UBI Banca Group

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.
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