UBI Banca Group

an exceptional and temporary capital buffer. The capital buffer, which must lead to a core tier
one ratio of 9% for banks by the end of June 2012, is having repercussions on the growth of
lending by banks.
While the basic strategy behind the 2011 – 2015 Business Plan remains firmly in place, in the
current context it no longer seemed to be a logical predictor of expected average cash flows.
Therefore the 2012 budget approved by the competent bodies in February 2012 was used for
measurement purposes, together with 2013 – 2016 projections based on the best estimates
made by management and on the current market context. The budget and the projections
were formulated by first assessing the following factors:
a) an examination of the differences between the 2011 budget figures and the actual
figures;
b) examination of the reliability of the projections made by comparing them with
inputs from external sources (consensus macroeconomic forecasts, consensus
forecasts made by equity analysts), with emphasis placed on those referred to for
impairment testing purposes in IAS 36 (§ 33 letter a));
c) verification of the consistency between the implied risk in discount rates and the
implementation risk of the plan;
d) growth rate assumptions, never greater than the expected long-term inflation rate
of 2%.
The projections are based on the following assumptions:
a) a moderate growth rate for the world economy, technical recession in the euro area and
a more significant contraction for Italian GDP in terms of magnitude and duration;
b) the implementation of unconventional monetary policies by the ECB;
c) estimated short-term interest rates (Euribor one month) below 1% until 2013, then
rising to higher levels, but still below 3% in 2016. The magnitude of the rise in rates
will ensure a progressive return to normality for markups and markdowns, although
still below historical levels observed before the crisis;
d) a flat scenario for projections of growth in direct funding and lending in which a ratio
of lending to funding nevertheless reappears which favours the latter;
e) projections for operating expenses basically unchanged compared to 2011;
f) a cost of risk falling progressively from 2011 levels, but still remaining higher than
those forecast in the 2011 - 2015 Business Plan;
g) a partial reopening of institutional markets with funding possible on that channel from
2013.
CGU
The impairment test was conducted on single legal entities to which the goodwill was allocated
(the cash generating units - CGUs) and on the consolidated financial statements as a whole
(second level impairment test). In the cases of those CGUs which were not wholly owned, the
goodwill was re-calculated on a notional basis for the purposes of the test, including also the
goodwill attributable to non controlling interests (not recognised in the consolidated financial
statements) by a process of “grossing up” (i.e. goodwill attributable to the Parent/percentage
interest held), in accordance with example No. 7 in IAS 36.
Value measurement
The value measurement used to calculate the recoverable amount of the CGUs was that of the
value in use or the fair value if the value in use was lower than the carrying amount. In fact in
the current year the recoverable amount for those CGUs operating in the commercial and
corporate banking sectors was the value in use, because the criterion which was based on
305