- Impaired loans (2.22%) 2,320,471 287,557 (2.00%) 2,032,914 12.39% 

- Restructured loans (0.85%) 889,070 60,577 (0.81%) 828,493 6.81% 

- Past due loans (0.45%) 474,548 14,742 (0.45%) 459,806 3.11% 

Performing loans (92.86%) 97,073,520 519,820 (94.83%) 96,553,700 0.54% 

Total loans to customers 104,538,582 2,723,753 101,814,829 2.61% 

The item as a percentage of the total is given in brackets. 

(*) Coverage is calculated as the ratio of impairment losses to gross exposure. 

Total outstanding gross deteriorated loans were unchanged at €8.59 billion in the fourth 

quarter 2011. Despite this performance, the overall result of action taken by the Group to 

manage credit quality, the cumulative change over twelve months was an increase of €1.12 

billion (+15.1%), including €0.44 billion relating to the first quarter, €0.10 billion to the second 

quarter, €0.52 billion to the third and just €0.06 billion to the fourth. 

The annual increase was the result of performance by non-performing loans (+€0.60 billion) 

and impaired loans (+€0.52 billion), while growth in restructured loans was modest (+€45 

million), almost fully offset by the reduction in exposures past due and/or in arrears (-€40 

million). 

At the end of December net deteriorated loans totalled €6.28 billion, an increase year-on-year 

of €1.02 billion (+19.4%), consisting of: €0.38 billion for the first quarter, €0.16 billion for the 

second, €0.46 billion for the third and €0.02 billion for the fourth. 

The trends reported were accompanied by a reduction of 2.63 percentage points in the total 

coverage (down from 29.52% to 26.89%), of which 1.78 percentage points reflect disposals of 

121

unsecured non-performing loans (€219.4 million), almost fully written-off, while the remaining 

part is due to lower estimated losses on newly classified positions 3 . 

Coverage for performing loans, on the other hand, increased to 0.58% from 0.54% in December 

2010. 

From the viewpoint of the types of loan, as can be seen from the table, “Composition of loans 

to customers”, approximately 65% of the annual growth in net deteriorated loans regards the 

item “mortgage loans and other medium to long-term loans” backed by collateral, which 

results automatically in a lower level of coverage, while 21% relates to the non-banking 

financial sector. 

NON-PERFORMING LOANS 

Gross non-performing loans rose to €4.38 billion from €3.78 billion at the end of 2010, up by 

€596.4 million (+15.8%), of which €198.6 million relating to the first quarter, €42.8 million to 

the second, €207 million to the third and €148 million to the fourth 4 . 

As already reported, the trend for the second quarter includes the effects of the disposal of 

unsecured non-performing loans for a total of €119.9 million (€58.5 million relating to B@nca 

24-7, €36.1 million to the network banks and €25.3 million to UBI Leasing), while changes in 

the fourth quarter incorporated the two additional disposals performed by B@nca 24-7 

amounting to €93.1 million and by UBI Leasing amounting to €6.4 million. 

Around 90% of the year-on-year increase is attributable to the network banks and to UBI 

leasing. 

Performance during the year with respect to the previous year saw on the one hand a 

reduction of 16% in inflows from other classes of deteriorated exposures (from impaired loans 

in particular) and on the other an increase in payments received and disposals. 

Gross non-performing loans backed by collateral increased constantly over the twelve month 

period to reach €2.65 billion (+€0.60 billion; +29.4%) accounting for 60.6% of total gross loans 

(54.2% in December 2010). 

On the other hand, net non-performing loans rose from €1.94 billion to €2.48 billion, up by 

€541.5 million (+27.9%), of which €131.7 million relating to the first quarter, €123.5 million to 

the second quarter, €147.4 million to the third and €138.9 million to the fourth quarter. The 

total outstanding at the end of the year included just 11% not backed by any type of guarantee 

(collateral or other). 

As a result of the trends reported above, the ratio of non-performing loans to loans reached 

4.27% in gross terms and to 2.49% in net terms (i.e. net of impairment losses). Despite this, 

the credit quality of the Group continues to outperform the average for Italian banks, which is 

6.24% for gross non-performing loans and 3.09% for net non-performing loans in the private 

sector. 

Coverage fell to 43.31% from 48.69% twelve months before, a reflection of both the increase in 

the proportion of positions backed by collateral – and therefore with less recognition of 

impairment losses – and the disposals of unsecured non-performing loans, almost fully 

written-off (98.4%), already mentioned. If the phenomena just mentioned, which accounted for 

197 and 263 basis points respectively, is not considered then the coverage for non-performing 

loans would have been 47.91%. 

Coverage for non-performing loans not backed by collateral, considered gross of write-offs (the 

write-off of positions subject to bankruptcy proceedings and the relative impairment losses), 

was 77.45% at the end of December (80.82% in December 2010). Net of the disposal of 

3 Either as a result of the existence of collateral or because they are operational impairment or restructured loans for which 

agreements have been reached to reschedule debt by agreeing to a debt repayment schedule pursuant to article 67 or to a debt 

restructuring plan pursuant to article 182-bis of the Bankruptcy Act. 

4 A gross exposure of €31 million relating to Fondazione Centro San Raffaele del Monte Tabor was classified as non-performing in the 

fourth quarter of 2011. 

122

unsecured loans mentioned above, the coverage for non performing loans not backed by 

collateral was 78.72%. 

In addition to the disposals of non-performing loans mentioned, in the fourth quarter the 

Group disposed of €23 million of unsecured loans subject to proceedings by creditors, with the 

recovery of €0.7 million. Furthermore, Centrobanca disposed of loans (mainly performing) to 

generate a gain of €0.5 million. 

Total disposals of receivables and non-performing loans during the year gave rise to reversals 

of impairment losses of €2.5 million, including €2.1 million relating to B@nca 24-7, which 

confirmed the appropriateness of the valuations and impairment losses made by that bank. 

UBI Factor: exposure to Fondazione Centro San Raffaele del Monte Tabor 

This exposure amounted to approximately €31 million and relates to advances made in 2004 on VAT 

credits held with the tax authorities totalling €137.2 million, subsequently found to be uncollectable in court 

proceedings in relation to litigation between the invoice seller and the tax authorities themselves. Total 

impairment losses of €9.5 million had been recognised on this exposure at the end of the year after a 

reversal of impairment amounting to €6 million was recognised following the acceptance of an improved 

offer on the disposal of this hospital with respect to the original proposal contained in the arrangement with 

creditors presented by the Foundation (ruling of the Bankruptcy Court of Milan of 27 th October 2011), which 

offered a higher percentage of recovery of the unsecured loan than had been originally estimated. On 19 th 

March 2012 the creditors approved the proposed arrangement. 

The classification of the position as non-performing loan had a significant impact on the ratio of net nonperforming 

loans to net loans to customers of this company, which rose from 0.55% in September to 1.27% 

at the end of year (0.42% in December 2010). 

IMPAIRED LOANS 

After four months of progressive growth, total outstanding gross impaired loans decreased for 

the first time in the last three months of 2011, although only slightly, amounting to €2.84 

billion. 

Nevertheless, the cumulative change over twelve months was an increase of €523.7 million 

(+22.6%), of which +€184.3 million attributable to the first quarter, +€192.4 million to the 

second quarter, +€222.4 million to the third and -€75.4 million to the fourth quarter. 

Approximately three quarters of the year-on-year increase was attributable to Centrobanca 

and the network banks. 

Gross impaired loans backed by collateral rose to €1.85 billion (+€0.44 billion year-on-year; 

+31.3%) to account for 65% of total outstanding gross loans at the end of December (60.7% at 

the end of 2010), notwithstanding a fall in the last quarter (-€42 million), but nevertheless 

smaller than that for total gross impaired loans. 

Performance during the year with respect to the previous year saw a reduction in the flow into 

new classifications, although with a higher percentage of new classifications from performing 

loans than transfers from other classes of deteriorated exposures. 

The trend for net impaired loans was similar to that for gross impaired loans, rising from €2.03 

billion to €2.53 billion during the year, up by €500.9 million (+24.6%) including +€200 million 

relating to the first quarter, +€171.5 million to the second quarter, +€214.2 million to the third 

and -€84.8 million to the fourth quarter. 

The year-on-year fall in coverage from 12.39% to 10.91% basically reflects the increase in the 

percentage of positions backed by collateral, as already mentioned. 

Net of secured loans, coverage for impaired loans stood at 19.04% (22.41% twelve months 

before). 

123

Loans to customers: changes in deteriorated gross exposures in 2011 


Non-performing 

loans 

Impaired loans 

Restructured 

exposures 

Past due 

exposures 

Opening gross exposure as at 1st January 2011 3,780,973 2,320,471 889,070 474,548 

Increases 1,491,771 2,172,222 250,048 785,998 

transfers from performing exposures 415,216 1,612,768 33,930 759,222 

transfers from other classes of deteriorated exposures 873,878 387,217 136,218 3,244 

other increases 202,677 172,237 79,900 23,532 

Decreases -895,419 -1,648,526 -205,332 -826,408 

transfers into performing exposures -37,316 -353,276 -1 -239,867 

full impairment losses -328,588 -2,003 -2,963 -1 

payments received -315,552 -368,314 -178,198 -57,097 

disposals -174,581 - - - 

transfers to other classes of deteriorated exposure -3,482 -897,419 -18,616 -481,040 

other decreases -35,900 -27,514 -5,554 -48,403 

Final gross exposure as at 31st December 2011 4,377,325 2,844,167 933,786 434,138 

Loans to customers: changes in deteriorated gross exposures in 2010 



loans 


Restructured 

exposures 

Past due 

exposures 

Opening gross exposure as at 1st January 2010 2,751,588 2,208,369 479,520 934,119 

Increases 1,649,454 2,484,776 1,046,418 1,811,969 

transfers from performing exposures 422,669 1,258,375 181,571 1,617,752 

transfers from other classes of deteriorated exposures 1,114,275 780,327 372,139 30,112 

other increases 112,510 446,074 492,708 164,105 

Decreases -620,069 -2,372,674 -636,868 -2,271,540 

transfers into performing exposures -1,606 -294,429 -28,558 -1,228,549 

full impairment losses -285,864 -83 -1,521 - 

payments received -227,721 -287,673 -505,955 -53,547 

disposals -29,486 - - - 

transfers to other classes of deteriorated exposure -3,013 -1,379,429 -31,859 -882,552 

other decreases -72,379 -411,060 -68,975 -106,892 

Final gross exposure as at 31st December 2010 3,780,973 2,320,471 889,070 474,548 

RESTRUCTURED LOANS 

Reflecting a performance similar to that of impaired loans, although less marked, gross 

restructured loans increased year-on-year, but fell in the fourth quarter. 

Over twelve months, the total rose from €889.1 million to €933.8 million, up by €44.7 million 

(+5%), of which +€8.6 million attributable to the first quarter, +€19.1 million to the second 

quarter, +€32.9 million to the third and -€15.9 million to the fourth. 

Over 80% of the year-on-year change was attributable to UBI Leasing and the network banks 

(although with differing performance within the item) and it benefited, with respect to the 

previous year, from fewer new classifications from performing loans and fewer transfers from 

other categories of deteriorated exposures. 

Coverage of 10% had increased by over three percentage points compared to 6.8% at the end 

of 2010. 

EXPOSURES PAST DUE AND/OR IN ARREARS 

Gross exposures past due and in arrears performed in the opposite direction to other categories 

of deteriorated loans, reducing overall from €474.5 million to €434.1 million, benefiting from 

action taken for the qualitative management of single items, which had the effect of halving 

new classifications from performing loans compared to the previous year. 

124

In detail, the annual change (-€40.4 million; -8.5%) is the aggregate result of the following 

changes: 

• +€48.4 million between January and March, due mainly to positions for which the Italian 

Banking Association - Ministry of the Economy and Finance moratorium has expired and 

which are being assessed until an extension is granted; 

• -€149.9 million in the period April-June, as a result of significant repayments and returns 

to performing status; 

• +€62.4 million between July and September, including €42.5 million due to delays in 

payments by public administration counterparties of UBI Factor; 

• -€1.4 million between October and December. This category was affected by an increase in 

the fourth quarter in the past due category for the B@nca 24-7 portfolio (up by €51.4 

million compared to previous period), while outstanding UBI Factor exposures decreased 

(-€34.4 million), partly in relation to the progressive disengagement of the company from 

business with customers operating with public administrations. 

Within this class, “PD 90” positions – i.e. exposures past due and in arrears for more than 90 

days, backed by property mortgages, considered at the level of single transaction and gross of 

impairment losses – fell by €125.4 million to €173 million (€298.4 million in December 2010, 

€299.7 million in March, €210.3 million in June, €211.3 million in September). As a 

percentage of the total, these positions fell progressively over twelve months from 62.9% to 

39.9%. 

The trend for coverage increased from 3.11% in December 2010 to 3.27% in June 2011 and 

then inverted, falling to 2.34% at the end of the year. This performance must be interpreted in 

relation to the increase, as a percentage of the total, in positions in B@nca 24-7’s “salary 

backed loans” portfolio and in UBI Factor positions attributable to technical delays in 

payments made by public administrations, for which coverage is naturally lower because of 

their nature. 

125

The interbank market 

and the liquidity situation 

Quarterly changes in net interbank debt 


31.12.2011 

A 

30.9.2011 

B 

30.6.2011 

C 

31.3.2011 

D 

31.12.2011 

E 

Loans to banks 6,184,000 5,314,336 4,384,636 4,510,008 3,120,352 

of which: loans to central banks 739,318 1,485,674 325,450 345,625 739,508 

Due to banks 9,772,281 8,611,714 4,966,574 7,332,517 5,383,977 

of which: due to central banks 6,001,500 4,000,333 - 1,255,064 2,219,152 

Net interbank position -3,588,281 -3,297,378 -581,938 -2,822,509 -2,263,625 


31.12.2010 

F 

30.9.2010 

G 

30.6.2010 

H 

31.3.2010 

I 

31.12.2009 

L 

Loans to banks 3,120,352 3,427,795 3,290,637 2,996,834 3,278,264 

of which: loans to central banks 739,508 295,430 375,415 282,815 641,788 

Due to banks 5,383,977 7,126,257 9,252,062 4,612,141 5,324,434 

of which: due to central banks 2,219,152 2,000,056 2,977,481 479,002 639,753 

Net interbank debt -2,263,625 -3,698,462 -5,961,425 -1,615,307 -2,046,170 

The deterioration of the Italian sovereign debt crisis has heightened the perception of risk attaching to 

Italian banks – among the main holders of that debt – since the summer. This has caused on the one hand, 

a progressive reduction in interbank transactions, with increasingly fewer foreign counterparties involved 

and on the other it has made the longer maturity institutional markets (EMTNs and covered bonds) actually 

inaccessible for Italian banks, which has also affected trading on monetary markets (euro commercial 

paper and certificates of deposit) as a result. 

These phenomena have had a particularly strong impact on the availability of funds, notwithstanding the 

high proportion of retail funding which traditionally characterises Italian banks and represents a very 

stable source of liquidity. 

The consequence was an increase in recourse to funding from the Eurosystem (loans in euro to Italian 

banks for monetary policy purposes), which rose progressively from €41 billion at the end of June to €105 

billion in September, reaching almost €210 billion in December, to then stabilise at around €200 billion in 

January and February 2012. 

On its part, the governing council of the ECB has encouraged refinancing by adopting exceptional monetary 

policy measures. It introduced three-year fixed rate operations with full allotment of bids. It has further 

widened the range of eligible assets, by extending the criteria for the acceptability of loans and it has 

reduced the compulsory reserve requirement from 2% to 1%. These measures were added to by an initiative 

taken by the Italian government, which introduced government guarantees on the medium-term funding of 

banks. 

The liquidity injected into the banking system at a low cost has in fact significantly reduced pressures on 

funding, thereby allowing banks to make operational decisions which do not compromise their continued 

lending to the economy and also to invest in securities. 

In this context described above, the UBI Banca Group has addressed its liquidity management 

by introducing a number of lines of action: 

• it has strengthened its liquidity reserves represented by assets eligible for refinancing 

with the ECB. In this context the Parent also made use of the government measures by 

issuing government backed bonds at the beginning of 2012: two issuances on 2 nd 

January for a total nominal amount of €3 billion (€2 billion with a three-year maturity 

and €1 billion with a five-year maturity), followed by a further €3 billion nominal on 

27 th February (€2 billion, three-year and €1 billion, five-year); 

• it participated in two refinancing operations with a three-year maturity (longer-term 

refinancing operation – LTRO) to compensate for the absence of institutional funding 

126

and to thereby guarantee greater stability to the liability structure of its balance sheet 

in a market context still far from “normality”; 

• The Group was allotted financing of €6 billion in the auction held on 21 st December 

and a further €6 billion in the second operation on 29 th February 2012 (with value date 

1 st March); 

• it took action designed on the one hand to contain lending, especially to the “large 

corporate” segment, and on the other hand to consolidate and increase funding from 

customers, which represents 80% of total direct funding for the UBI Banca Group. The 

above was performed with a view to further safeguarding the structural balance 

between funding and lending business with customers, with consequent effects on the 

consolidated liquidity position. 

An examination of balance sheet items at the end of 2011 shows that the net interbank debt of 

the Group rose to -€3.6 billion from -€2.3 billion in December 2010, after reaching -€0.6 

billion in June (the lowest level in the last two years). 

Analysis of items with a residual maturity of less than three months also shows a net balance 

calculated net of auctions with the central bank of +€2.1 billion (+€0.3 billion in December 

2010). 

As shown in the table, the quarterly performance of the items was quite varied during 2011. 

After a significant improvement in the net balance in the second quarter, made possible, 

amongst other things, by the results of institutional issuances 1 – accompanied also by the 

elimination of the exposure to central banks – the Group began in the summer to participate 

in weekly auctions held by the Eurosystem for increasingly larger amounts. 

Weekly operations with the central bank were supplemented in October with financing of one 

billion euro with a maturity of one year (maturity 1 st November 2012). 

The subsequent participation in December in the first of the two LTROs for €6 billion allowed 

the Group to completely eliminate its outstanding debt (€4 billion including the one-year one 

billion euro loan just mentioned), replacing it and supplementing it with funds available on a 

stable basis for three years. 

In detail, loans to banks as at 31 st December 2011 totalled €6.2 billion, almost twice the 

amount recorded in the previous December. The change that occurred reflects an increase in 

lending to banks other than the central bank (up by €3.1 billion to €5.4 billion), while the sum 

on the centralised account held with the central bank for compulsory reserve requirements, 

was basically unchanged at €0.7 billion. 

In terms of types of lending, the increase in interbank lending was composed as follows: 

‐ an increase in current accounts and deposits (+€1.4 billion, of which +€0.8 billion in the 

fourth quarter alone); 

‐ new investments of €1.1 billion in debt instruments issued by banks made towards the end 

of the year (securities eligible for refinancing used to increase the pool of assets eligible for 

refinancing with the ECB); 

‐ increased financing (+€0.6 billion), above all in the form of reverse repurchase agreements 

(+€0.5 billion), used for the acquisition of securities eligible for refinancing. After significant 

growth at the beginning of the year, in relation to the need to temporarily supplement the 

“collateral pool” held with the ECB, the latter were reduced in the third quarter when a 

second rating was obtained for the securitisation of B@nca 24-7 residential mortgages and 

when eligibility was obtained for the securitisation of Banca Popolare di Bergamo 

performing loans to SMEs. 

1 See the previous section “funding policies” in this respect. 

127

Loans to banks: composition 

Changes 

31.12.2011 % 31.12.2010 % 


Loans to central banks 739,318 11.9% 739,508 23.7% -190 0.0% 

Term deposits - - - - - - 

Compulsory reserve requirements 738,100 11.9% 739,508 23.7% -1,408 -0.2% 

Reverse repurchase agreements - - - - - - 

Other 1,218 0.0% - - 1,218 n.s. 

Loans to banks 5,444,682 88.1% 2,380,844 76.3% 3,063,838 128.7% 

Current accounts and deposits 2,516,230 40.7% 1,161,396 37.3% 1,354,834 116.7% 

Term deposits 455,701 7.4% 466,445 14.9% -10,744 -2.3% 

Other financing: 1,329,819 21.5% 753,003 24.1% 576,816 76.6% 

- reverse repurchase agreements 534,373 8.6% 988 0.0% 533,385 n.s. 

- finance leases 98 0.0% 165 0.0% -67 -40.6% 

- other 795,348 12.9% 751,850 24.1% 43,498 5.8% 

Debt instruments 1,142,932 18.5% - - 1,142,932 n.s. 

Total 6,184,000 100.0% 3,120,352 100.0% 3,063,648 98.2% 

Interbank funding at the end of year was close to €10 billion, up by €4.4 billion over twelve 

months, due primarily to the transactions with the ECB (+€3.8 billion) already mentioned, but 

also to greater recourse to the market (+€0.6 billion), mainly in terms of repurchase 

agreements. 

Outstanding exposure to central banks of €6 billion consisted entirely of liquidity with a threeyear 

maturity obtained in the auction held on 21 st December 2011. 

With regard to amounts due to other banks, a comparison in terms of type of funding between 

the two year-end positions shows a reduction of €0.2 billion for current accounts and demand 

and term deposits considered as a whole (down from €1.9 billion to €1.7 billion). In reality, the 

quarterly performance saw temporary growth in the first quarter which reached €3 billion, 

followed by a decrease as the management of all interbank liquidity converged on the 

Eurosystem as a consequence of the increase in country risk. 

Furthermore, term deposits at the end of year (€0.8 billion) included a European Investment 

Bank (EIB) deposit of €0.6 billion. 

The item “financing”, amounting to €1.9 billion, increased by €0.7 billion. This change reflects 

an increase in repurchase agreements to finance assets ineligible for refinancing, to be 

interpreted in relation to the corresponding asset item. 

“Other” financing includes a medium to long-term transaction with the European Investment 

Bank relating to the Parent for a residual amount, after repayments for the year, of €588 

million (€672 million at the end of 2010). 

Due to banks: composition 

Changes 

31.12.2011 % 31.12.2010 % 


Due to central banks 6,001,500 61.4% 2,219,152 41.2% 3,782,348 170.4% 

Due to banks 3,770,781 38.6% 3,164,825 58.8% 605,956 19.1% 

Current accounts and deposits 896,512 9.2% 692,788 12.9% 203,724 29.4% 

Term deposits 778,119 8.0% 1,199,455 22.3% -421,336 -35.1% 

Financing: 1,881,780 19.2% 1,149,003 21.3% 732,777 63.8% 

- repurchase agreements 1,007,037 10.3% 290,737 5.4% 716,300 246.4% 

- other 874,743 8.9% 858,266 15.9% 16,477 1.9% 

Amounts due for commitments to repurchase own 

equity instruments - - - - - - 

Other payables 214,370 2.2% 123,579 2.3% 90,791 73.5% 

Total 9,772,281 100.0% 5,383,977 100.0% 4,388,304 81.5% 

128

With regard to the liquidity reserve, consisting of the portfolio of assets eligible for refinancing 

with the central bank, total assets net of haircuts at the end of 2011 amounted to €11.6 billion 

(€9.1 billion at the end of 2010), composed of €8 billion of assets deposited in the “collateral 

pool” with the European Central Bank and €3.6 billion of government securities not refinanced 

with the Cassa di Compensazione e Garanzia (a central counterparty clearing house), available 

and non “pool”. 

Given the current use of €6 billion, the liquidity margin still available is €5.6 billion. 

Total Group assets eligible for refinancing had reached €24.5 billion as at 20 th March 2012, 

composed of approximately €16 billion of assets deposited in the “collateral pool” and €8.5 

billion of government securities not refinanced with the Cassa di Compensazione e Garanzia, 

available and non “pool”. 

Since the assets pledged on that date amounted to €12.3 billion 2 , the liquidity margin still 

available was €12.2 billion, a more than twofold increase compared to December. 

Assets eligible for refinancing 

Figures in billions of euro 

nominal 

amount 

20.3.2012 31.12.2011 

30.9.2011 

30.6.2011 

amount 

eligible (net of 

haircuts) 

nominal 

amount 

amount 


haircuts) 

nominal 

amount 

amount 


haircuts) 

nominal 

amount 

amount 


haircuts) 

nominal 

amount 

31.3.2011 31.12.2010 

amount 


haircuts) 

nominal 

amount 

amount 


haircuts) 

Securities owned (AFS, HTM and L&R) (*) 13.55 13.33 6.25 5.76 1.31 1.07 1.50 1.36 1.41 1.28 1.40 1.34 

Government backed bonds 6.00 5.65 - - - - - - - - - - 

Covered bonds 0.75 0.69 - - - - - - - - - - 

B@nca 24-7 residential mortgage 

securitisation (**) 

1.40 0.75 1.44 0.76 1.48 0.88 0.00 0.00 0.00 0.00 1.71 1.30 

B@nca 24-7 salary backed loan 

securitisation (**) - - - - 0.00 0.00 0.00 0.00 0.00 0.00 0.38 0.31 

B@nca 24-7 consumer loan securitisation 

(**) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.13 1.73 

UBI Leasing leased assets securitisation 2.54 1.83 3.44 2.47 3.44 2.46 3.44 2.47 3.44 2.76 3.44 2.87 

Banco di Brescia securitisation of 

performing loans to SMEs 0.46 0.33 0.59 0.44 1.56 0.43 1.56 1.18 1.56 1.17 1.56 1.25 

Banca Popolare di Bergamo securitisation 

of performing loans to SMEs 1.86 1.30 1.86 1.28 1.86 1.25 - - - - - - 

Eligible assets resulting from participation 

in ABACO (***) 0.59 0.59 0.65 0.65 0.41 0.41 0.39 0.39 0.30 0.30 0.27 0.27 

Securities acquired through repurchase 

agreements - - 0.33 0.28 1.57 0.88 2.21 1.58 2.16 1.64 - - 

Total 27.15 24.47 14.56 11.64 11.63 7.38 9.10 6.98 8.87 7.15 10.89 9.07 

(*) These include unencumbered government securities, not refinanced with the Cassa di Compensazione e Garanzia (a central counterparty clearing 

house), for the following amounts: 

31 st December 2011: €3.6 billion (net of haircuts) entirely available, non-pool; 

20 th March 2012: €11.8 billion (net of haircuts), of which €3.3 billion contributed to the pool and €8.5 billion available, non-pool. 

(**) The amounts for the B@nca 24-7 securitisations were shown as nil from 31 st March 2011 because a second rating had not yet been acquired and they 

were therefore temporarily ineligible. The securitisation of salary backed loans was closed down in December 2011 because of its low value. 

(***) ABACO (bank assets eligible as collateral) is the name given to procedures drawn up by the Bank of Italy for the management of loans eligible for 

refinancing. In order to qualify as eligible, an asset must meet specific requirements concerning the following: type of debtor/guarantor (public sector, 

non financial company, international and supranational institutions), high credit rating (single “A-” credit quality level, equivalent to a default probability 

of 0.10%) and a minimum amount (one million euro for national use until 2011). 

The increase in the size of the portfolio of assets eligible for refinancing was the result of many 

operations of various types carried out in 2011 and above all in the first few months of 2012. 

The requirement for a second rating came into force on 1 st March 2011 when ABS instruments were 

required to obtain ratings from two different international agencies in order to be eligible. 

This made it necessary to commence processes for the assignment of a second rating for internal 

securitisations used by the UBI Banca Group, which in the meantime had become no longer eligible. 

They were temporarily compensated for with the acquisition of securities eligible for refinancing from 

external counterparties by means of reverse repurchase agreements. 

In August, the eligibility of a B@nca 24-7 residential mortgage securitisation was restored and the 

eligibility of a securitisation of performing loans (mainly to SMEs) granted by Banca Popolare di Bergamo 

was approved. 

The above amounts made it possible to compensate for both the reduction in the Banco di Brescia 

securitisation, following the partial repayment of the nominal amount (-€0.81 billion net of haircuts over 

the three month period) and for other changes caused by changes in market prices, with only a marginal 

renewal of the reverse repurchase agreements. 

2 €12 billion with a three-year maturity acquired through participation in two auctions in December 2011 (€6 billion) and February 

2012 (€6 billion) and €0.3 billion relating to finance in dollars obtained last January maturing on 29 th March 2012. 

129

The collateral pool also benefited in the last quarter from new investments in securities eligible for 

refinancing issued by banks for a total of €1.1 billion net of haircuts (€1.35 billion nominal). 

The significant increase in the liquidity reserve obtained in the first few months of 2012 

(+€12.9 billion) was the result of the following: 

• new government backed UBI Banca issuances for a total nominal amount of €6 billion 

(€5.65 billion net of haircuts); 

• new covered bond issuances not placed on the market (“self-retained”) amounting to €0.75 

billion nominal (€0.69 billion, net of haircuts); 

• an increase in unencumbered government securities not refinanced with the Cassa di 

Compensazione e Garanzia to reach a total of €11.8 billion net of haircuts, of which €3.3 

billion contributed to the pool of assets eligible for refinancing with the ECB and €8.5 

billion available non-pool. 

The above action offset the effects of the grace period on the UBI Leasing UBI securitisation (- 

€0.64 billion net of haircuts), the reduction in the contribution from investments in eligible 

securities issued by banks (-€0.55 billion net of haircuts) and the absence of securities 

acquired through reverse repurchase agreements (-€0.28 billion). 

*** 

The downgrade’s by Moody's and Fitch, performed in the last quarter of 2011 in the wake of the lowering of 

Italy’s credit rating, had the consequence, amongst other things, of making it necessary for UBI Banca – 

and also several other national banking groups – to restructure the securitisations it had originated and 

held on its books as owned by the Group, in order to ensure continuity to the investments of the special 

purpose entities without compromising the eligibility of the senior securities issued. 

More specifically, on the one hand the ratings on the financial instruments invested in by the special 

purpose entities had to be redefined and on the other hand collateral had to be lodged on behalf of those 

entities for the swaps which back those securitisations, where UBI Banca is a direct counterparty. The 

main action taken was as follows: 

‐ 24-7 Finance Srl (B@nca 24-7 residential mortgages): redefinition of “eligible investments” bringing the 

minimum up to the rating levels of UBI Banca in order to enable the entity to continue to invest in ECP 

and French CDs issued by UBI Banca International Lux. As a consequence of that redefinition Moody’s 

downgraded from “Aaa” to “Aa3”. DBRS’s A (high) rating , on the other hand, was confirmed; 

‐ 24-7 Finance Srl (B@nca 24-7 consumer loans): redefinition of “eligible investments” to bring the 

minimum up to the current rating levels of UBI Banca and to thereby enable the entity to continue to 

invest in ECP and French CDs issued by UBI Banca International Lux. Action on the swaps with 

accounts opened to lodge collateral with a third party counterparty. As a consequence of that 

redefinition Moody’s downgraded from “Aaa” to “Aa2”. 

The early winding up of the securitisation is currently being considered, following the new downgrade of 

UBI Banca by Fitch in February 2012 and also in consideration of the significant amortisation of the 

senior tranche scheduled for the end of May 2012; 

‐ 24-7 Finance Srl (B@nca 24-7 salary backed loans): the procedure for obtaining a second rating was not 

commenced for this securitisation, in consideration of the advanced state of amortisation and the 

consequent minimum notional nominal amount reached by the senior tranche. On 11 th October 2011, the 

Management Board of UBI Banca decided on early redemption. On 20 th December 2011 the 

securitisation was wound up in advance by returning the loan portfolio to the originator with early 

redemption of the securities issued and the early termination of all the contracts; 

‐ UBI Lease Finance 5 Srl (UBI Leasing performing assets): redefinition of “eligible investments” to bring 

the minimum up to the current rating levels of UBI Banca and to thereby enable the entity to continue to 

invest in ECP and French CDs issued by UBI Banca International Lux. Action on the swaps with 

accounts opened to lodge collateral with a third party counterparty. As a consequence of that 

redefinition Moody’s downgraded from “Aaa” to “Aa2” and Fitch from “A” to “A-“; 

‐ UBI Finance 2 Srl (Banco di Brescia performing loans to SMEs): redefinition of “eligible investments” to 

bring the minimum up to the current rating levels of UBI Banca and to thereby enable the entity to 

continue to invest in ECP and French CDs issued by UBI Banca International Lux. Action on the swaps 

with accounts opened to lodge collateral with a third party counterparty. As a consequence of that 

redefinition Moody’s downgraded from “Aaa” to “Aa2” and Fitch from “Aaa” to “A-“; 

‐ UBI Finance 3 Srl (Banca Popolare di Bergamo performing loans mainly to SMEs): redefinition of “eligible 

investments” to bring the minimum up to the current rating levels of UBI Banca and to thereby enable 

the entity to continue to invest in ECP and French CDs issued by UBI Banca International Lux. Action on 

the swaps with accounts opened to lodge collateral with a third party counterparty. As a consequence of 

that redefinition Moody’s downgraded from “Aaa” to “Aa2” and Fitch from “Aaa” to “A-“; 

130

The new ratings assigned to the above securitisations did not compromise their eligibility for refinancing 

operations with the European Central Bank. The only exception to this was the B@nca 24-7 consumer loan 

securitisation, which remains ineligible because it has only one of the two ratings required by the ECB. 

The downgrade of UBI Banca’s ratings by Fitch in 2012 made it necessary to take action again with further 

restructuring of the three securitisations rated by Fitch (UBI Finance 2, UBI Finance 3 and UBI Lease 

Finance 5). The following action was therefore taken: 

• UBI Finance 2 Srl: the frequency of the coupon was changed from half yearly to quarterly and the 

alignment of the swap hedges was modified as a consequence; the liquidity accounts of the special 

purpose entity were moved from UBI Banca International Lux to another eligible counterparty (currently 

Bank of New York Mellon); provision in the documentation of the payment of the “commingling” 

guarantee 3 , as defined with Fitch; further changes to the definition of eligible investments so that the 

special purpose entity may continue to invest in the Group’s commercial paper (ECP and French 

certificates of deposit issued by UBI Banca International Lux); 

• UBI Finance 3 Srl: the frequency of the coupon was changed from half yearly to quarterly and the 

alignment of the swap hedges was modified as a consequence; the liquidity accounts of the special 

purpose entity were moved from UBI Banca International Lux to another eligible counterparty (currently 

Bank of New York Mellon); provision in the documentation of the payment of the “commingling” 

guarantee, as defined with Fitch; further changes to the definition of eligible investments so that the 

special purpose entity may continue to invest in the Group’s commercial paper (ECP and French 

certificates of deposit issued by UBI Banca International Lux); 

• UBI Lease Finance 5 Srl: creation of an extraordinary payment date (24 th February 2012) on which an 

early extraordinary amortisation of the funds which had been formed until then on the accounts of the 

special purpose entity was performed with a consequent decrease by approximately €900 million of the 

senior tranche (nominal amount down from €3,440,500,000 to €2,539,986,695); the frequency of the 

coupon was changed from half yearly to quarterly and the alignment of the swap hedges was modified 

as a consequence; provision in the documentation of the payment of a “commingling” guarantee and the 

actual payment of the sum with value date 24 th February 2012, as defined with Fitch; further changes 

to the definition of eligible investments so that the special purpose entity may continue to invest in the 

Group’s commercial paper (ECP and French certificates of deposit issued by UBI Banca International 

Lux). 

Finally, further action on swaps is still under study, designed mainly to reduce the margins paid. 

The action described above, together with that taken in the fourth quarter of 2011, helped to reduce the 

linkage between the securitisations in question with the Parent, UBI Banca, making them much less 

vulnerable to possible further downgrades caused by changes in the Parent’s rating. 

While the restructuring work was in progress in February 2012, Fitch confirmed its “A-“ rating for the three 

securitisations in question, for UBI Finance 2 and UBI Finance 3 and for UBI Lease Finance 5 on completion 

of that work. During that same period, however, Moody’s cut its rating on those same securitisations from 

“Aa2” to “Aa3”. 

The new ratings assigned to the above securitisations nevertheless remain compatible with the eligibility 

requirement for refinancing operations with the European Central Bank. 

3 Guarantee in cash to be paid into an account held in the name of the special purpose entity to be able to maintain management of the 

collection accounts, which is to say the accounts into which the amounts are paid for the repayment of the loans transferred by the 

originators. 

131


The year 2011 was an extremely critical one for Italy. The weak signals of recovery that 

manifested at the beginning of the year were not repeated in the second half and the 

difficulties caused by the development of the sovereign debt crisis worsened, resulting in a 

significant widening of the yield spreads between BTPs and German bunds. This had severe 

repercussions on the banking system, which in the meantime saw the institutional funding 

market close and the need to strengthen capital grow. 

In this context, the UBI Banca Group gradually reduced government securities held in 

portfolio financed through the Cassa di Compensazione e Garanzia (a central counterparty 

clearing house), only partly renewing maturing investments and changing the internal 

composition in terms of available-for-sale (AFS) financial assets and financial assets held for 

trading (HFT). In the last quarter of the year, management policy returned to focus on new 

purchases of Italian government securities, mainly BOTs and BTPs with maturities of up to 

three years, classified as held for trading, partly with a view to supporting interest income and 

net trading income. 

Total financial assets of the Group amounted to €11 billion as at 31 st December 2011, a 

marked decrease of €2.1 billion compared to twelve months before. Net of financial liabilities, 

over half of which consisted of financial derivatives, net financial assets amounted to €10 

billion (€12.2 billion in 2010). 

As shown in the table, changes in the total were attributable primarily to the trend for AFS 

securities, which decreased by €2.2 billion in the third quarter following maturities of 

government securities concentrated in September 2011. This reduced the proportion of that 

portoflio as a pecentage of the total to 72.8% from 78% at the end of 2010, while a modest 

increase in assets held for trading was recorded (up by €0.1 billion year-on-year), which was in 

reality the end result of large fluctuations during the year. Financial assets held for trading 

increased as a percentage of the total portfolio from 20.8% to 26%. 

On the other hand assets classified in application of the fair value option remained more or 

less unchanged at €126.2 million, all held by the Parent consisting of residual investments in 

hedge funds. 

Financial assets/liabilities 

31.12.2011 31.12.2010 Changes 

Figures in thousands of euro Amount % Amount % amount % 

Financial assets held for trading 2,872,417 26.0% 2,732,751 20.8% 139,666 5.1% 

of which: financial derivatives contracts 596,986 5.4% 514,141 3.9% 82,845 16.1% 

Financial assets at fair value 126,174 1.2% 147,286 1.1% -21,112 -14.3% 

Available-for-sale financial assets 8,039,709 72.8% 10,252,619 78.1% -2,212,910 -21.6% 

Financial assets (a) 11,038,300 100.0% 13,132,656 100.0% -2,094,356 -15.9% 

of which: 

- debt instruments 9,687,568 87.8% 11,611,039 88.4% -1,923,471 -16.6% 

- of which: Italian government securities 7,838,038 71.0% 9,646,573 73.5% -1,808,535 -18.7% 

- equity instruments 485,294 4.4% 667,497 5.1% -182,203 -27.3% 

- Units in O.I.C.R. (collective investment instruments) 229,513 2.1% 274,362 2.1% -44,849 -16.3% 

Financial liabilities held for trading (b) 1,063,673 100.0% 954,423 100.0% 109,250 11.4% 

of which: financial derivatives contracts 625,772 58.8% 545,161 57.1% 80,611 14.8% 

Net financial assets (a-b) 9,974,627 12,178,233 -2,203,606 -18.1% 

The portfolio consisting of “financial assets held for trading” (€2,872,417 thousand) was smaller than the same portfolio held by the Parent (€3,515,897 

thousand) due to the presence of financial derivatives contracts entered into by UBI Banca with the Group network banks and product companies. These 

instruments, in addition to being subject to partial and potential elimination as intercompany items, were classified by the Parent as held for trading because 

the relative assets hedged were recognised in the balance sheets of the Group network banks and product companies. When the consolidation was prepared, 

those instruments, entered into to hedge the underlying assets, were recognised within hedging derivatives. 

Total financial derivatives held for trading by the Parent amounted to €1,432,457 thousand at the end of year, while the figure for the Group was €596,986 

thousand. 

132

Management accounting figures 1 as at the 31 st December 2011, show the following: 

- in terms of type of financial instrument, the securities portfolio of the Group was composed as 

follows: 80.5% of government securities, 17% of corporate securities (approximately 72% were 

issued by major Italian and international banks and financial institutions and 88% of the 

investments in corporate securities also carry an “investment grade” rating), 1.3% of hedge 

funds and the remainder (1.2%) consisting of funds and equities; 

- from a financial viewpoint, floating rate securities accounted for 50.3% of the portfolio 2 and 

fixed rate securities for 40.4%, while structured instruments (for which the optional component 

concerned the coupons only and not the capital invested), present mainly in the AFS portfolio, 

accounted for 6.7%, while the remainder were composed of equities, funds and convertible 

bonds; 

- as regards the currency of denomination, 98.7% of the securities were denominated in euro and 

0.6% in dollars with currency hedges, while in terms of geographical distribution, 95.8% of the 

investments (excluding hedge funds) were issued from countries in the euro area and 2% from 

the USA; 

- finally, an analysis by rating (for the bond portfolio only) shows that 98.1% of the portfolio 

consisted of “investment grade” securities with an average rating of Baa1 (A2 in December 

2010). 

Available-for-sale financial assets 

“Available for sale financial assets” (AFS), asset item 40, are measured at fair value with the recognition of 

changes in a separate fair value reserve in equity, except for losses due to reductions in value that are 

considered significant or prolonged. In this case the reduction in value that occurred in the period is recognised 

through profit or loss, the amount being transferred from the negative or positive reserve that may have been 

recognised in equity previously. Following the recognition of impairment losses, recoveries in value continue to be 

recognised in the separate fair value reserve in equity. Any decreases below the level of the previous impairment 

losses are recognised through profit and loss. 

Information on the fair value hierarchy (levels one, two and three) is given in Section A.3 of Part A – 

Accounting Policies in the Notes to the Consolidated Financial Statements. 

Available-for-sale financial assets: composition 

31.12.2011 31.12.2010 Changes 

Figures in thousands of euro Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total amount % 

Debt instruments 6,621,026 920,410 10,296 7,551,732 8,509,464 1,115,988 10,255 9,635,707 -2,083,975 -21.6% 

of which: Italian government 

securities 5,625,881 338,292 - 5,964,173 7,366,675 409,872 - 7,776,547 -1,812,374 -23.3% 

Equity instruments 251,226 46,963 88,444 386,633 346,586 73,614 70,357 490,557 -103,924 -21.2% 

Units in O.I.C.R. 

(collective investment instruments) 39,064 62,280 - 101,344 18,313 106,596 - 124,909 -23,565 -18.9% 

Financing - - - - - - 1,446 1,446 -1,446 -100.0% 

Total 6,911,316 1,029,653 98,740 8,039,709 8,874,363 1,296,198 82,058 10,252,619 -2,212,910 -21.6% 

Available-for-sale financial assets amounted to €8 billion at the end of 2011, having decreased 

from €10.2 billion twelve months before. They were composed principally as follows: 

- the UBI Banca AFS portfolio amounting to €6,706 million (€8,698 million in December 

2010); 

- the IW Bank portfolio, designed to stabilise that bank’s net interest income given the nature 

of its normal operations, amounting to €722 million (€845 million); 

1 The management accounting figures relate to a smaller portfolio than that recognised in the consolidated financial statements, because they 

exclude equity investments and some minor portfolios, while they include transactions that may be performed at the end of the period with 

the value date for settlement in the following month. 

2 The fixed rate securities purchased as part of asset swaps are also considered as floating rate. They account for 77% of the floating 

rate securities. 

133

- the Centrobanca corporate bond portfolio, which represents activity complementary to and 

consistent with the lending approach of that bank, amounting to €479 million (€557 

million). 

Changes in this item, which remained basically stable in the first half, saw a contraction in 

the second half of the year (-€2.2 billion, of which -€1.9 billion in the third quarter and -€0.3 

billion in the fourth quarter), attributable primarily to debt instruments (down by over €2 

billion in the second half, of which €1.8 billion relating to Italian government securities). 

At the end of the year debt instruments 3 amounted to €7.6 billion and were composed as 

follows: €6.6 billion in fair value level one 4 , €920 million in level two (which included €338.3 

million of Italian sovereign debt, while corporate securities consisted primarily of unlisted 

bank bonds issued mainly by Italian banks) and a little more than €10 million in fair value 

level three (of which €8.7 million in Equitalia perpetual financial instruments). 

This item, 83% of which is held by the Parent, includes securities which matured mainly in 

September 2011 (BTPs and CTZs), in a difficult market context, which is the aggregate result 

also of repurchases of short-term (up to three years) Italian government securities. These 

changes, to which decreases in fair value must be added, occurred above all in the last quarter 

of the year, and were attributable to the falls in prices following the widening of the country 

risk spread for Italy. 

As concerns IW Bank, which holds a portfolio composed almost entirely of floating rate Italian 

government securities, the decrease that occurred over twelve months (-€123 million) was the 

result of falls in fair value (-€83 million), due to decreases in prices and maturities and 

redemptions (down by approximately €47 million). 

The Centrobanca portfolio – composed mainly of investment grade companies – decreased by 

€78 million, including €57 million as a result of impairment losses on assets and over €35 

million due to redemptions. Investment policies over twelve months for its corporate bond 

portfolio were progressively oriented on refocusing on the Group’s captive customers, with 

investments targeted on Italian corporate issuers and major European players with business 

activities and subsidiaries operating on the domestic market. 

The financial crisis caused a decrease in the market value of debt instruments with a relative 

negative impact on the fair value reserve of €935 million (before tax). 

Equity instruments 5 fell to €387 million from €491 million the year before, as a result of the 

combined effect of sales and disposals of investments and reductions in fair value, which 

affected instruments recognised within fair value level one in particular. 

This category determined the trend for the item (a total decrease of €103.9 million), falling by 

€95.4 million, attributable principally to: 

• the disposal by the Parent of its interest held in London Stock Exchange (a book value of 

€15.5 million in December 2010); 

• the reclassification of the equity investment in ETF Track on the EuroStoxx 50 (€17.1 

million) within units in O.I.C.R.s (collective investment instruments); 

3 As at 31 st December 2010, debt instruments also included a securitisation of INPS (national insurance institute) assets (valued at 

€89.1 million), held by the Parent, which matured in the third quarter of 2011. Consequently the AFS portfolio no longer contains 

any direct investments in ABS instruments. 

However, own securitisations, eliminated when consolidating the accounts, still exist amounting to €29.9 million, down compared to 

€39.3 million twelve months before, mainly the result of the early redemption of Sintonia Finance (in the Centrobanca AFS portfolio 

amounting to €7.2 million at the end of 2010). They were composed as follows: 

- Lombarda Lease Finance 4 (ABS instruments classified within the UBI Banca available-for-sale portfolio) amounting to €3.9 

million (€5.8 million); 

- Orio Finance (RMBS securities held by the Parent and classified within financial assets held for trading), amounting to €5 million 

(€5.3 million); 

- Lombarda Lease Finance 4 amounting to €21 million, classified within L&R and held by UBI Leasing (unchanged compared to 

December 2010). 

4 Fair value level one debt instruments also include government securities held by the network banks (with a carrying amount of 

approximately €80 million) lodged as a guarantee for the issue of bankers’ drafts. 

5 Shareholdings that are not classified as companies subject to control, joint control or significant influence and that are not held for 

merchant banking and private equity activities, are recognised here. 

134

• decreases in the fair value of the share A2A Spa, down from €11.6 million to €8.3 million, 

and in the share Intesa Sanpaolo in particular, for which the market value at consolidated 

level fell to €240.4 million, after recognition of total impairment losses of €112.5 million. 

As already reported, in June 2011 the UBI Banca Group participated in the increase in the share capital 

by subscribing 41,435,116 ordinary shares at a price of 1.369 euro per share, for an amount of €56.7 

million. As a result of that subscription, the Group holds 186,458,028 shares, accounting for 1.20% of 

the share capital with voting rights. 

On the other hand, unlisted equity investments with a level two and three fair value decreased 

overall by €8.6 million, partly in relation to the disposal of investments by the Parent (PerMicro 

and Banca Valsabbina Scpa with book values in December 2010 of €0.4 million and €1.7 

million, respectively) and by Banco di Brescia (Hopa Spa for €2.7 million), while a new 

investment was made by UBI Pramerica SGR in Tages Capital Sgr 6 (+€0.5 million). The 

decrease was also caused net decreases in fair value of approximately €4.5 million, due in 

detail to the following impairment losses recognised: S.A.C.B.O. (-€4.4 million), Aedes Spa – 

ordinary shares category C (-€1.1 million), Immobiliare Fiera di Brescia Spa (-€1 million), Siteba 

Spa (-€0.8 million) and Risparmio e Previdenza Spa (-€0.4 million). These were partially offset 

by increases in the fair value of the companies SIA Spa (formerly S.I.A.-S.S.B. Spa, +€1.5 

million), Società per i mercati di Varese Spa (+€0.6 million) and Autostrade Lombarde Spa 

(+€0.5 million). 

Units in O.I.C.R. (collective investment instruments) – held almost entirely by UBI Banca – 

amounted to €101.3 million, down by €23.6 million over twelve months, the aggregate result of 

opposing trends for fair value levels one and two. 

Level two in particular fell by €44.3 million, as a result of the combined effect of net falls in the 

fair value of investments, redemptions (although new subscriptions of units in funds were 

made) and disposals (€18.5 million) performed by UBI Pramerica SGR as part of the 

management of its proprietary portfolio 7 . 

This category included an investment in the closed-end fund Centrobanca Sviluppo Impresa 

with a fair value of €26.6 million, partially redeemed during the year for €12.8 million (of 

which €3.8 million represented profit). 

Fair value level one investments on the other hand increased by €20.7 million, primarily due 

to a more accurate reclassification of the instrument ETF Track on the EuroStoxx 50, with a 

book value of €17.1 million (previously classified within equity instruments) and of the Azimut 

Dividend Premium Class A fund (with a book value of €9.5 million, previously recognised 

within fair value level two), but also to an impairment loss recognised on the Polis property 

fund (€12.4 million as at 31 st December 2011 and €18.3 million twelve months before). 

Units in O.I.C.R.s include a total of €20 million (€26.6 million the year before) invested in 

property funds. 

6 With effect from 1 st October 2011, UBI Pramerica SGR contributed its Capitalgest Alternative Investments Fund management 

operations to Tages SGR – comprising the assets and liabilities, the service and outsourcing contracts and the specialist personnel. 

On conclusion of that transaction, the Group’s asset management company held a 10% investment in Tages SGR, which had fallen 

as at 31 st December 2011 to 7.74%, as a result of capital operations performed by Tages SGR after the capital contribution 

mentioned above. 

7 With a view to improving its liquidity management, in the first half of 2011 UBI Pramerica SGR completed the disposal of the units it 

held in its proprietary mutual funds resulting from the contribution of the Capitalgest SGR Spa operations in January 2008. This 

had commenced in the last quarter of 2010 and was designed to further reduce the risk attaching to proprietary investments. A 

profit of €2.2 million was realised on the disposals. 

135

Financial instruments held for trading 

Financial assets held for trading 

Asset item 20, “Financial assets held for trading”, comprises financial trading instruments “used to 

generate a profit from short-term fluctuations in price”. They are recognised at fair value through profit or 

loss – FVPL. 

Information on the fair value hierarchy (levels one, two and three) is given in Section A.3 of Part A – 


Financial assets held for trading: composition 

31.12.2011 31.12.2010 Changes 


A. On-balance sheet assets 

Debt instruments 2,135,752 84 - 2,135,836 1,964,319 11,013 - 1,975,332 160,504 8.1% 

of which: Italian government 

securities 1,873,865 - - 1,873,865 1,870,026 - - 1,870,026 3,839 0.2% 

Equity instruments 12,811 - 85,850 98,661 72,856 2 104,082 176,940 -78,279 -44.2% 


(collective investment instruments) 447 101 1,447 1,995 512 54 1,601 2,167 -172 -7.9% 

Financing - 38,939 - 38,939 - 64,171 - 64,171 -25,232 -39.3% 

Total (a) 2,149,010 39,124 87,297 2,275,431 2,037,687 75,240 105,683 2,218,610 56,821 2.6% 

B. Derivative instruments 

Financial derivatives 220 596,766 - 596,986 1,014 509,601 3,526 514,141 82,845 16.1% 

Credit derivatives - - - - - - - - - - 

Total (b) 220 596,766 - 596,986 1,014 509,601 3,526 514,141 82,845 16.1% 

Total (a+b) 2,149,230 635,890 87,297 2,872,417 2,038,701 584,841 109,209 2,732,751 139,666 5.1% 

Financial assets held for trading had risen to €2.9 billion as at 31 st December 2011, (up by 

€0.1 billion compared to the previous year), as a result of the performance by debt 

instruments 8 (+€0.2 billion). The basic stability of Italian government securities – almost 90% 

of the total – is the result of considerable fluctuations that occurred during the year. Disposals 

and maturities progressively reduced the total to €0.5 billion in the first half, while mainly 

short-term (up to three years) BOTs and BTPs were purchased from the third quarter onwards 

– favoured, amongst other things, by the significant fall in prices – which brought the total for 

government securities to almost €1.9 billion. 

The total also includes over €234.4 million of government securities issued by France and 

Germany. 

Equity instruments decreased during the year from €177 million to €98.7 million. Disposals of 

fair value level one instruments by UBI Banca (-€38.3 million) and by Centrobanca (-€21.7 

million) accounted for €60 million of this reduction. 

For the Parent, this consisted of the disposal of an equity portfolio managed under a mandate 

by UBI Pramerica SGR (European equities classified here amounted to €39 million as at 31 st 

December 2010). The new management strategy employed in the first quarter of 2011 was 

oriented towards investments in UBI Pramerica mutual funds, classified under the fair value 

option, initially amounting to €330 million, which were completely disposed of in the following 

September due to turbulence on financial markets (see the following sub-section in this 

respect). 

For Centrobanca, this consisted of the disposal of an equity instrument subscribed in 

December 2010 and disposed of in January 2011. 

8 Debt instruments included residual direct investments in “Asset Backed Securities”, all held by the subsidiary, UBI Banca 

International Sa, consisting mainly of mortgage backed securities (MBS), with the underlying assets principally of European origin 

amounting to €0.3 million (€0.5 million twelve months before). At the end of the year, on the other hand, a structured product 

matured – similar in terms of risk to ABS instruments – also held by UBI Banca International Sa, with a book value of €2.6 million in 

December 2010. 

136

This category also includes investments in equity instruments classified within fair value level 

three, held as part of merchant banking and private equity business, in connection with 

Centrobanca. These had fallen to €85.9 million in December 2011 from €104.1 million the 

year before, due to the combined effect of impairment losses recognised on some investments 

(-€12.2 million for Medinvest International 9 and -€0.5 million for Manisa Srl, both held by the 

Parent) and the disposal of an investment held by Centrobanca (-€12.1 million), which were 

partially offset by the increase in the fair value of an asset held by this subsidiary (+€4.4 

million) and also by a new acquisition for €2.2 million towards the end of the year. 

Investments in OICR units (collective investment instruments) amounted to approximately €2 

million and related mostly to hedge funds classified within fair value level three, purchased by 

UBI Banca prior to 30 th June 2007 and still held, amounting to €1.5 million 10 . 

The item financing (€39 million compared to €64.2 million in December 2010) relates entirely 

to positions held by the subsidiary, Prestitalia Spa. 

Finally, financial assets classified as held for trading also included derivative instruments 

amounting to €597 million (€514.1 million twelve months before) entirely of a financial nature, 

for which the performance and amount must be interpreted in strict relation to the 

corresponding item recognised within financial liabilities held for trading. 

*** 

As already reported, at the end of 2010 fair value level two debt instruments still included impaired assets 

amounting to €0.9 million – fully disposed of in the first few months of 2011 – attributable to the expected 

realisable value of bonds issued by Lehman Brothers and subscribed by UBI International and by the 

Parent for a total nominal amount of €10 million. 

As concerns the position of the Group with regard to Lehman Brothers, as already reported in the 

previous 2009 and 2010 annual reports: 

- UBI Banca and Centrobanca have filed proof of claim applications with the Southern District Court of 

New York in connection with derivatives contracts which had been entered into with companies in the 

Lehman Brothers Group; 

- Centrobanca has filed proof of claim applications in relation to derivatives contracts which it had 

entered into with Lehman Brothers Special Financing Inc. subject to Chapter 11 bankruptcy 

proceedings in the USA; 

With regard to the above positions, following the approval on 5 th December 2011 of a distribution plan 

proposed by Lehman Brothers Holding Inc. in the context of the Chapter 11 proceedings mentioned, 

which were approved by the competent court on 6 th December 2011, distribution to creditors (including 

UBI Banca and Centrobanca) should start in 2012 on the basis of the plan mentioned. 

As concerns the position of Lehman Brothers International (Europe), a company belonging to the Lehman 

Brothers Group and subject to an administration order in the United Kingdom, as already reported in the 

2010 Annual Report, on 17 th September 2010 UBI Banca filed a creditor’s claim for GBP 485,930.71 in 

relation to derivatives contracts that had been entered into with Lehman Brothers International (Europe). 

Finally,in relation to that last position, as already reported, UBI Banca has already filed creditor claims 

against Lehman Brothers Holdings Inc., as the guarantor of Lehman Brothers International (Europe), in 

the context of the Chapter 11 proceedings in the USA mentioned above. 

9 See the previous section “The consolidated income statement” for further details. 

10 The following sub-section, “financial assets at fair value”, may be consulted for a full picture of the Group’s investments in hedge 

funds. 

137

Financial liabilities held for trading 

Financial liabilities held for trading: composition 

31.12.2011 31.12.2010 Changes 


A. On-balance sheet liabilities 

Due to banks 335,123 - - 335,123 110,657 - - 110,657 224,466 202.8% 

Due to customers 102,778 - - 102,778 298,605 - - 298,605 -195,827 -65.6% 

Debt instruments - - - - - - - - - - 

Total (a) 437,901 - - 437,901 409,262 - - 409,262 28,639 7.0% 


Financial derivatives 187 625,585 - 625,772 1,191 543,970 - 545,161 80,611 14.8% 

Credit derivatives - - - - - - - - - - 

Total (b) 187 625,585 - 625,772 1,191 543,970 - 545,161 80,611 14.8% 

Total (a+b) 438,088 625,585 - 1,063,673 410,453 543,970 - 954,423 109,250 11.4% 

Financial liabilities held for trading (liabilities item 40) had risen to €1.1 billion as at 31 st 

December 2011 (up by €109.3 million on the previous year), due mainly to an increase in fair 

value level two financial derivatives – consisting almost entirely of contracts on interest rates – 

the changes in which are to be interpreted primarily in relation to volumes of business. 

On-balance sheet liabilities, held entirely by the Parent, remained steady at €0.4 billion of 

which €0.2 billion relating to uncovered short positions on Italian government securities (€0.4 

billion at the end of 2010). A change in the composition occurred within the item, out of 

amounts due to customers (-€0.2 billion) and into amounts due to banks (+€0.2 billion). 

Financial assets at fair value 

The item “financial assets at fair value” includes financial instruments classified as such in application of 

the fair value option (FVO). They are composed exclusively of units in O.I.C.R. (collective investment 

instruments) and include the remaining units in hedge funds subscribed after 1 st July 2007. 

These financial assets are recognised at fair value through profit or loss. 

Information on the fair value hierarchy (levels one, two and three) is given in Section A.3, of Part A – 


Financial assets at fair value: composition 

31.12.2011 31.12.2010 Changes 


Debt instruments - - - - - - - - - - 

Equity instruments - - - - - - - - - - 


(collective investment 

instruments) 104,846 - 21,328 126,174 116,208 - 31,078 147,286 -21,112 -14.3% 

Financing - - - - - - - - - - 

Total 104,846 - 21,328 126,174 116,208 - 31,078 147,286 -21,112 -14.3% 

As at 31 st December 2011, financial assets designated at fair value consisting of units in 

O.I.C.R.s classified within fair value levels one and three – held entirely by the Parent – 

amounted to €126.2 million (down by €21.1 million on December 2010). 

Investments of €104.9 million were recognised within fair value level one relating to three 

Tages funds (formerly Capitalgest Alternative), which incurred losses of €11.4 million over 

twelve months, which account for the change compared to December 2010. 

With regard to the management mandate conferred on the Group’s asset management company, units in 

UBI Pramerica mutual funds were subscribed in March 2011 for a total of €0.3 billion (fair value level one), 

138

which were fully disposed of in the third quarter when a stop-loss mechanism was triggered 11 (in 

compliance with limits set by the financial risk policy). 

The remaining investments in hedge funds amounting to €21.3 million are classified within 

fair value level three. If the remaining amount of €1.5 million recognised within financial 

assets held for trading, (fair value level three OICR units, purchased before 30 th June 2007) 

are also included, then investments in hedge funds as at 31 st December 2011 totalled €22.8 

million (€32.7 million at the end of 2010). 

Redemptions of approximately €5 million 12 were received during the year, net of redemption 

fees 13 . 

As concerns redemption applications, management accounting figures show that at the end of 2011 

seven funds, amounting to €14 million, are expected to pay and/or have declared that they were 

implementing a deferred redemption plan (known as a "gate") – as allowed for in their respective 

regulations; another 17 funds have created “side pockets” for an amount of €8.8 million. 

*** 

As concerns the Madoff collapse and the court proceedings initiated by UBI Banca against the fund Thema 

International Plc and the relative depository bank, HSBC Institutional Trust Services Ltd, held before the 

Commercial Court of Dublin, the “discovery” stage during which the parties exchange documentation and 

relevant information for the purposes of the proceedings in question, is still in progress. 

In the meantime, UBI Banca is monitoring the class actions brought in the USA and the liquidation 

proceedings in progress in the British Virgin Islands brought against three funds attributable to Madoff, 

Fairfield Sigma Ltd., Kingate Euro Ltd. and Kingate Global Ltd., in order to protect UBI Banca’s creditor 

rights also with respect to these actions. 

*** 

As concerns the Dynamic Decisions Growth Premium 2X fund, in liquidation, following the signing of an 

agreement with the receivers which gives UBI Banca preference in the redemption of sums recovered in the 

liquidation, in return for financing paid to the receivers, no significant and/or relevant developments have 

occurred. 

Exposure to sovereign debt risk 

On 28 th July 2011, the European Securities and Markets Authority (ESMA) published 

document No. 2011/266 relating to information on sovereign debt to be disclosed in annual 

and half year financial reports prepared by listed companies that adopt IAS/IFRS. 

Details of the exposures of the UBI Banca Group are given on the basis that, according to the 

instructions issued by this European supervisory authority, “sovereign debt” is defined as debt 

instruments issued by central and local governments and by government entities and also as 

loans granted to them. 

As at 31 st December 2011, the book value of sovereign exposures amounted to €8.7 billion, 

concentrated almost fully in Italy (approximately 98%). 

In addition to credit exposure to Italian public administrations amounting to €884 million, the 

Group also held Italian government securities amounting to €7.6 billion, (89% of which held 

by the Parent) of which almost €6 billion classified within available-for-sale assets and €1.6 

billion within financial assets held for trading (considered net of uncovered short positions). 

Sovereign debt risk exposures to countries other than Italy are therefore kept low and for loans 

mainly regarded Spain (€117.5 million, inclusive of factoring transactions) and Luxembourg 

(€92.7 million). Both exposures relate to a foreign subsidiary of the Group which carries on 

business in both countries. 

11 The losses incurred on the mutual fund portfolio caused UBI Pramerica SGR to firstly change the composition of the mix of 

products used for investments, with preference given to strictly monetary funds and then, in consideration of the continuing 

adverse conditions on markets, to sell all units held in funds at the end of September (€329.3 million as at 30 th June 2011). 

12 A further one million euro has been received since the beginning of 2012. 

13 The technical term used to indicate expenses for repayment. 

139

As concerns, on the other hand, portfolio investments in securities, these consisted of fairly 

modest exposures and mainly regarded core Eurpean Union countries: Germany (€9 million) 

and France (-€2.9 million). 

Positions existing as at 30 th June 2011, relating to Finland (€5 million nominal) and Spain 

(€2.5 million nominal), both consisting of securities with ten-year maturities, were disposed of 

in July. 

UBI Banca Group: exposures to sovereign debt risk 

Country / portfolio of classification 

31.12.2011 30.6.2011 

Nominal amount Carrying amount Fair value Nominal amount Carrying amount Fair value 

figures in thousands of euro 

- Italy 9,201,954 8,512,083 8,512,083 8,757,285 8,816,455 8,816,455 

financial assets and liabilities held for trading (net exposure) 1,674,474 1,664,216 1,664,216 31,773 32,935 32,935 

available-for-sale financial assets 6,649,895 5,964,173 5,964,173 7,740,276 7,789,305 7,789,305 

loans 877,585 883,694 883,694 985,236 994,215 994,215 

- Spain 117,470 117,470 117,470 118,429 118,468 118,468 

financial assets and liabilities held for trading (net exposure) - - - 2,519 2,558 2,558 

loans 117,470 117,470 117,470 115,910 115,910 115,910 

- Germany 15,150 9,189 9,189 97 97 97 

financial assets and liabilities held for trading (net exposure) 15,005 9,044 9,044 7 7 7 

loans 145 145 145 90 90 90 

- France -1,999 -2,909 -2,909 -4,989 -5,170 -5,170 

financial assets and liabilities held for trading (net exposure) -1,999 -2,909 -2,909 -4,989 -5,170 -5,170 

- Luxembourg 92,712 92,712 92,712 129,010 129,010 129,010 

loans 92,712 92,712 92,712 129,010 129,010 129,010 

- Holland 10 10 10 10 10 10 

loans 10 10 10 10 10 10 

- Argentina 2,941 705 705 1,528 673 673 

financial assets and liabilities held for trading (net exposure) 2,941 705 705 1,528 673 673 

- Finland - - - 5,000 5,132 5,132 

financial assets and liabilities held for trading (net exposure) - - - 5,000 5,132 5,132 

Total on-balance sheet exposures 9,428,238 8,729,260 8,729,260 9,006,370 9,064,675 9,064,675 

The table below shows the distribution by maturity of Italian government securities held in 

portfolio. 

The average maturity of the AFS portfolio is 10/11 years, while the average residual maturity 

of Italian government securities in the HFT portfolio is 1.12 years. 

M aturities of Italian government securities 

31.12.2011 

30.6.2011 



held for trading (*) 

Available-for-sale 

financial assets 

Total % 

Financial assets Available-for-sale 

held for trading (*) financial assets 

Total % 

Up to 6 months 385,154 107,971 493,125 6.5% -200,033 2,352,909 2,152,876 27.5% 

Six months to one year 750,458 - 750,458 9.8% 178,513 107,549 286,062 3.7% 

One year to three years 451,206 1,409,166 1,860,372 24.4% 68,526 49,872 118,398 1.5% 

Three years to five years 77,171 711,089 788,260 10.3% - 884,250 884,250 11.3% 

Five years to ten years 216 1,786,281 1,786,497 23.4% 9,524 2,100,108 2,109,632 27.0% 

Over ten years 3 1,949,666 1,949,669 25.6% -23,596 2,294,612 2,271,015 29.0% 

Total 1,664,208 5,964,173 7,628,381 100.0% 32,935 7,789,299 7,822,234 100.0% 

(*) Net of the relative uncovered short positions. 

Due to the significant amounts for securities maturing in the third quarter (€2.2 billion), a 

comparison with the comparative figures as at 30 th June 2011 shows a reduction in exposure 

on the shorter term segment of the yield curve (down from 27.5% to 6.5% at the end of year), 

with a repositioning at the same time towards maturities from “six months to one year” and 

from “one year to three years” (which together account for a percentage of the portfolio which 

rose from 5.2% to 34.2%), consistent with the policy to purchase securities with maturities of 

up to three years pursued by the Parent in the last part of the year. 

140

As concerns the longer-term segment of the curve – over five years – a slight reduction in the 

exposure occurred (down from 56% in June to 49% at the end of 2011), although no change 

was made to UBI Banca’s policy to invest in longer-term BTPs, over 50% of which are hedged 

by asset swaps. 

141

Exposures to some types of products 

This section provides an update of the position of the UBI Banca Group with regard to some 

types of financial instruments, which since the subprime mortgage crisis in 2007, are now 

considered at high risk. 

Special purpose entities (SPEs) 

The involvement of the UBI Group in special purpose entities (SPEs 14 ) concerns the following 

types: 

- entities formed to allow the issue of preference shares; 

- conventional securitisation transactions 15 performed by Group member companies in 

accordance with Law No. 130 of 30 th April 1999; 

- the issue of covered bonds, in accordance with Art. 7 bis of Law No.130/1999. 

Special purpose entities existed as at 31 st December 2011, within the UBI Banca Group for the 

issue of preference shares used as innovative equity instruments on international capital 

markets. These issues, which current supervisory regulations allow to be included in the 

consolidated tier one capital, take the form of non redeemable instruments and they have 

particularly junior levels of subordination. The preference shares included in the tier one 

capital amounted to €453.46 million and they were issued by a number of the banks which 

formed the Group prior to the merger. 

On the one hand, securitisations form part of a strategic policy to expand lending by 

simultaneously freeing up part of the supervisory capital relating to the amounts transferred 

and on the other they constitute an important medium to long-term funding instrument. The 

underlying assets securitised consist of performing assets of the network banks and other 

product companies. 

The list of SPEs used for the securitisations in which the Group is involved is as follows: 

Orio Finance Nr. 3 Plc, 

Albenza 3 Srl, 

Lombarda Lease Finance 4 Srl, 

UBI Lease Finance 5 Srl, 

24-7 Finance Srl (multi compartment SPE – 3 securitisations), 

UBI Finance 2 Srl, 

UBI Finance 3 Srl. 

Finally, with regard to the issue of covered bonds, the SPEs UBI Finance Srl and UBI Finance 

CB 2 Srl (the latter formed on 20 th December 2011) were formed for the purchase of loans from 

banks in order to create cover pools for covered bonds issued by the Parent, in accordance 

with the structure of these operations. 

The special purpose entities listed above are included in the consolidated accounts because 

these companies are in reality controlled, since their assets and liabilities were originated by 

Group member companies. As concerns Sintonia Finance, this securitisation (of a multioriginator 

nature) was wound up at the end of November 2011 by the repurchase of the 

remaining loans by Centrobanca and the other originator, the early redemption of the bonds 

and the winding up of the related hedging derivatives. 

The securitisations concerning the special purpose entities, 24-7 Finance Srl, UBI Lease 

Finance 5 Srl, UBI Finance 2 Srl and UBI Finance 3 Srl were performed in order to form a 

14 Special Purpose Entities (SPEs) are special companies formed to achieve a determined objective. 

15 With normal securitisations the originator sells the portfolio to a special purpose entity which then issues tranches of asset-backed 

securities in order to purchase it. With a synthetic securitisation, on the other hand, the originator purchases protection for a pool of 

assets and transfers the credit risk attaching to the portfolio – either fully or in part – by using credit derivatives such as CDSs 

(credit default swaps) and CLNs (credit-linked notes) or by means of personal guarantees. 

142

portfolio of assets eligible as collateral for refinancing with the European Central Bank, 

consistent with Group policy for the management of liquidity risk. 

They were carried out on performing residential mortgages, salary backed loans (redeemed in 

advance on 20 th December 2011) and consumer loans of B@nca 24-7 (24-7 Finance Srl), on 

lease contracts of UBI Leasing (UBI Lease Finance 5 Srl), on performing loans to small to 

medium-sized enterprises of Banco di Brescia (UBI Finance 2 Srl) and on performing loans to 

SMEs of Banca Popolare di Bergamo (UBI Finance 3 Srl). 

In the securitisations in question, the senior securities issued by the entities – assigned a 

rating – are listed and can be used for refinancing operations with the ECB, with the sole 

exception of the 24-7 Finance Srl securitisation of consumer loans for which early winding up 

of the operation is currently being considered. 

A securitisation commenced in December 2010 through the transfer of performing loans to 

businesses held by Banca Popolare di Bergamo to the SPE UBI Finance 3 Srl was completed in 

July 2011 when UBI Finance 3 issued securities (the transfer of the loans by the originator 

took place with effect from 1 st December 2010 for approximately €2.8 billion). 

The issue of covered bonds is designed to diversify sources of funding for the Group and also 

to contain the cost of it. As at 31 st December 2011, UBI Banca had performed placements of 

covered bonds for a total nominal amount of €5.75 billion (€2 billion issued in 2011) as part of 

a programme for a maximum issuance of €10 billion euro. The originator banks issued a 

subordinated loan to the SPE, UBI Finance Srl, equal to the value of the loans sold, in order to 

fund the purchase. At the end of December, these loans amounted to approximately €9.72 

billion (€9.11 billion in June 2011; €7.83 billion in December 2010). 

In this respect, exposures are present in the Group which relate solely to the special purpose 

entities formed for the securitisations mentioned and they all fall within the consolidation 

scope. 

Ordinary lines of liquidity existed as at 31 st December 2011 granted by the Parent to the 

special purpose entity Orio Finance Nr.3 Plc for a total of €5 million euro, but not drawn on 

(also not drawn on as at 31 st December 2010). Ordinary lines of liquidity were also granted by 

B@nca 24-7 to the entity 24-7 Finance Srl for a total of €227.4 million, fully drawn on (€37.3 

million, also fully drawn on, at the end of 2010). 

Following downgrades by the rating agencies Moody’s and Fitch on 5 th and 11 th October 2011 

respectively, UBI Banca made a liquidity facility available for UBI Finance 2 amounting to 

€16.3 million and for UBI Finance 3 amounting to €28 million. 

The programme to issue covered bonds and all the securitisations are hedged by swap 

contracts where the main objective is to normalise the flow of interest generated by the 

transferred or securitised portfolio and to concretely protect the special purpose entity from 

interest rate risk. As a consequence of the downgradings of UBI Banca’s ratings in October 

2011, it became necessary to provide margins for the swap contracts entered into between the 

Parent or other Group member companies and the SPEs for the securitisations and the 

covered bond programme. 

The accounts used for the margins were opened with an eligible institution which was Bank of 

New York Mellon (ratings: Moody’s, Aa2 negative; S&P, AA- stable; Fitch, AA- stable). The 

margins were paid from 26 th October 2011 for an initial total amount of a little more than 

€1,015 million, of which €717 million for the covered bond programme and €298 million for 

the securitisations. 

The total balance at the end of 2011 amounted to €785 million, of which €632 million for the 

covered bond programme and €153 million for internal securitisations. 

No exposures exist to special purpose entities or other conduit operations with underlying 

securities or investments linked to United States subprime and Alt-A loans. 

The total assets of SPEs relating to securitisations and to covered bonds amounted to €21.6 

billion (€21.9 billion at the end of 2010). 

Details by asset class are given in the table below: 

143

SPE underlying assets 

Figures in millions of euro 

Classification of underlying assets of the securitisation 31.12.2011 

31.12.2010 

Measurement Gross of Net of Gross of Net of 

Entity Total assets Class of underlying asset Accounting criteria impairment impairment impairment impairment 

Classification adopted losses losses losses losses 

Albenza 3 Srl 23.1 Mortgages L&R CA 22.2 22.1 36.3 36.3 

Sintonia Finance - Mortgages L&R CA - - 25.5 23.4 

24-7 Finance Mortgages L&R CA 1,688.2 (*) 1,681.4 (*) 1,903.9 (*) 1,894.5 (*) 

24-7 Finance 4,670.3 Salary backed loans L&R CA - - 414.1 (*) 413.7 (*) 

24-7 Finance Consumer loans L&R CA 1,322.0 (*) 1,283.9 (*) 1,809.6 (*) 1,761.8 (*) 

Lease Finance 4 162.3 Leasing L&R CA 143.9 143.4 232.1 226.7 

UBI Lease Finance 5 3,913.4 Leasing L&R CA 3,753.3 (*) 3,753.3 (*) 2,449.4 (*) 2,445.8 (*) 

Orio Finance 3 23.1 RMBS Notes (ALBENZA 3 Srl) L&R CA 23.1 23.1 37.4 37.4 

UBI Finance 9,686.0 Mortgages L&R CA 9,570.2 9,554.1 7,700.0 7,687.2 

UBI Finance 2 1,013.7 Loans to SMEs and small businesses L&R CA 949.9 (*) 946.8 (*) 1,241.8 (*) 1,236.9 (*) 

UBI Finance 3 2,109.4 Loans to businesses L&R CA 2,047.0 (*) 2,039.6 (*) 2,707.7 (*) 2,699.5 (*) 

Total impaired assets, mortgages and loans 668.5 393.6 372.2 242.4 

Total impaired assets, leasing 195.6 179.0 157.3 153.9 

TOTAL 21,601.2 20,383.9 20,020.3 19,087.3 18,859.5 

(*) assets transferred not derecognised on the books of the originators 

The distribution by geographical location and credit rating of the securities issued relating to 

the securitisations by the special purpose entities Lombarda Lease Finance 4 and UBI Lease 

Finance 5 are given below. 

Securitisations of UBI Leasing: distribution of the underlying assets and of the securities issued 

(31 st December 2011) 

DISTRIBUTION BY GEOGRAPHICAL AREA 

DISTRIBUTION OF ASSETS BY CREDIT RATING 

0.74% 

1.19% 

1.60% 

4.17% 

1.96% 

7.76% 

17.29% 

51.35% 

0.00% 

14.34% 

4.63% 

10.05% 

84.92% 

Lombardy 

Piedmont 

Trentino Alto Adige 

Liguria 

Veneto 

Latium 

Emilia Romagna 

Friuli Venezia Giulia 

AAA A BBB unrated 

Exposures in ABS, CDO, CMBS and other structured credit products 

As at 31 st December 2011, the UBI Banca Group held direct investments in ABS instruments 

amounting to €0.3 million (€92.2 million in December 2010), consisting of ABS instruments 

recognised within financial assets held for trading, belonging to the subsidiary UBI Banca 

International, with underlying assets of European origin (€0.5 million in December 2010). 

In the second half of the year, ABS instruments were redeemed for a total of €89.1 million 

(classified within available-for-sale financial assets), relating to the senior tranche of INPS 

(national insurance institute) securitisations, in addition to structured credit products for a 

total of €2.6 million (classified within financial assets held for trading in the UBI Banca 

International portfolio). 

No direct investments exist in securities backed by commercial mortgages (CMBS). 

144

The table summarises direct Group exposures in ABS instruments: none of the positions listed 

contained underlying assets linked to subprime or Alt-A loans. 

Direct exposure in ABS 

Figures in millions of euro 

Classifications 31.12.2011 

31.12.2010 

Hedged by 

Hedged by 

Counterparty Type of exposure Rating Seniority Accounting Gross of Net of techniques to Gross of Net of techniques to 

relationship Classification impairment impairment reduce impairment impairment reduce 

losses losses counterparty/ losses losses counterparty/ 

credit risk 

credit risk 

investor ABS HFT 0.3 0.3 no 0.5 0.5 

investor ABS AAA Senior AFS - - - 88.7 89.1 

investor Other structured HFT - - - 2.6 2.6 

no 

no 

no 

TOTAL 0.3 0.3 91.8 92.2 

Own securitisations, eliminated when consolidating the accounts, totalled €12.1 billion (€11.1 

billion at the end of 2010) and related mainly to ABS instruments (including €9.5 billion of 

senior securities) used as collateral for advances from the ECB. Further details are provided in 

the previous section “The interbank market and the liquidity situation”, which may be 

consulted. 

In addition to the direct exposures, hedge funds or funds of hedge funds were identified among 

the assets present in Group portfolios with exposures to structured credit products of the CDO 

and CMBS type. Investment in these funds as at 31 st December 2011 amounted to 

approximately €105 million (net of impairment losses/reversals) and presented low 

percentages of exposure. Total indirect exposure to CDOs and CMBSs amounted to 

approximately €0.3 million (€0.1 million in December 2010). 

Other subprime and Alt-A exposures 

Again at the end of the 2011, indirect exposures to subprime and Alt-A mortgages existed that 

were contained in hedge funds or funds of hedge funds held by the Parent. The percentages of 

exposure to subprime and Alt-A mortgages were again low (no fund had a percentage exposure 

of greater than 1%), with total exposure to subprime and Alt-A loans of approximately €0.3 

million (€0.3 million as at 31 st December 2010). 

Exposures to monoline insurers 

Indirect exposures to monoline insurance companies exist in hedge funds or funds of hedge 

funds held by UBI Banca. The percentages of exposure remained very modest with an overall 

amount of less than €0.1 million, unchanged compared to December 2010. 

Leveraged Finance 

The term leveraged finance is used in the UBI Banca Group to refer to finance provided for a 

company or an initiative which has debt that is considered higher than normal on the market 

and is therefore considered a higher risk. Usually this finance is used for specific acquisition 

purposes (e.g. the acquisition of a company by other companies – either directly or through 

vehicles/funds – owned by internal [buy-in] or external [buy-out] management teams). They 

are characterised by “non investment grade” credit ratings (less than BBB-) and/or by 

remuneration that is higher than normal market levels. 

Leveraged finance business is performed by Centrobanca and is regulated by the Group Credit 

Risk Policy designed to combine the achievement of budget targets in terms of business 

volumes and profits with appropriate management of the attached risks. 

Briefly, operations are based on a maximum investment ceiling, reviewed annually and 

allocated on the basis of rating classes for operations according to predefined maximum 

percentages. The system of limits is calculated to seek appropriate diversification both in 

terms of sector and the concentration of risk on single company or Group counterparties. 

145

The table below summarises on- and off-balance sheet exposure for leveraged finance by 

Centrobanca. That activity accounts for 11.2% of total lending and unsecured guarantees 

granted by Centrobanca (12.2% as at 31 st December 2010). The amounts shown as at 31 st 

December 2011 relate to 85 positions (grouped by Group of companies), for an average 

exposure per loan of €10.6 million. There were around seven Groups of companies with 

exposures greater than €20 million (all on-balance sheet loans) corresponding to 

approximately 32.1% of the total. 

Centrobanca leveraged finance business 

figures in millions of euro 

On-balance sheet exposure 

gross exposure to customers 

Guarantees 

gross exposure to customers 

used impairment used impairment 

31 December 2011 

31 December 2010 

857.2 -14.1 46.2 -3.9 

853.0 -7.7 51.9 -6.0 

The graphs below show the distribution of leveraged exposures by geographical area and by 

sector. 

Distribution of Centrobanca leveraged exposures 

(the figures as at 31 st December 2010 are given in brackets) 

EXPOSURE BY GEOGRAPHICAL AREA 

EXPOSURE BY SECTOR 

Usa and 

Messico 

8% (4%) Europe 

18% (21%) 

Commerce and 

services 

23% (39%) 

Italy 

74% (75%) 

Manifacturing 

77% (61%) 

Residual exposures also exist within the UBI Banca Group – approximately €218 million (€265 

million as at 31 st December 2010) – relating to leveraged finance transactions performed before 

this type of business was centralised at Centrobanca. They were performed by the network 

banks relating to a total of 26 positions with average exposure per transaction of €8.4 million. 

The distribution by bank was as follows: Banco di Brescia (€105.1 million), Banca Popolare di 

Bergamo (€61.2 million), Banca Popolare Commercio e Industria (€19.7 million), Banca 

Regionale Europea (€17.1 million) and Banca di Valle Camonica (€15.3 million). 

146

Financial derivative instruments for trading with customers 

The analysis performed as at 31 st December 2011 for internal monitoring purposes shows that 

the risks assumed by customers continue to remain generally low and they outlined a 

conservative profile for the Group business in OTC derivatives with customers. 

The quantitative data updated at the end of the 2011 showed the following: 

- an increase in the total negative mark-to-market for customers, which stood at 4.95% of 

the notional amount of the contracts compared to 3.35% twelve months before. The 

worsening of the mark-to-market amounts is strictly connected with the European 

financial crisis, which became more severe in the last quarter of 2011 and caused a 

generalised reduction in interest rate levels; 

- the notional amount for existing contracts, totalling €6.979 billion, was attributable to 

interest rate derivatives amounting to €6.486 billion and currency derivatives amounting 

to €0.486 billion plus a marginal notional amount for commodities contracts of €7 million; 

- hedging derivative transactions accounted for approximately 96.3% of the notional amount 

traded for interest rate derivatives and 93.3% of the notional amount for currency 

derivatives; 

- the net total mark-to-market (interest rate, currency and commodities derivatives) 

amounted to approximately -€330 million. Those contracts with a negative mark-to-market 

for customers were valued at approximately -€346 million. 

In 2011 the Group incorporated regulations for its business in OTC derivative instruments 

with customers in its “Policy for the trading, sale and subscription of financial products” and the 

relative regulations to implement it as follows: 

customer segmentation and classes of customers associated with specific classes of 

products, stating that the purpose of the derivatives transactions must be hedging and that 

transactions containing speculative elements must be of a residual nature; 

rules for assessing the appropriateness of transactions, defined on the basis of the products 

sold to each class of customer; 

principles of integrity and transparency on which the range of OTC derivatives offered to 

customers must be based, in compliance with the guidelines laid down by the Italian 

Banking Association (and approved by the CONSOB) for illiquid financial products; 

rules and processes for assessing credit exposure, which grant credit lines with maximum 

limits for trading in interest rate and currency derivatives and credit lines on each single 

transaction for commodities derivatives or derivatives with private individual retail 

counterparties, while counterparty risk is assessed on the basis of Bank of Italy circular No. 

263/2006; 

rules and processes for managing restructuring operations, while underlining their 

exceptional nature; 

the rules and processes for the settlement of transactions in OTC derivative instruments 

with customers that are subject to verbal or official dispute; 

the catalogue of products offered to customers and the relative credit equivalents, updated 

with respect to previous versions. 

147

OTC interest rate derivatives: details of instrument types and classes of customer 

Product 

class 

1 

Type of instrument 

Customer classification 

Number of 

transactions 

Data as at 31st December 2011 

Notional MtM of which negative MtM 

Purchase of caps Qualified 16 43,657,849.17 60,611.39 

3: Professional 65 163,662,255.80 159,037.07 - 

2: Non private individual retail 1,536 445,861,683.93 2,384,069.75 - 

1: Private individual retail 1,348 155,743,481.13 967,691.59 - 

Purchase of caps Total 2,965 808,925,270.03 3,571,409.80 - 

Capped swaps Qualified 37 160,254,084.86 -3,208,669.12 -3,208,669.12 

3: Professional 77 301,679,162.21 -8,340,825.99 -8,340,825.99 

2: Non private individual retail 1,425 958,861,499.49 -24,620,257.59 -24,620,257.59 

1: Private individual retail 3,491 381,614,617.15 -5,877,855.03 -5,877,855.03 

Capped swaps Total 5,030 1,802,409,363.71 -42,047,607.73 -42,047,607.73 

IRS Plain Vanilla Qualified 34 191,187,309.94 -9,256,382.00 -9,256,382.00 

3: Professional 264 1,392,153,515.28 -106,195,476.99 -106,366,993.09 

2: Non private individual retail 819 1,503,310,200.59 -116,210,376.73 -116,213,208.02 

1: Private individual retail 420 62,774,972.80 -2,435,842.93 -2,435,842.93 

IRS Plain Vanilla Total 1,537 3,149,425,998.61 -234,098,078.65 -234,272,426.04 

IRS Step Up Qualified 3 3,954,716.77 -629,914.31 -629,914.31 

3: Professional 19 71,838,019.94 -5,976,266.23 -5,976,266.23 

2: Non private individual retail 66 142,579,084.10 -25,876,602.48 -25,899,299.89 

1: Private individual retail 1 991,216.36 -84,169.34 -84,169.34 

IRS Step up Total 89 219,363,037.17 -32,566,952.36 -32,589,649.77 

Purchase of collars Qualified 1 6,638,426.56 -327,112.45 -327,112.45 

3: Professional 2 7,812,579.89 -216,025.95 -216,025.95 

2: Non private individual retail 7 12,186,698.85 -707,007.29 -707,007.29 

Purchase of collars Total 10 26,637,705.30 -1,250,145.69 -1,250,145.69 

Total Class 1: hedging derivatives 9,631 6,006,761,374.82 -306,391,374.63 -310,159,829.23 

Class 1: % of Group total 98.49% 92.61% 91.88% 91.97% 

2 

Purchase of caps with KI/KO 3: Professional 2 23,364,818.85 -342,393.26 -342,393.26 


Purchase of caps with KI/KO Total 10 36,860,053.22 -551,985.68 -551,985.68 

Purchase of collars with KI/KO 3: Professional 1 4,500,000.00 -72,577.53 -72,577.53 


Purchase of collars with KI/KO Total 4 10,878,838.44 -1,055,929.99 -1,055,929.99 

IRS Cap spreads(¹) 2: Non private individual retail 1 250,293.00 -941.81 -941.81 

IRS Cap spreads Total 1 250,293.00 -941.81 -941.81 

IRS Convertible Qualified 1 6,000,000.00 -496,638.79 -496,638.79 

3: Professional 9 140,105,154.61 -4,863,267.94 -4,863,267.94 


IRS Convertible Total 35 192,618,151.44 -7,944,100.62 -7,944,100.62 

Total Class 2: hedging derivatives with possible exposure 50 240,607,336.10 -9,552,958.10 -9,552,958.10 

to contained financial risks 


3a 

IRS Range 3: Professional 12 65,493,024.02 -4,390,254.90 -4,390,254.90 


1: Private individual retail¹ 1 500,000.00 -35,236.40 -35,236.40 

IRS Range Total 81 198,698,439.98 -15,054,665.06 -15,054,665.06 

Memory floor(¹) 3: Professional 1 4,000,000.00 -950,335.52 -950,335.52 

Memory floors Total 1 4,000,000.00 -950,335.52 -950,335.52 

Total Class 3a: partial hedging derivatives with pre-established maximum l 82 202,698,439.98 -16,005,000.58 -16,005,000.58 

3b 

Gap floater swaps 2: Non private individual retail 3 5,964,460.00 -226,037.92 -235,941.48 

Gap floater swaps Total 3 5,964,460.00 -226,037.92 -235,941.48 

IRS corridor accruals(¹) 3: Professional 2 7,000,000.00 -25,675.64 -25,675.64 

IRS corridor accruals Total 2 7,000,000.00 -25,675.64 -25,675.64 

IRS Range stability 3: Professional 2 7,000,000.00 -413,931.86 -413,931.86 


IRS Range stability Total 11 23,150,000.00 -1,259,010.78 -1,259,010.78 

Total Class 3b: speculative derivatives with unquantifiable maximum loss 16 36,114,460.00 -1,510,724.34 -1,520,627.90 

Total Class 3: derivatives not for hedging 98 238,812,899.98 -17,515,724.92 -17,525,628.48 


Total UBI Banca Group 9,779 6,486,181,610.90 -333,460,057.65 -337,238,415.81 

(1) Prior transaction not attributable to catalogue products. 

148

OTC currency derivatives: details of instrument types and classes of customer 


Product 

class 

1 



Number of 

transactions 

Notional 

MtM 

of which negative 

MtM 

Vanilla currency options purchased by the customer 3: Professional 1 740,740.74 779.39 - 

Vanilla currency options purchased by the customer Total 1 740,740.74 779.39 - 

Forward synthetic Qualified 20 6,874,415.23 316,269.27 -1,921.81 

3: Professional 263 195,739,722.69 -1,775,333.44 -3,330,143.53 

2: Non private individual retail 54 23,056,523.52 178,210.62 -490,261.44 

Forward synthetic Total 337 225,670,661.44 -1,280,853.55 -3,822,326.78 

Plafond Qualified 19 6,043,494.98 27,758.33 -94,398.33 

3: Professional 110 83,981,559.83 1,112,860.60 -1,439,064.66 

2: Non private individual retail 163 52,191,390.18 696,844.63 -1,184,798.69 

Plafond Total 292 142,216,444.99 1,837,463.56 -2,718,261.68 

Currency collars 3: Professional 17 3,346,088.54 121,604.83 -29,512.79 

2: Non private individual retail 5 414,459.75 3,877.89 -11,858.26 

Currency collars Total 22 3,760,548.29 125,482.72 -41,371.05 

Total Class 1: hedging derivatives 652 372,388,395.46 682,872.12 -6,581,959.51 

Class 1: % of Group total 75.12% 76.61% - 80.29% 

2 

Knock in collars 3: Professional 46 11,195,527.93 -733,629.62 -733,629.62 

Knock in collars Total 46 11,195,527.93 -733,629.62 -733,629.62 

Knock in forward Qualified 4 1,130,975.59 54,116.15 -176.94 

3: Professional 78 61,837,184.12 3,681,068.48 -156,165.30 

2: Non private individual retail 11 3,612,313.87 92,112.78 - 

Knock in forwards Total 93 66,580,473.58 3,827,297.41 -156,342.24 

Average rate options 3: Professional 5 3,557,951.47 -472,498.68 -472,498.68 

Average rate options Total 5 3,557,951.47 -472,498.68 -472,498.68 

Total Class 2: hedging derivatives with possible exposure 144 81,333,952.98 2,621,169.11 -1,362,470.54 



3b 

Knock out forward 3: Professional 11 11,756,629.40 273,738.21 -40,195.06 

Knock out forward Total 11 11,756,629.40 273,738.21 -40,195.06 

Knock out knock in forward 3: Professional 38 14,549,121.36 337,629.89 -11,318.01 

Knock out knock in forwards Total 38 14,549,121.36 337,629.89 -11,318.01 

Vanilla currency options sold by the customer 3: Professional 23 6,031,993.22 -201,435.56 -201,435.56 

Vanilla currency options sold by the customer Total 23 6,031,993.22 -201,435.56 -201,435.56 

Total Class 3: derivatives not for hedging 72 32,337,743.98 409,932.54 -252,948.63 


Total UBI Banca Group 868 486,060,092.42 3,713,973.77 -8,197,378.68 

OTC commodities derivatives: details of instrument types and classes of customer 


Product class 



Number of 

transactions 

Notional MTM of which negative MtM 

2 

Commodity swaps Qualified 1 971,095.14 -41,169.95 -41,169.95 

3: Professional 14 4,004,500.60 -65,180.19 -214,912.55 

2: Non private individual retail 2 145,000.00 -19,809.00 -19,809.00 

Commodity swaps Total 17 5,120,595.74 -126,159.14 -275,891.50 

Commodity collars 3: Professional 2 1,232,500.00 81,022.00 - 

Commodity collars Total 2 1,232,500.00 81,022.00 - 

Forward synthetic 2: Non private individual retail 3 552,990.00 19,091.00 - 

Forward synthetic Total 3 552,990.00 19,091.00 - 

Total Class 2: hedging derivatives with possible exposure 22 6,906,085.74 -26,046.14 -275,891.50 


Total UBI Banca Group 22 6,906,085.74 -26,046.14 -275,891.50 

TOTAL UBI BANCA GROUP 10,669 6,979,147,789.06 -329,772,130.02 -345,711,685.99 

149

OTC derivatives: first five counterparties by bank (figures in euro) 


Bank Classification MtM of which negative MtM 

Centrobanca 3: Professional and qualified -22,089,182 -22,089,182 

3: Professional and qualified -17,628,112 -17,628,112 

2: Non private individual retail -4,592,902 -4,592,902 



Banco di Brescia 3: Professional and qualified -3,941,365 -3,941,365 





Banca Popolare Commercio e Industria 2: Non private individual retail -5,792,980 -5,792,980 





Banca Popolare di Ancona 2: Non private individual retail -5,600,150 -5,600,150 





Banca Regionale Europea 3: Professional and qualified -3,871,660 -3,871,660 


3: Professional and qualified -963,679 -963,679 


2: Non private individual retail -595,627 -595,627 

Banca Popolare di Bergamo 2: Non private individual retail -2,617,310 -2,617,310 





Banco di San Giorgio 2: Non private individual retail -818,271 -818,271 





Banca di Valle Camonica 3: Professional and qualified -654,747 -657,126 





Banca Carime 2: Non private individual retail -615,077 -615,077 





150

Equity and capital adequacy 

Reconciliation between equity and result for the year of the Parent with consolidated equity as at 31st December 2011 

and profit for the year then ended 


The consolidated equity of the UBI Banca Group as at 31 st December 2011, inclusive of profit 

for the year, amounted to €8,939 million, down compared to €10,979 million at the end of 

2010. 

As can be seen from the statement of changes in equity, contained among the mandatory 

consolidated financial statements, in addition to the loss for the year of €1,841.5 million the 

following items contributed to the total decrease of €2,040 million that occurred over twelve 

months: 

• the allocation of 2010 consolidated profit to dividends and other uses amounting to €102.2 

million 1 ; 

• the positive impact, totalling €986 2 million, attributable almost entirely to the capital 

increase performed in June and July, which led to the issue of 262,580,944 new shares 

following the exercise of option rights, the sale on the stock exchange and the subsequent 

exercise of rights not taken up and the final subscription by the underwriting syndicate, 

was as follows: 

• +€656.5 million the impact on share capital; 

• +€329.5 million the increase in the share premium reserve, inclusive of the deduction from that 

item of the expenses incurred to complete the operations net of tax (€16.2 million) and the proceeds 

from the sales of rights not exercised (€2.1 million); 

• a decrease of €4.4 million as a consequence of the purchase of treasury shares in July, to 

be assigned to the Senior Management of the Group in relation to incentive schemes; 

• the negative impact on consolidated income generated by the overall reduction in the fair 

value reserves amounting Fair value reserves attributable to the Group: composition 

to €1,062.1 million. This 

Figures in thousands of euro 31.12.2011 31.12.2010 

consisted of -€1,039.5 

Available-for-sale financial assets -1,350,979 -311,493 

million relating to 

Cash flow hedges -3,217 -619 

available-for-sale financial 

Foreign currency differences -243 -243 

assets, -€2.6 million to Actuarial gains/losses -34,155 -14,518 

cash flow hedges, -€19.6 Special revaluation laws 72,729 73,146 

million to “actuarial Total -1,315,865 -253,727 

gains/losses on defined 

benefit plans” and -€0.4 million to “special revaluation laws”; 

• a decrease on aggregate in reserves of profits amounting to €15.8 million. This 

included: -€9.2 million relating to the public tender offer to purchase IW Bank shares; -€4.4 

million for the increase in the investment in Banco di San Giorgio, following an operation to 

increase the share capital of this bank in Liguria; +€2.1 million for the positive impact of 

exchange rate differences on the equity of Swiss subsidiaries; 

Equity 

of which: Result for 

the year 

Equity and result for the year in the financial statements of the Parent 7,609,829 -2,713,054 

Effect of the consolidation of subsidiaries including joint ventures 1,651,195 403,078 

Effect of measuring other significant equity investments using the equity method -21,038 10,760 

Dividends received during the year - -338,369 

Other consolidation adjustments (including the effects of the PPA) -300,963 796,097 

Equity and result for the year in the consolidated financial statements 8,939,023 -1,841,488 

1 The 2010 consolidated net profit was fully drawn on with an allocation to reserves of €69.9 million. 

2 This amount also includes the residual effect of the conversion of the convertible bond “UBI 2009/2013 convertibile con facoltà di 

rimborso in azioni” and the exercise of the warrants “Warrant azioni ordinarie UBI Banca 2009/2011”, which led to the issue of a 

further 19,213 new shares with an increase in the share capital and the share premium reserve amounting to €49,782.5 and 

€188,063 respectively. 

151

Fair value reserves of available-for-sale financial assets attributable to the Group: changes in the period 


Debt 

instruments 

Equity 

instruments 

OICR units 


instruments) 

Financing 

Total 

1. Opening balances as at 1st January 2011 -365,103 54,646 -1,036 - -311,493 

2. Positive changes 24,330 9,727 7,307 - 41,364 

2.1 Increases in fair value 3,899 3,053 4,294 - 11,246 

2.2 Transfer to income statement of negative reserves 17,930 3,852 1,549 - 23,331 

- following impairment losses 6,650 3,759 1,403 - 11,812 

- from disposal 11,280 93 146 - 11,519 

2.3 Other changes 2,501 2,822 1,464 - 6,787 

3. Negative changes -1,052,126 -17,233 -11,491 - -1,080,850 

3.1 Reductions in fair value -1,019,357 -9,125 -7,531 - -1,036,013 

3.2 Impairment losses - - - - - 

3.3 Transfer to income statement of positive reserves: from dis -4,760 -7,290 -3,460 - -15,510 

3.4 Other changes -28,009 -818 -500 - -29,327 

4. Closing balances as at 31st December 2011 -1,392,899 47,140 -5,220 - -1,350,979 

Fair value reserves of available-for-sale financial assets attributable to the Group: composition 

31.12.2011 

31.12.2010 

Figures in thousands of euro Positive reserve Negative reserve Total Positive reserve Negative reserve Total 

1. Debt instruments 78,744 -1,471,643 -1,392,899 66,715 -431,818 -365,103 

2. Equity instruments 51,267 -4,127 47,140 58,225 -3,579 54,646 

3. Units in O.I.C.R. 

(collective investment instruments) 6,973 -12,193 -5,220 9,124 -10,160 -1,036 

4. Financing - - - - - - 

Total 136,984 -1,487,963 -1,350,979 134,064 -445,557 -311,493 

As shown in the table, the decrease mentioned above of €1,039.5 million in the “fair value 

reserve for available-for-sale financial assets” is attributable mainly to debt instruments held 

in portfolio (down by €1,027.8 million to -€1,392.9 million net of tax and the portion 

attributable to non-controlling interests) and in particular to Italian government securities for 

which the reserve amounted to -1,174.5 milion 3 at the end of the year. 

The reserve for debt instruments was affected during the year by decreases in fair value of 

€1,019.4 million. This included -€863.8 million attributable to the Parent (approximately 90% 

relating to Italian government securities), -€64.1 million to Lombarda Vita, -€51.3 million to 

IW Bank (relating almost entirely to Italian government securities) and -€36.3 million to 

Centrobanca. 

Increases, on the other hand, included transfers of negative reserves for disposals to the 

income statement following the sale of securities, almost entirely government, comprised 

within the UBI Banca (+€6.1 million) and IW Bank (+€2.7 million) portfolios. 

Approximately 90% of the decreases in the fair value of equity instruments were attributable to 

UBI Banca (-€4.6 million attributable almost entirely to the interest held in S.A.C.B.O.) and to 

Banco di Brescia (-€3.5 million). 

The table also shows a transfer from the positive reserve to the income statement of €7.3 

million, including €6.9 million relating to the Parent: €5.8 million (net of tax) attributable to 

the entire disposal of the interest held in the London Stock Exchange completed in month May 

and €1.1 million from the disposal of shares of Banca Valsabbina. 

The decreases in fair value relating to OICR units were generated almost entirely by UBI Banca 

(-€4.9 million) and by Lombarda Vita (-€2.6 million). 

3 On the basis of management accounting estimates this had reduced to €629 million as at 26 th March 2012. As already reported, the 

negative available-for-sale reserve for Italian government securities as at 30 th September 2011, used as a capital filter in the EBA 

exercise on capital, amounted to -€868 million. 

152

Capital adequacy 

Capital ratios (Basel 2 standardised approach) 

Figures in thousands of euro 31.12.2011 31.12.2010 

Tier 1 capital before filters 8,075,253 6,766,798 

Preference shares and savings/privileged shares attributable to non-controlling interests 489,191 489,191 

Tier 1 capital filters -137,541 -73,593 

Tier 1 capital after filters 8,426,903 7,182,396 

Deductions from tier 1 capital -150,625 -134,508 

Tier 1 after filters and specific deductions (Tier 1) 8,276,278 7,047,888 

Supplementary capital after filters 4,305,074 3,770,505 

Deductions from supplementary capital -150,625 -134,508 

Supplementary capital after filters and specific deductions (Tier 2) 4,154,449 3,635,997 

Deductions from tier 1+supplementary capital -148,574 -147,685 

Total supervisory capital 12,282,153 10,536,200 

Credit and counterparty risk 6,746,523 6,952,925 

Market risk 73,545 106,636 

Operational risk 460,749 489,312 

Other prudential requirements - - 

Total prudential requirements 7,280,817 7,548,873 

Subordinated liabilities Tier 3 

Nominal amount - - 

Amount eligible - - 

Risk weighted assets 91,010,213 94,360,909 

Core tier 1 ratio after specific deductions from tier 1 capital (tier 1 capital net of preference 

shares/risk weighted assets) 8.56% 6.95% 

Tier 1 capital ratio 

(tier 1 capital/Risk weighted assets) 9.09% 7.47% 

Total capital ratio 

[(Supervisory capital+tier 3 eligible)/risk weighted assets] 13.50% 11.17% 

With a provision of 18 th May 2010 and a later communication of 23 rd June 2010 (“Clarification of supervisory measures concerning supervisory capital – 

prudential filters”), the Bank of Italy issued new supervisory instructions for the treatment of fair value reserves relating to debt instruments held in the 

“available-for-sale financial assets” portfolio for the purposes of calculating supervisory capital (prudential filters). More specifically, as an alternative to the 

“asymmetric approach” (full deduction of net losses from the tier one capital and inclusion of 50% of the net gains in the tier two capital) already provided for 

by Italian regulations, it was permitted – in compliance with 2004 CEBS guidelines – to completely neutralise gains and losses recognised in the reserves 

mentioned (“symmetrical approach”) subsequent to 31 st December 2009, but limited to securities issued by the central governments of countries belonging to 

the European Union. The Group decided to take advantage of the option and reported the decision to the Bank of Italy on 29 th June 2010. It was therefore 

applied uniformly by all members of the banking Group, commencing with the calculation of supervisory capital as at 30 th June 2010. 

The supervisory capital of the UBI Banca Group amounted to €12.3 billion as at 31 st 

December 2011, an increase compared to €10.5 billion at the end of 2010 (+€1.8 billion), the 

result of increases in both the tier one capital and the tier two capital. 

The increase in the tier one capital (up €1.2 billion to €8.3 billion) mainly reflects the results of 

the increase in the share capital completed in July, but also the elimination of the negative 

filter regarding the substitute tax on goodwill and the increases in deductions and negative 

filters, together with a fall in capital attributable to non-controlling interests. 

Changes in the tier two capital (up €0.5 billion to €4.2 billion), on the other hand, were 

attributable almost entirely to the trends for subordinated bonds, notwithstanding the 

increase in negative filters and deductions. More specifically, the issue of subordinated 

liabilities sold to retail customers of the Group (+€1 million) more than compensated on the 

one hand for issues matured/redeemed/amortised during the year (approximately -€0.5 

153

illion) and on the other hand for the negative effects of further changes (-€43 million) mainly 

attributable to filters and deductions. 

Compliance with capital adequacy requirements determined an absorption of capital of €7.3 

billion, a decrease of €0.3 billion compared to the previous year, mainly the result of less 

absorption for credit and counterparty risk (-€0.2 billion). The latter change, which was 

negative on aggregate, was connected with falls in volumes of business over twelve months, 

which was only partially offset by the greater requirement, estimated at almost €70 million, 

following the downgrade of the ratings for UBI Banca that occurred in the last quarter of 2011. 

The other capital requirements also decreased, although more moderately: -€33.1 million for 

market risks, due mainly to a decrease in the generic risk on debt and equity instruments, 

and -€28.6 million for operational risk as a result of the fall in gross income at consolidated 

level. 

As a consequence, risk weighted assets, consisting principally of credit and counterparty risk, 

fell by over €3.3 billion to €91 billion. 

The changes in the aggregates reported above caused a generalised improvement in all the 

capital ratios calculated as at 31 st December 2011: on that date the core tier one ratio and the 

tier one ratio stood at 8.56% (6.95% at the end of 2010) and 9.09% (7.47%) respectively, while 

the total capital ratio rose to 13.50% (11.17%) 4 . 

The impairment losses recognised on goodwill had no impact on the capital ratios and the 

supervisory capital was calculated inclusive of the effects of the distribution of a dividend of 

0.05 euro per share. 

The European stress test 

UBI Banca, together with four other Italian banks, took part in the 2011 European stress tests 

conducted by the European Banking Authority (EBA) – in co-operation with the Bank of Italy, 

the European Central Bank (ECB), the European Commission (EC) and the European 

Systemic Risk Board (ESRB) – on 90 banks representing more than 65% of the total assets of 

the European banking system. The results were published simultaneously on 15 th July 2011. 

The tests were designed to assess the ability of European banks to resist sever shocks and their degree of 

capital adequacy if hypothetical stress events occurred under particularly adverse conditions. 

The hypotheses and the methodology of the exercise were designed to assess the capital adequacy of 

banks using a benchmark of a core tier one ratio of 5% and to increase market confidence in the soundness 

of the banks taking part in the exercise. 

The adverse scenario used was defined by the ECB and covered a time horizon of two years (2011-2012) 5 . 

The stress test was conducted assuming that the balance sheets of the banks had remained unchanged 

compared to December 2010, without considering the effects of company strategies and/or future 

management initiatives and it did not constitute a profit forecast of the single banks taking part. 

UBI Banca passed the stress test with a level of capitalisation well above the benchmark set 

[and also above the observation threshold set (5%-6%)], which confirmed the soundness of the 

Group. In the adverse scenario hypothesised, the core tier one ratio, estimated on the 

consolidated figures for UBI Banca, resulted to have risen from 7% in December 2010 to 7.4% 

at the end of 2012. This last figure incorporated the effects of the increase in the share capital, 

which was fully underwritten and announced to the market in a binding manner before 30 th 

April 2011, but excluded the impacts of future action taken to strengthen capital available to 

management. 

4 As already reported, savings shares and privileged shares have been excluded from the core tier one capital since 31 st December 

2010, while they are included in the tier one capital. 

5 The scenario involved a decrease in GDP and adverse performance by all the main macroeconomic variables with a related estimated 

impact on PD and LGD and, as a result, on forecasts of impairment losses in the lending portfolio. A greater than expected increase 

in interest rates was hypothesised together with a widening of sovereign debt spreads with a consequent increase in the cost of 

funding and falls in equity prices. 

154

Research & Development 

Research & Development activity was performed centrally by the Group’s service company. 

The main project work carried out in 2011 involved in some cases the continuation of projects 

already initiated in the previous year and in others the development of new opportunities 

offered by technological progress to support corporate processes and customer relationships. 

The first cases included the “new work station” project designed as its initial area of 

application to simplify and increase the efficiency of mortgage processing activities for retail 

customers. Once the first stage was completed with the introduction of a document 

management platform with a view to paperless processing, digitalised communication to 

notary firms was commenced in June with the combined use of digital signatures, certified 

electronic email and legally valid electronic storage. 

In the mobile internet sector, where clear potential exists for the use of mobile telephones to 

deliver and use banking information and services – the upgrade for the main existing devices 

and terminals (iPhones, Androids, BlackBerrys) of the application for the use of home banking 

services was completed. At the same time new evolved functions were developed which will be 

released shortly: extension of functions to include securities trading and a version dedicated 

specifically for tablets. 

Following the success achieved with the introduction of the iPad platform for the management 

and sharing of documents by top management in board and committee meetings, wifi 

networks are currently being introduced in the management departments of the Parent. Based 

on careful user profile information they will allow, in total security, optimum use of the service 

as a result of integration with the corporate document management system. 

New R&D activity has been undertaken with specific reference to new market trends and 

technological advances, on the one hand in the paperless document sector, especially with 

regard to branch procedures and on the other with the launch of the “enterprise services 2.0” 

web project (blog and forum). 

The line of research into paperless documents involved the analysis and testing of 

biometric/graphometric signatures 1 for the production of digital signatures right from the 

outset, thereby eliminating as a consequence the need to print and store hardcopy documents. 

Following successful testing, this solution was adopted in five Banca Popolare di Bergamo 

branches in the last quarter of the year for numerically frequent transactions (paying in and 

withdrawals performed through cashier desks) with the objective of extending the use in 2012 

to other types of transaction such as bank transfers. 

As concerns web 2.0 blog and forum tools, since they are now widely used in numerous 

contexts due to their ease of use and effectiveness, possible applications are currently being 

studied to improve corporate processes and to make the diffusion of information in the Group 

more effective and rapid. 

Continuous testing of enterprise 2.0 solutions and technologies is currently in progress in the 

IT Systems unit at UBI Sistemi e Servizi. This has already led to the development of concrete 

solutions in this area and also in the new Group corporate portal in the last quarter of 2011 

within which blogs and areas for corporate initiatives (“YOUBI live”) have been activated 

together with true and genuine forums (“The ideas box”). 

1 Biometric/graphometric technology can be used to place a naturally produced digital signature on documents and that is the placing 

of a graphics stroke on a special tablet that is able to “capture” its five characteristic traits: the rhythm, speed, pressure, acceleration 

and movement. 

155

The system of internal control 

The document “Report on the corporate governance and ownership structure of UBI Banca 

Scpa” attached to these reports may be consulted for a description of the architecture, rules 

and organisational units of the system of internal controls. It also gives specific information 

required under Art. 123 bis, paragraph 2b) of the Consolidated Finance Act (Legislative Decree 

No. 58/1998) concerning the risk management and internal control systems that govern the 

financial reporting process. 

156

Transactions with related parties 

With Resolution No. 17221 of 12 th March 2010 – amended by the subsequent Resolution No. 

17389 of 23 rd June 2010 – the Consob (Italian securities market authority) approved a 

Regulation concerning related-party transactions. The new regulations concern the procedures 

to be followed for the approval of transactions performed by listed companies and the issuers 

of shares with a broad shareholder base with parties with a potential conflict of interest, 

including major or controlling shareholders, members of the management and supervisory 

bodies and senior managers including their close family members. 

The regulations currently apply within the UBI Banca Group to UBI Banca Scpa only as a 

listed company. Banco di San Giorgio, to which the regulations applied until 31 st December 

2011 because it had a significantly broad shareholder base, has been excluded since 1 st 

January 2012 due to changes in the shareholder structure. 

As specifically concerns UBI Banca, in November 2010 the Supervisory Board appointed a 

Related Parties Committee from among its members to which transactions falling within the 

scope of the regulations must be submitted in advance. 

In this respect the UBI Banca regulations have excluded the following transactions from their 

scope of application and these are consequently not subject to the disclosure obligations 

required under the Consob regulation, but without prejudice to the provisions of Art. 5, 

paragraph 8, where applicable, of the said Consob Regulation: 

(a) shareholders’ resolutions concerning the remuneration of the Members of the Supervisory Board passed in 

accordance with Art. 2364-bis of the Italian Civil Code, including those concerning the determination of a total 

sum for the remuneration of the Members of the Supervisory Board assigned particular offices, powers and 

functions; 

(b) remuneration schemes based on financial instruments approved by shareholders in accordance with Art. 22, letter 

b) of the Corporate By-Laws and in compliance with Art. 114-bis of the Consolidated Finance Act and the relative 

operations to implement them; 

(c) resolutions, other than those referred to under the preceding letter a) of this article, concerning the fees of 

Members of the Management Board appointed to special positions and other key management personnel and also 

the resolutions with which the Supervisory Board determines the fees of the Members of the Management Board 

on condition that: 

(i) UBI Banca has adopted a remuneration policy; 

(ii) the Remuneration Committee formed by the Supervisory Board in accordance with Art. 49 of the Corporate 

By-Laws has been involved in the definition of that remuneration policy; 

(iii) a report setting out the remuneration policy has been submitted for approval or a consultative vote to a 

Shareholders' Meeting; 

(iv) the remuneration awarded is consistent with that policy; 

(d) “transactions of negligible amount” are those related-party transactions for which the amount is less than €250 

thousand. If a related-party transaction is concluded with a member of the key management personnel, a close 

family member of that person or with companies controlled by or subject to significant influence of those persons, 

it will be considered a transaction of negligible amount if the amount of the transaction is not greater than €100 

thousand; 

(e) transactions which fall within the ordinary performance of operating activities and the related financial activities 

concluded under equivalent market or standard conditions; 

(f) transactions to be performed on the basis of instructions for the purposes of stability issued by the supervisory 

authority, or on the basis of instructions issued by the Parent of the Group to carry out instructions issued by the 

supervisory authority in the interests of the stability of the Group; 

(g) transactions with or between subsidiaries and also venturers in joint ventures, as well as transactions with 

associates, if no significant interests of other related parties exist in the subsidiaries or associates that are 

counterparties to the transaction. 

Also, in compliance with Consob recommendations, transactions with related-parties of UBI 

Banca performed by subsidiaries are subject to the regulations in question if, under the 

provisions of the Corporate By-Laws or internal regulations adopted by the Bank, the 

Supervisory Board, in response to a proposal of the Management Board, or even an officer of 

the Bank on the basis of powers conferred on that officer, must preliminarily examine or 

approve a transaction to be performed by subsidiaries. 

In accordance with Art. 5, paragraph 8 of Consob Resolution No. 17221 of 12 th March 2010, 

already mentioned, the following related-party transactions concluded in 2011, were excluded 

157

from the scope of the regulations for related-party transactions with UBI Banca, because they 

were concluded with subsidiaries: 

• UBI Leasing - in relation to funding requirements, UBI Banca provided short term funding 

totalling €6,587 million. This funding is subject to specific regulations which govern 

intragroup transfer pricing; 

• UBI Factor - in relation to funding requirements, UBI Banca provided short term funding 

totalling €3,012 million. This funding is subject to specific regulations which govern 

intragroup transfer pricing; 

• UBI Pramerica - in relation to operational requirements to cover foreign currency 

transactions, credit lines granted for maximum forward currency transactions of €500 

million at the beginning of year, were subsequently increased by a further €250 million to 

bring them up to a total of €750 million; 

• Centrobanca 

- in relation to operational requirements, at the beginning of 2011 UBI Banca increased 

the maximum limit for the issue of unsecured bank guarantees for subscribers of bonds 

amounting to €1.1 billion, to bring it up to a total of €5.5 billion; 

‐ in accordance with Decree Law No. 201 of 6 th December 2011, the “Save Italy” decree, 

UBI Banca decided to take advantage of the Italian government guarantee for the issue 

of debt and liability instruments. The magnitude of the guarantees issued by UBI Banca 

in favour of Centrobanca totalled €3 billion, corresponding to maturities to be refinanced 

in relation to bond issues placed on the retail and institutional market in the first 

quarter of 2012. The terms and conditions of those instruments, issued on 2 nd January 

2012 and for which a guarantee was requested, are as follows: 

‐ first issue - nominal amount: €2,000,000,000; original duration: 36 months; 

amortisation profile: redeemed in one payment on maturity; interest rate: fixed at 

6.5%; 

‐ second issue - nominal amount: €1,000,000,000; original duration: 60 months; 

amortisation profile: redeemed in one payment on maturity; interest rate: fixed at 7%. 

On 14 th November 2011, the Supervisory Board of UBI Banca approved the commencement of 

a project to merge Banco di San Giorgio into Banca Regionale Europea. 

As a company with a significantly broad shareholder base, in accordance with Consob 

Regulation No. 17221 of 12 th March 2010, in 2010 Banco di San Giorgio adopted 

“Regulations for related-party transactions” and it appointed its own “Related Parties 

Committee”, composed of three directors, the majority of whom independent. In 2011, the 

percentage of the total share capital of that bank held by non-controlling shareholders fell 

below the threshold of 5%, which meant that the conditions for qualification as an issuer with 

a significantly broad shareholder base were no longer met by the company. Notwithstanding 

this, because issuers with a broad shareholder base are considered to be such until the end of 

the financial year in which those conditions are no longer met, the Related Parties Committee 

carried out its activities in the period from 1 st January until 31 st December 2011. 

Specific reports were prepared with regard to transactions of greater importance concluded by 

Banco di San Giorgio in 2011, which were submitted in advance to the examination of the 

Related Parties Committee. These reports, together with the corresponding opinions expressed 

by the Related Parties Committee, were sent to the Consob and published on the corporate 

website of Banco di San Giorgio. 

Furthermore: 

• no transactions were performed in the reporting period with other related parties which 

influenced the capital position or the results of the Parent Bank, UBI Banca to a significant 

extent; 

• there have been no modifications and/or developments of transactions with related parties, 

which may have been reported in previous financial reports, that could have a significant 

effect on the capital position or the results of the Parent, UBI Banca. 

*** 

158

In compliance with IAS 24, Part H of the Notes to the Consolidated Financial Statements 

provides information on balance sheet and income state transactions between related parties 

of UBI Banca and Group member companies, as well as those items as a percentage of the 

total for each item in the consolidated financial statements. 

Further information is given in the “Report on corporate governance and the ownership 

structure of UBI Banca Scpa” attached to these reports. 

159

Consolidated companies: the principal 

figures 

Profit 

Figures in thousands of euro 2011 2010 Change % change 

Unione di Banche Italiane Scpa (1) (2,713,054) 283,720 (2,996,774) n.s. 

Banca Popolare di Bergamo Spa 171,768 106,719 65,049 61.0% 

Banco di Brescia Spa 94,952 71,979 22,973 31.9% 

Banca Popolare Commercio e Industria Spa 50,010 21,914 28,096 128.2% 

Banca Regionale Europea Spa (2) 30,186 246,375 (216,189) (87.7%) 

Banca Popolare di Ancona Spa (3) 2,276 18,340 (16,064) (87.6%) 

Banca Carime Spa (4) 45,981 37,652 8,329 22.1% 

Banca di Valle Camonica Spa 728 1,574 (846) (53.7%) 

Banco di San Giorgio Spa 1,190 375 815 217.3% 

UBI Banca Private Investment Spa (1,609) 57 (1,666) n.s. 

Centrobanca Spa (5) 1,225 16,153 (14,928) (92.4%) 

Centrobanca Sviluppo Impresa SGR Spa 260 287 (27) (9.4%) 

Banque de Dépôts et de Gestion Sa (*) (6,894) (7,767) (873) (11.2%) 

B@nca 24-7 Spa 18,341 (5,723) 24,064 n.s. 

IW Bank Spa (6) 2,814 (704) 3,518 n.s. 

UBI Banca International Sa (*) 10,307 8,908 1,399 15.7% 

UBI Pramerica SGR Spa 37,576 38,475 (899) (2.3%) 

UBI Leasing Spa (7) (30,151) (20,632) 9,519 46.1% 

UBI Factor Spa 8,564 18,601 (10,037) (54.0%) 

BPB Immobiliare Srl 700 747 (47) (6.3%) 

Società Bresciana Immobiliare Mobiliare - S.B.I.M. Spa 1,373 1,251 122 9.8% 

UBI Sistemi e Servizi SCpA - - - - 

UBI Fiduciaria Spa (186) 209 (395) n.s. 

UBI Assicurazioni Spa (49,99%) 2,000 (2,168) 4,168 n.s. 

Aviva Assicurazioni Vita Spa (49,99%) 3,245 1,500 1,745 116.3% 

Aviva Vita Spa (50%) 5,500 2,000 3,500 175.0% 

Lombarda Vita Spa (40%) 4,507 14,333 (9,826) (68.6%) 

UBI Insurance Broker Srl 3,594 3,571 23 0.6% 

UBI Trustee Sa 23 25 (2) (8.0%) 

CONSOLIDATED (8) (1,841,488) 172,121 (2,013,609) n.s. 

(*) The profit shown is from the financial statements prepared for the consolidation according to the accounting policies followed by 

the Parent. 

(1) The figure for 2011 includes impairment losses of €3,029.8 million on Group equity investments, goodwill and other intangibles 

(net of tax). 

(2) The figure for 2010 included a gain of €225.4 million (net of taxes) realised on the sale of an interest held in BPCI to the Banca del 

Monte di Lombardia Foundation on conclusion of the branch switching operation. If the effect of the main non-recurring items is 

excluded for both years, the normalised profit for 2011 of €30 million increased by €7.3 million compared to €22.7 million the year 

before. 

(3) The figure for 2011 includes the effects of the recognition of impairment losses on the investments in UBI Leasing (€16.2 million) 

and in Centrobanca (€11.9 million). 

(4) The figure for 2011 includes the effects of the recognition of impairment losses of €12.1 million on the goodwill of the bank. 

(5) The figure for 2011 includes the effects of the recognition of impairment losses of €7.2 million on the goodwill of the bank. 

(6) The figure for 2010 has been restated for consistency by including the result for InvestNet Italia Srl, merged on 1 st August 2011. 

(7) The figure for 2011 includes the effects of the recognition of impairment losses of €2 million on the goodwill of the company. 

(8) The figure for 2011 includes the recognition of impairment losses on goodwill and finite useful life intangible assets of €2,190.9 

million (net of tax and non-controlling interests). 

160

Net loans to customers 

Figures in thousands of euro 31.12.2011 31.12.2010 Change % change 

Unione di Banche Italiane Scpa 15,692,663 14,536,121 1,156,542 8.0% 

Banca Popolare di Bergamo Spa 19,609,764 20,276,206 -666,442 -3.3% 

Banco di Brescia Spa 13,561,110 15,078,204 -1,517,094 -10.1% 

Banca Popolare Commercio e Industria Spa 8,563,354 8,885,600 -322,246 -3.6% 

Banca Regionale Europea Spa 6,916,708 6,851,620 65,088 0.9% 

Banca Popolare di Ancona Spa 7,810,341 7,702,345 107,996 1.4% 

Banca Carime Spa 4,865,871 4,765,224 100,647 2.1% 

Banca di Valle Camonica Spa 1,889,840 1,885,564 4,276 0.2% 

Banco di San Giorgio Spa 2,811,916 2,787,617 24,299 0.9% 

UBI Banca Private Investment Spa 460,742 439,511 21,231 4.8% 

Centrobanca Spa 7,160,450 6,972,678 187,772 2.7% 

Banque de Dépôts et de Gestion Sa 205,020 207,425 -2,405 -1.2% 

B@nca 24-7 Spa 10,511,749 11,219,553 -707,804 -6.3% 

UBI Banca International Sa 1,087,454 1,095,406 -7,952 -0.7% 

IW Bank Spa 246,010 207,028 38,982 18.8% 

UBI Factor Spa 2,868,344 2,744,758 123,586 4.5% 

UBI Leasing Spa 9,045,465 9,698,555 -653,090 -6.7% 

CONSOLIDATED 99,689,770 101,814,829 -2,125,059 -2.1% 

Risk indicators 

Net non-performing 

loans / net loans 

Net impaired loans / 

net loans 

Net non-performing 

loans + Net impaired 

loans / net loans 

Percentages 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 

Unione di Banche Italiane Scpa - - - - - - 

Banca Popolare di Bergamo Spa 2.29% 1.74% 2.41% 1.87% 4.70% 3.61% 

Banco di Brescia Spa 1.62% 1.23% 2.84% 2.11% 4.46% 3.34% 

Banca Popolare Commercio e Industria Spa 3.60% 2.96% 2.15% 2.53% 5.75% 5.49% 

Banca Regionale Europea Spa 2.18% 1.88% 2.44% 1.91% 4.62% 3.79% 

Banca Popolare di Ancona Spa 4.35% 3.73% 3.50% 3.29% 7.85% 7.02% 

Banca Carime Spa 1.93% 1.24% 3.34% 2.27% 5.27% 3.51% 

Banca di Valle Camonica Spa 2.79% 1.60% 3.05% 2.52% 5.84% 4.12% 

Banco di San Giorgio Spa 2.65% 1.68% 5.32% 4.34% 7.97% 6.02% 

UBI Banca Private Investment Spa 1.45% 1.17% 1.23% 1.34% 2.68% 2.51% 

Centrobanca Spa 1.48% 1.16% 3.52% 2.07% 5.00% 3.23% 

Banque de Dépôts et de Gestion Sa 0.09% 0.09% 1.74% 0.65% 1.83% 0.74% 

B@nca 24-7 Spa 2.18% 1.55% 1.05% 0.65% 3.23% 2.20% 

UBI Banca International Sa 0.08% 0.07% 2.31% 1.93% 2.39% 2.00% 

IW Bank Spa - - 0.14% 0.01% 0.14% 0.01% 

UBI Factor Spa 1.27% 0.42% 0.16% 0.15% 1.43% 0.57% 

UBI Leasing Spa 4.52% 3.19% 2.85% 1.91% 7.37% 5.10% 

CONSOLIDATED 2.49% 1.91% 2.54% 2.00% 5.03% 3.91% 

161

Direct funding from customers 


Unione di Banche Italiane Scpa 31,300,106 31,369,474 -69,368 -0.2% 


Banco di Brescia Spa 11,980,422 11,736,765 243,657 2.1% 


Banca Regionale Europea Spa 5,608,417 5,391,805 216,612 4.0% 

Banca Popolare di Ancona Spa 6,429,378 6,485,148 -55,770 -0.9% 

Banca Carime Spa 7,552,126 7,562,665 -10,539 -0.1% 

Banca di Valle Camonica Spa 1,358,499 1,421,234 -62,735 -4.4% 

Banco di San Giorgio Spa 1,652,028 1,572,492 79,536 5.1% 

UBI Banca Private Investment Spa 517,020 489,429 27,591 5.6% 

Centrobanca Spa 4,374,547 5,345,526 -970,979 -18.2% 


B@nca 24-7 Spa 900 23,861 -22,961 -96.2% 

UBI Banca International Sa (1) 1,060,263 1,266,869 -206,606 -16.3% 

IW Bank Spa 1,907,380 1,513,127 394,253 26.1% 

CONSOLIDATED 102,808,654 106,760,045 -3,951,391 -3.7% 

Direct funding from customers includes amounts due to customers and securities issued, with the exclusion of bonds subscribed 

directly by companies in the Group. 

Direct funding for the following banks was therefore adjusted as follows: 

BANKS 31.12.2011 31.12 2010 

UBI Banca €3,922.9 million €3,421 million 

Banca Popolare di Bergamo €50 million €50 million 

Banco di Brescia €752.3 million €382.2 million 

Banca Popolare Commercio e Industria - €181 million 

Banca Popolare di Ancona - €352 million 

Centrobanca €2,326.2 million €201.6 million 

Banca Regionale Europea €201.3 million €201 million 

Banca di Valle Camonica €254.3 million €201.7 million 

Banco di San Giorgio €763.8 million €332.4 million 

B@nca 24-7 €5,773 million €4,321 million 

(1) The figure for 31 st December 2011 is net of issues of French certificates of deposit and euro commercial paper totalling €5,318.8 

million (€7,042.5 million as at 31 st December 2010). 

162

Indirect funding from customers (at market prices) 


Unione di Banche Italiane Scpa 5 14 -9 -64.3% 



Banca Popolare Commercio e Industria Spa 10,057,784 11,186,686 -1,128,902 -10.1% 

Banca Regionale Europea Spa 6,842,123 7,267,934 -425,811 -5.9% 



Banca di Valle Camonica Spa 1,049,267 1,065,405 -16,138 -1.5% 

Banco di San Giorgio Spa 1,429,294 1,644,556 -215,262 -13.1% 

UBI Banca Private Investment Spa 5,003,443 5,420,922 -417,479 -7.7% 


Lombarda Vita Spa 5,007,705 5,149,988 -142,283 -2.8% 

Aviva Assicurazioni Vita Spa 2,121,844 2,305,298 -183,454 -8.0% 

UBI Pramerica SGR Spa 20,288,875 25,047,354 -4,758,479 -19.0% 

UBI Banca International Sa 2,904,707 2,971,932 -67,225 -2.3% 

IW Bank Spa 3,161,568 3,037,925 123,643 4.1% 

Aviva Vita Spa 4,234,773 4,374,554 -139,781 -3.2% 

CONSOLIDATED 72,067,569 78,078,869 -6,011,300 -7.7% 

Assets under management (at market prices) 


Unione di Banche Italiane Scpa - 9 -9 -100.0% 

Banca Popolare di Bergamo Spa 11,267,911 12,460,373 -1,192,462 -9.6% 



Banca Regionale Europea Spa 3,719,506 4,205,324 -485,818 -11.6% 



Banca di Valle Camonica Spa 437,371 513,063 -75,692 -14.8% 

Banco di San Giorgio Spa 492,037 637,651 -145,614 -22.8% 

UBI Banca Private Investment Spa 3,659,999 4,073,214 -413,215 -10.1% 


Lombarda Vita Spa 5,007,705 5,149,988 -142,283 -2.8% 

Aviva Assicurazioni Vita Spa 2,121,844 2,305,298 -183,454 -8.0% 

UBI Pramerica SGR Spa 20,288,875 25,047,354 -4,758,479 -19.0% 

UBI Banca International Sa 181,843 289,940 -108,097 -37.3% 

IW Bank Spa 462,063 496,899 -34,836 -7.0% 

Aviva Vita Spa 4,234,773 4,374,554 -139,781 -3.2% 

CONSOLIDATED 36,892,042 42,629,553 -5,737,511 -13.5% 

163

The performance of the main consolidated 

companies 

BANCA POPOLARE DI BERGAMO SPA 


31.12.2011 31.12.2010 Change 

% change 

Balance sheet 

Loans to customers 19,609,764 20,276,206 -666,442 -3.3% 

Direct funding (*) 19,764,170 20,596,076 -831,906 -4.0% 

Net interbank debt 1,603,761 2,537,387 -933,626 -36.8% 

Financial assets held for trading 61,943 51,761 10,182 19.7% 

Available-for-sale financial assets 20,196 20,795 -599 -2.9% 

Equity (excluding profit for the year) 2,117,762 2,143,727 -25,965 -1.2% 

Total assets 25,074,514 24,455,885 618,629 2.5% 

Indirect funding from customers (including insurance) 24,563,676 24,944,977 -381,301 -1.5% 

of which: assets under management 11,267,911 12,460,373 -1,192,462 -9.6% 

Income statement 

Net interest income 503,565 443,493 60,072 13.5% 

Dividends and similar income 184 254 (70) (27.6%) 

Net commission income 316,002 302,214 13,788 4.6% 

Net income from trading, hedging and disposal/repurchase activities 2,105 9,650 (7,545) (78.2%) 

Other net operating income/(expense) 21,413 13,311 8,102 60.9% 

Operating income 843,269 768,922 74,347 9.7% 

Personnel expense (272,399) (277,279) (4,880) (1.8%) 

Other administrative expenses (197,029) (204,095) (7,066) (3.5%) 

Net impairment losses on property, equipment and investment property and intangible assets (7,692) (7,178) 514 7.2% 

Operating expenses (477,120) (488,552) (11,432) (2.3%) 

Net operating income 366,149 280,370 85,779 30.6% 

Net impairment losses on loans (**) (83,114) (96,212) (13,098) (13.6%) 

Net impairment losses on other assets/liabilities (262) (1,873) (1,611) (86.0%) 

Net provisions for risks and charges (56) 187 (243) n.s. 

Profit (loss) on the disposal of equity investments 1,486 (30) 1,516 n.s. 

Pre-tax profit from continuing operations 284,203 182,442 101,761 55.8% 

Taxes on income for the year from continuing operations (112,435) (75,723) 36,712 48.5% 

Profit for the year 171,768 106,719 65,049 61.0% 

Other information 

Number of branches 358 365 -7 

Total work force (actual employees+personnel on leasing contracts) 3,724 3,779 -55 

Financial ratios 

ROE [profit for the year/equity (excluding profit for the year)] 8.11% 4.98% 

Cost:income ratio (operating expenses/operating income) 56.58% 63.54% 

Net non-performing loans/net loans to customers 2.29% 1.74% 

Net impaired loans/net loans to customers 2.41% 1.87% 

(*) Inclusive of bonds subscribed by the Parent amounting to €50 million as at 31 st December 2011 (€50 million also as at 31 st December 2010). 

(**) The item for 2010 included an impairment loss of €1.4 million relating to the Mariella Burani Group. 

The share capital of Banca Popolare di Bergamo as at 31 st December 2011 was wholly owned by UBI 

Banca. 

The year 2011 ended with a profit of €171.8 million, up significantly compared to €106.7 

million in 2010 (+€65.1 million; +61%), the result of good performance by net operating profit 

(+€85.7 million to €366.1 million), with an increase in revenues (+€74.3 million to €843.3 

million) and a contraction at the same time in the most significant expense items (-€11.4 

million to €477.1 million). 

Revenues performed as follows: 

- net interest income reached €503.6 million (+€60.1 million) as a result of favourable market 

trends for interest rates; 

164

- net commission income rose to €316 million (+€13.8 million), the aggregate result of an 

overall decrease in commissions on indirect funding, which was more than offset by an 

increase in commissions on current accounts (which also included those for commitment 

fees); 

- the contribution from net income from trading, hedging and disposals and repurchases, 

amounting to €2.1 million, was down on the previous year (-€7.5 million), due mainly to the 

negative impacts of hedges on fixed rate mortgages and on fair value changes in hedges on 

bonds; 

- other net operating income and expense increased to €21.4 million (+€8.1 million) benefiting 

to a large extent from net income from securitisations and covered bonds, as well as 

increased tax recoveries. 

Expenses included: 

- personnel expense down to €272.4 million (-€4.9 million). Both years were affected by 

extraordinary items 1 , net of which this expense increased by €12.1 million from 271.2 

million to €283.3 million, as a result of greater costs for company bonuses, salary trends 

and incentive schemes, partly offset by decreases in average personnel numbers; 

- the overall reduction in other administrative expenses to €197 million (-€7 million) is the 

aggregate result of a significant containment in the cost of some items (-€2.4 million for 

professional and advisory services; -€1.6 million for outsourced services; -€1.4 million for 

postal expenses and -€1.2 million for both credit recovery and rent payable), while the few 

items which increased included the tenancy of premises (+€1.6 million), fees for services 

provided by Group companies (+€1.5 million) and above all indirect taxes (+€3.7 million); 

- impairment losses on tangible and intangible assets increased by €0.5 million a €7.7 

million. 

As a result of the performance reported above, the cost:income ratio improved from 63.5% to 

56.6%. 

Net impairment losses on loans fell from €96.2 million to €83.1 million (-€13.1 million), 

including €73.6 million for specific impairment losses recognised on deteriorated loans (€48.5 

million on non-performing loans and €19 million on impaired loans) and €9.5 million for 

collective impairment losses on performing loans. The loan loss rate stood at 0.42% compared 

to 0.47% twelve months before. 

A sum of €1.5 million – classified within profits from the disposal of equity investments – 

contributed to pre-tax profit. It related to the sale of a property previously used as a branch 

which was then closed in 2010, when the distribution network was rationalised. 

As concerns the balance sheet, loans fell progressively from €20.3 billion to €19.6 billion (-€0.7 

billion; -3.3%), while the composition changed with an increase in mortgages and other 

medium to long-term loans (+€0.9 billion to €12.7 billion), accounting for 64.6% of total loans 

(58.1% in December 2010). On the other hand, short-term loans decreased, especially with 

regard to “Other transactions” (-€0.9 billion to €2.5 billion) affected by the repayment of some 

significant loans to “large corporate” clients. In terms of type of borrower, loans to “households 

and local businesses” increased by 4.5% year-on-year, while loans to the large corporate 

segment already mentioned decreased by 33.3%, consistent with the objective of not failing to 

provide support and liquidity to local economies. 

From the viewpoint of the quality of lending, net deteriorated loans increased over twelve 

months from €1,061.8 million to €1,212.5 million (+€150.7 million), although the trend 

reversed in the fourth quarter: +€95.1 million to €448.4 million for non-performing loans 2 

mainly due to transfers from impaired loans; +€92.5 million to €472.1 million for impaired 

loans, fuelled above all by new classifications from performing loans; -€31 million to €270 

million for restructured loans; -€5.9 million to €22 million for exposures past due and in 

arrears. Within the latter, exposures in arrears for between 90 and 180 days relating to 

1 The figure for 2011 benefited from the release of provisions set aside previously and better than expected results amounting to €10.9 

million before tax. In 2010, on the other hand, the item included higher expense of €6.1 million for leaving incentives, again before 

tax. 

2 In the second quarter, Banca Popolare di Bergamo disposed of unsecured non-performing loans amounting to €2.4 million, written 

down by 87.5%, which gave rise to a net loss on the sale of €0.2 million. 

165

exposures secured by real estate property fell from €23 million to €19.7 million. As a result of 

these trends both the ratio of net impaired loans to net lending and the ratio of non-performing 

loans to net loans increased from 1.74% to 2.29% and from 1.87% to 2.41% respectively. 

Penalised by the current difficulty in accumulating household savings, direct funding totalled 

€19.8 billion, a decrease of €0.8 billion compared to €20.6 billion at the end of 2010 (-4%) 3 , 

basically a reflection of changes in amounts due to customers (-0.8 billion to €12.9 billion) and 

in particular to the fall in current accounts and deposits (-€0.8 billion to €12.3 billion), which 

accounted for over 95% of the decrease. Repurchase agreements with ordinary customers also 

decreased, by half (-€0.2 billion), although offset by an increase in term deposits (+€0.1 billion) 

and other types of funding (+€0.1 billion). 

Securities issued performed steadily, unchanged at €6.9 billion, although a partial change in 

the composition occurred out of bonds (-€0.2 billion to €6.2 billion) and into other certificates 

(+€0.2 billion to €0.7 billion), for which the increase was mainly attributable swaps on 

certificates of deposit denominated in yen. 

Indirect funding from private individual customers also fell during the year from €24.9 billion 

to €24.5 billion (-€0.4 billion; -1.5%) 4 , the aggregate result of opposing trends within the item. 

On the one hand, assets under custody rose to €13.3 billion (+€0.8 billion), the consequence, 

amongst other things, of campaigns to sell financial instruments which resulted in new 

subscriptions of €0.7 billion. On the other hand, all components of assets under management 

(-€1.2 billion to below €11.2 billion) decreased – especially with regard to mutual investment 

funds and Sicav’s (-€0.7 billion to €5.3 billion) – due both to the results for net new 

subscriptions and to a generalised reduction in market prices. 

At the end of year the net interbank position showed funds of €1.6 billion, down compared to 

€2.5 billion twelve months before, a reflection of the increased impact of borrowings using 

repurchase agreements entered into with the Parent since August, for which the underlying 

was class A securities issued on 25 th July 2011 by UBI Finance 3 and subscribed by the bank 

as part of the securitisation transaction commenced in December 2010. 

Capital ratios consisted of a tier one ratio (tier one capital to risk weighted assets) of 16.33% 

(16.23% at the end of 2010) and a total capital ratio (supervisory capital and reserves to riskweighted 

assets) of 18.48% (18.38%). 

The proposal for the allocation of profit is to distribute dividends of €51.6 million after legal 

and by-law allocations and to allocate €108.3 million to the voluntary reserve. 

3 Net of intragroup items and the “large corporate” segment, total direct funding amounted to €18.9 billion a decrease of 

approximately 3% year-on-year. 

4 Net of the “large corporate” component, indirect funding amounted to €24 billion, an increase of 0.3% year-on-year. 

166

BANCO DI BRESCIA SPA 


31.12.2011 31.12.2010 Change 

% change 

Balance sheet 

Loans to customers 13,561,110 15,078,204 -1,517,094 -10.1% 

Direct funding (*) 12,732,715 12,118,974 613,741 5.1% 

Net interbank debt 167,426 -2,490,173 2,657,599 n.s. 

Financial assets held for trading 64,158 100,954 -36,796 -36.4% 

Available-for-sale financial assets 26,690 20,913 5,777 27.6% 


Total assets 15,752,411 17,621,805 -1,869,394 -10.6% 

Indirect funding from customers (including insurance) 12,893,350 14,849,800 -1,956,450 -13.2% 

of which: assets under management 6,488,943 7,569,511 -1,080,568 -14.3% 


Net interest income 324,449 325,858 (1,409) (0.4%) 

Dividends and similar income 1,280 1,249 31 2.5% 


Net income (loss) from trading, hedging and disposal/repurchase activities 1,426 (1,477) 2,903 n.s. 

Other net operating income/(expense) 14,920 14,845 75 0.5% 


Personnel expense (173,677) (172,843) 834 0.5% 


Net impairment losses on property, equipment and investment property and intangible assets (10,255) (11,101) (846) (7.6%) 




Net impairment losses on other assets/liabilities (***) (2,493) (849) 1,644 193.6% 

Net provisions for risks and charges (5,718) (2,875) 2,843 98.9% 

Profit on the disposal of equity investments 184 1,296 (1,112) (85.8%) 





Number of branches 364 362 2 







(*) Inclusive of bonds subscribed by the Parent amounting to €752.3 million as at 31 st December 2011 (€382.2 million as at 31 st December 

2010). 

(**) The item for 2010 included an impairment loss of €1.4 million relating to the Mariella Burani Group. 

(***) The item included impairment losses in 2011 on the available-for-sale companies Immobiliare Fiera di Brescia (€1 million) and Risparmio e 

Previdenza (€0.6 million). 

The share capital of Banco di Brescia as at 31 st December 2011 was wholly owned by UBI Banca. 

Banco di Brescia ended 2011 with a profit of €95 million, an increase compared to €72 million 

earned in the year before. 

Net operating income rose to €229 million from €219.2 million before, due to the combined 

effect of an increase in operating income (+€5.3 million) and a reduction in operating expenses 

(-€4.5 million). 

The main items of revenues, which totalled €541.7 million, performed as follows: 

- net interest income remained fairly stable at €324.4 million (-€1.4 million), the aggregate 

result of the following: higher funding costs even though average volumes fell; on the 

lending front, the effect of repricing action with a fall in volumes of short-term loans was 

only partially offset by growth in medium to long-term lending; the absence of net interest 

income from the business of the foreign branch (contributed in December 2010); 

- net commission income reached almost €200 million (+€3.7 million), a reflection of income 

earned on insurance products (+€3.9 million), collection and payment services (+€1.9 

167

million) and other services (+€5.3 million; inclusive of commitment fees), which more than 

compensated for the contraction in commissions from the placement of securities (-€6.2 

million), attributable primarily to a fall in the placement of third party bonds; 

- trading, hedging and disposal and repurchase activities generated income of €1.4 million (a 

loss of €1.5 million in 2010), the result of opposing performance by the individual items: 

losses on fixed rate mortgage hedges (-€2.4 million) and repurchases of financial liabilities (- 

€0.4 million) were offset by profits on fair value changes in bond hedges (€1.8 million) and 

business in domestic currency swaps, in relation to swaps on certificates of deposit 

(totalling €1.6 million); 

- the residual item, other net operating income and expense, amounted to €14.9 million, 

unchanged compared to the year before. 

Expenses, down to €312.8 million, performed as follows: 

- personnel expense of €173.7 million rose slightly (+0.5%) due principally to growth in the 

average cost of the various components of income, which was only partially offset by a 

decrease in average personnel numbers; 

- other administrative expenses of €128.8 million fell significantly (-€4.5 million) – which by 

themselves account for the decrease in the whole aggregate – the result of a careful policy to 

monitor expenses and improve efficiency. The main savings were made on “telephone and 

data transmission expenses” (-€3.2 million) 5 , “postal expenses” (-€0.8 million) and 

“outsourced services” (-€1.4 million), while increases were recorded by “fees for services 

provided by Group companies” (+€1.7 million) and “tenancy of premises” expenses (+€0.6 

million); 

- impairment losses of €10.3 million on tangible and intangible assets decreased by €0.8 

million compared to the previous year. 

As a result of the performance reported above, the cost:income ratio fell from 59.1% to 57.7%. 

Net impairment losses on loans fell to €65.7 million compared to €97.9 million in 2010 which 

included an impairment loss for a large amount on a non-performing position. 

Specific impairment losses on non-performing loans amounted to €60.7 million (€77.2 million), 

of which €48.1 million on non-performing loans, while collective impairment losses on 

performing loans amounted to €5 million (€20.7 million the year before). As a consequence, the 

loan loss rate fell to 0.48% (0.65% in 2010). 

Net impairment losses on other assets and liabilities were recognised amounting to €2.5 

million (€0.8 million in 2010). The item includes impairment losses on securities classified 

within the available-for-sale portfolio relating to equity investments held in the companies 

Immobiliare Fiera di Brescia and Risparmio & Previdenza Spa (a total of €1.6 million). 

Net provisions for risks and charges increased from €2.9 million to €5.7 million, a reflection of 

greater charges for revocation clawback actions and legal action relating to compounding of 

interest. 

As concerns balance sheet items, loans to customers amounted to €13.6 billion, a fall of 10.1% 

year-on-year, attributable to a reduction in short-term loans: current account overdrafts (-€0.4 

billion to €2.2 billion) and other transactions (-€1.3 billion to €2.2 billion), while mortgages and 

other forms of medium to long-term lending held firm (+€0.2 billion to €9.1 billion), now 

accounting for 67.1% of total lending. 

At the end of the year, the net deteriorated loans of the Bank had risen to €838 million 

(+12.3% million euro over twelve months). In detail, increases were recorded for net nonperforming 

loans (up from €184.9 million to €220.2 million) and impaired loans (up from 

€318.7 million to €384.9 million), while slight decreases occurred for restructured exposures 

(down from €201.5 million to €194.7 million) and positions past due and/or in arrears (down 

from €41 million to €38.3 million), which included €26.8 million of exposures in arrears for 

between 90 and 180 days secured by mortgage collateral. 

5 Due, amongst other things, to the absence of an expense for participation in a guarantee system designed to cover the costs of 

damages resulting from the fraudulent use of magnetic strip cards (subject to mass replacement with cards fitted with microchips in 

2011). 

168

Direct funding reached €12.7 billion, up by 5.1% compared to 2010. Amounts due to 

customers rose to €9.2 billion (+3.1%), benefiting from an increase in current accounts and 

term deposits (a total increase of €0.5 million), which offset the fall in repurchase agreements 

(-€0.2 million). 

Securities issued also increased, rising from €3.2 billion to €3.5 billion, due principally to the 

issue of a bond for €0.6 billion subscribed by the Parent and designed to improve structural 

balance, while a similar debt instrument was redeemed early for €0.3 billion. 

Indirect funding from ordinary customers amounted to €12.9 billion, down by 13.2%, 

attributable to negative trends for all components. 

Although benefiting from the placement of bonds issued by third parties and by the Parent (a 

total of €0.5 billion), assets under custody fell to €6.4 billion (-€0.9 billion) affected by the 

performance of equity and bond markets. Assets under management, amounting to €6.5 

billion, also fell significantly (-€1.1 billion), penalised by both the performance effect and by 

negative net inflows for mutual investment funds and Sicav’s (-€0.8 billion) and customer 

portfolio managements (-€0.3 billion). 

At the end of year the bank had a net interbank position consisting of funding of €0.2 billion 

(debt of €2.5 billion the year before). The change occurred in relation to diminished debt to the 

Parent in the form of both the correspondence account, as a result of a decrease in the 

volumes of business with customers, and repurchase agreements (-€0.8 billion), following the 

first amortisation of the class A notes (senior tranches) issued by UBI Finance 2 as part of a 

securitisation transaction. 



assets) of 15.75% (13.28%). 


and by-law allocations. 

169

BANCA POPOLARE COMMERCIO E INDUSTRIA SPA 


31.12.2011 31.12.2010 Change 

% change 

Balance sheet 



Net interbank debt -139,265 253,106 -392,371 n.s. 


Available-for-sale financial assets 10,366 19,314 -8,948 -46.3% 

Equity (excluding profit for the year) 1,159,664 1,159,451 213 0.0% 

Total assets 9,819,351 10,129,982 -310,631 -3.1% 

Indirect funding from customers (including insurance) 10,057,784 11,186,686 -1,128,902 -10.1% 

of which: assets under management 4,132,113 4,743,435 -611,322 -12.9% 



Dividends and similar income - 2 (2) (100.0%) 


Net loss from trading, hedging and disposal/repurchase activities (832) (2,145) (1,313) (61.2%) 

Other net operating income/(expense) (**) 3,868 7,791 (3,923) (50.4%) 






Net operating income (loss) 116,407 78,312 38,095 48.6% 

Net impairment losses on loans (***) (25,220) (30,827) (5,607) (18.2%) 

Net impairment losses on other assets/liabilities (888) (13) 875 n.s. 

Net provisions for risks and charges (2,134) (2,718) (584) (21.5%) 

Profit on the disposal of equity investments (2) (20) (18) (90.0%) 





Number of branches 235 234 1 







(*) The item included bonds as at 31 st December 2010 subscribed by the Parent amounting to €181 million. 

(**) The item included approximately one million euro in 2010 as the price received for the sale to RBC Dexia of the correspondence banking 

operations and €1.7 million of amounts recovered following the bankruptcy of a counterparty. 

(***) The item for 2010 included an impairment loss relating to the Mariella Burani Group amounting to €1.6 million. 

As at 31 st December 2011, UBI Banca held 75.0769% of the share capital of Banca Popolare Commercio, the 

Banca del Monte di Lombardia Foundation held 16.2369% and the remaining 8.6862% was held by Aviva 

Spa. 

The Bank ended the year with a profit of €50 million, a more than twofold increase compared 

to €21.9 million earned in 2010. 

Net operating income amounted to €116.4 million (+€38.1 million compared to 2010), the 

result of both an increase in operating income (+6% to €357.1 million) and the containment of 

costs (-7.2% to €240.7 million). 

The performance by operating income (+€19.3 million) was driven primarily by net interest 

income, up from €197.8 million to €216.7 million, which benefited from growth in interest rate 

spreads and also from greater volumes of medium to long-term lending business. 

Net commission income also made a positive contribution, although to a more moderate 

extent, rising from €134.3 million to €137.3 million, as a result of contributions from “foreign 

business”, “collection and payment services” and “current account management”. 

Trading and hedging activity recorded a net loss of €0.8 million (a loss of €2.1 million at the 

end of 2010), as it continued to be affected by the negative impact of hedges on fixed rate 

170

mortgages (-€6.5 million) and the loss on disposals and repurchases of financial liabilities 

(-€0.8 million), while a profit of €0.6 million was earned on fair value changes in hedges on 

bonds and of €2.7 million on trading activity. 

Other net operating income and expense fell to €3.9 million from €7.8 million the year before. 

As already reported, in 2010 the item had benefited from extraordinary recoveries (€2.4 

million) and a non-recurring contribution of approximately one million euro resulting from the 

sale of corresponding banking contracts to RBC Dexia. 

As concerns operating expenses, personnel expense decreased by 7.4% (down from €137.3 

million to €127.1 million), attributable primarily to a reduction in average personnel numbers 

notwithstanding an increase in the average cost of the different components of employment 

contracts (company bonus and salary and incentive scheme trends). 

Other administrative expenses of €106.4 million fell by almost €10 million compared to the 

previous year, as a result of a reduction in intragroup service fees (-€3.8 million) and in “rent 

payable” (-€2.4 million) in addition to savings on the following: “telephone and data 

transmission expenses”, “postal expenses”, “property and equipment maintenance” and 

“professional and advisory services” expenses (for total savings of €2.6 million). 


amounted to €7.1 million, an increase of approximately €1 million euro. 

As a result of the performance reported above, the cost:income ratio improved considerably 

falling from 76.8% to 67.4%. 

Net impairment losses on loans fell to €25.2 million (-€5.6 million), as a result of constant 

attention paid to monitoring and risk management, which helped to improve the quality of the 

portfolio. Provisions for risks and charges, which included provisions made to meet existing 

litigation risks (compounding of interest, investment services, bonds, banking contracts and 

clawback revocatory proceedings), also fell, down from €2.7 million to €2.1 million. 

As concerns balance sheet items, loans to customers amounted to €8.6 billion a decrease 

compared to €8.9 billion in 2010, reflecting falls in short term lending (“current account 

overdrafts” and “other transactions”), which were only partially offset by growth in mortgages 

and other forms of medium to long-term lending, which rose to €5.8 billion (68.2% of total 

lending). 

Net deteriorated loans, amounting to €552.3 million, remained virtually unchanged compared 

to €549.5 million the year before. 

In detail, increases were recorded in net non-performing loans, up from €263.3 million to 

€308.7 million, and in restructured exposures, up from €42.3 million to €53.4 million, while 

impaired loans reduced from €225 million to €184.4 million, together with past due loans, 

which fell from €18.9 million to €5.8 million, as a result of a significant decrease in arrears for 

between 90 and 180 days relating to exposures secured by real estate property (€5.1 million 

compared to €18.3 million at the end of 2010). 

At the end of the year the direct funding of the Bank totalled €7.5 billion, down by €0.7 billion, 

attributable in particular to securities issued (-€0.5 billion), the result, amongst other things, 

of the early redemption of a bond subscribed by the Parent amounting to €180 million. 

At the same time, indirect funding from private customers also fell with respect to 2010, falling 

from €11.2 billion to €10 billion, affected by negative performance by financial markets and by 

a decrease in net inflows of new subscriptions. 

All the main components recorded decreases: assets under custody fell to €5.9 billion (€6.5 

billion in December 2010), while assets under management amounted to €4.1 billion (€4.7 

billion), penalised by the trend in the mutual fund and Sicav sectors (-€0.5 billion to €2 

billion). 

At the end of 2011, the net interbank position was one of debt of €0.1 billion (funds of €0.3 

billion twelve months before), due to increased debt to the Parent, in the form of both current 

171

accounts and deposits and term deposits, partly as a result of the early redemption of the bond 

already mentioned, amounting to €180 million. 



assets) of 20.74% (19.81%). 

The proposal for the use of profit is to distribute dividends of €47 million after legal and by-law 

allocations. 

172

BANCA REGIONALE EUROPEA SPA 


31.12.2011 31.12.2010 Change 

% change 

Balance sheet 

Loans to customers 6,916,708 6,851,620 65,088 0.9% 

Direct funding (*) 5,809,713 5,592,784 216,929 3.9% 

Net interbank debt -101,899 -195,497 -93,598 -47.9% 

Financial assets held for trading 19,406 25,269 -5,863 -23.2% 

Available-for-sale financial assets 12,912 9,610 3,302 34.4% 

Equity (excluding profit for the year) 1,439,972 1,216,497 223,475 18.4% 

Total assets 8,033,252 8,132,305 -99,053 -1.2% 





Dividends and similar income 403 1,318 (915) (69.4%) 

Net commission income 97,927 99,330 (1,403) (1.4%) 

Net loss from trading, hedging and disposal/repurchase activities (500) (946) (446) (47.1%) 

Other net operating income/(expense) 6,817 8,809 (1,992) (22.6%) 


Personnel expense (109,376) (110,126) (750) (0.7%) 


Net impairment losses on property, equipment and investment property and intangible assets (7,653) (6,644) 1,009 15.2% 



Net impairment losses on loans (26,965) (27,430) (465) (1.7%) 

Net impairment losses on other assets/liabilities (1,162) (169) 993 587.6% 

Net provisions for risks and charges (**) (975) 3,253 (4,228) n.s. 

Profit (loss) on the disposal of equity investments and impairment of goodwill (***) (226) 230,662 (230,888) n.s. 

Pre-tax profit from continuing operations 50,730 264,550 (213,820) (80.8%) 


Profit for the year 30,186 246,375 (216,189) (87.7%) 


Number of branches 229 229 - 







(*) Inclusive of bonds subscribed by the Parent amounting to €201.3 million as at 31 st December 2011 (€201 million as at 31 st December 

2010). 

(**) In 2010 the item included the release of a provision made in prior years for litigation with the Ministry of the Economy amounting to €3.9 

million. 

(***) In 2011 the item included an impairment loss on the goodwill of the Nice branch amounting to €0.2 million. In 2010, on the other hand, the 

item related primarily to a gain on the sale of an interest held in BPCI to the Banca del Monte di Lombardia Foundation. 

As at 31 st December 2011, UBI Banca held 74.9437% of the share capital of Banca Regionale Europea, the 

Cassa di Risparmio di Cuneo Foundation held 24.98% and the remaining 0.0763% was held by non 

controlling shareholders. 

The year 2011 ended with a profit of €30.2 million, a decrease compared to €246.4 million the 

year before, which, however, benefited from a significant gain (€225.4 million net of taxes), 

realised following the sale of an interest held in the share capital of Banca Popolare Commercio 

e Industria to the Banca del Monte di Lombardia Foundation as part of the reorganisation of 

the ownership structure following the “branch switches” performed in January 2010. In 

normalised terms, net of non-recurring items, 2011 profit amounted to €30 million, an 

increase compared to €22.7 million in 2010 (+€7.3 million; +32.5%). 

Net operating income performed well (+€21.8 million to €80 million), with over three quarters of 

the growth attributable to increased income (+€17.1 million to €273 million) and the remaining 

part to savings on costs (down by €4.7 million to approximately €193 million). 

Revenues performed as follows: 

173

- net interest income reached €168.4 million (+€21 million), mainly as a result of pricing 

policies implemented on loans as a whole and on mortgages in particular; 

- the fall in dividends (-€0.9 million to €0.4 million) arose from the absence of a dividend 

distributed by the subsidiary Banco di San Giorgio; 

- net commission income fell slightly to €97.9 million (-€1.4 million), the aggregate result of a 

fall in items relating to indirect funding, consisting of the placement of third party securities 

and the distribution of third party services, while an increase was recorded on commissions 

on current accounts (which also included those for commitment fees); 

- net trading and hedging activity again recorded a loss of €0.5 million, although this was an 

improvement compared to the loss of €0.9 million the year before. It was affected by the 

negative impact of hedges on fixed rate mortgages and the repurchase of own bonds on the 

secondary market, which was only partially offset by gains from fair value changes in 

hedges on bonds; 

- other net operating income and expense fell to €6.8 million (-€2 million) due to the absence 

of extraordinary components, which the 2010 result had benefited from. 

Expenses included: 

- personnel expense of €109.4 million, almost unchanged compared to €110.1 million before 

which, however, included redundancy expenses of €2.3 million. Net of that non recurring 

item, this expense increased by €1.8 million, the aggregate result of opposing trends with a 

reduction in personnel numbers on the one hand and an increase in the average cost of the 

components of employment contracts on the other; 

- other administrative expenses fell to €75.9 million (-€5 million), benefiting from an attentive 

policy to control expenses and improve efficiency, which resulted in significant savings on 

the following: telephone data transmission expenses (-€2 million 6 ), insurance premiums 

(-€1.4 million), outsourced services (-€0.9 million), professional and advisory services (-€0.6 

million) and postal expenses (-€0.5 million). The most significant increases, on the other 

hand, were for tenancy of premises expenses (+€0.7 million) and above all for indirect taxes 

(+€1.2 million); 

- net impairment losses on property, equipment and investment property and intangible 

assets (+€1 million to €7.7 million) included the depreciation on the new headquarters in 

Turin, to which General Management and central offices previously located in Milan and 

decentralised units at Cuneo were transferred in January 2011. 

As a result of the performance reported above, the cost:income ratio improved from 77.2% to 

70.7%. 

Net impairment losses on loans fell slightly to approximately €27 million (-€0.4 million) and 

included specific impairment losses on non-performing loans of €25.2 million (€23.4 million in 

2010) and collective impairment losses on performing loans of €1.8 million (€4 million in 

2010). 

On the other hand, net impairment losses on other assets and liabilities increased to €1.1 

million (+€1 million), including €0.6 million 7 relating to available-for-sale financial assets and 

€0.5 million to guarantees. 

Net provisions for risks and charges of approximately €1 million were recognised in relation to 

risks for current litigation, while net reversals of €3.3 million were recognised in 2010, which 

had benefited from a release of €3.9 million as a result of a settlement agreement concerning 

litigation with the Ministry of the Economy and Finance. 

The income statement also recorded a loss on the disposal of investments and impairment 

losses on goodwill amounting to €0.2 million, which included an impairment loss on the 

goodwill relating to the French branch in Nice, while the 2010 figure originated from the gross 

gain, already mentioned, of €230.7 million made on the disposal of the interest held in BPCI. 

6 Due, amongst other things, to the absence of an expense for participation in a guarantee system designed to cover the costs of 

damages resulting from the fraudulent use of magnetic strip cards (subject to mass replacement with cards fitted with microchips in 

2010). 

7 This included €0.40 million in 2011, relating to the new investment in the fund Eptasviluppo. 

174

As concerns the balance sheet, loans exceeded €6.9 billion (+0.9%), including €127.5 million 

relating to the foreign branches. A change in the composition of the item occurred with an 

increase in medium to long-term loans, consisting mainly of mortgages (+€0.2 billion to €4.1 

billion), accounting for 58.8% of total loans (56.3% in December 2010). 

As concerns the quality of lending, net deteriorated loans increased over twelve months from 

€306.2 million to €360.7 million (+€54.5 million), although this trend reversed in the last 

quarter. In detail: +€22.3 million to €150.8 million for non-performing loans 8 , due mainly to 

transfers from impaired loans; +€37.9 million to €168.8 million for impaired loans, fuelled 

above all by new classifications from performing loans; +€10.5 million to €30.8 million for 

restructured loans, following the transfer of three positions previously classified within 

impaired loans; -€16.2 million to €10.3 million for exposures past due and in arrears. Within 

the latter, exposures in arrears for between 90 and 180 days relating to exposures secured by 

real estate property fell from €22.6 million to €7.9 million. As a result of these trends, both the 

ratio of net impaired loans to net lending and the ratio of non-performing loans to net loans 

increased to 2.44% and to 2.18% respectively. 

Direct funding totalled €5.8 billion, an increase of €0.2 billion compared to €5.6 billion at the 

end of 2010 (+3.9%), driven by the growth in amounts due to customers (+€0.1 billion to €4 

billion 9 ), in the context of which the fall in repurchase agreements was more than offset by 

increases in current accounts and deposits. 

Securities issued reached €1.8 billion (+€0.1 billion), a reflection of good performance by 

certificates of deposit (+€0.1 billion), used mainly for swaps in yen. 

Indirect funding from private customers fell overall during the year from €7.3 billion to €6.8 

billion (-€0.4 billion; -5.9%), fully reflecting the decreases in assets under management (-€0.5 

billion to €3.7 billion) and in mutual investment funds and Sicav’s in particular (-€0.4 billion 

to €1.7 billion), which were offset by growth in assets under custody (+€0.1 billion to over €3.1 

billion). 

At the end of year the net interbank position, which related primarily to the Parent, consisted 

of debt of €0.1 billion (an increase compared to -€0.2 billion in 2010). 



assets) of 28.52% (27.69%). 


allocations and an allocation to the voluntary reserve. 

As reported in the preceding section, “Significant events that occurred during the year ”, on 21 st December 

2011, the Board of Directors of Banca Regionale Europea passed a resolution to merge its subsidiary, 

Banco di San Giorgio Spa, into itself, scheduled for July 2012 with a view to Group simplification and the 

creation of a North West banking centre. 

Finally with effect from 1 st February 2012, Riccardo Barbarini was appointed General Manager of Banca 

Regionale Europea to replace Roberto Tonizzo, who will occupy the same position in another bank in the 

Group. 

8 In the second quarter, Banca Regionale Europea disposed of unsecured non-performing loans for €10.1 million, written down by 

97%, which gave rise to a net loss on the sale of €43 thousand. 

9 Inclusive of €45.2 million relating to foreign branches. 

175

BANCA POPOLARE DI ANCONA SPA 


31.12.2011 31.12.2010 Change 

% change 

Balance sheet 



Net interbank debt -839,437 -209,751 629,686 300.2% 



Equity (excluding profit for the year) 874,448 875,143 -695 -0.1% 

Total assets 8,744,167 9,100,755 -356,588 -3.9% 





Dividends and similar income 1,025 3,757 (2,732) (72.7%) 


Net income (loss) from trading, hedging and disposal/repurchase activities (1,001) 2,970 (3,971) n.s. 

Other net operating income/(expense) 3,140 2,732 408 14.9% 




assets (11,489) (11,980) (491) (4.1%) 




Net impairment losses on other assets/liabilities 726 955 (229) (24.0%) 

Net provisions for risks and charges (1,282) (1,057) 225 21.3% 

Profit (loss) on the disposal of equity investments (***) (28,147) 25 (28,172) n.s. 





Number of branches 238 248 -10 







(*) The item included bonds as at 31 st December 2010 subscribed by Parent amounting to €352 million. 

(**) The item for 2010 included an impairment loss relating to the Mariella Burani Group amounting to €0.9 million. 

(***) The figure for 2011 included the effects of the recognition of impairment losses on the investments in UBI Leasing (€16.2 million) and in 

Centrobanca (€11.9 million). 

As at 31 st December 2011, UBI Banca held 92.934% of the share capital of the Banca Popolare di Ancona, 

Aviva Spa held 6.486% and the remaining 0.580% was held by non controlling shareholders. 

The year 2011 ended with a profit of €2.3 million (€18.3 million in 2010), affected by losses of 

€28.1 million incurred for impairment losses recognised on investments in UBI Leasing (€16.2 

million) and Centrobanca (€11.9 million), as a result of impairment tests. 

Net of those items, classified as non-recurring, profit amounted to €30.4 million, an increase 

compared to the normalised figure for the year before (€21.6 million). 

Net operating income recorded growth of 14.3% to €103.3 million, due to the combined effect 

of higher operating income (+3.1%) and lower costs (-1.3%). 

The main items of income, which amounted to €328.9 million (+€9.8 million), performed as 

follows: 

- net interest income rose to €213.6 million (+€9.3 million), as a result of an increase in the 

contribution from net interest from customers, which benefited from an increase in medium 

to long-term loans; 

176

- dividends and similar income fell from €3.8 million to €1 million and related to 

remuneration on investments held in Centrobanca and Arca Sgr; 

- net commission income of €112.2 million increased by €6.8 million, benefiting from growth 

in commissions on current accounts (including commitment fees) and also on collection and 

payment services; 

- trading, hedging and disposal and repurchase activities generated a loss of approximately 

€1 million (a profit of €3 million in 2010), attributable mainly to the negative impact of 

hedges on fixed rate mortgages and losses on the repurchase of financial liabilities, even if 

profits were recognised on fair value changes in hedges on bonds and domestic currency 

swap business in relation to swaps on certificates of deposit (primarily with Japanese yen); 

- other net operating income and expense rose to €3.1 million from €2.7 million the year 

before. 

Operating expenses, which fell by €3.1 million to €225.6 million, performed as follows: 

- personnel expense of €126.6 million increased slightly due to an increase in the average 

cost of the components of employment contracts, which was only partially offset by the 

reduction in average personnel numbers; 

- other administrative expenses, however, fell to €87.4 million (-€3.3 million), due in 

particular to lower expenses for rent payable, professional and advisory services, 

outsourced services and postal expenses; 


assets also fell to €11.5 million, from €12 million the year before. 

As a result of work performed to improve the quality of loans, commenced as far back as 2008 

by improving management and monitoring processes, net impairment losses on loans fell 

significantly from €51.5 million to €43.3 million (€38 million attributable to specific 

impairment losses on loans in default) and the loan loss rate fell as a consequence from 0.67% 

to 0.55%. 

Net provisions for risks and charges amounted to €1.3 million (€1.1 million in 2010) and 

related mainly to litigation concerning financial investments and the compounding of interest. 

As concerns the balance sheet, at the end of year loans to customers had reached €7.8 billion 

(+1.4% compared to twelve months before), driven by growth in mortgages and other forms of 

medium to long-term lending (+6.4% to €5.3 billion), while falls were recorded for current 

account overdrafts (-€0.1 billion to €1.4 billion) and other forms of short term lending (-€0.1 

billion to €1.1 billion). 

The net deteriorated loans of the Bank rose to €661.6 million from €572.3 million in 2010. The 

trend affected all categories as follows: 

- net non-performing loans increased by 18.2% to €339.8 million and they increased at the 

same time as a percentage of total loans from 3.73% to 4.35%; 

- impaired loans recorded growth of 7.9% to €273.5 million, accounting for 3.5% of total 

loans (3.29% in December 2010); 

- restructured exposures almost doubled to €28.9 million due to new classifications of 

significant counterparties, while positions past due and/or in arrears amounted to €19.4 

million (€15.7 million the year before), of which €11.6 million attributable to exposures in 

arrears for between 90 and 180 days backed by mortgages. 

Direct funding of €6.4 billion fell by 6% over twelve months. Within the item, securities issued 

fell to €2.1 billion (-€0.3 billion), affected mainly by the early redemption of a bond (€350 

million) subscribed by the Parent, while growth was recorded in the item “Other certificates” 

(+€0.1 billion), composed mainly of certificates of deposit denominated in foreign currency 

(primarily Japanese yen). 

However, the fall in amounts due to customers was more modest (-€0.1 billion to 

approximately €4.4 billion), in relation to new demand for repurchase agreements by 

customers. 

In a particularly difficult market context, indirect funding also decreased to €3.5 billion from 

€3.8 billion in December 2010, penalised by negative performance by all components of assets 

177

under management, which fell overall to €1.6 billion (-16.9%), and by mutual funds and 

Sicav’s in particular (-€0.2 billion to €0.6 billion). Assets under custody on the other hand 

increased slightly (+1.2% to approximately €2 billion), benefiting above all from the 

contribution of €0.2 billion made by bonds issued by the Parent and by third parties. 

At the end of year the net interbank position again consisted of debt of €0.8 billion (-€0.2 

billion in December 2010), due to the maturity of term deposits held with the Parent and, in 

terms of liabilities, to new term deposits made by the Parent, designed to maintain structural 

balance. 


(15.13% in 2010) and a total capital ratio (supervisory capital and reserves to risk-weighted 

assets) of 16.27% (15.57%). 

The proposal for the allocation of profit is to distribute dividends of €2.1 million after an 

allocation to the extraordinary reserve of €131 thousand and an allocation of €90 thousand to 

a fund available to the Board of Directors. 

178

BANCA CARIME SPA 


31.12.2011 31.12.2010 Change 

% change 

Balance sheet 


Direct funding 7,552,126 7,562,665 -10,539 -0.1% 

Net interbank debt 3,555,824 3,670,923 -115,099 -3.1% 

Financial assets held for trading 3,395 2,698 697 25.8% 

Available-for-sale financial assets 27,661 27,793 -132 -0.5% 


Total assets 9,684,175 9,784,297 -100,122 -1.0% 





Dividends and similar income 122 107 15 14.0% 


Net income (loss) from trading, hedging and disposal/repurchase activities (928) 2,018 (2,946) n.s. 

Other net operating income/(expense) (*) 9,955 4,618 5,337 115.6% 


Personnel expense (**) (144,902) (153,219) (8,317) (5.4%) 

Other administrative expenses (94,708) (94,309) 399 0.4% 

Net impairment losses on property, equipment and investment property and intangible assets (14,082) (14,582) (500) (3.4%) 



Net impairment losses on loans (22,778) (22,875) (97) (0.4%) 

Net impairment losses on other assets/liabilities (488) (434) 54 12.4% 

Net provisions for risks and charges (2,676) 862 (3,538) n.s. 

Loss on the disposal of equity investments and impairment of goodwill (***) (11,392) (2) 11,390 n.s. 












(*) In 2011 the item included insurance compensation of approximately €4 million following a decision by the Court of Appeal of Catanzaro. 

(**) In 2011 the item included the release of a provision made previously of €3.7 million. 

(***) In 2011 the item included an impairment loss of €12.1 million on the goodwill of the Bank. 

As at 31 st December 2011, UBI Banca held 92.8332% of the share capital of Banca Carime, Aviva Spa held 

7.1476% and the remaining 0.0192% was held by non controlling shareholders. 

Banca Carime ended 2011 with a profit of €46 million an increase compared to €37.7 million 

2010, even though it incurred an impairment loss on goodwill of €12.1 million. 

Net operating income recorded growth of 28.9% to €117.8 million, as a result of increased 

operating income (+€18 million to €371.5 million) and a decrease in operating expenses at the 

same time (-€8.4 million to €253.7 million). 

In detail, income performed as follows: 

- net interest income of €250.2 million rose by 5.6% (+€13.2 million), principally as a result of 

higher interest rates combined with larger volumes of medium to long-term lending; 

- net commissions amounted to €112.2 million (+2.2%; +€2.4 million) due in particular to 

current account commissions, inclusive of commitment fees, which more than compensated 

for the reduction in commissions on the placement of securities, on loan origination for 

B@nca 24-7 (due to a decrease in loans) and on insurance; 

- the net result on trading, hedging and disposal and repurchase of financial assets/liabilities 

fell from a profit of €2 million to a loss of €0.9 million, due to the negative impact of fair 

value changes in hedges on bonds (-€0.6 million), hedges on fixed rate mortgages (-€0.3 

179

million) and the repurchase of own bonds on the secondary market (-€1.6 million), while 

profits were earned on securities trading (+€0.9 million); 

- other operating income and expenses increased from €4.6 million to €10 million, benefiting 

from an insurance reimbursement of approximately €4 million. 

As concerns operating expenses: 

- personnel expense fell by 5.4%, to €144.9 million, attributable mainly to a reduction in 

average personnel numbers, while variable components of remuneration increased; 

- other administrative expenses of €94.7 million remained almost unchanged compared to 

2010 (+0.4%). Within the item, increases were recorded in “fees for services provided by 

Group companies” (+€1.3 million), “insurance premiums” (+€1.2 million) and “tenancy of 

premises” (+€0.9 million), while expenses decreased for “professional and advisory services” 

(-€0.8 million), “outsourced services” (-€0.7 million), “postal expenses” 

(-€0.6 million) and “telephone and data transmission” expenses (-€0.5 million); 


assets also remained stable at €14.1 million (€14.6 million). 

As a result of these changes, the cost:income ratio improved by almost six percentage points, 

falling from 74.1% to 68.3%. 

Net impairment losses on loans fell slightly to €22.8 million (€22.9 million twelve months 

before), the result of a reduction in collective impairment losses (-€5.1 million) and an increase 

in specific net impairment losses (+€5 million). 

Net impairment losses on other assets/liabilities were again marginal at €0.5 million (€0.4 

million), while net provisions for risks and charges amounted to €2.7 million consisting mainly 

of provisions made for litigation with customers for compounding of interest (in 2010 the item 

consisted of net reversals of €0.9 million). 

Finally net operating income for the year included an expense of €11.4 million, the net result of 

an impairment loss of €12.1 million on goodwill and gains on the sale of properties of €0.7 

million. 

As concerns the balance sheet, loans to customers rose to €4.9 billion with growth of €0.1 

billion (+2.1%), driven by growth in medium to long-term lending (+€0.2 billion), consisting 

principally of mortgages, which now accounts for 71.6% of the loan portfolio, while a 

generalised fall was recorded by short term loans (-€0.1 billion). 

The continuation of the economic crisis in a local economy, which was already particularly 

fragile, was reflected in a decline in the quality of credit, with an increase in net deteriorated 

loans to €270.5 million (+€85.9 million). In detail, net non-performing loans increased (+€35 

million to €93.9 million) as did net impaired loans (+54.3 to €162.3 million), while slight 

decreases occurred for restructured exposures (-€0.1 million to €2.1 million) and past due 

exposures (-€3.3 million to €12.2 million), which included €8.7 million of exposures in arrears 

for between 90 and 180 days secured by real estate property. 

Direct funding from customers, totalling €7.6 billion, remained unchanged compared to the 

year before. Within the item, amounts due to customers remained stable at €5.2 billion as did 

securities issued at €2.4 billion, while a partial change in the composition occurred within the 

item, out of bonds and into certificates of deposit, mainly into certificates of deposit 

denominated in yen. 

On the other hand indirect funding from customers amounting to €5.4 billion, fell by €0.4 

billion due to decreases in assets under management (-0.8 billion to €2.9 billion), penalised by 

significant declines in mutual investment funds and Sicav’s (-€0.7 billion to €1.6 billion). On 

the other hand assets under custody rose to €2.5 billion (+€0.4 billion), as a result of the 

placement of bonds issued by third parties and by the Parent in particular (a total increase of 

€0.4 billion nominal). 

At the end of 2011 the net interbank position consisted of funds of €3.6 billion (-€0.1 billion 

compared to the end of 2010), a reflection of the significant liquidity held by the Banca. 

180



assets) of 31.63% (29.82%). 

The proposal for the allocation of profit is to distribute total dividends of €42.4 million after 

legal and by-law allocations. 

181

CENTROBANCA SPA 


31.12.2011 31.12.2010 Change 

% change 

Balance sheet 


Direct funding (*) 6,700,750 5,547,161 1,153,589 20.8% 

Net interbank debt -642,178 -1,514,777 -872,599 -57.6% 



Equity (excluding profit for the year) 542,566 577,124 -34,558 -6.0% 

Total assets 10,672,079 10,512,435 159,644 1.5% 



Dividends and similar income 939 1,532 (593) (38.7%) 


Net income from trading, hedging and disposal/repurchase activities (**) 15,288 14,010 1,278 9.1% 

Other net operating income/(expense) 2,002 5,351 (3,349) (62.6%) 

Operating income 138,539 163,207 (24,668) (15.1%) 





Net operating income 86,675 108,198 (21,523) (19.9%) 

Net impairment losses on loans (***) (60,439) (65,430) (4,991) (7.6%) 

Net impairment losses on other assets/liabilities (3,602) (3,564) 38 1.1% 

Net provisions per risks and charges (****) (1,040) (7,669) (6,629) (86.4%) 

Loss on the disposal of equity investments and impairment of goodwill (*****) (7,188) (15) (7,173) n.s. 


Taxes on income for the year from continuing operations (13,181) (15,367) (2,186) (14.2%) 




Total work force (actual employees+personnel on leasing contracts) 316 325 -9 






(*) Inclusive of bonds subscribed by the Parent and by Banco di San Giorgio amounting to €2,326.2 million as at 31 st December 2011 (€201.6 

million euro as at 31 st December 2010). 

(**) In 2010 the item included a loss on the disposal/repurchase of loans amounting to €5.3 million. 

(***) The item for 2010 included an impairment loss of €6 million relating to the Mariella Burani Group. 

(****) In 2010 the item included an extraordinary provision amounting to €1.3 million made for a derivative in probable default. 

(*****) In 2011 the item related to an impairment loss on the entire goodwill of the Bank. 

As at 31 st December 2011, UBI Banca held 94.2715% of the share capital of Centrobanca, while 5.4712% 

was held by Banca Popolare di Ancona Spa, 0.1008% by Veneto Banca Holding Scpa and the remaining 

portion totalling 0.1565% was held by 16 different banks, mainly “popular” banks. 

Centrobanca is the bank in the Group which specialises in corporate and investment banking 

to support corporate clients with innovation, expansion and financial restructuring. 

The new 2012-2015 Business Plan of the Group initially envisaged a redefinition of the operating scope of 

the Bank, with a progressive focus on corporate and investment banking, with the transfer to the network 

banks of the less complex corporate lending transactions and a consequent reduction in new loans and 

the related income. With a view to further simplification of the UBI Banca Group’s customer service 

model, it was officially decided in November 2011 to strengthen activities typical of Centrobanca’s 

business by merging it into the Parent to create a division dedicated to “large corporate” clients and 

investment banking, to be completed by 2013 10 . 

The year 2011 ended with a profit of €1.2 million (-€14.9 million compared to €16.2 million the 

year before), affected, amongst other things, by the impairment loss on goodwill of €6.5 million 

(net of tax). In normalised terms, net of extraordinary items, 2011 profit would have been €7.7 

million compared to €16.6 million the year before. 

10 See the preceding section “Significant events that occurred during the year” for further information. 

182

Net operating income fell (-€21.5 million to €86.7 million), the aggregate result of a decrease in 

operating income (-€24.7 million to €138.5 million), which was only partially offset by further 

reductions in costs (-€3.1 million to €51.9 million). 

Income performed as follows: 

- net interest income decreased to €86.7 million (-€13.5 million), the result mainly of higher 

funding costs (during the year the Bank gave priority to the issue of medium and long-term 

instruments to create a greater balance with the duration of loans) and of an attentive loan 

selection and pricing policy designed to maintain a constant income from interest bearing 

assets; 

- dividends (-€0.6 million to €0.9 million) incorporated the lower contribution from the 

interest held in IW Bank; 

- net commission income (-€8.5 million to €33.6 million) was affected by a decrease in the 

component relating to lending, attributable to both a slowdown in the growth of assets 

recorded in the last part of the year and the contraction already mentioned in the operating 

scope regarding corporate lending activity; 

- net income from trading hedging and disposal/repurchase activity was €15.3 million (+€1.3 

million), the aggregate result on the one hand of a decrease in trading activities (-€6 million 

of which -€6.5 million on transactions on interest rates connected with derivatives to hedge 

own liabilities) and on the other of an overall increase in hedging and disposal and 

repurchase activity (+€7.3 million) relating largely to gains on the unwinding of hedges 

regarding repurchases of own securities; 

- other net operating income and expense totalled €2 million (-€3.4 million) and included the 

recovery of legal costs of €1.6 million incurred by the Bank. 

Within operating expenses, personnel expense fell to €31.3 million (-€1.6 million) as a result of 

a decrease in average personnel numbers and lower fees paid to directors, while other 

administrative expenses fell to €19.5 million (-€1.5 million), due mainly to lower services costs 

and IT expenses, which benefited from economies of scale and from the renegotiation of Group 

contracts. 

As a result of the performance described above, the cost:income ratio increased to 37.4% from 

33.7% at the end of 2010. 

Net impairment losses on loans, amounting to €60.4 million, an improvement compared to 

€65.4 million the year before, the aggregate result of a substantial decrease in specific net 

impairment losses (down to €45.4 million from €68.3 million in 2010) and an increase in 

collective impairment losses on loans (€15 million compared to reversals of €2.9 million before) 

in relation to changes in methodologies and not to a deterioration in the quality of performing 

loans. 

Net provisions for risks and charges also decreased to €1 million (-€6.7 million) and related 

mainly to a single case of current litigation. 

Finally, pre-tax profit was affected by the full write-off of goodwill already mentioned, 

amounting to €7.2 million, following impairment tests. 

As concerns the balance sheet, loans to customers amounted to €7.2 billion, slightly down 

compared to €7 billion in 2010 (+2.7%). In terms of type of business, both corporate lending 

(+3.7%) and Acquisition & Project Finance (+5.5%) increased, while corporate finance 

decreased (-15.1%). 

Affected, amongst other things, by the trend in investments in the second half of the year, a 

decrease in loans approved was recorded in 2011 (-32.4% to €2.3 billion). New loans (-12.3% to 

€1.9 billion) were affected on the one hand by the change in the operating scope of 

Centrobanca and on the other by a policy of growth in assets targeted on “core” clients, with 

non financial companies again the main recipients. 

Total net deteriorated loans rose over twelve months to €523.2 million (+€85.4 million; 

+19.5%), but were accompanied, nevertheless, by a change in the composition as follows: nonperforming 

loans increased to €106.1 million (+€24.9 million), mainly as a result of transfers 

from impaired loans; impaired loans increased to €251.9 million (+€107.8 million), due 

183

principally to new classifications from performing loans; however, restructured loans and 

exposures past due and in arrears fell to €159.8 million (-€8.6 million) and to €5.4 million (- 

€38.7 million) respectively. As a result of these trends, both the ratio of net impaired loans to 

net loans and the ratio of net non-performing loans to net loans increased from 2.07% to 

3.52% and from 1.16% to 1.48% respectively, while the ratio of net deteriorated loans to net 

loans rose to 7.31% (6.28% at the end of 2010). 

During the year, net interbank debt more than halved to €0.6 billion (-€0.9 billion; -57.6%), 

due mainly to the requirement to restore balance to the ratio of short-term funding to medium 

to long-term funding, which led to a reduction in debt owed to the Parent, which was replaced 

by bond issues always subscribed by it. 

On the other hand, direct funding increased to €6.7 billion (+€1.2 billion; +20.8%) as a result 

of bonds placed amounting to €2.15 billion, subscribed entirely by the Parent, while maturities 

for the year totalled €1.08 billion. 

Financial assets held for trading rose from €447.6 million to €520.1 million (+€72.5 million; 

+16.2%), mainly the result of increases in derivatives due to hedging performed on behalf of 

Group customers. 

The portfolio of available-for-sale financial assets, consisting almost entirely of investments in 

corporate bonds made as part of Centrobanca’s overall lending business, decreased to €487.5 

million from €566.1 million the year before (-€78.6 million; -13.9%). Again in 2011, investment 

policies were designed to refocus on captive Group customers with investments in Italian 

corporate issuers and the major European players operating in Italy. 

Capital ratios as at 31 st December 2011 consisted of a tier one ratio (tier one capital to risk 

weighted assets) of 8.25% (8.72% at the end of 2010) and a total capital ratio (supervisory 

capital and reserves to risk-weighted assets) of 10.10% (11.19%). 

The proposal for the allocation of profits is to first allocate €0.06 million to the legal reserve 

and then to distribute dividends of €1.34 million, by drawing €0.18 million from retained 

profits. 

With effect from 8 th April 2011, Massimo Capuano, the General Manager of the Bank since 1 st February 

2011, was appointed to the position of Managing Director. 

184

B@NCA 24-7 SPA 


31.12.2011 31.12.2010 Change % change 

Balance sheet 


Direct funding (*) 5,773,917 4,344,858 1,429,059 32.9% 

Net interbank debt -6,220,848 -7,757,694 -1,536,846 -19.8% 

Equity (excluding profit for the year) 342,624 348,179 -5,555 -1.6% 

Total assets 13,294,909 12,957,569 337,340 2.6% 



Dividends and similar income 1 - 1 - 


Net loss from trading, hedging and disposal/repurchase activity (10,578) (24,036) (13,458) (56.0%) 



Personnel expense (12,322) (13,046) (724) (5.5%) 

Other administrative expenses (46,651) (45,921) 730 1.6% 

Net impairment losses on property, equipment and investment property and intangible assets (187) (180) 7 3.9% 

Operating expenses (59,160) (59,147) 13 0.0% 


Net impairment losses on loans (105,303) (149,833) (44,530) (29.7%) 

Net provisions for risks and charges (**) (7,855) (8,912) (1,057) (11.9%) 



Profit (loss) for the year 18,341 (5,723) 24,064 n.s. 








(*) Inclusive of bonds subscribed by the Parent amounting to €5,773 million as at 31 st December 2011 (€4,321 million as at 31 st December 

2010). 

(**) In 2010, the item included a provision of eight million euro in relation to estimated risks on the lending portfolio brokered by Ktesios Spa. 

The share capital of B@nca 24-7 as at 31 st December 2011 was wholly owned by UBI Banca. 

As part of an overall improvement in credit risk management at Group level, this Bank, which 

specialises in consumer credit, underwent profound reorganisation in 2011, with the objective 

of discontinuing some higher risk lines of business (special purpose loans and consumer credit 

to non captive customers) as already reported in the previous section “Significant events that 

occurred during the year”. The reorganisation of operations will be completed after 1 st May 

2012, with the contribution of outstanding salary and pension backed loans to Prestitalia and 

the subsequent merger of B@nca 24-7 into UBI Banca, effective for accounting and tax 

purposes from 1 st January 2012. 

The Bank ended the year with a profit of €18.3 million, compared to a loss of €5.7 million the 

previous year, as a result of a substantial decrease in net impairment losses on loans (-€44.5 

million to €105.3 million), notwithstanding a lower contribution from net operating income 

(-19.4 million to €145.3 million), entirely attributable to lower operating income (-€19.4 million 

to €204.5 million). 

Income performed as follows: 

- net interest income fell to €159.2 million (-€41.3 million), as a result of lower volumes of 

business, following the change in the focus of operations in progress. The fall in interest 

income was accompanied by an increase in interest expense on securities issued and on 

amounts due to banks, which was only partly offset by a reduction in the negative 

differentials on hedges on loans to customers; 

- the contribution from net commissions increased to €19.6 million (+€2 million), due to a fall 

in commission expense (in relation to the distribution of credit cards and insurance 

products through indirect networks), which was greater than that for commission income; 

185

- the net result for financial activities was again an overall loss of €10.6 million (a loss of €24 

million in 2010), the result of an improvement in the trading component (due to the 

unwinding of derivatives positions), notwithstanding a worsening of the hedge component. 

Profits of €2.1 million were also earned on disposals and repurchases, following the disposal 

of unsecured non-performing loans concluded during the year; 

- other net operating income and expense increased to €36.2 million (+€6.4 million), 

benefiting from increased income from securitisations. 

Operating expenses, which remained almost unchanged over twelve months, included a fall in 

personnel expense (-€0.7 million to €12.3 million), due, amongst other things, to a reduction in 

personnel numbers, which was fully offset by an increase in other administrative expenses 

(+€0.7 million to €46.6 million), attributable mainly to higher expenses for outsourced IT 

services and consulting services in connection with the IT migration project and the merger of 

B@nca 24-7 into the Parent. 

Although still high, net impairment losses on loans fell by approximately 30%, benefiting from 

action taken to contain risks, which took the form of the progressive discontinuation of the 

SILF network of agents and indirect networks (i.e. Ktesios Spa 11 ), with the concentration, at 

the same time, of new salary backed loans in the subsidiary Prestitalia Spa. 

Similarly, provisions for risks and charges in relation to possible operating risks connected 

with salary backed lending and personal loan business, decreased by €1 million to €7.9 

million 12 . 

Pre-tax profit of €32.1 million recorded significant growth compared to €6 million at the end of 

2010. However, tax expense of €13.8 million was particularly high, due to the limits on the 

deductibility of impairment losses on loans and to the increase in the rate for IRAP (local 

production tax), despite the benefits resulting from the disposals of loans concluded during the 

year. 

As concerns the balance sheet, the difficult economic context and the strategic reorganisation 

activity affected total outstanding loans, which fell to €10.5 billion (-€0.7 billion; -6.3%), the 

aggregate result of a general reduction in all types of lending, which was greater for non 

captive loans brokered by SILF (down from 9.7% to 6.3% of the total) and for captive loans 

originated through Group branches (down from 15.9% to 15.6%). While the total amounts fell 

slightly, an increase as a percentage of the total was recorded for salary backed loans 13 (up 

from 27.7% to 29.2%) and mortgages 14 (up from 45.9% to 48%). On the other hand, the 

remaining types of lending were practically unchanged (up from 0.8% to 0.9%). 

Total new loans disbursed almost halved, down to €1.5 billion from €2.7 billion in 2010. These 

were composed as follows: €0.6 billion of salary backed loans brokered by the subsidiary 

Prestitalia and indirect networks (-44.7%); approximately €0.6 billion of personal and special 

purpose loans distributed through the network banks (-12%) and the SILF distribution 

network (-37.8%); €0.3 billion of mortgages (-66%), brokered principally through the BY YOU 

network before the transfer of new disbursements to the network banks. 

At the end of the year total active cards issued by B@nca 24-7 to Group customers (net of 

cards being replaced) had reached €551 thousand (+9.1% compared to €505 thousand at the 

end of 2010), with a significant increase in the total value of the transactions performed (+€0.3 

billion to €1.8 billion; +21.3%). 

Over the twelve month period, net deteriorated assets increased from €269.3 million to €403.9 

million (+50%) as follows: net non-performing loans 15 rose from €173.7 million to €229.2 

million (+32%) and net impaired loans rose from €73.1 million to €110.1 million (+50.7%), 

while exposures past due and in arrears – which included an increase in positions relating to 

11 Losses on loans recognised in the financial statements in relation to the Ktesios Group amounted to €19.4 million, including €11.4 

million recognised through profit and loss in 2011 and €8 million resulting from the reclassification of a previous provision for risks 

and charges made in the fourth quarter of 2010. 

12 The figure includes a total of €3.6 million relating to the Ktesios Group. 

13 As at 31 st December 2011, salary backed loans brokered through the Ktesios Group amounted to €883 million. 

14 Following a revision of the Group arrangements with the BY YOU network, activity to disburse new mortgages was transferred 

directly to the network banks on 18 th May 2011, leaving the management of outstanding mortgages only to the Bank. 

15 In 2011 the Bank performed two disposals of unsecured non-performing loans for a total gross amount of €151.6 million, which had 

been written down almost entirely: €58.5 million in June and €93.1 million in December. 

186

late payments for technical reasons by public administrations – increased from €22.5 million 

to €64.6 million (+186%). 

Lending business is financed mainly through intragroup interbank funding (current account 

overdrafts, term deposits and repurchase agreements with the Parent, where the underlying for 

the latter consists of senior securities resulting from securitisations 16 ), but also through the 

issue of bonds subscribed by the Parent and classified within securities issued. In this respect, 

B@nca 24-7 issued three new bonds during the year at a fixed rate with maturities of two, 

three and four years, subscribed entirely by UBI Banca for a total of €1.4 billion nominal. 

As a consequence, while consisting of debt of €6.2 billion, the net interbank position as at 31 st 

December 2011, had improved compared to the previous year (-€7.8 billion). 



assets) of 9.99% (9.36%). 

The proposal for the allocation of the profit for the year of €18.3 million is to allocate €9.6 

million to retained earnings, after allocating €0.9 million to the legal reserve, replenishment of 

the loss for the previous year of €5.7 million and replenishment of the loss in relation to the 

negative first time adoption reserve, resulting from the partial spin-off of former SILF 

operations amounting to €2.1 million. 

16 On 20 th November 2011, the Bank wound up in advance a securitisation of salary backed loans which had been formed on 26 th 

September 2008 by the issuer 24-7 Finance Srl. 

187

IW BANK SPA 


31.12.2011 

31.12.2010 Change 

% change 

Balance sheet 

Loans to customers 246,010 207,028 38,982 18.8% 

Direct funding 1,907,380 1,513,127 394,253 26.1% 

Net interbank debt 852,085 401,300 450,785 112.3% 



Equity (excluding profit for the year) 43,216 36,065 7,151 19.8% 

Total assets 3,195,580 2,874,217 321,363 11.2% 

Indirect funding from customers (including insurance) 3,161,568 3,037,925 123,643 4.1% 

of which: assets under management 462,063 496,899 -34,836 -7.0% 




Net income from trading, hedging and disposal/repurchase activities 3,312 7,787 (4,475) (57.5%) 

Other net operating income/(expense) (*) 1,293 4,175 (2,882) (69.0%) 



Other administrative expenses (31,560) (31,977) (417) (1.3%) 

intangible assets (**) (6,601) (8,470) (1,869) (22.1%) 



Net impairment losses on loans (1,472) (969) 503 51.9% 

Net impairment losses on other assets/liabilities (373) (613) (240) (39.2%) 

Net provisions for risks and charges (***) (3,317) (2,933) 384 13.1% 

Profit on the disposal of equity investments (****) (454) (1,982) (1,528) (77.1%) 



Profit (loss) for the year 2,814 (444) 3,258 n.s. 





ROE [profit for the year/equity (excluding profit for the year)] 6.51% -1.23% 


Net non-performing loans/net loans to customers - - 


The figures as at and for the year ended 31 st December 2010 have not been restated on a pro-forma basis to take account of InvestNet Italia, 

merged into the Bank on 15 th July 2011, but relate to IW Bank only. 

(*) In 2010 the item included prior year income of €2.5 million, following the conclusion of a settlement agreement with former Directors. 

(**) In 2010 the item included impairment losses on intangible assets of €1.4 million. 

(***) In 2011 the item included provisions of €2.1 million for unreconciled accounts, while in 2010 the item included a provision of €2.3 million, 

in relation to differences found when inspections were performed on suspense accounts when the migration to the new IT platform was 

performed. 

(****) In 2010 the item included an impairment loss on interests held in InvestNet International and Investnet Italia amounting to two million 

euro. 

As at 31 st December 2011, UBI Banca held 65.039% of the share capital of IW Bank, Centrobanca held 

23.496% and Webstar Sa held 10.336%, while the remaining 1.129% consisted of treasury shares held in 

portfolio by the Bank. 

IW Bank specialises in the provision of banking and financial services to retail and 

institutional customers almost exclusively through the internet. Its range of services includes 

trading in financial instruments, the distribution of OICRs (collective investment instruments), 

current accounts, the issue of credit and debit cards, electronic money, insurance, personal 

loans and mortgages. On 6 th May 2011, the Board of Directors approved a strategic business 

plan for the period 2011-2015, which involves, amongst other things, the creation of new 

synergies with the Parent, a new commercial service model, the expansion of the range of high 

quality products and services for customers and the rationalisation of the internal processes of 

the bank and its cost structure, designed to employ IW Bank as a channel for the direct 

funding of the Group in Italy. These initiatives were made possible, amongst other things, by 

the migration to a new IT system supplied by the company Cedacri and they included the 

188

launch of high remuneration deposit products (IW Power “Special”) which, assisted by an 

effective advertising campaign, has resulted in a substantial increase in direct funding. 

In 2011, IW Bank further increased the number of active accounts held, up to 112.1 thousand 

from 105.8 thousand at the end of 2010. Also the average daily number of orders received from 

customers and executed rose to 36.6 thousand from 35.5 thousand in 2010. 

It is underlined that the comparative figures in reclassified balance sheet and income 

statement for 2010 presented here have not been restated on a consistent basis to include the 

figures for Investnet Italia Srl merged with a deed of 1 st August 2011, with effect for accounting 

and fiscal purposes from 1 st January 2011. 

From an operational viewpoint, the year ended with a profit of €2.8 million compared to a loss 

of €0.4 million the year before. Moreover, the result for the year was significantly affected by 

expenses relating to non-recurring items consisting of provisions of €2.1 million, net of tax, to 

meet possible future risks and charges connected with further accounting differences in 

relation to the former IT system (€3.9 million in 2010, connected mainly with operational 

decisions concerning the reorganisation of the Group and the replacement with the Bank’s IT 

platform). Net of those extraordinary items, profit for the year amounted to €4.9 million (€3.5 

million in 2010). 

The year ended with net operating income of close to €14 million, up over twelve months by 

€5.9 million, of which more than 60% attributable to lower costs (-€3.6 million to €57.4 

million) and the remainder to higher income (+€2.3 million to €71.4 million). 

Income included an increase in net interest income (+€11.7 million to €35.7 million) – relating 

mainly to the new structure of the available-for-sale securities portfolio and an increase in 

loans and receivables – which was partially offset by decreases in all the other items: -€2 

million to €31.1 million for net commission income, due to less business activity with 

customers for order routing and greater commission expense on trading in financial 

instruments; -€4.5 million to €3.3 million for net income from trading, hedging and disposal 

and repurchase activity, which mainly reflected lower gains on the fixed rate component of the 

available-for-sale securities portfolio; -€2.9 million to €1.3 million for other net operating 

income and expense which, however, had benefited from €2.5 million of extraordinary items 

connected with the conclusion of a settlement agreement with former Bank personnel. 

The improvement in operating expenses was general and included the following: -€1.3 million 

to below €19.2 million for personnel expense due to lower personnel numbers; -€0.4 million to 

€31.6 million for other administrative expenses due on the one hand to greater expense for 

outsourced services provided by third parties and for the advertising campaign to promote the 

IW Power “Special” products and other minor expenses relating to supply contracts for the 

merged company Twice Sim and lower strategic and organisational consulting costs; -€1.9 

million to €6.6 million for net impairment losses on property, equipment and investment 

property and intangible assets which included the write-off of intangible assets amounting to 

€1.4 million the year before. 

Greater net impairment losses on loans were also recognised (+€0.5 million to €1.5 million), 

along with increased provisions (+€0.4 million to €3.3 million), including the €2.1 million 

already mentioned to meet possible future risks and charges related to further accounting 

differences connected with the former legacy IT system, with particular reference to settlement 

accounts. 

As concerns balance sheet items, direct funding increased appreciably to €1.9 billion (+€0.4 

billion; +26.1%), attributable principally to the launch of the new IW Power “Special” products. 

Indirect funding also rose overall to €3.2 billion (+€0.1 billion; +4.1%), although within the 

item, assets under management fell to €462.1 million (-€34.8 million; -7%). 

Loans to customers increased at the end of 2011 to €246 million (+€39 million; +18.8%), 

consisting of €177.4 million attributable to mortgages, €7.4 million to personal loans, €15.1 

million to the use of credit cards, the grant of credit lines for margin trading and for temporary 

189

overdrafts, while the remaining €11.5 million related to other transactions (postal deposits, 

security deposits, commercial loans and guarantee margins with clearing houses). 

The net interbank position, consisting mainly of positions with the Parent, more than doubled 

to €852.1 million (€401.3 million in December 2010). 

The portfolio of available-for-sale financial assets, amounting to €721.8 million (-€123.3 

million; -14.6%), consisted mainly of Italian government securities, including €714 million of 

floating rate certificates (CCT). 

In September, the equity of the Bank decreased as a result of the creation of a negative fair value reserve 

in application of international accounting standards due to the change in the fair value of the availablefor-sale 

financial assets held in its securities portfolio. In consideration of the transitory nature of those 

reserves – which are negative because of changes in the prices of Italian government securities of which 

almost all of the owned portfolio of IW Bank is composed – and the probability that they will presumably 

be eliminated (especially if the securities are held until their natural maturity), on 29 th September 2011, 

UBI Banca, the sole and controlling shareholder made a “payment into an account for a future increase 

in the share capital to be decided by 27 th April 2012” amounting to €60,179 thousand, equal to the 

negative amount of the fair value reserve recognised as at 28 th September 2011 and not eligible for 

inclusion in the supervisory capital. 

In a later disclosure of 22 nd November 2011, the Parent reported that given the continuing high volatility 

on bond markets, as a partial rectification and in order to provide greater stability, the “payment” 

mentioned was to be considered as being without the time limit of the 27 th April 2012, and that the 

decision on the best timing for the conversion into share capital, if necessary, or its return should the 

negative effects of the fluctuations in the prices on the securities in the Bank’s portfolio be reversed was 

to be made by IW Bank, in co-ordination with UBI Banca. In the light of those developments, IW Bank 

decided to postpone all decisions on the question during the course of the year in order to acquire a 

clearer view of the outlook in both capital and corporate terms. 

An appreciable recovery in the prices of the Italian government securities held in portfolio occurred after 

the end of the year, with a consequent positive impact on the “fair value reserves” recognised within the 

equity of the Bank, which rose from a negative balance of €71,452 thousand as at 31 st December 2011 to 

a negative balance of €18,390 thousand as at 8 th March 2012. 




The proposal for the allocation of profit is to allocate €2,673 thousand to retained earnings, 

after allocating €141 thousand to the legal reserve. 

190

UBI LEASING SPA 


31.12.2011 31.12.2010 Change % change 

Balance sheet 


Due to customers 387,638 682,963 -295,325 -43.2% 

Net interbank debt -9,532,793 -10,501,685 -968,892 -9.2% 

Financial assets available-for trading 60 1,598 -1,538 -96.2% 

Available-for-sale financial assets 26 26 - - 


Total assets 10,382,757 11,601,054 -1,218,297 -10.5% 



Net commission income (1,879) (2,283) (404) (17.7%) 

Net income (loss) from trading, hedging and disposal/repurchase activities 1,632 (14,615) 16,247 n.s. 

Other net operating income/(expense) (*) 31,514 44,037 (12,523) (28.4%) 


Personnel expense (17,376) (15,820) 1,556 9.8% 


Net impairment losses on property, equipment and investment property and intangible (995) (603) 392 65.0% 

Operating expenses (45,794) (45,402) 392 0.9% 


Net impairment losses on loans (111,556) (114,612) (3,056) (2.7%) 

Net provisions for risks and charges (**) (2,497) (2,646) (149) (5.6%) 

Profit (loss) on the disposal of equity investments (***) (1,962) 20 (1,982) n.s. 

Pre-tax loss from continuing operations (34,103) (21,079) 13,024 61.8% 

Taxes on income for the year from continuing operations 3,952 447 3,505 n.s. 

Loss for the year (30,151) (20,632) 9,519 46.1% 


Total work force (actual employees+personnel on leasing contracts) 255 242 13 





(*) The item for 2011 includes €3.3 million of expenses incurred in relation to the termination of mandates conferred on UBI leasing 

agents. 

(**) The item for 2011 includes €2.4 million for provisions relating to the termination of mandates conferred on UBI leasing agents. 

(***) In 2011 the item included an impairment loss of €2 million on goodwill. 

As at 31st December 2011, UBI Banca held 79.9962% of the share capital of UBI Leasing, 18.9965% was 

held by Banca Popolare di Ancona Spa and the remaining 1.0073% was held by Banca Valsabbina Scpa. 

The year 2011 was a difficult one for the leasing sector as the economic crisis continued and 

businesses failed to invest as a consequence. On the basis of Assilea (national association of 

leasing companies) data, the value of contracts signed nationally fell to €24.6 billion from 

€27.3 billion the year before (-9.8%; -€2.7 billion). In terms of business sector, the crisis hit the 

property sector particularly hard (-21%; -€1.9 billion) and also the machinery and equipment (- 

10.6%; -€842 million) and aeronautical sectors (-27.3%; -€294 million), while the automobile 

sector (-1%; -€59 million) performed with more stability. Only the energy sector recorded 

positive performance (+10.5%; +€384 million). 

In the already difficult economic environment just mentioned, UBI Leasing’s operations were 

also affected by internal structural problems, exacerbated by an uncertain and weak market. 

Consequently, the company saw its market share fall from 6.81% to 3.16% to reach tenth 

place in the Assilea classification (from fourth place at the end of 2010). 

The Company has more that halved its business in terms of both the number of contracts 

signed (down from 10,216 to 4,999) and in terms of value (-€1.1 billion to €0.8 billion; -58.1%). 

As shown in the table, significant decreases were recorded in all sectors, as a consequence, at 

least in part, of substantial organisational and procedural changes introduced during the year 

191

y the “Company restructuring programme” launched by the Board of Directors on 16 th 

February 2011 17 . 

Performance by business sector 

2011 2010 % change 

Figures in thousands of euro number amount number amount number amount 

Auto 2,901 109,671 5,745 223,580 -49.5% -50.9% 

of which: - motor vehicles 1,685 52,731 3,240 103,752 -48.0% -49.2% 

- commercial vehicles 732 17,117 1,560 36,237 -53.1% -52.8% 

- industrial vehicles 484 39,823 945 83,591 -48.8% -52.4% 

Machinery and equipment 1,639 169,521 3,351 328,832 -51.1% -48.4% 

Aeronautical 54 17,081 242 93,689 -77.7% -81.8% 

Property 335 339,370 731 794,155 -54.2% -57.3% 

Energy 70 142,615 147 418,648 -52.4% -65.9% 

Total 4,999 778,258 10,216 1,858,904 -51.1% -58.1% 

The main points of the programme consisted of the following: 

• a revision of the organisational structure, with a view to simplification and alignment with 

the organisational design indicated by the Parent: 

a Risk Control Service was introduced, on the staff of the Managing Director, consisting 

of two functions (compliance, risk management and anti money-laundering); 

in the commercial sphere, with effect from 1 st July 2011, the distinction between the 

banking and the agent distribution channels was eliminated and replaced by two general 

geographical areas (Northern and “Central and Southern”), with a subsequent drastic 

reduction in the network of agents, which at the end of the year was composed of six 

agencies for a total of nine agents compared to 85 twelve months before 18 . At the same 

time the proactive presence of personnel in bank branches was increased in line with the 

new distribution model – which came into operation on 1 st October 2011 – focused 

almost exclusively on business with captive Group customers, with the main objective of 

acquiring new customers on which to perform cross-selling activity through the network 

banks; 

the Credit Approval and Operations departments were reorganised and centralised; 

• action was undertaken in the first half of the year to reorganise the structure of the 

company and its lending processes as part of a specific “Revision of credit quality” project, 

launched in 2010 with the objective of improving the credit quality of the company, in 

consideration of the critical condition in which it lay. Measures which gradually became 

operational included the following: the implementation of electronic credit authorisation 

software (PEF Leasing); the introduction of new software to manage problem loans; the 

revision of the automatic approval tools used for the non captive channel (Experian scoring); 

the centralisation at the Company Credit Department of approvals for counterparties 

classified as medium and/or high risk by the rating models used by the Group 19 ; 

• the completion of a specific “Qualitative Self Risk Assessment” project designed to identify 

the main operational risks, the relative risk management controls and possible future 

policies to allow the Company to correct the failings found. 

As concerns the balance sheet, lending to customers over twelve months fell to €9 billion (-€0.7 

billion; -6.7%), while within the item, the proportion subject to securitisation as a result of 

transactions relating to UBI Lease Finance 5 increased by approximately 45%. 

17 These initiatives were decided independently by the UBI Banca Group. UBI Leasing was never subject to specific inspections, but it 

was involved, together with the Parent and the network banks, in inspections conducted between February and July 2010, designed 

to assess the profile of the Group with regard to the management, governance and control of credit risk in the corporate customer 

segment. 

18 On 16 th February, the Board of Directors of the Company revoked the general powers of attorney conferred on its agents, with the 

exception of area chiefs. The new commercial model was communicated by registered letter in April, as a result of which, from 1 st 

October 2011 the UBI Leasing agents no longer provide assistance to banks and receive a commission if they find new business with 

the Group’s network banks. Almost all the agency contracts were terminated in 2011, with specific provisions made in the accounts 

for indemnities which may be due (€2.4 million). 

19 At the same time that those initiatives were introduced, further action was also taken to set reference prices for the various markets 

and products and the minimum prices applicable on the basis of the 2011 budget and to reorganise the structure of regulations for 

Company processes and procedures and the relative manuals in order to protect the Company from incurring operating losses 

which are not connected to business risk profiles. 

192

The continuing deterioration of the overall economic and financial environment caused a 

further increase in deteriorated loans, which came to total €1,178.8 million (gross of 

impairment), an increase of €216.6 million (+22.5%), attributable almost entirely to the 

property sector which accounted for three quarters of problem loans at the end of the year 20 . 

In terms of categories, the deterioration mainly regarded non-performing loans 21 (+€138 

million), which represented more than 50% of total deteriorated loans, and impaired loans 

(+€81.8 million), but also restructured loans (+€19 million), while a decrease in past due 

exposures was recorded (-€22.2 million). Although the total deteriorated loan portfolio recorded 

growth, coverage remained almost unchanged (up from 20.1% to 20.5%) at levels lower than 

the Group average, considering both the secured nature of the loans granted (ownership of the 

asset leased) and the prevalence of property transactions. On the other hand the coverage for 

performing loans rose from 0.40% to 0.63% as a result of an increase in impairment losses 

recognised in the fourth quarter. 

Furthermore, the capital was strengthened in the second quarter with an increase in the share 

capital of €60 million (inclusive of €15 million recognised in the share premium reserve) to take 

into account both changes in the supervisory context and the need to provide adequate capital 

to fund future investments. 

From an operating viewpoint, the fall in net operating income (-€14.2 million to €81.9 million) 

was attributable almost entirely to lower income (-€13.9 million to €127.7 million), due to 

increased difficulties on financial markets and, although to a lesser extent, to the effects of 

commercial and distribution restructuring. 

Net interest income (-€18 million to €96.4 million) worsened due to both a decrease in average 

lending and to increased costs for funding, even if supplied by the Parent, while the results for 

net trading and hedging income (+€16.2 million to €1.6 million) and for other net operating 

income and expense (-€12.5 million to €31.5 million) were affected mainly by the absence of 

the results of the Lombarda Lease Finance 3 securitisation, which was wound up in 2010. The 

latter category also included greater costs of €3.3 million connected with the closure of agent 

networks and the termination of contracts with UBI leasing agencies. 

On the other hand, the modest rise in operating expenses (+€0.4 million to €45.8 million) was 

attributable entirely to higher depreciation and amortisation charges (+€0.4 million to €1 

million), while the increase in personnel expense (+€1.6 million to €17.4 million), connected, 

amongst other things, with an increase in personnel numbers, was fully offset by the fall in 

other administrative expenses (-€1.6 million to €27.4 million). 

Although slightly down over twelve months, net impairment losses on loans, were again 

particularly high (€111.6 million), while net provisions for risks and charges of €2.5 million 

were almost entirely attributable to the termination of agency contracts already mentioned. 

The “item profits from the disposal of equity investments and impairment losses on goodwill” 

related to the full write-off of goodwill arising from the prior year acquisition of Veneta 

Factoring operations, which until the previous year had been recognised within intangible 

assets. The change already mentioned in the commercial and distribution strategies made by 

the Company and the consequent discontinuation of business generated by the network of 

agents meant that the reasons for maintaining that goodwill on the books no longer applied. 

The proposal to replenish the loss for the year is to draw €30.2 million from the share 

premium reserve. 




20 UBI Leasing therefore decided to create an organisational unit within the Problem Loan Department for the recovery, management 

and sale of real estate assets repossessed by the Company following the termination of lease contracts. 

21 In 2011 the Company performed two disposals of unsecured non-performing loans for a total gross amount of €31.7 million, which 

had been written down almost entirely: €25.3 million in the second quarter and €6.4 million in the fourth quarter. 

193

UBI PRAMERICA SGR SPA 


31.12.2011 31.12.2010 Change % change 

OWN "RETAIL CUSTOMERS" 6,782,454 7,724,350 -941,896 -12.2% 

Of which: customer portfolio management 5,082,519 5,659,178 -576,659 -10.2% 

FUND BASED INSTRUMENTS 1,699,935 2,065,172 -365,237 -17.7% 

FUNDS 14,026,614 18,958,811 -4,932,197 -26.0% 

of which: Pramerica funds included in fund based instruments 1,190,291 1,882,328 -692,037 -36.8% 

Other duplications 110,961 125,379 -14,418 -11.5% 

SICAV’s and other (net of duplications) 781,059 371,900 409,159 110.0% 

TOTAL ASSETS UNDER MANAGEMENT 20,288,875 25,047,354 -4,758,479 -19.0% 


Net interest income 1,739 924 815 88.2% 


Performance fees 11,728 14,982 (3,254) (21.7%) 

Net income from trading, hedging and disposal/repurchase activity 2,073 2,048 25 1.2% 

Other net operating income/(expense) 69 (43) 112 n.s. 



Other administrative expenses (14,383) (15,114) (731) (4.8%) 




Net provisions for risks and charges 20 292 (272) (93.2%) 


Taxation for the year (17,722) (19,146) (1,424) (7.4%) 

Profit from discontinued operations 226 - 226 - 

Profit for the year 37,576 38,475 (899) (2.3%) 


Total work force (actual employees+personnel on leasing contracts) 142 142 - 

As at 31 st December 2011, UBI Banca held 65% of the share capital of UBI Pramerica SGR and the 

remaining 35% was held by Prudential International Investments Corporation. 

Significant events occurred during the course of 2011. 

The operation to contribute three Capitalgest Alternative hedge funds (Conservative, Dynamic 

and Equity Hedge) to Tages Sgr Spa was concluded with effect from 1 st October 2011. The 

operation, commenced in the previous April, involved the acquisition of a stake - recognised 

within available-for-sale financial assets –, of 7.74% as at 31 st December 2011 in the share 

capital of Tages Sgr which received the contribution and a gain of approximately €0.2 million 

(net of tax). 

Following the tax reform for Italian registered mutual funds (in February) and the reform on 

financial income (in August), the Company had to make important changes to its IT, 

organisational, administrative and sales procedures in order to make them compliant with the 

new legislation. 

The operation to dispose of the units it held in its proprietary mutual funds resulting from the 

contribution of the Capitalgest Sgr Spa operations in January 2008 was completed in the first 

half. That disposal generated liquidity of €18.5 million and a gross profit of €2.2 million. 

With regard to the marketing of new products, the activity as the main distributor of the 

subsidiary UBI Management Company S.A. was performed. In detail, the sales for the new UBI 

Sicav sector entitled “UBI Sicav Coupon Certa 2012-2015” - for which UBI Pramerica is both 

the manager and the distributor - was concluded in December 2011. 

UBI Pramerica SGR Spa received important recognition in 2011: 

in February the “Capitalgest Alternative Conservative” funds received the 2011 “Premio Mondo Hedge 

Award” as the “best low and medium volatility funds in 2010”; 

in March, with regard to the 2010 “High Return Prize”, the “UBI Pramerica Obbligazioni Dollari” fund 

was nominated as the “Best American Bond Fund” as a result of its performance over three years, while 

194

UBI Pramerica SGR finished in second place in the classification for “The best Italian mutual fund 

manager in the BIG category” 

still in March, the company received the Milano Finanza “Tripla A Fondi Comuni di Investimento” prize 

for the results achieved by the “UBI Pramerica Portafoglio Moderato” and “UBI Pramerica Euro Cash” 

funds over a period of 36 months 

in March as well,UBI Pramerica received four prizes at the 2011 Lipper Fund Awards granted to: the 

“UBI Pramerica Euro B.T.” fund as the best “bond-eurozone-short term” fund over three, five and ten 

years; the “UBI Pramerica Euro Corporate” fund as the best “bond euro-corporates” fund over five years; 

the “UBI Pramerica Euro Medio/Lungo Termine” fund as the best “bond eurozone long term” fund over 

five years; and “UBI Pramerica Portfolio Moderato”, as the best “mixed asset EUR cons-global” fund over 

five years. 

Further recognition was also received in 2012: 

in the 2012 “Grands Prix – Fundclass” awards, UBI Pramerica SGR received the 2012 “European Funds 

Trophy-Fundclass” prize as the best management company in the category “16-25 funds”; 

with regard to the 2011 “High Return Prize”, for the second year running, the “UBI Pramerica 

Obbligazioni Dollari” fund was again recognised as the “Best American Bond Fund” as a result of its 

achievements over three years, while UBI Pramerica Sgr was classified in third place as “The best 

Italian mutual fund manager in the BIG category”. 

In terms of volumes, total assets managed by UBI Pramerica as at 31 st December 2011 – on 

behalf of ordinary customers – amounted to €20.3 billion, a decrease compared to €25 billion 

at the end of 2010, given the difficulties experienced by the sector. If the customer portfolios 

managed on behalf of institutional customers are also considered, total assets under 

management by UBI Pramerica at the end of 2011 amounted to €22.8 billion (net of 

duplications) compared to 29.4 billion (again net of duplications) twelve months before. 

In terms of the income statement, net operating income fell by €2.3 million to €55.1 million, 

the result of a contraction in revenues (-4.1 to €84 million), only partially compensated by 

costs decrease (-1.8 to €28.9 million). 

Within operating income, the reduction in net commissions (-€5 million; -5.9%) was affected by 

both a lower contribution from performance fees (-€3.3 million) and a contraction in total 

assets managed, although mitigated by the commission reallignement carried out in the firt 

part of the year. 

On the other hand, net interest income recorded a slight increase (+€0.8 million to €1.7 

million), a reflection of a general increase in interest rates and a more efficient allocation of 

liquidity. 

On the expense front, personnel expense fell slightly (-€1.1 million; -7%) as did other 

administrative expenses (-€0.7 million; -4.8%), which, moreover, benefited from a reduction in 

costs for the service provided by the Group IT outsourcer. 

As a result of the performance reported above, the year 2011 ended with a profit of €37.6 

million, compared to €38.5 million earned in the previous year. The proposal for the allocation 

of profits is to distribute dividends of €37.3 million. 

195

UBI FACTOR SPA 


31.12.2011 31.12.2010 Change % change 

Balance sheet 


Due to customers 5,161 9,539 -4,378 -45.9% 

Net interbank debt -2,732,941 -2,609,221 123,720 4.7% 


Total assets 2,898,354 2,775,049 123,305 4.4% 







Other administrative expenses (12,314) (9,859) 2,455 24.9% 


Operating expenses (24,887) (21,688) 3,199 14.8% 


Net impairment losses on loans (*) (14,813) (3,147) 11,666 370.7% 

Net provisions for risks and charges (1) (1) - - 

Profit on the disposal of equity investments 84 - 84 - 


Taxation for the year on profit from continuing operations (6,395) (9,794) (3,399) (34.7%) 



Total work force (actual employees+personnel on leasing contracts) 153 153 - 


R.O.E. [Profit for the year/equity (excluding profit for the year)] 7.07% 17.30% 




(*) In 2011 the item included a provision of €9.5 million for a credit position relating to the Fondazione Centro San Raffaele del Monte 

Tabor. 

The share capital of UBI Factor as at 31 st December 2011 was wholly owned by UBI Banca. 

UBI Factor, the Group member company which specialises in factoring business, performs 

“captive factoring” activity, mainly with network banks customers and to an increasingly 

smaller extent with public administrations. According to Assifact (The Italian Factoring 

Association) data, in 2011 the Company was positioned in fourth place nationally in the sector, 

both in terms of outstanding amounts (receivables which have been purchased, but not yet 

received), with a market share of 5.90%, and in terms of advances with and without recourse, 

with a market share of 6.41%. 

The pursuit of policies to gradually reduce business with public administrations, no longer 

considered core business, continued in 2011, in consideration also of the increasing delays 

with which payments are received from public sector authorities. On the other hand, the 

Company focused progressively on the search for captive counterparties originated by the 

network banks, with particular and constant attention paid to monitoring due dates and the 

real quality of invoice sellers in terms of overall creditworthiness. Customers held in common 

with the network banks now represent almost 80% of the counterparties of the company, 

consistent with the role of Group “product company” assigned to UBI Factor. 

The growth in the Company’s business is also being driven by an important increase in 

international activity both directly and through co-operation with foreign correspondent factors 

within Factors Chain International. The commercial initiative in operation since 2008 on the 

Turkish market, originally designed to establish a local operating presence, received a strong 

boost within the Factors Chain International network, partly as a result of increased 

geographical coverage, no longer limited to the Italian market, but extended to include the EU, 

with important market shares in areas where either the UBI Banca Group or UBI Factor itself 

196

have branches (Poland, Spain and Germany), with a significant diversification by business 

sector 22 . 

The extension of that business generated natural growth in operating relationships with other 

correspondents, mainly Turkish, but also in Spain, where intragroup synergies are being 

developed with UBI Banca International. 

The following is reported with regard to equity investments: 

• the liquidation period for Tex Factor Spa was concluded with the redemption of shares to shareholders, 

in accordance with a resolution passed by an extraordinary shareholders meeting of the Company itself 

held on 11 th February 2011. UBI Factor derecognised its investment with a profit of €84 thousand; 

• Siderfactor Spa was placed in voluntary liquidation with a resolution passed by an extraordinary 

shareholders meeting on 12 th December 2011, with effect from 11 th January 2012. The liquidation 

should be completed in 2012 with the disposal of all the assets and the extinction of the liabilities 

recognised. 

The year 2011 ended with a profit of €8.6 million, a decrease compared to €18.6 million the 

year before, the result primarily of recognised higher impairment losses. 

Net operating income amounted to €29.7 million, down on 2010 (-€1.9 million; -5.9%), the 

aggregate result of growth in operating expenses (+€3.2 million to €24.9 million) only partly 

offset by an improvement in income (+€1.3 million to €54.6 million). 

The trend for income was the result of net interest income, which rose to €38.3 million (+€3.5 

million; +10%) – due to increases in advances and a focus on more profitable business – and 

other net operating income and expense, which increased to €3.6 million (+€1.5 million mainly 

for recoveries of expenses; +68.8%), while net commission income fell to €12.6 million (-€3.6 

million; -22.2%), mainly as a result of greater sums paid to Group banks on the basis of a 

commercial co-operation agreement signed in 2008. 

On the expenses front, on the other hand, other administrative expenses increased to €12.3 

million (+€2.5 million; +24.9%), attributable primarily to legal expenses for litigation 

concerning amounts owed by the health department of the Regional Government of Latium 

and also expenses for the migration to the new IT platform. Personnel expense, which 

increased to €11.7 million (+€0.6 million; +5.1%), included a provision for 2011 performance 

bonuses and the relative contributions of €0.2 million, while the increase in depreciation and 

amortisation related almost entirely to intangible assets. 

As a consequence, the cost:income ratio worsened by almost five percentage points, rising from 

40.7% to 45.6%. 

Net impairment losses on loans rose from €3.1 million to €14.8 million (+€11.7 million), 

attributable principally to loans to public administrations, no longer considered core business 

for the Company. They included €9.5 million relating to the exposure to Fondazione Centro 

San Raffaele del Monte Tabor, details of which are given in the previous section “Banking 

business with customers: lending”. 

As concerns volumes of business, despite the discontinuation of business with public 

administrations, the turnover for business generated during the year amounted to €8.2 billion 

(+8.6%), including €7.8 billion of factoring business (+10%). 

Consequently, advances to customers rose to approximately €2.9 billion (including 3% for the 

Polish branch), an increase of 4.5% compared to €2.7 billion twelve months before. 

The performance within net deteriorated assets, which increased from €17.3 million to €63.6 

million (+€46.3 million), was as follows: 

non-performing loans increased from €11.5 million to €36.5 million (+€25 million, including 

€21.5 million relating to the classification of the exposure to San Raffaele, already 

mentioned, as non-performing); 

22 Negotiations to acquire the Turkish company Strateji Factoring Hizmetleri A.S. were interrupted because of a change in the 

orientation by some of the shareholders in the company being acquired, who wished to make changes to some terms of the contract 

and to policies, which were not considered acceptable to UBI Factor and the Parent in terms of legitimacy and feasibility. However, 

this did not affect the validity of the existing commercial agreement with Strateji Factoring concerning export factoring, which 

benefited in 2011 from increases in volumes of business. 

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impaired loans – attributable mainly to receivables purchased from public administrations 

and classified as deteriorated exposures because of the remaining duration of the advance 

and not on the basis of the collectability – increased slightly to €4.5 million (+€0.3 million); 

advances past due and in arrears totalled €22.6 million, an annual increase of €21 million, 

two thirds of which consisting of positions with public administrations. 

Capital ratios as at 31 st December 2011, consisted of a tier one ratio (tier one capital to risk 



The proposal for the allocation of profits is to distribute dividends of €1.04 million. 

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Treasury shares 

In 2011, the companies included in the consolidation did not hold any treasury shares or 

those of the Parent, with the sole exception of IW Bank which, as at 31 st December 2011, held 

831,168 treasury shares, (corresponding to 1.13% of the share capital), unchanged compared 

to twelve months before, for a nominal amount of €207,792 and a value at the purchase price 

of approximately €2.6 million. 

Litigation 

THE MARIELLA BURANI GROUP 

On 11 th October 2011, Centrobanca was served with a writ of summons from the Burani 

Designers Holding NV (“BDH”) Receivership (advised by Prof. Avv. Bruno Inzitari) to appear 

before the Court of Milan. It claimed Centrobanca was liable in relation to a public tender offer 

to purchase launched by Mariella Burani Family Holding Spa on the shares of Marella Burani 

Fashion Group Spa (“MBFG”). According to the writ of summons, the Burani family and the 

directors of BDH provided an inaccurate representation of the accounts to non-controlling 

shareholders and markets and conceived of and promoted the public tender offer to purchase 

with the sole purpose of artificially inflating the price of the MBFG share, in order to delay the 

bankruptcy of the Burani Group. In this context, Centrobanca is considered responsible for 

the abusive grant of loans to support the aforementioned operation, thereby generating, as a 

consequence, false confidence in the capital and financial solidity of the Burani Group on the 

part of creditors and the market. 

The damages claimed against Centrobanca in the writ of summons amount to approximately 

€134 million. 

Centrobanca – which has been duly accepted as a creditor in all the bankruptcy proceedings 

concerning the Burani Group – considers that this claim made through the courts is without 

foundation and has already applied to the court arguing both on points of law and merit to 

defend against the Receiver’s claim and in support of the complete rightfulness of its conduct. 

The first hearing, originally scheduled for February 2012, has been postponed until 19 th June. 

On 1 st March 2012, Centrobanca was served with a writ of summons from the Mariella Burani 

Family Holding Receivership (advised by the lawyers Stefano Ambrosini and Barbara Rovati), 

containing a claim for compensation, again in this case too, amounting to approximately €134 

million, based on arguments of fact and law similar to those already served in the summons 

served by BDH Receiver. The first hearing was set for 30 th June 2012. 

The same defence team employed to defend Centrobanca against the previous summons was 

engaged, in order to carry out the investigations needed for the Bank to defend itself in the 

courts. 

As already reported, the total gross exposure of the UBI Banca Group to the Burani Group 

amounts to approximately €74.2 million, on which impairment losses of 94.6%. have been 

recognised. 

NOTIFICATIONS 

In 2011, the Guardia di Finanza (Finance Police) served five “Written notifications of 

findings” for failure to report suspect transactions for a total of €3,447,000: three notifications 

for €1,836,500 were received in the first half and the remaining two, totalling €1,640,500, 

were received in the second half. 

The recipients of the allegations, served jointly on the legally authorised representatives of the 

respective network banks, are three branch managers of Banco di Brescia and two branch 

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managers of Banca Popolare Commercio e Industria. The relative defence documents were filed 

with the Ministry of the Economy and Finance within the set time limits. 

With regard to a notification served in 2006, the Ministry of the Economy and Finance 

summoned the recipient of the provision, jointly with Banca Popolare di Bergamo, to a hearing 

that was held on 8 th February 2011. The legal advisor of the bank presented defence 

documents and the case was dismissed with a provision of the following 23 rd May. 

Inspections 

The Bank of Italy performed inspections of the Group between the end of January and the 

end of June 2011, pursuant to Art. 68 of Legislative Decree No. 385/1993 (consolidated 

banking act). They concerned the management and measurement of risks assumed by the 

product companies which use large distribution networks (UBI Banca Lombarda Private 

Investment and B@nca 24-7) or operate online (IW Bank). 

On 23 rd September the supervisory authority communicated its “Remarks and observations” 

with regard to those inspections. Some failings were reported into which the units responsible 

at the Parent conducted a thorough investigation to assess the weaknesses found, together 

with the lines of action already actually taken during the inspection. On 24 th October UBI 

Banca furnished detailed replies to each of the remarks and observations contained in the 

inspection report. Some of the actions of an ownership nature already taken with regard to 

B@nca 24-7 are reported in the section on significant events that occurred during the year. 

Moreover, with regard to B@nca 24-7, irregularities were alleged pursuant to Art. 145 of 

Legislative Decree No. 385/1993 already mentioned, which mainly regarded the prior position 

of the company, with the commencement of the relative penalty procedures concerning 

company personnel. B@nca 24-7 presented its defence to the supervisory authority against 

those claims. 

On 14 th December 2011, the Italian Supervisory Authority announced the commencement of 

inspections in accordance with articles 54 and 68 of Legislative Decree No. 385/1993, 

designed to assess the adequacy of initiatives taken following the findings of the September 

2010 inspections concerning liquidity risks and also in relation to the particular situation on 

markets. The inspections were concluded on 16 th March 2012. 

As part of the programme to validate internal models introduced by the Group some time ago, 

in October and November 2011 the Bank of Italy carried out an initial survey (pre-validation) 

of the activities undertaken by the Group in view of the introduction of an internal model for 

the calculation of capital requirements for credit risk (A-IRB approach). 

Following that action and further progress made on Group projects, on 9 th March 2012 the 

Supervisory Authority officially announced the commencement of final verifications (validation) 

of conformity of the system to the qualitative and quantitative requirements set by the relative 

regulations. 

At the same time, an official application was made by the UBI Banca Group for recognition for 

supervisory purposes of its internal rating based, credit risk management system. 

A similar programme was followed, although with different timing, for operational risks. The 

pre-validation phase was carried by the Supervisory Authority in the first quarter of 2011, 

while validation inspections at the Parent took place in February 2012. 

With regard to the above, authorisation by the Bank of Italy for the use of internal models is 

expected in time for the supervisory reports to be made as at 30 th June 2012. 

On 12 th May 2011, the Consob (Italian securities market authority) notified Banca Popolare di 

Bergamo of the results of inspections conducted in 2010 1 . It had found a few matters requiring 

attention on which it asked the managing body of the bank to take corrective action. 

1 The inspection, conducted by the Intermediaries Division – Supervisory Office of the Consob, commenced in December 2009 and was 

concluded on 25 th October 2010. Its purpose was to ascertain the actual degree of compliance by the bank with regulations which 

implemented the MiFID regarding the provision of investment services, with particular regard to the advisory service and the 

progressive update of the solutions adopted pursuant to Consob Communication No. 9019104 of 2 nd March 2009 (Level 3 – 

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In a meeting of 11 th July 2011, the Board of Directors examined and studied the matters 

raised, taking note of the Consob’s observations. It decided to set up a specific working group, 

which included personnel from the relevant functions at the Parent, designed to identify and 

programme appropriate organisational and IT action to remedy the matters raised. 

That working group has already concluded some of its planned activities designed to comply 

with the Supervisory Authority’s recommendations and it has made periodic progress reports 

to the management body. Further activities are continuing in order to fully define the action 

decided. 

FINES 

With Resolution No. 17727 of 29 th March 2011, notified on 6 th April 2011, the Consob imposed 

administrative fines on twelve employees of IW Bank and also jointly on the bank itself on 

conclusion of the administrative penalty proceedings initiated with a letter of 12 th April 2010 

for violation of Art. 187 nonies of the Consolidated Finance Act and the relative provisions to 

implement it issued by the CONSOB in the period 1 st January 2007 – 3 rd December 2008 

(further information is given in the 2010 Annual Report). 

The total amount of the fines imposed, which vary from a maximum of €32 thousand to a 

minimum of €12 thousand for the individuals involved, was €252,900. 

The proceedings which led to the imposition of the fines was initiated by the Spot Markets 

Office of the Markets Division of the Consob, following the inspections conducted at IW Bank 

in the period from 13 th March until 3 rd December 2008. 

On 27 th July 2011, the Bank of Italy notified Centrobanca of a provision concerning the 

application, pursuant to Art. 145 of Legislative Decree No. 385/1993 (the consolidated 

banking act), of administrative fines for a total of €339 thousand on members and former 

members of the management and supervisory bodies and on the former General Manager in 

office at the time of the matters in question (2008) . 

The provision was issued following inspections conducted in the period February-July 2010, 

designed to assess the Group with regard to the management, governance and control of credit 

risk in the corporate customer segment, during which the supervisory authority found 

irregularities relating to Centrobanca subject to penalties (failures in the organisation and 

management of credit by the General Manager, failures in organisation and internal controls 

on the part of members and former members of the Board of Directors and also failures with 

controls by the Board of Statutory Auditors); 

Tax aspects 

Summary of changes introduced during the year 

Provisions were issued during the year, which involved the financial sector. These were the 

“Development Decree” Decree Law No. 70 of 13 th May 2011, the “Financial stabilisation 

decrees” Decree Law No. 98 of 6 th July 2011, Decree Law No. 138 of 13 th August 2011 and the 

“Save Italy” Decree Law No. 201 of 6 th December 2011, some of which are still with no 

definitive interpretative framework. Amendments were made to these towards the end of the 

year with the “thousand extensions” Decree Law No. 216 of 29 th December 2011 and at the 

beginning of 2012, with the “Liberalisations” Decree Law No. 1 of 24 th January 2012. 

The most important points of these measures are given below. 

Intermediary Regulations) concerning the duty of an intermediary to act with integrity and transparency when distributing illiquid 

financial products. 

In accordance with Art. 145, paragraph 10 of the Consolidated Banking Act, Centrobanca is civilly liable to make the payment, with 

the obligation to recover the amounts from those responsible. 

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Development Decree – Decree Law No. 70/2011 

This decree, converted into Law No. 106 of 12 th July 2011, introduced simplifications into the tax 

obligations of taxpayers, with regard to the following: 

- tax inspections; 

- tax assessment enforcement; 

- tax collection; 

- income tax and/or substitute tax returns; 

- the documentation for some transactions; 

- recalculation of some asset values for tax purposes. 

Measures affecting property funds are particularly important with the introduction of a 20% tax on 

income paid to investors on condition that they do not hold more than 5% of the fund itself. In this event, 

taxation is on a “transparency basis” (tax on earnings declared by the fund is paid directly by the 

individual investors). 

Financial stabilisation decree – Decree Law No. 98/2011 

This decree, converted into Law No. 111 of 15 th July 2011, has significant effects for the banking sector: 

‐ an increase of 0.75 percentage points from 3.90% to 4.65% in the base rate on the Imposta Regionale 

sulle Attività Produttive (IRAP - local production tax) tax for banks and financial intermediaries. Extra 

regional percentages must then be added to this base rate. The measure is effective from 1 st January 

2011; 

‐ an appreciable increase in stamp duty on the communication relating to the custodial deposit of 

customer securities. The new measure sets a duty ranging from a minimum of €34.20 to a maximum 

of €680 annually, depending on the value of the securities deposited. The following Decree Law No. 

138/2011 and Decree Law No. 201/2011 made further significant changes to the stamp duty; 

‐ the introduction of the right to realign, for tax purposes, increases in the value of equity investments 

either held by parties required to prepare consolidated financial statements for them or acquired 

through company disposals. The realignment only concerns increases in the value of equity 

investments attributable to goodwill, brands or other intangible assets as stated in the consolidated 

financial statements. UBI Banca took advantage of that right with regard to the extraordinary 

ownership operation that took place in 2007, involving the merger of Banca Lombarda e Piemontese 

Spa into UBI Banca, where the latter recognised equity investments attributable to the former in its 

accounts. The amortisation for tax purposes of the increased value may be performed from 2013 over 

ten tax years; 

‐ further measures of a procedural nature concerning tax inspections and business relations with 

investees resident in EU countries. 

Second financial stabilisation decree – Decree Law No. 138/2011 

This decree, converted into Law No. 148 of 14 th September 2011, introduced the following: 

‐ an increase in the ordinary VAT rate from 20% to 21%; 

‐ a change in the withholding tax on income from capital and on capital gains to 20% from the previous 

rates of 12.5% or 27% for bank deposits, current accounts and certificates of deposit. The new rate, 

which does not apply to Italian government securities, entered into force on 1 st January 2012, except 

for some transitory mechanisms. This involved costly changes in procedures, both in terms of IT 

systems and documents regarding customers; 

‐ the reduction to €2,500 of the threshold for the use of cash and bearer instruments. This threshold 

was further reduced to €1,000 with the subsequent Decree Law No. 201/2011; 

‐ further obligations for reporting to tax authorities on financial relationships with customers (i.e. 

selected lists). This measure was amended again by Decree Law No.201/2011. 

The “Save Italy” decree – Decree Law No. 201/2011 

This decree, converted into Law No. 214 of 22 nd December 2011, involves the following: 

‐ a new measure in force from 1 st January 2012 on stamp duty, regarding communications concerning 

financial products and instruments sent to customers. Stamp duty is applicable to communications 

regarding financial investments, even if they do not relate to custodial deposits. The duty is calculated 

on an annual proportional basis of one per thousand (0.1%) from 2012 and one and a half per 

thousand (0.15%) from 2013, with a minimum amount of €34.20. A maximum amount of €1,200 has 

been set for 2012 only; 

‐ modifications in force from 1 st January 2012 to stamp duty due on bank statements sent by banks to 

their customers. The stamp duty was extended to include bank statements for savings books. The 

amount of the duty has been raised overall for entities other than private individuals from €73.80 to 

€100, while it remains unchanged overall for private individuals (€34.20). Private individuals are 

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exempt from the duty if average annual deposits resulting from bank statements and savings books 

do not exceed a total of five thousand euro. A decree will be issued to implement this; 

‐ a special stamp duty of four per thousand (0.4%) in relation to assets which were repatriated between 

2001 and 2010 or were “regularised” in accordance with capital repatriation laws and on which 

confidentiality was still maintained as at 31 st December of the previous year. The duty is due in the 

amount of ten and thirteen and a half per thousand (1.0% and 1.35%) for the years 2012 and 2013. 

This new measure appears extremely onerous from a practical viewpoint for banks; 

‐ an extraordinary tax for 2012 of ten per thousand (1.0%) concerning assets that had been 

“regularised” which, as at 6 th December 2011, had been wholly or partially drawn from the deposit, 

custodial or management accounts as a result of regularisation procedures or in any case withdrawn; 

‐ an aid to economic growth with effect from the tax period in progress as 31 st December 2011, 

consisting of the deduction from corporate income (IRES -corporate income tax) of the notional return 

on increases in equity with respect to the equity existing at the end of the financial year in progress as 

at 31 st December 2010. That return has been set at 3% for the first three years; 

‐ the deduction for IRES purposes, with effect from the tax period in progress as at 31 st December 

2012, of an amount equal to the IRAP (local production tax) corresponding to the taxable portion of 

employee and similar personnel expenses, but net of the deductions already allowed; 

‐ various amendments to the “tax wedge” with effect from the tax period following that in progress as at 

31 st December 2011. More specifically, the deduction of €4,600 for IRAP purposes for every 

permanent employee on the payroll during the tax period was increased to €10,600 for female 

employees and for those below the age of 35; 

‐ a new proposal for transforming deferred tax assets into tax credits with regard to tax losses (cf. Art. 

84 of the Consolidated Income Tax Act) arising from the deduction of some negative components of 

income (impairment losses on loans, amortisation of goodwill and other intangible assets) already 

provided for originally in paragraphs 55 to 58 of Art. 2 of Decree Law No. 225/2010, converted with 

Law No.10/2011. In this regard, on 22 nd September 2011 the tax authorities issued Resolution No. 

94/E, which regulated the transformation of deferred tax assets into tax credits in accordance with 

Decree Law No. 225/2010 just mentioned. More specifically, where statutory accounting losses have 

been recorded, companies may use that legislation from the approval of the relative financial report 

onwards. 

‐ the obligation from 1 st January 2012, for financial operators to periodically report movements and all 

information concerning business with customers to the tax authorities, for tax inspection purposes. 

That data will be entered in a special section of the tax authorities’ database and the director of the 

tax authorities will issue a special provision to implement this after consultation with the trade 

associations of financial operators and with the Personal Data Protection Authority. That information 

may also be used by the tax authorities, employing centralised procedures and based on criteria 

identified in a provision issued by the authorities, to draw up special selected lists of those taxpayers 

at greatest risk of tax evasion. In this case too banks may be involved in onerous compliance 

formalities in terms of both practical operations and the related responsibilities; 

‐ the reduction to €1,000 of the threshold for the use of cash and bearer instruments; 

‐ the experimental application with effect from 1 st January 2012 of the Municipal Property Tax for the 

years 2012, 2013 and 2014. That tax which makes taxation on property more severe, brings together 

the previous municipal property tax (ICI) and personal income tax on income from properties not 

rented. For businesses in particular, the base rate will be 0.76% of the revalued assumed property 

income for tax purposes, with the possibility for municipalities to increase or decrease this by 0.30%. 

The “thousand extensions” decree – Decree Law No. 216/2011 and the “Liberalisations” decree – 

Decree Law No. 1/2012 

These provisions introduced adjustments to the tax reform for financial assets with effect from 1 st 

January 2012, with particular regard to taxation on current account interest and on repurchase 

agreements and stock lending involving financial instruments with subsidised rates. 

TAX FOR ENTITIES SUBJECT TO IFRS 

A Ministerial Decree of 8 th June 2011 was published on 13 th June 2011, which adds to previous 

regulations concerning the tax treatment for corporate income tax (IRES) and local production tax (IRAP) 

purposes for those entities subject to IFRS and more specifically concerning the implementation of the 

“reinforced derivation principle”. 

The following is of particular interest in this decree: 

‐ the definition of hedges for tax purposes which also comprise assets designated at fair value; 

‐ the tax treatment for financial instruments reclassified into different portfolios pursuant to IAS 39; 

‐ the tax treatment, with regard to companies, for the grant of shares to employees; 

‐ confirmation of the tax classifications for properties regardless of the different classification under 

IFRS; 

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‐ the tax treatment of provisions or other liabilities as designated by IFRS; 

‐ the application for tax purposes of classifications under the Consolidated Income Tax Act 

concerning shares and bonds as opposed to the provisions of IAS 32. 

With regard to interpretation, the tax authorities issued the following circulars: 

*** 

• Circular No. 7/2011, which illustrates the treatment for IRES purposes of items in financial 

statements prepared according to IFRS and that is on the combined basis of Legislative Decree No. 

38/2005, Law No. 244/2007 and Ministerial Decree No. 48/2009. The income of those entities 

subject to IFRS, which include all the companies in the UBI Group, is first determined according to 

the “simple derivation” principle, while the “reinforced derivation” principle has been in force since 1 st 

January 2008. The latter principle also applies retroactively under certain conditions. The circular 

confirms the validity of practices followed by UBI Banca Group companies for those years and we 

therefore consider that the pending tax disputes in this regard can be concluded by applications for 

internal review or abandonment of each inspection; 

• Circular No. 23/2011, which follows on from the previous circular No. 51/2010, provides further 

clarification of legislation concerning CFCs, “Controlled Foreign Companies”, introduced to prevent 

the attribution of income to foreign companies located in blacklisted countries, or with tax levels 50% 

lower than the corresponding national IRES, which would otherwise be attributable to the Italian 

parent. This is also useful for the purposes of preparing the relative applications for non application; 

• Circular No. 33/2011 illustrates the new tax regime for Italian and foreign registered mutual 

investment funds in force from 1 st July 2011. The regime for the taxation of income from funds on a 

mark-to-market basis was repealed on that date with tax now levied when earnings are received by 

investors or when the investment is redeemed. This followed the approval of Decree Law No. 225 of 

29 th December 2010, converted into Law No. 10 of 26 th February 2011, which removed the 

penalisation of domestic funds with respect to the same funds registered abroad. From an operational 

viewpoint, the change in the legislation required considerable action to be taken with regard to 

procedures and above all the need to properly adjust the amounts and taxation for those instruments 

held by customers as at 30 th June 2011. The circular in question contains important clarifications 

concerning “tax substitutes” (who apply withholding taxes) and intermediaries and, in particular, on 

the documentation and procedures that apply to them for the correct application of the new tax 

regulations. 

BUSINESS WITH NON RESIDENTS – TRANSFER PRICES 

With regard to the special procedures designed to prevent resident companies from being subject to tax 

penalties in relation to violations concerning the determination of “transfer prices” for tax purposes (Art. 

110, paragraph 7 of the Consolidated Income Tax Act) in relation to transactions and business with 

foreign subsidiaries, UBI Banca prepared the relative “master file” and the national documentation for 

the tax year 2010. 

BUSINESS WITH SUBSIDIARIES RESIDENT ABROAD 

According to that which has already been reported above on Circular No. 23/E/2011, the UBI Banca 

Group has presented seven applications for non application with regard to its subsidiaries located in the 

state of Delaware (USA) – Banca Lombarda Preferred Capital Company LLC, Banca Lombarda Preferred 

Securities Trust, Banca Popolare di Bergamo Funding LLC, Banca Popolare di Bergamo Capital Trust, 

Banca Popolare Commercio e Industria Funding LLC, Banca Popolare Commercio and Industria Capital 

Trust – and to the subsidiary UBI Banca International located in Luxembourg. 

The tax authorities requested additional documentation which was duly provided. We feel confident that 

all the documentation furnished will confirm the proper tax conduct of our subsidiaries and that no “tax 

transparency” effects with result for the Parent. 

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Tax litigation 

As already reported, Group companies have adopted IAS-IFRS accounting standards in 

accordance with Legislative Decree No. 35/2005 and the relative taxation for direct tax 

purposes was not clearly defined in the legislation until the enactment of the 2008 Finance Act 

(Law No. 244/2007) and the issue of the relative Regulation No. 48/2009, which was 

supplemented by a ministerial decree of 8 th June 2011. It was not until the issue of the tax 

authorities Circular No. 7/E/2011 that the interpretative framework was set out by the 

financial authorities, a good six years after the first income tax return affected by IFRS was 

filed. 

This, together with the complexity of specific tax legislation in the financial and banking 

sectors has generated questions of interpretation both now and in the past, with respect to 

which the tax authorities make objections of an interpretative nature or with regard to tax 

avoidance and evasion. 

In relation to the above, the Group has been subjected to a significant number of tax 

inspections in recent years followed by tax assessment reports, from which notices of tax 

assessment have arisen which generally confirm what was found during the inspection. Where 

tax consolidation for corporate income tax (IRES) purposes exists, with the relative joint 

liability, these inspections are then duplicated for the Parent as the consolidating company. 

The initiatives of importance which took place during the year are described below. 

Banca Popolare di Ancona: on conclusion of a tax inspection conducted for the tax years 2007 and 

2008, on 10 th June 2011 the Marches Regional Department of the tax authorities served a tax 

assessment report which raised questions over the attribution of some expenses incurred. Considering 

the differing interpretation in law of the concept of the attribution of expenses, inclusive of 

documentation factors, an application was filed for full compliance by consent with the tax assessment 

report pursuant to Art. 5 bis of Legislative Decree No. 218/1997. A total payment of €602.7 thousand 

was therefore made on 7 th September 2011. 

Banca Popolare Commercio e Industria, Banca Popolare di Bergamo: the tax authorities – the 

Regional Department for Lombardy – Large Taxpayers Office – served a notice of assessment on BPCI on 

24 th October 2011 and on BPB on 6 th December 2011, which challenged them over the treatment applied 

for VAT purposes to revenues received in 2006 for activity performed as a depository bank for mutual 

investment funds. 

More specifically, it was alleged that Banca Popolare Commercio e Industria had failed to pay taxes of 

€1.202 million and a fine of €2.777 million, while Banca Popolare di Bergamo was accused of failing to 

pay taxes of €2.774 million and a fine of €4.682 million. 

This issue is a common one in the banking sector and it arises over the interpretation at national level of 

the EU Directive 77/388/EEC of 17 th May 1977. The banking sector believes that the consideration for 

that activity is exempt from VAT (Italian Banking Association Circular, Tax Series No. 25 of 28 th 

December 2010 and Assogestioni – national association of asset management companies – Circular No. 

138 of 10 th December 2010), while the tax authorities consider it subject to VAT in full. 

The issue is currently being analysed by the relative associations, partly in view of a hoped for solution to 

the interpretation. In the meantime the banks in question will present appeals to the competent tax 

commission. 

Banca Regionale Europea: on 20 th December 2011, on conclusion of inspections relating to 2008, the 

tax authorities’ Regional Department for Piedmont delivered the relative tax assessment report where the 

tax deduction of losses was alleged for the disposal without recourse of the loans to a customer in 

difficulty in 2008 by the bank, together with other banks and finance company creditors in a broader 

context of the restructuring of the customer’s debt. More specifically, the inspectors alleged the absence 

of the assumptions of certainty and finality of the disposal because of the existence of guarantees 

granted to the creditors recognised by the purchaser. As a consequence, the bank was considered to have 

greater taxable income for IRES and IRAP purposes of €2.836 million, which gave rise to increased taxes 

for IRES and IRAP totalling approximately €916 thousand, in addition to fines – estimated at between 

€152 thousand and €305 thousand – plus interest. 

The inspectors evidently did not consider the principle known as “reinforced derivation”, which the bank 

employs as an entity subject to IFRS where, as in the case in question, the requirements are met for the 

derecognition of the loans in question. 

Banco di Brescia: on 16 th November 2011, Banco di Brescia and UBI Banca (as the consolidating 

company) were served with notices of assessment and notified of fines for corporate income tax (IRES) 

purposes relating to 2006 for a total of €5.134 million (of which €1.945 million for increased taxation, 

€272 thousand for interest and €2.917 million of fines). These notices resulted from a tax assessment 

report received by Banco di Brescia on 19 th June 2009, the findings of which are fully accepted, in which 

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a different criterion is used to calculate the timing of tax deductions for impairment losses on loans. On 

6 th December 2011, an application for tax assessment by consent was filed in order to obtain, as a 

reduction in the increased tax demanded, what had already been paid voluntarily in accordance with 

Law No. 244/2007 for the realignment of statutory accounts with tax accounts with regard to existing 

provisions for risks and charges. This procedure was concluded on 1 st February 2012 without the parties 

having reached an agreement. The bank reserves the right to appeal within the legal time limits. 

Centrobanca: following the tax assessment report received on 23 rd July 2009, with which the Lombardy 

Regional Department of the tax authorities did not approve the criteria employed for the recognition of 

disposal of loans to customers, and that is the impairment losses recognised on them, even where the 

reinforced derivation principle, introduced for entities subject to IFRS with Law No.244/2007, applies. 

On 20 th July 2011, a notice of assessment was received from the same regional department for a total of 

€6.920 million (of which €2.736 million for increased taxation, €351 thousand of interest and €3.832 

million of fines). This notice takes no account whatsoever of the outcome of the criminal proceedings 

(which occurred in the meantime and concluded with a ruling of 8 th June 2011 by the Court of Milan 

dismissing the case because there was “no case to answer”) and in fact confirmed the results of the tax 

assessment report. An unsuccessful attempt was made to use compliance by consent procedures in 

relation to that notice of assessment and therefore court proceedings were initiated. 

UBI Assicurazioni: on conclusion of inspections relating to 2008, on 30 th November 2011 the tax 

authority inspectors from the Lombardy Regional Department delivered their tax assessment report from 

which the following amounts can be estimated: increased IRES of €87 thousand, increased IRAP (local 

production tax) of €13 thousand and increased VAT of €40 thousand. 

These findings mainly concerned questions relating to the tax period or the VAT regime for co-insurance. 

In consideration of the small amounts of the demands, the new owners of UBI Assicurazioni agreed with 

the proposal to file an application for tax assessment by consent. As already reported, under the clauses 

of the contract signed with the controlling shareholder of the company, UBI Banca is not required to pay 

any compensation because the case in question is within the exemption limits. 

UBI Banca: on 28 th November 2011, UBI Banca was served with a notice of assessment and notified of 

fines imposed for corporate income taxes relating to 2003 for a total of €47.138 million (of which €17.986 

million for increased corporate income tax, €3.970 million for interest and €25.181 million of fines). This 

notice resulted from a tax assessment report received by the bank on 8 th July 2010, which contained one 

irregularity only that was fully reproduced in the notice of assessment. Very briefly, with regard to the 

contributions of banking operations made by BPB-CV Scrl in June 2003 to the newly formed BPB Spa 

and BPCI Spa (as part of the operation which gave rise to the BPU Banca Group), the full deduction of 

the provisions for risks and charges taxed separately by the contributor (BPB-CV Scrl) was contested, 

because the tax authorities considered that those provisions should have been deducted in subsequent 

years by the contributing companies (BPB and BPCI). 

The above tax assessment report gave rise to criminal proceedings (fiscal offence of inaccurate income tax 

returns) against the legally authorised representative of BPU Banca, when the tax returns for 2003 were 

filed. The case was closed on 21 st July 2010 with an order for no further action by the Criminal Court of 

Bergamo, both because of the absence of specific intent and because the statute of limitations applied to 

the alleged offence. The assessment was performed as a result of Ruling No. 247 of 25 th July 2011 of the 

Constitutional Court, which doubled the length of the assessment period for fiscal offences, even if the 

ascertainment of the criminal offence occurs when the ordinary assessment period has expired. This 

issue is subject to broad debate, which is still in progress. In the case in question, the inspection relating 

to 2003 took place well after the time limit pursuant to article 43 of Presidential Decree No. 600/1973 

had expired. 

On 6 th December 2011, UBI Banca filed an application for tax assessment by consent in relation to the 

notice of assessment, the procedures for which are still in progress. 

UBI Banca: on 12 th December 2011, UBI Banca as the consolidating company and the Large Taxpayers 

Office of the Lombard Regional Department of the tax authorities, signed a legal reconciliation agreement 

in order to reduce the litigation concerning a series of appeals relating to 2004, presented by UBI Banca 

and some of the consolidated companies (Banco di Brescia, UBI Leasing, Grifogest SGR and Banca 

Lombarda Private Investment). An increased payment resulted from that agreement totalling 

approximately €744 thousand compared to an original demand of approximately €4 million, for which 

appropriate provisions had been made. The payment documentation is expected from the competent 

authorities. 

UBI Banca: on 23 rd June, the Bergamo tax unit of the Guardia di Finanza (finance police) commenced a 

tax inspection for the year 2008. The inspection was suspended indefinitely to allow the inspectors to coordinate 

their work with the Regional Department of the tax authorities. 

UBI Banca and Banco di Brescia: in compliance with Supervisory Recommendations issued in Bank of 

Italy Circular No. 229/1999, in 1999-2000 the former Banca Lombarda e Piemontese Spa, its subsidiary 

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Banco di Brescia Spa, the former Banca Popolare di Bergamo-Credito Varesino Scrl and the former 

Banca Popolare Commercio e Industria Scrl each individually conducted operations to strengthen capital, 

the results of which are still in existence, by issuing preference shares through special companies located 

in the State of Delaware (U.S.A.). These operations were authorised by the Bank of Italy and were 

conducted in compliance with the authorisation received. As already reported, at the time (1999-2000) 

and in any case until the introduction of the company reform pursuant to Legislative Decree No. 6/2003 

(the “Vietti Reform”), the direct issue in Italy of financial instruments with the characteristics necessary 

to comply with the requirements of the above supervisory regulations was forbidden and, in view of that 

circumstance, those same supervisory recommendations stated that “the innovative capital instruments, 

such as preference shares, are instruments issued by foreign subsidiaries included in the banking 

group”. 

Between 2009 and 2011, the Large Taxpayers Office of the Lombard Regional Department of the tax 

authorities served specific notices of tax assessment on UBI Banca and Banco di Brescia for the years 

2004, 2005 and 2006 in relation to those transactions (for a total of €41.363 million of which €17.997 

million for increased corporate income tax, €2.568 million for interest and €20.780 million of fines) 

alleging the failure to apply a withholding tax of 12.5% pursuant to article 26 paragraph 5 of Presidential 

Decree No. 600/1973 by the Italian bank (UBI Banca and BBS) on the interest paid on the subordinated 

deposit made by the LLC located in Delaware. The tax authorities’ argument is based on a change in the 

classification for tax purposes only of the subordinated deposit from the foreign company to the Italian 

company (exempt from withholding tax) as a loan (subject to withholding tax of 12.5%). 

The banks appealed against those notices. After a number of hearings, on 22 nd December 2011 section 

35 of the Tax Commission of Milan rejected the appeal presented by UBI Banca relating to 2004, based 

on the statements made by the Bank of Italy for supervisory capital purposes, rather than on the 

provisions of the Italian Civil Code or tax legislation. Moreover, that same commission held that fines 

were not due because of the objective uncertainty surrounding the regulations. The hearing that regards 

Banco di Brescia in relation to 2004 is set for 25 th October 2012. 

With regard to the litigation in question, in the light, amongst other things, of expert opinions received by 

the Parent and Banco di Brescia, the risk of losing is considered unlikely and more specifically it is held 

that the legal basis of the appeal will be recognised in the courts. 

UBI Banca, BPB Immobiliare and Banca Carime – These companies in the UBI Banca Group have 

appealed against notices of tax assessment with which the tax authorities have reclassified transactions 

as property disposals, which the companies had considered contributions of property operations 

performed in 2003 to Immobiliare Serico, with a consequent demand for increased corporate income tax 

and VAT and the relative fines for a total of approximately €82.8 million. These companies won their 

cases in the court of first instance and in 2011 hearings were held in the competent regional tax 

commissions initiated by the relative departments of the tax authorities which had lost. The Lombard 

Regional Tax Commission upheld the decision of the court of first instance with regard to both UBI 

Banca and BPB Immobiliare, while a ruling by the Calabria Regional Tax Commission regarding Carime 

has not yet been issued. 

UBI Leasing: on 20 th June 2011, on conclusion of a tax inspection which initially concerned the tax year 

2007, but was subsequently extended to also include the following years, the Brescia tax unit of the 

Guardia di Finanza (finance police) issued a tax assessment report to UBI Leasing (the inspection, which 

was interrupted repeatedly, had started in February 2009). The tax assessment report was centred 

primarily on the legality in civil (violation of the prohibition on agreements of forfeiture) and tax law of 

sale and lease back transactions on property (land), from which greater VAT payable arose amounting to 

€7.2 million. 

The company considers that the inspectors classified the transaction incorrectly and in that respect it 

commenced negotiations with the relative department of the tax authorities and filed its observations on 

the tax assessment report (in accordance with the Taxpayers Statute Law 212/2000). 

Banque de Dépôts et de Gestion: in May the Swiss tax authorities rejected the appeal made by UBI 

Banca and Banque de Dépôts et de Gestion against a demand concerning the failure by BDG to apply a 

withholding tax of 15% on dividends paid in the years 2006-2008 to its parent, UBI Banca, because in 

the opinion of the Swiss authorities, as a co-operative UBI Banca is not entitled to the exemption allowed 

for joint stock companies. Since it is held, on the contrary, that grounds exist in the case in question for 

the application of the parent-subsidiary directives, a further appeal was lodged against the decision in 

the competent Federal Administrative Court. That court rejected the appeal in January 2012. The 

litigation regards a sum of €1.59 million in addition to tax credits recognised by the Swiss tax authorities 

worth approximately €2 million. UBI Banca will assess the action to be taken in the light of studies 

currently in progress in order to see its right to refunds or tax relief upheld, partly in the light of the 

bilateral Italian-Swiss Convention. An appeal was lodged in this respect on 23 rd February 2012 with the 

Federal Court against the decision of the Federal Administrative Court. 

207

Further details of tax inspections concerning the Group in recent years are given in the Notes 

to the Consolidated Financial Statements, Part B, Section 12.5 Liabilities, Contingent 

Liabilities, which may be consulted. 

208

Investor relations and external communication 

Relations with analysts and institutional investors and 

communication through the corporate website 

In the difficult environment experienced in 2011, due to the increasing severity of a crisis, the 

duration of which is now without precedent, the investor relations office, which reports directly 

to the CEO, has continued to carefully monitor market events in order to allow a prompt and 

transparent response to the demands of equity and debt investors, analysts and the financial 

community as a whole for information. 

Furthermore, during the year, ordinary activities were added to by those for the presentation 

of the 2011-2015 Business Plan and the increase in the share capital completed in July 2011, 

which were performed in particularly complex periods for markets. 

As part of its investor relations activities, dialogue with the financial community took place as 

follows: 

conference calls 2 organised when annual and interim results were approved and for the 

presentation of the Business Plan; 

the participation of UBI Banca as a speaker at seven international conferences for 

institutional equity and debt investors; 

periodic meetings with Italian and international investors and with the analysts who cover 

the UBI share (the share is currently followed by 23 brokerage houses, including 17 

international, while the remainder are Italian). Altogether, senior management and/or the 

investor relations officer met more than 200 institutional investors (equity and debt) over 

the twelve month period, sometimes on more than one occasion; 

the very many occasions on which analysts and investors were provided with information in 

response to telephone or email queries, especially in view of the intense reporting activity 

required by the situation on markets. 

Work continued at the same time on updating and improving the corporate website, 

www.ubibanca.it, in both the Italian and English version, also in the light of the everincreasing 

importance of online communications, both in terms of regulations and use. A new 

section of the site was implemented during the year containing an interactive version of the 

financial statements of the Group. It can be used to navigate the consolidated financial 

statements of the Group covering a number of years, with graphs of trends for the main 

balance sheet items and information of interest can be downloaded in excel or pdf format. 

Significant improvements were also made to the corporate social responsibility section. 

The efforts and investments made over the years to improve online financial communication 

resulted in the UBI Banca website achieving 12 th position in the Italian league table compiled 

annually by the specialist web ranking company Hallvarsson & Halvarsson (KWD Group), and 

it again held second position in the Italian banking sector. 

Press relations 

Communication activity continued in 2011, with a maximum of transparency and co-operation 

with each publication and with each journalist, in order to ensure an accurate perception of 

the distinguishing features and values of the Group. 

In continuation with the policy pursued in previous years, the network banks were in involved 

in the issue of press releases at local level in order to attain widespread distribution of 

information to the public. 

As a result of UBI Banca’s communication strategy, the network banks continue to obtain 

coverage in the Italian press and in the local press above all, thereby helping to provide further 

visibility to the Parent. 

2 With a view to encouraging the fullest participation of those potentially concerned, all the invitations (prepared in the English 

language) are not only sent to a mailing list of analysts and investors, but are also communicated to the Consob and Borsa Italia Spa 

through NIS (the Borsa Italia network information service) and published on the corporate website at the same time. A copy of the 

presentation is made available on the Bank’s website, in good time beforehand. 

209

In 2011, UBI Banca obtained visibility in the Italian press in 8,266 articles, 35.7% of which (2,955 

articles) described the Group and its banks in detail, with a readership (an estimate of the number of 

people who read these articles) of more than 1.5 billion readers (+30% compared to 2010) 3 . 

The percentage of positive articles out of total high standing articles was 17% while negative articles 

accounted for 13%. Compared to 2010, the percentage of positive articles fell as did that for negative 

articles. The consequent increase in neutral articles is explained by the quantity of articles which 

analysed the sector and the huge attention paid by the general media to economic and financial issues, 

which were given more space as a result of the crisis in progress. 

A total of 67% of the positive articles were dedicated entirely to the UBI Banca Group. 

In one of the most complex years in recent times, UBI Banca has demonstrated its ability to 

maintain a substantial presence in the national media by means of the following: the 

announcement of concrete and “preventative” measures such as the capital increase, which 

received international admiration from supervisory and regulatory bodies and from a major 

international financial newspaper (Financial Times), which reflected positively on Italy and in 

other countries; the presentation of the new business plan to the financial community, which 

achieved strong visibility, both nationally and locally; continuous and constant local coverage, 

confirmed, amongst other things, by the concrete approach and high standards of quality 

acknowledged by the media in relations with families and businesses (with regard above all to 

international services and agreements with associations). 

Events and sponsorships 

In order to enhance its brand and support commercial advertising, as it does every year, UBI 

Banca promoted a series of events on its local markets. 

It organised a road show in important towns and cities to present the XVI Rapporto Einaudi 

(Einaudi report) on the global economy and Italy, the result of a study performed by the 

Einaudi Centre and supported by UBI Banca. 

In order to present opportunities for internationalisation to businesses, it organised “UBI 

International Day” in co-operation with the Sole 24 Ore Group, a two-day event during which 

businesses were given the chance to learn from the Group’s international specialists of the 

services provided on foreign markets and to study different subjects in specialists workshops. 

A tournée was organised with the Accademia del Teatro alla Scala in ten foreign cities where 

the UBI Banca Group has a presence, in order to increase foreign visibility on the occasion of 

the 150 th anniversary of the Unification of Italy. These events met with great success in local 

communities, which acknowledged the Group’s role as a sponsor of prestigious artistic 

initiatives. 

A series of meetings was organised by the network banks in important towns and centres to 

launch the UBI Community service model, dedicated to the third sector, which saw the 

involvement of leading protagonists in the nonprofit sector. The cycle of meetings is continuing 

in the current year. 

Again in order to help promote the UBI Community project, UBI Banca supported the 2011 

Sodalitas Social Innovation Award, organised by the Sodalitas Foundation to give visibility to 

major nonprofit organisation projects of social value and to illustrate the expected returns of 

forprofit-nonprofit partnerships, thereby helping to reduce the distances between the parties 

involved. 

Important sponsorships again included the partnerships with the Goggi Ski Club in Bergamo 

and with the Bergamo international tennis tournament. 

A sponsorship of the cycling team TX Active Bianchi also continued. This mountain bike team 

is led by Felice Gimondi and is dedicated to the mountain bike and cross country fields and 

the sponsorship encourages a sport close to nature out in the fresh air. 

Co-operation was renewed in the cultural field with the “Popotus a scuola” project, organised 

by the daily newspaper Avvenire. UBI Banca has supported this initiative of the publishing 

group for years now. The objective is to help children to read and understand newspapers by 

using a specific tool to attract them. 

3 Data processed by a company external to the Group. 

210

Social and environmental responsibility 

By progressively integrating social responsibility objectives in its Business Plan, UBI Banca 

pursues the convergence of corporate strategies, policies and objectives with its values and 

principles and with the expectations of its stakeholders. The objective is to create sustainable 

value through the control of reputational risk, to establish a strong and distinctive corporate 

identity and to seek a climate of trust with its staff, its shareholder base and markets. 

All the organisational units in the Group are involved in the definition and pursuit of social 

responsibility objectives, with support from the Corporate Social Responsibility Function, 

which formulates proposals for policies and guidelines, contributes to the management and 

control system, supports the involvement of stakeholders and manages reporting activities. 

A summary of the main social responsibility activities performed in 2011 is given below, while 

the Social Report may be consulted for further information and in-depth analysis. 

CORPORATE GOVERNANCE (Code of Ethics) 

On conclusion of joint activity involving management, consisting of a series of interviews and a 

working group composed of different functions formed by the “Macro Areas” of UBI Banca, the 

network banks and the principal product companies, on 13 th and 14 th December 2010 the 

Supervisory Board and the Management Board of UBI Banca approved the Code of Ethics, 

which is an integral part of the “Organisational, Management and Control Model pursuant to 

Legislative Decree 231/01”. At the beginning of 2011 that same text was (i) adopted by all the 

banks and companies in the Group with official approval by the management bodies, (ii) 

communicated to all Group personnel by means of internal memos and publication on the 

corporate intranet, (iii) delivered to all subsidiaries and associates and published in English 

and Italian on the corporate website of the Group. 

As planned, the first initiatives to implement the Code of Ethics were commenced during the 

year and the Code of Conduct was published, for which procedures were concluded in 

December when the management bodies of UBI Banca approved it and it was sent to Group 

companies and banks for formal implementation, with resolutions passed by management 

bodies. 

The Code of Ethics training programme consisted of a classroom course in which over 1,900 

managers of central and network units were involved and an online training course for all 

Group personnel with over 9,000 personnel benefiting. Training activity will continue in 2012 

with further classroom sessions planned and the repeat of the online course to include those 

who were unable to benefit from it in 2011 and also new personnel who have been appointed 

in the meantime. 

The training programme was designed to communicate the most important aims and contents 

of the Group Code of Ethics simply and directly, and to link them with broader corporate 

social responsibility issues. The intention was to support the integration of CSR in business 

strategies and to make it a source of innovation and enhanced competitiveness and 

reputation, by educating personnel on the strategic nature of the CSR approach in the 

banking world and by increasing awareness of its economic value for the Group and of actions 

taken to strengthen its impact. 

The managers of organisational units also took a questionnaire to assess conduct observed at 

work from an ethical viewpoint. The survey was conducted by an outside company which 

ensured anonymity and the results are currently being analysed. 

MARKET 

Business management is oriented towards innovation in products and services, marketing 

approaches and distribution processes consistent with the ethical, social and environmental 

expectations of stakeholders and in implementation of the mutual and community vocation of 

the Group. 

In addition to the action taken to assist families and businesses already reported in the 

preceding section on commercial activity, the most important initiatives were as follows: 

the launch of UBI Community, the new customer service model which includes a range of 

products and services specially designed for the third sector and Church related 

institutions. The UBI Community range of services was designed on the basis of a series of 

211

meetings with representatives of both Church and non-Church organisations to learn their 

characteristics and specific requirements; 

the conclusion of the partnership with PerMicro to develop micro-credit for social inclusion 

and to support employment; 

the conclusion of the pilot project with a range of services designed for immigrants, which 

allowed the Group to assess important features of the service to use as tool with a view to 

social inclusion and enhancement of this group within the context of the various segments 

of the retail market; 

participation, together with the leading banking groups in Italy, in the working round table 

“Science for Peace”, organised by the Veronesi Foundation to draw up a “Code of 

responsibility for finance to the arms industry”, consistent with the orientation of the Group 

since 2007, when it set its policy for transactions with counterparties operating in the arms 

and materials for armaments sectors. 

SOCIAL INTERVENTION 

The management of social intervention is designed to strengthen and support those large 

numbers of nonprofit organisations which work in the following fields: social, recreational and 

sport; welfare and solidarity; education and training; culture: university and research; 

restoration of artistic heritage and the protection of the environment. 

In 2011 the Group, with contributions from the Parent, the network banks, the main product 

companies and its foundations, disbursed a total of approximately €15 million (-7.4% 

compared to 2010), in the form of donations and sponsorships. Each entity in the Group 

operates independently in response to the demands it encounters and considers consistent 

with its own values and social responsibility objectives. 

While the Social Report furnishes a full and complete view of the activity performed during the 

year, one of the most important longstanding partnerships is that with CESVI (one of the main 

Italian NGOs operating in the field of humanitarian emergencies throughout the world) as part 

of which UBI Banca supported the initiative “CESVI sUBIto for the Horn of Africa” in 2011 for 

people in Somalia hit by famine. UBI Banca made its Group branches available to receive 

donations from customers, which successfully reached the ceiling of a total of €100 thousand 

(including €40 thousand from the private banking sector). 

ENVIRONMENTAL RESPONSIBILITY 

In addition to its pursuit of full and substantial compliance with regulations in force, it is 

Group policy to contribute to sustainable economic development, thereby also concretely 

implementing the principles of the Global Compact. 

The environmental policy approved in December 2008 commits the Group to reducing its 

environmental impact through the intelligent and responsible management of both direct 

impacts (i.e. impacts generated by its own operating activities through the consumption of 

resources, the production of waste and harmful emissions) and also indirect impacts (i.e. 

impacts generated by the conduct of third parties with whom the Bank does business, such as 

its customers and suppliers). The Group Energy Manager and Mobility Manager, appointed 

within the UBI Sistemi e Servizi Real Estate Department and the Human Resources Area of the 

Parent respectively, are the main protagonists assigned the role of promoting and supporting 

the implementation of policy through targeted initiatives, in co-operation with the Group 

Corporate Social Responsibility Function of the Group. 

With regard to direct impacts, in 2011 the Group yet again made exclusive use of electricity 

certified as from renewable sources (RECS certificates) and for the first year 184,099 kWh of 

energy was generated by the photovoltaic plant installed at Jesi. This made it possible to 

reduce total CO 2 emissions by 63.1% in the last three years. The largest consumption 

amounted to 746,879 GJ of electricity (-5.7% in the last three years) and 2,000,705 kg of 

paper (-2.3% compared to 2010). Waste production remained almost unchanged (+0.4% for a 

total of 2,161 tons). 

As concerns indirect impacts, the Group has been active for some time in its commercial 

activities with “green” products, and that is credit lines provided for investments in energy 

savings and in the diversification of energy sources, with particular attention given to 

renewable sources or those with a low environmental impact, the volumes of which are 

reported in the preceding section “Commercial activity”. 

During 2011, loans granted amounted altogether to € 736 million. 

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ECONOMIC REPORT 

In 2011 the Group generated economic value of €2,849 million (-6.5% compared to 2010). 

Economic value distributed amounted to €3,035 thousand, inclusive of the loss attributable to 

non controlling interests. Net of that item, economic value distributed amounted to €3,055 

thousand: 46.6% to employees, 29.9% to public administrations for taxes, 21.6% to suppliers, 

1.5% to registered and unregistered shareholders, 0.4% to the community (see the 2011 Social 

Report for further details). 

REPORTING AND CONTROL 

The Social Report, together with the social responsibility section of the Group corporate 

website, is the main instrument for integrated reporting on the economic aspects (the 

economic value generated and distributed), social aspects (commitments, objectives and 

results achieved in terms of satisfying the legitimate expectations of stakeholders) and 

environmental aspects (commitments, objectives and results for controlling direct and indirect 

impacts) of operations. 

In accordance with requirements expressed by stakeholders in consultation activities 

conducted during the year, consisting of the Consultation Project for customers and focus 

groups with trade associations and local nonprofit organisations, and with developments in 

best practices, it was decided to publish the following for 2011: 

a summary document, of an informative nature, to involve the broadest possible range of 

stakeholders, designed for consultation on the internet and using tablets and smartphones. 

Printed in 3,000 copies, it is published and distributed to shareholders on the occasion of 

the Annual General Meeting together with the consolidated and separate annual report; 

a detailed document, prepared for the first time in compliance with the highest level A+ of 

the “Sustainability Reporting Guidelines G3.1”, accompanied by a “Financial Services 

Sector Supplement” of the Global Reporting Initiative 4 and subject to independent auditing 

by the independent auditors KPMG Spa. This document is published in electronic format 

only and is translated into English, while hardcopy versions are produced and sent only on 

request. 

The social responsibility section of the Group corporate website underwent a series of 

improvements in 2011, in order to achieve the following objectives: reorganisation and 

simplification of the navigation tree; the insertion of new contents, especially on corporate 

social responsibility governance (e.g. the social responsibility model, relevant issues, 

reputational risk management) and on the Social Report in order to make it accessible to 

stakeholders with the ease of navigation on the web. As a consequence, the corporate social 

responsibility section reached 15 th position overall (+2 positions compared to the previous 

year) and 4 th position among banks in the 2011 CSR Online Awards Italy league table. The 

classification, drawn up each year by the communication company Lunquist, assesses the 

quality of the online communication of businesses on social and environmental, ethical and 

corporate governance issues and on the level of dialogue with stakeholders. 

Meetings were again held in 2011 with representatives of trade associations and nonprofit 

organisations, conducted by an independent company using the focus group method, in order 

to verify the level of awareness and agreement with the social responsibility policies of the 

Group and the quality of the reporting provided in the communities concerned and to survey 

expectations and acquire recommendations for improvement. The meetings were held in Turin, 

at the new headquarters of Banca Regionale Europea, in Genoa for the Banco di San Giorgio 

and at Breno for Banca di Valle Camonica. 

4 An independent nonprofit foundation located in Amsterdam which was formed from a project started in 1997 by CERES of Boston (a 

coalition of investors, environmental organisations and public interest groups, which came together to promote corporate social 

responsibility by addressing businesses directly on social and environmental issues). Its mission is to produce global standards for 

sustainability reporting, thanks to the contribution of hundreds of experts in a large number of countries throughout the world. 

213

Legislation on the protection of personal data 

With a view to simplifying personal data requirements (Art. 45), Decree Law No. 5 of 9 th 

February 2012 “urgent measures on simplification and development (published in the Official 

Journal No. 33 on 9 th February 2012), abolished the obligation to prepare an annual update of 

the “Security Programme Document” pursuant to Legislative Decree No. 196 of 30 th June 2003 

(“Privacy Code”). 

Since the change introduced had no effect on the general security obligations under Art. 31 

and following of that code, the banks and companies in the Group went ahead with all the 

updates required with regard to the treatment of data, risk analysis and security measures. 

214

Principal risks and uncertainties to which 

the UBI Banca Group is exposed 

Risks 

The UBI Banca Group attributes primary importance to the measurement, management and 

monitoring of risk, as activities necessary to the sustainable creation of value over time and to 

the consolidation of its reputation on its markets. 

In compliance with the regulations in force for the prudential supervision of banks (Bank of 

Italy Circular No. 263/2006), the Group has put a process in place to calculate its capital 

adequacy requirement – for the present and the future – to meet all significant risks to which 

the Group is or might be exposed (ICAAP - Internal Capital Adequacy Assessment Process). 

In this respect very careful identification is performed on a continuous basis of the risks 

subject to measurement. Risk identification activity is designed to verify the magnitude of 

Group risks already subject to measurement and to detect signals of other types of risk which 

may manifest. Identification involves precise conceptual definition of the risks to which the 

Group is exposed, an analysis of the factors which combine to generate them and a description 

of the relative manner in which they manifest. This activity was achieved by means of a 

centralised process of analysis supplemented by self assessment conducted on all the entities 

of the Group. 

Once the activity to identify significant risks is completed, the ICAAP process involves the 

measurement of the risks identified and the calculation of the total capital 1 required to meet it 

(capital adequacy), both at present and in the future. Use is also made of specific (by assessing 

impacts on a single risk) and global (by assessing impacts on all risks at the same time) stress 

tests to perform a better assessment of exposure to risk and of systems for mitigating and 

monitoring it and calculating capital requirements. 

The UBI Banca Group has a system of risk governance and management in place which takes 

account of organisation, regulations and methods in order to ensure consistency in its 

operations and its relative propensity to risk. 

In consideration of its mission, the operations of the Group and also the market context in 

which it operates, the risks to be subjected to measurement in the ICAAP assessment process 

were identified and divided into first pillar and second pillar risks, as required by the relative 

regulations. 

First pillar risks – already managed under the requirements of supervisory regulations – are as 

follows: 

• credit risk (including counterparty risk): the risk of incurring losses resulting from the default of a 

counterparty with whom a position of credit exposure exists. This also comprises the definition of 

counterparty risk, which constitutes a particular type of credit risk. It is the risk that a counterparty 

to a transaction involving determined types of financial instruments defaults before the transaction 

itself is settled. 

• financial risks: risk of changes in the market value of financial instruments held, due to unexpected 

changes in market conditions and in the credit rating of the issuer; 

• operational risk: the risk of incurring losses resulting from the inadequacy or malfunction of 

procedures, human resources and internal events or from exogenous events. This includes losses 

resulting from fraud, human error, business disruption, system failure, non performance of contracts 

and natural disasters and it comprises legal risk. 

In addition to first pillar risks, second pillar risks were identified, consisting of the following: 

1 See Part F, section 1 A. Qualitative Information of the Notes to the Consolidated Financial Statements for a definition of total capital. 

215

• risks defined as measurable, for which established quantitative methods have been 

identified, which lead to the determination of internal capital or for which useful 

quantitative thresholds or limits can be defined which, combined with qualitative 

measurements, allow allocation and monitoring processes to be defined; 

• risks defined as non measurable, for which policies and measures for control, reduction or 

mitigation are considered more appropriate because no established approaches exist for the 

measurement of internal capital that are useful for allocation purposes. 

The second pillar risks subject to analysis are as follows: 

MEASURABLE RISKS: 

‐ concentration risk: risk resulting from exposures in the banking portfolio to counterparties, or groups 

of counterparties in the same economic sector or counterparties engaged in the same business or 

belonging to the same geographical area. Concentration risk can be divided into two types: single 

name concentration risk and sector concentration risk; 

‐ interest rate risk: the current or future risk of a change in net interest income and in the economic 

value of the Group, following unexpected changes in interest rates which have an impact on the 

banking book. 

‐ business risk: the risk of adverse and unexpected changes in profits and margins with respect to 

forecasts, connected with volatility in volumes of business due to competitive pressures and market 

conditions; 

‐ equity risk: the risk of losses incurred in equity investments that are not fully consolidated on a lineby-line 

basis. 

‐ fixed asset risk: the risk of changes in the value of the intangible fixed assets of the Group. 

By convention measurable risks also include those risks for which, although no well established 

approaches exist for the estimate of internal capital, operational limits of a quantitative nature, for which 

there is a consensus in the literature, can be set to measure, monitor and mitigate them. 

These risks are: 

- liquidity risk: the risk of the failure to meet payment obligations which can be caused either by an 

inability to raise funds or by raising them at higher than market costs (funding liquidity risk), or by 

the presence of restrictions on the ability to sell assets (market liquidity risk) with losses incurred on 

capital account; 

- structural liquidity risk: the risk resulting from a mismatch between the sources of funding and 

lending. 

NON MEASURABLE RISKS: 

- risks resulting from securitisations: the risk that the underlying economic substance of a 

securitisation is not fully reflected in decisions made to measure and manage risk; 

- compliance risk: the risk of incurring legal or administrative penalties, substantial financial 

losses or damage to reputation resulting from violations of laws and mandatory external 

regulations or internal regulations (by-laws, codes of conduct and voluntary codes); 

- reputational risk: the risk of incurring losses resulting from a negative perception of the image of 

the Bank by customers, counterparties, shareholders of the Bank, investors, the supervisory 

authority or other stakeholders; 

- residual risk: the risk of incurring losses resulting from the unforeseen ineffectiveness of 

established methods of mitigating risk used by the Bank (e.g. mortgage collateral); 

- strategic risk: the current or future risk of a fall in profits or in capital resulting from changes in 

the operating context, inadequate decision-making, failure to react to changes in a competitive 

environment. 

Details are given below of risks which have significant impacts for the UBI Banca Group and 

the action taken to mitigate them. Risks other than those reported below, which are of 

marginal importance, are not expected to change during the course of the year. 

216

Credit risk 

Credit risk constitutes the most important characteristic risk of the UBI Banca Group: 

historically this risk accounts for approximately 90% of the supervisory risk capital. 

The year just ended was characterised by weak domestic demand, which was confirmed by 

recent economic indicators (two consecutive falls in Italian GDP in the third and fourth 

quarters of 2011) and opinion among businesses. The continuing difficulties of the economy in 

general and the related consumer crisis have continued to have a negative impact on the ability 

of businesses and individuals to meet their obligations, thereby maintaining high levels of 

credit risk and as a consequence also high rates of loan impairment and credit provision. 

In this situation of objective difficulty, the Group has nevertheless reviewed its credit 

monitoring and control processes, in order to prevent a further deterioration in its portfolio and 

to also maximise recoveries on already deteriorated loans. The following initiatives were taken 

in this respect during 2011: 

• the CR2 Programme – Credit Recovery and Regularisation: 

- the consolidation and progressive rationalisation of the process for monitoring 

performing positions in order to anticipate intervention by account managers for at risk 

counterparties and to prevent the deterioration of accounts by taking prompt action; 

- the update and development of the credit recovery system in order to increase credit 

recovery on non-performing loans partly through improving IT support and innovation in 

operating processes. 

• the Problem Loan Quality Project: an initiative launched in the network banks to reduce 

size of the impaired loan portfolio, through the adoption of a new approach to the 

management of non-performing loans, as a consequence of portfolio segmentation and the 

assignment of strategies and objectives to personnel in the distribution network; 

• Credit Quality Contacts: improved monitoring at local level in the network banks with the 

introduction of a new role responsible for credit quality management. 

Liquidity risk 

The problems of confidence on institutional and interbank markets, caused primarily by fears 

of sovereign state insolvencies, in a context of a slowdown in trends for traditional funding, 

due to lower household disposable income, has led to the risk of shortfalls in the liquidity 

required to fund the core lending of the Bank. In this context, the recent Eurosystem 

refinancing operations relaxed pressures on funding. Nevertheless, the recent recommendation 

on capital issued by the European Banking Authority (EBA) on 8 th December 2011, designed 

to strengthen the capital positions of European banks, by creating an exceptional and 

temporary capital buffer by the end of June 2012, sufficient to bring the core tier one ratio up 

to 9%, could have further repercussions on bank lending. In the light of this the Group took 

part in the ECB’s LTRO operations and prepared a capital management plan compatible with 

the EBA recommendations. 

Detailed information on financial risk management objectives and policies and also on the 

exposure of the Group to price risk, credit risk, liquidity risk and the risk of changes in cash 

flows – pursuant to article 2428 of the Italian Civil Code – is given in Part E of the notes to the 

consolidated financial statements, which may be consulted. 

Uncertainties 

An uncertainty is defined as a possible event for which the potential impact, attributable to one 

of the risk categories just mentioned, cannot be determined and therefore quantified at 

present. 

The scenario in which the Group is operating is one of a recession already in progress – and 

which will probably last for most of 2012 – with substantial risks of it worsening, due mainly 

to the continuation of the process to solve the European sovereign debt crisis and the 

217

uncertainty surrounding the outcomes, despite the steps forward taken in recent days with 

the approval of a budget discipline pact and a permanent stability fund (Fiscal Compact and 

ESM – European Stability Mechanism). A final solution, which would therefore succeed in at 

least partially restoring the confidence of investors, seems today to be only on the horizon, at a 

difficult point in time when in the first half of 2012 alone, the euro area has to face substantial 

government debt issuances. 

The elements of uncertainty identified could manifest with impacts attributable primarily to 

credit and business risk, but without affecting the capital strength of the Group. 

In detail, the main uncertainties identified for 2012 are linked to the following aspects: 

- developments in the macroeconomic situation. The persistent pressures on sovereign debt in 

the euro area and the continuing uncertainty over the consolidation of United States finances, 

is having repercussions on the outlook for growth in advanced economies. This is reflected in 

Italy by heavily depressed domestic demand, accompanied by household incomes that are still 

contracting, high and growing unemployment and the consolidation of government finances 

which will further cool the economic climate. 

In the light of these considerations, in 2012 the rate of defaults is expected to remain at the 

same high levels reached during the crisis and credit risk will only be able to reduce 

significantly at the end of the restructuring process that is affecting the whole national 

economy and the industrial sector in particular; 

- changes in the legislative and regulatory context. The regulatory context is subject to various 

processes of change following both the issue of a number of legislative provisions at EU and 

national level, with the introduction of the relative regulations to implement them, relating to 

the provision of banking services, and also to the related jurisprudence and decisions by the 

courts (e.g. the form, content and modification of contracts, interest, other items of 

remuneration for credit lines and overdrafts and the sale of insurance policies). This scenario, 

which has introduced discontinuities in operations and has at times directly affected the 

profits of banks, and/or costs for customers, requires particular effort both in terms of 

interpretation and implementation. 

Recent provisions that should be underlined include the Save Italy and Liberalisations decrees 

which may have negative impacts on profits. The Group is studying action to soften the 

impacts of that legislation, which includes constant and attentive monitoring of operating 

costs and a constant search for efficiency in internal processes. 

*** 

The risks and uncertainties described above were subject to a process of assessment designed, 

amongst other things, to examine the impacts of changes in market parameters and conditions 

on corporate performance. The Group does in fact possess instruments to measure the possible 

impacts of risks and uncertainties on its operations (sensitivity analysis and stress tests in 

particular), which allow it to rapidly and continuously adapt its strategies – in terms of its 

distribution, organisation and cost management systems – to changes in the operating context. 

Risks and uncertainties are also under constant observation through the implementation of the 

policies and regulations to govern risk adopted by the Group: policies are updated in relation to 

changes in strategy, context and market expectations. Periodic monitoring of policies is designed 

to verify their state of implementation and their adequacy. The findings of the analyses 

performed show that the Group is able to meet the risks and uncertainties to which it is exposed, 

which therefore confirms the assumption that it is a going concern. 

218

Risks relating to health and safety at the workplace 

(Legislative Decree No. 81 of 9th April 2008) 

The main issues involved in 2011 in the complex activity carried out to ensure the proper 

implementation of regulations on this subject were as follows: 

- the development of the work-related stress assessment process; 

- start of the process to comply with UNI INAIl (national insurance institute for accidents at 

the workplace) Guidelines to increase the effectiveness of the organisation and management 

model already in place with regard to the administrative liability of companies concerning 

prevention offences pursuant to article 25 septies of Legislative Decree 231/2001; 

- analysis of robberies with a focus on the impact of those events on the mental and physical 

well-being of personnel. 

As concerns the assessment of work-related stress, the methodological process commenced in 

the Group involves a number of connected and sequential stages. 

The first was completed in 2011 and consisted of the acquisition, processing and comparison 

(against a sector benchmark, amongst other things) of numerically significant, objective data 

(“alarm bell” events, working context and content indicators). Rather than merely compiling 

INAIL forms, which are extremely generic, it was decided to analyse real situation 

contextualised risk factors, in order to bring to the fore preventative measures already adopted 

by Group companies to manage issues of pressing social concern, such as the enhancement of 

human resources, working conditions and how work is organised. 

The stage where workers and/or their representatives are involved must still be completed. In 

order to prevent this from transforming into an opportunity for negotiations and/or conflict, it 

was decided to employ the focus group method (which involves the sole presence of an outside 

observer, who is usually a psychologist) across all companies, which has already been 

successfully employed in smaller units in the Group where no trade union representatives are 

present. 

As mentioned above, this is just the first level of compliance with the legislation, a sort of 

introductory phase needed to identify those factors, among all those analysed, which it is 

considered may generate a risk of exposure to work-related stress in relation to the specific 

workplace. 

Risk analysis in the field of the application of health and safety legislation must necessarily 

consider the relationship of that legislation (which as is known requires those occupying the 

positions of Official Employer, senior manager and company officers to act as guarantors and 

therefore to be personally liable) to Legislative Decree No. 231/2001, which regulates the 

administrative liability of legal entities. 

Activities programmed for the three year period 2011-2013 include a project launched to 

update the current organisation, management and control model pursuant to Legislative 

Decree No. 231 to comply with the provisions of Art. 30 of Legislative Decree No. 81/2008, 

with specific reference to the UNI INAIl Guidelines, in order to increase the effectiveness of 

these in terms of exemption from the administrative liability of natural persons with regard to 

prevention offences pursuant to Art. 25 septies of Legislative Decree No. 231 (serious or very 

serious malicious bodily harm or manslaughter in violation of safety regulations). 

One of the essential requirements of the UNI INAIl Guidelines is the need for health and safety 

to become an integral part of corporate policies and strategies, so that the application of 

regulations under Legislative Decree No. 81/2008 is based primarily on company organisation 

that is explicitly structured in those terms. 

A working group was set up for that purpose, which, by actively involving personnel from 

different units, and not only at the Parent but also at UBI.S, involved in various ways in 

sensitive processes, will analyse the compliance with the UNI-INAIL recommendations of 

corporate processes which impact health and safety. It will then identify changes and/or 

additions needed with a view to achieving official approval of a process that is fully integrated 

and consistent with the Group’s administrative liability procedures (Decree No. 231) and 

which will form a special part of those procedures with specific regard to offences under Art. 

25 septies. 

219

Compliance of corporate health and safety procedures with the UNI-INAIl Guidelines will also 

bring automatic savings on annual INAIL insurance contributions (“fluctuation of the 

prevention premium”, which results in a reduction of 7% in the annual premium), which this 

national accident insurance institute offers to companies which can demonstrate that they 

have adopted virtuous practices on prevention and occupational risks at the workplace to 

improve health and safety conditions over and above those required by law 2 . 

Particular attention was also paid to an interpretation of developments in criminal phenomena 

(robberies and thefts) both in the sector nationally and in the UBI Banca Group. A constant 

reduction in the number of events has been seen since 2008 (approximately 30% less each 

year, which for the UBI Banca Group translates into a total reduction of 64% in 2011 

compared to the figure for 2008). However, there has been a worrying increase in robberies 

performed using methods which result in the need for psychological assistance (robberies with 

personnel taken hostage for long periods). The trend for robberies considered “serious” in 

terms of the impact on the mental and physical well-being of personnel has in fact reversed, 

with an increase inversely proportional to the overall phenomenon. The ratio of “serious” 

robberies to total robberies therefore rose from 21% in 2008 to 51% in 2011. 

A joint working group was therefore set up on the issue with Group organisational units 

responsible for the management of safety, designed to identify and agree upon new solutions 

of both a technical and organisational nature, which will act as a deterrent to crime, by 

effectively integrating with the measures already implemented in order to continue to achieve 

the positive results so far attained. 

The following is reported to complete the picture of initiatives put in place to address health 

and safety risks: 

• the creation of a special section in the new Group portal, in operation since the last quarter 

of 2011, in which information can easily be found on the following: legislation and Group 

regulations; news on safety organisation in the Group; classroom material for training 

purposes; 

• training initiatives conducted as part of multi-year training programmes for the various 

figures and roles involved. Remote training courses were made available in 2011 on risks 

specific to the banking industry, such as that connected with the use of video monitors 

(completed by 14,355 staff, accounting for 79% of potential participants) and robberies 

(completed by 7,564 staff, accounting for 68% of potential participants). The latter course 

supplemented conventional classroom training activities. 

The positive trend for work-related accidents and illnesses in the banking sector continued in 

2011, with the Group again placed in the lowest class both in terms of absolute severity and 

the frequency and seriousness of accidents. “Accidents while travelling” which occur while 

travelling to and from work were again the most prevalent of total accidents. In this respect 

the data for the UBI Banca Group is not only perfectly in line with that for the sector, but it 

also pursues special policies designed to reduce road accident risks at the source, by 

encouraging, where possible, the use of public transport even for work activities, or by making 

collective transport facilities available, where restructuring processes result in significant 

travelling requirements for personnel 

The remaining potential sources of accident risk normally present at the workplace, (known as 

“interference risks” connected with ordinary and extraordinary maintenance work performed 

at the premises of Group companies) are subject to constant educational campaigns for UBI.S 

personnel who manage relations with Group suppliers directly. 

2 In the absence of that certification, the benefit of the “premium fluctuation” is subject to the production of detailed and complex 

documentation. While that certification has not yet been obtained, the validity of the health and safety procedures in place in the 

UBI Banca Group was confirmed indirectly when INAIl reduced the premium required for 2012 from the Parent, UBI.S and all the 

Group’s network banks, including UBI Banca Lombarda Private Investment. 

220

Subsequent events and the business outlook 

for consolidated operations 

Part A, Section 4 of the Notes to the Financial Statements may be consulted for significant 

events occurring after the end of the year. 

*** 

With regard to the business outlook for operations, we report the forecasts given below on the 

basis of information currently available. 

The background environment (economic recession, low short-term interest rates, constraints 

resulting from EBA recommendations, competitive pressure on the cost of retail funding) will 

affect profits in the financial year 2012. The year will nevertheless benefit from commercial 

action already undertaken in 2011 and also from the positive results expected from the active 

management of the financial structure of the Group. 

Operating expenses are forecast to fall further compared to 2011, as a result of continuing 

action to contain them, which should make it possible to offset increases resulting from 

automatic contract clause increases, inflation, the full application of the increases in indirect 

taxation and from operations announced to streamline the Group. 

Action undertaken to monitor credit quality should enable impairment losses to be contained 

at levels close to those recorded in 2011. 

Consequently, growth in profits on ordinary operations, although only slight, is forecast for 

2012, other economic factors remaining unchanged. 

The fundamental strategic lines of the 2011-2013/2015 Business Plan remain unchanged and 

no update is planned unless greater stability in the context is seen. 


THE MANAGEMENT BOARD 

221

STATEMENT OF THE CHIEF 

EXECUTIVE OFFICER AND OF THE 

SENIOR OFFICER RESPONSIBLE 

FOR PREPARING THE COMPANY 

ACCOUNTING DOCUMENTS 

222

223

Certification of the consolidated financial statements pursuant to Art. 81-ter of the 

Consob Regulation 14 th May 1999, No.11971 and subsequent modifications and 

integrations 

1. The undersigned Victor Massiah, Chief Executive Officer, and Elisabetta Stegher, Senior Officer 

Responsible for preparing the company accounting documents of UBI Banca Scpa, having taken account 

of the provisions of paragraphs 3 and 4 of article 154 bis of Legislative Decree No. 58 of 24 th February 

1998, hereby certify: 

• the adequacy in relation to the characteristics of the company and 

• the effective application 

of the administrative and accounting procedures for the preparation of the consolidated financial 

statements during the course of 2011. 

2. The model employed 

The assessment of the adequacy of the administrative and accounting procedures for the preparation of 

the consolidated financial statements as at and for the year ended 31 st December 2011 was based on an 

internal model defined by UBI Banca Scpa and developed in accordance with the framework drawn up 

by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) and with the 

framework Control Objectives for IT and related technology (COBIT) which represent the generally 

accepted international standards for internal control systems. 

3.Furthermore, it is certified that: 

3.1 the consolidated financial statements: 

a) were prepared in compliance with the applicable international financial reporting standards 

recognised by the European Community in accordance with the Regulation No. 1606/2002 

(EC) issued by the European Parliament on 19 th July 2002; 

b) correspond to the records contained in the accounting books; 

c) give a true and fair view of the capital, operating and financial position of the issuer and of 

the group of companies included in the consolidation. 

3.2 the management report comprises a reliable analysis of the performance, operating results and 

position of the issuer and of the companies included in the consolidation, together with a description, 

insofar as they are known, of the main risks and uncertainties to which they are exposed. 


Victor Massiah 

Chief Executive Officer 


Elisabetta Stegher 

Senior Officer Responsible for 

preparing the company accounting 


224

225

Independent auditors’ report 

226

227

228

229

Consolidated 

Balance Sheet

Consolidated Balance Sheet 

ASSETS (figures in thousand of euro) 31/12/2011 31/12/2010 

10. Cash and cash equivalents 625,835 609,040 

20. Financial assets held for trading 2,872,417 2,732,751 

30. Financial assets at fair value 126,174 147,286 

40. Available-for-sale financial assets 8,039,709 10,252,619 

60. Loans to banks 6,184,000 3,120,352 

70. Loans to customers 99,689,770 101,814,829 

80. Hedging derivatives 1,090,498 591,127 

90. Fair value change in hedged financial assets 704,869 429,073 

100. Equity investments 352,983 368,894 

120. Property, equipment and investment property 2,045,535 2,112,664 

130. Intangible assets 2,987,669 5,475,385 

of which: 

goodwill 2,538,668 4,416,660 

140. Tax assets: 2,817,870 1,723,231 

a) current 459,282 650,177 

b) deferred 2,358,588 1,073,054 

150. Non current assets and disposal groups held for sale 22,020 8,429 

160. Other assets 2,244,343 1,172,889 

Total assets 129,803,692 130,558,569 

Table 1: 100O|1 - NOTA1 

ai “Criteri di redazione” . 

ldi di confronto al 31 dicembre 2006 si riferiscono al solo ex Gruppo BPU Banca.ai “Criteri di redazione” . 

LIABILITIES AND EQUITY (figures in thousand of euro) 31/12/2011 31/12/2010 

10. Due to banks 9,772,281 5,383,977 

20. Due to customers 54,431,291 58,666,157 

30. Securities issued 48,377,363 48,093,888 

40. Financial liabilities held for trading 1,063,673 954,423 

60. Hedging derivatives 1,739,685 1,228,056 

80. Tax liabilities: 702,026 993,389 

a) current 383,364 441,433 

b) deferred 318,662 551,956 

100. Other liabilities 3,139,616 2,600,165 

110. Post-employment benefits 394,025 393,163 

120. Provisions for risks and charges: 345,785 303,572 

a) pension and similar obligations 76,460 68,082 

b) other provisions 269,325 235,490 

140. Fair value reserves (1,315,865) (253,727) 

170. Reserves 2,416,471 2,362,382 

180. Share premiums 7,429,913 7,100,378 

190. Share capital 2,254,367 1,597,865 

200. Treasury shares (4,375) 

210. Non-controlling interests 898,924 962,760 

220. Profit (loss) for the year (1,841,488) 172,121 

Total liabilities and equity 129,803,692 130,558,569 

231

Consolidated Income Statement 


2011 2010 

10. Interest and similar income 4,047,546 3,525,312 

20. Interest expense and similar (1,925,857) (1,378,714) 

30. Net interest income 2,121,689 2,146,598 

40. Commission income 1,351,827 1,378,117 

50. Commission expense (159,893) (196,892) 

60. Net commission income 1,191,934 1,181,225 


80. Net trading income (loss) 10,711 (56,891) 

90. Net hedging income 8,938 67,209 

100. Income (loss) from disposal or repurchase of: 26,529 17,057 

a) loans and receivables 2,464 (3,850) 

b) available-for-sale financial assets 11,929 31,245 

d) financial liabilities 12,136 (10,338) 

110. Net income (loss) on financial assets and liabilities at fair value (38,849) 6,669 

120. Gross income 3,340,949 3,385,966 

130. Net impairment losses on: (742,221) (756,653) 

a) loans (607,078) (706,932) 

b) available-for-sale financial assets (128,182) (42,364) 

d) other financial transactions (6,961) (7,357) 

140. Net financial income 2,598,728 2,629,313 

170. Net income from banking and insurance operations 2,598,728 2,629,313 

180. Administrative expenses (2,304,249) (2,375,174) 

a) personnel expense (1,423,196) (1,451,584) 

b) other administrative expenses (881,053) (923,590) 


200. Net impairment losses on property, equipment and investment property (110,888) (109,838) 

210. Net impairment losses on intangible assets (672,608) (130,500) 

220. Other net operating income 243,065 239,430 

230. Operating expenses (2,876,275) (2,403,291) 

240. Profits of equity investments 10,248 99,027 

260. Net impairment losses on goodwill (1,873,849) (5,172) 

270. Profits on disposal of investments 6,818 14,458 

280. Pre-tax profit (loss) from continuing operations (2,134,330) 334,335 

290. Taxes on income for the year from continuing operations 271,991 (231,980) 

300. Post-tax profit (loss) from continuing operations (1,862,339) 102,355 

310. Post-tax profit from discontinued operations 248 83,368 

320. Profit (loss) for the year (1,862,091) 185,723 

330. (Profit) loss attributable to non-controlling interests 20,603 (13,602) 

340. Profit (loss) for the year attributable to the shareholders of the Parent (1,841,488) 172,121 

a seguito della fusione tra gli ex Gruppi BPU e Bana Lombarda, nonché della variazione del principio contabile relativo ai 

piani a benefici definiti per i dipendenti, i 

rispetto a quelli già pubosito si rimanda a quanto I 

Iesposto nella sezione relativa ai “Criteri di redazione” . 

icembre 2006 si riferiscono al solo ex Gruppo BPU Banca. 

232

Consolidated statement of comprehensive income 


10. PROFIT (LOSS) FOR THE YEAR (1,862,091) 185,723 

Other comprehensive income (expense) net of taxes 

20. Available-for-sale financial assets (981,503) (456,017) 

30. Property, equipment and investment property - - 

40. Intangible assets - - 

50. Foreign investment hedges - - 

60. Cash flow hedges (2,694) 1,356 

70. Foreign currency differences - - 

80. Non-current assets held for sale - - 

90. Actuarial losses on defined benefit plans (21,435) (12,537) 

100. Share of fair value reserves of equity-accounted investees (62,742) (30,398) 

110. Total other comprehensive expense net of taxes (1,068,374) (497,596) 

120. COM PREHENSIVE EXPENSE (item 10 + 110) (2,930,465) (311,873) 

130. 

CONSOLIDATED COMPREHENSIVE INCOME (EXPENSE) ATTRIBUTABLE TO NON- 

CONTROLLING INTERESTS (27,256) 7,017 

130 

CONSOLIDATED COM PREHENSIVE EXPENSE ATTRIBUTABLE TO THE SHAREHOLDERS 

OF THE PARENT (2,903,209) (318,890) 

233

Statement of changes in consolidated equity 

to 31/12/2011 

(figures in thousands of euro) 

Balances as at 31/12/2010 

Restatement of opening balances 


Allocation of prior 

year profit 

Reserves 

Dividends and other uses 

Changes in reserves 

Share capital: 2,112,552 - 2,112,552 - - (10,932) 656,502 - - - - - - 2,758,122 2,254,367 503,755 

a) ordinary shares 2,076,462 - 2,076,462 - - (10,932) 656,502 - - - - - - 2,722,032 2,254,367 467,665 

b) other shares 36,090 - 36,090 - - - - - - - - - - 36,090 - 36,090 

Share premiums 7,179,155 - 7,179,155 - (2,604) 329,535 - - - - - 7,506,086 7,429,913 76,173 

Reserves 2,690,200 - 2,690,200 69,885 - (25,197) - - - - - - 2,734,888 2,416,471 318,417 

Fair value reserves (225,851) - (225,851) - - (458) - - - - - - (1,068,374) (1,294,683) (1,315,865) 21,182 

Equity instruments - - - - - - - - - - - - - - - - 

Treasury shares - - - - - - - (4,375) - - - - - (4,375) (4,375) - 

Profit (loss) for the year 185,723 - 185,723 (69,885) (115,838) - - - - - - (1,862,091) (1,862,091) (1,841,488) (20,603) 

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 

- attributabl e to sharehol ders 

of the Parent 10,979,019 - 10,979,019 - (102,236) (16,213) 986,037 (4,375) - - - - (2,903,209) 8,939,023 X X 

- attributabl e to noncontrolling 

interests 962,760 - 962,760 - (13,602) (22,978) - - - - - - (27,256) 898,924 X X 

New share issues 

Changes during the year 

Equity transactions 


Extraordinary distribution of 

dividends 

Change in equity instruments 

Derivatives on treasury shares 

Stock options 

Consolidated comprehensive income 

(expense) 

Equity as at 31/12/2011 

Equity attributable to the shareholders 

of the Parent as at 31/12/2011 

Equity attributable to non-controlling 

interests as at 31/12/2011 

The figures presented in this statement of changes in equity correspond to those reported in Table B.1 (Consolidated equity by type of company) contained in Part F of the Notes to the Financial Statements. 

Details of fair value reserves: 

31.12.10 31.12.10 31.12.11 31.12.11 

Parent NCI Parent NCI 

a) available for sale 

b) cash flow hedge 

c) foreign currency differences 

d) actuarial gains/losses 

e) special revaluation laws 

-311,493 -4,355 -1,350,979 -9,115 

-619 -32 -3,217 -128 

-243 0 -243 0 

-14,518 -1,684 -34,155 -3,482 

73,146 33,947 72,729 33,907 

-253,727 27,876 -1,315,865 21,182 

234

to 31/12/2010 



Restatement of opening balances 


Allocation of prior 

year profit 

Reserves 

Dividends and other uses 

New share issues 


Extraordinary distribution of 

dividends 

Change in equity instruments 

Share capital: 2,033,305 - 2,033,305 - - 79,247 - - - - - - - 2,112,552 1,597,865 514,687 

a) ordinary shares 1,997,215 - 1,997,215 - - 79,247 - - - - - - - 2,076,462 1,597,865 478,597 

b) other shares 36,090 - 36,090 - - - - - - - - - - 36,090 - 36,090 

Share premiums 7,186,217 - 7,186,217 - (7,062) - - - - - - 7,179,155 7,100,378 78,777 

Reserves 2,555,746 - 2,555,746 69,878 - 64,576 - - - - - - 2,690,200 2,362,382 327,818 

Fair value reserves 287,175 - 287,175 - - (15,430) - - - - - - (497,596) (225,851) (253,727) 27,876 

Equity instruments - - - - - - - - - - - - - - - - 

Treasury shares - - - - - - - - - - - - - - - - 

Profit for the year 287,147 - 287,147 (69,878) (217,269) - - - - - - 185,723 185,723 172,121 13,602 

Equity: 12,349,590 - 12,349,590 - (217,269) 121,331 - - - - - (311,873) 11,941,779 10,979,019 962,760 

- attributabl e to sharehol ders 

of the Parent 11,411,248 - 11,411,248 - (200,221) 86,882 - - - - - - (318,890) 10,979,019 X X 

- attributable to noncontrol 

l ing interests 938,342 - 938,342 - (17,048) 34,449 - - - - - - 7,017 962,760 X X 

Changes in reserves 

Changes during the year 

Equity transactions 

Derivatives on treasury shares 

Stock options 

Consolidated comprehensive income 

(expense) 

Equity as at 31/12/2010 

Equity attributable to the shareholders 

of the Parent as at 31/12/2010 

Equity attributable to non-controlling 

interests as at 31/12/2010 

The figures reported are presented to show amounts for the entire business, i.e. attributable to the Parent and to non controlling interests. 

235

Consolidated Statement of Cash Flows (Indirect method) 


A. OPERATING ACTIVITIES 

1. Ordinary activities 654,177 84,058 

- profit (los s) for the year (+/-) (1,841,488) 172,121 

- gains/losses on financial assets held for trading and on financial assets/liabilities at fair value ( 28,138 50,222 

- gains/losses on hedging activities (-/+) (8,938) (67,209) 

- net impairment losses on loans (+/-) 742,221 756,653 

- net impairment losses on plant, equipment and investment property and intangible assets (+/-) 2,657,343 240,338 

- net provisions for risks and charges and other expense/income (+/-) 31,595 32,381 

- net premiums not received (-) - - 

- other insurance income/expense not received (+/-) - - 

- outstanding taxes and duties (+) (860,402) (360,522) 

- net impairment losses on disposal groups held for sale after tax (+/-) - - 

- other adjustments (+/-) (94,292) (739,926) 

2. Cash flows generated/absorbed by financial assets (3,015,466) (8,758,001) 

- financial assets held for trading (128,955) (1,213,878) 

- financial assets at fair value (18,919) 33,110 

- available-for-sale financial assets 2,084,728 (3,908,724) 

- loans to banks: repayable on demand - - 

- loans to banks: other loans (4,065,648) 157,912 

- loans to customers 1,495,981 (4,514,509) 

- other assets (2,382,653) 688,088 

3. Cash flows generated/absorbed by financial liabilities 1,608,723 8,769,541 

- amounts due to banks repayable on demand - - 

- amounts due to banks: other payables 4,388,304 59,543 

- due to customers (4,234,866) 5,801,196 

- securities issued 283,475 3,744,444 

- financial liabilities held for trading 109,250 99,036 

- financial liabilities at fair value - - 

- other liabilities 1,062,560 (934,678) 

Cash flows generated/absorbed by operating activities (752,566) 95,598 

B. INVESTING ACTIVITIES 

1. Cash flows generated by 39,429 218,289 

- disposals of equity investments 2,704 81,095 

- dividends received on equity investments 19,997 24,099 

- disposals of held-to-maturity investments - - 

- disposals of property, equipment and investment property 9,662 14,458 

- disposals of intangible assets - 811 

- disposals of lines of businesses 7,066 97,826 

2. Cash flows absorbed by (149,494) (188,471) 

- purchases of equity investments (36,000) (13,988) 

- purchases of held-to-maturity investments - - 

- purchases of property, equipment and investment property (48,992) (105,507) 

- purchases of intangible assets (64,502) (68,976) 

- purchases of lines of business - - 

Cash flows generated/absorbed by investing activities (110,065) 29,818 

C. FUNDING ACTIVITIES - - 

- issues/repurchases of treasury shares 981,662 - 

- issues/purchases of equity instruments - - 

- distribution of dividends and other uses (102,236) (200,221) 

Cash flows generated/absorbed by funding activities 879,426 (200,221) 

CASH FLOWS GENERATED/ABSORBED DURING THE YEAR 16,795 (74,805) 

Key: (+) generated (-) absorbed 

236

Reconciliation 


Cash and cash equivalents at beginning of year 609,040 683,845 

Cash and cash equivalent inflow on 01/04/2007 following the merger - - 

Total net cash flows generated/absorbed during the year 16,795 (74,805) 

Cash and cash equivalents: effect of changes in exchange rates - - 

Cash and cash equivalents at end of year 625,835 609,040 

237

PART A – Accounting policies 

A.1 – General Part 

A.2 – The main items in the financial statements 

PART B – Notes to the consolidated balance sheet 

Assets 

Liabilities 


PART C – Notes to the consolidated income statement 

PART D – Consolidated statement of comprehensive 

income 

PART E – Information on risks and the relative 

hedging policies 

PART F – Information on consolidated equity 

PART G – Business combination transactions 

concerning companies or lines of business 

Notes to the 

Consolidated 

Financial 

Statements 

PART H – Transactions with related parties 

PART I – Share-based payments 

PART L – Segment Reporting 

The figures contained in the tables in the notes to the consolidated financial statements 

are stated in thousands of euro, unless specified otherwise. 

238

Part A – Accounting policies 

A.1 – GENERAL PART 

Section 1 Statement of compliance with IFRS 

This consolidated financial report has been prepared in compliance with the international 

financial reporting standards issued by the International Accounting Standards Board (IASB) 

and endorsed at the date of publication and also in compliance with the related interpretations 

of the International Financial Reporting Interpretation Committee (IFRIC) 1 . 

The report is composed of the balance sheet, income statement, statement of comprehensive 

income, statement of cash flows, statement of changes in equity and the notes to the financial 

statements, accompanied by the consolidated management report, subjected to audit by the 

independent auditors and it relates to the companies (subsidiaries, associates and companies 

subject to joint control) included in the consolidation. 

The consolidated financial statements as at and for the year ended 31 st December 2011 have 

been clearly stated and give a true and fair view of the capital and financial position, the result 

for the year, the changes in equity and the cash flows. 

Section 2 Basis of preparation 

These consolidated financial statements have been prepared according to the general 

accounting principles contained in IAS 1 “Presentation of financial statements” and they 

therefore report information on a going concern basis, recognising income and expenses on an 

accruals basis, without offsetting assets against liabilities and revenue against expenses. 

The information contained in this annual report is expressed, unless otherwise indicated, in 

euro as the accounting currency and the financial information, the balance sheet and income 

statement, the notes and comments and the explanatory tables are presented in thousands of 

euro. The relative rounding of the figures has been performed on the basis of Bank of Italy 

instructions. Items for which there are no values for the current and the previous period have 

been omitted. 

The mandatory financial statements used in this annual report comply with those defined in 

Bank of Italy Circular No. 262/2005, as amended by the first update of 18 th November 2009 

and by subsequent communications from the supervisory authority. In addition to the 

accounts as at 31 st December 2011, they also provide the same comparative information as at 

31 st December 2010. 

On 10 th February 2012, the Bank of Italy issued “addendum” letter No. 0125853/12 (complied 

with for the preparation of these financial statements) concerning “financial statements and 

supervisory reporting” with which it provided banks and financial intermediaries with replies 

to requests for clarification that it had received concerning the correct treatment for the 

recognition of certain transactions. 

The recommendations contained in it were found to be in line with Group practice. 

1 See the “List of IAS/IFRS standards approved by the European Commission”. The standards listed there and the 

relative interpretations are applied on the basis of events occurring that are disciplined by them in the year from 

which application becomes compulsory, unless indicated otherwise. 

239

Accounting policies 

The accounting policies contained in Part A.2 concerning the classification, valuation and 

derecognition phases are essentially the same as those adopted for the preparation of the 2010 

annual financial statements. 

The accounting policies employed tend to apply the cost criterion with the exception of the 

following financial assets and liabilities, which are valued using the fair value criterion: 

financial instruments held for trading (including derivative products), financial instruments 

designated at fair value (in application of the fair value option) and available-for-sale financial 

instruments. 

To complete the information, non-current assets available for sale (and the liabilities 

associated with them) have been recognised at the lower of the carrying amount and the fair 

value (net of sales costs). 

With regard to changes in IFRS, during the reporting year the European Commission 

published EC Regulation 149/2011, which makes various slight changes to the IFRS as part 

of the annual improvement process designed to simplify and clarify them. 

These amendments, which became compulsory for the financial year 2011, concern various 

standards as can be seen from the “List of IAS/IFRS standards adopted by the European 

Commission” later in this report. 

Application of the following EU regulations, published by the European Commission in 2010, 

became compulsory in 2011: 

• Regulation No. 574/2010 – “Amendments to IFRS 1 and IFRS 7”; 

• Regulation No. 632/2010 – IAS 24 “Related party transactions”; 

• Regulation No. 633/2010 – IFRIC 14 “The limit on a defined benefit asset”; 

• Regulation No. 662/2010 – IFRIC 19 “Extinguishing financial liabilities with equity 

instruments”. 

The effect of these new standards is of a purely informative nature in this annual report. 

Section 3 Consolidation scope and methods 

The consolidated financial statements include the financial and operating results of UBI Banca 

Scpa and the companies either directly or indirectly controlled by it, including within the 

scope of the consolidation also those companies which operate in sectors different from that to 

which the Parent belongs and the special purpose entities, when the conditions of effective 

control exist, even in the absence of an equity stake, but in relation to what is termed 

“business”. 

The following principal changes occurred in the consolidation scope compared with the 

situation as at 31 st December 2010. 

Changes in the consolidation scope 

‐ the disposal, on 27 th April 2011, of 30% of the share capital of BY You S.p.A.. As a 

result of that sale the company and its subsidiaries are no longer consolidated with the 

proportionate method. Due to the existence of a pledge on shares representing 10% of 

the share capital with voting rights for UBI Banca, the company is recognised using the 

equity method; 

‐ on the basis of agreements concluded between the main shareholders and the company 

Sopaf and the signing of a new shareholders’ agreement, the company Polis Fondi SGR 

S.p.A. is now consolidated using the equity method instead of the previous 

proportionate method; 

‐ on 25 th November 2011, the securitisation transaction performed using the company 

Sintonia Finance S.r.l. was redeemed in advance. That company was excluded from the 

consolidation from that date; 

240

‐ the formation, on 20 th December 2011, of the company UBI Finance CB 2 S.r.l. The 

creation of that company was necessary for the coming launch of a second programme 

of covered bond issuances. 

No extraordinary transactions were recorded as taking place within the Group in 2011. 

However, a series of transactions to purchase shares or subscribe share issuances took place, 

which resulted in changes in consolidation methods. 

Further information on the changes described above is given in the section “The consolidation 

scope” contained in the Management Report, which may be consulted. 

With regard to the consolidation methods used, companies subject to control are consolidated 

using the line-by-line method, those subject to joint control are proportionately consolidated, 

while those interests over which the Group exercises significant influence are valued using the 

equity method. 

The line-by-line consolidation method 

Subsidiaries subject to control are consolidated using the full line-by-line method. The concept 

of control goes beyond a majority percentage interest in the share capital of the company 

invested in and is defined as the power to determine the financial and operating policies of the 

entity in question for the purpose of obtaining the benefits from its activities. 

The line-by-line consolidation method involves summing the items of the income statements 

and balance sheets of subsidiaries on a line-by-line basis The following adjustments are made 

for this purpose: 

(a) the carrying amounts of the subsidiaries held by the Parent and the corresponding part of 

the equity are eliminated; 

(b) the proportion of equity and of profit or loss for the year attributable to other shareholders 

is stated under a separate item 

If the results of the above adjustments are positive, then they are recognised (after first 

allocating them if possible to the assets or liabilities of the subsidiary) as goodwill within item 

130 “intangible assets” on the date of the first consolidation, if the necessary conditions apply. 

If the resulting differences are negative they are normally charged to the income statement. 

Intragroup balances and transactions, including revenues, costs and dividends are completely 

eliminated. 

The operating results of a subsidiary that is acquired during the period are included in the 

consolidated balance sheet starting from the date on which it is acquired Similarly, the 

operating results of a subsidiary that is disposed of are included in the consolidated balance 

sheet until the date on which control over the company is released. 

The accounts used in the preparation of consolidated financial statements are stated as of the 

same date. 

The consolidated financial statements have been prepared using uniform accounting policies 

for like transactions and events. 

If a subsidiary uses different accounting policies from those employed in the consolidated 

financial statements for like transactions and other events in similar circumstances, 

adjustments are made to its accounts for the purposes of the consolidation. 

The proportionate method 

An equity investment is considered as subject to joint control even in the absence of equal 

voting rights, if control over the operating activities and strategic policies of the company 

invested in is shared with others on the basis of contractual agreements. 

Application of the proportionate method involves the inclusion in the investor’s balance sheet 

of its share of the assets controlled jointly and of its share of the liabilities for which it is 

jointly responsible. 

241

The income statement of the investor includes the relative share of the income and expenses of 

the jointly controlled entity. 

Intragroup balances and transactions, including revenues, costs and dividends are eliminated 

on the basis of the share of joint control. 

The investor ceases the use of the proportionate consolidation method for the purposes of 

consolidation from the date on which it ceases to have joint control over the investment 

The equity method 

Equity investments over which the Group exercises significant influence, which is the power to 

participate in the financial and operating policy decisions but not to control or have joint 

control over them are measured using the equity method. 

Under this method an equity investment is initially recorded at cost and the carrying amount 

is increased or decreased to reflect the investor's share of the profit or loss of the associate 

after the acquisition date. The proportion of the profit or loss for the year made by the investee 

attributable to the investor is stated in the income statement of the latter. Dividends received 

from an investee reduce the carrying value of the investment; adjustments to the carrying 

amount may also be required arising from a change in the portion of the investee's equity 

attributable to the investor that have not been recognised in the income statement. These 

changes include changes arising from the revaluation of property, equipment and investment 

property and from exchange rate differences on items in foreign currency. The portion of those 

changes attributable to the investor are recorded directly in its equity. 

Where potential voting rights exist, the investor's share of profit or loss of the investee and of 

changes in the investee's equity is determined on the basis of present ownership interests and 

does not reflect the possible exercise or conversion of potential voting rights. 

Where the investee incurs continued losses, if these exceed the carrying value of the investee, 

the carrying value is written off and further losses are only recognised if the investor has 

contracted legal or implicit obligations or has made payments on behalf of the investee. If the 

investee subsequently realises a profit, the investor resumes recognition of its share of the 

profits only after reaching the share of the profit which was previously not recognised. 

For the purposes of consolidating investments in associates, the figures from the financial 

statements prepared and approved by the boards of directors of the individual companies are 

used. Where accounts prepared according to international standards are not available those 

prepared according to national accounting standards are used after first verifying that there 

are no significant differences. 

The consolidating entity ceases use of the equity method from the date on which it ceases to 

exercise significant influence over the associate and the investment is classified within either 

“financial assets held for trading” or “available-for-sale financial assets”, according to the case, 

starting from that date on condition that the associate does not become a subsidiary or 

subject to joint control. 

242

1. Equity investments in companies subject to exclusive control and to joint control (proportionately consolidated) 

Name 

Headquarters 

Share capital 

Details of investment 

Investing company 

A.1 Line-by-line consolidated companies 

1. Unione di Banche Italiane Scpa - UBI Banca Bergamo 

PARENT 

2. 24-7 Finance Srl Brescia euro 10,000 4 UBI Banca Scpa 10.000% 10.000% 

3. Albenza 3 Srl Milan euro 10,000 4 X X X 

4. Barberini Sa Brussels (Belgium) euro 3,092,784 1 UBI Banca Scpa 100.000% 100.000% 

5. BDG Singapore Pte Ltd Singapore Sing. dollars 5,600,000 1 Banque de Depots et de Gestion Sa 100.000% 100.000% 

6. B@nca 24-7 Spa Bergamo euro 316,800,000 1 UBI Banca Scpa 100.000% 100.000% 

7. Banca Carime Spa Cosenza euro 1,468,208,505,92 1 UBI Banca Scpa 92.833% 92.833% 

8. Banca di Valle Camonica Spa Breno (BS) euro 2,738,693 1 UBI Banca Scpa 74.244% 82.960% 

Banco di Brescia Spa 8.716% 

9. Banca Lombarda Preferred Capital Company LLC Delaware (USA) euro 1,000 1 UBI Banca Scpa 100.000% 100.000% 

10. Banca Lombarda Preferred Securities Trust Delaware (USA) euro 1,000 1 UBI Banca Scpa 100.000% 100.000% 

11. Banca Popolare Commercio e Industria Capital Trust Delaware (USA) euro 1,000 1 BPCI Funding Llc - USA 100.000% 100.000% 

12. Banca Popolare Commercio e Industria Funding LLC Delaware (USA) euro 1,000,000 1 UBI Banca Scpa 100.000% 100.000% 

13. Banca Popolare Commercio e Industria Spa Milan euro 934,150,467,60 1 UBI Banca Scpa 75.077% 75.077% 

14. Banca Popolare di Ancona Spa Jesi ( AN) euro 122,343,580 1 UBI Banca Scpa 92.934% 92.934% 

15. Banca Popolare di Bergamo Spa Bergamo euro 1,350,514,252 1 UBI Banca Scpa 100.000% 100.000% 

16. Banca Regionale Europea Spa Cuneo euro 468,880,348,04 1 UBI Banca Scpa 74.944% 75.800% 

17. Banco di Brescia Spa Brescia euro 615,632,230,88 1 UBI Banca Scpa 100.000% 100.000% 

18. Banco di San Giorgio Spa Genoa euro 102,119,430 1 UBI Banca Scpa 38.193% 95.693% 

Banca Regionale Europea Spa 57.500% 

19. Banque de Depots et de Gestion Sa Lausanne (Switzerland) Swiss francs 10,000,000 1 UBI Banca Scpa 100.000% 100.000% 

20. BPB Capital Trust Delaware (USA) euro 1,000 1 BPB Funding Llc - USA 100.000% 100.000% 

21. BPB Funding LLC Delaware (USA) euro 1,000,000 1 UBI Banca Scpa 100.000% 100.000% 

22. BPB Immobiliare Srl Bergamo euro 185,680,000 1 UBI Banca Scpa 100.000% 100.000% 

23. Centrobanca Spa Milan euro 369,600,000 1 UBI Banca Scpa 94.271% 99.742% 

Banca Popolare di Ancona Spa 5.471% 

24. Centrobanca Sviluppo Impresa SGR Spa Milan euro 2,000,000 1 Centrobanca Spa 100.000% 100.000% 

25. Coralis Rent Srl Milan euro 400,000 1 UBI Banca Scpa 100.000% 100.000% 

26. Investnet International Spa Milan euro 12,478,465 1 IW Bank Spa 100.000% 100.000% 

27. Invesclub srl in liquidazione Milan euro 10,000 1 IW Bank Spa 100.000% 100.000% 

28. IW Bank Spa Milan euro 18,404,795 1 UBI Banca Scpa 65.039% 88.535% 

Centrobanca Spa 23.496% 

29. Lombarda Lease Finance 4 Srl Brescia euro 10,000 4 UBI Banca Scpa 10.000% 10.000% 

30. Orio Finance Nr. 3 Plc Dublin (Ireland) euro 10,000 4 X X X 

31. Prestitalia Spa Rome euro 46,385,482 1 Banca 24-7 Spa 100.000% 100.000% 

32. Silf - Società Italiana Leasing e Finanziamenti Spa Cuneo euro 2,000,000 1 UBI Banca Scpa 100.000% 100.000% 

33. Società Bresciana Immobiliare - Mobiliare SBIM Spa Brescia euro 35,000,000 1 UBI Banca Scpa 100.000% 100.000% 

34. Società Lombarda Immobiliare Srl - SOLIMM Brescia euro 100,000 1 UBI Banca Scpa 100.000% 100.000% 

35. UBI Banca International Sa Luxembourg euro 59,070,750 1 UBI Banca Scpa 90.603% 100.000% 


Banco di San Giorgio Spa 0.173% 

Banca Popolare di Bergamo Spa 3.372% 

36. UBI Banca Private Investment Spa Brescia euro 67,950,000 1 UBI Banca Scpa 100.000% 100.000% 

37. UBI Factor Spa Milan euro 36,115,820 1 UBI Banca Scpa 100.000% 100.000% 

38. UBI Fiduciaria Spa Brescia euro 1,898,000 1 UBI Banca Scpa 100.000% 100.000% 

Type of 

ownership 

% held 

% of votes 

243

39. UBI Finance Srl Milan euro 10,000 1 UBI Banca Scpa 60.000% 60.000% 

40. UBI Finance 2 Srl Brescia euro 10,000 4 UBI Banca Scpa 10.000% 10.000% 

41. UBI Finance 3 Srl Brescia euro 10,000 4 UBI Banca Scpa 10.000% 10.000% 

42. UBI Gestioni Fiduciarie Sim Spa Brescia euro 1,040,000 1 UBI Fiduciaria Spa 100.000% 100.000% 

43. UBI Insurance Broker Srl Bergamo euro 3,760,000 1 UBI Banca Scpa 100.000% 100.000% 

44. UBI Lease Finance 5 Srl Brescia euro 10,000 4 UBI Banca Scpa 10.000% 10.000% 

45. UBI Leasing Spa Brescia euro 241,557,810 1 UBI Banca Scpa 79.996% 98.993% 


46. UBI Management Company Sa Luxembourg euro 125,000 1 UBI Pramerica SGR Spa 100.000% 100.000% 

47. UBI Pramerica SGR Spa Milan euro 19,955,465 1 UBI Banca Scpa 65.000% 65.000% 

48. UBI Sistemi e Servizi Scpa Brescia euro 35,136,400 1 UBI Banca Scpa 70.845% 98.520% 

Banca Carime Spa 2.960% 

Banca Popolare Commercio e Industria Spa 2.960% 


Banca Popolare di Bergamo Spa 2.960% 

Banca Regionale Europea Spa 2.960% 


Banca 24-7 Spa 1.480% 

Banca di Valle Camonica Spa 1.480% 

Banco di San Giorgio Spa 1.480% 

Centrobanca Spa 1.480% 

UBI Banca Private Investment Spa 1.480% 

UBI Pramerica SGR Spa 1.480% 

UBI Factor Spa 0.740% 

Silf Spa 0.074% 

IW Bank Spa 0.074% 

Prestitalia Spa 0.074% 

UBI Insurance Broker Srl 0.074% 

49. UBI Trustee Sa Luxembourg euro 250,000 1 UBI Banca International Sa 100.000% 100.000% 

50. UBI Finance CB 2 Srl Milan euro 10,000 4 UBI Banca Scpa 10.000% 10.000% 

Key 

(1) Type of ownership: 

1 = majority of voting rights in ordinary general meetings 

2 = dominating influence over ordinary general meetings 

3 = agreements with other shareholders 

4 = other forms of control 

5 = “unitary management” control under Art. 26, paragraph 1, of “Legislative Decree No. 87/92” 

6 = “unitary management” control under Art. 26, paragraph 2, of “Legislative Decree No. 87/92 

7 = joint control 

(2) (Votes available at ordinary shareholders’ meetings, distinguishing between actual and potential) 

244

2. Other information 

Companies in which no equity investment is held, but for which shares have been received as 

pledges are excluded from the consolidation scope, in consideration of the purpose of 

possession, which is to secure the loan granted and not to exercise control and determine 

financial and operating policies in order to obtain the economic benefits deriving from them. 

The balance sheet, income statement and statement of cash flows of consolidated companies 

which operate with a reference currency other than the euro are translated at the exchange 

rate ruling at the end of the year. All the exchange rate differences resulting from the 

translation are recognised in a specific reserve in equity. If an investment is disposed of, this 

reserve is eliminated with a simultaneous debit or credit to the income statement at the time 

of disposal. 

International financial reporting standards require the recognition in the financial statements 

of corporate events in a manner which reflects the underlying economic substance of them. 

No equity investments held directly or indirectly by the Parent with an interest of less than 

20% existed at the reporting date over which it is considered it exerted significant influence. 

Furthermore, with the exception of equity investments held for merchant banking activities 

classified within item 20 “Financial assets held for trading”, no equity investments held 

directly or indirectly by the Parent Bank with an interest of more than 20% existed as at the 

reporting date over which it is considered it did not exert significant influence. 

No significant restrictions existed as at the balance sheet date on the capacity of associate 

companies to transfer funds to the investing company in payment of dividends or repayment of 

loans or advances. 

The reporting dates of the companies valued according to the equity method and of those 

consolidated proportionately were the same as that of the Parent. 

Section 4 Subsequent events 

With regard to the provisions of IAS 10, subsequent to 31 st December 2011, the reporting date, 

and until 27 th March 2012, the date on which the draft Annual Report was approved by the 

Management Board for submission to the Supervisory Board, no events occurred to make 

adjustments to the figures presented in the report necessary. 

For information purposes, the following events are mentioned: 

▪ 

▪ 

▪ 

20 th January 2012: in compliance with requests made by the European Banking Authority 

(EBA), UBI Banca presented a programme for achieving a core tier one ratio of 9% by 30 th 

June 2012. In consideration of the temporary nature of the requested increase, the plan 

does not include any possibility of new resort to the market. It relies substantially on the 

adoption, by the end of the first half of 2012, of advanced internal models for the 

calculation of capital requirements on corporate credit risk, on further action to optimise 

risk weighted assets and on self funding. Any requirement remaining as at 30 th June 2012, 

will be met, if substantial, by the partial conversion of outstanding convertible debt 

instruments; 

in January and February 2012, as part of action taken to strengthen the liquidity reserve 

consisting of assets eligible for refinancing, UBI Banca took advantage of the opportunity to 

issue government backed bonds: on 2 nd January it made two issuances for a total €3 billion 

nominal (€2 billion with a three year maturity and €1 billion with a five year maturity), 

followed on 27 th February by two additional issuances of €3 billion nominal (€2 billion with 

a three year maturity and €1 billion with a five year maturity); 

between 7 th February and 12 th March 2012, a public tender offer to purchase was launched 

on tier one instruments (preference shares) in issue. The offer made to both qualified and 

other investors was taken up for a total nominal amount of €109 million, equivalent to 

approximately one fourth of the nominal amount of the securities issued, and it generated a 

net gain of approximately €15.8 million recognised in the first quarter of 2012 (see the 

section “General banking business with customers: funding” in the Consolidated 

Management Report for further information); 

245

▪ 

▪ 

▪ 

14 th March 2012: the UBI Banca Group disclosed that it had informed Arca SGR of its 

desire to withdraw from the share capital of that company, with respect to all the shares 

held. The right of withdrawal arose, in accordance with Art. 2347 of the Italian Civil Code, 

because the Group did not vote in favour of the resolution passed by an Extraordinary 

Shareholders’ Meeting which, on 20 th February 2012 (filed with the Company Registrar of 

Milan on 5 th March 2012), had made amendments to the Corporate By-Laws of Arca SGR. 

The withdrawal involves 13,354,000 shares held by the UBI Banca Group (11,562,000 by 

UBI Banca and 1,792,000 by Banca Popolare di Ancona), accounting for 26.708% of the 

share capital of Arca SGR, valued at consolidated level at an average of € 2.09 per share. 

Following the exercise of that right to withdrawal, the UBI Banca Group will have the right 

to cash payment for the shares held, in the amount of € 2.70 per share, as determined 

according to the law by the Board of Directors of Arca SGR. The payment will take place 

within the time limits set by the Italian Civil Code; 

27 th March 2012: with regard to the plan to merge Banco di San Giorgio into Banca 

Regionale Europea - approved by the boards of directors of the two banks on 21 st December 

2011 – the Management Board of UBI Banca approved modifications to the parameters for 

the merger to take account of the results of impairment tests conducted at the end of the 

year. The new share price for the purchase by BRE of the ordinary shares held by the 

Parent was € 4.344. Shareholders of Banco di San Giorgio other than BRE have the right to 

sell their shares at a price that will be set by the Board of Directors of BRE, having received 

the opinion of the Board of Statutory Auditors and of the external statutory auditors (see in 

this respect the information given in the section “Significant events that occurred during 

the year” contained in the Consolidated Management Report); 

in the first quarter of 2012, UBI Banca made further investments of €5 billion in Italian 

government securities, including €3 billion classified with held-to-maturity investments and 

€2 billion within available-for-sale financial assets. This action, designed to support net 

interest income, mainly regarded securities with a maturity of three years, and therefore 

with the same duration as the funding acquired through the Eurosystem. 

Section 5 Other aspects 

Collective impairment losses on performing loans 

Activity to revise the process for the management and monitoring of credit was completed in 

2010 and it included the measurement of collective impairment losses on the performing loans 

of the network banks, with a refinement and update of the approach based on the Basel 2 risk 

parameters. 

Improved methods for the classification of customer risk and internal models for the 

measurement of credit risk were employed in 2011, which also included an increase in the 

length of the period considered for the use of historical data series in the calculation of PD. 

Revisions of internal models mainly involved the business regulatory segment for which 

validation of the advanced approach is being performed, currently in progress with the Bank of 

Italy. 

Impairment losses on available-for-sale equity instruments 

In June 2011, the UBI Banca Group participated in the increase in the share capital 

performed by Intesa Sanpaolo, which involved the assignment of two new shares for every 

seven old shares already held at a subscription price of 1.369 euro for each new share. The 

operation involved a total payout of €56.7 million and resulted in the acquisition of 

41,435,116 new shares, so that the Intesa Sanpaolo shares currently held, which are 

recognised as “available-for-sale financial assets”, now number 186,458,028 (145,022,912 

shares as at 31 st December 2010). 

With specific reference to the valuation of the share in question and in compliance with the 

impairment policy pursued by the Group and with IAS 39, further impairment losses of €112.5 

246

million were recognised through profit or loss in 2011, of which €15.9 million had already 

been recognised as at 30 th June 2011. 

Impairment losses of euro €15.3 million were also recognised during the year on non 

significant share holdings and also on units held in OICRs (collective investment instruments). 

Realignment of values for tax purposes relating to goodwill and other intangible assets 

Paragraphs 12 to 15 of article 23 of Decree Law No. 98 of 6 th July 2011, converted into Law 

No. 111 of 15 th July 2011, containing measures for financial stabilisation, allows values for 

statutory accounting and for tax purposes relating to goodwill and other intangible assets to 

be realigned. More specifically the legislation in question allows, in accordance with the 

principles of Law No. 2 of 28 th January 2009, the recognition for tax purposes of higher values 

attributed to controlling interests acquired through extraordinary transactions, consisting of 

the value of goodwill, business brands and other intangible assets recognised autonomously in 

the consolidated financial statements. 

That realignment is performed by the payment of a substitute tax of 16% and it allows the 

amount in question to be deducted (but not in the statutory accounts) for corporate income 

tax (IRES) and local production tax (IRAP) purposes at constant rates over ten years. 

With specific regard to the tax relief on the amounts relating to prior year extraordinary 

transactions, and that is those performed before the law in question entered into force, a oneoff 

substitute tax could be paid by 30 th November 2011, while the deduction of the 

amortisation (for tax purposes only) runs from 2013. 

As already reported in the interim financial report as at and for the period ended 30 th June 

2011, in view of the above, UBI Banca decided to take advantage of the option in question with 

regard to the following: 

• goodwill recognised in the consolidated financial statements as at 31 st December 2010, 

arising from: 

- the purchase price allocation performed following the merger between the former 

BPU Banca Group and the former Banca Lombarda e Piemontese Group, net of the 

€569 million already subject to tax relief in 2009 – consisting of goodwill 

recognised in the separate balance sheet of UBI Banca – for a total amount subject 

to tax relief of €2,361.7 million; 

- the acquisition of IW Bank, with an amount subject to tax relief of €54.6 million; 

• other intangible assets, recognised in the consolidated balance sheet as at 31 st 

December 2010, arising from the purchase price allocation following the merger 

between the former BPU Group and the former Banca Lombarda e Piemontese Group. 

In detail, these intangible assets consist of the following: 

- core deposits, with an amount subject to tax relief of €312 million; 

- assets under management, with an amount subject to tax relief of €165 million; 

- assets under custody, with an amount subject to tax relief of €54 million; 

- brands, with an amount subject to tax relief of €338 million. 

Reference was made with regard to the accounting treatment, as occurred in 2008, to the 

Italian Accountants Association (Organismo Italiano di Contabilità) document, “Application No. 

1 - Hypothesis for the accounting treatment for the substitute tax for tax relief on goodwill 

pursuant to paragraph 10, Art. 15 of Decree Law No. 185 of 29 th November 2008”. This 

document allows the simultaneous recognition of the substitute tax and the relative deferred 

tax assets in the income statement. 

Following the resolution, passed by the Management Board on 25 th August 2011 and 

confirmed by the Supervisory Board on 29 th August 2011, to take advantage of the options 

provided by the legislation in question, as at 30 th June 2011 the amount relating to the 

substitute tax (16%) was charged to the income statement and deferred tax assets based on 

the nominal corporate income tax rate (27.5%) were recognised 2 . 

With regard to deferred local production tax (IRAP) assets, the decision to take advantage of 

the tax relief resulted in a decrease in the tax base of UBI Banca of €328,526 thousand, with a 

2 In this regard, in compliance with IAS 12 tax assets are recognised on the assumption that it is probable that 

sufficient taxable profit will be available against which the deductible temporary difference can be utilised. 

247

consequent absence of taxable income for IRAP purposes in the future. Consequently deferred 

tax assets for IRAP purposes were not recognised and those that had been recognised 

previously were released. 

In the consolidated financial statements, higher current taxation of €525,642 thousand was 

recognised in the 2011 income statement, due to the substitute tax, the recognition of the 

IRAP deferred tax assets already mentioned of €24,964 thousand was reversed and lower 

taxation was recognised with a new deferred tax liability for IRES of €903,447 thousand. The 

net positive impact amounted to €352,841 thousand. 

Changes to rates for local production tax (IRAP) 

Paragraph 5 of article 23 of the aforementioned Decree Law No. 98 of 6 th July 2011 raises the 

rate for IRAP by 0.75% for banks and financial companies. The rate therefore rises from the 

current level of 3.9% (4.82% for banks which operate in regions which levy an additional tax) 

to 4.65% (5.57% for banks which operate in regions which levy an additional tax). 

The change applies from the tax year 2011 and involved the recognition in the consolidated 

accounts of higher current taxation of €16.2 million (€15.1 million net of non controlling 

interests) and an increase in deferred tax liabilities recognised as at 31 st December 2010 of 

€6,267 thousand (€5,342 thousand net of non controlling interests). 

The amount relating to the increase in the deferred tax liabilities recognised in the balance 

sheet as at 31 st December 2011, which relates mainly to deferred tax liabilities for intangible 

assets arising from the purchase price allocation, was considered non recurring for the 

purposes of the normalised income statement, while the recognition of higher current taxes 

was not subject to normalisation. 

Use of estimates and assumptions in the preparation of the consolidated financial 

statements 

Balance sheet items are measured according to the policies set out in subsequent Part A.2 

“The main balance sheet items” of these accounting policies. 

Where it is impossible to measure items in the financial statements with precision, the 

application of those policies involves the use of estimates and assumptions which may even 

have a significant effect on the amounts recognised in the balance sheet and in the income 

statement. 

The use of reasonable estimates forms an essential part of the preparation of financial 

statements and we have listed here those items in the financial statements in which the use of 

estimates and assumptions is most significant: 

• measurement of loans and receivables; 

• measurement of financial assets not listed in active markets; 

• measurement of intangible assets and equity investments; 

• quantification of provisions for risks and charges; 

• quantification of deferred taxes; 

• definition of the depreciation and amortisation charges for property, equipment and 

investment property and intangible assets with finite useful lives. 

Furthermore, in this respect an adjustment may be made to an estimate following a change in 

the circumstances on which it was based or if new information is acquired or yet again on the 

basis of greater experience. A change in an estimate is applied prospectively and it therefore 

generates an impact on the income statement in the year in which it is made and, if it is the 

case, also in future years. 

No significant changes were made this financial year to the criteria previously employed for 

estimates in the financial statements as at 31 st December 2010, except for the items described 

below. 

- Useful life of UBI Sistemi e Servizi centralised hardware 

The useful life of centralised hardware assets was revised during the year. These consist of 

data storage equipment and the relative servers. 

248

The revision of the useful life of these fixed assets was supported by an analysis conducted by 

an external firm of experts and arises from the recognition that the economic useful life and 

therefore the related economic benefits resulting from their use has increased principally as a 

result of technological developments in the hardware and software equipment in question. 

Consequently, a useful life of 48 months was considered appropriate instead of 30 months, as 

estimated previously. 

The revised useful life was adopted prospectively and therefore for assets acquired from 2011 

and it involved recognition of lower depreciation of €1.3 million for the year. 

- Useful life of UBI Sistemi e Servizi software 

The consortium company UBI Sistemi e Servizi possesses application software used exclusively 

by Banca 24-7 under a service contract. As a consequence of the extraordinary operation to be 

performed in the near future which will lead, eventually, to the retirement of that software, 

UBI Sistemi e Servizi adjusted its useful life accordingly and it recognised increased expense of 

approximately €3.5 million in its income statement for 2011. 

Amendments to IAS 39 

******* 

The process of the full revision of IAS 39, is still in progress and at present no documents 

issued by the IASB have been endorsed by the European Commission. With regard to the 

compulsory adoption of the new accounting rules, on 16 th December 2011 the IASB issued the 

amendment “Mandatory Effective Date of IFRS 9 and Transition Disclosures”, which postponed 

the date in question until 1 st January 2015, because the projects on the impairment of 

financial instruments measured at amortised cost and on hedge accounting (stages two and 

three of the full project to revise IAS 39) and also that on insurance contracts are still in 

progress. 

The definition of stage two “impairment” and the first part of stage three on “general hedge 

accounting” is expected in 2012, while the issue of an exposure draft on the second part of 

stage three “macro hedge accounting” is currently scheduled for the third quarter of 2012. 

249

List of the main IFRS standards endorsed by the European Commission 

IAS/IFRS ACCOUNTING STANDARD ENDORSEMENT 

IAS 1 Presentation of financial statements Reg. 1274/2008, 

53/2009, 70/2009, 

494/2009, 243/2010, 

149/2011 

IAS 2 Inventories Reg. 1126/2008 

IAS 7 Statement of cash flows Reg. 1126/2008, 

1274/2008, 70/2009, 

494/2009, 243/2010 

IAS 8 Accounting policies, changes in accounting estimates and errors Reg. 1126/2008, 

1274/2008, 70/2009 

IAS 10 Events after the reporting date Reg. 1126/2008, 

1274/2008, 70/2009, 

1142/2009 

IAS 11 Construction contracts Reg. 1126/2008, 

1274/2008 

IAS 12 Income taxes Reg. 1126/2008, 

1274/2008, 495/2009 

IAS 16 Property, plant and equipment Reg. 1126/2008, 

1274/2008, 70/2009, 

495/2009 

IAS 17 Leases Reg. 1126/2008, 

243/2010 

IAS 18 Revenues Reg. 1126/2008, 69/2009 

IAS 19 Employee benefits Reg. 1126/2008, 

1274/2008, 70/2009 

IAS 20 Accounting for government grants and disclosure of government 

assistance 

Reg. 1126/2008, 

1274/2008, 70/2009 

IAS 21 The effects of changes in foreign exchange rates Reg. 1126/2008, 

1274/2008, 69/2009, 

494/2009, 149/2011 

IAS 23 Borrowing costs Reg. 1260/2008, 70/2009 

IAS 24 Related party disclosures Reg. 632/2010 

IAS 26 Retirement benefit plans Reg. 1126/2008 

IAS 27 Consolidated and separate financial statements Reg. 494/2009 

IAS 28 Investments in associates Reg. 1126/2008, 

1274/2008, 70/2009, 

494/2009, 495/2009, 

149/2011 

IAS 29 Financial reporting in hyperinflationary economies Reg. 1126/2008, 

1274/2008, 70/2009 

IAS 31 Interests in joint ventures Reg. 1126/2008, 

70/2009, 494/2009, 

149/2011 

IAS 32 Financial instruments: presentation Reg. 1126/2008, 

1274/2008, 53/2009, 

70/2009, 495/2009, 

1293/2009, 149/2011 

IAS 33 Earnings per share Reg. 1126/2008, 

1274/2008, 495/2009 

IAS 34 Interim financial reporting Reg. 1126/2008, 

1274/2008, 70/2009, 

495/2009, 149/2011 

IAS 36 Impairment of assets Reg. 1126/2008, 

1274/2008, 69/2009, 

70/2009, 495/2009, 

243/2010 

IAS 37 Provisions, contingent liabilities and contingent assets Reg. 1126/2008, 

1274/2008, 495/2009 

IAS 38 Intangible assets Reg. 1126/2008, 

1274/2008, 70/2009, 

495/2009, 243/2010 

IAS 39 Financial instruments: recognition and measurement Reg. 1126/2008, 

250

1274/2008, 53/2009, 

70/2009, 494/2009, 

495/2009, 824/2009, 

839/2009, 1171/2009, 

243/2010, 149/2011 

IAS 40 Investment property Reg. 1126/2008, Reg. 

1274/2008, Reg. 70/2009 

IAS 41 Agriculture Reg. 1126/2008, 

1274/2008, 70/2009 

IFRS 1 First-time adoption of international financial reporting standards Reg. 1126/2009, 

1164/2009, 550/2010, 

574/2010, 662/2010, 

149/2011 

IFRS 2 Share-based payment Reg. 1126/2008, 

1261/2008, 495/2009, 

243/2010 , 244/2010 

IFRS 3 Business combinations Reg. 495/2009, 149/2011 

IFRS 4 Insurance contracts Reg. 1126/2008, 

1274/2008, 1165/2009 

IFRS 5 Non-current assets held for sale and discontinued operations Reg. 1126/2008, 

1274/2008, 70/2009, 

494/2009, 1142/2009, 

243/2010 

IFRS 6 Exploration for and evaluation of mineral resources Reg. 1126/2008 

IFRS 7 Financial instruments: disclosures Reg. 1126/2008, 

1274/2008, 53/2009, 

70/2009, 495/2009, 

824/2009, 1165/2009, 

574/2010, 149/2011 

IFRS 8 Operating segments Reg. 1126/2008, 

1274/2008, 243/2010, 

632/2010 

SIC/IFRIC INTERPRETATION DOCUMENTS ENDORSEMENT 

IFRIC 1 

Changes in existing decommissioning, restoration and similar Reg. 1126/2008, 

liabilities 

1274/2008 

IFRIC 2 

Members' shares in co-operative entities and similar 

Reg. 1126/2008, 

instruments 

53/2009 

IFRIC 4 Determining whether an arrangement contains a lease 

Reg. 1126/2008, 

70/2009 

IFRIC 5 

Rights to interests arising from decommissioning, restoration Reg. 1126/2008 

and environmental rehabilitation funds 

IFRIC 6 

Liabilities arising from participating in a specific market - waste Reg. 1126/2008 

electrical and electronic equipment 

IFRIC 7 

Applying the restatement approach under IAS 29 “Financial Reg. 1126/2008, 

reporting in hyperinflationary economies” 

1274/2008 

IFRIC 9 Reassessment of embedded derivatives 

Reg. 1126/2008, 

495/2009, 1171/2009, 

243/2010 

IFRIC 10 Interim financial reporting and impairment 

Reg. 1126/2008, 

1274/2008 

IFRIC 12 Service concession arrangements Reg. 254/2009 

IFRIC 13 

Reg. 1262/2008, 

Customer loyalty programmes 

149/2011 

IFRIC 14 

Reg. 1263/2008, Reg. 

Prepayments of a minimum funding requirement 

1274/2008, 633/2010 

IFRIC 15 Agreements for the Construction of Real Estate Reg. 636/2009 

IFRIC 16 

Reg. 460/2009, Reg. 

Hedges of a net investment in a foreign operation 

243/2010 

IFRIC 17 Distributions of non-cash assets to owners Reg. 1142/2009 

IFRIC 18 Transfers of assets from customers Reg. 1164/2009 

IFRIC 19 Extinguishing financial liabilities with equity instruments Reg. 662/2010 

251

Reg. 1126/2008, 

SIC 7 Introduction of the euro 

1274/2008, 494/2009 

Government assistance – no specific relation to operating Reg. 1126/2008, 

SIC 10 

activities 

1274/2008 

SIC 12 Consolidation – special purpose entities Reg. 1126/2008 

SIC 13 

Jointly controlled entities – non-monetary contributions by Reg. 1126/2008, 

venturers 

1274/2008 

SIC 15 Operating leases – Incentives 

Reg. 1126/2008, 

1274/2008 

SIC 21 Income taxes – Recovery of revalued non-depreciable assets Reg. 1126/2008 

SIC 25 

SIC 27 

SIC 29 

Income taxes – Changes in the tax status of an enterprise or its 

shareholders 

Evaluating the substance of transactions in the legal form of a 

lease 

Service concession arrangements: disclosures 

Reg. 1126/2008, 

1274/2008 

Reg. 1126/2008 

Reg. 1126/2008, 

1274/2008, 70/2009 

SIC 31 Revenue – Barter transactions involving advertising services Reg. 1126/2008 

SIC 32 

Intangible assets – Website costs 

Reg. 1126/2008, 

1274/2008 

252

A.2 – THE MAIN ITEMS IN THE FINANCIAL STATEMENTS 

1. Financial assets and liabilities held for trading and 

financial assets and liabilities at fair value 

This category includes: 

1.1. Definition of financial assets and liabilities held for trading 

A financial asset or liability is classified as held for trading (at fair value through profit or loss 

– FVPL) and is stated within either item 20 “Financial assets held for trading” or item 40 

“Financial liabilities held for trading”, if it is: 

• acquired or incurred for sale or repurchase in the short term; 

• part of a portfolio of identified financial instruments which are managed together and for 

which there is evidence of a recent and effective strategy of short term profit taking; 

• a derivative (except for derivatives designated and effective as a hedging instrument – see 

the relative section below). 

1.1.1. Derivative financial instruments 

A “derivative” is defined as a financial instrument or other contract with the following 

characteristics: 

• its value changes in response to the change in an interest rate, in the price of a financial 

instrument, in a commodity price, in a foreign currency exchange rate, in a price, interest 

rate or credit rating index, or credit worthiness index or other specific variable; 

• it requires no initial investment, or a net initial investment that is smaller than would be 

required for other types of contract from which a similar response to changes in market 

factors would be expected; 

• it is settled at a future date. 

The UBI Group holds derivative financial instruments for both trading and for hedging 

purposes (see the relative section below for information on the latter). 

1.1.2. Embedded derivative financial instruments 

An "embedded derivative financial instrument" is defined as a component of a hybrid 

(combined) instrument which also includes a “host” non derivative contract such that some of 

the cash flows of the combined instrument behave in a way similarly to the derivative as a 

stand-alone instrument. The embedded derivative is separated from the host contract and 

treated in the accounts as a stand-alone derivative if and only if: 

• the economic risks and characteristics of the embedded derivative are not closely related to 

the economic risks and characteristics of the host contract; 

• a separate instrument with the same conditions as the embedded derivative would satisfy 

the definition of a derivative; 

• the hybrid (combined) instrument is not recognised within financial assets or liabilities 

held for trading. 

253

1.2. Definition of financial assets and liabilities at fair value 

Financial assets and liabilities may be designated on initial recognition under “financial assets 

and liabilities at fair value” and recorded under items 30 “Financial assets at fair value” and 

50 “Financial liabilities at fair value”. 

A financial asset/liability is designated at fair value through profit or loss on initial recognition 

only when: 

a) it is a hybrid contract containing one or more embedded derivatives and the embedded 

derivative significantly alters the cash flows that would otherwise be generated by the contract; 

b) the designation at fair value through profit or loss allows better information to be provided 

because: 

• it eliminates or considerably reduces an asymmetry in the valuation or in the 

recognition, which would otherwise result from the valuation of assets or liabilities or 

from recognition of the relative profits and losses on a different basis; or, 

• a group of financial assets, financial liabilities or of both is managed and its 

performance is valued on the basis of its fair value according to a documented risk 

management procedure or investment strategy and the information on the group is 

provided internally on that basis to senior managers with strategic responsibilities. 

1.3. Recognition criteria 

The financial instruments “Financial assets and liabilities held for trading and financial assets 

at fair value” are recognised 

• at the time of settlement if they are debt or equity instruments; or, 

• on the trade date if they are derivative contracts. 

Measurement on initial recognition is at cost considered to be the fair value of the instrument 

without considering any transaction costs or income directly attributable to the instruments 

themselves. 

1.4. Measurement criteria 

Subsequent to initial recognition, the financial instruments in question are measured at fair 

value with changes recognised in the income statement within item 80 “Net trading income 

(loss)”, for assets/liabilities held for trading and within item 110 “Net income/loss on financial 

assets and liabilities at fair value” for financial assets/liabilities at fair value”. The 

measurement of the fair value of the assets and liabilities held in a trading portfolio is based 

on prices quoted on active markets or on internal valuation models which are generally used 

in financial practice as described in greater detail in Part A.3.2 of the Notes to the financial 

statements “Fair Value Hierarchy”. 

1.5. Derecognition criteria 

“Financial assets and liabilities held for trading and financial assets at fair value” are 

derecognised in the accounts when the rights to the cash flows from the financial assets or 

liabilities expire or when the financial assets or liabilities are transferred with the substantial 

transfer of all the risks and rewards deriving from ownership of them. 

The result of the transfer of financial assets or liabilities held for trading is recognised in the 

income statement within item 80 “Trading income (loss)”, while the result of the transfer of 

financial assets or liabilities at fair value is recognised within item 110 “Net income/loss on 

financial assets and liabilities at fair value”. 

254

2. Available-for-sale financial assets 

2.1 Definition 

Available-for-sale financial assets (AFS) are defined as non-derivative financial assets 

designated on initial recognition as such or that are not classified as: 

(1) loans and receivables (see section below); 

(2) financial investments held until maturity (see section below); 

(3) financial assets held for trading and measured at fair value recognised through profit or 

loss (see section below). 

These financial assets are recognised within item 40 “Available-for-sale financial assets”. 

2.2 Recognition criteria 

Available-for-sale financial assets are recognised initially when, and only when, the company 

becomes a party in the contract clauses of the instrument and that is on the date of 

settlement, at fair value which generally coincides with the cost of them. This value includes 

costs or income directly connected with the instruments themselves. 

The recognition of available-for-sale financial assets may result also from the reclassification 

out of “held-to-maturity investments” or, but only and only in rare circumstances and in any 

case only if the asset is no longer held for sale or repurchase in the short term, out of 

“financial assets held for trading”; in this case the recognition value is the same as the fair 

value at the moment of reclassification 

2.3 Measurement criteria 

Subsequent to initial recognition, available-for-sale financial assets continue to be recognised 

at fair value with interest (resulting from application of the amortised cost) recognised through 

profit or loss and changes in fair value recognised in equity within item 140 “Fair value 

reserves”, except for losses due to impairment, until the financial asset is derecognised, at 

which time the profit or loss previously recognised in equity must be recognised through profit 

or loss. Equity instruments for which the fair value cannot be reliably measured according to 

the methods described are recognised at cost. 

The measurement of the fair value of available-for-sale financial assets is based on the prices 

quoted on active markets or on internal measurement models which are generally used in 

financial practice as described in greater detail in Part A.3.2 of the Notes to the financial 

statements “Fair Value Hierarchy”. 

At the end of each financial year or interim reporting period, objective evidence of impaired 

value is assessed, which in the case of equity instruments is also held to be significant or 

prolonged. 

As concerns the significance of the impairment, significant indications of impairment exist 

where the market value of an equity instrument is less than 35% of its historical cost of 

acquisition. In this case impairment is recognised through profit or loss without further 

analysis. If the impairment is less then it is recognised only if the valuation of the instrument 

performed on the basis of its fundamentals does not confirm the soundness of the company 

and that is its earning prospects. 

As concerns the permanence of the impairment, it is defined as prolonged when the fair value 

remains below its historical cost of purchase for a period of longer than 18 months. In this 

case the impairment is recognised through profit or loss without further analysis. If the fair 

value continues to remain below its historical purchase cost for periods shorter than 18 

months, then the impairment to be recognised through profit or loss is determined by 

considering, amongst other things, whether the impairment is attributable to general negative 

255

performance by stock markets rather than to the specific performance of the individual 

counterparty. 

If there is permanent impairment, the cumulative change, including that previously recognised 

in equity under the aforementioned item, is recognised directly in the income statement within 

item 130 “net impairment losses on b) available-for-sale financial assets”. 

Permanent impairment loss is recognised when the acquisition cost (net of any repayments of 

principal and amortisation) of an available-for-sale financial asset exceeds its recoverable 

amount. Any recoveries of value, which are only possible when the causes of the original 

permanent impairment no longer exist are treated as follows: 

• if they relate to investments in equity instruments, then with a balancing entry directly in 

the equity reserve; 

• if they relate to investments in debt instruments, they are recognised in the income 

statement within item 130 “Net impairment losses on b) available-for-sale financial assets”. 

The amount of the reversal of the impairment loss may not in any case exceed the amortised 

cost which, in the absence of previous value adjustments, the instrument would have had at 

that time. 

Because the UBI Group applies IAS 34 “Interim financial reporting” to its half year interim 

reports with consequent identification of a half year “interim period”, any impairment 

incurring is recognised historically at the end of the half year. 

2.4 Derecognition criteria 

Available-for-sale financial assets are derecognised in the accounts when the contractual 

rights to the cash flows from the financial assets expire or when the financial assets are sold 

with the substantial transfer of all the risks and benefits deriving from ownership of them. 

The result of the disposal of available-for-sale financial assets is recognised in the income 

statement within item 100 “Income/loss from the disposal or repurchase of b) available for 

sale financial assets”. Upon derecognition any corresponding amount of what was previously 

recognised in shareholders’ equity under 140 “Fair value reserves” is written off against the 

income statement. 

256

3. Held-to-maturity investments 


Held-to-maturity investments (HTM) are defined as non derivative financial assets with fixed or 

determinable payments and fixed maturity that a company intends and is able to hold to 

maturity. Exception is made for those: 

(a) held for trading and those designated upon initial recognition at fair value through profit 

or loss (see previous section); 

(b) designated as available for sale (see previous section); 

(c) which satisfy the definition of loans and receivables (see section below). 

When annual and interim reports are prepared the intention and ability to hold financial 

assets until maturity is assessed. 

The assets in question are recognised under item 50 “Held-to-maturity investments”. 


Held-to-maturity investments are recognised initially when, and only when, the company 

becomes a party in the contract clauses of the instrument and that is on the date of 

settlement, measured at cost inclusive of any costs and income directly attributable to it. If the 

recognition of assets in this category is the result of the reclassification out of “available-forsale 

financial assets” or, but only and only in rare circumstances if the asset is no longer held 

for sale or repurchase in the short term, out of the “financial assets held for trading”, the fair 

value of the assets as measured at the time of the reclassification is taken as the new measure 

of the amortised cost of the assets. 


Held-to-maturity investments are valued at amortised cost using the criteria of the effective 

interest rate (see the section below “loans and receivables” for a definition). The result of the 

application of this method is recognised in the income statement in the item 10 “Interest and 

similar income”. 

When annual financial statements or interim reports are prepared objective evidence of the 

existence of an impairment of the value of the assets is assessed. If there is permanent 

impairment, the difference between the recognised value and the present value of expected 

future cash flows discounted at the original effective interest rate is included in the income 

statement under the item 130 “Net impairment losses on c) held-to-maturity investments”. 

Any reversal of impairment losses recorded, should the cause that gave rise to the previous 

recognition of impairment loss no longer exist, are recognised under the same item in the 


The fair value of held-to-maturity investments is measured for disclosure purposes or where 

effective currency or credit risk hedges exist (in relation to the risk hedged) and it is estimated 

as described in greater detail in Part A.3.2 of the Notes to the financial statements “Fair Value 

Hierarchy”. 

257


Held-to-maturity investments are derecognised when the rights to the cash flows from the 

financial assets expire or when the financial assets are sold with the substantial transfer of all 

the risks and rewards deriving from ownership of them The result of the disposal of held-tomaturity 

financial assets is recognised in the income statement under the item 100 

“Income/loss from disposal or repurchase of c) held-to-maturity investments”. 

4. Loans and receivables 


Loans and receivables (L&R) are defined as non-derivative financial assets with fixed or 

determinable payments that are not quoted in an active market. The following are exceptions: 

(a) those which it is intended to sell immediately or in the short term, that are classified as 

held for trading and those that may have been designated on initial recognition as at fair 

value through profit or loss; 

(b) those designated upon initial recognition as available for sale; 

(c) those for which the holder may not recover substantially all of its initial investment, other 

than because of credit deterioration; in this case they are classified as available-for-sale. 

Loans and receivables are recognised under the items 60 “Loans to banks” and 70 “Loans to 

customers”. 


Loans and receivables are initially recognised when the company becomes part of a loan 

contract, which is to say when the creditor acquires the right to the payment of the sums 

agreed in the contract. That moment corresponds to the date on which the loan is granted. 

Recognition in this category may result also from the reclassification out of “available-for-sale 

financial assets” or, but only and only in rare circumstances if the asset is no longer held for 

sale or repurchase in the short term, out of “financial assets held for trading”. 

The amount initially recognised is that of the fair value of the financial instrument which is 

the same as the amount granted inclusive of costs or income directly attributable to it and 

determinable from the outset, independently of when they are paid. The amount of the initial 

recognition does not include all those expenses that are reimbursed by the debtor 

counterparty or that are attributable to internal expenses of an administrative character. 

If the recognition is the result of reclassification, the fair value of the asset recognised at the 

time of the reclassification is taken as the new measure of the amortised cost of the assets. 

For loans not granted under market conditions, the initial fair value is calculated by using 

special measurement techniques described below; in these circumstances the difference 

between the fair value that is calculated and the amount granted is included directly in the 

income statement within the item interest. 

Contango and repo agreements with the obligation or right to repurchase or resell at term are 

recognised as funding or lending transactions. For transactions with a spot sale and forward 

repurchase, the spot cash received is recognised in the accounts as borrowings while the spot 

purchase transactions with forward resale are recognised as lending for the spot amount paid. 


Loans and receivables are measured at amortised cost using the criteria of effective interest. 

The amortised cost of a financial asset or financial liability is the amount at which the 

financial asset or financial liability was measured upon initial recognition net of principal 

258

epayments, plus or minus the cumulative amortisation using the effective interest criterion 

on any difference between that initial amount and the maturity amount, and minus any 

reduction (arising from an impairment or uncollectability). 

The effective interest criterion is a method of calculating amortised cost of an asset or liability 

(or group of assets and liabilities) and of distributing the interest income or expense over its 

relative life. The effective interest rate is the rate that exactly discounts the estimated flow of 

future cash payments or receipts until the expected maturity of the financial instrument. To 

determine the effective interest rate, the cash flows must be estimated taking into 

consideration all the contractual conditions of the financial instrument (e.g. payment in 

advance, a purchase option or similar), but future impairments of the loan are not considered. 

The computation includes all fees and basis points paid or received between parties to the 

contract which are integral parts of the effective interest, the transaction costs and all other 

premiums or discounts. 

At each reporting date or when interim reports are prepared, any objective evidence that a 

financial asset or group of financial assets has suffered impairment loss is assessed. This 

circumstance occurs when it is probable that a company may not be able to collect amounts 

due on the basis of the original contracted conditions or, for example, in the presence of: 

(a) significant financial difficulties of the issuer or debtor; 

(b) an infringement of the contract such as default or failure to pay interest or repay 

principal; 

(c) the lender, because of the economic or legal factors relating to the financial difficulties of 

the debtor, granting a concession to the latter which the lender would not otherwise have 

considered; 

(d) the probability of the beneficiary declaring procedures for loan restructuring; 

(e) the disappearance of an active market for that financial asset due to financial difficulties; 

(f) available data which indicate a substantial decrease in expected future cash flows for a 

similar group of financial assets since the time of the initial recognition of those assets, 

although the decrease cannot yet be identified with the single financial assets of the group. 

The measurement of non-performing loans (loans which, according to Bank of Italy definitions, 

are non performing, impaired, restructured and past due, including exposures in arrears for 

between 90 and 180 days secured by property mortgages) is performed on a case-by-case 

basis. The remaining loans are measured using collective statistical methods which group 

uniform classes of risk together. 

The method for calculating the impairment losses recognised on non-performing loans is 

based on discounting expected future cash flows for principal and interest, taking account of 

any guarantees attached to positions and of any advances received. The basic elements for 

determining the present value of cash flows are the identification of the estimated receipts, the 

relative maturity dates and the discount rate to apply. The amount of the loss is equal to the 

difference between the recognised value of the asset and the present value of expected future 

cash flows, discounted at the original effective interest rate. 

The measurement of performing loans relates to asset portfolios for which no objective 

evidence of impairment exists and which are therefore valued collectively. Percentage rates of 

loss calculated from historical data series are applied to the estimated cash flows from the 

assets, grouped into uniform classes with similar characteristics in terms of credit risk for the 

network banks of the Group, according to Basel 2 regulations, to which appropriate corrective 

factors are applied to give a measurement consistent with the relative accounting standard. 

If a loan is subject to individual measurement and shows no objective impairment loss, it is 

placed in a class of financial assets with similar credit risk characteristics and subjected to 

collective measurement. 

Permanent impairment that is found is immediately recognised in the income statement under 

the item 130 “Net impairment losses on a) loans and receivables” as are reversals of part or all 

of the impairment losses previously recognised. Reversals of impairment losses are recognised 

where there is an improvement in credit quality sufficient to provide reasonable certainty of 

prompt collection of the principal and the interest according to the original conditions of the 

259

original loan contract, or in the presence of a progressive reversal of the present value 

calculated at the time of recognising the impairment loss. Where loans are measured on a 

collective basis, any upward value adjustments or reversals of impairment losses are 

recalculated as differences in relation to each performing loan at the measurement date. 

The fair value of medium and long-term loans and receivables is measured by considering 

future cash flows discounted at the replacement rate or the market rate existing at the 

measurement date and relating to a position with the same characteristics as the loan 

measured. 

The fair value is measured for all loans and receivables for information purposes only. For 

loans and receivables subject to effective hedging, the fair value is calculated in relation to the 

risk that is hedged for measurement purposes. 


Loans and receivables are derecognised when the rights to the cash flows from the financial 

assets expire or when the financial assets are sold with the substantial transfer of all the risks 

and rewards deriving from ownership of them. Otherwise loans and receivables continue to be 

recognised for an amount equal to the remaining involvement, even if legal title has been 

transferred to a third party. 

The assets in question are derecognised even when the Bank maintains the contractual right 

to receive cash flows from them, but when at the same time it has a contractual obligation to 

pay those cash flows to a third party. 

The profit or loss on the disposal of loans and receivables is recognised in the income 

statement within the item 100 “Income from the disposal or repurchase of a) loans and 

receivables”. 

5. Hedging derivatives 


Hedging transactions are designed to neutralise potential losses on a specific item (or group of 

items) attributable to a determined risk, by means of the gains realised on another instrument 

or group of instruments if that particular risk should actually result in losses. 

The UBI Group uses the following type of hedging transactions, appropriately represented in 

the financial statements and described below: 

• a fair value hedge: the objective is to offset adverse changes in the fair value of the asset or 

liability hedged; 

• a cash flow hedge: the objective is to hedge against the exposure to variability in expected 

cash flows with respect to the initial expectations. 

Derivative contracts stipulated with external counterparties are designated as hedging 

instruments. 


As with all derivatives, derivative financial instruments used for hedging are initially 

recognised and subsequently measured at fair value and are classified in the balance sheet 

under assets within item 80 “Hedging derivatives” and under liabilities within item 60 

“Hedging derivatives”. 

A relationship qualifies as a hedge and is appropriately represented in the financial statements 

if, and only if, all the following conditions are satisfied: 

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• at the start of the hedging transaction the relationship is formally designated and 

documented, including the company’s risk management objective and strategy for 

undertaking the hedge. This documentation includes identification of the hedging 

instrument, the item or transaction hedged, the nature of the risk being hedged, and how 

the company will assess the hedging instrument's effectiveness in offsetting the exposures 

to changes in the fair value of the item hedged or in the cash flows attributable to the risk 

hedged; 

• the hedging is expected to be highly effective; 

• the planned transaction hedged, for hedging cash flows, is highly probable and presents an 

exposure to changes in cash flows that could have effects on the income statement; 

• the effectiveness of the hedging can be reliably measured; 

• the hedging is measured on an ongoing basis and is considered highly effective for all the 

financial years in which it was designated. 

5.2.1 Methods for testing effectiveness 

A hedge relationship is judged effective, and as such is appropriately represented in the 

financial statements, if at its inception and during its life the changes in the fair value or cash 

flows of the hedged item attributable to the hedged risk are almost always completely offset by 

the changes in the fair value or cash flows of the hedging instrument. This conclusion is 

reached when the actual result falls within a range of between 80% and 125%. 

The effectiveness of hedging is tested at inception by means of a prospective test and when 

annual reports are prepared by means of a retrospective test; the outcome of the test justifies 

the application of hedging accounting because it demonstrates its expected effectiveness. 

Retrospective tests are conducted monthly on a cumulative basis where the objective is to 

measure the degree of effectiveness of the hedging in the reporting period and therefore to 

verify whether the hedging has actually been effective in the period. 

Derivative financial instruments that are considered hedges from a profit and loss viewpoint 

but which do not satisfy the requirements to be considered effective instruments for hedging 

are recognised under item 20 “Financial assets held for trading” or under item 40 “Financial 

liabilities held for trading” and the profits and losses under the corresponding item 80 

“Trading income (loss)”. 

If the above tests do not confirm the effectiveness of the hedge, then if it is not derecognised, 

the derivative contract is reclassified within derivatives held for trading and the instrument 

hedged is again measured according to the criterion applied for its balance sheet classification. 


5.3.1 Fair value hedging 

Fair value hedging is treated as follows: 

• the profit or loss resulting from measuring a hedging instrument at fair value is included 

in the income statement under item 90 “Net hedging income (loss)”. 

• the profit or loss on the item hedged attributable to the hedged risk adjusts the value in 

the accounts of the hedged item and is recognised immediately, regardless of the type of 

asset or liability hedged, in the income statement within the aforementioned item. 

Hedge accounting is discontinued prospectively in the following cases: 

1. the hedging instrument expires or is sold, terminated, or exercised; 

2. the hedge no longer meets the hedge accounting criteria described above; 

3. the entity revokes the designation. 

In case 2, if the assets or liabilities hedged are valued at amortised cost, the higher or lower 

value resulting from valuing them at fair value as a result of the hedge becoming ineffective is 

recognised through profit or loss, according to the effective interest rate method prevailing at 

the time of revocation of hedge. 

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The methods used for measurement of the fair value of the risk hedged in the assets or 

liabilities hedged are described in the notes that comment on available-for-sale financial 

assets, loans and held-to-maturity investments. 

5.3.2 Cash flow hedging 

When a derivative is designated as a hedge of exposure to changes in expected cash flows from 

an asset or liability in the balance sheet or a future transaction considered highly probable, 

the accounting treatment of the hedge is as follows: 

• the profits or losses (from the valuation of the hedging derivative) attributable to the 

effective portion of the hedge are recognised in a special reserve in equity termed 140 “Fair 

value reserves 

• the profits or losses (from measurement of the hedging derivative) attributable to the 

ineffective portion of the hedge are recognised directly in the income statement under item 

90 “Net hedging income (loss)”; 

• the asset or liability hedged is measured according to the class of asset or liability to which 

it belongs. 

If a future transaction occurs which involves recognising non-financial assets and liabilities, 

the corresponding profits or losses initially recognised under item 140 “Fair value reserves” are 

then transferred from that reserve and included as an initial cost of the asset or liability that is 

recognised If the future hedged transaction subsequently involves recognition of a financial 

asset or liability, the associated profits or losses that were originally recognised under the item 

140 “Fair value reserves” are reclassified to the income statement in the same reporting period 

or periods during which the assets acquired or liabilities incurred have an effect on the income 

statement If a portion of the profits or losses recognised in the fair value reserve are not 

considered recoverable, it is reclassified into the income statement within item 80 “Net trading 

income (loss)”. 

In all cases other than those already described, the profits or losses initially recognised under 

the item 140 “Fair value reserves” are transferred to the income statement to reflect the time 

and manner in which the future transaction is recognised in the income statement 

An entity must discontinue hedge accounting prospectively in each of the following 

circumstances: 

(a) the hedging instrument expires or is sold, terminated, or exercised (for this purpose the 

replacement or exchange of one hedging instrument with another hedging instrument is 

not a conclusion or termination if that replacement or exchange forms part of an entity’s 

documented hedging strategy). In this case the total profit (or loss) on the hedging 

instrument continues to be recognised directly in equity until the reporting period in 

which the hedge became effective and it continues to be recognised separately until the 

programmed hedging transaction occurs; 

(b) the hedge no longer satisfies the criteria for hedge accounting. In this case the total profit 

or loss on the hedging instrument continues to be recognised directly in equity starting 

from the reporting period in which the hedge became effective and it continues to be 

recognised separately in equity until the programmed hedging transaction occurs; 

(c) it is no longer considered that the future transaction should occur, in which case any 

related total profit or loss on the hedging instrument recognised directly in equity starting 

from the reporting period in which the hedge became effective must be recognised through 

profit or loss; 

(d) the entity revokes the designation. For hedges of a programmed transaction, total profits 

or losses on the hedging instrument recognised directly in equity starting from the 

reporting period in which the hedge became effective continue to be recognised separately 

in equity until the programmed transaction occurs or it is expected that it will no longer 

occur. 

If it is expected that the transaction will no longer occur the total profit (or loss) that had been 

recognised directly in equity is transferred to the income statement. 

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5.3.3 Hedging portfolios of assets and liabilities 

Hedging of portfolios of assets and liabilities (“macrohedging”) and appropriate accounting 

treatment is possible after first: 

- identifying the portfolio to be hedged and dividing it by maturity dates; 

- designating the risk to be hedged; 

- identifying the interest rate risk to be hedged; 

- designating the hedging instruments; 

- determining the effectiveness. 

The portfolio for which the interest rate risk is hedged may contain both assets and liabilities. 

This portfolio is divided on the basis of expected maturity or repricing dates of interest rates 

after first analysing the structure of the cash flows. 

Changes in the fair value of the hedged instrument are recognised in the income statement 

under item 90 “Net hedging income (loss)” and in the balance sheet under item 90 “Fair value 

change in hedged financial assets” or under item 70 “Fair value change in hedged financial 

liabilities”. 

Changes occurring in the fair value of the hedging instrument are recognised in the income 

statement within item 90 “Net hedging income (loss)” and under assets in the balance sheet in 

item 80 “Hedging derivatives” or under liabilities side in item 60 “Hedging derivatives”. 

6. Equity investments 


6.1.1 Associates 

An “associate” is defined as a company in which at least 20% of the voting rights are held or 

over which the investing company exercises significant influence and which is neither a 

subsidiary nor a company subject to joint control by the investing company. Significant 

influence is the power to participate in the financial and operating policy decisions of the 

company invested in but not to control or have joint control of it. 

6.1.2 Companies subject to joint control 

A “company subject to joint control” is defined as a company governed by a contractual 

arrangement whereby two or more parties undertake an economic activity that is subject to 

joint control. 


Equity investments in associates or joint ventures are recognised at cost of purchase plus any 

accessory costs. 

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Investments in associates are valued using the equity method. Investments in companies 

subject to joint control are measured by adopting either the equity method or the 

proportionate method 

Any objective evidence that an equity investment has been subject to impairment is assessed 

as at each annual or interim reporting date. The recoverable amount is then calculated, 

considering the present value of the future cash flows which may be generated by the 

investment, including the final disposal value. If the recoverable amount calculated in this way 

is less than carrying value the difference is recognised in the income statement under 240 

“Profits (losses) of equity investments (valued at equity)”. Any future reversals of impairment 

are also included in the item where the reasons for the original impairment no longer apply. 


Equity investments are derecognised in the balance sheet when the contractual rights to the 

cash flows from the financial assets expire or when the financial assets are sold with the 

substantial transfer of all the risks and rewards deriving from ownership of them. The result of 

the disposal on investments valued using the equity method recognised in the income 

statement under item 240 “Profits (losses) of equity investments (valued at equity)”; the result 

of the disposal of equity investments other than those valued using the equity method is 

recognised in the income statement under item 270 “Profits (losses) on the disposal of 

investments. 

7. Property, equipment and investment property 

7.1 Definition of assets for functional use 

“Assets for functional use” are defined as tangible assets possessed to be used for the purpose 

of carrying on a company’s business and where the use is planned to last longer than one 

year. 

Assets for functional use also include properties rented to employees, ex employees and their 

heirs, as well as works of art. 

7.2 Definition of investment property 

“Investment property” is defined as properties held in order to earn rentals or for capital 

appreciation. As a consequence, investment property is to be distinguished from assets held 

for the use of the owner because they generate cash flows that are very different from the other 

assets held by the banking group. 

Finance lease contracts are also included within property, equipment and investment property 

(for functional use and held for investment) even if the legal title to the assets remains with the 

leasing company. 


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Tangible assets, functional and other, are initially recognised at cost (item 120 “Property, 

equipment and investment property”), inclusive of all costs directly connected with bringing 

the assets to working condition for the use of the assets and of purchase taxes and duties that 

are not recoverable This amount is subsequently increased to include expenses incurred from 

which it is expected future benefits will be obtained. The costs of ordinary maintenance are 

recognised in the income statement at the time at which they are incurred while extraordinary 

maintenance costs (improvements) from which future benefits are expected are capitalised by 

increasing the value of the relative asset. 

Improvements and expenses incurred to increase the value of leased assets from which future 

benefits are expected are recognised: 

– under the most appropriate category of item 120, “Property, equipment and 

investment property” if they are independent and can be separately identified, 

whether they are leased assets the property of others or whether they are held 

under a financial leasing contract 

– under item 120 “Property, equipment and investment property” if they are not 

independent and cannot be separately identified as an increase to the type of 

assets concerned if held by means of a financial leasing contract or under item 

160 “Other assets” if they are held under an ordinary leasing contract 

The cost of property, equipment and investment property is recognised as an asset if, and only 

if: 

• it is probable that the future economic benefits associated with the asset will flow to the 

enterprise; 

• the cost of the asset can be reliably determined. 


Subsequent to initial recognition, items of property, equipment and investment property for 

use in operations are recognised at cost, as defined above, net of accumulated depreciation 

and any permanent cumulative impairment. The depreciable amount, equal to cost less the 

residual value (i.e. the amount that would be normally obtained from disposal, less disposal 

costs, if the asset was normally in the conditions, including age, expected at the end of its 

useful life), should be allocated on a systematic basis over the asset's useful life by adopting 

the straight line method of depreciation. The useful life of an asset, which is reviewed 

periodically to detect any significant change in estimates compared to previous figures, is 

defined as: 

• the period of time over which it is expected that the asset can be used by a company or, 

• the quantity of products or similar units that a company expects to obtain from the use of 

the asset. 

Since property, equipment and investment property may consist of items with different useful 

lives, land, whether by itself or as part of the value of a building is not depreciated since it 

constitutes a fixed asset with an indefinite life. The value attributable to the land is deducted 

from the total value of a property for all buildings in proportion to the percentage of 

ownership. Buildings, on the other hand, are depreciated according to the criteria described 

above. 

Works of art are not depreciated because they generally increase in value over time. 

Depreciation of an asset starts when it is available for use and ceases when the asset is 

derecognised, which is the most recent of when it is classified as for sale and the date of 

derecognition. As a consequence depreciation does not stop when an asset is left idle or is no 

longer in use, unless the asset has already been fully depreciated. 

Improvements and expenses which increase the value are depreciated as follows: 

• if they are independent and can be separately identified, according to the presumed useful 

life as described above; 

• if they are not independent and cannot be separately identified, then if they are held under 

an ordinary leasing contract, over the shorter of the period in which the improvements and 

expenses can be used and that of the remaining life of the contract taking account of any 

265

individual renewals, or if the assets are held under a finance lease contract, over the 

expected useful life of the assets concerned. 

The depreciation of improvements and expenses to increase the value of leased assets 

recognised under item 160 “Other assets” is recognised under item 220 “Other operating 

income (expense)”. 

At the end of each annual or interim reporting period the existence of indications that 

demonstrate the impairment of the value of an asset are assessed. The loss is determined by 

comparing the carrying amount of the item of property, equipment and investment property 

with the lower recoverable amount. The latter is the greater of the fair value, net of any sales 

costs, and the relative use value intended as the present value of future cash flows generated 

by the asset. The loss is immediately recognised in the income statement under item 200 “Net 

impairment losses on property, equipment and investment property”; the item also includes 

any future recovery in value if the causes of the original write down no longer exist 

7.4.1 Definition and measurement of fair value 

7.4.1.1 Properties 

The fair value is measured on the basis of the market value intended as meaning the best 

price at which the sale of a property might reasonably be expected to have been completed 

unconditionally for cash consideration on the measurement date, assuming: 

 

 

 

 

 

that the seller and the purchaser are independent counterparties; 

the intention of the seller to sell the assets is real; 

that there is a reasonable period (having regard to the nature of the property and the 

state of the market) for the proper marketing of the property and for the agreement of 

price and terms necessary to complete the sale; 

that the market trend, level of values and other circumstances were, at the date of 

signing the preliminary contract of purchase and sale, identical to those existing at the 

measurement date; 

that no account is taken of bids by purchasers for whom the property has 

characteristics which make it “outside the market range”. 

The procedures adopted for determining the market value are based on the following methods: 

• the direct comparative or market method, based on a comparison between the asset in 

question and other similar assets subject to sale or currently on sale on the same market or 

competing markets; 

• the income method based on the present value of potential market incomes for a similar 

property, obtained by capitalising the income at a market rate. 

The above methods are performed individually and the values obtained are appropriately 

averaged. 

7.4.1.2 Determination of the value of land 

The method used for identifying the percentage of the market value attributable to land is 

based on an analysis of the location of the property, taking account of the type of construction, 

the state of conservation and the cost of rebuilding the entire building. 

266

7.5 Property, equipment and investment property acquired through 

finance leases 

A finance lease is a contract that substantially transfers all the risks and rewards incident to 

ownership of an asset. Legal title may or may not be transferred at the end of the lease term. 

The beginning of the lease term is the date on which the lessee is authorised to exercise his 

right to use the asset leased and therefore corresponds to the date on which the lease is 

initially recognised. 

When the contract commences, the lessee recognises the financial lease transactions as assets 

and liabilities in its balance sheet at the fair value of the asset leased or, if lower, at the 

present value of the minimum payments due. To determine the present value of the minimum 

payments due, the discount rate used is the contractual interest rate implicit in the lease, if 

practicable, or else the lessee’s incremental borrowing rate is used. Any initial direct costs 

incurred by the lessee are added to the amount recognised for the asset. 

The minimum payments due are apportioned between the finance charges and the reduction 

of the residual liability. The former are allocated over the lease term so as to produce a 

constant rate of interest on the residual liability. 

The finance lease contract involves recognition of the depreciation charge for the asset leased 

and of the finance charges for each financial year. The depreciation policy used for assets 

acquired under finance leases is consistent with that adopted for owned assets. See the 

relative paragraph for a more detailed description. 


Property, equipment and investment property are derecognised when they are disposed of or 

when they are permanently retired from use and no future economic benefits are expected 

from their disposal. Any gains or losses resulting from the retirement or disposal of the 

property, equipment and investment property, calculated as the difference between the net 

consideration on the sale and the carrying amount of the asset are recognised in the income 

statement under item 270 “Profit (loss) on the disposal of investments”. 

8. Intangible assets 


An intangible asset is defined as an identifiable non-monetary asset without physical 

substance that is used in carrying on a company’s business. 

The asset is identifiable when: 

• it is separable, which is to say capable of being separated and sold, transferred, licensed, 

rented, or exchanged; 

• it arises from contractual or other legal rights, regardless of whether those rights are 

transferable or separable from other rights and obligations. 

An asset possesses the characteristic of being controlled by the company as a result of past 

events and the assumption that its use will cause economic benefits to flow to the enterprise. 

An entity has control over an asset if it has the power to obtain future economic benefits 

arising from the resource in question and may also limit access by others to those benefits. 

Future economic benefits arising from an intangible asset might include receipts from the sale 

of products or services, savings on costs or other benefits resulting from the use of the asset 

by an enterprise. 

267

An intangible asset is recognised if, and only if: 

(a) it is probable that the expected future economic benefits attributable to the asset will flow 

to the entity; 

(b) the cost of the asset can be measured reliably. 

The probability of future economic benefits occurring is assessed on the basis of reasonable 

and supportable assumptions that represent the best estimate of the economic conditions that 

will exist over the useful life of the asset. 

The degree of probability attaching to the flow of economic benefits attributable to the use of 

the asset is assessed on the basis of the sources of information available at the time of initial 

recognition, giving greater weight to external sources of information. 

In addition to goodwill and software used over several years, brands, core deposits, assets 

under management and assets under management recognised following the merger of the 

former BPU Banca and the former Banca Lombarda e Piemontese are also considered as 

intangible assets. 

8.1.1 Intangible assets with a finite useful life 

A finite useful life is defined for an asset where it is possible to estimate a limit to the period 

over which the related economic benefits are expected to be produced. 

Intangible assets considered as having a finite useful life include software, core deposits, 

assets under management and brands. 

8.1.2 Intangible assets with an indefinite useful life 

An indefinite useful life is defined for an asset where it is not possible to estimate a predictable 

limit to the period over which the asset is expected to generate economic benefits for the Bank. 

The attribution of an indefinite useful life to an asset does not arise from having already 

programmed future expenses which restore the standard level of performance of the asset over 

time and prolong its useful life. 

Intangible assets considered as having an indefinite useful life include goodwill. 


Assets recognised under the balance sheet item 130 “Intangible assets” are stated at cost and 

any expenses subsequent to the initial recognition are only capitalised if they are able to 

generate future economic benefits and only if those expenses can be reliably determined and 

attributed to the assets. 

The cost of an intangible asset includes: 

• the purchase price including any non-recoverable taxes and duties on purchases after 

commercial discounts and bonuses have been deducted; 

• any direct costs incurred in bringing the asset into use. 


Subsequent to initial recognition, intangible assets with a finite useful life are recognised at 

cost net of total amortisation and impairment losses that may have occurred. Amortisation is 

calculated on a systematic basis over the estimated useful life of the asset (see definition 

included in the section “Property, equipment and investment property ”) using the straight line 

method for all intangible assets with the exception of intangible assets relating to customer 

accounts recognised following the purchase price allocation resulting from the merger of the 

former BPU Banca and the former Banca Lombarda e Piemontese. In this case the 

amortisation is calculated using percentage rates of amortisation which represent the 

probability of the customer accounts ending over time. 

268

Amortisation begins when the asset is available for use and ceases on the date on which the 

asset is derecognised. 

Intangible assets with an indefinite useful life (see goodwill as defined in the section below if 

positive) are recognised at cost net of any impairment loss resulting from periodic reviews 

when tests are performed to verify the appropriateness of the carrying amount of the assets 

(see section below). As a consequence amortisation of these assets is not calculated. 

No intangible assets arising from research (or from the research phase of an internal project) 

are recognised. Research expenses (or the research phase of an internal project) are recognised 

as expenses at the time at which they are incurred. 

An intangible asset arising from development (or from the development phase of an internal 

project) is recognised if, and only if, the following can be demonstrated: 

(a) the technical feasibility of completing the intangible asset so that it becomes available for 

sale or use; 

(b) the intention of the company to complete the intangible asset to use it or sell it; 

(c) the capacity of the company to use or sell the intangible asset. 

At the end of each annual or interim reporting period the existence of potential impairment of 

the value of intangible assets is assessed. The impairment is given by the difference between 

the carrying value of the assets and the recoverable amount and is recognised, as are any 

recoveries of value, under the item 210 “Net impairment losses on intangible assets”, with the 

exception of impairment losses on goodwill which are recognised under item 260 “Net 

impairment losses on goodwill”. 

8.4 Goodwill 

Goodwill is defined as the difference between the purchase cost and the fair value of assets 

and liabilities acquired as part of a business combination which consists of the union of 

separate enterprises or businesses in a single entity required to prepare financial statements. 

The result of almost all business combinations consists in the fact that a sole entity, an 

acquirer, obtains control over one or more separate businesses of the acquiree. When an entity 

acquires a group of activities or net assets that do not constitute a business it allocates the 

cost of the group to individual assets and liabilities identified on the basis of their relative fair 

value at the date of acquisition. 

A business combination may give rise to a holding relationship between a parent company and 

a subsidiary in which the acquirer is the parent company and the acquiree is the subsidiary. 

All business combinations are accounted for using the purchase method of accounting. 

The purchase method involves the following steps: 

(a) identification of the acquirer (the acquirer is the combining enterprise that obtains control 

of the other combining enterprises or businesses); 

(b) determination of the acquisition date; 

(c) determination of the cost of the business combination, intended as the consideration 

transferred by the purchaser to the shareholders of the acquiree; 

(d) the allocation, as at the acquisition date, of the cost of the business combination by means 

of the recognition, classification and measurement of the identifiable assets acquired and 

the identifiable liabilities assumed; 

(e) recognition of any existing goodwill. 

Business combinations performed with subsidiary undertakings or with companies belonging 

to the same group are recognised on the basis of the significant economic substance of the 

transactions. 

In application of that principle, the goodwill arising from those transactions in the separate 

financial statements is recognised: 

269

(a) within asset item 120 of the balance sheet if significant economic substance is found; 

(b) as a deduction from equity if it is not found. 

These transactions are eliminated from the consolidated financial statements and are therefore 

recognised solely as the relative costs incurred in relation to parties external to the Group. 

The goodwill recognised in the consolidated financial statements of the Group (“goodwill 

arising on consolidation” resulting from the elimination of the equity investments in 

subsidiaries) is the result of all the goodwill and positive consolidation differences relating to 

some of the companies controlled by the Parent. 

Any changes in the share of ownership which do not result in the loss or acquisition of control 

are to be considered, in compliance with IAS 27, as transactions between shareholders and as 

a consequence the relative effects must be recognised as either an increase or a decrease in 

equity. 

8.4.1. Allocation of the cost of a business combination to assets and liabilities and 

contingent liabilities 

The acquirer: 

(a) recognises the goodwill acquired in a business combination as assets; 

(b) measures that goodwill at its cost to the extent that it is the excess of the cost of the 

business combination over the acquirer's share of interest in the net fair values of the 

acquiree's identifiable assets, liabilities and contingent liabilities. 

Goodwill acquired in a business combination represents a payment made by the acquirer in 

the expectation of receiving economic future benefits from the asset which cannot be identified 

individually and recognised separately. 

After initial recognition, the acquirer values the goodwill acquired in a business combination 

at the relative cost net of cumulative impairment. 

The goodwill acquired in a business combination must not be amortised. The acquirer tests 

the asset for impairment annually or more frequently if specific events or changed 

circumstances indicate that it may have suffered a reduction in value, according to the relative 

accounting standard. 

The standard states that an asset (including goodwill) has suffered an impairment loss when 

the amount recognised in the accounts exceeds the recoverable amount understood as the 

greater of the fair value, net of any sales expenses and its value in use, defined by paragraph 6 

of IAS 36. 

In order to test for impairment, goodwill must be allocated to cash generating units or to 

groups of cash generating units, in observance of the maximum aggregation limit which 

cannot exceed the operating segment identified in accordance with IFRS 8. 

8.4.2. Negative goodwill 

If the acquirer’s share of the net fair value of the identifiable assets, liabilities and contingent 

liabilities exceeds the cost of the business combination the acquirer: 

(a) reviews the identification and measurement of the identifiable assets, liabilities and 

contingent liabilities of the acquiree and the determination of the cost of the business 

combination; 

(b) immediately recognises any excess existing after the new measurement in the income 

statement. 

270

8.4.3. Derecognition criteria 

Intangible assets are derecognised following disposal or when no economic future benefit is 

expected from its use or disposal. 

9. Liabilities, securities issued (and subordinated liabilities) 

The various forms of interbank and customer funding are recognised in the balance sheet 

items 10 “Due to banks”, 20 “Due to customers” and 30 “Securities issued”. These items also 

include liabilities recognised by a lessee in financial leasing operations. 


The liabilities in question are recognised in the balance sheet at the time when the funding is 

received or when the debt securities are issued. 

The amount initially recognised is the fair value, which is normally the same as either the 

consideration received or the issue price, inclusive of any additional expenses or income that 

are directly attributable to the transaction and determinable from the outset, regardless of 

when they are paid. 

The amount of the initial recognition does not include all those costs that are reimbursed by 

the creditor counterparty or that are attributable to internal costs of an administrative 

character. 


After initial recognition, medium to long-term financial liabilities are measured at amortised 

cost using the effective interest method as defined in previous paragraphs. 

Short-term liabilities, for which the time factor is insignificant, are measured at cost. 


Financial liabilities are derecognised when they expire or are extinguished. 

The repurchase of own securities issued results in derecognition of the securities with the 

consequent redefinition of the liability for debt instruments issued. Any difference between the 

repurchase value of the own securities and the corresponding carrying value of the liabilities is 

recognised in the income statement under the item 100 “Income from the disposal or 

repurchase of d) financial liabilities”. Any subsequent re-issue of the securities previously 

subject to derecognition in the accounts constitutes a new issue for accounting purposes with 

the consequent recognition at the new issue price without any effect in the income statement. 

10. Tax assets and liabilities 

Tax assets and liabilities are stated in the balance sheet under the items 140 “Tax assets” and 

80 “Tax liabilities”. 

271

10.1. Current tax assets and liabilities 

Current tax for the current and prior periods is recognised as a liability to the extent that it 

has not yet been settled; any excess compared to the amount due is recognised as an asset. 

Current tax liabilities (assets) for the current and prior years, are measured at the amount 

expected to be paid to/recovered from taxation authorities, using the enacted tax rates and tax 

laws in force. 

Current tax assets and liabilities are derecognised in the year in which the assets are realised 

or the liabilities are extinguished. 

10.2. Deferred tax assets and liabilities 

Deferred tax liabilities are recognised for all taxable temporary differences unless the deferred 

tax liability arises from: 

• goodwill for which amortisation is not deductible for tax purposes or 

• the initial recognition of an asset or a liability in a transaction which: 

is not a business combination and 

at the time of the transaction, affects neither the accounting nor the taxable profit. 

Deferred tax assets are not calculated for higher values of assets for which the tax regime has 

been suspended relating to equity investments and to reserves for which the tax regime has 

been suspended because it is considered there are no reasonable grounds to assume they will 

be taxed in future. 

Deferred tax liabilities are recognised in the balance sheet item 80 “Tax liabilities b) deferred”. 

A deferred tax asset is recognised for all deductible temporary differences if it is probable that 

a taxable income will be used against which it will be possible to use the deductible temporary 

difference, unless the deferred tax asset arises from: 

• negative goodwill which is treated as deferred income; 

• the initial recognition of an asset or liability in a transaction which: 

is not a business combination and 

affects neither the accounting profit nor the taxable profit at the time of the transaction. 

assets for prepaid taxes are recognised under the balance sheet item 140 “Tax assets b) 

deferred. 

Deferred tax assets and deferred tax liabilities are subject to constant monitoring and are 

measured using the tax rates that it is expected will apply in the period in which the tax asset 

will be realised or the tax liability will be extinguished on the basis of the tax regulations 

established by laws currently in force. 

Deferred tax assets and deferred tax liabilities are derecognised in the accounts in the year in 

which: 

• the temporary difference which gave rise to them becomes payable with regard to 

deferred tax liabilities or deductible with regard to deferred tax assets; 

• the temporary difference which gave rise to them is no longer valid for tax purposes. 

Deferred tax assets and deferred liabilities are not discounted to present values nor offset one 

against the other. 

272

11. Non-current assets and disposal groups held for sale – 

Liabilities associated with disposal groups held for sale 

Non-current assets and liabilities and groups of non-current assets and liabilities for which it 

is presumed that the carrying value will recovered by selling them rather than by continued 

use are classified respectively under items 150 “Non-current assets and disposal groups held 

for sale” and 90 “Liabilities associated with disposal groups held for sale”. 

In order to be classified within these items the assets or liabilities (or disposal groups) must be 

immediately available for sale and there must be active, concrete programmes to sell the 

assets or liabilities in the short term. 

These assets or liabilities are measured at the lower of the carrying amount and their fair 

value net of disposal costs. Profits and losses attributable to groups of assets or liabilities held 

for sale are recognised in the income statement under item 310 “Post-tax profit from 

discontinued operations Profits and losses attributable to individual assets held for disposal 

are recognised in the income statement under the most appropriate item. 

12. Provisions for risks and charges 

12.1. Definition 

A provision is defined as a liability of uncertain timing or amount. 

A contingent liability, however, is defined as: 

• a possible obligation, the result of past events, the existence of which will only be 

confirmed by the occurrence or (non occurrence) of future events that are not totally under 

the control of the company; 

• a present obligation that is the result of past events, but which is not recognised in the 

accounts because: 

 

 

it is improbable that financial resources will be needed to settle the obligation; 

the amount of the obligation cannot be measured with sufficient reliability. 

Contingent liabilities are not recognised in the accounts, but are only reported, unless they are 

considered a remote possibility. 

12.2. Recognition criteria and measurement 

A provision is recognised if and only if: 

• there is a present obligation (legal or implicit) that is the result of a past event, and 

• it is probable that the use of resources suitable for producing economic benefits will be 

required to fulfil the obligation, and 

• a reliable estimate can be made of the amount arising from fulfilment of the obligation. 

The amount recognised as a provision represents the best estimate of the expenditure required 

to settle the present obligation at the reporting date and reflects the risks and uncertainties 

that inevitably characterise a number of facts and circumstances. The amount of a provision is 

measured by the present value of the expenditure that it is assumed will be necessary to settle 

the obligation where the effect of the present value is a substantial aspect. Future events that 

273

might affect the amount required to settle the obligation are only taken into consideration if 

there is sufficient objective evidence that they will occur. 

Provisions made for risks and charges include those for the risk attaching to any existing tax 

litigation. 

12.3. Derecognition criteria 

The provision is reversed when it becomes improbable that the use of resources suitable for 

producing economic benefits will be required to settle the obligation. 

13. Foreign currency transactions 

13.1. Definition 

A foreign currency is a currency other than the functional currency of the entity, which is the 

currency of the primary economic environment in which an entity operates. 

13.2. Recognition criteria 

A foreign currency transaction is recorded at the time of initial recognition in the functional 

currency applying the spot exchange rate between the functional currency and the foreign 

currency ruling on the date of the transaction. 

13.3. Measurement criteria 

At each reporting date: 

(a) foreign currency monetary amounts 3 are translated using the closing rate; 

(b) non-monetary items 4 measured at historical cost in foreign currency are translated using 

the exchange rate at the date of the transaction; 

(c) non-monetary items carried at fair value in a foreign currency are translated using the 

exchange rates that existed on the dates when the fair values were determined. 

Exchange rate differences arising from the settlement of monetary items, or from the 

translation of monetary items at rates different from those at which they were translated when 

initially recognised during the year or in previous financial statements, are recognised in the 

income statement for the period except for exchange rate differences arising on monetary 

items that form part of a net investment in a foreign operation. 

3 “Monetary” items are defined as relating to determined sums in foreign currency, which is to say to assets and 

liabilities which must be received or paid for a determined amount in foreign currency. The defining characteristic of 

a monetary item is the right to receive or an obligation to pay a set or calculable number of foreign currency units. 

4 See the note on “monetary” items for the contrary. 

274

Exchange rate differences arising from a monetary item that forms part of a net investment in 

a foreign operation of an entity that prepares financial statements are recognised in the 

income statement of the separate company financial statements of the entity that prepares the 

financial statements or the separate company financial statements of the foreign operation. 

These exchange rate differences in the financial statements that include the foreign operation 

(e.g. in the consolidated accounts when the foreign operation is a subsidiary) are initially 

recognised as a separate component in equity and are recognised in the income statement at 

the time of the disposal of the net investment. 

When a profit or loss on a non-monetary item is recognised directly in equity, each change in 

that profit or loss is also recognised directly in equity. However, when a profit or loss on a nonmonetary 

item is recognised in the income statement each change in that profit or loss is 

recognised in the income statement. 

The financial statements of foreign subsidiaries and associates which employ an accounting 

currency that is different from that of the Parent are translated using the exchange rates 

ruling at the reporting date 

14. Other information 

14.1 Treasury shares 

Treasury shares if present in the UBI Group portfolio are deducted from equity. No profit or 

loss arising from the purchase, sale, issue or cancellation of treasury shares is recognised in 

the income statement. 

The differences between the purchase and sale price arising from these transactions are 

recorded in equity reserves. 

14.2 Provisions for guarantees granted and commitments 

Provisions made on a case-by-case and collective basis to estimate possible payments to be 

made connected with the assumption of credit risks attaching to guarantees granted and 

commitments assumed are calculated by applying the same criteria as that reported for loans. 

These provisions are recognised within the item 100 “Other liabilities” against the item in the 

income statement 130d “Net impairment losses on: other financial transactions”. 

14.3 Employee benefits 

14.3.1 Definition 

Employee benefits are defined as all forms of consideration given by a company in exchange 

for services rendered by employees. Employee benefits can be classified as follows: 

• short-term employee benefits (not including benefits due to employees for severance 

payments and benefits paid in the form of equity instruments) due entirely within twelve 

months after the service is rendered by employees; 

• post-employment benefits due after the contract of employment has terminated; 

• post-employment benefit plans subsequent to the termination of the employment contract 

and that is agreements whereby the company provides benefits subsequent to the 

termination of the employment contract; 

• long-term benefits, other than the previous, due entirely within the twelve months 

subsequent to the end of the financial year in which employee rendered the relative service. 

275

14.3.2 Post-employment benefits and defined benefit plans 

14.3.2.1 Recognition criteria 

Following the reform of supplementary pensions pursuant to Legislative Decree No. 252/2005, 

portions of post-employment benefit funds maturing from 1st January 2007 constitute a 

“defined benefit plan”. 

The liability relating to those portions is measured on the basis of the contributions due 

without the application of any actuarial methods. 

However, post-employment benefits maturing up until 31st December 2006 continue to 

constitute a “post employment benefit” belonging to the “defined benefit plan” series and as 

such require the amount of the obligation to be determined on an actuarial basis and to be 

discounted to present values because the debt may be extinguished a long time after the 

employees have rendered the relative service. 

The amount is accounted for as a liability amounting to: 

(a) the present value of the defined benefit obligation as at the reporting date; 

(b) plus any actuarial gains (less any actuarial losses) recognised in a separate reserve in 

equity; 

(c) less any pension costs relating to past service rendered not yet recognised; 

(d) less the fair value at the reporting date of any assets at the service of the plan. 

14.3.2.2 Measurement criteria 

As concerns the accounting treatment for actuarial gains/losses, the UBI Group has opted for 

direct recognition of these items within fair value reserves in equity. 

“Actuarial gains/losses” comprise adjustments arising from the reformulation of previous 

actuarial assumptions as a result of actual experience or from changes in the actuarial 

assumptions themselves. 

The “Projected Unit Credit Method” is used to calculate the present value. This considers each 

single period of service as giving rise to an additional unit of severance payment and therefore 

measures each unit separately to arrive at the final obligation. This additional unit is obtained 

by dividing the total expected service by the number of years that have passed from the time 

service commenced until the expected payment date. Application of the method involves 

making projections of future payments based on historical analysis of statistics and of the 

demographic curve and discounting these flows on the basis of market interest rates. The rate 

used for discounting to present value is calculated as the average of the swap, bid and ask 

rates at the measurement date appropriately interpolated for intermediate maturity dates. 

14.3.3 Stock Option/Stock granting 

Stock option and stock granting plans are defined as personnel remuneration schemes where 

the service rendered by an employee (or a third party) is remunerated by using equity 

instruments (including options on shares). 

The cost of these transactions is measured at the fair value of equity instruments granted and 

is recognised in the income statement under item 180 “Administrative expenses a) personnel 

expenses” on a straight line basis over the original life of the plan 

The fair value determined relates to the equity instruments granted at the time of grant and 

takes account of market prices, if available, and the terms and conditions upon which the 

instruments were granted. 

276

14.4 Segment reporting 

Segment reporting is defined as the manner in which financial information on a company is 

reported by operating segment. 

An operating segment is intended as a component of an entity: 

• that engages in business activities that generate revenues and expenses; 

• whose operating results are reviewed regularly by the entity’s chief operating decision 

maker, to make decisions about the resources to be allocated to the segment and 

assess its performance; and 

• for which discrete financial information is available. 

Segment reporting is based on elements that senior management uses to make operating 

decisions (a “management approach”) and consequently the identification of operating 

segments is performed on the basis of the current system of reporting to management which is 

based primarily on management analysis of legally recognised entities. 

Segment reporting is completed by information on the geographical areas in which revenues 

are produced and assets are held. 

14.5 Revenues 

14.5.1 Definition 

Revenues are the gross inflow of economic benefits resulting from business arising from the 

ordinary operating activities of a company when these inflows create an increase in equity 

other than an increase resulting from payments made by shareholders. 

14.5.2 Recognition criteria 

Revenues are measured at the fair value of the consideration received or due and are 

recognised when they can be reliably estimated. 

The result of the rendering of services can be reliably estimated when the following conditions 

are met: 

• the amount of revenue can be measured reliably; 

• it is probable that the economic benefits arising from the transaction will flow to the 

company; 

• the stage of completion of the operation as at the reporting date can be measured reliably; 

• the costs incurred, or to be incurred, to complete the transaction can be measured 

reliably. 

Revenue recognised in return for services rendered is recognised by reference to the stage of 

completion of the transaction. 

Revenue is only recognised when it is probable that the economic benefits arising from the 

transaction will be enjoyed by the company. Nevertheless when the recoverability of an 

amount already included within revenues is uncertain, the amount not recoverable or the 

amount for which recovery is no longer probable is recognised as a cost instead of adjusting 

the revenue originally recognised. 

Revenue arising from the use by third parties of the company’s assets which generate interest 

or dividends are recognised when: 

• it is probable that the economic benefits arising from the transaction will be received by 

the company; 

• the amount of the revenue can be reliably measured. 

277

Interest is recognised on an accruals basis that takes into account the effective yield of the 

asset. In detail: 

• interest income includes the amortisation of any discounts, premiums or other differences 

between the initial carrying amount of a security and its value at maturity; 

• arrears of interest that are considered recoverable are recognised in the item 10 “Interest 

and similar income”, but only the part considered recoverable. 

Dividends are recognised when shareholders acquire the right to receive payment. 

Expenses or revenues resulting from the sale or purchase of financial instruments, determined 

by the difference between the amount paid or received for the transaction and the fair value of 

the instrument are recognised in the income statement on initial recognition of the financial 

instrument when the fair value is determined: 

• by making reference to current and observable market transactions in the same 

instrument; 

• by using valuation techniques which use, as variables, only data from observable markets. 

14.6 Expenses 

Expenses are recognised in the accounts at the time at which they are incurred while following 

the criteria of matching expenses to revenues that result directly and jointly from the same 

transactions or events. Expenses that cannot be associated with revenues are recognised 

immediately in the income statement. 

Expenses directly attributable to financial instruments measured at amortised cost and 

determinable from the outset, regardless of the time at which they are settled, are recognised 

in the income statement by applying the effective interest rate, a definition of which is given in 

the section “Loans and receivables”. 

Impairment losses are recognised through profit and loss in the year in which they are 

measured. 

278

A.3 – INFORMATION ON FAIR VALUE 

A Information on fair value 

A.3.1 Transfers between portfolios 

The UBI Banca Group performed no reclassifications of financial asset portfolios as a result of 

changes in the purpose or use of those assets, during both the current and the previous 

financial year. 

A.3.2 Fair value hierarchy 

The fair value used for measuring financial instruments is determined on the basis of criteria, 

listed below, which involve the use of what are termed observable or unobservable inputs. 

Observable inputs are parameters developed on the basis of available market data and they 

reflect the assumptions that market participants should use when they price financial 

instruments. On the other hand, unobservable inputs are parameters for which market data 

are not available and which are therefore developed on the basis of the best available 

information on the assumptions that market participants should use when they price financial 

instruments. 

Fair value determined on the basis of level 1 inputs: 

The measurement is based on observable inputs, i.e. prices listed on active markets for 

identical financial instruments to which the entity can gain access on the valuation date of the 

instrument. A market is defined as active when the prices quoted reflect normal market 

transactions, are regularly and readily available and if those prices represent actual and 

regular market trading. 


The measurement is performed using methods that are used if the instrument is not listed on 

an active market and is therefore based on inputs that are different from those of level one. 

The measurement of the financial instrument is based on prices inferred from market 

quotations for similar assets or by using measurement techniques for which all the significant 

factors – credit spreads and liquidity spreads – are inferred from observable market variables. 

Although this is the application of a measurement technique, there is basically no element of 

discretion in the resulting price, because the most important parameters used are drawn from 

markets and the calculation methods used replicate quotations existing on active markets. 


The measurement is performed using methods which consist of measuring unlisted 

instruments by employing significant inputs not inferable from markets and which therefore 

involve the use of estimates and assumptions made by management. 

The choice of the method of measuring fair value is not optional, because the methods must 

be applied in hierarchical order. 

Level 1 

Equity instruments quoted on regulated markets, bonds quoted on the EuroMot circuit and 

those for which prices that represent actual and regular market transactions continuously 

available from the main contribution platforms occurring on the basis of a normal reference 

period with price fluctuations over the last five days which occur at intervals considered 

normal are considered as quoted on an active market. 

Those derivatives for which a quotation on an active reference market (e.g. IDEM) are also 

considered as quoted, to the extent that the markets are considered highly liquid. 

The fair value of these instruments is calculated on the basis of the relative closing prices on 

the last day of the month on the markets on which they are quoted. 

279

Level 2 

Where no prices are available on active markets, the fair value of instruments is measured by 

using measurement models which make use of market inputs. The resulting measurement is 

therefore based on factors inferred from official quotations, essentially similar in terms of risk 

factors, by applying a determined method of calculation. 

With regard to derivatives, almost all the trading instruments consist of over the counter 

derivatives and they are therefore measured using internal models that use market inputs. 

The options implicit in structured bonds and in the respective hedging derivatives are 

measured using appropriate pricing models which make use of directly observable market 

inputs (e.g. interest rate curves, volatility matrices and correlations, exchange rates). The 

calculation methodologies used replicate the prices of financial instruments listed on active 

markets without making discretionary assumptions which might influence the final price. 

As concerns equity instruments recognised within the available-for-sale portfolio, these are 

classified as within level two if they are measured on the basis of measurement methods which 

consider transactions occurring in the instrument in a reasonable period of time with respect 

to the date of measurement and in some cases, by means of stock market multiples for 

comparable companies. 

Finally the “plain vanilla” bonds in issue and the “plain vanilla” component of structured 

bonds are valued by discounting future cash flows to present values. The curve used for 

subordinated issues is obtained by applying the UBI subordinated spread observed for 

transactions with a duration equal to the residual life of the bond to the risk free curve. The 

curve used for senior issues destined for institutional customers is the UBI EMTN curve. 

Finally the curve used to determine the fair value of issues subscribed by ordinary customers 

is obtained by applying the spreads observed in the last quarter for issues with a maturity 

equal to the residual life of individual bonds to the risk free curve. 

Level 3 

Level three is defined as the fair value determined using measurement models which use 

inputs that are not directly observable on markets and which involve the use of estimates and 

assumptions by management. 

Complex OTC derivatives are measured using internal models that use implicit assumptions; 

the credit risk component is also considered explicitly for these. 

The remaining part of the equity instruments classified as available-for-sale are measured 

using methods based on an analysis of the fundamentals of the company in question and, as 

an alternative of last resort, at cost. 

It is necessary to use valuation models to measure the level three fair value of options with 

underlying equity instruments that involve the use of market inputs that are not directly 

observable and which involve the use of estimates and assumptions in the measurement. More 

specifically the measurement instruments are designed using appropriate calculation methods 

based on specific assumptions that regard: 

• the performance of future cash flows, affected by future events to which probabilities are 

assigned based on historical experience or on behavioural assumptions; 

• determined input parameters not observable on active markets which are estimated from 

financial instruments observable on the market but not identical to the instruments 

measured. 

Finally, with regard to bonds issued, these are recognised within level 3 and measured at cost 

if this correlates directly with the financing operation. 

280

Information on the valuation models used for securities and derivatives 

The target instrument used for pricing securities and derivatives in the UBI Group is the 

software application Mxg2000 by Murex. This software takes account of all market factors in 

measuring the value of financial instruments. 

The majority of the market data is acquired through the information provider Reuters, partly 

in real time (i.e. prices, yield curves and exchange rates) and partly at preset times (ATM 

volatility for swaptions and ATM volatility and smile curves for caps and floors). The 

application is also fed “on demand” with a series of market parameters supplied by the 

provider Bloomberg: correlations, dividend yields, index and forex volatility. 

Fair value is calculated daily as follows: 

the market parameters acquired in real time by Mxg2000 (prices, yield curves and 

exchange rates) are crystallised at 4.45 p.m. and used as reference data for calculating 

the mark-to-market. The last update of the day for the volatilities of swaptions and 

caps/floors (and the other market data acquired on demand if necessary) is performed 

at 4.45 p.m.; 

at the end of the day closure (which occurs at 9.00 p.m.), a series of software 

procedures are performed which extract various information from Mxg2000 including 

the reference mark-to-market for the day. 

The pricing of unlisted financial assets is currently calculated using the software application 

Risk Watch by Algorithmics, before the full migration of Group portfolios onto the Mxg2000 

Front Office target system takes place. For these instruments the future cash flows are 

discounted to present values using interest rates which take into account the specific nature 

of the issuer (credit spread). 

OTC derivatives on interest rates and exchange rates and derivatives used to hedge bonds 

(with interest rates and currencies as the underlying) are valued using the target software 

(Mxg2000). Values are measured for all contracts which can be priced using closed formula 

models. In detail, the main pricing models used in Mxg2000 for OTC derivatives are: Black 

Yield, Black Fwd, Black Swap Yield, Cox Fwd, Trinomial, Lnormal and CMS Convexity 

Analytical. 

Derivative instruments that are not managed in Murex, relating to embedded options in 

structured bonds issued and in the respective derivative hedges are valued using internal 

models (stochastic models with MonteCarlo simulations). 

Pricing for unlisted “plain vanilla” liabilities securities and the “plain vanilla” component of 

structured securities is currently calculated on the Front Office Mxg2000 target system. 

The pricing models employed for securities and derivatives are used continuously over time 

and are only modified when substantial market changes occur. 

281

A.3.2.1 Accounting portfolios: distribution by fair value level 

Financial assets/liabilities measured at fair value 

31.12.2011 31.12.2010 

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 

1. Financial assets held for trading 2,149,230 635,890 87,297 2,038,701 584,841 109,209 

2. Financial assets at fair value 104,846 - 21,328 116,208 - 31,078 

3. Available-for-sale financial assets 6,911,316 1,029,653 98,740 8,874,363 1,296,198 82,058 

4. Hedging derivatives - 1,090,498 - - 591,127 - 

Total 9,165,392 2,756,041 207,365 11,029,272 2,472,166 222,345 

1. Financial liabilities held for trading 438,088 625,585 - 410,453 543,970 - 

2. Financial liabilities at fair value - - - - - - 

3. Hedging derivatives - 1,739,685 - - 1,228,056 - 

Total 438,088 2,365,270 - 410,453 1,772,026 - 

A.3.2.2 Annual changes in financial assets recognised at fair value (Level 3) 

FINANCIAL ASSETS 

held fo r trading 

meas ured at fair 

value 

available-for-sale hedges 

1. Opening balances 109,209 31,078 82,058 - 

2. Increases 9,587 1,776 34,249 - 

2.1. Purchases 2,276 - - - 

2.2. Profits recognised in: 

2.2.1. Income statement 4,395 1,290 - - 

- of which gains 4,369 752 - - 

2.2.2. Equity X X 1,172 - 

2.3. Transfers from other levels 311 - 30,944 - 

2.4. Other increases 2,605 486 2,133 - 

3. Decreases (31,499) (11,526) (17,567) - 

3.1.Sales (11,609) - (3 ,004) - 

3.2. Redemptions (5,893) (4,790) (124) - 

3.3. Losses recognised in: 

3.3.1. Income statement (13,610) (6,736) (1 ,812) - 

- of which losses (13,610) (6,628) (1 ,812) - 

3.3.2. Equity X X (644) - 

3.4. Transfers to other levels - - (11 ,856) - 

3.5. Other decreases (387) - (127) - 

4. Closing balances 87,297 21,328 98,740 - 

Within the increases, item 2.3 “transfers from other levels” includes the investment in ICBPI 

Istituto Centrale Banche Popolari (available-for-sale financial assets) transferred to level 3 in 

compliance with the methodology described in point A.3.3. The relative accrued interest is 

included in item 2.4 “other increases”. 

Within the decreases, item 3.4 “transfers to other levels” relates mainly to equity investments 

in Siteba SpA amounting to €1.5 million and in SSB amounting to €9.8 million. 

Losses recognised in the income statement include €12.2 million relating to Medinvest 

International Sca. 

A.3.2.2 Annual changes in financial liabilities recognised at fair value (level 3) 

No financial liabilities recognised at fair value level 3 exist in the UBI Group. 

282

PART B – Notes to the consolidated balance 

sheet 

ASSETS 

SECTION 1 Cash and cash equivalents – Item 10 

1.1 Cash and cash equivalents: composition 

31/12/2011 31/12/2010 

a) Cash in hand 625,835 609,040 

b) Deposits with central banks - - 

Total 625,835 609,040 

SECTION 2 Financial assets held for trading – Item 20 

2.1 Financial assets held for trading: composition by type 

Items/Amounts 31/12/2011 31/12/2011 31/12/2010 

31/12/2010 

L 1 L 2 L 3 L 1 L 2 L 3 

A. On-balance sheet assets 

1. Debt instruments 2,135,752 84 - 2,135,836 1,964,319 11,013 - 1,975,332 

1.1 Structured instruments 173 - - 173 8 2,792 - 2,800 

1.2 Other debt instruments 2,135,579 84 - 2,135,663 1,964,311 8,221 - 1,972,532 

2. Equity instruments 12,811 - 85,850 98,661 72,856 2 104,082 176,940 


(collective investment instruments) 447 101 1,447 1,995 512 54 1,601 2,167 

4. Financing - 38,939 - 38,939 - 64,171 - 64,171 

4.1 Reverse repurchase agreements - - - - - - - - 

4.2 Other - 38,939 - 38,939 - 64,171 - 64,171 

Total A 2,149,010 39,124 87,297 2,275,431 2,037,687 75,240 105,683 2,218,610 


1. Financial derivatives 220 596,766 - 596,986 1,014 509,601 3,526 514,141 

1.1 for trading 220 596,766 - 596,986 1,014 504,659 3,526 509,199 

1.2 connected with fair value options - - - - - - - - 

1.3 other - - - - - 4,942 - 4,942 

2. Credit derivatives - - - - - - - - 

2.1 for trading - - - - - - - - 

2.2 connected with fair value options - - - - - - - - 

2.3 other - - - - - - - - 

Total B 220 596,766 - 596,986 1,014 509,601 3,526 514,141 

Total (A+B) 2,149,230 635,890 87,297 2,872,417 2,038,701 584,841 109,209 2,732,751 

Equity instruments also include equity investments held for merchant banking activity, 

performed mainly by Centrobanca Spa. 

As at 31.12.2010, item 1.2 “Other debt instruments – Level 2” included impaired assets 

consisting of bonds issued by Lehman Brothers for a nominal amount of €10 million 

recognised at 8.625% of the nominal amount. 

Those instruments were fully disposed of in the first quarter of 2011, with the realisation of a 

profit of approximately €1.6 million. 

Item 3 “OICR units (collective investment instruments)” relates exclusively to remaining 

investments in hedge funds. 

Item 4 “ Financing – Level 2” relates to salary backed loans of the subsidiary Prestitalia Spa to 

be sold to third parties. 

283

2.2 Financial assets held for trading: composition by debtors/issuers 

31/12/2011 31/12/2010 

A. ASSETS 

1. Debt ins truments 2,135,836 1,975,332 

a) Governments and central banks 2,108,953 1,906,508 

b) Other public authorities 7 7 

c) Banks 7,377 35,394 

d) Other issuers 19,499 33,423 

2. Equity ins truments 98,661 176,940 

a) Banks 2,598 5,400 

b) Other issuers: 96,063 171,540 

- insurance companies - 3,605 

- financia l c o m panie s 85,848 47,368 

- non-financial companies 6,415 116,713 

- o ther 3,800 3,854 

3. Units in O.I.C.R. (c o lle c tive inve s tme nt ins trume nts ) 1,995 2,167 

4. Financing 38,939 64,171 

a) Governments and central banks - - 

b) Other public authorities - - 

c) Banks - - 

d) Other 38,939 64,171 

To tal A 2,275,431 2,218,610 

B. DERIVATIVE INSTRUM ENTS 

a) Banks 

- fair value 72,409 159,984 

b) Customers - 

- fair value 524,577 354,157 

Total B 596,986 514,141 

Total (A+B) 2,872,417 2,732,751 

2.3 Financial assets held for trading: annual changes 

Changes /Underlying as s ets Debt ins truments Equity ins truments 


(co llective inves tment 

instruments) 

Financing 

To tal 

A. Opening balances 1,975,332 176,940 2,167 64,171 2,218,610 

B. Increases 23,714,710 97,402 459 38,939 23,851,510 

B.1 P urchases 23,176,857 89,311 367 38,939 23,305,474 

B.2 P ositive changes in fair value 21,760 4,358 19 - 26,137 

B.3 Other changes 516,093 3,733 73 - 519,899 

C. Decreases (23,554,206) (175,681) (631) (64,171) (23,794,689) 

C.1 Sales (22,371,111) (156,867) (401) (64,171) (22,592,550) 

C.2 Redemptions (728,238) - (3) - (728,241) 

C.3 Negative changes in fair value (19,838) (16,528) (225) - (36,591) 

C.4 Trans fers to o ther po rtfo lio s - - - - - 

C.5 Other changes (435,019) (2,286) (2) - (437,307) 

D. Final balances 2,135,836 98,661 1,995 38,939 2,275,431 

Within debt instruments, item B.3 “Other changes” (increases), the amount of €437.9 million 

relates to uncovered short positions existing at the end of the year. Similarly, item C.5, “Other 

changes” (decreases) includes an amount of €409.3 million relating to the total uncovered 

short positions existing at the end of the previous year. 

284

SECTION 3 Financial assets at fair value –Item 30 

3.1 Financial assets at fair value: composition by type 

Items/Amounts 31/12/2011 Total 31/12/2010 

Total 

L 1 L 2 L 3 L 1 L 2 L 3 

1. Debt instruments - - - - - - - - 

1.1 Structured instruments - - - - - - - - 

1.2 Other debt instruments - - - - - - - - 

2. Equity instruments - - - - - - - - 


(collective investment instruments) 104,846 - 21,328 126,174 116,208 - 31,078 147,286 

4. Financing - - - - - - - - 

4.1 Structured - - - - - - - - 

4.2 Other - - - - - - - - 

Total 104,846 - 21,328 126,174 116,208 - 31,078 147,286 

Cost 104,846 - 21,328 126,174 116,208 - 31,078 147,286 

: 103000O|1 – NOTA 

Level one investments consisted of a hedge fund of the company Tages Capital SGR. The 

amount shown for level three relates to the residual value of non Group hedge funds. Further 

information on this item is given at the foot of Table 7.1 in income statement Section 7 – “Net 

value change in financial assets/liabilities at fair value”, which may be consulted. 

3.2 Financial assets at fair value: composition by debtors/issuers 

It e m s / A m o u n t s 31/12/2011 31/12/2010 

1. D e b t in s t ru m e n t s - - 



c) Banks - - 

d) Other issuers - - 

2. Equity instruments - - 

a) Banks - - 

b) Other issuers: - - 

- ins urance co mpanies - - 

- financ ia l c o m pa nie s - - 

- no n-fina ncia l c o m panie s - - 

- o ther - - 

3. Units in O.I.C.R. (c o lle c tive inve s tme nt ins trume nts ) 126,174 147,286 

4. Financing - - 



c) Banks - - 

d) Other - - 

To tal 126,174 147,286 

285

3.3. Financial assets at fair value: annual changes 

D ebt ins truments 

Equity instruments 


(collective 

investment 

instruments) 

Financing 

A. Opening balances - - 147,286 - 147,286 

B. Increases - - 656,146 - 656,146 

B.1 Purchases - - 654,370 - 654,370 

B.2 Positive changes in fair value - - 752 - 752 

B.3 Other changes - - 1,024 - 1,024 

C. Decreases - - (677,258) - (677,258) 

C.1 Sales - - (630,477) - (630,477) 

C.2 Redemptions - - (4,790) - (4,790) 

C.3 Negative changes in fair value - - (17,990) - (17,990) 

C.4 Other changes - - (24,001) - (24,001) 

D. Final balances - - 126,174 - 126,174 

Total 

The majority of the amounts for purchases and sales relate to transactions performed during 

the year for investments and disposals of units in the funds of UBI Pramerica SGR. 

SECTION 4 Available-for-sale financial assets – Item 40 

4.1 Available-for-sale financial assets: composition by type 

Items/Amounts 31/12/2011 Total 31/12/2010 

Total 

L 1 L 2 L 3 L 1 L 2 L 3 

1. Debt instruments 6,621,026 920,410 10,296 7,551,732 8,509,464 1,115,988 10,255 9,635,707 

1.1 Structured instruments 73,426 - 3,773 77,199 177,191 - - 177,191 

1.2 Other debt instruments 6,547,600 920,410 6,523 7,474,533 8,332,273 1,115,988 10,255 9,458,516 

2. Equity instruments 251,226 46,963 88,444 386,633 346,586 73,614 70,357 490,557 

2.1 At fair value 251,226 46,937 54,467 352,630 346,586 73,588 46,008 466,182 

2.2 At cost - 26 33,977 34,003 - 26 24,349 24,375 


(collective investment instruments) 39,064 62,280 - 101,344 18,313 106,596 - 124,909 

4. Financing - - - - - - 1,446 1,446 

Total 6,911,316 1,029,653 98,740 8,039,709 8,874,363 1,296,198 82,058 10,252,619 

Equity instruments are recognised within “Level 3” if, for example, in the absence of a price 

quoted on an active market, their fair value is estimated by assuming the value at cost or the 

quota of the equity corresponding to the interest held. 

In consideration of the particular nature of the shareholding, the equity investment held by 

Banca Carime Spa in the Bank of Italy of approximately €422 thousand is recognised at cost. 

Amounts recognised at cost also include all the equity investments held by the Group for the 

purposes of a more solid presence on its local markets and for the development of commercial 

agreements. 

The units in O.I.C.R.s – Level 1 relate almost exclusively to investments in the Polis Portafoglio 

Immobiliare fund amounting to €12.4 million, to the Trackers EURSTOXX50 ETF amounting 

to €17.1 million and to the Azimut Dividend Premium Class A fund amounting to €9.5 million. 

The units classified within level two relate to investments in private equity funds. 

286

4.2 Available-for-sale financial assets: composition by debtors/issuers 

It e m s / A m o u n t s 31/12/2011 31/12/2010 

1. D e b t ins t ru m e n t s 7,551,732 9,635,707 

a) Governments and central banks 5,964,174 7,779,641 


c) Banks 914,064 890,267 

d) Other issuers 673,494 965,799 

2. Equity ins truments 386,633 490,557 

a) Banks 275,412 332,655 

b) Other issuers: 111,221 157,902 

- insurance companies 4,131 4,499 

- financia l c o m panie s 14,877 54,758 

- non-financial companies 91,579 95,883 

- o ther 634 2,762 

3. Units in O.I.C.R. (collective investment instruments) 101,344 124,909 

4. Financing - 1,446 



c) Banks - - 

d) Other - 1,446 

To tal 8,039,709 10,252,619 

Equity instruments include shares acquired by the network banks following partial 

conversions of restructured loans. 

|1 - NOTA 

4.3 Available-for-sale financial assets: hedged assets 

Items/Components 31/12/2011 31/12/2010 

1. Financial assets subject to fair value specific hedge 

a) interest rate ris k 3,913,760 5,694,419 

b) price risk - - 

c) currency risk - - 

d) credit risk - - 

e) multiple risks - - 

2. Financial assets subject to cash flow specific hedge 

a) interest rate ris k - - 

b) currency risk - - 

c) other - - 

Total 3,913,760 5,694,419 

Investments in available-for-sale financial assets (government securities – and other debt 

instruments) subject to specific fair value hedges on interest rate risk were decreased during 

the year. 

As summarised in section 5.1 of the part on the income statement, item 90 “Net hedging 

income”, the fair value changes in hedging contracts and the underlying securities led to the 

recognition of a net gain of €3.2 million. 

287

4.4 Available-for-sale financial assets: annual changes 

Debt instruments 



(collective 

investment 

instruments) 

Financing 

A. Opening balances 9,635,707 490,557 124,909 1,446 10,252,619 

B. Increases 2,044,579 68,543 35,173 - 2,148,295 

B.1 Purchases 1,982,067 58,015 6,659 - 2,046,741 

B.2 Positive changes in fair value 14,638 3,028 5,195 - 22,861 

B.3 Reversal of impairment losses - 234 2,059 - 2,293 

- recognised in the income statement - - - - - 

- recognised in equity - 234 2,059 - 2,293 

B.4 Transfers from other portfolios - - - - - 

B.5 Other changes 47,874 7,266 21,260 - 76,400 

C. Decreases (4,128,554) (172,467) (58,738) (1,446) (4,361,205) 

C.1 Sales (542,935) (22,358) (23,893) - (589,186) 

C.2 Redemptions (2,595,261) (125) (16,509) - (2,611,895) 

C.3 Negative changes in fair value (949,864) (8,883) (6,840) - (965,587) 

C.4 Impairment losses (373) (119,733) (11,128) - (131,234) 

- recognised in the income statement (373) (119,733) (8,076) - (128,182) 

- recognised in equity - - (3,052) - (3,052) 

C.5 Transfers to other portfolios - - - - - 

C.6 Other changes (40,121) (21,368) (368) (1,446) (63,303) 

D. Final balances 7,551,732 386,633 101,344 - 8,039,709 

Total 

Purchases of debt instruments consisted mainly of investments in government securities 

(approximately €1.8 billion), while the remaining part consisted of purchases of bonds issued 

by major banks. 

Again with regard to debt instruments, the decrease in fair value was attributable to the 

serious economic situation on markets (especially in the last quarter of the year). The mark-tomarket 

recognition of instruments was performed in a separate fair value reserve in equity. 

Purchases of investments in equity instruments related almost totally to the subscription of 

the Intesa Sanpaolo S.p.A. share increase for €56.7 million, while sales mainly regarded the 

following: 

- London Stock Exchange Group amounting to €16.6 million; 

- Hopa S.p.A. amounting to €2.7 million; 

- Banca Cooperativa Valsabbina Scrl amounting to €1.5 million; 

- Permicro amounting to €0.7 million. 

Impairment losses charged to the income statement relate mainly to shares held in Intesa 

Sanpaolo S.p.A., amounting to €112,542 thousand. 

The schedule below shows changes and the effects in the income statement of the shares held 

in Intesa Sanpaolo S.p.A.. 

historical amounts 

amounts as at 

31/12/2010 

movements in reserves and in the 

income statement to 31/12/2010 

number of 

shares unit price cost unit price fair value 

reversal of share 

to reserve (gross of 

tax) 

recognition in the 

income statement 

145,022,912 5.686 824,600 2.0423 296,180 (126,069) (36,807) 

Subscription of share capital 

increase (June 2011) 

new historical amounts 

amounts as at 

31/12/2011 

movements in reserves and in the 

income statement to 31/12/2011 

number of 

shares unit price 

cost 

number of 

shares unit price cost unit price fair value 

fair value change 

of share in reserve 

(gross of tax) 

recognition in the 

income statement 

41,435,116 1.369 56,725 186,458,028 4.727 881,325 1.2891 240,363 0 (112,542) 

288

Purchases of units of O.I.C.R.s consisted of investments in private equity funds made during 

the year. Impairment losses charged to the income statement regarded the Polis Portafoglio 

Immobiliare fund amounting to €4.3 million and other private equity funds amounting to €3.8 

million. 

SECTION 5 Held-to-maturity investments – Item 50 

5.1 Held-to-maturity investments: composition by type 

No held-to-maturity investments were recognised. 

5.2. Held-to-maturity investments: debtors/issuers 

No items of this type exist in the UBI Group. 

5.3 Held-to-maturity investments: hedged 

No items of this type exist in the UBI Group. 

5.4 Held-to-maturity investments: annual changes 

No movements in the item occurred in 2011. 

Table 2: 105030O|1 - NOTA 

SECTION 6 Loans to banks – Item 60 

6.1 Loans to banks: composition by type 

Type of transaction/Amounts 31/12/2011 31/12/2010 

A. Loans to central banks 739,318 739,508 

1. Term deposits - - 

2. Compulsory reserve requirement 738,100 739,508 

3. Reverse repurchase agreements - - 

4. Other 1,218 - 

B. Loans to banks 5,444,682 2,380,844 

1. Current accounts and deposits 2,516,230 1,161,396 

2. Term deposits 455,701 466,445 

3. Other loans 1,329,819 753,003 

3.1 Reverse repurchase agreements 534,373 988 

3.2 Finance leases 98 165 

3.3 Other 795,348 751,850 

4. Debt instruments 1,142,932 - 

4.1 Structured instruments - - 

4.2 Other debt instruments 1,142,932 - 

Total (carrying amount) 6,184,000 3,120,352 

Total (fair value) 6,184,350 3,120,509 

Deteriorated loans to banks as at 31/12/2011 amounted to €48 thousand. 

Item 3.3.3 “Other loans - other” consists mainly of mortgages, cheques drawn on third parties 

and pooled financing. 

289

6.2 Loans to banks: assets subject to specific hedging 


1. Loans subject to fair value specific hedge: 

a) interest rate risk 31,143 - 




2. Loans subject to cash flow specific hedge: 

a) interest rate - - 

b) exchange rate - - 

c) expected transactions 

d) other - - 

Total 31,143 - 

Loans to banks subject to specific hedges relate to a single without recourse sale in foreign 

currency, which matures in April 2012. 

6.3 Finance leases 

Duration 

deteriorated 

exposures 

quota of principal 

minimum payments 

of which secured 

remaining amou nt 

quota of interest 

gross investment 

of wh ich un secured 

remaining amount 

on demand - - - - - - 

up to 3 months - 17 - 1 18 - 

between 3 months and 1 year - 52 - 1 53 - 

from 1 year to 5 years - 29 - - 29 - 

more than 5 years - - - - - - 

indeterminate maturity - - - - - - 

total gross value - 98 - 2 100 - 

SECTION 7 Loans to customers – Item 70 

7.1 Loans to customers: composition by type 

31/12/2011 

31/12/2010 

Type of transaction/Amounts 

Performing Deteriorated Performing Deteriorated 

1. Current accounts 11,755,970 1,151,331 12,656,534 1,067,391 

2. Reverse repurchase agreements 923,859 - 323,597 - 

3. Long term loans 53,065,825 3,172,375 51,431,308 2,512,658 

4. Credit cards, personal loans and salary backed loans 5,320,840 206,948 6,200,764 144,009 

5. Finance leases 7,948,943 937,571 8,821,521 769,279 

6. Factoring 3,137,443 62,427 2,971,751 16,946 

7. Other transactions 11,048,930 748,232 14,097,107 749,846 

8. Debt instruments 208,076 1,000 51,118 1,000 

8.1 Structured instruments 8,893 - 3,409 - 

8.2 Other debt instruments 199,183 1,000 47,709 1,000 

Total (carrying amount) 93,409,886 6,279,884 96,553,700 5,261,129 

Total (fair value) 96,393,361 6,240,636 98,756,310 5,260,108 

On the basis of Bank of Italy instructions, since 31 st December 2009 deteriorated assets have 

included loans that have been past due and/or in arrears for more than 90 days backed by 

property mortgages, which amounted to €171.3 million. 

Reverse repurchase agreements amounting to €0.9 million were performed with Cassa di 

Compensazione e Garanzia (a central counterparty clearing house). 

Other transactions included a security deposit with the Cassa di Compensazione e Garanzia 

amounting to €458 million. 

Table 3: 107000O|1 - NOTA2_ASS 

290

7.2 Loans to customers: composition by debtors/issuers 

Type o f trans actio n/Amo unts 

31/12/2011 31/12/2010 

Performing Deteriorated Performing Deteriorated 

1. Debt instruments 208,076 1,000 51,118 1,000 

a) Governments - - - - 

b) Other public authorities 7,637 - 8,026 - 

c) Other issuers 200,439 1,000 43,092 1,000 

- non-financial companies 1,256 - 5,524 - 

- financial companies 199,183 1,000 37,568 1,000 

- ins urance co mpanies - - - - 

- o ther - - - - 

2. Financing to 93,201,810 6,278,884 96,502,582 5,260,129 

a) Governments 180,989 - 91,716 1 

b) Other public authorities 869,391 18,857 1,001,685 2,323 

c) Other 92,151,430 6,260,027 95,409,181 5,257,805 

- non-financial companies 52,452,519 4,506,570 55,995,639 3,958,314 

- financial companies 4,418,276 94,053 4,981,460 68,283 

- insurance companies 134,419 197 124,449 112 

- o ther 35,146,216 1,659,207 34,307,633 1,231,096 

Total 93,409,886 6,279,884 96,553,700 5,261,129 

7.3 Loans to customers: assets subject to specific hedging 


1. Loans subject to fair value specific hedge: 

a) interest rate risk 640,551 370,600 




2. Loans subject to cash flow specific hedge: 

a) interest rate risk - - 


c) other - - 

Total 640,551 370,600 

7.4 Finance leases 

Duration 

deteriorated 

exposures 

minimum payments 

quota of principal 

of which secured 


quota of interest 

gross investment 

of which 

unsecured 


on demand 83,293 341,649 - - - - 

up to 3 months 10,597 274,581 14,634 78,243 352,824 

between 3 months and 1 year 29,746 772,030 50,294 219,315 991,345 

from 1 year to 5 years 129,418 2,634,726 261,331 839,489 3,474,215 

more than 5 years 279,447 3,701,878 832,828 871,521 4,573,399 

indeterminate maturity 405,070 224,079 - - 224,079 - 

total 937,571 7,948,943 1,159,087 2,008,568 9,615,862 - 

Net loans to customers for finance leases, net of intercompany eliminations, totalled 

€8,886,514 thousand of which €937,571 thousand were “deteriorated assets” and €143,394 

thousand “assets transferred not derecognised”. 

The lending portfolio for the finance leases of UBI leasing consisted of 73,971 contracts, 

composed as follows: 

- 71 % property sector; 

- 14 % machinery and equipment sector; 

- 7 % energy sector; 

291

- 5 % auto sector; 

- 3 % aeronautical sector. 

The ten largest exposures had a total remaining value of €261,615,988. 

Indexing of €67,909 thousand was recognised during the year on lease instalments relating to 

floating rate contracts. 

SECTION 8 Hedging derivatives – Item 80 

8.1 Hedging derivatives: composition by type of contract and underlying assets 

Type of derivative/Underlying 

31/12/2011 31/12/2010 

assets 

L 1 L 2 L 3 Total 

NOMINAL 

L 1 L 2 L 3 Total 

NOMINAL 

AMOUNT 

AMOUNT 

A) Financial derivatives - 1,090,498 - 1,090,498 27,975,915 - 591,127 - 591,127 19,718,767 

1) Fair value - 1,010,954 1,010,954 26,887,383 - 560,918 560,918 19,117,091 

2) Cash flow - 79,544 - 79,544 1,088,532 - 30,209 - 30,209 601,676 

3) Foreign investments - - - - - - - - - - 

B) Credit derivatives - - - - - - - - - - 

1) Fair value - - - - - - - - - - 

2) Cash flow - - - - - - - - - - 

Total - 1,090,498 - 1,090,498 27,975,915 - 591,127 - 591,127 19,718,767 

8.2 Hedging Derivatives: composition by portfolios hedged and type of hedge 

Fair Value 

Cash flow 

Trans actio ns /Type o f 

hedging 

Interes t rate 

ris k 

C urre nc y 

ris k 

S pe c ific Macro -hedge Specific Macro -hedge 

Credit risk 

Price risk 

Multiple 

ris ks 

Foreign 

inve s tme nts 

1. Availa ble -fo r-s a le financ ia l 

409 - - - - X - X X 

a s s e ts 

2. Loans and receivables - - - X - X - X X 

3. Held-to -maturity 

X - - X - X - X X 

inve s tm e nts 

4. P o rtfo lio X X X X X - X - X 

5. Other trans actio ns - - - - - X - X - 

Total assets 409 - - - - - - - - 

1. F ina ncia l lia bilitie s 1,010,545 - - X - X 79,544 X X 

2. P o rtfo lio X X X X X - X - X 

To tal liabilitie s 1,010,545 - - - - - 79,544 - - 

1. Expected transactions X X X X X X - X X 

2. P o rtfo lio o f financia l a s s e ts 

X X X X X - X - - 

a nd lia bilitie s 

292

SECTION 9 Fair value change in hedged financial assets – Item 90 

9.1 Fair value change in hedged assets: composition by portfolios hedged 

Fair value change in hedged assets/Group components 31/12/2011 31/12/2010 

1. Positive changes 

1.1 of specific portfolios: 704,869 429,073 

a) loan s 704,869 429,073 

b) available-for-sale assets - - 

1.2 general - - 

2. Negative changes 

2.1 of specific portfolios - - 

a) loan s - - 

b) available-for-sale assets - - 

2.2 general - - 

Total 704,869 429,073 

09000O|1 - NOTA 

9.2 Assets of the banking group subject to interest rate risk macro hedge: composition 

Hedged assets 31/12/2011 31/12/2010 

1. Loans 7,383,359 12,523,038 

2. Available-for-sale assets - - 

3. Portfolio - - 

Total 7,383,359 12,523,038 

293

SECTION 10 Equity investments – Item 100 

10.1 Equity investments in companies subject to joint control (accounted for using the 

equity method) and in companies subject to significant influence: information on 

investments 

Details of investment 

Name Headquarters Type of ownership 

% of votes 

Investing company 

% held 

B. Companies 

1. Arca SGR Spa Milan Significant influence 

UBI Banca Scpa 23.124% 

25.000% 


2. Aviva Assicurazioni Vita Spa Milan Significant influence UBI Banca Scpa 49.999% 49.999% 

3. Aviva Vita Spa Milan Significant influence UBI Banca Scpa 50.000% 50.000% 

4. Capital Money Spa Milan Significant influence UBI Banca Scpa 20.671% 20.671% 

5. Polis Fondi SGR Milan Significant influence UBI Banca Scpa 19.600% 19.600% 

6. Lombarda China Fund Management Co. Shenzen (China) Significant influence UBI Banca Scpa 49.000% 49.000% 

7. Lombarda Vita Spa Brescia Significant influence UBI Banca Scpa 40.000% 40.000% 

8. Prisma Srl Milan Significant influence UBI Banca Scpa 20.000% 20.000% 

9. SF Consulting Srl Mantua Significant influence UBI Banca Scpa 35.000% 35.000% 

10. Sider Factor Spa Milan Significant influence UBI Factor Spa 27.000% 27.000% 

11. Sofipo Fiduciarie Sa Lugano (Svizzera) Significant influence Banque de Depots et de Gestion Sa 30.000% 30.000% 

12. SPF Studio Progetti Finanziari Srl Rome Significant influence Banca Popolare di Ancona Spa 25.000% 25.000% 

13. By You Spa Milan Significant influence UBI Banca Scpa 10.000% 20.000% 

14. UBI Assicurazioni Spa Milan Significant influence UBI Banca Scpa 49.999% 49.999% 

15. UFI Servizi Srl Rome Significant influence Prestitalia Spa 23.167% 23.167% 

The balance sheet as at 31 st December 2011 includes equity-accounted investees only. 

The larger equity investments were subjected to impairment testing, in some cases using the 

average of the multiples of a sample of comparable companies, while in other cases the 

dividend discount model method was employed. 

Greater information is given here on the market values relating to the more significant equity 

investments recognised in the consolidated financial statements of the UBI Banca Group. 

Furthermore, the market value for the insurance companies Aviva Assicurazioni Vita Spa, 

Aviva Vita Spa and Lombarda Vita Spa was calculated on the basis of a sample of companies 

quoted on active European stock markets considering the multiple price/book value (P/BV) 

adjusted for non controlling interests and for intangible assets. The source for the amounts 

used was Bloomberg. The equity value was compared with the carrying amount of the equity 

investments in the consolidated financial statements. 

- Aviva Vita Assicurazioni Spa – the equity attributable to the Parent, amounting to €51.1 

million, inclusive of 2011 profit for the year and also of a positive consolidation difference 

amounting to €2.6 million, compared to an equity value (pro rata) of €86.1 million; 

- Aviva Vita Assicurazioni Spa – the equity attributable to the Parent amounted to €102.3 

million, inclusive of 2011 profit for the year, compared to an equity value (pro rata) of 

€162.7 million; 

- Lombarda Vita Spa – the equity attributable to the Parent, amounting to €121.7 million, 

inclusive of 2011 profit for the year and a positive consolidation difference amounting to 

€29.4 million, compared to an equity value (pro rata) of €160.0 million. 

The equity attributable to the Parent for UBI Assicurazioni Spa amounted to €37.3 million, 

inclusive of the profit for the year and a positive consolidation difference of €5.6 million, 

compared to an equity value (pro rata) of €72.9 million, calculated on the base of a 

development of the dividend discount model financial method, based on financial projections 

for the company over the period 2012-2014 and applying a solvency ratio of 125% of the 

required margin and a long-term growth rate of 2%. 

The equity attributable to the Parent for Arca SGR Spa amounted to €28 million, inclusive of 

profit for the year, compared to an equity value (pro rata) of €36.1 million, consistent with a 

liquidation value determined by the Board of Directors of Arca SGR for the purposes of the 

exercise of the right of withdrawal pursuant to Art. 2437 of Italian Civil Code, as described in 

Section 4 Part A of the notes to the financial statements. 

294

For further details “Part A. Accounting policies – Section 3 – Consolidation scope and 

methods” of this report may be consulted. 

10.2 Equity investments in companies subject to joint control and in companies subject 

to significant influence: accounting information 

Name Total assets Total revenues Profit (Loss) Equity 

Consolidated 

carrying 

amount 

A. Equity accounted investees 

1. Arca SGR Spa 162,675 159,539 (3,748) 104,704 27,964 

2. Aviva Assicurazioni Vita Spa 2,096,641 261,200 (4,500) 96,988 51,104 

3. Aviva Vita Spa 4,132,700 656,600 13,100 204,683 102,392 

4. Capital Money Spa 7,981 11,264 35 3,650 1,572 

5. Lombarda China Fund Management Co. 14,544 8,755 (1,471) 12,524 6,137 

6. Lombarda Vita Spa 5,293,856 1,086,305 11,268 230,810 121,690 

7. Prisma Srl 1,264 1,025 41 198 32 

8. SF Consulting Srl 7,916 8,554 151 707 247 

9. Sider Factor Spa 47,847 2,552 763 4,121 1,113 

10. Sofipo Fiduciarie Sa 3,023 763 (99) 2,513 754 

11. SPF Studio Progetti e Servizi Finanziari Srl 988 1,039 - 140 37 

12. UBI Assicurazioni Spa 644,733 196,974 6,490 63,331 37,258 

13. UFI Servizi Srl 464 347 - 163 39 

14. Polis Fondi SGR Spa 12,883 6,102 817 8,892 1,743 

15. By You Spa 12,734 40,674 1,976 3,068 901 

TOTAL 12,440,249 2,441,693 24,823 736,492 352,983 

The fair value is not given because they are investments in companies that are not listed on 

active markets. 

295

10.3 Annual changes in equity investments 

31/12/2011 31/12/2010 

A Opening balances 368,894 413,943 

B Increases 53,869 34,868 

B.1 Purchases 36,000 13,988 

B.2 Reversals of impairment losses - - 

B.3 Revaluations - - 

B.4 Other changes 17,869 20,880 

C Decreases (69,780) (79,917) 

C.1 Sales - (36,812) 

C.2 Impairment losses - - 

C.3 Other changes (69,780) (43,105) 

D Final balances 352,983 368,894 

E Total revaluations - - 

F Total impairment losses - - 

The amount recognised on line B.1 “Purchases” represents increases in the share capital 

subscribed and paid up by the Parent for Lombarda Vita S.p.A. amounting to €16 million and 

for Aviva Vita S.p.A. amounting to €20 million. 

The amount recognised on line B.4 “Other changes” consists of the following: 

‐ an amount of €3,726 thousand of which €132 thousand for positive exchange rate 

differences and €2,649 thousand due to the change from proportionate consolidation to 

equity method accounting for the companies Polis Fondi SGR S.p.A. and By You S.p.A. 

and other changes in reserves amounting to €934 thousands of euro; 

‐ total profit for the period of €14,143 thousand. In detail: 

o Aviva Vita Spa €5,950 thousand 

o Lombarda Vita Spa €4,507 thousand 

o UBI Assicurazioni Spa €3,245 thousand 

The amount recognised on line C.3 “Other changes” consists of the following: 

‐ dividends of €1,335 thousand; 

‐ total losses for the period of €4,196 thousand, of which €2,388 thousand relating to 

Aviva Vita Assicurazioni SpA, €1,086 thousand to Arca SGR Spa and €721 thousand to 

Lombarda China Fund Management Co.; 

‐ other decreases of €64,248 thousand relating almost totally to changes in the fair value 

reserves of Lombarda Vita Spa amounting to €58,068 thousand and to UBI 

Assicurazioni Spa amounting to €4,674 thousand. 

10.4 Commitments relating to equity investments in subsidiaries 

Commitments relating to the possible exercise of options 

Banca Popolare Commercio e Industria/Banca Carime/Banca Popolare di Ancona – banc 

assurance agreement with the Aviva Group: this agreement between UBI Banca and Aviva 

involves three call options granted to UBI on equity investments in banks (BPCI, Carime and 

Popolare di Ancona) for which the trigger events are connected with the performance of the 

joint-venture or the termination of the distribution agreement or the exclusive distribution 

condition. If UBI fails to exercise the call options, Aviva will have the right from 30 th September 

296

2016 (from 1 st January 2020 in the case of the investment in Popolare di Ancona), to exercise 

a put option on the same investments at a price equal to the fair value at the time of exercise. 

10.5 Commitments relating to equity investments in companies subject to joint control 

Commitments connected with the possible payment of further tranches of the price 

Nothing to report. 

10.6 Commitments relating to equity investments in companies subject to significant 

influence 

Commitments relating to the possible exercise of options 

Lombarda Vita Spa: as part of the renewal of life banc assurance agreements with the 

Cattolica Assicurazioni Group concluded on 30 th September 2010, the options on the 

respective investments in the Lombarda Vita joint venture were reformulated with purchase 

options only, exercisable on the basis of the occurrence of predetermined conditions. 

Lombarda China Fund Management Company: the partnership agreement signed between 

UBI Banca and Goudu Securities Banca Ltd in the asset management sector, focused on the 

Chinese market, involves a series of intersecting put and call options which can be exercised if 

determined trigger events occur concerning the respective investment held in Lombarda China 

Fund Management. 

Recapitalisation commitments 

Aviva Vita Spa: on 13 th February 2012, a shareholders meeting of Aviva Vita passed a 

resolution to increase the share capital by a total of €15 million (€7.5 million attributable to 

UBI Banca), in order to provide a more adequate solvency margin, which could be eroded by 

possible fluctuations in the prices of government securities held in portfolio. It granted the 

Board of Directors a mandate to request the payment if the solvency margin should fall below 

the stability threshold of 120%. 

297

SECTION 11 Technical reserves of reinsurers – Item 110 

No items of this type exist. 

SECTION 12 Property, equipment and investment property – Item 120 

12.1 Property, equipment and investment property: composition of assets measured at 

cost 

Assets/amounts 31/12/2011 31/12/2010 

A. Assets used in operations 

1.1 owned 1,822,888 1,891,547 

a) land 875,524 884,296 

b) buildings 774,081 814,977 

c) furnishings 45,265 50,393 

d) electronic equipment 56,909 62,646 

e) other 71,109 79,235 

1.2 acquired through finance leases 40,127 44,075 

a) land 20,914 22,123 

b) buildings 19,143 21,518 

c) furnishings - 203 

d) electronic equipment - 113 

e) other 70 118 

Total A 1,863,015 1,935,622 

B. Assets held for investment 

2.1 owned 182,520 177,042 

a) land 109,843 103,864 

b) buildings 72,677 73,178 

2.2 acquired through finance leases - - 

a) land - - 

b) buildings - - 

Total B 182,520 177,042 

Total (A+B) 2,045,535 2,112,664 

12.2 Property, equipment and investment property: composition of the assets at fair 

value or revalued 

No property, equipment and investment property at fair value are held. 

298

12.3 Property, equipment and investment property used in operations: annual changes 

Land Buildings Furnishings 

Electronic 

equipment 

Other 

Total 

A. Gross opening balances 1,026,280 1,403,926 200,891 416,108 382,371 3,429,576 

A.1 Total net reductions in value (119,861) (567,431) (150,295) (353,349) (303,018) (1,493,954) 

A.2 Net opening balances 906,419 836,495 50,596 62,759 79,353 1,935,622 

B. Increases 1,771 10,148 4,925 24,220 16,337 57,401 

B.1 Pu rchases 8 3,920 4,825 23,940 16,235 48,928 

B.2 Capitalised improvement expenses - 4,060 - - - 4,060 

B.3 Reversal of impairment losses - - - - - - 

B.4 Positive changes in fair value recognised in: - - - - - - 

a) equity - - - - - - 

b) income statement - - - - - - 

B.5 Positive exchange rate differences - - - - - - 

B.6 Transfers from properties held for investment 1 23 - - - 24 

B.7 Other changes 1,762 2,145 100 280 102 4,389 

- business combinations - - - - - - 

- other changes 1,762 2,145 100 280 102 4,389 

C. Decreases (11,752) (53,419) (10,256) (30,070) (24,511) (130,008) 

C.1 Sales (2,650) (2,566) (55) (40) (93) (5,404) 

C.2 Depreciation - (42,895) (9,870) (29,663) (24,015) (106,443) 

C.3 Impairment losses recognised in: - - - - - - 

a) equity - - - - - - 


C.4 Negative changes in fair value - - - - - - 

a) equity - - - - - - 


C.5 Negative exchange rate differences - - - - - - 

C.6 Transfers to: (8,739) (7,694) - - - (16,433) 

a) tangible assets held for investment (5,102) (4,408) - - - (9,510) 

b) assets held for sale (3,637) (3,286) - - - (6,923) 

C.7 Other changes (363) (264) (331) (367) (403) (1,728) 

- business combinations - - - - - - 

- other changes (363) (264) (331) (367) (403) (1,728) 

D. Final net balances 896,438 793,224 45,265 56,909 71,179 1,863,015 

D.1 Total net reductions in value (17,904) (481,050) (104,650) (304,351) (215,511) (1,123,466) 

D.2 Final gross balances 914,342 1,274,274 149,915 361,260 286,690 2,986,481 

12.4 Annual changes in tangible assets held for investment 

Total 

Land 

Buildings 

A. Opening balances 103,864 73,178 

B. Increases 9,121 6,230 

B.1 Purchases 64 - 

B.2 Capitalised improvement expenses - 107 

B.3 Positive changes in fair value - - 

B.4 Reversals of impairment losses - - 

B.5 Positive exchange rate differences 5,102 4,408 

B.6 Transfers from properties used in operations 3,955 1,715 

B.7 Other changes - - 

C. Decreases (3,142) (6,731) 

C.1 Sales (2,126) (2,132) 

C.2 Depreciation - (4,445) 

C.3 Negative changes in fair value - - 

C.4 Impairment losses - - 

C.5 Negative exchange rate differences - - 

C.6 Transfers to other asset portfolios (1) (23) 

a) properties for use in operations - - 

b) non current assets held for disposal - 

C.7 Other changes (1,015) (131) 

D. Final balances 109,843 72,677 

E. F air value 138,125 131,096 

Since land and buildings are recognised at cost, the Parent arranged for expert external 

appraisers to estimate the fair value of all property assets for the purposes of the annual 

impairment test on the carrying amounts. 

The estimate was based on generally accepted valuation principles, by applying the following 

valuation criteria: 

the direct comparative or market method, based on a comparison between the asset in 

question and other similar assets subject to sale or currently on sale on the same market 

or competing markets; 

the income method, based on the present value of potential market incomes for a property, 

obtained by capitalising the income at a market rate. 

299

These valuation methods were performed individually and the values obtained were 

appropriately averaged 

The appraisals performed basically confirmed the appropriateness of the carrying amounts. 

300

12.5 Commitments for the purchase of property, equipment and investment property 

Assets/amounts 31/12/2011 31/12/2010 

A. Assets used in operations 

1.1 owned 1,506 9,558 

- land - - 

- buildings 1,191 1,959 

- furnishings 21 222 

- electronic equipment - 3,710 

- other 294 3,667 

1.2 Finance lease - - 

- land - - 

- buildings - - 

- furnishings - - 

- electronic equipment - - 

- other - - 

Total A 1,506 9,558 

B. Assets held for investment 

2.1 owned - 633 

- land - - 

- buildings - 633 

2.2 Finance lease - - 

- land - - 

- buildings - - 

Total B - 633 

Total (A+B) 1,506 10,191 

SECTION 13 Intangible assets – Item 130 

13.1 Intangible assets: composition by type of asset 

Assets/amounts 

31/12/2011 31/12/2010 


Indefinite useful 

life 



life 

A.1 Goodwill X 2,538,668 X 4,416,660 

A.2 Other intangible assets 448,964 37 1,058,688 37 

A.2.1 Assets measured at cost: 448,964 37 1,058,688 37 

a) Internally generated intangible assets 249 - 409 - 

b) Other assets 448,715 37 1,058,279 37 

A.2.2 Assets at fair value: - - - - 

a) Internally generated intangible assets - - - - 

b) Other assets - - - - 

Total 448,964 2,538,705 1,058,688 4,416,697 

301

Details of the item “Goodwill” are given below. 


31.12.2011 31.12.2010 changes 

UBI Banca Scpa - 521,245 ( 521,245) 

Banco di Brescia Spa 671,960 1,267,763 ( 595,803) 

Banca Carime Spa 649,240 812,454 ( 163,214) 

Banca Popolare di Ancona Spa 249,049 249,049 - 

Banca Popolare Commercio e Industria Spa 209,258 232,543 ( 23,285) 

Banca Regionale Europea Spa 173,785 309,121 ( 135,336) 

UBI Pramerica SGR Spa 170,284 205,489 ( 35,205) 

Banco di San Giorgio Spa 133,404 155,265 ( 21,861) 

Banca Popolare di Bergamo Spa 100,045 100,044 1 

IW Bank Spa 65,846 65,846 - 

Banca di Valle Camonica Spa 43,224 103,621 ( 60,397) 

Prestitalia Spa 24,895 24,895 - 

UBI Factor Spa 20,554 61,491 ( 40,937) 

UBI Banca Private Investment Spa 20,189 20,189 - 

InvestNet International Sa 2,719 2,719 - 

UBI Sistemi e Servizi SCpA 2,122 2,122 - 

UBI Insurance Broker Srl 2,094 2,094 - 

UBI Leasing Spa - 160,337 ( 160,337) 

B@nca 24-7 Spa - 71,132 ( 71,132) 

Centrobanca Spa - 17,785 ( 17,785) 

UBI Banca International Sa - 15,080 ( 15,080) 

UBI Management Company Sa - 9,155 ( 9,155) 

Twice Sim Spa - - - 

By You Spa - 3,459 ( 3,459) 

UBI Fiduciaria Spa - 2,052 ( 2,052) 

CB Invest Spa - - - 

UBI G estio ni Fidu ciarie Sim Spa - 778 ( 778) 

Sintesi Mutui Srl - 685 ( 685) 

Solimm Spa - 172 ( 172) 

Capitalgest Alternative Investments SGR Spa - - - 

Gestioni Lombarda (Suisse) Sa - - - 

Barberini Sa - - - 

Other goodwill - 75 ( 75) 

TOTAL 2,538,668 4,416,660 ( 1,877,992) 

In compliance with IAS 36, an impairment test is performed at the end of each year (or more 

frequently if evidence exists from an analysis of internal or external circumstances that might 

give rise to doubts that the value of the assets can be recovered). 

The result of the impairment test as at 31 st December 2011 determined a total impairment loss 

on goodwill of €1,873,849 thousand. Details are given in the income statement table 18.1 “Net 

impairment losses on goodwill: composition”. Furthermore, following the disposal of almost all 

the shares held (with the consequent exclusion of the companies from the consolidation), the 

goodwill of the BY You Group and of Sintesi Mutui amounting to €4,143 thousand was 

derecognised. 

“Other finite useful life intangible assets” amounting to €448,964 thousand were comprised 

mainly of the following: 

“brands” totalling €126,038 thousand arising from the purchase price allocation 

performed on 1 st April 2007 following the merger of the BPU Banca and Banca 

Lombarda banking groups. That amount relates to the value of the brands of the banks 

302

in the former Banca Lombarda Group subject to amortisation since 2010 (residual life 

of 18 years). The amortisation for the year amounted to €18,770 thousand. The result 

of the impairment test was an impairment loss of €193,053 thousand. Net of ordinary 

amortisation and of impairment losses, the value of the brands of the single banks was 

as follows: 

Banco di Brescia Spa 

Banca Regionale Europea Spa 

Banca di Valle Camonica Spa 

Banco di San Giorgio Spa 

TOTAL 

€90,475 thousand 





 

 

 

 

“core deposits”, intangible assets associated with customer relationships totalling 

€41,221 thousand. These assets arose from the purchase price allocation already 

mentioned and from that relating to Banco di S. Giorgio Spa following its acquisition, 

at the beginning of 2009, of operations consisting of 13 branches from Banca Intesa 

San Paolo Spa. In view of their close dependence on customer relationships, they are 

by definition finite useful life assets and are subject to systematic amortisation 

according to a schedule that takes account of the probability of current accounts being 

closed. Amortisation for the year totalled €29,107 thousand. On the basis of the results 

of the impairment test performed at the end of year, an impairment loss of €241,679 

thousand was recognised on core deposits; 

“asset management business” consisting both of the actual management and the 

relative distribution activities totalled €62,323 thousand. These assets are amortised 

over the useful remaining life of the customer relationships. The amortisation for the 

year was €14,437 thousand while the impairment loss recognised as a result of the 

impairment test was €88,248 thousand; 

“assets under custody” business totalled €48,949 thousand with total amortisation in 

2011 of €5,148 thousand; 

the remaining balance consists almost exclusively of software, allocated mainly to 

UBISS scpa, the UBI Group service company. 

Finally, the renegotiation of distribution agreements with By You resulted in changes in 

the cash flows that will be generated from that distribution channel. As a result of these, 

impairment losses of €19.5 million were recognised as at 30 th June 2011 on the intangible 

assets previously recognised in the separate financial statements of the Parent. These 

intangible assets amounted to €21 million as at 31 st December 2010. 

303

13.2 Annual changes in intangible assets 

Goodwill 

Other intangible assets: internally 

generated 



life 

Other intangible assets: other 



life 

Balances as at 

31/12/2011 

A Opening gross balances 4,605,452 4,358 - 1,331,716 37 5,941,563 

A.1 Total net reductions in value ( 188,792) ( 3,949) - ( 273,437) - ( 466,178) 

A.2 Net opening balances 4,416,660 409 - 1,058,279 37 5,475,385 

B. Increases - - - 64,503 - 64,503 

B.1 Purchases - - - 64,502 - 64,502 

B.2 Increases in intangible internal assets X - - - - - 

B.3 Reversal of impairment losses X - - - - - 

B.4 Positive changes in fair value - - - - - - 

- in equity X - - - - - 

- in the income statement X - - - - - 

B.5 Positive exchange rate differences - - - - - - 

B.6 Other changes - - - 1 - 1 

C. Decreases ( 1,877,992) ( 160) - ( 674,067) - ( 2,552,219) 

C.1 Sales ( 4,143) - - - - ( 4,143) 

C.2 Impairment losses ( 1,873,849) ( 160) - ( 672,448) - ( 2,546,457) 

- Amortisation X ( 160) - ( 125,765) - ( 125,925) 

- Impairment losses ( 1,873,849) - - ( 546,683) - ( 2,420,532) 

+ equity X - - - - - 

+ income statement ( 1,873,849) - - ( 546,683) - ( 2,420,532) 

C.3 Negative changes in fair value - - - - 

- in equity X - - - - - 

- in the income statement X - - - - - 

C.4 Transfers to non current assets held for sale. - - - - - - 

C.5 Negative exchange rate differences - - - - - - 

C.6 Other changes - - - ( 1,619) - ( 1,619) 

D. Final net balances 2,538,668 249 - 448,715 37 2,987,669 

D.1 Total net impairment losses ( 180,528) ( 4,109) - ( 857,107) - ( 1,041,744) 

E. Final gross balances 2,719,196 4,358 - 1,305,822 37 4,029,413 

F. Value at cost - - - - - - 

13.3 Other information 

Software 

The useful life of software considered for the purposes of amortisation is three years. 

Contracted commitments to purchase intangible assets amounted to €17,667 thousand for the 

acquisition of software. 

Impairment tests on goodwill 

Frequency 

The carrying amount for goodwill is tested systematically, at least annually, for impairment as 

described in Part A.2 of the notes to the financial statements. In 2011, goodwill was tested for 

impairment both as at 30 th June 2011, following the approval of the 2011-2015 Business Plan, 

and as at 31 st December 2011. 

Impairment procedure and cash flows used for the test 

The impairment test was conducted with the assistance of an outside expert of high standing 

on the basis of a procedure which was approved (prior to the examination of the financial 

statements) by the Management Board on 21 st February 2012 and submitted to the 

Supervisory Board on 7 th March 2012. The Management Board considered it prudent not to 

use the figures for the 2011-2015 Business Plan, approved in May 2011 and used for the 

impairment test performed as at 30 th June 2011, because the assumptions underlying that 

plan had been formulated in an environment prior to the rapid deterioration of financial and 

conditions that occurred in the second half of 2011, which led to the following: a general rise 

in spreads, the closure of some conventional financial markets and a compression of interest 

rates together with competitive pressures on normal funding. This was then added to with 

intervention by the EBA, which issued a recommendation on 8 th December 2011 concerning 

the capital of banks, designed to strengthen their capital position through the constitution of 

304

an exceptional and temporary capital buffer. The capital buffer, which must lead to a core tier 

one ratio of 9% for banks by the end of June 2012, is having repercussions on the growth of 

lending by banks. 

While the basic strategy behind the 2011 – 2015 Business Plan remains firmly in place, in the 

current context it no longer seemed to be a logical predictor of expected average cash flows. 

Therefore the 2012 budget approved by the competent bodies in February 2012 was used for 

measurement purposes, together with 2013 – 2016 projections based on the best estimates 

made by management and on the current market context. The budget and the projections 

were formulated by first assessing the following factors: 

a) an examination of the differences between the 2011 budget figures and the actual 

figures; 

b) examination of the reliability of the projections made by comparing them with 

inputs from external sources (consensus macroeconomic forecasts, consensus 

forecasts made by equity analysts), with emphasis placed on those referred to for 

impairment testing purposes in IAS 36 (§ 33 letter a)); 

c) verification of the consistency between the implied risk in discount rates and the 

implementation risk of the plan; 

d) growth rate assumptions, never greater than the expected long-term inflation rate 

of 2%. 

The projections are based on the following assumptions: 

a) a moderate growth rate for the world economy, technical recession in the euro area and 

a more significant contraction for Italian GDP in terms of magnitude and duration; 

b) the implementation of unconventional monetary policies by the ECB; 

c) estimated short-term interest rates (Euribor one month) below 1% until 2013, then 

rising to higher levels, but still below 3% in 2016. The magnitude of the rise in rates 

will ensure a progressive return to normality for markups and markdowns, although 

still below historical levels observed before the crisis; 

d) a flat scenario for projections of growth in direct funding and lending in which a ratio 

of lending to funding nevertheless reappears which favours the latter; 

e) projections for operating expenses basically unchanged compared to 2011; 

f) a cost of risk falling progressively from 2011 levels, but still remaining higher than 

those forecast in the 2011 - 2015 Business Plan; 

g) a partial reopening of institutional markets with funding possible on that channel from 

2013. 

CGU 

The impairment test was conducted on single legal entities to which the goodwill was allocated 

(the cash generating units - CGUs) and on the consolidated financial statements as a whole 

(second level impairment test). In the cases of those CGUs which were not wholly owned, the 

goodwill was re-calculated on a notional basis for the purposes of the test, including also the 

goodwill attributable to non controlling interests (not recognised in the consolidated financial 

statements) by a process of “grossing up” (i.e. goodwill attributable to the Parent/percentage 

interest held), in accordance with example No. 7 in IAS 36. 

Value measurement 

The value measurement used to calculate the recoverable amount of the CGUs was that of the 

value in use or the fair value if the value in use was lower than the carrying amount. In fact in 

the current year the recoverable amount for those CGUs operating in the commercial and 

corporate banking sectors was the value in use, because the criterion which was based on 

305

comparable transactions for corporate assets consisting of branches, was no longer considered 

useable because the market, at least for transactions concerning small business units or 

transactions between related parties, had become inactive. 

The discounted cash flow criterion was used to estimate the value in use. This considers the 

value of each CGU as the result of the sum of the following: 

1) the present value of the cash flows forecast over the period for which the projections 

were made (2012 – 2016) discounted at a rate that expresses the risk for those flows 

(the opportunity cost of the equity); and 

2) the present value of the cash flows that can be generated beyond the explicit forecast 

period, obtained by capitalising the cash flow for the last year of the forecast (2016) at 

a rate that results from the difference between the opportunity cost of the equity and 

the expected long-term growth rate for the cash flows. 

Discount rates 

The discount rates were estimated using the same method as that used in previous 

impairment tests, in compliance with IAS 36 and with the “Guidelines for impairment tests on 

goodwill in contexts of financial and real crisis” issued by the Organismo Italiano di 

Valutazione (OIV – Italian Valuation Body). 

The estimate of the opportunity cost of equity as at 31.12.2011, net of the growth rate for 

income assumed for the estimate of the terminal value was 9.45%, 1.45% higher than the 

percentage assumed for impairment testing purposes in the previous year (8%). That increase, 

which affected the reduction in value recorded for all CGUs the year before, was attributable 

entirely to the increase in country risk: the one year average of daily yields to maturity on ten 

year Italian instruments rose from 4.0% as at 31.12.2010 to 5.3% as at 31.12.2011, an 

increase of 1.3%. For the purposes of estimating the opportunity cost of equity we report the 

following: 

a) a capital asset pricing model was used; 

b) in accordance with IAS 36 § A18, the estimate of the cost of equity includes 

country risk, which was incorporated into the estimate of the equity risk premium 

– assumed to be 6% – and in the beta. These estimates were assumed in 

compliance with the recommendations of the OIV guidelines mentioned (reported 

in § LG35 b); 

c) the specific yield to maturity of the interbank rate for each year of the forecast was 

assumed as the risk free rate. The current yield curve requires the present value of 

short term cash flows to be discounted at a short-term rate and long term cash 

flows to be discounted with long term rates. This is to avoid discounting short-term 

cash flows based on short-term rates and an excessively high rate. In this respect 

appendix A of IAS 36 specifies the use of the term structure of interest rates (§ 

A21, IAS 36); 

d) the risk free rate used to estimate the cost of equity is consistent with future 

interest rates forecast by management and assumed for the estimate of future cash 

flows used in the measurement. The risk free rate assumed in the terminal value 

was the yield to maturity on the ten year interest rate swap, which was 3.11%. 

That rate, although higher, is in line with the estimate of the future long-term rate 

forecast by UBI Banca management; 

e) for the network banks and for the Group as a whole (second level impairment test), 

the method used to estimate the beta was the same as that used in previous years. 

That beta is based on the historical volatility over one year of the UBI banca share 

linked to the benchmark volatility of the Stoxx 600 European market index. The 

beta estimate assumed was 1.39x and it was compared with beta estimates 

calculated on the basis of historical returns for the share and the market over two 

306

years (beta = 1.29x) and five years (1.03x). Since all three of these estimates were 

equally significant statistically, the choice of that beta measurement, which is the 

most conservative, was made not only on the basis of the principle of prudence, 

but also on that of the following factors: i) continuity with the method used in 

previous years, ii) the greater ability of this estimate to express more recent trends 

in terms of both country risk and risk in the banking sector and finally iii) 

alignment of the estimate with that obtainable on the basis of more recent 

volatilities implied in options on the UBI Banca share, on the Stoxx 600 and on the 

Eurex market; 

f) for the other companies, the beta (comprised within a range of between 0.99x and 

1.39x) was estimated using the same method as that used in the previous year, on 

the basis of the returns for comparable European companies. The beta estimated 

includes the share of country risk, not already incorporated in the equity risk 

premium; 

g) the following were assumed for the purposes of estimating the rate of capitalisation 

of income for the calculation of the terminal value: growth rates aligned with future 

inflation of 2% for the network banks and similar companies in terms of business 

risk; growth rates of a fundamental nature, i.e. calculated on the basis of profit 

retention and expected income assumed for the terminal value for the other 

companies. 

The table below shows the opportunity cost of equity for different CGUs. 

CGU 

Initial discount 

rate net of taxes 

Final discount 

rate net of taxes 

Banche Rete, Centrobanca, UBI 

International, UBI Private 8.93% 11.45% 2.00% 

Investment 

IW Bank 6.55% 9.07% 2.00% 

Prestitalia 6.86% 9.38% 1.89% 

B@nca 24-7 6.86% 9.38% 0.47% 

UBI Leasing / UBI Factor 7.89% 10.41% 0.00% 

UBI Pramerica 8.41% 10.91% 0.00% 

Nominal growth 

rate in income for 

the calculation of 

the terminal value 

The following is reported with regard to the opportunity cost of equity estimated in the 

terminal value for the network banks and the entire Group: 

a) the estimate of 11.45% is in line with the consensus estimate of 11.50% made by the 

financial market analysts who follow the UBI Banca share; 

b) if an alternative method was used to estimate the opportunity cost of equity (which 

incorporated country risk in the risk free rate only), then an estimate for the cost of equity 

would have been obtained in line with the measurement assumed of 11.45%. More 

specifically, if the approach suggested in letter a) of the OIV guidelines given in § LG35 

were followed, then an estimate of the risk free rate of 5.3%, an equity risk premium of 5% 

and a beta of 1.25x (calculated on the basis of daily yields over one year for the share and 

the Ftse Italy All Share market index), would give an opportunity cost of equity of 11.55%. 

307

Second level impairment test 

Because the UBI Group presents costs that were not allocated to single CGUs, a second level 

impairment test was performed on the Group as a whole in accordance with sections 101 and 

103 of IAS 36 (and illustrative example 8 of IAS 36). The second level impairment test 

compared the total recoverable amount for UBI Banca with the consolidated equity of the 


Impairment test results 

As a consequence of the above, the impairment tests performed on the single CGUs resulted in 

the need to recognise total impairment losses on goodwill of €1,873,849 thousand (of which 

€126.3 million already recognised as at 30 th June 2011), with €1,410,721 thousand allocated 

to the network banks and €463,128 thousand to the other Group member companies. 

Impairment tests on finite useful life intangible assets 

Finite useful life assets are subject to systematic amortisation over the estimated useful life of 

the asset. As described in Part A.2 of the notes to the financial statements, at the end of each 

financial period, tests are also performed for impairment losses resulting from differences 

between the carrying amount and the recoverable amount for the assets. 

Following changes in the macroeconomic and financial environment, the results of that test 

resulted in the recognition of impairment losses on all finite useful life intangible assets, 

except for those attaching to assets under custody business and software. 

To complete the information, for all the intangible assets subjected to impairment testing, the 

analyses performed on the remaining economic lives as at 31.12.2011 found no requirements 

to reduce them. 

Details are given below on finite useful life intangible assets subjected to impairment tests, 

while, as already reported, the intangible assets resulting from the By You distribution 

agreements were entirely written down by €19.5 million as at 30 th June 2011 as described in 

the previous section 13.1. 

Brand names 

Impairment was recognised on the brand name because the total estimated value of the UBI 

brand name made by independent experts, and on which the previous measurements used for 

impairment testing were based, was revised downwards below the level of annual amortisation 

charge for it. 

The impairment test on the value of the brand name was based on public independent 

estimates of the value of the UBI brand. Those estimates were linked to the network banks of 

the former Banca Lombarda e Piemontese, for which the brand names were identified among 

the intangible assets when the purchase price allocation was performed. 

The analysis, based on the multiple “value of the brand/pre-tax income” implied in the 

independent estimate by the public source already mentioned, resulted in a total impairment 

loss of €193,053 thousand. 

Core Deposits 

The assets attaching to core deposits were tested for impairment because of continuing flat 

curves for interest rates, which reduced the profits on these assets due to the low markdowns 

on them. 

The value of core deposit goodwill was estimated for impairment test purposes on the basis of 

the present value of the income from these assets over their residual useful life. 

The estimate of the value was based on the following assumptions: 

a remaining useful life of the core deposit goodwill, equal to the life of the purchase 

price allocation (PPA) adjusted for the time elapsing between the date of the PPA 

(1.4.2007) and the measurement date (31.12.2011). This was performed once it had 

308

een verified that the overall rate of loss on assets that occurred between the date of 

the PPA and 31.12.2011 was lower than or equal to the rate of amortisation; 

the total amount of the deposits as at 31.12.2011 consisting of the customers deposits 

of the network banks existing as at 31.12.2011 on the basis of the PPA perimeter; 

the forecasts for markdowns and commissions on current accounts are those implied 

in the 2012 budget assumptions and in the 2013 – 2016 forecasts for each network 

bank to which the intangible assets attaching to the core deposits were allocated. 

These forecasts are the same as those used to estimate the recoverable amount of the 

goodwill; 

operating expenses are consistent with forecasts of the cost:income ratio for the 

network bank to which the core deposits relate for the period 2012 – 2016; 

the opportunity cost of equity is the same as that used to test the goodwill of the 

network banks recognised in the consolidated financial statements for impairment. 

The value of the core deposit goodwill assets was less than the respective carrying amounts, 

which resulted in the need to recognise a total impairment loss of €241,679 thousand. 

For Banca Popolare di Bergamo and Banca Popolare Commercio & Industria, the core deposit 

goodwill allocated resulted from an operation to streamline the branch network geographically 

because contributions of operations had been made consisting of the branches of the former 

Banca Lombarda e Piemontese (Banco di Brescia and Banca Regionale Europea). 

Assets under management 

Intangible assets attaching to asset management business were tested for impairment because 

of reduced profits on this business triggered by general falls in prices on both equity and bond 

markets. 

The same procedure used for testing core deposit goodwill for impairment was employed for 

these intangible assets. The following was therefore performed: 

- the remaining useful life of the assets as at 31.12.2011 was verified; 

- the value of the intangible assets attaching to asset management business was estimated 

using: 

 

 

the remaining useful life estimated as at 31.12.2011 (equal to the weighted average 

life estimated for the PPA adjusted for the time elapsed); 

the total assets under management as at 31.12.2011 acquired at the time of the PPA 

(including insurance funding); 

income from those assets under managment consistent with 2012 budget 

assumptions and 2013 – 2016 forecasts; 

 

an opportunity cost of equity the same as that used to test the goodwill of the network 

banks recognised in the consolidated financial statements for impairment. 

The estimate of the total intangible assets in question was less than the respective carrying 

amount, which therefore resulted in the need to recognise a total impairment loss of €88,248 

thousand. 

To complete the information a sensitivity analysis was performed to identify, for those CGUs 

not subject to impairment, the variation in key variables that would render the recoverable 

amount equal to the carrying amounts in the consolidated financial statements. 

The table below gives the maximum tolerable increase in the cost of equity and the cost of risk 

for each of the above CGUs in order for the recoverable amount to equal the carrying amount 

and therefore for an impairment loss to be recognised. 

309

Cash Generating Unit Increase in the cost of equity Increase in the cost of risk 

Banca Popolare di Ancona 0.41% 0.055% 

Banca Popolare di Bergamo 16.0% 1.269% 

Prestitalia 3.4% 0.683% 

UBI Banca Private Investment 0.25% 0.061% 

IW Bank 0.477% 0.217% 

The analysis reported shows that in the case of the network bank CGUs, the lowest margin of 

tolerance regarded the CGU Banca Popolare of Ancona, for which an increase of 0.055% in the 

cost of risk would bring the recoverable amount into line with the carrying amount. 

As concerns the GCUs operating in non banking financial sectors, the table shows that for the 

UBI Banca Lombarda Private Investment, a rise in the cost of equity of 0.25% or in the cost of 

risk of 0.061% would make the recoverable amount equal to the carrying amount. 

The table below gives a summary of impairment losses on intangible assets as at 31/12/2011: 

(amounts in euro) 

Banco di Brescia B.R.E B. Valle Cam. B. S. Giorgio B.P.C.I. B.P.B UBI Pramerica Total 

Core Deposits 135,135,000.00 51,621,000.00 12,430,000.00 7,599,000.00 28,408,000.00 6,486,000.00 241,679,000.00 

Taxes -44,034,631.64 -16,821,043.55 -4,050,397.54 -2,476,184.30 -9,256,934.29 -2,113,505.91 -78,752,697.23 

Non-controlling interests -8,719,575.57 -1,427,926.22 -958,713.10 -4,773,044.66 -15,879,259.55 

Net core deposits 91,100,368.36 26,080,380.88 6,951,676.25 4,164,102.59 14,378,021.05 4,372,494.09 147,047,043.22 

AUM 14,030,000.00 10,808,000.00 602,000.00 5,465,000.00 61,000.00 57,282,000.00 88,248,000.00 

Taxes -4,571,768.10 -3,521,858.13 -196,165.67 -1,780,806.32 -19,877.25 -18,665,717.76 -28,756,193.24 

Non-controlling interests -1,825,636.33 -75,950.16 -918,216.31 -13,515,703.14 -16,335,505.94 

Net AUM 9,458,231.90 5,460,505.54 329,884.16 2,765,977.37 41,122.75 25,100,579.10 43,156,300.82 

Brand names 105,912,000.00 63,138,000.00 16,873,000.00 7,130,000.00 193,053,000.00 

Taxes -35,109,828.00 -20,930,247.00 -5,593,399.50 -2,363,595.00 -63,997,069.50 

Non-controlling interests -10,575,694.03 -1,922,100.40 -892,012.36 -13,389,806.80 

Net brand names 70,802,172.00 31,632,058.97 9,357,500.10 3,874,392.64 115,666,123.70 

Total Gross 255,077,000.00 125,567,000.00 29,303,000.00 15,331,000.00 33,873,000.00 6,547,000.00 57,282,000.00 522,980,000.00 

Total Taxes -83,716,227.74 -41,273,148.68 -9,643,797.04 -5,035,944.98 -11,037,740.61 -2,133,383.16 -18,665,717.76 -171,505,959.97 

Total non-controlling interests -21,120,905.93 -3,350,026.62 -1,926,675.63 -5,691,260.98 -13,515,703.14 -45,604,572.29 

Net Total 171,360,772.26 63,172,945.39 16,309,176.34 8,368,379.40 17,143,998.41 4,413,616.84 25,100,579.10 305,869,467.74 

310

SECTION 14 Tax assets and tax liabilities – Asset item 140 and Liability 

item 80 

14.1 Deferred tax assets: composition 

31/12/2011 31/12/2010 

Balancing entry in the income statement 1,831,151 885,951 

Balancing entry in equity 527,437 187,103 

Total 2,358,588 1,073,054 

for the following reasons: 

- impairment loss on loans to banks and customers and unsecured guarantees not deducted 516,236 443,311 

- losses 2,165 - 

- post-employment benefits 7,285 8,841 

- maintenance expenses 1,924 1,972 

- application of IFRS (amortised cost in particular) 85,110 84,468 

- advance depreciation and amortisation 8,705 8,045 

- property, equipment and investment property 33,584 36,127 

- personnel expense 19,591 16,353 

- entertainment expenses 11 134 

- provisions for risks and charges not deducted 63,535 56,251 

- sales price adjustments, long term costs and non-recurring transactions 5,291 2,305 

- intangible assets and goodwill 1,085,288 227,549 

- fair value change in securities and equity investments 514,943 167,299 

- impairment losses on properties 149 962 

- purchase price allocation of bonds 10 194 

- revaluation of hedged subordinated liabilities - 46 

- non-recurring expenses not deducted 1,011 629 

- cash flow hedges 1,617 295 

- other 12,133 18,273 

14.2 Deferred tax liabilities: composition 

31/12/2011 31/12/2010 

Balancing entry in the income statement 145,418 188,200 

Balancing entry in equity 173,244 363,756 

Total 318,662 551,956 

O|1 - NOTA 

14.3 Changes in deferred tax assets (balancing entry in the income statement) 

31/12/2011 31/12/2010 

1. Opening balance 885,951 802,142 

2. Increases 1,091,400 196,861 

2.1 Deferred tax assets arising during the year 1,058,319 182,823 

a) relating to previous years 6,950 5,633 

b) due to changes in accounting policies - - 

c) reversals of impairment losses 6 - 

d) other 1,051,363 177,190 

2.2 New taxes or increases in tax rates 10,081 - 

2.3 Other increases 23,000 14,038 

3. Decreases (146,200) (113,052) 

3.1 Deferred tax assets derecognised during the year (132,905) (110,369) 

a) reversals of temporary differences (107,248) (110,009) 

b) impairment losses on non-recoverable items (25,657) (360) 

c) due to changes in accounting policies - - 

d) other - - 

3.2 Reductions in tax rates - - 

3.3 Other decreases (13,295) (2,683) 

Final amount 1,831,151 885,951 

Deferred tax assets are recognised on the basis of the probability of there being sufficient 

future taxable income and also taking into account the consolidated tax regime adopted in 

accordance with articles 117 et seq of Presidential Decree No. 917/86. 

311

No deferred tax assets were recognised for impairment losses on equity investments which 

satisfied the requirements for participation exemption. 

The rates generally used for calculating deferred tax assets for IRES (corporation tax) and IRAP 

(local production tax) purposes are 27.50% and 5.57%. 

The difference between the “increases” and the “decreases” of “deferred tax assets” recognised 

in the income statement does not correspond to the item “change in deferred tax assets”, 

reported in table 20.1 of the income statement section “Taxes on income for the year from 

continuing operations“ amounting to approximately €17,801 thousand. An amount of 

approximately €16,049 thousand (recognised within item 2.3 “Other increases”) represents the 

deferred IRES tax relating to the debt for the health policy which arose against an entry 

recognised in equity in past years and which was recognised in the income statement in 2011, 

as a result of the new trade union agreement signed in September 2011 by the Parent and 

some network banks, which removes the obligation on them to contribute to the cost of the 

policy for retired personnel. 

The appreciable increase in deferred tax assets is due primarily because the Parent took 

advantage of an option to realign tax accounts with statutory accounts relating to goodwill and 

other intangible assets recognised independently in the consolidated financial statements, in 

accordance with paragraphs 12 to 15 of article 23 of Decree Law No. 98 of 6 th July 2011. The 

deductibility of the tax amortisation on the amount subject to this tax relief (€3,285.3 million) 

at constant rates over ten years from 2013 was obtained in return for payment of a substitute 

tax of 16% amounting to €525.6 million. As a consequence deferred tax assets of €903.4 

million were recognised. 

The amount recognised within item 3.1 b) “impairment losses on non-recoverable items” 

relates to deferred tax assets already recognised by the Parent for IRAP purposes in the 2010 

Annual Report, for which the reasons for the initial recognition were no longer valid due to 

expectations of losses for taxable income for IRAP purposes in subsequent years. 

14.4 Changes in deferred tax liabilities (balancing entry in the income statement) 

31/12/2011 31/12/2010 


2. Increases 39,666 38,480 

2.1 Deferred tax liabilities arising during the year 37,850 32,329 

a) relating to previous years 3,702 869 


c) other 34,148 31,460 

2.2 New taxes or increases in tax rates 800 445 

2.3 Other increases 1,016 5,706 

3. Decreases (82,448) (69,549) 

3.1 Deferred tax liabilities derecognised during the year (74,079) (66,034) 



c) other (4,019) (217) 


3.3 Other decreases (8,369) (3,515) 

4. Final balance 145,418 188,200 

14040O|1 - 

NOTA 

Deferred tax liabilities were recognised on the basis of temporary differences between the 

financial accounting value of an asset or liability and its value for tax purposes. That 

recognition was made on the basis of the tax legislation in force. 

No deferred taxes were recognised on untaxed reserves, because no events occurred to remove 

the tax exemption regime. 

The difference between the “increases” and the “decreases” of the “deferred tax liabilities” 

recognised in the income statement does not correspond to the item “change in deferred tax 

liabilities”, reported in table 20.1 of the income statement section “Taxes on income for the 

year from continuing operations“ amounting to approximately €810 thousand. An amount of 

approximately €936 thousand relates to deferred IRES tax, recognised by the Parent relating 

312

to the debt for the health policy which arose against an entry recognised in equity in past 

years and which was charged to the income statement in 2011, as a result of the new trade 

union agreement already mentioned, signed in September 2011. 

“Other decreases” within item 3.3 include €4,704 thousand relating to the Parent for deferred 

IRAP tax liabilities recognised in prior years, for which the reasons for the original recognition 

are no longer valid. 

14.5 Changes in deferred tax assets (balancing entry in equity) 

31/12/2011 31/12/2010 

1. Opening bal ance 187,103 33,610 

2. Increases 386,259 161,061 

2.1 Deferred tax assets arising during the year 385,192 149,610 

a) relating to previous years - 9,515 


c) other 385,192 140,095 

2.2 New taxes or increases in tax rates 908 - 

2.3 Other increases 159 11,451 

3. Decreases (45,925) (7,568) 

3.1 Deferred tax assets derecognised during the year (7,164) (7,434) 


b) impairment losses on non-recoverable items (16) - 

c) due to changes in accounting policies - - 


3.3 Other decreases (38,761) (134) 

4. Final bal ance 527,437 187,103 

14.6 Changes in deferred tax liabilities (with balancing entry in equity) 

31/12/2011 

31/12/2010 


2. Increases 30,779 10,913 

2.1 Deferred tax liabilities arising during the year 19,810 7,823 

a) relating to previous years 3 5,185 


c) other 19,807 2,638 

2.2 New taxes or increases in tax rates 10,820 2 

2.3 Other increases 149 3,088 

3. Decreases (221,291) (79,758) 

3.1 Deferred tax liabilities derecognised during the year (217,088) (79,734) 



c) other (408) (5,314) 


3.3 Other decreases (4,203) (24) 

4. Final balance 173,244 363,756 

313


The tables above contain the aggregate figures giving all the information on the single 

companies and banks fully consolidated line-by-line. Tables 14.3 “Changes in deferred tax 

assets (balancing entry in the income statement)” and 14.4 “Changes in deferred tax liabilities 

(balancing entry in the income statement)” recorded movements due to the consolidation 

entries which determined changes in the consolidated profit. 

Finally taxes of €2,882 thousand in respect of dividends that will be paid by subsidiaries in 

2011 have been recognised within deferred tax liabilities with the balancing entry in the 

income statement (€6,490 thousand as at 31 st December 2010). 

314

SECTION 15 Non-current assets and liabilities and groups of assets and 

the associated liabilities held for disposal – Asset item 150 and Liability 

item 90 

15.1 Non-current assets and disposal groups held for sale: composition by type of asset 

31/12/2011 31/12/2010 

A. Single assets 

A.1 Financial assets 12,750 - 

A.2 Equity investments - - 

A.3 Property, equipment and investment property 9,270 6,023 

A.4 Intangible assets - 2,406 

A.5 Other non-current assets - - 

Total A 22,020 8,429 

B. Groups of assets (discontinued operating units) 

B.1 Financial assets held for trading - - 

B.2 Financial assets at fair value - - 

B.3 Available-for-sale financial assets - - 

B.4 Held-to-maturity investments - - 

B.5 Loans to banks - - 

B.6 Loans to customers - - 

B.7 Equity investments - - 

B.8 Property, equipment and investment property - - 

B.9 Intangible assets - - 

B.10 Other assets - - 

Total B - - 

C. Liabil ities associated w ith non-current assets hel d 

for disposal. 

C.1 Borrow ings - - 

C.2 Securities - - 

C.3 Other liabilities - - 

Total C - - 

D. Liabil ities associated w ith activities under disposal 

D.1 Due to banks - - 

D.2 Due to customers - - 

D.3 Securities issued - - 

D.4 Financial liabilities held for trading - - 

D.5 Financial liabilities at fair value - - 

D.6 Provisions - - 

D.7 Other liabilities - - 

Total D - - 

315



15.3 Information on equity investments in companies subject to significant influence 

not accounted for using the equity method 


SECTION 16 Other assets - Item 160 

16.1 Other assets: composition 

Description/Amo unts 31/12/2011 31/12/2010 

Consolidation adjustments - - 

Tax credits relating to prior years and related interest 2,827 3,794 

VAT tax credits and payments on account 2,254 4,491 

Credits for withholding taxes paid on behalf of third parties 11,723 6,931 

Payments on account for stamp duty on banking documents and deeds 160,578 111,813 

Tax credits for personal income tax and post-employment benefits on account 389 450 

Withholding tax on merger losses - - 

Tax credits on withholding tax 2,972 2,508 

Items in transit 177,709 264,565 

Debtor items in transit not yet posted to destination accounts 335,092 124,695 

Bills, securities, coupons and fees to be debited to customers and correspondents 92,187 155,603 

Cheques drawn on the bank 3,676 23 

Improvements to third party leased assets 39,516 42,883 

Accrued income not attributed to specific items 11,409 10,529 

Prepaid expenses not attributed to specific items 90,534 102,404 

Sundry debtor items 1,313,477 342,200 

Total 2,244,343 1,172,889 

316

LIABILITIES 

SECTION 1 Due to banks – Item 10 

1.1 Amounts due to banks: composition by type 

Description/Amounts 31/12/2011 31/12/2010 

1. Due to central banks 6,001,500 2,219,152 

2. Due to banks 3,770,781 3,164,825 

2.1 1. Current accounts and deposits 896,512 692,788 

2.2 Term deposits 778,119 1,199,455 

2.3 Financing 1,881,780 1,149,003 

2.3.1 Repurchase agreements 1,007,037 290,737 

2.3.2 Other 874,743 858,266 

2.4 Amounts due for commitments to repurchase own equity instruments - - 

2.5 Other payables 214,370 123,579 

Total 9,772,281 5,383,977 

Fair value 9,769,928 5,375,821 

ab 

Item 1, “Due to central banks”, includes an amount of €6 billion relating to finance received 

from the ECB. 

Term deposits include deposits of €569 million from the EIB. 

The item “Financing – other” includes outstanding transactions with the EIB amounting to 


ella 1: 

1.2 Details of the item 10 “Due to banks”: subordinated liabilities 

No subordinated liabilities due to banks have been recognised. 

1.3 Details of the item 10 “Due to banks”: structured debts 

No structured debts due to banks have been recognised. 

1.4 Amounts due to banks subject to specific hedge 


1. Liabilities subject to fair value specific hedge: 165,866 170,058 

a) interest rate risk 165,866 170,058 


c) multiple risks - - 

2. Liabilities subject to specific cash flow hedge: - - 

a) interest rate risk - - 


c) other - - 

Total 165,866 170,058 

1.5 Amounts due for finance leases 

No amounts due to banks for finance leases have been recognised. 

317

SECTION 2 Due to customers – Item 20 

2.1 Amounts due to customers: composition by type 


1. Current accounts and deposits 46,065,651 45,209,037 

2. Term deposits 1,396,835 1,341,501 

3. Financing 6,022,955 11,152,853 

3.1 repurchase agreements 5,568,351 11,011,766 

3.2 other 454,604 141,087 

4. Amounts due for commitments to repurchase own equity instruments - - 

5. Other payables 945,850 962,766 

Total 54,431,291 58,666,157 

Fair value 54,431,314 58,666,278 

Financial liabilities for repurchase agreements include a transaction with the Cassa di 

Compensazione e Garanzia (central counterparty clearing) amounting to €4.6 billion. 

Tabel 

2.2 Details of item 20 “Due to customers”: subordinated liabilities 

No subordinated liabilities due to customers have been recognised. 

2.3 Details of item 20 “Due to customers”: structured debts 

No structured debts due to customers have been recognised. 

2.4 Amounts due to customers subject to specific hedge 

No amounts due to customers subject to specific hedge have been recognised. 

Tabella 2: 202030O|1 - NOTA 

2.5 Amounts due for finance leases 

Amounts due to customers for finance leases totalled €217 thousand. Details of these are as 

follows: 

Counterparty Total amount Contract expires 

Amount for final 

purchase 

ABF Leasing Spa 837 13/02/2012 217 

The total amount relates to a property contract signed by UBI Banca Scpa. 

The remaining life of the above debt is as follows: 

Remaining life UBI contracts UBI Leasing contracts Total 

up to 3 months 217 - 217 

between 3 months and 1 year - - - 

from 1 ye ar to 5 years - - - 

more than 5 years - - - 

total 217 - 217 

318

SECTION 3 Securities issued – Item 30 

3.1 Securities issued: composition by type 

31/12/2011 31/12/2010 

Type of securities / 

Fair Value 

Fair Value 

Amounts 

Carrying 

Carrying 

Amount Level 1 Level 2 Level 3 Amount Level 1 Level 2 Level 3 

A. Securities 

1. bonds 44,429,027 19,040,937 18,480,913 4,180,132 42,880,256 16,007,731 21,430,817 5,070,534 

1.1 structured 8,193,086 1,358,001 6,161,199 239,665 7,750,255 1,473,636 5,164,983 959,907 

1.2 other 36,235,941 17,682,936 12,319,714 3,940,467 35,130,001 14,534,095 16,265,834 4,110,627 

2. other securities 3,948,336 - 3,731,633 218,802 5,213,632 - 5,766,494 200,352 

2.1 structured 

2.2 other 3,948,336 3,731,633 218,802 5,213,632 5,766,494 200,352 

Total 48,377,363 19,040,937 22,212,546 4,398,934 48,093,888 16,007,731 27,197,311 5,270,886 

Structured bonds listed on an active market (Level 1) include a convertible bond issued on 10 th 

July 2009 by the Parent for €653.8 million, inclusive of amounts accrued. 

At the end of the year bonds issued in relation to covered bond operations amounted to €5.8 

billion (the carrying amount inclusive of the fair value delta hedge amounting €318.4 million 

was €6.1 billion). 

Bond issues consisting of issues on the EMTN market totalled €10.3 billion. 

3.2 Details of item 30 “Securities issued”: subordinated securities 

Description/Amount 31/12/2011 31/12/2010 

Subordinated securities issued 4,825,306 4,177,319 

319

Details of item A.1 “Subordinated securities” are also given. 

ISSUER 

TYPE OF ISSUE 

COUPON 

MATURITY 

DATE 

EARLY REDEMPTION 

CLAUSE 

NOMINAL 

AMOUNT 

IAS AMOUNT 

31.12.2011 

BPB CAPITAL TRUST 

2001/perpetual - mixed rate - Currency euro ISIN Until 14-2-2011 fixed rate at 8.364%; from 15-2-2011 variable 

1 perpetual (*) 

227,436 229,649 

XS0123998394 

rate Euribor 3M + 5.94%. 

TIER ONE CAPITAL 

BANCA LOMBARDA PREFERRED 

SECURITIES TRUST 

Innovative equity instruments 

2 

2000/perpetual - mixed rate - Currency euro ISIN 

XS0108805564 

Until 9-3-2010 fixed rate of 8.17%; from 10-3-2010 to 9-3-2011 

variable rate Euribor 3M + 3.375%; from 10-3-2011 variable rate 

Euribor 3M + 5.94%. 

perpetual (*) 124,636 125,143 

BPCI CAPITAL TRUST 

3 

4 

5 

6 

2001/perpetual - mixed rate - Currency euro ISIN 

XS0131512450 

2011/2018 - mixed rate ISIN IT0004767742 - 

Currency euro Listed on MOT (electronic bond 

market) 

2010/2017 - fixed rate ISIN IT0004645963 - Currency 

euro Listed on MOT (electronic bond market) 

2004/2014 - variable rate ISIN IT0003754949 - 

Currency euro 

Until 26-6-2011 fixed rate of 9.00%; from 27-6-2011 variable rate 

Euribor 3M + 5,94%. 

Quarterly fixed rate 6.25% until 2014 and subsequently variable 

Euribor 3M +1%. 

Half year fixed rate 4.30%. 5-11-2017 

Half year Euribor 6M + 0.125% for years 1-5; Euribor 6M + 

0.725% for years 6-10. 

perpetual (*) 

18-11-2018 

Redemption by 

repayment schedule at 

constant annual rates 

from 5-11-2013 

101,388 

221,598 

101,929 

219,055 

400,000 397,740 

23-12-2014 110,068 109,105 

7 


Currency euro 

Half year Euribor 6M + 0.125% for years 1-5; Euribor 6M + 

0.725% for years 6-10. 

22-10-2014 

137,059 136,248 

8 

9 



market) 

Quarterly Euribor 3M + 0.85%. 28-11-2015 

2006/2018 - variable rate EMTN ISIN XS0272418590 - Quarterly Euribor 3M + 0.50% for years 1-7; Euribor 3M + 1.10% 

Currency euro 

for years 8-12. 

Redemption by fixed 

rate annual amortisation 

schedule from 28-11- 

2011 

479,519 474,739 

30-10-2018 Call 30-10-2013 211,650 211,988 

10 



market) 





2012 

211,992 209,976 

UNIONE DI BANCHE ITALIANE 

Ordinary subordinated bond issues 

(Lower Tier 2) 

11 

2009/2019 - mixed rate ISIN IT0004457070 Currency 

euro - Listed on MOT (electronic bond market) 

Half year fixed rate 4.15% until 2014; subsequently variable 

Euribor 6M + 1.85%. 

13-3-2019 13-3-2014 370,000 383,886 

TIER TWO CAPITAL 

12 



market) 





2012 

156,837 154,915 

13 

2009/2019 - mixed rate ISIN IT0004497050 Currency 


Half year fixed rate 4% until 2014; subsequently variable Euribor 

6M + 1.85%. 

30-6-2019 30-6-2014 365,000 370,940 

14 

15 

16 

17 

2010/2017 - fixed rate ISIN IT0004572878 Currency 




market) 





Half year fixed rate 3.10%. 23-2-2017 

Half year variable rate Euribor 6M + 0.40% 23-2-2017 

Half year fixed rate 5.50%. 16.6.2018 

Half year fixed rate 5.40% 30-6-2018 




2013 




2013 




2014 




2014 

300,000 309,378 

152,587 151,473 

400,000 412,217 

400,000 412,473 

BANCA POPOLARE DI 

BERGAMO 

Hybrid capitalisation instruments 

(Upper Tier 2) 

18 


Currency euro - Listed on MOT (electronic bond 

market) 

Quarterly Euribor 3M + 0.80% 18-6-2012 No provision 250,000 

250,191 

BANCA CARIME 

Hybrid capitalisation instruments 

(Upper Tier 2) 

19 

2002/2012 - fixed rate 6% ISIN IT0003302863 - 

Currency euro 

Half yearly fixed rate 6% 25-6-2012 

No provision 164,000 164,261 

TOTAL 

4,783,770 4,825,306 

(*) Subsequent to the early redemption dates, securities are called every 3 months. 

320

3.3 Securities issued subject to specific hedge 

31/12/2011 31/12/2010 

1. Securities subject to specific fair value hedge: 29,575,882 25,945,089 

a) interest rate risk 29,573,877 25,943,029 

b) currency risk 

c) multiple risks 2,005 2,060 

2. Securities subject to specific cash flow hedge: 1,128,268 766,343 

a) interest rate risk 

b) currency risk 1,128,268 766,343 

c) other 

A 

Greater use of bond issues and the performance of interest rates led to a corresponding 

increase in positions subject to fair value hedging on interest rates, as reported in section 5.1 

of the part on the income statement. The net result of fair value changes in hedging contracts 

and the underlying securities issued, generated income of €23.5 milion, recognised within item 

90 of the income statement – “Net hedging income”. 

321

SECTION 4 Financial liabilities held for trading – Item 40 

4.1 Financial liabilities held for trading: composition by type 

Type of transaction / Group items NOMINAL 

31/12/2011 

FAIR VALUE 

FAIR NOMINAL 

31/12/2010 

FAIR VALUE 

FAIR 

AMOUNT L1 L2 L3 VALUE* AMOUNT L1 L2 L3 VALUE* 

A. On-balance sheet liabilities 

1. Due to banks 325,000 335,123 - - 335,123 111,500 110,657 - - 110,657 

2. Due to customers 105,000 102,778 - - 102,778 299,500 298,605 - - 298,605 

3. Debt instruments - - - - - - - - - - 

3.1 Bonds - - - - - - - - - - 

3.1.1 Structured - - - - X - - - - X 

3.1.2 Other bonds - - - - X - - - - X 

3.2 Other s ecurities - - - - - - - - - - 

3.2.1 Structured - - - - X - - - - X 

3.2.2 Other - - - - X - - - - X 

Total A 430,000 437,901 - - 43 7,901 411,000 409,262 - - 4 09,262 


1. Financial derivatives 187 625,585 - 1,191 543,970 - 

1.1 For trading X 187 624,184 - X X 1,191 529,034 - X 

1.2 Connec ted with fair value options X - - - X X - - - X 

1.3 Other X - 1,401 - X X - 14,936 - X 

2. Credit derivatives - - - - - - 

2.1 For trading X - - - X X - - - X 

2.2 Connec ted with fair value options X - - - X X - - - X 

2.3 other X - - - X X - - - X 

Total B X 187 6 25,585 - X X 1,191 543,970 - X 

Total (A+B) X 438,088 6 25,585 - X X 410,453 543,970 - X 

Items 1, “Due to banks”, and 2, “Due to customers”, relate to outstanding uncovered short positions of which €210 million with Italian 

government securities as the underlying and €228 million with government securities of other European countries as the underlying. 

Key 

FV = fair value 

FV* = Fair value calculated excluding changes in value resulting from a change in the credit rating of the issuer since the date of issue 

NA = nominal or notional amount 

L = listed 

UL = unlisted 

bella 3: 

322

4.2 Details of item 40 “Financial liabilities held for trading”: subordinated liabilities 

No subordinated financial liabilities held for trading have been recognised. 

4.3 Details of item 40 “Financial liabilities held for trading”: structured debt 

No structured debt financial liabilities held for trading have been recognised. 

4.4 Financial liabilities held for trading (excluding “uncovered short positions”): annual 

changes 

No financial liabilities held for trading have been recognised. 

SECTION 5 Financial liabilities held at fair value – Item 50 

The UBI Group has not applied the option under IFRS to designate financial liabilities at fair value 

(fair value option). 

SECTION 6 Hedging derivatives – Item 60 

6.1 Hedging derivatives: composition by type of hedge and hierarchical level 

Type of derivative / 

Fair value 31/12/2011 Nominal 

Fair value 31/12/2010 

Nominal 

Underlying assets 

L1 L2 L3 amount L1 L2 L3 amount 

A. Financial derivatives - 1,739,685 - 17,604,196 - 1,228,056 - 24,047,341 

1) Fair value - 1,739,328 - 17,564,103 - 1,226,673 - 23,949,961 

2) Cash flow - 357 - 40,093 - 1,383 - 97,380 

3) Foreign investments - - - - - - - - 

B. Credit derivatives - - - - - - - - 

1) Fair value - - - - - - - - 

2) Cash flow - - - - - - - - 

Total - 1,739,685 - 17,604,196 - 1,228,056 - 24,047,341 

323

6.2 Hedging derivatives: composition by portfolios hedged and type of hedge 

Fair Value 

Cash flow 

Transactions /Type of hedge 

Interest rate 

risk 

Currency 

risk 

Specific 

Credit risk 

Pr ice risk 

Multiple 

risks 

Macro -hedge Sp ecific Macr o-hedge 

Foreign 

investments 

1. Available-for-sale financial assets 934,985 - - - - X - X X 

2. Loans 130 ,713 - - X - X - X X 

3. Held-to-maturity investments X - - X - X - X X 

4. Portfolio X X X X X 723 ,640 X - X 

5. Other transactions - - - - - X - X - 

Total assets 1,065, 698 - - - - 723, 640 - - - 

1. Financi al liabilities 36,922 - - X - X 357 X X 

2. Portfolio - - - - - - - - X 

Total liabilities 36, 922 - - - - - 357 - - 

1. Expected transactions X X X X X X - X X 

2. Portfolio of financial assets and liabilities X X X X X - X - - 

SECTION 7 Fair value change in macro-hedged financial liabilities – Item 70 


SECTION 8 Tax liabilities – Item 80 

Details of tax liabilities are reported in assets section 14. 

SECTION 9 Liabilities associated with assets held for disposal – Item 90 

See assets section 15 for details. 

324

SECTION 10 Other liabilities – Item 100 

10.1 Other liabilities: composition 


Balance of illiquid portfolio items 177,704 857,981 

Credit items in transit in departments or branches pending posting to accounts 291,153 134,104 

Sums available to customers and banks for transactions in the course of payment 139,587 158,461 

Items payable to tax authorities on behalf of third parties 29,488 38,999 

Items in transit 120,528 95,497 

Sums due to customers but not available due to various restrictions 50 121 

Tax withheld on income paid to third parties 129,800 123,897 

Indirect taxes payable 6,336 16,647 

Social security contributions for third parties in the course of payment 1,944 2,143 

Dividends and sums due to shareholders 286 363 

Amounts due to staff pension funds, inclusive of accessory costs 13,620 7,937 

Accrued expenses not attributed to specific items 62,320 43,271 

Deferred income not attributed to specific items 145,097 167,377 

Payables for educational, cultural, charitable and social purposes 11,220 13,356 

Debt for post-employment benefit/welfare schemes 12,707 19,322 

Doubtful overall outcomes on guarantees granted and commitments 62,252 48,221 

Due to personnel 89,500 179,761 

Residual creditor items 1,846,024 692,707 

Total 3,139,616 2,600,165 

210000O|1 - NOTA 

SECTION 11 Post-employment benefits – Item 110 

11.1 Annual changes in post-employment benefits 

31/12/2011 31/12/2010 


B. Increases 20,702 30,226 

B.1 Allocation for the year 3,955 7,039 


C. Decreases (19,840) (51,335) 

C.1 Payments made (17,528) (46,564) 

C.2 Other changes (2,312) (4,771) 


325


The demographic and actuarial assumptions adopted to value the post-employment benefit provision and leaving 

entitlements as at 31/12/2011 

Mortality rate 

The “RGS48” tables (prepared by the State General Accounting Office) were used 

appropriately modified on the basis of historical data for the Group. 

Post-employment benefit The probability of advance payments, calculated on the basis of historical data for the 

advances 

Group, is 2% while the average amount requested is between 45% and 100% of the 

available provision. 

Inflation rates Long term forecasts of the scenario for inflation led to the use of a rate of 2%. 


A discount rate of 3.957%, was used, calculated as the weighted average of the EUR 

Composite A curve as at 31.12.2011, using, as weights, the ratios between the amount paid 

and advanced for each maturity date and the total amount to be paid and advanced until 

the extinction of the population considered. This was performed because IAS 19 states that 

reference should be made to the market yields of “high quality corporate bonds”, or to 

yields on securities with a low credit risk. By making reference to the definition of 

“investment grade” securities, where a security qualifies for that classification if its rating is 

equal to or higher than BBB for S&P or Baa2 for Moodys, it was decided to consider only 

securities issued by corporate issuers with a class “A” rating with the assumption that this 

class identifies an average level for “investment grade” securities and thereby excludes 

higher risk securities. Since IAS 19 makes no explicit reference to a specific market sector 

for the bonds, it was decided to opt for a “composite” market curve which therefore 

summarises the prevailing market conditions on the valuation date for securities issued by 

companies belonging to different sectors, including utilities, telephone, financial, banking 

and industrial sectors. The euro area was used for the geographical area. 

The demographic and actuarial assumptions adopted to measure the post-employment benefit as at 31/12/2010 

Mortality rate 

The “RGS48” tables (prepared by the State General Accounting Office) were used 

appropriately modified on the basis of historical data for the Group. 

Post-employment benefit The probability of advance payments, calculated on the basis of historical data for the 

advances 

Group, is 2% while the average amount requested is between 45% and 100% of the 

available provision. 

Inflation rates Long term forecasts of the scenario for inflation led to the use of a rate of 2%. 


A discount rate of 4.071%, was used, calculated as the weighted average of the EUR 

Composite A curve as at 31.12.2010, using, as weights, the ratios between the amount paid 

and advanced for each maturity date and the total amount to be paid and advanced until 

the extinction of the population considered. This was performed because IAS 19 states that 

reference should be made to the market yields of “high quality corporate bonds”, or to 

yields on securities with a low credit risk. By making reference to the definition of 

“investment grade” securities, where a security qualifies for that classification if its rating is 

equal to or higher than BBB for S&P or Baa2 for Moodys, it was decided to consider only 

securities issued by corporate issuers with a class “A” rating with the assumption that this 

class identifies an average level for “investment grade” securities and thereby excludes 

higher risk securities. Since IAS 19 makes no explicit reference to a specific market sector 

for the bonds, it was decided to opt for a “composite” market curve which therefore 

summarises the prevailing market conditions on the valuation date for securities issued by 

companies belonging to different sectors, including utilities, telephone, financial, banking 

and industrial sectors. The euro area was used for the geographical area. 

326

SECTION 12 Provisions for risks and charges – Item 120 

12.1 Provisions for risks and charges: composition 

Items/Components 31/12/2011 31/12/2010 

1. Company pension funds 76,460 68,082 

2. Other provisions for risks and charges 269,325 235,490 

2.1 litigation 108,612 113,868 

2.2 personnel expense 70,932 41,423 

2.3 other 89,781 80,199 

Total 345,785 303,572 

The provision for personnel expense consisted of 2011 provisions (and the remainder of those for 

2010) for the company bonus and ordinary incentive schemes and the provision for product 

campaigns, the renewal of the senior management national labour contract renewal and national 

and company labour contract renewals. 

12.2 Provisions for risks and charges: annual changes 

It ems/Components 

Pension funds 

Total 

Other provisions 


B. Increases 16,210 109,295 

B.1 Allocation for the year 80 103,418 

B.2 Changes due to passage of time 2,850 1,958 

B.3 Changes due to changes in discount rate - 1,117 


C. Decreases (7,832) (75,460) 

C.1 Use for the year (7,832) (51,924) 

C.2 Changes due to changes in discount rate - (205) 

C.3 Other changes - (23,331) 


12.3 Defined benefit company pension funds 

The balance in the financial statements for defined benefit company pension funds was composed 

of Banca Carime Spa funds amounting to €50,853 thousand, Banca Regionale Europea Spa funds 

amounting to €24,854 thousand and Centrobanca Spa funds amounting to €1,024 thousand. 

12.3.1 Description of the funds 

BANCA CARIME SPA 

Banca Carime SpA recognised liabilities relating to internal pension funds set aside to cover 

supplementary INPS (national insurance institute) pension obligations within liability item 120a 

“provisions for risks and charges: pension and similar obligations”. 

The liabilities in question constitute a defined benefit plan and are subject to periodic actuarial 

measurement in compliance with IAS 19 “Employee benefits”. 

The following was performed in 2011 with regard to the measurement of these liabilities: 

• the measurement methods employed were brought into line with those already in use in the 

rest of the UBI Banca Group with regard to the variables for the following: 

the discount rate curve; 

327

demographic tables; 

the characteristics of the prediction model with regard to the disbursement of the 

returns; 

• the accounting procedures employed for actuarial gains and losses 1 were aligned with those 

in use in the UBI Group which involves the recognition of these items in a special valuation 

reserve in equity instead of recognising them through profit or loss. 

The alignments described above had no impacts on profit and loss but only on the balance sheet 

as follows: 

• the restatement in a special valuation reserve against retained earnings of €8.7 million in 

relation to actuarial losses recognised through profit and loss in prior years; 

• the recognition in a separate valuation reserve against the item “Provisions for risks and 

charges: pension and similar obligations” of 2011 actuarial losses amounting to 

approximately €7.4 million. 

To complete the information, because the above amounts were not significant with respect to 

Group equity, no restatement of the comparative figures for 2010 was performed. 

Three defined benefit funds existed as at 31.12.2011 as follows: 

1. The fund to supplement I.N.P.S. (national insurance institute) benefits for compulsory 

invalidity, old age and survivors insurance for retired staff of the former Cassa di Risparmio di 

Calabria e Lucania (Reg. No. 9059 in the Pension Fund Register); 


invalidity, old age and survivors insurance for retired staff of the former Cassa di Risparmio di 

Puglia (Reg. No. 9124 in the Pension Fund Register); 


invalidity, old age and survivors insurance for retired staff of the former Cassa di Risparmio 

Salernitana (Reg. No. 9053 in the Pension Fund Register). 

The funds pay the following welfare benefits as a direct pension for: 

• old age, when the participants have reached 60 years of age if men and 55 years of age if 

women, provided that they have participated in the fund for at least 15 years; 

• length of service, at any age when the participants have participated in the fund for 35 years if 

men and 30 years if women; 

• invalidity at any age when permanently and completely unable to work through disability and 

participating in the fund (in addition, for the fund of the former Cassa di Risparmio di Puglia, the 

invalidity must be caused by work and for the fund of the former Cassa di Risparmio Salernitana, 

participation for at least five years is required). 

Furthermore, survivors of participants receive an ‘indirect pension’ if a participant dies while in 

service and a surviving dependent’s pension if a participant dies, provided a direct pension has 

been paid. 

1 In accordance with IAS 19, actuarial gains and losses represent changes in the liability which occur in the period 

generated: 

• by differences between the assumptions used in the calculation model and the actual changes in the magnitudes 

subjected to verification; 

• by changes that occur in the assumptions in the period in question. 

328

Description of the main actuarial assumptions 

The defined benefit plan funds were subjected to actuarial valuation which in the technical audit 

as at 31.12.2011 resulted in an amount for the mathematical reserve which on average, in the 

actuarial sense, will allow the pensions granted to pensioners and their surviving dependents to 

be paid. 

The valuations were performed in compliance with accounting standard IAS 19, with the 

legislation governing the relative pensions schemes and with company regulations. More 

specifically, the criterion used to calculate the liability is consistent with the projected unit credit 

method required under IAS 19. 

The following demographic assumptions were assumed: 

• for the probability of the death of pensioners, the RG48 tables prepared by the State General 

Accounting Office, separately by gender; 

• for the probability of leaving a family, those adopted in the INPS (national insurance institute) 

model for projections to 2010, separately by gender; 

• for the probability of the death of a spouse, the RG48” tables prepared by the State General 

Accounting Office, separately by gender. 

The economic and financial assumptions used in the actuarial valuation were as follows: 

Former Carical 

pension fund 

Former 

Caripuglia 

pension fund 

Former Carisal 

pension fund 

a) Discount rate* 3.83% 3.83% 3.83% 

b) Annual pension revaluation rate 1.50% 1.50% 1.50% 

c) Inflation rate 2.00% 2.00% 2.00% 

* calculated as the weighted average of the EUR Composite A interest rate curve as at 31.12.2011, using, as weights, the ratios between the amount paid 

for each maturity date and the total amount to be paid until the extinction of the population considered. 

Actuarial valuations 

The table below gives the results of the actuarial valuations performed as at 31 st December 2011 

in relation to the different groups: 

329

Changes in liabilities in 2011 for IAS 19 purposes 

Former Carical 

pension fund 

Former 

Caripuglia 

pension fund 

Former Carisal 

pension fund 

Total 

A. Opening balances 33,894 9,174 579 43,647 

B. Increases 9,944 2,495 192 12,631 

B.1 Interest expense balancing entry in the income statement 

"personnel expense" 

1,429 390 24 1,843 

B.2 Actuarial gains balancing entry in "fair value reserves" 8,515 2,105 168 10,788 

B.3 Pro visio ns - - - - 

B.4 Other changes - - - - 

C. Decreases (4,329) (1,017) (79) (5,425) 

C.1 Pension benefits paid (4,329) (1,017) (79) (5,425) 

C.2 Actuarial losses balancing entry in "fair value reserves" - - - - 

C.3 Other changes - - - - 

D. Final balances 39,509 10,652 692 50,853 

The average present value of pensions currently being paid (immediate costs) was identified as 

constituting the economic commitments of the fund as at 31 st December 2011. 

A sufficiently prudent system of financial capitalisation was adopted that is able to guarantee the 

full cover of the benefits to be paid to the group of pensioners existing as at 31 st December 2011 

with the accumulated reserves at any moment. 

CENTROBANCA SPA 

This is a supplementary pension fund in which there are now ten remaining pensioners from 

Centrobanca participating. No changes in the population of the participants has occurred since 

the previous year. 

The contribution for the 2011, as specified by the “Fund Regulations” was calculated on the basis 

of the weighted average rate used in the valuation performed 3.83%). 

Against that contribution the Bank benefited from the returns on using the assets of the fund. 

The sums in the fund are not invested in specific assets. 

Except for the amount recognised within liability item 120a), no other liabilities and/or assets 

were recognised in the financial statements of the bank 

The main actuarial assumptions on which the valuation of the fund as at 31.12.2011 was based 

are as follows: 

- demographic assumptions deduced from the RG48 mortality tables prepared by the State 

General Accounting Office, separately by gender; 

- a discount rate calculated as the weighted average of the EUR Composite A interest rate curve as 

at 31.12.2011, using, as weights, the ratios between the amount paid for each maturity date and 

the total amount to be paid until the extinction of the population considered. 

The present value of the fund, calculated on the basis of those assumptions, resulted in an 

“actuarial loss” of €159 thousand (point C.3). 

330


CENTROBANCA PENSION FUND 

A. Opening balances 909 

B. Increases 189 

B.1 Interest expense balancing entry in the income statement "personnel expense" - 

B.2 Actuarial gains balancing entry in "fair value reserves" 

B.3 Provisions 30 

B.4 Other changes 159 

C. Decreases (75) 

C.1 Pension benefits paid (75) 

C.2 Actuarial losses balancing entry in "fair value reserves" 

C.3 Other changes - 

D. Final balances 1,023 

BANCA REGIONALE EUROPEA SPA 

As at 31.12.2011 there was a fund to supplement compulsory invalidity, old age and survivors 

insurance for the staff of Banca Regionale Europea originally from the former Cassa del Monte di 

Lombardia and from the former Cassa di Risparmio di Cuneo. 

The fund pays the following welfare benefits as a direct pension for: 

• old age, when the participants have reached the age limits set in the contracts in force at the 

time, provided that they have participated in the fund for at least 15 years; 

• length of service, when the participants have reached the minimum age limits set in the 

contracts in force at the time; 

• invalidity when, having obtained acknowledgement of the condition of invalidity and whatever 

the age, a length of service of at least five years has been served, or whatever the length of service, 

if the invalidity is permanent and caused by work. 

Furthermore, survivors of participants receive an ‘indirect pension’ if a participant dies while in 

service after one year of participation in the fund or after any period if death was caused by work 

and a surviving dependent’s pension if a participant dies, provided a direct pension has been 

paid. 

Description of the main actuarial assumptions 

The defined benefit plan fund was subjected to actuarial valuation which in the technical audit as 

at 31/12/2011 resulted in an amount for the mathematical reserve which on average, in the 

actuarial sense, will allow the pensions granted to pensioners and their surviving dependents to 

be paid. 

The valuations were performed in compliance with accounting standard IAS 19, with the 

legislation governing the relative pensions schemes and with company regulations. More 

specifically, the criterion used to calculate the liability is consistent with the projected unit credit 

method required under IAS 19. 

The following demographic assumptions: 

• for the probability of death of pensioners, direct and/or indirect, those for the Italian population 

taken from “RG48” tables prepared by the State General Accounting Office, separately by gender; 

• for the probability of death of a spouse, those for the Italian population taken from “RG48” 

tables prepared by the State General Accounting Office, separately by gender; 

• for the probability of leaving a family, those adopted in the INPS (national insurance institute) 

model for projections to 2010, separately by gender; 

331

The economic and financial assumptions used in the actuarial valuation were as follows: 

• discount rate of 4.23% 

• expected rate of pension revaluation of 1.50% 

• annual inflation rate of 2.00%. 

Actuarial valuations 

The table below gives the results from the actuarial valuations performed as at 31 st December 

2011 in relation to the different groups: 


Former B.M.L. 

pension fund 

Former C.R.C. 

pension fund 

Total 

A. Opening balances 9,732 13,794 23,526 

B. Increases 2,213 1,178 3,391 

B.1 Interest expense balancing entry in the income statement "personnel expense" 423 585 1,008 

B.2 Actuarial gains balancing entry in "fair value reserves" 1,655 593 2,248 

B.3 Provisions 50 - 50 

B.4 Other changes 85 - 85 

C. Decreases (715) (1,618) (2,333) 

C.1 Pension benefits paid (715) (1,618) (2,333) 

C.2 Actuarial losses balancing entry in "fair value reserves" - - - 

C.3 Other changes - - - 

D. Final balances 11,230 13,354 24,584 

The average present value of pensions currently being paid (immediate costs) was identified as 

constituting the economic commitments of the fund as at 31 st December 2011. 

A sufficiently prudent system of financial capitalisation was adopted that is able to guarantee the 

full cover of the benefits to be paid to the group of pensioners existing as at 31 st December 2011 

with the accumulated reserves at any moment. 

12.4 Provisions for liabilities and charges – other provisions 

31/12/2011 31/12/2010 

1. Provision for revocation risks 27,657 29,161 

2. Provision for bonds and default 9,637 10,155 

3. Other provisions for risks and charges 52,487 40,883 

Total 89,781 80,199 

332

12.5 Contingent liabilities 

31/12/2011 31/12/2010 

for personnel litigation 499 246 

for revocation risks 2,210 2,857 

for bonds in default 11 - 

for compounding of interest 1,127 1,394 

for claim risks 547 660 

for tax litigation 238,260 183,600 

for other litigation 73,506 73,390 

Total 316,160 262,147 

The liabilities regulated by IAS 37, characterised by the absence of certainty over the timing or the 

amount of future expense required to settle presumed liabilities, can be classified as being of two 

types: 

• probable liabilities; 

• contingent liabilities (possible or remote). 

The correct identification of the nature of liabilities is of fundamental importance because it 

determines whether or not the risk deriving from an obligation must be recognised in the financial 

statements. 

The recognition of a provision for risks and charges in the financial statements represents a 

probable liability of uncertain timing or amount 2 and the amount recognised in the accounts 

represents the best estimate of the expenditure required to settle the obligation existing as at the 

reporting date and reflects the risks and uncertainties that inevitably characterise a number of 

different facts and circumstances. 

The amount of a provision is measured by the present value of the expenditure that it is assumed 

will be necessary to settle the obligation where the effect of the present value is significant. 

Future events that might affect the amount required to settle the obligation are only taken into 

consideration if there is sufficient objective evidence that they will occur. 

The measurement of provisions is periodically reviewed to verify that they are reasonable. 

The general and theoretical legal parameters which govern the process of determining the present 

value of provisions, which is performed for each single case of litigation and for the relative 

residual life, are given below: 

• type/nature of the litigation, to be assessed in the light of the legal claims formulated by the 

counterparty. Various “macro-families” are identifiable in this respect such as corporate litigation, 

labour law cases, financial intermediation litigation, litigation generically definable as 

compensation for damages (resulting from non performance of contract obligations, illegal actions, 

violation of regulations) etc.; 

2 Details of the criteria for recognising provisions are given in Part A.2 of the notes to the financial statements “The main 

items in the financial statements”, section 12 “Provisions for risks and charges”, which may be consulted. 

333

• degree of “innovation” in the litigation, to be assessed by considering whether the issues 

turn on matters already known and “weighed” by the Bank or on completely new matters which 

therefore require study (e.g. resulting from a change in the legislation or in legal orientations); 

• degree of “strategic importance” of the litigation to the bank: for commercial reasons the 

Bank might for example decide to end a case very rapidly even if it had grounds of defence that 

would allow it to resist in court for a long time; 

• average length of litigation, to be weighted taking account of geographical factors, which is to 

say the location of the jurisdiction in which the case is tried and the state of progress of the trial. 

In this respect a decision must be taken on the source of the statistics from which data is 

obtained and assistance can be obtained from the lawyers who represent the Bank in litigation 

and who have direct knowledge of the jurisdictions concerned for each case; 

• the “nature” of the counterparty (e.g. a private individual or a legal entity, a professional 

operator or not, a consumer or not, etc.). 

A contingent liability is defined as: 

• a possible obligation, the result of past events, the existence of which will only be confirmed 

by the occurrence or (non occurrence) of future events that are not totally under the control of 

the enterprise; 

• a present obligation that is the result of past events, but which is not recognised in the 

accounts because: 

 

 

it is improbable that financial resources will be needed to settle the obligation; 

the amount of the obligation cannot be measured with sufficient reliability. 

Contingent liabilities are not recognised in the financial statements but are only reported, unless 

they are considered a remote possibility. In the latter case, in compliance with IAS 37, no 

information is given on them in the notes to the financial statements. 

Amounts for contingent liabilities are also subject to periodic verification because it is possible 

that events may occur which make them remote or probable with the possible need, in the latter 

case, to make a provision for them in the financial statements. 

A list of contingent liabilities of a tax nature are listed below to which the Bank has attributed a 

possible risk. 

334

NOTICES OF TAX ASSESSMENT 

BPB Immobiliare (2003) increased taxation of €16.4 million, fines of €17.6 million 

This was a contribution of company property operations considered by the tax authorities as the 

disposal of assets. 

A ruling was given fully in favour of the company by the Tax Commission of the Province of 

Bergamo against which the tax authorities appealed to the Regional Tax Commission of 

Lombardy. The latter rejected the appeal of the authorities confirming the ruling appealed against. 

Banca Carime (2003) increased taxation of €14.4 million, fines of €22.6 million 




Cosenza against which the tax authorities appealed to the Regional Tax Commission of Calabria. 

The hearing was held on 14 th July and the relative ruling has still not yet been issued. 

UBI Banca (2003) increased taxation of €5.3 million, fines of €6.4 million 




Bergamo against which the tax authorities appealed to the Regional Tax Commission of 

Lombardy. The latter rejected the appeal of the authorities confirming the ruling appealed against. 

UBI Banca (2004, 2005 and 2006) increased taxation of euro €13.2 million, fines of €12.2 million 

These were complex transactions designed to strengthen capital performed in 2001 with the 

authorisation of the Bank of Italy. The tax authorities alleged failure to apply a withholding tax on 

interest paid to a foreign subsidiary on deposits made by the subsidiary, which were reclassified 

by the tax inspectors as financing. On the basis of expert opinion it is considered that the tax 

regime applied by the bank – which was then Banca Popolare di Bergamo and Banca Popolare 

Commercio e Industria – complied with the requirements of contracts and the law. Since the 

question involves more than one year, notices of tax assessment for 2004, 2005 and 2006 have 

been received so far. An appeal has been lodged for the latter years, while for 2004 the Tax 

Commission of the Province of Milan rejected the appeal lodged by UBI Banca although it 

considered that fines were not due because of the objective uncertainty surrounding the 

legislation. On the basis of expert opinion it is considered that the tax regime applied by the bank 

complied with the requirements of contracts and the law. The relative tax demands were appealed 

against before the Tax Commission of the Province of Milan. While the verdict is pending for 2005, 

a collection order for €2.86 million was issued which the UBI Banca paid. 

Banco di Brescia (2004, 2005 and 2006) increased taxation of €4.75 million, fines of €8.61 

million 

These were complex transactions designed to strengthen capital performed in 2000 with the 

authorisation of the Bank of Italy. The tax authorities alleged failure to apply a withholding tax on 

interest paid to a foreign subsidiary on deposits made by the subsidiary, which were reclassified 

by the tax inspectors as financing. On the basis of expert opinion it is considered that the tax 

regime applied by the bank complied with the requirements of contracts and the law. The relative 

tax demands were appealed against before the Tax Commission of the Province of Milan. While the 

verdict is pending for 2004 and 2005, a collection order for €1.92 million was issued which Banco 

di Brescia paid. 

UBI Leasing (2003, 2004, 2005 and 2006) increased taxation of €3.9 million, fines of €8.8 million 

Alleged improper application of a subsidised VAT rate on marine lease transactions or undue 

deduction of VAT on invoices for non existent transactions and improper quantification of the 

recognition of non existent invoices for IRES and IRAP purposes. At present the tax authorities 

have issued an interim collection order limited to the IRES demands for a total of €22 thousand. 

As part of the “second level” assessment because the tax consolidation option was chosen for that 

335

year, for 2004 the tax authorities have issued a collection order on a temporary basis, pending a 

verdict, for taxes of €22 thousand, which the company paid. In consideration of the circumstance 

that several companies participating in the tax consolidation were subject to assessment for the 

tax year 2004, a reconciliation agreement was reached with the Regional Tax Commission of 

Lombardy for a total settlement of €75 thousand. 

UBI Leasing (2008) increased taxation of €0.30 million, fines of €0.30 million 

A question of alleged mistaken calculation of the tax base for the purposes of land registry and 

mortgage duties following end of lease purchase transactions on two finance lease contracts. 

UBI Banca – BDG increased taxation of €1.5 million, fines of €0 million 

The recovery of withholding taxes not applied by the subsidiary BDG on dividends paid in various 

tax years to the Parent and considered as falling within the parent-subsidiary directives. The 

Swiss tax authorities consider that joint stock co-operative companies like UBI Banca are not 

joint stock companies and consequently do not fall within the scope of the directive. In January 

2012 the Swiss court rejected the appeal lodged. 

Centrobanca (2006) increased taxation of euro €2.73 million and fines of €3.83 million 

This regards the criteria employed for the recognition of the disposal of loans to customers or the 

recognition of impairment losses on those same loans notwithstanding the tax derivation principle 

introduced for IFRS entities in 2005. The conduct of the company is also supported by the 

reputable opinions of external advisors. Observations were presented against the demands in the 

tax assessment report as permitted by the taxpayers’ statute (Law No. 212/2000). In 

consideration of the magnitude of the demands, the inspectors referred the case to the Public 

Prosecutor’s Office of Milan, where the hearing is still in progress. On 8 th June 2011, section nine 

of the Court of Milan issued a ruling dismissing the case because there was “no case to answer”. 

On 20 th July 2011 a notice of tax assessment was received from the tax authorities which took no 

account whatsoever of the outcome of the criminal proceedings and confirmed the results of the 

tax assessment report. An unsuccessful attempt was made to use compliance by consent 

procedures in relation to that notice and therefore court proceedings were initiated. 

Banca Popolare Commercio e Industria (2006) increased taxation of €1.2 million and fines of 

€2.8 million 

This regarded allegations concerning the tax treatment for VAT relating to 2006 for commissions 

charged to third parties for custody and administration activities performed as a depository bank 

for investment funds. This issue is a common one in the banking sector and it arises over the 

interpretation at national level of the EU Directive 77/388/EEC of 17 th May 1977. 

Banca Popolare di Bergamo (2006) increased taxation of €2.78 million and fines of €4.69 million 

This regarded allegations concerning the tax treatment for VAT relating to 2006 for commissions 

charged to third parties for custody and administration activities performed as a depository bank 

for investment funds. This issue is a common one in the banking sector and it arises over the 

interpretation at national level of the EU Directive 77/388/EEC of 17 th May 1977. 

Banco di Brescia (2006) increased taxation of €1.95 million and fines of €2.92 million 

This is a case of alleged irregularities in the quantification of the recognition of impairment losses 

on loans for the year. After an unsuccessful attempt to use compliance by consent procedures 

court proceedings were commenced against this allegation. 

UBI Banca (2003) increased taxation of €18 million and fines of €25.2 million 

This is a case of allegations of undue corporate income tax deductions of expense items in relation 

to contributions of operations performed in 2003 which gave rise to the formation of the former 

Banche Popolari Unite Group. The assessment relates to a year (2003) for which the time limit 

expired on 31 st December 2008, while the inspection was performed in 2010. The bank has 

336

presented an application for tax assessment by consent after an application for internal review 

was not accepted. 

TAX ASSESSMENT REPORTS 

UBI Leasing (2006-2009) increased taxation of €0.41 million 

These were allegations relating to the application of a subsidised VAT rate on marine lease 

transactions and undue deduction of VAT on invoices for transactions considered non existent by 

the tax authorities. For similar allegations relating to prior years the tax authorities have already 

issued notices of tax assessment reported above. 

Silf (2007) increased taxation of €0.4 million 

Allegations concerning irregularities in the deductibility of some expenses during the year (in 

particular, those related to commission expenses paid to financial advisors) and of loan losses as 

well as the quantification of the recognition of impairment losses on loans for the year. 

Observations were presented against the demands in the tax assessment report as permitted by 

the taxpayers’ statute (Law No. 212/2000). 

UBI Leasing (2007-2010) increased taxation of €7.2 million 

These were allegations concerning property leasing transactions involving the construction of the 

property, considered by the inspectors as irregular sale and lease back transactions. Observations 

were presented against the tax assessment report as permitted by the taxpayers’ statute (Law No. 

212/2000). 

Banca Regionale Europea (2008) increased taxation of €0.9 million 

These were allegations concerning the tax deduction of the loss resulting from the disposal 

without recourse of the loans to a customer in difficulty performed by the bank in 2008. More 

specifically, the Piedmont Regional Department of the tax authorities alleged the absence of the 

assumptions of certainty and finality of the disposal because of the existence of guarantees 

granted to the creditors recognised by the purchaser. 

OTHER TAX LITIGATION 

Further tax liability litigation exists, relating mainly to years prior to 31 st December 2006 which 

regard the matters listed below. 

UBI Banca (1983 and 1984 former Banca Popolare Bergamo Scrl) increased taxation of €1.93 

million 

These consist of cases pending before the Central Tax Commission, concerning appeals against 

notices of assessment, mainly regarding the recovery of taxes on expenses deducted fully by the 

bank and not proportionately as held by the tax authorities. 

Banca Regionale Europea (2003) fines of €1.2 million 

This is litigation relating to the procedures followed by the bank to adjust its income tax return 

originally filed for 2003. The case is currently pending before the Supreme Court of Cassation 

brought by the tax authorities against the decision in favour of the bank by the court of first 

instance. 

Banco di Brescia (2003 and 2004) increased taxation of €0.40 million 

This consists of litigation concerning tax collection demands arising from the alleged erroneous 

application for the years 2003 and 2004, of the rate for IRAP on the value of production relating to 

the Veneto Region. The appeals lodged by Banco di Brescia were recently accepted by the relative 

regional tax commission. 

337

Banca Carime (2003 and 2004) increased taxation of €0.52 million 

This consists of two cases of litigation concerning the presumed absence of documentation for 

withholding taxes on interest from treasury postal bonds issued prior to 1997. The decisions in 

favour of the bank by the court of first instance were appealed against by the tax authorities 

before the competent Regional Tax Commission. 

Banca Carime (2005 and 2007) increased taxation of €0.26 million 

This consists of two cases of litigation commenced for the nullification of two collection demands 

with which tax credits for the years 2005 and 2007 were considered collectable. They related to 

investments in disadvantaged areas pursuant to article 8 of Law No. 388/2000 which accrued to 

the bank in 2000 and 2001 and were allegedly used to incorrectly offset tax liabilities. 

UBI Banca (2010) increased taxation of €0.56 million 

Notice of payment issued to UBI Banca for alleged failure to pay mortgage and land registry taxes 

in relation to the sale of a property. An appeal to nullify the notice was filed in November 2011 

with the competent Provincial Tax Commission. 

338

SECTION 13 Technical reserves – Item 130 

No amounts were recognised within item 130 “Technical reserves” either as at 31/12/2011 or as 

at 31/12/2010. 

SECTION 14 Redeemable shares – Item 150 

14.1 Redeemable shares: composition 

No shares have been issued with redemption clauses. 

SECTION 15 Equity attributable to the Parent – Items 140, 160, 170, 180, 

190, 200 and 220 

15.1 “Share capital” and “Treasury shares”: composition 

31/12/2011 31/12/2010 

Number of ordinary shares 901,746,759 639,145,902 

nominal unit value in euro 2.50 2.50 

Number of treasury shares 1,200,000 - 

nominal unit value in euro 2.50 0.00 

- NOTA 

339

15.2 Share capital – Number of shares of the Parent: annual changes 

Items/type Ordinary Other 

A. Shares existing at the beginning of the year 639,145,902 - 

- fully pa id up 639,145,902 - 

- not fully paid up - - 

A.1 Treasury shares (-) - - 

B.2 Outstanding shares: initial number 639,145,902 - 

B. Increases 262,600,857 - 

B.1 New issues 262,600,857 - 

- by payment: 262,600,857 - 

- business combinations - - 

- conversion of bonds 604 - 

- exercise of warrants 19,309 - 

- other 262,580,944 - 

- free of charge: - - 

- in favour of employees - - 

- in favour of directors - - 

- other - - 

B.2 Sale of treasury shares - - 

B.3 Other changes - - 

C. Decreases (1,200,000) - 

C.1 Cancellation - - 

C.2 Purchase of treasury shares (1,200,000) - 

C.3 Company disposal operations - - 

C. 4 Other changes - - 

D. Outstanding shares: closing balances 900,546,759 - 

D.1 Treasury shares (+) 1,200,000 - 

D.2 Shares outstanding at the end of the year 901,746,759 - 

- fully paid up 901,746,759 - 

- not fully paid up - - 

340

15.3 Share capital: other information 

UBI Banca ordinary share 2009/2011 warrants 

On 9 th May 2009, an ordinary shareholders’ meeting of UBI Banca approved an increase in the 

share capital in tranches for a maximum nominal amount of €79,893,237.50 by the issue of up to 

31,957,295 ordinary shares with a nominal value of 2.50 euro each and regular dividend 

entitlement corresponding to that of the UBI Banca shares outstanding at the time of the issue, in 

order to service the issue of 639,145,900 warrants “Warrant azioni ordinarie UBI Banca 

2009/2011”. 

The warrants were allotted free of charge to the shareholders of the Bank on 18 th May 2009 on a 

basis of one warrant for each UBI share held. 

The warrants grant shareholders or their assignees the right to subscribe one share for every 20 

warrants held at a price of 12.30 euro (which then became 11.919 euro in application of Art. 7 of 

the regulations). The holders of the warrants could exercise their rights to subscribe for a period 

of 30 calendar days from 1 st June 2011 until 30 th June 2011. 

Quantitative information on warrant conversions performed during the year is given in the 

summary table for all the movements in shares on the page that follows. 

Convertible bond issue “UBI 2009/2013 convertibile con facoltà di rimborso in azioni” 

On 18 th June 2009, the Management Board of UBI Banca, following the decisions taken on 27 th 

May 2009 and in implementation of the authorisation granted by an extraordinary shareholders’ 

meeting of 9 th May 2009, approved the final conditions for the convertible bond “UBI 2009/2013 

convertibile con facoltà di rimborso in azioni”, offered as a rights issue to the shareholders of UBI 

Banca. 

The issuance of the convertible bonds was performed for a total nominal amount of €639,145,872, 

through the issue of 50,129,088 convertible bonds for a nominal amount of €12.75 each, offered 

as a rights issue to the shareholders of UBI Banca at a ratio of four convertible bonds for every 51 

ordinary shares of UBI Banca possessed. The issue price of each convertible bond was €12.75. 

The convertible bonds confer the right on the holders to the payment of a fixed coupon equal to 

5.75% gross per annum of the nominal amount of the convertible bonds to be paid annually and 

which will have a term running from 10 th July 2009 until 10 th July 2013. 

The Management Board also decided to increase the share capital at the service of the convertible 

bonds by a maximum amount of €639,145,872 through the issue of a maximum of 255,658,348 

ordinary shares of UBI Banca, with a nominal value of €2.50 each, normal dividend entitlement 

and having the same characteristics of the ordinary shares of UBI Banca outstanding on the date 

of issue. 

As concerns the conversion and redemption rights attaching to the convertible bonds, when 18 

months have elapsed since the issue date of the convertible bonds: 

• bondholders shall have the right to convert the convertible bonds into UBI Banca shares at a 

ratio of one ordinary share for every one convertible bond held. If the conversion right is exercised, 

UBI Banca shall have the right to pay a sum of money in place of the shares, not less than the 

nominal amount of the bonds, calculated on the basis of the stock market share price of the UBI 

Banca shares; 

• UBI Banca shall have the right to call the convertible bonds by payment in cash and/or in UBI 

Banca shares, with the addition of a premium equal to 10% of the nominal amount of the 

convertible bonds. 

The convertible bonds shall be redeemed at par on the maturity date. UBI Banca shall have the 

right to perform the redemption by payment in cash and/or ordinary shares of UBI Banca, in an 

amount not less than the nominal value of the convertible bonds. 

341

Also, with regard to the conversion right, UBI Banca has set a cap on the value of its share at 

€12.80, above which, redemption of the liability will be performed by repayment in shares. 

The tables below provide quantitative information on the conversions performed during the year. 

Share capital increase and repurchase of treasury shares 

An operation to increase the share capital was performed in 2011. The management report may 

be consulted for a description of the details and stages by which the operation was implemented. 

Details of changes in the number of shares, in the share capital and in the share premiums that 

occurred in 2011 are given below. 

Date 

Reason 

Number of shares 

(in euro) 

Share capital 

Share premium 

reserve 

31.12.2010 639,145,902 1,597,864,755 7,100,378,060 

3.3.2011 Bond conversion February 2011 268 670 2,747 

3.6.2011 Bond conversion May 2011 96 240 984 

24.6.2011 Exercise of options for share capital increase 242,331,448 605,828,620 316,969,534 

24.6.2011 Allocation of expenses incurred for share capital increase - 22,393,614 

Tax effects of expenses for share capital increase 6,158,244 

5.7.2011 Bond conversion June 2011 240 600 2,460 

5.7.2011 Sale of unexercised option rights 2,126,197 

7.7.2011 Conversion of warrants June 2011 19,309 48,273 181,872 

11.7.2011 Exercise of unexercised rights 5,706,984 14,267,460 7,464,735 

18.7.2011 Subscription by the syndicate 14,542,512 36,356,280 19,021,606 

31.12.2011 901,746,759 2,254,366,898 7,429,912,824 

Repurchases of treasury shares were made in 2011 in relation to personnel incentive schemes. 

Date 

Reason 

Number of 

shares 

(in euro) 

Share capital 

Share 

pr emium 

reserve 

Equity 

15.7.2011 Incentive scheme treasury share repurchase - 500,000 - 1,250,000 - 552,200 - 1,802,200 

18.7.2011 Incentive scheme treasury share repurchase - 700,000 - 1,750,000 - 818,090 - 2,568,090 

31.7.2011 Expenses for treasury share repurchase - 5,000 - 5,000 

- 1,200,000 - 3,000,000 - 1,375,290 - 4,375,290 

342

15.4 Reserves of profits: other information 

The reserves of profits in the consolidated financial statements increased by €69,885 thousand. 

That increase was almost entirely the result of the allocation of the profit for the year ended 

31.12.2010 amounting to €172,121 thousand, the distribution of a dividend for 2010 and the 

allocations of profits made by the governing bodies of the Bank and its subsidiaries. 

SECTION 16 Non-controlling interests – Item 210 

16.1 Non controlling interests: compositionella 

31/12/2011 31/12/2010 

Share capital 503,755 514,687 

Share premiums 76,173 78,777 

Reserves 318,417 327,818 

Treasury shares 

Fair value reserves 21,182 27,876 


Profit for the year attributable to non controlling interests (20,603) 13,602 

Total 898,924 962,760 

Non-controlling interests net of fair value reserves and profits (losses) for the year decreased by 

approximately €22,937 thousand. The changes were due primarily to extraordinary transactions 

performed during the year, which have already been reported in full in the Consolidated 

Management Report (public tender offer on IW Bank, increase in the share capital of UBI Leasing 

and Banco di San Giorgio SpA), and also to substantial purchases of shares in Centrobanca SpA 

from non controlling shareholders. The impacts on non-controlling interests were as follows: 

share capital: decrease of approximately €10.9 million of which: 

Centrobanca Spa 

IW Bank Spa and its subsidiary Investnet 


UBI Leasing Spa 

-€6,961 thousand 

-€4,244 thousand 

-€612 thousand 

+€1,060 thousand 

With regard to Centrobanca SpA, 6,325,112 shares accounting for 1.88% of the share capital were 

purchased from non controlling shareholders in the last quarter of the year, partly in relation to 

the coming merger of the company already announced into the Parent. The decrease in the share 

capital held by non controlling shareholders of Banco di San Giorgio SpA is the result of a 

decrease due to the purchase of shares from non controlling shareholders amounting to €1,744 

thousand and an increase of €1,162 thousand due to the increase in the share capital concluded 

in October 2011. 

Non controlling interests included €9,844 thousand consisting of savings shares and €26,246 

thousand consisting of the privileged shares of Banca Regionale Europea Spa. 

Share premiums decreased by approximately €2.6 million of which: 

IW Bank Spa and its subsidiary Investnet 


- €3,621 thousand 

+ €893 thousand 

343

UBI Leasing SpA 

+ €353 thousand 

Reserves decreased by approximately €9.4 million. That decrease was determined 

primarily by an increase of €13.6 million (2010 profit) and by a decrease of approximately 

€27.7 million due to the distribution of dividends and other outgoings. A payment into an 

account for an increase in the share capital was also made by the Parent in favour of IW 

Bank SpA totalling €60,179 thousand, which resulted in an increase in “Other reserves” of 

non controlling interests of approximately €6,990 thousand. 

The remaining differences related to the extraordinary operations described above and to residual 

changes in percentage holdings due to the purchase or sale of shares from or to non-controlling 

shareholders during the year. 

The effect of the transfer to the income statement of asset items when the purchase price 

allocation was performed had a negative impact on profit attributable to non controlling interests 

amounting to approximately €55.378 thousand (€10.034 thousand as at 31 st December 2010) of 

which €45.605 thousand due to impairment losses recognised on intangible assets as a result of 

impairment tests performed as at 31 st December 2011. 

OTHER INFORMATION 

1. Guarantees granted and commitments 

Transactions 31/12/2011 31/12/2010 

1) Guarantees granted of a financial nature 3,239,645 1,832,763 

a) Banks 242,523 226,696 

b) Customers 2,997,122 1,606,067 

2) Guarantees granted of a commercial nature 4,462,468 4,686,558 

a) Banks 133,237 191,074 

b) Customers 4,329,231 4,495,484 

3) Irrevo cable commitments to pay funds 4,982,031 6,691,440 

a) Banks 253,441 111,933 

i) of certain use 253,344 107,773 

ii) of uncertain use 97 4,160 

b) Customers 4,728,590 6,579,507 

i) of certain use 318,599 579,994 

ii) of uncertain use 4,409,991 5,999,513 

4) Commitments underlying credit derivatives: protection sales - - 

5) Assets pledged to guarantee obligations to third parties - - 

6) Other commitments 4,408,578 3,632,315 

Total 17,092,722 16,843,076 

4: 301000O|1 – NOTA 

2. Assets pledged to secure own liabilities and commitments 

Portfolios 31/12/2011 31/12/2010 

1. Financial assets held for trading 1,151,894 1,827,624 

2. Financial assets at fair value 

3. Available-for-sale financial assets 5,225,541 7,892,169 

4. Held-to-maturity investments 

5. Lo ans to banks 1,138,914 

6. Loans to customers 235,169 48,152 

7. Property, equipment and investment property 

Total 7,751,518 9,767,945 

344

The financial assets contained in the table relate to securities and loans implemented by the 

banks in the Group as reported in detail below: 

Portfolios 

Guarantees of liabilities or commitments 

Financial assets held for trading 

Repurchase agreements € 1,151,894 

€ 1,151,894 

Available-for-sale financial assets 

Bank of Italy advances € 1,058,287 

Repurchase agreements € 4,130,743 

Issue of bankers' drafts € 8,425 

Interbank market collat. € 5,616 

Other transactions € 22,470 

€ 5,225,541 

Loans to banks 

Bank of Italy advances € 1,138,914 

€ 1,138,914 

Loans to customers 

Repurchase agreements € 199,183 

Mortgages € 35,986 

€ 235,169 

3. Information on operating leases 


4. Composition of investments for unit-linked and index-linked policies 


345

5. Management and intermediation on behalf of third parties 

Type of services (in euro) 

Amounts 

1. Execution of orders on behalf of customers 149,591,978 

a) Purchases 76,039,986 

1. Settled 75,793,355 

2. Not settled 246,631 

b) Sales 73,551,992 

1. Settled 73,344,845 

2. Not settled 207,147 

2. Portfolio managements 29,193,266 

a) Individual 13,235,786 

b) Collective 15,957,480 

3. Custody and administration of securities 236,840,989 

a) Securities of third parties held on deposit: connected with depository bank activity (not including portfolio managemen - 

1. Securities issued by companies included in the consolidation 

2. Other securities - 

b) Other third party securities held on deposit (not including portfolio managements): other 135,384,369 

1. Securities issued by companies included in the consolidation 

2. Other securities 135,384,369 

c) Securities belonging to third parties, deposited with third parties 74,784,034 

d) Own securities deposited with third parties 26,672,586 

4. Other transactions 40,601,692 

346

PART C – Notes to the consolidated income 

statement 

SECTION 1 Interest – Items 10 and 20 

1.1 Interest income and similar: composition 

Items/Type 

Debt 

instruments 

Financing 

Other 

transactions 

2011 2010 

1. Financial assets held for trading 40,910 1,482 - 42,392 31,634 

2. Financial assets at fair value - - - - - 

3. Available-for-sale financial assets 373,970 - - 373,970 328,149 

4. Held-to-maturity investments - - - - - 

5. Loans to banks 2,993 53,174 160 56,327 29,782 

6. Loans to customers 1,270 3,564,333 7,382 3,572,985 3,133,962 

7. Hedging derivatives X X - - - 

8. Other assets X X 1,872 1,872 1,785 

Total 419,143 3,618,989 9,414 4,047,546 3,525,312 

Interest on impaired assets relates almost entirely to loans to customers and totalled €181,738 

thousand. 

1.2 Interest income and similar: hedging differentials 

The interest balance for margins on hedging differentials to 31 st December 2011, was 

negative. 

Details are given in Table 1.5 later in this section. 

1.3 Interest and similar income: other information 

Items/Amounts 2011 2010 

Interest income on financial assets held in foreign currency 44,063 32,970 

Interest income on finance lease transactions 300,126 253,920 

ble 4: 501030O|1 - NOTA 

347

1.4 Interest expense and similar: composition 

Items/Type Borrowings Securities 

Other 

transactions 

2011 2010 

1. Due to central banks (21,520) - - (21,520) (14,115) 

2. Du e to banks (62,117) X (219) (62,336) (29,972) 

3. Due to customers (412,256) X (4,251) (416,507) (196,582) 

4. Securities issued X (1,325,414) - (1,325,414) (1,069,742) 

5. Financial liabilities held for trading (12,574) - - (12,574) (9,108) 

6. Financial liabilities at fair value - - - - - 

7. Other liabilities and provisions X X (728) (728) (789) 

8. Hedging derivatives X X (86,778) (86,778) (58,406) 

Total (508,467) (1,325,414) (91,976) (1,925,857) (1,378,714) 

e 5: 502000O|1 - NOTA3_ALTRE 

1.5 Interest expense and similar: hedging differentials 

able 6: 502010O|1 - NOTA 

Items 2011 2010 

A. Positive differentials on hedging transactions 1,086,381 918,121 

B. Negative differentials on hedging transactions (1,173,159) (976,528) 

C. Balance (A-B) (86,778) (58,407) 

1.6 Interest expense and similar: other information 

Items/Amounts 2011 2010 

Interest expense on liabilities held in foreign currency (30,360) (33,072) 

Interest expense on finance lease transactions (759) (631) 

Table 7: 502020O|1 - NOTA 

348

SECTION 2 Commissions – Items 40 and 50 

2.1 Commission income: composition 

Type of services/Sectors 2011 2010 

a) guarantees granted 49,793 42,648 

b) credit derivatives - - 

c) management, trading and advisory services: 622,140 683,743 

1. trading in financial instruments 38,410 39,462 

2. foreign exchange trading 11,868 12,259 

3. portfolio management 277,518 273,077 

3.1. individual 72,042 72,968 

3.2. collective 205,476 200,109 

4. custody and administration of securities 13,702 15,788 

5. depository banking - 7,751 

6. placement of securities 74,538 105,533 

7. receipt and transmission of orders 40,852 43,565 

8. advisory activities 4,855 6,062 

8.1 on investments 4,855 5,958 

8.2 on financial structure - 104 

9. distribution of third party services 160,397 180,246 

9.1. portfolio management 42 68 

9.1.1. individu al 42 68 

9.1.2. collective - - 

9.2. insurance products 119,723 127,927 

9.3. other products 40,632 52,251 

d) collection and payment services 150,128 146,820 

e) servicer activities for securitisation transactions - - 

f) services for factoring transactions 26,486 26,995 

g) tax collection and payment services - - 

h) management of multilateral trading systems - - 

i) current account administration 216,501 213,902 

j) other services 286,779 264,009 

Total 1,351,827 1,378,117 

The sub item j) “Other services” to 31/12/2011 includes “Other commission income” 

consisting of: 

- customer finance €203,962 thousand 

- foreign transactions €10,704 thousand 

- issue of bankers' drafts €5 thousand 

During the year Centrobanca performed transactions which led to the recognition within 

commission income of “day one profit” amounting to €141 thousand (these commissions 

totalled €678 thousand in 2010). These are transactions for which a difference between the 

transaction price and the value of the instrument obtained using internal valuation techniques 

arises on initial recognition. 

Commissions on the sale of third party bonds fell compared to before by approximately €29.3 

million. 

349

2.2 Commission expense: composition 

Services/Sectors 2011 2010 

a) guarantees received (807) (809) 

b) credit derivatives - - 

c) management and trading services: (82,257) (90,276) 

1. trading in financial instruments (18,268) (16,368) 

2. foreign ex change tra ding (38) (281) 

3. porfolio management (6,236) (5,772) 

3.1. own - (5,083) 

3.2. on behalf of third parties (6,236) (689) 

4. custody and administration of securities (6,979) (8,569) 

5. placement of financial instruments (4,416) (4,942) 

6. financial instruments, products and services distributed through indirect networks (46,320) (54,344) 

d) collection and payment services (44,141) (60,899) 

e) other services (32,688) (44,908) 

Total (159,893) (196,892) 

SECTION 3 Dividends and similar income – Item 70 

3.1 Dividends and similar income: composition 

2011 2010 

Items/Income 

Dividends 

Income from 

OICR units 


instruments) 

Dividends 

In come from 

OICR units 


instruments) 

A. Financial assets held for trading 1,037 18 3,350 27 

B. Available-for-sale financial assets 16,079 2,863 18,298 2,424 

C. Financial assets at fair value - - - - 

D. Equity investments - X - X 

Total 17,116 2,881 21,648 2,451 

Dividends recognised within “available-for-sale financial assets”, included those received on 

the Intesa Sanpaolo Spa shares, which amounted to approximately €11.6 million. 

Table 8: 507000O|1 - NOTA 

350

SECTION 4 Net trading income (loss) – Item 80 

4.1 Net trading income (loss): composition 

Transactions/Components of income 

Gains 

(A) 

Income from 

trading 

(B) 

Losses 

(C) 

Losses from 

trading 

(D) 

Net result [(A+B) 

- (C+D)] 

1. Financial assets held for trading 25,564 168,696 (126,008) (135,644) (67,392) 

1.1 Debt instruments 21,020 56,096 (16,287) (30,497) 30,332 

1.2 Equity instruments 4,486 3,586 (16,429) (2,131) (10,488) 

1.3 Units in O.I.C.R. (collective investment instruments) 19 26 (158) (152) (265) 

1.4 Financing - - - - - 

1.5 Other 39 108,988 (93,134) (102,864) (86,971) 

2. Financial liabilities held for trading 2,520 7 (4,027) (2) (1,502) 

2.1 Debt instruments 1,662 - (4,027) (2) (2,367) 

2.2 Payables - - - - - 

2.3 Other 858 7 - - 865 

3. Other financial assets and liabilities: exchange rate differences X X X X (5,011) 

4. Derivative instruments 541,790 2,174,634 (597,976) (2,139,555) 84,616 

4.1 Financial derivatives 541,790 2,174,634 (597,976) (2,139,555) 84,616 

- on debt instruments and interest rates 525,882 2,143,116 (573,906) (2,115,024) (19,932) 

- on equity instruments and share indices 199 6,346 (130) (11,802) (5,387) 

- on currencies and gold X X X X 105,723 

- other 15,709 25,172 (23,940) (12,729) 4,212 

4.2 Credit derivatives - - - - - 

Total 569,874 2,343,337 (728,011) (2,275,201) 10,711 

The amount shown in line 1.5 “Other” relates principally to the exchange rate differences for 

certificates of deposit denominated in yen and it is linked to the amount shown in line 4.1 

“Financial derivatives on currencies and gold”. 

Equity instruments included a gain on Medinvest International Sca of €12.2 million. 

SECTION 5 Net hedging income (loss) – Item 90 

5.1 Net hedging income (loss): composition 

Income components/Amounts 2011 2010 

A. Relative income 

A.1 Fair value hedge derivatives 873,414 459,121 

A.2 Hedged financial assets (fair value) 800,569 643,067 

A.3 Hedged financial liabilities (fair value) 116,520 318,069 

A.4 Cash flow hedge financial derivatives - - 

A.5 Assets and liabilities in foreign currency 1,152 32 

Total income from hedging activity (A) 1,791,655 1,420,289 

B. Relative expense 

B.1 Hedging derivatives at fair value (935,417) (929,827) 

B.2 Hedged financial assets (fair value) (141,837) (241,699) 

B.3 Hedged financial liabilities (fair value) (705,430) (180,529) 

B.4 Cash flow hedge financial derivatives (33) (1,025) 

B.5 Assets and liabilities in foreign currency - - 

Total expense from hedging activity (B) (1,782,717) (1,353,080) 

C. Net hedging income (loss) (A-B) 8,938 67,209 

351

SECTION 6 Income (loss) from disposals/repurchases – Item 100 

6.1 Income (loss) from disposals/repurchases: composition 

2011 2010 

Items/Income components 

Profits Losses Net result Profits Losses Net result 


1. Loans to banks - - - 1,463 - 1,463 

2. Loans to customers 7,848 (5,384) 2,464 - (5,313) (5,313) 

3. Available-for-sale financial assets 12,372 (443) 11,929 32,127 (882) 31,245 

3.1 Debt instruments 1,407 (380) 1,027 19,670 (581) 19,089 

3.2 Equity instruments 8,467 (63) 8,404 10,418 (298) 10,120 

3.3 Units in O.I.C.R (collective investment instruments) 2,498 - 2,498 2,039 (3) 2,036 

3.4 Financing - - - - - - 

4. Held-to-maturity investments - - - - - - 

Total assets 20,220 (5,827) 14,393 33,590 (6,195) 27,395 

Financial liabilities 

1. Due to banks - - - - - - 

2. Due to customers - - - - - - 

3. Securities issued 21,198 (9,062) 12,136 6,574 (16,912) (10,338) 

Total liabilities 21,198 (9,062) 12,136 6,574 (16,912) (10,338) 

As concerns equity instruments, the most significant transaction was the disposal of the 

interest held in London Stock Exchange Group PLC which generated a profit of approximately 


The profit shown in the table above on financial liabilities is attributable to the sale and 

redemption of own issue bonds. 

SECTION 7 Net income (loss) on financial assets and liabilities at fair 

value – Item 110 

7.1 Net value change in financial assets/liabilities at fair value: composition 


Gains 

(A) 

Income from 

trading 

(B) 

Losses 

(C) 

Losses from 

trading 

(D) 

Net result [(A+B) - 

(C+D)] 

1. Financial assets 752 2,390 (17,990) (24,001) (38,849) 

1.1 Debt instruments - 

1.2 Equity instruments - 

1.3 Units in O.I.C.R. (collective investment instruments) 752 2,390 (17,990) (24,001) (38,849) 

1.4 Financing - 

2. Financial liabilities held for trading - - - - - 

2.1 Debt instruments - 

2.2 Due to banks - 

2.3 Due to customers - 

3. Other financial assets and liabilities: exchange rate differences X X X X - 

4. Credit and financial derivatives - - - - - 

Total 752 2,390 (17,990) (24,001) (38,849) 

The following table gives the changes that occurred in the hedge fund portfolio in 2011: 

description 

opening 

balances 

purchases 

sales/ 

redemptions 

profits/ 

losses 

gains/losses 

exchange 

rate effects 

closing 

balance 

Pramerica Funds 654,370 (632,329) (22,041) - - 

Tages Funds 116,208 - - - (11,361) 104,847 

Other hedge funds 31,078 - (4,790) 430 (5,877) 486 21,327 

Total 147,286 654,370 (637,119) (21,611) (17,238) 486 126,174 

352

SECTION 8 Net impairment losses on loans – Item 130 

8.1 Net impairment losses on loans: composition 

Transactions/Components of 

income 

Impairment losses (1) Reversals of impairment losses (2) 

Specific 

Specific 

Portfolio 

2011 2010 

Portfolio 

Other reversals 

Other revers als 

Write-offs 

Other 

Of interest of impairment 

losses 

Of interest of impairment 

losses 

A. Loans to banks - (5) (114) - 2 - - (117) 8 

- Financing - (5) (114) - 2 - - (117) 8 

- Debt instruments - - - - - - - - - 

B. Loans to customers (138,345) (666,815) (121,493) 43,593 216,790 - 59,309 (606,961) (706,940) 

- Financing (138,345) (666,738) (121,493) 43,593 216,790 - 59,309 (606,884) (706,864) 

- Debt instruments - (77) - - - - - (77) (76) 

C. Total (138,345) (666,820) (121,607) 43,593 216,792 - 59,309 (607,078) (706,932) 

Table 9: 514000O|1 - NOTA1_BANCHE 

Table 10: 514000O|1 - NOTA3_ALTRE 

353

8.2 Net impairment losses on available-for-sale financial assets: composition 

Impairment losses (1) 

Reversals of impairment losses (2) 


S pecific 

Write-offs Other of interest 

Specific 

other reversals of 

impairment losses 

2011 2010 

A. Debt instruments - (373) - - (373) (474) 

B. Equity instruments - (119,733) X X (119,733) (40,240) 

C. Units in O.I.C.R. 

(collective investment instruments). - (8,076) X - (8,076) (1,650) 

D. Loans to banks - - - - - - 

E. Loans to customers - - - - - - 

Total - (128,182) - - (128,182) (42,364) 

The main impairment losses on equity instruments related to Banca Intesa Sanpaolo Spa, for which the valuation on 31 st December 2011 

resulted in recognition of impairment amounting to €112.5 million (€36.8 million as at 31/12/2010). An impairment loss was also recognised on 

the investment in A2A Spa amounting to €3.3 million (€2.7 million as at 31/12/2010). 

Impairment losses on units held in OICRs (collective investment instruments) included those relating to the following: the Polis fund (Portfolio F. 

Property C.) amounting to €4.3 million; the Emerald Fund Trust amounting to €0.7 million; and the TL COM fund amounting to €0.7 million. 

Impairment losses of €1.6 million had already been recognised on this last item in the previous year. These impairment losses, the result 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 financial 

statements, was performed in relation to the continued lower value of the units with respect to the historical cost of purchase. 

8.3 Net impairment losses on held-to-maturity investments: composition 

This type of item is not present for the UBI Group. 

354

8.4 Net impairment losses on other financial transactions: composition 

Transactions / Components of 

income 

Impairment losses (1) 

Specific 

portfolio 

Write-offs Other of interest 

Reversals of impairment losses (2) 

Specific 

portfolio 



of interest 



2011 2010 

A. Guarantees granted - (2,443) (7,229) - 1,847 - 1,569 (6,256) (6,356) 

B. Credit derivatives - - - - - - - - - 

C. Commitments to pay funds - - (1,272) - - - 906 (366) (862) 

D. Other transactions - (2,609) - - 1,621 - 649 (339) (139) 

Total - (5,052) (8,501) - 3,468 - 3,124 (6,961) (7,357) 

355

SECTION 9 Net premiums – Item 150 

9.1 Net premiums: composition 

This item no longer exists in the UBI Banca Group, because UBI Assicurazioni has been 

excluded from the consolidation since 1 st January 2010. 

11: 516000O|1 - NOTA 

SECTION 10 Other income/expense of insurance operations – Item 160 

10.1 Balance of other income/expense of insurance operations: composition 



10.2 Composition of the sub-item “Net change in technical reserves” 



10.3 Composition of the sub-item “Claims paid during the year” 



12: 517020O|1 - NOTA 

SECTION 11 Administrative expenses – Item 180 

11.1 Personnel expense: composition 

Type of expense/Sectors 2011 2010 

1) Employees (1,425,623) (1,411,084) 

a) Wages and salaries (983,736) (948,075) 

b) Social security charges (267,758) (250,714) 

c) Post-employment benefits (60,928) (62,432) 

d) Pension expense (74) (105) 

e) Provision for post-employment benefits (9,078) (10,817) 

f) Provision for pension and similar: (2,930) (4,144) 

- defined contribution - - 

- defined benefits (2,930) (4,144) 

g) Payments to external supplementary pension plans: (50,431) (50,411) 

- defined contribution (50,154) (50,363) 

- defined benefits (277) (48) 

h) Expenses resulting from share based payments - - 

i) Other employee benefits (50,688) (84,386) 

2) Other personnel in service (6,504) (18,130) 

3) Director s and statut or y auditors (19,001) (22,118) 

4) Expenses for retired personnel 27,932 (252) 

Total (1,423,196) (1,451,584) 

Personnel expense includes a non-recurring item of income amounting to €27.9 million, 

recognised within item 4 “Expenses for retired personnel”. 

The amount relates to the release of amounts recognised in prior years due to actuarial 

recalculations of post-retirement benefits, now no longer considered due. 

356

11.2 Average number of employees by category 

31/12/2011 31/12/2010 

EMPLOYEES 18,645 18,994 

a) senior managers 468 510 

b) middle managers 7,482 7,561 

c) remaining employees 10,695 10,923 

OTHER PERSONNEL 476 677 

“Other personnel” also includes the directors and statutory auditors of Group member 

companies. “Other personnel” also includes the directors and statutory auditors of Group 

member companies. 13: 519010O|1 - NOTA 

11.3 Defined benefit company pension funds: total expenses 

See section 12.3 “Defined benefit company pension funds” in the balance sheet liabilities 

section. 

11.4 Other benefits for employees 

The item “Other benefits for employees” consists mainly of expenses relating to the leaving 

incentive plan amounting to €3.5 million, expenses for luncheon vouchers amounting to €20.9 

million and insurance expenses of €14.6 million. 

11.5 Other administrative expenses: composition 

2011 2010 

A. Other administrative expenses (666,346) (712,876) 

Rent payable (72,060) (77,847) 

Professional and advisory services (90,225) (102,647) 

Rentals hardware, software and other assets (36,211) (38,679) 

Maintenance of hardware, software and other assets (40,483) (40,842) 

Tenancy of premises (54,755) (51,748) 

Property maintenance (27,245) (27,816) 

Counting, transport and management of valuables (16,004) (16,503) 

Membership fees (9,468) (10,818) 

Information services and land registry searches (12,612) (13,168) 

Books and periodicals (1,877) (1,901) 

Postal (26,576) (31,906) 

Insurance premiums (44,276) (45,806) 

Advertising (26,007) (24,663) 

Entertainment expenses (2,017) (2,099) 

Telephone and data transmission expenses (58,531) (69,934) 

Services in outsourcing (46,439) (51,223) 

Travel expenses (23,476) (23,476) 

Credit recovery expenses (44,000) (46,103) 

Forms, stationery and consumables (11,137) (13,304) 

Transport and removals (7,354) (6,987) 

Security (9,736) (9,651) 

UBI Group merger expenses - - 

Other expenses (5,857) (5,755) 

B. Indirect taxes (214,707) (210,714) 

Indirect taxes and duties (37,498) (40,467) 

Stamp duty (140,749) (129,567) 

Municipal property tax (8,806) (9,029) 

Other taxes (27,654) (31,651) 

Total (881,053) (923,590) 

Table 14: 519000bO|1 - NOTA 

357

SECTION 12 Net provisions for risks and charges – Item 190 

12.1 Net provisions for risks and charges: composition 

Provisions 

Uses 

Net provisions in 

2011 

Net provisions in 

2010 

Additions to and uses of revocation provisions (3,635) 1,387 (2,248) (1,440) 

Additions to and uses of personnel expense provisions (450) - (450) (79) 

Additions to and uses of provisions for bonds in default (1,004) 718 (286) 46 

Additions to and uses of litigation provisions (20,016) 9,591 (10,425) (16,924) 

Other additions to and uses of provisions for risks and 

charges 

(28,363) 10,177 (18,186) (8,812) 

Total (53,468) 21,873 (31,595) (27,209) 

Table 15: 520000O|1 - NOTA 

Table 12.2 “Provisions for risks and charges – annual changes” in the balance sheet liabilities 

section may be consulted for provisions and uses of provisions for risks and charges 

SECTION 13 Net impairment losses on property, equipment and 

investment property – Item 200 

13.1 Net impairment losses on property, equipment and investment property: 

composition 

Assets/Components of income 

Depreciation 

(a) 

Impairment losses 

(b) 

Reversals of 


(c) 

Net result 

(a+b-c) 

A. Property, equipment and investment property 

A.1 Owned (110,116) - - (110,116) 

- for operational use (105,671) - (105,671) 

- for investment (4,445) (4,445) 

A.2 Acquired through finance lease (772) - - (772) 

- for operational use (772) (772) 

- for investment - - 

Total (110,888) - - (110,888) 

: 521000O|1 - NOTA3_ALT 

358

SECTION 14 Net impairment losses on intangible assets – Item 210 

14.1 Net impairment losses on intangible assets: composition 

Assets/Components of income 

Amortisation 

(a) 

Impairment losses 

(b) 

Reversals of 


(c) 

Net result 

(a+b-c) 

A. Intangible assets 

A.1 Owned (125,925) (546,683) - (672,608) 

- Internally generated by the company (160) (160) 

- other (125,765) (546,683) (672,448) 

A.2 Acquired through finance lease - 

Total (125,925) (546,683) - (672,608) 

Details are given in the footnote to Table 13.2 in the balance sheet assets section, which may 

be consulted. 

SECTION 15 Other net operating income/expense – Item 220 

15.1 Other operating expense: composition 

2011 2010 

Other operating expenses (77,219) (80,285) 

Fines and charges for late tax payments (219) (500) 

Depreciation of improvements to third party leased assets (7,443) (6,898) 

Ordinary maintenance of investment properties - - 

Other expenses and prior year expense (69,557) (72,887) 

- of which costs relating to finance lease contracts (7,145) (7,169) 

Table 16: 523000O|1 - NOTA1 

15.2 Other operating income: composition 

2011 2010 

Other operating income 320,284 319,715 

Charges to third parties for expenses on deposit and current accounts 15,458 13,745 

Recovery of insurance premiums 31,644 33,125 

Other income for property management 1,633 1,450 

Recovery of taxes 163,065 153,846 

Rent income 6,525 7,509 

Other income, expense recoveries and prior year income 101,959 110,040 

- of which recoveries on lease contracts 14,181 14,020 

Table 17: 523000O|1 - NOTA2 

359

SECTION 16 Profits (losses) of equity investments – Item 240 

16.1 Profits (losses) of equity investments: composition 

Income components/sectors 2011 2010 

1) Jointly controlled entities 

A. Income 301 - 

1. Revaluations - - 

2. Profits on sale 301 - 

3. Reversals of impairment losses - - 

4. Other income - - 

B. Expense - - 

1. Impairment losses - - 

2. Impairment losses due to deterioration - - 

3. Losses on sale - - 

4. Other expense - - 

Net result 301 - 

2) Companies subject to significant influence 

A. Income 14,143 101,641 

1. Revaluations - - 

2. Profits on sale - 81,387 

3. Reversals of impairment losses - - 

4. Other income 14,143 20,254 

B. Expense (4,196) (2,614) 

1. Impairment losses - - 

2. Impairment losses due to deterioration - - 

3. Losses on sale - (154) 

4. Other expense (4,196) (2,460) 

Net result 9,947 99,027 

Total 10,248 99,027 

Table 18: 525000O|1 - NOTA 

The amount in line A.2 of section 1 “Profits on sale” relates to the sale of 30% of By You S.p.A. 

in April 2011 at a price of €2,296 thousand. 

The amounts in lines A.4 “Other income” and B.4 “Other expense” of section 2 represent the 

profits and losses respectively of equity-accounted investees. 

Details are given in the note at the foot of Table 10.3 “Annual changes in equity investments” 

in the balance sheet section. 

360

SECTION 17 Net result of changes in the fair value of property, 

equipment and investment property and intangible assets – Item 250 

17.1 Net result of changes in the fair value (or at revalued amount) of property, 

equipment and investment property and intangible assets 

No “Net result of changes in the fair value of property, equipment and investment property and 

intangible assets” was recognised 

SECTION 18 Net impairment losses on goodwill – item 260 

18.1 Net impairment losses on goodwill: composition 


Goodwill 

recognised in 

separate 

balance sheets 

Value of UBI 

Banca 

synergies 

goodwill 

Goodwill arising 

on consolidation 

Total 

Banco di Brescia Spa 595,803 595,803 

Banca Popolare di Bergamo Spa 191,104 191,104 

Banca Regionale Europea Spa 236 135,100 135,336 

UBI Leasing Spa 2,000 158,337 160,337 

Banca Carime Spa 12,144 151,069 163,213 

Banca Popolare Commercio e Industria Spa 128,635 23,285 151,920 

B@nca 24-7 Spa 55,032 71,132 126,164 

Banca Popolare di Ancona Spa 91,087 91,087 

UBI Factor Spa 40,938 40,938 

UBI Pramerica SGR Spa 6,851 35,205 42,056 

Banca di Valle Camonica Spa 60,397 60,397 

Centrobanca Spa 7,193 18,535 10,592 36,320 

Banco di San Giorgio Spa 21,861 21,861 

UBI Banca International Sa 15,080 15,080 

UBI Management Company Sa 9,155 9,155 

UBI Fiduciaria Spa 2,052 2,052 

UBI Gestioni Fiduciarie Sim Spa 778 778 

Solimm Spa 171 171 

Centrobanca Sviluppo Imp. SGR 76 76 

UBI Assicurazioni SpA 30,001 30,001 

TOTAL 21,573 521,245 1,331,031 1,873,849 

Details are given in the footnote to Table 13.2 in the balance sheet assets section, which may 

be consulted. 

361

SECTION 19 Profits (losses) on disposal of investments – Item 270 

19.1 Profits (losses) on disposal of investments: composition 


A. Properties 6,793 7,789 

- Profits on sale 6,915 7,837 

- Losses on sale (122) (48) 

B. Other assets 25 6,669 

- Profit on sale 120 6,808 

- losses on sale (95) (139) 

Net result 6,818 14,458 

Profits on disposals in 2011 relating to item A “Properties” consisted primarily of profits on the 

disposal of assets belonging to Banca Popolare di Bergamo Spa and Banque de Depôts et de 

Gestion Sa. 

With regard to other assets, in 2010 profits on disposals related to the sale of a branch 

belonging to Banque de Depôts et de Gestion Sa. 

362

SECTION 20 Taxes on profit for the year from continuing operations – 

Item 290 

20.1 Taxes on profit for the year from continuing operations: composition 


1. Current taxes (-) (702,119) (357,990) 

2. Change in current taxes of prior years (+/-) 3,119 (2,800) 

3. Reduction in current taxes for the year (+) - - 

4. Change in deferred tax assets (+/-) 927,399 92,361 

5. Change in deferred tax liabilities (+/-) 43,592 36,449 

6. Taxes for the year (-) (-1+/-2+3+/-4+/-5) 271,991 (231,980) 

Comments on changes in income taxes are given in balance sheet asset section 14.. 530 

20.2 Reconciliation between theoretical taxation and actual taxation recorded in the 

accounts 

IRES (CORPORATE INCOM E TAX) Taxabl e income IRES % 

Theoretical IRES payable 388,718 (106,897) 27.50% 

Permanent increases 

- Non deductible interest expense 74,052 (20,364) 5.24% 

- Non deductible impairment losses on AFS securities 12,728 (3,500) 0.90% 

- Taxes on dividends of UBI subsidiaries - (1,235) 0.32% 

- Other minor impacts 22,426 (6,167) 1.59% 

Permanent decreases 

- Gains 95% PEX exempt (6,284) 1,877 -0.48% 

- Untaxed dividends (18,997) 5,224 -1.34% 

- Valuation of equity-accounted investees (9,947) 2,735 -0.70% 

- Allowance for Corporate Equity (22,225) 6,112 -1.57% 

Effective IRES payabl e 439,931 (122,215) 31.44% 

IRAP [LOCAL PRODUCTION TAX] taxable income IRAP % 

Theoretical IRAP payabl e 388,718 (21,652) 5.57% 

Permanent increases 

- Personnel expense + administrative expenses not deductible for IRAP purp 1,018,705 (56,742) 14.60% 

- Non deductible impairment losses on AFS securities 0 0 0.00% 

- Impairment of tangible and intangible assets not deductible for IRAP purpo 13,893 (774) 0.20% 

- Net impairment losses on loans not deductible for IRAP purposes 608,239 (33,879) 8.72% 

- Non deductible interest expense 64,997 (3,620) 0.93% 

- Provisions for risks and charges not deductible for IRAP purposes 28,862 (1,608) 0.41% 

- Non recoverable UBI IRAP loss IRAP (8,556) 2.20% 

Permanent decreases 

- Valuation of equity-accounted investees (9,947) 554 -0.14% 

- Untaxed dividends (9,999) 557 -0.14% 

- Other minor impacts (2,877) 160 -0.04% 

Effective IRAP payabl e 2,100,592 (125,559) 32.30% 

Total effective IRES and IRAP tax expense 388,718 (247,775) 63.74% 

363

SECTION 21 Post-tax profit after tax from discontinued operations – Item 

310 

21.1 Post-tax profit after tax from discontinued operations: composition 

Income components/sectors 31/12/2011 31/12/2010 

Asset/liability group 

1. Income - 

2. Expense - 

3. Results of change in fair value of assets and associated liabilities - 

4. Profit (loss) on sale 256 89,072 

5. Taxes and duties (8) (5,704) 

Profit (loss) 248 83,368 

Table 19: 532000O|1 - NOTA 

In the previous year, profit from discontinued operations amounting to €89.1 million related to 

the operation to dispose of an equity investment in RCB DEXIA Investor Services (net of the 

relative expenses) resulting from the contribution of depository banking operations, while €15 

thousand related to the disposal of a property located in Brescia belonging to UBI Banca Scpa. 

21.2 Details of taxes on income in relation to discontinued operations 

2011 2010 

1. Current taxation (-) (8) (5,704) 

2. Change in deferred tax assets (+/-) - 

3. Change in deferred tax liabilities (-/+) - 

4. Taxes on income for the year (-1+/-2+/-3) (8) (5,704) 

In the previous year, taxes recognised on the item profit from discontinued operations related 

almost entirely to the operation to dispose of the equity interest acquired with the contribution 

of depository banking operations just mentioned. 

able 20: 530010O|1 - NOTA 

SECTION 22 Profit (loss) for the year attributable to non-controlling 

interests – Item 330 

22.1 Details of the item 330 “Profit for the year attributable to non-controlling 

interests” 

Profit attributable to non-controlling interests, inclusive of the effects of consolidation entries, 

totalled €11,535 thousand and was composed as follows: 

2011 2010 

UBI Pramerica SGR Spa 11,279 

Banca Popolare Commercio e Industria Spa 5,354 2,769 

Banca Carime Spa 3,165 2,642 

Banca Popolare di Ancona Spa 2,117 1,048 

Centrobanca Spa 417 403 

IW Bank Spa 370 - 

Other companies 112 92 

Total 11,535 18,233 

364

22.2 Details of the item 330 “Loss for the year attributable to non controlling 

interests” 

Losses attributable to non controlling interests, inclusive of the effects of consolidation entries, 

totalled €32,138 thousand and were composed as follows: 

2011 2010 

Banca Regionale Europea Spa (18,361) (848) 

Banco di San Giorgio Spa (6,081) (954) 

Banca di Valle Camonica Spa (4,202) (637) 

UBI Leasing Spa (826) (792) 

Ubi Pramerica (2,365) 

Investnet International Sa (292) (1,305) 

IW Bank Spa - (92) 

Other companies (11) (3) 

Total (32,138) (4,631) 

SECTION 23 Other information 

No situations exist which require further information. 

SECTION 24 Earnings per share 

Introduction 

With the adoption of international accounting standards, all listed companies, or companies 

for which listing is in progress, which are required to prepare separate company and/or 

consolidated financial statements in compliance with IFRS (Legislative Decree No. 38/2005), 

must report the calculation of their earnings per share (EPS) in their financial statements in 

accordance with IAS 33. 

More specifically that standard requires both basic earnings per share and diluted earnings 

per share to be reported: 

(i) basic EPS has been calculated by dividing the profit attributable to the ordinary 

equity holders of the Parent (numerator) by the weighted average number of 

ordinary outstanding shares (denominator) during the year 

(ii) diluted EPS has been calculated by taking into account the dilutive effect of 

potential ordinary shares, i.e. financial instruments and/or contracts which assign 

rights to the holders to acquire ordinary shares. 

Earnings per share for the year ended 31 st December 2011 

Calculation of basic EPS 

On the basis of what has been stated above, the numerator for calculating basic EPS amounts 

to -€1,841,488 thousand. 

With regard to the denominator of this indicator, the weighted average number of outstanding 

ordinary shares as at 31 st December 2011 was 774,891,234. 

In this respect: 

(i) as at 1 st January 2011 the outstanding ordinary shares of UBI Banca numbered 

639,145,902; 

(ii) on 3 rd March 2011 268 shares were issued for the conversion of a convertible bond 

issue, 

(iii) on 3 rd June 2011 96 shares were issued for the conversion of a convertible bond 

issue; 

(iv) on 24 th June 2011 242,331,448 shares were issued following the exercise of option 

rights for the share capital increase; 

365

(v) 

(vi) 

(vii) 

(viii) 

(ix) 

(x) 

on 5 th July 2011 240 shares were issued for the conversion of a convertible bond 

issue; 

on 7 th July 2011 19,309 shares were issued for the conversion of rights held by 

warrant holders exercised in June 2011; 

on 11 th July 2011 5,706,984 shares were issued for unexercised option rights; 

on 18 th July 2011, 14,542,512 shares were subscribed by the underwriting 

syndicate; 

as at 31 st December 2011 UBI Banca held 1,200,000 treasury shares in portfolio; 

as a result of the above changes, the ordinary shares outstanding of UBI Banca 

numbered 900,546,759 as at 31 st December 2011. 

Calculation of diluted EPS 

For the purposes of calculating diluted EPS, as already stated, account must be taken of the 

dilutive effect on the ordinary shares of the Parent resulting from the presence of “potential” 

ordinary shares that are outstanding, such as for example: 

(i) instruments representing debt or equity, including preference shares, that are 

convertible into ordinary shares, 

(ii) options and warrants, 

(iii) shares to be issued if the conditions defined in contractual agreements are met. 

As already reported in the balance sheet section 15 “Equity attributable to the Parent”, 

potential ordinary shares of UBI Banca existed as at 31 st December 2011 for the possible 

conversion of a convertible bond issue (a maximum of 255,657,744 new ordinary shares). 

The right to convert the convertible bonds into ordinary shares of UBI Banca was exercised in 

2011 for at total of 604 new shares. 

To summarise: 

EPS 2011 2010 

Consolidated profit attributable to the Parent (thousands of euro) (1,831,333) 168,291 

Weighted average number of ordinary shares outstanding 774,891,234 639,145,902 

Basic earnings per share (in euro) (2.3633) 0.2633 

Diluted earnings per share (in euro) (2.3633) 0.2633 

The table that follows contains: (i) a reconciliation of consolidated profit attributable to the 

shareholders of the Parent and profit attributable to ordinary equity holders and also (ii) the 

dilutive effect on the average number of outstanding ordinary shares. 

EPS 2011 2010 

EPS with recognised profits 

Consolidated net profit attributable to the Parent (thousands of euro) (1,841,488) 172,121 

Profit not attributable to owners of ordinary equity instruments (thousands of euro) (10,155) (3,830) 

Consolidated profit attributable to the Parent (thousands of euro) (1,831,333) 168,291 

Number of shares existing at the beginning of the year 639,145,902 639,145,902 

Number of shares issued during the year 262,600,857 - 

Weighted average shares issued during the year 135,745,332 - 

Weighted average number of ordinary shares outstanding 774,891,234 639,145,902 

Weighted dilutive effect resulting from the exercise of potential ordinary shares - - 

Weighted average number of ordinary shares for diluted capital 774,891,234 639,145,902 

Basic earnings per share (in euro) (2.3633) 0.2633 

Diluted earnings per share (in euro) (2.3633) 0.2633 

366

Part D – Consolidated statement of comprehensive 

income 

Items 

2011 

Gross amount Tax on income Net amount 

10. Loss for the year X X (1,862,091) 

Other comprehensive income 

20. Available-for-sale financial assets: (1,318,585) 337,082 (981,503) 

a) changes in fair value (1,325,890) 359,421 (966,469) 

b) transfer to income statement 5,847 (2,636) 3,211 

- impairment losses (7,086) 773 (6,313) 

- profits on sale 12,933 (3,409) 9,524 

c) other changes 1,458 (19,703) (18,245) 

30. Property, equipment and investment property - 

40. Intangible assets - 

50. Foreign investment hedges - - - 

a) changes in fair value - 

b) transfer to income statement - 

c) other changes - 

60. Cash flow hedges: (4,030) 1,336 (2,694) 

a) changes in fair value (4,030) 1,336 (2,694) 



70. Currency translation differences: - - - 




80. Non current assets held for sale: - - - 




90. Actuarial losses on defined benefit plans: (29,363) 7,928 (21,435) 

100. Portion of fair value reserves attributable to equity-accounted investees: (82,867) 20,125 (62,742) 

a) changes in fair value (83,938) 20,389 (63,549) 

b) transfer to income statement 5,981 (1,463) 4,518 

- impairment losses 2,862 (711) 2,151 

- profits on sale 3,119 (752) 2,367 

c) other changes (4,910) 1,199 (3,711) 

110. Total other comprehensive items (1,434,845) 366,471 (1,068,374) 

120. Comprehensive loss (items 10+110) (2,930,465) 

130. Consolidated comprehensive loss attributable to non controlling interests (27,256) 

140. 

Consolidated comprehensive loss attributable to the shareholders of the 

parent 

(2,903,209) 

367

368

Part E - Information on risks and the relative 

hedging policies 

Section 1 - Banking Group Risks 

In compliance with current regulations, the UBI Group has adopted a risk control system which 

disciplines and integrates the organisational, regulatory and methodological guidelines of the system 

of internal controls with which all Group member companies must comply in order to allow the 

Parent to perform its activities of strategic, management and operational control in an effective and 

economical manner. 

Group member companies co-operate pro-actively in identifying risks to which they are subject and 

in defining the relative criteria for measuring, managing and monitoring them. 

The key principles on which Group risk analysis and management are based for the pursuit of an 

increasingly more knowledgeable and efficient allocation of economic and supervisory capital are as 

follows: 

- rigorous containment of financial and credit risks and strong management of all types of risk; 

- the use of a sustainable value creation approach to the definition of risk appetite and the 

allocation of capital; 

- definition of the Group’s risk appetite with reference to specific types of risk and/or specific 

activities in a set of policy regulations for the Group and for the single entities within it. 

The appetite for risk helps to define the strategic positioning of the Group and it is defined in 

compliance with its mission and its strategy and its business and value creation objectives. 

The definition of the UBI Group’s appetite for risk includes quantitative and qualitative factors: 

 

 

from a quantitative viewpoint, the risk appetite is given by the amount of capital that the 

Bank is willing to put at risk and it helps to define the strategic positioning of the Group; 

from a qualitative viewpoint, risk appetite relates to the Group’s desire to strengthen its 

management and monitoring systems and the efficiency and effectiveness of its system of 

internal controls. 

In view of the proposals to modify banking regulations (Basel 3) and the European Banking Authority 

(EBA) recommendation on capital, the overall planning for the Basel Two Project was moved forward 

by six months with respect to the original objective. Consequently, the first calculation of the 

minimum capital requirement using the Advanced Internal Rating Based (AIRB) approach for credit 

risk is planned for the June 2012 supervisory reports. In October and November 2011, the Parent, 

UBI Banca, was subject to a pre-validation inspection by the Bank of Italy and, subsequently, in 

meetings held on 15 th December 2011, the Management Board and the Supervisory Board approved 

the filing of an official application to the Supervisory Authority for authorisation to use the AIRB 

approach for the calculation of the capital requirement for credit risk. In the meeting just mentioned 

the Supervisory Board therefore certified compliance by the Group, both at consolidated and 

individual company level, with the minimum regulatory requirements set for the AIRB approach. 

Similarly, procedures were set in motion for authorisation to use the advanced internal method for 

the calculation of the capital requirement for operational risks (the advanced measurement approach 

369

– AMA) – in combined use with the traditional standardised approach (TSA) and the basic indicator 

approach (BIA) – which should also be complete by 30 th June 2012. 

With regard to the second pillar, the ICAAP report as at 31 st December 2011 is to be filed with the 

supervisory body in April 2012 and it will include first pillar risks, second pillar risks specified by 

regulations and risks identified independently by the Group. The structure of the report gives details 

of the following: strategic lines of development and the forecast horizon considered by the Group 

business plan; a description of corporate governance, organisational structures and systems of 

control related to ICAAP; exposure to risks, methods of measuring and aggregating them and stress 

tests; the components, estimates and methods of allocating internal capital; the relationship between 

internal capital, supervisory requirements and supervisory capital; and finally the self assessment of 

ICAAP, which identifies areas for further growth in the methodological model. 

When the ICAAP report is filed, a report will be made available to the public at the same time on the 

UBI Banca website (www.ubibanca.it), in the investor relations sector, in compliance with the third 

pillar requirements. The regulations introduce obligations to publish information on capital 

adequacy, exposure to risks and the general characteristics of the systems designed to identify, 

measure and manage them. 

The information to be provided favours greater transparency in the ways in which banks manage 

risk. The Bank of Italy has made special tables available in this respect in which the quantitative and 

qualitative information which banks must publish is classified, thereby making the data comparable. 

This part – sections 1 to 4 1 - furnishes information on the risk profiles listed below, on the relative 

management and hedging policies pursued by the Group and its activities relating to financial 

derivative instruments: 

a) credit risk; 

b) market risks: 

- interest rates, 

- price, 

- currency, 

c) liquidity risk; 

d) operational risks. 

Sections 5 and 6 also provide information on the risks pertaining to the insurance companies and 

other companies in the consolidation. 

A report on the general framework of the risks and uncertainties to which the UBI Group is exposed 

is given in a special section of the management report, prepared in compliance with Legislative 

Decree No. 32 of 2 nd February 2007, which implements EC Directive No. 2003/51/EC. 

1 Sections 1 to 4 provide information for the banking group only, except in cases where explicit reference is made 

to all the companies in the consolidation. 

370

1. CREDIT RISK 

Qualitative information 

1.1 General aspects 

The strategies, policies and instruments for the assumption and management of credit risk are 

defined by the Risk Management Area of the Parent in co-operation with the Credit and Credit 

Recovery Macro Area and with support and co-ordination of the relative specialist units. 

There is a particular focus in the formulation of policies to manage credit risk on maintaining an 

appropriate risk-yield profile and on assuming risks that are consistent with the risk appetite defined 

by senior management and, more generally, with the mission of the UBI Group. 

The priorities in the orientation of the Group's credit management policies are to support local 

economies, families, businessmen, professionals and small-to-medium sized enterprises. 

The particular attention paid to maintaining relationships established with customers and to 

developing them over the years is one of the strong points of the Group and it helps to eliminate 

information asymmetries and offers continuity in customer relationships with a view to long term 

support. 

Even in the continuing and difficult current economic situation, the Bank is ensuring that the 

economy has adequate access to credit by participating, amongst other things, in “Agreements” 

stipulated between the Italian Banking Association, the Ministry of Finance and trade associations, 

while preserving the quality of its assets and by employing an extremely selective approach to “non 

core” exposures. 

With regard to “business” customers in particular, lending rules have been formulated and are being 

followed for the disbursement and management of loans, which in operational terms translate into 

action which ranges from the development to the containment of exposures. These rules are based on 

a number of drivers as follows: 

internal counterparty rating (average weighted rating for Groups of companies), linked to the 

degree of protection provided by any accessory guarantees there may be; 

degree of engagement of the UBI Group with the counterparty or Group of companies; 

the economic sector to which the counterparty or Group of companies belongs with a view to: 

the level of sector risk; 

the overall level of concentration of the UBI Group in the individual economic sector (with 

verification also of the concentration at individual bank or company level). 

Finally particular attention is paid to the definition of guidelines for the treatment of new products, 

with adequate reporting to senior management concerning observance of risk-yield objectives, the 

calculation of minimum interest rates for granting loans, the quality of borrowers, guarantees 

received and expected rates of recovery in cases of insolvency. 

371

1.2 Policies for the management of credit risk 

1.2.1 Organisational aspects 

In the performance of its traditional banking business, the Group is exposed to the risk that the 

loans it grants will not be repaid by borrowers when they are due and that partial or full impairment 

losses must be recognised on them. More specifically the risk profile for lending is sensitive to the 

performance of the economy as a whole, to the deterioration in the financial position of 

counterparties (shortage of liquidity, insolvency, etc.), or to changes in their competitiveness, to 

structural or technological changes in corporate debtors and to other external factors (e.g. changes in 

legislation, deterioration in the value of financial guarantees and mortgages connected with market 

performance). A further risk factor to which the Group pays particular attention is the degree of 

diversification in the lending portfolio among different borrowers and among the different sectors in 

which they operate. 

The organisational model on which the units which manage lending activity is based is as follows: 

Parent units for centralised monitoring and co-ordination; 

the General Managements of banks and Group companies, to which the following report: 

- credit departments; 

- local credit centres, 

- branches; 

- corporate banking units (CBUs); 

- private banking units (PBUs). 

The characteristics of that organisational model ensure strong standardisation between the units of 

the Parent and the corresponding units in the network banks, with consequent linearity in the 

processes and the optimisation of information flows. Loan granting activity is also differentiated, at 

local level, by customer segment (retail/private banking/corporate and institutional) and specialised 

by the status of the loan: “performing” (managed by retail, private banking and corporate lending 

units) and “default” (managed by problem loan units). 

Furthermore, with regard to banks, the introduction of decentralised Local Credit Units to support 

retail branches and corporate banking and private banking units, ensures effective co-ordination and 

liaison between units operating on their respective markets. The Parent oversees policy management, 

overall portfolio monitoring, the refinement of assessment systems, problem loan management and 

compliance with regulations through the Credit and Credit Recovery, Risk Control, Strategic 

Development and Planning and the Parent and Group Audit Macro Areas. 

For all those entities (individual companies or groups) with authorised credit from banks and 

companies in the Group (including risk activities involving issuer and related risks), which totals 

more than €50 million, the Parent must set an operational limit which is the maximum credit that 

may be authorised for the counterparty at UBI Group level. The Management Board of the Parent is 

responsible for granting, changing and renewing operational limits on the proposal of the UBI Credit 

Area after first consulting the UBI Credit Committee. 

The banks and companies of the Group must also request a prior, consultative, non binding opinion 

from the Parent for combinations of a) amounts of authorised credit and b) determined internal rating 

classes. It is the Parent’s duty to assess whether it is consistent with the credit policies of the Group, 

according to the criteria and parameters laid down in the credit authorisation regulations of the 

Group. A prior opinion is not required for credit authorisations for single counterparties or groups of 

companies which fall within the operational limits that have been set. 

372

In consideration of the specific federal organisation of the UBI Group, the Parent decided to adopt a 

“focused” model for the management of corporate customers common to more than one network bank 

on the basis of which, briefly: 

- decisions relating to credit risk management, pricing and the formulation of commercial policies for 

customers common to two or more banks are centred on a lead bank, termed the pivot bank, thereby 

avoiding the generation of a decrease in the overall profitability on the counterparty; 

- non pivot banks abstain from opening new accounts and/or from granting new credit facilities. 

A Pivot Bank may be defined as the bank which has the best chances, with its own business units, of 

arranging new business and/or intensifying existing business with the customer in common, in order 

to draw the greatest possible benefit for the whole banking Group. It therefore directs the other banks 

involved with regard to the most appropriate conduct to follow to improve business with the customer 

as a whole. 

The various organisational units in banks and product companies are responsible for credit and 

commercial activities and they also hold responsibility for monitoring both the activity they perform 

directly and that performed by those units which report to them. More specifically, responsibility for 

managing and monitoring performing loans lies in the first instance with the account managers who 

handle daily relationships with customers and who have an immediate perception of any 

deterioration in credit quality. Nevertheless, all employees of Group member companies are required 

to promptly report all information that might allow difficulties to be identified at an early stage or 

which might recommend different ways of managing accounts, by concretely participating in the 

monitoring process. 

In the second instance, the organisational unit responsible for monitoring credit risk is the Credit 

Quality Management and Monitoring Unit, which carries out monitoring, supervision and analysis of 

performing positions on both a case by case and a collective basis, where the intensity and degree of 

detail of the analysis is a function of the risk class attributed to the counterparties and the 

seriousness of the performance problems. This unit, not involved in loan approval procedures, either 

on its own initiative or on submission of a proposal, may assess a position and decide (or propose to 

a superior decision-making unit when the decision does not lie within its powers), to change the 

classification of performing counterparties to a more serious status. In these cases it asks, through 

its Credit Department, the Credit Area of UBI Banca to issue a prior non binding opinion in those 

cases where Credit Authorisation Regulations require it. The Portfolio Policy and Quality Service in 

the UBI Banca Credit and Credit Recovery Macro-Area is responsible for co-ordinating and defining 

guidelines for monitoring the lending portfolio, overseeing the development of monitoring tools, 

monitoring credit policies and preparing management reports. 

Furthermore an “arrears management” system is operational, designed to preserve and protect 

customer relationships through the prompt resolution of lending irregularities (late 

repayments/unauthorised overdrafts) detected on performing private individual and “small economic 

operator” customers by providing centralised support contact with customers to normalise problem 

loan positions. 

The Risk Management Area is located in the Risk Control Macro Area and it performs the following 

through its Credit Risk Service: 

– it defines, in co-operation with the Methods and Models Service, Group criteria and 

methodologies for the development of internal rating models – probability of default (PD), loss 

given default (LGD), and exposure at default (EAD) – in line with regulatory requirements and 

best practices; 

373

– it works with the Rating Desk and the Major Borrowers Rating units in that same Area, on the 

definition of methods for assigning counterparty ratings; 

– it produces periodic analyses which illustrate the risk profile of the total lending portfolio and 

the commercial sub-portfolios at Group level and at the level of individual legal entities, in 

terms of distribution by rating class, LGD and expected loss, loan impairment rates and 

concentration in the largest customers; 

– it develops methods, in co-operation with the Tax and Administration Area, for calculating 

collective provisions to be recognised in the financial statements on the basis of internal credit 

ratings for the network banks and Centrobanca and loan impairment rates for the other 

banks and product companies; 

– it calculates loan deterioration rates for the Group and defines the relative calculation 

methods for individual legal entities; 

– it works with the Commercial Macro Area and with the Planning and Management Control 

Area to provide input parameters (PD, LGD, EAD) for product pricing activities. 

Furthermore, the Credit Risk Service plays a key role within the Basel 2 project: 

– it formulates guidelines on credit risk matters generally and also with regard to periodic 

reporting to the Supervisory Authority; 

– it draws up roll-out plans for models implemented at the Parent; 

– it monitors the extent to which regulatory provisions are covered by internal rating models; 

– it co-ordinates activities for the development and maintenance of internal rating processes 

and systems. 

Finally, the Risk Policies Service forms part of the Risk Management Area and it formulates policies 

for the assumption and management of risk, including credit risk. 

More specifically, the service formulates the operational details of policies by preparing regulations to 

implement them and also detailed documents, both for the Parent and for single banks and 

companies, which illustrate aspects relating to the definition, use, monitoring and reporting of risk in 

relation to compliance with the guidelines and the indicators that are set. 

These documents are implemented by the Group banks and companies, which must have a 

knowledge of the risk profile and the risk management policies defined by the senior management of 

the Parent and which must contribute, each within the scope of their responsibilities, to the 

implementation, consistent with the reality of their companies, of the risk management strategies and 

policies decided by the senior management of the Parent. 

The Service also provides specialist support for the operational implementation of the policies and 

regulations for them, concerning the assumption and management of credit risk and it periodically 

monitors their consistency with Group operations, and proposes corrective action if necessary. 

The Area then defines in detail, and undertakes, active credit portfolio management action designed 

to optimise the creation of value on the loan portfolio and also takes initiatives to mitigate, monitor 

and transfer credit risk (e.g. securitisations), assessing the impact on economic capital and on 

supervisory capital requirements. As concerns the production and distribution of products which 

involve the assumption of credit risk by Group member companies, it participates, together with the 

Commercial Macro Area, in the definition of the relative convention agreements. 

1.2.2 Management, measurement and control systems 

The Credit Risk Service is responsible for Group reporting on credit risk in order to monitor changes 

in the risk attached to lending for individual banks and commercial portfolios. The reports are 

374

submitted quarterly to the Boards of Directors of the individual network banks. For the network 

banks and Centrobanca the reports describe distributions by internal rating classes, LGD and 

expected loss and for the network banks they also give changes in average risk for the corporate 

market, the small business portfolio in the retail market and for the affluent and mass market 

portfolios again in the retail market. Reporting for the product companies is based on the specific risk 

for the various types of lending and products marketed. Special reports on specific matters are also 

prepared on the main components of credit risk. 

The set of models which constitute the internal rating system (IRB) of the Group are managed by the 

Risk Management Area and by the Credit Area. 

The system at present involves the use of automatic models for private individuals and small-sized 

businesses, automatic models supplemented by qualitative questionnaires and a geo-sectoral module 

for medium to large-size businesses. However, a mainly judgemental model for major borrowers (i.e. 

groups of companies with authorised credit of greater than €20 million) was discontinued from July 

2011. 

Automatic models summarise ratings statistically on the basis of the following risk factors 

appropriately calibrated according to the type of counterparty or model: 

- economic and financial factors; 

- performance factors (internal and external); 

- qualitative factors (competitive positioning, corporate structure, etc.); 

- geo-sectoral factors. 

As part of the Basel 2 project activities, which involve an initial validation on the network banks and 

Centrobanca limited to the “businesses” supervisory portfolio, estimates were performed on a new 

generation of rating and LGD estimation models for that portfolio, following, amongst other things, 

discussions with the Supervisory Authority. 

The main features of this new generation of rating models are as follows: 

the revision of the credit risk segmentation, which defines which model is applied to each 

counterparty; 

the development of a new quantitative component, which uses internal models for the analysis 

of the financial component, abandoning the use of a model furnished by an external provider; 

the development of new software engines to integrate the different components of quantitative 

analysis; 

the development of new qualitative questionnaires; 

a different procedure for incorporating information on the group of companies to which a 

counterparty belongs within automatic rating models; 

a different procedure for updating ratings designed to ensure an optimum mix between the 

need to incorporate up-to-date information and maintain a low level of volatility. 

Estimates were performed with regard to LGD on the new models for the network banks, based, 

amongst other things, on econometric estimate factors and used both from a management and 

regulatory viewpoint. Centrobanca’s estimate models were also subjected to detailed revision, which 

involved not only an update of the historical data series employed, but also a revision of the clusters 

and underlying assumptions, with a conservative orientation. 

375

Credit processes within the network banks work with information channelled from the rating system 

as described in detail below. 

The operational units involved in the loan disbursement and renewal process use internal credit 

ratings, which constitute necessary and essential evaluation factors for credit authorisations when 

these are assessed and revised. Powers to authorise loans are based on the risk profiles of the 

customers or the transactions as given by the credit rating and by the expected loss, while they are 

managed using Pratica Elettronica di Fido (electronic credit authorisation) software. The credit 

ratings are used, amongst other things, to monitor loans both by the management reporting system 

and in the information made available to units in banks involved in the lending process. 

The assignment to rating classes that are different from those calculated by the internal rating 

system on the basis of the models adopted is made by proposing an override on the rating for which 

the methods of presentation, examination and validation are different for cases of: 

higher rating override; 

lower rating override. 

These changes are made on the basis of information not already considered by the rating model, not 

adequately weighted by the model or where it is intended to anticipate the future influence of the 

information. 

In addition to the process for the disbursement, renewal and monitoring of credit and to the 

departmental reporting process just described, the processes directly affected by internal ratings or in 

which internal estimates of PD and LGD are described below. 

The calculation of collective impairment losses on performing loans 

The calculation methodologies used for the calculation of collective impairment losses on performing 

loans in the network banks and at Centrobanca are different from those used by the main product 

companies of the Group. 

More specifically a method is employed for loans (and guarantees) to customers in network banks 

and at Centrobanca based on internal estimates of PD (probability of default) associated with internal 

ratings and estimates of LGD (loss given default). The latter uses operational corrective factors with 

respect to the parameters used for regulatory purposes. It should be noted that the percentages of 

impairment resulting from the application of the PD and LGD are also used for “irrevocable 

commitments of uncertain use” to which the supervisory credit conversion coefficient is also applied. 

The approach currently used for those product companies most subject to credit risk is that based on 

impairment rates for loans which uses a broader definition of default that includes changes of 

classification from performing to impaired and non-performing classes (B@nca 24/7 and UBI Leasing) 

and internal estimates of LGD. 

As concerns LGD, different internal estimates are used at UBI Leasing for different types of product 

and sales channel, while expert values are applied at Banca 24/7, estimated on the bank’s own data 

where significant and in other cases values are borrowed from similar products sold by the network 

banks. Special “danger rates” need to be applied to render the definitions of default used for 

impairment rates and estimates of LGD consistent. For both UBI Leasing and Banca 24/7, these are 

estimated on internal data and differentiated by product. Further refinements and updates of 

parameters were performed within this methodological framework in 2011. For UBI Leasing they 

376

involved an update of the historical data series and for Banca 24/7 a specific development of the 

management of the salary backed loans portfolio. 

The calculation of risk adjusted pricing levels 

Expected loss is one of the inputs for the calculation model for theoretical minimum pricing levels 

which guarantee achievement of a return on risk adjusted capital (RORAC). According to the risk 

adjusted pricing policy pursued, theoretical minimum pricing matrices are defined by market and 

segment, product and type of guarantee, rating and maturity. 

Creation of value, capital allocation and incentive schemes 

As part of its capital management processes, the UBI Group applies multi-period methodologies to 

assess risk adjusted performance that are designed to measure and summarise the effects of 

economic, asset, risk and capital variables that impact the creation of wealth for shareholders. With 

regard to the incentive scheme, one of the quantitative objectives of the scheme is the cost of credit 

on loans, which incorporates the collective impairment loss component, calculated using 

measurements of PD and LGD. 

Stress tests 

Stress tests for credit risk are performed in relation to the ICAAP Report, as support in the 

preparation of business plans and in response to specific requests by the Bank of Italy. More 

specifically, stress tests are performed on those exposure classes that can present greater variability 

in the ratio between risk weighted assets (RWA) and the corresponding amount of the exposure. 

The scenarios analysed involve an increase in the average ratio between the amount of the exposure 

and RWAs of differing dimensions, estimating the impact on capital ratios. 

The Group intends within the framework of the Basel 2 project to apply for authorisation from the 

supervisory body to use its own internal rating and LGD ratings for the purpose of determining 

minimum supervisory requirements firstly for the “corporate” and then subsequently for “retail 

exposure” supervisory portfolios. The Group pursues the objective of maintaining a level of 

capitalisation that is adequate for the actual risk of its lending portfolio and therefore of using the 

rating and LGD calculation systems which are already used for operating purposes also for 

supervisory purposes. 

As recommended by the Bank of Italy circular No. 263/2006, New Supervisory Instructions for 

Banks, the Group currently adopts the standardised approach for the determination of supervisory 

capital. It was decided to make use, for the “businesses and other” supervisory class of exposures in 

particular, of external credit ratings, where available, furnished by the agencies Moody’s and Cerved 

Group (formerly Lince), which are ECAIs (External Credit Assessment Institutions) recognised by the 

Bank of Italy. 

Activity also continued in 2011 to revise, update and adopt policies and regulations for credit risk 

management. 

Existing policies are listed below together with the principal contents. 

377

Credit risk management policy 

A process to adopt a credit risk management policy was concluded in the first quarter of 2011, 

together with the completion of the relative regulations to implement it and the documents to set 

limits both for the Group and for single banks and companies. The process allows a common 

approach to be followed for the assumption of risk and procedures to manage it across the entire 

Group and it standardises risk indicators, while taking account of the specifics of each class of risk. 

The policy gives details of limits and it regulates the procedures for assuming risk for the following 

types of risk: 

- credit risk (including counterparty risk): the risk of incurring losses resulting from the default of a 

counterparty with whom a position of credit exposure exists. Credit risk can be divided into the 

following two types: 

- credit risk relating to business with ordinary customers, with a specific focus on: 

credit risk relating to Centrobanca’s business involving structured finance; 

credit risk relating to Centrobanca’s private equity business; 

- credit risk relating to business with institutional customers and with ordinary customers 

resident in high risk countries; 

- concentration risk: risk resulting from the existence of large exposures to single counterparties (or 

groups) or resulting from exposures to groups of counterparties which operated in the same 

economic sector or which are located in the same geographical area. Concentration risk is divided 

into two types: 

 

 

single name concentration risk; 

sector concentration risk. 

Ordinary customers 

Standards, principles and limits to manage credit risk are set for ordinary customers both at 

consolidated level and for individual legal entities, on the basis of the availability of risk drivers 

generated by the internal rating model (rating class, probability of default and loss given default). The 

definition of the limits is based on a series of indicators expressed in terms of: capital allocation, 

values for maximum risk (i.e. target and maximum expected loss and cost of credit), limits on the 

assumption of risks in terms of the distribution of exposures by credit rating class and the 

management of credit quality. 

The Credit Risk Management Service prepares quarterly reports on compliance with the indicators set 

for all the Areas concerned and for the governing bodies of the Parent and the individual banks and 

companies in the Group. 

Structured finance 

A specific focus was placed on structured finance business performed by Centrobanca. 

The term structured finance operations refers to non standard finance operations, formulated on the 

basis of the specific requirements of customers, usually performed for industrial or infrastructure 

investments, or to acquire listed and unlisted companies. It may be promoted by institutional 

investors. 

378

Specific limits are set for this business which combine the achievement of budget targets in terms of 

volumes disbursed and profitability with appropriate management in terms of distribution by rating 

and transaction classes, concentration for single exposures and maximum duration. 

The Centrobanca Credit Monitoring Service introduced a target process for monitoring limits, with the 

relative monthly reporting. 

Private equity 

A specific focus was placed for ordinary customers on private equity business which consists of 

acquiring stakes in a target company either by purchasing existing shares from third parties or by 

subscribing new share issues to bring new capital to the target company. More specifically the 

mission and relative strategies are specified, distinguishing between the acquisition of direct interests 

and the subscription of units in private equity funds formed by entities within the Group or outside 

it. 

Institutional counterparty and country risk 

For institutional and ordinary customers resident in high risk countries, the risk management policy, 

the relative regulations to implement it and the documents containing the limits, set standards, 

principles and limits designed to ensure proper management of the entire process of the assumption, 

management and monitoring of credit risk in this area. 

Limits are set for maximum exposure to credit risk as follows: 

 

 

 

maximum exposure limits: maximum limits on total authorised credit for the different risk 

classes of the exposures (combinations of counterparty ratings and country ratings) at Group 

and individual company level; 

single name concentration limits: maximum limits on total authorised credit for each borrower 

for the different risk classes (combinations of counterparty ratings and country of residence 

ratings) defined at Group level; 

country concentration limits: maximum limits on total authorised credit for each country defined 

at Group and individual company level. 

Concentration risk 

Geo-sectoral concentration risk is dealt with as part of second pillar risks. The policy sets a specific 

capital requirement to take account of the higher sensitivity of a more concentrated portfolio. 

Single name concentration risk is addressed by setting maximum exposure limits on single 

counterparties in order to limit risks of instability that would arise from high rates of concentration 

for loans to major borrowers if one of these should default. The limits set are based on counterparty 

ratings and the type of transaction. 

The contents of the policy have been set out in regulations and in a document which gives details of 

the limits approved by the Management Board. 

379

Policy for the distribution of mortgages through brokers 

This policy regulates the procedures for the use of external distribution networks for granting 

mortgages to non captive customers in order to mitigate potential credit, operational and reputational 

risks. 

The policy defines the following: 

 

 

 

minimum capitalisation limits for the brokerage companies and a prohibition on direct 

agreements with mortgage brokers and real estate agents; 

minimum contents for agreements between distribution networks and banks or companies in the 

UBI Group including, for example, the specification of a minimum list of risk indicators to be 

monitored for which there must be a provision in the agreement that requires the network to 

remain within certain limits. Once those limits are exceeded penalties are applied (if maximum 

risk limits are exceeded) or bonuses are paid (if particularly low levels of risk are achieved) to the 

distribution network; 

an obligation by banks entering into agreements to put a process in place to monitor changes in 

the risk indicators just mentioned, with support from the Parent. 

Policy on the portability, renegotiation, substitution and early repayment of the mortgages of 

direct customers of the network banks 

The policy on the portability, renegotiation, substitution and early repayment of mortgages of the UBI 

Group furnishes guidelines for portability (in both directions), the renegotiation (including the 

rescheduling of instalments as regulated by the agreement between the Ministry of the Economy and 

Finance and the Italian Banking Association), the substitution and early repayment (partial or total) 

of mortgages. It is designed (by setting minimum standards of service amongst other things) to 

minimise processing times, conditions and related costs and also to equip the Group with appropriate 

processes and instruments to manage the relative risks (credit, operational and reputation). 

The policy also defines objectives for the maximum time limits for responding to customers for which 

a specific monitoring process has been launched. 

Policy on the portability, renegotiation, substitution and early repayment of mortgages granted 

through brokers 

As was defined for the mortgages of direct customers of the network banks, the policy on the 

portability, renegotiation, substitution and early repayment of brokered mortgages sets, for this 

specific type of business, maximum time limits for responding to customers for which the necessary 

monitoring process must be put in place. 

Risk-adjusted pricing policy 

The risk-adjusted pricing policy defines a process to formulate and implement risk-adjusted pricing 

approaches for various products which involve the assumption of credit risk. 

The price setting process involves a detailed process of defining and using prices to ensure that: 

380

the prices approved become the reference used by the Credit Committee of the Parent and the 

loan approval units of the individual banks and they must be given in all loan approval 

proposals; 

– appropriate operational and IT procedures are defined to implement the pricing framework. 

Policy on risks resulting from securitisations 

The “Policy on risks resulting from securitisations” sets guidelines for the Group to manage risks 

relating to securitisations defined as “the risk that the underlying economic substance of a 

securitisation is not fully reflected in decisions made to measure and manage risk”. This risk relates 

to both conventional and synthetic securitisations originated by the Group which involve the transfer, 

at least partial, of the risk attaching to the securitised assets. 

The process of implementing a securitisation must involve stating the objective of the transaction and 

the role played by the UBI Banca Group in it and verification that it is fully compliant with the 

requirements contained in Bank of Italy Circular 263 “New regulations for the prudent supervision of 

banks” of 27 th December 2006. 

The UBI Group will make sole use of agencies recognised by the Bank of Italy (ECAI – External Credit 

Assessment Institution) when assigning ratings to bonds and/or the tranches issued. 

Policy on residual risk 

The “Policy on residual risk” formulates strategic orientations relating to the management of “residual 

risk”, defined as the risk of incurring losses resulting from the unforeseen ineffectiveness of 

established methods of mitigating credit risk used by the UBI Group. 

The policy contains a definition of the process of control over the acquisition and use of techniques to 

reduce credit risk in order to mitigate that risk. 

That process is centred on the definition of appropriate risk management processes designed firstly to 

ensure the verification of compliance with supervisory regulations, distinguishing between: 

 

 

“general requirements”, such as “legal certainty”, the “speed of implementation” and 

“organisational requirements”; 

“specific requirements”, with particular attention to revaluation and monitoring of collateral 

and guarantees and verification of the absence of substantial correlation between the ability of 

the debtor to repay and the collateral. 

1.2.3 Techniques for mitigating credit risk 

The Group employs standard risk mitigation techniques used in the banking sector by acquiring 

security such as properties and financial instruments as well as personal guarantees from 

counterparties for some types of loan. Determination of the total amount of credit that can be granted 

to a given customer and/or group of companies to which the customer belongs takes account of 

special criteria for assigning weightings to the different categories of risk and to guarantees. Prudent 

"haircuts" are applied to the estimated value of collateral depending on the type of security. 

The main types of security accepted by the Group are as follows: 

- real estate mortgage 

381

- pledge. 

In the case of mortgage collateral, a distinction is made between specially regulated “land” mortgage 

loans and ordinary mortgage loans with regard to the amount of the loan, which in the former case 

must comply with limits set in relation to the value or the cost of the assets used as collateral. 

Pledges represent the second general class of collateral used and different possible types of pledge 

exist within the Group depending on the instrument which is used as the collateral. They are as 

follows: 

- pledges on dematerialised financial instruments such as for example government securities, 

bonds and shares in listed companies, customer portfolio managements, bonds of the Group, 

etc.; 

- pledges of material securities, e.g. valuables and/or sums deposited on current accounts or 

bearer or named savings accounts, certificates of deposit, units in mutual funds, shares and 

bonds issued by unlisted companies; 

- pledges on insurance policies; 

- pledges of quotas held in limited liability companies, which by law must be formed by a 

notarial deed and are subject to registration. 

A pledge on the value of financial instruments is performed using defined measurement criteria and 

special “haircuts” which reflect the variability in the value of the security pledged. In the case of 

financial instruments denominated in foreign currency, the “haircut” applied for the volatility of the 

exchange rate must be added to that for the volatility of the security. 

As concerns pledges on rights arising from insurance policies, these may only be constituted on life 

insurance policies for which the regulations expressly allow the possibility of a pledge in favour of the 

Bank and only if determined conditions are met (e.g. once the time limit for exercising redemption 

rights has expired, policies which pay only in “case of death” must be excluded, and so forth). Special 

measurement criteria and “haircuts” are also defined for insurance policies. 

In order to ensure that general and specific requirements are met for recognition of collateral, as part 

of its credit risk mitigation techniques (CRM) (in accordance with Bank of Italy Circular No. 263 of 

27/12/2006 and subsequent updates), for prudent purposes the UBI Group has performed the 

following: 

- redefined credit processes relating to the acquisition and management of collateral. With 

particular regard to mortgages, in network banks it is compulsory to enter all data on a 

property needed to render collateral eligible in account manager software systems. Particular 

attention was paid to the compulsory nature of expert appraisals and to the prompt recovery 

of the relative information, including notarial information (details of registrations), essential 

for guarantees to be accepted; 

- acquired, for existing mortgages, all the information required to ensure that they are 

admissible, in line with the provisions of Basel 2 in terms of specific requirements. 

Organisational and IT procedures were consolidated in 2011 for the management of collateral, based 

on set processes to approve, value and monitor them. 

1.2.4 Deteriorated financial assets 

The classification of the problem loan portfolio complies with official regulations and can be 

summarised as follows: 

382

exposures past due and/or continuously in arrears; 

restructured positions; 

impaired loans; 

non-performing loans. 

In addition to those classes, there remains a type of problem loan in respect of “country risk” for 

unsecured exposures to institutional and ordinary customers belonging to countries considered as 

“at risk” as defined by the supervisory authority. With regard to “impaired” loans, in order to optimise 

management and solely for operational purposes, these are divided into positions for which it is 

considered that the temporary situation of objective difficulty can be overcome in a very short period 

of time (nine months) and the remaining positions, for which it is felt best to disengage from the 

account with credit recovery out of court over a longer period of time. Additionally, loans past due 

and/or continuously in arrears are subject to controls to decide, within a maximum operational 

period of 60 days, whether to reclassify them as either “performing” or into another non-performing 

loan class. 

The management of problem loans is performed on the basis of the level of risk. It is performed by the 

organisational units responsible for the management of problem loans of individual banks and 

product companies. For “non-performing loan” positions of the network banks (limited to those 

positions for which the management centralisation process has been completed) and Centrobanca 

(from January 2012 for the latter), managemement is by the Non-Performing Loans Service of the 

Credit and Credit Recovery Macro Areas of the Parent where the centralised management process was 

completed. 

Assessment of the appropriateness of impairment losses recognised is performed on a case by case 

basis for individual positions to ensure adequate levels of cover for expected losses. 

The analysis of deteriorated exposures is performed continuously by the single operational units 

which manage risks and by the Parent. 

The resolution of difficulties by counterparties is a determining factor for the return of positions to 

“performing” status. This event occurs principally and above all for accounts which are past due 

and/or continuously in arrears and for impaired accounts. 

383

Quantitative information 

A. Credit quality 

A.1 Deteriorated and performing credit exposures: amounts, impairment losses, 

changes, economic and geographical distribution 

A.1.1 Distribution of financial assets by portfolio and according to credit quality 

Portfolios/quality 

Nonperforming 

loans 

Impaired 

loans 

Ba nking g roup 

Restructured 

exposures 

Past due 

exposures 

Other compa nies 

Other a ssets Deter iorated Other assets 

1. Financial assets held for tradi ng 1,169 7,407 1, 444 1,957 2, 759,784 - 2 2, 771, 763 

2. Available-for-sale financial assets - - - - 7,551,732 - - 7, 551, 732 

3. Held-to-maturity investments - - - - - - - - 

4. Loans to banks 67 - - - 6, 172,953 - 10,980 6, 184, 000 

5. Loans to customers 2,480,569 2 ,533,660 8 40, 681 424,006 93, 387,735 968 22,151 99,689,770 

6. Financial assets at fair value - - - - - - - - 

7. Financial assets held for disposal - - - - - - - - 

8. Hedging deriva tives - 83 - 3 1, 090,412 - - 1, 090, 498 

31/12/2011 2,481,805 2,541,150 842,125 425,966 110,962,616 968 33,133 117,287,763 

31/12/2010 1,940,450 2,039,732 830,954 464,573 112,338,652 3,258 99,487 117,717,106 

Total 

384

A.1.2 Distribution of credit exposures by portfolio and by credit quality (gross and net 

amounts) 

Por tfolios/quality 

G ross expo sure 

Deteriora ted assets 

Specific 


Net exposure 


Ot her asset s 

Portfolio 


Ne t exposur e 

Total 

(net exposure ) 

A. Banking group 

1. Financial assets held for tradi ng 14,302 (2, 325) 11,977 2, 759,784 - 2,759,784 2,771,761 

2. Availa ble-f or-sale financial assets - - - 7, 551,732 - 7,551,732 7,551,732 

3. Held-to-maturity investments - - - - - - - 

4. Loans to banks 179 (112) 67 6, 173,102 (149) 6,172,953 6,173,020 

5. Loans to customers 8, 881,880 (2,602, 964) 6,278,916 93, 929,376 (541, 641) 93,387,735 99,666,651 

6. Financial assets at fair value - - - - X - - 

7. Financial assets held for disposal - - - - - - - 

8. Hedging deriva tives 86 - 86 1, 090,412 X 1,090,412 1,090,498 

Total A 8,896,447 (2,605,401) 6,291,046 111,504,406 (541,790) 110,962,616 117,253,662 

B. Othe r consolida ted undertakings 

1. Financial assets held for trading - - - 2 X 2 2 

2. Availa ble-for-sale financial assets - - - - - - - 

3. Held-to-maturity investments - - - - - - - 

4. Loans to banks - - - 10,980 - 10,980 10,980 

5. Loans to customers 1,081 (113) 968 22,174 (23) 22,151 23,119 

6. Financial assets at fair value - - - X X - - 

7. Financial assets held for disposal - - - - - - - 

8. Hedging deriva tives - - - X X - - 

Tot al B 1,081 (113) 968 33,156 (23) 33,133 34,101 

31/12/2011 8,897,528 (2,605,514) 6,292,014 111,537,562 (541,813) 110,995,749 117,287,763 

31/12/2010 7,760,139 (2,481,172) 5,278,967 112,957,999 (519,860) 112,438,139 117,717,106 

A.1.2.1 Distribution of renegotiated and non renegotiated performing credit exposures by 

portfolio (total for the "Banking Group" and "Other consolidated undertakings ") 

Portfolios/time past due 

Exposures subject to renegotiation as part of collective agreements 

Past due under Past due over Past due over Past due 

Not past due 

3 months 3 months 6 months over 1 year 

Past due under 

3 months 

Past due over 

3 months 

Other exposures 

Past due over 

6 months 

Past due 

over 1 year 

Not past due 

Total 

(net exposure) 

1. Financial assets held for trading - - - - - - - - - 3,745,266 3,745,266 

2. Available-for-sale financial assets - - - - - - - - - 6,347,375 6,347,375 

3. Held-to-maturity investments - - - - - - - - - - - 

4. Loans to banks - - - - - - - - - 40,609,959 40,609,959 

5. Loans to customers - 15,256 4,416 - 4,168,498 - 126,439 45,269 1,203 54,993,500 59,354,581 

6. Financial assets at fair value - - - - - - - - - - - 

7. Financial assets held for disposal - - - - - - - - - - - 

8. Hedging derivatives - - - - - - - - - 938,568 938,568 

Total (T) - 15,256 4,416 - 4,168,498 - 126,439 45,269 1,203 106,634,668 110,995,749 

385

A.1.3 Banking Group - On- and off-balance sheet credit exposures to banks: gross and net 

amounts 

Type of exposure/amounts 


Specific impairment 

losses 

Portfolio 


Net exposure 

A. On-balance sheet exposure 

a) Non-perfor ming loans 179 (112) X 67 

b) Impaired loans - - X - 

c) Restructured exposures - - X - 

d) Past due exposures - - X - 

e) Other assets 7,094, 545 X (149) 7, 094,396 

Tot al A 7, 094, 724 (112) ( 149) 7, 094, 463 

B. Off-balance sheet ex posures 

a) Deteriora ted 49 - X 49 

b) Other 2,644, 566 X (652) 2, 643,914 

Total B 2,644,615 - (652) 2,643,963 

Tot al A+B 9, 739, 339 (112) ( 801) 9, 738, 426 

A.1.4 Banking Group - On-balance sheet credit exposures to banks: changes in gross 

deteriorated exposures 

Description/categories 


loans 


Restructured 

exposures 

Past due 

exposures 

A. Initial gross exposure 177 - - - 

- of which: exposures transferred not derecognised - - - - 

B. Inc reases 2 - - - 

B. 1 transf ers fr om p erf or ming exposures - - - - 

B. 2 transf ers fr om other categories of deteriorated exp osures - - - - 

B.3 other increases 2 - - - 

C. Decreases - - - - 

C.1 transfers to performing exposures - - - - 

C. 2 impair ment losses - - - - 

C.3 payments received - - - - 

C.4 from disposals - - - - 

C. 5 transf ers to other categor ies of i mpa ired exp osures - - - - 

C.6 other decreases - - - - 

D. Final gross exposure 179 - - - 


386

A.1.5 Banking Group - On-balance sheet credit exposures to banks: changes in total net 




loans 


Restructured 

exposures 

Past due 

exposures 

A. Total initial net impairment (109) - - - 


B. Inc reases (5) - - - 

B.1 impair ment losses (5) - - - 

B.2 transfers from other categories of deteriorated exposures - - - - 

B.3 other increases - - - - 

C. Decreases 2 - - - 

C.1 unrealised reversals of impairment losses 2 - - - 

C.2 reversals of impairment losses - - - - 

C.3 write-offs - - - - 

C. 4 transf ers to other categor ies of i mpa ired exposures - - - - 

C.5 other decreases - - - - 

D. Total closing net impairment (112) - - - 


A.1.6 Banking Group - On- and off-balance sheet credit exposures to customers: gross and net 

amounts 

Type of exposure/amounts 


Specific impairment 

losses 

Portfolio 


Net exposure 


a) Non performing loans 4,668, 898 (2,188,065) X 2, 480,833 

b) Impaired loans 2,846, 081 (311,652) X 2, 534,429 

c) Restructured exposures 933, 776 ( 93,095) X 840,681 

d) Past due exposures 434, 158 ( 10,152) X 424,006 

e) Other assets 1 02,733, 404 X (541,638) 102, 191,766 

Total A 111,616,317 (2,602,964) (541,638) 108,471,715 

B. Off-balance sheet ex posures 

a) Deteriora ted 205, 297 ( 19,272) X 186,025 

b) Other 14,904, 460 X (44,654) 14, 859,806 

Tot al B 15, 109, 757 ( 19,272) (44, 654) 15, 045, 831 

Total A+B 126,726,074 (2,622,236) (586,292) 123,517,546 

387

A.1.7 Banking Group - On-balance sheet credit exposures to customers: changes in gross 

deteriorated exposures 



loans 


Restructured 

exposures 

Past due 

exposures 

A. Initial gross exposure 4,051,975 2,319,550 889,069 474,355 


B. Inc reases 1,506,420 2,174,103 250,037 786,201 

B. 1 transf ers fr om perf or ming exposures 426,324 1, 613,362 33,930 759, 222 

B. 2 transf ers fr om other categories of deteriorated exposures 873,878 387,218 136,218 3, 244 

B. 3 other increases 206,218 173,523 79,889 23, 735 

C. Decreases (889,497) (1,647,572) (205,330) (826,398) 

C.1 transfers to performing exposures (23,837) (353,276) (1) (239,867) 

C.2 impair ment losses (329,864) (2,003) (2,963) (1) 

C.3 payments received (315,989) (367,432) (178,198) (57,097) 

C. 4 f rom d isp osals (17 4,58 1) - - - 

C.5 transfers to other categor ies of i mpa ired exposures ( 3,483) (897,419) (18,616) (481,040) 

C.6 other decreases (41,743) (27,442) (5,552) (48,393) 

D. Final gross exposure 4,668,898 2,846,081 933,776 434,158 


A.1.8 Banking Group - On-balance sheet credit exposures to customers: changes in total net 




loans 


Restructured 

exposures 

Past due 

exposures 

A. Total initial net impairment (2,112,810) (287,669) (60,577) (14,732) 


B. Inc reases (775,417) ( 186,573) (51,885) (7,594) 

B.1 impair ment losses (628,757) (146,702) (38,580) (5,445) 

B. 2 transf ers fr om other categories of deteriorated exposures (10 6,30 8) (5 ,62 3) (12, 791) (381 ) 

B.3 other increases (40,352) (34,248) (514) (1,768) 

C. Decreases 700,162 162,590 19,367 12,174 

C. 1 unrealised reversals of impair ment losses 102,041 9,438 588 701 

C. 2 reversals of i mpa irment losses 99,97 4 36 ,373 12,027 3, 159 

C. 3 write-offs 329,864 2,003 2,963 1 

C. 4 transf ers to other categor ies of i mpa ired exposures 1,005 114,739 1,238 8, 121 

C.5 other decreases 167,278 37 2,551 192 

D. Total closing net impairment (2,188,065) (311,652) (93,095) (10,152) 


388

A.2 Classification of exposures on the basis of external and internal ratings 

A.2.1 Banking Group - Distribution of on- and off-balance sheet exposures by class of external rating 

Exposures External rating classes Unrated Total 

Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 

A. On-balance sheet exposure 1,829,738 16,930,434 1,085,146 4,352,647 2,831,634 3,382,955 85,153,624 115,566,178 

B. Derivatives - 101,040 - 9,872 26,778 15,009 1,534,699 1,687,398 

B.1 Financial derivatives - 101,040 - 9,872 26,778 15,009 1,534,699 1,687,398 

B.2 Credit derivatives - - - - - - - - 

C. Guarantees granted 32,847 2,675,798 24,024 140,678 74,623 126,216 4,627,927 7,702,113 

D. Commitments to grant funds 25,381 584,255 14,045 92,431 159,533 265,323 3,841,063 4,982,031 

Total 1,887,966 20,291,527 1,123,215 4,595,628 3,092,568 3,789,503 95,157,313 129,937,720 

A.2.2 Banking Group - Distribution of on- and off-balance sheet exposures by class of internal rating 

Exposures Internal rating classes 

unrated TOTAL 

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 

A. On-balance sheet exposure 447,479 1,519,215 3,647,539 5,858,022 11,732,498 5,319,290 6,436,990 13,905,006 2,909,880 6,398,033 3,678,673 1,485,664 1,655,360 822,013 25,828,080 91,643,742 

B. Derivatives 908 7,700 4,001 41,482 29,412 22,755 59,413 58,007 13,252 85,703 11,031 941 4,408 2,469 1,342,248 1,683,730 

B.1 Financial derivatives 908 7,700 4,001 41,482 29,412 22,755 59,413 58,007 13,252 85,703 11,031 941 4,408 2,469 1,342,248 1,683,730 

B.2 Credit derivatives - - - - - - - - - - - - - - - - 

C. Guarantees granted 51,260 531,295 475,912 1,739,627 1,661,431 439,542 532,750 568,402 106,745 240,410 90,345 14,128 38,852 33,721 1,047,694 7,572,114 

D. Commitments to grant funds 34,406 118,188 211,606 558,655 338,950 279,303 302,007 360,968 66,799 298,560 123,465 18,007 27,100 38,147 1,707,575 4,483,736 

Total 534,052 2,176,397 4,339,058 8,197,785 13,762,291 6,060,890 7,331,161 14,892,383 3,096,677 7,022,707 3,903,514 1,518,740 1,725,720 896,350 29,925,597 105,383,322 

The classes on the “Master Scale” consist of probability of default (PD) intervals within which PDs corresponding to the single classes of 

the different internal rating models are mapped. The rating classes are presented in decreasing order of creditworthiness: the best 

creditworthiness in rating class 1; the worst creditworthiness in rating class 14. 

The distribution shows the aggregates of exposures, (i.e. net of intercompany eliminations) to the ordinary customers to which internal 

credit ratings have been assigned of UBI Banca, the network banks of the Group (Banca Popolare di Ancona Spa, Banca Carime Spa, 

Banca Popolare di Bergamo Spa, Banca Popolare Commercio e Industria Spa, Banca di Valle Camonica Spa, UBI Banca Private 

Investment Spa, Banca Regionale Europea Spa, Banco di Brescia Spa, Banco di San Giorgio Spa) and Centrobanca Spa (“specialised 

lending” exposures are also given for the latter). 

A.3 Distribution of guaranteed/secured credit exposures by type of guarantee 

389

A.3.1 Banking Group – Guaranteed/secured credit exposures to banks 

Amount of net exposure 

Properties 

Secure d (1) 

Securities 

Governments and 

central banks 

Other public 

authorities 

Personal guarantees (2) 

1. on-balance sheet secured/guar an teed credit exposures: 

1.1. fully guaranteed/secured 20,042 25,006 - - - - - - - - - - - 25,006 

- of which deteriorated - - - - - - - - - - - - - - 

1.2. partially guaranteed/secured 1,007,586 - 996,614 - - - - - - - - - 7,241 1,003,855 


2. Off-balance sheet guaranteed /secured cred it exposures: 

2.1. fully guaranteed/secured 266,330 - - 266,330 - - - - - - - - - 266,330 


2.2. partially guaranteed/secured - - - - - - - - - - - - - - 


Other collateral 

CLNs 

Credit derivatives 

Other derivatives 

Banks 

Othe r 


central banks 

Other public 

authorities 

Guarantees 

Banks 

Other 

Total (1)+(2) 

390

A.3.2 Banking Group – Guaranteed/secured credit exposures to customers 

Amount of net exposure 

Properties 

Secured (1) 

Securities 

Othe r collateral 


central banks 

Othe r public 

authorities 

Banks 

Other 

Personal guarantees (2) 

1. on-balance sheet secured/guaran teed credit exposures: 

1.1 fully guaranteed secured 61,653,945 123,933,812 5,343,796 75,343 - - - - - 10,447 633,124 50,560 53,918,177 183,965,259 

- of which deteriorated 3,701,236 8,494,344 77,629 1,417 - - - - - 6,178 36,360 10,888 5,888,347 14,515,163 

1.2 partially guaranteed/secured 14,805,489 291,205 758,917 3,937,723 - - - - - - 135,630 61,895 5,911,144 11,096,514 

- of which deteriorated 1,416,970 81,161 61,607 286,269 - - - - - - 4,345 2,257 674,933 1,110,572 

2. Off-balance sheet guaranteed/secured credit exposures: - - - - - - - 

2.1 fully guaranteed secured 3,345,645 3,246,197 150,879 62,068 - - - - - - 13,654 14,242 3,464,866 6,951,906 

- of which deteriorated 65,806 163,730 2,942 307 - - - - - - 644 400 114,057 282,080 

2.2 partially guaranteed/secured 312,494 5,070 40,730 7,251 - - - - - - 1,192 36,212 40,112 130,567 

- of which deteriorated 552 - 54 17 - - - - - - - - 503 574 

CLNs 

Credit derivatives 

Other derivatives 


central banks 

Other public 

authorities 

Guarantees 

Banks 

Other 

Total (1)+(2) 

Following clarifications on interpretation furnished by the Bank of Italy with “addendum” letter No. 0142023/11 of 16 th February 2011 

concerning the presentation of guarantees in tables A.3.1 and A.3.2 of the notes to the financial statements, for the 2011 and future 

annual reports, the fair value of collateral for credit exposures is required with the nominal amount to be given up to the “amount of 

the net exposure” only when that is not available. Previously disclosure of the value of the collateral equal to the net secured exposure 

of the customer was required. 

391

B. Distribution and concentration of credit exposures 

B.1 Banking group - Distribution by sector of on- and off-balance sheet exposures to customers (carrying amount) 

Governments and Central Banks Other public authorities Financial companies Insurance companies Non financial companies 

Other 

Exposures/Counterparties 

Net exposure 

Specific impairment losses 

Portfolio impairment losses 

Net exposure 



Net exposure 



Net exposure 



Net exposure 



Net exposure 



A. On-bal ance sheet exposure 

A.1 Non performing loans 261 - X 2,154 (951) X 14,388 (62,658) X 161 (1,955) X 1,694,392 (1,305,262) X 769,477 (817,239) X 

A.2 Impaired loans - - X 2,278 (281) X 55,473 (30,153) X 36 (5) X 1,746,126 (210,427) X 730,516 (70,786) X 

A.3 Restructured exposures - - X 8 - X 17,193 (2,663) X - - X 816,550 (89,527) X 6,930 (905) X 

A.4 Past due exposures - - X 14,416 - X 8,001 (12) X - - X 250,266 (3,572) X 151,323 (6,568) X 

A.5 Other exposures 8,253,288 X (90) 877,449 X (3,183) 4,679,930 X (13,866) 141,268 X (14) 52,785,674 X (326,283) 35,454,157 X (198,202) 

TOTAL A 8,253,549 - (90) 896,305 (1,232) (3,183) 4,774,985 (95,486) (13,866) 141,465 (1,960) (14) 57,293,008 (1,608,788) (326,283) 37,112,403 (895,498) (198,202) 

B. Off-bal ance sheet 

exposures 

B.1 Non performing loans - - X - - X 11 - X - - X 36,222 (8,908) X 180 (264) X 

B.2 Impaired loans - - X 526 - X 3,429 (910) X - - X 77,513 (4,305) X 2,107 (95) X 

B.3 Other deteriorated assets - - X - - X 194 (3) X - - X 65,780 (4,785) X 63 (2) X 

B.4 Other exposures 316,218 X - 1,271,216 X (2,008) 722,094 X (1,179) 450,024 X (14) 11,010,715 X (19,691) 1,089,539 X (21,762) 

TOTAL B 316,218 - - 1,271,742 - (2,008) 725,728 (913) (1,179) 450,024 - (14) 11,190,230 (17,998) (19,691) 1,091,889 (361) (21,762) 

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) 

31/12/2010 9,886,079 (1) - 2,329,718 (464) (225) 5,989,022 (80,124) (15,291) 203,543 (1,555) (136) 73,451,444 (1,580,247) (334,963) 37,205,685 (836,796) (204,790) 

392

B.2 Banking group – Geographical distribution of on- and off-balance sheet exposures to customers (carrying 

amount) 

ITALY OTHER EUROPEAN COUNTRIES AMERICA ASIA REST OF THE WORLD 

Exposures/Geographical areas 

Net exposure 

Total 

impairment 

losses 

Net exposure 

Total 

impairment 

losses 

Net exposure 

Total 

impairment 

losses 

Net exposure 

Total 

impairment 

losses 

Net exposure 

Total 

impairment 

losses 


A.1 Non performing loans 2,472,545 (2,153,571) 5,805 (17,924) 2,302 (11,085) - (4,532) 181 (953) 

A.2 Impaired loans 2,487,628 (298,805) 43,217 (12,705) 53 (19) - - 3,531 (123) 

A.3 Restructured exposures 824,972 (91,230) 15,623 (1,843) 46 - - - 40 (22) 

A.4 Past due exposures 423,306 (10,152) 700 - - - - - - - 

A.5 Other exposures 98,313,389 (528,736) 3,107,134 (11,807) 569,1 93 (1,055) 7,769 (9) 194,281 (31) 

TOTAL 104,521,840 (3,082,494) 3,172,479 (44,279) 571,594 (12,159) 7,769 (4,541) 198,033 (1,129) 

B. Off-balance sheet exposures 

B.1 Non performing loans 36,413 (9,172) - - - - - - - - 

B.2 Impaired loans 83,575 (5,310) - - - - - - - - 

B.3 Other deteriorated assets 64,858 (4,787) 1,179 (3) - - - - - - 

B.4 Other exposures 14,113,728 (43,944) 557,208 (637) 162,642 (73) 8,039 - 18,189 - 

TOTAL 14,298,574 (63,213) 558,387 (640) 162,642 (73) 8,039 - 18,189 - 

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) 

31/12/2010 123,996,064 (2,991,449) 4,052,591 (39,051) 763,641 (17,036) 31,153 (4,349) 222,042 (2,707) 

393

B.3 Banking group – Geographical distribution of on- and off-balance sheet exposures to banks (carrying amount) 

ITALY OTHER EUROPEAN COUNTRIES AMERICA ASIA REST OF THE WORLD 

Exposures/Geographical areas 

Net exposure 

Total 

impairme nt 

losses 

Net exposure 

Total 

impairment 

losses 

Net exposure 

Total 

impairment 

losse s 

Net exposure 

Total 

impairment 

losse s 

Net exposure 

Total 

impairment 

losses 


A.1 Non p erforming loans 20 (2) 4 7 (110) - - - - - - 

A.2 Impaired loans - - - - - - - - - - 

A.3 Restructured exposures - - - - - - - - - - 

A.4 Past due exposures - - - - - - - - - - 

A.5 Other exposures 3,474,051 (149) 3,097,18 9 - 309,678 - 15,766 - 197,712 - 

TOTAL 3,474,071 (151) 3,097,236 (110) 309,678 - 15,766 - 197,712 - 

B. Off-balance sheet exposures 

B.1 Non performing loans - - - - - - - - - - 

B.2 Impaired loans - - - - 49 - - - - - 

B.3 Other deteriorated assets - - - - - - - - - - 

B.4 Other exposures 1,197,882 (9) 1,274,86 7 (330) 106,303 (20) 46,274 (213) 18,588 (80) 

TOTAL 1,197,882 (9) 1,274,867 (330) 106,352 (20) 46,274 (213) 18,588 (80) 

31/12/2011 4,671,953 (160) 4,372,103 (440) 416,030 (20) 62,040 (213) 216,300 (80) 

31/12/2010 2,571,094 (33) 2,006,265 (299) 221,948 (7) 103,913 (235) 173,762 (104) 

B.4 Large exposures 

31/12/2011 

Number of positions 3 

Exposure 15,388,367 

Risk p ositions 1,127,147 

394

C. Securitisation and the transfer of assets 

C.1 Securitisation transactions 


Underlying objectives strategies and processes of securitisations 

The securitisation of loans allows direct access to capital markets with the diversification of 

the sources of finance and the reduction of risk assets for the purposes of solvency 

coefficients, without excluding the originator from managing the relationship with the 

customer. 

Law No. 130/1999 “Measures on the securitisation of loans” introduced the possibility into the 

national legislation of performing securitisation operations using specially formed Italian 

registered companies (termed special purpose entities). Four companies in the Group took 

advantage of this law for the following securitisations: UBI Finance 2 Srl, UBI Finance 3 Srl, 

Lombarda Lease Finance 4 Srl, UBI Lease Finance 5 Srl, Albenza 3 Società per la 

Cartolarizzazione Srl – Orio Finance nr 3 Plc, 24-7 Finance Srl. 

On 25 th November 2011, the Sintonia Finance Srl securitisation was wound up in advance. 

The originators (Centrobanca Spa and Banca Popolare di Cremona) exercised their option 

under the contract to repurchase all the loans held in portfolio (the amount recognised in the 

books of Centrobanca was €19.3 million) and on receipt of the purchase price the special 

purpose entity fully redeemed the notes issued. 

Details are given in the pages that follow of the early redemption of the notes (relating to salary 

backed loans only) of the entity 24/7 Finance Srl. 

*** 

The downgrade’s by Moody's and Fitch, performed in the last quarter of 2011 in the wake of 

the lowering of Italy’s credit rating, had the consequence, amongst other things, of making it 

necessary to restructure the securitisations originated and held on the books as owned by the 

Group (“self securitisations”), in order to ensure continuity to the investments of the special 

purpose entities without compromising the eligibility of the senior notes issued. 

More specifically, on the one hand the ratings on the financial instruments invested in by the 

special purpose entities had to be redefined and on the other hand collateral had to be lodged 

on behalf of those entities for the swaps which back those securitisations, where UBI Banca is 

a direct counterparty. 

The new ratings assigned did not compromise their eligibility for refinancing operations with 

the European Central Bank. The only exception to this was the B@nca 24-7 consumer loan 

securitisation, which remains ineligible because it has only one of the two ratings required by 

the ECB. 

The downgrade of UBI Banca’s ratings by Fitch in 2012 made it necessary to take action again 

with further restructuring of the three securitisations rated by Fitch (UBI Finance 2, UBI 

Finance 3 and UBI Lease Finance 5). 

The action described above helped to reduce the linkage between the securitisations in 

question with the Parent, UBI Banca, making them much less vulnerable to possible further 

downgrades caused by changes in the Parent’s rating 1 . 

The UBI Finance 2 Srl transaction which holds a UBI Banco di Brescia securitisation was 

concluded in the first few months of 2009. On 13 th January 2009 the contract for the transfer 

1 Further information on the action that became necessary following the downgrades mentioned is given 

in the Management Report, which may be consulted. 

395

of a loan portfolio was signed, which consisted of €2,093,238,616.49 of performing loans to 

small-to-medium sized businesses, while the issuance of the relative notes, fully subscribed by 

the originator (UBI Banco di Brescia), was performed on 27 th February 2009. 

The main characteristics of the UBI Finance 2 securities issued in 2009 are as follows: 

• class A notes (senior tranches): nominal amount €1,559,500,000.00 at floating rate, made 

available to the Parent, UBI Banca, by means of repurchase agreements, to be used as 

collateral in refinancing transactions with the ECB or to guarantee intraday transactions with 

the Bank of Italy; Following the action described above, the notes were downgraded by Moody's 

from “Aaa” to “Aa3” and by Fitch from “Aaa” to “A-”; 

• class B notes (junior tranches): nominal amount €519,850,000.00 unrated and with a yield 

equal to the additional return on the transaction, which allow the originator, Banco di Brescia, 

to benefit from the excess spread on the underlying portfolios. 

In the second half of 2011 a new securitisation transaction was performed by transferring 

loans to small to medium-sized enterprises, classified as performing and held by Banca 

Popolare di Bergamo Spa, to the special purpose entity UBI Finance 3 Srl. 

The transaction was performed in two stages: 

• the transfer of the loans by the originator Banca Popolare di Bergamo to the special purpose 

entity UBI Finance 3 on 6 th December 2010, for an amount of approximately €2.8 billion; 

• the issue of notes by UBI Finance 3 (performed in July 2011). Following the action described 

above, the senior notes were downgraded by Moody's from “Aaa” to “Aa3” and by Fitch from 

“Aaa” to “A-”. 

When the mortgages were transferred, servicing and sub-servicing contracts were signed by 

which UBI Banca as the Parent performs the role of servicer, while the collection of payments 

and managing relations with customers for the securitised assets were delegated to the 

originator, Banca Popolare di Bergamo, as the sub-servicer (here too, except for those 

positions reclassified as non-performing, which will be handled by the Credit Area of the 

Parent). 

The Lombarda Lease Finance 4 Srl securitisation was performed by means of a number of 

interconnected contracts, with the following structure: 

• on 11.05.05, a contract was signed for the periodic transfer without recourse by the UBI 

Leasing Spa to Lombarda Lease Finance 4 S.r.l. (LLF4) of loans relating to leasing contracts, 

against payment of the nominal value of the loans transferred by the special purpose entity 

(LLF4). In accordance with the transfer contract signed, on 19.10.05 UBI Leasing Spa 

transferred loans to LLF4 relating to lease contracts for an amount equal to the loans 

transferred which had expired. 

• the amount of the loans transferred in the first transfer was €1,100,007,686 and the amount 

for the first transfer scheduled under the “revolving” programme was €63,637,298; 

• collection of the repayments was managed by the “originator” as the “servicer” of the 

transaction, on specific mandate of the transferee; 

• on 15.06.05, LLF4 issued notes with different redemption characteristics to fund the 

transaction; 

• subscription of class A1-A2-B “senior and mezzanine” notes by institutional investors; 

• subscription of class D “Junior” securities by the originator. 

396

The UBI Lease Finance 5 Srl securitisation was performed by means of a number of 

interconnected contracts, with the following structure: 

• on 13.11.08, a contract was signed for the transfer without recourse by UBI Leasing Spa to 

UBI Lease Finance 5 S.r.l. (“LF5”) of the principal of implicit performing loans recognised in 

the financial statement as at 31.10.2008 and the related lease contracts, against payment of 

the nominal amount of the loans transferred by the SPE (LF5); 

• the amount of the loans transferred was €4,024,051,893.21; 

• collection of the repayments was managed by the “originator” as the “servicer” of the 

transaction, on specific mandate of the transferee; 

• on 28.11.09, UBI LF5 issued notes with differing redemption characteristics; 

• subscription of class A-B “senior and junior” notes by the originator. Following the action 

described above, the senior notes were downgraded by Moody's from “Aaa” to “Aa3” and by 

Fitch from “Aaa” to “A-”. 

The securitisation Albenza 3 Società per la Cartolarizzazione Srl was performed in 2001 on 

performing loans resulting from mortgages granted to private individuals resident in Italy. The 

transfer contract was structured as follows: 

• the transfer without recourse of the loans to the special purpose entity Albenza 3 Società per 

la Cartolarizzazione S.r.l., in which the UBI Banca Group holds no interest, amounting to 

€389,532,000; 

• funding of the operation by the issue of a single Albenza 3 Società per la Cartolarizzazione 

S.r.l. note (unrated); 

• the note was purchased by BPB International Finance Plc (liquidated in 2004), and 

securitised again with the assistance of the Irish registered SPV Orio Finance nr. 3 plc. 

The Orio Finance nr 3 plc securitisation was performed in 2002 on the securities present in 

the BPB International Finance plc portfolio amounting to 390,000,000 euro and on the 

Albenza 3 notes already mentioned, together with other MBS securities (Holmes Funding nr 1 

plc; Holmes Funding nr 2 plc). 

The transfer contract was structured as follows: 

• transfer of securities to the special purpose vehicle Orio Finance nr 3 plc, in which the UBI 

Banca Group holds no interest; 

• funding of the operation by the issue of notes divided into three classes: 

- class A notes (senior notes): floating rate notes equal to the Euribor three month + 

0.260% for an amount of €427,200,000; 

- class B notes (mezzanine notes): floating rate notes equal to the Euribor three month 

+ 0.70% for an amount of €17,800,000; 

- class C notes (junior securities): floating rate notes equal to the Euribor three month 

+ 1.00%, for an amount of €21,600,000; 

• the different classes were assigned a different degree of subordination in the definition of 

payment priorities for both the interest and principal components. The class C notes were 

recognised within the trading portfolio of UBI Banca Scpa and were eliminated in the 

consolidation against the junior securities recognised within liabilities in the balance sheet of 

Orio Finance nr 3 plc. 

The 24-7 Finance Srl securitisation was performed in 2008 on: 

• performing loans resulting from mortgages granted to private individuals resident in Italy, 

secured by a prime grade mortgages on residential properties located in Italy all fully built; 

397

• performing loans resulting from salary backed loans to private individuals resident in Italy, 

secured by a “deducted for non payment” clause and by a loss of employment insurance 

policy; 

• performing loans resulting from personal loans and dedicated loans to private individuals 

resident in Italy. 

The transfer contract was structured as follows: 

• the transfer without recourse of the loans to the special purpose entity 24/7 Finance Srl in 

which UBI Banca Spa holds a 10% interest; 

• funding of the transaction by the issue of notes divided according to the sub-transaction as 

follows: 

- mortgages: 

class A notes (senior notes): floating rate bonds equal to the Euribor three months + 

0.02% for an original amount of €2,279,250,000. Following the action described 

previously, the senior notes were downgraded by Moody's from “Aaa” to “Aa3”, while the 

DBRS “A high” rating was confirmed; 

class D securities (junior securities): notes with a yield equal to the “additional return”, 

for an amount of €225,416,196; 

- salary backed loans: 

class A notes (senior notes): floating rate notes equal to the Euribor three months for 

an original amount of €722,450,000; 

class D notes (junior notes): notes with a yield equal to the “additional return”, for an 

amount of €113,728,307; 

- consumer loans: 

class A notes (senior notes): floating rate notes equal to the Euribor six month + 0.35% 

for an original amount of €2,128,250,000. The notes were downgraded by Moody's from 

“Aaa” to “Aa2”, while work to assign a second rating was suspended; 

class D notes (junior notes): notes with a yield equal to the “additional return”, for an 

amount of €435,940,122. 

On 20 th December 2011, the entire salary backed loan securitisation was wound up with the 

consequent repurchase of the loans by Banca 24/7 for a total of €298,451,078.94 (equal to 

the entire residual debt). Consequently, on receipt of the sales price the special purpose entity 

redeemed all the securities issued. 

398

The entities of the UBI Banca Group involved in the securitisation transactions and the 

respective roles played are listed below: 

UBI Finance 2 

Originator 

Issuer 

Servicer 

Subservicer 

Collection Account Bank 

Investment Account Bank 

Cash Manager 

Quotaholder 

UBI Finance 3 

Originator 

Issuer 

Servicer 

Subservicer 



Cash Manager 

Quotaholder 

Lombarda Lease Finance 4 

Originator 

Issuer 

Servicer 



Cash Manager 

Quotaholder 

UBI Lease Finance 5 

Originator 

Issuer 

Servicer 


Cash Manager 

Calculation Agent 

Account Bank 

Albenza 3 

Originator 

Issuer 

Servicer 



UBI Banco di Brescia Spa 

UBI Finance 2 Srl 

UBI Banca Scpa 

UBI Banco di Brescia Spa 


The Bank of New York Mellon 



UBI Banca Popolare di Bergamo Spa 

UBI Finance 3 Srl 








Lombarda Lease Finance 4 Srl 


UBI Banca International Sa 





UBI Lease Finance 5 Srl 





The Bank of New York Sa Italian Branch 


Albenza 3 Società per la Cartolarizzazione 

Srl 



Centrobanca Spa 

399

Orio Finance 3 

Originator UBI Banca (formerly BPB Inte Fin – 

Dublin) 

Issuer 

Orio Finance nr 3 Plc 

Servicer 

Citibank N.A. 


Citibank N.A. 

Cash Manager 

Citibank N.A. 

24-7 Finance 

Originator 

Issuer 

Servicer 

Quotaholder 


Cash Manager 



Class D Notes Depository 

B@nca 24-7 Spa 

24-7 Finance Srl 

B@nca 24-7 Spa 


The Bank of New York 

The Bank of New York - London Branch 

The Bank of New York - London Branch 

The Bank of New York 

Monte Titoli 

Internal risk measurement and monitoring systems connected with securitisation transactions 

including measurement, for those transactions originated by the Group, where risks were 

transferred to third parties. Illustration of the organisational structure for managing 

securitisation transactions including systems for reporting to senior management or to a similar 

body. 

It was decided to outsource corporate servicing to TMF Management Italy Srl for these 

securitisations described above: UBI Finance 2, UBI Finance 3, Lombarda Lease Finance 4 

and UBI Lease Finance 5. A professional firm of consultants was appointed for the remaining 

securitisations with the exception of 24-7 Finance, for which corporate servicing was 

performed by Zenith Service. 

It was decided not to outsource IT and accounting operations related to servicer activities. 

Continuous cash collection activities were performed by the originators making use, amongst 

other things, of the main Group accounting system. This was also useful for reconstructing 

movements in the accounts of the securitisation companies and therefore for providing them 

with the information needed by the corporate servicers for preparing financial statements. 

In order to ensure continuity and effectiveness in the performance of their servicer functions, 

appropriate technical and organisational units were created to monitor the various phases of 

the securitisation process. Accounting and reporting systems in particular were designed, 

which took account of the need to be able to reconstruct all transactions at any moment. 

The main units responsible for the management of securitisations are the Finance, 

Administration and Operational Control and Risk Control Macro Areas. The roles and tasks 

relating to the performance of the various operational phases of servicing and to monitoring 

performance data were defined in those units. More specifically, a set of quarterly reports are 

prepared to monitor each individual securitisation transaction. 

400

Description of the hedging policies adopted to mitigate risks connected with securitisations, 

including the strategies and processes adopted to continuously monitor the effectiveness of these 

policies. 

All the securitisations are hedged by swap derivative contracts where the main objective is to 

stabilise the flow of interest generated by the securitised portfolios and to protect the special 

purpose entity from interest rate risk. 

Swap contracts were entered into for each securitisation between the special purpose entities 

and the respective swap counterparties who, in order to be able to “close” the risk with the 

originators, signed contracts identical in form but opposite in their effects with UBI Banca 

which in turn renegotiated further “mirror swaps” with the respective originators. The 

following constituted exceptions to that practice: the UBI Lease Finance 5, UBI Finance 2 and 

UBI Finance 3 transactions, where the special purpose entity entered into swap contracts 

directly with UBI Banca (which then renegotiated mirror swaps with the originators UBI 

Leasing, UBI Banco Brescia and Banca Popolare Bergamo). 

Further information on Group activities concerning securitisation transactions is given in the 

Management Report which may be consulted. 


C.1.1 Exposures resulting from securitisation transactions by quality of the underlying assets 

No exposures resulting from securitisation transactions by quality of the underlying assets to 

report. la 5: 190060O|1 - NOTA 

C.1.2 Exposures resulting from the principal “own” securitisation transactions by type of 

securitised assets and by type of exposure 

No exposures resulting from “own” securitisation transactions to report. 

C.1.3 Exposures resulting from the principal “third party” securitisation transactions by type of 

securitised assets and by type of exposure 

No exposures resulting from “third party” securitisation transactions to report. 

C.1.4 Exposures to securitisations by financial asset portfolio and by type 

Exposure/portfolio Trading At fair value 

Available-forsale 

Held-tomaturity 

Loans 31/12/2011 31/12/2010 

1. On-statement of financial 

position exposures - - - - - - 89,051 

- Senior - - - - - - 89,051 

- Mezzanine - - - - - - - 

- Junior - - - - - - - 

2. Off-statement of financial 

position exposures - - - - - - - 

- Senior - - - - - - - 

- Mezzanine - - - - - - - 

- Junior - - - - - - - 


C.1.5 Total amount of the securitised assets underlying the junior securities or other forms of 

lending support 

No securitised assets underlying the junior securities or other forms of lending support to 

report. 

401


C.1.6 Interests in special purpose entities 

Name Registered address % interest 

Lombarda Lease Finance 4 Srl Via XX Settembre, 8 - Brescia 10% 

UBI Lease Finance 5 Srl Via Foro Bonaparte, 70 - Milano 10% 

24-7 F inance Srl Via XX Settembre, 8 - Brescia 10% 

UBI Finance Srl Via Foro Bonaparte, 70 - Milano 60% 

UBI Finance 2 Srl Via XX Settembre, 8 - Brescia 10% 

UBI Finance 3 Srl Via XX Settembre, 8 - Brescia 10% 

UBI Finance CB 2 Via Foro Bonaparte, 70 - Milano 10% 

402

C.1.7 Servicer activity – payments received on securitised loans and redemptions of securities issued by the special purpose entity 

Securitised assets (end Payments received on 

Percentage of securities redeemed (the end of period figure) 

of period figure) loans during year 

Servicer 

Special purpose entity 

Senior Mezzanine Junior 

Deteriorated Performing Deteriorated Performing Deteriorated Performing Deteriorated Performing Deteriorated Performing 

assets assets assets assets assets assets assets assets assets assets 

UBI Banca Scpa Albenza 3 Società per la cartolarizzazione Srl 968 22,151 281 14,007 - - - - - - 

UBI Banca Scpa UBI Finance 2 Srl (1) - - - - - - - - - - 

UBI Banca Scpa UBI Finance 3 Srl (1) - - - - - - - - - - 

Centrobanca Spa Sintonia Finance Srl - - 626 3,940 - - - - - - 

UBI Leasing Spa Lombarda Lease Finance 3 Srl - - - - - - - - - - 

UBI Leasing Spa Lombarda Lease Finance 4 Srl 17,002 143,037 3,207 84,016 - - - - - - 

UBI Leasing Spa UBI Lease Finance 5 Srl 155,460 3,752,687 5,748 814,923 - - - - - - 

B@nca 24/7 Spa 24-7 Finance Srl (1) - - - - - - - - - - 

(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 

liabilities issued by the special purpose entity. 110O|1 - NOTA 

C.1.8 Special purpose entities belonging to the banking group 

No special purpose entities belonging to the banking group to report. 

403

C.2 Transfers 

C.2.1 Financial assets transferred not derecognised 

Fin an cial assets he ld for trading 

Financial assets at 

fa ir va lu e 

Available-for-sale financial assets Held-to-maturity investments Loans to banks Loans to customers 

A B C A B C A B C A B C A B C A B C 

A. On-balance sheet assets 1 ,137,977 - - - - - 3 ,490,86 8 - - - - - - - - - - - 

1. Debt instruments 1,137,977 3,258,552 - - - - - - - - - - - 

2. Equity instruments 232,316 - - X X X X X X X X X 

3. O.I.C.R. 

(collective invest ment inst rum ents ) 

- - - - - - - - - X X X X X X X X X 

4. F inancing - - - - - - - - - - - - - - - - - - 

5. Im paire d asse ts - - - - - - - - - - - - - - - - - - 

B. Derivative instruments - - - X X X X X X X X X X X X X X X 

31/12/2011 1 ,137,977 - - - - - 3 ,490,86 8 - - - - - - - - - - - 

of which deteriorated - - - - - - - - - - - - - - - - - - 

31/12/2010 1 ,771,525 - - - - - 6 ,544,62 6 - - - - - - - - - - - 

of which deteriorated - - - - - - - - - - - - - - - - - - 


Key: 

A = Financial assets transferred and fully recognised (carrying amount) 

B = Financial assets transferred and partially recognised (carrying amount) 

C = Financial assets transferred and partially recognised (entire amount) 

404

C.2.2 Financial liabilities resulting from financial assets transferred not derecognised 


held for trading 

Financial 

assets at fair 

value 

Available-for-sale 

financial assets 

Held-tomaturity 

investments 


Loans to 

customers 

Total 

31/12/2011 31/12/2010 

A. Due to customers 891,818 - 3,056,261 - - - 3,948,079 8,293,089 

1. from assets fully recognised 891,818 - 3,056,261 - - - 3,948,079 8,293,089 

2. from assets partially recognised - - - - - - - - 

B. Due to banks 234,234 - 468,088 - - - 702,322 121,181 

1. from assets fully recognised 234,234 - 468,088 - - - 702,322 121,181 

2. from assets partially recognised - - - - - - - - 

31/12/2011 1,126,052 - 3,524,349 - - - 4,650,401 

of which deteriorated 

31/12/2010 1,775,506 - 6,638,764 - - - - 8,414,270 

of which deteriorated 

405

C.3 Banking Group – Covered bond operations 

Objectives 

In 2008 the Management Board of UBI Banca passed a resolution to proceed to implement a 

structured programme for the issue of covered bonds designed to produce benefits in terms of 

funding while containing the cost at the same time. 

In detail, the Management Board performed the following: 

 

 

 

 

 

 

it identified the objectives of the programme; 

it identified the basic structure of an operation to issue covered bonds in the light of the 

legislation and explained and examined the main elements, including the portfolio of 

loans, the criteria for selecting them, the structure of the financial transaction and the 

relative tests; 

it assessed and approved the impacts and the organisational, IT and accounting changes 

that would be required. These changes were performed to ensure proper risk management 

by the Parent and also by the single banks participating. Account was also taken, in 

drawing up the procedures, of the requirements set by regulations issued by the Bank of 

Italy; 

it assessed the risks connected with the operation to issue covered bonds; 

it assessed the organisational and operating structure of the special purpose entity 

concerned in order to ensure that the contracts involved in the operation contained 

clauses that would guarantee the proper and efficient performance of the functions of the 

special purpose entity itself; 

it assessed the legal aspects through an in-depth examination of the parties and contract 

documents used, with particular attention paid to the nature of the guarantees given by 

the special purpose entity and the relations between the issuing bank, the originator 

banks and the special purpose entity. 

The structure 

The basic structure of the operation to issue covered bonds involved the performance of the following 

activities: 

 

 

 

one bank (the originator) transfers a set of assets with determined characteristics to a special 

purpose entity to form a separate set of assets termed a “cover pool”; 

the originator bank (acting here as a financing bank) grants a subordinated loan to the special 

purpose entity designed to fund the purchase of the assets by the entity; 

the bank (the issuing bank) issues covered bonds backed by a primary, unconditional and 

irrevocable guarantee given by the special purpose entity to the sole benefit of the holders of 

the covered bonds and the hedging counterparties involved in the transaction. The guarantee 

is backed by all the assets transferred to the special purpose entity and which form part of the 

cover pool. 

As part of the structure described above, the UBI Banca Group has launched a programme for issues 

of 10 billion euro of covered bonds. The structure that was adopted also allows the transfer of the 

portfolios which constitute the segregated assets of the special purpose entity from more than one 

originator bank, which are not issuer banks. 

To achieve this, a special purpose entity, UBI Finance Srl was formed, which as the guarantor of the 

issue performed by UBI Banca acquired a portfolio of residential mortgages transferred to it from 

network banks of the Group, which participated in the programme both as originator banks and as 

financing banks. 

406

The roles of master servicer, calculation agent and cash manager of the transaction were performed 

by the Parent, while that of paying agent was performed by Bank of New York (Luxembourg) Sa. The 

representative of the bondholders is BNY Corporate Trustee Services Limited. 

UBI Banca then delegated responsibility for servicing activity, consisting of collecting payments and 

managing relations with customers for the portfolio transferred by each originator, to the originator 

banks as sub-servicers. The originator banks also perform the role of swap counterparties in the 

“balance guarantee swaps” stipulated with the special purpose entity in order to normalise the cash 

flows generated by the mortgage portfolio. 

A summary of the main features of the structure of UBI Banca’s covered bond programme is given 

below. 

Asset 

Monitor 

Loan granted 

Interest on loan 

(monthly) 

Annual Coupon 

(fixed) 

Covered Bond 

Funding from 

covered 

bond issue 

Covered bond investors 

Guarantee 

Interest on subordinated loan 

Euribor + spread 

Sellers 

Asset SWAP 

Interest on Cover Pool 

Subordinated Loan Granted 

UBI Finance SRL 

SPE 

Euribor + spread 

floating (monthly) 

LIABILITY SWAPS 

Coupon (fixed) 

Mortgage 

cover pool 

A). Covered bonds. UBI Banca Scpa issues covered bonds under the programme. 

B). Bonds. In order to allow the funding acquired on institutional markets from the issue of covered 

bonds to flow back to the originator banks, these banks may issue bonds and the right to require 

subscription of them by UBI Banca, within the limits of their quota of participation in the 

programme. These bonds shall have the same maturity as the covered bonds and a yield equal to (or 

slightly higher than) that of the covered bonds. 

C). Subordinated Loans. In order to fund the purchase of mortgages by the special purpose entity, the 

originator banks grant subordinated loans to it. The yield on these loans is calculated as a “premium” 

or “extra spread” equal to the amount of the interest received, which remains in the accounts of the 

special purpose entities once priority amounts in the chain of payments have been deducted, relating 

to items such as the expenses incurred by the entity, payments to swap counterparties and 

allocations to “reserve accounts”. 

D). Swaps to hedge interest rate risk. If the covered bonds are issued at a fixed rate, UBI Banca 

hedges the interest rate risk by entering into swap contracts with market counterparties, thereby 

transforming the exposure to a variable rate. These swaps lie outside the perimeter of the covered 

bond programme and are entered into with a view to interest rate risk management as part of the 

Parent’s ALM. 

E). Asset Swaps. Asset swap contracts are entered into between the originator banks and the special 

purpose entity to normalise the cash flows consisting of the interest instalments on the portfolios 

407

transferred. Each of these swaps has an initial notional value equal to the value of the portfolios 

transferred to UBI Finance by each originator. These notional amounts are then adjusted monthly on 

the basis of the contraction of the portfolio and increases due to the addition of new mortgages. The 

duration of the swaps are related to the maturities of the mortgages in each portfolio transferred. 

Since the individual originator banks are not assigned ratings themselves and as a consequence 

would not comply as swap counterparties with the criteria set by the rating agencies to rate the 

programme, UBI Banca backs the payments between the originator banks and UBI Finance by 

signing a guarantee. 

The swap contracts involve the monthly flow back to the originator banks of the interest received on 

the loans present in each portfolio (net of the expenses of the special purpose entity and of provisions 

in its accounts as indicated in the chain of payments) against the payment of a sum equal to the 

notional return indicated at the Euribor rate plus a spread. 

F). Liability Swaps. A liability swap contract is entered into between UBI Banca and UBI Finance for 

each fixed rate issue. These are designed to protect against interest rate risk, which might affect the 

cash flows received from the special purpose entity (including those from the asset swaps) and the 

amounts due from the special purpose entity to investors (fixed rate coupons on the covered bonds) 

in the event of default by UBI Banca. 

The structure of the liability swaps only requires the exchange of cash flows between UBI Banca and 

the special purpose entity in the event of default by UBI Banca or alternatively when UBI Banca 

assigns a swap contract to another eligible counterparty both the asset swap and the liability swap 

are structured to comply with all the conditions set by the rating agencies and they incorporate all 

the standard provisions set by the market for a downgrade. 

G). Current accounts. The operation involves a complex system of current accounts to pay and receive 

the cash flows involved in the operation. A series of accounts were opened in the name of the special 

purpose entity for each originator bank as follows: 

• Collection Accounts (with UBI Banca S.c.p.a) linked to each originator bank into which sums 

received are paid consisting of interest and principal on the portfolios of each originator, and, 

where applicable, other assets transferred to the special purpose entity under the programme 

(e.g. eligible assets and top-up assets); 

• Interest Account with Bank of New York Mellon, London Branch (until November 2011 with 

UBI Banca International Luxembourg) linked to each originator bank into which all interest 

paid into the collections accounts will be paid on a daily basis and also all amounts paid to 

the special purpose entity by the counterparties of the swap contracts. 

• Principal Account with Bank of New York Mellon, London Branch (until November 2011 with 

UBI Banca International Luxembourg) linked to each originator bank into which all the 

principal repayment amounts paid into the collection account will be paid on a daily basis; 

• a Reserve Fund Account with Bank of New York Mellon, London Branch (until November 2011 

with UBI Banca International Luxembourg) into which interest accruing on the covered bonds 

is paid monthly in order to guarantee the payment of current coupons; 

• an Expense Account, into which the amounts required to meet the expenses of the special 

purposes entity will be paid, drawn from interest accounts, in proportion to the quota of 

participation in the programme of each originator bank. 

Effectiveness tests 

Effectiveness tests are performed monthly on the whole cover pool and separately on the portfolios 

transferred by each originator, in order to determine the financial integrity of each bank’s portfolio. 

408

As required by the regulations, because it is a multioriginator programme, with cross-collateralisation 

of the originator banks’ portfolios, the only valid test for investors is that performed on the whole 

cover pool, while the tests performed on the individual portfolios are used to determine the integrity 

of each originator’s portfolio for the purposes of cross-collateralisation between the different 

originator banks. 

In detail: 

• the nominal value test verifies whether the nominal value of the loans in the transferred 

portfolio is greater than the nominal value of the covered bonds issued. In order to ensure an 

adequate degree of overcollateralisation in the portfolio, while the covered bonds are 

considered at their nominal value, the loans in the portfolio are weighted on the basis of the 

relative collateral backing them and the total amount is further reduced by an asset 

percentage; 

• the net present value test verifies whether the present value of the loans remaining in the 

portfolio is greater than the present value of the covered bonds issued; 

• the interest cover test verifies whether the interest received and held in accounts and the cash 

flows from interest to be received net of the entity’s expense is greater than the interest to be 

paid to the holders of the covered bonds; 

• amortisation test (similar to the nominal value test, but only performed if UBI Banca is 

downgraded by rating agencies); 

• the top-up assets test verifies whether, before UBI Banca defaults, the total amount of 

additional assets and liquidity is not 15% greater than the nominal value of the loans 

remaining in the portfolio transferred, in compliance with the Ministry of the Economy and 

Finance and Bank of Italy instructions. 

If all the tests are passed simultaneously then the special purpose entity may proceed to pay all the 

parties involved in the programme, including the originator banks as the lenders of the subordinated 

loan, in the order indicated in the “payment chain”. 

However, if the results of the tests are negative, then the contract states that the UBI Banca Group 

must increase the collateral of the portfolio by transferring new mortgages to it and that is “topped 

up” with extra assets. Failure to pass the tests, once the time limit allowed for the Group to add 

assets has passed, results in an “issuer event of default” with a consequent enforcement of the 

guarantee issued by UBI Finance. In this event the originator banks would only receive the 

repayments of the subordinated loans granted after the redemption of the covered bonds by the 

special purpose entity and within the limits of the remaining funds. 

Organisational action and control procedures 

As part of an organisational analysis process, four general processes were identified to which the 

main activities of the programme were assigned. In detail: 

1. identification of the liquidity requirements and approval of the operation by the competent 

bodies. This general process involves assessment of proposals for the issue of covered 

bonds by the Finance Committee of UBI Banca and approval of the basic outline by the 

Management Board. Subsequently the network banks involved are informed, which assess 

the proposals and their involvement in the issues on the basis of the information received. 

In this context an “arranger” is identified who will supervise the operation and the internal 

organisational units involved are also brought in; 

2. planning and arrangement of the transaction. This general process involves verifying the 

criteria for extracting and validating the assets which form part of the portfolio which is to 

cover the issue. It interfaces with the rating agencies and external auditors and 

preparatory work is done for proper segregation of the asset portfolio and for transfer to 

the special purpose entity and all the relative contracts are prepared by internal units of 

the bank and external advisors; 

409

3. management of the operations. This general process involves opening current accounts for 

the operations of the special purpose entity, granting the subordinated loan, entering into 

derivatives contracts between the network banks and the special purpose entity, once the 

“chain of payments” has been determined, performing tests on the effectiveness of the 

portfolio and identifying the mortgage loans to top-up the cover pool which backs the 

covered bonds issued. These activities are performed on a continuous basis; 

4. regulatory controls. This general process involves putting internal and external controls 

required by regulations in place to: analyse and monitor obligations to ensure the quality 

and integrity of the assets transferred to back the portfolio; to define effectiveness tests 

and to produce summary reports; to verify compliance with limits set on the transfer of 

eligible assets; to verify cover for financial risks; to verify compliance by the special 

purpose entities with the obligations resulting from the guarantee given; to verify the 

contract documents employed; and to verify the completeness of the controls to be 

performed by the Parent. External controls are also put in place to ensure compliance of 

the measurement criteria applied by the bank with those required for the preparation of 

annual financial statements and also to guarantee the proper performance of the 

transaction and the validity of the guarantee given to back redemption of the covered 

bonds. 

History of the UBI Banca covered bond programme 

In the context of the procedures described above, the UBI Banca Group launched a 10 billion euro 

programme for the issue of covered bonds in July 2008, with the first transfers of mortgages 

performed by two banks in the Group, Banco di Brescia and Banca Regionale Europea, for a total 

amount, as at that time, of approximately 2 billion euro. 

The Bank performed its first public issue of covered bonds for 1 billion euro in September 2009 with 

the assistance of Barclays Capital as the arranger. 

Banca Popolare di Bergamo also joined the programme at the end of 2009, by transferring a part of 

its mortgage portfolio, amounting to approximately €1.3 billion, at the service of the second public 

issuance performed in December 2009. 

Details of the two issues are given below. 

Name Issue date Maturity date Nominal amount Coupon 

UBI BANCA 3.625% CB due 23.09.2016 23.09.2009 23.09.2016 1,000,000,000.00 36,250,000.00 


After a framework agreement between the EIB (European Investment Bank) and the UBI Group for 

the grant of medium-to-long term loans to corporate clients was signed on 30 th April 2010, the Bank 

issued privately placed bonds fully subscribed by the EIB. 

Details of the issue are given below. 

Name Issue date Maturity date Nominal amount Coupon (1) 

UBI BANCA TV CB due 30.04.2022 30.04.2010 30.04.2022 238,636,369,00 2,796,526,52 

(1) The coupon is six monthly, floating rate. The amount indicated relates to the coupon payable at the end of April 2012. 

In May 2010, Banco di San Giorgio and Banca Popolare di Ancona also joined the covered bond 

programme, with the transfer of assets in the third transfer operation in which those originator banks 

already participating in the programme were also involved. Total assets of €2.7 billion were 

transferred with that operation performed on 1 st May 2010. 

410

A fourth public issuance took place on 15 th September 2010 for a further 1 billion euro, details of 

which are given below. 



Full participation in the programme by the network banks was completed in the last quarter of 2010 

when the following banks joined the programme with the transfer of mortgages for a total amount of 

€2.4 billion on 1 st October 2010: Banca Popolare Commercio ed Industria, Banca Carime, Banca di 

Valle Camonica and UBI Banca Lombarda Private Investment. 

A further public issue took place in October for €500,000,000, with a five year maturity, details of 

which are given below. 


UBI BANCA 3.125% CB due 18.10.2015 18.10.2010 18.10.2015 500,000,000.00 15,625,000.00 

In the first quarter of 2011, in January and February 2011 two more public issuances of covered 

bonds took place for a total of €1.75 billion, details of which are given below. 


UBI BANCA 5.250% CB due 28/01/2021 28/01/2011 28/01/2021 1,000,000,000,00 52,500,000.00 

UBI BANCA 4.500% CB due 22/02/2016 22/02/2011 22/02/2016 750,000,000,00 33,750,000.00 

A further transfer of assets was performed for the covered bond programme in which Banca Popolare 

di Bergamo and Banco di Brescia participated. They transferred mortgages to the special purpose 

entity UBI Finance which they already held in their portfolios for a total of €1.4 billion of residual 

capital debt. 

A second transfer was performed on 31 st October 2011 of total assets of €1.6 billion. The participating 

banks on this occasion were Banca Regionale Europea, Banca Popolare di Ancona and Banco di San 

Giorgio. 

411

Subsequently, in November 2011, after a further framework agreement between the EIB (European 

Investment Bank) and the UBI Group for the grant of medium-to-long term loans to corporate clients 

was signed, a second issuance was performed of privately placed bonds fully subscribed by the EIB. 

Details of the issuance are as follows: 

Name Issue date Maturity date Nominal amount Coupon (*) 

UBI BANCA TV CB due 18/11/2022 18/11/2011 18/11/2022 250,000,000.00 5,669,805.56 

(*) The half yearly coupon is floating rate and the amount indicated relates to the coupon payable at the end of May 2012. 

When issued all the bonds indicated above received the highest rating from Fitch (AAA) and Moody’s 

(Aaa). 

The following banks formed part of the programme as at 31 st December 2011: Banco di Brescia, 

Banca Regionale Europea, Banca Popolare di Bergamo, Banca Popolare di Ancona, Banco di San 

Giorgio, Banca Popolare Commercio ed Industria, Banca CARIME, Banca di Valle Camonica and UBI 

Banca Private. 

The total portfolio used to cover the issues, which for accounting purposes is recognised within the 

assets of each originator bank, consisted on that date of over €9.6 billion of residual capital debt. 

The portfolio used to cover the issues, which for accounting purposes is recognised within the assets 

of each originator bank, consisted of over €9.6 billion of residual capital debt as at 31.12.2011. 

The table below gives the distribution of the portfolio (remaining principal debt) for each originator 

bank and the total by class of credit quality as at 31.12.2011. 

Type of loan 

Total 

portfolio 

originated 

by Banca 

Regionale 

Europea 

originated 

by Banco 

di Brescia 

originated 


Popolare di 

Bergamo 

originated 


Popolare di 

Ancona 

originated 

by Banco 

di San 

Giorgio 

originated 


Popolare 

Commercio 

& Industria 

originated 


Carime 

originated 


di Valle 

Camonica 

originated 

by UBI 


Private 

Investment 

(Remaining principal debt – figures in thousands of euro) 

Performing 

loans 

8,500,842 936,507 1,803,927 2,168,484 887,745 385,239 1,530,265 530,329 158,653 99,695 

Delinquent 

loans 

1,014,546 107,642 318,101 187,487 97,306 80,262 127,099 49,480 27,920 19,249 

Portfolio 

Collateral (1 + 9,515,388 1,044,159 2,122,028 2,355,971 985,051 465,501 1,657,364 579,809 186,573 118,944 

2) 

Defaulted 

loans 

131,543 15,918 34,091 34,713 8,786 8,887 18,727 6,235 4,033 154 

Total UBI 

Finance 

portfolio 

9,646,931 1,060,087 2,156,119 2,390,684 993,837 474,388 1,676,091 586,044 190,606 119,098 

In 2011 this portfolio generated total payments received of approximately €1.2 billion, distributed as 

follows among the portfolios of the different originators: 

originated 

Type of loan 

Total 

portfolio 

originated 


Regionale 

Europea 

originated 

by Banco 

di Brescia 

originated 


Popolare di 

Bergamo 

originated 


Popolare di 

Ancona 

originated 

by Banco 

di San 

Giorgio 

originated 


Popolare 

Commercio 

& Industria 

originated 


Carime 

originated 


di Valle 

Camonica 

by UBI 


Lombarda 

Private 

Investment 


Payments 

received in 

2011 (*) 

1.341.009 126.553 307.500 364.886 107.484 50.321 219.309 112.129 32.311 20.515 

412

With regard to aspects concerning the downgrade of the Parent’s rating, as already reported in subsection 

C.1, the covered bond programme was also affected by the downgrade which required the 

introduction of further guarantees. These included for example the increase in the level of 

“overcollateralisation” of the portfolio, making security deposits with margin accounts on swap 

contracts in which the Parent or the originator banks are the counterparty and the replacement of 

UBI Banca International with Bank of New York Mellon as the account bank for the operation. The 

Management Report, which may be consulted, provides further information on these aspects. 

Furthermore, even if the rating for a covered bond programme – due to the specific structure of the 

transactions – is not immediately and directly related to the rating of the issuer, following further 

action taken by Fitch and Moodys in the first few months of 2012, the rating for the covered bond 

issues was downgraded to the current level of AA+ negative watch for Fitch and Aa2 for Moodys. 

To complete the information, on 1 st February 2012 a further transfer of assets was performed to back 

the covered bond programme, amounting to approximately €1.2 billion. The originator banks were 

Banco di Brescia, Banca Popolare di Bergamo, UBI Banca Private and Banca Carime. 

Subsequently, on 22 nd February 2012, three further issuances of covered bonds were performed at a 

floating rate, for €250 million each, details of which are given below. These bonds have been 

repurchased by the Parent in order to use them as eligible collateral in operations with the central 

bank. 


UBI BANCA Floating CB due 17/02/2014 22/02/2012 17/02/2014 250,000,000.00 2,084,270.83 



(*) The coupons are quarterly floating rate and the amount indicated relates to the coupon payable in May 2012 

The issues were assigned an AA+ rating by Fitch and an Aa2 rating by Moody’s. 

413

D. Banking group - Models for the measurement of credit risk 

With regard to the measurement of credit risk, the Group has developed a portfolio credit risk model 

using the Algorithmics PCRE calculation engine. The model, which includes PD and LGD used for 

supervisory purposes among its input variables, considers the total risk for a loan portfolio by 

modelling and capturing the component resulting from the correlation of counterparty defaults, 

calculating credit losses and the capital at credit risk at portfolio level. This involves the use of a 

complex method for measuring the total risk of the entire portfolio, designed to capture mutually 

dependent phenomena in changes in counterparty creditworthiness and to determine the distribution 

of total losses for the whole portfolio as the basis for calculating risk. 

Calculation of the correlation between defaults therefore makes it possible to establish the 

concentration of risk within a portfolio, which can be used as a basis both for managing and 

mitigating total risk by employing an appropriate diversification strategy and also for implementing 

efficient pricing policies. 

The model proposed uses an approach similar to that of the Merton model (1974). Counterparty 

creditworthiness is given by an intermediate variable, the Credit Worthiness Index (affected by two 

components: a system and a specific component). The future level of this variable determines 

creditworthiness on the basis of specially calculated thresholds and therefore also any corresponding 

losses. 

The analysis of changes in counterparty creditworthiness can be performed over a time period of 

longer than one year with intermediate steps. 

414

2. BANKING GROUP - MARKET RISK 

2.1 Interest rate risk and price risk – supervisory trading portfolio 


A. General aspects 

The considerations that follow relate exclusively to the “trading book”, as defined by supervisory 

regulations. Transactions designed to affect sensitivity at Group level and equity investments in other 

companies classified as for trading according to IAS are excluded. 

Management of Group financial risk is centred in general in the Parent and is performed by the 

Finance Macro Area. Exception is made for the portfolio for which management has been delegated to 

UBI Pramerica SGR by the Parent and for portfolios managed directly by Centrobanca, IW Bank, BDG 

and UBI Banca International. 

B. Processes for the management and methods of measurement of interest rate risk and price 

risk 

The guidelines for the assumption and monitoring of financial risk in the UBI Banca Group are 

defined in the Policy to Manage Financial Risks of the UBI Banca Group and in the relative documents 

to implement it (Regulations and document setting operational limits) with particular reference to 

market risk on the trading book and to interest rate, currency and liquidity risks on the banking 

book. 

More specifically the policy defines the capital allocated (maximum acceptable loss) to trading book 

activities, equal to 1.5% of the available financial resources (with an early warning threshold for 

amounts greater than 80% of the capital allocated), and it sets an early warning threshold on VaR, 

which must not exceed 20% of the capital allocated. 

Within the trading book, the monitoring of the consistency of the risk profiles of Group portfolios with 

respect to risk-return objectives is based on a system of limits which involves the combined use of 

various indicators. The following are defined for each portfolio of the Group: 

mission 

maximum acceptable loss limit 

VaR limit 

possible limits on the type of financial instruments permitted, 

possible limits on composition. 

Consistent with the limits set by the policy, the Document setting operational limits defines operational 

limits for the trading book of the UBI Group in 2011, both at general level and for counterparties and 

single portfolios. 

The main operational limits for 2011 (including reallocations and any new limits set in the second 

half of the year) are as follows: 

maximum acceptable loss for the UBI Group trading book €110.47 million 

early warning on maximum acceptable loss (MAL) 70% MAL 

415

one day VaR limit for the UBI Group trading book €18.21 million 

early warning on VaR 80% VaR 

Observance of the limits set for each portfolio is monitored daily. 

The summary measurement used to assess the exposure of the Bank to financial risks is value at 

risk (VaR). It is a statistical measurement used to estimate the loss that might occur following 

adverse changes in risk factors. 

The VaR of the UBI Banca Group is measured using a confidence interval of 99% and a holding 

period of one day. This value is defined in terms of limits consistent with the time horizon for the 

possible disinvestment of the portfolios. The VaR gives the “threshold” of the daily loss which, on the 

basis of probability hypotheses could only be exceeded in 1% of cases. 

The method used for calculating VaR is that of historical simulation. With this approach the portfolio 

is revalued by applying all the changes in risk factors recorded in the two previous years (500 

observations). The values thus obtained are compared with the present value of the portfolio to give a 

hypothetical series of gains or losses. The VaR corresponds to the sixth worst result (confidence 

interval of 99%) of those obtained. 

The Group employs a stress testing programme to identify events or factors which could have a 

significant effect on positions to supplement the risk indicators obtained from the use of VaR. 

Stress tests are by nature both quantitative and qualitative and they consider not just market risks 

but also the effects on liquidity generated by market turbulence. They are based on both specially 

created theoretical shocks and market shocks actually observed in a predetermined historical period. 

The predictive power of the model adopted for risk measurement is currently monitored using daily 

backtesting analysis, which uses an actual P&L calculated by the front office systems of the Group. 

Retrospective tests consider changes in the value of the portfolio resulting from the front office 

systems of the Group, determined on day t with respect to positions present at t-1. The actual P&L is 

generated from all the transactions opposite in sign to the initial position for a total amount less than 

or equal to the total of the position t-1 without considering transactions of the same sign as the initial 

position that may have arisen during the day. 

The risk of losses caused by unfavourable changes in the price of traded financial instruments due to 

factors related to the issuer can be the result of daily trading activity (idiosyncratic risk) or of a 

sudden change in price with respect to general market trends (event risk, such as the risk of default 

by the issuer caused by a change in the market’s expectation that an issuer itself will default). 

The UBI model for monitoring specific risk for debt securities is capable of detecting the first of the 

two components (idiosyncratic risk) because it considers spread curves by economic sector and rating 

as risk factors. 

Total risk on equity instruments (and OICR – collective investment instruments) is measured by 

considering single shares as risk factors and it includes both the generic risk component (i.e. the risk 

of losses caused by unfavourable trends in the prices of the financial instruments traded in general) 

and a specific component relating to the situation of the issuer. 

416


1. Supervisory trading portfolio: distribution by residual life (repricing date) of the on-balance 

sheet financial assets and liabilities and financial derivatives 

See the subsequent sub-section which contains an analysis of sensitivity to interest rate risk 

2. Supervisory trading portfolio: internal models and other methods of sensitivity analysis 

The graph below shows the changes in VaR that occurred in 2011, for the trading portfolios of the 

UBI Banca Group. 

Change in market risk: daily market VaR for the UBI Group in 2011 

10,000,000 

9,000,000 

8,000,000 

7,000,000 

6,000,000 

5,000,000 

4,000,000 

3,000,000 

2,000,000 

1,000,000 

‐ 

VaR by risk factor calculated on the entire trading book of the UBI Group as at 31 st December 2011 

is given below. 

Trading book of the UBI Banca Group 31.12.2011 Average Minimum Maximum 

Currency risk 283,180 150,503 22,067 299,347 

Interest rate risk 761,322 1,488,533 597,226 3,942,137 

Equity risk 265,056 483,455 133,633 1,585,827 

Credit risk 8,251,941 1,777,774 70,325 8,589,319 

Volatility risk 156,591 225,794 144,234 342,273 

Diversification effect (1) (1,540,091) 

Total (2) 8,178,000 2,919,509 796,569 8,625,828 

(1) The diversification effect is due to the imperfect correlation between the different risk factors present in the Group’s portfolio. 

(2) The maximum VaR was recorded on 15/12, the minimum VaR on 21/06 

417

Backtesting analysis 

Backtesting analysis is designed to test the predictive power of the VaR model adopted. It uses an 

actual profit and loss calculated on the basis of returns on positions in the portfolio on the previous 

day. 

The backtesting analysis for the trading book of the UBI Group is given below for 2011. 

UBI Group trading book: backtesting for 2011 

12000000 

9000000 

Profit & Loss 

VaR 

6000000 

3000000 

0 

‐3000000 

‐6000000 

‐9000000 

‐12000000 

‐15000000 

Actual backtesting analysis of the supervisory portfolios of the UBI Group identified twelve 

overshoots, i.e. twelve days when the P&L was worse than the VaR calculated by the risk 

management system. These overshoots occurred in the second half of the year when the Italian 

sovereign debt crisis worsened. 

Theoretical stress tests 

The Group has a stress testing programme designed to analyse the reaction of portfolios to risk factor 

shocks with the objective of verifying the ability of the supervisory capital to absorb very large 

potential losses and to identify possible measures needed to reduce risks and conserve the capital 

itself. 

Stress tests based on theoretical shocks consist of specially created extreme shifts in interest rate 

(short, medium and long term), credit spread, exchange rate, equity price and volatility curves. A brief 

description of the most significant stress tests is given below. 

• Bull/Bear Steepening: a shock on the yield curve where the decrease/increase in short term 

interest rates is greater/smaller than that for long term rates. 

418

• Bull/Bear Flattening: a shock on the yield curve where the decrease/increase in short term 

interest rates is smaller/greater than that for long term rates. 

• Shock Credit Spread: a widening in the credit spread of 100 basis point for corporate and 

government securities with a rating of less than AAA. 

• Flight to quality: this simulates a shift from investment in high risk to low risk assets. The 

shock applied is a decrease of 100bp in the interest rates for AAA government securities, and 

increase of 100bp in the credit spread on corporate and banking securities, and a 

depreciation in equity instruments of 10%. 

The table below gives the results of the theoretical stress tests performed on the portfolios of the UBI 


The effect of theoretical shocks on the trading and banking book of the UBI Group 

Data as at 31/12/11 

UBI GROUP TRADING 

BOOK 31/12/11 

UB I GROUP BANKING 

BOOK 31/12/11 

TOTAL UBI GROUP 

31/12/11 

Change in NAV Change in NAV Change in NAV 

Risk Factors IR 

Shock Shock +1bp -56,377 0.00% 1,027,418 0.01% 971,112 0.01% 


Shock Shock -1bp 56,332 0.00% -1,030,826 -0.01% -974,566 -0.01% 


Shock Shock +100bp -4,938,081 -0.29% 86,235,349 1.06% 81,304,077 0.83% 


Shock Shock -100bp 9,022,482 0.53% -114,888,880 -1.42% -105,870,015 -1.08% 


Shock Bear Steepening -3,660,386 -0.22% 164,649,583 2.03% 160,992,773 1.64% 


Shock Bull steepening 5,377,485 0.32% -41,146,862 -0.51% -35,769,882 -0.36% 


Shock Bear Flattening -5,301,008 -0.31% 38,763,982 0.48% 33,463,414 0.34% 


Shock Bull Flattening 2,986,127 0.18% -165,248,391 -2.04% -166,184,132 -1.70% 

Risk Factors Equity 

Shock +10% 641,902 0.04% 10,631,387 0.13% 11,639,843 0.12% 

Risk Factors Equity 

Shock -10% -641,902 -0.04% -10,631,387 -0.13% -11,639,843 -0.12% 

Risk Factors Volatility 

Shock +20% -80,227 0.00% 2,659,085 0.03% 2,578,858 0.03% 

Risk Factors Volatility 

Shock -20% 107,274 0.01% -3,460,615 -0.04% -3,353,341 -0.03% 

Risk Factors Forex 

Shock +15% -2 ,645,263 -0.16 % -1,600,5 80 -0.0 2% -4,245,843 -0 .0 4% 

Risk Factors Forex 

Shock -15% 2,645,263 0.16% 1,600,580 0.02% 4,245,843 0.04% 

Risk Factors Credit Spread 

Shock -18,104,524 -1.07% -411,533,456 -5.07% -429,648,753 -4.38% 

Flight to qua lity scenario -19,585,224 -1.16% -422,164,843 -5.20% -442,121,203 -4.51% 

419

The analysis shows a very heightened sensitivity of the UBI Group’s portfolios to credit spread shocks 

(consistent with the presence of Italian government securities and corporate securities, which are 

present in the UBI available-for-sale, the Centrobanca Corporate and the UBI International 

Luxembourg portfolios) and to interest rate shocks (consistent with the presence of bonds and 

interest rate derivatives in Group portfolios). 

The limits set for the trading book are also used for the portfolios in the banking book, which contain 

assets classified for IFRS purposes as available-for-sale (the UBI available-for-sale portfolio, the 

Centrobanca corporate portfolio and the IW Bank available-for-sale portfolio), loans & receivables (the 

UBI and Centrobanca portfolios) and the fair value option portfolios (the UBI hedge fund portfolio and 

the UBI Sicav portfolio). The main operational limits for the banking book of the UBI Group decided 

for 2011, including the reallocations and the new limits set in the second half of the year, are given 

below. 

• maximum loss for UBI Banking Book portfolios 


• one day VaR limit for UBI banking book portfolios 


The graph below shows the changes in daily VaR that occurred in 2011 for the banking portfolios of 

the UBI Group. 

140,000,000 

130,000,000 

120,000,000 

110,000,000 

100,000,000 

90,000,000 

80,000,000 

70,000,000 

60,000,000 

50,000,000 

40,000,000 

VaR by risk factor calculated on the entire banking book of the UBI Group as at 31 st December 2011 

is given below. 

Banking book of the UBI Banca Group 31.12.2011 Average M inimum M aximum 

Currency risk 147,918 108,550 63,422 163,928 

Interest rate risk 16,781,100 38,418,915 6,611,870 72,378,637 

Equity risk 3,679,647 3,986,402 3,432,609 5,033,058 

Credit risk 129,660,291 56,474,674 8,678,983 1 32,893,436 

Volatility risk 778,762 361,052 69,816 785,229 

D ivers ific ation effec t (1 ) (17,850,050) 

Total (2) 133,197,668 86,801,347 58,529,814 1 33,909,330 

(1) T he diversification effect is due to the imperfect correlation between the different risk factors present in the Group’s portfolio. 

(2) The maximum VaR was recorded on 20/12, the minimum VaR on 30/06 

420

2.2 Interest rate risk and price risk – banking portfolio 


A. General aspects, management processes and methods of measurement of interest rate risk 

and price risk 

Interest rate risk consists of changes in interest rates which have the following effects: 

• on net interest income and consequently on the profits of the bank (cash flow risk); 

• on the net present value of assets and liabilities, which has an impact on the present value of 

future cash flows (fair value risk). 

The control and management of structural interest rate risk - fair value and cash flow – is performed 

in a centralised manner by the Parent within the framework, defined annually, of the Policy to 

Manage Financial Risks of the UBI Banca Group, which identifies measurement methods and models 

and limits or early warning thresholds in relation to net interest income and the economic value of 

the Group. 

The Policy to Manage Financial Risks of the UBI Banca Group 2011 defines a system of limits on 

exposure to interest rate risk based on indicators measured in a scenario of a +100 bp increase in 

interest rates over a time horizon of twelve months. The Supervisory Board has set a limit on the 

estimate of variation in net interest income at consolidated level, which must be > 0 and an early 

warning threshold on sensitivity, which must be negative and remain within a range of 0% to 4% of 

available financial resources 1 (taken with a negative sign). With regard to those limits, the 

Management Board has set an early warning level on sensitivity of -€350 million. For economic value 

sensitivity only, a policy of basic balance in terms of exposure to interest rate risk is defined at 

individual company level, except for specific limits and early warning thresholds set for individual 

companies and banks in the Group: 

Banca Carime: limit -€50 million, early warning threshold -€40 million; 

Centrobanca: limit -€20 million, early warning threshold -€15 million, 

IW Bank: limit -€12 million at individual level, early warning threshold -€8.5 million in terms 

of contribution to consolidated exposure, -€10 million at individual level. 

The early warning threshold for the network banks with no specific exceptions is set at 1% of 

individual supervisory capital. The early warning threshold for the product companies is -€5 million 

with no specific exceptions. 

Compliance with individual limits is pursued by Group member companies by means of hedging 

derivative contracts entered into with the Parent. UBI Banca may then close the position with 

counterparties outside the Group, acting in accordance with strategic policies and within the 

consolidated limits set by the governing bodies. 

Measurement, monitoring and reporting of interest rate risk exposure is performed at consolidated 

and individual level by the Risk Management Area of the Parent, which performs the following on a 

monthly basis: 

• a sensitivity analysis designed to measure changes in the value of assets on the basis of 

parallel shocks on interest rate levels for all the time buckets of the curve; 

• a simulation of the impact on net interest income for the current year by means of a static gap 

analysis (i.e. assuming that the positions remain constant during the period), considering 

1 See Part F, section 1, point A of the Notes to the Consolidated Financial Statements for a definition of available 

financial resources. 

421

different hypotheses for the elasticity of demand deposits. 

On the basis of the periodic reports produced, the ALM and Funding Area of the Parent takes 

appropriate action to prevent the limits and early warning thresholds from being exceeded. 

Exposure to interest rate risk is measured by using gap analysis and sensitivity analysis models and 

an assessment of impact on net interest income on all those financial instruments – assets and 

liabilities – not included in the trading book in accordance with supervisory regulations. 

Sensitivity analysis on economic value, which includes an estimate of the impacts resulting from 

early repayment of mortgages and long term loans, is accompanied by an estimate of the variation in 

net interest income. Both types of analysis are performed by hypothesising a shock of a parallel rise 

in the yield curve of 100 basis points. The calculation of sensitivity on economic value is for items to 

maturity only and is performed by including impacts resulting from the early repayment and 

renegotiation of mortgages and loans. The analysis of the impact on net interest income is over a time 

horizon of twelve months, with account taken of both the variation in the profit on demand items 

(inclusive of viscosity phenomena) and that variation for items to held to maturity. 

B. Fair value hedging 

Specific and macro hedges were performed at Group level using financial derivative instruments, in 

order to reduce exposure to adverse changes in fair value due to interest rate risk. More specifically 

the following are hedged: fixed interest rate securities in the available for sale portfolio (specific 

hedges) loans to ordinary customers on fixed and mixed interest rate schedules (macro-hedges), 

mortgages with cap options (macro-hedges) and fixed rate bond and covered bond issues (specific 

hedges). 

The derivative contracts used are of the interest rate swap and interest rate cap type. 

The hedging transactions entered into in 2011 were for the following: 

 

 

 

 

AFS securities (specific hedges) amounting to approximately €150 million nominal; 

“prefix” mortgages (macro-hedge) amounting to approximately €1.20 billion nominal; 

covered bonds issues (specific hedges) amounting to €1.7 billion; 

other fixed rate issues (specific hedges) amounting to approximately €8.3 billion. 

Tests for effectiveness are performed prospectively when a hedge is first implemented and this is 

generally followed by monthly retrospective tests. 

Prospective effectiveness tests are performed by the Finance Area. Retrospective tests are performed 

by the Risk Management Area, which keeps official records of effectiveness over time for each hedging 

transaction. 

C. Cash flow hedging 

Details of cash flow hedges are reported in the financial statements of the UBI Group in relation to 

issues of certificates of deposit denominated in Japanese currency (JPY), which are hedged by 

domestic currency swaps (DCS). 

422


1. Banking portfolio: distribution by residual life (by repricing date) of financial assets and 

liabilities 

See the subsequent sub-section which contains an analysis of sensitivity to interest rate risk 

2. Banking portfolio: internal models and other methods of sensitivity analysis. 

The exposure of the Group to interest rate risk, measured in terms of core sensitivity measured on a 

scenario of a increase in interest rates of +100 bp, on items as at 31 st December 2011 amounted to 

approximately -€243.78 million (-€346.38 million as at 31 st December 2010), equal to 1.99% of the 

consolidated supervisory capital, compared to a limit of -€420 million set on that aggregate by the 

2011 Policy to Manage Financial Risks and an early warning threshold on that same indicator of - 

€350 million. 

The total level of exposure includes an estimate, consistent with the provisions of the Financial Risks 

Policy, of the impact of the early repayment of loans (approximately +€180.55 million in terms of 

sensitivity) and also the effect of structural ALM action taken using derivatives, even if subject to a 

capital requirement for market risk, with the objective of acting on the individual sensitivity of Group 

companies. 

In detail, the core sensitivity originated by the network banks amounted to approximately -€30.71 

million, while approximately -€34.18 million is attributable to the activities of the product companies. 

The Parent contributes a total of approximately -€170.94 million, including -€26.35 million from 

structural and sensitivity action relating to Group member companies. In fact UBI Banca operates as 

the sole counterparty for Group member companies in hedging derivatives contracts and, if 

necessary, it then closes the positions on the market on the basis of positioning with respect to the 

limits set by the Financial Risks Policy and expected scenarios for future interest rate trends. 

The table below reports the exposure, measured in terms of economic value sensitivity in a scenario 

of an increase in reference interest rates of +200 bp, recorded in 2011, given as a percentage of tier 

one capital and supervisory capital as at 31 st December 2011. 

Risk indicators - average amounts 2011 2010 

parallel shift of +200 bp 

sensitivity/tier 1 6.90% 8.99% 

sensitivity/supervisory capital 4.65% 5.98% 

Risk indicators - end of period values 31/12/2011 31/12/2010 

parallel shift of +200 bp 

sensitivity/tier 1 5.66% 9.13% 

sensitivity/supervisory capital 3.81% 6.06% 

Sensitivity analysis of net interest income focuses on changes in profits resulting from a parallel 

shock on the yield curve measured over a time period of 12 months. The overall determination of 

exposure contributes to the analysis of the viscosity of on-demand items. The exposure of the UBI 

Group to interest rate risk, estimated in terms of an impact on net interest income of an increase in 

reference interest rates of 100 bp, amounted to +€81.94 million as at 31 st December 2011. 

423

2.3 Currency risk 


A. General aspects, management processes and methods of measuring currency risk 

Currency risk is calculated on the basis of mismatches existing between assets and liabilities in 

foreign currency (spot and forward), relating to each currency other than the euro. The main sources 

of risk are as follows: 

 

 

 

 

lending and funding in foreign currency with corporate and retail customers; 

holding financial instruments denominated in foreign currency; 

holding units in O.I.C.R. (collective investment instruments) for which, even if they are 

denominated in euro, it is not possible to determine the composition in foreign currency of the 

underlying investments and/or for which the maximum limit on investment in foreign 

currency is not known and binding; 

dealing in foreign bank notes. 

Foreign currency risk in the UBI Group regards banking book exposures originated by the network 

banks and/or by the product companies – resulting from their commercial activities – and their 

positions relating to trading in foreign currency. 

Trading on foreign exchange markets is performed by the Group treasury function which operates by 

using instruments such as forward trades, forex swaps, domestic currency swaps and currency 

options, thereby optimising risks resulting from Group positions in foreign currency. 

Exposure to currency risk is calculated starting from the net foreign currency position using a 

method based on supervisory regulations. Equity investments and tangible assets are not included in 

the calculation of the net foreign currency position. 

B. Currency risk hedging 

Foreign currency risk arising from exposures in the banking book is mitigated by systematically 

hedging them with funding and lending transactions in the same currency as the original 

transaction. This activity to contain risk is also performed by the product companies for their own 

banking book positions. The remaining exposures and trading portfolio exposures are fully and 

precisely hedged with spot forex positions. 

For some network banks in the Group (Banca Popolare di Bergamo S.p.A. and Banca Popolare di 

Ancona S.p.A), issues of certificates of deposit in foreign Japanese currency (JPY) are hedged by 

simultaneously entering into DCS contracts with customers, as already mentioned in the sub-section 

on interest rate risk. The accounting treatment employed for these transactions is that for cash flow 

hedging. 

424


1. Distribution of assets, liabilities and derivatives by foreign currency in which they are 

denominated 

Items 

Currencies 

US Dollars UK sterling Yen Canadian Dollar S wiss F rancs Other cu rrencies 

A. Financial assets 1,068,657 107,582 40,512 6,142 840,312 179,207 

A.1 Debt instruments 36,411 54,629 - - 7,455 - 

A.2 Equity instruments 611 - - - 3,802 - 

A.3 Financing to banks 116,275 29,967 1,481 4,667 21,371 34,349 

A.4 Financing to customers 895,953 22,986 39,031 1,475 807,684 144 ,858 

A.5 Other financial asse ts 19,407 - - - - - 

B. Other assets 2,956 1,416 154 205 2,659 663 

C. Financial liabilities 564,816 118,792 1,130,981 9,390 238,732 58,994 

C.1 Due to banks 64,444 76,080 3,311 379 50,914 32,773 

C.2 Due to customers 483,707 42,208 2,434 9,011 177,830 26,111 

C.3 Debt instruments 16,665 504 1,125,236 - 9,988 110 

C.4 Other fin an cial liabilities - - - - - - 

D. Other liabilities 357 20 - - 4,130 240 

E. Financial D erivatives (184,699) (55,201) 1,084,797 2,704 (572,452) (134,618) 

E.1 Op tions - (5) - - - (1) 

E.1.1 Long positions 439,391 32,382 1 ,005 3,382 8,312 8,853 

E.1.2 Short positions 439,391 32,387 1 ,005 3,382 8,312 8,854 

E.2 Other derivatives (184,699) (55,196) 1,084,797 2,704 (572,452) (134,617) 

E.2.1 Long positions 915,164 77,313 1,345 ,336 35,033 12,215 122,940 

E.2.2 Short positions 1,099,863 132,509 260 ,539 32,329 584,667 257,557 

Total assets 2,426,168 218,693 1,387,007 44,762 863,498 311,663 

Total liabilities 2,104,427 283,708 1,392,525 45,101 835,841 325,645 

Balance (+/-) 321,741 (65,015) (5,518) (339) 27,657 (13,982) 

2. Internal models and other methods of sensitivity analysis. 

The absorption of capital for currency risk as at 31 st December 2011 was nil, given a general net open 

position in foreign currency of less than two per cent of supervisory capital. 

Exposure to currency risk benefited during the year from a reduction in investments in hedge funds. 

425

2.4 Derivative financial instruments 

A. Financial derivatives 

A.1 Supervisory trading portfolio: end of period and average notional amounts 

Underlying assets/type of derivative 

31/12/2011 31/12/2010 

Over the counter Central counterparties Over the counter Central counterparties 

1. Debt instruments and interest rates 28,658,326 623,007 42,886,343 2,607,348 

a) Options 7,765,102 - 11,170,173 4,366 

b) Swaps 20,893,224 - 31,181,043 - 

c) Forwards - - 1,628 - 

d) Futures - 623,007 - 2,602,982 

e) Other - - 533,499 - 

2. Equity instruments and share indices 59,681 1,440 216,278 48,619 

a) Options 59,681 100 211,349 12,001 

b) Swaps - - - - 

c) Forwards - - 4,929 67 

d) Futures - 1,340 - 36,551 

e) Other - - - - 

3. Currencies and gold 5,342,657 - 5,530,973 - 

a) Options 2,030,499 - 2,240,278 - 

b) Swaps - - 449,035 - 

c) Forwards 3,312,158 - 2,841,660 - 

d) Futures - - - - 

e) Other - - - - 

4. Commodities 5,785 - 26,300 - 

5. Other underlying - - - - 

Total 34,066,449 624,447 48,659,894 2,655,967 

Average am ounts 41,363,171 1,640,207 57,454,454 2,260,184 

A.2 Banking portfolio: notional, end of period and average amounts 

A.2.1 For hedging 

U nderlying assets/type of derivative 

31/12 /2 011 31/12/2 010 

Ov er the coun ter Cen tral cou nte rparties O ver th e cou nter Central cou nterpartie s 

1 . Debt in stru m en ts an d in terest rates 4 7,902 ,8 50 - 43,000 ,2 61 - 

a) O ptions 5,230,386 - 609,05 7 - 

b) Swaps 42,672,464 - 42,391,20 4 - 

c) Fo rwards - - - - 


e) O ther - - - - 

2 . Equity in strum ents an d sh are in dices - - - - 

a) Options - - - - 

b) Swaps - - - - 



e) O ther - - - - 

3 . Curren cies and gold 1,128 ,6 25 - 765 ,8 47 - 


b) Swaps 1,128,625 - 8,90 2 - 



e) O ther - - 756,94 5 - 

4 . Com m odities - - - - 


Total 4 9,031 ,4 75 - 43,766 ,1 08 - 

Average am ou nts 4 6,398 ,7 92 - 43,838 ,2 42 - 

426

A.2.2 Other derivatives 

Underlying assets/type of d erivative 

31/12/2011 31/12/2010 


1. Debt instruments and interest rates 126,494 - 36,652 - 

a) Options 19,094 - 36,652 - 

b) Swaps - - - - 

c) Forwards - - - - 


e) Other 107,400 - - - 

2. Equity instruments and share indices 2,167,983 - 8,900,492 - 

a) Options 2,167,983 - 8,900,492 - 

b) Swaps - - - - 



e) Other - - - - 

3. Currencies and gold - - - - 


b) Swaps - - - - 



e) Other - - - - 

4. Commodities - - - - 


Total 2,294,477 - 8,937,144 - 

Average amounts 5,615,810 - 8,480,285 - 

427

A.3 Financial derivatives: gross positive fair value – by type of product 

Positive fair value 

Portfolio/type of derivative 

31/12/2011 31/12/2010 


A. Supervisory trading portfolio 595,567 220 495,701 888 

a) Options 61,106 35 78,646 20 

b) Interest rate swaps 489,384 - 392,669 - 

c) Cross currency swaps 23 - 377 - 

d) Equity swaps - - - - 

e) Forwards 44,024 - 21,442 1 

f) Futures - 185 - 867 

g) Other 1,030 - 2,567 - 

B. Banking portfolio - for hedging 1,090,498 - 591,127 - 


b) Interest rate swaps 1,010,954 - 560,918 - 

c) Cross currency swaps - - 

d) Equity swaps - - 

e) Forwards - - - - 

f) Futures - - - - 

g) Other 79,544 - 30,209 - 

C. Banking portfolio - o ther derivatives 1,199 - 17,552 - 

a) Options 1,199 - 17,552 - 

b) Interest rate swaps - - - - 

c) Cross currency swaps - - - - 




g) Other - - - - 

Total 1,687,264 220 1,104,380 888 

A.4 Financial derivatives: gross negative fair value – by type of product 

Negative fair value 

Portfolio/type of derivative 

31/12/2011 31/12/2010 


A. Supervisory trading portfolio 624,066 187 528,939 1,191 

a) Options 49,123 - 57,498 - 

b) Interest rate swaps 522,968 - 447,098 - 

c) Cross currency swaps 47 - - - 


e) Forwards 50,889 - 21,698 - 

f) Futures - 187 - 1,191 

g) Other 1,039 2,645 

B. Banking portfolio - for hedging 1,739,685 - 1,228,056 - 


b) Interest rate swaps 1,739,328 - 1,226,673 - 





g) Other 357 - 1,383 - 

C. Banking portfolio - o ther derivatives 1,413 106 15,030 - 

a) Options 1,413 - 15,030 - 

b) Interest rate swaps - - - - 





g) Other - 106 - - 

Total 2,365,164 293 1,772,025 1,191 

428

A.5 OTC financial derivatives: supervisory trading portfolio – notional amounts, gross positive and negative fair 

values by counterparty – contracts not covered by clearing agreements 

Contracts not covered by clearing 

agreements 


central banks 

Other public 

authorities 

Banks 

Financial companies 

Insurance companies 

Non financial 

companies 

Other 

1) Debt instruments and interest rates 

- notional amount - 23,264 20,143,364 1,179,250 - 6,264,316 1,048,132 

- positive fair value - 1 174,824 11,708 - 313,739 11,911 

- negative fair value - 10 508,864 20,585 - 2,758 2,064 

- future exposure - 81 127,820 7,751 - 17,290 744 

2) Equity instruments and share indices 

- notional amount - - 7,383 - - - 52,298 

- positive fair value - - 440 - - - - 

- negative fair value - - - - - - - 

- future exposure - - 443 - - - 623 

3) Currencies and gold 

- notional amount - 3,043,069 1,134,983 278 1,145,733 18,594 

- positive fair value - - 40,365 31,007 7 10,402 134 

- negative fair value - - 69,483 3,223 - 15,825 297 

- future exposure - - 25,920 10,482 3 7,120 185 

4 ) Other secu rities 

- notional amount - - 2,891 - - 2,894 - 

- positive fair value - - 627 - - 402 - 

- negative fair value - - 581 - - 376 - 

- future exposure - - 289 - - 289 - 

A.6 OTC financial derivatives: supervisory trading portfolio – notional amounts, gross positive and negative fair 

values by counterparty – contracts covered by clearing agreements 

No items of this type exist in the UBI Banca Group. 

429

A.7 OTC financial derivatives: banking portfolio – notional amounts, gross positive and negative fair values by 

counterparty – contracts not covered by clearing agreements 

Contracts not covered by clearing 

agreements 


central banks 

Other public 

authorities 

Banks 

Financial companies 

Insurance companies 

Non financial 

companies 

Other 

1) Debt instruments and interest rates 

- notional amount - - 45,074,401 2,929,896 3,350 3,500 18,197 

- positive fair value - - 979,431 31,523 - - - 

- negative fair value - - 1,561,291 178,037 - - - 

- future exposure - - 264,425 16,749 - - - 

2) Equity instruments and share indices 

- notional amount - - 734,697 337,925 773,818 170,670 150,873 

- positive fair value - - 1,199 - - - - 

- negative fair value - - - - - - 1,414 

- future exposure - - 56,516 29,396 33,854 17,059 5,876 

3) Currencies and gold 

- notional amount - 5,743 - 26,377 - 79,062 1,017,443 

- positive fair value - 254 - 2,228 - 5,294 71,768 

- negative fair value - 16 - - - 34 306 

- future exposure - 57 - 264 - 794 10,216 

4 ) Other secu rities 

- notional amount - - - - - - - 

- positive fair value - - - - - - - 

- negative fair value - - - - - - - 

- future exposure - - - - - - - 

A.8 OTC financial derivatives: banking portfolio – notional amounts, gross positive and negative fair values by 

counterparty – contracts covered by clearing agreements 


430

A.9 Residual maturity of OTC financial derivatives: notional amounts 

Underlying asset/Residual maturity Up to 1 year 1 year to 5 years More than 5 years Total 

A. Supervisory trading portfolio 17,323,748 9,639,788 7,102,913 34,066,449 

A.1 Financial derivatives on debt instruments and interest rates 12,006,703 9,548,710 7,102,913 28,658,326 

A.2 Financial derivatives on equity instruments and share indices 7,416 52,265 - 59,681 

A.3 Financial derivatives on exchange rates and gold 5,303,844 38,813 - 5,342,657 

A.4 Financial derivatives on other securities 5,785 - - 5,785 

B. Banking portfolio 10,646,479 27,344,997 13,334,476 51,325,952 

B.1 Financial derivatives on debt instruments and interest rates 9,324,889 26,094,128 12,610,327 48,029,344 

B.2 Financial derivatives on equities and share indices 192,965 1,250,869 724,149 2,167,983 

B.3 Financial derivatives on exchange rates and gold 1,128,625 - - 1,128,625 

B.4 Financial Derivatives on other securities - - - - 

Total 31/12/2011 27,970,227 36,984,785 20,437,389 85,392,401 

Total 31/12/2010 39,158,581 32,975,936 29,228,629 101,363,146 

A.10 OTC financial derivatives: counterparty risk/financial risk – Internal models 

The UBI Banca Group does not use internal models to measure counterparty risk and financial risk for OTC financial derivatives. 

431

B. Credit derivatives 

B.1 Credit derivatives: end of period and average notional amounts 


B.2 OTC credit derivatives: gross positive fair value – by type of product 


B.3 OTC credit derivatives: gross negative fair value – by type of product 


B.4 OTC credit derivatives: gross fair value (positive and negative) by counterparty – 

contracts not covered by clearing agreements 


B.5 OTC credit derivatives: gross fair value (positive and negative) by counterparty – 

contracts covered by clearing agreements 


B.6 Residual maturity of credit derivatives: notional amounts 


B.7 Credit derivatives: counterparty risk/financial risk – internal models 

The UBI Banca Group does not use internal models to measure counterparty and financial risk for 

credit derivatives. 

C. Financial and credit derivatives 

C.1 OTC financial and credit derivatives: net fair value and future exposure by 

counterparty 

No OTC financial and credit derivatives with contracts covered by clearing agreements were 

recognised. 

432

3 BANKING GROUP - LIQUIDITY RISK 


A. General aspects, processes for the management and methods for the measurement of 

liquidity risk 

Liquidity risk is defined in the UBI Group as the risk of the failure to meet payment obligations, 

which can be caused either by an inability to raise funds, by raising them at higher than market 

costs (funding liquidity risk), or by the presence of restrictions on the ability to sell assets (market 

liquidity risk) with losses incurred on capital account. 

Structural liquidity risk is defined as the risk resulting from a mismatch between the sources of 

funding and lending. 

The primary objective of the liquidity risk management system is to enable the Group to meet its 

payment obligations and to raise additional funding at a minimum cost and without prejudice to 

potential future income. 

The general principles on which liquidity management within the Group is based are as follows: 

• the adoption of a centralised management system run by Group Treasury; 

• diversification of the sources of funding and limits on exposure to institutional counterparties; 

• protection of Group capital in liquidity crisis situations; 

• a proper financial balance between assets and liabilities; 

• a proper level of eligible and/or liquid assets, sufficient to meet liquidity requirements even under 

stress conditions. 

The reference framework for the measurement, monitoring and management of exposure to liquidity 

risk is defined annually as part of the Policy to Manage Financial Risks of the UBI Banca Group and 

the relative regulations to implement it and the document setting operational limits approved by the 

corporate governance bodies. 

Corporate risk policies are supplemented by a contingency funding plan (CFP), an emergency plan for 

liquidity management, the main aim of which is to protect the Bank’s assets in situations of liquidity 

drainage, by putting in place crisis management strategies and procedures to find sources of funding 

in cases of emergency. 

In 2011 both the system for monitoring liquidity risk and the relative structural balance between 

assets and liabilities was revised in order to incorporate the developments and recommendations of 

the international process in progress to revise the regulations governing liquidity risk. 

These documents set out rules for the pursuit and maintenance of an adequate degree of 

diversification in the sources of funding and a proper structural balance between the sources and 

uses of funds for the network banks and the product companies, through the pursuit of co-ordinated 

and efficient funding and lending policies. 

The following are responsible for liquidity risk management: 

• the Finance Macro Area (1 st level management), which monitors liquidity daily and manages risk 

on the basis of defined limits; 

• the Risk Management Area (2 nd level management), responsible for periodically verifying that limits 

are observed. 

433

The system for the management of liquidity risk defined by the Policy to Manage Financial Risks of 

the UBI Banca Group and supplemented by the Contingency Funding Plan is based on a system of 

early warning thresholds and limits consistent with the general principles on which liquidity 

management within the Group is based. 

More specifically, liquidity risk is managed by means of the measurement, monitoring and 

management of the expected liquidity requirement, using a net liquidity balance model of analysis at 

consolidated level, supplemented with stress tests designed to assess the Group’s ability to withstand 

crisis scenarios characterised by an increasing level of severity. 

The net liquidity balance is obtained from the daily liquidity ladder by comparing expected cash flow 

projections with counterbalancing capacity over a time horizon of up to three months. The cumulative 

sum of expected cash flows and of the counterbalancing capacity, for each time bucket, quantifies 

liquidity risk measured under different stress scenarios. 

The objectives of stress tests are to measure the vulnerability of the Group to exceptional but 

plausible events and they provide a better assessment of exposure to liquidity risk, the systems for 

mitigating and monitoring them and the length of the survival period under hypotheses of adverse 

scenarios. The following risk factors that can alternatively affect the cumulative imbalance of cash 

inflows and outflows or the liquidity reserve are considered in the definition of stress scenarios, 

divided into base stress and internal scenarios: 

• wholesale funding risk: shortage of unsecured and secured funding on the institutional market; 

• retail funding risk: volatility of on demand liabilities relating to ordinary customers and 

redemptions of own securities; 

• off-balance sheet liquidity risk: use of margins available on irrevocable credit lines granted; 

• market liquidity risk: fall in the value of securities which constitute a liquidity reserve and an 

increase in the margins requested for positions in financial derivative instruments. 

Monitoring the level of cover to meet expected liquidity requirements through an adequate reserve of 

liquidity is accompanied by daily monitoring of exposure on the interbank market. Limits and early 

warning thresholds are set for the two indicators mentioned and a contingency funding plan is 

triggered if they are exceeded. 

In compliance with supervisory provisions the system for the management of liquidity risk employed 

by the Group also involves monitoring sources of funding both at consolidated and individual 

company level, by using a system of indicators. In this respect specific thresholds are set both for the 

maximum level of funding from institutional markets, considered more volatile under stress 

conditions, and the minimum levels of cover for lending activity with funding from ordinary 

customers or with medium to long-term funding from institutional customers. 

Finally the management of structural balance is performed by using models which measure the 

degree of stability of liabilities and the degree of liquidity of assets in order to mitigate risk associated 

with the transformation of maturities within a tolerance threshold considered acceptable by the 

Group. The model employed by the Group to monitor structural balance is designed to incorporate 

the general lines currently being defined in the process to revise supervisory regulations for liquidity 

risk with specific reference to medium to long-term indicators. Measurement of the degree of stability 

of liabilities and the degree of liquidity of assets is based principally on criteria of residual life and on 

the classification of the counterparties which contribute to the definition of the weightings of assets 

and liabilities. 

434

Finally the Group reports its liquidity position to the Bank of Italy on a daily basis, consisting of the 

net liquidity balance over a three month time horizon, following standard procedures set by that 

supervisory authority. The liquidity position is supplemented, on request by the Bank of Italy, on a 

weekly basis with the following information: 

• the principal maturities, forecast over a time horizon of twelve months, both on the institutional 

and the retail market, with details according to the type of funding instrument (e.g. bond issues, 

repurchase agreements, commercial paper); 

• details of assets available for refinancing transactions with the central bank and of liquid assets; 

• the main providers of funds on the interbank market. 

Further information on Group activities on the interbank market is given in the Management Report 

which may be consulted. 

435


1.1 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in euro 

436

1.2 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in USD 

437

1.3 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in CHF 

438

1.4 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in GBP 

439

1.5 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in YEN 

440

1.6 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in other currencies 

Details of the securitisations in which Group member companies (originators) subscribe the liabilities issued by special purpose 

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 

these notes and in the Management Report, which may be consulted. 

441

4 BANKING GROUP - OPERATIONAL RISKS 


A. General aspects, procedures for the management and methods for the 

measurement of operational risk 

Operational risk is defined as the risk of loss resulting from inadequate or failed procedures, human 

resources and internal systems or from exogenous events. This type of risk includes loss resulting 

from fraud, human error, business disruption, system failure, non-performance of contracts and 

natural disasters. 

This definition includes the legal risk of losses resulting from violations of laws and regulations, and 

from contractual or non contractual responsibilities or from other litigation, but it does not include 

reputational and strategic risk. 

Operational risk is characterised by cause and effect relations for which one or more trigger events 

generate a prejudicial event or effect which is directly linked to an economic loss. 

An operational loss is therefore defined as a set of negative economic impacts resulting from events of 

an operational nature, recognised in the accounts of a business and sufficient to impact on the 


When formulating its policy to manage operational risk, the UBI Banca Group placed a particular 

focus on maintaining an appropriate risk profile that is consistent with the propensity to risk defined 

by senior management. It is Group policy to identify, measure and monitor operational risks within 

an overall process of operational risk management with the following objectives: 

– to identify the causes of prejudicial events at the origin of operational losses and 

consequently to increase corporate profitability and improve operational efficiency, by 

identifying critical areas and monitoring and optimising the system of controls; 

– to optimise policies to mitigate and transfer risk, such as for example, the use of 

insurance, on the basis of the magnitude and effective exposure to risk; 

– to optimise the allocation and absorption of capital for operational risk and provision 

policies in a perspective of creating value for shareholders; 

– to support decision-making processes concerning the start up of new business, 

activities, products and systems; 

– to develop an operational risk culture at business unit level, increasing awareness 

throughout units; 

– to respond to the regulatory requirements of the New Basel Accord on Capital for banks 

and banking groups. 

In the light of the regulatory context as set out by the Bank of Italy in the publication of Circular No. 

263 of 27/12/2006, the UBI Banca Group has adopted the “traditional standardised approach” (TSA) 

in combined use with the “basic indicator approach” (BIA) for the calculation of capital requirements 

for operational risks and it has commenced the procedures for the authorisation by the supervisory 

authority for the use of an “advanced measurement approach” (AMA) internal model in combined use 

with the TSA and BIA approaches which should be completed by 17 th June 2012. 

442

The organisational model 

The organisational model for the management of operational risks is based on a combination of 

components based on the responsibilities assigned and the specific position occupied in the 

organisation chart, both centralised and decentralised, consistent with the federal, multi-functional 

and integrated structure of the Group. In this context the Parent performs the functions of 

management, co-ordination and control, and the supervision of business functions, which includes 

supporting the activities of network banks and product companies in their core businesses, and it 

supplies common support services either directly or through subsidiaries. 

The design of the organisational structure is differentiated and based on the size and operational 

complexity of each entity in the Group: Parent, service company, commercial banks, product 

companies. Centralised responsibilities, each within the scope of their functions, are assigned to the 

following: 

– the Operational Risks Committee is the policy making and governance body which 

oversees the general process of operational risk management. Its composition, 

functional rules, duties and powers are governed by the General Corporate Regulations; 

– Operational Risks Service: as the unit responsible for the general system of 

operational risk management, it plans, develops and maintains methods for the 

detection, measurement and monitoring of operational risk and it verifies the 

effectiveness of measures to mitigate operational risk and of the relative reporting 

systems. It is also responsible for policy setting, co-ordination and control of the overall 

system at Group level; 

– the Methods and Models Service is the unit responsible for calculating capital 

requirements for the legal entities of the Group which intend to adopt advanced 

approaches on the basis of validation instructions received from the Models and 

Processes Validation Service and other internal and external bodies according to the 

case. This service forms part of the Operational Risk Service; 

– the Models and Processes Validation Service: as a function that is independent of 

persons or units involved in the development of risk management and measurement 

systems, it is responsible for the continuous assessment of the quality of the operational 

risk management system and its compliance over time with legislation and regulations, 

operational requirements and market demands. Its activities include verification of the 

reliability of capital requirement calculations and tests of the use of the measurement 

system in decision making processes and in the management of operational risks (use 

tests); 

– the Risk Policies Service is the unit responsible for formulating and revising the 

“Operational Risk Policy of the UBI Banca Group”. It is also involved in assessing and 

taking out insurance policies to mitigate operational risk following procedures contained 

in the Insurance Risk Management Regulations. 

The organisational model is structured with four levels of responsibility for the individual legal 

entities of the Group as follows: 

– Operational Risk Officer (ORO): these are responsible within their legal entities (Parent 

– network banks – product companies) for implementing the overall framework for the 

management of operational risks as defined by Group policies and the respective 

regulations to implement it; 

443

– Local Operational Risk Support Officer (LORSO): the main role acting in support of 

the Operational Risk Officer in the general management of operational risks in the 

entities to which they belong. In the legal entities to which they belong these officers 

also support and co-ordinate the Risk Champions and Risk Owners who liaise with 

those involved in the operational risk management system; 

– Risk Champion (RC): operationally responsible for supervising operational risk 

management (loss data collection – LDC – and self risk assessment) for the purposes of 

overall validation in their business areas, co-ordinating and supporting the relative risk 

owners. They support the risk monitoring process and participate in the definition and 

implementation of mitigation strategies; 

– Risk Owners (RO): their task is to recognise and report loss events (LDC), both actual 

and/or potential, which occur in the course of everyday operations. They participate in 

the implementation of corrective or improvement action decided at higher levels 

designed to reduce exposure to risk. 

Management, measurement and control systems 

The Operational Risk Management System of the Group is composed of the following: 

– a decentralised process for collecting data on operational losses (loss data collection) 

designed for integrated and systematic detection of damaging events that occur which 

result in an actual loss, almost a loss (a “near miss”) or a profitable event. Operational 

losses detected are periodically reconciled in the accounts and updated in real time by 

Risk Owners and/or Risk Champions by means of a software application available on 

the Group intranet, which shows any recoveries that are obtained separately, including 

those resulting from specific insurance policies; 

– a structured process for mapping and assessing risk, operational context factors and 

significant internal control system scenarios (risk assessment) intrinsic to the business 

areas of the Group, supported by a software application for integrated management, 

where the intention is to furnish critical operational self diagnosis of potential exposure 

to the risk of future losses, of the adequacy of controls and of the mitigation measures 

in place; 

– a database of operational losses incurred by the sector nationally since 2003. The Group 

has participated in the DIPO (Italian database of operational losses) project launched by 

the Italian Banking Association to exchange loss data in the sector since it commenced; 

– a system for measuring economic and supervisory capital to calculate the absorption of 

supervisory capital by operational risk for each business unit using an AMA and a 

standardised approach. The measurement of operational risk using the AMA system is 

performed using an extreme value theory (EVT) approach, based on all of the three 

sources of information described above (internally detected operational losses [LDC], 

assessment of potential exposure to risk [self risk assessment] and operational losses 

incurred in the national banking sector [DIPO]). 

444

Reporting 

A reporting system has been implemented to support the monitoring of operational risks which 

furnishes the information needed for proper management, measurement and mitigation of the levels 

of risk assumed by the Group. 

That system is structured with the same levels of responsibility employed by the organisational model 

to support the multiple information requirements intrinsic to the federal model of Group 

organisation. The objective is to guarantee standardised information and allow periodic verification of 

the operational risks assumed as input for the definition of management strategies and objectives 

that are consistent with standard levels of acceptable risk. 

Reporting to corporate bodies, the senior management of the Parent and of the main legal entities in 

the Group and to the Operational Risks Committee is periodically performed centrally by the 

Operational Risks Service. It includes an analysis at differing degrees of detail and with differing 

frequencies according to requirements of the following: an analysis of data on internal losses and the 

relative recoveries together with a comparison with external data for the sector nationally; the results 

of the assessment of risk exposure with the identification of areas of vulnerability; and a description 

of the action needed to prevent and mitigate risk and of the relative effectiveness. 

Risk transfer mechanisms 

The UBI Banca Group has taken out adequate insurance policies to cover the principal transferable 

operational risks with due account taken of supervisory regulations (Bank of Italy Circular No. 

263/2006). The policies were taken out by UBI Banca Scpa in its own name and on behalf of the 

network banks and product companies of the Group concerned. 

Legal risk 

The companies in the UBI Banca Group are party to a number of court proceedings of varying nature 

originating from the ordinary performance of their business. While it is not possible to predict final 

outcomes with certainty, it is considered that an unfavourable conclusion of these proceedings, both 

taken singly or as a whole, would not have a significant effect on the financial and operating position 

of the UBI Banca Group. 

Significant legal proceedings currently pending to which some network banks of the Group are party 

include the following: 

1. revocation bankruptcy clawback actions against Banca Popolare di Bergamo, Banca 

Popolare Commercio e Industria and Banco di Brescia taken by various companies 

related to Giacomelli Sport S.p.A. (claim made amounting to €84,755,557 ); 

2. a revocation clawback action against Banco di Brescia taken by Alcado Spa, with a 

claim for an amount of €5,579,054 and by Formenti Seleco Spa, with a claim 

amounting to €1,447,453. Furthermore, in addition to Banco di Brescia the 

extraordinary administrators of Formenti Seleco Spa, have also issued writs against 

another 18 legal entities for abusive grant of loans. In this respect, it must be 

underlined that the Court of Cassation in combined session made three rulings in 

March 2006, to the effect that there were no grounds by which a bankruptcy receiver 

could legitimately take action against banks with a “liability action for abusive grant of 

loans” (rulings No. 7030, No. 7029 and No. 7031 of 28 th March 2006), which was 

confirmed in later rulings of the court (cf. Cassation Civ. sect. I, 13 th June 2008 No. 

445

16031). It must also be underlined that the Court of Monza – which is the court in 

which the case in question originates – in a recent ruling (12 th September 2007) 

peremptorily excluded that the grant of a long term loan under market conditions could 

constitute damages which should be compensated by the company granting the loan. In 

fact no grounds exist for substantial damages to an estate, because damages only exist 

in the legal sense where a legally significant interest has been impaired and the grant of 

a loan, while it may be abusive, does not cause damage (after the statements of claim 

and counter claims were filed, the case was returned to the court). 

A writ served by a former director of C.I.T. Spa on Banco di Brescia, on five other banks, 

on other directors, on the statutory auditors of CIT and on the independent auditors of 

CIT Spa, with the intention of ascertaining the responsibilities of the other members of 

the board of directors and statutory auditors of CIT Spa and also of the banks which, by 

participating in a company turnaround plan, had enabled the company to continue to 

operate, causing damages to the company and to its creditors, with the consequent 

aggravation of the capital and operating situation and strengthening of the guarantees 

given to back loans. This writ followed on from litigation directly between the court 

appointed receiver of CIT and the former director for responsibility over the failure of the 

company. The hearing for the pleadings on the preliminary objections (invalid locus 

standi and nullity of the writ) raised by the bank was held on 17 th January 2012, 

during which the judge held the case over allowing the legal time limits for final written 

statements to be filed along with the responses and for a possible verbal hearing; 

3. action against Banca Popolare di Bergamo concerning the purchase of covered warrants 

and Olivetti warrants (the latter via internet banking) with a total claim of €5,630,000. 

In this case the counterparty not only alleges failure to receive proper information on 

the risks attaching to covered trades, but also disowned the signatures on the contract 

documents, required by regulations governing financial instruments and the capital in 

question. Investigations performed by the internal audit function into the affair found 

no evidence of liability of the Bank in the transactions in question. Later the 

counterparty accepted that the signatures were his, but claimed that he had signed 

blank forms which had subsequently been filled in abusively by the bank. The court set 

hearing for pleadings for 14 th April 2012. 

Banca Popolare Bergamo S.p.A. is also involved in a case concerning a number of 

combined claims for a total amount of €12,500,000, regarding an appeal against an 

injunction, compounding of interest and compensation for damages following a 

mistaken protest of cheques (case halted following the bankruptcy of the counterparty 

and then resumed within the legal time limits) for which a ruling is now expected; 

4. five cases against Centrobanca: 

– one action with a government counterparty concerning the restitution of a 

payment of €20 million collected following the enforcement of a guarantee 

granted; 

– a compensation action for claimed damages of €65 million brought by the 

official receiver of FIRS Spa concerning declarations made by Centrobanca 

regarding the availability of securities belonging to FIRS held on deposit; 

– a writ served by Burani Designer Holding B.V. (BDH) concerning the possible 

liability of Centrobanca with regard to the public tender offer to purchase 

launched by Mariella Burani Family Holding (MBFH) on the shares of the 

Mariella Burani Fashion Group; 

– a writ concerning failure to fulfil contract obligations towards Zero SGR. 

446

Studies are in progress concerning the content of the last two cases and 

possible risk for the Bank. 

5. revocation bankruptcy clawback actions are pending against Banca Popolare di Ancona 

brought by Elmarc Spa (with a claim for €5,769,000), by Corderia Napoletana Spa (with a 

claim for €6,244,925), by Calzaturificio MCR srl (with a claim for €5,800,000), by Antonio 

Merloni Spa (with a claim for €5,365,000), by Napoli Calcio Spa (with a claim for 

€5,041,493), by Romeo Andrea Francesco (with a claim for €5,000,000) and by 

Salumificio Vito sas (with a claim for €5,000,000). 

In order to meet the claims received, the UBI Banca Group made appropriate provisions on the basis 

of a reconstruction of the amounts potentially at risk and taking account of established legal opinion 

on the matters in question. 

Contingent liabilities related to legal risk include a claim for damages resulting from pre-contractual 

and contractual responsibility in relation to a loan transaction received by Banca Popolare di 

Ancona. The claim is for €13.5 million, and it constitutes only a potential risk. 

The specific sections of this report may be consulted for information on corporate litigation not 

directly related to ordinary business operations and on tax litigation. 

447


The graphs below show that the main sources of operational risk for the Bank in the period from 

January 2008 to December 2011 were “external causes” (78% of frequencies and 48% of the total 

impacts detected) and “processes” (19% of frequencies and 45% of the total impacts detected). 

The “external causes” risk driver included, amongst other things, human actions performed by third 

parties and not directly under the control of the Bank. The “process” risk driver included 

unintentional errors and incorrect application of regulations. 

Percentage of operational losses by risk driver (detection from 1 st January 2008 to 31 st December 2011) 

19.1% 

Number of events 

1.3% 

Impact on profit 

2.4% 

1.1% 

78.5% 

44.9% 

48.0% 

4.7% 

External factors (external context) People (Human Factor) 

Processes 

Systems 

Operational losses during the year were again concentrated on the following risk factors: “processes” 

(31% of frequencies and 58% of the total impacts detected) and “external causes” (64% of frequencies 

and 29% of the total impacts detected). 

Percentage of operational losses by risk driver (detection from 1 st January 2011 to 31 st December 2011) 



30.9% 

2.1% 

64.2% 

58.2% 

2.4% 

29.5% 

2.9% 

9.9% 

External factors (external context) People (Human Factor) 

Processes 

Systems 

448

The types of event which recorded the greatest concentration of operational losses during the period 

examined were “external fraud” (74% of frequencies and 44% of the total impacts detected), 

“execution, delivery and process management” (13% of frequencies and 24% of the total impacts 

detected) and “customers, products and professional practices” (6% of frequencies and 23% of the 

total impacts detected). 

Percentage of operational losses by type of event (detection from 1 st January 2008 to 31 st December 2011) 



74.2% 

0.3% 1.3% 

3.8% 

44.1% 

2.0% 

2.4% 

4.0% 

6.5% 

23.2% 

1.1% 

12.8% 

23.5% 

0.8% 

Customers, products and professional practuces 

Damage from external events 

Execution, delivery and process management 

External fraud 

Internal fraud 

Business interruprtion and systems malfunctions 

Employment and safety at work 

Operational losses incurred during the year were concentrated mainly in the following types of event: 

“execution, delivery and process management” (19% of frequencies and 49% of the total impacts 

detected), “customers, products and professional practices” (13% of frequencies and 23% of the total 

impacts detected) and “external fraud” (55% of frequencies and 14% of the total impacts detected). 

Percentage of operational losses by type of event (detection from 1 st January 2011 to 31 st December 2011) 



55.27% 

0.73% 2.02% 

7.23% 

48.80% 

14.01% 

1.91% 

12.87% 

2.08% 

2.92% 

8.94% 

18.96% 

1.11% 

23.17% 

Customers, products and professional practuces 

Damage from external events 

Execution, delivery and process management 

External fraud 

Internal fraud 

Business interruprtion and systems malfunctions 

Employment and safety at work 

449

Operational losses detected in 2011 were concentrated above all in the following lines of business: 

“retail banking” (63%), “retail brokerage” (15%) and “trading and sales” (13%). 

Capital requirements 

The Bank has employed the traditional standardised approach (TSA) since 2008 for the calculation of 

capital requirements on operational risk (see Bank of Italy Circular No. 263 of 27/12/2006 relating to 

the new prudential supervisory regulations for banks). 

The capital requirement calculated according to the standardised approach (TSA) is the product of 

the multiplication of gross income (the “significant indicator” consisting of item 120 in the mandatory 

income statement in the consolidated financial statements pursuant to Bank of Italy circular No. 262 

of 22 nd December 2005), divided into supervisory lines of business, by the “beta” coefficients defined 

in the supervisory regulations (see Bank of Italy circulars No. 263 of 27 th December 2006 and No. 155 

of 18 th December 1991). The significant indicator for the supervisory lines of business was 

extrapolated from management accounting data, by applying classification criteria defined by internal 

regulations in compliance with supervisory instructions. 

The capital requirement as at 31 st December 2011, calculated as the average of the requirements for 

the last three years, amounted to €461 million. It was absorbed mainly by the following lines of 

business: retail banking (47%), commercial banking (29%), retail brokerage (12%) and trading and 

sales (9%). The average coefficient of absorption with respect to the significant indicator was 13%. 

The capital requirement fell by €28.5 million (-6%) compared to the previous year, caused mainly by a 

drop in gross income. 

Section 2 - Risks for insurance companies 

The Group controls the brokerage company UBI Insurance Broker and holds interests in the share 

capital of insurance companies as part of banc assurance agreements with major insurance groups 1 . 

In terms of risks, these equity investments are deducted from supervisory capital and account for 

less than 0.3% of consolidated assets. 

Section 3 - Risks for other companies 

No significant risks are reported for the remaining companies included in the consolidation which are 

not part of the banking Group and are not insurance companies. 

1 The section “the scope of consolidation” in the consolidated management report may be consulted for details. 

450

PART F – Information on consolidated equity 

Section 1 – Consolidated equity 

A. Qualitative information 

Equity is defined by international financial reporting standards in a residual manner as “what 

remains of an entity’s assets after all the liabilities have been deducted”. From a financial 

viewpoint equity is the means measured in monetary form contributed by the owners or generated 

by the entity. 

Operational levers are developed on a broader base, consistent with the supervisory aggregate, 

which are characterised not just by equity in the strict sense but also by intermediate 

instruments such as innovative instruments, hybrid instruments and subordinated liabilities. 

As the Parent of the Group, UBI Banca performs supervision and co-ordination activities for the 

companies in the Group and, without prejudice to the independence of each of them in terms of 

business and company by-law, lays down appropriate policies for them. The Parent assesses 

capitalisation requirements in both the strict sense and also by issuing subordinated liabilities or 

hybrid capitalisation instruments of subsidiaries. The senior management of the Parent submits 

proposals to its governing bodies which decide accordingly. 

The proposals, once approved by the governing bodies of the Parent, are then submitted to the 

competent bodies of the subsidiaries. 

In compliance with regulatory constraints and internal objectives, the Parent analyses and coordinates 

capital requirements on the basis of the business plan, the budget and the related risk 

profiles and it acts as a privileged counterparty in gaining access to capital markets applying an 

integrated approach to optimising capital strength. 

The following analysis metrics are used from the viewpoint of capital management to cover risks: 

supervisory capital, defined as a regulatory measurement of capital – specified in 

supervisory regulations – to be held to cover capital requirements (Pillar 1 risks); 

total capital, or available financial resources (AFR), defined as the sum of capital elements 

that the Group considers can be used to cover internal capital and total internal capital 

requirements 1 (Pillar 2 risks). 

Capital management activity is designed to govern the current and future capital solidity of the 

Group by verifying compliance with the supervisory requirements of Pillar 1 and by continuously 

monitoring the adequacy of the total capital to meet Pillar 2 risks. This activity regards above all 

an analysis of capital requirements in relation to budget and business plan objectives and it is 

carried out at both consolidated and single legal entity level. 

1 “Internal capital” is defined as risk capital, the capital requirement for a determined risk that the bank considers 

necessary to cover losses above a given expected level. “Total internal capital” is defined as internal capital required for all 

significant risks assumed by the bank, including possible internal capital requirements due to considerations of a strategic 

character. 

451

B. Quantitative information 

Information is given in Part B of these notes to the financial statements in Liabilities Section 15 – 

Equity attributable to the Parent and – with particular reference to the increase in the share 

capital and other operations affecting the share capital – in the Management Report, which may 

be consulted. 

B.1 Consolidated equity by type of company 

Consolidation 

Equity items 

Banking 

group 

Insurance 

companies 

Other 

companies 

eliminations 

and 

31/12/2011 

adjustments 

1. Share capital 8,787,069 - - (6,028,947) 2,758,122 

2. Share premiums 8,365,275 - - (859,189) 7,506,086 

3. Reserves 5,222,609 - 5,050 (2,492,771) 2,734,888 

4. Equity instruments - - - - 

5. (Treasury shares) (6,971) - - 2,596 (4,375) 

a) parent (6,971) - - 2,596 (4,375) 

b) subsidiaries - - - - - 

6. Fair value reserves: (1,099,756) (74,728) 313 (120,512) (1,294,683) 

- Available-for-sale financial assets (1,293,614) - - 8,248 (1,285,366) 

- Property, equipment and investment property 35,745 - - (6,583) 29,162 

- Intangible assets - - - - - 

- Foreign investment hedges - - - - - 

- Cash flow hedges (3,473) - - 128 (3,345) 

- Foreign currency differences (243) - - - (243) 

- Non-current assets held for disposal - - - - - 

- Actuarial gains (losses) on defined benefit 

plans 

(38,233) - - 775 (37,458) 

- Share of fair value reserves of equity 

accounted investees 

- (74,728) 313 - (74,415) 

- Special revaluation laws 200,062 - - (123,080) 76,982 

7. Profit (loss) for the year attributable to the 

Parent and to non-controlling interests 

(2,276,161) 11,323 3,060 399,687 (1,862,091) 

Total 18,992,065 (63,405) 8,423 (9,099,136) 9,837,947 

For greater clarity and comprehension of the amounts relating to consolidated equity by type of 

company, we have included the following reconciliation between total equity and non-controlling 

interests and the equity attributable to the Parent. 

Reconciliation schedule 

Group 

Non controlling 

interests 

Total 

Share capital 2,254,367 503,755 2,758,122 

Share premiums 7,429,913 76,173 7,506,086 

Reserves 2,416,471 318,417 2,734,888 

Equity instruments 0 0 0 

(Treasury shares) ( 4,375) 0 ( 4,375) 

Fair value reserves ( 1,315,865) 21,182 ( 1,294,683) 

Loss for the year (+/-) attributable to the Parent and 

to non-controlling interests 

( 1,841,488) ( 20,603) ( 1,862,091) 

Equity 8,939,023 898,924 9,837,947 

452

B.2 Fair value reserves of available-for-sale financial assets: composition 

As sets/amounts 

31/12/2011 

Positive reserve 

Negative reserve 


Banking group 





Insurance 

companies 




Other companies 

Consolidation 

eliminations and 

adjustments 

1. Debt instruments 950 (1,337,777) 77,795 (152,243) - (77,795) 161 ,432 950 (1,328,588) 

2. Equity instruments 49,948 (2,123) 2,231 (2,062) - (3,038) 2 ,091 4 9,141 (2,094) 

3. U nits in O.I.C.R. (collective 

invest ment inst ruments ) 

1,467 (6,079) 5,673 (6,122) - (5,839) 6 ,125 1,301 (6,076) 

4. F inancing - - - - - - - - - 

Total as at 31/12/2011 52,365 (1,345,979) 85,699 (160,427) - - (86,672) 169,648 51,392 (1,336,758) 

Total as at 31/12/2010 68,846 (372,518) 70,950 (82,935) - (138) (76,021) 88,092 63,775 (367,499) 

B.3 Fair value reserves of available-for-sale financial assets: annual changes 

De bt 

instrume nts 

Equity 

instruments 

Units in 

O.I.C.R 

(collective 

invest ment 

instruments) 

Financing 

A. Opening balances (356,221) 54,009 (1,512) - 

2. Positive changes 11,842 9,587 6,105 - 

2.1 Increases in fair value 824 2,973 3,683 - 

2.2 Transfer to income statement of negative reserves 9,468 3,815 1,462 - 

- following impairment losses - 3,759 1,462 - 

- from disposal 9,468 56 - - 

2.3 Other changes 1,550 2,799 960 - 

3. Negative changes (983,259) (16,549) (9,368) - 

3.1 Decrease in fair value (960,471) (8,527) (4,952) - 

3.2 Impairment losses - 

3.3 Transfer to income statement of positive reserves: from disposal (328) (7,228) (3,977) - 

3.4 Other changes (22,460) (794) (439) - 

4. Closing balances (1,327,638) 47,047 (4,775) - 

453

Section 2 – Capital and banking supervisory ratios 

2.1 Scope of application of the regulations 

Supervisory capital and the relative ratios are calculated on the basis of Circular No. 263/06 (New 

regulations for the prudent supervision of banks) and Circular No. 155/91 (Instructions for 

compiling supervisory capital reports and capital ratios), both issued by the Bank of Italy, as 

amended by the 11 th update of 31 st January 2012 and by the 14 th update of 21 st December 2011 

respectively. 

More specifically, Circular No. 263 sets out prudent principles of a general nature for the 

calculation of supervisory capital and the absorption of capital. 

In the case of the UBI Group, the adoption of the new regulations took the form of the 

standardised approach. 

The consolidation scope used for supervisory capital and capital ratio (the “Banking Group”) 

purposes differs from the accounting scope of consolidation used to prepare the financial reports 

in accordance with IFRS. More specifically the consolidation scope for accounting purposes 

includes non-banking, non-financial and service companies which are excluded from the banking 

supervisory consolidation scope. Furthermore, the latter employs proportionate consolidation of 

banking, financial and operating companies which are jointly controlled, while these are 

consolidated using the equity method in the financial statements. 

There are no hindrances within the Group, either legal or substantial, which might prevent the 

rapid transfer of capital resources or funds. 

2.2 Banking supervisory capital 


Supervisory capital is determined on the basis of the figures for capital and profit and loss 

resulting from the application of IFRS and it is calculated as the algebraic sum of a series of 

positive and negative items, which are considered eligible for inclusion – with or without 

limitations - in relation to the ‘quality’ of the capital. The amount of those items is considered net 

of any tax expenses. Positive components of the capital must be fully available to the Bank, so 

that they can be used without restrictions to cover risks to which the intermediary is exposed. 

Supervisory capital is composed of tier one capital and the supplementary capital (tier two), net of 

“prudential filters” 2 and some deductions. 

1. Tier one capital 

Tier one capital includes paid up share capital, share premiums, reserves (considered prime 

quality items), non innovative instruments (not present in the UBI Group) and innovative capital 

instruments, profit for the period, net of the part available for distribution as dividends and other 

forms of distribution and positive prudent filters of tier one capital and instruments subject to 

transition provisions (grandfathering). Treasury shares held in portfolio, goodwill, other intangible 

2 Prudent filters are corrections made to equity items in the balance sheet made to safeguard the quality of the supervisory 

capital and to reduce potential volatility induced by the application of IFRS. 

With regard to those prudent filters that are most important to the UBI Group, the regulations state that unrealised gains 

and losses on available-for-sale financial assets are divided between equity instruments (inclusive of collective investment 

instruments) and debt instruments. For each of these aggregates, if the reserve in question is negative it reduces the tier 

one capital and if it is positive the tier two capital is increased by 50% of the reserve. 

454

fixed assets, prior and current year losses, other negative items and negative prudent filters for 

tier one capital (termed negative elements of tier one capital) are deducted from the total of the 

items mentioned previously (termed positive elements of tier one capital). The algebraic sum of the 

positive and negative components of the tier one capital constitutes the “tier one capital before 

items to be deducted”. The tier one capital is constituted by the difference between the “tier one 

capital before items to be deducted” and “items to be deducted from tier one capital”. 

2. Tier two capital 

The tier two capital comprises – with some limits on eligibility for inclusion – the fair value 

reserves, non innovative and innovative capital instruments, hybrid capital instruments, tier two 

subordinated liabilities, other positive elements and positive prudent filters (termed positive 

elements of tier two capital). Other negative items and negative tier two prudent filters (termed 

negative elements of tier two capital) are deducted from the total of those items. 

Details of innovative equity instruments eligible for inclusion in the tier one capital, hybrid 

capitalisation instruments and subordinated liabilities are given in Part B of these notes to the 

financial statements, under Liabilities, Section 3, Securities issued – item 30. 

3. Tier three capital 

The Group has no subordinated debt eligible for inclusion in tier three. 


Use was made by the UBI Banca Group in the calculation of supervisory capital as at 31 st 

December 2011 – in compliance with provisions issued by the Bank of Italy in May 2010 3 – of the 

possibility of completely neutralising the impacts on supervisory capital of gains and losses 

recognised in the fair value reserves relating to government securities issued by EU member 

states held in the “available-for-sale financial assets” portfolio. This approach is in addition to 

that already contained in regulations, which requires losses to be deducted entirely from 

supervisory capital and gains to be only partially included. The option in question has been 

applied across the board by all members of the banking group from 30 th June 2010. 

The consolidated supervisory capital of UBI as at 31 st December 2011 amounted to €12,282 

million, an increase compared to 31 st December 2010 (€10,536 million). 

The increase in the tier one capital is mainly the result of the operation to increase the share 

capital completed in July 2011. In addition, a negative filter relating to the substitute tax on 

goodwill 4 was abolished with respect to 31 st December 2010 and there were increases in 

3 With a provision of 18 th May 2010 and a later communication of 23 rd June 2010 (“Clarification of supervisory measures 

concerning supervisory capital – prudential filters”), the Bank of Italy issued new instructions for the treatment of fair 

value reserves relating to debt instruments held in the “available-for-sale financial assets” portfolio for the purposes of 

calculating supervisory capital (prudential filters). More specifically, as an alternative to the “asymmetric approach” (full 

deduction of net losses from the tier one capital and partial inclusion of net gains in the tier two capital) already provided 

for by Italian regulations, it is now permitted – in compliance with 2004 CEBS guidelines –, limited to securities issued by 

the central governments of countries belonging to the European Union, to completely neutralise gains and losses in the 

reserves mentioned (“symmetrical approach”). The measure is designed to prevent unjustified volatility in supervisory 

capital, caused by sudden changes in the prices of securities that are not related to changes in the credit ratings of the 

issuers. 

4 Bank of Italy, Supervisory Bulletin No. 3, March 2011, “Communication of 31 st March 2011 – Prudential filter relating to 

the substitute tax on goodwill”, a measure issued as a result of the provisions of the “thousand extensions” decree 

concerning deferred tax assets. 

455

deductions and negative filters, together with a reduction in capital attributable to non-controlling 

interests. 

The increase in tier two capital – of approximately €518 million – was generated almost entirely by 

changes in subordinated bonds and by the increase in negative filters and deductions. More 

specifically, the issue of subordinated liabilities sold to retail customers of the Group (for €1,021 

million nominal) more than compensated for issues matured/called/amortised in 2011 (for a total 

of €460 million). Further changes, attributable mainly to filters and deductions, had an aggregate 

negative impact of approximately €43 million. 

Information on the capital recommendation issued by the European Banking Authority (EBA) on 

8 th December 2011 is given in the Management Report which may be consulted. 


31/12/2011 31/12/2010 

A. Tier 1 capital before the application of prudent filters 8,564,444 7,255,989 

B. Tier 1 capital prudent filters: (137,541 ) (73,593) 

B.1 IFRS positive prud ent filters (+) 579 337 

B.2 IFRS negative prudent filters (-) (138,120 ) (73,930) 

C. Tier 1 capital before items to be deducted (A+B) 8,426,903 7,182,396 

D. Items to be deducted from tier 1 capital (150,625 ) (134,508) 

E. Total tier 1 capital (C-D) 8,276,278 7,047,888 

F. S upplementary capital before the application of p ru dent filters 4,312,934 3,780,644 

G. Supplementary capital prudent filters: (7,860 ) (10,139) 

G.1 IFRS positive prudent filte rs (+) - - 

G.2 IFRS negative prudent filters (-) (7,860 ) (10,139) 

H. Supplementary capital before items to be d educted (F+G) 4,305,074 3,770,505 

I. Items to b e deducted from supplementary capital (150,625 ) (134,508) 

L. Total supplementary capital (tier 2) (H-I) 4,154,449 3,635,997 

M. Items to be deducted from total tier 1 and supplementary capital (148,574 ) (147,685) 

N. Supervisory capital (E+L-M) 12,282,153 10,536,200 

O. Tier three capital - - 

P. Supervisory capital inclusive of tier 3 (N+O) 12,282,153 10,536,200 

2.3 Capital adequacy requirement 


Capital adequacy is monitored constantly with a view to the present and the future to maximise 

its efficiency and at the same time to ensure that the Group achieves its capitalisation objectives 

and also constantly complies with minimum limits set by supervisory regulations. 

Compliance with capitalisation objectives is also monitored at both individual company and 

consolidated level and corrective action is immediately taken when objectives change to bring the 

various lines of business back into line with optimum risk/yield profiles 


The table below shows the absorption of supervisory capital as a function of the total capital 

adequacy requirement. 

456

Compliance with that requirement at the end of the year required capital of €7,281 million (total 

requirements), against which the Group recorded actual supervisory capital amounting to 

€12,282 million. 

Finally, the table that follows summarises compliance with requirements in terms of ratios. The 

capital ratios as at 31 st December 2011, calculated on the basis of the Basel 2 standardised 

approach, had increased compared to 31 st December 2010. The core tier one ratio (core tier one 

capital net of preference shares and instruments subject to transition provisions/risk weighted 

assets) stood at 8.56% (6.95% in December 2010). The tier one ratio rose from 7.47% (in 

December 2010) to 9.09%, while the total capital ratio stands at 13.50% (11.17% in December 

2010). The impairment losses on goodwill had no impact on the capital ratios. 

The rise in all the capital ratios was generated – together with the effects of the share capital 

increase – by the reduction in risk weighted assets (RWA). 

More specifically, the capital requirement for credit risk fell compared to December 2010 by 

approximately €206 million. This effect was the result of a fall in volumes of business that 

occurred during the reporting period, which more than offset the other impacts (downgrades in 

the last quarter of 2011, estimated at a greater requirement of almost €70 million). 

With regard to market risk, on the other hand, the fall was of approximately €33 million of the 

relative capital requirement, attributable to a decrease in the collective risk on debt and equity 

instruments, which more than compensated for the negative impact of the application of the 

“Basel 2.5” rules (greater requirements of approximately €4 million). Finally, the decrease in 

consolidated gross income determined a fall in the capital requirement for operational risk. 

Categories/Amounts 

Amounts not w eighted 

Weighted amounts/requirements 

31/12/2011 31/12/2010 31/12/2011 31/12/2010 

A. RISK ASSETS 

A.1 Credit and counterparty risk 138,669,242 153,224,093 84,331,533 86,911,561 

1. Standardised approach 138,665,393 153,129,218 84,328,842 86,890,359 

2. Method based on internal ratings - - - - 

2.1 Basic - - - - 

2.2 Advanced - - - - 

3. Securitisations 3,849 94,875 2,691 21,202 

B. SUPERVISORY CAPITAL REQUIREM ENTS 

B.1 Credit and counterp arty ri sk 6,746,523 6,952,925 

B.2 M arket risk 73,545 106,636 

1. Standard methodology 73,545 106,636 

2.Internal models - - 

3. Concentration risk - - 

B.3 Op erati onal risk 460,749 489,312 

1. Basic indicator approach 48,965 49,137 

2. Standardised approach 411,784 440,175 

3. Advanced measurement approach - - 

B.4 Other prudent requirements - - 

B.5 Other cal cul ati ons - - 

B.6 Total p rudent requirements 7,280,817 7,548,873 

C. RISK ASSETS AND SUPERVISORY RATIOS 

C.1 Risk w eighted assets 91,010,213 94,360,908 

C.2 Tier 1 capital/Risk w eighted assets (tier 1 capital ratio) 9.09% 7.47% 

C.3 Supervisory capital including tier 3/risk w eighted assets 

(Total capital ratio) 

13.50% 11.17% 

Section 3 – Insurance capital and supervisory ratios 


457

PART G – Business combination transactions 

concerning companies or lines of business 

SECTION 1 - TRANSACTIONS PERFORMED DURING THE YEAR 

No business combinations involving companies or lines of business were performed by the UBI 

Banca Group in 2011. 

SECTION 2 - TRANSACTIONS PERFORMED AFTER THE END OF THE YEAR 

No business combinations were performed after the end of the year. 

458

PART H – Transactions with related parties 

1. Information on the remuneration of directors and senior managers 

Information is provided in the notes to the separate company financial statements of Banche 

Popolare Unite Scpa, which may be consulted. 

2. Information on transactions with related parties 

In compliance with IAS 24, information is provided below on the statement of financial position 

and income statement transactions between related parties of UBI Banca and Group member 

companies, as well as those items as a percentage of the total for each item in the consolidated 

financial statements. 

According to IAS 24, a related party is a person or entity that is related to the entity that is preparing its financial 

statements (the “reporting entity”). 

(a) A person or close family member of that person is related to the reporting entity if that person: 

(i) has control or joint control over the reporting entity: 

(ii) has significant influence over the reporting entity; or 

(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. 

(b) An entity is related to a reporting entity if any of the following conditions apply: 

(i) the entity and the reporting entity are members of the same group (which means that each parent, subsidiary and 

fellow subsidiary is related to the others); 

(ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group 

of which the other entity is a member); 

(iii) both entities are joint ventures of the same third party; 

(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity; 

(v) the entity is a post-employment defined benefit plan for the benefit of employees of either the reporting entity or an 

entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also 

related to the reporting entity; 

(vi) the entity is controlled or jointly controlled by a person identified in (a); 

(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management 

personnel of the entity (or of a parent of the entity). 

In compliance with the regulations in force, we report that all transactions carried out by the 

Group member companies with related parties were conducted in observance of correct principles 

both in substance and form, under conditions analogous to those applied for transactions with 

independent parties. 

More specifically, the Parent and its subsidiary UBI Sistemi e Servizi Scpa provide Group member 

companies with a series of services, governed by intragroup contracts drawn up in accordance 

with the principles of consistency, transparency and uniformity in line with the organisational 

model of the Group. Under this model, strategic, and management activities are centralised at 

UBI Banca and technical and operational activities in UBI Sistemi e Servizi Scpa. 

The prices agreed for the services provided under the contracts were determined on the basis of 

market prices or, where appropriate reference parameters could not be found in the marketplace, 

in accordance with the particular nature of the services provided and also in relation to the 

service contracts signed by UBI.S with its consortium shareholders, on the basis of the costs 

incurred for the services provided. 

The main intragroup contracts existing at the end of the year included those which implement 

the centralisation of activities in the Governance and Business Areas of the Parent and they 

involved the Parent and the main banks in the Group (Banca Popolare di Bergamo Spa, Banca 

Popolare Commercio e Industria Spa, Banca Popolare di Ancona Spa, Banca Carime Spa, Banco 

di Brescia Spa, Banca Regionale Europea Spa, Banca di Valle Camonica Spa, Banco di San 

Giorgio Spa, UBI Banca Private Investment Spa) and also contracts to implement the “national 

tax consolidation” (in accordance with articles 117 to 129 of Presidential Decree No. 917/1986, 

459

the consolidated income tax act) concluded by the Parent. There were also all the intragroup 

contracts which implement the centralisation in UBI Sistemi e Servizi of support activities for the 

principal companies in the UBI Group. 

We report with regard to transactions between companies in the Group and all of its related 

parties that no atypical and/or unusual transactions were performed; furthermore, no 

transactions of that type were even performed with counterparties that were not related parties. 

Atypical and/or unusual transactions, as indicated in Consob Communications No. 98015375 of 

27 th February 1998 and No. 1025564 of 6 th April 2001, defined as all those transactions which, 

because of their significance/importance, the nature of the counterparties, the content of the 

transaction (even in relation to ordinary operations), the way in which the transfer price is 

decided and the timing of the event (close to the end of the financial year) might give rise to 

doubts concerning: the correctness/completeness of the information in the accounts, a conflict of 

interests, the security of the companies assets and the rights of non-controlling shareholders. 

With Resolution No. 17221 of 12 th March 2010 – amended by the subsequent Resolution No. 

17389 of 23 rd June 2010 – the Consob (Italian securities market authority) approved a Regulation 

concerning related-party transactions. The new regulations concern the procedures to be followed 

for the approval of transactions performed by listed companies and the issuers of shares with a 

broad shareholder base with parties with a potential conflict of interest, including major or 

controlling shareholders, members of the management and supervisory bodies and senior 

managers including their close family members. 

The key points of the regulations issued are as follows: 

- greater emphasis on the role of independent board members at all stages of the decisionmaking 

process in connection with related party transactions; 

- a regime of transparency; 

- the introduction of detailed corporate governance regulations containing rules designed to 

ensure substantial and procedural integrity in related-party transactions (a special regime for 

companies which adopt a two tier system of governance). 

The regulations currently apply within the UBI Banca Group to UBI Banca Scpa and to Banco 

San Giorgio Spa, because these banks have a broad shareholder base. 

In relation to the above, the members of the competent bodies of the banks mentioned have 

approved regulations which govern related-party transactions, within the set time limits. These 

are available on their respective corporate websites and appropriate internal processes have been 

defined to ensure compliance with the new provisions. 

As specifically concerns UBI Banca, the Supervisory Board has appointed a Related Parties 

Committee from among its members to which transactions falling within the scope of the 

regulations must be submitted in advance. 

In this respect the UBI Banca regulations have excluded the following transactions from their 

scope of application and these are consequently not subject to the disclosure obligations required 

under the Consob regulation, but without prejudice to the provisions of Art. 5, paragraph 8, 

where applicable, of the said Consob Regulation: 

(a) shareholders’ resolutions concerning the remuneration of the Members of the Supervisory Board passed 

in accordance with Art. 2364-bis of the Italian Civil Code, including those concerning the determination 

of a total sum for the remuneration of the Members of the Supervisory Board assigned particular offices, 

powers and functions; 

(b) remuneration schemes based on financial instruments approved by shareholders in accordance with Art. 

22, letter b) of the Corporate By-Laws and in compliance with Art. 114-bis of the Consolidated Finance 

Act and the relative operations to implement them; 

(c) resolutions, other than those referred to under the preceding letter a) of this article, concerning the fees of 

Members of the Management Board appointed to special positions and other key management personnel 

460

and also the resolutions with which the Supervisory Board determines the fees of the Members of the 

Management Board on condition that: 

(i) UBI Banca has adopted a remuneration policy; 

(ii) the Remuneration Committee formed by the Supervisory Board in accordance with Art. 49 of the 

Corporate By-Laws has been involved in the definition of that remuneration policy; 

(iii) a report setting out the remuneration policy has been submitted for approval or a consultative vote 

to a Shareholders' Meeting; 

(iv) the remuneration awarded is consistent with that policy; 

(d) “transactions of negligible amount” are those related-party transactions for which the amount is less than 

€250 thousand. If a related-party transaction is concluded with a member of the key management 

personnel, a close family member of that person or with companies controlled by or subject to significant 

influence of those persons, it will be considered a transaction of negligible amount if the amount of the 

transaction is not greater than €100 thousand; 

(e) transactions which fall within the ordinary performance of operating activities and the related financial 

activities concluded under equivalent market or standard conditions; 

(f) transactions to be performed on the basis of instructions for the purposes of stability issued by the 

supervisory authority, or on the basis of instructions issued by the Parent of the Group to carry out 

instructions issued by the supervisory authority in the interests of the stability of the Group; 

(g) transactions with or between subsidiaries and also venturers in joint ventures, as well as transactions 

with associates, if no significant interests of other related parties exist in the subsidiaries or associates 

that are counterparties to the transaction. 

Also, in compliance with Consob recommendations, transactions with related-parties of UBI 

Banca performed by subsidiaries are subject to the regulations in question if, under the 

provisions of the Corporate By-Laws or internal regulations adopted by the Bank, the Supervisory 

Board, in response to a proposal of the Management Board, or even an officer of the Bank on the 

basis of powers conferred on that officer, must preliminarily examine or approve a transaction to 

be performed by subsidiaries. 

Further information is given in the “Report on corporate governance and the ownership structure 

of UBI Banca Scpa” attached to these reports. 

461

Transactions with related parties – principal balance sheet items 

Financial 

Financial 

Loans to 

Due to Securities 

Guarantees 

assets held for Loans to banks 

Due to banks 

liabilities held 

customers 

customers issued 

granted 

trading 

for trading 


Associates 7 - 116,568 - 177,177 35 - 24,955 

Senior managers (1) - - 1,412 - 14,312 10,061 - - 

Other related parties 59,869 - 307,426 - 108,537 1,621 - - 

Total 59,876 - 425,406 - 300,026 11,717 - 24,955 

(1) A “senior manager” is defined as “a member of the key management personnel, where key management personnel are those who have power and responsibility for the planning, 

management and control of the activities of the entity and they include its directors”. 

Transactions with related parties - percentage 



he ld for trading 


Loans to 

customers 

Due to banks 

Due to 

customers 

Securities 

issued 

Financial 

liabilitie s held for 

trading 

Guaran tees 

granted 

With related parties (a) 59,876 - 425,406 - 300,026 11,717 - 24,955 

Total (b) 2,872,417 6,184,000 99,689,770 9,772,281 54,431,291 48,377,363 1,063,673 7,702,114 

Percentage (a/b*100) 2.085% 0.000% 0.427% 0.000% 0.551% 0.024% 0.000% 0.324% 

Summary of principal income statement transactions with related parties 

Operating 

Othe r 

Dividends and Net commission Personnel 

Net interest 

income/expense admin istrative 

similar income income expense 


s expenses 

Associates (1,569) 1,324 99,555 (114) 3,772 (13,028) 

Senior managers (1) (399) - 168 (15,294) (15) - 

Other related parties 6,140 - 16,611 (325) 19 (405) 

Total 4,172 1,324 116,334 (15,733) 3,776 (13,433) 

(1) A “senior manager” is defined as “a member of the key management personnel, where key management personnel are those who have power and responsibility for the 

planning, management and control of the activities of the entity and they include its directors”. 

Percentage of income statement transactions with related parties in respect of the consolidated financial statements 

Operating 

Other 


Net interest 

income/expense administrative 

similar income income expense 


s expenses 

With related parties (a) 4,172 1,324 116,334 (15,733) 3,776 (13,433) 

Total (b) 2,121,689 19,997 1,191,934 (1,423,196) 243,063 (881,053) 

Percentage (a/b*100) 0.197% 6.621 % 9.760% 1.105% 1.554% 1.525% 

462

Principal balance sheet items with associate companies subject to significant influence 


Financ ial ass ets 

held for trading 

Loans to 

customers 

Due to banks 

Financial 

Due to 

Securities issued 

customers 

liabilitie s held 

for trading 

Guaran tees 

granted 

Arca SGR Spa - 674 - - - - - 

Aviva Assicurazioni Vita Sp a 7 19,101 - 60,379 - - - 

Aviva Vita Spa - 18,758 - 23,193 - - - 

Capital Money Spa - - - 15 - - - 

Ge.Se.Ri. Spa in liquidazione - - - - - - - 

Lombarda China Fund Management Company - - - - - - - 

Lombarda Vta Spa - 20,099 - 64,863 - - 24,955 

Polis Fondi - 4,069 - 67 - - - 

Prisma Srl - - - 960 - - - 

S.P.F. Studio Progetti Finanziari srl 34 - 322 - - - 

SF Consulting Srl - 1,444 - 212 - - - 

Siderfactor Spa - 32,580 - 2 - - - 

Sofipo Fiduciaire Sa - - - - - - 

SPF Studio Progetti Finanziari Srl - - - - - - - 

Te x Fac tor Spa in liquidazione - - - - - - - 

UBI Assicurazioni Spa - 19,808 - 27,164 - - - 

UFI Servizi Srl - - - - 35 - - 

Total 7 116,567 - 177,177 35 - 24,955 

463

Principal income statement items with associate companies subject to significant influence 

Operating 

Other 


Net interest 

income/expense administrative 

similar income inc ome expense 


s expenses 

Arca SGR Spa - 1,156 2,960 (600) - - 

Aviva Assicurazioni Vita Spa (1,062) - 7,663 (29) - (593) 

Aviva Vita Spa (714) - 35,314 - - - 

Capital Money Spa - - (4,485) - - - 

Ge.Se.Ri. Spa in liquidazione - - - - - - 

Lombarda China Fund Management Company - - - - - - 

Lombarda Vta Spa (937) 168 35,537 - 1,916 (3,795) 

Polis Fondi 107 - 273 - - - 

Prisma Srl (3) - 128 - 30 - 

S.P.F. Studio Progetti Finanziari srl (1) (1) 14 11 (21) 

SF Consulting Srl (5) - 681 - - - 

Siderfactor Spa 1,147 - 5 - 124 - 

Sofipo Fiduciaire Sa - - - - - - 

SPF Studio Progetti Finanziari Srl - - - - - - 

Te x Fac tor Spa in liquidazione - - - - - - 

UBI Assicurazioni Spa (102) - 21,480 501 1,694 (8,477) 

UFI Servizi Srl - - - - - (142) 

Total (1,570) 1,324 99,555 (114) 3,775 (13,028) 

464

PART I – Share-based payments 


In implementation of the “UBI Banca Group remuneration and incentive policies” (the 

“Policy”), which were approved on 25 th February 2011 by the Supervisory Board, after prior 

consultation with the Remuneration Committee, in compliance with “Supervisory 

provisions on the remuneration and incentive policies and practices of banks and banking 

groups” issued by the Bank of Italy, on 30 th April 2011 an ordinary shareholders’ meeting 

of UBI Banca approved the payment of the variable component of bonuses to be made by 

the use of shares for top management and the highest management level of the control 

functions. 

Incentive schemes for 2011 are described in detail in the “2011 Annual report to the 

shareholders’ meeting on remuneration and incentives policies” which may be consulted. 

They are subject to specific trigger conditions which guarantee the capital stability (core 

tier one) and liquidity (net stable funding ratio) of the UBI Banca Group, as well as the 

ability to generate value by the Group and the single companies belonging to it (economic 

value added). The calculation of bonuses is related to the degree to which set objectives are 

achieved, each being weighted on the basis of their importance. 

The following was performed with regard to top management and the highest management 

level of the control functions: 

‐ deferment of payment of a portion (according to the role performed) of between 40% 

and 60% of annual bonuses if they are due; 

‐ the grant of financial instruments, by the assignment of ordinary shares of the 

Parent, UBI Banca, for a portion equal to at least 50% of variable remuneration, 

setting an adequate period of personnel retention for this, in order to align the 

incentives to the Bank' s medium to long-term interests. 

As a consequence of the above, the first portion of share-based bonuses should be 

assigned in the third year following the reporting year (2014), while the second portion 

should be assigned in the fifth year following the reporting year (2016). In order to ensure 

the Group's value generation capability over time, the second deferred portion is also 

subject to the achievement of set conditions relating to the creation of value corrected for 

risk, and that is to profit. 


According to IFRS 2 “share-based payments”, the scheme in question constitutes an 

“equity settled” operation where payment is based on shares and made using equity 

instruments. On this basis, because the objective of IFRS 2 is to recognise the impact on 

profit and loss of the remuneration paid by means of equity instruments in the income 

statement in the form of personnel expense, UBI Banca and the subsidiaries involved in 

the scheme recognised the cost for the year within the item 150a “Administrative 

expenses: personnel expense” against an increase in equity made by posting the amount to 

a separate reserve in equity because the obligation of the company will be extinguished by 

the delivery of equity instruments and that obligation will be settled in any event by the 

Parent. 

As concerns the quantification of the cost of the scheme, since it is impossible to measure 

the value of the services provided by employees with precision, in compliance with IFRS 2 

465

it is calculated on the basis of the fair value of the UBI share on the grant date 1 multiplied 

by the number of shares that it is estimated will be vested. 

More specifically, the fair value of the equity instruments granted is calculated with 

account taken of the circumstance that they will be delivered, as planned, in 2014 and 

2016. That estimate, based on the market price of the shares, does not include the effect 

of any dividends that may be distributed in the period and in general it adequately weights 

the terms and conditions governing the grant of the instruments. 

The total cost total of the scheme estimated on that basis is €622 thousand, divided as 

follows: 

‐ an up-front portion consisting of 110,812 shares to be delivered in 2014, equivalent to 

€373 thousand; 

‐ a deferred portion consisting of 73,875 shares to be delivered in 2016 (if the conditions 

to which the deferment is subject are met) equivalent to €249 thousand. 

In accordance with the vesting conditions hypothesised (profit and/or service) the cost of 

the scheme reported above is spread over the whole vesting period of the scheme, with the 

portion for the year recognised in the income statement, which for the reporting year 

amounted to €159 thousand. Furthermore, any change in the cost will only occur if the 

vesting requirements are not met because the result conditions for vesting set by the plan 

on the basis of which the number of shares that will actually be delivered is decided are 

not satisfied, while changes will not be based on changes in the fair value of the UBI 

shares 

1 

In this case, this is the date on which the treasury shares are repurchased, because it is only on that date that the 

number of financial instruments needed to meet the obligation assumed by the company can be estimated. 

466

PART L – Segment Reporting 

Three segments have been identified in the presentation of the results and the financial position 

for 2011, termed banking, non-banking financial and other companies, as opposed to the four 

segments presented in prior years. 

The banking segment comprises the nine network banks of the Group, IW Bank Spa, Banque de 

Depots et de Gestione Sa and UBI International Sa. 

The “non-banking financial sector” comprises Centrobanca Spa, Ubi Leasing Spa, Ubi Factor Spa, 

Ubi Pramerica SGR Spa, Banca 24-7 Spa, Silf Spa, Prestitalia Spa, Ubi Fiduciaria Spa and UBI 

Gestioni Fiduciarie SIM Spa. 

The “other companies” segment comprises UBI Banca Scpa, Ubi Sistemi e Servizi Scpa and all the 

remaining Group member companies. That segment also includes all the consolidation entries 

including all the intercompany eliminations with the exception of those relating to the purchase 

price allocations made to the relative individual segments. 

The algebraic sum of the three segments identified in this manner represents the income 

statement and balance sheet of the UBI Banca Group as at and for the year ended 31 st December 

2011. 

Distribution by business segment: income statement 

Corporate Centre 

(UBI, UBIS, 

Property companies 

+ all intercompany 

and consolidation 

entries) 

item/business segment 

Banking 

(Aggregate) 

Non-banking 

financial 

(Aggregate) 

To ta l 

Net interest income (expense) 1,809,316 415,384 -103,011 2,121,689 

Net commission income (expense) 1,092,867 182,318 -83,251 1,191,934 

Other expense/income 8,971 16,044 2,311 27,326 

Gross income (l oss) 2,911,154 613,746 -183,951 3,340,949 

Net impairment losses on loans and financial assets -314,410 -296,070 -131,741 -742,221 

Net financial income (l oss) 2,596,744 317,676 -315,692 2,598,728 

Net income from insurance operations - - - 0 

Net income (l oss) from banking and insurance operations 2,596,744 317,676 -315,692 2,598,728 

Administrative expenses -1,856,118 -246,017 -39,049 -2,141,184 

Net provisions for risks and charges -16,972 -14,026 -597 -31,595 


property and intangible assets -601,781 -25,004 -164,155 -790,940 

Other net operating income/expense 65,768 34,440 -12,764 87,444 

Operating expenses -2,409,103 -250,607 -216,565 -2,876,275 

Profits (losses) of equity investments -31,944 612 41,580 10,248 

Net impairment losses on goodwill -1,014,975 -337,629 -521,245 -1,873,849 

Profits on disposal of investments 6,213 46 559 6,818 

Pre-tax loss from continuing operations -853,065 -269,902 -1,011,363 (2,134,330) 

Taxes on income for the year from continuing operations -132,879 -27,318 432,188 271,991 

Post-tax profit from discontinued operations - 226 22 248 

Profit (loss) for the period attributable to non-controlling interes -24,161 -12,392 57,156 20,603 

Profit for the period -1,010,105 -309,386 -521,997 (1,841,488) 

467

Distribution by business segment: balance sheet 

item/business segment 

Banking 

(Aggregate) 

Non-banking 

financial 

(Aggregate ) 

Corporate Centre 

(UBI, UBIS, P roperty 

companies + all 

intercompany and 

consolidation entries) 

Loans to banks 10,497,211 1,434,727 

Due to banks 15,520,219 0 

Net financial assets 1,164,004 702,867 8,163,438 

Loans to customers 68,245,726 34,234,657 -2,790,613 

Due to customers 47,439,342 325,479 6,666,470 

Securities issued 25,766,298 17,905,050 4,706,015 

Equity-accounted investees 1,695 359 350,929 

Non-controlling interests 908,512 51,793 -61,382 

Loss for the year -1,010,105 -309,386 -521,997 

The items "loans to banks" and "due to banks" have been stated in the three segments on the 

basis of the prevailing balance. 

The item "non-controlling interests" in the "banking" and "non-banking financial" segments 

relates only to the portion of equity and of the profit for the year of the companies not wholly 

owned. It does not include non controlling-interests and the part of consolidated items 

attributable to non-controlling interests which have been attributed to the "corporate centre". 

468

Disclosures concerning the fees for independent auditing and other 

services in compliance with Art. 149 duodieces of CONSOB Issuers’ 

Regulations 

In accordance with Art. 149 duodieces of Consob Issuers’ Regulations, information concerning 

payments made to the independent auditors KPMG Spa and companies belonging to same 

network for the following services is given in the table below. 

1) Auditing services which include: 

• audit of the annual accounts for the purposes of expressing a professional 

opinion; 

• review of the interim accounts. 

2) Certification services which include appointments where the auditor assesses a specific 

element, the determination of which is performed by another who is responsible for it, by 

employing appropriate criteria in order to furnish a conclusion which gives the recipient a 

measure of the reliability of that specific element. 

3) Tax consultancy services. 

4) Other services. 

The fees presented in the table relating to the financial year 2011, are those contractually agreed, 

inclusive of any indexing (but not of out-of-pocket expenses, nor of supervisory authority 

contributions and VAT). 

Pursuant to the regulations cited, payments made to possible secondary auditors or to firms 

belonging to the respective networks are not included. 

Type of service 

Audit of the accounts 

Certification services 

Firm providing the 

service 

KPMG SpA, KPMG SA, 

KPMG LLP, KPMG Sarl 

KPMG SpA, KPMG SA, 

KPMG LLP 

Recipient of the service 

Fees 

(€000) 

(*) 5,277 

(**) 1,938 

Tax consultancy services - 

Other services: 3,119 

Assistance activities (risk 

assessment, gap analysis and 

office project) concerning the Basel 2 

project 

KPMG Advisory Spa UBI Banca Scpa 846 

469


assessment, gap analysis, office 

project and benchmarking) 

concerning the various stages of the 

interest rate and liquidity risk 

project 

KPMG Advisory Spa 

UBI Banca Scpa, UBI 

Sistemi e Servizi Scpa 

841 


assessment, gap analysis, office 

project and risk management) for 

the project to complete and update 

reporting on operating performance 

KPMG Advisory Spa UBI Banca Scpa 332 

Methodological support for the IT 

migration project 

KPMG Advisory Spa UBI Factor Spa 298 

Assistance activities for the 

compliance project 

KPMG Advisory Spa Centrobanca Spa 230 

Assistance activities and definition 

of procedures 

KPMG Advisory Spa UBI Leasing Spa 202 

Other services 

KPMG Advisory Spa, 

KPMG TAX M. MICHNA 

Sp. K 

UBI Banca Scpa, UBI 

Sistemi e Servizi Scpa, UBI 

Leasing Spa, UBI Factor 

Spa, Banca 24-7 Spa 

370 

Total 

10,334 

(*) UBI Banca Scpa, Banca 24-7 Spa, Banca Carime Spa, Banca di Valle Camonica Spa, Banca 

Popolare Commercio e Industria Spa, Banca Popolare di Bergamo Spa, UBI Sistemi e Servizi Scpa, 

UBI Leasing Spa, UBI Pramerica SGR Spa, Centrobanca Spa, Centrobanca Sviluppo Impresa SGR 

Spa, UBI Factor Spa, IW Bank Spa, SBIM Spa, Solimm Spa, Prestitalia Spa, UBI Gestioni 

Fiduciarie SIM SpA, SILF Spa, UBI Fiduciaria Spa, Banque de Depots et de Gestion Sa, BDG 

Singapore Pte Ltd, UBI Banca International Sa, UBI Finance 3 Srl, UBI Lease Finance 5 Srl, UBI 

Management Company Sa, UBI Trustee Sa 

(**) UBI Banca Scpa, Banca 24-7 Spa, Banca Carime Spa, Banca di Valle Camonica Spa, Banca 

Popolare Commercio e industria Spa, Banca Popolare di Bergamo Spa, UBI Sistemi e Servizi Scpa, 

UBI Leasing Spa, UBI Pramerica SGR Spa, Centrobanca Spa, Centrobanca Sviluppo Impresa SGR 

Spa, UBI Factor Spa, IW Bank Spa, SBIM Spa, Solimm Spa, UBI Gestioni Fiduciarie SIM Spa, 

SILF Spa, UBI Fiduciaria Spa, BDG Singapore Pte Ltd, UBI Banca International Sa 

470

UBI Banca Group

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