UBI Banca Group

Financial assets
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.
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