UBI Banca Group

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.
Capital ratios as at 31 st December 2011 consisted of a tier one ratio (tier one capital to risk
weighted assets) of 4.81% (3.89% at the end of 2010) and a total capital ratio (supervisory
capital and reserves to risk-weighted assets) of 6.64% (5.57%).
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