UBI Banca Group

A low risk profile
The Group has no sovereign debt exposure to countries at risk.
The quality of Group loans continues to be high with a ratio of non-performing loans to
loans, both gross and net of impairment losses, of 4.27% and 2.49% respectively,
compared to data for the Italian banking sector as a whole of 6.24% for gross nonperforming
loans and 3.09% for net non-performing loans.
The loan loss rate has improved and now stands at 0.61% (0.69% at the end of 2010).
Risk weighted assets, which consist of credit and counterparty risk, fell to €91 billion,
accounting for approximately 70% of balance sheet assets, while financial assets
accounted for 8.5%, with Italian government securities in particular representing
approximately 6% of total balance sheet assets.
Appropriate liquidity
Sound liquidity management was ensured during the year by several lines of action
which were pursued. The liquidity reserve, consisting of assets eligible for refinancing
with European Central Bank, was increased and the Bank participated in two
refinancing operations conducted by the ECB with a three year maturity (with the
allotment of €12 billion). The liquidity reserve, consisting of the portfolio of assets
eligible for refinancing with the central bank, calculated net of haircuts, amounted to
€11.6 billion at the end of 2011, with a margin still available of €5.6 billion. Total Group
assets eligible for refinancing had risen to €24.5 billion as at 20 th March 2012, with a
margin of liquidity still available of €12.2 billion, a more than twofold increase
compared to December.
Results for the year
The management of operations in 2011 was yet again (and even more severely) affected
by the economic situation and by foreseeable future scenarios.
The UBI Banca Group adopted normal prudent criteria and recognised impairment
losses on finite useful life intangible assets that had arisen following the merger
between the former BPU Banca Group and the former Banca Lombarda e Piemontese
Group. In other words it significantly impaired (by €2,397 million gross, accounting for
44% of the total on the books at the end of 2010) the carrying amounts that had been
recognised.
Since these amounts had been generated by a “paper for paper” transaction, with no
cash payments involved, the treatment introduced by IFRS requires recognition of the
impairment through profit and loss – with a loss of €1.8 billion recognised in the income
statement as a consequence – even if that impairment generated effects of an
accounting nature only, with no impact on the Group’s operations, or repercussions on
its liquidity, capital ratios (because these are calculated after deducting all intangible
assets) or future profits.
Replenishment of the loss, caused by the impairment loss, will be carried out by
drawing on the share premium reserve, which had received the amounts resulting from
the increase in the share capital at the service of the merger of Banca Lombarda e
Piemontese into the Bank.
Following the replenishment of the loss, the equity of the Group (inclusive of non
controlling interests) will amount to €9,838 million.
The year 2011 ended with consolidated profit before impairment of €349 million, an
increase of 97% compared to €177 million the year before, as a result of good
performance by revenues, notwithstanding the variable market conditions. The Group
also continued to progressively contain costs, partly in relation to action designed to
rationalise and simplify the corporate structure, already decided and currently being
implemented.
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