UBI Banca Group

elation to higher volumes of business), +€2.6 million from “current account administration”
and +€32.7 million from “other services” (which include commitment fees) 5 ;
• management, trading and advisory services 6 , on the other hand, decreased by €53.4 million
to €528.1 million (accounting for 44.2% of total net commission income compared to 49.1%
before). The change is the aggregate result on the one hand of an increase in portfolio
management commissions (+€4 million, the result, amongst other things, of a realignment
of commissions on collective asset management instruments) and on the other hand of falls
in the following items: placement of securities (-€30.5 million, in relation to lower orders for
“third party securities”); distribution of insurance products (-€8.2 million); depository
banking (-€7.7 million following the contribution of these operations in May 2010); receipt
of orders and investment advisory services (-€3.9 million, as volatility on markets increased
and customers adopted a prudent approach).
A reduction in commission expense also occurred in relation to the distribution of financial
instruments, products and services through indirect networks (-€8 million), due largely to
the rationalisation of UBI Banca Lombarda Private Investment’s network of financial
advisors.
Even net of performance fees 7 (relating entirely to UBI Pramerica SGR and recognised in the
fourth quarter, amounting to €11.7 million in 2011, compared to €15.4 million in 2010),
quarterly net commission income held up well compared to previous interim periods and
totalled €303.4 million (€292 million in the third quarter of 2011, €294.6 million in the second
quarter and €291.9 million in the first). Changes within the item partially replicated annual
trends and more specifically a comparison with the third quarter shows the following: an
improvement in income from securities (+€3.1 million, attributable partly to customer portfolio
managements, but above all to the distribution of insurance products, in the presence of lower
securities brokerage and trading income) accompanied by good performance from
commissions of a strictly banking nature (+€7.8 million).
The performance during the year of assets classified under the fair value option affected the
net result for financial activities, which was €7.3 million, compared to €34 million in 2010. In
detail:
• trading activities generated €10.7 million, compared to a loss previously of -€56.9 million,
due almost entirely to the unwinding and ineffectiveness of hedging derivatives, used on a
macro-hedge basis, for fixed rate mortgages subject to either early repayment or
renegotiation. It is a phenomenon which had a greater impact in 2010 and which reduced
considerably in 2011.
Net of that unwinding phenomenon (-€18.4 million in 2011 and -€55.8 million in 2010),
normal activities generated the following: +€26.4 million (-€14.6 million) from debt
instruments (inclusive of financial liabilities held for trading) and the related derivative
instruments; -€15.9 million (-€2.7 million) from equity instruments and the related
derivative instruments, which incorporates the impairment loss on Medinvest International 8
of €12.2 million; -€0.3 million (+€0.4 million) from investments in hedge funds; and +€13.7
million (+€14.7 million) from foreign currency business;
• the result for financial assets and liabilities at fair value – a loss of €38.8 million, compared
to a profit of €6.7 million in 2010 – incorporated disposals of UBI Pramerica funds in the
third quarter with a loss of €22 million, when a stop-loss 9 mechanism was triggered (in
compliance with the limits set by the Financial Risks Policy) losses on Tages hedge funds,
formerly Capitalgest (-€11.4 million) and the fair valuation of residual positions in other
hedge funds;
5 All the changes were calculated by subtracting commission expense from the respective commission income.
6 The amount consists of management, trading and advisory services net of the corresponding expense items and is calculated
excluding currency trading.
7 The item accounts for 1% of total net commission income compared to 1.3% before.
8 Medinvest International Sca (Luxembourg), classified within private equity investments and in which a 19.57% interest is held, is a
merchant bank which invests in companies and also provides financial advisory services to SMEs. The impairment loss was
recognised in relation to the poor performance of the main investment held in its portfolio.
9 The losses incurred on the mutual fund portfolio caused UBI Pramerica SGR to firstly change the composition of the mix of products
used for the Parent’s investments, with preference given to strictly monetary funds and then, in consideration of the continuing
adverse conditions on markets, to sell all units held in funds at the end of September (€329.3 million as at 30 th June 2011).
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