UBI Banca Group

- 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.
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