UBI Banca Group

Letter from the chairmen
Dear registered and non registered shareholders,
In 2011, the financial crisis, which never died down completely, was stoked by a
dangerous new source of difficulty in the euro area, which, with unforeseeable
intensity, gradually affected the sovereign debts of countries with high debt and weak
development prospects in the medium-term, including Italy. Growing fears of insolvency
for sovereign issuers had repercussions on the banking industry and caused a sudden
deterioration in the terms and conditions for wholesale funding offered to Italian banks,
which were trapped between requests to strengthen capital and demands to support
small and medium-sized businesses, the backbone of the country’s economy.
In this context, thanks to the strategic policies pursued over the years and in particular
to the adequacy of the increase in the share capital concluded in July 2011, UBI Banca
was again able to continue to benefit from good capital strength, a well-balanced capital
structure and low levels of risk, without prejudice to its focus on service to customers
(small to medium-sized businesses and families), the key strength of the Group’s
companies.
These are results which assume even more importance in the light of the difficulties
which arose during the year and they enable the UBI Banca Group to take its place as
one of the soundest in Italy.
Adequate capitalisation
All the capital ratios, calculated on the basis of the “standardised approach”, showed
improvement: a core tier one ratio of 8.56% (up from 6.95% at the end of 2010) and a
total capital ratio of 13.5% (up from 11.17% before).
The Group therefore has no plans whatsoever of performing any new operation to
increase its share capital on the market.
Any capital requirements needed to reach the core tier one ratio of 9% recommended by
the European Banking Authority (EBA), which may remain on the basis of assessments
made as at 30 th June 2012, will be met, if substantial, by the partial conversion of
outstanding convertible bonds.
Well-balanced capital structure
Maintenance of high standards of structural balance was ensured by consolidation and
growth in funding from ordinary (non institutional) customers, which represents over
80% of total direct funding for the UBI Banca Group and also by a change in the
composition of funding with a preference for longer-term funding through the placement
of bonds. Total Group funding as at 31 st December 2011, consisting of total amounts
administered on behalf of customers, reached almost €175 billion, of which
approximately €103 billion was direct funding and €72 billion indirect funding (the latter
figure having been penalised by price trends on financial markets).
On the lending front, with demand for loans affected by the deterioration of the
economic environment, the management policy pursued was designed to guarantee full
support for businesses and households, with a reduction in exposure to the large
corporate segment and rationalisation of disbursements to customers outside the Group.
At the end of December loans to customers are close to €100 billion (77% of total assets)
with a ratio of lending to funding of 97% (95.4% at the end of 2010).
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