UBI Banca Group

years (beta = 1.29x) and five years (1.03x). Since all three of these estimates were
equally significant statistically, the choice of that beta measurement, which is the
most conservative, was made not only on the basis of the principle of prudence,
but also on that of the following factors: i) continuity with the method used in
previous years, ii) the greater ability of this estimate to express more recent trends
in terms of both country risk and risk in the banking sector and finally iii)
alignment of the estimate with that obtainable on the basis of more recent
volatilities implied in options on the UBI Banca share, on the Stoxx 600 and on the
Eurex market;
f) for the other companies, the beta (comprised within a range of between 0.99x and
1.39x) was estimated using the same method as that used in the previous year, on
the basis of the returns for comparable European companies. The beta estimated
includes the share of country risk, not already incorporated in the equity risk
premium;
g) the following were assumed for the purposes of estimating the rate of capitalisation
of income for the calculation of the terminal value: growth rates aligned with future
inflation of 2% for the network banks and similar companies in terms of business
risk; growth rates of a fundamental nature, i.e. calculated on the basis of profit
retention and expected income assumed for the terminal value for the other
companies.
The table below shows the opportunity cost of equity for different CGUs.
CGU
Initial discount
rate net of taxes
Final discount
rate net of taxes
Banche Rete, Centrobanca, UBI
International, UBI Private 8.93% 11.45% 2.00%
Investment
IW Bank 6.55% 9.07% 2.00%
Prestitalia 6.86% 9.38% 1.89%
B@nca 24-7 6.86% 9.38% 0.47%
UBI Leasing / UBI Factor 7.89% 10.41% 0.00%
UBI Pramerica 8.41% 10.91% 0.00%
Nominal growth
rate in income for
the calculation of
the terminal value
The following is reported with regard to the opportunity cost of equity estimated in the
terminal value for the network banks and the entire Group:
a) the estimate of 11.45% is in line with the consensus estimate of 11.50% made by the
financial market analysts who follow the UBI Banca share;
b) if an alternative method was used to estimate the opportunity cost of equity (which
incorporated country risk in the risk free rate only), then an estimate for the cost of equity
would have been obtained in line with the measurement assumed of 11.45%. More
specifically, if the approach suggested in letter a) of the OIV guidelines given in § LG35
were followed, then an estimate of the risk free rate of 5.3%, an equity risk premium of 5%
and a beta of 1.25x (calculated on the basis of daily yields over one year for the share and
the Ftse Italy All Share market index), would give an opportunity cost of equity of 11.55%.
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