UBI Banca Group

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).
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