UBI Banca Group

Joint stock co-operative company 

Registered office: Bergamo, Piazza Vittorio Veneto 8 

Operating offices: Bergamo, Piazza Vittorio Veneto 8; Brescia, Via Cefalonia 74 

Member of the Interbank Deposit Protection Fund and the National Guarantee Fund 

Tax Code, VAT No. and Bergamo Company Registration No. 03053920165 

ABI (Italian Banking Association) 3111.2 Register of Banks No. 5678 Register of banking groups No. 3111.2 

Parent of the Unione di Banche Italiane Banking Group 

Share capital as at 3 rd March 2011: Euro 1.597.865.425,00 fully paid up 

www.ubibanca.it

Contents 

Our mission ........................................................................................................................... 5 

Letter from the chairmen ........................................................................................................ 6 

UBI Banca: company officers .................................................................................................. 10 

UBI Banca Group: branch network as at 31 st December 2010 ................................................ 11 

UBI Banca Group: the main investments as at 31 st December 2010 ................................... 12 

UBI Banca Group: principal figures and performance indicators ........................................ 14 

The rating .............................................................................................................................. 15 

Notice of call .......................................................................................................................... 17 

CONSOLIDATED FINANCIAL STATEMENTS OF THE UBI BANCA GROUP 

AS AT AND FOR THE YEAR ENDED 31 ST DECEMBER 2010 

CONSOLIDATED MANAGEMENT REPORT ................................................................................... 20 

▪ The macroeconomic scenario ............................................................................................. 21 

▪ Significant events that occurred during the year ................................................................ 31 

▪ Commercial activity ........................................................................................................... 38 

▪ The distribution network and positioning .......................................................................... 54 

▪ Human resources .............................................................................................................. 62 

▪ The consolidation scope .................................................................................................... 74 

▪ Reclassified consolidated financial statements, reclassified income statement net 

of the most significant non-recurring items and reconciliation schedules ........................... 84 

- Reclassified consolidated statement of financial position ............................................................ 84 

- Reclassified consolidated quarterly statements of financial position ............................................ 85 

- Reclassified consolidated income statement ............................................................................... 86 

- Reclassified consolidated quarterly income statements ............................................................... 87 

- Reclassified consolidated income statement net of the most significant 

non-recurring items ................................................................................................................... 88 

- Reconciliation schedules ............................................................................................................ 89 

- Notes to the reclassified consolidated financial statements ......................................................... 90 

▪ The consolidated income statement ............................................................................................ 91 

▪ General banking business with customers: funding ........................................................... 102 

- Funding policies ........................................................................................................................ 102 

- Total funding ............................................................................................................................. 104 

- Direct funding ........................................................................................................................... 105 

- Indirect funding and assets under management ......................................................................... 109 

▪ General banking business with customers: lending ............................................................................ 111 

- Performance of the loan portfolio .............................................................................................. 111 

- Risk .......................................................................................................................................... 114 

▪ The interbank market and the liquidity situation ............................................................... 119 

▪ Financial assets ................................................................................................................ 123 

▪ Equity and capital adequacy ............................................................................................. 140 

▪ Research & Development ................................................................................................... 146 

▪ The system of internal control ........................................................................................... 147 

▪ Transactions with related parties ...................................................................................... 148 

▪ Consolidated companies: the principal figures ................................................................... 150 

▪ The performance of the main consolidated companies ....................................................... 154 

▪ Other information ............................................................................................................. 188 

- Treasury shares ......................................................................................................................... 188 

- Litigation ................................................................................................................................... 188 

- Inspections ................................................................................................................................ 190 

- Tax aspects .............................................................................................................................. 191 

- Investor relations and external communication .......................................................................... 193 

- Social and environmental responsibility ..................................................................................... 195 

- Legislation on the protection of personal data ............................................................................ 198 

1

▪ Principal risks and uncertainties to which the UBI Banca Group is exposed ...................... 199 

▪ Subsequent events occurring and the business outlook 

for consolidated operations ................................................................................................ 205 

STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER 

RESPONSIBLE FOR PREPARING THE CORPORATE ACCOUNTING DOCUMENTS ............................ 206 

INDEPENDENT AUDITORS’ REPORT .......................................................................................... 209 

CONSOLIDATED FINANCIAL STATEMENTS ................................................................. 212 

▪ Consolidated statement of financial position ...................................................................... 213 

▪ Consolidated income statement ......................................................................................... 214 

▪ Consolidated statement of comprehensive income ............................................................. 215 

▪ Statement of changes in consolidated equity ..................................................................... 216 

▪ Consolidated statement of cash flows ................................................................................ 218 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ................................................... 220 

▪ Part A – Accounting policies .............................................................................................. 221 

▪ Part B – Notes to the consolidated statement of financial position ...................................... 265 

▪ Part C – Notes to the consolidated income statement ......................................................... 325 

▪ Part D – Consolidated comprehensive income .................................................................... 346 

▪ Part E – Information on risks and the relative hedging policies .......................................... 347 

▪ Part F – Information on consolidated equity ....................................................................... 432 

▪ Part G – Business combinations transactions concerning companies or lines of business .. 439 

▪ Part H – Transactions with related parties ......................................................................... 440 

▪ Part I – Share based payments .......................................................................................... 445 

▪ Part L – Segment Reporting ............................................................................................... 446 

ATTACHMENT 

Disclosures concerning the fees of the independent auditors and services other than auditing in 

compliance with Art. 149 duodecies of the Issuers’ Regulations .............................................. 449 

SEPARATE FINANCIAL STATEMENTS OF UBI BANCA SCPA 

AS AT AND FOR THE YEAR ENDED 31 ST DECEMBER 2010 

MANAGEMENT REPORT ................................................................................................. 453 

▪ UBI Banca: principal figures and performance indicators .................................................. 454 

▪ The UBI Banca organisation chart ..................................................................................... 455 

▪ The macroeconomic scenario ............................................................................................. 457 

▪ Human resources .............................................................................................................. 458 

▪ Reclassified financial statements, reclassified income statement net 

of the most significant non-recurring items and reconciliation schedules ........................... 460 

- Reclassified statement of financial position. ............................................................................... 460 

- Reclassified quarterly statements of financial position ................................................................ 461 

- Reclassified income statement ................................................................................................... 462 

- Quarterly reclassified income statements ................................................................................... 463 

- Reclassified income statement net of the most significant 

non recurring items .................................................................................................................. 464 

- Reconciliation schedules ............................................................................................................ 465 

- Notes to the reclassified financial statements ............................................................................. 466 

▪ The income statement ....................................................................................................... 467 

▪ General banking business ................................................................................................. 475 

- Funding .................................................................................................................................... 475 

- Lending ..................................................................................................................................... 477 

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- Operations on the interbank market .......................................................................................... 478 

▪ Financial assets ................................................................................................................ 481 

▪ Equity and capital adequacy ............................................................................................. 487 

▪ Relations with Group member companies .......................................................................... 489 

▪ Research & Development ................................................................................................... 489 

▪ The system of internal control ........................................................................................... 489 

▪ Transactions with related parties. ..................................................................................... 490 

▪ Share performance and shareholder structure ................................................................... 492 

- Share performance .................................................................................................................... 492 

- Report on corporate governance and the ownership structure .................................................... 494 

- Treasury shares ......................................................................................................................... 495 

- Report on the admission of new registered shareholders ............................................................. 495 

- Report on mutual objects ........................................................................................................... 495 

- Initiatives to reform legislation on ‘popular’ co-operative banks .................................................. 497 

- Shareholdings of management and supervisory bodies, 

the General Manager and Senior Managers with strategic responsibilities ................................... 497 

- De jure and delegated powers of the corporate bodies ................................................................. 497 

▪ Other information ............................................................................................................. 498 

- Litigation ................................................................................................................................... 498 

- Legislation on the protection of personal data ............................................................................ 498 

▪ Principal risks and uncertainties to which UBI Banca is exposed ....................................... 499 

▪ Subsequent events and the business outlook ......................................................................... 499 

▪ Proposal for the allocation of profit for the year and dividend distribution .......................... 500 

STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER RESPONSIBLE FOR 

PREPARING THE CORPORATE ACCOUNTING DOCUMENTS ................................................... 503 

INDEPENDENT AUDITORS’ REPORT ................................................................................. 505 

SEPARATE FINANCIAL STATEMENTS ............................................................................... 509 

▪ Statement of financial position .......................................................................................... 510 

▪ Income statement .............................................................................................................. 511 

▪ Statement of comprehensive income .................................................................................. 512 

▪ Statement of changes in equity .......................................................................................... 513 

▪ Statement of cash flows. ................................................................................................... 515 

NOTES TO THE SEPARATE FINANCIAL STATEMENTS .......................................................... 517 

▪ Part A – Accounting policies ........................................................................................................ 518 

▪ Part B – Notes to the statement of financial position .......................................................... 553 

▪ Part C – Notes to the income statement ............................................................................. 611 

▪ Part D – Comprehensive income ........................................................................................ 636 

▪ Part E – Information on risks and the relative hedging policies ............................................... 638 

▪ Part F – Information on equity ........................................................................................... 717 

▪ Part G – Business combination transactions concerning companies or lines of business ... 724 

▪ Part H – Transactions with related parties ................................................................................ 725 

▪ Part I – Share based payments ................................................................................................... 739 

▪ Part L – Segment Reporting ......................................................................................................... 739 

ATTACHMENTS TO THE SEPARATE FINANCIAL STATEMENTS .............................................. 740 

▪ List of real estate properties. ............................................................................................. 741 

▪ Convertible bonds ............................................................................................................. 746 

▪ List of significant equity investments held in unlisted companies as at 31 st December 2010 

in compliance with Art. 126 of Consob Resolution No. 11971/1999 ................................... 747 

▪ Disclosures concerning the fees of the independent auditors and services other than 

auditing in compliance with Art. 149 duodecies of the Issuers’ Regulations ....................... 752 

3

REPORT ON CORPORATE GOVERNANCE AND 

THE OWNERSHIP STRUCTURE OF UBI BANCA SCPA ................................................................................ 753 

REPORT OF THE SUPERVISORY BOARD TO THE SHAREHOLDERS’ MEETING 

in compliance with Art.153, paragraph 1 of Legislative Decree No. 58 of 24 th February 1998 

and of Art. 46, paragraph 1, letter h) of the corporate by-laws. .................................................... 807 

REPORTS ON THE OTHER ITEMS ON THE AGENDA OF THE SHAREHOLDERS’ MEETING ................. 820 

GLOSSARY ....................................................................................................................... 853 

BRANCH NETWORK OF THE UBI BANCA GROUP ………………………………………………………………868 

CALENDAR OF CORPORATE EVENTS OF UBI BANCA FOR 2011 ……………………………………………881 

CONTACTS …………………………………………………………………………………..……………………882 

Key 

The following abbreviations are used in the tables: 

- dash (-): when the item does not exist; 

- not significant (n.s.): when the figure is insufficient to reach the minimum level in question or is in any case not 

significant; 

- not available (n.a.): when the information is not available 

- a cross “X”: when no amount is to be given for the item (in compliance with Bank of Italy instructions). 

All figures are given in thousands of euros, unless indicated otherwise. 

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Our mission 

To create value for our customers 

and all our stakeholders, 

by generating sustainable and lasting profit 

through our ability to interpret, serve and encourage 

economic development and social well-being 

in the local communities 

in which we operate. 

We work everyday with passion, 

experience and the ability to blend tradition 

with innovation to provide families and businesses 

with excellence in our banking, financial 

and insurance products and services, 

thereby building long-lasting relationships, 

based on trust, with our customers 

and with all our stakeholders. 

(from the “Charter of Values” of the UBI Banca Group, approved on 29 th January 2008) 

5

Letter from the chairmen 

Dear registered and non registered shareholders, 

The year just ended was yet again a difficult one: the macroeconomic context continues to 

show signs of recovery, but the situation remains uncertain; financial markets are periodically 

shaken by turmoil which never dies down, but on the contrary was stirred up again during the 

year by fears of insolvency for some sovereign countries; and the banking system is struggling to 

recover from circumstances it has never experienced before. On the one hand the diminished 

propensity to save by households is placing limits on the growth of funding from customers and 

on the other hand lending business is recording a moderate recovery – after a low in October 

2009 – but is faced with a quality of credit that is far from satisfactory, even if it has improved 

compared to the recent past. 

And the results achieved during the year were in fact modest. 

Nevertheless, the UBI Banca Group did not remain dormant, but used all possible internal 

organisational and operational means to make significant savings on costs, with a focus on its 

core business, a change in the organisational configuration and a more streamlined geographical 

market presence for its network banks. 

• The agreement reached on 20 th May 2010 concluded trade union negotiations and achieved a 

structural reduction in costs at Group level by reducing personnel numbers and the relative 

unit cost. It was supported by the adoption of appropriate organisational and operational 

measures designed to encourage improvements in efficiency and productivity. The planned 

decrease in total personnel numbers was of 895 employees, including 500 through a 

redundancy incentive scheme implemented during the year. Over a full year this will result in 

a decrease in personnel expense of 70 million euro from 2011. 

• An agreement was concluded on 31 st May to transfer a business unit to Royal Bank of 

Canada Dexia Investor Services consisting of the depositary banking business of the UBI 

Banca Group and also the transfer of correspondent bank contracts. The operation not only 

reduced operational risk for the Group to the advantage of its core banking business, but also 

generated a net gain of 83,4 million euro. 

• At the same time the Group commenced internal action to simplify operations: 

- the “Simplicity objective” project to find solutions to improve services and customer 

response times for products and services considered high priority, in order to optimise 

support processes and tools for the commercial network; 

- a project to revise the lending proces, with the dual aim of reducing customer response 

times and lightening administrative loads on account managers, but of course without 

relaxing credit risk management. It was implemeted with the intention of improving the 

effectiveness and efficiency of the process in the network banks; 

- organisational changes at the Parent, designed to streamline some units and at the same 

time strengthen the integrity of the supervision of important operational processes, with 

the objective of shortening the chain of command and strengthening some operational 

areas considered strategically important. 

However, the most important action in 2010 was that taken on the branch networks, with the 

reorganisation of the areas covered by the network banks, and that taken on the distribution 

model. 

The project to optimise the branch network designed to focus each network bank on its own local 

market by grouping all the branches in a given area under a single brand was completed on 25 th 

January 2010. At the same time a series of branches were transformed into mini-branches, 

which report to a parent branch. The network banks are currently present in 78 provinces and 

operate under a single brand in 74 of these. 

6

On 21 st June action was taken as planned under the trade union agreement of May 2010 to 

eliminate overlap and streamline market presence in areas with low growth forecasts, while at 

the same time expanding branches with good growth prospects. 

An enhancement to the distribution model was developed in the third quarter with the 

introduction of a “group branch”, which, although autonomous from both a commercial and a 

credit viewpoint, reports to a “head branch”, which provides operational support for it. 

In consideration of its role as the principal bank in the Piedmont area, Banca Regionale Europea 

transferred its General Management to Turin from January 2011. 

Moreover the Group has not abandoned endogenous growth and opened 17 new branches 

during the year and transformed six existing “treasury” branches into mini-branches. 

From a commercial viewpoint, policies were focused on broadening the product range, the 

acquisition of new customers and initiatives to support families and enterprises. 

More careful analysis of customer needs and requirements was performed with an increasingly 

more advisory approach, designed to generate customised services and solutions. The 

commercial strategy also continues to maximise synergies between network banks and product 

companies. Particular attention was placed on multi-channel growth (with new and enhanced 

consultative and transaction functions and devices for internet and mobile banking functions) 

and the contact centre was expanded (with the creation of a new unit in Milan). 

A new business unit was created in October 2010 dedicated to public authorities, associations 

and non profit organisations (including Church and religious entities), with the formulation of a 

specific product range to support a customer differentiated and distinctive service model. The 

development of this area occurs in an operating context of confirming and enhancing the role of 

the main bank played by the Group in its local markets. 

UBI Banca is committed to supporting the economy even in the face of persistent uncertainties 

and the difficulties of the economic situation. Its lending policies prioritise an orientation of 

participation in numerous initiatives to assist families and businesses, introduced by both the 

Italian Banking Association and at local level (e.g. guarantee bodies and Dioceses). 

If the large corporate segment is excluded, which does not form part of the Group’s traditional 

mission, annual lending increased by +4,8%, more than that for the sector nationally to the 

private sector of +4,3%. 

Furthermore, lending to the economy has grown progressively over the years, reaching almost 

102 billion euro in December 2010, with significant increases compared both to 2008 (+5,7%) 

and to 2007 (+9,5%). Within the aggregate, medium-to-long term lending gradually increased to 

reach a total of 69,9 billion euro at the end of last December. 

This progress was made possible by historically weighted management of pricing consistent 

with the cost of risk (and also with the increased cost of funding) and the spreads on the lending 

rates applied were again lower on average than those for the sector, thereby ensuring the 

competitiveness of the Group and growth in market share. 

Funding policies are oriented towards increasingly more diversification of the sources, both in 

terms of type and maturity, pursued in parallel with action to increase growth designed to 

encourage balanced growth of volumes from non institutional customers. 

The Group pays particular attention to strengthening funding from ordinary customers, by 

pursuing policies focused on structural balance, able to generate sustainable inflows over time, 

consistent with growth in lending. Initiatives developed during the year included the issue of 

listed UBI Banca bonds for 1,8 billion euro (fixed rate, mixed rate and with a lower tier two 

subordination clause). 

Funding from institutional customers – constantly below 20% of total funding – consisted mainly 

of covered bonds for the medium-to-long term component with 1,75 billion euro issued during the 

year, while use of the EMTN programme was limited, partly in relation to the higher cost, with 

issues of 1,7 billion, which basically offset bonds maturing and redeemed during the year. Short 

term institutional funding, on the other hand, saw an intensification of issues of French 

certificates of deposit and euro commercial paper, instruments able to act as buffers for the 

management of liquidity and funding. 

7

At the end of December, consolidated direct funding rose to 106,8 billion euro (+9,8% 

compared to 2009 and +4% net of total business with the Cassa di Compensazione e Garanzia 

(central counterparty clearing), to record growth compared to both 97,6 billion euro in 2008 and 

90,3 billion euro at the end of 2007. 

Within the aggregate, medium-to-long term funding reached more than 43 billion euro. 

Group profits were penalised by a fall in revenues, which could not be offset by the policy to 

contain costs – rigorously pursued – as they continued to be affected by both the high cost of 

credit, although now falling, and by impairment losses on financial assets (approximately 50 

million euro). 

The year therefore ended with consolidated profit of 172 million euro (270 million euro in 2009), 

the result of operating income of 3,5 billion euro (3,9 billion euro the previous year), held down 

above all by the performance of net interest income and the result for financial activities, in 

addition to the absence of net income from insurance operations following the partial disposal of 

UBI Assicurazioni. Operating expenses amounted to 2,5 billion euro, down by 46 million euro 

including: -14 million relating to personnel expense, -7,5 million euro to other administrative 

expenses and -24 million euro to depreciation and amortisation. 

Net impairment losses on loans fell by 158 million euro and stood at 707 million euro, due to the 

quality of the loan portfolios of some network banks, which was brought into line with the Group 

average, and to the marked reduction in single impairment losses on deteriorated loans for 

those same network banks. However, this performance was offset by the difficulties of some 

product companies in relation to specific business sectors, such as consumer finance, which is 

nevertheless showing the first signs of improvement after the corrective action taken, and 

property leasing, where a project was commenced in the fourth quarter to redefine business as a 

whole in co-ordination with the Parent. 

The UBI share has not remained immune to the pressures on financial markets, where the 

banking sector in particular was hit very hard. After the sharp fall in the spring triggered by the 

Greek sovereign debt crisis, equity markets started to recover partially in the third quarter 

compared to the lows recorded at the end of June, only to sink again towards the end of the year 

as the difficulties of the Irish banking sector emerged. The year again opened in 2011 with 

markets performing weakly: signs of a partial recovery in the second half of January gradually 

disappeared as tensions intensified in North Africa (in Libya in particular) and as oil prices rose 

as a consequence. 

The Management Board has decided to submit a proposal to the shareholders meeting 

convened for 29 th -30 th April 2011 to declare a dividend of 0,15 euro on the 639.146.170 

ordinary shares with dividend entitlement from 1 st January 2010 – to be drawn on the profit of 

the Parent of 284 million euro – for a total of 96 million euro (amount virtually the same as the 

normalised consolidated profit) after statutory and by-law allocations and an allocation to the 

extraordinary reserve. An allocation of 154 million euro is proposed to the latter to fully replenish 

it, after drawing from it in 2008, and to further strengthen capital. 

When approving the separate and consolidated financial statements, the Supervisory Board 

expressed its opinion in favour of the proposal for the allocation and distribution of profit 

formulated by the Management Board. Payment of the dividend, if approved, will be made on 

23 rd May 2011, with value date of 26 th May 2011. 

The time is arriving in the current context for the application of new prudential supervisory 

rules, to strengthen the quality and quantity of banking capital, to contain financial leverage in 

the banking system, reduce the possible pro-cyclical effects of prudential rules and to tighten 

control over liquidity risks. 

UBI Banca has always considered capital solidity to be a distinguishing factor and its 

consolidated capital is in fact of high quality with 94% of its tier one capital consisting of core tier 

one capital (share capital + reserves) and only 6% of innovative capital instruments. Despite the 

economic situation, this characteristic has enabled UBI to support its customers, increase market 

share and to pay regular dividends, without the need for government assistance. 

Nevertheless, recent changes in legislation and regulations connected with the expected 

future capital requirements demanded by Basel III, market trends and the imminent launch of a 

8

new business plan, have led the Group to reconsider its capital situation with the following aims: 

to position itself at a higher than average level of capitalisation, consistent with the prudent and 

realistic approach typical of the Group; to achieve a further improvement in the mix and quality 

of the Group’s capital, strengthening its common equity, as required by the new regulations; to 

avoid the issue, in the short term, of capital instruments with high costs for which full eligibility 

for inclusion in supervisory capital is uncertain; to grasp, all opportunities for endogenous 

growth which may arise during the period of the business plan, pursuing, at the same time, a 

sustainable dividend policy; and also to support and strengthen the ratings assigned by 

international rating agencies with positive impacts on the international perception of UBI Banca 

and on the cost of funding. 

For these reasons, the Management Board has passed a resolution, with the approval of the 

Supervisory Board, to submit a proposal to an extraordinary Shareholders’ Meeting of the Bank, 

for examination and approval, for authorisation to increase the share capital by up to one billion 

euro with option rights for shareholders and holders of the convertible bond “UBI 2009/2013 

Convertibile con facoltà di rimborso in azioni”. It is planned to implement the authorisation 

presumably by the end of the summer, if market conditions allow and subject to obtaining the 

necessary authorisations, while the new Group business plan will also form an integral part of 

the prospectus for the share issue. 

The amount of the proposed increase in the share capital is such as to achieve a 

remuneration of capital consistent with its cost, over the period covered by the Business Plan. 

According to a simulation on figures as at 31 st December 2010, following the increase, the core 

tier one ratio would stand at 8,01%, the tier one ratio at 8,53% and the total capital ratio at 

12,23%. These ratios would also allow the Group to continue to issue covered bonds without 

limits. 

A capital buffer remains available, consisting of an outstanding bond amounting to 639 million 

euro, already convertible since 10 th January of this year, maturing in July 2013 and accounting 

for approximately 70 basis points of the core tier one ratio on current figures. 

Strengthening capital constitutes a primary and indispensible requirement for UBI Banca to 

be able to continue to operate as a bank in the most traditional sense, supporting potential 

growth in lending at the service of its customers and the local communities in which it has 

always operated. UBI Banca is a local community bank, but with global operations, a 

continuously evolving range of products and services, the ability to assist its customers in all 

important economic and financial affairs, even abroad, through its representative offices and 

numerous co-operation agreements. 

This long term action will be illustrated in the Business Plan, in the certainty that our work as a 

“traditional bank”, will not fail to give satisfactory results in future. 

The Chairman of the Management Board 

Emilio Zanetti 

The Chairman of the Supervisory Board 

Corrado Faissola 

April 2011 

9

UBI Banca: company officers 

Honorary Chairman 

Giuseppe Vigorelli 

Supervisory Board (appointed by a Shareholders’ Meeting on 24 th April 2010) 

Chairman 

Senior Deputy Chairman 

Deputy Chairman 


Corrado Faissola 

Giuseppe Calvi 

Alberto Folonari 

Mario Mazzoleni 

Battista Albertani 

Giovanni Bazoli 

Luigi Bellini 

Mario Cattaneo 

Silvia Fidanza 

Enio Fontana 

Carlo Garavaglia 

Alfredo Gusmini 

Pietro Gussalli Beretta 

Giuseppe Lucchini 

Italo Lucchini 

Federico Manzoni 

Toti S. Musumeci 

Sergio Orlandi 

Alessandro Pedersoli 

Giorgio Perolari 

Sergio Pivato 

Roberto Sestini 

Giuseppe Zannoni 

Management Board (appointed by the Supervisory Board on 27 th April 2010) 

Chairman 


Chief Executive Officer 


Flavio Pizzini 

Victor Massiah 

Giampiero Auletta Armenise 

Giuseppe Camadini 

Mario Cera 

Giorgio Frigeri 

Gian Luigi Gola (*) 

Guido Lupini 

Andrea Moltrasio 

Franco Polotti 

General Management 

General Manager Graziano Caldiani (**) 

Deputy General Manager 

Rossella Leidi 


Giovanni Lupinacci 


Ettore Medda 


Pierangelo Rigamonti 

Senior Officer Responsible in accordance with 

Art. 154 bis of the Consolidated Finance Act 

Elisabetta Stegher 

Independent auditors 

KPMG Spa 

(*) Appointed on 30 th June 2010 by the Supervisory Board 

(**) In office since 1st October 2010. 

10

UBI Banca Group: branch network as at 31 st 

December 2010 

11

UBI Banca Group: the main investments as 

at 31 st December 2010 

12

UBI Banca Group: 

principal figures and performance 

indicators 1 

31.12.2010 31.12.2009 31.12.2008 

STRUCTURAL INDICATORS 

Net loans to customers/total assets 78,0% 80,1% 79,0% 

Direct funding from customers/total liabilities 81,8% 79,5% 80,0% 

Net loans to customers/direct funding from customers 95,4% 100,8% 98,7% 

Equity (including profit for the year) /total liabilities 8,4% 9,3% 9,1% 

Assets under management/indirect funding from private customers 54,6% 53,2% 53,1% 

Leverage ratio (total assets-goodwill-other intangible assets)/(equity+minority interests-intangible 

assets) 19,9 17,8 17,5 

PROFIT INDICATORS 

ROE (Profit for the year/equity excluding profit for the year) 1,6% 2,4% 0,6% 

ROA (Profit for the year/total assets) 0,13% 0,22% 0,06% 

The cost/income ratio (operating expenses/operating income) 70,6% 64,4% 63,9% 

Personnel expense/operating income 41,5% 37,5% 38,8% 

Net impairment losses on loans/net loans to customers (cost of credit) 0,69% 0,88% 0,59% 

Net interest income/operating income 61,3% 61,5% 68,7% 

Net commission income/operating income 33,9% 31,1% 33,3% 

Net result on financial activities/operating income 1,0% 3,2% -5,9% 

RISK INDICATORS 

Net non performing loans/net loans to customers 1,91% 1,36% 0,88% 

Net impairment losses on non-performing loans/gross non-performing loans (coverage for nonperforming 

loans) 48,69% 51,57% 54,58% 

Net non-performing + net impaired loans/net loans to customers 3,91% 3,24% 2,08% 

Net impairment losses on non-performing and impaired loans/gross non-performing 

loans+impaired loans (coverage) 34,89% 35,93% 38,22% 

Net non-performing loans /equity excluding profit for the year 17,95% 11,96% 7,67% 

CAPITAL RATIOS Basel 2 standard 

Tier 1 ratio (tier 1 capital/total risk weighted assets) 7,47% 7,96% 7,73% 

Core tier I ratio after specific deductions to tier 1 capital 

(tier 1 capital net of preference shares/total risk weighted assets) 6,95% 7,43% 7,09% 

Total capital ratio [(supervisory capital+tier 3/total risk weighted assets] 11,17% 11,91% 11,08% 

Supervisory capital (in thousands of euro) 10.536.200 10.202.555 9.960.812 

of which: Tier one capital after the application of prudential filters and specific deductions 7.047.888 6.816.876 6.944.723 

Risk weighted assets 94.360.909 85.677.000 89.891.825 

INCOME STATEMENT, STATEMENT OF FINANCIAL POSITION FIGURES (in thousands of euro), 

STRUCTURAL DATA (numbers) 

Profit 172.121 270.099 69.001 

Normalised profit 105.116 173.380 425.327 

Operating income 3.496.061 3.906.247 4.089.739 

Operating expenses (2.468.564) (2.514.347) (2.611.348) 

Net loans to customers 101.814.829 98.007.252 96.368.452 

of which: net non-performing loans 1.939.916 1.332.576 848.671 

net impaired loans 2.032.914 1.845.073 1.160.191 

Direct funding from customers 106.760.045 97.214.405 97.591.237 

Indirect funding from customers 78.078.869 78.791.834 74.288.053 

of which: assets under management 42.629.553 41.924.931 39.430.745 

Total funding from customers 184.838.914 176.006.239 171.879.290 

Equity (excluding profit for the period) 10.806.898 11.141.149 11.071.206 

Total assets 130.558.569 122.313.223 121.955.685 

Branches in Italy 1.892 1.955 1.944 

Total personnel at the end of year (actual employees in service + workers on agency leasing 

contracts) 19.699 20.285 20.680 

Average total personnel (actual employees in service + workers on agency leasing contracts) (*) 19.384 20.185 20.606 

Financial advisors 786 880 924 

1 The indicators have been calculated using the reclassified figures contained in the section “Reclassified consolidated financial statements, 

reclassified income statement net of the most significant non-recurring items and reconciliation schedules” in the Consolidated Management 

Report. 

Information on the share is reported in the relative section of the UBI Banca Management Report. 

(*) Part time employees have been calculated within total average personnel numbers according to convention on a 50% basis. 

14

The rating 

The tables below summarise the ratings assigned to the Group by the international agencies, 

Standard & Poor’s, Moody’s and Fitch Ratings. 

As part of its general analysis of Italian banks, on 23 rd April 2010 Standard & Poor’s affirmed 

its short and long term counterparty ratings for UBI Banca and revised its Outlook from Stable 

to Negative in relation to a perceived decrease in the Group’s capacity to absorb credit losses 

greater than expected should fragile recovery in progress run into difficulties. 

On 17 th December 2010 Fitch Ratings lowered its long term counterparty rating for UBI 

Banca to A from A+, with a Stable Outlook, affirming all its other ratings. The downgrade was 

made in consideration of the sluggish activity in the Italian economy and the continued low 

interest rates, which, in the opinion of the rating agency, made any swift recovery in UBI 

Banca’s operating profitability unlikely. 

At the same time Fitch Ratings emphasised the importance of the following: the Group’s strong 

franchise in the richest regions of the country; solid management and a credit risk awareness 

which has allowed asset quality to deteriorate less than its peers; adequate capitalisation in 

relation to a conservative approach to risk; adequate liquidity with diversified sources of 

funding. 

As a consequence of the manoeuvre the ratings on outstanding issues (senior debt, lower tier 

two and hybrid securities) were downgraded by one notch. 

STANDARD & POOR’S 

Short-term Counterparty Credit Rating (i) A-1 

Long-term Counterparty Credit Rating (ii) A 

Outlook 

Negative 

RATINGS ON ISSUES 

Senior unsecured debt 

A 

Subordinated debt (Lower Tier II) A- 

Preference shares 

BBB 

French Certificats de Dépôt Programme A-1 

(i) The ability to repay debt maturing in less than one year. 

(A-1: best rating – D: worst rating) 

(ii) With reference to debt maturing after one year, it indicates the 

ability to pay interest and repay principal, together with any 

sensitivity to the adverse effects of changes in circumstances or 

economic conditions. 

(AAA: best rating – D: worst rating) 

MOODY'S 

Long-term debt and deposit rating (I) 

Short-term debt and deposit rating (II) 

Bank Financial Strength Rating (BFSR) (III) 

Baseline Credit Assessment (BCA) (IV) 

Outlook (deposit ratings) 

Outlook (Bank Financial Strength Rating) 


Senior unsecured LT 

Lower Tier II subordinated 

Preference 

shares 

(former BPB-CV and Banca Lombarda) 

Euro Commercial Paper Programme 

Covered Bond 

A1 

Prime-1 

C 

A3 

Stable 

Negative 

A1 

A2 

Baa3 

Prime-1 

Aaa 

(I) The ability to repay long-term debt (maturing after one year) in 

local currency. By using the JDA method (Joint Default Analysis), 

this rating associates the financial strength rating (BFSR – Bank 

Financial Strength Rating) with the probability of intervention if 

needed by external support (shareholders, the group to which it 

belongs or official institutions). (Aaa: prime quality – Baa3: 

medium quality). 

(II) The ability to repay debt in local currency maturing in the short 

term (due in less than one year). 

(Prime -1: highest quality – not prime: speculative grade) 

(III) This rating does not relate to the ability to repay debt but 

considers the bank’s intrinsic financial strength (by analysing 

factors such as its geographical market presence, the 

diversification of its activities, the financial basics) in the absence 

of external support. (A: best rating – E: worst rating) 

(IV) The Baseline Credit Assessment represents the equivalent of the 

Bank Financial Strength Rating on the traditional scale of the long 

term rating. 

15

FITCH RATINGS 

Short-term Issuer Default Rating (1) 

F1 

Long-term Issuer Default Rating (2) 

A 

Bank Individual Rating (3) 

B/C 

Support Rating (4) 2 

Support Rating Floor (5) 

BBB 

Outlook for Long-term Issuer Default Rating Stable 


Senior unsecured debt 

A 

Lower Tier II subordinated A- 

Preference shares 

BBB+ 

Euro Commercial Paper Programme 

F1 

Covered bond 

AAA 

(1) The capacity to repay debt in the short term (less than 13 

months). (F1: best rating – D: worst rating) 

(2) The ability to meet financial commitments in the long term, 

independently of the maturity of individual bonds. This rating is 

an indicator of the probability that an issuer will default. (AAA: 

best rating – D: worst rating) 

(3) An assessment of a bank’s intrinsic strength (profitability, 

balance sheet strength, commercial network, ability of 

management, operational environment and outlook), on the 

assumption that the bank cannot rely on external support 

(possible intervention by a lender of last resort, support from 

shareholders, etc.). (A: best rating - E: worst rating) 

(4) A rating of the possibility of concrete and timely external support 

(from the state or large institutional investors) if the bank finds 

itself in difficulty. (1: best rating – 5: worst rating) 

(5) This rating gives additional information, closely linked to the 

Support Rating, in that for each level of the Support Rating it 

identifies the minimum level which the Issuer Default Rating could 

reach if negative events were to occur. 

16

Notice of call 1 

An Ordinary and Extraordinary General Meeting of the Shareholders of Unione di Banche 

Italiane Scpa is convened in first call on Friday 29 th April 2011 at 5.00 p.m. at the registered 

address of the bank, at No. 8 Piazza Vittorio Veneto, Bergamo, and in second call on Saturday 

30 th April 2011 at 9.30 a.m. at the New Bergamo Trade Fair, in Via Lunga, Bergamo to 

discuss and resolve on the following 

Agenda 

Ordinary session 

1) Proposal for the allocation and distribution of profit, after first presenting the separate and 

consolidated financial statements as at and for the year ended 31 st December 2010, 

pursuant to article 22, paragraph 2, letter d) of the Corporate By-Laws. 

2) Report to the shareholders on Group remuneration and incentive policies. 

Proposals for: 

- remuneration policies for members of the Management Board; 

- the incentive scheme based on financial instruments for the top management of the 

Group. 

3) Authorisation of the Management Board concerning treasury shares. 

4) Proposal concerning the appointment for the legal external audit (article 13, paragraph 1 of 

Legislative Decree No. 39 of 27 th January 2010). 

Extraordinary session 

1) Proposal to amend the following articles of the Corporate By-Laws: numbers 22, 25, 26 and 

No. 28 (Title V - Shareholders’ Meetings), No. 37 (Title VI - Management Board), No. 44, No. 

45, No. 46 and No. 49 (Title VIII - Supervisory Board), No. 50 (Title IX – General 

Management). Relative and consequent resolutions. 

2) Proposal to authorise the Management Board, pursuant to Art. 2443 of the Italian Civil 

Code, to increase the share capital by payment, in one or more tranches, within twelve 

months of the date of the shareholders’ resolution, by a total maximum amount of one 

billion euro, inclusive of any share premiums, by the issue of ordinary shares having the 

same characteristics as those already outstanding, to be offered to the holders of option 

rights, with the broadest powers to establish, from time to time and in observance of the 

above limitations, the procedures, the terms and the conditions of the operation, inclusive 

of the issue price and comprising any share premiums and dividend entitlements. Relative 

and consequent resolutions. 

Consequent amendments to Art. 5 of the Corporate By-Laws. 

*** 

The subscribed and paid up share capital of UBI Banca Scpa amounts to Euro 

1.597.865.425,00 consisting of 639.146.170 shares with a nominal value of Euro 2,50 each. 

The total number of registered shareholders with the right to vote is 78.705. 

Only persons who have been registered shareholders for at least 90 days from the date of entry 

in the shareholders’ register may attend the Shareholders’ Meeting and exercise voting rights. 

Legitimate authorisation to participate in shareholders’ meetings and to exercise voting rights 

is certified by a communication to the Bank, performed by the relative intermediary, in 

compliance with its accounting entries, in favour of the party holding the right to vote. In this 

regard, registered shareholders for whom the said communication has been made to the Bank 

at least two working days prior to that set for the Shareholders’ Meeting in first call may 

attend the Shareholders’ Meeting, in accordance with the Law. The legitimate right to attend 

and vote nevertheless remains, should the communications be received by the Bank later than 

1 This notice of call for a General Meeting of the Shareholders will be published in the Official Journal, No. 37 on 2 nd April 2011. 

17

the aforementioned time limit, provided they are received before the commencement of the 

proceedings of each single session of the shareholders’ meetings. 

A registered shareholder is entitled to only one vote no matter how many shares are 

possessed. 

A registered shareholder is entitled to be represented by issuing a written proxy to another 

registered shareholder having the right to attend the Shareholders’ Meeting. Proxies may not 

be granted to members of the governing or controlling bodies or to employees of the Bank, to 

companies controlled by it, or to the members of the governing or controlling bodies or to 

employees of the latter. 

No registered shareholder may act as a proxy for more than 3 (three) other registered 

shareholders. 

Voting by post is not permitted. 

Registered shareholders holding shares that have not yet been dematerialised pursuant to the 

legislation and regulations in force must deliver them in good time to an approved 

intermediary in order to perform the dematerialisation procedure required and to make the 

communication mentioned above. 

The communication performed by the intermediary shall contain a special section which may 

be used to authorise a proxy by signing the said section. In compliance with the procedures 

and the time limits set by law, a number of registered shareholders equal to not less than one 

fortieth of the total number of registered shareholders entitled on the date of the request, may 

make an application in writing for additions to be made to the agenda to be dealt with in the 

meeting, as it results from the notice convening the Shareholders' Meeting, with the indication 

in the request of the additional items proposed. The signature of each registered shareholder 

making the request must be duly authenticated either in accordance with the law or by 

employees of the Bank or its subsidiaries specifically authorised for that purpose. The 

legitimacy of that right is given by the validity of the documentation testifying to the 

possession of the shares on the date of the presentation of the application. 

The documentation relating to the items on the agenda will be deposited and made available to 

the public at the registered address of the Bank and on the website www.ubibanca.it and it 

will be filed with Borsa Italiana SpA within the time limits and according to the procedures of 

the Law and regulations. 

Registered Shareholders may view and obtain copies of the aforementioned documentation in 

accordance with the law by applying in advance to the Management Board Support and 

Registered Shareholders Department. 

Bergamo, 28 th March 2011 

The Chairman of the Management Board 


18

The macroeconomic scenario 

The severe recession in 2010, which followed the financial crisis triggered by sub-prime 

mortgages, has given way to a global economic recovery, but in the presence of a series on 

uncertainties which seem prejudicial to a return to normality: the reduction in financial leverage, 

the variability of exchange rates and its impact on world imbalances, the high rates of 

unemployment and public debt and, since the autumn, a recovery in inflation even in advanced 

economies. 

The pressures unleashed in the spring by the Greek public debt crisis – the consequences of 

which then progressively extended to other countries in the euro area with high levels of debt 

(Ireland, Portugal and Spain) – also helped to render more fragile a recovery that was already 

affected by weak domestic demand. 

The renewed pressures on financial markets towards the end of the year, triggered by the serious 

difficulties experienced by the Irish banking sector and by uncertainties over new European anticrisis 

regulations 1 , resulted in a progressive rise in yields on long term government securities. At 

the same time risk levels for major international banks started to increase again with a rise in 

premiums on credit default swaps (CDS) after the decrease that followed the highs recorded in the 

spring at the time of the Greek crisis, as they incorporated a heightened perception of risk on 

sovereign debt. 

On 21 st November Ireland made an official request for a loan to the European Union and to the 

International Monetary Fund which was accepted on 28 th November, when a bailout plan was 

prepared for a total of 85 billion euro, composed as follows: 45 billion euro provided by the EU- 

EMU through the EFSF and EFSM programmes and by bilateral loans from the United Kingdom, 

Sweden and Denmark; 22,5 billion euro from the IMF and the remaining 17,5 billion euro from 

the Irish Government itself (Treasury monetary funds and investments by the national Pension 

Reserve Fund). 

Important measures were taken during the year designed to prevent the repetition of new financial crises. In 

detail: 

− 

− 

in May, after the adoption of a three-year programme of bilateral loans to Greece of 80 billion euro (in 

addition to the 30 billion euro granted by the IMF), the European Union and the countries in the euro area 

formulated two agreements for financial stability: on the one hand the European Financial Stabilisation 

Mechanism (EFSM) was created to allow the European Commission to acquire up to 60 billion euro, 

guaranteed by the EU budget, for loans to EU countries suffering exceptional circumstances beyond their 

control; on the other hand a three-year plan was launched jointly with the IMF, designed to guarantee the 

funding requirements of countries in the euro area with high levels of debt. Additionally, 440 billion euro 

may be made available through the European Financial Stability Facility (EFSF) 2, a special purpose entity 

created on 7 th June to acquire funds on the market by issuing securities guaranteed by countries in the euro 

area 3 ; 

reforms of the regulation and supervision of the financial system have been approved in both the United 

States and Europe. In the United States greater powers have been conferred on the Federal Reserve over 

major financial groups, with the creation of a financial stability council composed of regulatory authorities, 

including the Federal Reserve itself, called upon to oversee systemic risks. In Europe, on the other hand, a 

European System of Financial Supervision (ESFS) has been operational since 1 st January 2011. This 

system consists of a European Systemic Risk Board – ESRB, with general oversight functions and of three 

new authorities 4 called upon to work with the 27 national authorities of the individual member countries of 

the union with country specific oversight functions; 

1 The yield differentials on ten year government securities for Greece, Ireland, Spain and Portugal, widened substantially compared those 

for Germany, while Italy and Belgium experienced a smaller rise. 

2 The IMF will make 250 billion euro available which, in addition to the 60 billion euro provided by the EFSM and the 440 billion which 

should come from the EFSF, will allow the planned total of 750 billion euro to be reached. 

3 The rules that govern the functioning of this special purpose entity state that a ratio of 120% must be maintained between the 

guarantees provided and the securities issued to finance applicant countries. Another rule states that the ratio between loans granted 

and securities issued shall be approximately two thirds with the remaining part invested in a liquidity reserve. Moreover studies are in 

progress to assess the adequacy of the programme to manage a crisis which includes several countries and which could soon lead to an 

increase in the amount of the guarantees which set limits on the funding and lending performed. 

The first European debt instrument was placed on markets by the EFSF in January 2010. It has a duration of five years, is directly 

guaranteed by member countries in the eurozone and is entirely destined to finance Ireland at a rate lower than that country would have 

had to pay on its own issues. 

4 One for the banking sector (European Banking Authority – EBA), one for financial markets (European Securities and Markets Authority – 

ESMA) and one for insurance companies and pension funds (European Insurance and Occupational Pensions Authority – EIOPA). 

21

− 

− 

− 

at the end of November the Finance Ministers of the countries in the euro area defined the main 

characteristics of a permanent mechanism to safeguard financial stability in the area (the European 

Stability Mechanism, ESM). This mechanism, which should replace the European Financial Stability Facility 

(EFSF) from June 2013, will provide financial support to countries requesting assistance under rigorous 

conditions, similar to those set by the EFSF. It will have initial funding of 500 billion euro subject to 

subsequent revision on a two yearly basis; 

the debate on the proposal to strengthen the stability pact also continued with the introduction of monetary 

penalties applicable prior to the start of an excess deficit procedure, which could be started even if the debt 

reduction of a country towards the limit of 60% of GDP were not considered satisfactory. A possibility was 

also introduced to accompany supervision of public debt and deficits with a procedure designed to promptly 

identify macro economic imbalances of potential importance for the financial stability of the area by making 

use of quantitative indicators, currently being defined, such as savings rates, private debt, balance of 

payments and income from investments and transfers; 

at the end of December the Basel Committee on Banking Supervision published the final documents on the 

new regulations for banks (Basel 3). The new regulations require larger amounts of higher quality capital, 

improved risk hedging, the introduction of a ceiling on leverage as an addition to the “risk-based” capital 

requirements, measures to encourage the accumulation of capital in positive phases of the credit cycle and 

the introduction of two liquidity requirements. The new regulations must be implemented by all member 

countries with laws and national regulations which will come into force gradually over six years from 1 st 

January 2013. 

Aggregate debt and its components (% of GDP) in the principal European countries 

Aggregate debt Private sector (1) Public sector 

Percentages 

2007 2008 2009 2007 2008 2009 2007 2008 2009 

Italy 218,2 226,7 241,3 114,6 120,4 125,3 103,6 106,3 116,0 

Germany 196,7 197,8 207,9 131,8 131,5 134,5 64,9 66,3 73,4 

France 210,3 221,5 240,5 146,5 154,0 162,4 63,8 67,5 78,1 

Portugal 291,6 309,8 336,3 228,9 244,5 260,2 62,7 65,3 76,1 

Ireland 236,8 319,3 397,1 211,8 275,0 331,6 25,0 44,3 65,5 

Greece 212,2 229,4 250,3 107,2 119,1 123,5 105,0 110,3 126,8 

Spain 250,0 259,9 279,2 213,9 220,1 226,0 36,1 39,8 53,2 

United Kingdom 253,1 274,0 293,1 208,6 221,9 224,9 44,5 52,1 68,2 

Source: Eurostat 

(1) Non consolidated data w as used for the private sector (households, non profit organisations, non financial companies). Loans and securities excluding shares 

w ere comprised w ithin the notion of private sector debt. 

With regard to monetary policy, trends for advanced and developing economies moved in 

different directions. In the case of the former, central banks maintained an expansionary attitude 

– with official rates at record low levels – designed to support the fragile recovery in progress in a 

context of very low inflationary risks for most of the year 5 . The rapid increase in prices in the last 

quarter may lead to a change in that orientation. On the other hand, the monetary authorities of 

the main emerging countries have already put restrictive measures in place designed to contain 

pressure on prices generated by the large quantities of liquidity injected into markets during the 

crisis 6 . 

5 At the beginning of November the Federal Reserve launched a new programme for the purchase of long term government securities for a 

total of 600 billion dollars, to be completed by the middle of 2011. The programme is in addition to the re-investment, again in 

government securities, of the proceeds from redemptions of government agency securities and mortgage backed securities, amounting to 

approximately 250-300 billion euro in the same period. 

In October the Bank of Japan marginally reduced its reference rate, which now lies between 0% and 0,10%, announcing a quantitative 

easing programme which involves the purchase of equity and property funds (for a total of 500 billion yen). 

The Governing Council of the ECB decided to continue to conduct principal refinancing operations and those with maturities equal to the 

compulsory reserve maintenance period by means of fixed rate tender procedures with full allotment of all bids as long as it is considered 

necessary or at least until 12 th July 2011. It also decided that three month operations performed until this date will be conducted with 

full allotment of all bids and at a rate equal to the average of the principal refinancing rate over the duration of the operation. 

6 Since March 2011, the Indian central bank has increased its reference rate six times during the year and twice in January and March 

2011; it now stands at 6,75%. 

The People’s Bank of China has intervened repeatedly on compulsory reserve requirements (six times in 2010 and three times in the first 

three months of 2011), raising it to a record high of 20%, while there have been three increases in bank lending rates (+25 basis points in 

October and December 2010 and in February 2011); it now stands at 6,06%. 

The Central Bank of Brazil performed three rises in 2010 and two in January and March 2011 to bring the reference rate up to 11,75%. 

The Central Bank of Russia, which had made four cuts to rates in the first half of 2010 in consideration of the fragility of the recovery 

after the sharp fall in 2009, raised the reference rate, currently at 8%, by 25 basis points at the end of February. 

22

On foreign exchange markets 

the euro generally depreciated 

against all the principal 

international currencies – with a 

partial recovery in the first few 

months of 2011 – as a 

consequence of the repeated 

pressures generated by the 

sovereign debt crisis. As shown 

in graph one, after reaching a 

low of less than 1,20 euro 

M ajor exchange rates and oil prices (Brent) at the end of period 

against the dollar at the beginning of June, the single currency recovered partially in the third 

quarter only to be affected by new difficulties in the economic situation in November. The trend 

for the yen, on the other hand, was more uniform, appreciating progressively between March and 

November against the United States currency to reach almost 80 yen per dollar. 

Despite intervention by the Chinese central bank, which returned to a controlled floating regime 

against a basket of currencies, the hoped for revaluation of the yen against the dollar was 

nevertheless fairly modest. 

Dec-10 

A 

Sep-10 

B 

Jun-10 

C 

Mar-10 

D 

Dec-09 

E 

% change 

A/E 

Euro/Dollar 1,3377 1,3630 1,2234 1,3510 1,4316 -6,6% 

Euro/Yen 108,60 113,75 108,15 126,27 133,08 -18,4% 

Euro/Yuan 8,8148 9,1192 8,2972 9,2230 9,7726 -9,8% 

Euro/Franc CH 1,2486 1,3387 1,3177 1,4236 1,4823 -15,8% 

Euro/Sterling 0,8572 0,8675 0,8183 0,8898 0,8860 -3,3% 

Dollar/Yen 81,15 83,45 88,39 93,46 92,90 -12,6% 

Dollar/Yuan 6,5900 6,6905 6,7815 6,8258 6,8259 -3,5% 

Futures - Brent (in $) 94,75 82,31 75,01 82,70 77,93 21,6% 

1,58 

Euro-dollar and dollar-yen exchange rates (2009-2010) 

Graph No.1 

102 

100 

Oil prices Brent (2009-2010) Graph No. 2 

1,54 

1,50 

€/$ $/Yen (right) 

100 

98 

95 

90 

85 

1,46 

96 

80 

1,42 

94 

75 

1,38 

92 

70 

1,34 

90 

65 

1,30 

88 

60 

55 

1,26 

86 

50 

1,22 

84 

45 

1,18 

82 

40 

1,14 

J F M A M J J A S O N D J F M A M J J A S O N D 

2009 2010 

80 

35 

J F M A M J J A S O N D J F M A M J J A S O N D 

2009 2010 

The macroeconomic background 

According to the IMF, while slowing in the second half, world GDP returned to growth of 5% (- 

0,6% in 2009) in the year just ended, although with marked differences between countries and 

geographical areas. While the main emerging countries, and Asian countries in particular, 

experienced accelerating growth rates as at the same time they increased their importance at 

global level, the recovery in advanced countries was more moderate and at times uneven, as in 

the case of the euro area. 

The scenario was one of high unemployment and a progressive return to inflation attributable to a 

generalised increase in raw materials, foodstuffs and energy prices, due mainly to increased 

demand against a relatively rigid supply, particularly with regard to foodstuffs. 

As shown in graph two, after fluctuating at around 70 to 80 dollars per barrel, the price of Brent 

oil ended the year on an upwards trend, which continued into January and February, when 

prices exceeded 110 dollars per barrel pushed up by geopolitical tensions in the North African 

area. 

After slowing during the spring, the United States economy accelerated progressively. In the 

fourth quarter, the quarterly increase in GDP was 2,8% annualised (+2,6% in the third quarter), 

driven primarily by consumption, and by durable goods in particular, but also by a new positive 

contribution from net exports, largely due to a decrease in imports. The contribution from fixed 

investments, however, where the residential component continues to be weak, was more modest. 

Generally average annual GDP for the United States returned to growth (+2,8%) after a fall in 

2009 (-2,6%). 

23

The principal element of weakness today is the unemployment rate (9,4% in December), slightly 

down compared to the highs recorded during the year (9,8% in April and November), but stably 

above 9% for twenty months. The improvement in progress was confirmed by figures for January 

2011 (9%). The average of 9,6% for 2010 was the highest since 1984. 

After peaking at the end of 2009 (2,7%), inflation fell rapidly to a little over 1% between June and 

November, ending the year at 1,5%. “Core” inflation (net of foodstuffs and energy products), on 

the other hand, has remained stably below 1% (0,8% in December) since April. 

The “twin deficits” continued to move in opposite directions but with the roles reversed compared 

to the previous year. The federal deficit was reduced to 1.277 billion dollars from 1.471,3 billion 

euro in 2009 (-13,2%) 7 , while the negative balance of trade started to grow again to 497,8 billion 

dollars (+32,8%), affected mainly by greater deficits with China and Opec countries. 

Actual and forecast data: industrialised countries 

Percentages 

Gross domestic product 

Consumer prices 

(average annual rate) 

Unemployment 


Public Sector Deficit (% of GDP) 

Reference interest 

rates 

2009 2010 2011 (1) 2009 2010 2011 (1) 2009 2010 2011 (1) 2009 2010 (1) 2011 (1) Dec-09 Dec-10 

United States -2,6 2,8 2,1 -0,4 1,6 2,0 9,3 9,6 9,4 11,3 10,3 12,1 0-0,25 0-0,25 

Japan -6,3 3,9 1,3 -1,4 -0,7 0,2 5,2 5,1 5,2 8,7 10,6 9,0 0,10 0-0,10 

Euro Area -4,1 1,7 1,5 0,3 1,6 2,2 9,4 10,0 10,0 6,3 6,2 4,8 1,00 1,00 

Italy -5,2 1,2 1,1 0,8 1,6 2,2 7,8 8,5 9,2 5,4 4,6 3,9 - - 

Germany -4,7 3,6 2,2 0,2 1,2 2,1 7,5 6,9 6,6 3,0 3,6 2,6 - - 

France -2,6 1,6 1,6 0,1 1,7 2,1 9,5 9,8 9,7 7,5 7,7 6,5 - - 

Portugal -2,5 1,3 -1,0 -0,9 1,4 1,8 9,6 10,9 11,0 9,3 -7,0 -5,3 - - 

Ireland -7,6 -0,2 0,9 -1,7 -1,6 0,8 11,9 13,5 14,0 14,4 32,3 10,5 - - 

Greece -2,0 -4,2 -3,0 1,3 4,7 3,0 9,5 13,8 13,6 15,4 9,3 7,6 - - 

Spain -3,7 -0,2 0,7 -0,2 2,0 3,0 18,0 20,1 20,7 11,1 8,9 7,6 - - 

United Kingdom -4,9 1,3 2,2 2,2 3,3 3,6 7,6 7,8 7,6 11,4 10,1 7,8 0,50 0,50 

(1) Forecasts Source: Prometeia and official statistics 

The recovery in Japan slowed during the spring and now seems to have halted. In the last quarter 

of the year, GDP fell by 0,3% compared to the previous period after +0,8% in the third quarter 

(+1,5% and +0,5% in the first and second quarters respectively.). The trend reflects a strong 

slowdown in consumption, the persistent weakness of investments and a progressive weakening 

of the balance of trade, penalised, amongst other things, by a stronger yen. The economic 

situation also appears to be in line with the Tankan report anticipations which reported a fall in 

the confidence of businesses for the first time in six half year periods. On the other hand some 

positive signals seem to be coming from industrial output, up in November over the previous 

period (+3,3% in December) after five consecutive falls and on the labour market where the 

unemployment rate fell in December fell below 5% for the first time after nine months (it peaked 

at 5,3% in June). 

Japan has not yet come out of the period of deflation in progress since February 2009. The 

general consumer price index stood at zero in December, while “core” inflation, net of foodstuffs 

continued to remain negative (-0,4%). 

China further accelerated its growth rate in 2010, with an average increase in GDP of 10,3% 

(+9,2% in 2009), which is pushing it into second position in the world ahead of Japan. This 

annual performance was driven by all components, and by domestic demand in particular: 

+23,8% for fixed investments, although decelerating compared to 2009; +18,4% for sales of 

consumer goods; +15,7% for industrial output, driven by heavy industry. 

The positive balance of trade fell to 183,1 billion dollars (-6,4% compared to 2009) due to more 

intense growth in imports (+38,7%) compared to exports (+31,3%). Currency reserves reached 

almost 2.600 billion dollars (+7,6%), including a significant proportion (approximately 1.160 

billion euro) stably invested in United States government securities. 

The acceleration in economic growth was accompanied by a rise in inflation to high levels (4,6% in 

December, 4,9% in January 2011), which reflected price increases in the foodstuffs and property 

sectors. 

7 In order to consolidate the recovery, in December the United States Government launched a new fiscal stimulus programme of 

approximately 800 billion dollars (5,5% of GDP), to be performed over the two years: 2011-12. 

24

Actual and forecast data: the principal emerging countries 

Gross domestic product 

Consumer prices 


Unemployment 


Reference interest 

rates 

Percentages 2009 2010 2011 (1) 2009 2010 2011 (1) 2009 2010 2011 (1) Dec-09 Dec-10 

China 9,2 10,3 8,5 -0,7 3,3 2,7 4,3 4,1 4,0 5,31 5,81 

India 5,7 9,5 7,3 10,9 13,2 6,7 n.a. n.a. n.a. 4,75 6,25 

Brazil -0,6 7,5 4,5 4,9 5,0 4,6 8,1 6,7 7,5 8,75 10,75 

Russia -7,9 3,7 4,5 11,7 6,6 7,4 8,4 7,5 7,3 8,75 7,75 

(1) Forecasts Source: Prometeia, IMF and official statistics 

The main emerging countries also recorded a return to high growth rates after a slowdown in 2009. 

In the third quarter India’s GDP increased by 10,6% year-on-year, a reflection of a significant acceleration in 

domestic demand, both for consumer goods (+9,3%) and for investments (+12,4%), and an improvement of 

foreign demand, which, however continues to make a marginal contribution. The favourable context benefited 

both the industrial sector (an average increase of +9,5% in industrial output on an annual basis between April 

and November) and the service sector. Despite lower levels between August and November, Indian inflation 

continues to be the highest in the Asian area. 

Russia made up lost ground after the fall in 2009, benefiting from the gradual recovery in the global economy 

and the consequent revival of exports (oil in particular) and industrial production. Signs of a slowdown 

appeared in the third quarter with an increase in GDP of just 2,7% on an annual basis, the combined effect of 

an acceleration in consumer spending and a deceleration in investments, but above all of a significant increase 

in imports against more modest performance by exports. Inflation increased to 8,8% in December, reflecting 

increases in international prices. 

The Brazilian economy was driven by industrial output (+10,5% on average annually), positively affected by 

receipts from raw materials prices which remained high and by huge inflows of foreign capital, attracted by 

favourable returns in a stable macroeconomic context. However, the capital inflows helped fuel inflation which 

reached 5,9% in December, above the target set by the Brazilian authorities. 

The year 2010 was generally one of recovery for the euro area, although at different rates in the 

various countries of the Monetary Union and with a deceleration in the second half. GDP 

increased by just 0,3% over the previous period in the third and fourth quarters (+1% in the 

spring), affected mainly by a progressive slowdown in the German economy, which was, however, 

again the most lively. 

On aggregate average annual GDP increased by 1,7% (-4,1% in 2009) driven by positive 

performance by net exports, even if now slowing, as they responded to world economic trends, 

while consumption and investments made a small contribution to output. 

The industrial production index has recorded year-on-year changes of greater than 5% since 

March (+8% in December) but in monthly terms the trend is not yet clear (-0,1% in December). 

Unemployment remained at high levels (10% at the end of 2010; 9,9% at the end of 2009) with 

Spain continuously above 20% since May. 

Inflation has increased progressively: the harmonised consumer price index rose to 2,2% in 

December from 0,9% twelve months before (an annual average of 1,6% compared to 0,3% in 

2009). Net of foodstuffs and energy products, along with alcohol and tobacco products, the index 

recorded significant changes (1,1% in December). 

The number of countries which form part of the Monetary Union rose to 17 with the entrance of Estonia on 1 st 

January 2011. Estonia, which became part of the European Union on 1 st May 2004, satisfied all the 

requirements (public debt, budget deficit, interest rates and inflation) for admission. 

In line with international performance, the weak recovery in Italy also lost vigour in the second 

half of the year. The quarterly increase in GDP between September and December was just 0,1% 

(+0,3% and +0,5% in the third and second quarters respectively), affected by a lower contribution 

from net foreign demand, partly the result of an increase in imports against persistent weakness 

for consumption and investments. 

Average annual GDP grew by 1,2% after the significant contraction in 2009 (-5,2%), driven by the 

rebuilding of inventories and by the recovery of private sector consumption and gross investment 

against a still negative, but improving, balance of payments. 

Industrial production (seasonally adjusted), which has recorded positive growth since February – 

with year-on-year changes of greater than 7% between March and June and a peak of +9,7% in 

August –, subsequently lost vigour to record an increase of 5,4% in December (an increase of 

+5,3% on average over twelve months after two consecutive years of reductions). In terms of 

individual sectors, the most lively were those of “refineries” (+15,6%), “fabrication of machinery 

and equipment” (+13,3%) and “metal products” (+12,2%), while negative growth was recorded for 

25

“computer fabrication” (-13,1%), “pharmaceuticals” (-7,4%), “mineral extraction” (-3,6%), 

“fabrication of electrical equipment” (-2,8%) and “foodstuffs” (-2,5%). 

The most recent estimates for December confirmed an unemployment rate of 8,6% (over 2,1 

million jobless), still close to the high recorded in October (8,7%), but nevertheless lower than the 

European average (10%) as a result of the use of state income benefits: a total of 1,2 billion hours 

of state lay-off and redundancy benefits were authorised in 2010, an increase of 31,7% compared 

to 914 million hurs in 2009. In the last months of the year the trend, which was already slowing, 

seems to have reversed with four consecutive falls year-on-year which also affected extraordinary 

and exceptional lay-off benefits in December 8 . 

Prices in Italy were affected by a progressive recovery of inflation, although a little lower than in 

the euro area. In December the harmonised consumer price index rose to 2,1% (2,2% for Europe) 

from 1,1% at the end of 2009 (0,9%). Average annual inflation was 1,6% (0,8% in 2009), in line 

with European levels. 

The Italian balance of payments deficit reached 27,3 billion euro, a fourfold increase compared to 

2009, due principally to a return to deficit for intermediate products and a deepening of the 

energy deficit. The increase in imports (+22,6%) exceeded that for exports (+15,7%) and was 

higher in both cases for trade with non EU countries. 

Finally, with regard to public finance, the Stability Law for 2011 9 , enacted by Parliament last 

December, does not generate any net debt over the next three years. The targets set by the “Public 

Finance Decision” at the end of September therefore remain in place, although they have been 

updated on the basis of Istat (Italian office for statistics) data for 2010: the ratio of deficit to GDP, 

which fell to 4,6% (from 5% of the Public Finance Decision) will fall below 3% in 2012, in line with 

commitments undertaken at European level, while the ratio of public debt to GDP, which 

decreased further to 119% (from 118,5% of the Public Finance Decision), is not expected to 

decrease until 2012. 

8 According to preliminary Bank of Italy estimates, a measure of the underuse of the labour supply which includes the equivalent of the 

hours of state lay-off and redundancy benefits and discouraged workers who are seeking jobs with less intensity would stand at least two 

percentage points above the rate of unemployment. 

9 This law, which replaces the Finance Act from this year onwards, following the reform of public accounts and finance (Law No. 19/2009), 

requires the acquisition of funds of six billion euro in 2011, 1,6 billion euro in 2012 and 1,2 billion euro in 2013. 

26

Financial markets 

United States and European yield curves for maturities of greater than one year shifted 

substantially downwards compared to December 2009, in line with the continuation of 

particularly expansionary monetary policies in the two areas. Nevertheless a rise occurred 

compared to the end of June – which in the case of the United States only affected maturities of 

longer than two years – in relation to both an improvement in the outlook for economic growth 

and expectations of increased inflation. The concerns expressed by the ECB, repeated, moreover 

in a meeting of March 2011, over the sharp rise in prices in recent moths and the consequent 

expectation of a possible rate rise in the short term, resulted in a rise in European rates 

compared to June, even for maturities of less than two years. 

After a positive start, in the second quarter of 2010 the trend for the equity markets of the major 

industrialised economies reversed sharply due to the fragility of the recovery, but above all to the 

turmoil triggered by the sovereign debt crises of some European countries which penalised the 

banking sector in particular. The recovery was generalised in the second half, even if in some 

cases insufficient to cover the losses that had been incurred. 

Over twelve months United States stock exchanges recorded rises of over 10%, managing in some 

cases to return to levels prior to the Lehman Brothers collapse, while Japanese markets ended 

the year with a moderate fall. Trends in Europe were divergent: the brilliant result for the German 

stock exchange, driven by a strong economic recovery, was offset by the difficulties of those 

countries most affected by the sovereign debt crises (Portugal, Ireland, Greece and Spain) with 

particularly evident repercussions on other markets in the area such as the Italian market. 

In line with trends on other world stock exchanges, equity prices on emerging markets recovered 

compared to the lows recorded in the second quarter. At the end of the year the MSCI Emerging 

Market index recorded an improvement of 16%. 

The political events affecting North African countries and the violent earthquake that hit Japan 

pulled down international share prices, wiping out the improvements that had been recorded in 

the first few weeks of the year. 

After a partial recovery compared to the lows recorded in May, the equity markets managed by 

Borsa Italiana fell again in the last quarter to end 2010 with losses of over 10% year-on-year. 

They were attributable partly to the substantial impact of the banking sector which, despite the 

soundness of Italian banks, were particularly affected by the multiple shocks generated by the 

progressive spread of the sovereign debt crisis. 

Trading in equities reduced in terms of the number of contracts (62,2 million, -3%), while the 

volume increased compared to the previous year (748,2 billion euro, +11%). Similarly the 

27

numbers of average daily trades in shares also fell (243 thousand contracts) while the value 

increased (2,9 billion euro). 

The principal share indices in local currency 

Dec-10 

A 

Sep-10 

B 

Jun-10 

C 

Mar-10 

D 

Dec-09 

E 

% change 

A/E 

Ftse Mib (Milan) 20.173 20.505 19.312 22.848 23.248 -13,2% 

FTSE Italy All Share (Milan) 20.936 21.098 19.869 23.368 23.653 -11,5% 

Xetra Dax (Frankfurt) 6.914 6.229 5.966 6.154 5.957 16,1% 

Cac 40 (Paris) 3.805 3.715 3.443 3.974 3.936 -3,3% 

Ftse 100 (London) 5.900 5.549 4.917 5.680 5.413 9,0% 

S&P 500 (New York) 1.258 1.141 1.031 1.169 1.115 12,8% 

DJ Industrial (New York) 11.578 10.788 9.774 10.857 10.428 11,0% 

Nasdaq Composite (New York) 2.653 2.369 2.109 2.398 2.269 16,9% 

Nikkei 225 (Tokyo) 10.229 9.369 9.192 11.244 10.546 -3,0% 

Topix (Tokyo) 899 830 828 985 908 -1,0% 

MSCI emerging markets 1.151 1.076 918 1.010 989 16,4% 

Principal short and long term interest rates in 2010 

5,25 

5,00 

4,75 

4,50 

4,25 

4,00 

3,75 

3,50 

3,25 

3,00 

2,75 

2,50 

2,25 

2,00 

1,75 

1,50 

1,25 

1,00 

0,75 

0,50 

0,25 

0,00 

J F M A M J J A S O N D 

US Treasury 10 years Federal f unds rate BTP 10 years Euribor 3 month 

Bund 10 years ECB principal refinancing rate USA Libor 3 month 

Graph No. 5 

Despite the difficult context, in 2010 the markets managed by Borsa Italiana nevertheless 

managed to set further new records: new record highs for trading in ETFs (exchange traded 

funds) and ETCs (exchange traded commodities), with a value of 78,5 billion euro and 3,4 million 

contracts, and for trading on the MOT (electronic bond market) and the ExtraMOT (a total value 

of 230 billion euro and 3,9 million contracts); record trades for the equities derivatives on the 

IDEM (Italian Derivatives Market), with a daily average of 173 thousand standard contracts; 

continued European leadership for contracts on both the electronic stock exchange and the 

electronic bond market. 

At the end of the year listed companies on the Italian Stock Exchange numbered 332, unchanged 

compared to twelve months before as a result of ten new admissions and ten withdrawals. The 

total market capitalisation of listed companies fell to 425 billion euro (27,5% of GDP) from 457 

billion euro at the end of 2009 (30,1% of GDP). 

As a consequence of the increase in the value of equity trades, while capitalisation was lower, 

turnover velocity 10 increased from 147% to 176% over twelve months. 

On 9 th February 2011 the London Stock Exchange Group, the company which controls Borsa Italiana, and the 

TMX Group, the owner of the Toronto stock exchange, announced a coming merger which should lead to the 

creation of a leading organisation in the commodities, derivatives and bond sectors with over 6.700 listed 

companies on different segments and capitalisation of around 4,5 billion euro. The new Group will be 55% 

owned by the LSE and 45% by the TMX. The operation will enhance Borsa Italiana’s experience in post trading 

services and also its position as a global centre for fixed income trading. 

10 An indicator which, as the ratio of the value of the shares traded electronically to capitalisation, gives a measure of the turnover of the 

shares traded . 

28

After a favourable start to the year and a subsequent alternation of positive and negative results, 

the mutual investment funds sector again started to show signs of weakness in the last quarter of 

2010. Net inflows for the year were nevertheless positive at 5,7 billion euro (-0,7 billion euro in 

2009), the aggregate result of opposing performance by Italian registered funds (-10,1 billion euro) 

– still penalised by unfavourable tax treatment 11 – and by foreign registered funds (+15,8 billion 

euro) which now account for almost 58% of assets. In terms of the type of fund, disinvestments 

from monetary products (-23,7 billion euro) and from hedge funds (-2 billion euro) were more 

than offset by increases in bond funds (+19,9 billion euro), equities funds (+3,7billion euro), 

balanced funds (+3,6 billion euro) and flexible funds (+4,2 billion euro) 12 . 

At the end of December assets amounted to 460 billion euro, an increase of 5,7% compared to 

435,3 billion euro twelve months before with a change in composition into bond funds (up from 

38,1% to 41,1%), equity funds (from 21,2% to 23,4%) and to a lesser extend into flexible funds 

(from 13,1% to 14,6%) and balanced funds (from 3,9% to 4,6%), against a substantial movement 

out of monetary funds (from 20% to 13,5%) and to a slight extent out of hedge funds (from 3,7% 

to 2,8%). 

The banking system 

The pace of growth in funding from customers in the Italian banking system slowed during the 

year, affected by a lower propensity to save by households. This was set against by a moderate 

recovery in lending business after a low recorded in October 2010. The quality of credit continued 

to deteriorate, although at a slower rate than in the recent past. 

On the basis of Bank of Italy data 13 , direct funding (deposits of residents and bonds) increased 

year-on-year in December by +3,1% (+9,2% in December 2009), the aggregate result of a 

reduction in the bond component (-1,6% compared to +11,2% at the end of 2009) and a still 

positive trend for other types of funding (+6,3% compared to +7,8% in December 2009), driven 

principally by repurchase agreements (+82,7%). 

As concerns loans to private sector residents, this had increased on an annual basis at the end of 

the year by +4,3% (+1,7% in December 2009). Total loans to households and non financial 

companies increased by 3,8% (+0,5% at the end of 2009), driven by the households component 

(+7,5% compared to +5,9% twelve months before) and by home purchase loans in particular 

(+8%), while the various forms of consumer credit tended to slow (+1,8% from +4,9% in 

December 2009). The trend for loans to businesses finally reversed (+1,6% compared to -2,3% at 

the end of 2009). 

In terms of risk, non performing loans to the private sector gross of impairment losses increased 

over twelve months by 31,2% (those to households by +31,3% and those to businesses by 

+31,5%). The ratio of gross non-performing loans to the private sector to gross loans to the private 

sector therefore rose to 4,60% (3,81% in December 2009). 

Net non-performing loans, which had grown significantly in terms of the total since March had 

increased by 28,9%. Consequently the ratio of net non-performing loans to total loans rose to 

2,43% from 2,03% at the end of 2009, while the ratio of net non performing loans to capital and 

reserves reached 13,28% (10,47% at the end of 2009). 

At the end of the year securities, other than shares and ownership interests, issued by residents 

in Italy and present in the portfolios of Italian banks had increased, year-on-year, by 8,5%, 

attributable mainly new investments in government securities (+30,5%) concentrated mainly in 

the first half of the year – both medium-to-long term (CCTs and BTPs, +36,2%) and short term 

(BOTs and CTZs, +20,1%) – against a reduction in “other certificates” (-2,7%). Within the latter, 

11 Decree Law No. 225/2010 known as the “Thousand extensions”, converted into Law No. 10/2011, introduced the expected tax reform 

for mutual funds, which will come into force from 1 st July 2011. On the basis of the new law, taxation on actual profit taking will also be 

applied to Italian investment funds, that is on gains or losses recorded when investments are sold, rather than on the “mark-to-market” 

value accruing, thereby bringing the tax treatment into line with that for foreign funds. 

12 Assogestioni (national association of asset management companies), “Map of assets under management (collective instruments and 

customer portfolio management) 4 th quarter 2010”. 

13 Bank of Italy, supplement to the statistics bulletin “Moneta e Banche”, March 2011. 

29

more than 70% continue to consist of bank bonds. The ratio of securities to private sector loans 

therefore stood at 33,4% (28,3% at the end of 2009). 

After reaching a low in June (1,36%) the average weighted interest rate on bank funding from 

customers calculated by the Italian Banking Association 14 (which includes the yield on deposits, 

bonds and repurchase agreements in euro for households and non financial companies) stood at 

1,50% compared to 1,59% twelve months before. Similarly, in line with conditions on the 

interbank market, the average weighted interest rate on loans to households and non financial 

companies also showed signs of recovery with respect to the record low reached in June, (3,52%), 

returning to 3,62% (3,76% in December). 

* * * 

In addition to the developments in progress in international regulations already mentioned, a 

number of changes were introduced into the legislative framework for Italian banks in 2010: 

• on 1 st March the European Payment Services Directive (PSD) entered into force, a measure 

designed to eliminate regulatory differences between member countries and to increase 

competition between operators, by guaranteeing equal conditions, more transparency and 

protection for customers. The directive sets the whole subject of payments within a single 

regulatory framework with the objective of supporting an integrated European market for 

electronic payments and reducing the costs and inefficiency of paper and cash instruments; 

• on 11 th October trading commenced on the new segment of the Mercato Interbancario 

Collateralizzato (MIC – collateralised interbank market) 15 , named the “New MIC”, with the 

transfer to the Cassa di Compensazione e Garanzia (central counterparty clearing) and to 

Monte Titoli S.p.A. of the functions performed previously by the Bank of Italy (guaranteeing 

transactions, acquisition, valuation, custody and administration of financial assets conferred 

by banking operators); 

• with Decree Law No. 78/2010, converted into Law 122/2010, the limit on the transfer of cash, 

the issue of bank cheques, bankers’ drafts, postal cheques and holding bearer passbooks was 

reduced from 12.500 euro to five thousand euro; 

• Legislative Decree No. 39/2010, which incorporated Directive No. 43/2006, rewrote the rules 

for statutory audits reorganising them in a consistent manner, requiring compliance with 

specific requisites concerning independence, ethics, training and quality control. For public 

interest entities (including banks, companies that issue listed financial instruments, insurance 

companies and stock broking companies) statutory audits may not be performed by the Board 

of Statutory Auditors, but must be performed by external statutory auditors or by audit firms 

and the appointment must be for a minimum of seven/nine financial years; 

• finally with regard to listed banks: 

− in March the Consob (Italian securities market authority) 16 issued a regulation on 

transactions with related parties which regulates procedures to be followed for the approval 

of transactions of significant amount where the counterparties have potentially conflicting 

interests; 

− Legislative Decree No. 27/2010 implemented EC Directive No. 2007/36/EC on 

shareholders’ rights with innovative changes to many articles of the Italian Civil Code and 

the Consolidated Law on Finance, with consequent amendments also to the Issuers’ 

Regulations 17 . The changes introduced, applicable to shareholders’ meetings held after 31 st 

October 2010, have no effects on co-operative companies, which were expressly excluded 

from the scope of the new legislation. 

14 Italian Banking Association, Monthly Outlook, Economia e mercati Finanziari-Creditizi, February 2011. 

15 The MIC was an anonymous guaranteed segment of the e-Mid platform, created to encourage the recovery of trading on interbank 

circuits following the 2008 financial crisis. When it was created, the guarantees granted by the Bank of Italy were scheduled to lapse on 

31 st December 2010. 

16 Resolution No. 17221 amended by a later Resolution No. 17389 of 23 rd June 2010. 

17 Consob Resolution No. 17592 of 14 th December 2010. 

30

Significant events that occurred during the 

year 

The trade union agreement of 20 th May 2010 

Trade union negotiations were concluded on 20 th May 2010, designed to achieve a significant 

reduction in costs at consolidated level, by decreasing personnel numbers and the relative unit 

costs. These were supported operationally by the adoption across the board (for all companies) of 

appropriate organisational and management measures designed to increase efficiency and 

productivity. 

As concerns personnel expense in particular, a reduction in total Group personnel numbers by 

895 was planned to be implemented for 500 employees by means of a redundancy incentive 

scheme and by means of normal personnel management mechanisms, including the partial 

replacement of personnel normally leaving the Group for the remaining reductions. 

The redundancy incentive scheme involved all employees who had attained the right to a pension 

by 31 st December 2011. 

The voluntary applications received (497) allowed the target set to be met virtually completely 

without the need to resort to the use of Law No. 223/1991 as permitted under the agreement 1 . 

Group banks and companies contributed jointly to reaching the Group target, accepting 

applications received in excess of the quota set at individual company level and using these to 

compensate for other companies where targets were not fully met. 

The first Group of personnel to leave (321) occurred at the end of June with effect from 1 st July; 

the remaining group with effect subsequent to 1 st July 2010 as shown in the table 

Banks/Companies involved 

Personnel leaving with effect 

from 1 st July 2010 

Personnel leaving with effect 

subsequent to 1 st July 2010 

Total 

Banca Popolare di Bergamo 62 25 87 

Banco di Brescia 41 33 74 

Banca Popolare di Ancona 58 18 76 

Banca Popolare Commercio e Industria 26 16 42 

Banca Regionale Europea 23 8 31 

Banco di San Giorgio 6 2 8 

Banca di Valle Camonica 4 2 6 

Banca Carime 58 54 112 

Centrobanca 6 3 9 

UBI Banca 31 12 43 

UBI Sistemi e Servizi 6 6 12 

Total 321 179 500 

The total cost of the operation – with account taken of the provisions of Decree Law No. 78/2010 

converted into Law No. 122/2010 – was 33,2 million euro, already recognised in the income 

statement for the period ended 30 th June 2010. It was divided between incentives, for those who 

had already acquired the right to retire, and use of the “solidarity fund” pursuant to Ministerial 

Decree No. 158 of 2000. 

When fully phased in, the agreement, together with other personnel management mechanisms, 

will create personnel expense synergies of approximately 70 million euro from 2011. Net of the 

above expenses, the savings for the second half of 2010 were approximately 13 million euro. 

1 The completion of the redundancy plan for 500 personnel was implemented by proceeding, until the target was reached, to terminate the 

employment contracts of senior management who had acquired the right to a pension and had not voluntarily applied for retirement 

under the scheme, through application of the relative law and clauses in the contract. 

31

In order to balance the personnel leaving under the agreement reported here and in order to 

guarantee the necessary operational continuity for those business units affected by the 

organisational changes, a commitment was made, in conjunction with the memorandum signed 

by UBI Banca, to convert the temporary employment contracts of 550 personnel to permanent 

contracts for young people already working for the Group. These conversions, concluded in the 

fourth quarter, were in addition to 170 already provided for under the previous trade union 

agreement of 23 rd January 2010 concerning the branch network optimisation. 

A basic requirement for the conversion of contracts was the positive assessment of workers, with 

priority given to those with the greatest length of service in the Group, compatible with 

requirements that emerged on local markets and in individual banks and companies on the basis 

of their dimension objectives. 

The agreement also covered a series of operational and organisational lines of action as follows: 

• the streamlining of the branch network of the Group, as reported in detail in a subsequent 

sub-section and the consequent change in the composition of customer portfolios; 

• the development of Contact Centre activities in order to strengthen support for the commercial 

activities of the network banks and to improve contacts with customers, with particular 

reference to the retail and small business segments. This will also contribute to a more 

effective and contained management of geographical mobility as the result of the creation of a 

new unit in Milan, in addition to the existing centre in Brescia. 

Total employees working in the Contact Centre therefore rose from 65 at the end of 2009 to 

153 in December 2010. This unit, originally located in the Commercial Macro Area of the 

Parent, was moved to UBI Sistemi e Servizi on 1 st January 2011, in order to guarantee better 

management of the service by means, amongst other things, of more direct involvement by the 

network banks which benefit from it directly; 

• general increases in efficiency which will include Group companies as follows: 

- the Business Process Re-engineering Project for Loans (described on subsequent pages), 

with organisational impacts on UBI Banca, the network banks and UBI.S, designed to 

improve the lending process within the Group with particular reference to the grant and 

monitoring of loans and credit recovery; 

- UBI Banca Private Investment, with the closure of twelve branches (including six already 

closed in June, when action was taken on the business units of the network banks) and the 

creation of a Central Back Office in Milan in July to which administrative activities 

previously performed by branches to support Financial Advisors were transferred (order 

processing and first level controls for orders placed off-site in relation to assets under 

management, insurance and pension products and personal loans); 

- SILF, with the reorganisation and focus of activities on two centres: Cuneo and Bergamo. All 

the SILF activities complementary to B@nca 24-7, previously performed in Milan, have been 

located on the Bergamo centre, created in June, in order to improve costs as a result of 

more effective operations; 

- Centrobanca, with a revision of the scope of its activities in order to increase the focus of 

the company on transactions with a higher specialist content (specialised lending, 

acquisition finance, project financing, leveraged finance, shipping, pool financing and 

industrial credit operations with non standard and/or complex structures including the 

monitoring of covenants). 

As a consequence, the authorisation ceilings for the company in the industrial credit sector 

were raised from 2010, with the network banks now responsible for all non secured loan 

transactions of less than 15 million euro, non operating asset mortgage loans below four 

million euro and all transactions pursuant to the Sabatini Law. 

32

Action undertaken on the branch network of the Group and on 

the distribution model 

The distribution network of the UBI Banca Group was subjected in 2010 to a number of actions 

taken with the primary purpose of strengthening the relationship of network banks with their 

local markets and subsequently to streamline the distribution network of those banks with a view 

to achieving an enhanced market presence and a significant reduction in costs. Finally, towards 

the end of the year the distribution model was developed to strengthen the commercial 

effectiveness of branches and to ensure increasingly more rapid response times. 

Details are given as follows: 

• on 25 th January the project to optimise the branch network was completed. It involved Banca 

Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria, Banca 

Regionale Europea and Banco di San Giorgio 2 and its objective was to increase the focus of the 

network banks on their respective geographical markets, by grouping together branches in the 

same geographical area under a single brand name. As a result, the network banks now 

operate with a single brand name in 72 of the 78 provinces in which they are present 3 . 

Technically the project involved the intragroup transfer of 316 branches through contributions 

of 14 sets of operating assets. On 21 st July, the restoration of the original ownership interests 

held by UBI Banca took place (with the repurchase of the minority shareholdings acquired by 

each network bank following the contributions performed), together with the reorganisation of 

the shareholdings of the foundations, as reported in detail in the section “The consolidation 

scope”; 

• at the same time as the optimisation operation was performed, 37 Group branches, including 

existing branches and those resulting from the “switches”, were transformed into minibranches 

reporting to a parent branch. The operation involved 16 branches belonging to the 

BPCI, 14 to the BPB, six to BRE and one to BBS; 

• on 21 st June action was taken on the distribution network as provided for under the Trade 

Union Agreement of 20 th May 2010, designed to eliminate overlaps and streamline market 

presence in areas with limited margins for growth and with insufficient current and/or 

potential profitability of the branches concerned. At the same time branches near those 

affected by the action were strengthened and those with better growth prospects expanded. A 

total of 44 branches 4 and 37 mini-branches 5 were closed, 101 small branches were 

transformed into mini-branches 6 and the parent branch of five mini-branches was changed 7 ; 

• in the third quarter an enhancement to the distribution model was developed, with the 

introduction of a new type of “Group Branch”, which, although autonomous from both a 

commercial and a credit viewpoint, reports to a “head branch” – generally larger and with 

greater authorisation powers over both commercial and credit matters – that is able to provide 

operational support to “group branches” partly through the local centralisation of some 

processes. The project was implemented at the beginning of 2011 at Banco di Brescia, Banca 

Carime, Banca Regionale Europea and Banca di Valle Camonica and was accompanied by a 

change in the composition of customer portfolios with the more complex accounts moving to 

head branches, which, since they possess all types of specialist personnel, have become 

leading local players; 

• consistent with its role as the leading bank in the Piedmont area, Banca Regionale Europea 

has transferred its General Management, central offices and decentralised units at Cuneo to 

11, Via Santa Teresa in Turin from January 2011. 

2 The operation did not involve Banca Popolare di Ancona, Banca Carime and Banca di Valle Camonica. 

3 The co-presence provinces are: Milan, Rome, Bergamo, Brescia, Monza Brianza and Como. For the latter two provinces attributed to BPB, 

the presence of BPCI and BVC is residual (1 branch in the fist case, 1 parent branch and 1 related mini-branch in the second case). 

4 In detail: 12 branches of the BPB, 10 of the BPCI, seven of BBS, six of UBI BPI, four of BPA plus one for institutional customers, two of 

Banca Carime plus one for institutional customers, two of BRE, one of BSG and one of UBI Banca for institutional customers. 

5 In detail: 17 mini-branches of BPCI including one in-house company branch, plus one advisory branch, 12 of BPB, six of the BPA and 

two of BBS. 

6 In detail: 65 branches of Banca Carime, 11 of BPA, nine of BRE, six of BSG, five of BPCI, three of BPB, one of BBS and one of the Parent 

UBI Banca. 

7 In detail: two mini-branches of BRE, two of BPCI and one of BPA. 

33

Although priority was given during the year to the reorganisation of the distribution network, the 

Group nevertheless continued with its endogenous growth by opening 17 new branches – half of 

which belonging to Banca Popolare di Bergamo – and by transforming six existing “treasury” 

branches into mini-branches. 

This growth will continue in 2011 with both the opening of new branches (approximately twenty) 

and intervention on existing units, with further closures, transformations and/or transfers. 

A detailed summary of the operations performed in 2010 on the branch network of the Group is 

given in a table contained in the section “The distribution network and positioning”, which may be 

consulted. 

The international presence: development 

Action was also taken on the international front in relation primarily to two foreign subsidiary 

banks, designed to improve the Group focus and strengthen its commercial potential. In detail: 

• Banque de Dépôts et de Gestion Sa was reorganised to focus business on the private banking 

segment, with the reconfiguration of its geographical presence to concentrate operations on the 

most important centres. In this context: 

- its presence in the Ticino Canton was streamlined in June with the closure of the Mendrisio 

branch and the merger from 31 st October of its subsidiary Gestioni Lombarda Suisse Sa 

into it; 

- the sale to the Swiss Banking Group Valiant of the Neuchâtel and Yverdon branches, which 

conduct mainly retail business, was concluded, with effect from 31 st December 2010, with a 

gain on the sale of approximately 5,6 million euro; 

- an increase in the capital of the subsidiary BDG Singapore Private Ltd. of four million Swiss 

francs was decided in December (concluded in January 2011). This subsidiary commenced 

asset management activities after obtaining a “Capital Markets Services” license in October; 

• with effect from 10 th December, the Luxembourg branch of Banco di Brescia was contributed 

to UBI Banca International Sa, thereby streamlining the Group presence in Luxembourg with 

the merger of two entities which already operated with a high degree of integration. UBI Banca 

International Sa took over the transferred branch’s short term institutional funding activities, 

performed by the issue of French certificates of deposit and euro commercial paper 8 ; 

• the range of co-operation agreements with foreign banks was broadened further: currently 37 

exist which give cover for more than 50 countries 9 ; 

• finally the Group sponsored events of great importance in order to increase the visibility of the 

brand abroad and to consolidate its closeness to customers that operate on international 

markets 10 . 

8 The euro commercial paper and French certificates of deposit programmes of the new issuer were formalised on 13 th August and 22 nd 

September 2010 respectively The original programmes of the branch transferred came to an end with the maturity of the last issues (30 th 

November for the euro commercial papers and 22 nd December 2010 for the French certificates of deposit). 

9 A co-operation framework agreement was signed in 2010 with OJSC OTP Bank, a Russian subsidiary of the Hungarian OTP Group. The 

agreement completes the two that already exist in the country (with Center-Invest Bank, which operates in southern regions and Bank of 

Moscow, well-established in the capital). Amongst other things, OJSC OTP is able to provide operating standards very similar to those of 

the UBI Group and has a multi-lingual international desk in Moscow which can also provide assistance in the Italian language. 

Lastly an agreement was signed on 2 nd December with the Russian state bank Vnesheconombank (VEB), which involves the 

establishment of a maximum budget of 50 million euro to finance co-operation projects between Russian and Italian small to mediumsized 

enterprises. 

A further two agreements were added to the 37 mentioned with the European Bank for Reconstruction and Development (EBRD) and 

with the International Financial Corporation (IFC) of the World Bank Group for access to their respective “trade facilitation” programmes. 

10 These included a series of initiatives designed to reward the excellence of Italian businesses in the world: the “China Trader 

Award” awarded to companies that have distinguished themselves for their innovation and technology; “The Golden Bridge” in Russia 

and the “Amerigo Vespucci Prize” awarded to San Paolo of Brazil. 

Organisational and financial support was also given to foreign commercial missions, organised by the chambers of commerce of Italian 

provinces of major importance to the UBI Group. The objective here is to assist businesses in the process of internationalising their 

business on foreign markets. 

Finally, the event “U will Be International” was organised in November, during which 500 businesses met representatives of the UBI 

Banca foreign network at the Kilometro Rosso Science Park in Bergamo. 

34

Action taken to simplify operations 

Business Process Re-engineering (BPR) for Loans 

Business Process Re-engineering (BPR) for Loans is a project started in the second half of 2009 

designed to improve the effectiveness and efficiency of the lending process in the network banks 

of the Group. It meets the dual requirement to reduce customer response times and at the same 

time to simplify administrative procedures for account managers without, however, relaxing credit 

risk controls. 

The project was developed along the following lines of action: 

• excellence in customer response times: while maintaining adequate control over credit risks, 

the action undertaken included the redistribution of work loads between central and 

peripheral units, by increasing the ordinary authorisation powers of peripheral approval bodies 

and of local loan approval centres (LACs) for counterparties with low risk profiles (“low” and 

“medium”); 

• the appointment of external suppliers to perform property appraisals and the centralisation of 

mortgage guarantee processing at UBI.S: this was implemented gradually during the year in all 

Group banks by means of the following: 

- the introduction of a single procedure for requesting property appraisals by specialist 

external companies; 

- the centralisation of mortgage guarantee processing at UBI.S, in order to reduce manual 

administrative activities by account managers for the processing of mortgage guarantees; 

• the introduction of a Counterparty Problem Indicator: calculated automatically by means of a 

mechanism which progressively aggregates weighted problem phenomena on each 

counterparty at network bank level, it allows, in combination with internal rating systems, 

reports to be generated for timely action to be taken; 

• management of arrears. The project is designed to preserve and protect customer relationships 

by means of the prompt resolution of lending irregularities (late repayments/unauthorised 

overdrafts) detected on performing private individual and “small economic operator” customers 

by providing direct support from a specialist central unit operating since June 2010 at UBI.S 

offered to customers by account managers; 

• the new credit recovery model. As part of action to generally improve the efficiency of the 

processes and units involved in this activity, the decentralisation in network banks of the 

management of customers classified as “recoverable impaired positions” 11 , previously managed 

as a service by units in the Parent, was completed. A special business unit entitled “Problem 

Loan Service” was also created in the Credit Area of the Parent whose tasks include the 

supervision of credit recovery processes, support for network banks with debt restructuring, 

monitoring of Group problem loans and supervision of processes and tools relating to the 

“arrears management” system; 

• Credit quality. This project was commenced in 2008 as an approach to improve credit quality 

in the retail customer segment for Banca Popolare Commercio e Industria and Banca Popolare 

di Ancona. It was gradually extended in 2009 to all the Group’s network banks with positive 

results in terms of improvement for all types of problem loan. It was therefore decided, as part 

of the BPR for lending project, to transform what had originally commenced as action to 

improve an incidental problem into a consolidated approach and therefore into an ordinary 

model for monitoring the quality of credit. 

11 “Recoverable impaired positions” are those for which total disengagement is planned (exposures being repaid, exposures for which a 

normalisation plan of longer than twelve months must be drawn up for which, although no normalisation plan exists, the exposures are 

subject to progressive reduction). These are therefore different from “operationally impaired loans” which are positions for which 

situations of temporary difficulty can be overcome in a very short period of time and for which controlled operation is allowed in order 

to mitigate risk and return the position to “performing” status, i.e. with a “normalisation plan” of less than 12 months. Counterparties 

are included in this class for which a restructuring plan with a duration of longer than six months is being drawn up (referred as a 

“stand-still” stage). 

35

The “Simplicity objective” project 

The “Simplicity objective” project was launched to find solutions to improve service and customer 

response times for products and services considered high priority, by improving support 

processes and tools for the commercial network. The main areas of intervention were as follows: 

‐ the simplification of procedures for the sale of the main current account and investment 

products by automating and integrating the compilation and printing of all forms and by 

reducing the number of signatures required for stipulating contracts; 

‐ response times on mortgage loans to private individuals with the introduction of condition 

based products, designed to inform customers of the feasibility of a loan within 48 hours of 

receiving income documents on the basis of predetermined assessment parameters; 

‐ the revision of the commercial independence of the larger branches with greater volumes of 

business in order to increase customer response times to requests to change interest rates and 

conditions; 

‐ the creation of a specialist “Delivery Management” unit for the entire life cycle of payment 

cards issued by the network banks, reducing delivery times, minimising delays and supporting 

the distribution network with problem management; 

‐ the continuous improvement of response times and standards of service for the helpdesk used 

by the distribution network, by means of initiatives designed to develop the analysis of internal 

requirements, support action, “technical professional” and “behavioural” training for helpdesk 

personnel and improvement of the information website used by the distribution network; 

‐ the improvement of the management of internal Group regulations by means of action to 

rationalise the existing regulations, to simplify the publishing and the approval of new 

regulations and the introduction of an evolved front end for consultation by the distribution 

network. 

The divestment of non strategic assets 

On 31 st May 2010 the agreement with RBC Dexia Investor Services 12 (RBC Dexia), signed on 28 th 

September 2009, was concluded – one of the largest suppliers in the world of services to 

institutional investors – involving the following: 

▪ 

▪ 

▪ 

the transfer to RBC Dexia of a business unit consisting of the depositary banking business of 

the UBI Banca Group (more than 19 billion euro of assets administered, relating mainly to 

mutual fund management activities performed by the subsidiary UBI Pramerica SGR); 

the transfer of correspondent banking operations to RBC Dexia through the sale of contracts 

held by BPCI for the supply of paying agent services in Italy to Luxembourg Sicavs and Irish 

UCITS; 

the supply to UBI Banca of custody and settlement services for foreign securities activities 

relating to customer and proprietary business. 

As a result of this transaction, by making use of the services of a global specialist able to 

guarantee a high standard of service in the depositary banking sector, UBI Banca has further 

optimised its operational risk and is continuing to invest in and focus on its core business of 

supplying products and services to its customers. 

The transaction is worth 93 million euro. A contract was also signed, with a life of ten years, for 

the supply, under market conditions, of depositary banking services to UBI Pramerica by RBC 

Dexia. 

No guarantee was issued in this respect by UBI concerning the minimum level of assets under 

management present in the business unit contributed. The agreements signed, nevertheless 

contain some adjustment mechanisms to the transfer price, if certain events occur – including 

withdrawal from the contract and renegotiation of the consideration – connected with the 

12 RBC Dexia Investor Services is a joint venture between the Royal Bank of Canada and Dexia which provides a full range of services for 

investors at global level. 

36

performance for the two main contracts with UBI Pramerica falling within the scope of the 

business operations contributed: (i) the depositary banking contract and (ii) the contract for the 

outsourced provision of administrative services. 

In terms of profit and loss, the transfer of the interest as part of the contribution of the depositary 

banking operations generated a net gain of 83,4 million euro, recognised from 30 th June 2010 

within item 310 “post-tax profit from discontinued operations”. 

The transfer of the contracts, however, gave rise to proceeds of 957 thousand euro for BPCI, 

recognised within item 220 “Other operating income (expenses)”. 

From an operational viewpoint, the IT migrations for the depositary banking and the 

correspondence banking systems were completed in June. The migration of the retail and 

institutional customers’ assets was performed and at the beginning of 2011 the migration of the 

software managed by Unione Fiduciaria to Dexia for the calculation of NAVs was completed. 

The renewal of the partnership in the life banc assurance sector 

On 30 th September 2010, UBI Banca and Cattolica Assicurazioni concluded an agreement for the 

renewal of their partnership in the life insurance sector, which was due to expire at the end of the 

year, extending it until 31 st December 2020. The agreement, signed on 29 th July 2010, involves 

the distribution of the insurance products of the Lombarda Vita joint venture on an exclusive 

basis through the branch networks of the network banks of the former Banca Lombarda Group 

(Banco di Brescia, Banca Regionale Europea, Banca di Valle Camonica and Banco S. Giorgio). 

In this context, the partnership was strengthened with the transfer by the UBI Banca Group of a 

further 9,9% of the share capital of the joint venture to the Cattolica Assicurazioni Group. On 

completion of the transaction, the share capital of Lombarda Vita was held as follows: 60% by 

Cattolica Assicurazioni (compared to 50,1% previously) and 40% by UBI Banca Group (compared 

to 49,9% previously). 

The operation, which received the necessary authorisations from the competent authorities, 

involved the payment of total consideration of 118,3 million euro, including 60,9 million euro (net 

of taxation) as the consolidated gain, recognised in the results to 30 th September 2010. 

On 21 st December 2010, the UBI Banca Group and the Aviva Group agreed to renew their 

strategic partnership in the life insurance sector, which expires at the end of the year, by 

extending it for a further five years until 31 st December 2015 and maintaining the contractual 

conditions unchanged. 

The agreements involve the distribution of Aviva Vita insurance products through the branches of 

Banca Popolare Commercio e Industria, Banca Popolare di Bergamo and Banca Carime, while 

products designed by Aviva Assicurazioni Vita will be sold through the branches of Banca 

Popolare di Ancona. 

Since the agreements are not subject to authorisation by the competent authorities they therefore 

became immediately operational. 

37

Commercial activity 

Reorganisation action and commercial policies 

The UBI Banca Group performed its activities during the year in a context of substantial 

reorganisation of the distribution networks of the network banks, designed to reduce costs 

significantly by means of an improved local market presence and more effective customer service. 

The Commercial Macro Area of the Parent was also affected by reorganisation with the expansion 

of some operating functions considered of strategic importance including “payment systems and 

electronic payment cards” and “third sector associations and organisations”. 

Commercial policies were focused during the year on broadening the product range with an 

increasingly advisory oriented approach, on the acquisition of new customers and young 

customers in particular and on initiatives to support families and enterprises, both nationally and 

locally. 

Full use of customer relationship management tools was made for a more careful analysis of 

customer needs and requirements to identify sub-segments with specific needs for which “madeto-measure” 

commercial services could be provided. 

The release of the “Financial planning and advice” platform was completed on the entire 

commercial network at the beginning of 2010. In addition to compliance with the more stringent 

regulatory requirements for investment services (MiFID), this also enabled customised services for 

private individual customers to be developed. 

The Group “catalogue” was then enriched with new products including the Mutuo Prefix (a floating 

rate mortgage with a maximum limit or cap which “protects” borrowers from potential rate 

increases), the “CLUBINO” savings book (for customers between the age of 0 to 12) and the Enjoy 

card. At the same time specific advertising and/or product initiatives aimed at young people were 

implemented. 

The commercial strategy also continued to maximise synergies between network banks and 

product companies, by promoting, for example, banking products for the “non captive” customers 

of these companies. In the consumer credit sector the Group strengthened its position by 

acquiring control of Prestitalia, a leading company in the sector in Italy. 

Finally, particular attention was paid to multi-channel growth. The Contact Centre was expanded 

during the year with the creation of a new unit in Milan and both new consultative and 

transaction functions of internet and mobile banking services were put in place. 

Commercial policies in 2011 will be oriented towards the achievement of sustainable growth over 

time, with attention paid to maintaining a general structural balance based on the capacity of all 

markets (including the corporate market) to generate direct funding to support growth in lending 

and to maintain high levels of capital strength, through rationalising, amongst other things, the 

use of capital and careful control over the quality of credit. 

The management of pricing will continue to be weighted, on the basis of the cost of the risk and 

the increased cost of funding, with a focus on customer targets and on high value added business 

and on the following in particular: small business counterparties, the affluent segment, young 

people and foreigners in the Retail Market; high potential counterparties and foreign trade 

business for the Corporate Market; remunerated advisory services and, “Pro-Active Wealth 

Advisory” services for high-net-worth and institutional customers in the Private Market. 

38

The Retail Market 

The retail market includes a total of approximately 3,6 million customers, consisting of 3,2 

million private individuals (mass market and affluent segments), 355 thousand businesses (small 

economic operators 1 and small businesses 2 ) and approximately 30 thousand authorities and 

associations. These customers are served by 7.000 staff consisting of account and branch 

managers. 

In consideration of the difficult economic situation, yet again in 2010 the commercial activities of 

the Group continued to be oriented on the one hand to providing solutions to help customers deal 

with the current difficulties and on the other to constantly improving the quality and quantity of 

the products and services provided. 

“Anti Crisis” measures to support small-to-medium sized enterprises 

and families 

During the year the banks in the Group participated in new initiatives organised at national and 

local level and took forward measures launched in 2009 to help families and businesses in their 

respective local markets, co-operating with public institutions (chambers of commerce, regional 

and provincial governments) and guarantee bodies 3 . 

In August 2009 the Group had promptly joined the initiative, “Joint Announcement” to help SMEs 

or in other words the “Agreement for the deferral of the debts of small-to-medium size enterprises 

to banks” 4 (and subsequent additions) signed by the Ministry of the Economy and Finance, by 

the Italian Banking Association and by other associations belonging to the Banks-Businesses 

Observatory. In June 2010 it also participated in the extension to the time limit for the 

presentation of the relative applications from businesses until 31 st January 2011, which put back 

the original deadline of 30 th June 2010 by seven months. 

At the end of December more than 14.800 thousand applications had been received – principally 

attributable to medium-to-long term loans – for a total of 4,3 billion euro, of which more than 

13.000 had already been processed for a quota of deferred repayment on capital amounting to 

520 million euro. Almost all the applications meeting the requirements for eligibility were 

accepted. 

As concerns the provision of products under the Agreement to strengthen the capital of SMEs, the 

Group confirmed its creation of a credit line entitled “200% Immediate Recapitalisation”, (which 

provides loans equal to twice the increases in capital actually paid in by the 

shareholders/proprietors of a business, up to a maximum of four million euro) and also of two 

credit lines backed by guarantees under arrangements with major guarantee bodies, with more 

attractive conditions than those of the Agreement: 

- “400% Support and Development” – loans up to four times the amount of capital contributions 

made by the shareholders/proprietors of a business (up to a maximum of 500 thousand euro) 

designed to support growth projects by making fixed investments; 

- “200% Capital Reinforcement”, loans of up to twice the amount of capital contributions made 

by the shareholders/proprietors of a business (joint stock companies, partnerships or sole 

proprietor businesses), for a maximum amount of one million euro, designed to support the 

capitalisation of businesses and the restructuring of the sources of funding. These loans may 

1 Companies with a turnover below 300 thousands euro. 

2 Companies with a turnover above 300 thousands euro. 

3 These included a variety of subsidised instruments for businesses supported by the UBI Group: measures in the Piedmont Region for 

innovation by SMEs to support energy efficiency, to support firms operating in the tourist industry and for farms (tenancies and 

mechanisation); measures in the Region of Lombardy to support innovation in businesses, the introduction of new technologies and to 

enhance competitiveness as well as measures to meet the functional needs of farms; measures in Calabria to consolidate short term 

liabilities, to support investments and to improve and expand hotel facilities. Operations were also commenced to support farms based 

on the 2007-2013 Rural Development Programmes which included measures to assist with interest payments. 

4 The agreement, which became operational on 28 th September 2009 is for SMEs that are in temporary difficulty but which have good 

operating prospects and are going concerns. It enables them to benefit from four measures: i) the deferral for twelve months of capital 

repayments on mortgages; ii) the deferral for twelve or six months of the capital repayment portion of property or equipment leasing 

instalments respectively; iii) an extension to 270 days for the repayment of bank advances on short term receivables; iv) special finance 

designed to strengthen capital. 

39

also be granted even in cases where capital payments are deferred or where future profits are 

to be allocated to reserves. 

Since the weak economic recovery would suggest that the liquidity problems of businesses are 

likely to continue, following the expiry of the deferral mentioned above and in order to support 

businesses which survived the most acute phase of the crisis, on 16 th February 2011 the Italian 

Banking Association and the other signatories to the Joint Announcement signed an “Agreement 

for loans to small-to-medium sized enterprises” to which the Group promptly adhered for all the 

measures involved. 

The Agreement extends the time limit until 31 st July 2011 for the presentation of applications to 

defer loans to banks by SMEs which have not already taken advantage of a similar benefit, under 

the same conditions as the Joint Announcement and the subsequent addendum of 23 rd December 

2009. 

The new Agreement also extends the repayment schedules for medium-to-long term loans which 

have benefited from the deferral under the Joint Announcement by up to a maximum of two years 

(three years for secured loans). As part of that extension, SMEs which apply may use instruments 

to manage interest rate risk that are directly linked to the loans in question. 

The provision of loans by banks in the UBI Group to strengthen the capital of SMEs again under 

the Agreement described above, was confirmed. 

On the basis of conventions signed subsequently by the Italian Banking Association and the 

Cassa Deposito e Prestiti (CDP – state controlled fund and deposit institution), the Group also 

continued to grant loans to SMEs under attractive conditions using CDP funds resulting from 

postal savings (with a lower cost) as follows: 

1) in the first stage of the operation, (Convention signed on 28 th May 2009) – designed to support 

investments to be made, and/or in progress, or to increase working capital – which involved the grant of 

three billion euro nationally, the banks in the Group accepted approximately 1.200 applications for 

assistance for loans, amounting to more than 107 million euro of loans disbursed; 

2) as part of the Convention signed on 17 th February 2010, designed to regulate the criteria for distributing 

and granting the second tranche of five billion euro, the Group signed a new loan contract with the CDP 

which involved the allocation of a budget to be used by 28 th February 2011, amounting to 286 million 

euro. 

The duration of the repayment schedule was set at a maximum of seven years, at an interest rate equal 

to the Euribor half year plus a spread differing according to the duration of the loan and the grace period 

and also dependent on the tier one ratio of the Bank. In consideration of the grace period chosen and the 

tier one ratio of greater than 7%, the spread for the Group stood in February 2011 at 85 basis points for 

terms of three years, at 95 basis points for terms of five years and at 105 basis points for terms of seven 

years. 

In February 2011, 1.911 loans had been approved for more than 154 million euro, of which 

approximately 117 million euro had already been disbursed, while applications for loans of more than 63 

million euro were being assessed; 

3) on 17 th December 2010 a third Convention was signed, designed to support the recovery in progress, 

which involved two further types of loan: 

- a “Ten year budget”, in addition to the three, five and seven year budgets, with funding of one billion 

euro, to support lending requirements for long term investments by SMEs: 

- a “Stable budget” to finance the growth of SMEs, into which the funds not fully used by the previous 

budgets will gradually flow, and which will offer all maturities (three, five, seven and ten years). 

The Group has been granted funding of 51,6 million euro for the “Ten year budget”, which must be used 

by 30 th June 2011. 

The “Stable budget” on the other hand may be used “on demand” and must be used to fund unsecured 

loans (maturities of 13 to 120 months) and secured loans (maturities of 61 to 120 months) for 

investments to be made or being made and to increase working capital (with loans for 100% of the 

planned expenditure). 

In consideration of the tier one ratio of the Group, in January 2011 the spread for maturities of up to ten 

years was 106 basis points. 

Memorandums of intent were signed in 2010 between banks in the Group and local Provincial 

Governments (e.g. the Provinces of Brescia and Bergamo) designed to pay advances on sums 

owed to businesses by local authorities, thereby reducing financial pressures on businesses 

created by late payments. 

40

These agreements involved the payment of advances by the banks participating on those 

receivables, subject to notification of the receivables, with repayment in up to 17 months with low 

spreads. 

On their part the local authorities certify that the companies’ receivables are undisputed claims 

payable in cash and indicate the period of time in which they will make the payment to the banks 

making advances on the certified sums, together with the relative method of payment. 

On 20 th January 2010, the Group adhered to one of the Italian Banking Association “Families 

Plan” initiatives designed to support the sustainability of the retail lending market. It was an 

agreement to defer the repayment of mortgages by families in difficulty as a result of the crisis, 

signed by the Italian Banking Association and thirteen consumer associations 5 (a similar measure 

to the Agreement for the deferral of loans to SMEs described above). 

During the year the Agreement led to the deferral of 1.114 mortgages, on a remaining total debt of 

more than 93 million euro. 

As concerns the framework agreement signed in May 2009 by the Italian Banking Association and 

by the Italian Episcopal Conference to grant “Loans of hope” 6 – disbursement of which is from 

September 2009 until 2012 and which is centred on B@nca 24-7 –, this resulted in the grant of 

16 loans for a total of 96.000 euro. Because the number of families financed was relatively low, 

due to the strictness of the constraints imposed by the memorandum of intent, the agreement has 

been modified recently and it is forecast that the project will involve larger numbers of families in 

2011. 

In consideration of the continuing severe hardship suffered by families in Abruzzo hit by the 2009 

earthquake, the Group adhered to the new agreement signed between the Italian Banking 

Association and the CDP – to supplement that signed in 2009 – raising the ceilings on loans and 

adding new forms of finance to those already provided. 

In 2010 UBI Banca Private Investment, the Group’s lead bank in the earthquake zone, granted 34 

loans for a total of approximately 1,3 million euro. 

To confirm the Group’s closeness to its traditional local markets, it intervened, through Banco di 

Brescia, to support towns in the Veneto region hit by flooding on 31 st October 2010, adhering – 

both for families and for SMEs – to the measures of the Ordinance of the President of the Council 

of Ministers No. 3906 of 13 th November 2010 (deferral of mortgage repayments). 

Finally, in the last quarter of the year the “‘Solidarity Fund’ for mortgages for the purchase of a 

main dwelling” became operational. It was created by an initiative of the Ministry of the Economy 

and Finance (MEF) with Law No. 244 of 24 th December 2007, with the objective of assisting 

debtors in difficulty with regular mortgage repayments, and it included the following: 

- for mortgage contracts for the purchase of a main dwelling for borrowers, the possibility for a 

customer, if certain conditions are met, to apply for the deferral of repayments not more than 

twice for a maximum period of not longer than 18 months in the life of the mortgage; 

- the creation at the MEF of the “Fund” mentioned, usable on request by mortgage borrowers 

who intend to make use of the right to defer payments, in order to pay for the costs of the 

banking procedures and possible notary fees required to defer the mortgage repayments; 

- the deferral of payments, if the mortgage borrower can demonstrate the inability to meet 

mortgage repayments and rescheduling expenses, but before enforcement proceedings on the 

mortgage security have commenced. 

The Group has already received the first applications and an assessment of the success of the 

initiative will become possible as the year progresses. 

5 Briefly the agreement involves the deferral for at least twelve months of repayments on mortgages of up to 150.000 euro taken out for the 

purchase, construction or renovation of a main dwelling even with arrears in payments of up to 180 consecutive days for customers: 

- with taxable annual income of up to 40.000 euro; 

- who have suffered from particularly negative events in the two year period 2009-2010 (death, job loss, becoming non self-sufficient, 

becoming eligible for state redundancy benefits). 

6 For families that have lost all income from work, have no unearned income or income other than that generated by the ownership of a 

home or ordinary or extraordinary state redundancy benefits. It is designed to implement projects for the return to work or the start of 

small businesses. 

41

Private individuals 

Investment in the development of service models for “Private individual” customers continued 

during the year with an advisory approach committed to excellence. In detail, tools were released, 

described below, designed to increase efficiency in the management of commercial proposals that 

are increasingly customised to meet specific customer requirements. 

PLANNING AND FINANCIAL ADVICE PLATFORM 

The main objective is to support account managers in the formulation of appropriate investment 

proposals that are in line with third level MiFID regulations and optimised to fit the relative 

customer profile. The advisory platform was rolled out throughout the Group in 2010 and further 

functional enhancements are planned for 2011 with the definition of a more distinctive product 

range for affluent segment customers. 

MORTGAGE PLATFORM 

Released in 2010 and 2011, it provides account managers with a set of tools designed to provide 

the following: 

- estimates for customised and sustainable products for customers; 

- a rapid response capacity by means of condition based products and services; 

- simplified and efficient management of the mortgage application processing stages. 

NEED ANALYSIS PLATFORM 

This tool allows account managers to study the “overdraft” financial requirements of customers in 

a structured manner, so that they can offer solutions consistent with a customer’s personal 

characteristics and projects with a significant impact on household budgets. 

The release of a further advisory platform is planned for the current year designed to ensure 

excellence in the provision of non life insurance policies. 

* * * 

Attention was focused in the Group’s commercial activity in 2010 on improving customer trends, 

both in terms of attracting new customers to the Group and increasing the loyalty of existing 

customers. 

The campaigns for the acquisition of new customers have focused on high potential segments and 

primarily on the following: 

- young people: with the launch of a new savings book, CLUBINO, for minors and the marketing 

of a prepaid card ENJOY, targeted at 18-30 year olds and supported by advertising initiatives 

including Libertà di Comunicare (Freedom to communicate) and Promozione Natale 2010 (2010 

Christmas promotion) in partnership with the telephone operator Vodafone; 

- foreigners: with the launch in 2010 and 2011 of the “Money Transfer” service on a limited 

number of pilot branches, the result of an agreement signed with Western Union. 

The action taken to increase the loyalty and satisfaction of “private individual” customers 

included the start of targeted “Loyalty programmes”, which involve various customer segments, 

with different scoring methods depending on the products and services used. The first prize 

operation launched in 2010 was linked to the prepaid card Enjoy, with the Enjoy People Club for 

“young people”. On the other hand a “Loyalty programme” commenced in the first few months of 

the year targeted at holders of the Libra credit card. Customer behaviour that was rewarded 

included not only use of the card, but also use of a wide range of Group products and services 

(e.g. loans, non life insurance policies, etc.). 

CURRENT ACCOUNTS 

The new Bank of Italy regulations governing transparency came into force on 26 th May 2010, 

which involve the insertion of “Summary cost indicators” in information sheets. Summary cost 

indicators give the annual indicative cost of a current account and the figure is obtained by 

summing fixed and variable annual costs for six standard users, to each of which different levels 

of use are associated. The account Conto Zero Zero UBI (UBI zero zero account) was therefore 

created for better positioning with respect to competitors. The account has no fixed charges, no 

expenses for management and use and no constraints to link it with mortgages, personal loans or 

42

forms of investment. It was created primarily to acquire new customers and to meet the 

expectations of those who want a transparent product that is above all always accessible. 

The conditions of the Duetto Basic account were renewed with the monthly charge down from 

4,95 euro to 3,00 euro. The Duetto Basic account not only includes all banking services 

comprised within the fixed charge (direct debit of utility bills, cheque books, debit cards, Qui UBI 

remote banking), but also three insurance services provided by Europ Assistance, with cover for 

accidents, withdrawals and health services. 

The CLUBINO, the savings book for children from 0 to 12 years of age – for which UBI Banca was 

awarded second place in the children’s/youth accounts category in the Milano Finanza 

classification of banking products – was a great success. In order to ensure continuity in the 

product range it is being followed by a new current account, currently being defined, for young 

people between the ages of 14 and 18, with operations limited to paying in cash, receipt of credit 

transfers and cash withdrawals from branches or from ATMs using the Libramat card for minors. 

LOANS 

In 2010 the “Mortgages for private individual customers” sector showed the first signs of recovery 

after two sluggish years. The Group nevertheless succeeded in maintaining positive growth in 

disbursements, assisted by the good reception given to the new product “Prefix”, a floating rate 

mortgage with a cap launched in February. With a maximum contractual limit set on the interest 

rate of 5,50%, the Prefix Mortgage allows customers to enjoy the benefits of a variable rate, while 

protected from excessive rises in the reference parameter (the Euribor three month rate). It also 

includes the application of a competitive spread which differs on the basis of the life of the loan 

and the credit rating of the customer. 

Small Businesses 

Commercial policies led to the progressive establishment of different service models for Small 

Economic Operators (SEOs) and small-to-medium sized enterprises (SMEs). They are designed to 

respond to the specific requirements of Small Business customers more effectively, which are 

particularly uniform both financially and in terms of size. 

The “standardised” commercial approach to SEO customers, who are more numerous and have 

“basic” requirements, is designed to progressively integrate with direct channels (call centres, 

internet banking, evolved ATMs), which are constantly implemented with new services. 

The service model for SME customers, who have more sophisticated and varied requirements, 

involves a “relationship” approach, with importance given to regular meetings with account 

managers (at least quarterly), in order to explore customers’ needs, their potential and future 

requirements and to propose more attractive solutions. 

The relationship approach with SME customers was further enhanced during the year with 

intense and progressive training action to support the network of specialist account managers 

and to consolidate planning activity aspects and a “risk-adjusted” approach to pricing. 

FINANCIAL CONSULTING 

This is based on co-operation by the network banks with SF Consulting, an associate company 

controlled by the Finservice Group and specialised in the supply of consulting services in the 

subsidised loans sector which include: assessment of the eligibility of companies for subsidies, 

the preparation of investment projects, the assessment of investment plans and general 

assistance in making and processing applications for subsidised loans. 

Recently the activities of SF Consulting have extended to include the energy efficiency of businesses, with good results for 

corporate customers, which suggests further possibilities also exist for co-operation involving Retail customers. 

Commercial action with the network banks resulted in more than 1.600 new potential 

applications with visits to more than four thousand concerns in the small business and corporate 

segment. 

UBI Banca, SF Consulting and Finservice have also signed a convention for support and advisory 

activities in relation to formalities for the issue of guarantees under the “Guarantee Fund for 

SMEs” pursuant to Law No. 662 of 23 rd December 1996. It became operational in February 2011. 

The purpose of the convention is to support account managers with activities required to obtain 

guarantees issued by the Fund, ranging from feasibility assessment (inclusive of verification of 

43

the subjective and objective requirements of the enterprise) to the acquisition of guarantee 

certification. Businesses can benefit from the Guarantee Fund created by Law No. 662 for any 

type of operation, provided it is directly linked to the operating activities of the enterprise. 

Depending on the nature of the eligible operations, the type of beneficiaries and their location, the 

guarantee covers 85%, 80% or 60% of the loan with a maximum amount guaranteed per 

enterprise of 1.500.000 di euro. 

As part of the convention, SF Consulting has created a special IT platform, implemented by the 

Group, which allows account managers to interact with the company while applications to the 

Guarantee Fund are being processed. 

SECTOR PRODUCTS 

The Small Business service model is also based on the development of specific products targeted 

on different sectors designed to strengthen UBI Banca’s role as a “partner bank”. The products 

were created following a process of analysis and study based on special “focus group” surveys on 

businesses in individual sectors, on interviews with account managers and on specific meetings 

with the relevant trade associations. 

The product range reserved to farms entitled SubitoImpresa Agriculture was launched in 2010, 

which follows that for wholesale merchants which came out in 2009. The initiative was designed 

to satisfy the principal needs of businesses in the sector: savings on the management of 

payments and receipts, increased return on company liquidity, rapid finance for current 

operations, cover for company risk, immediate advances against predetermined credit 

authorisations to grasp commercial opportunities and deal with adversities, such as climatic 

disasters and livestock epidemics as well as to simplify administrative and corporate costs. 

A complete range of loans for farms was therefore made available, designed in particular for 

initiatives to shorten supply chains, diversify production and facilitate generation turnover. 

“NEW ENERGY” LOANS 

Proposals to support investments in the production of “clean” energy and for energy savings 

launched in 2009 were as follows: “New Photovoltaic Energy”, designed to finance investments in 

photovoltaic plant, and “New Energy - Renewable Sources and Energy Savings”, to support 

corporate development programmes designed to generate energy either from renewable sources or 

with a low environmental impact (i.e. wind power, hydro, biomass generation) and to improve 

energy efficiency. 

Group co-operation continued in support of these proposals with the Department of Mechanical 

and Industrial Engineering in the Faculty of Engineering at the University of Brescia to develop a 

software application – recently updated in the light of new incentive regulations and available on 

the website www.ubibanca.com – to measure the technical and economical sustainability of these 

investments by simulating the expected economic and environmental cost-benefits. 

INITIATIVES IN CO-OPERATION WITH THE EUROPEAN INVESTMENT BANK 

On 12 th April 2010, the European Investment Bank (EIB) signed a finance contract with the UBI 

Banca Group which represents the first tranche of a total EIB loan of 500 million euro to UBI 

Banca already approved and destined entirely to Italian small-to-medium sized enterprises 

(SMEs). Technically the operation will take the form of the subscription by the EIB of covered 

bonds issued by UBI Banca: the first issue of 250 million euro, relating to the financing just 

mentioned, took place at the end of April. 

The projects that may be financed, through mortgage or unsecured loan contracts (although 

finance leases are available), are mainly in the agriculture, industry, services and tourism sectors 

with a maximum limit on each project of 12,5 million euro. The funds will be disbursed by seven 

banks in the Group (Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e 

Industria, Banca Regionale Europea, Banca Carime, Banca di Valle Camonica and Banco di San 

Giorgio) and by UBI Leasing. The issue of covered bonds lowers the cost of funding and enables 

reduced interest rates to be charged to businesses which take advantage of this opportunity: 20 

basis points less on average compared to the standard cost of loans for each class of risk. 

The product became operational at the end of July 2010 and as at 31 st January 2011, 65 

applications had been received for loans. 

Commercial activities will be intensified in the first half in order to complete the first tranche of 

the loans by September and to perform the subsequent issue of 250 million euro and the relative 

loans by the end of this year. 

44

Again with regard to EIB initiatives, Banca Popolare di Ancona won a contract under a tender 

procedure organised by the Marches Region for the management of an EIB credit line worth 100 

million euro for investments and expenses incurred in the context of an appropriate SME 

development programme. The projects must be located in the Region and the maximum amount 

that can be financed is 1,6 million euro. 

Authorities, Associations and the third sector 

UBI Banca has created a specific business unit, operational since 1 st October 2010, dedicated to 

the management and development of business in the following segments: public authorities, trade 

associations, guarantee consortium bodies and funds and organisations operating in the non 

profit sector including Church and religious entities. 

The Group intends in this manner to identify structured commercial approaches and the relative 

service models which – based on the specifics, complexity and organisation of the customers in 

question – require a separate and differentiated approach with the design of products and 

services able to meet the needs expressed. Completion of the activity is in progress and it will be 

rolled out gradually, partly as a function of the development of market prospects and the 

legislative and regulatory contexts of the sectors concerned. 

The approach of all the network banks will therefore be standardised, consolidating and 

developing activities already performed over the years with the same partners, as an expression of 

local economies and institutions and also with the “world” associated with them (enterprises, 

employees and families). The development of relations in this area occurs in a context of 

confirming and enhancing the role of lead bank played in the Group’s local markets. 

ASSOCIATIONS AND GUARANTEE BODIES: CONVENTION LOANS 

Particular attention has always been paid, with regard to medium-to-long term lending to SMEs, 

to loans granted “under convention”, i.e. loans provided on the basis of agreements with 

guarantee bodies and trade associations, which represent an important link in relations with local 

economies. At the same time the use of public sector instruments to mitigate credit risk 

continued in the current difficult economic situation, including the use of the Guarantee Fund for 

SMEs (pursuant to Law No. 662/1996) and the Fund managed by the SGFA (Fund Management 

Company for the agricultural and food sectors which manages intervention for the issue of direct 

and subsidiary guarantees) for farms. 

As a result of new medium-to-long term loans granted in 2010 – 1.485 million euro for more than 

16.700 loans (+25% in terms of amount and +4% in terms of number of loans compared to 2009) 

– total outstanding medium-to-long term loans rose to 3.475 million euro (+21% compared to the 

end of 2009). Short term loans rose from approximately 500 million euro to 600 million euro 

(+20%). 

The broad range of existing products was added to by numerous initiatives organised in cooperation 

with local public institutions (chambers of commerce, regions and provinces) and by 

those already described in the sub-section “Anti crisis measures to support small-to-medium 

sized enterprises and families” 7 . 

In the light of the growing Group business with guarantee bodies through conventions and of the corporate changes in 

progress (company reorganisations and mergers between guarantee bodies and the transformation of some guarantee bodies 

into intermediaries supervised by the Bank of Italy), a new service model will be adopted in the first half of 2011 designed to 

standardise the processes for stipulating conventions, for assessing guarantee bodies and monitoring operations for all the 

banks in the Group. 

The website “UBI-Confidi Web” was created in September 2010, a platform for online dialogue 

between guarantee bodies with convention agreements and the banks in the Group and for the 

exchange of information. The website will be enriched with additional functions to manage credit 

risk and to develop business by the end of June 2011. 

A review of the product range and the rates and charges applied to credit lines granted under 

conventions is currently in progress to bring them into line both with the increase in the cost of 

funding and credit risk and also with the actual “value” of the guarantees acquired. 

7 The “Portfolio PMI Jeremie FESR”, became operational in the first half of the year at BPB, Banco di Brescia and BPCI. It is a synthetic 

securitisation performed on the basis of convention agreements with Confapi Lombarda Fidi and Confidi Province Lombarde, destined to 

support investments with a high innovative content. The operation, which will be completed on 30 th June 2011, involves the potential 

creation of two loan portfolios for a total of 87 million euro. 

45

THIRD SECTOR 

The third sector has become a fundamental player in the Italian economy, having incorporated, 

amongst other things, parts of the welfare system previously managed by the public sector. Non 

profit organisations (NPOs) are experiencing a growing need for finance – as government funds 

allocated to them are contracting and support from private individuals is diminishing due to the 

economic crisis – which only the banking sector can provide. 

This relationship, which offers banks an important return in terms of reputation and links with 

local markets (as a multiplier of relationships and a social aggregator), has become strategic 

commercially, partly in consideration of the considerable growth in the sector since the 1990s: 

NPOs operating in Italy number around 250 thousand with turnover of more than 45 billion euro 

and they involve total connected “private individuals” (employees, volunteers and associate 

workers) estimated at four million. 

Historically the UBI Banca Group holds a quota of deposits from and loans to the third sector 

that is higher than for the sector nationally. This is due to its traditional presence on local 

markets in which NPOs are more numerous and to relationships established over the years (NPOs 

account for 3.4% of total Group deposits compared to 2% for the sector nationally; while they 

account for 0,68% of Group loans compared to 0,52% for the sector 8 ). 

In order to strengthen network banks’ links with local communities and to further improve 

market positioning, consultation with NPOs was conducted in 2010 to measure their 

characteristics and needs. The results were used to define dedicated products and a specific 

service model to distribute them. 

Agreements are currently being defined with umbrella organisations in order to develop areas of 

co-operation for initiatives to assist NPOs on local markets. At the same time training activity will 

be commenced for network bank personnel designed to enhance relations with these 

organisations. 

The commercial model will be rolled out in the second quarter of 2011 in approximately 50 

branches of the Provinces of Bergamo and Brescia and it will be extended to the whole country 

within a few months. 

AUTHORITIES 

The “Authorities” segment is composed of public authorities and condominiums. 

Public authorities constitute a sector currently undergoing a period of profound change. This is 

partly due to the intense computerisation of public administrations designed to generate greater 

efficiency in organisational and service delivery terms and also to comply with European 

standards. 

In this context, the Group is seeking to manage legislative and regulatory change in order to 

increase its expertise and specialisations needed to support the development of public 

administrations, especially for treasury services for public authorities (at the end of the year it 

managed 2.166 treasury services). 

PattiChiari Consortium: commitments to quality 

Activities to implement and manage quality commitments promoted by the PattiChiari 

Consortium continued during the year. They were adhered to by all the Group’s network banks 

with the aim of improving retail customer relationships. 

On the one hand quality commitments not yet introduced were rolled out according to the agreed 

consortium calendar and on the other hand commitments already put in place were consolidated. 

Group banks also continued with financial education programmes in schools, already actively 

supported for some years. 

It was decided in the second half of the year to commence a project to streamline quality 

commitments to both make them clearer and easier to communicate to customers and to align 

the general self-regulatory framework with changes that have since occurred in compulsory 

8 Source: data from Bank of Italy accounts for September 2010. 

46

egulations, in order to avoid unnecessary overlap. The dynamic nature of the project led to the 

exclusion of some initial commitments from the scope of the PattiChiari initiative and to 

incorporate others in uniform areas, while basically maintaining the entire contents of the 

existing service 9 . 

As a result of this optimisation process, which moreover is consistent with the general principles 

underlying the project (simplicity, clarity, comparability and customer mobility), Group banks will 

find it easier to inform customers of the commitments and to make better use of tools designed to 

enable customers to make aware and informed decisions. 

9 The perimeter of the project currently comprises eleven quality commitments (current accounts compared, basic account, average times 

for closing current accounts, transferability of payment services, transferability of mortgage information, transferability of securities 

dossiers, transferability of collection orders, FARO – ATM function services, home banking security, payment card security, certification 

of mortgage expenses and interest charges) and two optional initiatives (list of services provided on an account, information for access to 

credit for small-to-medium sized enterprises). 

47

The Private Banking Market 

Private Banking service of the UBI Banca Group is a specialist service available throughout the 

country, provided through individual network banks by 360 “private bankers” in more than 100 

dedicated units. 

UBI Private Banking is the third largest private banking operator nationally in Italy with 35 billion 

euro of assets under management and approximately 29.000 relationships (around 65.000 

customers). 

The UBI private banking service model underwent intense development in 2010 with the 

expansion of advisory services in the following areas: 

• the “Pro-Active Wealth Advisory Service” (a customised financial advisory service which 

performs thorough assessments of the characteristics and needs of family groups, analysing 

estates and proposing the best investment solutions available on the market) was further 

developed with a focus on the following: 

- strong synergies with UBI Pramerica SGR; 

- systematic comparison with the major investment houses; 

- professionalism and team commitment (over 2.000 meetings with customers and over 3.500 

customised reports delivered); 

- a tested and systematically verified quantitative method: launch/development of 

performance attribution (analysis for each customer of the impact of strategies proposed by 

the ProAWA service); automation of reports for customers on portfolio, scenario and strategy 

analysis and on asset allocation proposals; 

- advanced investment and support tools; 

• the “Family Business Advisory Service” – designed to meet specific customer requirements for 

generation turnover, family and corporate governance and asset control structures – has been 

gradually consolidated by means of in-depth training programmes and the organisation of 

meetings with customers; 

• the launch of a new Planninng and financial consulting tool on the whole distribution network 

which, on the basis of customer profile analysis and answers furnished from the MiFID 

questionnaire, is used to formulate financial solutions that are highly customised to match the 

customer’s requirements. 

The following progress was made with the product range in 2010: 

• the “UBI Pramerica asset management” range of products was broadened: 

- the number of indices underlying the open, customer portfolio management products was 

increased to give greater customisation of the product; 

- the range of Sicav classes dedicated to the private banking market was enlarged; 

• the range of banc assurance products was extended by: 

- the creation, within the broad range of products, of a new capitalisation product (insurance 

branch V), designed to attract new customers; 

- the extension of sales of Aviva products to include Banca Popolare di Ancona (unit linked 

policies in insurance branch III). 

48

The corporate market 

The Corporate Market has approximately 40.000 clients classified in the segment on the basis of 

a minimum turnover of five million euro and therefore characterised by complex financial 

behaviour patterns. 

It has been divided into three sub-segments on the basis of the complexity of the financial 

behaviour of the clients: Large Corporate (turnover of greater than 150 million euro), Mid 

Corporate (turnover between 25 and 150 million euro) and Lower Corporate (turnover between 5 

and 25 million euro). The three sub-segments are managed and supported by a network of 

specialist account managers comprising a total of approximately 750 account managers and 

assistants working in 65 Corporate Banking Units and 30 “Corners” and supported, for “foreign 

commercial” activities, by 300 specialists operating in 35 foreign centres. 

In 2010 the corporate market fully implemented the concept of an INTEGRATED PRODUCT RANGE (UBI 

Corporate Advisory), by making use of the Group’s product companies and an evolved commercial 

approach, which involves the following: 

- integration with the product companies through the presence of a liaison officer in the 

network banks (integrated product range contact) for the more complex products (structured 

finance, investment banking, leasing, factoring, advisory services for subsidised loans, 

insurance brokerage), who reports directly to the Corporate Area of the Parent, with the 

objective of systematically managing the commercial approach and defining a customer driven 

product range; 

- the Mid Corporate Advisory Service, a programme to support Mid Corporate clients, which by 

processing a client’s historical data and comparing them with the performance of the sectors to 

which it belongs and its main competitors, is able to highlight the client’s overall needs. The 

programme has shown that the new commercial approach, which is designed to propose the 

Bank as a partner at all stages in the life cycle of a business, is becoming fundamental for the 

creation of value for companies themselves; 

- the Large Corporate Advisory Service: an approach that is integrated with the demands of the 

sub-segment, centred on the preparation of evolved commercial plans, the result of joint 

contributions from a virtual team (network banks, product companies, foreign commercial 

centres). The project is designed to improve the overall service in order to increase market 

share. Approximately 350 detailed commercial plans were prepared on companies in the subsegment 

in 2010; 

- the extension of customer relationship management (CRM) to include foreign commercial 

services in order to support the operations of corporate and foreign commercial supply chains. 

With regard to the FOREIGN COMMERCE SECTOR, the recent crisis which hit Italy found a sort of 

safety valve in the increase in foreign trade: in 2010 Italian exports increased by more than 15% 

compared to 2009, with more lively business with non EU countries than with those in the union, 

while imports increased by 22%. 

The commitment and effort concentrated in this area by the Group allowed the network banks to 

increase the quantity and quality of their volumes of business with corporate clients, with positive 

returns also in terms of customer satisfaction. 

At the same time the focus on business with India, China, Brazil and other emerging countries 

(markets with very attractive high growth rates) continued in order to identify – with the 

assistance of commercial agreements and partnerships with major international operators – 

business areas with high valued added connected with the world of trade finance. 

The Group also continues to invest in: 

- initiatives designed to strengthen its image and those of its local banks: the event “U will Be 

International” organised at the Kilometro Rosso venue in Bergamo was a great success. It was 

the first opportunity for businesses to meet the entire foreign network of the Group 

(companies, branches, representative offices); 

49

- constant monitoring of the quality of the service provided to clients by the dedicated 

distribution network, combined with the search for new technical and organisational solutions 

to render processes increasingly more efficient; 

- an increase in the professionalism of personnel achieved as a result of a significant 

commitment to commercial and technical training. 

Finally, with regard to the network of personnel specialising in MARKET DEVELOPMENT – Market 

Developer Corporate Account Managers, who report directly to the Corporate Departments of the 

network banks – 32 market developers operated in 2010, who were assigned set geographical 

areas and lists of specific target clients. They contributed significantly to the diffusion of a 

corporate advisory approach and to an integrated corporate product range. 

Communication and marketing initiatives 

In recent months UBI Banca has sought and adopted a style of advertising – which continues to 

be clear, transparent and honest in its contents – that is very personal and innovative, highly 

attractive and distinctive in the Italian banking world. 

The advertising campaigns are characterised by the use of amiable irony in the messages and a 

“sunny” graphics format which, together, act to involve the public emotionally, communicating a 

positive feeling of trust and friendliness. The communication is modern, simple, close to the 

everyday lives of people and more akin to life in successful sectors in industry and commerce. 

The objective is not just to effectively present individual products targeted according to the case at 

different customer segments, but also to acquaint everyone with the “honest banking” on which 

the identity of the group and its “historical” corporate culture is based. 

Communication and marketing activity was focused in 2010 on the acquisition of new customers 

and of young people between the ages of 0 and 29 in particular. 

CLUBINO 

“Clubino”, the savings book for children aged between 0 and 12 was launched in January 2010 

and met with considerable interest and appreciation by customers. The product educates children 

on the subject of saving in an entertaining and involving manner with prizes, a dedicated website, 

local events and special initiatives. The latter included the competition “Draw your town” which 

was very popular: from more than 12.000 drawings received, a jury of experts selected the 13 best 

works in terms of imagination and originality which were published in the 2010 UBI Banca 

calendar. The result was an explosion of light and colours which express how children see their 

towns. In addition to the publication of the drawings on the calendar, each little artist was 

awarded a beautiful prize. 

ENJOY 

Enjoy is a prepaid, reloadable MasterCard which, because it has an IBAN code, can be used to 

perform many of the transactions normally only possible with a current account. It is an 

innovative product for young people aged between 18 and 29, an important target for increasing 

the customer base. 

The launch of the product was announced by an advertising and marketing campaign designed to 

arouse as much curiosity as possible. It performed the function of drawing the attention of young 

people to UBI Banca, stimulating their desire to appear, thanks to a photographic competition, 

and involving them in the definition of an “ideal bank for young people” through messages loaded 

onto the bulletin board of a website created for the initiative. These messages not only confirmed 

the validity of the “Enjoy” product and appreciation for it, but also furnished interesting ideas for 

the development of products designed for young people. 

The inspiration for the advertising was taken from the period of the “flower children” and 1970s 

styles, which is currently extremely popular in the world of fashion and design. The positive 

values of modernity, change and above all the freedom of that historical and social period were 

evoked. It is precisely the value of freedom which young people of all generations have always 

asked for and demanded. It became the basic idea and rationale of the “banking freedom” which 

UBI Banca wants to provide today with its new product Enjoy. 

50

In order to acquaint the target with new banking methods, various initiatives were organised to 

support the commercialisation of the product in co-marketing with the telephone operator 

Vodafone. A loyalty programme was also launched which rewards each use of the card and 

passing the word around within the “Enjoy People” community. 

These activities occupied the whole of 2010, with advertising in all Group branches and intense 

dedicated advertising campaigns mainly on the internet and radio, with occasions of high 

visibility in universities and shopping centres in major cities 10 . 

Customer Care 

The Consultation Project 

Attention to managing the qualitative aspects of customer relationships and service activities had 

already led, in 2008, to the launch of the Consultation Project with the objective of measuring the 

satisfaction of network bank customers by means of a customer satisfaction index for the Retail, 

Corporate and Private Banking markets. 

The measurement of the index is performed with the assistance of a major national market 

research institute. It is measured continuously in terms of aggregates and also at the level of 

network banks, market segments, local retail banking areas, branches, corporate business units 

(CBU) and private banking business units (PBU), by means of approximately 150.000 telephone 

interviews of a representative sample of customers each year. The customer satisfaction index has 

been included among incentive scheme objectives since 2009. 

The performance of the indices improved progressively for the three markets (Retail, Private 

Banking and Corporate) until October 2010, when it was followed by a fall in the last two months 

of the year. 

In detail, in December the index for the total Retail Market increased slightly compared to the 

59 

58,5 

58 

57,5 

57 

56,5 

56 

55,5 

55 

Customer satisfaction indices of the network banks 

57,99 

56,17 

56,52 

58,4 

56,58 

58,22 

56,16 

index in 2009, again above the 

benchmark comparison, which 

also increased by a similar 

amount. 

The improvement for the Retail 

Market was due mainly to the 

affluent segment, while the 

mass market and small 

business segments remained at 

the same level as the year 

before. The index nevertheless 

remained above the relative 

benchmark comparisons for all 

three market segments. 

The research also identified 

discriminating factors for Retail 

Market customers such as contact with the branch manager and the offer of new products and 

services: more offers and a higher frequency of contact was associated with a higher index of 

customer satisfaction. 

The most significant improvement was found for the Private Banking Market, which rose even 

further than the benchmark comparison rose. An analysis by asset class shows an improvement 

across the board for all customers, with higher index values for those in the higher net worth 

groups. 

In continuity with what was already found in 2009, customers expressed a high degree of 

satisfaction with account managers, with regard to both relationship aspects and professional 

expertise, but they would appreciate more proposals from them. 

58,11 

57,73 57,69 57,74 

56,09 

Index 2009 October 2010 November 2010 December 2010 

Retail Market Corporate Market Private Banking Market 

10 Pictures are published at the beginning of this report of the main communication and marketing activities targeted at young people. 

51

The Corporate Market ended the year with a slightly lower index than in 2009 as a result of the 

fall that occurred in the last two months of the year and the index was still below the benchmark 

comparison which also fell slightly. An analysis by segment confirmed that the degree of 

satisfaction increases with company size both for the Group and for its competitors. 

Some in depth surveys were conducted on specific subject areas in parallel to the measurement of 

the customer satisfaction index, which allowed the Group to acquire interesting indications with 

a view to improving the service. 

These surveys involved the following: 

‐ retail customers, holders of UBI Pramerica mutual funds and customer portfolio managements, who judged 

the range of products offered by the Group to be complete and the service to be high quality, declaring 

themselves fairly satisfied with the products chosen; 

‐ customers holding UBI Assicurazioni non life insurance policies, who, as in 2009, expressed a degree of 

satisfaction that was higher than the average for the Group and a high level of loyalty; 

‐ public authority treasuries, customers of UBI Banca, who expressed a high degree of satisfaction. The 

customers of these authorities appreciated the centralisation and the automation in a central office, 

although they did not yet make full use of the IT tools available (the survey performed formed part of the 

monitoring activities required for quality certification); 

‐ the quality of “foreign services” provided by Group banks was judged by corporate and SME clients as 

generally satisfactory: the index showed higher levels of growth in the value added by the service and in 

direct contact with the Foreign Centre; 

‐ the customers of the 316 branches involved in the “branch switching” operation, the majority of whom found 

no significant differences compared to the past. Some aspects of operational functioning were subject to 

complaint, but only in the period immediately following the operation, which then disappeared as operations 

normalised; 

‐ the customers using the QuiUBI home banking services, for whom widespread use was found together with 

a medium, but increasing, index of satisfaction, higher than that of customers not using the services; 

‐ the satisfaction of customers with accounts at different banks compared to those with accounts at one bank 

(i.e. who have accounts with banks in the UBI Group only): retail customers with accounts in more than one 

bank, with indices down compared to previous surveys, accounted for a third of the total Retail Market and 

more than half of the small business segment. UBI Banca was nevertheless considered the main bank for 

these customers. Customers who declared that they had accounts with one bank only had a higher 

satisfaction index than those who also used other banks. The Private Banking Market, which has a higher 

percentage of customers with accounts at different banks (more than half of the total), also had higher 

indices of satisfaction for those with accounts at Group banks only. The Corporate Market, which consists 

almost entirely of clients with accounts at more than one bank, recorded a slight reduction in the average 

number of accounts held compared to 2009. 

Complaints 

Complaints constitute a valuable instrument for customer consultation and each one, or even 

just one complaint, may contain valuable information for improving the quality of the services 

provided. 

This orientation led the UBI Group to broaden the means available to customers for making 

complaints to include the internet channel, available on all the websites of the network banks. 

52

Distribution of complaints received by the network banks in 2010 by channel of communication 

Email 17,5% 

Website 4,1% 

Fax 6,7% 

Hardcopy 71,3% 

Telephone 0,4% 

In 2010 a total of 4.256 complaints were received by the Group’s network banks, a reduction of 

17% compared to the previous year. Complaints to report impolite or unprofessional conduct by 

personnel accounted for less than 2% of the total (1,74%). With an average response time of 22 

days (32 days in 2009), complaints processed during the year numbered 4.188 including 1.636 

accepted (they included 1.318 resolved fully in favour of customers). 

The distribution of the complaints shows that more than 50% of the local units of the network 

banks (branches, private and corporate banking centres) either received no complaints (29% of 

cases) or just one (27%). 

Distribution of complaints received in 2010 by local unit of the network banks 

no complaints; 

29% 

1 complaint; 

27% 

more than 2 

complaints; 

28% 

2 complaints; 

16% 

Sixty four complaints were presented to the Financial Banking Arbitrator service, formed within 

the Bank of Italy for the out-of-court settlement of disputes. In 2010 the Financial Banking 

Arbitrator examined a total of 32 cases, of which 13 were resolved in favour of the customers. 

Ten new complaints were presented to the Banking Ombudsman, which made eight decisions, 

two of which in favour of the applicants. 

Activity continued again in 2010 to inform and train the commercial personnel of all the Group’s 

network banks, designed to facilitate an increasingly effective ability to consult customers and to 

interpret their needs and take action on sources of even latent dissatisfaction manifested by 

customers. Classroom training activity, which involved 3.200 employees, consisted of strictly 

relevant courses delivered across the board and it was flanked by initiatives directly accessible 

from the work station of each employee. 

53

The distribution network and market 

positioning 

The branch network of the Group 

As at 31 st December 2010 the UBI Banca Group had 1.901 branches, (unchanged at the date of 

this report), compared to 1.967 at the end of 2009. 

The branch network of the UBI Banca Group in Italy and abroad 

number of branches 31.12.2010 31.12.2009 Change 

UBI Banca Scpa 2 2 - 

Banca Popolare di Bergamo Spa (1) 365 375 -10 

Banco di Brescia Spa (2) 362 363 -1 

Banca Popolare Commercio e Industria Spa (3) 234 214 20 

Banca Regionale Europea Spa (3)(4) 229 295 -66 

Banca Popolare di Ancona Spa 248 256 -8 

Banca Carime Spa 294 295 -1 

Banca di Valle Camonica Spa 64 59 5 

Banco di San Giorgio Spa 57 53 4 

UBI Banca Private Investment Spa 31 36 -5 

B@nca 24-7 Spa 1 1 - 

IW Bank Spa 2 2 - 

Centrobanca Spa 6 7 -1 

Banque de Dépôts et de Gestion Sa - Switzerland 3 6 -3 

UBI Banca International Sa - Luxembourg 3 3 - 

TOTAL (1)(3) 1.901 1.967 -66 

Total Branches in Italy (1)(3) 1.892 1.955 -63 

Financial advisors 786 880 -94 

ATMs 2.470 2.533 -63 

(1) The figure as at 31 st December 2010 includes a temporary mini-branch for the launch of the prepaid card 

Enjoy. 

(2) The figure as at 31 st December 2009 included a foreign branch which was contributed on 10 th December 

2010 to UBI Banca International. 

(3) The figures do not include the business units dedicated exclusively to pawn business [ten as at 31 st December 

2009, belonging to Banca Regionale Europea; nine (following the branch switching operation) as at 31 st 

December 2010, operating under the Banca Popolare Commercio e Industria brand]. 

(4) The figure as at 31 st December 2010 includes three foreign branches, while that as at 31 st December 2009 

included two foreign branches. 

As already reported in the previous section “Significant events that occurred during the year 

2010”, the main changes that occurred to the branch network of the Group during the year can 

be summarised as follows: 

− intragroup transfers which in January involved 316 branches, through the contribution of 

operations, performed to increase the focus of the network banks on their respective 

geographical markets. At the same time, 37 Group branches, both existing branches and those 

resulting from transfers, were transformed into mini-branches; 

− direct action to streamline market presence, in implementation of the trade union agreement of 

20 th May 2010, which resulted in the closure in June of 81 business units and the 

transformation of 101 branches into mini-branches; 

− the continuation of the programme to open new branches with the start-up of 17 units and the 

transformation of six units previously providing treasury services into mini-branches; 

54

Action taken in 2010 on the branch network of the Group in Italy and abroad 

Net effect of branch 

switches 

branches 

Opening of: 

mini-branches 

Transformation of 

treasury branches 

into mini-branches 

Closures/ 

transfers 

Transformation of 

branches into minibranches 

UBI Banca Scpa - - - - - 1 

Banca Popolare di Bergamo Spa 7 5 3 1 26 17 

Banco di Brescia Spa 9 - - - 10 2 

Banca Popolare Commercio e Industria Spa 47 - - - 27 21 

Banca Regionale Europea Spa -68 4 - - 2 15 

Banca Popolare di Ancona Spa - 1 1 1 11 11 

Banca Carime Spa - 1 - - 2 65 

Banca di Valle Camonica Spa - - 1 4 - - 

Banco di San Giorgio Spa 5 - - - 1 6 

UBI Banca Private Investment Spa - 1 - - 6 - 

Centrobanca Spa - - - - 1 - 

Banque de Dépôts et de Gestion Sa - - - - 3 - 

TOTAL - 12 5 6 89 138 

A summary is given below of the changes (other than branch switches) that occurred in 2010 and 

until the date of this report, which affected the Group presence in Italy, while details of the 

foreign network are given in a separate sub-section: 

• BANCA POPOLARE DI BERGAMO opened five branches at Muggiò and Bernareggio (Monza 

Brianza), Bagnatica (Bergamo), in Rome in Largo di Vigna Stelluti and at Velletri (Rome) and 

four mini-branches (including one former treasury branch) at Bergamo at Kilometrorosso and 

in Viale Vittorio Emanuele II (a temporary mini-branch closed in March 2011), at Songavazzo 

and Scanzorosciate, Tribulina district (Bergamo). On the other hand it closed a total of 26 

units 1 ; 

• BANCO DI BRESCIA closed nine branches 2 in June 2010 and opened a new mini-branch at 

Brescia in March 2011; 

• BANCA POPOLARE COMMERCIO E INDUSTRIA closed 27 units 3 ; 

• BANCA REGIONALE EUROPEA opened two branches at Asti in Corso Savona and at Ivrea (Turin) 

changing its presence in the capital of Piedmont by opening a branch in Corso Francia, while it 

closed branches in Via Gobetti and Piazza Gran Madre di Dio. Finally, in February and March 

2011 a new branch became operational at Ovada (Alessandria) along with two new minibranches 

at Casale Monferrato and Tortona at the local health board premises, while two minibranches 

closed, again at Casale Monferrato in Via Hugues and at Rivoli (Turin) in Piazza 

Martiri della Libertà; 

• BANCA POPOLARE DI ANCONA opened a new branch at Filottrano (Ancona) and two minibranches 

(including one former treasury branch) at Grazzanise (Caserta) at the air and naval 

base and at Gualdo Cattaneo (Perugia), while it closed 11 units 4 . In January 2011 a new minibranch 

also started to operate at the air and naval base at Frosinone; 

• BANCA CARIME opened a second branch at Monopoli (Bari), while it closed branches at Ceglie 

Messapica (Brindisi) and at Carmiano (Lecce). In March 2011, the mini-branch at Vibo 

Valentia in Corso Vittorio Emanuele III was closed; 

1 Varese in Via Luini, Via Veratti, Via Griffi and at 60 Via Sanvito Silvestro; Bergamo in Via Suardi, at 2 Viale Vittorio Emanuele II and at 3 

Piazza Pontida; Laveno Mombello (Varese) at 81 and 89 Via Labiena; Venegono Superiore (Varese) in Via Busti; Uboldo (Varese) in Viale 

Italia; Busto Arsizio (Varese) in Corso Europe; Cardano al Campo (Varese) in Via Gramsci; Cassano Magnago (Varese) at 6 Via Aldo Moro; 

Gavirate (Varese) in Via IV November; Lonate Pozzolo (Varese) in Via Cavour; Sesto Calende (Varese) in Piazza Abba; Tradate (Varese) in 

Corso Bernacchi; Induno Olona (Varese) at 28 Via Porro; Lavena Ponte Tresa (Varese); Como in Viale Giulio Cesare; Cermenate (Como) at 

29/31 Via Matteotti; Cantù (Como) in Largo Adua; Lecco in Via Resinelli; Seregno (Monza Brianza) in Corso Matteotti; Vimercate (Monza 

Brianza) in Via Garibaldi. 

2 Mantua in Via Calvi and Piazza de Gasperi; Cremona in Via Mantova and in Via Giordano; Caldiero (Vicenza) in Via Strà; Milan in Via 

Negri; Castiglione delle Stiviere (Mantova) at 36 Via Cavour; Brescia at 3 Piazza della Loggia; Piansano (Viterbo). 

3 Milan in Via Gentilino, at 97 Via Padova, Via Rosellini, Via Sanzio, Via Secchi, at 3 Via Solari, Viale Corsica, Via Pindemonte, Viale 

Romagna, Via Tucidide, Corso Cristoforo Colombo, Largo d’Ancona; Parma at 32 Via della Repubblica and Via Tanara; Piacenza in 

Piazzale Velleia and Via Sopramuro; Melzo (Milan) in Piazza Repubblica; Sesto San Giovanni (Milan) at 40 Viale Casiraghi; Abbiategrasso 

(Milan) in Piazza Golgi; Rozzano (Milan) in Via Torino; Cinisello Balsamo (Milan) in Via Libertà; Trezzano sul Naviglio (Milan) in Via 

Leonardo da Vinci; Voghera (Pavia) in Via XX September; Vigevano (Pavia) in Piazza Volta; Casteggio (Pavia) in Via Giulietti; Mortara 

(Pavia) in Piazza Silvabella; Carpi (Modena) in Via Peruzzi. 

4 Marcianise (Caserta) on the Sannitica state road; Ancona in Piazza Rosselli; Fabriano (Ancona) in Via Martiri della Libertà; Senigallia 

(Ancona) at the “Il Maestrale” shopping centre; Fano (Pesaro Urbino) in Via Pisacane; Porto Recanati (Macerata); Rimini in Via 

Gambalunga; Misano Adriatico (Rimini); Pescara at 263 Via Marconi; Rome in Via Ortolani; Guidonia Montecelio (Rome) on the Tiburtina 

state road at Setteville. 

55

• BANCA DI VALLE CAMONICA opened five new mini-branches (including four former treasury 

branches) at Sonico, Niardo and Darfo Boario Terme, Corna district (Brescia), Villa di Tirano 

(Sondrio) and Menaggio (Como); 

• BANCO DI SAN GIORGIO opened a mini-branch at Lerici (La Spezia) and, in March 2011, a minibranch 

in Genoa in Via alla Porta degli Archi; 

• UBI BANCA PRIVATE INVESTMENT opened a second branch in Florence, while it closed six units 

at Bologna, Foggia, Frosinone, Pesaro, Rome in Via Baldovinetti and Varese; 

• CENTROBANCA closed its branch in Bari. 

A full list of all Group branches in Italy and abroad is given in the final pages of this publication. 

After the end of the year the UBI Banca Group rolled out an evolved distribution model (see the 

previous section “Significant events that occurred during the year”) with the introduction of new 

types of “head branch” and “group branch”. The action involved a total of 552 branches in four 

network banks 5 . 

The Italian distribution network of the Group is completed by units dedicated specifically to 

private banking customers (private banking units and the associated “corners”) and to corporate 

customers (corporate banking units and the associated “corners”). 

The summary given in the 

table “Private banking and 

corporate units” shows that 

there were 94 corporate 

banking units and 107 private 

banking units operating as at 

31 st December 2010. As can be 

seen from the table, these 

units were also subject to 

reorganisation 

and 

rationalisation as part of the 

branch optimisation project 

performed in January 2010, 

with a consequent reduction 

compared to the end of 2009 

(-18 private banking facilities 

and -25 corporate facilities) 6 . 

New action was taken to 

restructure these facilities in 

the first few weeks of 2011, 

performed in parallel with the 

changes that affected the 

distribution models of some 

network banks. In detail: 

- with regard to private 

banking facilities, Banco di 

Brescia streamlined its 

presence in Milan and 

Brescia unifying the four 

units previously operating in 

the two Lombard cities into just two PBUs; 

Private banking and corporate units 

31.12.2010 

31.12.2009 

reclassified 

after switch 

Change 31.12.2009 

Private Banking Units 107 104 3 122 

Private Banking Units (PBU) 58 58 - 60 

Banca Popolare di Bergamo 14 14 - 13 

Banco di Brescia 12 12 - 9 

Banca Popolare Commercio e Industria 8 8 - 13 

Banca Regionale Europea 6 6 - 7 

Banca Carime 3 3 - 3 

Banca Popolare di Ancona 5 5 - 5 

Banca di Valle Camonica 1 1 - 1 

Banco di San Giorgio 3 3 - 3 

UBI Banca Private Investment 6 6 - 6 

Private corners 49 46 3 62 

Banca Popolare di Bergamo 18 15 3 18 




Banca Carime 11 10 1 10 


Banco di San Giorgio - 1 -1 1 

Corporate Banking Units 94 95 -1 120 

Corporate Banking Units (CBU) 66 66 - 71 





Banca Carime 5 5 - 5 




Corporate corners 28 29 -1 49 



Banca Popolare Commercio e Industria 4 6 -2 11 


Banca Carime 3 2 1 2 




5 Banco di Brescia, Banca Carime, Banca di Valle Camonica and Banca Regionale Europea. 

6 Additional changes occurring in 2010 were as follows: 

− in the private banking sector, BPB opened three new corners at Arcore, Cesano Maderno, Binzago district (Monza Brianza) and Erba 

(Como); Banco di San Giorgio closed its only corner at Chiavari, while Banca Carime opened a corner at Vibo Valentia, which then 

ceased operations in March 2011 when its mini-branch host closed; 

− in the corporate banking sector, Banca Carime opened a new corner at Lamezia Terme (Catanzaro), while Banca Popolare Commercio e 

Industria closed corners at Sassuolo (Modena) and Reggio Emilia. 

56

- as concerns corporate banking facilities on the other hand, again Banco di Brescia unified two 

units operating previously in Milan into one single CBU and it transformed its Cremona CBU 

into a corner, while opening two new corners in Milan at Lambrate and Corsico (Milan). Banco 

di San Giorgio, on the other hand, closed a corner at Imperia, while Banca Carime transformed 

a corner at Lecce into a CBU and opened a new corner at Martina Franca (Taranto). 

Following the action described, 104 private banking facilities (56 PBUs and 48 corners) and 95 

corporate banking facilities (65 CBUs and 30 corners) were in operation at the date of this Report. 

The distribution network of the Group was also supported by a network of 786 financial advisors 

reporting to UBI Banca Private Investment, consisting of 419 operating in the central and 

northern division and 367 in the central and southern division. The decrease compared to 880 

financial advisors at the end of 2009 reflects the streamlining process started in the second half 

of 2008 designed to increase the average per capita portfolio of financial advisors 7 and to improve 

the quality of the network. 

On the basis of Assoreti (national association of stock brokerage companies) data published in December, UBI 

Banca Private Investment was again in 2010 among the first ten operators nationally in terms of number of 

advisors, assets and net inflows. The latter were driven by assets under management, two thirds of which 

consisting of mutual funds and Sicavs. 

The international presence 

At the date of this report the international presence of the UBI Banca Group was structured as 

follows: 

• two foreign banks, Banque de Dépôts et de Gestion Sa (with branches in Switzerland at 

Lausanne, Geneva and Lugano and a fund management company in Singapore) and UBI 

Banca International Sa (with headquarters in Luxembourg, branches in Munich and Madrid 

and a trust company in Luxembourg); 

• three foreign branches of Banca Regionale Europea in France (at Nice, Menton and Antibes); 

• representative offices in Sao Paolo in Brazil, Mumbai, Shanghai, Hong Kong and Moscow; 

• equity investments (mainly controlling interests) in four foreign companies: in addition to UBI 

Trustee Sa Luxembourg and BDG Singapore Private Ltd. also in Lombarda China Fund 

Management Co. and UBI Management Co. Sa; 

• one Branch of UBI Factor Spa in Krakow in Poland; 

• 37 commercial co-operation agreements with foreign banks (covering more than 50 countries) 

two “Trade Facilitation” agreements with the European Bank for Reconstruction and 

Development (EBRD) and with the International Financial Corporation (IFC) and a “product 

partnership” in the Middle East and in Asia with Standard Chartered Bank to guarantee 

effective assistance on all the principal international markets for corporate clients. 

7 The average size of financial advisors’ portfolios increased from approximately five to six million euro over twelve months 

57

Remote channels 

The Group’s market presence is strengthened by functions for the consultation and management 

of bank accounts provided for network bank customers by multi-channel services. An innovative 

new platform on which all direct channels available to private individuals and businesses 

converge (internet and mobile banking, the contact centre, interbank corporate banking, ATMs 

and POS terminals) ensures the constant enhancement and customisation of services based on 

customer profiles and the channel used. 

Channels available to private individual customers include: 

• the QUI UBI internet banking service for information on banking positions (current accounts, 

securities deposits, payment cards, mortgages, insurance policies, etc.) and to perform 

numerous payment and investment transactions autonomously, with maximum security, 

speed and savings for those gaining access from a PC or a smart cell phone. The “business” 

version for small business clients provides additional specific functions for single bank 

management of a company, which include the payment of single or multiple bills of exchange 

and the management of commercial portfolios; 

• the QUI UBI Contact Centre service, contactable on a toll free number even outside normal 

branch opening times, which in addition to normal telephone services (information, order 

collection and payment instructions) comprises both actual and potential customer support 

and consultation activity together with advertising and marketing activity; 

• a network consisting of approximately 2.500 ATMs, including over 300 equipped for paying in 

banknotes and cheques in addition to normal consultation, withdrawal and payment 

functions. 

Customers of the QUI UBI Internet Banking service grew in 2010 by more than 23%, exceeding 

643 thousand at the end of the year (approximately 520 thousand in December 2009). The growth 

of the QUI UBI Affari service was particularly encouraging having reached more than 65 thousand 

users at the end of the year (+84% compared to twelve months before). 

The mobile banking service recorded 15 thousand accesses per month on the website optimised 

for cell phone navigation, while in December, the first month of availability, over ten thousand 

downloads of applications for iPhones and Androids were recorded. 

The speed and increasing security of these channels has increased customer satisfaction as 

confirmed by the increase in their use: 

- the number of payment and telephone recharge transactions rose to around 4,5 million, an 

increase of 45%; 

- more than half of the trading in securities on regulated markets is now regularly performed 

through direct channels; 

- the percentage of payments performed using evolved ATMs, accounting for 15% in 2010, also 

increased, although by a limited amount. 

These results were also assisted by numerous improvements made during the year, as follows: 

• the internet banking platform for private individual and small business customers was 

improved with new consultation functions (consultation of direct debit instructions, amount of 

total securities deposits, capital gains) and instruction functions (payment of multiple bills of 

exchange, revocation of hardcopy advice of collection orders, email address certification, credit 

transfers for building renovation and energy savings, customisation of menu preferences and 

fast transactions); 

• the rollout of the free information service entitled “QUI UBI Light” designed to help customers 

uneasy with the internet to use this channel; 

• the development of a new multichannel “demo” which shows customers the main functions 

available on direct channels by means of illustrative videos and interactive simulations; 

• the launch of a mobile application for navigation using iPhones and Android smartphones in 

addition to that on the optimised site already available for approximately two thousand models 

of cell phones; 

58

• the adoption of a single infrastructure for the public websites of the network banks based on 

the model adopted for the commercial website ubibanca.com; 

• the launch of a prize competition “Qui fai. Qui hai. Qui UBI” to incentivise the electronic mail 

receipt service entitled Le mie contabili (my accounts) 8 ; 

• in the first half, the installation was also completed of 30 kiosks, self service machines, 

equipped with touch screen technology which provide consultation and instruction functions 

by means of Bancomat debit cards that are very simple and intuitive to navigate. 

Action to enhance internet banking products is also moving forward in the current year with the 

implementation of new functions to further improve customer access to information by means of 

self service procedures and broader technological support in the use of banking services 9 . 

Services for businesses allow companies to manage all their banking and interbank transactions, 

both single and multi-bank. in an efficient and integrated manner. They also allow companies to 

configure the connection for use by single companies or groups of companies, to provide 

economic and organisational benefits in the management of cash flows with banks customers and 

suppliers. 

In the fourth quarter of 2010 the migration onto the new interbank corporate banking platform 

was concluded, which allowed the range of services offered to be redefined on the basis of the real 

needs of the end users. Some small economic operator (SEO) customers were therefore moved to 

the QUI UBI Affari Service, more appropriate to the requirements of these counterparties, while 

the commercial range of products and services for the corporate and small business segments 

was focused on the QUI UBI Businesses Service, the Group’s multi-bank, interbank corporate 

banking product. 

Consequently at the end of December the UBI Banca Group had over 146 thousand companies 

connected to the interbank corporate banking channel, which confirmed the growth in the 

number of payment and receipt instructions communicated on electronic channels. 

Cards 

At the end of 2010 total credit cards issued by B@nca 24-7 and by Cartasì numbered 1.020.898, 

an increase of 6% compared to 963.351 cards in December 2009 and recovering strongly 

compared to June (+17%), a result assisted by marketing initiatives 10 . 

The range currently offered by the UBI Group is differentiated by type of user: 

− private individual customers can choose between flexible cards (with repayment either of the 

balance or in instalments) and revolving cards of different varieties according to the market 

(Retail or Private Banking); 

− companies, on the other hand, are offered business and corporate cards which vary according 

to the credit limit and the services. 

In order to satisfy the different needs of customer segments more fully in terms of functions and 

additional bundled services, a series of actions were defined to streamline the Libra range of 

credit cards issued by B@nca 24-7 and distributed by the network banks of Group. More 

specifically action was taken to diversify the type on the basis of the target customers, with 

consequent differentiation in terms of maximum credit limits and charges, the latter in proportion 

to the services linked to the card. 

In detail, in July: 

8 The number of customers who agreed to forgo hardcopy correspondence in 2010 practically doubled to 200 thousand. At the same time 

the number of current and deposit accounts linked to this service (305 thousand as at December 2010) increased significantly. 

9 Initiatives carried forward in the first quarter of 2011 include: the launch of the prize competition entitled “Formula UBI”, reserved to 

holders of the Libra card, which can be managed on a multi-channel basis (branch, internet, contact centre, SMS); the release of new 

instruction functions for QUI UBI and QUI UBI Affari (e.g. donations to non profit organisations and POS terminal statements); the 

creation of a mobile application for Blackberry and Nokia. 

10 The “Family Range” offer – which allows four payment cards to be purchased (a Libramat debit card, a Libra Classic credit card, an 

additional or family Libra Classic credit card and a SEMPRE prepaid card) offered in a single package at a total cost of 24 euro – was 

flanked in July by the prize competition Il cielo in una carta (heaven in a card) targeted at all those who take out a payment card from 

among a set range during the period when magnetic band cards are replaced with microchip cards. 

59

− marketing of the Libra Gold Superior card was launched, a new “premium” charge card linked 

to the international MasterCard association, available for the Retail and Private Banking 

segments in both a principal and a family version; 

− “Plus” versions of the Libra Classic and Libra Extra cards were introduced; 

− the Libra Gold card was repositioned on the basis of the maximum credit limits and the 

annual charge. Libra Gold, like the new Libra Gold Superior, has therefore become a 

“premium” product which provides additional packages and services of certain interest to 

customers. 

All the new types of card incorporate highly specialised insurance packages that are distinctive on 

the Italian market, provided in co-operation with Chartis Insurance together with the normal 

insurance policies provided by UBI Assicurazioni. The “rebate program” was also extended to the 

Gold and Gold Superior cards. This mechanism, already provided for Libra Extra and Kalìa cards, 

eliminates the annual charge if spending in the year before exceeds a set amount 11 . 

Prepaid cards increased by 30% over twelve months to 175.942 (135.413 at the end of 2009), as a 

result of the success of “Enjoy”, the new reloadable evolved card launched in April which 

incorporates the services of a current account 12 . 

The Enjoy card, which achieved immediate popularity with 45 thousand cards issued in 2010, 

won the “MF Innovation Award” for services and prepaid cards 13 . 

The launch of this new prepaid card was effectively supported by the advertising campaigns 

Libertà di comunicare (Freedom to communicate) and Promozione Natale 2010 (2010 Christmas 

promotion), both designed to acquire new customers. It was also assisted by the possibility 

introduced in December to book the card online and then collect it from branches as part of the 

“Remote selling project” for the development of internet sales of banking products 14 . 

Finally, as concerns debit cards (Bancomat-Pagobancomat), at the end of 2010 these came to 

number 1.900.000, an annual increase of over 25%. 

The trend was assisted by the marketing in the second half of the new Libramat card, a debit card 

equipped with a microchip which responds to the new general SEPA recommendations. 

The distinctive feature of this new card is the ability to make withdrawals and payments subject 

to online control of current account balances, both in Italy and abroad (termed “OLI”, On Line to 

Issuer). It is also possible to set further limits (termed “card” limits) without online controls of 

current account balances. 

In July the Group commenced the progressive replacement of the current multifunction debit and 

credit cards equipped with magnetic bands only with new chip cards. This process, which should 

be complete by the end of the first half of 2011, involves over a million and a half cards. 

The Group also has more than 61.220 POS terminals installed in retail outlets. In 2010, Banca 

Popolare Commercio e Industria participated in a pilot initiative to install POS terminals with 

contactless technology in the Milan area which allow payments of small amounts to be accepted, 

termed micro-payments, swiftly and securely, where the transaction is performed in just a few 

seconds, without cardholders losing possession of their payment cards. The contactless 

technologies installed are PayWave by Visa and PayPass by MasterCard. 

11 “Formula UBI” was launched in February 2011, a prize competition designed to increase customer loyalty by the extraction of prizes for 

holders (both new and existing customers) of at least one Libra card linked to the MasterCard association. 

12 These included the following; credit transfers in Italy and in the Sepa Area; payment of wages directly into the card account; direct debit 

of utility bills; the definition, from time to time, of the maximum balance that can be spent by telephone or internet banking (box 

service); the possibility to make micro-payments using innovative new contactless technology(MasterCard, PayPass). 

13 The “Milano Finanza” newspaper awards, made in co-operation with Accenture, are among the most important made to companies in 

the banking, financial and communication industries. The Innovation Award in particular is made to financial products and services 

which respond best to market demands. 

14 Additional versions of the Enjoy card were launched in March 2011 with the common feature that they can be customised by customers: 

Enjoy standard, with indication of the first and last name of the holder, Enjoy Gallery Card, with customisable graphics; Enjoy Brand 

Card, the result of co-branding initiatives with institutions and companies made-to-measure to meet the requirements of the brand 

partner. 

60

The positioning of the Group 

The table summarises the positioning of the 

UBI Group in terms of branches as at 30 th 

September 2010, on the basis of the latest 

available Bank of Italy data. 

Compared to the position at the end of 2009, 

market share has fallen in some of the 

Lombard provinces affected by geographical 

streamlining initiatives agreed under the 

trade union agreement of 20 th May 2010. 

With account taken of recently formed 

provinces 15 , at the end of September the 

Group had a market share equal to or greater 

than 10% in 19 Italian provinces, as well as 

an important presence in Milan (9%) and in 

Rome (4%). 

UBI Banca Group: market shares 

Branches 30.9.2010 31.12.2009 

North Italy 6,4% 6,6% 

Lombardy 12,9% 13,4% 

Prov. of Bergamo 20,9% 20,8% 

Prov. of Brescia 22,8% 22,4% 

Prov. of Como 6,1% 6,7% 

Prov. of Lecco 5,4% 5,9% 

Prov. of Sondrio 8,1% 7,1% 

Prov. of Mantua 5,7% 6,5% 

Prov. of Milan 9,1% 9,6% 

Prov. of Monza Brianza 8,5% - 

Prov. of Pavia 15,5% 16,4% 

Prov. of Varese 23,7% 26,5% 

Piedmont 8,4% 8,3% 

Prov. of Alessandria 11,2% 11,0% 

Prov. of Cuneo 24,5% 24,6% 

Prov. of Novara 5,1% 5,0% 

Liguria 6,0% 6,0% 

Prov. of Genoa 5,0% 4,9% 

Prov. of Imperia 5,8% 5,7% 

Prov. of Savona 5,9% 5,9% 

Prov. of La Spezia 10,3% 10,9% 

Central Italy 3,6% 3,7% 

Marches 8,7% 9,0% 

Prov. of Ancona 10,5% 11,1% 

Prov. of Macerata 9,5% 9,8% 

Prov. of Ascoli Piceno 3,6% 6,4% 

Prov. of Fermo 10,6% - 

Prov. of Pesaro-Urbino 8,1% 8,2% 

Latium 4,3% 4,4% 

Prov. of Viterbo 14,9% 15,2% 

Prov. of Rome 4,0% 4,1% 

South Italy 8,3% 8,3% 

Campania 6,1% 6,1% 

Prov. of Caserta 8,6% 8,6% 

Prov. of Salerno 8,1% 8,0% 

Prov. of Naples 5,5% 5,4% 

Calabria 22,2% 21,7% 

Prov. of Catanzaro 14,2% 13,9% 

Prov. of Cosenza 25,7% 25,6% 

Prov. of Crotone 18,9% 18,4% 

Prov. of Reggio Calabria 22,2% 21,4% 

Prov. of Vibo Valentia 28,2% 26,8% 

Basilicata 14,5% 14,5% 

Prov. of Matera 15,7% 15,5% 

Prov. of Potenza 13,9% 13,9% 

Apulia 8,1% 8,2% 

Prov. of Brindisi 11,6% 12,3% 

Prov. of Bari 10,1% 9,2% 

Prov. of Barletta-Andria-Trani 6,3% - 

Prov. of Taranto 8,3% 8,3% 

Total Italy 5,6% 5,7% 

15 The Bank of Italy has provided market share data from June 2010 for the new provinces of Monza Brianza, Fermo and Barletta-Andria- 

Trani, formed in 2009. 

61

Human resources 

Changes in the composition of Group Personnel 

Employees actually in service 

Employees on the payroll 

31.12.2010 31.12.2009 Changes 31.12.2010 31.12.2009 Changes 

Number A B A-B C D C-D 

Banca Popolare di Bergamo Spa 3.761 3.606 155 3.808 3.664 144 

Banco di Brescia Spa 2.632 2.624 8 2.625 2.643 -18 

Banca Carime Spa 2.221 2.211 10 2.363 2.395 -32 

Banca Popolare Commercio e Industria Spa 1.756 1.965 -209 1.952 1.946 6 

Banca Popolare di Ancona Spa 1.715 1.692 23 1.795 1.805 -10 

Banca Regionale Europea Spa 1.552 1.958 -406 1.585 2.011 -426 

UBI Banca Scpa 1.367 1.318 49 2.171 2.204 -33 

Banco di San Giorgio Spa 417 373 44 418 369 49 

Banca di Valle Camonica Spa 346 349 -3 346 353 -7 

Centrobanca Spa 325 351 -26 316 337 -21 

IW Bank Spa* 291 281 10 312 284 28 

B@nca 24-7 Spa 227 204 23 172 135 37 

UBI Banca Private Investment Spa 167 174 -7 163 171 -8 

Banque de Dépôts et de Gestion Sa 110 124 -14 107 124 -17 

UBI Banca International Sa 98 96 2 92 91 1 

TOTAL FOR BANKS 16.985 17.326 -341 18.225 18.532 -307 

UBI Sistemi e Servizi SCpA 1.860 1.838 22 665 657 8 

UBI Leasing Spa 242 226 16 250 245 5 

UBI Factor Spa 153 145 8 145 143 2 

UBI Pramerica SGR Spa** 142 128 14 122 117 5 

Prestitalia Spa 105 107 1 102 107 -5 

UBI Insurance Broker Srl 40 38 2 36 36 - 

UBI Fiduciaria Spa 23 25 -2 17 18 -1 

Silf Spa 14 26 -12 25 28 -3 

BPB Immobiliare Srl 9 10 -1 4 5 -1 

IW Lux Sàrl 7 13 -6 8 10 -2 

UBI Gestioni Fiduciarie Sim Spa 7 8 -1 4 4 - 

Gestioni Lombarda (Suisse) Sa 6 8 -2 5 8 -3 

Centrobanca Sviluppo Impresa SGR Spa 6 6 - 2 2 - 

Coralis Rent Srl 6 5 1 - - - 

UBI Trustee Sa 4 - 4 4 - 4 

UBI Management Company Sa 2 3 -1 2 3 -1 

S.B.I.M. Spa 1 1 - - - - 

Twice Sim Spa* - 44 -44 - 44 -44 

Capitalgest Alternative Investments SGR Spa** - 10 -10 - 1 -1 

UBI Pramerica Alternative Investments SGR Spa** - 2 -2 - 5 -5 

CB Invest Spa - 1 -1 - 3 -3 

TOTAL 19.612 19.970 -358 19.616 19.968 -352 

Workers on personnel leasing contracts 87 373 -286 87 373 -286 

TOTAL PERSONNEL 19.699 20.343 -644 

On secondment outside the Group 

- out 17 14 3 

- in 13 16 -3 

TOTAL WORKFORCE 19.716 20.357 -641 19.716 20.357 -641 

∗ The position of IWBank as at 31 st December 2010 also includes the personnel of Twice Sim, merged on 1 st November 2010. 

** The position of UBI Pramerica SGR Spa as at 31 st December 2010 also includes the personnel of Capitalgest Alternative Investments SGR Spa and UBI 

Pramerica Alternative Investments SGR Spa merged with effect from 1 st July 2010. 

The table above gives details for each company of the actual distribution of ordinary employees (workers on permanent and temporary 

contracts and on apprenticeship contracts) within the Group as at 31 st December 2010, adjusted to take account of secondments to and from 

other entities within or external to the Group (column A) compared with the position at the end of 2009 (column B) restated on a consistent 

basis. Column C, on the other hand, gives details for each company of the number of employees on the payroll as at 31 st December 2010 

compared with the end of 2009 restated on a consistent basis (column D). 

The position as at 31 st December 2009 was restated as follows: 

• the personnel of UBI Banca was reduced by 50 employees working on depositary banking operations disposed of on 31 st May 2010; 

• the personnel of Banca Carime was increased by one, reinstated in 2010. 

62

At the end of 2010 the total personnel of the UBI Banca Group numbered 19.699 compared to 

20.343 in December 2009 1 , a decrease over twelve months of 644. This change reflects, on the 

one hand, less recourse to agency leasing contracts by network banks and Group member 

companies and, on the other, a reduction in the numbers of employees actually in service, on 

temporary and on permanent contracts, due to personnel turnover with recruitment and persons 

leaving and to redundancy schemes. 

The synergies involved primarily the network banks (-612 consisting of 378 employees and 234 

on agency leasing contracts), mainly in relation to two batches leaving under incentive schemes 

under the agreement of 20 th May 2010 (which involved a total of 500 personnel, including 436 in 

the network banks), but also as a result of redundancy initiatives performed in the distribution 

network. 

Furthermore, the changes in personnel numbers at the level of individual network banks are attributable to the 

branch “switches” performed in January as part of the branch network optimisation plan, which led to 

specialisation of the banks by geographical area. 

The remaining personnel working in other banks and companies in the Group also recorded a 

decrease in personnel (a total of -32), which nevertheless included some units with growth in 

personnel consistent with the specific organisational and market contexts in which they operate. 

The table gives details of changes in the type 

of employee contract, with a total decrease 

in numbers over twelve months of 352, the 

result of 1.056 personnel leaving – 153 due 

to use of the “solidarity fund”, 413 for 

retirement, (392 on incentive schemes) and 

198 for end of contract – and 704 new 

appointments, as follows: 

- 293 on permanent contracts (including 

part of the 550 temporary contract 

conversions pursuant to the agreement of 

20 th May 2010 2 ), 

- 400 on temporary contracts and 

- 11 on apprenticeship contracts. 

Employees on the payroll 

Number 31.12.2010 31.12.2009 Change 

Total employees 19.616 19.968 -352 

of which: permanent 19.420 19.441 -21 

on temporary contracts 171 498 -327 

apprentices (*) 25 29 -4 

(*) Contract regulated by Legislative Decree No. 276/2003 (Biagi Law) for young people 

between the ages of 18 and 29, by which they acquire a qualification through training at 

work which provides them with specific occupational skills. The duration varies from a 

minimum of 18 months to a maximum of 48 months. 

In the fourth quarter of 2010, the contracts of 13 employees were converted from 

temporary to permanent contracts. 

Intragroup mobility involved 641 personnel consisting of 505 on secondment and 136 leaving and 

being re-appointed in a new Group member company. This mobility was attributable mainly to 

organisational measures taken in connection with processes to reallocate personnel as a 

consequence of initiatives to increase efficiency performed in implementation of the trade union 

agreement of 20 th May 2010 and in connection with merger operations. 

The average age of Group employees as at 31 st December 2011 was 43 years and five months 

compared to 43 years and three months at the end of 2009, while the average length of service 

was 16 years and nine months compared to 16 years and seven months a year before. 

The percentage of part time 

employees was 7,3% (7% at the 

end of 2009). Female personnel 

accounted for 36,7% of the total, 

compared to 35,5% in the year 

before. 

Composition of personnel in Group Banks by rank 

Number 31.12.2010 % 31.12.2009 % 

Senior managers 411 2,3% 465 2,5% 

Middle managers 3rd and 4th level 3.209 17,6% 3.291 17,8% 

Middle managers 1st and 2nd level 3.877 21,3% 3.961 21,4% 

3rd Professional Area (office staff) 10.488 57,5% 10.540 56,8% 

1st and 2nd Professional Area (other personnel) 240 1,3% 275 1,5% 

As can be seen from the table 

TOTAL FOR BANKS 18.225 100,0% 18.532 100,0% 

there were no significant 

changes in the composition of personnel by rank. The reduction shown in both absolute and 

1 The figure published in the consolidated financial statements as at and for the year ended 31 st December 2009 (20.285) also included 50 

personnel working in the depository operations business unit disposed of by UBI Banca in May 2010; on the other hand it did not yet 

include Prestitalia (107 employees), included in the consolidation with effect from September 2010, and also one employee of Banca 

Carime reinstated during the year. 

2 The remaining conversions to permanent contracts do not appear as new appointments because they were performed with changes in the 

contract with no intervening interruption. 

63

percentage terms in the senior manager category reflects the redundancy incentive scheme 

implemented in 2010. 

Further details in trends and in the composition of Group personnel are given in the 2010 Social 

Report, which may be consulted. 

Developments in redundancy plans and the employment 

programme 

As concerns the redundancy plan implemented by the UBI Banca Group on the basis of the trade 

union agreement of 14 th August 2007, this resulted in 36 personnel leaving in 2010 which, added 

to the 864 that had already left since 31 st December 2009, brought the total number of personnel 

leaving at the end of 2010 to 900. This incentive scheme will end in 2011 with 60 employees 

leaving after a postponement in relation to new measures introduced by Decree Law No. 78/2010 

(converted into Law No. 122/2010). 

As concerns the 500 redundancies planned under the trade union agreement of 20 th May 2010, 

321 were implemented effective from 1 st July and the remainder took effect subsequent to that 

date. 

Personnel leaving through use of the ‘credit solidarity fund’ numbered 116, while in all other 

cases personnel left due to retirement. 

As concerns the employment programme, the 425 conversions from temporary to permanent 

contracts planned under the agreement of 14 th August 2007 had already been completed in 2009. 

However, the following was performed in 2010: 

- 170 temporary to permanent contract conversions pursuant to the trade union agreement of 

23 rd January 2010 concerning “the branch switching operation”; 

- 550 contract conversions under the agreement of 20 th May 2010, all completed in the last 

quarter of the year, the majority of which with the transformation performed with no 

interruption in service. 

The children of workers who had applied for early redundancy were considered in the selection of candidates 

in compliance with the trade union agreement of August 2007 and subsequently affirmed in that of May 2010. 

Management policies and instruments 

The difficult economic context in recent years, characterised by increasing demands from 

customers and strong pressure on profits, required action to be taken in a number of areas. In 

this situation the UBI Group considered it even more important to focus on human capital as a 

key factor in the success of the Group. 

With a view to enhancing and encouraging the growth of its human resources, the UBI Group 

uses operational and development tools established and periodically updated over the years, 

which provide it with a valuable database on the occupational history of personnel. 

The system of roles, skill measurement and performance assessment are used to manage almost 

all personnel and the results represent the basis for the definition of career paths, the 

identification of training requirements and how economic recognition is assigned. 

“Managerial appraisal” methods (assessment through structured interviews) are used to enhance 

and develop key personnel with the objective of verifying – and if necessary increasing – 

consistency between market challenges and the skills of senior management. 

Particular attention is paid to the management of talent in the Group, in order to ensure 

continuity in management and appropriate action to guarantee personnel retention. In this 

64

espect the measurement of potential was continued, in order to facilitate the ability to fill future 

key positions in the Group, by giving priority to internal personnel, and was extended in the 

current year to include mass market account managers, professionals in the product companies 

and function managers at UBI Banca and UBI Sistemi e Servizi, with a total of 262 personnel 

involved. 

Finally the release of ERM (Employee Relationship Management) was completed during the year 

at UBI Banca, UBI Sistemi e Servizi and in the network banks. It is an innovative tool designed to 

integrate and enhance the management and development of human resources. ERM not only acts 

as a pool for all information on employees, but also assigns a portfolio of resources to each 

manager, providing them with valid support in directing and managing their actions, in order to 

ensure a proactive, swift and standard approach in behaviour adopted throughout the Group. All 

this allows an increasingly sharper focus on individuals, thereby placing human resources at the 

centre of management activity. 

Remuneration and incentive policies 

The pursuit of the objectives of sustainable growth and the creation of value, defined in the 

document “Risk appetite and the creation of value in the UBI Banca Group: details and 

governance” also apply in the governance of remuneration and incentive schemes, where the 

objective is to encourage, by means of planning over a number of years and through sound and 

prudent management, the maintenance of a level of capitalisation that is adequate for the risks 

assumed. 

In view of this, on 10 th March 2010 the Supervisory Board of UBI Banca, having consulted the 

Remuneration Committee, approved the “Remuneration and incentive policies” of the UBI Group 

(“2010 Policy”), formulated on the basis of EU and national legislation, with the involvement of the 

corporate functions responsible for risk management, strategic planning and compliance and also 

with the support of a major external consulting firm. 

The basic principles on which the incentive and remuneration system for 2010 was based are as 

follows: 

- identification of conditions for implementation in terms of profit appropriate to the risk; 

- the definition of a total amount of performance related remuneration such as not to limit the 

ability of the bank to maintain an adequate level of capitalisation for the risks assumed; 

- the establishment of symmetry with respect to the results achieved with significant reductions 

(even to zero) if performance is below forecasts or negative; 

- assessment of the results of the business unit a person belongs to and to that of the bank or 

Group as a whole and, where possible, of the results of the individual; 

- variable remuneration linked to long term performance measurement indicators which reflect 

the profitability of the bank over time, adjusted for current and future risks, for the cost of 

equity and the liquidity required to perform the activities undertaken; 

- the presence of an adequate system for deferring remuneration for an appropriate period of 

time, for a substantial proportion of the remuneration of those roles of particular importance 

to Group profits and risk; 

- any clauses agreed for the early termination of employment contracts are such as to ensure 

that the remuneration paid in these circumstances is linked to the performance achieved and 

the risks assumed. 

The 2010 Policy consists of five chapters as follows: 

1) defines the general principles to be applied to determine remuneration for company officers; 

2) deals with the principles for the determination of fixed remuneration and approaches and 

methods for determining the variable component and its partial deferment; 

3) gives details of roles and responsibilities in the definition, proposal and approval of the 

remuneration and incentive system; 

4) illustrates operational procedures and timing for the implementation of the system; 

65

5) defines control mechanisms for the system in compliance with supervisory authority 

recommendations. 

The values on which the 2010 Policy is based are those of equity, uniformity, meritocracy and 

consistency over time. Pursuit of these values is important to the Group and it also relates to 

models for determining variable components of remuneration introduced in Group companies in 

2010, attributable to three types of incentive, depending on the recipients and the specific 

mechanisms: 

- the first is for top and senior management (Management by Objectives – “MBO TSM”); 

- the second is for the remaining executive personnel (Management by Objectives – “MBO Other 

executive personnel”); 

- the third is for middle managers and professional areas (Ordinary Incentive Schemes– “OIS”). 

Conditions were established for the implementation of incentive schemes for 2010 based on value 

creation and risk parameters such as the achievement of normalised gross income targets and 

return on risk adjusted capital (“RORAC”). The schemes are based on the principle of 

management by objectives, where specific objectives at company, team and individual level are 

set, with the calculation of bonuses linked to the achievement of those objectives. In 

consideration of the particular economic situation resulting from the financial crisis, the models 

adopted involved the payment of significant and growing variable remuneration only if budget 

objectives are exceeded. 

With regard to the types of objective, use was made of indicators which, in compliance with the 

requirements of “objectivity” and “immediate measurement”, were consistent with long term 

strategies and interests (including sustainable growth, ethics, uniformity, personnel development, 

skills acquired) and the effectiveness and permanence of the results, also for the purposes of 

adequate capitalisation in relation to the risks assumed. The definition of the objectives 

underlying the incentive mechanisms and generally those connected with banking or insurance 

products and services was performed with regard to the need to pursue and safeguard the 

integrity of relations with customers and to comply with regulations and legislation in force. To 

give an example, direct links with individual services or products are excluded for personnel 

responsible for the sale of financial products and instruments, and reference is made more 

generally to areas or sectors of activity and types of service or product. 

Other indicators used, either directly or indirectly adjusted for risk, or of a non financial type, 

concern the following: 

- profit objectives adjusted for actual or expected losses (e.g. operating losses and impairment 

losses on loans either singly or collectively calculated); 

- non financial objectives, related also to monitoring of ex-ante risk (e.g. performing positions 

past due for longer than 60 days, MiFID advice, net customer flows); 

- customers satisfaction objectives, using specific surveys and continuous monitoring of 

customer satisfaction levels; 

- income objectives and volumes for aggregates without reference to single products, although 

with a distinction made between direct and indirect funding, with different weightings. 

The schemes involve the exclusion of employees subject to disciplinary measures more serious 

than a verbal reprimand. Special treatments such as guaranteed bonuses and leaving bonuses 

which exceed those provided for by collective labour agreements are also excluded. 

The use of economic and financial indicators was expressly excluded for those functions included 

in cases mentioned in legislation and regulations, such as for example functions involved in the 

preparation of corporate accounting documents, internal controls, compliance and risk 

management. In these cases appropriate indicators linked to the operations of the organisational 

unit were identified. 

The bonus is linked to medium-to-long term objectives for roles that are of particular importance 

to Group profitability and risk as follows: 

- payment of a part of the bonus accruing on the basis of annual results achieved (by the Group, 

company, business unit/function and individual), in relation to the position occupied, in the 

year following the period in question, with deferral of the remaining part paid after three years, 

depending on the achievement of profit and risk objectives; 

66

- for the achievement of three-year objectives, payment of a part of the deferred bonus at the end 

of the three-year period, without interest, while a remaining part is linked to the UBI Banca 

share price in the observation period 1 st January 2011 – 31 st December 2014, as specifically 

decided by the Shareholders’ Meeting of UBI Banca of 24 th April 2010, with subsequent 

payment after five years; 

- any deferred part of bonuses are not paid if the three-year objective is not achieved; 

- loss of all rights to deferred bonuses if the contract of employment is terminated in the period 

considered. 

As concerns members of the governing bodies of the Group (with the exception of executive board 

members/chief executive officers, who may receive performance related remuneration), 

remuneration and incentive policies exclude them from variable remuneration and no guaranteed 

bonuses or leaving bonuses are paid to members of these bodies. Furthermore, the fees set for 

board members who are employees of the UBI Banca Group and hold positions in a Group bank 

or company is incorporated in their salaries and is therefore paid back to the company concerned. 

In terms of amount, at consolidated level the 

fees of directors and statutory auditors 

accounted for approximately 1,47% of 

personnel expense as shown in the table aside. 

UBI Banca Group: 

composition of personnel expense 

Figures in thousands of euro 31.12.2010 

Directors and statutory auditors' fees 20.880 

Other items 1.397.471 

Total Personnel expense (1) 1.418.351 

(1) Net of non-recurring items 

The tables below show the distribution of the cost of gross annual remuneration for employees at 

consolidated level and for the Parent. 

Gross Annual Remuneration (1) : UBI Banca Group 

Gross Annual Remuneration (1) : 

UBI Banca Scpa (employee workforce) 

Figures in thousands of euro 

31.12.2010 


31.12.2010 

Senior managers 88.913 

Middle managers 608.050 

Professional Areas 565.091 

TOTAL 1.262.054 

1) Valued at cost, by applying an average cost of approximately 40%. Cost items not 

considered a component of fixed remuneration have been excluded (e.g. overtime, 

travelling allowances, expense refunds, bonuses and incentives, productivity awards, 

etc.). 

Senior managers 25.588 

Middle managers 56.965 

Professional Areas 27.990 

TOTAL 110.543 

1) Valued at cost, by applying an average cost of approximately 40%. Cost items not considered a component of 

fixed remuneration have been excluded (e.g. overtime, travelling allowances, expense refunds, bonuses and 

incentives, productivity awards, etc.). 

The composition of gross annual remuneration is also reported below for individual Macro Areas 

of the Parent, in terms of senior management, middle management and professional areas. 

67

Gross Annual Remuneration (1) : Unione di Banche Italiane Scpa [w orkforce (2) ] 


Senior 

managers 

Middle 

managers 

Professional 

Areas 

Total 

2010 

Legal and corporate affairs and subsidiaries 2.245 3.522 1.852 7.619 

Administration and operational control 2.347 5.091 3.887 11.325 

Parent and Group audit 1.231 11.109 2.515 14.855 

Commercial 6.022 9.717 7.566 23.305 

Risk control 2.430 6.593 3.158 12.181 

Credit and credit recovery 1.848 4.824 2.537 9.209 

Finance 1.994 5.563 943 8.500 

Human resources and organisation 3.376 7.946 4.697 16.019 

Strategic development and planning 1.060 1.954 465 3.479 

TOTAL 22.553 56.319 27.620 106.492 

1) Valued at cost, by applying an average cost of approximately 40%. Cost items not considered a component of fixed remuneration have 

been excluded (e.g. overtime, travelling allowances, expense refunds, bonuses and incentives, productivity awards, etc.). 

(2) Excluding General M anagement and personnel reporting directly to the Supervisory Board and the Chief Executive Officer. 

Lastly, gross annual remuneration for the “key personnel” of the Group is given in compliance 

with the latest Bank of Italy “Supervisory measures concerning the remuneration and incentive 

practices of banks” (document subject to public consultation until 22 nd January 2011 and 

currently being published 3 ). 

Gross Annual Remuneration (1) : "Key personnel" 

(2011 Policy) 

Figures in thousands of euro 28.02.2011 

Key personnel 13.958 

1) Valued at cost, by applying an average cost of approximately 40%. Cost items not 

considered a component of fixed remuneration have been excluded (e.g. overtime, 

travelling allowances, expense refunds, bonuses and incentives, productivity awards, 

etc.). 

Finally, with regard to variable remuneration at Group level for 2010 this amounted, inclusive of 

collective company bonuses, paid on the basis of allocations made in the accounts, to 1,54% of 

personnel expense net of non-recurring items, due to the failure to meet the conditions required 

to trigger bonus schemes. 

*** 

As concerns the most recent developments, at the end of 2010 further changes were introduced to 

the relative regulations. 

On 14 th December 2010, Directive 2010/76/EC of the European Parliament and the Council of 

the European Union was issued, which amended Directives No. 2006/48EC and No. 2006/49/EC 

with regard to the capital requirements for trading portfolios and for securitisations and the 

supervisory authority review of remuneration policies. It expressly includes remuneration policies 

and practices in the organisational structures and governance of banks and in the oversight 

activities of supervisory authorities and it contains specific criteria with which banks must 

comply in order to: guarantee proper processing and implementation of remuneration schemes; 

manage potential conflicts of interest effectively; ensure that remuneration schemes take 

appropriate account of the current and future risks, the degree of capitalisation and the liquidity 

3 “Subjects whose professional role has or may have a significant impact on the banks risk profile” category. The 

Supervisory measures provide a non exhaustive list of positions which unless differently indicated belong to this category, 

as: Director with executive powers, General Managers and Managers of the main business or geographical areas; staff 

directly reporting to the boards in charge for strategic supervision, management and control. 

68

levels of each bank; increase the degree of transparency towards markets; strengthen oversight 

action by supervisory authorities. 

In order to implement Directive 2010/76/EC, on 22 nd December 2010 the Bank of Italy opened 

the document “Supervisory measures concerning the remuneration and incentive practices of 

banks”, which is currently being published, to public consultation, on the basis of articles 53 and 

67 of the Consolidated Banking Act and decrees of the Ministry of Economics and Finance, in its 

capacity as Chair of the Interministerial Committee for Credit and Savings meetings of 5 th August 

2004 and 27 th December 2006, which addressed the subjects of the organisation and governance 

and the capital adequacy and the containment of risk and the public disclosures of banks and 

banking groups, respectively. 

For the purpose of implementing the latest changes in regulations, on 25 th February 2011, the 

Supervisory Board of UBI Banca, after consultation with the Remuneration Committee, approved 

the document “Remuneration and incentive policies” (“Policy 2011”), on the following matters: 

1. general policy on the remuneration of corporate bodies; 

2. remuneration and incentive policies for employees or associate workers not linked to the 

Group by regular employee contracts; 

3. powers and responsibilities (in the definition, proposal and approval of the remuneration and 

incentive system); 

4. controls (to be performed by the relative corporate functions designed to pursue the adequacy 

and regulatory compliance of the remuneration policies and practices adopted and their proper 

functioning). 

As concerns the remuneration structure for members of governing bodies, the 2011 Policy affirms 

the guidelines set out in the 2010 edition, but with some amendments. Principles of the policy 

include the following: 

- the fees of members of the governing bodies of the UBI Group are structured with a ceiling set 

by that of the Chairman of the Management Board which is set at the same level as that of the 

Chairman of the Supervisory Board, (the amount of which is related to decisions taken by 

shareholders); 

- for subsidiaries, fees for attendance by the Chairman and Deputy Chairman at meetings of the 

Board of Directors and the Executive Committee may be included in the fixed fee for the 

position; 

- executive board members and chief exective officers may receive forms of remuneration linked 

to results, while all the other members of the governing bodies of the Group receive no variable 

remuneration; 

- traditional “attendance tokens” are incorporated as part of the fixed remuneration; 

- no guaranteed bonuses or leaving bonuses exist for members of governing bodies (apart for 

any exceptions expressly allowed for by the “Supervisory Measures). 

In consideration of the need for UBI Banca Group policy to comply with these new requirements, 

the 2011 Policy provides for the following: 

- the identification of “key personal” in accordance with the Bank of Italy “Supervisory 

Measures” currently being published; 

- the identification of performance indicators measured net of risks over several years; 

- for top management, deferment of payment of a portion of between 40% and 60% of bonuses 

and the introduction of the use of financial instruments for a portion equal to at least 50% of 

variable remuneration, setting an adequate period of personnel retention for this. 

The incentive mechanisms put in place to implement the 2011 Policy included details of aspects 

relating to conditions to trigger incentives, definition of the underlying objectives, calculation 

formulas, procedures for payment of bonuses (including matters concerning deferment and the 

use of financial instruments), specifications concerning personnel belonging to control functions 

and payment rules. 

69

Trade union relations 

Activity involving relations with trade union organisations was intense during the year in 

question. It was attributable mainly to the streamlining and optimisation of the distribution 

networks of some Group banks and to the continuation of integration processes. 

The procedures agreed for the optimisation of the branch network of the UBI Group were 

concluded on 23 rd January 2010. They were performed by means of transfers of business units 

between Banca Popolare di Bergamo, Banco di Brescia, Banca Regionale Europea, Banca 

Popolare Commercio and Industria e Banco di San Giorgio, by the transformation of branches 

into mini-branches and adjustment to the new geographical organisation of banks. A special 

Trade Union Memorandum of Intent was signed to regulate all financial and regulatory aspects of 

the procedures for the transfer of the employment contracts of the approximately 2.200 personnel 

affected by the operation. 

With specific reference to Banca Regionale Europea, following, amongst other things, the new 

focus of the bank in Piedmont, the agreement signed on 21 st October 2010 regulated the transfer 

to Turin of the Central Management in Milan and the decentralised offices in Cuneo. The 

operation did not involve job losses, but did involve geographical mobility measures and, where 

necessary, job retraining measures. 

Again with regard to action taken on the local distribution networks of the network banks, the 

introduction of an evolved distribution model was agreed with trade union organisations at Banco 

di Brescia, Banca Regionale Europea, Banca di Valle Camonica and Banca Carime, (parent 

branches – group branches). The main aims included strengthening market presence and 

improving the commercial effectiveness and operational efficiency of branches. 

An agreement was signed on 20 th May at Group level concerning procedures for the management 

of redundancies within the UBI Group, designed to improve efficiency and productivity through 

rigorous containment of costs, and of labour costs in particular, against a background scenario of 

general weakness in the banking sector and a consequent reduction in revenues (see the section 

“Significant events that occurred during the year” for further details). 

Negotiations were commenced in January 2010 and subsequently concluded on 3 rd February 

concerning the discontinuance of operations at UBI Sistemi e Servizi relating to Sicav 

administration and the consequent reorganisation of the Finance and Foreign Back Office 

Department. This action, taken in preparation for the transfer of correspondent banking 

operations to RBC Dexia, did not involve job losses, but did involve job conversion processes 

within UBI Sistemi e Servizi for the personnel concerned. 

The redefinition of the operational perimeter and the organisational structure of Twice Sim Spa 

was performed in March, followed by the merger of Twice Sim Spa into IW Bank Spa, with effect 

from 1 st November. Procedures for the management of geographical and occupational mobility 

were agreed upon with trade union organisations with an agreement of 21 st October 2010. 

An agreement was signed in June concerning the merger of UBI Pramerica Alternative 

Investments SGR Spa and Capitalgest Alternative Investments SGR Spa into UBI Pramerica SGR. 

The operation in question, designed primarily to streamline the corporate structure of the 

companies controlled by UBI Pramerica SGR Spa, did not involve any job losses, nor were there 

any significant repercussions in terms of geographical and occupational mobility. 

On 26 th November 2010 a Memorandum of Intent on “Climate” was signed, the result of wide 

ranging consideration of issues relating to the best use of human resources and their centrality 

and enhancement as a key factor for the development and success of the Group. This trade union 

agreement was designed to seek solutions which will ensure fair and sustainable working 

conditions centred on respect for the dignity of workers, by putting in place an adequate system 

of guarantees concerning working conditions and the organisation of personnel. On that same 

date it was decided to reward all personnel for the great efforts made in the reorganisation 

processes which affected the Group with an extraordinary one-off payment in the form of fuel 

coupons and/or a contribution to pension funds. 

70

Finally, to complete the picture of discussions and negotiations with trade unions, mention must 

be made of agreements signed in application of and in compliance with measures established 

under the national labour contract in force, on specific company issues at Banca Regionale 

Europea, Banco di Brescia, Banco di San Giorgio and UBI Factor. 

Training 

Training constitutes a key factor for the professional enhancement of personnel. Appropriately 

structured and integrated with other systems for the development of human resources, it is an 

effective tool for improving specialist skills and for developing corporate identity and culture 

through the dissemination of Group values and strategies. 

The overall training supply, which may be consulted in a special online catalogue, includes the 

following: 

• a system of defined training programmes, structured in the form of a sequence of 

recommended courses and on-the-job experience stages designed to ensure the development 

and refinement of the knowledge and skills considered necessary for each role and required as 

part of the skill measurement system; 

• specific training, designed to satisfy the requirements of specific segments of Group personnel 

and to support the dissemination of strategies and projects relating to organisational 

innovation, changes generated by regulatory developments and the more significant product, 

instrument and process innovations. 

Over 96.000 training days (in the classroom, job experience and remote training) were delivered in 

2010, virtually unchanged compared to 2009 and with an average of approximately 5,2 training 

days per employee. Seventy five percent of training was for personnel working in retail market 

roles, 52% for personnel in professional areas and 46% for middle management personnel. 

A total of approximately 443.000 training days were delivered in the period 2007-2010, over 10% 

more than that planned under the 2007-2010 Business Plan. 

Training activity already commenced in 2009 continued during the year, designed to improve the 

professional skills of roles in the distribution network, with attention focused on personnel with 

management responsibilities for business activities. The main projects implemented included the 

following: 

• ValoRe in Rete, an innovative training programme designed to stimulate and enhance existing 

Branch Managers; 

• the introduction of a compulsory, role qualifying, training programme for potential new Branch 

Managers; 

• an “Excellence in Corporate Banking” programme, a new highly specialised training initiative 

to furnish all Corporate Account Managers in the UBI Group with excellence in their 

professional expertise 

A third of all activity as devoted to improving the operational, commercial, credit and financial 

skills of distribution network personnel. In the finance area in particular the project “Planning 

and Financial Consulting”, for all retail, private banking and corporate account managers, was 

completed. It was designed to adequately accompany the release of the new service model in 

network banks for the provision of investment services to customers and further improve 

knowledge of MiFID regulations. 

Insurance subjects accounted for 32% of the training delivered during the year. They consisted of 

programmes specialised by market and by customer segment (private individuals, corporate) 

designed to qualify personnel to sell insurance products and to update them, in compliance with 

ISVAP (Insurance Authority) regulation No. 5/2006. 

71

Refresher and teaching initiatives continued in the regulatory field (more than 20% of the total) on 

regulations and legislation with a substantial impact on banking operations, including those 

concerning “transparency” and “health and safety at the workplace”. The implementation of the 

training programme designed to ensure that all Group personnel have an adequate knowledge 

and understanding of the “Organisation, Management and Control Model pursuant to Legislative 

Decree No. 231/2001” was of particular importance. 

A significant managerial training programme was implemented in 2010, designed for roles with 

greater responsibility in which the various initiatives included participation at intercompany 

events to encourage exchange of knowledge with others in different professional fields 

The School for Instructors is available to the in-house instructor corps, consisting of more than 

300 personnel who delivered almost 12.000 training hours (approximately 60% of total classroom 

training). 

The normal training 

programmes for new 

employees and personnel 

involved in retraining 

programmes 

are 

accompanied by new 

training programmes for 

employees appointed on the 

basis of “professional 

apprentice” contracts. The 

IT-language project was 

Training by subject area in 2010 

Subject area 

Classroom 

Remote 

training 

Job 

experience 

Total 

person/days of 

training 

Insurance 15.245 16.019 - 31.264 32,4% 

Commercial 6.295 8 845 7.148 7,4% 

Finance 11.242 1.840 381 13.463 13,9% 

Credit 5.878 6 2.173 8.057 8,3% 

Managerial-Behavioural 8.959 - 17 8.976 9,3% 

Regulatory 4.405 15.311 - 19.716 20,4% 

Other subjects 7.170 - 827 7.997 8,3% 

TOTAL 59.194 33.184 4.243 96.621 100,0% 

further incentivised to offer all Group personnel the chance to benefit freely from online courses 

designed to develop and/or perfect their knowledge of computers and the English language. 

% 

The training programme for branch managers 

In a particularly difficult and more competitive economic context, awareness of the crucial role 

played by Branch Managers in maintaining market share and growth of business on the complex 

retail market led the UBI Banca Group to approve an important strategic training project (ValoRe 

in Rete) designed to stimulate and enhance the professional skills of Branch Managers. 

The ValoRe in Rete project is an innovative and structured training programme, a genuine 

“workshop” in which Branch Managers worked and addressed the challenge of “virtuous 

behaviour” – whether commercial, credit, organisational or HR management – which they need to 

put into practice to “make a difference” in the excellent management of branch teams and in 

relationships with customers and the community. 

During the four classroom days, over 1.300 Branch Managers of the UBI Group – led by a 

selected panel of 45 Branch Managers working in the role of “instructors-facilitators” – worked 

intensely on the focus and study of behaviours and key moments which can make a concrete 

impact on branch performance and also on an “improvement plan” consisting of concrete action 

to achieve it. 

The findings of this “workshop” – in which a training programme was implemented which involved 

all areas of Branch Managers’ responsibilities, right across the board, – confirmed the validity and 

success of this innovative approach, designed also to share best experiences and practices among 

Group Branch Managers. 

At the same time a new compulsory training programme was introduced for potential new branch 

managers to qualify for the role, which involves the participation of candidates in two separate 

classroom activities for a total of ten days, structured as follows: 

1) improvement and certification of technical and professional knowledge (six classroom days 

with individual study and a final qualification examination); 

72

2) managerial training to develop management skills (four classroom days). 

The five examination sessions organised in 2010 led to the qualification of 110 new potential 

Branch Managers. 

Internal communication 

The internal communication activities performed in 2010 were designed and implemented to 

accompany processes of change with initiatives to promote and strengthen corporate identity. The 

overall internal communication strategy was therefore designed and developed with the objective 

of informing, motivating and involving personnel with continued use of the Group house organ 4 

and the introduction of innovative multimedia communication including the following: 

- a multimedia magazine for the shareholders meeting (developed to provide all Group employees 

with prompt information on the main subjects addressed during the 2010 annual 

shareholders’ meeting of UBI Banca). It is an easy to consult electronic magazine which 

contains different types of media (texts, images, audio and video recordings), within a coordinated 

graphics environment. Inserted in the homepage of the corporate portal, it has the 

appearance of a genuine magazine to be leafed through and it allows readers to choose topics 

for further study (short video interviews during and after the meeting, an organisation chart 

giving the composition of the new governing bodies, texts on the macroeconomic scenario and 

the outlook for the Group, etc.); 

- UBI Click, a multimedia tool through which the senior management of the Parent and of 

individual companies periodically informs employees of policies and important activities 

concerning the general context of the Group and individual banks and companies; 

- UBI Pod, an experimental means of communication which has the style of a radio broadcast to 

facilitate the direct involvement of employees in person. Two UBIPods were organised in 2010 

to support the Training Project ValoRe in Rete for Branch Managers of the Group; 

- a new corporate portal, a new version of the Group portal, in which new spaces are provided 

for communication to give better support for corporate processes and to organise occasions for 

participation and direct involvement by all personnel. The relative project activities were 

commenced in 2010, while the operational release will take place in 2011. 

The work environment 

The section “Principal risks and uncertainties to which the UBI Banca Group is exposed” may be 

consulted for information on matters regulated by Legislative Decree No. 81 of 9 th April 2008 

(health and safety at the workplace), while information on environmental responsibility is given as 

part of the information on corporate social and environmental responsibility contained in the 

section “other information”. 

Welfare 

The main initiatives carried forward in the field of welfare are reported as part of the information 

given on corporate social responsibility contained in the section “Other information”. 

4 yoUBI – A two monthly periodical of company information and culture. 

73

Consolidation scope 

The companies that formed part of the consolidation as at 31 st December 2010 are listed below, 

divided into subsidiaries (consolidated line-by-line), companies subject to joint control 

(proportionately consolidated) and associates (consolidated using the equity method). 

The percentage of control or ownership attributable to the Group (direct or indirect), their 

headquarters (registered address or operating headquarters) and the share capital is also 

indicated for each of them. 

Companies consolidated on a line-by-line basis (control is by the Parent of the Group where no other 

indication is given): 

1. Unione di Banche Italiane Scpa – UBI Banca (Parent) 

registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: 1.597.864.755 euro 

2. Banca Popolare di Bergamo Spa (100% controlled) 

registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: 1.350.514.252 euro 

3. Banco di Brescia San Paolo CAB Spa (100% controlled) 

registered address: Brescia, Corso Martiri della Libertà, 13 – share capital: 615.632.230,88 euro 

4. Banca Popolare Commercio e Industria Spa (75,0769% controlled) 

registered address: Milano, Via della Moscova, 33 – share capital: 934.150.467,60 euro 

5. Banca Regionale Europea Spa (74,9437% controlled) 1 

registered address: Cuneo, Via Roma, 13 – share capital: 468.880.348,04 euro 

6. Banca Popolare di Ancona Spa (92,8983% controlled) 

registered address: Jesi (Ancona), Via Don A. Battistoni, 4 – share capital: 122.343.580 euro 

7. Banca Carime Spa (92,8322% controlled) 

registered address: Cosenza, Viale Crati snc – share capital: 1.468.208.505,92 euro 

8. Banca di Valle Camonica Spa (74,2439% controlled and Banco di Brescia holds 8,7156%) 

registered address: Breno (Brescia), Piazza Repubblica, 2 – share capital: 2.738.693 euro 

9. Banco di San Giorgio Spa (the Parent holds 36,1939% and 57,3332% controlled by BRE) 

registered address: Genova, Via Ceccardi, 1 – share capital: 94.647.277,50 euro 

10. Banque de Dépôts et de Gestion Sa (100% controlled) 

registered address: Avenue du Théâtre, 14 - Lausanne (Switzerland) – share capital: 10.000.000 Swiss 

francs 

11. BDG Singapore Pte Ltd (100% controlled by Banque de Dépôts et de Gestion) 

registered address: 391B Orchard Road # 15-01 Ngee Ann City Tower B Singapore – share capital: 

325.000 Singapore dollars 2 

12. UBI Banca International Sa (90,6031% controlled and Banco di Brescia holds 5,8519%, BPB 

3,3723% and Banco di San Giorgio 0,1727%) 

registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: 59.070.750 euro 

13. UBI Trustee Sa (100% controlled by UBI Banca International) 

registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: 250.000 euro 

14. B@nca 24-7 Spa (100% controlled) 

operating headquarters: Bergamo, Via A. Stoppani, 15 – share capital: 316.800.000 euro 

1 The percentage of control relates to the total share capital held. The Group does in fact possess 80,1054% of the ordinary shares, 

26,4147% of the privileged shares and 59,127% of the savings shares. 

2 On 10 th December 2010, the parent company, Banque de Dépôts et de Gestion, decided to increase the share capital of the company by 

5.275.000 Singapore dollars, which it paid in on 19 th January 2011. The new share capital therefore rose to 5.600.000 Singapore dollars. 

74

15. Barberini Sa (100% controlled) 

registered address: Woluwe-Saint-Pierre, Avenue de Tervueren, 237 – Brussels (Belgium) – share capital: 

3.000.000 euro 

16. Prestitalia Spa (100% controlled by Barberini) 

registered address: Roma, Salita San Nicola da Tolentino, 1/b, Sc. B – share capital: 46.385.482 euro 

17. Silf Società Italiana Leasing e Finanziamenti Spa (100% controlled) 

registered address: Cuneo, Via Roma, 13 – share capital: 2.000.000 euro 

18. IW Bank Spa (55,2740% controlled and Centrobanca holds 23,496%) 

registered address: Milano, Via Cavriana, 20 – share capital: 18.404.795 euro 

19. InvestNet International Sa (100% controlled by IW Bank) 

registered address: 8, Boulevard Royal – Luxembourg – share capital: 12.478.465 euro 

20. Investnet Italia Srl, formerly IW Lux Sàrl (100% controlled by IW Bank) 

registered address: Milano, via Cavriana 20 – share capital: 5.000.000 euro 

21. Invesclub Srl (100% controlled by IW Bank) 

registered address: Milano, Via San Vittore al teatro, 1 – share capital: 10.000 euro 

22. UBI Banca Private Investment Spa (100% controlled) 

registered address: Brescia, Via Cefalonia, 74 – share capital: 67.950.000 euro 

23. Centrobanca Spa (92,3818% controlled and BPA holds 5,4712%) 

registered address: Milano, Corso Europe, 16 – share capital: 369.600.000 euro 

24. Centrobanca Sviluppo Impresa SGR Spa (100% controlled by Centrobanca) 

registered address: Milano, Corso Europe, 16 – share capital: 2.000.000 euro 

25. FinanzAttiva Servizi Srl (100% controlled) 

registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: 5.660.000 euro 

26. UBI Pramerica SGR Spa (65% controlled) 

operating headquarters: Milano, Via Monte di Pietà, 5 – share capital: 19.955.465 euro 

27. UBI Management Company Sa (100% controlled by UBI Pramerica SGR) 

registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: 125.000 euro 

28. UBI Insurance Broker Srl (100% controlled) 

registered address: Bergamo, Via f.lli Calvi, 15 – share capital: 3.760.000 euro 

29. UBI Leasing Spa (79,9962% controlled and BPA holds 18,9965%) 


30. Unione di Banche Italiane per il Factoring Spa - UBI Factor Spa (100% controlled) 

registered address: Milano, Via f.lli Gabba, 1/a – share capital: 36.115.820 euro 

31. BPB Immobiliare Srl (100% controlled) 

registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: 185.680.000 euro 

32. Società Bresciana Immobiliare Mobiliare - S.B.I.M. Spa (100% controlled) 

registered address: Brescia, Via A. Moro, 13 – share capital: 35.000.000 euro 

33. Società Lombarda Immobiliare Srl- SOLIMM (100% controlled) 

registered address: Brescia, Via Cefalonia, 74 – share capital: 100.000 euro 

34. BPB Funding Llc (100% controlled) 

registered address: One Rodney Square, 10 th floor, Tenth and King Streets, Wilmington, New Castle 

County, Delaware, USA – share capital: 1.000.000 euro 

35. BPB Capital Trust (100% controlled by BPB Funding Llc) 


County, Delaware, USA – share capital: 1.000 euro 

36. Banca Lombarda Preferred Capital Company Llc (100% controlled) 

registered address: 1209, Orange Street the Corp. Trust Center, Wilmington, New Castle County, 

Delaware, USA – share capital: 1.000 euro 

37. Banca Lombarda Preferred Securities Trust (100% controlled) 

registered address: 1209, Orange Street the Corp. Trust Center, Wilmington, New Castle County, 

Delaware, USA – share capital: 1.000 euro 

75

38. BPCI Funding Llc (100% controlled) 


County, Delaware, USA – share capital: 1.000.000 euro 

39. BPCI Capital Trust (100% controlled by BPCI Funding Llc) 


County, Delaware, USA – share capital: 1.000 euro 

40. UBI Fiduciaria Spa (100% controlled) 

registered address: Brescia, Via Cefalonia, 74 3 – share capital: 1.898.000 euro 

41. UBI Gestioni Fiduciarie Sim Spa (100% controlled by UBI Fiduciaria) 

registered address: Brescia, Via Cefalonia, 74 3 – share capital: 1.040.000 euro 

42. Coralis Rent Srl (100% controlled) 

registered address: Milano, Via f.lli Gabba, 1 – share capital: 400.000 euro 

43. UBI Sistemi e Servizi SCpA 4 – Consortium Stock Company (70,9193% controlled and 2,9599% 

held by: Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria, Banca 

Popolare di Ancona, Banca Carime and Banca Regionale Europea; 1,5539% held by UBI Pramerica SGR; 

1,4799% held by: Banco di San Giorgio, Banca di Valle Camonica, UBI Banca Lombarda Private 

Investment, Centrobanca and B@nca 24-7; 0,74% held by UBI Factor; 0,74% held by: UBI Insurance 

Broker and SILF). 


44. UBI Finance Srl 5 (60% controlled) 

registered address: Milano, Foro Bonaparte, 70 – share capital: 10.000 euro 

45. Albenza 3 Srl 6 

46. Orio Finance Nr. 3 Plc 6 

47. Sintonia Finance Srl 6 

48. 24-7 Finance Srl 7 

49. Lombarda Lease Finance 3 Srl 8 

50. Lombarda Lease Finance 4 Srl 8 

51. UBI Finance 2 Srl 9 

52. UBI Finance 3 Srl 

53. UBI Lease Finance 5 Srl 10 

3 With effect from 1 st January 2011, UBI Fiduciaria and UBI Gestioni Fiduciarie Sim transferred their registered addresses in Brescia from 

70, via Cefalonia to 74, via Cefalonia in the new UBI Banca management centre. 

4 The Group holds a controlling 98,52% interest in the share capital of UBI.S; the remaining 1,48% is held by UBI Assicurazioni. 

5 A special purpose entity in compliance with Law No. 130/1999, this company, enrolled on the general list of intermediaries pursuant to 

Art. 106 of the consolidated banking act, was formed on 18 th March 2008 to allow the Parent to implement a programme to issue 

covered bonds. 

6 Special purpose entities formed in compliance with Law No. 130/1999 for the securitisations performed in 2001 and 2002 by the former 

BPB-CV Scrl (Albenza 3 Srl), by BPU International Finance Plc Ireland, subsequently closed down – (Orio Finance Nr. 3 Plc) and by 

Centrobanca (Sintonia Finance Srl). They were included in the consolidated financial statements because they are in reality controlled, 

since their assets and liabilities were originated by Group member companies. The consolidation only concerns those assets subject to 

securitisation and the relative liabilities issued. As concerns Sintonia Finance, as the securitisation was multioriginator, only those 

assets and liabilities relating to the operation originated by Centrobanca were consolidated. 

7 A special purpose entity (formerly Lombarda Lease Finance 1 Srl) used in compliance with Law No. 130/1999 for the B@nca 24-7 

securitisations performed in 2008. It was included in the consolidated financial statements because this company is in reality 

controlled, since its assets and liabilities were originated by a Group member company. UBI Banca holds a 10% stake in the company. 

8 Special purpose entities formed in compliance with Law No. 130/1999 for the securitisations performed in years running from 2002 

until 2005 by SBS Leasing. They were included in the consolidated financial statements because these companies are in reality 

controlled, since their assets and liabilities were originated by Group member companies. UBI Banca holds an interest of 10% in each 

company. 

In the third quarter of 2010, UBI Leasing (formerly SBS Leasing) proceeded to the early close down of the Lombarda Lease Finance 3 

securitisation. The originator (UBI Leasing) exercised its option, as provided for under the contracts, to repurchase all the loans (en bloc 

and without recourse) (a remaining amount of 47,5 million euro out of 650,5 million euro securitised relating to lease contracts for 

machinery and equipment, property and automobiles), which had been sold in 2003 to Lombarda Lease Finance 3, which had in turn 

redeemed all the notes issued as part of the securitisation transaction on 30 th July 2010. As the transaction was closed, only the items 

in the income statement, relating to the assets and liabilities recognised by the Company during the year, remained in the end of year 

accounts. The disappearance of the cash flows (although the company remains operational) will result in the elimination of the company 

from the consolidation scope from the first quarter of 2011. 

9 A special purpose entity formed in accordance with Law No. 130/1999 for the securitisation performed in 2001 by Banco di Brescia and 

completed in the meantime. The company (formerly “Lombarda Mortgage Finance 1 Srl”) was used as an SPE (special purpose entity) for 

the securitisation of a portfolio of performing loans performed by Banco di Brescia at the beginning of 2009. It was included in the 

consolidated accounts because this company is in reality controlled, since its assets and liabilities were originated by a Group member 

company. UBI Banca holds a 10% stake in the company. 

10 A special purpose entity formed in compliance with Law No. 130/1999 and used as an SPE for the securitisation of performing loans by 

UBI Leasing in November 2008. It was included in the consolidated financial statements because this company is in reality controlled, 

since its assets and liabilities were originated by a Group member company. UBI Banca holds a 10% stake in the company. 

76

Companies consolidated using the proportionate method (the investment is by the Parent where no 

other indication is given): 

1. UBI Trust Company Ltd (99,9980% controlled by UBI Banca International) 11 

registered address: Esplanade, 44 – St. Helier, Jersey (Great Britain) – share capital: 50.000 pounds 

sterling 

2. BY YOU Spa 12 (formerly Rete Mutui Italia Spa, 40% interest held) 

registered address: Milano, Corso Venezia, 37 – share capital: 650.000 euro 

3. Polis Fondi SGRpA (9,8% interest held) 13 

registered address: Milano, Via Solferino, 7 – share capital: 5.200.000 euro 

Companies consolidated using the equity method (the investment is by the Parent where no other 

indication is given): 

1. Aviva Vita Spa (50% controlled) 

registered address: Milano, Viale Abruzzi, 94 – share capital: 115.000.000 euro 

2. Aviva Assicurazioni Vita Spa (formerly UBI Assicurazioni Vita Spa) (49,9999% held UBI Banca) 

registered address: Milano, Viale Abruzzi, 94 – share capital: 49.721.776 euro 

3. Lombarda Vita Spa (40% interest held) 

registered address: Brescia, Corso Martiri della Libertà, 13 – share capital: 185.300.000 euro 

4. UBI Assicurazioni Spa (49,9999% interest held) 

registered address: Milano, Piazzale f.lli Zavattari, 12 – share capital: 32.812.000 euro 

5. Lombarda China Fund Management Company (49% interest held) 

registered address: 47, Sin Mao Tower, 88 Century Boulevard, Pudong Area 200121, Shanghai (China) – 

share capital: 120.000.000 yuan/renminbi 

6. SF Consulting Srl (35% interest held) 

operating headquarters: Mantova, Via P.F. Calvi, 40 – share capital: 93.600 euro 

7. Sofipo Fiduciaire Sa (30% interest held by Banque de Dépôts et de Gestion) 

registered address: Via Balestra, 22B - Lugano (Switzerland) – share capital: 2.000.000 Swiss francs 

8. Arca SGR Spa (23,1240% interest held by the Parent and 3,5840% by BPA) 

registered address: Milano, Via M. Bianchi, 6 – share capital: 50.000.000 euro 

9. S.P.F. Studio Progetti Finanziari Srl (25% interest held by BPA) 

registered address: Roma, Via National, 243 – share capital: 92.960 euro 

10. Prisma Srl (20% interest held) 

registered address: Milano, Via S. Tecla, 5 – share capital: 120.000 euro 

11. Siderfactor Spa (27% interest held by UBI Factor) 

registered address: Milano, Via f.lli Gabba, 1/A – share capital: 1.200.000 euro 

12. Tex Factor Spa – in liquidation (20% interest held by UBI Factor) 

registered address: Milano, Via f.lli Gabba, 1/A – share capital: 1.033.000 euro 

13. Capital Money Spa (20,6711% interest held) 

registered address: Milano, Via Lausanne, 16 – share capital: 2.042.955 euro 

14. Ge.Se.Ri. – Gestione Servizi di Riscossione Spa in liquidation (100% controlled by BRE) 

registered address: Cuneo, Via Roma, 13 – share capital: 323.520 euro 

15. UFI Servizi Srl (23,1667% interest held by Prestitalia) 

registered address: Roma, Via G. Severano, 24 – share capital: 150.000 euro 

11 Following the geographical repositioning of trustee services to Luxembourg, the company was closed down with effect from 30 th June 

2010. The local monetary authority – Jersey Financial Services Commission Companies Registry – announced that it had removed UBI 

Trust Company from the companies register on 10 th February 2011. 

12 The company has 100% control of: By You Piemonte Srl, By You Liguria Srl, By You Mutui Srl, (which controls Sintesi Mutuo Srl) and 

By You Adriatica Srl,), all proportionately consolidated within the Group. 

13 Polis was included in the consolidation using the proportionate method because joint control emerged. The company manages the fund 

Polis, listed on the stock exchange since April 2001. 

77

Changes in the consolidation scope 

There have been no changes to the scope of consolidation compared to 31 st December 2009 

except for a few changes in the percentage of interests held and some streamlining action. 

Network banks: 

• Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria, Banca 

Regionale Europea, Banco di San Giorgio: the situation described – in terms of share capital 

and percentage shareholdings – reflects the implementation, in January 2010, of the “branch 

switching” operation already mentioned (see also the previous section “Significant events that 

occurred during the year”). The project involved the transfer of a series of branches performed 

by the contribution of 14 sets of corporate assets. Each of the five network banks receiving 

assets performed specific increases in share capital at the service of the contributions 14 . Since 

these are transactions “under common control”, the increases in the share capital did not give 

rise to a share premium because the shares were issued at the nominal value, in relation to 

the actual value of the assets transferred. 

The minority interests acquired reciprocally by the individual banks as a by-product of the 

operation were repurchased by the Parent on 27 th July 2010 and the original percentage 

ownership interests in the network banks will be restored, except for a change in the 

configuration of the holdings of the two foundations (the Cassa di Risparmio di Cuneo 

Foundation and the Banca del Monte di Lombardia Foundation), to take account of the new 

focus of the network banks on the historical geographical areas of the foundations themselves. 

The Banca del Monte di Lombardia Foundation is in fact no longer a shareholder of Banca 

Regionale Europea, having become a shareholder of Banca Popolare Commercio e Industria. 

The Cassa di Risparmio di Cuneo Foundation has remained a shareholder of Banca Regionale 

Europea – focused on the North East area – with its investment increasing from the 20% to 

25% with an investment of 125 million euro. 

The changes that occurred between 31 st December 2009 and 27 th July 2010 are summarised 

in the table below. 

Position as at 31st December 2009 

Investees (number of shares and % held) 

Shareholders BRE % BPCI % BPB % BBS % BSG % 

AVIVA Spa 77.278.293 11,89% 

Minority interests 687.838 0,08% 4.225.647 7,22% 

UBI Banca 509.595.702 59,95% 572.721.707 88,11% 1.256.300.000 100,0% 872.500.000 100,0% 20.760.378 35,45% 

Fondazione Cassa di Risparmio di Cuneo 169.858.230 19,98% 

Fondazione Banca del Monte di Lombardia 169.858.230 19,98% 

Banca Regionale Europea 33.574.808 57,33% 

Total number of shares and percentage held 

by the Group 850.000.000 59,95% 650.000.000 88,11% 1.256.300.000 100,0% 872.500.000 100,0% 58.560.833 92,78% 

Nominal value of shares (in euro) 0,52 1,05 1,00 0,68 1,50 

Share capital (in euro) 442.000.000 682.500.000 1.256.300.000 593.300.000 87.841.249,50 

Changes due to increases in share capital 

and contributions (25th January 2010) 

BRE % BPCI % BPB % BBS % BSG % 

Banco di Brescia 13.548.699 1,50% 1.456.507 0,16% 23.568.210 1,75% 392.721 0,62% 

Banca Regionale Europea 169.494.668 19,05% 6.477.249 0,48% 11.694.531 1,29% 

Banca Popolare di Bergamo 35.837.198 3,97% 68.715.937 7,72% 11.840.156 1,31% 4.144.631 6,57% 

Banca Popolare Commercio e Industria 2.307.080 0,26% 64.168.793 4,75% 9.306.829 1,03% 

Total number of shares after share capital 

increases 901.692.977 889.667.112 1.350.514.252 905.341.516 63.098.185 

of which number of shares issued for 

increases in the share capital 51.692.977 5,73% 239.667.112 26,93% 94.214.252 6,98% 32.841.516 3,63% 4.537.352 7,19% 

Position after re-adjustment (27th July 

2010) 

BRE % BPCI % BPB % BBS % BSG % 

AVIVA Spa 77.278.293 8,69% 

Minority interests 687.838 0,08% 4.225.647 6,70% 

UBI Banca 675.762.233 74,94% 667.934.237 75,08% 1.350.514.252 100,0% 905.341.516 100,0% 22.696.320 35,97% 

Fondazione Cassa di Risparmio di Cuneo 225.242.906 24,98% 

Fondazione Banca del Monte di Lombardia 144.454.582 16,24% 

Banca Regionale Europea 36.176.218 57,33% 

Total number of shares and percentage held 

by the Group 901.692.977 74,94% 889.667.112 75,08% 1.350.514.252 100,0% 905.341.516 100,0% 63.098.185 93,30% 

Nominal value of shares (in euro) 0,52 1,05 1,00 0,68 1,50 

Share capital (in euro) 468.880.348,04 934.150.467,60 1.350.514.252,00 615.632.230,88 94.647.277,50 

14 A shareholders’ meeting of Banco di San Giorgio held on 8 th January 2010 passed a resolution to increase the share capital at the 

service of the contributions and also to authorise the Board of Directors to issue share capital, in one or more tranches up to a total of 

20 million euro, to be completed by 31 st December 2013 and to offer option rights on the issues to registered shareholders. The 

objective is to bring the total capital ratio back into line with the target (7%) set for commercial banks in the Group. 

78

• Banca Popolare di Ancona Spa: UBI Banca made further purchases during the year from 

minority shareholders, for a total of 11.181 shares (a small fraction amounting to 0,0457% of 

the share capital) which brought its controlling interest up from 92,8526% at the end of 2009 

to 92,8983%; 

• Banca Carime Spa: in the twelve months in question, the Parent acquired 31.781 shares from 

minority shareholders to bring its controlling interest up to 92,8322% (92,8299% as at 31 st 

December 2009). 

• Banco di San Giorgio Spa: subsequent to 27 th July, UBI Banca acquired 141.361 shares from 

private individuals to bring its investment up from 35,9698% (post readjustment of interests) 

to 36,1939% as at 31 st December 2009. 

Other Banks: 

• IW Bank: on 20 th October 2010, UBI Banca purchased 156.488 shares, to bring its interest 

held in the share capital up to 55,2740% (from 55,0614% at the end of 2009) and the interest 

held by the Group up to 78,77% (78,5574% as at 31 st December 2009). 

Following that purchase, UBI Banca acquired both direct and indirect control through 

Centrobanca, with 57.989.829 ordinary shares of IW Bank (accounting for 79,6695% of the 

share capital, net of the treasury shares held by IW Bank), while Webstar held 7.609.144 

ordinary shares (10,4538% of the share capital, net of the treasury shares held by IW Bank). 

Together UBI Banca and Webstar 15 held 65.598.973 shares, accounting for 90,1233% of the 

share capital, net of the treasury shares held by IW Bank. 

Since they then held more than 90% of the share capital with voting rights (a threshold which 

determines the obligation to purchase the remaining shares of the issuer), on the following 27 th 

October 2010, UBI Banca and Webstar jointly announced, in compliance with Art 50 of the 

Issuers’ Regulations (residual public tender offer), their intention not to restore the free float 

and to comply with the purchase obligation. 

With Resolution No. 17669 of 16 th February 2011, the Consob (Italian securities market 

authority) set the share price at 1,988 euro per share for the purchase, in accordance with Art. 

108, paragraph 2 of the Consolidated Finance Act, of the ordinary shares of IW Bank by the 

offerors. 

On 22 nd February 2011, UBI Banca decided to pay an increase on the price set by the Consob, 

thereby bringing it up to 2,043 euro 16 for each share offered for sale, if it came to hold at least 

95% of the share capital (inclusive of the IW Bank shares held by Webstar and also of the 

treasury shares held in portfolio by IW Bank). In this event, the maximum amount disbursed 

by UBI Banca, if the offer is fully taken up, will be 14.7 million euro and it will be paid from its 

own funds. The price set by the Consob on the other hand would remain the consideration 

recognised if the acceptance of the offer was insufficient to acquire an interest at least equal to 

95% of the share capital. 

On 15 th March 2011, with Note No. 11019656 the Consob authorised the publication of the 

information document in relation to the operation for the obligation to purchase 7.189.039 

ordinary shares of IW Bank (9,8767% of the share capital with voting rights and 9,7652% of 

the total share capital) in compliance with Art 108, paragraph 2 of the Consolidated Finance 

Act. 

In this respect, the period for the presentation of applications to sell, agreed with Borsa 

Italiana, collected on the Mercato Telematico Azionario (electronic stock exchange) began on 

21 st March and will end on 8 th April, unless extended. Payment of the price will take place on 

13 th April 2011. 

The delisting of the share will take place at the end of the procedures laid down by the primary 

and secondary rules concerning compulsory public tenders to purchase. 

With regard to IW Bank’s subsidiaries, numerous actions were concluded during the year both 

to simplify and streamline the organisational structure, and to develop and enhance the core 

business consisting of online trading and banking: 

15 UBI Banca and Webstar had signed a shareholders’ voting agreement (published on 15 th September 2009 in accordance with article 122 

of the Consolidated Finance Act, subsequently amended on 29 th June 2010) concerning the ordinary shares of IW Bank. 

16 The highest official market price of the IW Bank share in the last 12 months. 

79

- on 22 nd March 2010, the disposals were completed of Twice & Partners Corporate Advisers 

Srl and Twice Research Srl (both previously 100% controlled by Twice Sim and consolidated 

on a line-by-line basis); 

- Italforex Srl was excluded from the consolidation from 30 th September 2010 (at the end of 

2009 it was recognised using the equity method), in consideration of its negligible 

importance and consistent with decisions taken by IW Bank; 

- on 1 st November 2010, after obtaining the legal authorisations, Twice Sim was merged 

(100%) into its parent, IW Bank, consistent with decisions taken by the respective Boards of 

Directors in December 2009 and by a Shareholders’ Meeting of Twice Sim of 26 th August 

2010, in accordance with the corporate by-laws. Since the entire share capital was held by 

the internet bank, the shares of Twice Sim were cancelled when the merger transaction was 

stipulated, without proceeding to replacement or new issues. The transaction is effective for 

accounting and tax purposes from 1 st January 2010. The company was consolidated on a 

line-by-line basis as at 31 st December 2009; 

- as a result of the above merger, on 1 st November 2010 control of Invesclub Srl, formerly 

controlled by Twice Sim, was acquired by IW Bank; 

- on 23 rd July 2010, the Board of Directors of IW Bank decided to merge IW Lux Sàrl, a fully 

controlled, Luxembourg registered company, into its Parent, after transferring its 

headquarters to Italy. This preparatory measure was officially completed by a Shareholders’ 

Meeting of IW Lux Sàrl on 25 th October 2010, which passed resolutions to relinquish its 

authorisation to provide financial services granted by the Ministry of Finance of 

Luxembourg on 26 th January 2010, to make the related changes to its business purpose, to 

transfer the registered address to Milan, to change the name of the company to Investnet 

Italia Srl and to approve a new text of the corporate by-laws. On 28 th December 2010, 

InvestNet Italia was registered with the Milan Company Registrar; 

- on 13 th January 2011, IW Bank acquired an interest in the consortium company UBI 

Sistemi e Servizi, purchasing 50.000 shares (0,074% of the share capital) from UBI 

Pramerica SGR for 38.500 euro; 

- on 2 nd March 2011, a Shareholders’ Meeting of Invesclub Srl passed a resolution to wind up 

the company by placing it into voluntary liquidation in accordance with Art. 2484 of the 

Italian Civil Code. This was in consideration of its non strategic importance both for its 

parent and for the Group; 

• Centrobanca Spa: on 4 th November 2010, the Parent purchased 101.732 shares from a 

banking counterparty for 177 thousand euro (equivalent to the pro-rata equity value as at 30 th 

June 2010). The investment held therefore rose from 92,3515% at the end of 2009 to 

92,3818% as at 31 st December 2010; while Group control increased at the same time over 

twelve months from 97,8227% to 97,8530%. 

As concerns the streamlining process in progress, action taken with regard to the subsidiaries 

of the Group’s “corporate bank” are summarised as follows: 

- on 27 th December 2010, the merger of CB Invest Spa (formerly Medinvest Spa, acquired on 

22 nd December 2009 from Twice Sim and then consolidated on a line-by-line basis) into 

Centrobanca became effective. As the merged company was wholly owned by Centrobanca, 

in compliance with Art. 2505 of the Italian Civil Code, the shares forming the share capital 

of CB Invest were cancelled with no share exchange. The transaction is effective for 

accounting and tax purposes from 1 st January 2010; 

- on 29 th December 2010, the liquidation of H&C Spa was concluded and it is therefore no 

longer included in the consolidation (the company, in which CB Invest held a 49,0833% 

interest, was consolidated using the equity method at the end of 2009); 

• UBI Banca International Sa: on 10 th December 2010, this Luxembourg based bank 

strengthened its capital by a total of 2,9 million euro, including 1.531.020 euro used to 

increase its share capital (up from 57.539.730 euro to 59.070.750 euro), for the purpose of 

acquiring the Luxembourg branch of Banco di Brescia. To achieve this, the contributing party 

received 3.002 new shares of UBI Banca International, which brought the interest held by 

Banco di Brescia up to 5,8519% (from 3,3468% before). As a result of the dilution effect, the 

remaining interests were reduced: for the Parent to 90,6031% (93,0138% as at 31 st December 

2009), for BPB to 3,3723% (from 3,4621%) and for Banco di San Giorgio to 0,1727% (0,1773% 

twelve months before). UBI Banca International is wholly owned by the Group. 

80

Asset management: 

• on 19 th March 2010, UBI Pramerica SGR repurchased 3,75% of the share capital from the 

management of UBI Pramerica Alternative Investments SGR Spa to restore its controlling 

interest to 100% (96,25% at the end of 2009). The operation was performed in preparation for 

the merger of the company into its asset management parent company; 

• on 30 th March 2010: in order to simplify the ownership structure of the Group, with the 

consequent elimination of the duplication of costs and overlap of business units, shareholders’ 

meetings were held by UBI Pramerica SGR, UBI Pramerica Alternative Investments SGR and 

Capitalgest Alternative Investments SGR, which passed resolutions to merge, in simplified 

form (pursuant to Art. 2505 of the Italian Civil Code), both the speculative asset management 

companies into their parent. The transaction – authorised by the Bank of Italy in February – 

took effect from 1 st July 2010, while it was effective for accounting and tax purposes from 1 st 

January 2010. As the shares of the merged companies were cancelled, the share capital of UBI 

Pramerica SGR remained unchanged. 

UBI Pramerica also acquired the 50.000 shares of UBI.S held by UBI Pramerica Alternative 

Investments, which brought its investment in the service company up to 1,5539%. 

On 13 th January 2011, these shares were sold to IW Bank to allow it to acquire an interest in 

the consortium company of 0,074%, while the interest held by UBI Pramerica SGR fell again to 

1,4799%; 

• on 3 rd August 2010, as part of the process to reorganise the sector, the transfer to UBI 

Pramerica SGR was completed of the entire interest in UBI Management Company Sa Lux held 

by UBI Banca Private Investment (99%) and by UBI Banca International (1%) for consideration 

of 560 thousand euro; 

• on 7 th December 2010, Gestioni Lombarda (Switzerland) Sa was merged into its parent, 

Company Banque de Dépôts et de Gestion, with effect from the preceding 31 st October, using 

the simplified procedure in force according to Swiss regulations, which accelerated the timing 

of the transaction; 

• on 14 th February 2011, the agreement was completed, signed on 28 th July 2010 by principal 

shareholders of Polis Fondi SGRpA: Sopaf on the one hand (which held 49% of the share 

capital) and UBI Banca and another four “popular” banks, Banche Popolari (Banco Popolare, 

BPER, Banca Popolare di Sondrio and Banca Popolare di Vicenza) on the other (shareholders 

who together also hold 49%). The purpose of the agreement was to acquire the investment held 

by Sopaf for consideration of eight million euro. Following the issue of the authorisation by the 

Bank of Italy (on 18 th January 2011), the planned transactions commenced. In this context 

UBI Banca acquired a further 9,8% of the share capital (amounting to 50.960 shares) for 

payment of 1,6 million euro. The five “popular” banks – the new majority shareholders with 

98% of the share capital – therefore signed a new five year shareholders’ agreement. 

Banc assurance: 

• on 30 th September 2010, as part of the agreement for the renewal of the partnership in the life 

banc assurance sector, UBI Banca and Cattolica Assicurazioni strengthened their co-operation 

with the sale by the UBI Banca Group of a further 9,9% of the share capital of the Lombarda 

Vita joint venture to the Cattolica Assicurazioni Group (see also the previous section 

“Significant events that occurred during the year” for further information). At the end of 

December the share capital of Lombarda Vita was therefore held as follows: 60% by Cattolica 

Assicurazioni (compared to 50,1% previously) and 40% by UBI Banca Group (49,9% 

previously). 

• on 13 th December 2010, the entire interest in Secur Broker Srl (10% held by the Parent and 

30% by UBI Insurance Broker) was sold to Marine & Aviation Spa (a well-established 

insurance brokerage) for 280 thousand euro. Secur Broker, consolidated using the equity 

method in December 2009, was therefore excluded from the consolidation. 

Consumer credit: 

• on 24 th March 2010: UBI Banca signed two agreements, one with the shareholders of Barberini 

Sa (to purchase the remaining 66,7% of the share capital) and one with the agent shareholders 

81

of Prestitalia Spa (to purchase 100% of the share capital in the company held by them). 

Commitments were officially agreed with the latter for the exclusive distribution of “salary 

backed loan” and “deduction of loan repayments from salary” products. 

At the same time as the purchase contracts were signed for the acquisition of 100% of 

Barberini and Prestitalia, action was taken, through Barberini, to subscribe an increase in the 

share capital of Prestitalia amounting to 37 million euro, in order to implement the necessary 

plan to strengthen its capital (pursuant to a provision of the Bank of Italy of 3 rd March 2010). 

The share capital of Prestitalia therefore rose to 46.385.482 euro (9.385.200 euro in December 

2009 17 ). 

The operation, which was authorised by the Antitrust Authority on 19 th May and by the Bank 

of Italy on 4 th August, was completed on 9 th September 2010 18 . In detail: 

- with regard to Barberini, UBI Banca acquired a total of 2.000.000 ordinary shares held by 

Medinvest International and Pharos Sa (accounting for 66,67% of the share capital subject 

to acquisition) for a total price of 7,3 million euro for the ordinary shares (of which 1,6 

million euro paid on 24 th March 2011 after determined conditions to which it was subject 

concerning the agency network of Presitalia were met) and also 92.784 financial 

instruments, termed "parts bénéficiaires", for a total price of 341 thousand euro (including 

1,6 thousand euro paid on 24 th March 2011); 

- with regard to Prestitalia, Barberini acquired 3.400 shares (6,4% of the share capital 

remaining after the increase in the share capital of 37 million euro fully subscribed by UBI 

Banca in March) at a price of 3,6 million euro; 

On 10 th January 2011, Barberini Sa sold its entire investment held in Prestitalia (53.378 

shares accounting for 100% of the share capital) to B@nca 24-7 for a total price of 77 million 

euro; 

• on 5 th July 2010, By You Mutui Srl acquired 100% of Sintesi Mutuo Srl (a credit brokerage 

company), which therefore is included in the consolidation under the proportionate method (as 

is the whole of the By You Group). The consideration, set at a maximum amount of 1,8 million 

euro, was paid progressively as determined volumes of mortgages granted were achieved; the 

last tranche of 0,3 million euro was paid in the fourth quarter of the year. 

Other Group Companies: 

• on 30 th October 2009, UBI Leasing (formerly SBS Leasing) repurchased, without recourse and 

en bloc, all the loans, (the remaining amount of approximately 40 million euro of the 610 

million euro originally securitised, relating to lease contracts for machinery and equipment, 

property and automobiles), which had been sold in 2002 to Lombarda Lease Finance 2, which 

in turn redeemed all the notes issued as part of the securitisation transaction. Since the cash 

flows relating to the assets and liabilities recognised by the special purpose entity ceased to 

exist during the first few months of 2010, it became possible to exclude the underlying 

business of LLF2 from the consolidation. The company nevertheless remained operational (UBI 

Banca holds a 10% interest). 

As part of internal securitisation activity designed to create additional assets eligible for 

refinancing, it was decided to use the company Lombarda Lease Finance 2 Srl as a special 

purpose entity (already recognised in the Bank of Italy list pursuant to Art. 106 of the 

consolidated banking act), with the change of its name to UBI Finance 3 Srl (as approved by a 

Shareholders’ Meeting of 17 th November 2010). UBI Banca had maintained a 10% interest in 

the company, while 90% is held by the Dutch foundation Stichting Brixia. A portfolio of Banca 

Popolare di Bergamo loans was sold (secured and unsecured loans to small-and-medium sized 

enterprises for a sum of 2,8 billion euro) to the company on 1 st December 2010. At the end of 

the year the special purpose entity was therefore included in the consolidated financial 

statements because this company is in reality controlled, since its assets and liabilities were 

originated by a Group member company. 

• on 16 th June 2010 an extraordinary shareholders’ meeting of Tex Factor Spa (20% interest 

held by UBI Factor) resolved to wind up the company (with effect from the date of filing the 

17 As already reported, as at 31 st December 2009 UBI Banca held 33,3333% of Barberini, which held a controlling interest in Prestitalia of 

68,5185%. The indirect interest held by UBI Banca therefore amounted to 22,8395%. The companies were consolidated proportionately. 

18 From 30 th September 2010, both Barberini Sa and Prestitalia Spa have been consolidated on a line-by-line basis; similarly as an investee 

of Prestitalia, UFI Servizi Srl was also included in the consolidation. 

82

decision with the Company Registrar on 1 st July 2010) and to put it into voluntary liquidation. 

The decision was taken on completion of analysis and assessment activity designed to 

ascertain the future prospects for growth, which were not found to be consistent with the 

expectations of the shareholders; 

• on 23 rd September 2010: following the disposal by Centrobanca of some quotas of Group Srl 

(an equity accounted investee), the company is no longer included within the consolidation 

(14,2857% the percentage of the share capital held at the end of December compared to 20% 

twelve months before); 

• on 30 th September 2010: following the increases in the share capital decided by PerMicro Spa, 

which increased the number of shareholders and consequently reduced the percentage held by 

UBI Banca Group, the company was excluded from the consolidation (an interest of 15,3041% 

held at the end of year compared to 20,6148% at the end of 2009); 

• on 30 th December 2010: BRE purchased 16.176 shares (held by a co-operative credit bank) for 

1.500 euro, equal to the remaining 5% of the share capital of Ge.Se.Ri Spa in liquidation to 

achieve full control of the company (95% in December 2009). The company continues to exist 

because it holds tax credits not yet received; 

• Capital Money Spa: as a result of the incomplete subscription of operations to increase the 

capital performed in 2009 and 2010, the interest held by UBI Banca increased over twelve 

months from 20,4604% to 20,6711%. 

83

Reclassified consolidated financial 

statements, reclassified income statement 

net of the most significant non-recurring 

items and reconciliation schedules 

Reclassified consolidated statement of financial position 


31.12.2010 31.12.2009 Changes % changes 

ASSETS 

10. Cash and cash equivalents 609.040 683.845 -74.805 -10,9% 

20. Financial assets held for trading 2.732.751 1.575.764 1.156.987 73,4% 

30. Financial assets at fair value 147.286 173.727 -26.441 -15,2% 

40. Available-for-sale financial assets 10.252.619 6.386.257 3.866.362 60,5% 

60. Loans to banks 3.120.352 3.278.264 -157.912 -4,8% 

70. Loans to customers 101.814.829 98.007.252 3.807.577 3,9% 

80. Hedging derivatives 591.127 633.263 -42.136 -6,7% 

90. Fair value change in hedged financial assets (+/-) 429.073 301.852 127.221 42,1% 

100. Equity investments 368.894 413.943 -45.049 -10,9% 

120. Property, equipment and investment property 2.112.664 2.106.835 5.829 0,3% 

130. Intangible assets 5.475.385 5.523.401 -48.016 -0,9% 

of which: goodwill 4.416.660 4.401.911 14.749 0,3% 

140. Tax assets 1.723.231 1.580.187 143.044 9,1% 

150. Non-current assets and disposal groups held for sale 8.429 126.419 -117.990 -93,3% 

160. Other assets 1.172.889 1.522.214 -349.325 -22,9% 

Total assets 130.558.569 122.313.223 8.245.346 6,7% 

LIABILITIES AND EQUITY 

10. Due to banks 5.383.977 5.324.434 59.543 1,1% 

20. Due to customers 58.666.157 52.864.961 5.801.196 11,0% 

30. Securities issued 48.093.888 44.349.444 3.744.444 8,4% 

40. Financial liabilities held for trading 954.423 855.387 99.036 11,6% 

60. Hedging derivatives 1.228.056 927.319 300.737 32,4% 

80. Tax liabilities 993.389 1.210.867 -217.478 -18,0% 

90. Liabilities associated with activities under disposal - 646.320 -646.320 -100,0% 

100. Other liabilities 2.600.165 3.085.006 -484.841 -15,7% 

110. Post-employment benefits 393.163 414.272 -21.109 -5,1% 

120. Provisions for risks and charges: 303.572 285.623 17.949 6,3% 

a) pension and similar obligations 68.082 71.503 -3.421 -4,8% 

b) other provisions 235.490 214.120 21.370 10,0% 

140.+170. 

+180.+190. Share capital, share premiums, reserves and fair value reserves 10.806.898 11.141.149 -334.251 -3,0% 

210. Minority interests 962.760 938.342 24.418 2,6% 

220. Profit for the year 172.121 270.099 -97.978 -36,3% 

Total liabilities and equity 130.558.569 122.313.223 8.245.346 6,7% 

84

Reclassified consolidated quarterly statements of financial position 


31.12.2010 30.9.2010 30.6.2010 31.3.2010 

31.12.2009 30.9.2009 30.6.2009 31.3.2009 

ASSETS 

10. Cash and cash equivalents 609.040 586.075 632.183 637.113 683.845 613.101 600.755 601.322 

20. Financial assets held for trading 2.732.751 2.836.561 2.640.330 1.990.806 1.575.764 1.431.752 1.634.912 2.072.595 

30. Financial assets at fair value 147.286 153.951 155.143 159.658 173.727 191.583 252.388 398.076 

40. Available-for-sale financial assets 10.252.619 10.954.989 12.501.312 7.123.883 6.386.257 5.257.186 5.483.644 5.316.954 

50. Held-to-maturity investments - - - - - 1.687.077 1.577.276 1.657.865 

60. Loans to banks 3.120.352 3.427.795 3.290.637 2.996.834 3.278.264 3.101.108 3.184.949 2.824.055 

70. Loans to customers 101.814.829 101.195.034 100.157.746 97.805.640 98.007.252 96.554.963 96.830.116 96.892.382 

80. Hedging derivatives 591.127 816.673 916.055 743.946 633.263 652.898 641.238 604.739 

90. Fair value change in hedged financial assets (+/-) 429.073 796.414 621.964 450.741 301.852 403.522 313.129 461.224 

100. Equity investments 368.894 375.800 406.789 419.289 413.943 360.098 337.162 297.068 

110. Technical reserves of reinsurers - - - - - 35.249 72.166 77.691 

120. Property, equipment and investment property 2.112.664 2.071.976 2.097.820 2.087.323 2.106.835 2.094.140 2.098.840 2.144.779 

130. Intangible assets 5.475.385 5.478.993 5.475.662 5.497.679 5.523.401 5.588.714 5.603.009 5.613.720 

of which: goodwill 4.416.660 4.413.791 4.397.766 4.401.911 4.401.911 4.447.194 4.446.873 4.446.250 

140. Tax assets 1.723.231 1.379.250 1.362.428 1.616.739 1.580.187 1.200.391 1.163.829 1.555.575 

150. Non-current assets and disposal groups held for sale 8.429 48.256 40.285 134.769 126.419 398.011 71.265 20.704 

160. Other assets 1.172.889 1.622.444 1.801.061 2.351.971 1.522.214 1.931.071 1.978.893 1.940.263 

Total assets 130.558.569 131.744.211 132.099.415 124.016.391 122.313.223 121.500.864 121.843.571 122.479.012 

LIABILITIES AND EQUITY 

10. Due to banks 5.383.977 7.126.257 9.252.062 4.612.141 5.324.434 5.306.536 6.073.741 5.953.954 

20. Due to customers 58.666.157 57.412.547 58.534.315 52.754.329 52.864.961 51.383.644 53.612.989 53.992.027 

30. Securities issued 48.093.888 46.463.566 44.828.119 45.670.177 44.349.444 44.162.873 42.522.368 41.707.004 

40. Financial liabilities held for trading 954.423 978.064 896.016 948.995 855.387 815.697 746.246 856.656 

60. Hedging derivatives 1.228.056 1.827.144 1.560.152 1.130.958 927.319 883.088 724.402 981.373 

80. Tax liabilities 993.389 908.091 814.057 1.277.497 1.210.867 1.132.291 1.014.788 1.633.358 

90. Liabilities associated with activities under disposal - - - 803.894 646.320 810.081 156 77 

100. Other liabilities 2.600.165 4.288.484 3.697.804 3.859.410 3.085.006 3.743.221 3.916.535 3.939.651 

110. Post-employment benefits 393.163 402.921 405.118 414.667 414.272 440.728 436.763 430.450 

120. Provisions for risks and charges: 303.572 295.747 271.353 277.233 285.623 282.450 289.167 292.517 

a) pension and similar obligations 68.082 69.560 70.464 70.982 71.503 69.820 72.758 80.892 

b) other provisions 235.490 226.187 200.889 206.251 214.120 212.630 216.409 211.625 

130. Technical reserves - - - - - 195.215 391.352 405.032 

140.+170. 

+180.+190. Share capital, share premiums, reserves and fair value reserves 10.806.898 10.886.557 10.867.923 11.351.150 11.141.149 11.104.760 10.942.579 11.152.097 

210. Minority interests 962.760 957.099 870.422 877.815 938.342 1.052.983 1.046.548 1.110.471 

220. Profit for the period 172.121 197.734 102.074 38.125 270.099 187.297 125.937 24.345 

Total liabilities and equity 130.558.569 131.744.211 132.099.415 124.016.391 122.313.223 121.500.864 121.843.571 122.479.012 

85

Reclassified consolidated income statement 


2010 

A 

2009 

B 

Changes 

A-B 

% changes 

A/B 

4th Quarter 

2010 

C 

4th Quarter 

2009 

D 

Changes 

C-D 

% changes 

C/D 

10.-20. Net interest income 2.142.526 2.400.543 (258.017) (10,7%) 548.555 557.917 (9.362) (1,7%) 

of which: effects of the purchase price allocation (61.141) (62.248) (1.107) (1,8%) (14.598) (13.963) 635 4,5% 

Net interest income excluding the effects of the PPA 2.203.667 2.462.791 (259.124) (10,5%) 563.153 571.880 (8.727) (1,5%) 

70. Dividends and similar income 24.099 10.609 13.490 127,2% 3.531 856 2.675 n.s. 

Profits (losses) of equity-accounted investees 17.613 35.375 (17.762) (50,2%) (1.867) 16.383 (18.250) n.s. 

40.-50. Net commission income 1.185.297 1.214.688 (29.391) (2,4%) 313.767 331.886 (18.119) (5,5%) 

of which performance fees 15.384 22.930 (7.546) (32,9%) 15.384 22.930 (7.546) (32,9%) 

80.+90.+ 

100.+110. 

Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities at fair 

value 34.044 126.783 (92.739) (73,1%) 20.573 33.737 (13.164) (39,0%) 

150.+160. Net income from insurance operations - 30.945 (30.945) (100,0%) - (51) (51) (100,0%) 

220. Other net operating income 92.482 87.304 5.178 5,9% 25.893 18.538 7.355 39,7% 

Operating income 3.496.061 3.906.247 (410.186) (10,5%) 910.452 959.266 (48.814) (5,1%) 

Operating income excluding the effects of the PPA 3.557.202 3.968.495 (411.293) (10,4%) 925.050 973.229 (48.179) (5,0%) 

180.a Personnel expense (1.451.584) (1.465.574) (13.990) (1,0%) (344.469) (346.621) (2.152) (0,6%) 

180.b Other administrative expenses (769.744) (777.216) (7.472) (1,0%) (201.335) (219.492) (18.157) (8,3%) 

200.+210. Net impairment losses on property, equipment and investment property and intangible assets (247.236) (271.557) (24.321) (9,0%) (63.996) (97.914) (33.918) (34,6%) 

of which: effects of the purchase price allocation (74.889) (100.992) (26.103) (25,8%) (18.722) (51.416) (32.694) (63,6%) 

Net impairment losses on property, equipment and investment property and intangible assets 

excluding the effects of the PPA (172.347) (170.565) 1.782 1,0% (45.274) (46.498) (1.224) (2,6%) 

Operating expenses (2.468.564) (2.514.347) (45.783) (1,8%) (609.800) (664.027) (54.227) (8,2%) 

Operating expenses excluding the effects of the PPA (2.393.675) (2.413.355) (19.680) (0,8%) (591.078) (612.611) (21.533) (3,5%) 

Net operating income 1.027.497 1.391.900 (364.403) (26,2%) 300.652 295.239 5.413 1,8% 

Net operating income excluding the effects of the PPA 1.163.527 1.555.140 (391.613) (25,2%) 333.972 360.618 (26.646) (7,4%) 

130.a Net impairment losses on loans (706.932) (865.211) (158.279) (18,3%) (251.217) (272.667) (21.450) (7,9%) 

130.b+c+d Net impairment losses on other assets and liabilities (49.721) (49.160) 561 1,1% (31.529) (13.606) 17.923 131,7% 

190. Net provisions for risks and charges (27.209) (36.932) (9.723) (26,3%) (15.204) (7.440) 7.764 104,4% 

240.+260.+270. Profit from the disposal of equity investments and net impairment losses on goodwill 90.700 100.302 (9.602) (9,6%) 12.346 96.684 (84.338) (87,2%) 

Pre-tax profit from continuing operations 334.335 540.899 (206.564) (38,2%) 15.048 98.210 (83.162) (84,7%) 

Pre-tax profit from continuing operations excluding the effects of the PPA 470.365 704.139 (233.774) (33,2%) 48.368 163.589 (115.221) (70,4%) 

290. Taxes on income from continuing operations (231.980) (243.442) (11.462) (4,7%) (34.693) (22.524) 12.169 54,0% 

of which: effects of the purchase price allocation 43.770 52.532 (8.762) (16,7%) 10.720 21.093 (10.373) (49,2%) 

Integration costs - (15.465) (15.465) (100,0%) - (633) (633) (100,0%) 

of which: personnel expense - (11.626) (11.626) (100,0%) - (97) (97) (100,0%) 

other administrative expenses - (5.886) (5.886) (100,0%) - (186) (186) (100,0%) 

net impairment losses on property, equipment and investment property and intangible assets - (4.510) (4.510) (100,0%) - (646) (646) (100,0%) 

taxes - 6.557 (6.557) (100,0%) - 296 (296) (100,0%) 

310. Post-tax profit (loss) from discontinued operations 83.368 5.155 78.213 n.s. (1) - 1 n.s. 

330. Profit (loss) for the year/period attributable to minority interests (13.602) (17.048) (3.446) (20,2%) (5.967) 7.749 (13.716) n.s. 

of which: effects of the purchase price allocation 10.034 24.280 (14.246) (58,7%) 2.503 12.461 (9.958) (79,9%) 

Profit for the year/period attributable to the shareholders of the Parent excluding the effects of the PPA 254.347 356.527 (102.180) (28,7%) (5.516) 114.627 (120.143) (104,8%) 

340. Profit (loss) for the year/period attributable to the shareholders of the Parent 172.121 270.099 (97.978) (36,3%) (25.613) 82.802 (108.415) n.s. 

Total impact of the purchase price allocation on the income statement (82.226) (86.428) (4.202) (4,9%) (20.097) (31.825) (11.728) (36,9%) 

86

Reclassified consolidated quarterly income statements 

2010 

2009 


4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 

10.-20. Net interest income 548.555 543.197 517.441 533.333 557.917 572.951 616.804 652.871 

of which: effects of the purchase price allocation (14.598) (14.060) (15.934) (16.549) (13.963) (15.198) (18.027) (15.060) 

Net interest income excluding the effects of the PPA 563.153 557.257 533.375 549.882 571.880 588.149 634.831 667.931 

70. Dividends and similar income 3.531 2.331 16.862 1.375 856 6.253 1.656 1.844 

Profits (losses) of equity-accounted investees (1.867) 8.414 6.043 5.023 16.383 8.828 5.956 4.208 

40.-50. Net commission income 313.767 263.973 313.929 293.628 331.886 297.178 294.300 291.324 

of which performance fees 15.384 - - - 22.930 - - - 

80.+90.+ 

100.+110. 

Net income (loss) from trading, hedging and disposal/repurchase activities and from assets/liabilities at 

fair value 20.573 19.357 (964) (4.922) 33.737 26.363 48.429 18.254 

150.+160. Net income from insurance operations - - - - (51) 8.967 16.088 5.941 

220. Other net operating income 25.893 25.327 17.170 24.092 18.538 24.249 23.226 21.291 

Operating income 910.452 862.599 870.481 852.529 959.266 944.789 1.006.459 995.733 

Operating income excluding the effects of the PPA 925.050 876.659 886.415 869.078 973.229 959.987 1.024.486 1.010.793 

180.a Personnel expense (344.469) (359.587) (376.496) (371.032) (346.621) (373.655) (366.562) (378.736) 

180.b Other administrative expenses (201.335) (183.844) (199.730) (184.835) (219.492) (174.589) (200.525) (182.610) 

200.+210. Net impairment losses on property, equipment and investment property and intangible assets (63.996) (60.425) (61.729) (61.086) (97.914) (58.143) (57.546) (57.954) 

of which: effects of the purchase price allocation (18.722) (18.723) (18.722) (18.722) (51.416) (16.526) (16.525) (16.525) 

Net impairment losses on property, equipment and investment property and intangible assets excluding 

the effects of the PPA 

(45.274) (41.702) (43.007) 

(42.364) (46.498) (41.617) (41.021) (41.429) 

Operating expenses (609.800) (603.856) (637.955) (616.953) (664.027) (606.387) (624.633) (619.300) 

Operating expenses excluding the effects of the PPA (591.078) (585.133) (619.233) (598.231) (612.611) (589.861) (608.108) (602.775) 

Net operating income 300.652 258.743 232.526 235.576 295.239 338.402 381.826 376.433 

Net operating income excluding the effects of the PPA 333.972 291.526 267.182 270.847 360.618 370.126 416.378 408.018 

130.a Net impairment losses on loans (251.217) (134.011) (189.845) (131.859) (272.667) (197.349) (235.622) (159.573) 

130.b+c+d Net impairment losses on other assets and liabilities (31.529) (147) (18.660) 615 (13.606) (580) 39.372 (74.346) 

190. Net provisions for risks and charges (15.204) (5.383) (4.407) (2.215) (7.440) (2.621) (17.081) (9.790) 

240.+260.+270. Profits (loss) from disposal of equity investments and net impairment losses on goodwill 12.346 80.498 (2.236) 92 96.684 (213) (357) 4.188 

Pre-tax profit from continuing operations 15.048 199.700 17.378 102.209 98.210 137.639 168.138 136.912 

Pre-tax profit from continuing operations excluding the effects of the PPA 48.368 232.483 52.034 137.480 163.589 169.363 202.690 168.497 

290. Taxes on income from continuing operations (34.693) (103.144) (34.285) (59.858) (22.524) (67.883) (50.367) (102.668) 

of which: effects of the purchase price allocation 10.720 10.545 11.153 11.352 21.093 10.189 11.106 10.144 

Integration costs - - - - (633) (3.875) (4.555) (6.402) 

of which: personnel expense - - - - (97) (2.563) (3.998) (4.968) 

other administrative expenses - - - - (186) (1.690) (1.136) (2.874) 

net impairment losses on property, equipment and investment property and intangible assets - - - - (646) (1.289) (1.312) (1.263) 

taxes - - - - 296 1.667 1.891 2.703 

310. Post-tax profit (loss) from discontinued operations (1) 12 83.035 322 - (33) (5) 5.193 

330. Profit (loss) for the period attributable to minority interests (5.967) (908) (2.179) (4.548) 7.749 (4.488) (11.619) (8.690) 

of which: effects of the purchase price allocation 2.503 2.395 2.622 2.514 12.461 4.219 4.117 3.483 

Profit (loss) for the period attributable to the shareholders of the Parent excluding the effects of the PPA (5.516) 115.503 84.830 59.530 114.627 78.676 120.921 42.303 

340. Profit (loss) for the period attributable to the shareholders of the Parent (25.613) 95.660 63.949 38.125 82.802 61.360 101.592 24.345 

Total impact of the purchase price allocation on the income statement (20.097) (19.843) (20.881) (21.405) (31.825) (17.316) (19.329) (17.958) 

87

Reclassified consolidated income statement net of the most significant non-recurring items 


2010 

Impairment of 

equity 

investments 

Intesa 

Sanpaolo, 

A2A and the 

Tlcom fund 

Contribution 

of depository 

banking 

operations 

non-recurring items 

Net 

impairment 

losses on 

goodwill of 

Gestioni 

Lombarda 

(Switzerland) 

Leaving 

incentives 

Tax effect of 

branch 

switching 

operations 

Partial 

disposal of the 

interest held in 

Lombarda Vita 

Spa 

Disposal of 

BDG 

branches 

Full 

impairment 

of IT 

systems 

Disposal of 

property in 

via Solferino, 

Milan 

2010 

net of nonrecurring 

items 

A 

2009 

Disposal of 

shares, 

sale/impairment 

of equity 

investments, 

impairment of 

intangible 

assets 

PEO gain on 

own 

subordinated 

instruments 

non-recurring items 

Impairment 

losses on 

DD Growth 

Fund 

Tax realignment 

pursuant to Art. 

15, paragraph 3, 

Decree Law 

185/2008 and 

IRAP refund 

Appraisal 

expenses for 

the "branch 

switching" 

operation 

Integration 

costs and 

other items 

2009 

net of nonrecurring 

items 

B 

Changes 

A-B 

% changes 

A/B 

Net interest income (including the effects of PPA) 2.142.526 2.142.526 2.400.543 2.400.543 (258.017) (10,7%) 

Dividends and similar income 24.099 24.099 10.609 10.609 13.490 127,2% 

Profits (losses) of equity-accounted investees 17.613 17.613 35.375 35.375 (17.762) (50,2%) 

Net commission income 1.185.297 1.185.297 1.214.688 1.214.688 (29.391) (2,4%) 

of which performance fees 15.384 15.384 22.930 22.930 (7.546) (32,9%) 

Net income from trading, hedging and disposal/repurchase activities and from 

assets/liabilities at fair value 34.044 1.374 35.418 126.783 (37.441) (60.543) 25.234 54.033 (18.615) (34,5%) 

Net income from insurance operations - - 30.945 30.945 (30.945) (100,0%) 

Other net operating income 92.482 (957) 91.525 87.304 1.686 88.990 2.535 2,8% 

Operating income (including the effects of PPA) 3.496.061 - (957) - - - - 1.374 - - 3.496.478 3.906.247 (37.441) (60.543) 25.234 - - 1.686 3.835.183 (338.705) (8,8%) 

Personnel expense (1.451.584) 33.233 (1.418.351) (1.465.574) (1.465.574) (47.223) (3,2%) 

Other administrative expenses (769.744) (769.744) (777.216) 7.511 (769.705) 39 0,0% 

Net impairment losses on property, equipment and investment property and 

intangible assets (including the effects of PPA) (247.236) 4.455 (242.781) (271.557) 34.891 (236.666) 6.115 2,6% 

Operating expenses (including the effects of PPA) (2.468.564) - - - 33.233 - - - 4.455 - (2.430.876) (2.514.347) 34.891 - - - 7.511 - (2.471.945) (41.069) (1,7%) 

Net operating income (including the effects of PPA) 1.027.497 - (957) - 33.233 - - 1.374 4.455 - 1.065.602 1.391.900 (2.550) (60.543) 25.234 - 7.511 1.686 1.363.238 (297.636) (21,8%) 

Net impairment losses on loans (706.932) (706.932) (865.211) 3.479 (861.732) (154.800) (18,0%) 

Net impairment losses on other assets and liabilities (49.721) 41.111 (8.610) (49.160) 41.454 (7.706) 904 11,7% 

Net provisions for risks and charges (27.209) (27.209) (36.932) 4.996 (31.936) (4.727) (14,8%) 

Profit (loss) from the disposal of equity investments and net impairment losses 

on goodwill 90.700 4.145 (81.095) (6.596) (5.442) 1.712 100.302 (96.157) 4.145 (2.433) (58,7%) 

Pre-tax profit from continuing operations before tax (including the effects of 

PPA) 334.335 41.111 (957) 4.145 33.233 - (81.095) (5.222) 4.455 (5.442) 324.563 540.899 (57.253) (60.543) 25.234 - 7.511 10.161 466.009 (141.446) (30,4%) 

Taxes on income for the year from continuing operations (231.980) (609) 263 (9.139) 18.294 20.201 1.566 (1.444) 1.759 (201.089) (243.442) (20) 19.586 (8.156) (31.038) (2.433) (2.524) (268.027) (66.938) (25,0%) 

Integration costs - - (15.465) 15.465 - - - 

of which: personnel expense - - (11.626) 11.626 - - - 

other administrative expenses - - (5.886) 5.886 - - - 

net impairment losses on property, equipment and investment property and 

intangible assets - - (4.510) 4.510 - - - 

taxes - - 6.557 (6.557) - - - 

Post-tax profit (loss) from discontinued operations 83.368 (83.356) 12 5.155 (5.155) - 12 n.s. 

Profit (loss) for the year attributable to minority interests (13.602) 173 (1.711) (2.951) (279) (18.370) (17.048) (8.198) 3.284 (633) (2.007) (24.602) (6.232) (25,3%) 

Profit for the year attributable to the shareholders of the Parent 172.121 40.502 (83.877) 4.145 22.383 15.343 (60.894) (3.656) 2.732 (3.683) 105.116 270.099 (65.471) (40.957) 17.078 (27.754) 4.445 15.940 173.380 (68.264) (39,4%) 

ROE 1,6% 1,0% 2,4% 1,6% 

Cost / Income ratio (including the effects of PPA) 70,6% 69,5% 64,4% 64,5% 

Cost / Income ratio (excluding the effects of PPA) 67,3% 66,2% 60,8% 60,8% 

88

Reconciliation schedule to 31st December 2010 

Items 

RECLASSIFIED INCOME STATEMENT 2010 reclassifications 

2010 


mandatory 

consolidated 

financial 

statements 

tax 

recoveries 

profit of equityaccounted 

investees 

depreciation for 

improvements 

to leased 

assets 

maximum 

overdraft 

charge 

reclassification 

reclassified 

consolidated 

financial 

statements 

10.-20. Net interest income 2.146.598 (4.072) 2.142.526 

70. Dividends and similar income 24.099 24.099 

Profit of equity-accounted investees - 17.613 17.613 

40.-50. Net commission income 1.181.225 4.072 1.185.297 

80.+90.+ 

100.+110. 


assets/liabilities at fair value 34.044 34.044 

150.+160. Net income from insurance operations - - 

220. Other net operating income/(expense) 239.430 (153.846) 6.898 92.482 

Operating income 3.625.396 (153.846) 17.613 6.898 - 3.496.061 

180.a Personnel expense (1.451.584) (1.451.584) 

180.b Other administrative expenses (923.590) 153.846 (769.744) 


200.+210. intangible assets (240.338) (6.898) (247.236) 

Operating expenses (2.615.512) 153.846 - (6.898) - (2.468.564) 

Net operating income 1.009.884 - 17.613 - - 1.027.497 

130.a Net impairment losses on loans (706.932) (706.932) 

130.b+c+d Net impairment losses on other assets and liabilities (49.721) (49.721) 

190. Net provisions for risks and charges (27.209) (27.209) 

240.+260. 

+270. 

Profit (loss) from the disposal of equity investments and net impairment 

losses on goodwill 108.313 (17.613) 90.700 

Pre-tax profit from continuing operations 334.335 - - - - 334.335 

290. Taxes on income for the year from continuing operations (231.980) (231.980) 

310. Post-tax profit from discontinued operations 83.368 83.368 

330. Profit (loss) for the year attributable to minority interests (13.602) (13.602) 

340. Profit for the year attributable to the shareholders of the Parent 172.121 - - - - 172.121 

Reconciliation schedule to 31st December 2009 

Ite ms 

RECLASSIFIED INCOME STATEMENT 2009 reclassifications 

2009 


mandatory 

consolidated 

financial 

statements 

integration 

costs 

net income 

from 

insurance 

operations 

profit of equityaccounted 

tax 

recoveries 

investees 

depreciation 

for 

improvements 

to leased 

assets 

maximum 

overdraft 

charge 

reclassification 

reclassified 

consolidated 

financial 

statements 

10.-20. Net interest income 2.495.628 (10.572) (84.513) 2.400.543 


Profit of equity-accounted investees - 35.375 35.375 

40.-50. Net commission income 1.130.175 84.513 1.214.688 

80.+90.+ 

100.+110. 


assets/liabilities at fair value 126.788 (5) 126.783 

150.+160. Net income from insurance operations 20.049 10.896 30.945 

220. Other net operating income/(expense) 235.042 (319) (155.308) 7.889 87.304 

Operating income 4.018.291 - - (155.308) 35.375 7.889 - 3.906.247 

180.a Personnel expense (1.477.200) 11.626 (1.465.574) 

180.b Other administrative expenses (938.410) 5.886 155.308 (777.216) 


200.+210. intangible assets (268.178) 4.510 (7.889) (271.557) 

Operating expenses (2.683.788) 22.022 - 155.308 - (7.889) - (2.514.347) 

Net operating income 1.334.503 22.022 - - 35.375 - - 1.391.900 

130.a Net impairment losses on loans (865.211) (865.211) 

130.b+c+d Net impairment losses on other assets and liabilities (49.160) (49.160) 


240.+270. Profits on the disposal of equity investments 135.677 (35.375) 100.302 

Pre-tax profit from continuing operations 518.877 22.022 - - - - - 540.899 

290. Taxes on income for the year from continuing operations (236.885) (6.557) (243.442) 

Integration costs - (15.465) (15.465) 


330. Profit (loss) for the year attributable to minority interests (17.048) (17.048) 

340. Profit for the year attributable to the shareholders of the Parent 270.099 - - - - - - 270.099 

89

Notes to the reclassified consolidated financial statements 

The mandatory financial statements have been prepared on the basis of Bank of Italy Circular No. 262 of 22 nd December 2005 

and subsequent updates. 

The contribution of depository banking operations was completed on 31 st May 2010. 

With regard to the statement of financial position, this involved the disposal of all the assets and liabilities associated with 

these operations, and of direct funding in particular – the most significant component consisting of the accounts for the 

management of the UBI Pramerica investment funds – which had been reclassified from 30 th September 2009 within 

“liabilities associated with activities under disposal”. 

With regard to the income statement, this included not only the gain realised on the contribution in 2010, but also the 

expenses and income from the operations transferred in respect of the first five months only. 

The majority of the share capital (50% + 1 share) of UBI Assicurazioni was disposed of on 29 th December 2009. Because this 

partial disposal was concluded at the end of the year, the income statement for 2009 included all the income and expense 

items on a “line-by-line” basis, while the statement of financial position items at the end of December no longer included the 

assets and liabilities of the insurance company. 

As from 1 st January 2010 the income and expense items relating to UBI Assicurazioni formed part of the item profit (loss) of 

equity-accounted investees (on the basis of the percentage interest held). 

A “commitment fee” was introduced from 1 st July 2009 which eliminated, amongst other things, the maximum overdraft 

charge. This brought about a reclassification – made in the reclassified financial statements only and not the mandatory 

financial statements – of the amounts for that fee, classified within interest until 30 th June 2009. 

In consideration of the commission nature of the commitment fee and the need for a uniform presentation of the data, the 

income from the maximum overdraft charge was reclassified out of net interest income and into net commission income for 

the periods prior to 1 st July 2009. 

The following rules have been applied to the reclassified financial statements to allow a vision that is more consistent with a 

management accounting style: 

- net income from insurance companies comprises (for all the 2009 interim periods and for the full year 2009) the revenues of UBI 

Assicurazioni Spa: net interest, net premiums (item 150), income from trading activities and net income from insurance operations 

and other (items 160 and 220 in the mandatory financial statements); 

- the tax recoveries recognised within item 220 of the mandatory financial statements (other net operating income/expenses) were 

reclassified as a reduction in indirect taxes included within other administrative expenses; 

- the item profit (loss) of equity-accounted investees includes the profit (loss) of equity-accounted investees included within item 240 

in the mandatory financial statements; 

- the item net impairment losses on property, equipment and investment property and intangible assets includes items 200 and 210 

in the mandatory financial statements and also the instalments relating to the depreciation of leasehold improvements classified 

within item 220; 

- the item profit (loss) from the disposal of equity investments and impairment losses on goodwill includes the item 240, net of profit 

(loss) of equity-accounted investees and also items 260 and 270 in the mandatory financial statements; 

- the item other net operating income/expense includes item 220, net of the reclassifications mentioned above. 

The reconciliation of the items in the reclassified financial statements with the figures in the mandatory financial statements, 

prepared on the basis of Bank of Italy Circular No. 262 of 22 nd December 2005, has been facilitated, on the one hand, with the 

insertion in the margin against each item of the corresponding number of the item in the mandatory financial statements with 

which it is reconciled and, on the other hand, with the preparation of specific reconciliation schedules. 

The comments on the performance of the main statement of financial position and income statement items are made on the 

basis of the reclassified financial statements and of the reclassified financial statements for the comparative periods, and the 

tables providing details included in the subsequent sections of this financial report have also been prepared on that same 

basis. 

In order to facilitate analysis of the Group’s performance and in compliance with CONSOB Communication No. DEM/6064293 

of 28 th July 2006, a special schedule has been included in the reclassified financial statements to show the impact on 

earnings only of the principal non-recurring events and items – since the relative effects on equity and cash flow, being 

closely linked, are not significant – which are summarised as follows: 

full year 2010: 

- impairment losses on AFS equity investments in Intesa Sanpaolo and A2A and also in the AFS fund TLcom; 

- the contribution of depository banking operations; 

- impairment losses on goodwill of Gestioni Lombarda (Switzerland); 

- leaving incentives (trade union agreement of 20 th May 2010); 

- tax impact of the branch switching operation; 

- partial disposal (9,9%) of the investment held in the Lombarda Vita Spa joint venture; 

- disposal of two branches by BDG; 

- full impairment loss on some components of IT systems by UBI.S and IW Bank; 

- disposal by the Parent of a property located in via Solferino, Milan 

full year 2009: 

- profits on the disposal of instruments recognised within investments held to maturity. impairment losses on some intangible assets 

(brands), impairment losses on equity investments in Intesa Sanpaolo investment and in the Fund Polis recognised within 

available-for-sale financial assets and profits on the sale of equity investments (quota of BPA, UBI Assicurazioni, Mercato Impresa 

and IW Bank) 

- gain realised on the public exchange offer on own subordinated debt instruments; 

- impairment loss on DD Growth Fund; 

- tax effects of realignment pursuant to Art. 15, paragraph 3 of Decree Law No. 185/2008 and IRAP (local production tax) refund; 

- appraisal expenses for the Group "branch switching" operation 

extraordinary expenses/impairment/provisions relating to IW Bank, provision for the investment in Coralis Rent, integration costs, 

profit on the sale of UBI Assicurazioni agent operations and sale to BPVI of a Palermo branch and a part of a Brescia corporate 

business unit by BPCI. 

90

The consolidated income statement 

The income statement figures commented on are based on the reclassified consolidated financial 

statements (the income statement, the quarterly income statements and the income statement net of the 

principal non-recurring items) contained in another section of this report and the tables furnishing details 

presented below are also based on those statements. The notes that follow those reclassified financial 

statements may be consulted as may the reconciliation schedules for a description of the reclassification. 

The results for 2010 were again affected by the macroeconomic scenario, in a context of a 

recession never completely recovered from, of uncertainty inherited from the turmoil and 

imbalances of the last four years and of sudden and unexpected pressures on financial 

markets, all factors which perpetuate the disorientation of operators. 

The year was characterised for the Group by a fall in ordinary revenues, which could not be 

offset by a policy to contain costs – rigorously pursued again in 2010 – as they continued to be 

affected by the economic situation, the high costs of credit, although now falling, and 

impairment losses on financial assets. The year 2010 therefore ended with a consolidated 

profit for the year of 172,1 million euro 1 , down compared to 270,1 million euro twelve months 

before, despite the presence of non-recurring items 2 , related principally to partial disposals of 

equity investments and the disposal of assets not related to the core business of the Group. 

The positive trend for operations recorded in 2010 was confirmed in the fourth quarter, 

although it ended with a loss of 25,6 million euro, attributable to further impairment losses on 

financial assets (over 22 million euro) and additional impairment losses and provisions, mainly 

of a prudent nature. This result, which compares with a profit of 82,8 million euro in the 

fourth quarter of 2009, did not benefit from any non-recurring gains, as occurred in the 

comparative period. 

Operating income – which summarises the performance of ordinary activities – totalled 

3.496,1 million euro (-10,5% compared to 2009), held down primarily by the trend for net 

interest income and by the result for finance activities, as well as by the absence of net income 

from insurance operations (following the partial disposal of UBI Assicurazioni on 29 th 

December 2009 and the consequent consolidation according to the equity method). 

On a quarterly basis, operating income amounted to 910,5 million euro (-5,1% compared to 

the fourth quarter of 2009), although net interest income (-1,7% compared to the fourth 

quarter of 2009) is showing signs of recovery after the uninterrupted fall commenced at the 

end of 2008: +1% the increase compared to the third quarter of 2010, +6% compared to the 

second quarter of 2010 and +2,9% compared to the first quarter of the year. 

In detail, net interest income 3 , which includes the expense of the purchase price allocation 

amounting to 61,1 million euro, fell to 2.142,5 million euro (-258 million euro the year before), 

penalised by weak demand for credit and even more by interest rate levels 4 . 

1 The result includes the expense resulting from the purchase price allocation of the merger amounting to 82,2 million euro (86,4 

million euro in 2009). 

2 If non-recurring items are not included, then the normalised profit is 105,1 million euro, compared to 173,4 million euro in the 

comparative year. These items consisted of net income of 67 million euro in 2010 (net of tax and minority interests), attributable 

mainly to the contribution of the depository banking operations and the partial disposal of Lombarda Vita, although offset by 

impairment losses on available-for-sale equity investments and payments related to leaving incentives. Positive again in 2009, net 

income from non-recurring items amounted to 96,7 million euro in 2009 (again net of tax and minority interests) the result primarily 

of the following: profits on the partial disposal of UBI Assicurazioni, a quota of BPA and Mercato Impresa; the gains from the public 

exchange offer on own held-to-maturity investments held in portfolio; the tax realignment and the IRAP [local production tax] refund. 

This was partly offset in 2009 by impairment losses on the equity investment in Intesa Sanpaolo and in the Polis Fund, by 

impairment losses on intangible assets, by the full impairment loss on the DD Growth Fund, by integration costs and by appraisal 

expenses for the operation to optimise the branch network. 

3 The introduction of a commitment fee from 1 st July 2009 made it appropriate, for the purpose of a consistent comparison, to 

reclassify the old maximum overdraft charges (MOC), amounting to 84,5 million euro in 2009, out of net interest income and into net 

commissions. Since the commitment fee is of an all encompassing nature, not only was the MOC eliminated, but also a series of 

commissions applied to credit lines and to authorised current account overdrafts. This caused a decrease in the relative income from 

162,7 million euro in 2009 to 117 million euro in 2010. 

4 The progressive average one month Euribor rate fell from 0,927% in 2009 to 0,573% in 2010 (-35 basis points). 

91

Interest and similar income: composition 


Debt 

instruments 

Financing 

Other 

transactions 

2010 2009 

1. Financial assets held for trading 30.701 - 933 31.634 18.210 

2. Financial assets at fair value - - - - - 

3. Available-for-sale financial assets 328.149 - - 328.149 165.526 

3. Held-to-maturity investments - - - - 59.659 

5. Loans to banks - 29.421 361 29.782 40.260 

6. Loans to customers 2.814 3.125.154 1.922 3.129.890 3.831.817 

7. Hedging derivatives X X - - - 

8. Other assets X X 1.785 1.785 2.685 

Total 361.664 3.154.575 5.001 3.521.240 4.118.157 

Interest and similar expense: composition 


Borrowings 

Securities 

Other 

transactions 

2010 2009 

1. Due to Central Banks (14.115) - - (14.115) (3.339) 

2. Due to banks (29.382) X (590) (29.972) (45.217) 

3. Due to customers (195.937) X (645) (196.582) (374.526) 

4. Securities issued X (1.069.742) - (1.069.742) (1.195.592) 

5. Financial liabilities held for trading (9.108) - - (9.108) (810) 

6. Financial liabilities at fair value - - - - - 

7. Other liabilities and provisions X X (789) (789) (1.406) 

8. Hedging derivatives X X (58.406) (58.406) (96.724) 

Total (248.542) (1.069.742) (60.430) (1.378.714) (1.717.614) 

Net interest income 2.142.526 2.400.543 

The main components were as follows 5 : 

• the net balance on business with customers amounted to 1.969,4 million euro (-267 million 

euro), affected above all by the impact of interest rates on the volumes of lending. 

Lending business did in fact perform positively over twelve months (an increase in 

consolidated lending of +4,8%, net of the large corporate component) affected, however, in 

the Group’s network banks, by a further narrowing of the spread (-38 basis points), and by 

the poor performance of average volumes of business (-0,1% lending and -3,5% funding). 

These changes provide a general summary of the progressive reductions in short term 

lending and funding partially offset by growth in medium-to-long term loans (now the most 

significant component) and by the stability of longer maturity funding from customers. The 

final balance on business with customers also included the income from positive 

differentials on hedges on fixed rate bonds issued (approximately 106 million euro 

compared to -25 million euro twelve months before); 

• financial assets relating to the owned securities portfolio generated net interest income of 

186,4 million euro (+15,6 million euro), the net effect of new investments in debt 

instruments performed in the first half (+5,4 billion euro over twelve months). In reality, the 

action taken to invest in Italian government securities, classified mainly within availablefor-sale 

financial assets, made a marked improvement in the contribution from the 

securities portfolio to net interest income, (an increase of +162,6 million euro in interest 

income from AFS financial assets compared to twelve months before), but at the same time 

it incorporated the impacts of the differentials paid on derivatives to hedge interest rate risk 

(available-for-sale, fixed rate bonds) which more than doubled during the year; 

• the net balance on interbank business showed net expense of 14,3 million euro, compared 

to -8,3 million euro recorded in 2009. This reflected on the one hand higher average levels 

of debt over twelve month and on the other a recovery in interest rates in the last quarter, 

especially on short term maturities. 

Quarterly net interest income – 548,6 million euro – fell slightly compared to the fourth 

quarter of 2009 (-9,4 million euro). On the one hand the item includes positive growth in the 

5 The calculation of net balances was performed by allocating interest for hedging derivatives and financial liabilities held for trading 

within the different areas of business (financial, with banks, with customers). 

92

net balance on income from financial assets (60,2 million euro, compared to 32,9 million euro 

in the fourth quarter of 2009), the result of substantial purchases of government securities, 

and on the other the increased cost of funding 6 , partly in relation to the expansion in volumes 

of business (+15,2 million euro for interest expense on securities issued, +7,6 million euro for 

interest on amounts due to customers and +16,3 million euro for interest on amounts due to 

banks). The delay of a few months with which the repricing of financial assets was performed 

in relation to rises in interest rates (which nevertheless remain at very low record levels) must 

also be underlined. 

Dividends, amounting to 24,1 million euro compared to 10,6 million euro previously, relate 

mainly to securities held in the AFS portfolio of the Parent, UBI Banca, and included 11,6 

million euro of profits distributed on the ordinary shares of Intesa Sanpaolo (not remunerated 

in the comparative year). 

Profit of equity-accounted investees fell to 17,6 million euro (35,4 million euro in 2009) due 

mainly to the lower contributions from Aviva Vita (two million euro, compared 18,5 million 

euro before), Lombarda Vita (14,3 million euro compared to 11,2 million euro in 2009), Aviva 

Assicurazioni Vita (1,5 million euro, compared to 3,3 million euro) and from Arca SGR (two 

million euro compared to 2,8 million euro before) and also to the loss incurred by UBI 

Assicurazioni (-2,2 million euro 7 ). 

Commission income: composition 

Commission expense: composition 


2010 2009 


2010 2009 

a) guarantees granted 42.648 41.069 a) guarantees received (809) (765) 

c) management, trading and advisory services 683.743 656.798 c) management and trading services: (90.276) (82.311) 

1. trading in financial instruments 39.462 37.830 1. trading in financial instruments (16.368) (17.093) 

2. foreign exchange trading 12.259 11.510 2. foreign exchange trading (281) (84) 

3. portfolio management 273.077 258.769 3. portfolio management (5.772) (2.877) 

3.1. individual 72.968 73.660 3.1. own (5.083) (1.653) 

3.2. collective 200.109 185.109 3.2. on behalf of third parties (689) (1.224) 

4. custody and administration of securities 15.788 19.188 4. custody and administration of securities (8.569) (10.687) 

5. depository banking 7.751 21.022 5. placement of financial ,pinstruments (4.942) (3.774) 

6. placement of securities 105.533 78.411 services 

7. receipt and transmission of orders 43.565 48.681 distributed through indirect networks 

(54.344) (47.796) 

8. advisory activities 6.062 5.965 d) collection and payment services (60.899) (64.034) 

8.1 on investments 5.958 5.965 e) other services (44.908) (51.899) 

8.2 on financial structure 104 - 

9. distribution of third party services 180.246 175.422 

9.1. portfolio management 68 - 

9.2. insurance products 127.927 105.233 Total (196.892) (199.009) 

9.3. other products 52.251 70.189 

d) collection and payment services 146.820 156.170 

f) services for factoring transactions 26.995 26.799 

i) current account administration 213.902 225.262 

j) other services 268.081 307.599 

Total 1.382.189 1.413.697 Net commission income 1.185.297 1.214.688 

Net commission income amounted to 1.185,3 million euro (-2,4% compared to 2009) the 

aggregate result of opposing trends that are becoming increasingly more evident. 

On the one hand, income from areas typical of normal banking business continued to fall, 

even if, after three years, the phenomenon seems to be showing the first signs of slowing. In 

detail: -32,5 million euro for “other services” (including, -45,7 million euro in relation to the 

new commitment fee as compared to the maximum overdraft charges and the previous 

commissions applied to credit authorisations and overdraft accounts taken together); -11,4 

million euro for the item “current account administration” (in relation to the lower unit profit 

on both conventional products and bundled accounts); -6,2 million euro for “collection and 

payment services” (the result, amongst other things, of the economic context) 8 . 

6 The trend for interest rates reversed from July in the third quarter with modest signs of recovery and then more marked signs 

towards the end of the year (the average one month Euribor stood at 0,816% in the fourth quarter of 2010, compared to 0,453% in 

the same period of 2009). 

7 UBI Assicurazioni was consolidated on a line-by-line basis in 2009 and therefore made no contribution to the item in question. As 

already reported, the profits of the company were recognised within the item on the basis of the percentage interest held by the 


8 All the changes were calculated by subtracting commission expense from the respective commission income. 

93

On the other hand, management, trading and advisory services 9 , which had recorded 

significant recoveries during the year, were held down in the fourth quarter by renewed 

pressures on financial markets, settling to 581,5 million euro (+18,4 million euro) and 

accounting for 49,1% of total net commission income for the year (46,4% in 2009). 

More specifically, the increase was attributable to individual and collective portfolio 

managements (+11,4 million euro), to the distribution of insurance products (+22,7 million 

euro) and to the placement of securities, mainly third party bonds (+26 million euro). This was 

partially offset by the absence of income from depository banking operations (-13,3 million 

euro), following the contribution of these operations in May 2010 and also by a fall-off in order 

collection (-5,1 million euro). 

The increased contribution from “assets under management” was the combined result of an 

increase in total average assets managed (assisted also by market trends) and in average 

profitability, as a consequence of a return by customers to investments in equities and bonds. 

Quarterly commission income reflected the volatility in prices toward the end of the year to 

stand at 313,8 million euro (-5,5% compared to fourth quarter of 2009). It recorded a 

fluctuating trend compared to previous interim periods: +18,9% compared to the low recorded 

in the third quarter of 2010, -0,1% compared to the second quarter and +6,9% compared to 

the first three months of the year. 

Affected by market trends, performance fees, which related entirely to UBI Pramerica SGR and 

were recognised in the last quarter of the year, fell from 22,9 million euro to 15,4 million euro 

(accounting for 1,3% of total commission income). 

Net income from financial activities fell to 34 million euro from 126,8 million euro the year 

before (in normalised terms the result fell from 54 million euro to 35,4 million euro), the result 

of performance in the following areas: 

• trading activities recorded a loss of 56,9 million euro (compared to a profit of 13,9 million 

euro previously), attributable almost entirely (-55,8 million euro) 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 (unwinding) 10 . 

The extreme reactivity to the “sovereign debt” risk of some European countries, together 

with the growing difficulties of first Greece and then Ireland towards the end of the year, 

affected the price of financial instruments, reducing their contribution to income from 

trading activities: -14,6 million euro for debt instruments and the related derivative 

instruments, net of the component just mentioned concerning the unwinding of some 

derivatives (-6,1 million in 2009), -2,7 million euro for equity instruments and the related 

derivative instruments (+5,2 million euro), +0,4 million euro for investments in hedge funds 

(+2,3 million euro) and +14,7 million euro for foreign exchange business (+10,3 million 

euro). 

In December UBI Banca International disposed of a Lehman Brothers security (2,5 million euro nominal, 

recognised in the financial statements as at 31 st December 2008 at the expected realisable value, equal to 8,625% 

of the nominal value), to realise a gain of over 300 thousand euro, recognised within item 80 “trading”; 

• net income from financial assets and liabilities at fair value – relating to investments in 

hedge funds performed after 1 st July 2007 – amounted to 6,7 million euro, compared to 

-25,2 million euro in 2009, which in addition to the gains realised on Capitalgest and from 

the redemptions that occurred, nevertheless included the full impairment loss of the SV 

Special Situation fund of 8,1 million euro and also the full impairment loss of 25,2 million 

euro on the DD Growth fund, which was classifed within non-recurring items; 

• net hedging income – which represents the change in the fair value of hedging derivatives 

and the relative items hedged – rose to 67,2 million euro (16 million euro in 2009) and 

should be interpreted in combination with the information reported on trading activity 

concerning the unwinding of hedges. The positive performance also relates to the market 

context and more specifically to the reversal in the trend for interest rates which became 

more marked in the last quarter of the year and had a positive impact on the value of the 

bonds hedged. 

9 The amount consists of management, trading and advisory services net of the corresponding expense items and is calculated 

excluding currency trading. 

10 See in this respect the Notes to the Consolidated Financial Statements, Part A – Accounting Policies – Section 5 – Other aspects. 

94

Net trading income (loss) 

Gains 

Profits from 

trading 

Losses 

Losses from 

trading 

Net income 

(loss) 2010 

Figures in thousands of euro (A) (B) (C) (D) [(A+B)-(C+D)] 

2009 

1. Financial assets held for trading 15.561 85.345 (61.541) (243.918) (204.553) 177.512 

1.1 Debt instruments 8.704 14.297 (20.458) (22.935) (20.392) 17.405 

1.2 Equity instruments 5.752 3.314 (7.500) (5.940) (4.374) 22.865 

1.3 Units in O.I.C.R. (collective investment instruments) 117 548 (97) (181) 387 2.292 

1.4 Financing - - - - - - 

1.5 Other 988 67.186 (33.486) (214.862) (180.174) 134.950 

2. Financial liabilities held for trading 10.529 1 (40) (11) 10.479 391 

2.1 Debt instruments 10.450 - (40) - 10.410 480 

2.2 Payables - - - (8) (8) - 

2.3 Other 79 1 - (3) 77 (89) 

3. Financial assets and liabilities: exchange rate differences X X X X 2.204 3.766 

4. Derivative instruments 255.111 2.142.572 (177.903) (2.277.469) 134.979 (167.805) 

4.1 Financial derivatives 255.111 2.141.638 (177.903) (2.275.746) 135.768 (168.637) 

- on debt instruments and interest rates 233.543 2.127.635 (160.855) (2.260.740) (60.417) (23.985) 

- on equity instruments and share indices 5.321 8.200 (6.676) (5.210) 1.635 (17.680) 

- on currencies and gold X X X X 192.668 (128.390) 

- other 16.247 5.803 (10.372) (9.796) 1.882 1.418 

4.2 Credit derivatives - 934 - (1.723) (789) 832 

Total 281.201 2.227.918 (239.484) (2.521.398) (56.891) 13.864 

Net hedging income 

Figures in thousands of euro 2010 2009 

Net hedging income 67.209 15.960 

Profit (loss) from disposal or repurchase 


Profits 

Losses 

Net profit (loss) 

2010 

2009 

Financial assets 

1. Loans to banks 1.463 - 1.463 - 

2. Loans to customers - (5.313) (5.313) (81) 

3. Available-for-sale financial assets 32.127 (882) 31.245 30.511 

3.1 Debt instruments 19.670 (581) 19.089 25.031 

3.2 Equity instruments 10.418 (298) 10.120 5.463 

3.3 Units in O.I.C.R (collective investment instruments). 2.039 (3) 2.036 17 

3.4 Financing - - - - 

4. Held-to-maturity investments - - - 37.441 

Total assets 33.590 (6.195) 27.395 67.871 

Financial liabilities 

1. Due to banks - - - - 

2. Due to customers - - - - 

3. Securities issued 6.574 (16.912) (10.338) 54.239 

Total liabilities 6.574 (16.912) (10.338) 54.239 

Total 40.164 (23.107) 17.057 122.110 

Net profit (loss) on financial assets and liabilities at fair value 


Net profit (loss) on financial assets and liabilities at fair value 6.669 (25.151) 


assets/liabilities at fair value 

34.044 126.783 

• net income from the disposal/repurchase of financial assets/liabilities amounted to 17,1 

million euro compared to 122,1 million euro in 2009 11 and was composed as follows: 

♦ 19,1 million euro from available-for-sale debt instruments, including 1,8 million relating 

to a corporate bond in the Centrobanca portfolio, 8,7 million relating principally to a BTP 

11 The amount included both non-recurring items associated with the gains generated by the public exchange offer on own 

subordinated instruments (60,5 million euro) and by the disposal of BTPs in the held-to-maturity portfolio (37,4 million euro), as 

well as on ordinary operating items such as the disposal of equity instruments (5,5 million euro, including 2,1 million euro – net of 

a consolidation adjustment – for the sale of the equity investment in Cedacri held by BRE, 1,5 million euro in relation to the 

disposal of the investment in SIA-SSB, as well as approximately one million euro from accepting the Meliorbanca pubic tender offer) 

and the disposal of BTPs as asset swaps (classified as available-for-sale) which had generated gains of approximately 20 million 

euro. 

95

disposed of by IW Bank and another 8,7 million euro relating to UBI Banca, realised on 

the sale of BTPs, CTZs and bank bonds with a short residual life; 

♦ 10,1 million euro from equity instruments, including 9,1 million euro on the disposal of 

the interest held in CartaSì Spa 12 ; 

♦ two million euro from units held in monetary and bond funds (resulting from the 

contribution of operations by Capitalgest SGR) sold by UBI Pramerica SGR in the second 

half of the year; 

♦ -10,3 million euro from the repurchase of securities issued as part of ordinary business 

with customers; 

♦ -5,3 million euro from disposals of impaired loans by Centrobanca; 

♦ +1,5 million from the sale by UBI Banca International of a loan to banks, net of the 

impairment loss, to a counterparty which acquired the former Soviet Republic bank in 

difficulty, the borrower in question; 

On a quarterly basis, net income from financial activities amounted to 20,6 million euro (+33,7 

million euro in the fourth quarter of 2009, which included profits of 37,4 million euro from the 

disposal of the held-to-maturity portfolio), due mainly to profits on the disposal of AFS 

securities and units of AFS funds (+19,1 million euro), hedging activity (+10,4 million euro) 

and assets at fair value (+0,5 million euro), partially offset, however, by the loss for trading (-6 

million euro, attributable above all to the impact of losses incurred as a result of the 

broadening of spreads on securities issued by less virtuous countries) and by the disposal of 

loans (-3,5 million euro related to Centrobanca). 

Following the partial disposal of UBI Assicurazioni (performed on 29 th December 2009), net 

income from insurance operations was nil (31 million euro in 2009). The profits of the 

company are now recognised in proportion to the percentage interest held within the item 

“profit of equity-accounted investees”. 

Other net operating income/(expense) amounted to 92,5 million euro (+5,2 million euro compared 

to 2009). 

Other net operating income and expenses 

The item includes the following: a 

payment of 2,5 million euro to IW 

Bank for the final settlement of 

the litigation that had arisen with 


Other operating income 

Recovery of expenses and other income on current accounts 

2010 

165.869 

13.745 

2009 

195.055 

26.565 

former officers of that bank 13 Recovery of insurance premiums 33.125 31.787 

; 1,7 

Recoveries of taxes 153.846 155.308 

million euro relating to a recovery Rents and other income for property management 8.959 7.936 

from a network bank creditor 

action and approximately one 

Recovery of expenses on finance lease contracts 

Other income and prior year income 

14.020 

96.020 

13.946 

114.821 

Reclassification of "tax recoveries" (153.846) (155.308) 

million euro resulting from the 

Other operating expenses (73.387) (107.751) 

disposal of BPCI’s correspondent 

Depreciation of leasehold improvements (6.898) (7.889) 

banking operations (as part of Costs relating to finance lease contracts (7.169) (8.176) 

the contribution of depository Expenses for public authority treasury contracts (7.542) (8.042) 

Ordinary maintenance of investment properties - - 

banking operations). 

Other expenses and prior year expenses (58.676) (91.533) 

The table shows the 

corresponding decreases that 

Reclassification of depreciation of leasehold improvements 6.898 7.889 

affected both other operating Other operating income and expenses 

income (-29,2 million euro) and 

92.482 87.304 

other operating expenses (-34,4 million euro), mainly as a result of changes in prior year 

income and expense 14 . 

12 On 17 th December 2010 UBI Banca sold its entire interest held in the company Società Istituto Centrale delle Banche Popolari 

Italiane Spa consisting of 4.289.751 shares accounting for 7,25% of the share capital for consideration of 23,4 million euro (5,4621 

euro per share), in addition to a dividend payment of 1,4 million euro. 

13 Following the unexpected reorganisation of top management at IW Bank, inspections were commenced in 2009 by the Parent which 

also concerned the accounting system of that bank. The inspection found a series of problems of an operational and organisational 

nature, especially with the system of controls for suspense accounts. Amongst other things, deferred items were found dating back 

some time concerning business with customers, of uncertain recovery, for which impairment losses on loans were recognised 

amounting to 3,5 million euro, operating costs of 1,7 million euro and provisions for risks and charges of one million euro. The 

amounts were classified within non-recurring items. 

14 The performance of prior year items relates, amongst other things, to Coralis Rent which ceased operations in November 2009. Its 

revenue and expenses were still included in the separate items of the comparative period figures amounting to 15,9 million euro for 

the income and 22,1 million euro for the expenses. Prior year expenses in 2009 also included 3,6 million euro due to litigation with 

a large Group of companies by BPA. 

96

The change in the item “recovery of expenses and other income on current accounts” is also to 

be noted. It fell by 12,8 million euro, partly in relation to the implementation of the European 

Directive on the transparency of transactions and banking services. 

Total operating expenses incurred by the 

Group during the year amounted to 

2.468,6 million euro, a decrease of 1,8% 

compared to 2009. The item fell in 

normalised terms, excluding nonrecurring 

items, by 1,7%. 

In detail: 

• personnel expense – which includes 33,2 

e) Provision for post-employment benefits (10.817) (17.407) 

f) Pensions and similar obligations: (4.144) (6.660) 

million euro of leaving incentives 

- defined contribution - (156) 

recognised in connection with a trade - defined service (4.144) (6.504) 

union agreement signed on 20 th May 

2010 – fell to 1.451,6 million euro (-14 

g) Payments to external supplementary pension 

plans: (50.411) (50.338) 

- defined contribution (50.363) (50.188) 

million euro, compared to the previous 

- defined benefits (48) (150) 

year; -47,2 million euro excluding the h) Expenses resulting from share based payment 

extraordinary payment, classified within 

agreements - (179) 

i) Other employee benefits (84.386) (42.325) 

the item “other employee benefits”). 

2) Other personnel in service (18.130) (26.559) 

The change is the aggregate result, on - Expenses for agency personnel on staff leasing 

the one hand, of savings of 

contracts (14.216) (21.628) 

- Other expenses (3.914) (4.931) 

approximately 32 million euro related to 

3) Directors and statutory auditors (22.118) (22.701) 

changes in average personnel numbers 4) Expenses for retired personnel (252) (107) 

and of changes in the variable Total (1.451.584) (1.465.574) 

components of remuneration, and on the 

other hand, to ordinary increases in salaries, leaving incentives, other specific payments to 

employees and expenses for training in external organisations (4,3 million euro). 

The details of the composition reported Other administrative expenses: composition 

in the table show a significant reduction 

concentrated in the item wages and 

employee expenses (-40,4 million euro), 


and also a fall in expense for workers on 

personnel leasing contracts (-7,4 million 

euro). The latter is due to both less use 

of this type of personnel and to the 

conversion to permanent contracts 

which occurred in the second half of the 

year. 

Personnel expense also benefited in the 

accounts from savings of more than 14,8 

million euro following the exclusion from 

the consolidation of UBI Assicurazioni 

and Mercato Impresa; 

• other administrative expenses, 

amounting to 769,7 million euro, 

decreased by -7,5 million euro, including 

-3,5 million euro for current expenses 

and -4 million euro for indirect taxation. 

In reality, the higher expenses shown in 

the table (a total of +14,9 million euro) 

are the result of the effects in the 

accounts of the partial disposal of UBI 

Assicurazioni (now an equity-accounted 

investee), and also the full disposal of 

Mercato Impresa 15 , which, while 

Personnel expense: composition 

2010 2009 


1) Employees (1.411.084) (1.416.207) 

a) Wages and salaries (948.075) (974.448) 

b) Social security charges (250.714) (264.733) 

c) Post-employment benefits (62.432) (60.006) 

d) Pension expense (105) (111) 

2010 2009 

A. Other administrative expenses (712.876) (716.329) 

Rent payable (77.847) (80.090) 

Professional and advisory services (102.647) (108.421) 

Rentals hardware, software and other assets (38.679) (36.869) 

Maintenance of hardware, software and other assets (40.842) (43.373) 

Tenancy of premises (51.748) (58.178) 

Property maintenance (27.816) (24.970) 

Counting, transport and management of valuables (16.503) (17.893) 

Membership fees (10.818) (11.541) 

Information services and land registry searches (13.168) (16.718) 

Books and periodicals (1.901) (1.970) 

Postal (31.906) (37.759) 

Insurance premiums (45.806) (27.331) 

Advertising (24.663) (28.033) 

Entertainment expenses (2.099) (2.385) 

Telephone and data transmission expenses (69.934) (67.817) 

Services in outsourcing (51.223) (47.597) 

Travel expenses (23.476) (24.396) 

Credit recovery expenses (46.103) (42.468) 

Forms, stationery and consumables (13.304) (13.545) 

Transport and removals (6.987) (8.414) 

Security (9.651) (11.368) 

Other expenses (5.755) (5.193) 

B. Indirect taxes (56.868) (60.887) 

Indirect taxes and duties (40.467) (45.157) 

Stamp duty (129.567) (133.620) 

Municipal property tax (9.029) (9.818) 

Other taxes (31.651) (27.600) 

Reclassification of "tax recoveries" 153.846 155.308 

Total (769.744) (777.216) 

15 Both companies were consolidated on a line-by-line basis until 2009 and the relative intragroup cash flows were eliminated as part 

of the consolidation process. The disposals (partial for UBI Assicurazioni and total for Mercato Impresa), which occurred in 

December 2009 brought out those items in the financial ye2010. However they were not sufficiently large as to warrant pro-forma 

restatement of the comparative period. 

97

affecting all types of expense, are concentrated mainly in the items insurance premiums and 

outsourced services in relation to the management of commercial products for businesses. If 

these items are excluded, current expenses continue to show the action taken to contain 

them, attributable mainly to tenancy of premises, information services and land registry 

searches, advertising and promotion expenses, rent payable, postal expenses (which in 2009 

included expenses to communicate changes in terms and conditions and the abolition of the 

maximum overdraft charge) and professional and advisory services (due to a non recurring 

item of 7,5 million euro in 2009 relating to appraisal expenses and IT intervention for the 

“branch switching” operation, of which 7,1 million euro is included in the item). On the other 

hand telephone and data transmission expenses moved in the opposite direction (due to the 

higher costs incurred for participation in the guarantee system designed to cover the costs of 

damages resulting from the fraudulent use of credit cards) as did credit recovery expenses 

(in consideration of the current economic context); 

• Net impairment losses on property, equipment and investment property and intangible assets 

reduced to 247,2 million euro (-24,3 million euro compared to 2009). The reduction mainly 

reflects the change in the purchase price allocation performed here, which reduced by 74,9 

million euro after the exceptional amount of 101 million euro in 2009, which incorporated a 

non recurring negative component (-34,9 million euro) related to the impairment test on 

brands 16 . 

The item also included amortisation of new investments in software, as well as a 4,5 million 

euro non-recurring full impairment of some parts of the IT system of the Group’s consortium 

service company (3,1 million euro, related mainly to retirements for end of use and service 

contract and for replacement of the product) and of IW Bank (1,4 million euro, mainly for the 

retirement of the bank’s previous legacy system and to a lesser extent for the Twice Sim and 

InvestNet software). 

On a quarterly basis, operating expenses totalled 609,8 million euro (-8,2% compared to the 

fourth quarter of 2009), which confirmed the downward trend for average quarterly spending 

(also for normalised figures): 608 million euro in 2010 compared to 618 million euro the year 

before. 

In terms of composition, the following trends were observed in the fourth quarter of the year 

compared to the same period in 2009: 

• a fall in personnel expense (-2,2 million euro, attributable mainly to workers on personnel 

leasing contracts, use of which was reduced partly by making permanent appointments); 

• a significant reduction in other administrative expenses (-18,2 million euro, due to the 

presence in 2009 of the 7,5 million euro of non-recurring expenses already mentioned in 

relation to appraisal expenses for the branch switching operation, to savings on the item 

tenancy of premises, postal expenses – fewer communications of changes to customers – 

advertising and telephone and data transmission expenses); 

• a reduction in net impairment losses on property, equipment and investment property and 

intangible assets (-33,9 million euro), which, while they included the amortisation of new IT 

investments, were affected by the absence of a non recurring item connected with the 

impairment test performed in December 2009 on indefinite life intangible assets (34,9 


As a summary of overall performance, net operating income for the year amounted to 

1.027,5 million euro, compared to 1.391,9 million euro in 2009. 

As a result of the performance of operating expenses, quarterly net operating income (300,7 

million euro) recorded growth compared both to the fourth quarter of 2009 (+1,8%), and to all 

the previous periods: +16,2% compared to the third quarter of 2010, +29,3% compared to 

second quarter and +27,6% compared to the first three months of the year. 

16 The result related to the carrying amounts for indefinite life intangible assets of the network banks of the former Banca Lombarda e 

Piemontese Group. The remaining goodwill on the brands has been depreciated from 2010 over 19 years, for a total of 

approximately 357 million euro with an annual additional impact on the PPA of 11 million euro. 

98

Net impairment losses/reversals of impairment losses 

on loans: composition 


Impairment losses/ 

reversals of impairment losses, net 

Specific 

Portfolio 

The figures for the year confirm the 

positive signals coming from net 

impairment losses on loans, down to 

706,9 million euro, a reduction of 

158,3 million euro compared to 

2009 17 . 

The improvement affected both 

portfolio impairment losses and 

reversals, which reduced by 29,5 

million euro due, amongst other 

things, to bringing the quality of the 

portfolios of some of the network 

banks into line with the Group 

average, while coverage for 

performing loans grew over twelve months from 0,52% to 0,54%, and also to specific 

impairment losses on deteriorated loans (down by 128,8 million euro). The latter – amounting 

to 631 million euro – are the aggregate result of varying trends: on the one hand the network 

banks by themselves recorded a significant reduction (-130,5 million euro), offering a signal for 

confidence in the short term, and also for a reduced need to recognise impairment losses 

following the improvement in the quality of some portfolios just mentioned. 

2010 

A. Loans to banks - 23 23 

B. Loans to customers (630.973) (75.982) (706.955) 

C. Total (630.973) (75.959) (706.932) 

Impairment losses/ 

reversals of impairment losses, net 

2009 


Specific Portfolio 

A. Loans to banks (3.468) (14) (3.482) 

B. Loans to customers (756.318) (105.411) (861.729) 

C. Total (759.786) (105.425) (865.211) 

Net impairment losses/reversals of impairment losses on loans: quarterly performance 

Figures in 

thousands of 

euro 

1st 

2nd 

Specific Portfolio Specific Portfolio 

Specific 

Quarter 

Quarter 

Portfolio 

3rd 

Quarter 

Specific 

Portfolio 

4th 

Quarter 

2010 (105.366) (26.493) (131.859) (184.080) (5.765) (189.845) (124.200) (9.811) (134.011) (217.327) (33.890) (251.217) 

2009 (122.845) (36.728) (159.573) (176.919) (58.703) (235.622) (178.354) (18.995) (197.349) (281.668) 9.001 (272.667) 

2008 (64.552) 4.895 (59.657) (85.136) (8.163) (93.299) (77.484) (25.384) (102.868) (219.512) (90.887) (310.399) 

On the other hand difficulties were encountered for some of the product companies, associated 

with specific operating segments: consumer finance, which is nevertheless showing some first 

positive signals after the corrective action taken, and property leasing, where a project to 

generally improve credit quality was launched in the fourth quarter in co-ordination with the 

Parent. 

The positive performance by individual impairment losses also contributed to reversals of 

losses (excluding present value discounting), which totalled 196,2 million euro, an increase 

from 128,2 million euro in 2009. 

Total net impairment losses as a percentage of net loans to customers had fallen consistently 

at the end of the year to 0,69% from 0,88% in 2009. 

On a quarterly basis, net impairment losses fell less markedly, settling at 251,2 million euro 

from 272,7 million euro in the fourth quarter of 2009. 

In reality, the item included a significant reduction in specific impairment losses (-64,3 million 

euro), but greater portfolio impairment losses (after the reversal of impairment losses that 

occurred in the last quarter of 2009). In accordance with the provisions of Bank of Italy 

Circular No. 263, the periodic update of the historical data series, which form the basis for the 

estimate of the risk parameters for the rating models (PD – probability of default) and LGD 

(Loss given default), did in fact introduce the period of recession (2008-2010), resulting in an 

increase in collective impairment losses in December for the network banks only of greater 

than 20 million euro. 

The cost of credit in the last quarter of the year fell to 0,99%, annualised, from 1,11% (again 

annualised) in the same period of 2009. 

Net impairment losses on other assets and liabilities totalled 49,7 million euro (49,2 million 

euro in the comparative year). 

These included 41,1 million euro of non-recurring items, as follows: 36,8 million euro resulting 

from the impairment loss on the AFS investment in Intesa Sanpaolo (an impairment loss had 

17 The item includes recognition of a further impairment loss of the Mariella Burani Group amounting to 11,3 million euro, after 

impairment losses of 56,5 million euro recognised in 2009. 

99

already been recognised in the first half of 17,2 million euro and a further loss was then 

recognised – on the basis of the official price of 2,0423 euro quoted on 31 st December 2010); 

2,6 million relating to the company A2A and 1,7 million euro relating to the permanent 

impairment loss on the units of the British TLcom fund classified within available-for-sale 

financial assets. 

Net impairment losses on other assets and liabilities were recognised in 2009 of 49,2 million 

euro as follows: 9,1 million euro on the Polis Fund and 32,4 million euro (all classified within 

non-recurring items) on Intesa Sanpaolo (the impairment loss had been recognised in the first 

half the year, while in the third and fourth quarter this investment recovered in value by 126,1 

million euro gross on the basis of the official price – 3,1654 euro – recorded on 30 th December 

2009, which increased the equity reserve in relation to available-for-sale financial assets). 

As a result, amongst other things, of 

the reversals recorded by some 

network banks following the 

settlement of litigation, net provisions 

for risks and charges fell from 36,9 

million euro 18 to 27,2 million euro. 

The following was recognised within 

the item: 

Net provisions for risks and charges 

2010 2009 


Net provisions for risks and charges for revocations (1.440) (1.881) 

Additions to and uses of personnel expense provisions (79) - 

Net provision for bonds in default 46 (739) 

Net provisions for litigation (16.924) (17.610) 

Other provisions for risks and charges (8.812) (16.702) 

Total (27.209) (36.932) 

• a provision of eight million euro 

made by B@nca 24-7, in relation to the company Ktesios – specialised in the salary backed 

loans sector which operates as an agent of B@nca 24-7, providing services, partly through 

an associate company, for the recovery of credit. 

On 11 th February 2011 Ktesios Spa, in consideration of the constant imbalance in its cash 

flows, announced that it had made proposals to its governing bodies to take appropriate 

corporate ownership initiatives, including a possible proposal to go into voluntary 

liquidation. With a provision of 8 th March 2011 the Bank of Italy removed Ktesios from the 

special list pursuant to Art. 107 of the Consolidated Banking Act. Therefore, from that date 

the company is only registered in the general list pursuant to Art. 106 of Legislative Decree 

No 385/93 and may not undertake new transactions; 

• a provision of two million euro made by Centrobanca against potential revocation action on 

the Burani Group; 

• a provision of 2,3 million euro made by IW Bank (to increase the provision already made in 

2009) for potential future risks and charges connected with differences found when 

inspections were performed (intensified and further developed when the IT migration took 

place) in suspense accounts, between balances in the accounts and the results of a support 

inventory, the nature of which is still being clarified. 

Profits from the disposal of equity investments and impairment losses on goodwill of 90,7 million 

euro were recognised during the year, classified practically entirely within non-recurring 

items 19 . 

The item included the following gains: 81,1 million euro on the sale of a further 9,9% of 

Lombarda Vita Spa to our joint venture partner (Società Cattolica di Assicurazione); 6,6 million 

euro on the disposal by BDG of its Yverdon and Neuchâtel branches; and 5,4 million euro on 

the disposal of a property belonging to the Parent located in via Solferino in the Milan. Losses 

on the other hand included the impairment loss on the Gestioni Lombarda Suisse goodwill 

(-4,1 million euro) and the impairment loss on Barberini goodwill (-1 million euro not classified 

within non-recurring items considering the negligible amount of the loss). 

18 The figure for 2009 included a provision of 2,8 million euro made for tax litigation arising with the Swiss authorities and a nonrecurring 

provision of four million euro to cover risks connected with a portfolio belonging the subsidiary Coralis Rent as well as one 

million euro relating to IW Bank. 

19 In 2009 the aggregate consisting of the items 240 (profits (losses) of equity investments), 270 (profits (losses) from the disposal of 

investments) and 260 (net impairment losses on goodwill), showed income of 100,3 million euro. It was the result of gains on the 

following non-recurring items: the sale on the basis of specific agreements of an interest in Banca Popolare di Ancona to Aviva for 

32,4 million euro (net of a consolidation adjustment), the disposal of the majority of the share capital of UBI Assicurazioni for 45,8 

million euro (net of a reversal of goodwill, accessory costs and the positive effect of a change in the consolidation criterion), the 

disposal of the entire interest held in Mercato Impresa for 12,8 million euro (net of a consolidation adjustment) and the partial 

disposal of IW Bank shares by Centrobanca for five million euro (net of consolidation adjustments). 

The item also included 3,8 million euro for the gain on the disposal of the non operating assets of BPB Immobiliare as part of a 

property management project. 

100

As a result of the performance described above, pre-tax profit from continuing operations 

amounted to 334,3 million euro, compared to 540,9 million previously. 

In the fourth quarter of the year pre-tax profit fell to 15 million euro from 98,2 million euro in 

the same period in 2009. In normalised terms, excluding non-recurring income and expense 

which affected the results for the year, pre-tax profit stood at 31,1 million euro up from 22,5 

million euro in the last three months of 2009. 

As a result of the trend for taxable income in 2010, taxes on income from continuing operations 

fell to 232 million euro from 243,4 million euro in 2009, to give a tax rate of 69,39%, compared 

to 45% in the previous year (61,96% and 57,52% respectively, in normalised terms), which, 

however, benefited from the positive impact of 12,6 million euro resulting from a substitute tax 

(with the relative release of the related deferred taxes) in relation to the realignment of 

statutory accounts with tax accounts pursuant to Art. 15, of Decree Law No. 185/2008. 

Compared to the theoretical tax rate (32,32%), the taxation levied was conditioned by the 

combined effect of greater IRES (corporate income tax) and IRAP (local production tax), due to: 

- the non deductibility of impairment losses on equity instruments recognised in the AFS 

portfolio, (four percentage points); 

- the partial non deductibility of interest expense (4%), introduced by Law No. 133 of 6 th 

August 2008 (six percentage points); 

- the tax effect of the branch switching operation (with a negative impact of five percentage 

points); 

- the total non deductibility for IRAP purposes of impairment losses on loans and personnel 

expenses and the partial non deductibility of other administrative expenses and 

depreciation and amortisation (approximately 25 basis points. 

These impacts were only partly reduced (three percentage points) by the taxation on profit on 

the sale of part of the interest held in Lombarda Vita. 

On a quarterly basis, although there were no significant changes in terms of the result, taxes 

rose to 34,7 million euro from 22,5 million euro in the fourth quarter of 2009. The tax burden 

in 2009 benefited from gains on the sales of a portion of the interest held in BPA, the majority 

of the share capital of UBI Assicurazioni and the entire interest held in Mercato Impresa (for a 

total of over 90 million euro), all performed by making use of the PEX regime. 

Following the conclusion of the activities for the implementation of the 2007-2010 Business 

Plan, no integration costs were recognised in the period (15,5 million euro in 2009). 

Finally, post-tax profit from discontinued operations of 83,4 million euro (non-recurring) was 

recognised in relation to the contribution of depository banking operations performed on 31 st 

May 2010 by the Parent to RBC Dexia Investor Services. 

The profit earned in 2009 – 5,1 million euro almost entirely non-recurring – included 2,6 

million euro from the sale of the operations created by agents of UBI Assicurazioni to the 

Cattolica Group and 2,5 million euro in respect of the sale by BPCI of its Palermo branch and 

a portion of a corporate banking unit in Brescia to Banca Popolare Vicentina, on the basis of 

agreements that had been stipulated. 

As a result of the performance already reported and as a result of the lower profits earned by 

some banks and companies of the Group, profit for the period attributable to minority interests 

(inclusive of the effects of consolidation entries) fell from 17 million euro to 13,6 million euro. 

101

General banking business with customers: 

funding 

Funding policies 

In 2010 Group funding policies were oriented towards increased diversification of the sources, 

both in terms of type and maturity, pursued in parallel with action to increase growth 

designed to encourage balanced and sustainable growth of volumes from non institutional 

customers. 

Institutional funding was affected by the high volatility present on international markets over 

the twelve month period. In April markets started to feel the repercussions of the Greek crisis, 

which rapidly spread to affect other European countries with high levels of public debt (Spain, 

Ireland, Portugal). Italy was not exempt. 

The heightened perception of sovereign debt risk rapidly transferred to the banking issues 

market, in consideration of the large investments held by banks in government securities and 

this led to a progressive increase in the premiums on credit default swaps. Spreads suddenly 

widened as a consequence, which made it more costly, if not actually difficult at times, to 

place new issues, especially for longer maturities. Modest signs of an improvement appeared 

in September, which allowed UBI Banca to resume its funding programme and to intensify it 

in the first few months of 2011. 

In this context priority was given to covered bonds, because of their lower cost compared to 

senior EMTN issues of the same maturity. 

More specifically, in the second half of 2010, UBI Banca performed two significant 

international placements of COVERED BONDS, pursuant to Art. 7 bis of Law No. 130/1999, with 

AAA and Aaa ratings from Fitch and Moody’s respectively: 

- on 15 th September, a first issue of one billion euro, maturing in September 2017, with a 

coupon of 3,375%; 

- on 18 th October, a second issue of 500 million euro, maturing in October 2015, with a 

coupon of 3,125%. 

At the end of April a private placement was also performed for 250 million euro with the 

European Investment Bank – maturing in April 2022 with a variable coupon equal to the 

Euribor six month rate plus 0,53% – as part of an agreement stipulated with the EIB for loans 

to Italian SMEs. 

After the end of the year, UBI Banca went to the covered bond market with two large 

international placements: a first issue in January for one billion euro, with a ten year maturity 

(28 th January 2021) and a coupon of 5,25%; a second issue in February for 750 million euro, 

with a fifteen year maturity (22 nd February 2016) and a coupon of 4,5%. 

All the operations reported above form part of a programme for a maximum issuance of ten 

billion euro running since July 2008 – a “multioriginator” programme which when fully 

underway will involve participation by ten banks in the UBI Group. They are in addition to two 

previous issues of one billion each performed in the second half of 2009. 

Therefore, at the date of publishing this report, UBI Banca had issued a total nominal amount 

of 5,5 billion euro of outstanding covered bonds. 

The issue is backed by UBI Finance Srl in which a portfolio of residential mortgages was formed, which as 

at 31 st December 2010 totalled 7,7 billion euro, 24,2% of which originated by Banca Popolare di Bergamo, 

23,6% by Banco di Brescia, 17,2% by Banca Popolare Commercio e Industria, 9,9% by Banca Regionale 

Europea, 8,7% by Banca Carime, 7,9% by Banca Popolare di Ancona, 4% by Banco di San Giorgio, 2,8% by 

Banca di Valle Camonica and the remaining 1,7% by UBI Banca Private Investment. 

102

The segregated portfolio has a high degree of fragmentation, because it includes 111 thousand mortgages 

with average residual debt of 69,7 thousand euro, distributed with approximately 73% in North Italy and 

12% in Central Italy. 

For the reasons already given, the EMTN PROGRAMME was limited: after a public placement for a 

nominal amount of 700 million euro performed in March – with a three year maturity (March 

2013) and a Euribor three month rate plus 0,65% – UBI Banca only returned to the market at 

the end of October, with a senior debt issue for a nominal amount of one billion euro, with a 

two year maturity (5 th November 2012) and a spread of 130 basis points on the Euribor three 

month rate. These two issues basically offset securities matured or redeemed during the year 

(six issues, including two subordinated, for a total nominal amount of 1,7 billion euro). 

Funding on the EMTN market also continued into the first few months of 2011: a private 

placement of 80 million euro with a two year maturity of due years performed in January, was 

followed in February by a public placement for 700 million euro, with a two year maturity and 

a fixed rate of 3,875%. 

At the same time the Group intensified its short term institutional funding with its FRENCH 

CERTIFICATES OF DEPOSIT AND EURO COMMERCIAL PAPER PROGRAMMES. In both cases these are 

instruments listed in Luxembourg issued by UBI Banca International, generally with three 

month maturities, able to act as buffers to optimise the management of liquidity and funding. 

When the Luxembourg branch of Banco di Brescia (the original issuer) was contributed to UBI 

Banca International, the two programmes were renewed by the latter bank with an increase at 

the same time in the maximum authorised funding to meet growing volumes of business. 

Although it is diversified, funding on institutional markets nevertheless accounts for a small 

portion of the total, constantly below 20% of direct funding from customers. 

The Group continues to pay particular strategic attention to strengthening its funding from 

ordinary customers, by pursuing funding policies focused on the structural balance of the 

Group, able to generate sustainable inflows over time, consistent with growth in lending. 

Again in 2010, issues of UBI BANCA LISTED BONDS were received positively by network bank 

customers and the new placements basically offset the maturing securities issued by those 

same network banks. 

The following debt was issued over twelve months: 

‐ three bonds with a lower tier two subordination clause for a total nominal amount of 853 

million euro, all with a seven year maturity (the first two placed in February for a total of 

453 million euro and the third in November for 400 million euro); 

‐ three fixed rate bonds for a total nominal amount of 810 million euro (two with a two year 

maturity: 278,6 million euro placed at the end of August and 450 million euro at the end of 

September; the third, with a three year maturity, for 81,3 million euro, issued in 

December); 

‐ a mixed rate issue (fixed for the first two years and then variable) for 175 million euro, with 

a four year maturity, placed in December. 

In the first few months of 2011 and until the date of this report, the Group issued a total nominal 

amount of 4,3 billion euro against maturities of 3,1 billion euro in the first quarter and 11,4 

billion euro for the current year. 

More specifically, placements on institutional markets were for a total nominal amount of 2,5 

billion euro, which fully offset issues that matured in the first quarter (1,1 billion euro) and 

almost equalled the amount maturing in the whole of 2011 (2,7 billion euro). 

Network bank issuances, on the other hand, amounted to 1,8 billion euro, compared to 

maturities of 1,3 billion euro in the quarter. 

103

The comments that follow are based on items in the consolidated statement of financial position contained 

in the reclassified consolidated financial statements on which the relative tables furnishing details are also 

based. 

The sections “Consolidated companies: the principal figures” and “The performance of the main 

consolidated companies” may be consulted for information on individual banks and Group member 

companies. 

Total funding 

TOTAL GROUP FUNDING, consisting of total 

amounts administered on behalf of 

customers, reached 184,8 billion euro, with 

growth of 5% over twelve months benefiting 

from the positive performance of direct 

funding (+9,8%), which fully offset the 

slight decrease in indirect funding (-0,9%), 

despite the recovery in the assets under 

management component (+1,7%). 

200.000 

180.000 

160.000 

140.000 

120.000 

100.000 

Direct and indirect funding 

(end of quarter totals in millions of euro) 

As concerns market segmentation of 

80.000 

customers 1 , management accounting 60.000 

figures for the average volumes of total 

funding for the network banks and for UBI 

Banca Private Investment show that the 

contribution to funding made by different 

40.000 

20.000 

0 

segments was distributed as follows: 67,6% 

of total funding came from the retail 

market (67% in December 2009), 26,3% 

Indirect funding Direct funding 

from the private banking market (26,9%) and 6,1% from the corporate market (6,1%). 

In terms of annual changes 2 , those same management accounting figures show changes of 

-0,4% for the retail market, which nevertheless recorded different trends within it (-1,3% for 

private individual customers, +5,4% for small business customers and +7,4% for the UBI BPI 

network of financial advisors), -2,7% for the corporate market and -3,5% for the private 

banking market. 

1 Q 08 

2 Q 08 

3 Q 08 

4 Q 08 

1 Q 09 

2 Q 09 

3 Q 09 

4 Q 09 

1 Q 10 

2 Q 10 

3 Q 10 

4 Q 10 

Total funding from customers 

31.12.2010 % 31.12.2009 % 

Changes 

Figures in thousands of euro amount % 

Direct funding 106.760.045 57,8% 97.214.405 55,2% 9.545.640 9,8% 

Indirect funding 78.078.869 42,2% 78.791.834 44,8% -712.965 -0,9% 

of which: assets under management 42.629.553 23,1% 41.924.931 23,8% 704.622 1,7% 

TOTAL FUNDING FROM CUSTOMERS 184.838.914 100,0% 176.006.239 100,0% 8.832.675 5,0% 

1 Retail: comprises mass market customers (private individuals with financial wealth – direct and indirect funding – of less than 50 

thousand euro), affluent customers (private individuals with financial wealth – direct and indirect funding - of between 50 thousand 

and 500 thousand euro) and small businesses (firms with a turnover of up to 5 million euro). 

Corporate: comprises corporate customers (companies with a turnover of between five and 150 million euro) and large corporate 

customers (groups of companies and companies with turnover of more than 150 million euro). 

Private banking: comprises customers consisting of private individuals with financial wealth (direct and indirect funding) of greater 

than 500 thousand euro. 

2 The changes relate to average balances in December 

104

Direct funding 

DIRECT FUNDING, amounted to 106,8 billion euro, an increase of 9,5 billion euro year-on-year, 

consisting of 5,8 billion euro of amounts due to customers and 3,7 billion euro of securities 

issued. 

The growth in AMOUNTS DUE TO CUSTOMERS over the twelve month period was driven by a 

significant increase in repurchase agreements (+5,9 billion euro), as a result of greater 

business with Cassa di Compensazione e Garanzia Spa (+5,7 billion euro) – used to fund the 

position in Italian government securities as part of action taken to support profits decided in 

May – and of a recovery by repurchase agreement business with customers (+0,2 billion euro). 

Net of business with the Cassa di Compensazione e Garanzia (central counterparty clearing), amounts 

due to customers would be virtually unchanged compared to the year before (+0,2%). 

Funding from current accounts, on the other hand, recorded a decrease (-0,8 billion euro) 

concentrated mainly in the first quarter of 2010, despite the partial recovery that occurred 

in the second half of the year when a series of commercial initiatives were undertaken with 

regard to funding. 

Growth in term deposits (+0,4 billion euro), however, was attributable to UBI International 

(+0,5 billion euro), as a result the transfer of business from Banco di Brescia’s Luxembourg 

branch, and to UBI Banca (+0,1 billion euro), in relation to the new business with the Cassa 

di Compensazione e Garanzia on the “New MIC” segment. 

Considered net of total business with the Cassa di Compensazione e Garanzia, direct funding from Group 

customers increased year-on-year by 3,7 billion euro (+4%). 

Direct funding from customers 

Changes 

31.12.2010 % 31.12.2009 % 


Current accounts and deposits (*) 45.209.037 42,3% 46.056.955 47,4% -847.918 -1,8% 

Term deposits 1.341.501 1,3% 950.761 1,0% 390.740 41,1% 

Financing 11.152.853 10,4% 5.156.697 5,3% 5.996.156 116,3% 

- repurchase agreements 11.011.766 10,3% 5.143.394 5,3% 5.868.372 114,1% 

of which: repos with Cassa di Compensazione e Garanzia 9.190.455 8,6% 3.510.031 3,6% 5.680.424 161,8% 

- other 141.087 0,1% 13.303 0,0% 127.784 n.s. 

Other payables 962.766 1,0% 700.548 0,7% 262.218 37,4% 

TOTAL AMOUNTS DUE TO CUSTOMERS (item 20 Liabilities) 58.666.157 55,0% 52.864.961 54,4% 5.801.196 11,0% 

Bonds 42.880.256 40,2% 39.514.741 40,6% 3.365.515 8,5% 

Other certificates 5.213.632 4,8% 4.834.703 5,0% 378.929 7,8% 

TOTAL SECURITIES ISSUED (item 30 Liabilities) 48.093.888 45,0% 44.349.444 45,6% 3.744.444 8,4% 

of which: 

securities subscribed by institutional customers: 18.797.662 17,6% 16.039.495 16,5% 2.758.167 17,2% 

- EMTN (**) 11.158.751 10,5% 11.187.997 11,5% -29.246 -0,3% 

- French certificates of deposit 2.886.945 2,7% 1.846.552 1,9% 1.040.393 56,3% 

- Euro commercial paper 521.256 0,5% 524.578 0,6% -3.322 -0,6% 

- Covered bonds 3.752.819 3,5% 1.978.464 2,0% 1.774.355 89,7% 

- Preference shares (***) 477.891 0,4% 501.904 0,5% -24.013 -4,8% 

bonds subscribed by ordinary customers 27.581.980 25,8% 25.853.627 26,6% 1.728.353 6,7% 

- of the Group: 

issued by UBI Banca 5.035.176 4,7% 3.413.707 3,5% 1.621.469 47,5% 

issued by the network banks 17.336.752 16,2% 19.550.948 20,1% -2.214.196 -11,3% 

- of external distribution networks: 

issued by Centrobanca 5.210.052 4,9% 2.888.972 3,0% 2.321.080 80,3% 

TOTAL DIRECT FUNDING 106.760.045 100,0% 97.214.405 100,0% 9.545.640 9,8% 

(*) In relation to the contribution of depository banking operations to RBC Dexia, concluded at the end of May 2010, the amounts on the UBI Pramerica fund 

management accounts forming part of those operations (0,6 billion euro) were reclassified within liabilities held for disposal from 31 st December 2009, 

(**) The corresponding nominal amounts were: 11.128 million euro (502 million euro subordinated) as at 31 st December 2010 and 11.168 million euro (1.202 

million euro subordinated) as at 31 st December 2009. 

(***) The preference shares were issued for nominal amounts by BPB Capital Trust for 300 million euro, by Banca Lombarda Preferred Securities Trust for 

155 million euro and by BPCI Capital Trust for 115 million euro. Following the public exchange offer concluded on 25 th June 2009, the residual nominal 

amounts consisted of 227,436 million euro for the BPB Capital Trust issue, 124,636 million euro for that of Banca Lombarda Preferred Securities Trust 

and 101,388 million euro for the BPCI Capital Trust issue. 

105

SECURITIES ISSUED amounted to 48,1 billion euro, with growth of 3,7 billion euro – concentrated 

in the second half of the year – driven by bonds (+3,3 billion euro to 42,9 billion euro), in 

relation to the placements reported in the preceding sub-section on funding policies, and to a 

lesser extent by item “Other payables” (+0,4 billion euro to 5,2 billion euro). 

Within the latter item, the increase in French certificates of deposit (up from 1,8 billion euro to 

2,9 billion euro) more than compensated for the fall in certificates of deposit in yen 

(-0,4 billion euro down to 0,8 billion euro). 

Total institutional funding reached 18,8 billion euro, an increase of 2,8 billion euro, with 

growth in both the long term maturity component, that of covered bonds (three issues for a 

nominal amount of 1.750 million euro), and in short term funding (+1 billion euro for French 

certificates of deposit), while the total for EMTN securities remained unchanged. 

In December 2010, funding from the EMTN programme remained practically unchanged 

compared to twelve months before. The two issues performed during the year for a nominal 

amount of 1,7 billion euro offset securities that matured and were redeemed (six issues, 

including two subordinated, for a total nominal amount of 1,7 billion euro 3 ). 

In detail, institutional funding was composed as follows as at 31 st December 2010: 

• EMTN securities (Euro Medium Term Notes) amounting to 11,2 billion (502,3 million euro 

subordinated), as part of a programme for a maximum issuance of 15 billion euro. All the 

securities are admitted for trading on the London stock exchange with the sole exception of 

those which had been issued by the former Banca Lombarda e Piemontese listed in 

Luxembourg; 

• Covered bonds amounting to 3,7 billion euro, consisting of five issues by UBI Banca for a 

total nominal amount of 3,75 billion euro as part of a programme for a maximum issuance 

of ten billion euro. All the securities are listed in London; 

• French certificates of deposit amounting to 2,9 billion euro, issued by the UBI Banca 

International as part of a programme for a maximum issuance of five billion euro, listed in 

Luxembourg 4 ; 

• Euro commercial paper amounting to 0,5 billion euro, issued by UBI Banca International as 

part of a programme for a maximum issuance of six billion euro, listed in Luxembourg 5 ; 

• Preference shares amounting to 0,5 billion euro consisting of the securities remaining 

following the public exchange offer of June 2009. These consist of three issues, two listed in 

Luxembourg and one in London. On 22 nd December 2010 the UBI Banca Group announced 

that it would not be calling outstanding innovative equity instruments and it increased the 

spread to levels in line with that of issues with similar characteristics. As from the call 

dates in 2011, holders of the three outstanding issues will be granted an increase in the 

spread to +594 basis points. 

Total funding from bonds issued to ordinary customers rose to 27,6 billion euro (+1,7 billion 

euro). Within the item, listed placements by UBI Banca issued to network bank customers 

(seven issues for a nominal amount of 1,8 billion euro, including three issues for 0,9 billion 

euro with a lower tier two subordination clause) offset only two thirds of the net decrease in 

issues by network banks (-2,2 billion euro). At the same time Centrobanca increased its 

funding through non captive channels (+2,3 billion euro). 

3 Subordinated securities redeemed included a BLP issue with maturity on 7 th December 2015 (ISIN XSO237670319), which, together 

with other issues, formed part of the public exchange offer of 25 th June 2009, for which an early redemption option was exercised on 

7 th December 2010. 

4 A new programme for issues by UBI Banca International Luxembourg was rendered official on 22 nd September 2010, in relation to 

the contribution of Banco di Brescia’s Luxembourg branch to UBI Banca International concluded in December, The previous 

programme, in which the issuer was the branch transferred, remained operational until the natural maturity of the relative issues 

(22 nd December 2010). 

5 A new programme for issues by UBI Banca International Luxembourg was rendered official on 13 th August 2010 in relation to the 

contribution of Banco di Brescia’s Luxembourg branch to UBI Banca International. The previous programme remained operational 

until the natural maturity of the securities which had been issued by the branch transferred (30 th November 2010). 

106

Maturities for bonds outstanding as at 31st December 2010 

Nominal amounts in millions of euro 

1st Quarter 

2011 

2nd Quarter 

2011 1st half 2011 2012 2013 Subsequent 

years 

Total 

UBI BANCA* 1.139 555 1.056 4.834 2.577 9.795 19.956 

of which: EMTN 1.128 555 1.033 4.070 1.692 2.652 11.130 

Covered bonds - - - - - 3.750 3.750 

Network banks 1.339 2.312 3.959 4.902 2.816 1.803 17.131 

Other banks in the Group 591 349 111 188 85 3.956 5.280 

TOTAL 3.069 3.216 5.126 9.924 5.478 15.554 42.367 

* The EMTN subordinated bonds were placed on the date of the expiration or the exercise of a call option. Preference shares have not been included. 

Listed securities 

Bonds listed on the MOT (electronic bond market) 

ISIN number 

Nominal amount of 

issue 

Book value as at 31st 

December 2010 

IT0001197083 Centrobanca zero coupon 1998-2018 L. 800 billion € 154.479.568 

IT0001257333 Centrobanca 1998/2014 reverse floater L. 300 billion € 120.874.797 

IT0001267381 Centrobanca 1998/2018 reverse floater capped L. 320 billion € 120.200.696 

IT0001278941 Centrobanca 1998/2013 equity linked coupon L. 100 billion € 42.938.603 

IT0001300992 Centrobanca 1999/2019 step dow n indicizzato al tasso sw ap euro 10 anni € 170.000.000 € 117.297.396 

IT0001312708 Centrobanca 1999/2019 step dow n eurostability bond € 60.000.000 € 53.656.336 

IT0003834832 Centrobanca 2005/2013 inflazione Italia con leva € 16.280.000 € 9.779.702 

IT0003210074 Banca Popolare di Bergamo-CV 2001/2012 a tasso variabile subordinato ibrido - upper tier 2 € 250.000.000 € 250.161.359 

IT0004424435 UBI subordinato low er tier 2 a tasso variabile con ammortamento 28.11.2008-2015 € 599.399.000 € 591.835.287 


IT0004457070 UBI subordinato low er tier 2 fix to float con rimborso anticipato 13.03.2009-2019 € 370.000.000 € 381.946.207 

IT0004497050 UBI subordinato low er tier 2 fix to float con rimborso anticipato 30.06.2009-2019 € 365.000.000 € 366.190.696 


IT0004497043 Unione di Banche Italiane Scpa tasso misto 30.06.2009-2014 € 219.990.000 € 216.057.808 




IT0004572878 UBI subordinato low er tier 2 a tasso fisso con ammortamento 23.02.2010-2017 € 300.000.000 € 301.729.015 

IT0004624547 Unione di Banche Italiane Scpa tasso fisso 2,30% 31.08.2010-2012 Welcome Edition € 278.646.000 € 278.908.777 

IT0004632680 Unione di Banche Italiane Scpa tasso fisso 2,15% 28.09.2010-2012 € 450.000.000 € 448.161.421 

IT0004626617 IW Bank Obbligazioni agosto 2015 con opzione di tipo call asiatica € 1.214.000 € 1.115.514 

IT0004642382 IW Bank Obbligazioni ottobre 2015 con opzione di tipo call asiatica - II tranche € 1.045.000 € 944.346 

IT0004645963 UBI subordinato low er tier 2 a tasso fisso con ammortamento 05.11.2010-2017 € 400.000.000 € 380.788.851 

IT0004651656 Unione di Banche Italiane Scpa tasso fisso 2,30% 02.12.2010-2013 Welcome Edition € 81.322.000 € 80.835.676 


Convertible bonds listed on the MOT (electronic bond market) 

ISIN number 


issue 


December 2010 

IT0004506868 UBI 2009/2013 convertibile con facoltà di rimborso in azioni € 639.145.872 € 652.263.445 

Covered bonds listed on the London Stock Exchange 

ISIN number 


issue 


December 2010 

IT0004533896 Covered Bonds due 23 september 2016 3,625% guaranteed by UBI Finance Srl € 1.000.000.000 € 1.028.582.677 

IT0004558794 Covered Bonds due 16 december 2019 4% guaranteed by UBI Finance Srl € 1.000.000.000 € 1.011.116.295 

IT0004599491 Covered Bonds due 30 april 2022 floating rate amortising guaranteed by UBI Finance Srl € 250.000.000 € 250.543.687 

IT0004619109 Covered Bonds due 15 september 2017 3,375% guaranteed by UBI Finance Srl € 1.000.000.000 € 971.231.814 

IT0004649700 Covered Bonds due 18 october 2015 3,125% guaranteed by UBI Finance Srl € 500.000.000 € 491.344.223 

IT0004682305 Covered Bonds due 28 january 2021 5,25% guaranteed by UBI Finance Srl € 1.000.000.000 - 

IT0004692346 Covered Bonds due 10 february 2016 4,5% guaranteed by UBI Finance Srl € 750.000.000 - 

Innovative equity instruments (preference shares) listed on international markets 

ISIN number 

Luxembourg 

XS0123998394 

XS0131512450 


issue 


December 2010 

Non-cumulative Fixed/Floating Rate Guaranteed Trust Preferred Securities 

Banca Popolare di Bergamo Capital Trust € 300.000.000 € 244.086.637 

9% Non-cumulative Guaranteed Trust Preferred Securities 

Banca Popolare Commercio e Industria Capital Trust € 115.000.000 € 106.899.082 

London 

XS0108805564 Step-Up Non-voting Non-cumulative Banca Lombarda Preferred Securities Trust € 155.000.000 € 126.904.945 

The list does not include the numerous EMTN issues listed in London and in Luxembourg, nor the securities generated by securitisations performed for 

internal purposes by B@nca 24-7, UBI Leasing and Banco di Brescia, all listed on the Dublin stock exchange, nor the issues of French certificates of deposit 

and of euro commercial paper, listed in Luxembourg. 

107

As concerns market segmentation of customers 1 , management accounting figures for average 

volumes of direct funding for the network banks and for UBI Banca Private Investment show 

that in December 79,5% of funding from customers came from the retail market (76,8% in 

December 2009), 11% from the private banking market (13,8%) and 9,5% from the corporate 

market (9,4%). 

In terms of annual changes 2 , those same management accounting figures show changes of 

+0,1% for the retail market, which recorded different trends within it (-1% for private 

individual customers, compared to +7,6% for the small business segment), -2,7% for the 

corporate market and -22,8% for the private banking market. 

Geographical distribution of direct 

funding from customers by region of 

location of the branch 

(excluding repurchase agreements and bonds) (*) 

Percentage of total 31.12.2010 31.12.2009 

Lombardy 59,11% 60,10% 

Latium 8,69% 7,70% 

Piedmont 7,61% 7,88% 

Calabria 4,76% 4,61% 

Apulia 4,77% 4,36% 

Campania 3,87% 3,77% 

Marches 4,01% 4,41% 

Liguria 2,50% 2,59% 

Emilia Romagna 0,98% 1,08% 

Veneto 1,14% 0,99% 

Umbria 0,49% 0,50% 

Abruzzo 0,41% 0,43% 


Friuli Venezia Giulia 0,26% 0,25% 

Molise 0,20% 0,23% 

Tuscany 0,16% 0,14% 

Valle d'Aosta 0,01% 0,01% 

Trentino Alto Adige 0,02% 0,03% 

Sardinia 0,00% 0,00% 

Finally, the table, “Geographical distribution of 

direct funding from customers by region of location 

of the branch” gives the geographical distribution of 

traditional funding (consisting of current accounts, 

savings deposits and certificates of deposit) in Italy. 

The figures confirm the marked geographical 

concentration of the Group in the northern regions 

of Italy despite a slight decrease (from 72,9% to 

71,6%) in relation to the action taken to streamline 

and optimise the presence of branches which 

involved network banks and was focused primarily 

in north west Italy. On the other hand an increase 

occurred in the percentage of funding from central 

regions (from 12,8% to 13,4%), and in Latium in 

particular (from 7,7% to 8,7%) and in the South 

(from 14,3% to 15%). 

TOTAL 100,00% 100,00% 

North 71,63% 72,93% 

- North West 69,23% 70,58% 

- North East 2,40% 2,35% 

Central 13,35% 12,75% 

South 15,02% 14,32% 

(*) The aggregates relate to banks only. 

108

Indirect funding and assets under management 

Indirect funding from ordinary customers 

Changes 

31.12.2010 % 31.12.2009 % 


Assets under custody 35.449.316 45,4% 36.866.903 46,8% -1.417.587 -3,8% 

Assets under management 42.629.553 54,6% 41.924.931 53,2% 704.622 1,7% 

Customer portfolio management 9.112.815 11,7% 8.654.514 11,0% 458.301 5,3% 

of which: fund based instruments 2.065.172 2,6% 2.116.155 2,7% -50.983 -2,4% 

Mutual investment funds and SICAV’s 21.189.141 27,1% 21.160.386 26,8% 28.755 0,1% 

Insurance policies and pension funds 12.327.597 15,8% 12.110.031 15,4% 217.566 1,8% 

of which: Insurance policies 12.124.734 15,5% 11.916.922 15,1% 207.812 1,7% 

TOTAL INDIRECT FUNDING FROM ORDINARY CUSTOMERS 78.078.869 100,0% 78.791.834 100,0% -712.965 -0,9% 

Group INDIRECT FUNDING from ordinary customers as at 31 st December 2010 amounted to 78,1 

billion euro, a decrease of 0,7 billion euro (-0,9%) compared to 78,8 billion euro twelve months 

before. 

As shown in the graph, no clear trend 

emerged for the total aggregate. 

The growth which began in the spring of 

2009, and which in March 2010 had 

brought the total back to the same level as 

in the third quarter of 2008, was 

interrupted in the months that followed as 

the Greek sovereign debt crisis became more 

acute. 

The partial recovery in the summer was 

then followed by another decrease in the 

last quarter when new pressures on 

financial markets arose, due to the 

difficulties of Irish banks which had a 

negative effect on prices. 

90.000 

80.000 

70.000 

60.000 

50.000 

40.000 

30.000 

20.000 

10.000 

Indirect funding 

(end of quarter totals in millions of euro) 

The year-on-year trend was affected mainly 

by a fall in assets under custody (-1,4 billion 

euro; -3,8%). On the other hand, assets 

under management, which came to account 

Assets under custody 

Assets under management 

for 54,6% of the total, recorded a slight increase (+0,7 billion euro; +1,7%), mainly attributable 

to customer portfolio managements (+0,5 billion euro; +5,3%) – despite the modest contraction 

in fund based instruments (-2,4%) – and to insurance policies and pension funds (+0,2 billion 

euro; +1,8%), while mutual investment funds and SICAV’s remained unchanged compared to 

the end of 2009. 

* * * 

In terms of assets under management net of Group funds (collective instruments and 

customer portfolio managements), at the end of the fourth quarter the UBI Banca Group was 

positioned in sixth place among operators in the sector 6 (fifth among Italian groups) with 

assets amounting to 29,4 billion euro – including approximately 4,4 billion euro relating to 

institutional customers – and a decrease in market share to 3,19% (3,54% in December 2009). 

* * * 

0 

1 Q 08 

2 Q 08 

3 Q 08 

4 Q 08 

1 Q 09 

2 Q 09 

3 Q 09 

4 Q 09 

1 Q 10 

2 Q 10 

3 Q 10 

4 Q 10 

6 Source: Assogestioni, “Map of assets under management (collective instruments and customer portfolio management) 4 th quarter of 

2010”. 

109

As concerns mutual investment funds and Sicav’s, the Assogestioni (national association of 

asset management companies) 7 figures for asset management companies of the UBI Group 

reported the following for 2010: 

− negative net inflows of 780,5 million euro, equivalent to -3,7% of assets under management 

at the end of 2009 (the figure for the sector nationally, on the other hand, recorded positive 

net inflows of 5.696 million euro, equivalent to 1,3% of assets under management twelve 

months before); 

− net assets under management of approximately 21 billion euro, which in December 

confirmed the UBI Group’s position in third place among operators in the sector with a 

market share of 4,56%, down compared to 4,87% at the end of 2009. However, the UBI 

Banca Group has been in fourth place 8 since January 2011; 

− a slight reduction in assets under management (-259 million euro; -1,2%) compared to a 

positive trend for the sector nationally (+5,7%). 

Fund assets 

UBI Banca Group 

31.12.2010 % 31.12.2009 % 

Changes 

Figures in millions of euro amount % 

Equities 2.734 13,1% 2.225 10,5% 509 22,9% 

Balanced 1.512 7,2% 1.497 7,1% 15 1,0% 

Bond 11.784 56,2% 9.152 43,1% 2.632 28,8% 

Monetary funds 3.715 17,7% 6.947 32,7% -3.232 -46,5% 

Flexible 840 4,0% 1.001 4,7% -161 -16,1% 

Hedge funds 378 1,8% 400 1,9% -22 -5,5% 

Total (a) 20.963 100,0% 21.222 100,0% -259 -1,2% 

Sector nationally 

31.12.2010 % 31.12.2009 % 

Changes 

Figures in millions of euro amount % 

Equities 107.423 23,4% 92.144 21,2% 15.279 16,6% 

Balanced 21.305 4,6% 17.040 3,9% 4.265 25,0% 

Bond 189.212 41,1% 165.823 38,1% 23.389 14,1% 

Monetary funds 62.333 13,5% 86.996 20,0% -24.663 -28,3% 

Flexible 67.087 14,6% 57.265 13,1% 9.822 17,2% 

Hedge funds 12.689 2,8% 16.062 3,7% -3.373 -21,0% 

Total (b) 460.049 100,0% 435.330 100,0% 24.719 5,7% 

Market share of the UBI Banca Group (a/b) 4,56% 4,87% 

The summary figures in the table confirm the prudential approach of UBI Group customers as 

follows: 

- a change in the composition out of monetary funds into bonds, which is greater for the 

Group than for the sector nationally; 

- an increase in equity funds, which has become more marked over twelve months compared 

to the Assogestioni sample, although the percentage for the UBI Banca Group remains 

around ten percentage points below that for the sector nationally (13,1% compared to 

23,4%); 

- a trend for flexible funds (-16,1%) in the opposite direction to that for the sector (+17,2%); 

- a stable and much higher percentage of lower risk funds (monetary funds and bonds), 

accounting as a whole for 73,9% of the total compared to 54,6% for the sample mentioned. 

Again in 2010 UBI Pramerica SGR Spa received important awards, details of which are given in the report 

on the company in the section “The performance of the main consolidated companies”. 

7 The data are taken from “Trend Mensile sui Fondi Aperti – December 2010” and “New map of assets under management relating to 

the 4 th quarter of 2010 (Collective instruments: open funds). 

8 “Trend Mensile sui Fondi Aperti – January 2011”. The Group moved down a place as a consequence of the formation of Am Holding, 

a new asset management company created from an alliance between Anima Sgr and Prima Sgr, two asset management companies 

which, considered singly, have lower assets under management and market share than those of the UBI Banca Group. 

110

General banking business with customers: 

lending 

Performance of the loan portfolio 

Composition of loans to customers 

of which 

of which 

Changes 

31.12.2010 % 

31.12.2009 % 

Figures in thousands of euro deteriorated 

deteriorated 

amount % 

Current account overdrafts 13.723.925 13,5% 1.067.391 14.086.259 14,4% 921.874 -362.334 -2,6% 

Reverse repurchase agreements 323.597 0,3% - 292.127 0,3% - 31.470 10,8% 

Mortgage loans and other 

medium-to-long term financing 53.943.966 53,0% 2.512.658 50.150.434 51,2% 2.104.763 3.793.532 7,6% 

Credit cards, personal loans and 

salary backed loans 6.344.773 6,2% 144.009 6.588.940 6,7% 106.801 -244.167 -3,7% 

Finance leases 9.590.800 9,4% 769.279 9.569.620 9,7% 664.558 21.180 0,2% 

Factoring 2.988.697 2,9% 16.946 2.533.777 2,6% 48.846 454.920 18,0% 

Other transactions 14.846.953 14,6% 749.846 14.681.758 15,0% 684.392 165.195 1,1% 

Debt instruments: 52.118 0,1% 1.000 104.337 0,1% 1.000 -52.219 -50,0% 

- structured instruments 3.409 0,0% - 31.113 0,0% - -27.704 -89,0% 

- other debt instruments 48.709 0,1% 1.000 73.224 0,1% 1.000 -24.515 -33,5% 

TOTAL 101.814.829 100,0% 5.261.129 98.007.252 100,0% 4.532.234 3.807.577 3,9% 

At the end of December LENDING TO CUSTOMERS had exceeded 101,8 billion euro, an increase of 

3,8 billion euro compared to 98 billion euro at the end of 2009 (+3,9% compared to an 

increase for the sector nationally, relating to the private sector, of +4,3%). 

In consideration of the persistent uncertainties and difficulties in the economic situation, 

lending policies prioritised an orientation of participation by the Group in the numerous 

initiatives to assist families and businesses, introduced by both the Italian Banking 

Association and at local level. If the large corporate segment is excluded, which does not form 

part of the Group’s traditional mission, annual lending increased by +4.8%. 

After a slight fall in the first quarter, the 

total lending portfolio embarked on a 

growth trend which was at its strongest 

between April and June (+2,4% in 

quarterly terms), but slowed 

progressively in the following months 

(+1% and +0,6% quarter-on-quarter for 

the third and fourth quarters) as the 

recovery in progress in the economy 

slowed. 

The long term trend shown in the graph 

was supported by both the network 

banks (+3,7%), which accounted for 

more than 67% of the consolidated total 

and by the product companies (+2,7%). 

1% 

0% 

‐1% 

‐2% 

‐3% 

It must also be considered that 

approximately 40% of the business of 

the latter comes from “captive” 

customers of the network banks (+4,9% annually). 

Details for the types of lending over twelve months are as follows: 

10% 

9% 

8% 

7% 

6% 

5% 

4% 

3% 

2% 

1 Q 08 

2 Q 08 

Annual rate of change in lending to the private sector (*) 

3 Q 08 

4 Q 08 

1 Q 09 

(*) Exlcuding loans to public administrations 

2 Q 09 

3 Q 09 

4 Q 09 

Sector 

nationally 

UBI Group 

1 Q 10 

2 Q 10 

3 Q 10 

4 Q 10 

111

• mortgages and other medium-to-long term lending drove growth in the total loans, 

representing the main form of lending accounting for 53% of the total and amounting to 

almost 54 billion euro (+3,8 billion euro; +7,6%). The result for B@nca 24-7 was particularly 

encouraging with total mortgages of over 5,1 billion euro, an annual increase of 558 million 

euro (+12%). On the basis of management accounting figures for performing residential 

mortgages only, granted by the network banks, Centrobanca and B@nca 24-7, total 

residential mortgages at the end of December had increased to 21,8 billion euro from 

approximately 20 billion euro at the end of 2009 (+9,4%); 

• factoring loans granted by UBI Factor increased to approximately three billion euro (+0,5 

billion euro; +18%) with particularly lively performance in the last quarter (+0,4 billion 

euro); 

• finance leases on the other hand remained stable at 9,6 billion euro (+0,2%); 

• reverse repurchase agreements amounted to 323,6 million euro, up from 292,1 million euro 

twelve months before (+10,8%), reflecting the ordinary business of the Parent with Cassa di 

Compensazione e Garanzia (central counterparty clearing); 

• short term forms of lending, more closely related to the demand from businesses for 

working capital, still did not show any significant signs of recovery: current account 

overdrafts fell to 13,7 billion euro (-0,4 billion euro; -2,6%) while “Other transactions” (loans 

for advances, portfolio, import/export transactions, very short term lending, etc.) rose to 

14,8 billion euro (+0,2 billion euro; +1,1%); 

• on the other hand, the various types of consumer credit fell to 6,3 billion euro (-0,2 billion 

euro; -3,7%). The reduction mainly reflected the trend for B@nca 24-7, which reduced its 

total outstanding loans over twelve months (-0,2 billion euro to 6,1 billion euro; -3,1%), 

partly on the basis of precise company policies pursued in order to improve credit quality. 

More specifically, the fall of over 0,3 billion euro in the special purpose loans brokered by 

SILF and of approximately 0,4 billion euro for all the other personal loans, originated 

mainly by the network banks of Group, was offset by an increase of 0,5 billion euro in 

salary backed loans originated by external distribution networks which had exceeded 3,1 

billion euro in December. 

Lending in relation to salary backed loans are measured on the basis of guarantees provided by the 

finance companies with which B@nca 24-7 works. 

The loans originated by the finance company Ktesios Spa amounted to 1,1 billion euro as follows: 

− 358 million euro secured by a pledge of 4,1 million euro, consisting of a term deposit on a current 

account held with B@nca 24-7; 

− 747 million euro guaranteed by a “deducted for non payment” clause. 

With a provision of 8 th March 2011, the Bank of Italy removed Ktesios from the special list pursuant to 

Art. 107 of the Consolidated Banking Act. Therefore, from that date the company is only registered in 

the general list pursuant to Art. 106 of Legislative Decree No 385/93 and may not undertake new 

transactions. 

In consideration of the current difficulties experienced by that company, B@nca 24-7 made an estimate 

of the risk attaching to the part of the portfolio consisting of loans backed by that counterparty. The 

estimates performed led the bank to make a provision of eight million euro classified within “Provisions 

for risks and charges”. 

At the end of December the ratio of lending to funding stood at 95,4%, a decrease compared to 

December 2009 (100,8%), a reflection of the different trends for the two items. If funding is 

considered net of repurchase agreements with the Cassa di Compensazione e Garanzia (central 

counterparty clearing) the ratios are 104,4% (104,6% in December 2009.) 

112

With regard to market 

segmentation of customers, 

management accounting 

figures for average 

monthly lending by 

network banks and by UBI 

Banca Private Investment 

show that at the end of the 

year, 55% was destined to 

the retail market, (54,7% 

at the end of 2009), 43,9% 

to the corporate market 

(44,3%) and the remaining 

1,1% to the private 

banking market (1%). 

Distribution of loans by economic sector 

(Management accounting figures for network banks Centrobanca) 

31.12.2010 30.9.2010 30.6.2010 31.3.2010 31.12.2009 

Manufacturing and service companies 

(non financial companies and producer households) 62,8% 63,1% 62,9% 62,4% 62,7% 

of which: other services destined for sale 17,7% 17,3% 17,4% 17,4% 16,9% 

Commerce, recovery and repair services 9,9% 10,0% 9,8% 9,7% 9,8% 

Construction and public works 9,3% 9,6% 9,5% 9,8% 9,8% 

Energy products 3,6% 3,7% 4,2% 3,3% 3,7% 

Metal products, excluding machines and means of transport 2,4% 2,5% 2,4% 2,4% 2,2% 

Agricultural, forestry and fishery products 2,1% 2,0% 2,0% 2,0% 2,0% 

Hotels and restaurants 2,0% 2,0% 2,0% 2,1% 2,1% 

Foodstuffs, beverages and tobacco products 1,6% 1,8% 1,8% 1,8% 2,1% 

Textiles, leather and footwear, clothing 1,6% 1,8% 1,7% 1,8% 1,7% 

Agricultural and industrial machinery 1,4% 1,5% 1,5% 1,5% 1,5% 

Consumer households 29,4% 28,9% 28,7% 28,7% 28,3% 

Financial companies 4,6% 4,6% 4,7% 5,1% 5,1% 

Public administrations 0,9% 0,9% 1,0% 0,9% 1,0% 

Other (not-for-profit institutions and the rest of the world) 2,3% 2,5% 2,7% 2,9% 2,9% 

TOTAL 100,0% 100,0% 100,0% 100,0% 100,0% 

In terms of annual trends 1 , those same management 

figures show an increase for the corporate market 

(+1,7%), driven by the core segment (+3,4%), against a 

decrease for the large corporate segment (-1,2%). Lending 

to the retail market increased by 3,1%, driven by the 

private individual segment (+4,2%) and to a lesser extent, 

by the small business segment (+1,8%). 

Again on the basis of management figures, the results 

given in the table for network banks and Centrobanca 

only – an aggregate which represents approximately 70% 

of gross loans – showed the following in December 2010: 

− 92,2% of outstanding loans is destined to 

manufacturing and service companies and consumer 

households (91% twelve months before), which 

confirms the traditional vocation of the Group to 

support communities in its markets; 

− as concerns the distribution by sector of lending to 

non financial companies and to producer households, 

“other services destined for sale” and “commercial 

services, recoveries and repairs”, continued to account 

for the largest percentage of the total (27,6%). partly 

because of their heterogeneity. 

Geographical distribution of loans to 

customers by region of location of the 

branch (*) 

Percentage of total 31.12.2010 31.12.2009 

Lombardy 70,37% 70,32% 

Piedmont 6,39% 6,37% 

Latium 4,62% 4,71% 

Marches 3,84% 3,93% 

Liguria 2,82% 2,83% 

Campania 2,17% 2,12% 

Apulia 2,07% 2,08% 

Emilia Romagna 1,97% 1,93% 

Calabria 1,82% 1,81% 

Veneto 1,59% 1,56% 

Umbria 0,64% 0,62% 

Abruzzo 0,61% 0,61% 


Friuli Venezia Giulia 0,24% 0,26% 

Molise 0,24% 0,25% 

Tuscany 0,20% 0,18% 

Valle d'Aosta 0,01% 0,01% 

Trentino Alto Adige 0,00% 0,00% 

Sardinia 0,00% 0,00% 

Total 100,00% 100,00% 

North 83,4% 83,3% 

- North West 79,6% 79,5% 

- North East 3,8% 3,8% 

Central 9,3% 9,4% 

South 7,3% 7,3% 

Details of the geographical distribution of lending are 

(*) The aggregates relate to banks only. 

given in the table “geographical distribution of loans to 

customers by region of location of the branch”. The total share of loans to northern regions 

amounted to 83,4% of the total, (of which 79,6%. to the North-West) while that to central 

regions constituted 9,3%. The remaining 7,3% was to southern regions. No significant changes 

appeared compared to the previous year. 

Concentration of risk 

(largest customers or groups as a percentage of total loans and guarantees) 

Customers or Groups 31.12.2010 30.9.2010 30.6.2010 31.3.2010 31.12.2009 

Largest 10 4,1% 4,1% 4,6% 4,0% 4,1% 

Largest 20 6,8% 6,7% 7,2% 6,5% 6,5% 

Largest 30 8,5% 8,4% 8,7% 8,1% 8,1% 

Largest 40 9,6% 9,5% 9,9% 9,2% 9,3% 

Largest 50 10,5% 10,4% 10,9% 10,1% 10,3% 

From the viewpoint of 

concentration, a generalised 

reduction was recorded 

compared to June 2 , while 

compared to December 2009 all 

the groups, except for the first, 

stood at slightly higher levels. 

As concerns “large exposures” on 

the other hand, the relative 

1 The changes relate to average balances in the month of December. 

2 Since 30 th June 2010, the method of calculation also includes exposures held in equity instruments. 

113

egulations were amended by the Bank of Italy 3 . According to the new regulations, “large 

exposures” are now measured on the basis of the nominal value, instead of the value weighted 

for counterparty risk. Consequently, at the end of 2010, the UBI Banca Group had five 

positions which exceeded 10% of the supervisory capital for a total of 22,2 billion euro: 

• 10,2 billion euro due to Cassa di Compensazione e Garanzia, in relation to repurchase 

agreement transactions by the Parent; 

• 8,3 billion euro due to the Ministry of the Treasury, in relation to investments in 

government securities by the Parent; 

• 1,4 billion euro due to a major banking group, in relation both to investments in bonds and 

to normal lending business with a non banking financial company of that group; 

• 2,3 billion euro due to two major corporate counterparties, as part of ordinary lending 

business with customers. 

It must be added, however, that the actual exposure of the UBI Group after weightings are 

applied in accordance with the rules currently in force amounts to a total of 1,8 billion euro 

and that for each of the five exposures, the percentage of consolidated supervisory capital is 

well below the limit of 25% set for banking groups. 

At the end of the year guarantees granted by the UBI Group totalled 6,1 billion euro, an 

increase of 5,75 billion euro compared to December 2009 (+6,1%). 

In detail, commercial guarantees had been granted for 4,5 billion euro (+2,5%) compared to 

guarantees of a financial nature of more than 1,6 billion euro (+17,8%). 

Risk 

Although still increasing strongly year-on-year, in 2010 deteriorated loans as a whole slowed 

significantly compared to the previous year, affected in the last quarter by compliance with 

new provisions introduced by the Bank of Italy concerning exposures past due and/or in 

arrears. More specifically, between October and December 2010, volumes of growth returned 

to practically the same rate as in the second quarter after an acceleration over the summer 4 . 

Loans to customers as at 31st December 2010 


Gross exposure 

Impairment 

losses 

Carrying amount 

Coverage (*) 

Deteriorated loans (7,14%) 7.465.062 2.203.933 (5,17%) 5.261.129 29,52% 

- Non-performing loans (3,62%) 3.780.973 1.841.057 (1,91%) 1.939.916 48,69% 

- Impaired loans (2,22%) 2.320.471 287.557 (2,00%) 2.032.914 12,39% 

- Restructured loans (0,85%) 889.070 60.577 (0,81%) 828.493 6,81% 

- Past due loans (0,45%) 474.548 14.742 (0,45%) 459.806 3,11% 

Performing loans (92,86%) 97.073.520 519.820 (94,83%) 96.553.700 0,54% 

TOTAL LOANS TO CUSTOMERS 104.538.582 2.723.753 101.814.829 2,61% 

The item as a percentage of the total is given in brackets. 

Loans to customers as at 31st December 2009 



Impairment 

losses 


Coverage (*) 

Deteriorated loans (6,35%) 6.373.596 1.841.362 (4,62%) 4.532.234 28,89% 

- Non-performing loans (2,74%) 2.751.588 1.419.012 (1,36%) 1.332.576 51,57% 

- Impaired loans (2,20%) 2.208.369 363.296 (1,88%) 1.845.073 16,45% 

- Restructured loans (0,48%) 479.520 40.785 (0,45%) 438.735 8,51% 

- Past due loans (0,93%) 934.119 18.269 (0,93%) 915.850 1,96% 

Performing loans (93,65%) 93.961.673 486.655 (95,38%) 93.475.018 0,52% 

TOTAL LOANS TO CUSTOMERS 100.335.269 2.328.017 98.007.252 2,32% 

The item as a percentage of the total is given in brackets. 

(*) Coverage is calculated as the ratio of impairment losses to gross exposure. 

3 Circular No. 263 “New regulations for the prudential supervision of banks” of 27 th December 2010. 

4 In detail: +0,21 billion euro in the first quarter, +0,24 billion euro in the second, +0,39 billion in third and +0,25 billion in the 

fourth. 

114

At the end of December, net deteriorated loans totalled 5,26 billion euro, an increase year-onyear 

of 0,73 billion euro (+16,1%) consisting of: +0,15 billion euro in the first quarter, +0,13 

billion euro in the second, +0,35 billion euro in the third and +0,10 billion euro in the fourth. 

The changes over twelve months mainly concerned non-performing loans (+0,61 billion euro), 

compared to smaller increases in impaired loans (+0,19 billion euro) and restructured loans 

(+0,39 billion euro). These were only partly offset by the reduction in exposures past due 

and/or in arrears (-0,46 billion euro), within which the positions past due and/or in arrears 

for more than 90 days backed by property mortgages fell appreciably (-0,27 billion euro). 

Although increasing slightly (from 28,89% to 29,52%), total coverage remained again at low 

levels in relation to the smaller estimated losses on newly classified positions due to the effect 

of the existence of collateral or because they are operational impairment or restructured loans 

for which agreements have been reached to reschedule debt by agreeing to a debt repayment 

schedule pursuant to article 67 of the Bankruptcy Law or to a debt restructuring plan 

pursuant to article 182-bis of the Bankruptcy Law. 

From the viewpoint of the types of loan, as can be seen from the table, “Composition of loans 

to customers”, more than 56% of the annual growth in net deteriorated loans regards the item 

“Mortgage loans and other medium-to-long term loans” backed by collateral, which results 

automatically in a lower level of coverage. 

As concerns performing loans, total coverage increased further to 0,54% (0,52% at the end of 

2009). 

NON-PERFORMING LOANS 

Net non-performing loans rose over twelve months from 1,3 million euro to 1,9 billion euro, an 

increase of 607,3 million euro (+45,6%, compared to +28,9% for the sector nationally 5 ), 

including 160,4 million euro relating to the first quarter, 132,4 million euro to the second, 

143,4 million euro to the third and 171,1 million euro to the fourth. 

The network banks accounted for 56% of the year-on-year increase in non-performing loans 

while the remainder is attributable almost entirely to Centrobanca (+33,8 million euro), 

B@nca 24-7 (+62,2 million euro) and UBI Leasing in particular (+170,3 million euro, including 

as much as 96 million euro in the last quarter of the year 6 ). 

As concerns gross non-performing 

loans, on the other hand, these 

Quarterly rate of change in net non‐performing loans 

22% 

increased by 1,03 billion euro to 3,78 

20% 

billion euro, a greater increase than 18% 

that recorded for the sector nationally 16% 

(+37,4% compared to +31,2%). 

14% 

12% 

Volumes of growth slowed 

10% 

progressively until September, but 8% 

then increased again in the last three 

6% 

4% 

Sector nationally 

months of the year: +0,28 billion euro 

2% 

in the first quarter 7 , +0,24 billion euro 0% 

UBI Group 

in the second, +0,18 billion euro in 

the third and +0,33 billion euro in the 

‐2% 

‐4% 

‐6% 

fourth, including approximately half 

relating to UBI Leasing, partly in 

relation to the classification of 

contracts subject to termination out of the impaired into the non-performing class. 

1 Q 09 

2 Q 09 

3 Q 09 

4 Q 09 

1 Q 10 

2 Q 10 

3 Q 10 

4 Q 10 

5 However, in the second half of 2010 only, Group net non-performing loans realigned with the figure for the sector nationally 

(+19,4% compared to +18%). 

6 Of this 87 million euro relates to reclassifications into the non-performing class, that occurred in the 4 th quarter, of contracts 

which UBI Leasing had classified as impaired and which were subject to termination. 

7 Including an exposure to the Burani Group of 72,5 million euro gross of impairment losses. 

115

More than 65% of the 1,03 billion euro of annual growth consisted of positions backed by 

collateral, which came to account for almost 44% of total gross non-performing loans (35% at 


The rate of new classifications out of the performing class reduced slightly compared to the 

previous year, while new classification from other deteriorated classes and from impaired 

loans in particular increased by a fifth. Recognition of full impairment losses on loans 

considered no longer recoverable increased by more than 15% compared to the previous year. 

As a result of the trends just reported, the ratio of non-performing loans to loans rose to 

1,91% in net terms (i.e. net of impairment losses) and to 3,62% in gross terms. Despite this 

the UBI Group continues to maintain a qualitative advantage compared to the average for 

Italian banks, which is 2,43% for net non-performing loans and 4,60% for gross nonperforming 

loans in the private sector. 

Coverage at 48,69%, appears to be falling compared to a year before (51,57%), but remains 

fairly stable compared to September (48,63%). 

For an accurate assessment of the performance of that level it must, however, be considered 

on the one hand that the calculation does not include positions subject to proceedings by 

creditors (bankruptcy, arrangement with creditors, extraordinary administration, etc.) with the 

non recoverable part and the relative impairment losses recognised eliminated and on the 

other hand that the percentage of secured loans with a normally lower level of coverage has 

increased. 

The coverage for unsecured non-performing loans, considered gross of impairment losses, had 

risen at the end of 2010 to 80,14% (78,45% in December 2009). 

IMPAIRED LOANS 

After a temporary reversal of the trend in the summer, net impaired loans recorded a higher 

increase in the last quarter of the year. The total rose from 1,84 billion euro to 2,03 billion 

euro, an increase of 187,8 million euro (+10,2%) distributed as follows: +59,3 million euro in 

the first quarter, +31,5 million in the second, -25,3 million euro in the third and +122,3 

million euro in the fourth. 

The total change that occurred over twelve months is attributable entirely to the network 

banks and to B@nca 24-7, while Centrobanca and UBI Leasing recorded a decrease in the 

item following the reclassification of positions into the non-performing class. 

The ratio of net impaired loans to net lending rose as a consequence to 2% (1,88% at the end 

of 2009). 

Gross impaired loans also rose from 2,21 billion euro to 2,32 billion euro, growth of 112,1 

million euro, occurring mainly in the last quarter: changes of +5,2 million euro, +32 million 

euro, -30,9 million euro and +105,8 million euro in each of the quarters of the year). 

At the end of year the percentage of total gross impaired loans backed by collateral had 

exceeded 60% (51% at the end of 2009). 

Reclassifications from the performing loan class fell by more than a quarter compared to the 

year before. The trend for this class also benefited from the approval of restructuring plans, 

which resulted in the reclassifications of many positions into the restructured class. 

116

Loans to customers: changes in deteriorated gross exposures in 2010 


Nonperforming 

loans 

Impaired loans 

Restructured 

exposures 

Past due 

exposures 

Opening gross exposure as at 1st January 2010 2.751.588 2.208.369 479.520 934.119 

Increases 1.649.454 2.484.776 1.046.418 1.811.969 

transfers from performing exposures 422.669 1.258.375 181.571 1.617.752 

transfers from other classes of deteriorated exposures 1.114.275 780.327 372.139 30.112 

other increases 112.510 446.074 492.708 164.105 

Decreases -620.069 -2.372.674 -636.868 -2.271.540 

transfers into performing exposures -1.606 -294.429 -28.558 -1.228.549 

full impairment losses -285.864 -83 -1.521 0 

disposals -29.486 - - - 

transfers to other classes of deteriorated exposure -3.013 -1.379.429 -31.859 -882.552 

other decreases -300.100 -698.733 -574.930 -160.439 

Final gross exposure as at 31st December 2010 3.780.973 2.320.471 889.070 474.548 

Loans to customers: changes in deteriorated gross exposures in 2009 


Nonperforming 

loans 

Impaired loans 

Restructured 

exposures 

Past due 

exposures 

Opening gross exposure as at 1st January 2009 1.868.615 1.382.852 142.114 214.007 

Increases 1.383.829 2.817.924 638.098 2.200.633 

transfers from performing exposures 455.774 1.745.232 302.734 2.030.659 

transfers from other classes of deteriorated exposures 921.622 777.374 110.626 129.860 

other increases 6.433 295.318 224.738 40.114 

Decreases -500.856 -1.992.407 -300.692 -1.480.521 

transfers into performing exposures -1.020 -327.980 -61.085 -592.403 

full impairment losses -245.501 -1.175 -26.445 -32 

disposals -8 -24 - - 

transfers to other classes of deteriorated exposure -7.657 -1.111.672 -791 -819.362 

other decreases -246.670 -551.556 -212.371 -68.724 

Final gross exposure as at 31st December 2009 2.751.588 2.208.369 479.520 934.119 

Coverage decreased to 12,39% from 16,45% at the end of 2009 in relation to the increase in 

positions backed by collateral, with account also taken on the one hand of the reclassification 

of the Burani Group exposures into the non-performing class in the first quarter 8 and on the 

other of the reclassification already mentioned into the non-performing class of UBI Leasing 

positions subject to contract termination (with coverage of 29%). 

Net of secured loans, coverage for impaired loans stood at 22,41% (28,39% twelve months 

before). 

RESTRUCTURED LOANS 

Net restructured loans almost doubled to 828,5 million euro from 438,7 million euro at the end 

of 2009. Moreover the increase, amounting to 389,8 million euro, related almost entirely to the 

progressive growth that occurred in the first nine months of the year (+360,5 million euro), 

while the trend slowed considerably in the last quarter (+29,3 million euro). 

The increase in the item – more than 60% of which related to Banco di Brescia (+128,6 million 

euro) and to Centrobanca (+120,2 million euro) – was partly the result of already deteriorated 

positions for which restructuring plans were agreed, which explains the reduction in coverage 

to 6,81% from 8,51% at the end of 2009. 

8 Coverage as at 31 st December 2009 calculated net of the exposures to the Burani Group, reclassified as non-performing loans in the 

first quarter 2010 together with the relative impairment losses, was 14,4%. 

117

EXPOSURES PAST DUE AND/OR IN ARREARS 

Moving in the opposite direction to other types of deteriorated loan, net exposures past due 

and in arrears halved over twelve months to 459,8 million euro compared to 915,8 million euro 

at the end of 2009, which also included the implementation of new Bank of Italy provisions 

regarding exposures past due and/or in arrears for more than 90 days, backed by property 

mortgages, at the level of single transactions. 

Net of the increase that occurred in the third quarter, the annual change for this class is one 

of a progressive decrease, which was particularly marked between October and December 

(-135,7 million euro in the first quarter, -155,5 million euro in the second, +55,8 million euro 

in the third and -220,6 million euro in the fourth), in parallel with the reduction in the “90 

days past due” component. The latter actually fell from 569,3 million euro at the end of 2009 

to 294,8 million euro in December 2010 (-133,6 million euro in the first quarter, -13,4 million 

euro in the second, +60,2 million euro in the third and -187,7 million euro in the fourth). 

The network banks accounted for 60% of the decrease in exposures past due and/or in 

arrears as a direct result of improved credit quality management, introduced in a structured 

fashion on the corporate and retail markets of the network banks at the beginning of 2010. 

This was also confirmed by the increase in reclassifications into the performing class which 

doubled over the year compared to 2009. 

Because they are fully secured by collateral, the prevalent percentage of positions past due 

and/or in arrears for more than 90 days (64% in December 2010; 62% at the end of 2009) 

explains the low coverage for this class, although it did increase from 1,96% to 3,11%. 

UBI LEASING 

The continuation of the economic crisis in 2010 resulted in a significant worsening of the 

credit quality of the UBI Leasing property and machinery and equipment portfolios originated 

both through its own agents and through the network banks (captive market), with a 

consequent strong impact in terms of impairment losses on loans. 

The negative trend worsened further in the fourth quarter, due to the adoption of restrictive 

criteria on the reclassification into the non-performing class of positions with terminated 

contracts and to the increase of provisions on the performing portfolio. 

In view of the scenario described the following actions were commenced in 2010: 

• a far reaching internal reorganisation of the company, which included corporate 

governance, by strengthening management; 

• a project initiative with the involvement of the Parent, focused on improving the quality of 

the portfolio and revising credit approval processes to increase quality standards at the 

disbursement, monitoring and credit recovery stages. 

The restructuring path undertaken will result in a strong focus on captive market growth and 

careful selection of business on the agent channel to address the higher risk profile and the 

significant losses incurred. 

118

The interbank market and the liquidity 

situation 

The quarterly changes in the net interbank debt 

31.12.2010 30.9.2010 30.6.2010 31.3.2010 31.12.2009 Changes A/E 

Figures in thousands of euro A B C D E amount % 

Loans to banks 3.120.352 3.427.795 3.290.637 2.996.834 3.278.264 -157.912 -4,8% 

of which: Loans to central banks 739.508 295.430 375.415 282.815 641.788 97.720 15,2% 

Due to banks 5.383.977 7.126.257 9.252.062 4.612.141 5.324.434 59.543 1,1% 

of which: Due to central banks 2.219.152 2.000.056 2.977.481 479.002 639.753 1.579.399 246,9% 

NET INTERBANK DEBT -2.263.625 -3.698.462 -5.961.425 -1.615.307 -2.046.170 217.455 10,6% 

31.12.2009 30.9.2009 30.6.2009 31.3.2009 31.12.2008 Changes F/L 

Figures in thousands of euro F 

G 

H 

I 

L amount % 

Loans to banks 3.278.264 3.101.108 3.184.949 2.824.055 3.053.704 224.560 7,4% 

of which: Loans to central banks 641.788 198.428 643.471 119.354 1.045.983 -404.195 -38,6% 

Due to banks 5.324.434 5.306.536 6.073.741 5.953.954 3.980.922 1.343.512 33,7% 

of which: Due to central banks 639.753 501.371 1.500.249 - 450.059 189.694 42,1% 

NET INTERBANK DEBT -2.046.170 -2.205.428 -2.888.792 -3.129.899 -927.218 1.118.952 120,7% 

The net interbank balance of the UBI Banca Group as at 31 st December 2010 consisted of debt 

of 2,3 billion euro. It had reduced progressively compared to the previous interim periods (with 

the sole exception of March 2010), but was basically unchanged compared to 31 st December 

2009. 

An analysis in terms of residual maturities shows a net short term balance of approximately 

+300 million euro, calculated excluding central bank auctions outstanding at the end of year 

(in consideration of the full allotment guarantee given). Even if that exposure is classified in 

terms of the short term debt component, this continues to be below the early warning 

threshold set by Group policy, standing at approximately -1,8 billion euro, as also occurred in 

the preceding interim periods. 

As shown in the table, which shows quarterly changes for the aggregates in 2010, while loans 

to banks remained practically constant, the trend for funding from banks was more variable 

and reached a high at the end of June, a time of difficulty on markets for longer term maturity 

issues, only to return at the end of the year to the same levels as at the end of 2009, as a 

result of a series of actions undertaken by the Group with regard to funding (bond and other) 

and also of the resumption of international placements. 

Access to the interbank market represents a source of complementary and residual funding for 

the Group compared to other sources of funding on institutional markets (see also the 

previous section “Funding policies”). 

In detail, loans to banks as at 31 st December 2010 amounted to 3,1 billion euro (3,3 billion 

euro twelve months before), including 740 million euro of loans to the central bank for 

compulsory reserve requirements, accounting for 24% of the total. 

Loans to banks other than the central bank recorded no significant changes over twelve 

months (-256 million euro), with only a small change in composition between the different 

types of lending. 

The decrease in term deposits (-262 million euro) and other financing (-135 million euro), 

mainly in the reverse repurchase agreement component, was accompanied by a slight increase 

in current account overdrafts and deposits (+142 million euro). More than 37% of loans 

outstanding at the end of the year were concentrated in this item, the most significant, 

amounting to 1,2 billion euro. 

119

Loans to banks: composition 

Changes 

31.12.2010 % 31.12.2009 % 


Loans to central banks 739.508 23,7% 641.788 19,6% 97.720 15,2% 

Term deposits - - - - - - 

Compulsory reserve requirements 739.508 23,7% 641.751 19,6% 97.757 15,2% 

Reverse repurchase agreements - - - - - - 

Other - - 37 0,0% -37 -100,0% 

Loans to banks 2.380.844 76,3% 2.636.476 80,4% -255.632 -9,7% 

Current accounts and deposits 1.161.396 37,3% 1.019.692 31,1% 141.704 13,9% 

Term deposits 466.445 14,9% 728.828 22,2% -262.383 -36,0% 

Other financing: 753.003 24,1% 887.956 27,1% -134.953 -15,2% 

- reverse repurchase agreements 988 0,0% 99.889 3,1% -98.901 -99,0% 

- finance leases 165 0,0% 313 0,0% -148 -47,3% 

- other 751.850 24,1% 787.754 24,0% -35.904 -4,6% 

Debt instruments - - - - - - 

TOTAL 3.120.352 100,0% 3.278.264 100,0% -157.912 -4,8% 

At the end of year, interbank funding amounted to 5,4 billion euro, unchanged compared to 

twelve months before (+59 million euro), although the change in the composition of the items 

can be seen from the table. 

Recourse to borrowing from the central bank intensified during the year – up by 640 million 

euro to 2,2 billion euro in December 2010 – which offset the reduction in amounts due to 

other banks (-1,5 billion euro), down to 3,2 billion euro. 

This phenomenon – explained, amongst other things, by tensions on monetary markets – 

triggered a process of replacement towards more stable funding (due to the full allotment 

clause) which brought amounts due to central banks to account for more than 40% of the 

total. 

As concerns borrowing from other banks, the appreciable reduction in current accounts and 

deposits (-1,9 billion euro) was contrasted by an increase in term deposits (+390 million euro); 

while the opposing trends for financing and other payables virtually balanced each other. 

Due to banks: composition 

Changes 

31.12.2010 % 31.12.2009 % 


Due to central banks 2.219.152 41,2% 639.753 12,0% 1.579.399 246,9% 

of which: repurchase agreements (*) - - 480.753 9,0% -480.753 -100,0% 

Due to banks 3.164.825 58,8% 4.684.681 88,0% -1.519.856 -32,4% 

Current accounts and deposits 692.788 12,9% 2.590.978 48,7% -1.898.190 -73,3% 

Term deposits 1.199.455 22,3% 809.405 15,2% 390.050 48,2% 

Financing: 1.149.003 21,3% 1.191.381 22,4% -42.378 -3,6% 

- repurchase agreements 290.737 5,4% 347.603 6,5% -56.866 -16,4% 

- other 858.266 15,9% 843.778 15,9% 14.488 1,7% 

Amounts due for commitments to repurchase own equity 

instruments - - - - - - 

Other payables 123.579 2,3% 92.917 1,7% 30.662 33,0% 

TOTAL 5.383.977 100,0% 5.324.434 100,0% 59.543 1,1% 

(*) A new system came into operation on 28 th June 2010 for the pool management of assets posted as collateral for loans in the Eurosystem, with the 

introduction of a single pooled deposit account for collateral in which all assets pledged are held. This involved a change to the procedures used to post 

collateral assets, with the transformation of repurchase agreements into pledge agreements. 

120

Assets eligible for refinancing 

Figures in billions of euro 

nominal 

amount 

31.12.2010 31.12.2009 

amount eligible 

(net of haircuts) 

nominal 

amount 

amount eligible 

(net of haircuts) 

AFS and HTM securities 1,40 1,34 1,80 1,76 

HFT securities 0,00 0,00 0,03 0,03 

B@nca 24-7 residential mortgage securitisation (*) 1,71 1,30 2,28 1,68 

B@nca 24-7 salary backed loan securitisation (**) 0,38 0,31 0,72 0,58 

B@nca 24-7 consumer loan securitisation 2,13 1,73 2,13 1,80 

UBI Leased assets securitisation 3,44 2,87 3,44 2,81 

Securitisation of Banco di Brescia assets 1,56 1,25 1,56 1,02 

Loans eligible resulting from participation in ABACO (***) 0,27 0,27 0,27 0,25 

TOTAL 10,89 9,07 12,23 9,93 

(*) nominal residual amount after partial redemption (of approximately 25%) recognised in 2010. 

(**) nominal residual amount after partial redemption (of approximately 48%) recognised in 2010. 

(***) ABACO (bank assets eligible as collateral) is the name given to procedures drawn up by the Bank of Italy for the management of loans eligible for 

refinancing. In order to qualify as eligible, an asset must meet specific requirements concerning the following: type of debtor/guarantor (public sector, 

non financial company, international and supranational institutions), high credit rating (single “A-” credit quality level, equivalent to a default probability 

of 0,10%) and a minimum amount (one million euro for national use until 2011). 

Assets eligible for refinancing with the central bank amounted to 9,1 billion euro as at 31 st 

December 2010 (9,9 billion euro at the end of 2009). 

The decrease compared to the previous year is due mainly to repayments on internal 

securitisations, and maturities of securities held in portfolio. 

In the third quarter, the Group completed activity to restructure the main existing 

securitisations and to render them revolving (by using the available liquidity of special purpose 

entities) and it is completing the creation of a new securitisation for a nominal amount of two 

billion euro and an expected increase, net of haircuts, of 1,5 billion euro. 

On 1 st January 2011 the central bank revised the classification and levels of haircuts for 

eligible instruments: the level was raised for asset backed securities from 12% to 16% with an 

impact on the total value of assets eligible for refinancing of approximately 0,3 billion euro. 

A second rating requirement became operational from 1 st March 2011. In order for 

securitisations to be eligible for refinancing with the Bank of Italy and/or the European 

Central Bank, ABS instruments must have ratings issued by at least two international 

agencies. 

The rating process specifically for internal securitisations (which regard four of the five existing 

securitisations and amount to 7,5 billion euro net of haircuts) has at present been completed 

on assets of 4,1 billion euro, with a consequent reduction in eligible assets (the delay was in 

fact the result of factors not under the direct control of the Group). 

In order to partially compensate for this decrease, UBI Banca entered into reverse repurchase 

agreements with external counterparties to purchase eligible assets amounting to 1,7 billion 

euro. 

The second rating process is expected to be complete by the end of the first half of 2011. 

As a result of the above, at the date of this report eligible assets amounted to 7,2 billion euro. 

*** 

In December 2010, the final version of the Basel Committee Accord was published on the process to revise 

international supervisory regulations on liquidity, which basically confirmed the version defined in 

December 2009, with the introduction of two indicators associated with a minimum regulatory threshold 

(nevertheless officially setting a specific percentage for the renewal of maturing loans, previously left to the 

discretion of the bank). 

At the same time, on 1 st January 2011 amendments to Bank of Italy supervisory regulations entered into 

force which make widespread changes to rules governing liquidity risk. These create an organised system 

of principles and obligations designed to orient banks towards greater rigour in the management of 

liquidity. This system is intended to direct banks and banking groups towards compliance with rules which 

121

will be introduced by the new international prudential regulations from 31 st December 2015 and which will 

form part of the general set of rules governing liquidity 1 . 

Furthermore, in March 2011, the EBA (European Banking Authority) ordered an assessment of liquidity risk 

in which the UBI Banca Group participated by preparing a standard matrix, structured by maturity 

intervals with the identification of predefined time intervals, to be compiled on a consolidated basis with 

data as at 31 st December 2010. The assessment, which involves the application of common stress factors 

by the EBA in order to estimate the survival period for each bank, is designed to assess the liquidity 

position of banks in relative terms (it is not yet possible at present to formulate hypotheses concerning the 

possible stress scenarios which will be applied). Finally there is a section relating to funding plans for the 

same time intervals, in order to identify possible concentrations in terms of issues planned at system level. 

The 2011 policy for the management of the financial risks of the UBI Banca Group significantly revised both 

the system for monitoring liquidity risk, and that for structural balance between assets and liabilities, in 

order to incorporate the developments and recommendations of the international process in progress to 

revise the regulations governing liquidity risk. 

From 20 th May 2010, that risk is managed by means of the measurement, monitoring and management of 

the expected liquidity requirement, using a net liquidity balance model of analysis at consolidated level on 

a time horizon of 30 days, integrated with stress tests designed to assess the Group’s ability to withstand 

crisis scenarios characterised by an increasing level of severity. The system adopted also involves 

monitoring sources of funding both at consolidated and individual company level, in order to verify their 

consistency and sustainability over time with respect to the current and expected liquidity requirement of 

the Group and also consistency with the level of dependence on institutional markets considered 

acceptable. 

Management of structural balance is performed by using models which assess the degree of stability of 

liabilities and the degree of liquidity of assets (based principally on criteria of residual life and on the 

classification of the counterparties which contribute to the definition of the relative weightings), in order to 

contain risk associated with the transformation of maturities within a tolerance threshold considered 

acceptable by the Group. This model is designed to incorporate the general lines currently being defined in 

the process to revise prudential regulations for liquidity risk with specific reference to medium-to-long term 

indicators. 

1 A summary of the new prudential regulatory framework is given in the section “equity and capital adequacy”, which may be 

consulted. 

122


With a view to supporting net interest income in a still fragile and uncertain market context, on 25 th May 

2010 a decision was taken – and finalised the following June – to invest in government securities. That 

investment – for a total nominal amount of six billion euro with partial profit taking in September and 

October – influenced trends for financial assets affecting both financial assets held for trading and 

available-for-sale financial assets, with new purchases of Italian government securities classified within 

debt instruments. 

The total financial assets of the Group as at 31 st December 2010 had exceeded 13 billion 

euro, a significant increase compared to the previous year (+5 billion euro). 

Net of financial liabilities held for trading, consisting mainly of financial derivatives, financial 

assets amounted to 12,2 billion euro (7,3 billion euro at the end of the 2009). 

In terms of composition, as can be seen from the table, the trend for the item is attributable to 

increases in financial assets held for trading and above all in instruments classified within 

available-for-sale financial assets as a result of the new investments in Italian government 

securities (more than doubled over twelve months, to account for 73,5% of the total) as part 

the action taken to support net interest income mentioned above. On the other hand financial 

assets at fair value continued to decrease having now become a residual item. 

Financial assets/liabilities 

31.12.2010 

31.12.2009 Changes 

Figures in thousands of euro Amount % Amount % amount % 

Financial assets held for trading 2.732.751 20,8% 1.575.764 19,4% 1.156.987 73,4% 

of which: financial derivatives contracts 514.141 3,9% 722.831 8,9% -208.690 -28,9% 

Financial assets at fair value 147.286 1,1% 173.727 2,1% -26.441 -15,2% 

Available-for-sale financial assets 10.252.619 78,1% 6.386.257 78,5% 3.866.362 60,5% 

Held-to-maturity investments - - - - - - 

TOTAL FINANCIAL ASSETS (A) 13.132.656 100,0% 8.135.748 100,0% 4.996.908 61,4% 

of which: 

- debt instruments 11.611.039 88,4% 6.251.008 76,8% 5.360.031 85,7% 

- of which: Italian government securities 9.646.573 73,5% 4.325.379 53,2% 5.321.194 123,0% 

- equity instruments 667.497 5,1% 846.841 10,4% -179.344 -21,2% 

- Units in O.I.C.R. (collective investment instruments). 274.362 2,1% 310.488 3,8% -36.126 -11,6% 

FINANCIAL LIABILITIES HELD FOR TRADING (B) 954.423 100,0% 855.387 100,0% 99.036 11,6% 

of which: financial derivatives contracts 545.161 57,1% 746.752 87,3% -201.591 -27,0% 

NET FINANCIAL ASSETS (A-B) 12.178.233 7.280.361 4.897.872 67,3% 

Management accounting figures 1 as at the 31 st December 2010 show the following: 

- in terms of types of financial instrument, the securities portfolio of the Group was composed 

as follows: 80,3% of government securities, 15,9% of corporate securities (of which 79% 

relating to major Italian and international banks and financial institutions), 1,3% of hedge 

funds and the remainder consisting of funds, equities and other instruments; 

- from a financial viewpoint, floating rate securities accounted for 63,4% of the portfolio 2 and 

fixed rate securities for 26,8%, while structured instruments (for which the optional 

component concerned the coupons only and not the capital invested), present mainly in the 

available-for-sale portfolio, accounted for 6,7%, while the remainder was composed of 

equities, funds and convertible bonds; 

1 The management accounting figures relate to a smaller portfolio than that stated in the consolidated financial statements, because 

they exclude equity investments and some minor portfolios 

2 The fixed rate securities purchased as part of asset swaps are also considered as floating rate. They account for 74% of the floating 

rate securities. 

123

- as regards the reference currency, 98,8% of the securities were denominated in euro, and 

0,6% in dollars with currency hedges, while in terms of geographical distribution, 95,2% of 

the investments (excluding hedge funds) were located in the euro area and 2,9% in USA 

securities; 

- finally, an analysis by rating (for the bond portfolio only) shows that 97,8% of the portfolio 

consisted of “investment grade” securities with an average rating of A3. 

Available-for-sale financial assets 

“Available for sale financial assets”, asset item 40, are measured at fair value with the recognition of 

changes in a separate fair value reserve in equity, except for losses due to reductions in value that are 

considered significant or prolonged. In this case the reduction in value that occurred in the period is 

recognised through profit or loss, the amount being transferred from the negative or positive reserve that 

may have been recognised in equity previously. Following the recognition of impairment losses, recoveries 

in value continue to be recognised in the separate fair value reserve in equity. Any decreases below the 

level of the previous impairment losses are recognised through profit and loss. 

Available-for-sale financial assets: composition 

31.12.2010 

31.12.2009 Changes 

Figures in thousands of euro L 1 L 2 L 3 Total L 1 L 2 L 3 Total amount % 

Debt instruments 8.509.464 1.115.988 10.255 9.635.707 4.041.201 1.573.093 6.586 5.620.880 4.014.827 71,4% 

of which: Italian government 

securities 7.776.547 - - 7.776.547 3.886.375 - - 3.886.375 3.890.172 100,1% 

Equity instruments 346.586 73.614 70.357 490.557 489.825 71.083 75.540 636.448 -145.891 -22,9% 

Units in O.I.C.R. 

(collective investment instruments) 18.313 106.596 - 124.909 17.177 110.046 260 127.483 -2.574 -2,0% 

Financing - - 1.446 1.446 - - 1.446 1.446 - - 

TOTAL 8.874.363 1.296.198 82.058 10.252.619 4.548.203 1.754.222 83.832 6.386.257 3.866.362 60,5% 

As at 31 st December 2010, available-for-sale financial assets had reached 10,3 billion euro (6,4 

billion euro at the end of 2009) and were composed principally as follows: 

- the AFS portfolio of UBI Banca amounting to 8.698 million euro (4.919 million euro in 

December 2009); 

- the IW Bank portfolio, designed to stabilise net interest income given the nature of its 

normal operations, amounting to 845 million euro (787 million euro); 

- the Centrobanca corporate bond portfolio, which represents activity complementary to and 

consistent with the lending approach of that bank, amounting to 557 million euro (535 


The significant growth that occurred reflects the trend for debt instruments, which rose from 

5.621 million euro to 9.636 million euro (+71,4%), as a result of new investments in Italian 

government securities contained primarily in the UBI Banca portfolio: a total of +3,9 billion 

euro including a nominal amount of 3,3 billion euro relating to the action taken to stabilise net 

interest income. 

The action, which commenced at the end of May, took concrete form with the purchase of BTPs and CTZs 

maturing in September 2011 for a total nominal amount of 5,5 billion euro classified within available-forsale 

financial assets (a further 0,5 billion euro, again maturing in September 2011, was classified within 

financial assets held for trading). 

Partial profit taking was performed in September and October (on the basis of the prices and credit spreads 

of the Italian government issues), by the sale of securities for a nominal amount of 3,2 billion euro (two 

billion euro of BTPs – of which 1,8 billion euro in asset swaps – and 1,2 billion euro of CTZs) and a 

subsequent reinvestment of one billion euro in longer term BTPs (2020 and 2021). 

124

This action was accompanied by investments in long term BTPs made in the first quarter and 

to a lesser extent in the third quarter, with partial disinvestments in the last quarter of the 

year. 

As concerns Centrobanca, the portfolio – 72,5% consisting of “investment grade” securities – 

increased by approximately 22 million euro, approximately half of which attributable to net 

investments and the remaining part to recoveries in value and positive exchange rate 

differences. The IW Bank portfolio also increased (almost 60 million euro) due to new net 

investments in Government securities (CCTs maturing in 2015). 

The debt instruments also include ABS financial instruments – all held by UBI Banca – eligible 

for refinancing with the ECB with a book value of 89,1 million euro consisting of securities 

from INPS (national insurance institute) securitisations (two securitisations existed at the end 

of 2009 for a total amount of 128,8 million euro). 

In addition to the net fair value impact (+0,4 million euro), the decrease compared to 165,2 

million of twelve months before is attributable to the redemption of an INPS securitisation 

amounting to 40,1 million euro and to banking securitisations (RMBSs – residential mortgage 

backed securities) with a book value of 36,4 million euro in December 2009 (49,7 million euro 

nominal). 

Total Group investments in ABS securities as at 31 st December 2010, net of own 

securitisations, amounted to 89,6 million euro (208 million euro the year before) and they were 

composed as follows: 

• 89,1 million euro, classified in the AFS portfolio of UBI Banca, already mentioned; 

• 0,5 million euro classified within the HFT portfolio of UBI International (see in this respect 

the sub-section “Financial assets held for trading”); 

The total amount at the end of 2009 included a security classified within the Centrobanca 

loans and receivables portfolio with a nominal value of five million euro, sold in the second 

half of 2010. 

Investments in own securitisations, eliminated in the consolidation, fell to 39,3 million from 

43,4 million euro in 2009 and related to the following: 

- RMBS securities classified within financial assets held for trading relating to UBI Banca 

(Orio Finance) and amounting to 5,3 million euro (6,6 million euro twelve months before); 

- ABS securities amounting to 34 million euro (36,8 million euro in December 2009) as 

follows: 

• 7,2 million euro in the Centrobanca AFS portfolio (Sintonia Finance) (7,5 million euro); 

• 5,8 million in the Parent’s AFS portfolio (Lombarda Lease Finance 4) (8,3 million euro); 

• 21 million euro classified within loans and receivables held by UBI Leasing (Lombarda 

Lease Finance 4) (unchanged compared to twelve months before). 

The sub-section "exposures of the UBI Banca Group to some types of products”, later in this section, may be 

consulted for further information on exposures to ABS instruments and to special purpose entities (SPE). 

Equity instruments fell to 491 million euro from 636 million euro the year before. 

Shareholdings that are not classified as companies subject to control, joint control or 

significant influence and that are not held for merchant banking and private equity activities, 

are recognised here. The decrease in these assets is basically due to the decrease in the fair 

value of listed equity investments classified within fair value level one and to the Intesa 

Sanpaolo share in particular 3 . Its market value, affected by the sharp drop in banking share 

prices at the end of the year, fell from 459,1 million euro to 296,2 million euro (-35,5%), while 

the A2A Spa share also fell from 16,4 million euro to 11,6 million euro over twelve months. On 

the other hand, an increase was recorded in the interest held in London Stock Exchange (from 

12,6 million euro to 15,5 million euro; +22,5%). 

The fair value level one class also includes an investment made in the second quarter of 2010 

with a nominal value of 20 million euro (ETF on EuroStoxx 50). 

As concerns unlisted equity investments, those with a level two and three fair value decreased 

on aggregate by almost three million euro, principally as a result of disposals of holdings in 

3 The UBI Banca Group holds a total of 145.022.912 shares, amounting to 1,22% of the share capital with voting rights. 

125

Carta SI, the former Si Holding Spa (-14,4 million euro), in Centrosim Spa 

(-1,7 million euro at consolidated level) and Equinox Investment Company Scpa (-0,9 million 

euro), while increases resulted from an increase in the value of some equity investments and 

from new investments. The latter included further purchases by the Parent in Autostrada 

Pedemontana Lombarda Spa (+5,3 million euro) and in Autostrade Lombarde Spa (+0,8 million 

euro), 4,7 million euro relating to the investment in GGP Greenfield by Centrobanca acquired 

through the conversion of amounts due from the company and one million euro net relating to 

UBI Banca International. 

The investment in OICR units (collective investment instruments) fell to 125 million euro from 

127 million euro previously (-2%), the result on the one hand of purchases and a net increase 

in the value of the UBI Banca investments (+15,6 million euro) and on the other of sales by 

UBI Pramerica (-17,9 million euro). The item includes property funds – held almost entirely by 

the Parent – totalling approximately 27 million euro (26,4 million euro in December 2009), 

including 18,3 million euro relating to the Polis Fund (17,2 million euro at the end of 2009), 

recognised within fair value level one. 

As a result of the losses recorded by debt instruments in particular, at the end of year the 

balance on the fair value reserve for available-for-sale financial assets recognised in equity was 

negative by 311,5 million euro (it was positive by 168,7 million euro in December 2009). 

Financial instruments held for trading 

Financial assets held for trading 

Asset item 20, “Financial assets held for trading”, includes financial trading instruments “used to generate 

a profit from short-term fluctuations in price or from a dealer’s margin”. They are recognised at fair value 

through profit or loss – FVPL. 

Financial assets held for trading: composition 

31.12.2010 31.12.2009 

Changes 


A. On-balance sheet assets 

Debt instruments 1.964.319 11.013 - 1.975.332 479.546 150.582 - 630.128 1.345.204 213,5% 

of which: Italian government 

securities 1.870.026 - - 1.870.026 439.004 - - 439.004 1.431.022 326,0% 

Equity instruments 72.856 2 104.082 176.940 109.266 80.592 20.535 210.393 -33.453 -15,9% 


(collective investment instruments) 512 54 1.601 2.167 628 8 8.642 9.278 -7.111 -76,6% 

Financing - 64.171 - 64.171 - 3.134 - 3.134 61.037 n.s. 

Total A 2.037.687 75.240 105.683 2.218.610 589.440 234.316 29.177 852.933 1.365.677 160,1% 

B. Derivative instruments 

Financial derivatives 1.014 509.601 3.526 514.141 582 721.626 623 722.831 -208.690 -28,9% 

Credit derivatives - - - - - - - - - - 

Total B 1.014 509.601 3.526 514.141 582 721.626 623 722.831 -208.690 -28,9% 

TOTAL (A+B) 2.038.701 584.841 109.209 2.732.751 590.022 955.942 29.800 1.575.764 1.156.987 73,4% 

At the end of December financial assets held for trading amounted to 2.733 million euro, an 

increase of more than 70% over twelve months, the result of new net investments in debt 

instruments concentrated mainly in the first half of the year. 

Debt instruments, amounting to 1.975 million euro (almost all with a level one fair value) 

increased by 1.345 million euro (more than tripled compared to December 2009) due to the 

net effect of sales, maturities and purchases of Italian government securities (+1.431 million 

126

euro, including a nominal amount of 0,5 billion euro connected with an investment decided in 

May). 

As at 31st December, the Group held Greek government securities in portfolio at the initial 

purchase price of 23,6 million euro (a book value of 24,6 million euro inclusive of the coupon 

interest accruing); the position was closed in February 2011. 

At the date of this report no investments in government debt instruments issued by Portugal, 

Ireland, Spain and Belgium were held in portfolio. 

Debt instruments also included direct investments in “Asset Backed Securities” 4 , all held by 

the subsidiary UBI Banca International Sa, consisting mainly of mortgage backed securities 

(MBS), with the underlying assets principally of European origin amounting to 0,5 million euro 

(a total book value of ABSs held in December 2009 of 37,8 million euro). 

The decrease that occurred over twelve months (-37,3 million euro) is attributable to the 

maturity of a collateralised debt obligation (“CBO Investment Jersey Ltd 1999-2010”) 

subscribed by UBI Banca amounting to 35,6 million euro and to the redemption of a security 

held in portfolio by UBI Banca International amounting to 1,5 million euro, as well as to the 

net fair value impact amounting to -0,2 million euro. 

Debt instruments also included a structured product, similar in terms of risk to ABS 

securities, amounting to approximately 2,6 million euro and relating to UBI Banca 

International Sa (2,4 million euro in December 2009). 

Equity instruments decreased during the year, down from 210 million euro to 177 million euro, 

principally in relation to disinvestments in European equities (all with a level one fair value) by 

the Group’s asset management company under the management mandate granted to it 5 (-52 

million euro) partially offset by a new equity purchase by the subsidiary Centrobanca, which, 

however, was sold in the first few days of 2011. 

This category also includes investments in equity instruments held as part of merchant 

banking and private equity business (in connection principally with Centrobanca’s activities). 

In December 2010, these totalled 104,1 million euro – classified within fair value level three – 

an increase compared to twelve months before (100,2 million euro) due to the net effect of new 

investments and disposals performed by Centrobanca and to the changes in the fair value of 

some equity investments. 

Investments in OICR units (collective investment instruments) fell to 2,2 million euro relating 

almost entirely to hedge funds purchased prior to 30 th June 2007 and still held (1,6 million 

euro classified within fair value level three compared to 8,6 million euro before) 6 . 

As concerns the item financing – all relating to Prestitalia Spa – this increased from 3,1 million 

euro to 64,2 million euro in relation to the full acquisition of the company, with consequent 

line-by-line consolidation applied to it, 

Finally, financial assets classified as held for trading also included derivative instruments 

amounting to 514,1 million euro (722,8 million euro in December 2009), entirely of a financial 

nature, for which the performance and amount must be interpreted in strict relation to the 

corresponding item recognised within financial liabilities held for trading. 

Financial instruments held for trading as at 31 st December 2010 included impaired assets 

amounting to 0,9 million euro (1,1 million euro in 2009), attributable to the expected 

realisable value of bonds issued by Lehman Brothers and subscribed by UBI International and 

by the Parent for a total nominal amount of 10 million euro. The change is due to the sale in 

4 The preceding sub-section on the available-for-sale portfolio should be consulted for a full picture of the Group’s investments in ABS 

securities. 

5 As already reported, this accounting class also includes the portfolio entrusted to UBI Pramerica SGR under the management 

mandate granted to it. On the basis of that mandate, management is performed following a capital protection strategy, which 

guarantees a level of capital protection on maturity of 96,80%. 

In December, approximately 39 million euro was invested in European equities (90,8 million euro at the end of 2009). Open positions 

also existed in futures on equity indices, options on exchange rates and forward currency contracts, The remaining part of the 

mandate was managed using monetary instruments. 

6 The following sub-section, “financial assets at fair value”, may be consulted for a full picture of the Group’s investments in hedge 

funds. 

127

December of a Lehman security held by UBI International with a nominal amount of 2,5 

million euro. 

Furthermore, at the date of this report the remaining Lehman securities held in portfolio had 

also been disposed of. 

As concerns the position of the Group with regard to Lehman Brothers, as already reported in the 2009 

Annual Report: 

- UBI Banca and Centrobanca have filed proof of claim applications with the Southern District Court of 

New York in connection with derivatives contracts which had been entered into with companies in the 

Lehman Brothers Group; 

- Centrobanca has filed proof of claim applications in relation to derivatives contracts which it had 

entered into with Lehman Brothers Special Financing Inc. subject to Chapter 11 bankruptcy proceedings 

in the USA; 

- UBI Banca has filed proof of claim applications in relation to bonds issued by Lehman Brothers Holdings 

Inc. which had been subscribed by UBI Banca, UBI Banca International and the Luxembourg branch of 

Banco di Brescia. The relative creditor’s claims must be considered as void in consideration of the 

disposal of the securities performed in the meantime. 

As concerns the position of Lehman Brothers International (Europe), a company belonging to the Lehman 

Brothers Group and subject to an administration order in the United Kingdom, on 17 th September 2010 UBI 

Banca filed a creditor’s claim for 485.930,71 GBP in relation to derivatives contracts that had been entered 

into with Lehman Brothers International (Europe). 

In relation to that last position, as already reported, UBI Banca had already filed creditor’s claims against 

Lehman Brothers Holdings Inc., as the guarantor of Lehman Brothers International (Europe), in the context 

of the Chapter 11 proceedings in the USA mentioned above. 

Financial liabilities held for trading 

Financial liabilities held for trading: composition 

31.12.2010 

31.12.2009 Changes 


A. On-balance sheet liabilities 

Due to banks 110.657 - - 110.657 86.857 - - 86.857 23.800 27,4% 

Due to customers 298.605 - - 298.605 21.778 - - 21.778 276.827 n.s. 

Debt instruments - - - - - - - - - - 

Total A 409.262 - - 409.262 108.635 - - 108.635 300.627 276,7% 

B. Derivative instruments 

Financial derivatives 1.191 543.970 545.161 3.960 742.792 - 746.752 -201.591 -27,0% 

Credit derivatives - - - - - - - - - - 

Total B 1.191 543.970 - 545.161 3.960 742.792 - 746.752 -201.591 -27,0% 

TOTAL (A+B) 410.453 543.970 - 954.423 112.595 742.792 - 855.387 99.036 11,6% 

Financial liabilities totalled 954,4 million euro as at 31 st December 2010, a moderate increase 

compared to 855,4 million twelve months before. As can be seen from the table, financial 

derivatives decreased during the year by 27% (-201,6 million euro to 545,2 million euro), 

while liabilities increased both in terms of amounts due to banks (+23,8 million euro) and in 

particular for amounts due to customers, up from 21,8 million euro to 298,6 million euro. In 

both cases the amounts due related to uncovered short positions in Government securities. 

As with financial assets held for trading, the changes for derivatives, almost all consisting of 

interest rate contracts, relate mainly to smaller volumes of business. 

128

Financial assets at fair value 

The item “financial assets at fair value” (asset item 30) includes financial instruments designated as such 

in application of the fair value option (FVO). They consist exclusively of units in hedge funds purchased 

subsequent to 1 st July 2007. 

These financial assets are recognised at fair value through profit or loss. 

Financial assets at fair value: composition 

31.12.2010 

31.12.2009 Changes 


Debt instruments - - - - - - - - - 

Equity instruments - - - - - - - - - 


(collective investment 

instruments) 116.208 31.078 147.286 108.819 - 64.908 173.727 -26.441 -15,2% 

Financing - - - - - - - - - 

TOTAL 116.208 - 31.078 147.286 108.819 - 64.908 173.727 -26.441 -15,2% 

As at 31 st December 2010, financial assets at fair value, consisting exclusively of O.I.C.R. 

(collective investment instruments) units in hedge funds, amounted to 147,3 million euro 

including 116,2 million euro – fair value level one – relating to UBI Pramerica SGR (formerly 

Capitalgest). 

If investments in hedge funds classified within financial assets held for trading are also 

included, then investments in hedge funds as at 31 st December 2010 totalled 148,9 million 

euro (182,4 million euro at the end of 2009). 

Redemptions, net of redemption fees 7 , were received during the year of approximately 43 

million euro (36,1 million euro relating to investments classified within financial assets at fair 

value and seven million euro relating to investments classified within financial assets held for 

trading). 

At the end of December requests to redeem not yet redeemed concerned the remainder of the 

hedge fund portfolio with the exception of the UBI Pramerica (formerly Capitalgest) funds. 

Management accounting figures show that ten funds, for an amount of approximately 22 

million euro, are expected to pay and/or have declared that they were implementing a deferred 

redemption plan (known as a "gate") – as allowed for in their respective regulations, while 

another 19 funds have created “side pockets” for an amount of 11 million euro. 

As concerns the Madoff collapse, court action initiated by UBI Banca against the fund Thema International 

Plc and the relative depository bank, HSBC Institutional Trust Services Ltd, is proceeding before the 

Commercial Court of Dublin. The “discovery” stage is currently in progress during which the parties 

exchange documentation and information relevant to the case. 

In the meantime, UBI Banca is monitoring the class actions brought in the USA and the liquidation 

proceedings in progress in the British Virgin Islands brought against three funds attributable to Madoff, 

Fairfield Sigma Ltd., Kingate Euro Ltd. and Kingate Global Ltd., in order to protect UBI Banca’s creditor 

rights also with respect to these actions. 

Finally, with regard to the Dynamic Decisions Growth Premium 2X fund, in liquidation, following the signing 

of an agreement with the receivers which gives UBI Banca preference in the redemption of sums recovered 

in the liquidation, in return for financing paid to the receivers, no significant and/or relevant developments 

have occurred. 

7 The technical term used to indicate expenses for repayment. 

129

Exposures of the UBI Banca Group to some types of products 

This section provides an update of the position of the UBI Banca Group with regard to some 

types of financial instruments, which since the subprime mortgage crisis in 2007, are now 

considered at high risk. 

Special purpose entities (SPEs) 

The involvement of the UBI Group in special purpose entities (SPEs 8 ) concerns the following 

types: 

- entities formed to allow the issue of preference shares; 

- conventional securitisation transactions 9 performed by Group member companies in 

accordance with Law No. 130 of 30 th April 1999; 

- the issue of covered bonds, in accordance with Art. 7 bis of Law No.130/1999. 

Special purpose entities existed as at 31 st December 2010, within the UBI Banca Group for the 

issue of preference shares used as innovative equity instruments on international capital 

markets. These issues, which current supervisory regulations allow to be included in the 

consolidated tier one capital, take the form of non redeemable instruments and they have 

particularly junior levels of subordination. The preference shares included in the tier one 

capital amounted to 453,46 million euro and they were issued by a number of the banks 

which formed part of the Group prior to the merger. These special purpose entities, which in 

accordance with IFRS fall within the consolidation scope are as follows 10 : 

BPB Funding Llc, 

BPB Capital Trust (100% controlled by BPB Funding Llc), 

Banca Lombarda Preferred Capital Company Llc, 

Banca Lombarda Preferred Securities Trust, 

BPCI Funding Llc, 

BPCI Capital Trust (100% controlled by BPCI Funding Llc). 

On the one hand securitisations form part of a strategic policy to expand lending by 

simultaneously freeing up part of the supervisory capital relating to the amounts transferred 

and on the other they constitute an important medium-to-long term funding instrument. The 

underlying assets securitised consist of performing assets of the network banks and other 

product companies. The list of SPEs used for the securitisations in which the Group is 

involved is as follows: 

Orio Finance Nr. 3 Plc, 

Albenza 3 Srl, 

Lombarda Lease Finance 4 Srl 11 , 

UBI Lease Finance 5 Srl, 

Sintonia Finance Srl, 

24-7 Finance Srl, 

UBI Finance 2 Srl, 

UBI Finance 3 Srl. 

Finally, the entity UBI Finance Srl was formed to purchase loans from banks as part of 

operations to issue covered bonds. 

With the exception of UBI Finance Srl, the special purpose entities listed above are included in 

the consolidated accounts because these companies are in reality controlled, since their assets 

and liabilities were originated by Group member companies. As concerns Sintonia Finance, 

8 Special Purpose Entities (SPE) are special companies formed to achieve a determined objective. 

9 With normal securitisations the originator sells the portfolio to a special purpose entity which then issues tranches of asset-backed 

securities in order to purchase it. With a synthetic securitisation, on the other hand, the originator purchases protection for a pool of 

assets and transfers the credit risk attaching to the portfolio – either fully or in part – by using credit derivatives such as CDSs (credit 

default swaps) and CLNs (credit-linked notes) or by means of personal guarantees. 

10 Control is by the Parent of the Group where no indication is given. See the section “The consolidation scope” in this respect. 

11 The securitisation Lombarda Lease Finance 3 Srl was closed down in the third quarter. The entity still remains operational. 

130

since the securitisation was multi-originator, only those assets and liabilities relating to the 

operation originated by Centrobanca are consolidated. 

The securitisations concerning the special purpose entities, 24-7 Finance Srl, UBI Lease 

Finance 5 Srl and UBI Finance 2 Srl were performed in order to constitute a portfolio of assets 

eligible as collateral for refinancing with the European Central Bank, consistent with Group 

policy for the management of liquidity risk. 

They were performed on performing residential mortgages, salary backed loans and consumer 

loans of B@nca 24-7 (24-7 Finance Srl), on lease contracts of UBI Leasing (UBI Lease Finance 

5 Srl) and on performing loans to small-to-medium sized enterprises of Banco di Brescia (UBI 

Finance 2 Srl). In the securitisations in question the senior securities issued by the entities – 

assigned a rating – are listed and can be used for refinancing operations with the ECB. 

Again in this context, in December 2010 a new securitisation transaction was initiated by 

transferring loans to small to medium sized enterprises, classified as performing and held by 

Banca Popolare di Bergamo Spa, to the special purpose entity UBI Finance 3 Srl. 

The operation consists of two stages: 

- the transfer of the loans by the originator to the special purpose entity on 6 th December 

2010 (effective from 1 st December), for an amount of approximately 2,8 billion euro. The 

purchase of the mortgages by the special purpose entity, financed by deferring payment of 

the transfer price, which will be paid when the securities are issued; 

- the issue of securities by UBI Finance 3. 

The second stage has not yet taken place and it is scheduled for before the end of the first half 

of 2011. 

The issue of covered bonds is designed to diversify sources of funding for the Group and also 

to contain the cost of it. As at 31 st December 2010, UBI Banca had performed three 

placements of covered bonds for a total nominal amount of 3,75 billion euro (1,75 billion euro 

issued in 2010) as part of a programme for a maximum issuance of ten billion euro. The 

originator banks issued a subordinated loan to the SPE, UBI Finance, equal to the value of the 

loans sold, in order to fund the purchase. At the end of December, these loans amounted to 

approximately 7,83 billion euro (3,67 billion euro in December 2009). 

In this respect, exposures are present in the Group which relate solely to the special purpose 

entities formed for the securitisations mentioned and they all fall within the consolidation 

scope. 

As at 31 st December 2010, ordinary credit lines existed granted by the Parent to the special 

purpose entity Orio Finance Nr.3 Plc for a total of five million euro, never drawn on (five 

million euro as at 31 st December 2009). Ordinary credit lines also existed granted by B@nca 

24-7 to the entity 24-7 Finance for a total of 37,3 million euro, entirely drawn on (64,4 million 

euro, entirely drawn on, at the end of 2009). 

All the securitisations are hedged by swap contracts where the main objective is to stabilise 

the flow of interest generated by the securitised portfolio and to protect the special purpose 

entity from interest rate risk. These derivatives contracts were taken out between the entities 

and the respective hedging counterparties which, in order to be able to “close” the risk with 

originator, took out contracts – identical in form but opposite in the effects – with UBI Banca. 

The Parent, then in turn, renegotiated further mirror swaps with the respective originators 12 . 

The exposures relating to the derivatives mentioned (of the Parent, Centrobanca and UBI 

Leasing towards the special purpose entities created for the securitisation of their assets) had 

a total mark-to-market value of 35,1 million euro (65,6 million euro as at 31 st December 

2009). 

No exposures exist to special purpose entities or other conduit operations with underlying 

securities or investments linked to United States subprime and Alt-A loans. 

The total assets of SPEs relating to securitisations and to covered bonds amounted to 

approximately 21,9 billion euro (13,5 billion euro in December 2009). 

12 The following constituted exceptions to that practice: the UBI Lease Finance 5 and UBI Finance 2 transactions, where the special 

purpose entity entered into swap contracts directly with UBI Banca (which then renegotiated mirror swaps with the originators UBI 

Leasing and UBI Banco Brescia) and the Sintonia Finance securitisation which Centrobanca Spa closed directly, without going 

through the Parent, hedging the risk by means of a swap contract. 

131

Details by asset class are given in the table below: 

SPE UNDERLYING ASSETS 

Classification of underlying assets of the securitisation 31.12.2010 31.12.2009 

Figures in millions of euro 

Measurement Gross of Net of Gross of Net of 

Entity Total assets Class of underlying asset Accounting criteria impairment impairment impairment impairment 

classification adopted losses losses losses losses 

Albenza 3 Srl 37,4 Mortgages L&R CA 36,3 36,3 53,3 53,2 

Sintonia Finance 29,8 Mortgages L&R CA 25,5 23,4 33,4 31,4 

24-7 Finance 5.492,9 Mortgages L&R CA 1.903,9 (*) 1.894,5 (*) 2.166,4 (*) 2.154,8 (*) 

24-7 Finance - Salary backed loans L&R CA 414,1 (*) 413,7 (*) 551,7 (*) 551,5 (*) 

24-7 Finance - Consumer loans L&R CA 1.809,6 (*) 1.761,8 (*) 1.665,2 (*) 1.629,7 (*) 

Lease Finance 3 61,2 Leasing L&R CA - - 56,0 56,0 

Lease Finance 4 335,4 Leasing L&R CA 232,1 226,7 332,9 332,6 

UBI Lease Finance 5 4.154,5 Leasing L&R CA 2.449,4 (*) 2.445,8 (*) 2.917,7 (*) 2.906,5 (*) 

Orio Finance 3 37,4 RMBS Notes (ALBENZA 3 Srl) L&R CA 37,4 37,4 54,3 54,3 

UBI Finance 7.746,2 Mortgages L&R CA 7.700,0 7.687,2 3.613,7 3.606,5 

UBI Finance 2 1.306,4 Loans to SMEs and small businesses L&R CA 1.241,8 (*) 1.236,9 (*) 1.632,7 (*) 1.627,9 (*) 

UBI Finance 3 2.702,5 Mortgages L&R CA 2.707,7 (*) 2.699,5 (*) - - 

Total impaired assets, mortgages and loans 372,2 242,4 133,0 82,7 

Total impaired assets, leasing 157,3 153,9 248,8 242,2 

TOTAL 21.903,7 19.087,3 18.859,5 13.459,1 13.329,3 

(*) assets transferred not derecognised on the books of the originators 

The distribution by geographical location and credit rating of the underlying assets relating to 

the securitisations by the special purpose entities Lombarda Lease Finance 4 and UBI Lease 

Finance 5 is given below. 

Distribution of the underlying assets of the UBI Leasing securitisations 

DISTRIBUTION BY GEOGRAPHICAL AREA 

DISTRIBUTION OF ASSETS BY CREDIT RATING 

1% 

1% 

4% 

16% 

A 

0% 

BBB 

1% 

unrated 

14% 

2% 

8% 

53% 

5% 

10% 

AAA 

85% 

Lombardy Veneto Piedmont 

Latium Trentino Alto Adige Emilia Rom 

Liguria Friuli Venezia Giulia Other 

AAA A BBB unrated 

Exposure in ABS, CDO, CMBS and other structured credit products 

As at 31 st December 2010, the UBI Banca Group held direct investments in ABS instruments 

amounting to 92,2 million euro (210,4 million euro in December 2009), net of repurchases of 

tranches of its own securitisations, composed as follows: 

- ABS instruments totalling 0,5 million euro (recognised within financial assets held for 

trading), belonging to the subsidiary UBI Banca International Sa, with underlying assets 

mainly of European origin (2,2 million euro in December 2009); 

132

- other structured credit products totalling 2,6 million euro (classified within financial assets 

held for trading in the UBI Banca International Sa portfolio) with an investment grade credit 

rating (2,4 million euro at the end of 2009); 

- ABS instruments totalling 89,1 million euro (recognised within available-for-sale financial 

assets) relating to senior tranches of INPS (national insurance institute) securitisations 

(128,8 million euro at the end of 2009); 

Group exposure to ABS instruments reduced following the sale of RMBS instruments for a 

nominal amount of 49,7 million euro, the redemption of ABS instruments relating to senior 

tranches of INPS securitisations for a nominal amount of 40 million euro and the sale of ABS 

instruments – with performing loans originated by banks as the underlying assets – for a 

nominal amount of five million euro. All the transactions mentioned took place in the second 

half of the year. 

The total amount of the direct investments in structured credit products (net of impairment 

losses) listed above accounted for 0,07% of consolidated Group assets. 

The ABS instruments classified within financial assets held for trading relate to trading 

activity that is subject to risk limits which are monitored daily. 

ABS securities recognised within available-for-sale financial assets are eligible for refinancing 

with the European Central Bank. 

No direct investments exist in securities backed by commercial mortgages (CMBS). 

The table summarises Group exposures in ABS instruments: none of the positions listed 

contained underlying assets linked to subprime or Alt-A loans. 

DIRECT EXPOSURE IN ABS 

Classifications 31.12.2010 31.12.2009 

Figures in millions of euro 

Hedged by 

Counterparty Accounting Gross of Net of techniques Gross of Net of 

relationship Type of exposure Rating Seniority classification impairment impairment to reduce impairment impairment 

losses losses counterparty/ losses losses 

credit risk 

investor ABS HFT 0,5 0,5 no 2,2 2,2 

investor ABS AAA Senior AFS 88,7 89,1 no 128,2 128,8 

investor ABS L&R - - - 5,0 5,0 

investor RMBS AFS - - - 34,3 36,4 

investor CDO HFT - - - 35,5 35,6 

investor Other structured products HFT 2,6 2,6 no 2,4 2,4 

TOTAL 91,8 92,2 207,6 210,4 

Own securitisations, eliminated when consolidating the accounts, totalled 11,1 billion euro 

(12,1 billion euro at the end of 2009) and related mainly to ABS instruments (including 9,2 

billion euro of senior securities) used as collateral for advances from the ECB. 

In addition to the direct exposures, hedge funds or funds of hedge funds were identified among 

the assets present in Group portfolios with exposures to structured credit products of the CDO 

and CMBS type. Investment in these funds as at 31 st December 2010 amounted to 

approximately 135 million euro (net of impairment losses/reversals) and presented low 

percentages of exposure (no hedge funds out of a total of 11 had a percentage of exposure 

lower than 2%). Total indirect exposure to CDOs and CMBSs amounted to approximately 0,1 

million euro, (0,5 million euro in December 2009). 

Net gains/losses attributable to structured credit products classified as held for trading are 

recognised within item 80 of the income statement “net trading income (loss)” and amounted 

to -3,1 million compared to +1,1 million euro in 2009. 

As concerns the fair value impact on structured products classified within available-for-sale 

financial assets, the reserve in equity was credited – net of tax – with approximately +0,2 

million euro (+0,1 million euro at the end of 2009). 

133

Other subprime and Alt-A exposures 

Again at the end of 2010, indirect exposures to subprime and Alt-A mortgages existed that 

were contained in hedge funds or funds of hedge funds held by the Parent. The percentages of 

exposure to subprime and Alt-A mortgages were again low (no fund had a percentage exposure 

of greater than 2%), with total exposure to subprime and Alt-A loans of approximately 0,3 

million euro (one million euro as at 31 st December 2009). 

Exposures to monoline insurers 

Indirect exposures to monoline insurance companies exist in hedge funds or funds of hedge 

funds held by UBI Banca. The percentages of exposure remained very modest with an overall 

amount of less than 0,1 million euro, unchanged compared to December 2009. 

As on the other hand concerns insurance policies to protect residential mortgage loans – for 

the part exceeding 80% of the mortgage – B@nca 24-7 eliminated its exposure to a monoline 

insurance company amounting to 71,7 million euro at the end of 2009, having ceased 

business relations with the company. 

Leveraged Finance 

The term leveraged finance is used in the UBI Banca Group to refer to finance provided for a 

company or an initiative which has debt that is considered higher than normal on the market 

and is therefore considered a higher risk. Usually this finance is used for specific acquisition 

purposes (e.g. the acquisition of a company by other companies – either directly or through 

vehicles/funds – owned by internal [buy-in] or external [buy-out] management teams). They 

are characterised by “non investment grade” credit ratings (less than BBB-) and/or by 

remuneration that is higher than normal market levels. 

Leveraged finance business is performed by Centrobanca and is regulated by the Group Credit 

Risk Policy designed to combine the achievement of budget targets in terms of business 

volumes and profits with appropriate management of the attached risks. 

Briefly, operations are based on a maximum investment ceiling, reviewed annually and 

allocated on the basis of rating classes for operations according to predefined maximum 

percentages. The system of limits is calculated to seek appropriate diversification both in 

terms of sector and the concentration of risk on single company or Group counterparties. 

The table below summarises on- and off-balance sheet exposure for leveraged finance by 

Centrobanca. That activity accounts for 12,2% of total lending and guarantees granted by 

Centrobanca (17% as at 31 st December 2009). The amounts shown relate to 158 positions for 

an average unit exposure of 5,6 million euro. There were around five positions of greater than 

20 million euro (all relating to on-balance sheet loans) corresponding to approximately 18% of 

the total. 

Centrobanca leveraged finance business as at 31st December 2010 

figure s in m illio ns o f e uro 

On-bal ance sheet exposure 

gross exposure to customers 

Guarantees 

gross exposure to customers 

31 December 2010 

31 December 2009 

used impairment used impairment 

853,0 -7,7 51,9 -6,0 

1.194,3 -9,2 90,7 -6,5 

The graphs below show the distribution of leveraged exposures by geographical area and by 

sector. 

134

Distribution of Centrobanca leveraged exposures 

(the figures as at 31 st December 2009 are given in brackets) 

EXPOSURE BY GEOGRAPHICAL AREA 

EXPOSURE BY SECTOR 

USA and Mexico 

4% (10%) 

Europe 

21% (31%) 

Commerce and 

services 

39% (29%) 

Italy 

75% (59%) 

Manufacturing 

61% (71%) 

Residual exposures also exist within the UBI Banca Group – approximately 265 million euro 

(384 million euro as at 31 st December 2009) – relating to leveraged finance transactions 

performed before this type of business was centralised at Centrobanca. They were performed 

by the network banks relating to a total of 34 positions with average unit exposure of 7,8 

million euro. 

The principal amounts related to Banco di Brescia (126,5 million euro), Banca Popolare di 

Bergamo (61,2 million euro), Banca Popolare Commercio e Industria (35,6 million euro) and 

Banca Regionale Europea (20,2 million euro). 

Financial derivative instruments for trading with customers 

In quantitative terms, the analysis performed as at 31 st December 2010 for internal monitoring 

purposes show that the risks assumed by customers are generally low and they outlined a 

conservative profile for UBI Group business in OTC derivatives with customers. 

An update of the qualitative analysis performed at the end of the year found the following: 

- a slight reduction in the total negative mark-to-market for customers, which stood at 

3,35% of the notional amount of the contracts compared to 3,57% as at 31 st December 

2009; 

- the notional amount for existing contracts, totalling 7,037 billion euro, consisted of 

interest rate derivatives amounting to 6,490 billion euro and currency derivatives 

amounting 0,542 billion euro. The notional amount for contracts on commodities was 

marginal, amounting to six million euro; 

- transactions in hedging derivatives accounted for approximately 95% of the notional 

amount traded for interest rate derivatives and 97% of the notional amount for currency 

derivatives; 

- the total net mark-to-market (interest rate, currency and commodities derivatives) 

amounted to approximately -216 million euro. Those contracts with a negative mark-tomarket 

for customers were valued at -236 million euro. 

The Group has set a “Policy for the sale of OTC derivative instruments to customers” and has 

issued “Regulations for the sale of OTC derivative instruments to customers”, which 

implement the policy in operational terms and regulate the following: 

• customer segmentation and classes of customers associated with specific classes of 

products, stating that the purpose of the derivatives transactions must be hedging and that 

transactions containing speculative elements must be of a residual nature; 

• rules for assessing the appropriateness of transactions, defined on the basis of the products 

sold to each class of customer; 

135

• principles of integrity and transparency on which the range of OTC derivatives offered to 

customers must be based, in compliance with the guidelines laid down by the Italian 

Banking Association (and approved by the CONSOB) for illiquid financial products; 

• rules and processes for assessing credit exposure, which grant credit lines with maximum 

limits for trading in interest rate derivatives and credit lines on each single transaction for 

currency derivatives and commodities derivatives, while counterparty risk is assessed on 

the basis of Bank of Italy circular No. 263/2006; 

• rules and processes for managing restructuring operations, while underlining their 

exceptional nature; 

• the catalogue of products offered to customers and the relative credit equivalents. 

136

OTC INTEREST RATE DERIVATIVES: DETAILS OF INSTRUMENT TYPES AND CLASSES OF CUSTOMER 

Data as at 31st December 2010 

Policy product 

class 

Type of instrument 

Policy customer class 

Number of 

transactions 

Notional 

MtM 

of which negative 

MtM 

1 

Purchase of caps 3: Professional and qualified 78 232.414.394,86 861.540,59 - 

2: Non private individual retail 1.211 353.369.786,87 4.204.297,86 - 

1: Private individual retail 1.162 133.225.297,52 2.279.578,73 - 

Purchase of caps Total 2.451 719.009.479,25 7.345.417,18 - 

Capped swaps 3: Professional and qualified 88 427.742.575,68 -6.215.069,56 -6.439.426,61 

2: Non private individual retail 1.420 892.377.512,68 -16.646.702,50 -16.841.466,76 

1: Private individual retail 6.175 663.064.276,37 -5.534.199,73 -5.566.073,33 

Capped swaps Total 7.683 1.983.184.364,73 -28.395.971,79 -28.846.966,70 

IRS Interest rate swaps 3: Professional and qualified 254 1.463.859.761,21 -53.170.837,75 -55.913.314,67 

2: Non private individual retail 792 1.314.505.785,40 -60.793.230,89 -62.250.539,20 

1: Private individual retail 544 75.831.702,38 -3.525.681,75 -3.558.649,03 

IRS Interest rate swaps Total 1.590 2.854.197.248,99 -117.489.750,39 -121.722.502,90 

IRS Step up 3: Professional and qualified 27 94.207.039,83 -5.179.486,33 -5.559.099,43 

2: Non private individual retail 79 161.200.907,63 -20.438.871,13 -20.481.729,94 

IRS Step up Total 106 255.407.947,46 -25.618.357,46 -26.040.829,37 

Total Class 1: hedging derivatives 11.830 5.811.799.040,43 -164.158.662,46 -176.610.298,97 

Class 1: % of Group total 97,84% 89,55% 77,07% 78,33% 

2 

Purchase of caps (including KI/KO) 3: Professional and qualified 2 25.873.627,97 -274.154,87 -274.154,87 

2: Non private individual retail 19 31.243.609,17 -448.353,36 -448.353,36 

Purchase of caps (including KI/KO) Total 21 57.117.237,14 -722.508,23 -722.508,23 

Purchase of collars (including KI/KO) 3: Professional and qualified 4 22.838.583,67 -320.288,59 -320.288,59 


Purchase of collars (incl. KI/KO) Total 

16 47.066.368,81 -1.978.876,28 -1.978.876,28 

IRS Cap spreads 2: Non private individual retail 1 311.409,00 -1.994,36 -1.994,36 

IRS Cap spreads Total 1 311.409,00 -1.994,36 -1.994,36 

IRS Convertible 3: Professional and qualified 11 161.849.635,48 -9.445.328,66 -9.445.328,66 


IRS Convertible Total 61 243.425.941,11 -12.994.543,19 -12.994.543,19 

Total Class 2: hedging derivatives with possible exposure 99 347.920.956,06 -15.697.922,06 -15.697.922,06 

to contained financial risks 


3a 

IRS Range 3: Professional and qualified 18 78.199.356,64 -7.048.574,24 -7.048.574,24 


1: Private individual retail 1 500.000,00 -53.565,52 -53.565,52 

IRS Range Total 129 263.767.118,38 -25.649.970,30 -25.649.970,30 

Memory floors 1 3: Professional and qualified 1 4.000.000,00 -4.102.134,49 -4.102.134,49 

Memory floors Total 1 4.000.000,00 -4.102.134,49 -4.102.134,49 

Total Class 3a: partial hedging derivatives with pre-established maximum loss 130 267.767.118,38 -29.752.104,79 -29.752.104,79 

3b 

Gap floater swaps 3: Professional and qualified 1 710.740,00 6.226,02 - 


Gap floater swaps Total 4 7.338.922,00 -112.671,03 -128.779,71 

IRS corridor accruals 3: Professional and qualified 6 15.500.000,00 -193.867,36 -193.867,36 


IRS corridor accruals Total 12 23.900.000,00 -293.068,79 -293.068,79 

IRS Range stability 3: Professional and qualified 2 7.000.000,00 -783.782,18 -783.782,18 


IRS Range stability Total 16 31.204.867,00 -2.973.041,45 -2.973.041,45 

Total Class 3b: speculative derivatives with unquantifiable maximum loss 32 62.443.789,00 -3.378.781,27 -3.394.889,95 

Total Class 3: derivatives not for hedging 162 330.210.907,38 -33.130.886,06 -33.146.994,74 


Total UBI Group 12.091 6.489.930.903,87 -212.987.470,58 -225.455.215,77 

¹ Prior transaction not attributable to product policy - maturity 28/02/2012, relating to a customer previously classified as non private individual retail on the basis of incorrect indications 

137

OTC CURRENCY DERIVATIVES : DETAILS OF INSTRUMENT TYPES AND CLASSES OF CUSTOMER 


Policy 

product 

class 

2 



Number of 

transactions 

Notional MtM of which negative MtM 

Collars 3: Professional and qualified 18 8.810.884,97 37.624,65 -57.038,55 

2: Non private individual retail 1 262.206,15 -6.437,04 -6.437,04 

Collars Total 19 9.073.091,12 31.187,61 -63.475,59 

Knock in collars 3: Professional and qualified 10 4.530.520,16 -143.151,32 -143.151,32 

Knock in collars Total 10 4.530.520,16 -143.151,32 -143.151,32 

New collars 3: Professional and qualified 10 2.584.195,82 -45.225,16 -59.166,63 


New collars Total 13 6.515.710,07 -60.942,80 -74.884,27 

Forward synthetic 3: Professional and qualified 251 200.211.403,59 -2.991.691,48 -4.646.303,70 

2: Non private individual retail 43 23.404.162,59 46.327,55 -347.612,44 

Forward synthetic Total 294 223.615.566,18 -2.945.363,93 -4.993.916,14 

Knock in forward 3: Professional and qualified 75 59.562.699,99 -28.607,53 -882.712,57 

2: Non private individual retail 26 11.180.671,72 81.590,59 -84.115,99 

Knock in forward Total 101 70.743.371,71 52.983,06 -966.828,56 

Bonus forward 3: Professional and qualified 6 2.516.510,01 -90.076,75 -90.076,75 

Bonus forward Total 6 2.516.510,01 -90.076,75 -90.076,75 

Options purchased by customer 3: Professional and qualified 6 4.223.265,52 232.753,49 - 

2: Non private individual retail 7 1.138.092,23 34.500,72 - 

Options purchased by customer Total 13 5.361.357,75 267.254,21 - 

Plafond 3: Professional and qualified 155 112.437.713,10 499.669,29 -1.215.453,65 

2: Non private individual retail 267 89.457.734,60 -727.648,27 -2.003.335,71 

Plafond Total 422 201.895.447,70 -227.978,98 -3.218.789,36 

Total Class 2: hedging derivatives with possible exposure 878 524.251.574,70 -3.116.088,90 -9.551.121,99 


Class 2: % of Group total 96,27% 96,77% - 96,41% 

3 

Knock out knock in forward 3: Professional and qualified 18 6.550.526,67 -125.140,27 -127.734,09 

2: Non private individual retail 2 2.967.690,47 117.331,05 - 

Knock out knock in forwards Total 20 9.518.217,14 -7.809,22 -127.734,09 

Options sold by customer 3: Professional and qualified 14 7.961.037,20 -227.767,65 -227.767,65 

Options sold by customer Total 14 7.961.037,20 -227.767,65 -227.767,65 

Total Class 3: derivatives not for hedging 34 17.479.254,34 -235.576,87 -355.501,74 

Class 3: % of Group total 3,73% 3,23% - 3,59% 

Total UBI Group 912 541.730.829,04 -3.351.665,77 -9.906.623,73 

OTC COMMODITIES DERIVATIVES: DETAILS OF INSTRUMENT TYPES AND CLASSES OF CUSTOMER 


Policy 

product class 

2 



Number of 

transaction 

s 

Notional MTM of which negative MtM 

Commodity swaps 3: Professional and qualified 15 5.800.290,00 -13.433,76 -334.312,76 

Commodity swaps Total 15 5.800.290,00 -13.433,76 -334.312,76 

Total Class 2: hedging derivatives with possible exposure 15 5.800.290,00 -13.433,76 -334.312,76 


Total UBI Group 15 5.800.290,00 -13.433,76 -334.312,76 

Total UBI Group 13.018 7.037.462.022,91 -216.352.570,11 -235.696.152,26 

138

OTC DERIVATIVES: FIRST FIVE COUNTERPARTIES FOR NETWORK BANKS (figures in euro) 


Bank Classification Policy MtM of which negative MtM 

Centrobanca 3: Professional and qualified -11.380.926 -11.561.962 

3: Professional and qualified -4.102.134 -4.102.134 

2: Non private individual retail -1.985.193 -1.985.193 


3: Professional and qualified -936.137 -936.137 

Banco di Brescia 3: Professional and qualified -7.963.713 -7.963.713 





Banca Popolare Commercio & Industria 2: Non private individual retail -4.375.640 -4.375.640 





Banca Popolare di Ancona 2: Non private individual retail -4.174.041 -4.174.041 



2: Non private individual retail -999.363 -999.363 


Banca Regionale Europea 3: Professional and qualified -2.702.881 -2.702.881 





Banca Popolare di Bergamo 2: Non private individual retail -1.967.672 -1.967.672 





Banco di San Giorgio 2: Non private individual retail -952.566 -952.566 





Banca di Valle Camonica 3: Professional and qualified -619.239 -619.239 





Banca Carime 3: Professional and qualified -369.184 -444.048 





UBI Private Investment 1: Private individual retail -1.016 -1.016 

1: Private individual retail -465 -465 





139

Equity and capital adequacy 

Reconciliation between equity and profit of the Parent with consolidated equity as at 31st 

December 2010 and profit for the period then ended 

of which: 


Equity 

Profit for the year 

Equity and profit for the year in the financial statements of the Parent 10.328.266 283.720 

Effect of consolidation of subsidiaries including joint ventures 1.517.263 471.186 

Effect of measuring other significant equity investments using the equity method 28.243 17.594 

Dividends received during the year - -286.048 

Other consolidation adjustments (including the effects of the PPA) -894.753 -314.331 

Equity and profit for the year in the consolidated financial statements 10.979.019 172.121 

The consolidated equity of the UBI Banca Group as at 31 st December 2010 inclusive of profit 

for the year, amounted to 10.979 million euro compared to 11.411,2 million euro at the end of 

2009. 

As can be seen from the statement of changes in equity, contained among the mandatory 

consolidated financial statements, the total decrease of 432,2 million euro that occurred over 

twelve months is attributable to: 

- the allocation of 200,2 million euro of 2009 consolidated profit to dividends and other 

uses 1 ; 

- the negative impact on consolidated comprehensive income generated by the reduction in 

the fair value reserves amounting to 488,8 million euro. This consisted of -480,2 million 

euro relating to available-for-sale financial assets, -12,1 million euro to “Actuarial 

gains/losses on defined benefit plans”, +2,2 million euro to “Special revaluation laws” and 

+1,3 million to cash flow 

hedges; 

Fair value reserves attributable to the Group: composition 

- an increase in other reserves 

amounting to 84,7 million euro, 

the aggregate result of impacts 

on equity resulting from the 

“branch switching” operation 

between banks in the Group 

and the subsequent restoration 

of the original ownership 

interests held by UBI Banca in 

the network banks, together with the planned reorganisation of the shareholdings of the 

two foundations; 

- posting of profit for the year of 172,1 million euro. 

Figures in thousands of euro 31.12.2010 31.12.2009 

Available-for-sale financial assets -311.493 168.729 

Cash flow hedges -619 -1.948 

Foreign currency differences -243 -243 

Actuarial gains/losses -14.518 -2.399 

Special revaluation laws 73.146 70.904 

TOTAL -253.727 235.043 

Fair value reserves of available-for-sale financial assets attributable to the Group: composition 

31.12.2010 31.12.2009 


Positive 

reserve 

Negative 

reserve 

Total 

Positive 

reserve 

Negative 

reserve 

Total 

1. Debt instruments 66.715 -431.818 -365.103 72.813 -75.261 -2.448 

2. Equity instruments 58.225 -3.579 54.646 173.770 -390 173.380 

3. Units in O.I.C.R. 

(collective investment instruments) 9.124 -10.160 -1.036 5.907 -8.110 -2.203 

4. Financing - - - - - - 

TOTAL 134.064 -445.557 -311.493 252.490 -83.761 168.729 

1 The profit was then fully drawn on with an allocation to reserves of 69,9 million euro. 

140

Fair value reserves of available-for-sale financial assets attributable to the Group: annual changes 


Debt 

instruments 

Equity 

instruments 

OICR units 

(collective 

investment 

instruments) 

Financing 

Total 

1. Opening balances as at 1st January 2010 -2.448 173.380 -2.203 - 168.729 

2. Positive changes 50.257 6.796 5.725 - 62.778 

2.1 Increases in fair value 11.433 4.990 3.970 - 20.393 

2.2 Transfer to income statement of negative reserves 2.877 1.498 1.373 - 5.748 

- for impairment 349 1.245 949 - 2.543 

- for disposal 2.528 253 424 - 3.205 

2.3 Other changes 35.947 308 382 - 36.637 

3. Negative changes -412.912 -125.530 -4.558 - -543.000 

3.1 Decrease in fair value -381.996 -7.750 -1.468 - -391.214 

3.2 Impairment losses - - - - - 

3.3 Transfer to income statement of positive reserves: for disposa -13.990 -116.710 -945 - -131.645 

3.4 Other changes -16.926 -1.070 -2.145 - -20.141 

4. Closing balances as at 31st December 2010 -365.103 54.646 -1.036 - -311.493 

As can be seen from the table, the decrease of 480,2 million euro already mentioned in the 

“fair value reserve for available-for-sale financial assets” primarily reflects the significant 

decreases in fair value that occurred in the securities held in portfolio (net of tax and minority 

interests). In detail: 

• the negative balance on the fair value reserve for debt instruments increased by 362,7 

million euro, with reductions in fair value amounting to 382 million euro, including 314,6 

million euro relating to the UBI Banca portfolio and to government securities in particular 

(over 90%); 

• the reserve relating to equity instruments decreased by 118,7 million euro to 54,6 million 

euro, due above all to the transfer to the income statement of the positive reserve 

recognised in December, following the recoveries in fair value at the end of the year. The fall 

in prices that occurred in 2010 made it necessary to recognise impairment losses on some 

equity instruments (Intesa Sanpaolo and A2A) with the elimination of the relative reserve (a 

total of -116,7 million euro net of tax, relating mainly to Intesa Sanpaolo). 

141

Capital adequacy 

Capital ratios (Standard Basel 2 standardised approach) 

Figures in thousands of euro 31.12.2010 31.12.2009 

Tier 1 capital before filters 6.766.798 6.563.377 

Preference shares and savings/privileged shares attributable to minority interests 489.191 453.460 

Tier 1 capital filters -73.593 -58.244 

Tier 1 capital after filters 7.182.396 6.958.593 

Deductions from tier 1 capital -134.508 -141.717 

Tier 1 after filters and specific deductions (Tier 1) 7.047.888 6.816.876 

Supplementary capital after filters 3.770.505 3.683.037 

Deductions from supplementary capital -134.508 -141.717 

Supplementary capital after filters and specific deductions (Tier 2) 3.635.997 3.541.320 

Deductions from tier 1+supplementary capital -147.685 -155.641 

Total supervisory capital 10.536.200 10.202.555 

Credit and counterparty risk 6.952.925 6.190.116 

Market ris k 106.636 143.085 

Operational risk 489.312 520.959 

Other prudential requirements - - 

Total prudential requirements 7.548.873 6.854.160 

Subordinated liabilities Tier 3 

Nominal amount - - 

Amount eligible - - 

Risk weighted assets 94.360.909 85.677.000 

Core tier 1 ratio after specific deductions from tier 1 capital 

(tier 1 capital net of preference shares/risk weighted assets) 6,95% 7,43% 

Tier 1 capital ratio 

(tier 1 capital/risk weighted assets) 7,47% 7,96% 

Total capital ratio 

[(Supervisory capital+tier 3 eligible)/risk weighted assets] 11,17% 11,91% 

As at 31 st December 2010, the supervisory capital of the UBI Banca Group exceeded 10,5 

billion euro, an increase compared to approximately 10,2 billion euro at the end of 2009. 

The change that occurred over the twelve month period is the aggregate result of a 

simultaneous increase in the tier one capital 2 and the tier two capital 3 and a reduction in the 

deductions applied to both the tier one and the supplementary capital, the effects of which 

more than offset the increase in the negative filters. 

Use was made by the UBI Banca Group in the calculation of supervisory capital as at 31 st December 2010 – 

in compliance with provisions issued by the Bank of Italy in May 2010 – of the possibility of completely 

neutralising the impacts on supervisory capital of gains and losses recognised in the fair value reserves 

relating to government securities issued by EU member states held in the “available-for-sale financial 

assets” portfolio. This approach is in addition to that already contained in regulations, which requires 

losses to be deducted entirely from supervisory capital and gains to be only partially included. The option 

in question has been applied across the board by all members of the banking group from 30 th June 2010. 

Compliance with capital adequacy requirements at the end of 2010 resulted in a capital 

requirement of over 7,5 billion euro, 0,7 billion euro greater than in the previous year as a 

result of increases in the absorption of capital for credit and counterparty risk 4 , against a 

2 The growth in the tier one capital was mainly attributable to the increase in minority interests, following the operations to optimise 

the branch network performed in 2010. As compared to 2009, savings and privileged shares amounting to approximately 36 million 

euro are no longer eligible for inclusion in the core capital, although they are included in the tier one capital. 

3 The increase in the tier two capital was generated almost entirely by changes in subordinated liabilities: the issue of subordinated 

liabilities sold to retail customers of the Group (853 million euro nominal) more than compensated for issues 

matured/redeemed/amortised during the year (a total of 738 million euro with account taken of the reduction by a fifth required by 

supervisory regulations in the five years prior to the maturity of the issues). 

4 The factors which contributed to that increase are as follows: 

- the entrance into force of new risk weighting coefficients for the Cerved (former Lince) rating; 

- the application of supervisory provisions designed to limit the reduced weighting of mortgage security for property companies; 

142

slight reduction in absorption in relation to market risks, mainly due to the disappearance of 

currency risk, and to operational risk, as a consequence of the fall in consolidated gross 

income. 

The result was a general worsening in all the capital ratios as at 31 st December 2010, 

calculated including the effects of the proposed dividend. 

The core tier one ratio fell to 6,95% and the tier one ratio to 7,47%, while the total capital ratio 

settled at 11,17%. 

These ratios do not include the additional positive impact of more than 70 basis points 

(estimated on current data) that could result from the potential conversion of the convertible 

debt issued in July 2009. Further benefits may accrue in future from adopting the advanced 

approach for the calculation of capital requirements for credit and operational risks. 

* * * 

As already reported, in April and May 2010, UBI Banca participated in the stress tests conducted at 

European level by the CEBS (Committee of European Banking Supervisors) and by national supervisory 

authorities. 

The stress tests involved 91 banking groups in 20 member states including the five major Italian banks and 

also the UBI Banca Group. 

Generally speaking, the results – published simultaneously at European level on 23 rd July 2010 – were 

positive, confirming the solidity of the UBI Banca Group. In the adverse scenario hypothesised (which also 

included an increase in sovereign risk for EU member countries) the estimated consolidated tier one ratio 

stood at 7,1% in 2011 (6,8% also considering the impact of sovereign risk), compared to 8% at the end of 

2009. 

Stress tests are also scheduled at European level for 2011 – co-ordinated by the new monetary authority 

(European Banking Authority, EBA) with the support of national supervisory authorities – in which the five 

major Italian banking groups will again be involved. 

There will be greater standardisation and severity than before in the criteria applied, hypothesising a 

collapse in property prices and an increased cost of funding. 

Changes in supervisory regulations 

Basel 3 

On 16 th December 2010, the Basel Committee on Banking Supervision published new rules on the capital 

and liquidity of banks which will enter into force on 1 st January 2013. 

The new regulations seek to strengthen the quality and quantity of the capital of banks, to contain financial 

leverage in the banking system, reduce the possible pro-cyclical effects of prudential rules and to tighten 

control over liquidity risks. 

As compared to the proposal for consultation issued in December 2009, the absorption of capital against 

deferred tax assets and major equity investments in banks and financial and insurance companies was 

reduced, with partial recognition of the contribution to capital to cover risk at consolidated level of minority 

interests held in banks and other companies belonging to the group subject to supervision, equivalent to 

banking supervision. 

The new rules on capital 

The new rules involve a change in the composition of the capital of banks in favour of common shares and 

retained earnings (common equity), the adoption of more stringent criteria for the inclusion of other equity 

instruments in capital and greater standardisation at international level of the components deducted. 

Requirements relating to particularly high risk exposures were also increased (e.g. securitisations and 

derivatives transactions). 

When fully introduced, banks must possess capital that must not fall below the following levels: 

• primary quality capital (common equity): 4,5% of risk weighted assets; 

• tier one capital: 6% of risk weighted assets; 

• total capital: 8% of risk weighted assets. 

- the increase in risk assets that occurred with growth in lending. 

143

Banks must have primary quality capital that exceeds the minimum amount (a buffer to conserve capital) 

by an amount equal to 2,5% of risk weighted assets, otherwise they will risk supervisory measures (e.g. 

restrictions on the distribution of profits or the payment of bonuses to employees). In periods of excessive 

growth in lending to the economy, a further buffer of up to 2,5% may be required of banks. 

The new standards will be introduced gradually: 

- from 2013, the new minimum requirements for common equity and tier one capital will be 3,5% and 

4,5% of risk weighted assets respectively and they will be progressively increased until they reach 

the new requirements in 2015. Similarly the new deductions from capital will be fully applied from 

2018; 

- the buffer for the conservation of capital will be introduced from 2016 and the transition to the new 

regime will be completed in 2019; 

- the equity instruments already issued and eligible for inclusion according to the existing rules will 

remain fully eligible until 2013. Subsequently the amount recognised for supervisory purposes will 

be reduced by 10% each year. 

New minimum capital requirements 

Common Equity 

(after deductions) 

Tier 1 

Total Capital 

Minimum requirement 4,5% 6,0% 8,0% 

Conservation buffer 2,5% 

Total 7,0% 8,5% 10,5% 

Anti-cyclical buffer 0%-2,5% 

Compliance timing (the dates relate to 1st January) 

2013 2014 2015 2016 2017 2018 2019 

Minimum common equity 3,5% 4,0% 4,5% 4,5% 4,5% 4,5% 4,5% 

Conservation buffer 0,625% 1,25% 1,875% 2,5% 

Common Equity + Minimum conservation buffers 5,125% 5,75% 6,375% 7,0% 

Minimum tier one ratio 4,5% 5,5% 6,0% 6,0% 6,0% 6,0% 6,0% 

Minimum total capital ratio 8,0% 8,0% 8,0% 8,0% 8,0% 8,0% 8,0% 

M inimum total capital ratio + conservation buffer 8,0% 8,0% 8,0% 8,625% 9,25% 9,875% 10,50% 

Leverage ratio 

A maximum leverage ratio has been introduced, designed to restrict growth in total exposures without an 

adequate capital base and to contain the level of debt by banks in periods of expansion in the business 

cycle. Banks will be obliged to hold tier one capital that is equal to at least 3% of non risk weighted assets. 

This provision will also be introduced gradually. In the first few years the leverage ratio will represent a 

pillar two measure. Any adjustments in the definition and the calibration of the instrument will be 

considered before it is applied as a first pillar rule in 2018. Banks must make adequate disclosures to 

markets concerning the ratio from 2015. 

Liquidity risk standards 

Two quantitative rules on liquidity have been introduced. The first, the liquidity coverage ratio, states that 

banks must maintain high quality liquid assets sufficient to meet requirements under stress conditions for a 

period of 30 days. The second, the net stable funding ratio, is designed to prevent structural imbalances in 

the composition of assets and liabilities over a period of one year. 

As with the measures on capital, the entrance into force of the liquidity risk requirements will also be 

gradual. After an initial observation stage, the short term ratio will enter into force in 2015 and the 

structural ratio in 2018. 

Implementation of EU directives 

On 31 st December 2010, new supervisory provisions entered into force which implement provisions 

approved by EU institutions in 2010 [directives 2009/27/EC, 2009/83/EC and 2009/111/CE which 

amended directives 2006/48 and 2006/49 (the “CRDs” capital requirement directives)] in order to 

strengthen some aspects of European prudential regulations, the weakness of which was revealed by the 

financial crisis. 

They consisted of an initial package of amendments (“CRD II”) which involved the following areas: 

144

- the governance and management of liquidity, with the introduction of rules on organisation and 

internal controls, giving clear details of the role of corporate bodies and functions and outlining the 

basic organisation of the process of risk management with the adoption of a funds transfer pricing 

system 5 and public disclosure obligations; 

- supervisory capital: the notion of “capital” was redefined, limited to common shares only. The 

financial characteristics which innovative and non innovative (hybrid) equity instruments must 

possess was specified in terms of permanence, payment flexibility and ability to absorb losses (with 

different limits to eligibility for inclusion according to the quality of the capital) with a thirty year 

transition regime (grandfathering) for existing instruments which do not comply with the new criteria 

for eligibility; 

- risk concentration, with the simplification, on the one hand, of the system of prudential limits and the 

relative weighting system, the criteria for which have been brought into line with techniques to 

mitigate credit risk and on the other hand with the establishment of oversight organisational units for 

the credit rating of customers to which the Bank has significant exposures (“large exposures”), for 

monitoring the relative exposures and for the detection of connections between customers. 

Implemenation of the second package of amendments (“CRD III”) was commenced in 2011: 

- new provisions for securitisations entered into force, designed to increase the degree of 

standardisation in regulations by means of uniform criteria for the recognition of securitisation 

transactions for supervisory purposes concerning, amongst other things, the grant and management 

of credit relating to securitisations. They make changes to the regulatory treatment of credit lines, 

introducing higher conversion factors and they are therefore more in line with the risk which that 

form of support manifested during the crisis. They also introduce a prohibition on banks investing in 

securitisation issues in which the seller or the originator has not retained a portion of the risk; 

- as concerns remuneration policies, a Bank of Italy consultation process has commenced on a new 

consolidated law, which will replace the existing legislation. It combines general principles 

concerning remuneration policies for all personnel, to be applied to all banks following proportional 

criteria, with precise rules applicable above all to key personnel within banking organisations. 

5 The UBI Banca Group has commenced a project for a new funds transfer pricing (FTP) system designed to ensure the following: 

- accurate measurement of income from different types of products and services; 

- the identification and pricing of expense and income items associated with risk positions, with account taken of the competitive 

context and the regulatory constraints; 

- a single instrument common to the different macro area organisational units of the Parent. 

The FTP applicable to single financial transactions (lending or funding transactions) will be calculated by summing the basic market 

rate for risk free transactions firstly to the additional expense that the UBI Group must incur to acquire funds on the market with 

the same maturity as the transaction and secondly the additional cost for risk and optional factors incorporated in the transaction. 

The scope of application will initially consist of new medium-to-long term disbursements by the distribution network of the network 

banks. 

145

Research & Development 

A summary is given below of the main research projects developed in 2010 by the Innovation 

and Architecture Design Department of the Parent. In come cases these consisted of the 

continuation of activity already commenced in the previous year and in other cases of new 

projects started during the year. These initiatives do not necessarily originate from specific 

requirements of the Group but are also based on technological developments which are 

studied for possible application to improve the efficiency and effectiveness of corporate 

processes including those regarding customer relationships. 

As part of the “unified communication” project (integration of telephone and PC-workstations), 

already commenced in 2008, in parallel with the completion at the Parent and in the network 

banks of the implementation of the VoIP platform 1 , activities were oriented towards the 

implementation of web collaboration 2 instruments to share documents and applications. 

As concerns video conference systems, a plan to expand use of them within the Group was 

completed in 2010 with a total of approximately 300 stations installed, 50 with webcams 

integrated in PC-workstations – while improvements in the quality were made at the same time 

with the introduction of high definition systems. It has been confirmed that this technology 

provides valid support to decision-making and information sharing processes and is also an 

important factor in reducing times and costs connected with the movements of personnel. 

The initial scope of application of the project “new work stations” is designed to simplify and 

increase the efficiency of mortgage processing activities for retail customers. The first stage 

has already been completed with the introduction of a paperless document management 

platform which became operational in January 2011. A second stage was commenced at the 

same time, designed to develop solutions for the integrated management of digital signatures, 

legally valid electronic storage and certified email. 

The new innovations of mobile web and application stores are clearly underlining the potential 

of mobile telephones for provision and use of banking services. An application for the use of 

home banking services 3 from the most popular mobile terminals was therefore studied and 

developed in combination with the Carta Enjoy products. This service, already successfully 

operational on iPhone and Android systems, will be extended in 2011 to include BlackBerry 

and Nokia devices. 

Recent technological developments included a study of the iPad platform to assess its potential 

for use in the Group. This led to an initial concrete application as a support to senior 

management for the management and sharing of documents in board and committee 

meetings. As part of the development of the document functions, it is planned, at a second 

stage, to design versions for specific users and perhaps integrate it with corporate document 

management systems. 

The need to combine Group attention to maximum security in home banking with customer 

demands for operational simplicity have led to the first testing of a new tool for the certification 

and validation of payment transactions, alongside the current system based on the use of 

identification codes. 

1 Technology that can be used to have a telephone conversation over the internet. 

2 Technology used for collaboration over the internet in real time both within the Group and in providing assistance to customers. 

3 Excluding securities trading. 

146

The system of internal control 

The document “Report on the corporate governance and ownership structure of UBI Banca 

Scpa” attached to these reports may be consulted for a description of the architecture, rules 

and organisational units of the system of internal controls. It also gives specific information 

required under Art. 123 bis of the Consolidated Finance Act (Legislative Decree No. 58/1998) 

concerning the risk management and internal control systems that govern the financial 

reporting process. 

Information on risk management and the relative hedging policies is contained in Part E of the 

notes to the consolidated financial statements, where details are also given of the information 

requested by Art. 2428 of the Italian Civil Code. 

147

Transactions with related parties 

With Resolution No. 17221 of 12 th March 2010 – amended by the subsequent Resolution No. 

17389 of 23 rd June 2010 – the Consob (Italian securities market authority) approved a 

Regulation concerning related-party transactions. The new regulations concern the procedures 

to be followed for the approval of transactions performed by listed companies and the issuers 

of shares with a broad shareholder base with parties with a potential conflict of interest, 

including major or controlling shareholders, members of the management and supervisory 

bodies and senior managers including their close family members. 

The key points of the regulations issued are as follows: 

- they strengthen the role of independent board members at all stages of the decision-making 

process concerning related-party transactions; 

- a regime of transparency; 

- the introduction of detailed corporate governance regulations containing rules designed to 

ensure substantial and procedural integrity in related-party transactions (a special regime 

for companies which adopt a two tier system of governance). 

The regulations apply within the UBI Banca Group to UBI Banca and IW Bank as listed 

companies and to Banco San Giorgio, because that bank has a broad shareholder base. 

In relation to the above, the members of the competent bodies of the banks mentioned have 

approved regulations which govern related-party transactions, within the set time limits. These 

are available on their respective corporate websites and appropriate internal processes have 

been defined to ensure compliance with the new provisions. 

As specifically concerns UBI Banca, the Supervisory Board has appointed a Related Parties 

Committee from among its members to which transactions falling within the scope of the 

regulations must be submitted in advance. 

In this respect, the UBI Banca regulations have excluded the following transactions from their 

scope of application and these are consequently not subject to the disclosure obligations 

required under the Consob regulation, but without prejudice to the provisions of Art. 5, 

paragraph 8, where applicable, of the said Consob Regulation: 

(a) shareholders’ resolutions concerning the fees of the Members of the Supervisory Board 

passed in accordance with Art. 2364-bis of the Italian Civil Code, including those 

concerning the determination of a total sum for the fees of the Members of the Supervisory 

Board assigned particular offices, powers and functions. 

(b) remuneration schemes based on financial instruments approved by shareholders in 

accordance with Art. 22, letter. b), of the By-Laws and in compliance with Art. 114-bis of 

the Consolidated Finance Act and the relative operations to implement them; 

(c) resolutions, other than those referred to under the preceding letter a) of this article, 

concerning the fees of Members of the Management Board appointed to special positions 

and other key management personnel and also the resolutions with which the Supervisory 

Board determines the fees of the Members of the Management Board on condition that: 

i. UBI Banca has adopted a remuneration policy; 

ii. the Remuneration Committee formed by the Supervisory Board in accordance with Art. 49 of 

the By-Laws has been involved in the definition of that remuneration policy; 

iii. a report setting out the remuneration policy has been submitted for approval or a consultative 

vote to a Shareholders' Meeting; 

iv. the remuneration awarded is consistent with that policy; 

(d) “transactions of negligible amount” are those related-party transactions for which the 

amount is less than 250 thousand euro. If a related-party transaction is concluded with a 

member of the key management personnel, a close family member of that person or with 

companies controlled by or subject to significant influence of those persons, it will be 

considered a transaction of negligible amount if the amount of the transaction is not 

greater than 100 thousand euro. 

148

(e) transactions which fall within the ordinary performance of operating activities and the 

related financial activities concluded under equivalent market or standard conditions; 

(f) transactions to be performed on the basis of instructions for the purposes of stability 

issued by the supervisory authority, or on the basis of instructions issued by the Parent of 

the Group to carry out instructions issued by the supervisory authority in the interests of 

the stability of the Group; 

(g) transactions with or between subsidiaries and also venturers in joint ventures, as well as 

transactions with associates, if no significant interests of other related parties exist in the 

subsidiaries or associates that are counterparties to the transaction. 

Also, in compliance with Consob recommendations, transactions with related-parties of UBI 

Banca performed by subsidiaries are subject to the regulations in question if, under the 

provisions of the By-Laws or internal regulations adopted by the Bank, the Management 

Board, the Supervisory Board in response to a proposal of the Management Board, or even an 

officer of the Bank, on the basis of powers conferred on that officer, must preliminarily 

examine or approve a transaction to be performed by subsidiaries. 

The section “The consolidation scope” gives details of the main transactions which involved 

Group member companies in 2010 and which affected the consolidated capital and operating 

position and also the consolidation scope existing as at 31 st December 2009. 

In compliance with IAS 24, part H of the Notes to the Consolidated Financial Statements also 

provides information on statement of financial position and income state transactions between 

UBI Banca 1 and Group member companies, as well as those items as a percentage of the total 

for each item in the consolidated financial statements. 

Further information is given in the “Report on corporate governance and the ownership 

structure of UBI Banca Scpa” attached to these reports. 

1 Le società collegate nonché i dirigenti con responsabilità strategiche e i loro familiari stretti unitamente alle entità da loro stessi 

controllate/collegate ovvero soggette ad influenza notevole. 

149

Consolidated companies: the principal 

figures 

Profit (loss) for the year 

Figures in thousands of euro 2010 2009 Change % change 

Unione di Banche Italiane Scpa 283.720 406.317 (122.597) (30,2%) 

Banca Popolare di Bergamo Spa 106.719 179.015 (72.296) (40,4%) 

Banco di Brescia Spa 71.979 128.973 (56.994) (44,2%) 

Banca Popolare Commercio e Industria Spa 21.914 1.978 19.936 n.s. 

Banca Regionale Europea Spa (1) 246.375 54.618 191.757 351,1% 

Banca Popolare di Ancona Spa 18.340 12.148 6.192 51,0% 

Banca Carime Spa 37.652 69.988 (32.336) (46,2%) 

Banca di Valle Camonica Spa 1.574 9.533 (7.959) (83,5%) 

Banco di San Giorgio Spa 375 1.934 (1.559) (80,6%) 

UBI Banca Private Investment Spa 57 (3.874) 3.931 n.s. 

Centrobanca Spa 16.153 28.042 (11.889) (42,4%) 

Centrobanca Sviluppo Impresa SGR Spa 287 137 150 109,5% 

Banque de Dépôts et de Gestion Sa (*)(2) (7.767) 2.297 (10.064) n.s. 

B@nca 24-7 Spa (5.723) (49.394) (43.671) (88,4%) 

BY YOU Spa 2.187 4.365 (2.178) (49,9%) 

IW Bank Spa (3) (444) 4.057 (4.501) n.s. 

UBI Banca International Sa (*) 8.908 13.980 (5.072) (36,3%) 

UBI Pramerica SGR Spa (4) 38.475 41.361 (2.886) (7,0%) 

UBI Leasing Spa (20.632) 11.578 (32.210) n.s. 

UBI Factor Spa 18.601 19.551 (950) (4,9%) 

BPB Immobiliare Srl 747 2.135 (1.388) (65,0%) 

Società Bresciana Immobiliare Mobiliare - S.B.I.M. Spa 1.251 1.017 234 23,0% 

UBI Sistemi e Servizi SCpA - - - - 

UBI Fiduciaria Spa 209 162 47 29,0% 

UBI Assicurazioni Spa (49,99%) (2.168) (497) 1.671 336,2% 

Aviva Assicurazioni Vita Spa (49,99%) 1.500 2.600 (1.100) (42,3%) 

Aviva Vita Spa (50%) 2.000 18.350 (16.350) (89,1%) 

Lombarda Vita Spa (49,90%) 14.333 10.841 3.492 32,2% 

UBI Insurance Broker Srl 3.571 3.050 521 17,1% 

UBI Trustee Sa 25 4.393 (4.368) (99,4%) 

Coralis Rent Srl 271 (4.254) 4.525 n.s. 

CONSOLIDATED 172.121 270.099 (97.978) (36,3%) 

(*) The profit shown is from the financial statements prepared for the consolidation according to the accounting 

policies followed by the Parent. 

(1) The figure for 2010 includes a gain of 225,4 million euro (net of taxes) on the sale of the interest held in Banca 

Popolare Commercio e Industria to the Banca del Monte di Lombardia Foundation. 

(2) The figure for 2009 has been revised for consistency to include the results of Gestioni Lombarda Suisse Sa, 

merged on 31 st October 2010. 

(3) The figure for 2009 does not include the result for Twice Sim, merged on 1 st November 2010. 

(4) The figure for 2009 has been revised for consistency to include the results of Capitalgest Alternative Investments 

SGR Spa and UBI Pramerica Alternative Investments SGR Spa, merged into the company on 1 st July 2010. 

150

Net loans to customers 

Figures in thousands of euro 31.12.2010 31.12.2009 Change % change 

Unione di Banche Italiane Scpa 14.536.121 12.560.060 1.976.061 15,7% 

Banca Popolare di Bergamo Spa (*) 20.276.206 19.959.411 316.795 1,6% 

Banco di Brescia Spa (*) 15.078.204 14.178.741 899.463 6,3% 

Banca Popolare Commercio e Industria Spa (*) 8.885.600 8.377.959 507.641 6,1% 

Banca Regionale Europea Spa (*) 6.851.620 7.278.450 -426.830 -5,9% 

Banca Popolare di Ancona Spa 7.702.345 7.332.080 370.265 5,0% 

Banca Carime Spa 4.765.224 4.530.670 234.554 5,2% 

Banca di Valle Camonica Spa 1.885.564 1.816.418 69.146 3,8% 

Banco di San Giorgio Spa (*) 2.787.617 2.320.407 467.210 20,1% 

UBI Banca Private Investment Spa 439.511 404.622 34.889 8,6% 

Centrobanca Spa 6.972.678 7.047.210 -74.532 -1,1% 

Banque de Dépôts et de Gestion Sa 207.425 272.862 -65.437 -24,0% 

B@nca 24-7 Spa 11.219.553 10.855.336 364.217 3,4% 

UBI Banca International Sa 1.095.406 953.676 141.730 14,9% 

IW Bank Spa 207.028 149.538 57.490 38,4% 

UBI Factor Spa 2.744.758 2.323.230 421.528 18,1% 

UBI Leasing Spa 9.698.555 9.597.373 101.182 1,1% 

CONSOLIDATED 101.814.829 98.007.252 3.807.577 3,9% 

Net non-performing 

loans / net loans 

Net impaired loans / 

net loans 

Net non-performing 

loans + Net impaired 

loans / net loans 

Percentages 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009 

Unione di Banche Italiane Scpa - - - - - - 

Banca Popolare di Bergamo Spa 1,74% 1,25% 1,87% 1,69% 3,61% 2,94% 

Banco di Brescia Spa 1,23% 0,93% 2,11% 1,77% 3,34% 2,70% 

Banca Popolare Commercio e Industria Spa 2,96% 2,54% 2,53% 2,38% 5,49% 4,92% 

Banca Regionale Europea Spa 1,88% 1,52% 1,91% 1,62% 3,79% 3,14% 

Banca Popolare di Ancona Spa 3,73% 2,85% 3,29% 3,66% 7,02% 6,51% 

Banca Carime Spa 1,24% 0,95% 2,27% 1,59% 3,51% 2,54% 

Banca di Valle Camonica Spa 1,60% 1,25% 2,52% 1,55% 4,12% 2,80% 

Banco di San Giorgio Spa 1,68% 1,49% 4,34% 1,94% 6,02% 3,43% 

UBI Banca Private Investment Spa 1,17% 0,78% 1,34% 0,87% 2,51% 1,65% 

Centrobanca Spa 1,16% 0,67% 2,07% 3,10% 3,23% 3,77% 

Banque de Dépôts et de Gestion Sa 0,09% 0,05% 0,65% 0,42% 0,74% 0,47% 

B@nca 24-7 Spa 1,55% 1,03% 0,65% 0,57% 2,20% 1,60% 

UBI Banca International Sa 0,07% 0,06% 1,93% 1,22% 2,00% 1,28% 

IW Bank Spa - - 0,01% 0,08% 0,01% 0,08% 

UBI Factor Spa 0,42% 0,58% 0,15% 0,19% 0,57% 0,77% 

UBI Leasing Spa 3,19% 1,45% 1,91% 2,25% 5,10% 3,70% 

CONSOLIDATO 1,91% 1,36% 2,00% 1,88% 3,91% 3,24% 

(*) The change in lending during 2010 was affected by the “branch switches” performed on 25 th January 2010 as part 

of the project to optimise the branch network. 

151

Direct funding from customers 


Unione di Banche Italiane Scpa 31.369.474 21.111.671 10.257.803 48,6% 

Banca Popolare di Bergamo Spa (*) 20.546.068 21.385.193 -839.125 -3,9% 

Banco di Brescia Spa (*) (1) 11.736.765 12.318.369 -581.604 -4,7% 

Banca Popolare Commercio e Industria Spa (*) 7.994.465 7.850.961 143.504 1,8% 

Banca Regionale Europea Spa (*) 5.391.805 7.460.874 -2.069.069 -27,7% 

Banca Popolare di Ancona Spa 6.485.148 6.747.461 -262.313 -3,9% 

Banca Carime Spa 7.562.665 7.892.084 -329.419 -4,2% 

Banca di Valle Camonica Spa 1.421.234 1.497.744 -76.510 -5,1% 


UBI Banca Private Investment Spa 489.429 561.051 -71.622 -12,8% 

Centrobanca Spa 5.345.526 3.067.540 2.277.986 74,3% 

Banque de Dépôts et de Gestion Sa (2) 419.437 508.502 -89.065 -17,5% 

B@nca 24-7 Spa 23.861 27.334 -3.473 -12,7% 

UBI Banca International Sa (3) 1.266.869 985.219 281.650 28,6% 

IW Bank Spa 1.513.127 1.469.381 43.746 3,0% 

CONSOLIDATED 106.760.045 97.214.405 9.545.640 9,8% 

Direct funding from customers includes amounts due to customers and securities issued, with the exclusion of bonds 

subscribed directly by companies in the Group 

Direct funding for the following banks was therefore adjusted as follows: 

BANKS 31.12.2010 31.12 2009 

UBI Banca 3.421 million euro 165,9 million euro 

Banca Popolare di Bergamo 50 million euro 2.311,1 million euro 

Banco di Brescia 382,2 million euro 1.652,3 million euro 

Banca Popolare Commercio e Industria 181 million euro 712 million euro 

Banca Popolare di Ancona 352 million euro 1.249 million euro 

Centrobanca 201,6 million euro 1.105,2 million euro 

Banca Regionale Europea 201 million euro 502,1 million euro 

Banca di Valle Camonica 201,7 million euro 351,5 million euro 

Banco di San Giorgio 332,4 million euro 813,5 million euro 

UBI Banca Private Investment - 75,2 million euro 

B@nca 24-7 4.321 million euro 4.349,1 million euro 

(*) The change in direct funding during 2010 was affected by the “branch switches” performed on 25 th January 2010 

as part of the project to optimise the branch network. 

(1) The figure as at 31 st December 2009 is net of issues of French certificates of deposit and euro commercial paper 

totalling 5.200,5 million euro. 

(2) The figure as at 31 st December 2009 has been revised for consistency to include the funding of Gestioni Lombarda 

Suisse Sa, merged on 31 st October 2010. 

(3) The figure as at 31 st December 2010 is net of issues of French certificates of deposit and euro commercial paper 

totalling 7.042,5 million euro. 

152

Indirect funding from customers (at market prices) 


Unione di Banche Italiane Scpa 14 12 2 16,7% 

Banca Popolare di Bergamo Spa (*) 24.944.977 21.544.048 3.400.929 15,8% 


Banca Popolare Commercio e Industria Spa (*) 11.186.686 12.296.433 -1.109.747 -9,0% 


Banca Popolare di Ancona Spa 3.828.041 3.670.727 157.314 4,3% 

Banca Carime Spa 5.753.026 5.705.915 47.111 0,8% 

Banca di Valle Camonica Spa 1.065.405 980.718 84.687 8,6% 


UBI Banca Private Investment Spa 5.420.922 4.879.018 541.904 11,1% 

Banque de Dépôts et de Gestion Sa (1) 991.880 1.204.560 -212.680 -17,7% 

Lombarda Vita Spa 5.149.988 5.061.697 88.291 1,7% 

Aviva Assicurazioni Vita Spa 2.305.298 2.565.908 -260.610 -10,2% 

UBI Pramerica SGR Spa (2) 25.047.354 25.252.201 -204.847 -0,8% 

UBI Banca International Sa 2.971.932 3.086.749 -114.817 -3,7% 

IW Bank Spa 3.037.925 2.403.852 634.073 26,4% 

Aviva Vita Spa 4.374.554 3.932.378 442.176 11,2% 

CONSOLIDATED 78.078.869 78.791.834 -712.965 -0,9% 

Assets under management (at market prices) 


Unione di Banche Italiane Scpa 9 7 2 28,6% 

Banca Popolare di Bergamo Spa (*) 12.460.373 10.911.606 1.548.767 14,2% 


Banca Popolare Commercio e Industria Spa (*) 4.743.435 4.955.300 -211.865 -4,3% 


Banca Popolare di Ancona Spa 1.879.189 1.937.869 -58.680 -3,0% 

Banca Carime Spa 3.688.062 3.947.603 -259.541 -6,6% 

Banca di Valle Camonica Spa 513.063 479.669 33.394 7,0% 

Banco di San Giorgio Spa (*) 637.651 559.528 78.123 14,0% 

UBI Banca Private Investment Spa 4.073.214 3.515.213 558.001 15,9% 

Banque de Dépôts et de Gestion Sa (1) 991.880 1.204.560 -212.680 -17,7% 

Lombarda Vita Spa 5.149.988 5.061.697 88.291 1,7% 

Aviva Assicurazioni Vita Spa 2.305.298 2.565.908 -260.610 -10,2% 

UBI Pramerica SGR Spa (2) 25.047.354 25.252.201 -204.847 -0,8% 

UBI Banca International Sa 289.940 98.367 191.573 194,8% 

IW Bank Spa 496.899 331.451 165.448 49,9% 

Aviva Vita Spa 4.374.554 3.932.378 442.176 11,2% 

CONSOLIDATED 42.629.553 41.924.931 704.622 1,7% 

(*) The change in indirect funding during 2010 was affected by the “branch switches” performed on 25 th January 2010 

as part of the project to optimise the branch network. 

(1) The figures as at 31 st December 2009 have been revised for consistency to include the funding of Gestioni 

Lombarda Suisse Sa, merged on 31 st October 2010. 

(2) The totals as at 31 st December 2009 have been revised for consistency to include the assets under management of 

Capitalgest Alternative Investments SGR Spa and UBI Pramerica Alternative Investments SGR Spa, merged into 

the company on 1 st July 2010. 

153

The performance of the main consolidated 

companies 

BANCA POPOLARE DI BERGAMO SPA 


31.12.2010 31.12.2009 Change 

% change 

Statement of financial position 

Loans to customers (*) 20.276.206 19.959.411 316.795 1,6% 

Direct funding (*) (**) 20.596.076 23.696.263 -3.100.187 -13,1% 

Net interbank position 2.537.387 5.573.557 -3.036.170 -54,5% 

Financial assets held for trading 51.761 50.459 1.302 2,6% 

Available-for-sale financial assets 20.795 21.283 -488 -2,3% 

Equity (excluding profit for the year) 2.143.727 1.721.337 422.390 24,5% 

Total assets (*) 24.455.885 26.506.767 -2.050.882 -7,7% 

Indirect funding from customers (including insurance) (*) 24.944.977 21.544.048 3.400.929 15,8% 

of which: assets under management (*) 12.460.373 10.911.606 1.548.767 14,2% 

Income statement 2010 2009 

Net interest income 443.493 550.870 (107.377) (19,5%) 

Dividends and similar income 254 - 254 - 

Net commission income 302.214 308.849 (6.635) (2,1%) 

Net income from trading, hedging and disposal/repurchase activities 9.650 6.534 3.116 47,7% 

Other net operating income 13.311 19.016 (5.705) (30,0%) 

Operating income 768.922 885.269 (116.347) (13,1%) 

Personnel expense (277.279) (276.415) 864 0,3% 

Other administrative expenses (204.095) (207.168) (3.073) (1,5%) 


intangible assets (7.178) (5.329) 1.849 34,7% 

Operating expenses (488.552) (488.912) (360) (0,1%) 

Net operating income 280.370 396.357 (115.987) (29,3%) 

Net impairment losses on loans (***) (96.212) (109.700) (13.488) (12,3%) 

Net impairment losses on other assets/liabilities (1.873) (1.012) 861 85,1% 

Net provisions for risks and charges 187 (543) 730 n.s. 

Loss on the disposal of equity investments (30) (12) 18 150,0% 

Pre-tax profit from continuing operations 182.442 285.090 (102.648) (36,0%) 

Taxes on income for the year for continuing operations (****) (75.723) (104.538) (28.815) (27,6%) 

Integration costs - (1.537) (1.537) (100,0%) 

of which: personnel expense - (1.663) (1.663) (100,0%) 


intangible assets - (490) (490) (100,0%) 

taxes - 616 (616) (100,0%) 

Profit for the year 106.719 179.015 (72.296) (40,4%) 

Other information 

Number of branches 365 375 -10 

Total work force (actual employees+personnel on leasing contracts) 3.779 3.736 43 

Financial ratios 

ROE [profit for the year/equity (excluding profit for the year)] 4,98% 10,40% 

Cost/income ratio (operating expenses/operating income) 63,54% 55,23% 

Net non-performing loans/net loans to customers 1,74% 1,25% 

Net impaired loans/net loans to customers 1,87% 1,69% 

(*) The total as at 31 st December 2010 includes the effects of the branch switches performed on 25 th January as part of the project 

to optimise the branch network. 

(**) Inclusive of bonds subscribed by the Parent amounting to 50 million euro as at 31 st December 2010 (2.311,1 million euro as at 

31 st December 2009). 

(***) The item for 2010 includes an impairment loss relating to the Mariella Burani Group amounting to 1,4 million euro. That 

impairment loss for 2009 amounted to 6,9 million euro. 

(****) The item for 2009 included the non recurring positive impacts resulting from the payment of a substitute tax with the release of 

deferred tax liabilities – for the purposes of the decree for the realignment of differences in statutory and tax accounting figures, 

following the adoption of IFRS – amounting to 0,8 million euro and from an IRAP (local production tax) refund amounting to five 

million euro. 

154

As part of the “branch switching” operation performed on 25 th January 2010, Banca Popolare di Bergamo 

disposed of 90 branches and acquired 97, to become the principal bank of the UBI Group in the provinces of 

Bergamo, Varese, Como, Lecco and Monza Brianza. 

The statement of financial position and income statement figures as at and for the year ended 31 st 

December 2010 incorporate the effects of that operation and are therefore not consistent with the 

comparative figures. 

The year 2010 ended with a profit of 106,7 million euro, down compared to 179 million euro in 

2009, earned, moreover, in a context of higher interest rates. 

Net operating income, down from 396,4 million euro to 280,4 million euro (-29,3%), was 

penalised by a fall in operating income (-116,3 million euro to 768,9 million euro), while 

expenses remained more or less unchanged at 488,6 million euro. 

Income included the following: 

- net interest income, which fell to 443,5 million euro (-107,4 million euro), mainly as a 

result of the market trend for interest rates already mentioned, while there was a modest 

contraction in volumes of business; 

- net commission income, which fell marginally to 302,2 million euro (-6,6 million euro), the 

aggregate result of a decrease in all current account items (including commitment fees) and 

the sale of third party products and services, partially offset by increases in commissions 

from indirect funding; 

- other net operating income/(expense), which amounted to 13,3 million euro (-5,7 million 

euro), the result primarily of lower expense recoveries from ordinary customers; 

- net income from trading and hedging activity totalled 9,6 million euro (+3,1 million euro), 

benefiting from the positive impacts of hedges on fixed rate mortgages and the change in 

the fair value of hedges on bonds. 

Expenses included the following: 

- personnel expense, amounting to 277,3 million euro (+0,9 million euro), which included a 

non recurring item of leaving incentives in relation to the agreement of 20 th May 2010 (6,1 

million euro). Net of that expense, the item fell by 5,2 million euro (-1,9%) compared to the 

previous year; 

- the main decreases in other administrative expenses (-3,1 million euro to 204,1 million 

euro), which were in rent payable, expenses for outsourced services and for tenancy of 

premises and cleaning, while increases were recorded for equipment lease expenses, the 

hire of hardware, professional services (in relation to the securitisation transaction) and 

maintenance of properties and equipment; 

- depreciation and amortisation, which increased by 1,8 million euro to 7,2 million euro, 

partly in relation to assets acquired as part of the distribution network optimisation 

operation. 

As a result of these changes the cost/income ratio worsened, rising from 55,23% to 63,54%. 

Net impairment losses on loans fell compared to the previous year to 96,2 million euro (-13,5 

million euro). They included 71,7 million euro relating to net specific impairment losses (87,2 

million in 2009) while 24,5 million euro related to collective impairment losses on performing 

loans (22,5 million euro in 2009), which incorporated the effects of the refinement of the 

calculation method and the update of the historical data series used as the basis for the 

estimate of risk parameters 

Despite the reduction in volumes of business following the completion of the “branch switches” 

(-0,2 billion euro), loans to customers increased by 20,3 billion euro (+0,3 billion euro), the 

aggregate result of an overall decrease in short term lending – penalised by the continuation of 

the effects of the economic crisis – which was more than offset by the increase in medium-tolong 

term lending, consisting primarily of mortgages. 

155

Deteriorated loans net of impairment losses reached 1,06 billion euro (+112,6 million euro). In 

detail: non-performing loans increased from 248,5 to 353,3 million euro; impaired loans rose 

from 336,7 to 379,6 million euro; restructured loans increased from 243,5 to 301 million euro; 

on the other hand, exposures past due and in arrears fell significantly from 120,5 million euro 

to 27,9 million euro. Within that item exposures in arrears for between 90 and 180 days 

secured by real estate property fell from 98,3 million euro to 23 million euro. 

Direct funding from customers, which included a net increase of 0,4 billion euro as a result of 

the distribution network optimisation operation, amounted to 20,6 billion euro, down by 3,1 

billion euro (-13,1%) compared to the end of 2009, the result primarily of the early redemption 

of bonds subscribed by the Parent (-2,3 billion euro). 

The item was also affected by a fall in both certificates of deposit (-0,4 billion euro) and bonds 

issued by the bank and placed with customers (-0,5 billion euro), which was only partially 

offset by growth in current accounts and deposits. 

Indirect funding from private customers increased during the year from 21,5 billion euro to 

24,9 billion euro (+3,4 billion euro). It benefited to a considerable extent from the “branch 

switches” which had a total net impact of 2,7 billion euro: over 1,7 billion euro relating to 

assets under custody, which reached almost 12,5 billion euro, and approximately one billion 

euro of assets under management, which also came close to 12,5 billion euro. 

The net interbank position at the end of 2010 consisted of funds of 2,5 billion euro, a 

significant decrease compared to 5,6 billion euro twelve months before in relation to opposing 

trends for funding and lending with customers. 

Capital ratios as at 31 st December 2010 consisted of a tier one ratio (tier one capital/risk 

weighted assets) of 16,23% (15,07% at the end of 2009) and a total capital ratio (supervisory 

capital/risk-weighted assets) of 18,38% (17,56%). 

The proposal for the allocation of profit is to distribute dividends of 27 million euro after legal 

and by-law allocations and to allocate 72,3 million euro to the voluntary reserve. 

156

BANCO DI BRESCIA SPA 


31.12.2010 31.12.2009 Change 

% change 




Net interbank position (debt) -2.490.173 6.071.367 -8.561.540 n.s. 

Financial assets held for trading 100.954 114.259 -13.305 -11,6% 

Available-for-sale financial assets 20.913 26.339 -5.426 -20,6% 


Total assets (*) 17.621.805 22.680.420 -5.058.615 -22,3% 

Indirect funding from customers (including insurance) (*) 14.849.800 14.225.218 624.582 4,4% 

of which: assets under management (*) 7.569.511 7.413.029 156.482 2,1% 



Dividends and similar income 1.249 1.699 (450) (26,5%) 


Net income/(loss) from trading, hedging and disposal/repurchase activities (1.477) 10.204 (11.681) n.s. 



Personnel expense (172.843) (164.527) 8.316 5,1% 



intangible assets (11.101) (11.627) (526) (4,5%) 

Operating expenses (317.265) (310.661) 6.604 2,1% 


Net impairment losses on loans (***) (97.859) (69.220) 28.639 41,4% 

Net impairment losses on other assets/liabilities (849) (1.348) (499) (37,0%) 

Net provisions for risks and charges (2.875) (3.258) (383) (11,8%) 

Profit/(loss) on the disposal of equity investments 1.296 (76) 1.372 n.s. 



Integration costs - (731) (731) (100,0%) 

of which: personnel expense - (597) (597) (100,0%) 



taxes - 307 (307) (100,0%) 

Post-tax profit (loss) from discontinued operations - - - - 




Total work force (actual employees+personnel on leasing contracts) 2.634 2.624 10 






(*) The total as at 31 st December 2010 includes the effects of the branch switches performed on 25 th January as part of the project 


(**) Inclusive of bonds subscribed by the Parent amounting to 382,2 million euro as at 31 st December 2010 (1.652,3 million euro as 

at 31 st December 2009). The figure as at 31 st December 2009 also included issuances of French certificates of deposit and euro 

commercial paper totalling 5.200,5 million euro. 

(***) The item for 2010 includes the impairment loss relating to the Mariella Burani Group amounting to 1,4 million euro. In 2009 

that impairment loss amounted to 2,4 million euro. 

(****) In 2009 the item included the non recurring positive impacts resulting from the payment of a substitute tax with the release of 


following the adoption of IFRS – amounting to 2,8 million euro and from an IRAP (local production tax) refund amounting to 3,1 

million euro. 

As part of the “branch switching” operation performed on 25 th January 2010, the bank disposed of a total 

of 28 branches and acquired 37 to become the principal bank of the Group in the provinces of Mantua, 

Brescia, Cremona and Lodi as well as the entire Triveneto area. The statement of financial position and 

income statement figures as at and for the year ended 31 st December 2010 incorporate the effects of that 

operation and are therefore not consistent with the comparative figures. 

157

Banco di Brescia ended 2010 with a profit of 72 million euro, a decrease compared to 129 

million euro achieved in the year before. 

Net operating income totalled 219,2 million euro compared to 275,5 million euro before, 

penalised by a decrease in operating income (-49,7 million euro) against a small increase in 

expense items (totalling +6,6 million euro). 

Income, amounting to 536,5 million euro, included changes in the various items as follows: 

• net interest income fell to 325,9 million euro (-27,4 million euro), mainly as a result of the 

trend for interest rates, which was only partly offset by growth in average volumes of 

lending business; 

• net commission income recorded a smaller decrease to 196 million euro (-4,2 million euro). 

The reduction regarded commissions on current accounts and the sale of third party 

products (consumer credit provided by B@nca 24-7) in particular and was only partly offset 

by growth in commissions on assets under management and under custody, in relation to 

the sale of bonds issued by the Parent and by third parties; 

• trading and hedging activity resulted in a loss of -1,5 million euro (income of 10,2 million 

euro in 2009), affected above all by the negative impact of hedges on fixed rate mortgages; 

• other net operating income/(expense) decreased to 14,8 million euro compared to 20,7 

million euro the year before, the result primarily of lower expense recoveries from ordinary 

customers. 

The increase in expenses by 2,1%, amounting to 317,2 million euro, was totally attributable 

to the trend for personnel expense, up to 172,8 million euro from 164,5 million euro in 2009. 

It was penalised primarily by “non recurring expenses” relating to leaving incentives pursuant 

to the trade union agreement of 20 th May 2010 (3,9 million euro) and changes in average 

personnel numbers (partly in relation to changes in the distribution network), which were only 

partly offset by lower provisions for company bonuses and incentive schemes. 

On the other hand, other administrative expenses, amounting to 133,3 million euro, remained 

more or less unchanged compared to the previous year (-0,9%). 

Similarly, net impairment losses on property, plant and equipment and intangible assets, 

amounting to 11,1 million euro, were also unchanged compared to the year before (11,6 


As a result of the performance reported above, the cost/income ratio rose from 53% to 59,1%, 

although it remained below the average for the Group. 

Net impairment losses on loans rose from 69,2 million euro to 97,9 million euro, as a result of 

greater impairment losses recognised as a result of the weak economic context. Specific 

impairment losses on deteriorated loans amounted to 77,2 million euro (60,5 million euro in 

2009), including 59 million euro relating to non-performing loans, while collective impairment 

losses on performing loans amounted to 20,7 million euro (8,8 million the year before). The 

latter also incorporated the effects of the refinement of the calculation method and the update 

of the historical data series used as the basis for the estimate of risk parameters 

Net provisions for risks and charges fell from 3,3 million euro to 2,9 million euro, as a result of 

the release of excess provisions and to lower provisions on revocation actions which partly 

offset the increased provisions made for litigation concerning the compounding of interest and 

financial investments. 

As concerns changes in statement of financial position items, in December loans to customers 

had exceeded 15 billion euro, an increase over twelve months of 0,9 billion euro, including 0,5 

billion euro attributable to the “branch switching” operation in January 2010. 

Good performance by loans was attributable both to “Current account overdrafts”, up to 2,6 

billion euro (+0,3 billion euro) and to mortgages, up by 0,6 billion euro to 8,9 billion euro, now 

accounting for 59,2% of the total lending portfolio. 

At the end of the year, the net deteriorated loans of the bank amounted to 746,1 million euro, 

an increase of 214,1 million euro compared to twelve months before (+40,2%). 

158

Net non-performing loans increased by 52,6 million euro to 184,9 million euro and impaired 

loans rose to 318,7 million euro (+67,9 million euro), while restructured exposures almost 

tripled rising from 72,9 million euro to 201,5 million euro. Both of the latter classes of loan 

were affected by reclassifications into the class of new positions of significant amount. 

On the other hand past due exposures fell from 76 million euro to 41 million euro and 

included 35 million euro of exposures in arrears for between 90 and 180 days relating to 

property mortgages (55,5 million euro at the end of 2009). 

Direct funding had fallen at the end of the year by 7,1 billion euro to 12,1 billion euro, 

attributable to a significant reduction in securities issued (from 10,3 billion euro to 3,2 billion 

euro), due primarily to the contribution to UBI Banca International of the bank’s Luxembourg 

branch, which at the end of 2009 had certificates of deposit and commercial paper in issue for 

a total 5,2 billion euro and a subordinated deposit with the foreign branch by Banca 

Lombarda Preferred Capital Company Llc of 165 million euro. Furthermore, in 2010 bonds 

subscribed by the Parent amounting to 1,1 billion euro were subject to early redemption, while 

bonds issued to ordinary customers which matured during the year (1,1 billion euro) were only 

partly offset by new issues (0,6 billion euro). 

Amounts due to customers, which remained more or less unchanged at 8,9 billion euro 

(+0,2%), included an increase in repurchase agreements (+0,1 billion euro), which were 

practically offset by the decrease in term deposits, while funding of 0,2 billion euro was 

acquired from the “branch switches”. 

As a result of net increases resulting from the branch network optimisation operation (+0,65 

billion euro of assets under custody and +0,2 billion euro of assets under management), 

indirect funding from ordinary customers increased by 0,6 billion euro to 14,9 billion euro, 

mainly the result of growth in assets under custody (+6,9% to 7,3 billion euro), but also due to 

the placement of bonds issued by the Parent (0,4 billion euro nominal) and third party bonds 

(0,5 billion euro). 

Assets under management (+2,1% to 7,6 billion euro) benefited from growth in customer 

portfolio managements (+7,7% to 1,3 billion euro) and insurance products (+5,1% to 3,2 billion 

euro), while decreases were recorded for mutual investment funds and Sicav’s (-3% to 3 billion 

euro). 

As a consequence of the differing trends for funding and lending with customers, at the end of 

year the bank had net interbank debt of 2,5 billion euro compared to funds of 6,1 billion euro 

the year before, attributable mainly to the reduction in deposits relating to the funding in CDs 

and euro commercial paper of the Luxembourg branch transferred, and to the redemption of 

the bonds subscribed by the Parent and the maturity of term deposits already mentioned. 


weighted assets) of 12,82% (14,04%) and a total capital ratio (supervisory capital and 

reserves/risk-weighted assets) of 13,28% (15,23%). 

The proposal for the allocation of profit is to distribute dividends of 18,1 million euro after 

legal and by-law allocations. 

159

BANCA POPOLARE COMMERCIO E INDUSTRIA SPA 


31.12.2010 31.12.2009 Change 

% change 



Direct funding (*) (**) 8.175.503 8.562.886 -387.383 -4,5% 

Net interbank position 253.106 904.700 -651.594 -72,0% 


Available-for-sale financial assets 19.314 12.167 7.147 58,7% 

Equity (excluding profit for the year) 1.159.451 830.972 328.479 39,5% 

Total assets (*) 10.129.982 10.335.412 -205.430 -2,0% 

Indirect funding from customers (including insurance) (*) 11.186.686 12.296.433 -1.109.747 -9,0% 

of which: assets under management (*) 4.743.435 4.955.300 -211.865 -4,3% 



Dividends and similar income 2 15 (13) (86,7%) 


Net income/(loss) from trading, hedging and disposal/repurchase activities (2.145) (4.607) (2.462) (53,4%) 

Other net operating income (***) 7.791 6.050 1.741 28,8% 


Personnel expense (137.261) (142.102) (4.841) (3,4%) 



intangible assets (6.122) (3.934) 2.188 55,6% 

Operating expenses (259.442) (264.559) (5.117) (1,9%) 


Net impairment losses on loans (****) (30.827) (112.181) (81.354) (72,5%) 

Net impairment losses on other assets/liabilities (13) 1.051 (1.064) n.s. 

Net provisions for risks and charges (2.718) (5.293) (2.575) (48,6%) 

Loss on the disposal of equity investments (20) (49) (29) (59,2%) 

Pre-tax profit from continuing operations 44.734 15.230 29.504 193,7% 

Taxes on income for the year for continuing operations (*****) (22.820) (14.508) 8.312 57,3% 





taxes - 507 (507) (100,0%) 

Pre-tax profit from discontinued operations (******) - 2.530 (2.530) (100,0%) 

Profit for the year 21.914 1.978 19.936 n.s. 


Number of branches 234 214 20 

Total work force (actual employees+personnel on leasing contracts) 1.756 1.982 -226 






(*) The total as at 31 st December 2010 includes the effects of the branch switches performed on 25 th January as part of the 

project to optimise the branch network. 

(**) Inclusive of bonds subscribed by the Parent amounting to 181 million euro as at 31 st December 2010 (712 million euro 

as at 31 st December 2009). 

(***) The item included approximately one million euro in 2010 as the price received for the sale to RBC Dexia of the 

correspondence banking operations and 1,7 million euro of amounts recovered following the bankruptcy of a 

counterparty. 

(****) The item for 2010 included an impairment loss relating to the Mariella Burani Group amounting to 1,6 million euro. 

(*****) In 2009 the item included the non recurring positive impacts resulting from the payment of a substitute tax with the 

release of deferred tax liabilities – for the purposes of the decree for the realignment of differences in statutory and tax 

accounting figures, following the adoption of IFRS – amounting to 0,9 million euro and from an IRAP (local production 

tax) refund amounting to 2,5 million euro. 

(******)The item as at 31 st December 2009 related to the sale of the Palermo branch and a portion of the Brescia corporate 

banking unit to Banca Popolare di Vicenza. 

160

As at 31 st December 2010 UBI Banca held 75,0769% of the share capital of Banca Popolare Commercio, the 

Banca del Monte di Lombardia Foundation held 16,2369% and the remaining 8,6862% was held by Aviva 

Spa. 

The “branch switching” operation performed on 25 th January 2010 resulted in a general re-organisation of 

the branch network of Banca Popolare Commercio e Industria, consisting of the disposal of 85 branches 

and the acquisition of 132 branches. As a consequence, BPCI became the main bank of the Group in the 

Lombard provinces of Milan and Pavia and in Emilian provinces of Bologna, Parma, Piacenza, Modena, 

Reggio Emilia and Ferrara. It also retained its presence in Rome. The statement of financial position and 

income statement figures as at and for the year ended 31 st December 2010 incorporate the effects of that 

operation and are therefore not fully consistent with the comparative figures of the year before. 

The Bank ended the year with a profit of 21,9 million euro compared to two million euro in 

2009, as a result of a significant reduction in impairment losses on loans made possible by an 

improvement in the quality of the portfolio. Net operating income, on the other hand, fell to 

78,3 million euro (-53,4 million euro compared to 2009) as a result of a fall in revenues (- 

14,8% to 337,8 million euro), only partially offset by a modest reduction in expenses (-1,9% to 

259,4 million euro). 

The decrease in operating income (-58,5 million euro) is attributable mainly to net interest 

income, down from 252,9 to 197,8 million euro, penalised by unfavourable trends in interest 

rates (the spread narrowed by more than the average for the network banks), while growth was 

recorded for average volumes of business, which was greater for funding. 

Net commission income also fell to 134,3 million euro from 141,9 million euro in 2009 (-5,4%), 

affected mainly by the fall in commissions on current accounts (inclusive of commitment 

fees), and it was only partly offset by the increase in commission on electronic payment cards 

and indirect funding. The latter were driven by the proceeds from the placement of bonds 

issued by the Parent and third parties. 

Trading and hedging activity recorded a loss of 2,1 million euro (-4,6 million in 2009), 

attributable to losses on the disposal/repurchase of financial liabilities and the negative 

impact of hedges on fixed rate mortgages, which was only partially offset by the positive 

impact of fair value changes in hedges on bonds. 

The item other net operating income/(expense), rose to 7,8 million euro from 6,1 million euro 

the year before. It benefited from a non-recurring item of approximately one million euro from 

the sale of corresponding banking and depositary banking contracts to RBC Dexia. 

As concerns operating expenses, personnel expense fell from 142,1 million euro to 137,3 

million euro as a result of lower provisions for company bonuses and lower outgoings due to 

reduced personnel numbers 

Other administrative expenses, amounting to 116,1 million euro, fell by 2,5 million euro, 

attributable in particular to a reduction in intragroup service charges (-2,6 million euro) and a 

reduction in expenses for professional and advisory services (-2 million euro approx.). 


rose to 6,1 million euro from 3,9 million euro in 2009, in relation to the acquisition of 

properties in connection with the “branch switches”. 

As a result of the performance reported above, the cost/income ratio worsened, rising from 

66,76% to 76,81%. 

Although the macroeconomic context is still far from favourable, net impairment losses on 

loans fell considerably (from 112,2 million euro to 30,8 million euro), as a result of action 

taken to improve the quality of the portfolio in progress since 2008. At the same time, 

provisions for risks and charges fell from 5,3 million euro to 2,7 million euro. They consisted 

mainly of provisions for litigation relating to revocation actions and for customer claims 

relating to investment services. 

Integration costs were recognised in 2009 for a total of 1,3 million euro, relating mainly to personnel 

expense incurred in relation to the completion of the IT migration together with a profit of 2,5 million euro 

161

from non recurring operations held for disposal attributable to a gain on the sale of a Palermo branch to 

Banca Nuova and a portion of the Brescia corporate banking unit to Banca Popolare di Vicenza. 

As concerns the statement of financial position figures, lending to customers rose from 8,4 

million euro to 8,9 billion euro due to an increase in volumes of business with retail 

customers, partly as a result of the branch network optimisation operation (+0,3 billion euro). 

Medium-to-long term lending increased by 24% and now accounts for more than 60% of the 

total lending portfolio. 

Net deteriorated loans increased by 60,7 million euro to 549,5 million euro. 

In detail, net non-performing loans rose from 212,7 million euro to 263,3 million euro, 

impaired loans from 199,8 million euro to 225 million euro and restructured exposures from 

34,4 million euro to 42,3 million euro, while past due loans more than halved from 41,9 

million euro to 18,9 million euro, as a result of a significant reduction in exposures in arrears 

for between 90 and 180 days relating to property mortgages which were reclassified within 

impaired loans (18 million euro compared to 38 million euro in 2009). 

Direct funding of the bank as at 31 st December 2010 amounted to 8,2 billion euro compared to 

8,6 billion euro the year before (-4,5%). Although the “branch switches” resulted in an increase 

in funding (mainly on demand deposits) of 0,8 billion euro, the fall in the item is attributable 

to securities issued and subscribed by the Parent as a result of the early redemption of two 

bonds for a total of 530 million euro, including 150 million euro subordinated. 

Indirect funding also fell compared to the previous year, down from 12,3 billion euro to 11,2 

billion euro, affected by the negative performance of markets. 

As a result of the change in the composition of customers’ investment portfolios, assets under 

custody decreased considerably (from 7,3 billion euro to 6,4 billion euro), while the fall in 

assets under management was more modest (from 4,9 billion euro to 4,7 billion euro). The 

latter included a reduction in customer portfolio managements (-0,2 billion euro, to 1,1 billion 

euro) and in mutual funds and Sicav’s (-0,3 billion euro, to 2,5 billion euro), while insurance 

products increased (approximately +0,3 billion euro, to 1,1 billion euro). 

The interbank position at the end of 2010 consisted of funds of 0,3 billion euro, a significant 

decrease compared to 0,9 billion euro in 2009, principally as a result of a decrease in current 

accounts and deposits held with the Parent. 



capital and reserves/risk-weighted assets) of 19,81% (18,59%). 

The proposal for the allocation of profit is to distribute total dividends of 19,7 million euro 

after legal and by-law allocations. 

162

BANCA REGIONALE EUROPEA SPA 


31.12.2010 31.12.2009 Change 

% change 


Loans to customers (*) 6.851.620 7.278.450 -426.830 -5,9% 


Net interbank position (debt) -195.497 1.328.154 -1.523.651 n.s. 


Available-for-sale financial assets 9.610 11.917 -2.307 -19,4% 

Equity (excluding profit for the year) 1.216.497 925.018 291.479 31,5% 

Total assets (*) 8.132.305 9.706.497 -1.574.192 -16,2% 

Indirect funding from customers (including insurance) (*) 7.267.934 9.362.398 -2.094.464 -22,4% 

of which: assets under management (*) 4.205.324 5.625.295 -1.419.971 -25,2% 



Dividends and similar income 1.318 10.300 (8.982) (87,2%) 


Net income/(loss) from trading, hedging and disposal/repurchase activities (***) (946) 12.756 (13.702) n.s. 






intangible assets (6.644) (9.125) (2.481) (27,2%) 



Net impairment losses on loans (27.430) (33.654) (6.224) (18,5%) 

Net impairment losses on other assets/liabilities (169) (506) (337) (66,6%) 

Net provisions for risks and charges (****) 3.253 (2.196) 5.449 n.s. 

Loss on the disposal of equity investments (*****) 230.662 (40) 230.702 n.s. 


Taxes on income for the year from continuing operations (******) (18.175) (26.106) (7.931) (30,4%) 



net impairment losses on property, equipment and investment property and intangible 

assets - (309) (309) (100,0%) 

taxes - 507 (507) (100,0%) 

Profit for the year 246.375 54.618 191.757 351,1% 









(*) The total as at 31st December 2010 includes the effects of the branch switches performed on 25° January as part of the project 


(**) Inclusive of bonds subscribed by the Parent amounting to 201 million euro as at 31 st December 2010 (502,1 million euro as at 


(***) In 2009 the item included a gain of 8,9 million euro on the disposal of the investment held in Cedacri. 

(****) In 2010 the item included the release of a provision made in prior years for litigation with the Ministry of the Economy 

amounting to 3,9 million euro. 

(*****) In 2010 the item related primarily to a gain on the sale of an interest held in BPCI to the Banca del Monte di Lombardia 

Foundation. 

(******) The item for 2009 included the non recurring positive impacts resulting from the payment of a substitute tax with the release 

of deferred tax liabilities – for the purposes of the decree for the realignment of differences in statutory and tax accounting 

figures, following the adoption of IFRS – amounting to 1,6 million euro and from an IRAP (local production tax) refund amounting 

to 1,7 million euro. 

163

As at 31 st December 2010 UBI Banca held 74,9437% of the share capital of Banca Regionale Europea, the 

Cassa di Risparmio di Cuneo Foundation held 24,98% and the remaining 0,0763% was held by minority 

shareholders. 

As part of the “branch switching” operation performed on 25 th January 2010, the bank disposed of a total 

of 113 branches and acquired 45, to become the principal bank of the Group in the Piedmont area. 

Consistent with this operation, General Management, central offices and decentralised units at Cuneo were 

transferred to Turin in January 2011. The statement of financial position and income statement figures as 

at and for the year ended 31 st December 2010 incorporate the effects of that operation and are therefore 

not fully consistent with the comparative figures. 

The year 2010 ended with a profit of 246,4 million euro, a significant increase compared to 

54,6 million euro the year before, as a result of a gain (225,4 million euro net of taxes) realised 

following the sale of an interest held in the share capital of Banca Popolare Commercio e 

Industria to the Banca del Monte di Lombardia Foundation as part of the ownership structure 

reorganisation following the “branch switches” performed in January 2010. 

Again in relation to the action taken on the distribution network, net operating income halved 

over twelve months, down from 118,4 million euro to 58,2 million euro, as a result of a fall in 

operating income (-96,3 million euro, -27,3%), which was only partially offset by a reduction in 

expenses (-36,1 million euro, -15,4%). 

Within operating income, amounting to 255,9 million euro: 

• net interest income amounted to 147,4 million euro (-39,9 million euro) affected by trends 

for interest rates, but above all by reduced volumes of business, as a result of the net 

reduction in the number of branches following the switching operation; 

• dividends and similar income amounted to 1,3 million euro (-9 million euro) and consisted 

principally of the dividend received from Banco di San Giorgio amounting to one million 

euro (-9,8 million in 2009); 

• net commission income fell to 99,3 million euro (-32,6 million euro). The reduction regarded 

all the main items, again reflecting the impacts of the change in the geographical area 

covered by the distribution network; 

• net income from trading and hedging activity was -0,9 million euro compared to 12,8 

million euro in 2009, which included non-recurring income of 8,9 million euro from the 

disposal of the interest held in Cedacri. The result for 2010 was affected by the negative 

impact of the hedges on fixed rate mortgages despite the positive effect of the fair value 

change in hedges on bonds; 

• the item other net operating income/(expense) decreased by 1,1 million euro to 8,8 million 

euro, basically as a result of lower recoveries of charges from ordinary customers. 

The fall in operating expenses, amounting to 197,6 million euro, affected all components, as a 

result of the change in the operating structure produced by the “switch”: 

• personnel expense, fell to 110,1 million euro from 128,6 million euro in 2009 due to a 

decrease in average personnel numbers, lower company bonuses and a lower actuarial 

valuation (post-employment benefits, loyalty bonus), despite 2,3 million euro of nonrecurring 

expenses for leaving incentives; 

• other administrative expenses fell to 80,9 million euro from 96 million euro before, as a 

result of lower intragroup service charges, lower tenancy of premises expenses and lower 

postal expenses; 

• net impairment losses on property, equipment and investment property and intangible 

assets fell from 9,1 million euro to 6,6 million euro, as a result of the disposal of properties 

that occurred as part of the operation to optimise the branch network. 

Net impairment losses on loans amounted to 27,4 million euro, down from 33,6 million euro 

the year before. They included specific impairment losses on non-performing loans of 23,4 

million euro (33,3 million euro in 2009) and collective impairment losses on performing loans, 

up to four million euro (0,3 million euro in 2009), due to refinements made to the calculation 

method. 

164

Net releases of provisions for risks and charges amounted to 3,3 million euro. The item 

benefited from a release of 3,9 million euro in relation to a settlement agreement concerning 

litigation with the Ministry of the Economy and Finance, concluded in April. 

As concerns statement of financial position items, in December loans to customers amounted 

to 6,9 billion euro (-0,4 billion euro year-on-year), reflecting a reduction in volumes of 

business as a consequence of the branch switches (-0,9 billion euro). In terms of types of 

lending, mortgages fell to 3,9 billion euro (-0,4 billion euro) and current accounts to 1,3 

billion euro (-0,4 billion euro), while there was an increase in “Other transactions” (+0,4 

billion euro to 1,7 billion euro) which includes various types of short term lending (advances 

on bills and import-export documents , etc..). 

At the end of the year net deteriorated loans of the bank totalled 306,2 million euro, up from 

285,2 million euro in December 2009. In detail, net non-performing loans, amounting to 128,5 

million euro, increased by 18,1 million euro, impaired loans rose from 117,8 million euro to 

131 million euro, while restructured loans doubled from 10,8 million euro to 20,3 million euro 

as a result of reclassifications into this class of significant amount following the changes in the 

composition of the branch network. 

On the other hand past due exposures fell from 46,2 million euro to 26,4 million euro and 

included 22,6 million euro of exposures in arrears for between 90 and 180 days, secured by 

real estate property reclassified within deteriorated loans in accordance with supervisory 

regulations (35,8 million euro at the end of 2009). 

Direct funding amounted to 5,6 billion euro, compared to eight billion euro the year before, 

reflecting a decrease in volumes of 1,5 billion euro, resulting from the “branch switches”. The 

decrease in the total for the item was also the result of a fall in total bonds issued (-0,8 billion 

euro), both for bonds issued to customers (-0,5 billion euro) and those subscribed by the 

Parent (-0,3 billion euro for the early redemption of an issue of 0,5 billion euro against a new 

issuance of 0,2 billion euro). 

As concerns indirect funding from ordinary customers – amounting to 7,3 billion euro (-2,1 

billion) – assets under custody totalled 3,1 billion euro (-0,7 billion euro year-on-year) with 

lower net inflows of 1,5 billion euro as a result of the “branch switches”. Assets under 

management fell to 4,2 billion euro (-1,4 billion euro), affected by lower net inflows of 1,2 

billion euro as a result of the branch switching operation. 

As a result of the differing trends for funding and lending with customers, the net interbank 

debt of the bank at the end of year, relating primarily to the Parent, amounted to 0,2 billion 

euro (compared to funds of 1,3 billion euro in December 2009). 


weighted assets) of 25,38% (15,52%) and a total capital ratio (supervisory capital and 


The proposal for the allocation of profit is to distribute total dividends of 19,9 million euro. 

165

BANCA POPOLARE DI ANCONA SPA 


31.12.2010 31.12.2009 Change 

% change 


Loans to customers 7.702.345 7.332.080 370.265 5,0% 

Direct funding (*) 6.837.163 7.996.422 -1.159.259 -14,5% 

Net interbank position (debt) -209.751 1.314.307 -1.524.058 n.s. 



Equity (excluding profit for the year) 875.143 867.338 7.805 0,9% 

Total assets 9.100.755 9.377.093 -276.338 -2,9% 

Indirect funding from customers (including insurance) 3.828.041 3.670.727 157.314 4,3% 

of which: assets under management 1.879.189 1.937.869 -58.680 -3,0% 





Net income/(loss) from trading, hedging and disposal/repurchase activities 2.970 (715) 3.685 n.s. 

Other net operating income/(expense) (**) 2.732 (196) 2.928 n.s. 




intangible assets (11.980) (12.262) (282) (2,3%) 



Net impairment losses on loans (***) (51.481) (115.745) (64.264) (55,5%) 

Net impairment losses on other assets/liabilities 955 (324) 1.279 n.s. 

Net provisions for risks and charges (1.057) (3.320) (2.263) (68,2%) 

Profit on the disposal of equity investments (****) 25 17.077 (17.052) (99,9%) 


Taxes on income for the year for continuing operations (*****) (20.515) (9.269) 11.246 121,3% 





taxes - 431 (431) (100,0%) 

Profit for the year 18.340 12.148 6.192 51,0% 









(*) Inclusive of bonds subscribed by the Parent amounting to 352 million euro as at 31 st December 2010 (1.249 million euro as at 


(**) In 2009 the item included a provision of 3,6 million euro following the conclusion of a settlement agreement with a large group of 

companies. 

(***) The item for 2010 includes an impairment loss relating to the Mariella Burani Group amounting to 0,9 million euro. In 2009 that 

impairment loss amounted to 0,1 million euro. 

(****) In 2009 the item included profit from the disposal of UBI Assicurazioni shares amounting to 17 million euro. 

(*****) In 2009 the item included a non recurring positive impact resulting from an IRAP [local production tax] refund amounting to 1,6 

million euro. 

As at 31 st December 2010, UBI Banca held 92,8983% of the share capital of the Banca Popolare di Ancona, 

Aviva Spa held 6,4853% and the remaining 0,6164% was held by minority shareholders. 

The Bank ended the year with a profit of 18,3 million euro, an increase compared to 12,1 

million euro in 2009, due to a significant reduction in impairment losses on loans as a result 

of an improvement in the quality of lending. 

166

Net operating income nevertheless fell by 27,6%, as a result of a decrease in operating income 

(-11,8%), only partly offset by a fall in expenses (-3,5%). 

The main items of operating income, which totalled 319,1 million euro 

(-42,7 million euro), performed as follows: 

- net interest income fell to 204,3 million euro (-29,9 million euro), incorporating the effects 

of a reduction in the interest rate spread and unfavourable performance for average 

volumes of business; 

- dividends and similar income fell to 3,8 million euro compared to 16,4 million euro the year 

before, which, however, included a dividend of 6,3 million euro paid by UBI Assicurazioni 

Spa (the investment was disposed of in December 2009); 

- net commission income amounted to 105,3 million euro (-6,7 million euro), affected above 

all by commissions on current accounts, only partly offset by positive growth in assets 

under management and under custody, the latter driven by sales of bonds issued by the 

Parent and by third parties; 

- trading, hedging and disposal/repurchase activities generated income of approximately 

three million euro (-0,7 million in 2009), mainly as a result of profit from fair value changes 

in mortgage and bond hedges, which more than compensated for losses on the repurchase 

of financial liabilities and the negative impact of unwinding derivatives to hedge against the 

early repayment of mortgages; 

- other net operating income/expense, rose to 2,7 million euro compared a net expense in 

2009 (-0,2 million euro), which included a cost – amounting to 3,6 million euro – in 

relation to a settlement agreement with a major group of companies. 

Operating expenses fell to 228,6 million euro (-8,3 million euro), as a result of contributions 

from all expense items: 

- personnel expense of 125,9 million euro fell by 2,2 million euro due mainly to lower 

provisions for company bonuses and also to a reduction in average personnel numbers. The 

item includes 4,5 million euro of leaving incentives following the trade union agreement of 

20 th May 2010. Net of that non recurring item the expense decreased by 5,2%; 

- other administrative expenses fell to 90,7 million euro (-5,8 million euro), due to lower 

expenses for professional and advisory services, the tenancy of premises, outsourced 

services and services provided by other Group member companies; 

- net impairment losses on property, equipment and investment property and intangible 

assets also fell to 12 million euro from 12,3 million euro the year before. 

As a result of an improvement in the quality of loans, net impairment losses on loans fell from 

115,7 million euro to 51,5 million euro. The cost of credit therefore decreased as a result from 

1,58% to 0,67%, returning into line with the average for the Group. 

Net provisions for risks and charges fell from 3,3 million euro to 1,1 million euro, benefiting 

from the release of excess and/or unnecessary provisions for losses on claims (+1,3 million 

euro) and revocation actions (+0,7 million euro). 

As concerns the statement of financial position, at the end of the year loans to customers had 

reached 7,7 billion euro, up from 7,3 billion euro the year before, driven by growth in 

mortgages (+0,5 billion euro to approximately five billion euro), while current account deposits 

decreased (-0,1 billion euro to 1,5 billion euro). 

Net deteriorated loans of the bank totalled 572,3 million euro compared to 508,2 million euro 

twelve months before (+12,6%). Within the aggregate, net non-performing loans increased 

(from 209,2 million euro to 287,4 million euro) as did restructured exposures (from 0,9 million 

euro to 15,7 million euro). On the other hand decreases were recorded for impaired loans (from 

268,7 million euro to 253,4 million euro) and past due exposures (from 29,4 million euro to 

15,7 million euro), within which exposures in arrears for between 90 and 180 days secured by 

real estate property fell from 24,4 million euro to 11,5 million euro. 

Direct funding amounted to 6,8 billion euro, down from eight billion euro in December 2009 (- 

14,5%), penalised above all by a fall in securities issued, down by over one billion euro to 2,3 

167

illion euro, mainly due to the redemption of bonds subscribed by the Parent (-0,9 billion 

euro). 

However, the fall in amounts due to customers was more modest (-0,1 billion euro to 

approximately 4,5 billion euro), reflecting a fall in current account deposits (-0,3 billion euro 

to 4,2 billion euro), only partly offset by funding from repurchase agreements. 

Indirect funding grew by 0,2 billion euro to 3,8 billion euro as a result of an increase in assets 

under custody (+0,2 billion euro, to almost two billion euro), which benefited from an issuance 

of bonds (some subordinated), issued by third parties and by the Parent for a total of 0,3 

billion euro. On the other hand, there was a slight fall in assets under management (-0,1 

billion euro to 1,9 billion euro), due primarily to a decrease in mutual funds and Sicav’s (-0,1 

billion euro to 0,8 billion euro), despite fair performance for customer portfolio management. 

At the end of the year net interbank debt stood at 0,2 billion euro (funds of 1,3 billion euro in 

December 2009). With regard to assets this was due to a decrease in liquidity on the interbank 

current account held with the Parent, as a consequence of redemptions of bonds and the 

maturities of two deposits (one a term deposit of 0,3 billion euro and one a subordinated 

deposit of 0,2 billion euro), while with regard to liabilities it was due to an increase in debt as a 

consequence of the redemptions already mentioned. 


weighted assets) of 15,13% (16,16% in 2009) and a total capital ratio (supervisory capital and 


The proposal for the allocation of profit is to distribute dividends of 16,5 million euro after an 

allocation to the extraordinary reserve of 1,2 and an allocation of 0,6 million euro to a fund 

available to the Board of Directors. 

168

BANCA CARIME SPA 


31.12.2010 31.12.2009 Change 

% change 



Direct funding 7.562.665 7.892.084 -329.419 -4,2% 

Net interbank position 3.670.923 4.318.255 -647.332 -15,0% 

Financial assets held for trading 2.698 2.214 484 21,9% 



Total assets 9.784.297 10.094.090 -309.793 -3,1% 


of which: assets under management 3.688.062 3.947.603 -259.541 -6,6% 



Dividends and similar income 107 115 (8) (7,0%) 


Net income/(loss) from trading, hedging and disposal/repurchase activities 2.018 (609) 2.627 n.s. 




Other administrative expenses (94.309) (95.118) (809) (0,9%) 


intangible assets (14.582) (13.703) 879 6,4% 



Net impairment losses on loans (22.875) (20.128) 2.747 13,6% 

Net impairment losses on other assets/liabilities (434) 123 (557) n.s. 

Net provisions for risks and charges 862 (6.076) 6.938 n.s. 

Profit (loss) on the disposal of equity investments (2) 21 (23) n.s. 


Taxes on income for the year for continuing operations (*) (31.305) (36.951) (5.646) (15,3%) 





taxes - 1.080 (1.080) (100,0%) 










(*) In 2009 the item included the non recurring positive impacts resulting from the payment of a substitute tax with the release of 


following the adoption of IFRS – amounting to 6,1 million euro and from an IRAP (local production tax) refund amounting to 1,2 

million euro. 

As at 31 st December 2010, UBI Banca held 92,8322% of the share capital of the Banca Carime, Aviva Spa 

held 7,1476% and the remaining 0,0202% was held by minority shareholders. 

The year 2010 ended with a profit for Banca Carime of 37,7 million euro compared to 70 

million euro in 2009, the result of a difficult market context – characterised by continued falls 

in volumes of business – against a structurally weak socio-economic background. 

169

Net operating income fell by 44,4 million euro to 91,4 million euro, as a result of a fall in 

operating income (-45,8 million euro to 353,5 million euro) and a modest decrease in operating 

expenses (-1,4 million euro to 262,1 million euro). 

Within operating income, net interest income fell to 237 million euro (-38,7 million euro) 

mainly due to the downwards pressure on interest rates, despite growth in average volumes of 

lending (+5,1%). 

Net commission income totalled 109,7 million, a decrease of 7,2% (-8,5 million euro), as a 

result of different trends that affected individual items. Falls in commissions on current 

account management and on consumer credit were only partially offset by commission income 

on assets under custody – which benefited from the sale of bonds issued by the Parent and 

third parties – and on insurance products. 

Net income on trading, hedging and disposal/repurchase activities which showed a loss of 0,6 

million euro in 2009, recorded income of two million euro, due to hedging activity (2,4 million 

euro) – from hedge accounting on mortgages, financing and fixed rate bonds – and, although to 

a lesser extent, to trading activity (1,2 million euro) driven by profits on trading in government 

securities and in currencies, while losses were recorded of 1,5 million euro from the 

disposal/repurchase of financial liabilities attributable to interest rate trends. 

Other net operating income/(expense) fell from 5,8 million euro to 4,6 million euro due 

primarily to lower expense recoveries from ordinary customers. 

With regard to expenses, personnel expense amounted to 153,2 million euro, a decrease of 1,4 

million euro (-0,9%), attributable to lower provisions for company bonuses and also to a 

decrease in average personnel numbers. The item included the following: 

- a prudential provision for risks and charges of 3,4 million euro as the best present 

estimate of the increased liabilities arising from a refinement of the formula employed to 

calculate the pension fund with particular reference to periodic payments made to 

participants in the fund; 

- leaving incentives of 5,9 million euro, pursuant to the trade union agreement of 20 th May 

2010. Net of that non recurring item the expense decreased by 4,8%. 

Similarly other administrative expenses also decreased slightly to 94,3 million euro (-0,9%), as 

a result of reduced “Tenancy of premises” expenses (electricity). 


amounted to 14,6 million euro compared to 13,7 million euro in 2009. 

As a result of the performance reported above, the cost/income ratio worsened, rising from 

65,99% to 74,14%. 

Net impairment losses on loans rose to 22,9 million euro (+2,7 million euro). While specific net 

impairment losses remained almost unchanged (-0,8 million euro), collective impairment 

losses recorded a decrease (+3,5 million euro), following a refinement of the calculation method 

and the update of the historical data series used as the basis for the estimate of risk 

parameters of the rating models (PD) and LGD. 

Net provisions for risks and charges – which included provisions for revocation actions 

and for customer claims relating to compounding of interest and financial investments – 

showed releases of 0,9 million euro following the conclusion of litigation without 

disbursements or with settlements for sums lower than the provision set aside (provisions of 

6,1 million euro were recognised in 2009). 

As concerns the statement of financial position, in December loans to customers reached 4,8 

billion euro (+0,2 billion euro), driven by medium-to-long term loans (+0,3 billion euro), which 

now account for approximately 70% of the total. 

The trend for net deteriorated loans rose to 184,6 million euro (+27,4 million euro), a reflection 

of the fragile economic context and the consequent poorer quality of credit. Net nonperforming 

loans amounted to 58,9 million euro, an increase of 36,8% year-on-year, while net 

impaired loans, amounting to 108 million euro, increased by 50,2%. On the other hand past 

due exposures fell from 42,2 million euro to 15,5 million euro. These included, 12,1 million of 

170

exposures in arrears for between 90 and 180 days relating to property mortgages, classified in 

that class in accordance with Bank of Italy provisions. 

At the end of the year direct funding totalled 7,6 billion euro, a decrease of 0,3 billion euro (- 

4,2%) compared to 2009, attributable to securities issued, and to bonds in particular (-0,5 

billion euro, to 2,2 billion euro), which were replaced by forms of indirect funding to which 

customers oriented their asset allocation decisions. 

Amounts due to customers on the other hand recorded an increase (+0,2 billion euro to 5,2 

billion euro), driven by the item current accounts and deposits. 

Indirect funding, amounting to approximately 5,8 billion euro, remained more or less 

unchanged over twelve months (+0,8%). Within the item, assets under custody increased by 

17,4% to over two billion euro – due to the sale of bonds issued by the Parent and third parties 

– which offset the fall in assets under management (-6,6% to 3,7 billion euro), penalised by 

difficulties in the insurance area (-0,7% to 1,3 billion euro) and above all with mutual funds 

and Sicav’s (-10,2% to 2,2 billion euro), while customer portfolio management performed well 

(+5,1% to 0,2 billion euro). 

As a result of the differing trends for funding and lending with customers, while still positive, 

the net interbank position fell from 4,3 billion euro to 3,7 billion euro. 




The proposal for the allocation of profit is to distribute total dividends of 33,9 million euro 

after legal and by-law allocations. 

171

CENTROBANCA SPA 


31.12.2010 31.12.2009 Change 

% change 


Loans to customers 6.972.678 7.047.210 -74.532 -1,1% 

Direct funding (*) 5.547.161 4.172.765 1.374.396 32,9% 

Net interbank debt -1.514.777 -2.977.202 -1.462.425 -49,1% 




Total assets 10.512.435 8.806.074 1.706.361 19,4% 




Net commission income 42.102 40.890 1.212 3,0% 

Net income from trading, hedging and disposal/repurchase activities 14.010 24.264 (10.254) (42,3%) 

Other net operating income 5.351 3.543 1.808 51,0% 


Personnel expense (32.957) (33.449) (492) (1,5%) 



intangible assets (1.003) (993) 10 1,0% 



Net impairment losses on loans (**) (65.430) (112.386) (46.956) (41,8%) 

Net impairment losses on other assets/liabilities (3.564) (2.477) 1.087 43,9% 

Net provisions per risks and charges (7.669) 679 (8.348) n.s. 

Profit/loss on the disposal of equity investments (***) (15) 17.798 (17.813) n.s. 






Total work force (actual employees+personnel on leasing contracts) 325 351 -26 






(*) Inclusive of bonds subscribed by the Parent (and by Banco di San Giorgio) amounting to 201,6 million euro as at 31 st December 

2010 (1.105,2 million euro as at 31 st December 2009). 

(**) The item for 2010 includes the impairment loss relating to the Mariella Burani Group amounting to six million euro. In 2009 that 

impairment loss amounted to 47 million euro. 

(***) In 2009 the item related to the sale of IW Bank shares to Webstar Sa. 

(****) In 2009 the item included a positive non-recurring impact resulting from an IRAP [local production tax] refund of 0,9 million 

euro. 

As at 31 st December 2010, UBI Banca held 92,3818% of the share capital of Centrobanca, while 5,4712% 

was held by Banca Popolare di Ancona Spa, 1,6% by Banca Popolare di Sondrio Scpa, 0,1420% by Banca 

di Piacenza Scpa, 0,1008% by Veneto Banca Holding Scpa and the remaining portion totalling 0,3042% 

was held by 24 different banks, mainly “popular” banks. 

Centrobanca is the bank in the Group which specialises in corporate and investment banking 

to support corporate clients with innovation, expansion and financial restructuring. 

The year 2010 ended with a profit of 16,2 million euro, a decrease compared to 28 million euro 

the year before, which, however, had benefited from non-recurring income totalling 18,4 

million euro net of taxes. In normalised terms, net of those items, 2010 profit recorded a 

significant recovery from 9,6 million euro to 16,6 million euro (+72%). 

172

The continuing difficult economic situation and the extraordinary low levels of interest rates 

affected the results of the bank, which recorded a fall in income which more than offset the 

reduction in expenses and the lower cost of credit. 

Net operating income fell to 108,2 million euro (-32,7 million euro; -23,2%). 

Within operating income, amounting to 163,2 million euro (-35,4 million euro; -17,8%): 

- net interest income amounted to 100,2 million euro, a decrease of over a fifth compared to 

2009, due to the combined effect of continuing low interest rates at record low levels and a 

reduction in average volumes of business; 

- dividends (-2,2 million euro to 1,5 million euro) were affected by the generally lower 

dividends received from IW Bank and from investees as part of private equity business; 

- net commission income increased to 42,1 million euro (+1,2 million euro), driven by 

commissions on lending activity; 

- net income from trading hedging and disposal/repurchase activity decreased by 10,3 

million euro to 14 million euro, the aggregate result of opposing trends for trading (-7,7 

million euro, including -6,4 million euro from securities in the owned portfolio) and hedging 

(+3,4 million euro, largely in relation to the unwinding of hedges on owned securities 

subject to repurchase), against increased losses from disposal/repurchase activity 

amounting to six million euro (including -5,3 million euro resulting from the disposal of 

non-performing loans); 

- other net operating income/(expense) totalled 5,4 million euro (+1,8 million euro) and 

included, the recovery of legal costs incurred by the bank (2,1 million euro) and receipts in 

relation to the price adjustment for the disposal of the interest held in Radici Film that 

occurred in 2009 (2,3 million euro), for which a provision of the same amount had been 

made. 

Within operating expenses (-2,7 million euro to 55 million euro; -4,6%) the most significant 

reduction regarded other administrative expenses (-2,2 million euro to 21 million euro), as a 

result of a decrease of 1,3 million euro in business support expenses, mainly those of a legal 

and advisory nature, resulting from action taken to optimise the professionals engaged, 

despite the presence of particularly critical positions involved in litigation. 

The decrease in personnel expense on the other hand (-0,5 million euro to 33 million euro) 

reflects the following: a reduction in variable components of remuneration (bonuses and 

incentive schemes); nine employees leaving under incentive schemes; less use of temporary 

and external personnel; and effective management of personnel turnover (replacement of 

personnel leaving with less costly appointments). 

As a result of the performance reported above, the cost/income ratio increased to 33,71%, 

from 29,04% in 2009. 

Net impairment losses on loans, amounting to 65,4 million euro, fell significantly compared to 

112,4 million a year before. The overall improvement is the aggregate result of a significant 

decrease in net specific impairment losses (down to 68,2 million euro from 104,8 million euro 

in 2009) and the presence of net reversals of impairment losses for collective impairment of 

loans (2,8 million euro compared to impairment losses of 6,7 million euro in 2009). 

Approximately 40% of the specific impairment losses were attributable to five positions 

including that relating to the Mariella Burani Group amounting to six million euro (47 million 

euro in 2009). 

Net provisions for risks and charges rose to 7,7 million euro (+8,3 million euro), including two 

million euro in relation to revocation risks on the Mariella Burani position. 

As concerns the statement of financial position, loans to customers amounted to 6,97 billion 

euro, slightly down compared to 7,05 billion euro in 2009 (-1,1%). In terms of type of business, 

there was a slight decrease in corporate lending (-1,5%) and in corporate finance 

(-1,1%), while Acquisition & Project Finance remained stable (+0,6%). 

173

The year 2010 recorded a slight recovery in lending, with an increase in loans approved (+2,1% 

to 3,35 billion euro). The main recipients of new loans (+0,5% to 2,16 billion euro) were non 

financial companies. 

Total net deteriorated loans increased only slightly during the year to 437,8 million euro (+5,9 

million euro; +1,4%), accompanied, however, by a change in the composition of the different 

classes. While reductions were recorded for net impaired loans 

(-74,1 million euro) and net past due exposures (-73,9 million euro), both net non-performing 

loans (+33,8 million euro) and restructured loans in particular recorded increases (+120,2 

million euro). As a result of these trends, the ratio of net impaired loans to net lending fell 

from 3,1% to 2,1%, while the ratio of non-performing loans to net lending rose from 0,7% to 

1,2% and the ratio of net restructured loans to net loans rose to 2,4% from 0,7% at the end of 

2009. 

Over twelve months net interbank debt halved (down from -3 billion euro to -1,5 billion euro), 

mainly as a result of an increase in receivables from banks (+1,7 billion euro) following the 

subscription of UBI bonds, as part of funding activity performed for the Parent. 

Direct funding from customers rose to 5,5 billion euro from 4,2 billion euro the year before, 

supported by the placement of bonds (mainly on external distribution networks) for 

approximately 2,8 billion euro, including approximately 1,7 billion euro transferred to the 

Parent, against maturities and redemptions of own securities amounting to 970 million euro. 

Financial assets held for trading increased by 12% to 448 million euro in relation to both the 

value of investments made as part of merchant banking and investment banking business and 

to the purchase of the Vallourec share, which was nevertheless disposed of in the first few 

days of 2011. 

The portfolio of available-for-sale financial assets, consisting almost entirely of investments in 

corporate bonds made as part of Centrobanca’s general lending business, increased to 

approximately 566 million euro from 537 million euro the year before. Investment policies in 

2010 were designed to refocus on captive Group customers with investments in Italian 

corporate issuers and the major European players operating in Italy. 




The proposal for the appropriation of profits is to first allocate 0,8 million to the legal reserve 

and then to distribute dividends of 15,5 million euro, by drawing 0,1 million euro from 

retained profits. 

174

B@NCA 24-7 SPA 


31.12.2010 31.12.2009 Change 

% change 



Direct funding (*) 4.344.858 4.376.481 -31.623 -0,7% 

Net interbank debt -7.757.694 -7.858.789 -101.095 -1,3% 

Equity (excluding profit for the year) 348.179 397.552 -49.373 -12,4% 

Total assets 12.957.569 13.136.902 -179.333 -1,4% 


Net interest income 200.453 174.415 26.038 14,9% 

Dividends and similar income - 2 (2) (100,0%) 


Net loss from trading, hedging and disposal/repurchase activity (24.036) (31.758) (7.722) (24,3%) 


Operating income 223.868 193.161 30.707 15,9% 



Net impairment losses on property, equipment and investment property and intangible assets (180) (229) (49) (21,4%) 


Net operating income 164.721 131.088 33.633 25,7% 


Net provisions per risks and charges (**) (8.912) (1.374) 7.538 548,6% 

Pre-tax profit from continuing operations 5.976 (55.163) 61.139 n.s. 

Taxes on income for the year for continuing operations (***) (11.699) 6.522 (18.221) n.s. 


of which: other administrative expenses - (1.112) (1.112) (100,0%) 

taxes - 359 (359) (100,0%) 

Profit for the year (5.723) (49.394) (43.671) (88,4%) 


Number of branches 1 1 - 

Total work force (actual employees+personnel on leasing contracts) 227 218 9 





(*) Inclusive of bonds subscribed by the Parent amounting to 4.321 million euro as at 31 st December 2010 (4.349,1 million euro as at 


(**) In 2010 the item included a provision of eight million euro in relation to estimated risks on the part of the lending portfolio 

guaranteed by Ktesios Spa. 

(***) In 2009 the item included a positive non-recurring impact resulting from an IRAP [local production tax] refund of 0,2 million euro. 

The bank ended the year with a loss of 5,7 million euro compared to -49,4 million euro in 

2009. Despite incurring a loss again, the improvement that occurred in both net operating 

income and in trends for impairment losses on loans, nevertheless resulted in a return to 

profit before taxes. 

Net operating income amounted to 164,7 million euro (+33,6 million euro; +25,7%), due 

primarily to good performance by revenues, up to 223,9 million euro (+30,7 million euro; 

+15,9%), but also to a reduction at the same time in expenses, down to 59,1 million euro (-2,9 

million euro; -4,7%). 

Operating income included the following: 

- net interest income, which was yet again the main driver, rising to 200,5 million euro (+26 

million euro) as a result of positive performance by average volumes of business and by the 

spreads. While interest income was more or less unchanged, the increase was attributable 

mainly to interest expense, within which the positive impact on securities issued was partly 

offset by negative differentials on hedges on loans to customers; 

175

- net commissions, which fell to 17,6 million euro (-8,2 million euro), within which 

commissions on insurance policies decreased in particular, affected by the lower volumes of 

loans granted; 

- net income from trading, hedging and disposal/repurchase activities, which again showed 

an overall loss (-24 million euro), the result of an improvement in hedging activity and 

poorer performance by trading activity, affected solely by the failure to meet the “effective 

hedge” criterion (i.e. the unwinding of derivative positions); 

- other net operating income/(expense) increased to 29,8 million euro (+5,1 million euro), 

benefiting from lower prior year expenses. 

Operating expenses included the following: 

- other administrative expenses, which fell to 45,9 million euro (-3,1 million euro), mainly in 

relation to lower expenses for “Professional and advisory services” and for the “Use of 

networks and ICT services”, despite increases in expenses for credit recovery expenses and 

for IT system management services outsourced to other Group member companies; 

- personnel expense on the other hand increased to 13 million euro (+0,3 million euro) partly 

in relation to increased personnel numbers. 

As a result of the performance reported above, the cost/income ratio improved over twelve 

months from 32,14% to 26,42%. 

While net impairment losses on loans (-35 million euro to 149,8 million euro) still remained at 

high levels, they benefited from action taken to contain risks, which took the form of reducing 

loans to “non captive” customers originated through the network of the SILF Group and also to 

“captive” customers originated through Group branches. 

On the other hand an increase was recorded for net provisions for risks and charges (+7,5 

million euro to 8,9 million euro), which took account of possible operational risks connected 

with salary backed lending business. 

Pre-tax profit, amounting to six million euro, recorded a considerable improvement compared 

to the loss of 55,2 million euro incurred in 2009. The final loss for the year, amounting to 5,7 

million euro, was affected by a particularly severe tax impact (11,7 million euro), due mainly to 

the limits on the deductibility of impairment losses on loans. 

As concerns the statement of financial position, the lending portfolio recorded a moderate 

increased in 2010, while volumes of business decreased. 

Total outstanding loans increased by 3,4% to 11,2 billion euro (+0,4 billion euro) over twelve 

months with a change in composition in favour of mortgages (up from 42,3% to 45,9% of the 

total) and salary backed loans (up from 23,6% to 27,7%), while the percentages of both non 

captive loans originated by SILF (down from 14,8% to 9,7%) and captive loans originated by 

Group branches (down from 18,4% to 15,9%) fell. On the other hand, the remaining types of 

lending were practically unchanged (down from 0,9% to 0,8%). 

The total amount of new loans granted, on the other hand, fell by 39,3%, falling from 4,4 

billion euro in 2009 to 2,7 billion euro. In detail, these consisted of the following: over one 

billion euro of salary backed loans originated by external networks (Prestitalia 1 and others, - 

24,8%); approximately one billion euro of mortgages (-33,5%), mainly through the network of 

BY YOU Spa 2 ; 0,7 billion euro of personal and special purpose loans distributed through the 

network banks (-36,5%) and the SILF distribution network (-80,3%). 

As concerns mortgages, an important project was prepared to be implemented in 2011. It 

involves the transfer to the network banks of disbursement activities and overall customer 

relationship management, designed on the one hand to ensure greater stability over time for 

lending business, reducing expenses connected with early repayments and on the other to 

1 On 10 th January 2011, B@nca 24-7 acquired the entire investment in the share capital of Prestitalia Spa from Barberini Sa, a 

company 100% controlled by UBI Banca. 

2 Contacts continued in 2010 between the Parent and the BY You distribution network designed to identify more appropriate methods 

to renew the commercial agreement with B@nca 24-7, which expires on 5 th October 2011. On 15 th February 2011, an “amendment 

agreement” to that commercial agreement was signed, designed to limit the exclusive rights of the bank for a limited period of time, 

thereby allowing BY YOU, in come cases, to propose property mortgages to other intermediaries. 

176

generate improved and sustainable economic returns by exploiting cross selling possibilities 

with other Group products. 

At the end of the year total active cards issued by B@nca 24-7 to Group customers numbered 

close to 505 thousand, an increase year-on-year of 6,1% compared to 476 thousand at the 

end of 2009. A particularly significant increase in new issues of cards was recorded, mainly 

the result of the process of replacing multifunction cards which commenced in July. 

Over the twelve months in question, net deteriorated loans increased from 198 million euro to 

269,3 million euro (+36%): net non-performing loans increased from 111,5 million euro to 

173,7 million euro (+55,7%), net impaired loans rose from 61,6 million euro to 73,1 million 

euro (+18,6%), while exposures past due and in arrears fell from 24,9 to 22,6 million euro (- 

9,3%). At the same time as the action already mentioned concerning new loans was taken to 

reduce risk in the loan portfolio, in 2010 the bank took further initiatives to improve the 

management of credit quality. It brought its organisational structure into line with that of the 

Group with the creation of a specific unit entitled “Credit support and monitoring” and it 

intensified controls on documentation of customer personal details and income, introducing 

more stringent credit rules on mortgage lending 3 . 

Lending business is financed mainly through intragroup interbank funding (current accounts 

overdrafts with UBI Banca and Banca Popolare di Bergamo; term deposits and repurchase 

agreements with the Parent, where the collateral consists of senior securities resulting from 

securitisations), but also through the issue of bonds subscribed by the Parent 4 . 

The net interbank position as at 31 st December 2010 was therefore again one of debt of -7,8 

billion euro, with no significant change compared to the previous year (-7,9 billion euro). 




The Board of Directors has proposed carrying forward the loss for 2010 amounting to 5,7 

million euro. 

3 In accordance with new Group policies, mortgages with a loan to value of greater than 80% were progressively reduced from the 

beginning of 2011 (a maximum of 5% of loans for mortgages with an LTV of greater than 80% and a maximum of 0,5% for 

mortgages with an LTV of greater than 95%). 

4 At the end of August the Banca issued a bond with a seven year maturity, subscribed entirely by the Parent, amounting to 420 

million euro. This issue partly offset the early redemption of another issue for a nominal amount of 450 million euro, maturing in 

2015. 

177

IW BANK SPA 


31.12.2010 31.12.2009 Change 

% change 


Loans to customers 207.028 149.538 57.490 38,4% 

Direct funding 1.513.127 1.469.381 43.746 3,0% 

Net interbank position 401.300 516.338 -115.038 -22,3% 



Equity (excluding profit for the year) 36.065 61.858 -25.793 -41,7% 

Total assets 2.874.217 2.569.415 304.802 11,9% 


of which: assets under management 496.899 331.451 165.448 49,9% 




Net income from trading, hedging and disposal/repurchase activities 7.787 6.589 1.198 18,2% 

Other net operating income/(expense) (*) 4.175 (420) 4.595 n.s. 

Operating income 69.071 70.034 (963) (1,4%) 

Personnel expense (20.577) (19.517) 1.060 5,4% 

Other administrative expenses (31.977) (26.453) 5.524 20,9% 

intangible assets (**) (8.470) (6.510) 1.960 30,1% 



Net impairment losses on loans (969) (5.530) (4.561) (82,5%) 

Net impairment losses on other assets/liabilities (613) - 613 - 

Net provisions for risks and charges (***) (2.933) (2.247) 686 30,5% 

Loss on the disposal of equity investments (****) (1.982) - 1.982 - 


Taxes on income for the year from continuing operations (1.994) (5.720) (3.726) (65,1%) 

Profit (loss) for the year (444) 4.057 (4.501) n.s. 


Number of branches 2 2 - 



ROE [profit for the year/equity (excluding profit for the year)] -1,23% 6,56% 


Net non-performing loans/net loans to customers - - 


The figures as at and for the year ended 31 st December 2009 have not been restated on a pro-forma basis to take account of Twice Sim, merged 

on 1 st November 2010, but relate to IW Bank only. 

(*) In 2010 the item included prior year income of 2,5 million euro following the conclusion of a settlement agreement with former 

Directors. 

(**) In 2010 the item included full impairment losses on intangible assets amounting to 1,4 million euro. 

(***) In 2010 the item included a provision of 2,3 million euro in addition to that made in 2009 (one million euro), in relation to 

differences found when inspections were performed on suspense accounts when the migration to the new IT platform was 

performed. 

(****) In 2010 the item included an impairment loss on interests held in InvestNet International and Investnet Italia amounting to two 

million euro. 

For more than ten years IW Bank has specialised in the provision of banking and financial 

services to retail and institutional customers almost exclusively through the internet. Its range 

of services includes trading in financial instruments, the distribution of OICRs (collective 

investment instruments), current accounts, the issue of credit and debit cards, electronic 

money, insurance, personal loans and mortgages. 

As at 31 st December 2010, UBI Banca held 55,274% of the share capital of IW Bank and 

Centrobanca held 23,496%, while 10,336% was held by Webstar Sa and 9,765% by other 

shareholders and the remaining 1,129% consisted of treasury shares. On that same date the 

shares of the bank were listed on the Mercato Telematico Azionario (electronic stock exchange) 

operated by Borsa Italiana. Following the joint acquisition by the parent company, UBI Banca, 

178

and a major shareholder Webstar Sa of over 90% of the share capital (net of treasury shares) 

on 27 th October 2010, they announced their intention not to restore the free float of the IW 

Bank share. UBI Banca therefore committed itself to complying with the obligation to purchase 

the remaining ordinary shares in preparation for the delisting of the share, as already reported 

in the preceding section “The consolidation scope”, which may be consulted. 

During the year just ended the bank strengthened its business model, took action to 

rationalise its equity investments with the mergers of its subsidiary Twice Sim (concluded on 

1 st November) and Investnet Italia, formerly IW Lux Sàrl 5 (decided on 23 rd July) and improved 

its operating processes. Despite the extent of the action taken, the bank recorded considerable 

commercial growth in 2010 which resulted in increases in the main operational performance 

indicators and growing attention to customer requirements. 

In February 2011 the bank successfully migrated from its legacy IT platform onto a new 

platform supplied by the company Cedacri, developed with one of the major technological 

centres in Italy specialised in processing banking and payment transactions with the objective, 

amongst other things, of improving the operational efficiency of customer services. 

In 2010 IW Bank further increased the number of active accounts held, up to 105,8 thousand 

from 99 thousand at the end of 2009 (recalculated to include Twice Sim). Again on a like-tolike 

basis, the average daily number of orders received from customers and implemented fell, 

however, to 35,5 thousand (36,4 thousand in 2009). 

It is underlined that the figures in reclassified statement of financial position and income 

statement presented here have not been restated on a consistent basis to include the figures 

for the merged company Twice Sim, but relate to IW Bank only. 

From an operational viewpoint, the year ended with a loss of 0,4 million euro compared to a 

profit of 4,1 million euro the year before. The result for the year, however, includes nonrecurring 

expense items totalling 3,9 million euro (net of tax), mainly related to management 

decisions concerning the corporate reorganisation of the Group and the replacement of the 

bank’s IT system. Net of those extraordinary items profit for the year amounted to +3,5 million 

euro. 

Net operating income more than halved to eight million euro from 17,5 million euro in 2009 

(-9,5 million euro), affected by growth in expense items (+8,5 million euro to 61 million euro), 

while operating income, which suffered from a fall in net interest income, decreased by 

approximately one million euro to 69,1 million euro. 

Operating income included the following: 

- net interest income amounting to 24 million euro (-8,1 million euro; -25,2%), the result of a 

decrease in interest rates and a change in the composition of the AFS portfolio following the 

sale of part of the fixed rate investments; 

- net commission income, which increased to 33,1 million euro (+1,3 million euro; +4,2%), 

the aggregate result of a fall in commissions on business with customers in the order 

routing area, which was offset by an increase in commissions on assets under management 

and in the banking area; 

- net income from trading hedging and disposal/repurchase activity, which rose to 7,8 

million euro (+1,2 million euro; +18,2%) benefiting from 8,7 million euro of profits on the 

sale of BTPs in the AFS portfolio; 

- other net operating income/(expense), which increased by approximately 4,6 million euro to 

4,2 million euro, benefited from a non recurring item of income amounting to 2,5 million 

euro following the conclusion of a settlement agreement with former Directors 6 . 

Within operating expenses: 

- personnel expense increased to 20,5 million euro (+1,1 million euro), the result, amongst 

other things, of an increase in personnel numbers due to the merger of Twice Sim; 

5 The section “The consolidation scope” may be consulted for further details of the process to streamline the IW Bank Group. 

6 2,1 million euro net of legal costs and the cancellation of a loan to the directors in question. See in this respect the specific subsection 

in the section “Other information” of this report. 

179

- other administrative expenses increased to approximately 32 million euro (+5,5 million 

euro) as a result of increases in IT expenses incurred for the IT migration and for disaster 

recovery and business continuity and in expenses for advisory services for legal affairs and 

CRM; 

- net impairment losses on property, equipment and investment property and intangible 

assets rose to 8,5 million euro (+2 million euro), mainly as a result of full impairment losses 

on intangible assets, largely due to the retirement of the previous legacy IT system and, to a 

lesser extent, to the retirement of software by the subsidiary InvestNet. 

Net impairment losses on loans of one million euro were recognised, a significant reduction 

compared to the end of 2009 (-4,6 million euro), while net provisions increased to 2,9 million 

euro (+0,7 million euro). 

Losses were also recognised on the disposal of equity investments, amounting to two million 

euro, due to the impairment losses on the equity investments in InvestNet International and 

Investnet Italia. 

As concerns the statement of financial position, direct funding exceeded 1,5 billion euro, an 

increase of 3% compared to 2009. 

During the summer IW Bank placed two tranches of a structured bond with the yield linked to 

the performance of the DJ Eurostoxx 5 share index, with capital guaranteed and redemption 

after five years. The bonds, which were issued for a nominal amount of 4.361.000 euro 

(including 2.259.000 placed with ordinary customers), are listed and traded on the 

DomesticMOT market operated by Borsa Italiana. 

Indirect funding from customers increased to three billion euro (+26,4%), partly as a result of 

good performance by assets under management, which rose from 331 million euro to 497 

million euro (+49,9%). 

Lending to customers increased over twelve months from 149,5 million euro to 207 million 

euro (+38,4%) and consisted of mortgages of approximately 117,6 million euro, personal loans 

of 8,8 million euro, the use of credit cards amounting to 14,5 million euro, credit lines for 

leveraged trading with financial leverage and to cover temporary overdrafts amounting to 38,7 

million euro, while the remaining 27,4 million euro related to “Other transactions” (postal 

deposits, security deposits, commercial credit and margins with clearing houses) 

The net interbank position, consisting mainly of positions with the Parent, decreased to 401,3 

million euro (516,3 million euro in December 2009). 

The portfolio of available-for-sale financial assets, amounting to 845 million euro (+57,9 

million euro), consisted mainly of Italian government securities, including 794 million euro of 

floating rate certificates (CCT). 




The proposal to cover the loss of 0,4 million euro is to draw the entire amount from the 

retained profit reserve. 

180

UBI PRAMERICA SGR SPA 


31.12.2010 31.12.2009 Change % change 

OWN "RETAIL CUSTOMERS" 7.724.350 7.264.874 459.476 6,3% 

Of which: customer portfolio management 5.659.178 5.148.719 510.459 9,9% 

Fund based instruments 2.065.172 2.116.155 -50.983 -2,4% 

FUNDS 18.958.811 20.076.424 -1.117.613 -5,6% 

of which: Pramerica funds included in fund based instruments 1.882.328 2.097.040 -214.712 -10,2% 

Other duplications 125.379 75.624 49.755 65,8% 

SICAV’s and other (net of duplications) 371.900 83.567 288.333 345,0% 

TOTAL ASSETS UNDER MANAGEMENT 25.047.354 25.252.201 -204.847 -0,8% 

Income statement 

Net interest income 924 1.706 (782) (45,8%) 



Performance fees 14.982 22.930 (7.948) (34,7%) 

Net income from trading, hedging and disposal/repurchase activity 2.048 466 1.582 339,5% 

Other net operating income/(expense) (43) 667 (710) n.s. 





intangible assets (120) (105) 15 14,3% 

Operating expenses (30.724) (30.373) 351 1,2% 


Net provisions for risks and charges 292 (375) 667 n.s. 


Taxation for the year (19.146) (19.793) (647) (3,3%) 




The figures as at and for the year ended 31 st December 2009 have been restated for consistency to include the results of Capitalgest 

Alternative Investments SGR Spa and UBI Pramerica Alternative Investments SGR Spa, merged into the company on 1 st July 2010. 

As at 31 st December 2010, UBI Banca held 65% of the share capital of UBI Pramerica SGR and the 

remaining 35% was held by Prudential International Investments Corporation. 

Following the streamlining of the product range performed in 2009, in 2010 UBI Pramerica 

SGR also completed the reorganisation of the Group’s asset management activities, designed 

to simplify the management and structure of operations and generally contain costs. In this 

respect: 

- the merger of Capitalgest Alternative Investments SGR Spa and UBI Pramerica Alternative 

Investments SGR Spa into UBI Pramerica SGR Spa became effective from 1 st July 2010, as 

authorised by the Bank of Italy with a provision of 19 th February 2010 7 . The operation – 

preceded in March by the repurchase of 3,75% of the share capital from the management of 

UBI Pramerica Alternative Investments SGR Spa – produced goodwill arising from the 

merger, recognised in the appropriate reserve in equity, of approximately 0,4 million euro, 

without any change to the share capital, having cancelled the shares of the merged 

companies; 

- on the following 3 rd August, the transfer (for consideration of 560 thousand euro) to UBI 

Pramerica SGR was performed of the entire interest in UBI Management Company Sa held 

by UBI Banca Private Investment (99%) and by UBI Banca International (1%). 

Following the conclusion of the agreement for the disposal of depository banking operations, 

from 31 st May 2010 the assets previously administered by the Parent UBI Banca relating to 

7 However, the transaction is effective for accounting and tax purposes from 1 st January 2010. 

181

the management of mutual funds by UBI Pramerica SGR were transferred to RBC Dexia 

Investor Services. 

The inspections commenced in 2009 by the Bank of Italy were officially concluded in 

September with no penalties imposed on the management and supervisory bodies of the 

company. 

UBI Pramerica SGR Spa received important recognition in 2010: 

− the 2010 Lipper Fund Awards Prize as the “Best Italian asset management company in the large bond class” 

as a result of the performance of its bond team over the last three years. UBI Pramerica received two more 

prizes awarded to the UBI Pramerica Euro B.T. fund as the best “Bond Eurozone – short term” fund over ten 

years and to the UBI Pramerica Portafoglio Moderato fund as the best “Mixed Asset EUR Conservative – 

Global” fund over five years; 

− the Triple A Mutual Investment Fund Prize awarded to the UBI Pramerica Portafoglio Moderato fund at the 

Milano Finanza 2010 Global Awards ceremony; 

− the 2009 “High Return Prize”, organised by “Il Sole 24 Ore”, awarded in March to the UBI Pramerica Euro 

Corporate fund as a result of its performance over three years and third place in the classification as “The best 

Italian mutual fund manager in the BIG category” in which companies with assets under management of more 

than 4.000 million euro are grouped; 

− the Morningstar Fund Awards Italy 2010 prize as the “Best euro area corporate bond fund”. 

Further recognition was also received in the first few months of 2011: 

− the “Capitalgest Alternative Conservative” funds received the 2011 “Premio Mondo Hedge Awards” as the 

“best low and medium volatility funds in 2010”; 

− with regard to the 2010 “High Return Prize”, the “UBI Pramerica Obbligazioni Dollari” fund was nominated as 

the “Best American bond fund” as a result of its performance over three years, while UBI Pramerica SGR 

improved is performance over the previous year by finishing in third place in the classification for “The best 

Italian mutual fund manager in the BIG category” 

− the company received the Milano Finanza “Tripla A Fondi Comuni di Investimento” prize for the results 

achieved by the “UBI Pramerica Portafoglio Moderato” and “UBI Pramerica Euro Cash” funds over a period 

of 36 months 

− UBI Pramerica received four prizes at the 2011 Lipper Fund Awards 2011 granted to: the “UBI Pramerica 

Euro B.T.” fund as the best “bond-eurozone-short term” fund over three, five and ten 10 years; the “UBI 

Pramerica Euro Corporate” fund as the best “bond euro-corporates” fund over five years; the “UBI Pramerica 

Euro Medio/Lungo Termine” fund as the best “bond eurozone long term” fund over five years; and “UBI 

Pramerica Portfolio Moderato”, as the best “mixed asset EUR cons-global” fund over five years. 

In terms of volumes, total assets under management by UBI Pramerica relating to ordinary 

customers amounted to 25 billion euro as at 31 st December 2010, a slight decrease compared 

to 25,3 billion euro at the end of 2009. If the customer portfolios managed on behalf of 

institutional customers are also considered, total assets under management by UBI Pramerica 

at the end of 2010 amounted to 29,4 billion euro (net of duplications) compared to 30,4 billion 

euro (again net of duplications) twelve months before. 

From an operating viewpoint, net operating income, down by 4,2 million euro to 57,3 million 

euro, was affected mainly by a contraction in revenues, while expenses remained more or less 

unchanged. 

Within operating income, the reduction in performance fees (-7,9 million euro; -34,7%) was 

only partly offset by the increase in other items of net commission income (a total of +4,5 

million euro; +6,9%). Similarly net interest income, penalised by the fall in lending rates, 

decreased (-0,8 million euro; -45,8%), while net income from disposal and repurchase activity 

(+1,6 million euro) benefited from the sale in the second half of the year of part of the shares in 

UBI Pramerica fund classified within the AFS portfolio. 

With regard to costs, the increase in personnel expense (+0,9 million euro; +6,5%) was offset to 

a large extent by the reduction in other administrative expenses (-0,6 million euro; -3,9%). 

As a result of the performance reported above, the year 2010 ended with a profit of 38,5 

million euro, a decrease compared to 41,4 million euro earned in the previous year. The 

proposal for the allocation of profits is to distribute dividends of 38,4 million euro. 

A change in senior management occurred after the end of the year. Paolo Cavrioli, the General Manager – 

who was appointed to new important positions in the UBI Banca Group – resigned with effect from 1 st 

March 2011 and was replaced by Andrea Pennacchia, previously the chief of the Organisation Area at the 

Parent. 

182

UBI LEASING SPA 


31.12.2010 31.12.2009 Change % change 



Due to customers (*) 682.963 776.360 -93.397 -12,0% 

Net debt with banks -10.501.685 -9.561.805 939.880 9,8% 

1.598 1.141 457 40,1% 

Available-for-sale financial assets 26 26 - - 

Equity (excluding profit for the year) 289.749 289.104 645 0,2% 

Total assets 11.601.054 10.765.141 835.913 7,8% 


Net interest income 114.422 98.776 15.646 15,8% 

Net commission income (2.283) (4.000) (1.717) (42,9%) 

Net loss from trading, hedging and disposal/repurchase activities (14.615) (3.024) 11.591 383,3% 


Operating income 141.561 123.714 17.847 14,4% 


Other administrative expenses (28.979) (26.676) 2.303 8,6% 


intangible assets (603) (640) (37) (5,8%) 


Net operating income 96.159 81.160 14.999 18,5% 

Net impairment losses on loans (114.612) (59.320) 55.292 93,2% 

Net provisions for risks and charges (2.646) (62) 2.584 n.s. 

Profit (loss) on the disposal of equity investments 20 15 5 33,3% 

Pre-tax profit (loss) from continuing operations (21.079) 21.793 (42.872) n.s. 

Taxes on income for the year for continuing operations (**) 447 (10.137) 10.584 n.s. 


of which: other administrative expenses - (115) (115) (100,0%) 

taxes - 37 (37) (100,0%) 

Profit (loss) for the year (20.632) 11.578 (32.210) n.s. 




R.O.E. [Profit for the year/equity (excluding profit for the year)] -7,12% 4,00% 




(*) The item includes variable rate subordinated bonds subscribed by the Parent amounting to 121,1 million euro (84 million euro at 


(**) In 2009 the item included non recurring income resulting from an IRAP (local production tax) refund amounting to 0,6 million 

euro. 

As at 31 st December 2010, UBI Banca held 79,9962% of the share capital of UBI Leasing, 18,9965% was 

held by Banca Popolare di Ancona Spa and the remaining 1,0073% was held by Banca Cooperativa 

Valsabbina Scpa. 

After two years of an appreciable contraction in volumes of business, in 2010 some sectors of 

the leasing market showed slight signs of recovery, while others confirmed the continuation of 

the economic crisis with the absence of investment by firms. 

On the basis of Assilea (national association of leasing companies) data, 2010 ended at 

national level with total contracts signed worth 27,3 billion euro, an increase of approximately 

5% compared to the year before. In terms of business sector there was slight growth in 

machinery and equipment (+3,7%; +317 million euro) and automobiles (+1,7%; +97 million 

euro), while the property sector produced the best result (+9,4%; +1 billion). The aeronautical 

and rail sector, on the other hand, was the only one to perform badly (-16,1%; -207 million 

euro). 

183

The trend for business was in the opposite direction to that for the sector nationally in the 

year just ended with a fall in average business for UBI Leasing. This, however, did not affect its 

third place in the Assilea classification (national association of leasing companies) among 

leasing firms on the Italian market for volume of contracts signed, even if its market share 

decreased to 6,81% (7,95% in 2009). 

The company signed 10.216 contracts for a total amount of approximately 1,9 billion euro, a 

decrease of 10,4% in volumes and of 4,1% in the number of transactions concluded. As can be 

seen from the table, the machinery and equipment and aeronautical sectors recorded the 

greatest decreases, although the property sector also contributed to the general reduction, 

which was only partly offset by the good result for the automobile sector, which performed 

markedly better than the sector nationally, while the trend for the captive business of many 

automobile manufacturers was in the opposite direction 

Performance by business sector 

2010 2009 

% change % change 

Figures in thousands of euro number amount number amount number amount 

Auto 5.745 223.580 5.147 193.676 11,6% 15,4% 

of which: - motor vehicles 3.240 103.752 3.122 101.096 3,8% 2,6% 

- commercial vehicles 1.560 36.237 1.299 32.059 20,1% 13,0% 

- industrial vehicles 945 83.591 726 60.521 30,2% 38,1% 

Machinery and equipment 3.402 390.210 4.298 466.805 -20,8% -16,4% 

Aeronautical 242 93.689 303 154.645 -20,1% -39,4% 

Property 827 1.151.425 905 1.260.102 -8,6% -8,6% 

TOTAL 10.216 1.858.904 10.653 2.075.228 -4,1% -10,4% 

As concerns the statement of financial position, lending to customers reached 9,7 billion euro, 

a slight increase compared to twelve months before (+1,1%). Approximately 28% of this had 

been securitised at the end of December. 

In order to support businesses on its local markets, a distinguishing characteristic of the company and the 

Group historically, UBI Leasing participated in initiatives to assist small-to-medium sized enterprises 

adhered to at Group level: 

- the “General agreement” with the European Investment Bank for the grant of subsidised finance; 

- a further extension until 31 st July 2011 of the “Common agreement for the deferral of SME debts” 8 ; 

Modest performance by lending continued to be accompanied by a progressive deterioration in 

the quality of credit, attributable to the protracted economic crisis, which affected the property 

and machinery and equipment sectors above all, both on the agent and the banking (captive 

market) distribution channels. Gross deteriorated loans rose from 761,7 million euro to 962,2 

million euro, with an increase of 200,5 million euro (+26,3%). The reduction in quality mainly 

affected both non-performing loans (+267,5 million euro), which now account for half of total 

deteriorated loans, and also restructured loans (+52,2 million euro), while decreases were 

recorded for impaired loans (-39,8 million euro) and past due exposures (-79,4 million euro), 

partly the result of transfers to the non-performing loan class. However, this growth was 

accompanied by only a partial increase in the degree of coverage (from 13,5% to 20,1%), which 

remains less than the average for the Group, in relation to both the secured nature of the 

loans (ownership of the asset leased) and the prevalence of property transactions (more than 

70% of outstanding deteriorated loans at the end of 2010). On the other hand the coverage for 

performing loans rose from 0,28% to 0,40%, as a result of an increase in impairment losses 

recognised in the fourth quarter. 

Having reached an extremely critical position, it was necessary to launch a project in that 

same period entitled the “Credit quality project” implemented in co-ordination with the Parent, 

8 UBI Leasing also adhered to a proposal of the Italian Banking Association to support people hit by the earthquake in Abruzzo by 

adapting the agreement mentioned to defer the debts of SMEs to meet specific local needs. The agreement was signed in 2009 by 

the Ministry of the Economy, by the Italian Banking Association and by other associations of the Banche-Imprese Observatory. That 

measure became operational on 14 th August 2010. 

184

designed to rapidly and effectively improve credit quality. The project team conducted andepth 

analysis and review of lending processes, and defined a series of actions that will be 

implemented in 2011. This initiative is focusing on analyses of the existing portfolio, the 

adequacy of specific impairment losses recognised and on the verification of tools, processes 

and organisational units involved in credit management. It will be completed by the end of 

June 2011. 

Again in order to ensure more precise risk management and credit recovery, the Credit Area 

was reorganised in 2010 with the creation of two departments, one for the disbursement of 

loans and one for the recovery of credit. The latter was then provided with three services: one 

for high risk and past due positions; one for restructured and impaired loans; and finally one 

for the management of non-performing loans. 

As concerns the financial management of the company: 

- a programme to strengthen capital was formulated in the first half of the year, which took 

the form of the issuance of a ten-year subordinated bond for a nominal amount of 50 

million euro and the early redemption of a ten-year subordinated bond with a nominal 

value of ten million euro issued on 22 nd December 2004; 

- in accordance with Group policies for the management of the structural balance of the 

company, further lines of medium-to-long term finance were granted in the second half of 

the year amounting to 1.621 million euro. 

From an operating viewpoint, the result for the year was affected by high costs due to the 

deterioration in credit quality, which more than offset the result for net operating income, 

which did in fact increase by 15 million euro compared to the previous year (+18,5% to 96,2 


Operating income (+17,8 million euro to 141,6 million euro) was driven by net interest income 

(+15,6 million euro to 114,4 million euro), while both the trend for other net operating 

income/(expense) (+12,1 million euro to 44 million euro) and for net trading and hedging 

income (-11,6 million euro to -14,6 million euro) was attributable mainly to the Lombarda 

Lease Finance 3 securitisation, which was closed down during the year. 

The increase in expenses (+2,8 million euro to 45,4 million euro) was to a large extent due to 

other administrative expenses (+2,3 million euro to 29 million euro) and in particular to legal 

advisory and credit recovery expenses and to insurance for leased assets. 

Net impairment losses on loans doubled from 59,3 million euro in 2009 to 114,6 million euro 

in 2010. As a consequence the year ended with a loss of 20,6 million euro compared to a profit 

of 11,6 million euro in 2009. 

The proposal to cover the loss is to draw on the extraordinary reserve for 18,6 million euro and 

on the share premium reserve for the remaining two million euro. 




A change in senior management occurred during the year. Gianpiero Bertoli was appointed 

Managing Director of the Board of Directors with effect from 1 st November to replace Maurizio 

Lazzaroni who went into retirement in 2010. 

A project to review the entire organisational structure of the company was also launched in 

December with the objectives of simplifying and streamlining it. It will be completed by the end of 

the first half of 2011. 

185

UBI FACTOR SPA 


31.12.2010 31.12.2009 Change % change 



Due to customers 9.539 15.946 -6.407 -40,2% 

Net debt with banks -2.609.221 -2.192.398 416.823 19,0% 


Total assets 2.775.049 2.366.367 408.682 17,3% 

Income statement 



Net commission income 16.251 16.260 (9) (0,1%) 






intangible assets (649) (349) 300 86,0% 

Operating expenses (21.688) (21.129) 559 2,6% 



Net impairment losses on other assets/liabilities - (89) (89) (100,0%) 

Net provisions for risks and charges (1) (80) (79) (98,8%) 


Taxation for the year (*) (9.794) (10.153) (359) (3,5%) 

Profit for the year 18.601 19.551 (950) (4,9%) 




R.O.E. [Profit for the year/equity (excluding profit for the year)] 17,30% 21,05% 




(*) In 2009 the item included non recurring income resulting from an IRAP (local production tax) refund amounting to 0,2 million 

euro. 

UBI Factor, the Group member company which specialises in factoring business, performs 

“captive factoring” activity, mainly with major international industrial groups and with public 

administrations. In 2010 the company rose from fifth to fourth place nationally in terms of 

outstanding amounts (receivables which have been purchased, but not yet received), with a 

market share of 6,5%, and in the same position in terms of advances with and without 

recourse, with a market share of 7,1%. 

Pursuit of policies continued during the year designed on the one hand to gradually reduce 

business with public administrations as a percentage of revenues and to abandon high risk 

sectors and on the other hand to focus on major large corporate counterparties, with an 

increase in business through the network banks in the light of the commercial co-operation 

agreement signed in 2008 9 . In order to achieve this a “Large corporate commercial plans” 

project was launched to promote growth in business with counterparties of high standing, able 

to provide large volumes of business with very low risk. 

Constant growth in foreign business continued based on factoring for export and import 

transactions with customers of high standing, good profitability and low credit risk, operating 

on both established and developing markets. 

9 A revision of the contents is currently being evaluated, after two years since it entered into force. The purpose is to render the 

commissions paid to the network banks more consistent with UBI Factors commercial strategies and with the contribution made by 

the banks themselves on the basis of indications furnished by the company. 

186

The foreign investments in both the Polish branch in Krakow and the commercial partnership 

with Strateji Faktoring Hizmetleri A.S., a major Turkish factoring company have been 

successful in this respect. With regard to the latter, following an appropriate assessment UBI 

Factor decided to acquire the company, to allow its large corporate customers to develop their 

presence in that particular geographical area, distinguished by increasingly larger domestic 

volumes of business. The relative letter of intent was therefore signed in 2010 which, if there 

are no changes in regulatory and market conditions, will lead to the gradual purchase of the 

entire Turkish company over the next three years. 

The year 2010 ended with a profit of 18,6 million euro compared to 19,6 million euro the year 

before. 

Net operating income generated 31,5 million euro (-6,4 million euro; -16,8%), the aggregate 

result of a fall of approximately 10% in operating income (-5,8 million euro to 53,2 million 

euro) and a modest increase in operating expenses (+0,6 million euro to 21,7 million euro). 

Net operating income included net interest income, down by 10% to 34,8 million euro, but 

perfectly in line with trends on the domestic factoring market and other net operating 

income/(expense), also down by 1,9 million euro to 2,2 million euro due to the failure of a 

significant item of income in 2009 to recur. Net commission income, on the other hand, 

remained stable at 16,3 million euro. 

Expenses items included an increase to 11,2 million euro for personnel expense (+0,5 million 

euro; +5%) due mainly to non-recurring factors (payment of leaving incentives in 2010 

amounting to 0,2 million euro; lower costs of 0,3 million in 2009 due to the release of 

provisions for redundancies in excess of the expected payments), while the reduction by 0,3 

million euro in other administrative expenses was offset by greater amortisation of intangible 

assets. 

As a consequence, the cost/income ratio worsened by five percentage points, rising from 

35,8% to 40,7%. 

Net impairment losses on loans more than halved from over eight million euro in 2009, due to 

an improvement in the quality of the portfolio, which demonstrated the effectiveness of the 

commercial policies in terms of prudent risk management. 

As concerns volumes of business, the total turnover for factoring business generated during 

the year amounted to 7,6 billion euro (+38,1%), including 7,1 billion euro of factoring business 

(+39,2%), which benefited from commercial action targeted at customers of banks in the 

Group, which in terms of volumes reached almost 40% of the total result for UBI Factor. 

As a consequence, loans to customers amounted to 2,7 billion euro (including 3% relating to 

the Polish branch), an increase of 18,1% compared to 2,3 billion euro twelve months before. 

Despite the difficult economic situation for domestic and international business, deteriorated 

loans fell from 48,8 million euro to 17,3 million euro (-65%). More specifically “non-performing 

loans” fell from 13,6 million euro to 11,5 million euro. Impaired positions – consisting mainly 

of receivables purchased relating to public administrations and classified as deteriorated loans 

because of the remaining duration of the loan and not on the basis of the collectability – 

reduced slightly to 4,2 million euro (-0,1 million euro compared to 2009) and exposures past 

due and in arrears fell almost to zero from 31 million euro to 1,6 million euro. 




The proposal for the allocation of profits is to distribute dividends of 4,9 million after allocating 

13,7 million to reserves. 

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Treasury shares 

The companies included in the consolidation did not hold any of their own shares nor those of 

the Parent during the course of 2010 with the sole exception of IW Bank which, as at 31 st 

December 2010 held 831.168 of its treasury shares (corresponding to 1,13% of the share 

capital) for a nominal amount of 207.792 euro and recognised at the purchase price of 

approximately 2,6 million euro. During the year IW Bank repurchased 4.000 treasury shares 

(corresponding to 0,005% of the share capital) with a nominal value of 1.000 euro at a price of 

approximately six thousand euro. 

Litigation 

THE MARIELLA BURANI GROUP 

Following on from what has already been communicated in previous periodic financial reports 

concerning the Mariella Burani Group, we report that with regard to the creditor court action 

taken against Mariella Burani Family Holding Spa (MBFH), Burani Designer Holding N.V. 

(BDH), Burani Private Holding Spa (BPH) and the Mariella Burani Fashion Group Spa (MBFG), 

Centrobanca’s creditor claims were accepted with a final ruling for all the proceedings with 

regard to the receivables resulting from a loan granted in August 2008 to MBFH concerning 

the public tender offer on MBFG shares and also with regard to receivables resulting from 

other loans granted between March 2004 and June 2007 to MBFG. 

As already reported, impairment losses were recognised on the total exposure to the Burani Group 

amounting to 56,5 million euro in 2009, with a further 11,3 million euro recognised in 2010. The latter are 

also in addition to a provision of two million euro, made against risks of revocation action against Mariella 

Burani Family Holding, performed by Centrobanca again in 2010. 

In January 2011, Centrobanca received a letter from the official receiver of BDH in which 

Centrobanca was held responsible for the bankruptcy of BDH as a consequence of the roles it 

played in the public tender offer and of the fall in the price of MBFG shares owned by BDH. 

The relative claim for damages amounted to approximately 134 million euro (the same as the 

average amount indicated by the court appointed expert for the number of MBFG shares 

owned by BDH before the public tender offer). 

The letter was examined by external legal advisors and the Board of Directors of Centrobanca 

assessed the position carefully, making a formal reply to the official receiver, firmly rejecting 

all the allegations made and underlining that the affair had been construed erroneously and in 

a contradictory manner. 

APPEAL BY BANCA REGIONALE EUROPEA AGAINST A FINE IMPOSED BY THE MINISTRY OF THE ECONOMY 

AND FINANCE 

In 2001 the Ministry of the Economy and Finance imposed a fine on Banca Regionale Europea 

(totalling 10,3 million euro) for alleged infringement of Law No. 197/1991 (the “anti-money 

laundering law”). 

A settlement agreement was signed in April 2010, which involved the payment of sum of one 

million euro to the Ministry of the Economy and Finance, while the latter waived its right to 

impose penalties awarded, with the abandonment of all the legal proceedings pending. 

For accounting purposes use was made of the provision that had been made of 5,140 million 

euro, with the recovery of the part in excess, net of the legal costs, in the form of a release of 

provisions for risks and charges (3,9 million euro). 

188

CONCLUSION OF THE APPEAL AGAINST THE FINE IMPOSED BY THE ANTITRUST AUTHORITY 

On 23 rd October 2010 the ruling was published with which the Council of State finally 

quashed the appeal lodged by the Antitrust Authority against the ruling of the TAR 

(Administrative Tribunal) of Latium No. 3685 of 6 th April 2009. This ruling, which upheld the 

appeals of all 23 of the banks that were fined – including Banca Popolare di Bergamo, Banca 

Popolare Commercio e Industria, Banco di Brescia and Banca Regionale Europea – quashed 

the administrative fines which the Antitrust Authority had imposed with a provision of 8 th 

August 2008, for unfair market practices in relation to the transfer of mortgages. 

As already reported, each of the Group banks was fined 450 thousand euro, a sum which was 

then returned by the Ministry of the Economy and Finance following the ruling of the court of 

first instance. In December that same ministry then made an interest payment at the legal 

rate on the sums reimbursed; a total of 74.515 euro recognised in the consolidated income 

statement 2010, within item 10, interest income. 

The ruling by the Council of State – which almost entirely upheld the grounds given by the 

TAR of Latium in the decision of first instance – concluded the affair, testifying to the proper 

conduct of the banks in the Group. 

NOTIFICATIONS 

On 10 th March 2010, the Markets-Insider Trading Office Division of the Consob (Italian 

securities market authority), notified UBI Banca Scpa, as the company into which Banca 

Lombarda e Piemontese Spa (BLP) was merged, of an alleged violation by the Bank pursuant to 

article 187-septies of Legislative Decree No. 58/1998 (Consolidated Finance Act) concerning an 

affair dating back to the beginning of 2006 relating to possible irregularities pursuant to 

article 187 ter of the Consolidated Finance Act (market manipulation) discovered in relation to 

trading in listed shares performed by an untrustworthy employee (subsequently dismissed) on 

an account of Banca Lombarda and on personal accounts of the employee himself, both by 

means of trading performed directly on the Borsa Italiana Spa electronic market and through 

orders placed though intermediaries. 

After filing it’s defence, UBI Banca received a letter dated 7 th March 2011 from the Consob 

informing it that “the Commission, having assessed the results of the investigation, had found 

no grounds for the adoption of penalties and it has therefore closed the relative proceedings”. 

In 2010, the Guardia di Finanza (Finance Police), served eleven “Written notification of 

findings” on nine branch managers of Banca Popolare di Ancona in relation to reporting 

omissions under “anti-money laundering” laws. In nine cases those notifications were also 

served on Banca Popolare di Ancona, as jointly liable. 

The bank filed its defence with the Ministry of the Economy and Finance within the set time 

limits and appropriate provisions were recognised. 

IW BANK 

Following inspections which took place between July 2009 and February 2010, facts and 

situations of bad management and organisational negligence on the part of former directors 

emerged. Consequently, on the basis of a proposal by UBI Banca, the controlling shareholder, 

an ordinary shareholders’ meeting of IW Bank held on 6 th April 2010 authorised the Board of 

Directors of that bank to initiate a corporate liability action, pursuant to Art, 2393, paragraph 

2 of the Italian Civil Code, against the former Managing Director, Pasquale Casale, who had 

been served with an official written warning in relation to liability for mismanagement, 

authorising the board to decide the timing and manner of conducting the action, subject to 

advice concerning the conditions and contents of the legal action from the legal advisors of the 

bank. 

During the shareholders’ meeting held on 24 th September 2010, a motion was approved to 

abandon the liability action against the former director Pasquale Casale. This was decided 

following and in the context of a more general settlement agreement stipulated in July 2010 

between UBI Banca and IW Bank on the one hand and Pasquale Casale and other third 

parties (Benedetto Marti – former Executive Deputy Chairman of IW Bank – and the company 

Casale, Marti & Associati Spa) on the other. This finally concluded the complex litigation 

between the parties. The basic terms of the agreement involved the following: 

- the payment to IW Bank of a lump sum of 2,5 million euro, which was paid to IW Bank 

when the settlement agreement was reached and recognised in the third quarter of 2010 

189

(2,1 million euro net of legal expenses and of the cancellation of amounts payable to those 

same former company officers). That amount, as provided for in the settlement agreement, 

also constitutes, up to an amount of 1.250.000 euro, a guarantee of prompt compliance 

with the reciprocal obligations contained within the said agreement; 

- a non competition commitment on the part of Casale, Marti & Associati Spa and Mr. Casale 

and Mr. Marti until 31 st March 2011 and a commitment not to appoint or solicit the 

appointment of employees, associate workers, financial advisors or customers of IW Bank 

and UBI Banca; 

- a commitment on the part of Pasquale Casale and Benedetto Marti to sell to UBI all the IW 

Bank shares in their possession (through the company Giudoca and Ottotto) and a 

consequent commitment on their part not to purchase shares of IW Bank, neither directly 

nor through third parties, for a period of 12 months following the above sale; 

- the abandonment by Pasquale Casale of all claims against IW Bank arising from his former 

employment relationship as General Manager. 

In conjunction with and at the same time as the settlement agreement was concluded, an 

agreement was signed between IW Bank and the IT supplier Enterprise Spa designed to settle 

all pending items relating to business relations between the bank and Enterprise. The 

settlement agreement concluded also requires Enterprise to provide a guarantee to the bank 

that it will continue to supply contracted services with the professional diligence required, 

until completion of all the activities resulting from the migration of the IT system of the bank 

onto the system supplied by the company Cedacri, which occurred in February 2011. 

With a letter of 12 th April 2010, the Markets Division of the Consob commenced administrative 

penalty proceedings, as the outcome of supervisory inspections conducted into IW Bank, 

which included the inspection performed between 13 th March and 3 rd December 2008. 

More specifically, the bank was charged with violation – relating to the period prior to the 

conclusion of the inspections – of Art. 187 nonies of the Consolidated Finance Act and the 

relative regulations to implement it issued by the Consob, which oblige those authorised to 

“report transactions which on the basis of reasonable grounds may be considered to constitute a 

violation of regulations [concerning market abuse] to the Consob without delay”. 

In this respect the Bank filed its defence with the Consob on 7 th July 2010 in the name of and 

on behalf of all those who had received the letters of notification sent by the Consob on 12 th 

April 2010, giving the grounds for the defence of the Bank itself. 

On 23 rd November IW Bank received a communication informing it of the start of the 

“investigative part of the decision” by the Consob, with the “Investigative Report” attached, 

containing an assessment of the defence filed with the Consob. On the following 23 rd 

December 2010 a note containing additions to its defence was filed with the Consob, prepared 

on behalf of IW Bank and those who had received notifications. 

Inspections 

In February 2010 the Bank of Italy commenced inspections – pursuant to articles 54 and 68 of 

Legislative Decree No. 385/1993 (Consolidated Banking Act) – designed to assess the Group 

with regard to the management, governance and control of credit risk in the corporate 

customer segment, including the state of progress of the project to introduce an internal rating 

system to measure risk, based on internal ratings. The inspections, which involved not only 

UBI Banca but also other banks in the Group, were concluded at the end of July. 

With a communication of 23 rd September 2010, the supervisory authority announced further 

inspections - pursuant to article 68 of Legislative Decree No. 385/1993 – designed to assess 

the Group for liquidity and interest rate risk and related processes of governance, 

management and control. These inspections were concluded in December. 

In both cases the considerations expressed by the supervisory authority contained 

observations, recommendations and suggestions which will be given the maximum 

consideration, in view amongst other things, of the preparation of the new Business Plan. 

Finally on 28 th January 2011, the Bank of Italy announced the commencement of new 

inspections of the UBI Banca Group – again pursuant to Art. 68 of Legislative Decree No. 

385/1993 – into the management and measurement of risks assumed by the product 

190

companies which use large distribution networks (UBI Banca Lombarda Private Investment 

and B@nca 24-7) or operate online (IW Bank). 

On 25 th October 2010, the on site inspection of Banca Popolare di Bergamo by the Consob, 

commenced in December 2009, was completed. It was designed to ascertain proper application 

of provisions concerning the MiFID and illiquid securities. The documentation acquired will be 

sent by the inspection team to the Intermediaries Supervision Office of the Consob for the 

assessment and the preparation of the final report, which had not yet been received at the 

date of this report. 

SANCTIONS 

On 13 th December 2010, the Bank of Italy imposed administrative fines totalling 532 thousand 

euro on the members of the Board of Directors and Board of Statutory Auditors and on the 

General Manager of Prestitalia Spa 1 . 

The fines relate to irregularities found during inspections conducted between 16 th September 

and 4 th December 2009 – when UBI Banca held only an indirect interest of 22,8395% – 

following which the supervisory authority issued a temporary order, dated 3 rd March 2010, to 

suspend activities until the company was recapitalised. 

The increase in the capital occurred in that same month of March, when agreements were 

signed to acquire control of Prestitalia (see the section “The consolidation scope” for further 

information). 

Tax aspects 

Summary of changes introduced during the year 

New legislation on tax that affected the activities of the Group in 2010 was of a limited nature. 

It must nevertheless be considered that the banking industry has repeatedly solicited 

measures on the following issues: 

- abuse of tax law with specific regard to restructuring/reorganisation operations or 

transnational financial operations; 

- criteria for the deductibility of impairment losses on loans for IRES (corporate income tax) 

and IRAP (local production tax) purposes; 

- the tax regime for financial instruments; 

- the VAT treatment of intragroup transactions; 

- and more generally the large tax burden for banks and financial intermediaries also 

compared to tax regimes in other EU countries. 

A further critical aspect for the sector is the application of IFRS standards, which has not been 

effectively accompanied by an appropriate tax framework. 

Furthermore, the Italian tax regime generates substantial recognition of deferred tax assets, 

which in the near future (Basel 3) will be considered as a negative component for the purposes 

of supervisory capital. 

Decree Law No. 225/2010 (known as the “thousand extensions”) – converted with Law No. 10 

of 26 th February 2011 – allows the main items of deferred tax assets (impaired 

loans/intangible assets) to be transformed into tax credits if a loss for the year is recognised in 

a bank’s separate financial statements. This provision is designed to ensure that the deferred 

tax assets just mentioned do not qualify as negative components of supervisory capital. 

1 In accordance with Art. 145, paragraph 10 of the Consolidated Banking Act, the company Prestitalia Spa is civilly liable to make the 

payment, with the obligation to recover the amounts from those responsible. 

191

EXTENSION OF DOMESTIC TAX LEGISLATION TO INCLUDE CONTROLLED FOREIGN COMPANIES 

As already reported, article 13 of Decree Law No. 78/2009, converted into Law No. 102/2009, 

introduced – with effect from 2010 – new and more stringent tax rules concerning business 

with companies located in countries that are considered tax havens, where these are in turn 

subsidiaries of Italian companies (CFC - Controlled Foreign Companies – legislation designed 

to prevent the attribution to foreign companies of earnings which would otherwise relate to the 

Italian parent company). 

With Circular No. 51/E of 6 th October 2010, the tax authorities furnished practical 

instructions on the matter. It specified that the regulations apply to both controlling interests 

in companies resident in countries on the “black list” and in companies resident in countries 

where the level of taxation is 50% lower than the corresponding national IRES (corporate 

income tax) and significant commercial and capital business relations exist with the Italian 

Group to which it belongs. 

An Italian company will not be obliged to tax the earnings of a foreign subsidiary “for 

transparency”, only if it files an application, to the tax authorities by 1 st June 2011 and 

receives approval in time for the subsequent filing of tax returns for the financial year 2010. 

While further clarifications may be issued by the tax authorities, the UBI Group considers that 

once the necessary applications have been made, the conditions for taxation “for 

transparency” are not met because its subsidiaries do not exceed the thresholds set by the 

legislation. In this respect it is not expected that the taxation estimates for 2010 will be worse 

than in prior years, since the only subsidiaries subject to the CFC regime are BDG Singapore 

Pte Ltd and UBI Trust Company Jersey. 

NEW VAT OBLIGATIONS 

Decree Law No. 40/2010, converted into Law No. 73/2010, introduced further reporting 

obligations for VAT taxpayers. More specifically – from 1 st July 2010 – transactions performed 

and received with businesses with headquarters, residence or domicile in determined 

countries with low taxation must be declared (ministerial decrees of 4 th May 1999 and 21 st 

November 2001). The reporting obligation concerns transactions performed since 1 st July 

2010. The return must be filed either monthly or quarterly according to the amount of the 

transactions performed in the preceding four quarters (greater or less than 50 thousand euro). 

The tax authority circular No. 53/E of 21 st October 2010 established that for companies 

operating in the financial sector and especially for those which adopt the regime pursuant to 

Art. 36 bis of Presidential Decree No. 633/1972, the return must only concern income 

transactions subject to VAT and therefore all expense transactions are excluded as are income 

transactions that are exempt, not subject to Vat and excluded from VAT. 

Furthermore, Decree Law No. 78/2010 (converted into Law No. 122/2010) introduced the 

obligation to report transactions for amounts of not less than 3.000 euro subject to VAT to the 

tax authorities via internet from 2010. The provision concerns all VAT taxpayers with regard to 

sales of goods and assets and to services provided and received. The declarations must be 

made by 30 th April of the year following that to which they relate, while for 2010 only they 

must be made by 31 st October 2011. 

Some exclusions are provided for the banking sector relating to information already present in 

the general databank of the tax authorities (e.g. customer accounts). 

BUSINESS WITH NON RESIDENTS – TRANSFER PRICES 

Decree Law No. 78/2010, converted into Law No. 122/2010 introduced special procedures to 

prevent resident companies which hold business relations with foreign subsidiaries from being 

subject to tax penalties in relation to violations concerning the determination of “transfer 

prices” for tax purposes pursuant to Art. 110, paragraph 7 of the Consolidated Income Tax 

Act. 

Following the Provision of the Director of the Tax Authorities issued on 29 th September 2010 to 

implement the above legislation, the tax authorities furnished practical details with Circular 

No. 58/E of 15 th December 2010. 

Briefly details were provided of the contents of the documentation considered indispensable in 

order to be able to benefit from the exemption in the event of assessment for taxes. This 

documentation consists of the “master file” (containing information on the Group) and the 

“national documentation” (concerning the individual company). While the filing of that 

documentation is optional and while transactions with foreign counterparties of the Group are 

192

at present limited to financial business relations, the competent offices of the Parent have 

been asked to identify the most appropriate methods for measuring and comparing intragroup 

prices in line with the OECD Guidelines of 28 th July 2010 and the results of this activity will in 

any case be used to demonstrate the correct determination of intragroup prices. 

Generally speaking, firms which operate with foreign parent companies and subsidiaries are 

hopeful that the financial authorities will simplify the obligations at least in relation to the 

magnitude of transnational business. 

TAX LITIGATION 

Three tax inspections by the tax authorities and Guardia di Finanza (finance police) were 

initiated and/or concluded at Group member companies in 2010. A new inspection was 

commenced at Banca Popolare di Ancona in March 2011 and concerns 2008. 

Further details of tax inspections concerning the Group in recent years and of action taken by 

the tax authorities are given in the Notes to the Consolidated Financial Statements, Part B, 

Section 12.5 Liabilities, Contingent liabilities, which may be consulted. 

Investor relations and external communication 

RELATIONS WITH ANALYSTS AND INSTITUTIONAL INVESTORS AND COMMUNICATION THROUGH THE 

CORPORATE WEBSITE 

The work of the Investor Relations Function, which reports directly to the CEO, continued to 

focus on both equity and debt security markets, under the difficult conditions which again 

continued to characterise markets in 2010. The objective was to ensure maximum 

transparency in disclosures to markets, a constant and traditional trait of the Group, and to 

dialogue with operators in the sector. 

The following deserve mention in this respect: 

• conference calls 2 organised when annual and interim results were approved; 

• the participation of UBI Banca as a speaker at seven international conferences in Milan, 

London and San Francisco to promote knowledge of the Group among institutional “equity” 

and “debt” investors and representatives of the international financial community; 

• periodic meetings with Italian and international investors and with the analysts who cover 

the UBI share (the share is currently followed by 26 brokerage houses, including 18 

international, while the remainder are Italian). 

Altogether senior management and/or the investor relations officer met more than 150 

institutional investors during the year, sometimes on more than one occasion; 

• the very many occasions on which analysts and investors were provided with information in 

response to telephone or email queries, especially in view of the intense reporting activity 

required by the situation on markets. 

Work continued during the year on updating and improving the corporate website 

www.ubibanca.it, in both the Italian and English version, also in the light of the everincreasing 

importance of online communications, both in terms of use and regulations. 

The efforts and investments made to improve online financial communication resulted in UBI 

Banca achieving 14 th position in the Italian league table compiled annually by the specialist 

web ranking company Hallvarsson & Halvarsson, and it again held second position in the 

Italian banking sector. 

2 With a view to encouraging the fullest participation of those potentially concerned, all the invitations (prepared in the English 

language) are not only sent to a mailing list of analysts and investors, but are also communicated to Consob and Borsa Italia Spa 

through NIS (the Borsa Italia network information service) and published on the corporate website at the same time. A copy of the 

presentation is made available on the Bank’s website, in good time beforehand. 

193

PRESS RELATIONS 

Communication activity was performed as always in 2010 with a maximum of transparency 

and co-operation with each publication and with each journalist in order to ensure an 

accurate perception of the distinguishing features and values of the Group. 

The network banks were in involved in the issue of press releases at local level in order to 

attain widespread distribution of information to the public. 

This was also underlined in the particular focus of the Group’s press releases on agreements 

with associations of different types in the single local areas in which it is present, designed to 

enhance the value of being “close to local communities” and to give further visibility to the 

Parent. As a result the network banks increased their visibility in local publications providing 

further visibility to the Parent. 

In 2010 UBI Banca obtained visibility in the Italian press in 9.501 articles, 24,4% of which 

described it in detail, with a readership (an estimate of the number of people who read these 

articles) of more than one billion readers (+21,8% compared to 2009). 

The percentage of positive articles out of total high standing articles was 29,2%, while negative 

articles accounted for 14,2%. 

In this context UBI Banca demonstrated that it was able to maintain a significant presence in 

the national and local media, underlining its corporate and capital soundness, especially when 

faced with the challenges of stress tests, the implications of Basel 3 and the new Payment 

Services Directive regulations. It has consolidated its closeness to local communities which 

goes hand in hand with its highly recognised concrete approach to business. 

EVENTS AND SPONSORSHIPS 

In order to enhance its brand and support commercial advertising the Group has always 

promoted a series of events on its local markets. 

More specifically, UBI Banca organised a road show in important towns and cities to present 

the XV Rapporto Einaudi (Einaudi report) on the global economy and Italy, the result of a 

study performed by the Einaudi Centre and supported by UBI Banca. 

The “U will be International” event, already mentioned, lasted two days during which firms 

were offered the opportunity to meet international specialists of the Group, to see the services 

it provides on foreign markets and to take part in specialist workshops. 

A seminar was held in 16 Italian towns and cities on the Scudo Ter (third version of the “tax 

shield” for the repatriation of capital), on an analysis of the economic scenario, on 

interpretation of it and on practical solutions. 

Sponsorships performed in 2010 can be divided into two categories: social, recreational and 

sports activities and cultural activities. 

With regard to the former, partnerships continued with the Goggi Ski Club in Bergamo and the 

Bergamo international tennis tournament. 

A sponsorship of the cycling team TX Active Bianchi was launched. The team is led by Felice 

Gimondi and dedicated to the mountain bike and cross country fields. The sponsorship 

supports a sport close to nature out in the fresh air. 

Co-operation continued in the cultural field with the “Popotus a scuola” project, organised by 

the daily newspaper Avvenire. UBI Banca has supported this initiative for some years. The 

objective is to help children to read and understand newspapers by using a specific tool to 

attract them. 

The Parent sponsored the publication of the seventh edition of the Federculture Annual 

Report entitled “Culture is needed today. Creativity and knowledge for social well-being and the 

future of the country”. The Annual Federculture Report provides the most complete photograph 

of the world of culture in Italy today and it is the most important source of analyses and upto-date 

information on cultural heritage and activity. 

Finally, co-operation with Mediaset was commenced to support a master in marketing, 

communication and sales management provided by Publitalia ’80. 

194

Social and environmental responsibility 

By progressively integrating social responsibility objectives, UBI Banca pursues the 

convergence of corporate strategies, policies and objectives with its values and principles and 

with the expectations of its stakeholders. The objective is to create sustainable value through 

the control of reputational risk, to establish a strong and distinctive corporate identity and to 

develop a climate of trust with its personnel, its shareholder base and markets 

All the organisational units in the Group are involved in defining and achieving social 

responsibility objectives, with support from the Corporate Social Responsibility Function, 

which formulates proposals for policies and guidelines, contributes to the management and 

control system, supports the involvement of stakeholders and manages reporting activities. 

A summary of the main traits of social responsibility at UBI Banca is given below, while the 

Social Report may be consulted for further information and in-depth analysis. 

CORPORATE GOVERNANCE (Code of Ethics) 

On conclusion of joint activity involving management, consisting of a series of interviews and a 

working group composed of different functions formed by UBI Banca, the network banks and 

the principal product companies, on 13 th and 14 th December 2010 the Supervisory Board and 

the Management Board of UBI Banca approved the Code of Ethics, which is as an integral part 

of the “Organisational, Management and Control Model pursuant to Legislative Decree 

231/01”. All the banks and Group member companies adopted the text approved by UBI 

Banca – with amendments to it, where necessary, required by the specific regulations 

governing their business sectors and/or the foreign country in which they are incorporated – 

through the official approval of it by their respective management bodies. 

The document incorporates the Group Charter of Values and makes reference to the universal 

principles of the Global Compact. It defines the manner in which UBI Banca and the 

companies in the Group intend to pursue their mission and act in dealings with their various 

stakeholders, by basing their management and operating activities on observance of moral and 

legal obligations contained in the code. The document identifies significant stakeholders in the 

Bank’s activities, defines general ethical principles and standards of conduct in dealings with 

stakeholders and it gives details for the implementation and monitoring of the Code itself, 

including the procedures for reporting suspected violations, how to treat them and the 

imposition of penalties where applicable. 

The Code applies to all organisational units and geographical areas in which UBI Banca 

operates and it is communicated to stakeholders through a variety of channels. It will be the 

subject of a training and internal communication programme in 2011 designed for all Group 

personnel and will be updated shortly with the issue of a Code of Conduct for personnel, 

currently being prepared in accordance with the guidelines contained in the current Art. 8.3 - 

Attachment C, which will form an integral part of it. 

THE MARKET 

Business management is oriented towards innovation in products and services, marketing 

approaches and distribution processes consistent with the ethical, social and environmental 

expectations of stakeholders and in implementation of the mutual and community vocation of 

the Group. 

Intense activity was performed during the year to plan and develop initiatives for the weaker 

groups in society and for nonprofit organisations. More specifically, in addition to the action 

taken to assist families and businesses reported in the section on commercial activity, the 

most important initiatives were as follows: 

• the launch of a project to define a service model for third sector organisations and Church 

and religious entities with a special range of products and services. Project work included a 

series of meetings with representatives of both Church and other organisations in order to 

discover their specific needs; 

• the continuation of the partnership with PerMicro (a leading player in the Italian sector) to 

develop micro-credit for social inclusion and to support employment. PerMicro doubled its 

volumes of businesses in 2010 with the grant of 530 micro-loans to families and 105 

micro-loans to start micro-businesses, for a total of 2,9 million euro; 

• the development of a range of products and services for immigrants, as part of the 

programme to acquire new customers on the retail market. 

195

SOCIAL ASSISTANCE 

Depending on the companies to which they belong, Group employees can benefit from the 

following: supplementary forms of pension and health care, insurance policies covering death 

or permanent disablement, gifts on important occasions such as marriages, births and 

adoptions, high school and university graduation, scholarship grants for children, paid leave 

to care for disabled family members, the emergency hospitalisation of family members, the 

birth or adoption of children and when they start nursery schooling. We also make extra 

payments to single income families or those with disabled members. 

Services: in addition to company crèches, these include eight company cultural and 

recreational clubs, holiday accommodation facilities at tourist locations (available to 

personnel and their families under special terms) and shuttle bus services provided for travel 

to and from work. Favourable terms and conditions are granted on charges and commissions 

for banking services along with loans at special rates for the purchase of homes and 

automatic credit on easy terms in line with the best market conditions. 

Solidarity: the Group has supported the Clematis Onlus since 2002. It is an association 

formed by employees and former employees of the former Banca Popolare di Bergamo- 

Credito Varesino. The association was formed to give support to the families of employees, 

whether in service or retired, who have non self sufficient, disabled children. 

SOCIAL INTERVENTION 

The management of social intervention is designed to strengthen and support those large 

numbers of nonprofit organisations which work in the following fields: social, recreational and 

sport; welfare and solidarity; education and training; culture: university and research; 

restoration of artistic heritage and the protection of the environment. 

In 2010 the Group, with contributions from the Parent, the network banks, the main product 

companies and its foundations, disbursed a total of approximately 16,2 million euro (-18,6% 

compared to 2009) in the form of donations and sponsorships. Each entity in the Group 

operates independently in response to the demands it encounters and considers consistent 

with its own values and social responsibility objectives. 

Important initiatives include the longstanding partnership with CESVI (one of the main Italian 

NGOs operating in the field of humanitarian emergencies throughout the world) as part of 

which UBI Banca supported the initiative “CESVI sUBIto for Pakistan” in 2010 for people in 

Pakistan hit by severe floods in the summer of 2010. UBI Banca made its 1.900 branches 

available to receive donations from customers ,which amounted to 30 thousand euro. This was 

then doubled with a contribution of an equal amount made by the Group for a total donation 

of 60 thousand euro. 

ENVIRONMENTAL RESPONSIBILITY 

In addition to its pursuit of full and substantial compliance with regulations in force, it is 

Group policy to contribute to sustainable economic development, thereby also concretely 

implementing the principles of the Global Compact. 

The environmental policy approved in December 2008 commits the Group to reducing its 

environmental impact through the intelligent and responsible management of both direct 

impacts (i.e. impacts generated by its own operating activities through the consumption of 

resources, the production of waste and harmful emissions) and also indirect impacts (i.e. 

impacts generated by the conduct of third parties with whom the Bank does business, such as 

its customers and suppliers). 

With regard to direct impacts the most important objective achieved in 2010 was the exclusive 

use of electricity certified as from renewable sources (RECS certificates) and this made it 

possible to reduce total CO 2 emissions by 46,6%, compared to 2009. Energy consumption 

amounted to 26.129 TOE 3 and waste production remained virtually stable (+2,5% for a total of 

2.153 tonnes). 

As concerns indirect impacts, the Group has been active for some time in its commercial 

activities with “green” products, and that is credit lines provided for investments in energy 

savings and in the diversification of energy sources, with particular attention given to 

3 A tonne of oil equivalent is a unit or measurement which represents the quantity of energy released by burning a tonne of crude oil 

and is equal approximately to 42 GJ (billion joules). The value is set by convention, because different types of oil have different 

values for the heat of combustion and there are many conventions currently in use. 

196

enewable sources or those with a low environmental impact. The New Energy product line is 

for businesses. It comes in two versions, Renewables and Photovoltaic, with approximately 700 

loans granted in 2010 for a total amount of 300 million euro, while the line Sun Strength is for 

private individual customers with over 500 loans granted in 2010 for approximately 12 million 

euro. 

ECONOMIC REPORT 

In 2009 the UBI Banca Group generated economic value of 3.048 billion euro (-0,5% compared 

to 2008), 6,4% of which is retained by the Group with the remainder distributed to 

stakeholders as follows: 47,6% to employees, 23,2% to suppliers, 18,8% to public 

administrations, 3,2% to registered and unregistered shareholders, 0,4% to third parties and 

0,4% to the community and the environment (see the 2010 Social Report for further details). 

REPORTING AND CONTROL 

The Corporate Social Responsibility Report, together with the social responsibility section of 

the Group corporate website, is the main instrument for integrated reporting on the economic 

aspects (the economic value generated and distributed), social aspects (commitments, 

objectives and results achieved in terms of satisfying the legitimate expectations of 

stakeholders) and environmental aspects (commitments, objectives and results for controlling 

direct and indirect impacts) of operations. 

The Group Social Report is prepared annually in compliance with the 2006 Sustainability 

Reporting Guidelines (G3) and the Financial Services Sector Supplement of the Global 

Reporting Initiative 4 (the 2010 edition again achieved an intermediate B+ level of application) 

and it is subjected to an independent audit. It is printed in 3,000 copies, published and 

distributed to shareholders on the occasion of the Annual General Meeting together with the 

Annual Report entitled “Reports and Accounts”. The 2010 edition has been audited by the 

independent auditors, KPMG Spa. 

As occurred last year, for a greater and broader readership of the report, two summary 

versions will be produced again in 2010. One version for the public with approximately 

100.000 copies printed and distributed as a supplement to the weekly Vita Non Profit 

magazine and in the branches of the Group and another distributed exclusively in electronic 

format on the corporate intranet of the Group. Both the full and the summary versions are 

available to the public (the former also in the English language) in the social responsibility 

section of the corporate website. 

Six meetings were held in the second half of 2010 with representatives of trade associations 

and nonprofit organisations, conducted by an independent company using the focus group 

method, in order to verify the level of awareness and agreement with the social responsibility 

policies of the Group and the quality of the reporting provided in the communities concerned 

and to survey expectations and acquire recommendations for improvement. The work 

performed in 2010 concluded a three year cycle of meetings, which involved all the main 

provinces in which the Group network banks are present. 

4 An independent nonprofit foundation located in Amsterdam which was formed from a project started in 1997 by CERES of Boston (a 

coalition of investors, environmental organisations and public interest groups which came together to promote corporate social 

responsibility by addressing businesses directly on social and environmental issues). Its mission is to produce global standards for 

sustainability reporting, thanks to the contribution of hundreds of experts in a large number of countries throughout the world 

197

Legislation on the protection of personal data 

In compliance with Art. 34 of Legislative Decree No. 196 of 30 th June 2003 – legislation on the 

protection of personal data – the companies of the Group subject to that legislation performed 

the periodic update of security programme documents on time and in compliance with the 

recommendations contained in the Attachment B, Technical Regulations, of that decree (rule 

19). 

In order to ensure the accurate and proper preparation of that document – standardising 

operational practices where possible and at the same time defining the scope of responsibility 

of each actor concerned – the Parent prepared specific corporate guidelines to regulate the 

process at UBI Banca, UBI Sistemi e Servizi and in the network banks. These guidelines were 

also used as a standard reference for other banks and companies in the Group required to 

comply with the legislation. 

198

Principal risks and uncertainties to which 

the UBI Banca Group is exposed 

Risks 

The UBI Banca Group attributes primary importance to the measurement, management and 

monitoring of risk, as activities necessary to the sustainable creation of value over time and to 

the consolidation of its reputation on its markets. 

In compliance with the regulations in force for the prudential supervision of banks (Bank of 

Italy Circular No. 263/2006), the Group has put a process in place to calculate its capital 

adequacy requirement – for the present and the future – to meet all significant risks to which 

the Group is or might be exposed (ICAAP - Internal Capital Adequacy Assessment Process). 

In this respect very careful identification is performed on a continuous basis of the risks 

subject to measurement. Risk identification activity is designed to verify the magnitude of 

Group risks already subject to measurement and to detect signals of other types of risk which 

may manifest. Identification involves precise conceptual definition of the risks to which the 

Group is exposed, an analysis of the factors which combine to generate them and a description 

of the relative manner in which they manifest. This activity was achieved by means of a 

centralised process of analysis supplemented by self assessment conducted on all the entities 

of the Group. 

Once the activity to identify significant risks is completed, the ICAAP process involves the 

measurement of the risks identified and the calculation of the capital required to meet it 

(capital adequacy), both at present and in the future. Use is also made of specific and global 

stress tests (by assessing impacts on a single risk and on all risks respectively) to perform a 

better assessment of exposure to risk and of systems for mitigating and monitoring them and 

calculating capital requirements. 

The UBI Banca Group has a system of risk governance and management in place which takes 

account of organisation, regulations and methods in order to ensure consistency in its 

operations and its relative propensity to risk. 

In consideration of its mission, the operations of the Group and also the market context in 

which it operates, the risks to be subjected to measurement in the ICAAP assessment process 

were identified and divided into first pillar and second pillar risks, as required by the relative 

regulations. 

First pillar risks – already managed under the requirements of supervisory regulations – are as 

follows: 

• credit risk (including counterparty risk): the risk of incurring losses resulting from the 

default of a counterparty with whom a position of credit exposure exists; 

• financial risks: risk of changes in market value or in financial instruments held due to 

unexpected changes in market conditions and the credit rating of the issuer; 

• operational risk: the risk of incurring losses resulting from the inadequacy or malfunction 

of procedures, human resources and internal events or from exogenous events. These 

include losses resulting from fraud, human error, business disruption, system failure, non 

performance of contracts and natural disasters and it comprises legal risk. 

199

In addition to first pillar risks, second pillar risks were identified, consisting of the following: 

• risks defined as measurable, for which established quantitative methods have been 

identified, which lead to the determination of internal capital or for which useful 

quantitative thresholds or limits can be defined which, combined with qualitative 

measurements, allow allocation and monitoring processes to be defined; 

• risks defined as non measurable, for which policies and measures for control, reduction or 

mitigation are considered more appropriate because no established approaches exist for the 

measurement of internal capital that are useful for allocation purposes. 

The second pillar risks subject to analysis are as follows: 

Measurable risks: 

- concentration risk: risk resulting from exposures in the banking portfolio to counterparties, 

or groups of counterparties in the same economic sector or counterparties which carry on 

the same business or belong to the same geographical area. Concentration risk can be 

divided into two types: single name concentration risk and sector concentration risk; 

- interest rate risk: current or future risk of a change in net interest income and in the 

economic value of the Bank following unexpected changes in interest rates which have an 

impact on the banking portfolio; 

- business risk: the risk of adverse and unexpected changes in profits and margins with 

respect to forecasts, connected with volatility in volumes of business due to competitive 

pressures and market conditions; 

- equity risk: the risk of losses incurred in the equity investments portfolio. 

- property risk: risk of changes in the value of property assets. 

By convention measurable risks also include those risks for which, although no well 

established approaches exist for the estimate of internal capital, operational limits of a 

quantitative nature, for which there is a consensus in the literature, can be set to measure, 

monitor and mitigate them. These risks are: 

- liquidity risk: the risk of the failure to meet payment obligations which can be caused either 

by an inability to raise funds or by raising them at higher than market costs (funding 

liquidity risk), or by the presence of restrictions on the ability to sell assets (market liquidity 

risk) with losses incurred on capital account; 

- structural liquidity risk: the risk resulting from inadequate matching of maturities for 

assets and liabilities. 

Non measurable risks: 

- risks resulting from securitisations: the risk that the underlying economic substance of a 

securitisation is not fully reflected in decisions made to measure and manage risk; 

- compliance risk: the risk of incurring legal or administrative penalties, substantial financial 

losses or damage to reputation resulting from violations of laws and mandatory external 

regulations or internal regulations (by-laws, codes of conduct and voluntary codes); 

- reputational risk: the risk of incurring losses resulting from a negative perception of the 

image of the Bank by customers, counterparties, shareholders of the Bank, investors, the 

supervisory authority or other stakeholders; 

- residual risk: the risk of incurring losses resulting from the unforeseen ineffectiveness of 

established methods of mitigating risk used by the Bank (e.g. mortgage collateral); 

- strategic risk: the current or future risk of a fall in profits or in capital resulting from 

changes in the operating context, inadequate decision-making, failure to react to changes in 

a competitive environment. 

* * * 

Credit risk constitutes the most important characteristic risk of the UBI Banca Group: 

historically this risk accounts for approximately 90% of the supervisory risk capital. 

The economic recovery in the year just ended was basically weak, after the substantial 

decreases in growth in 2008 and 2009. While timid signs of recovery have been seen, the 

protracted difficulties of the economy in general and the related consumer crisis have 

200

continued to have a negative impact on the ability of businesses and individuals to meet their 

commitments and this has held credit risk at high levels along with increases in problem loans 

and the relative provisions. 

It is considered that again in 2011 there will only be a slow recovery in the causes of risk in 

the financial system and in particular in levels of activity in relation to company earnings and 

household income. 

As concerns structural liquidity risk, the relationship between sources of funding and those of 

lending could be subject to difficulties because on the one hand it will be difficult to reduce 

volumes of lending and on the other hand, the need to replace maturing securities and the 

progressive impoverishment of households will stifle funding markets. However, given the 

maturities of its own bonds, the UBI Banca Group has prepared a structured programme of 

new issues which has been fully implemented to-date. 

As concerns liquidity risk, problems of trust persist on international and interbank markets, 

due above all to fears over the solvency of some sovereign states, in a context of a slowdown in 

traditional funding due to the lower available income of households. The country risk effect is 

penalising Italian banks with their funding on wholesale markets heavily compared to banks 

in other European countries. 

Risks other than those just reported, which are of marginal importance within the UBI Banca 

Group, are not expected to change during the course of the year. 

Detailed information on financial risk management objectives and policies and also on the 

exposure of the Group to price risk, credit risk, liquidity risk and the risk of changes in cash 

flows – pursuant to article 2428 of the Italian Civil Code – is given in Part E of the notes to the 

consolidated financial statements, which may be consulted. 

Uncertainties 

An uncertainty is defined as a possible event for which the potential impact, attributable to one 

of the risk categories just mentioned, cannot be determined and therefore quantified at present. 

The scenario unfolding for the Group is one of volumes of business recovering moderately, low 

profit margins and high credit risk. While the economic recovery has started, it is progressing 

quite differently in different countries: vigorously in emerging economies and slowly in 

advanced economies. Other potential vulnerabilities remain: the rapid growth of debt in some 

countries in the euro area could trigger doubts over the sustainability of public finances; 

markets are still highly volatile and difficulties could arise over the refinancing of huge 

quantities of banking debt in competition with sovereign states and businesses. 

The elements of uncertainty identified could manifest with impacts attributable basically to 

credit risk, interest rate risk and liquidity risk. 

In detail, the main uncertainties identified for 2011 are linked to the following aspects: 

- development of the macroeconomic situation: statistics published since the start of 2011 

have confirmed the continuation of world growth which would suggest that the recovery will 

be consolidated in the current year. Nevertheless temporary slowdowns in growth rates are 

not to be excluded. 

More specifically emerging countries – the growth drivers throughout 2010 – should 

continue to make a positive contribution to the performance of the macroeconomic 

scenario, despite the monetary tightening decided by central banks, including those of India 

and China, to dampen inflation. 

In this international context, Italian GDP grew in real terms in 2010 by 1,2%, driven to a 

considerable extent by the boost in exports, although net of exports the balance of foreign 

trade decreased. A significant contribution to growth in the economy also came from 

201

domestic demand net of inventories. Encouraging signs also arrived from industry, with an 

average annual increase in output of 5.3% and in manufacturing orders of 13.9%. 

With regard to inflation, consumer prices have been affected in recent months, in the euro 

area above all, by the sharp increase in raw materials, and in oil prices in particular, in 

light of the stronger global economic situation and the geopolitical instability in North Africa 

and the Middle East. Trends for commodities prices are also being affected “upstream” with 

pressures on production prices. 

In any event inflation in Italy in 2010 increased to 1,6%, fuelled mainly by prices for goods 

rather than services: 

- performance of financial markets and the yield curve: the process of the strategy to exit from 

the expansionary monetary policies pursued by the ECB to address the market and credit 

crises of previous years continued. In this respect the principal longer term (six and twelve 

month) refinancing auctions were not renewed, but were replaced by shorter three month 

operations. Last year saw growth in pressures connected with the sovereign debt of 

peripheral countries in the euro area (Greece, Spain, Portugal and Ireland in particular). 

The increases in interbank rates that occurred at the end of 2010 followed the process of 

normalisation determined by the gradual removal of extraordinary measures put in place by 

the European Central Bank during the last recession, while swap rates fell sharply. 

Finally, the risk of high volatility in the yields and therefore in the prices of the portfolio of 

owned bonds remains, the result of uncertainties over the solvency of some sovereign states 

and the normalisation of monetary policies. 

The periodic testing of the recoverability of goodwill is to be set against the background 

described. It is based on parameters and information that is significantly affected by the 

macroeconomic context and related to difficulties on financial markets. Consequently it is 

susceptible to rapid changes; 

- changes in the regulatory context: the legislative environment is subject at present to various 

changes. These are the result of both enactments at EU and national level, with the relative 

regulatory provisions to implement them, regarding the provision of banking services (e.g. 

relating to payment services and consumer credit) and also decisions in the courts (e.g. 

relating to the form of contracts, interest and other items of remuneration for banking 

services). This scenario which has introduced discontinuities in operations, could directly 

affect the profits of banks, requiring particular effort both in terms of interpretation and 

implementation. 

* * * 

The risks and uncertainties described above were subject to a process of assessment designed, 

amongst other things, to examine the impacts of changes in market parameters and conditions 

on corporate performance. The Group does in fact possess instruments to measure the possible 

impacts of risks and uncertainties on its operations (sensitivity analysis and stress tests in 

particular), which allow it to rapidly and continuously adapt its strategies – in terms of its 

distribution, organisation and cost management systems – to changes in the operating context. 

Risks and uncertainties are also under constant observation through the implementation of the 

policies and regulations to govern risk adopted by the Group: policies are updated in relation to 

changes in strategy, context and market expectations. Periodic monitoring of policies is designed 

to verify their state of implementation and their adequacy. The findings of the analyses 

performed show that the Group is able to meet the risks and uncertainties to which it is exposed, 

which therefore confirms the assumption that it is a going concern. 

Risks relating to health and safety at the workplace 

(Legislative Decree No. 81 of 9 th April 2008) 

To complete compulsory activity required for compliance with general obligations concerning 

health and safety at the workplace, the new risk assessment documents prepared by the 

Prevention and Protection Service were approved by the Official Employers of Group 

companies in December. These documents were prepared in accordance with articles 28 and 

202

29 of Legislative Decree No. 81/2008, on the basis of methodological recommendations made 

by the Permanent Consultative Commission for Health and Safety at the Workplace (Art. 6 of 

Legislative Decree No. 81/2008) for the assessment of work-related stress risks, published by 

the Ministry of Labour in a circular letter of 18 th November 2010. 

The obligation to also assess work-related stress risk, as part of workplace risks, had in fact 

been postponed repeatedly because that risk is different from “traditional” accident risks, 

where “automatic” techniques of measurement have existed for some time (e.g. noise levels, 

number of hours spent using a video terminal). It had therefore been underlined by all trade 

unions and associations that there was a need for practical guidelines to follow. The 

Commission also stated that the date of 31 st December 2010, contained in the article 28 

mentioned above, is to be considered the date on which assessment activity commences and 

not the date on which it is to be completed by firms subject to the obligation. 

With regard to the methodology, the assessment process will be completed in 2011 in close co-operation 

with the official Occupational Doctors and with the involvement of a significant sample of employees. It 

consists of two stages, one which is necessary and preliminary (the “objective” stage) and a second 

potential stage (the “subjective” stage) to be implemented only if the preliminary stage reveals elements of 

stress risk. 

The preliminary stage consists of measuring numerically appreciable objective factors, relating to: (i) 

events in employment relationships (absences, accidents, employment figures, training hours, workrelated 

litigation, etc.); (ii) the contents of the relationships (work loads and rhythms, hours and shifts, 

etc.); (iii) the context (decision-making autonomy, career development, role in the organisations, etc.). 

These are then to be used as possible indicators of stress. This is performed to analyse and identify the 

organisational antecedents of work-related stress, by acquiring comparative quantitative data, using a 

benchmarking process, which also uses data for the sector. 

If the findings of the first analysis reveal the presence of stress indicators high enough to 

require corrective action, then appropriate preventative action must be planned in addition to 

measures already present and in use, independently of the formal obligation to measure stress 

recently introduced 5 . 

With regard to the more traditional aspects of regulations governing health and safety at the 

workplace, the positive trend for work-related accidents and illnesses in the banking sector 

continued. It was again placed in the lowest class both in terms of absolute severity and the 

frequency and seriousness of accidents. “Accidents while travelling” which occur while 

travelling to and from work were again the most prevalent of total accidents. In this respect 

the data for the UBI Banca Group is not only perfectly in line with those for the sector, but 

Group also pursues special policies designed to reduce road accident risks at the source, by 

encouraging, where possible, the use of public transport even for work activities, or by making 

collective transport facilities available, where restructuring processes result in significant 

travelling requirements for personnel 

As concerns the remaining potential sources of accident risk normally present at the 

workplace, such as those connected with ordinary and extraordinary maintenance work 

performed at the operating premises of the group (termed “interference risks”) the virtuous 

process started in 2009 for the safety management of contracted work continued. This 

included greater involvement of the personnel of the Group’s consortium service company 

which manages relations with Group suppliers directly, while the practice of ensuring the 

participation of members of the Parent’s Prevention and Protection services in meetings for cooperation 

and co-ordination with contractors, as well as to provide support and advice, was 

consolidated. 

Much time was also dedicated to safety management for contracted work in the training day 

organised for all personnel assigned to emergency management in the local operating units of 

the network banks. 

Similarly, co-operation between the Prevention and Protection Service of the Parent and the 

operating units of the consortium service company responsible for property management also 

included accident prevention within its scope along with security issues. It was designed for 

5 Examples include the following: the continuous refinement of communication tools in companies; a significant investment in both 

commercial and behavioural training; numerous welfare initiatives with supplementary insurance, pensions and health care to 

which the company makes a significant financial contribution; the provision, either directly or indirectly, of children’s nurseries; 

collective transport facilities, where restructuring processes may result in significant travelling requirements for personnel. 

203

joint analysis of health and safety issues for personnel, right from the design stages of 

buildings, and also to find the most appropriate operational and management solutions. 

The risk of robbery in the banking sector and in business units in the distribution network in 

particular, where cash is present, remains an important issue, although the number of events 

in absolute terms has fallen constantly and substantially. The project for the widespread 

distribution of automatic systems for cash management has produced an appreciable 

reduction in the quantity of immediately available cash, which is the main objective of bank 

robbers. 

Nevertheless, there has been a certain increase, compared to the past, of robberies no longer 

carried out by single individuals or pairs of robbers, but by organised gangs, who aim to steal 

large sums. These have not hesitated to remain in bank premises for long periods, keeping 

personnel hostage under threat until timer operated safes open. The phenomenon is not just 

significant in terms of the financial damage, but also in terms of prevention risks, because the 

long duration of the robberies raises the level of stress to which employees are exposed as a 

result of the threats received. 

In this respect, the useful psychological assistance provided for years for branch network 

personnel was increased and the classroom training programme furnished by specialist 

psychologists was continued. In addition, further online training has now been provided to 

supplement classroom training, which simulates the real dynamics of the different types of 

robbery and as a result of its very interactive nature, provides personnel with a useful means 

of learning the correct behaviour to employ on those occasions. 

An analysis of the risks and uncertainties to which the UBI Banca Group is exposed in the 

application of health and safety legislation must necessarily consider the relationship of that 

legislation (which as is known requires those occupying the positions of Official Employer, 

senior manager and company officers to act as guarantors and therefore to be personally 

liable) to Legislative Decree No. 231/2001, which regulates the administrative liability of legal 

entities. 

The key connection between Legislative Decree No. 231/2001 and Legislative Decree No. 

81/2008 is article 30 of Legislative Decree No. 81, which gives the adoption and 

implementation of a management and organisation system for health and safety based on a 

specific series of parameters as effective justification for the administrative liability of legal 

entities. If that system is defined in compliance with UNI-INAIL guidelines (SGLS 2001) or with 

the 2007 OHSAS 18001 British Standard, conformity is presumed under the legislation. 

Although the adoption of a system based on the standards just mentioned is not compulsory, 

nor can it in any case guarantee absolute “immunity” from penalties in the event of an 

accident, it is considered that the progressive adoption of a system based in the UNI-INAIL 

guidelines by all the companies in the Group should constitute a concrete objective to be 

achieved. Consequently, an external advisory firm has already been commissioned to 

implement the relative project. 

The unification of the system of accident prevention appointments (appointment of a member of 

senior management of each company as an “Official Employer” and the grant of functional 

powers by the Official Employer” to senior managers operating in the areas more directly 

involved in the operational management of workplace health and safety issues for workers) can 

be considered the first and most important step to take in the introduction of the principles 

indicated in the legislation in question. 

Furthermore, as part of governance activities conducted by the Parent, the protocols for the 

assessment of risks, internal procedures, training programmes and procedures for the 

management of relations with occupational doctors who work for the UBI Banca Group have 

now been standardised, again with a view to consistency and compliance with the 

requirements of paragraph 1 of Art. 30 of Legislative Decree No. 81/2008. 

204

Subsequent events and the business outlook 

for consolidated operations 

Part A, Section 4 of the Notes to the Financial Statements may be consulted for significant 

events occurring after the end of the year. 

*** 

With regard to the business outlook, we report the forecasts given below on the basis of 

information currently available. 

The substantial increase in the cost of funding should not compromise the effect on interest 

income of repricing action already put in place from the second half of 2010. The general level 

of operating income is expected to improve as a result, amongst other things, of repricing 

action taken on commission items, partly inherited from the last quarter of 2010 and partly 

introduced in the first quarter of the current year. 

Operating expenses as a whole are expected to fall slightly compared to 2010. It should 

nevertheless be considered that the achievement of this forecast is dependent on the outcome 

of national labour contract negotiations. Constant measures are being taken to contain 

administrative expenses. 

An improvement is also forecast for the quality of credit which should enable an annual level 

for the cost of credit to be achieved that is lower than that recorded in 2010, but which will 

still be conditioned by the unfavourable economic situation. 

Consequently, an improvement in profits on ordinary activities is expected for 2011. 


THE MANAGEMENT BOARD 

205

STATEMENT OF THE CHIEF 

EXECUTIVE OFFICER AND OF THE 

SENIOR OFFICER RESPONSIBLE 

FOR PREPARING THE COMPANY 

ACCOUNTING DOCUMENTS 

206

207

Certification of the consolidated financial statements pursuant to Art. 81-ter of the 

Consob Regulation 14 th May 1999, No.11971 and subsequent modifications and 

integrations 

1. The undersigned Victor Massiah, Chief Executive Officer, and Elisabetta Stegher, Senior Officer Responsible for 

preparing the company accounting documents of UBI Banca Scpa, having taken account of the provisions of 

paragraphs 3 and 4 of article 154 bis of Legislative Decree No. 58 of 24 th February 1998, hereby certify: 

• the adequacy in relation to the characteristics of the company and 

• the effective application 

of the administrative and accounting procedures for the preparation of the consolidated financial statements during 

the course of 2010. 

2. The model employed 

The assessment of the adequacy of the administrative and accounting procedures for the preparation of the 

consolidated financial statements as at and for the year ended 31 st December 2010 was based on an internal model 

defined by UBI Banca Scpa and developed in accordance with the framework drawn up by the Committee of 

Sponsoring Organisations of the Treadway Commission (COSO) and with the framework Control Objectives for IT 

and related technology (COBIT) which represent the generally accepted international standards for internal control 

systems. 

3.Furthermore, it is certified that: 

3.1 the consolidated financial statements: 

a) were prepared in compliance with the applicable international financial reporting standards recognised 

by the European Community in accordance with the Regulation No. 1606/2002 (EC) issued by the 

European Parliament on 19 th July 2002; 

b) correspond to the records contained in the accounting books; 

c) give a true and fair view of the capital, operating and financial position of the issuer and of the group 

of companies included in the consolidation. 

3.2 the management report comprises a reliable analysis of the performance, operating results and position of the 

issuer and of the companies included in the consolidation, together with a description, insofar as they are 

known, of the main risks and uncertainties to which they are exposed. 


Victor Massiah 

Chief Executive Officer 

Elisabetta Stegher 

Senior Officer Responsible for preparing 

the company accounting documents 

(signed on the original) 

(signed on the original) 

208

Independent auditors’ report 

209

210

211

Consolidated 

financial statements

Consolidated Statement of Financial Position 

ble 1: 100O|1 - NO1i “Criteri di redazione” . 

sa 

ASSET ITEMS (figures in thousand euro) 31/12/2010 31/12/2009 

10. Cash and cash equivalents 609.040 683.845 

20. Financial assets held for trading 2.732.751 1.575.764 

30. Financial assets at fair value 147.286 173.727 

40. Available-for-sale financial assets 10.252.619 6.386.257 

60. Loans to banks 3.120.352 3.278.264 

70. Loans to customers 101.814.829 98.007.252 

80. Hedging derivatives 591.127 633.263 

90. Fair value change in hedged financial assets 429.073 301.852 

100. Equity investments 368.894 413.943 

120. Property, equipment and investment property 2.112.664 2.106.835 

130. Intangible assets 5.475.385 5.523.401 

of which: 

goodwill 4.416.660 4.401.911 

140. Tax assets: 1.723.231 1.580.187 

a) current 650.177 744.435 

b) deferred 1.073.054 835.752 

150. Non current assets and disposal groups held for sale 8.429 126.419 

160. Other assets 1.172.889 1.522.214 

Total assets 130.558.569 122.313.223 

LIABILITIES AND EQUITY (figures in thousand euro) 31/12/2010 31/12/2009 

10. Due to banks 5.383.977 5.324.434 

20. Due to customers 58.666.157 52.864.961 

30. Securities issued 48.093.888 44.349.444 

40. Financial liabilities held for trading 954.423 855.387 

60. Hedging derivatives 1.228.056 927.319 

80. Tax liabilities: 993.389 1.210.867 

a) current 441.433 558.997 

b) deferred 551.956 651.870 

90. Liabilities associated with activities under disposal - 646.320 

100. Other liabilities 2.600.165 3.085.006 

110. Post employment benefits 393.163 414.272 

120. Provisions for risks and charges: 303.572 285.623 

a) pension and similar obligations 68.082 71.503 

b) other provisions 235.490 214.120 

140. Fair value reserves (253.727) 235.043 

170. Reserves 2.362.382 2.207.863 

180. Share premiums 7.100.378 7.100.378 

190. Share capital 1.597.865 1.597.865 

210. Minority interests 962.760 938.342 

220. Profit for the year 172.121 270.099 

Total liabilities and equity 130.558.569 122.313.223 

ldi di confronto al 31 dicembre 2006 si riferiscono al solo ex Gruppo BPU Banca.ai “Criteri di redazione” . 

213

Consolidated Income Statement 

figures in thousands of euro 

2010 2009 

10. Interest and similar income 3.525.312 4.213.948 

20. Interest expense and similar (1.378.714) (1.718.320) 

30. Net interest income 2.146.598 2.495.628 

40. Commission income 1.378.117 1.329.184 

50. Commission expense (196.892) (199.009) 

60. Net commission income 1.181.225 1.130.175 


80. Net trading income (loss) (56.891) 13.864 

90. Net hedging income 67.209 15.960 

100. Income from disposal or repurchase of: 17.057 122.115 

a) loans (3.850) (81) 

b) available-for-sale financial assets 31.245 30.516 

c) held-to-maturity investments - 37.441 

d) financial liabilities (10.338) 54.239 

110. Net income/expense on financial assets and liabilities at fair value 6.669 (25.151) 

120. Gross income 3.385.966 3.763.200 

130. Net impairment losses on: (756.653) (914.371) 

a) loans (706.932) (865.211) 

b) available-for-sale financial assets (42.364) (43.883) 

d) other financial transactions (7.357) (5.277) 

140. Net financial income 2.629.313 2.848.829 

150. Net insurance premiums - 169.176 

160. Other income/expense of insurance operations - (149.127) 

170. Net income from banking and insurance operations 2.629.313 2.868.878 

180. Administrative expenses (2.375.174) (2.415.610) 

a) personnel expense (1.451.584) (1.477.200) 

b) other administrative expenses (923.590) (938.410) 


200. Net impairment losses on property, equipment and investment property (109.838) (117.408) 

210. Net impairment losses on intangible assets (130.500) (150.770) 

220. Other net operating income 239.430 235.042 

230. Operating expenses (2.403.291) (2.485.678) 

240. Profits of equity investments 99.027 35.578 

250. Net income on property, equipment and investment property and intangible assets at 

fair value 

- - 

260. Net impairment losses on goodwill (5.172) - 

270. Profits on disposal of investments 14.458 100.099 

280. Pre-tax profit from continuing operations 334.335 518.877 

290. Taxes on income for the year from continuing operations (231.980) (236.885) 

300. Post-tax profit from continuing operations 102.355 281.992 


320. Profit for the year 185.723 287.147 

330. Loss for the year attributable to minority interests (13.602) (17.048) 

340. Profit for the year attributable to the shareholders of the Parent 172.121 270.099 

In considerazione dell’allineamento delle prassi contabili resesi necessarie a seguito della fusione tra gli ex Gruppi BPU e 

Bana Lombarda, nonché della variazione del principio contabile relativo ai piani a benefici definiti per i dipendenti, i 

214

ispetto a quelli già pubosito si rimanda a quanto I 

Iesposto nella sezione relativa ai “Criteri di redazione” . 

icembre 2006 si riferiscono al solo ex Gruppo BPU Banca. 

Consolidated statement of comprehensive income 


10. PROFIT FOR THE YEAR 185.723 287.147 

Other comprehensive income net of taxes 

20. Available-for-sale financial assets (456.017) 254.041 

30. Property, equipment and investment property - 

40. Intangible assets - 

50. Foreign investment hedges - 

60. Cash flow hedges 1.356 10.682 

70. Foreign currency differences - 

80. Non current assets held for sale. - 

90. Actuarial gains (losses) on defined benefit plans (12.537) 3.471 

100. Share of fair value reserves of equity investments valued at equity (30.398) 38.186 

110. Total other comprehensive income (expense) net of taxes (497.596) 306.380 

120. COM PREHENSIVE INCOM E (EXPENSE) (item 10 + 110) (311.873) 593.527 

130. CONSOLIDATED COMPREHENSIVE INCOME ATTRIBUTABLE TO MINORITY INTERESTS 7.017 18.109 

140. 

CONSOLIDATED COM PREHENSIVE INCOM E (EXPENSE) ATTRIBUTABLE TO THE 

SHAREHOLDERS OF THE PARENT (318.890) 575.418 

215

Statement of changes in consolidated equity 

• to 31/12/2010 

(figures in thousands of euro) 

Balances as at 31/12/2009 

Restatement of opening balances 


Allocation of prior 

year profit 

Reserves 

Dividends and other uses 

New share issues 

Repurchase of treasury shares 

Extraordinary distribution of 

dividends 

Change in equity instruments 

Share capital: 1.597.865 - 1.597.865 - - - - - - - - - - 1.597.865 514.687 

a) ordinary shares 1.597.865 - 1.597.865 - - - - - - - - - - 1.597.865 478.597 

b) other shares - - - - - - - - - - - - - - 36.090 

Share premiums 7.100.378 - 7.100.378 - - - - - - - - 7.100.378 78.777 

Reserves 2.207.863 - 2.207.863 69.878 - 84.641 - - - - - - 2.362.382 327.818 

Fair value reserves 235.043 - 235.043 - - 2.241 - - - - - - (491.011) (253.727) 27.876 

Equity instruments - - - - - - - - - - - - - - - 

T reasury shares - - - - - - - - - - - - - - - 

Profit for the year 270.099 - 270.099 (69.878) (200.221) - - - - - - 172.121 172.121 13.602 

Equity attributable to the 

sharehol ders of the Parent 11.411.248 - 11.411.248 - (200.221) 86.882 - - - - - (318.890) 10.979.019 X 

Equity attributable to minority 

interests 938.342 - 938.342 (17.048) - 34.449 - - - - - - 7.017 X 962.760 

Changes in reserves 

Changes during the year 

Equity transactions 

Derivatives on treasury shares 

Stock options 

Consolidated comprehensive income 

Equity attributable to the shareholders 

of the Parent as at 31/12/2010 

Equity attributable to minority interests 

as at 31/12/2010 

216

• to 31/12/2009 



Restatement of opening balances 


Allocation of prior year 

profit 

Reserves 

Dividends and other uses 

Changes in reserves 

New share issues 

Change s during the ye ar 

Equity transactions 

Repurchase of treasury shares 

Extraordinary distribution of 

dividends 

Change in equity instruments 

Derivatives on treasury shares 

Stock options 

Consolidated comprehensive income 

Equity attributable to the Parent as at 

31/12/2009 

Equity attributable to the minority 

interests as at 31/12/2009 

Share capital: 1.597.865 - 1.597.865 - - - - - - - - - - 1.597.865 435.440 

a) ordinary shares 1.597.865 - 1.597.865 - - - - - - - - - - 1.597.865 399.350 

b) other shares - - - - - - - - - - - - - - 36.09 0 

Share premiums 7.100.378 - 7.100.378 - - - - - - - - 7.100.378 85.839 

Reserves 2.443.259 - 2.443.259 9.788 (234.165) (11.019) - - - - - - 2.207.863 347.883 

Fair value reserves (70.29 6) - (70.296) - - 20 - - - - - - 305.319 235.043 52.132 

Equity instruments - - - - - - - - - - - - - - - 

Treasury shares - - - - - - - - - - - - - - - 

Profit for the year 69.001 - 69.001 - (69.001) - - - - - - 270.099 270.099 17.048 

Equity attributable to the 

shareholders of the Parent 11.140.207 - 11.140.207 9.788 (303.166) (10.999) - - - - - 575.418 11.411.248 X 

Equity attributable to minority 

interests 1.123.637 - 1.123.637 - - (203.404) - - - - - - 18.109 X 938.342 

217

Consolidated Statement of Cash Flows (Indirect method) 


A. OPERATING ACTIVITIES 

1. Ordinary activities 84.058 918. 163 

- profit for the year (+/-) 172.121 270.099 

- gains/losses on financial assets held for trading and on financial assets/liabilities at fair value ( -/+ ) 50.222 11.287 

- gains/losses on hedging activities (-/+) (67.209) (15.960) 

- net impai rment losses on loans (+/-) 756.653 914.371 

- net impai rment losses on plant, equipment and investment pr operty and intangible assets (+/-) 240.338 268.178 

- net provisions for risks and charges and other expense/income (+/-) 32.381 36.932 

- net premiums not received (-) - - 

- other insurance i ncome/exp ense not received (+/-) - - 

- outstanding taxes and duties (+) (360.522) (370.840) 

- net impai rment losses on disposal groups held for sale after tax (+/-) - (5.155) 

- other adjustments (+/-) (739.926) (190.749) 

2. Cash flows genera ted/a bsorbed by financial assets (8.758.001) (2.190.821) 

- financi al assets held for trading (1.213.878) 764.754 

- financi al assets at fair value 33.110 261.279 

- available-for-sale financial assets (3.908.724) (1. 409.265) 

- loans to bank s: repayable on demand - - 

- loans to bank s: other loans 157.912 (224.560) 

- loans to customers (4.514.509) (2. 504.011) 

- other assets 688.088 920.982 

3. Cash flows genera ted/a bsorbed by financial liabilities 8.769.541 585.854 

- amounts due to b ank s r epa yable on d emand - - 

- amounts due to b ank s: other payables 59.543 1. 343.512 

- due to customers 5.80 1.196 (1. 285.720) 

- securities issued 3.74 4.444 908 .888 

- financi al liabilities held for trading 99.036 56.133 

- financi al liabilities at fair value - - 

- other lia bilities (934.678) (436.959) 

Cash flows generated/absorbed by operating activities 95.598 (686.804) 

B. INVESTING ACTIVITIES 

1. Cash flows genera ted by 218.289 1.219.026 

- disposals of equity investments 81.095 - 

- d ividends received on equity investments 24.099 10.609 

- disposals of held-to-maturity investments - 1. 083.337 

- disposals of property, equipment and investment property 14.458 19.826 

- disposals of i ntangible assets 811 - 

- disposals of lines of businesses 97.826 105.254 

2. Cash flo ws ab sor bed by (188.471) (338.868) 

- purchases of equity investments (13.988) (55.032) 

- purchases of held-to-maturity investments - (115.373) 

- purchases of property, equipment and investment property (105.507) (88.390) 

- purchases of intangible assets (68.976) (80.073) 

- purchases of lines of business - - 

Cash flows generated/absorbed by investing activities 29.818 880. 158 

C. FUNDING ACTIVITIES - - 

- issues/repurchases of treasury shares - - 

- issues/ purchases of equity instruments - - 

- distribution of dividends and other uses (200.221) (303.166) 

Cash flows generated/absorbed by funding activities (200.221) (303.166) 

CASH FLOWS GENERATED/ABSORBED DURING THE YEAR (74.805) (109.812) 

218

Reconciliation 


Cash and cash equivalents at beginning of year 683.845 793.657 

Cash and cash equivalent inflow on 01/04/2007 following the merger - - 

Total net cash flows generated /absorbed during the year (74.805) (109 .812) 

Cash and cash equivalents: effect of changes in exchange rates - - 

Cash and cash equivalents at end of year 609.040 683.845 

219

PART A – Accounting policies 

A.1 – General Part 

A.2 – The main items in the financial 

statements 

PART B – Notes to the consolidated statement 

of financial position 

Assets 

Liabilities 


PART C – Notes to the consolidated income statement 

PART D – Consolidated comprehensive income 

PART E – Information on risks and the relative 

hedging policies 

PART F – Information on consolidated equity 

PART G – Business combination transactions 

concerning companies or lines of business 

PART H – Transactions with related parties 

Notes to the 

Consolidated 

Financial 

Statements 

PART I – Share based payments 

PART L – Segment Reporting 

The figures contained in the tables in the notes to the financial statements are stated in thousands 

of euro, unless specified otherwise 

220

Part A – Accounting policies 

A.1 – GENERAL PART 

Section 1 Statement of compliance with IFRS 

This consolidated financial report has been prepared in compliance with the international 

financial reporting standards issued by the International Accounting Standards Board (IASB) and 

endorsed at the date of publication and also in compliance with the related interpretations of the 

International Financial Reporting Interpretation Committee (IFRIC) 1 . 

The report is composed of the statement of financial position, income statement, statement of 

comprehensive income, statement of cash flows, statement of changes in equity, the notes to the 

financial statements and the consolidated management report, subjected to audit by the 

independent auditors and it relates to the companies (subsidiaries, associates and companies 

subject to joint control) included in the consolidation. 

The consolidated financial statements as at and for the year ended 31 st December 2010 have been 

clearly stated and give a true and fair view of the capital and financial position, the result for the 

year, the changes in equity and the cash flows. 

SECTION 2 Basis of preparation 

These consolidated financial statements have been prepared according to the general accounting 

principles contained in IAS 1 “Presentation of financial statements” and they therefore report 

information on a going concern basis, recognising income and expenses on an accruals basis, 

without offsetting assets against liabilities and income against expenses. 

The information contained in this annual report is expressed, unless otherwise indicated, in euro 

as the accounting currency and the financial information, the statement of financial position and 

income statement, the notes and comments and the explanatory tables are presented in 

thousands of euro. The relative rounding of the figures has been performed on the basis of Bank 

of Italy instructions. Items for which there are no values for the current and the previous period 

have been omitted. 

The mandatory financial statements used in this annual report comply with those defined in Bank 

of Italy Circular No. 262/2005, as amended by the first update of 18 th November 2009 2 , and in 

addition to the accounts as at 31 st December 2010, they also provide the same comparative 

information as at 31 st December 2009. 

On 16 th February 2011 the Bank of Italy issued “addendum” letter No. 0142023/11 concerning 

“financial statements and supervisory reporting” with which it provided banks and financial 

intermediaries with replies to requests for clarification that it had received concerning the correct 

treatment for the recognition of certain transactions. 

From an initial examination of that document, it was found that the recommendations contained 

in it are mainly already followed by UBI Group practice. 

1 See the “List of IFRS standards approved by the European Commission”. The standards listed there and the relative 

interpretations are applied on the basis of events occurring that are disciplined by them and the year from which they 

must be applied. 

2 And also by subsequent communications from the supervisory authority. 

221

However, investigations concerning certain expense items are in progress with the supervisory 

authority through the Italian Banking Association and therefore no changes have been made to 

the accounting classifications already in use in this year’s financial statements. 

Accounting policies 

The accounting policies contained in Part A.2 concerning the classification, measurement and 

derecognition phases are essentially the same as those adopted for the preparation of the 2009 

annual financial statements. 

The accounting policies employed tend to apply the cost criterion with the exception of the 

following financial assets and liabilities, which are measured using the fair value criterion: 

financial instruments held for trading (including derivative products), financial instruments 

designated at fair value (in application of the fair value option) and available-for-sale financial 

instruments. 

To complete the information, non current assets available for sale (and the liabilities associated 

with them) have been recognised at the lower of the carrying amount and the fair value (net of 

sales costs). 

SECTION 3 Consolidation scope and methods 

The consolidated financial statements include the financial and operating results of UBI Banca 

Scpa and the companies either directly or indirectly controlled by it, including within the scope of 

the consolidation also those companies which operate in sectors different from that to which the 

Parent belongs and the special purpose entities, when the conditions of effective control exist, 

even in the absence of an equity stake, but in relation to what is termed “business”. 

The following principal changes occurred in the consolidation scope as compared with the 

situation as at 31 st December 2009. 

Changes in the consolidation scope 

‐ the disposal, on 22 nd March 2010, of Twice & Partners Corporate Advisers Srl and Twice 

Research Srl, both 100% controlled by Twice Sim Spa; 

‐ the purchase, on 5 th July 2010, of 100% of Sintesi Mutuo Srl by By You Mutui Srl; 

‐ the purchase of 100% of Barberini Sa on 9 th September 2010 by UBI Banca and, through 

it, of Prestitalia Spa which, while previously consolidated according to the proportionate 

method, are now consolidated according to the line-by-line consolidation method; 

‐ the partial disposal, on 23 rd September 2010, of quotas of the company Group Srl which 

therefore is no longer included in the consolidation; 

‐ a change in the percentage of ownership of Permicro Spa following increases in the share 

capital, which increased the number of shareholders and decreased the percentage held by 

the UBI Banca Group. The company was therefore excluded from the consolidation; 

‐ the disposal of 100% of the quotas held in Secur Broker Srl belonging to the UBI Group on 

13 th December 2010. 

Non recurring operations which occurred within the Group 

‐ the merger, on 1 st July 2010, of Capitalgest Alternative Investments SGR Spa and UBI 

Pramerica Alternative Investments SGR Spa into UBI Pramerica SGR Spa; 

‐ with the repurchase of the reciprocally held minority interests which individual banks 

came to possess after the “branch switching” operation performed in January, on 27 th July 

222

2010 the original ownership interests held by UBI Banca in the network banks were 

restored, together with the planned reorganisation of the shareholdings of the two 

foundations, as reported in full in the management report; 

‐ the merger, on 1 st November 2010, of Twice SIM Spa into IW Bank Spa; 

‐ the merger, on 10 th December 2010, of Gestioni Lombarda Suisse Sa into Banque de 

Depots et de Gestion Sa; 

‐ the merger, on 27 th December 2010, of CB Invest Spa into Centrobanca Spa. 

See the section “The consolidation scope” in the management report for further information on the 

changes just reported and for information on operations which resulted in changes in the 

percentages of ownership. 

As concerns changes in the percentage of ownership, these did not determine changes in the 

methods of consolidating the undertakings involved in those operations, except for those just 

mentioned. 

With regard to the consolidation methods used, companies subject to control are consolidated 

using the line-by-line method, those subject to joint control are proportionately consolidated, 

while those interests over which the Group exercises significant influence are valued using the 

equity method. 

The line-by-line consolidation method 

Subsidiaries subject to control are consolidated using the full line-by-line method. The concept of 

control goes beyond a majority percentage interest in the share capital of the company invested in 

and is defined as the power to determine the financial and operating policies of the entity in 

question for the purpose of obtaining the benefits from its activities. 

The line-by-line consolidation method involves summing the items of the income statements and 

statements of financial position of subsidiaries on a line-by-line basis The following adjustments 

are made for this purpose: 

(a) the carrying amounts of the subsidiaries held by the Parent and the corresponding part of the 

equity are eliminated; 

(b) the proportion of equity and of profit or loss for the year attributable to other shareholders is 

stated under a separate item 

If the results of the above value adjustments are positive, these are stated (after first allocating 

them if possible to the assets or liabilities of the subsidiary) as goodwill under item 130 

“intangible assets” on the date of the first consolidation. If the resulting differences are negative 

they are normally charged to the income statement. 

Intragroup balances and transactions, including revenues, costs and dividends are completely 

eliminated. 

The operating results of a subsidiary that is acquired during the period are included in the 

consolidated statement of financial position starting from the date on which it is acquired. 

Similarly, the operating results of a subsidiary that is disposed of are included in the consolidated 

statement of financial position until the date on which control over the company is released. 

The accounts used in the preparation of consolidated financial statements are stated as of the 

same date. 

The consolidated financial statements have been prepared using uniform accounting policies for 

like transactions and events. 

If a subsidiary uses different accounting policies from those employed in the consolidated 

financial statements for like transactions and other events in similar circumstances, value 

adjustments are made to its accounts for the purposes of the consolidation. 

223

The proportionate method 

An equity investment is considered as subject to joint control even in the absence of equal voting 

rights, if control over the operating activities and strategic policies of the company invested in is 

shared with others on the basis of contractual agreements. 

Application of the proportionate method involves the inclusion in the investor’s statement of 

financial position of its share of the assets controlled jointly and of its share of the liabilities for 

which it is jointly responsible. 

The income statement of the investor includes the relative share of the income and expenses of 

the jointly controlled entity. 

Intragroup balances and transactions, including revenues, costs and dividends are eliminated on 

the basis of the share of joint control. 

The investor ceases the use of the proportionate consolidation method for the purposes of 

consolidation from the date on which it ceases to have joint control over the investment 

The equity method 

Equity investments over which the Group exercises significant influence, which is the power to 

participate in the financial and operating policy decisions but not to control or have joint control 

over them are measured using the equity method. 

Under this method an equity investment is initially recorded at cost and the carrying amount is 

increased or decreased to reflect the investor's share of the profit or loss of the associate after the 

acquisition date. The proportion of the profit or loss for the year made by the investee attributable 

to the investor is stated in the income statement of the latter. Dividends received from an investee 

reduce the carrying value of the investment; adjustments to the carrying amount may also be 

required arising from a change in the portion of the investee's equity attributable to the investor 

that have not been recognised in the income statement. These changes include changes arising 

from the revaluation of property, equipment and investment property from exchange rate 

differences on items in foreign currencies. The portion of those changes attributable to the 

investor are recorded directly in its equity. 

Where potential voting rights exist, the investor's share of profit or loss of the investee and of 

changes in the investee's equity is determined on the basis of present ownership interests and 

does not reflect the possible exercise or conversion of potential voting rights. 

Where the investee incurs continued losses, if these exceed the carrying value of the investee, the 

carrying value is written off and further losses are only recognised if the investor has contracted 

legal or implicit obligations or has made payments on behalf of the investee. If the investee 

subsequently realises a profit, the investor resumes recognition of its share of the profits only 

after reaching the share of the profit which was previously not recognised. 

For the purposes of consolidating investments in associates the figures from the financial 

statements prepared and approved by the boards of directors of the individual companies are 

used. Where accounts prepared according to international standards are not available those 

prepared according to national accounting standards are used after first verifying that there are 

no significant differences. 

The consolidating entity ceases use of the equity method from the date on which it ceases to 

exercise significant influence over the associate and the investment is classified under either 

“Financial assets held for trading” or “available-for-sale financial assets”, according to the case, 

starting from that date on condition that the associate does not become a subsidiary or subject to 

joint control. 

224

1. Equity investments in companies subject to exclusive control and to joint control (proportionately consolidated) 

Name 

He adquarters 

Share capital 

Details of investment 

Investing company 

A.1 Line-by-line consolidated companies 

1. Unione di Banche Italiane Scpa - UBI B anca Bergamo 

PARENT 

2. 24 -7 Finance Srl Brescia euro 10.000 4 UB I Banca Scpa 10,000% 10 ,00 0% 

3. Albenza 3 Srl Mil an euro 10.000 4 X X X 

4. Barberini Sa Brussels (Belgium) euro 3.092.784 1 UB I Banca Scpa 100,000% 100,000% 

5. BDG Singap ore P te L td Singapore Singapore dollars 325.000 1 Banque d e Depots et de Gestion Sa 100,000% 100 ,00 0% 

6. B@nca 24-7 Spa Bergamo euro 316.800.000 1 UB I Banca Scpa 100,000% 100,000% 

7. Banca Carime Spa Cosenza euro 1.46 8.208. 505, 92 1 UB I Banca Scpa 92,832% 92 ,83 2% 

8. Banca di Valle Camonica Spa Breno (BS) euro 2.738.693 1 UBI Banca Scpa 74,244% 82,960% 

Banco di Brescia Spa 8,716% 

9. Banca Lomb arda Prefer red Capital C ompany LLC Delaware (USA) euro 1.000 1 UB I Banca Scpa 100,000% 100 ,00 0% 

10 . Banca Lombarda Preferred Securities Trust Delaware (USA) euro 1.000 1 UB I Banca Scpa 100,000% 100 ,00 0% 

11. Banca Popolar e C ommercio e Industria Capital Trust Delaware (USA) euro 1.000 1 BPC I Funding Llc - USA 100,000% 100,000% 

12. Banca Popolar e C ommercio e Industria Funding LL C Delaware (USA) euro 1.000.000 1 UB I Banca Scpa 100,000% 100,000% 

13. Banca Popolar e C ommercio e Industria Spa Mil an euro 934.150. 467, 60 1 UB I Banca Scpa 75,077% 75,077% 

14. Banca Popolar e di Ancona Spa Jesi ( AN) euro 122.343.580 1 UB I Banca Scpa 92,898% 92,898% 

15. Banca Popolar e di Bergamo Spa Bergamo euro 1.350.514.252 1 UB I Banca Scpa 100,000% 100,000% 

16 . Banca Regionale Europ ea Spa Cuneo euro 46 8.880. 348, 04 1 UB I Banca Scpa 74,944% 74 ,94 4% 

17 . Banco di B rescia Spa Brescia euro 61 5.632. 230, 88 1 UB I Banca Scpa 100,000% 100 ,00 0% 

18. Banco di San Giorgio Spa Genoa euro 94.647.277,50 1 UBI Banca Scpa 36,194% 93,527% 

Banca Regionale Europea Spa 57,333% 

19 . Banque de Depots et de Gestion Sa Lausanne (Switzerl and) Swiss francs 10.000.000 1 UB I Banca Scpa 100,000% 100 ,00 0% 

20. BPB Capital Trust Delaware (USA) euro 1.000 1 BPB Funding Llc - USA 100,000% 100,000% 

21. BPB Funding LLC Delaware (USA) euro 1.000.000 1 UB I Banca Scpa 100,000% 100,000% 

22. BPB Immobiliare Srl Bergamo euro 185.680.000 1 UBI Banca Scpa 100,000% 100,000% 

23. Centroba nca Spa Mil an euro 369.600.000 1 UB I Banca Scpa 92,382% 97,853% 

Banca Popolare di Ancona Spa 5,471% 

24 . Centroba nca Svilupp o Impresa SGR Spa Mil an euro 2.000.000 1 Centrobanca Spa 100,000% 100 ,00 0% 

25 . Corali s Rent Srl Mil an euro 400.000 1 UB I Banca Scpa 100,000% 100 ,00 0% 

26. FinanzAttiva Ser vizi Srl Bergamo euro 5.660.000 1 UB I Banca Scpa 100,000% 100,000% 

27. Invesclub Srl Mil an euro 10.000 1 IW B ank Spa 100,000% 100,000% 

28. Investnet International Sa Luxembourg euro 12.478.465 1 IW B ank Spa 100,000% 100,000% 

29. IW Bank Spa Mil an euro 18.404.795 1 UB I Banca Scpa 55,274% 78,770% 

Centrobanca Spa 23,496% 

30. Investnet Italia Srl Milan euro 5.000.000 1 IW Bank Spa 100,000% 100,000% 

31 . Lombard a Lease Fina nce 3 Srl Brescia euro 10.000 4 UB I Banca Scpa 10,000% 10 ,00 0% 

32 . Lombard a Lease Fina nce 4 Srl Brescia euro 10.000 4 UB I Banca Scpa 10,000% 10 ,00 0% 

33. Orio Fi nance Nr. 3 Plc Dublin (Ireland) euro 10.000 4 X X X 

34 . P restitalia Sp a Rome euro 46.385.482 1 Barb erini Sa 100,000% 100 ,00 0% 

35. Silf - Soci età Italiana Leasing e Finanziamenti Spa Cuneo euro 2.000.000 1 UB I Banca Scpa 100,000% 100,000% 

36. Sintonia Finance Srl Milan euro 10.000 4 X X X 

Type of 

ownership 

% held 

% of vot es 

225

37 . Società Bresciana Immob iliare - Mobi liare SBIM Spa Brescia euro 35.000.000 1 UB I Banca Scpa 100,000% 100 ,00 0% 

38 . Società Lombarda Immobil iare Spa - SOLIMM Brescia euro 100.000 1 UB I Banca Scpa 100,000% 100 ,00 0% 

39. UBI B anca Inter national Sa Luxembourg euro 59.070.750 1 UB I Banca Scpa 90,603% 100,000% 


Banco di San Giorgio Spa 0,173% 

Banca Popolare d i Berga mo Spa 3,372% 

40 . UBI B anca Private Investment Spa Brescia euro 67.950.000 1 UB I Banca Scpa 100,000% 100 ,00 0% 

41 . UBI Factor Spa Mil an euro 36.115.820 1 UB I Banca Scpa 100,000% 100 ,00 0% 

42 . UBI Fiduciaria Spa Brescia euro 1.898.000 1 UB I Banca Scpa 100,000% 100 ,00 0% 

43 . UBI Finance Srl Mil an euro 10.000 1 UB I Banca Scpa 60,000% 60 ,00 0% 

44 . UBI Finance 2 Srl Brescia euro 10.000 4 UB I Banca Scpa 10,000% 10 ,00 0% 

45. UBI Gestioni Fiduciarie Sim Spa Brescia euro 1.040.000 1 UB I Fiduciar ia Spa 100,000% 100,000% 

46. UBI Insurance Broker Srl Bergamo euro 3.760.000 1 UB I Banca Scpa 100,000% 100,000% 

47 . UBI L ease Finance 5 Srl Brescia euro 10.000 4 UB I Banca Scpa 10,000% 10 ,00 0% 

48. UBI L easing Spa Brescia euro 196.557.810 1 UB I Banca Scpa 79,996% 98,993% 

Banca Popolare d i Ancona Spa 18,997% 

49. UBI Management Company Sa Luxembourg euro 125.000 1 UBI Pramerica SGR Spa 100,000% 100,000% 

50. UBI Pramerica SGR Spa Mil an euro 19.955.465 1 UBI Banca Scpa 65,000% 65,000% 

51. UBI Sistemi e Servizi Scpa Brescia euro 35.136.400 1 UB I Banca Scpa 70,919% 100,000% 

Banca Carime Spa 2,960% 

Banca Popolare Commercio e Industria Spa 2,960% 


Banca Popolare d i Berga mo Spa 2,960% 

Banca Regionale Europea Spa 2,960% 


Banca 24-7 Spa 1,480% 

Banca di Valle C amonica Spa 1,480% 

Banco di San Giorgio Spa 1,480% 

Centrobanca Spa 1,480% 

UB I Assicur azioni Sp a 1,480% 

UB I Banca Private Investment Spa 1,480% 

UBI Pramerica SGR Spa 1,554% 

UB I Factor Spa 0,740% 

Silf Spa 0,074% 

UB I Insur ance Broker Srl 0,074% 

52 . UBI T rustee Sa Luxembourg euro 250.000 1 UB I Banca International Sa 100,000% 100 ,00 0% 

226

A.2 Proportiona tely consolidated companies 

1. By You Spa Mil an euro 650.000 7 UB I Banca Scpa 40,000% 40,000% 

2. By You Piemonte Srl Ciriè (TO) euro 60.000 7 By You Spa 100,000% 100,000% 

3. By You Mutui Srl Mil an euro 60.000 7 By You Spa 100,000% 100,000% 

4. By You Liguria Srl Genoa euro 60.000 7 By You Spa 100,000% 100,000% 

5. By You Adria tica Srl Bologna euro 60.000 7 By You Spa 100,000% 100,000% 

6. Polis Fondi SGR Spa Mil an euro 5.200.000 7 UB I Banca Scpa 9,800% 9,800% 

7. Si ntesi Mutuo Srl Naples euro 87.165 7 By You Mutui Srl 100,000% 100,000% 

8. UBI Tr ust Company L td Jersey (Grea t B rita in) UK sterling 50.000 7 UB I Banca International Sa 99,998% 99,998% 

Key 

(1) Type of ownership: 

1 = majority of voting rights in ordinary general meetings 

2 = dominating influence over ordinary general meetings 

3 = agreements with other shareholders 

4 = other forms of control 

5 = “unitary management” control under Art. 26, paragraph 1, of “Legislative Decree No. 87/92” 

6 = “unitary management” control under Art. 26, paragraph 2, of “Legislative Decree No. 87/92 

7 = joint control 

(2) Votes available at ordinary shareholders’ meetings, distinguishing between actual and potential 

227

2. Other information 

Companies in which no equity investment is held and for which shares have been received as 

pledges are excluded from the scope of the consolidation, in consideration of the purpose of 

possession, which is to secure the loan granted and not to exercise control and determine 

financial and operating policies in order to obtain the economic benefits deriving from them. 

The statement of financial position, income statement and statement of cash flows of consolidated 

companies which operate with a reference currency other than the euro are translated at the 

exchange rate ruling at the end of the year. All the exchange rate differences resulting from the 

conversion are recognised in a specific reserve in equity. If an investment is disposed of, this 

reserve is eliminated with a simultaneous debit or credit in the income statement at the time of 

disposal. 

International financial reporting standards require the recognition in the financial statements of 

corporate events in a manner which reflects the underlying economic substance of them. 

No equity investments held directly or indirectly by the Parent with an interest of less than 20% 

existed at the reporting date over which it is considered it exerted significant influence. 

Furthermore, with the exception of equity investments held for merchant banking activities 

classified under item 20 “Financial assets held for trading”, no equity investments held directly or 

indirectly by the Parent with an interest of more than 20% existed as at the statement of financial 

position date over which it is considered it did not exert significant influence. 

No significant restrictions existed as at the statement of financial position date on the capacity of 

associate companies to transfer funds to the investing company in payment of dividends or 

repayment of loans or advances. 

The reporting dates of the companies valued according to the equity method and consolidated 

proportionately were the same as that of the Parent. 

SECTION 4 Subsequent events 

With regard to the provisions of IAS 10, subsequent to 31 st December 2010, the reporting date, 

and until 28 th March 2011, the date on which the Annual Report was approved by the 

Management Board for submission to the Supervisory Board, no events occurred to make 

adjustments to the figures presented in the report necessary. 

For information purposes, the following events are mentioned: 

• on 19 th January 2011, the appointment of Maximum Capuano to the top management of 

Centrobanca was announced, effective from 1 st February. Capuano will occupy the position of 

Managing Director as soon as the amendment to the corporate by-laws required for his 

appointment can be made; 

• on 25 th January Centrobanca, received a claim for damages from the official receiver of Burani 

Designer Holding NV. The allegations made were all rejected, underlining that the affair had 

been construed erroneously and in a contradictory manner (the section “Other information” in 

the management report, may be consulted for further information); 

• on 11 th February 2011, Ktesios Spa – a company that specialises in the salary backed loans 

sector and which operates as an agent of B@nca 24-7, providing services, partly through an 

associate company, for the recovery of credit (on the basis of “deducted for non payment” 

clauses) – in consideration of the constant imbalance in its cash flows, announced that it had 

made proposals to its governing bodies to take appropriate corporate ownership initiatives, 

including a possible proposal to go into voluntary liquidation. With a provision of 8 th March 

2011, the Bank of Italy removed the company from the list of specially authorised 

intermediaries pursuant to Art. 107 of the Consolidated Banking Act, while it only maintained 

its registration on the general list of intermediaries pursuant to Art. 106 of the consolidated 

banking act. It was therefore allowed to continue with the disbursement of loans stipulated 

prior to the provision; 

228

• a series of study and assessment activities were commenced in the first quarter of 2011 of a 

strategic nature to identify the best options for the development and enhancement, including 

the use of external resources, of the activities performed at present by the Group’s asset 

management company in the funds of hedge funds sphere. The finalisation of these activities is 

not expected to be complete before the third quarter of the current year, in consideration, 

amongst other things, of the complex authorisation procedures involved. It is underlined that 

these assessments have no impact on the consolidated financial statements as at and for the 

year ended 31 st December 2010; 

• on 28 th March 2011, the Management Board of UBI Banca passed a resolution, with the 

approval of the Supervisory Board, to submit a proposal to an extraordinary Shareholders’ 

Meeting of the Bank, for examination and approval, requesting authorisation to increase the 

share capital by up to one billion euro with option rights for shareholders and holders of the 

convertible bonds “UBI 2009/2013 Convertibile con facoltà di rimborso in azioni”. That 

authorisation will probably be used by the end of the summer, if market conditions allow and 

subject to obtaining the necessary official authorisations. The new Business Plan will form an 

integral part of the relative prospectus. 

The Group has always considered capital solidity to be one of its distinguishing features and its 

consolidated capital is of high quality with 94% of its tier one capital consisting of core tier one 

capital (share capital + reserves) and only 6% of innovative equity instruments. As a result of 

that strength, despite the rapid deterioration in the economic environment, the Group has 

continued to be able to support its customers, increase its market share and pay regular 

dividends, while it has had no need of government assistance. 

Recent developments connected with the expected future levels of the new Basel 3 capital 

adequacy requirements, market trends and changes in the economic environment, together 

with the imminent launch of a new Business Plan, have nevertheless led the Group to 

reconsider its capital position with the following aims: 

- to position itself at a higher than average level, by taking action in advance with respect to 

its competitors, consistent with the prudence and realism that distinguishes the Group; 

- to improve the mix and quality of its capital, strengthening its “common equity”, as required 

by the new regulations; 

- to avoid the issue, in the short term, of new high cost capital instruments, for which the 

future eligibility to meet capital requirements also remains uncertain, in the absence of 

certain rules governing the required structure and tax treatment; 

- to grasp opportunities for endogenous growth during the period of the Business Plan, 

pursuing a sustainable dividend policy at the same time. The amount of the proposed 

increase in the share capital is such as to achieve a remuneration of capital consistent with 

its cost; 

- to support and strengthen the ratings assigned by international rating agencies with 

positive impacts on the international perception of UBI Banca and on the cost of funding. 

Once the increase in the share capital is completed and with account taken for changes in 

liquidity, consideration may be given to the possibility, subject to authorisation from the 

competent authorities, of calling in the outstanding innovative equity instruments for a 

nominal amount of 453,5 million euro, which presumably will cease to be included in the tier 

one capital from the end of 2012. In this respect, the following is underlined: 

1. any redemption of currently outstanding innovative equity instruments would give annual 

savings on net interest income of approximately 36 million euro; 

2. the hypothesis of issuing new instruments eligible for inclusion in supervisory capital for an 

amount of one billion euro would have involved a charge (in addition to the regulatory and 

tax uncertainties already mentioned) of over 100 million euro per year (at a hypothesised 

interest rate of higher than 10%) on net interest income, in other words an impact on 

earnings per share and therefore on a possible dividend ranging from approximately 8 to 12 

euro cents (depending on the admissibility or not of the tax deductibility of that cost, not yet 

regulated). 

229

Following the increase in share capital, a simulation on figures as at 31 st December 2010 

showed a core tier one ratio of 8,01%, a tier one ratio at 8,53% and a total capital ratio of 

12,23%. These capital ratios would allow the Group to continue to issue covered bonds without 

limits. 

A capital buffer already mentioned remains available, consisting of an outstanding convertible 

bond amounting to 639 million euro, already convertible since 10 th January of this year, 

maturing in July 2013 and accounting for approximately 70 basis points of the core tier one 

ratio on current figures. 

Further benefits may accrue in future from adopting the advanced approach for the calculation 

of capital requirements for credit and operational risks. 

Finally, with regard to holders of the convertible bond, article 9, “Bondholders rights in the 

event of operations concerning the share capital of the issuer”, of the regulations for that bond 

issue grants them the opportunity to participate in the proposed share issue with one option 

right assigned for each bond held. 

As the sole global coordinator, sole bookrunner and underwriter, Mediobanca – Banca di 

Credito Finanziario S.p.A. has agreed to underwrite – under the usual terms and conditions for 

this type of operation – the subscription of the portion of the share issue that is not taken up 

on conclusion of the offer on the stock exchange. 

Section 5 Other aspects 

Optimisation of branch networks 

A full report on the branch network optimisation operation has been given in the “Management 

report” section of this publication in the section “Significant events that occurred during the 

year”. It involved the transfer, in January, of 14 sets of business units, consisting mainly of 

branches and the subsequent reorganisation of the equity investments, which took place in July. 

Consequently, the effects of the entire operation have been recognised in the financial statements 

presented here. 

More specifically, the operation in question, performed between entities under common control, 

has been recognised in the separate financial statements of the entities of the UBI Group member 

companies in application of “Orientamenti preliminari Assirevi in tema IFRS” (OPI – preliminary 

orientations on IFRS of the Italian National Association of Auditors), since operations of this type 

do not fall within the scope of IFRS 3 “Business combinations”. 

In compliance with those OPI, since the operation was conducted for re-organisational purposes, 

it was therefore recognised on the basis of the carrying amounts, i.e. with no recognition through 

profit and loss. 

The sales of shares by the network banks involved was performed at fair value and the profits on 

the sales were recognised in the separate financial statements of those banks in a separate 

reserve in equity, except for the recognition through profit and loss of the profits on sales to 

counterparties outside the Group. 

The effects in the consolidated financial statements were limited to the recognition in equity of the 

net impacts of transactions with third parties, while the relative taxes, amounting to 18,3 million 

euro, were recognised entirely through profit and loss gross of minority interests. 

Hedge Accounting 

Until 31 st December 2009 the Group used a strategy to hedge interest rate risk for fixed rate 

medium-to-long term assets in compliance with the version of IAS 39 endorsed by the EU (termed 

a “carve out”), which allows a predetermined amount of contractually agreed cash flows (amount 

of cash) to be hedged, for which an entity intends to take out interest rate hedges. 

230

Following the entrance into force of new legislation (the “Bersani Decree”), when interest rates 

suddenly fell, the historical data and the forecast expected cash flows from repayments changed 

substantially and it became necessary to refine the Group’s hedging methods, based nevertheless 

on interest rate hedges, using the same hedging instruments. 

To achieve this, the amount of cash hedged that had reduced following early repayments, 

renegotiations and defaults was reconstituted with effect from 1 st January 2010. From an 

operational viewpoint the fixed rate assets previously not hedged were reclassified into portfolios 

subject to hedging. Also the refinement of the method used to hedge interest rate risk on fixed 

rate medium-to-long term assets involved a change to a percentage hedging approach. This 

percentage represents the expected cash flows because it is established on the basis of an 

estimate of early repayments which will occur in future and may be revised up to a maximum of 

100% of the remaining portfolio as a function of changes in the estimates of early repayments, 

performed necessarily over the duration of the hedging transactions, in order to measure the 

expected risk on the portfolio of outstanding mortgages. 

On aggregate, the above involved the recognition of income in the income statement on 1 st 

January 2010 of 22 million euro net of tax, which partly offset the negative impact of repayments, 

renegotiations and defaults in 2010, amounting to approximately 80 million euro net of tax. 

Collective impairment losses on performing loans 

The credit management and monitoring process updating was completed during the year and it 

included the measurement of collective impairment losses on the performing loans of the network 

banks. 

The activity consisted basically of the scheduled changes to the algorithm used to calculate 

collective impairment losses, in order to fully adopt the data obtained from the Basel 2 model in 

single entities. 

The data in the financial statements as at and for the year ended 31 st December 2010 were 

therefore the first in which the provision for the collective impairment losses of the Group’s 

network banks were calculated by the simple multiplication of the carrying amount, of the 

operational LGD (estimated according to the model) and of the PD (resulting from the application 

of rating models). This was performed in compliance with the decision taken by the Parent 

concerning the impairment of performing loans, which abandoned the reproportioning approach 

introduced at the end of 2008, now that the process designed to gradually eliminate the 

mechanism of redistributing the provision had been completed. 

At the same time a periodic revision of risk estimates was performed by updating risk parameters. 

This activity resulted in an increase in collective impairment losses in the Group’s network banks, 

amounting to 22,4 million euro, due to the inclusion of the historical data series for the more 

recent years, which are critical in terms of risk. 

The introduction of the new generation of rating and LGD models within the Basel 2 validation 

plan on the companies regulatory segment is now being programmed in 2011. 

Accounting treatment for the “overdrawn penalty” 

As already reported in the interim financial report as at and for the period ended 30 th September 

2010, last August, the UBI Group preliminarily revised its regulations for overdrawn penalty 

charges, before broader action is taken to revise terms and conditions for customers. This penalty 

is applied when accounts become overdrawn without authorisation, when overdraft limits are 

exceeded and when accounts continue to be overdrawn and it is basically set at a fixed amount 

231

when unauthorised overdrafts exceed a certain amount and when an account has a negative 

balance for several working days. 

The reason for this new regulation lies with the increased credit risk from overdrawn positions for 

which the bank must obtain adequate remuneration also for exceeding authorised credit limits 

and for unauthorised overdrafts. These are situations which imply the increased credit risk just 

mentioned and for which the Bank incurs an extraordinary cost for rapid processing, operational 

and monitoring activities to manage that risk. 

In consideration of the above, the proceeds from overdrawn penalty charges under the new 

commission regime are recognised in both the mandatory financial statements pursuant to the 

Bank of Italy circular No. 262/2005 and in the reclassified financial statements within the item 

“Interest and similar income”. This decision is based on the fundamental assumption that that 

remuneration is undoubtedly connected with the use of liquidity over time and does not therefore 

constitute remuneration for a service. This treatment complies with the sector recommendation 

which emerged from a broader discussion of the nature of “commitment fees”. 

Use of estimates and assumptions in the preparation of the consolidated financial 

statements 

Statement of financial position items are measured according to the policies set out in subsequent 

Part A.2 “The main statement of financial position items” of these accounting policies. 

Where it is impossible to measure items in the financial statements with precision, the application 

of those policies involves the use of estimates and assumptions which may even have a significant 

effect on the amounts recognised in the statement of financial position and in the income 

statement. 

The use of reasonable estimates forms an essential part of the preparation of financial statements 

and we have listed here those items in the financial statements in which the use of estimates and 

assumptions is most significant: 

• measurement of loans; 

• measurement of financial assets not listed in active markets; 

• measurement of intangible assets and equity investments; 

• quantification of provisions for risks and charges 

• quantification of deferred taxes; 

• definition of the depreciation and amortisation charges for property, equipment and 

investment property and finite life intangible assets. 

Furthermore, in this respect an adjustment may be made to an estimate following a change in the 

circumstances on which it was based or if new information is acquired or yet again on the basis of 

greater experience. A change in an estimate is applied prospectively and it therefore generates an 

impact on the income statement in the year in which it is made and, if it is the case, also in future 

years. 

No significant changes were made this financial year to the criteria previously employed for 

estimates in the financial statements as at 31 st December 2009. 

Amendments to IAS 39 

******* 

While the process of the full revision of IAS 39, is still in progress and should be concluded by the 

end of the first half of 2011, at present no documents issued by the IASB have been endorsed by 

the European Commission. 

232

A brief summary of the state of revision of the above standard is given below. 

Phase 1 Classification and Measurement 

On 12 th November the International Accounting Standards Board (IASB) approved the final 

version of IFRS 9 “Financial Instruments”, the new accounting standard destined to replace the 

part concerning the classification and measurement of financial assets contained in IAS 39 

“Financial instruments: recognition and measurement”, thereby completing the first phase of the 

project to fully revise that accounting standard. 

In consideration of the criticisms received during the consultation period, the standard has not 

been endorsed by the European Commission and is therefore not currently applicable to the 

financial statements of European countries. Consequently the endorsement phase for the 

revision of IAS 39 has been postponed. 

On 28 th October 2010, the IASB published new provisions concerning the classification and 

measurement of financial liabilities. More specifically, these new provisions, which basically 

confirm the framework already provided by IAS 39, normally require, in the case of the application 

of the fair value option, the recognition of changes in value attributable to credit ratings in the 

statement of comprehensive income and no longer in the income statement. 

Phase 2 Impairment 

On 5 th November 2009, the IASB published an exposure draft document, for the normal 

consultation, entitled “Financial Instruments; Amortised Cost and Impairment”. 

The draft version of that document, which proposes a revision of the procedures for the 

calculation of impairment losses of all financial assets measured at amortised cost, according to 

the “expected loss” model (which involves the recognition of expected losses over the whole 

contractual life of an asset), was subject to numerous criticisms by international commentators. 

These concerned in particular the complexity of its application and its concrete inapplicability to 

what are termed “open” portfolios. Consequently on 31 st January 2011 the IASB published a 

consultation document jointly with the FASB entitled “Supplement ‘Financial Instruments: 

Impairment’”, as a supplement to the “Financial Instruments: Amortised Cost and Impairment” 

exposure draft published in 2009, designed to resolve the main issues and practical problems 

brought up by commentators for the implementation of the proposed method of calculating 

expected losses. 

Phase 3 Hedge Accounting 

On 9 th November 2009, the IASB published an exposure draft document, for the normal 

consultation which ended on 9 th March 2011, entitled “Hedge Accounting”. 

This document, which does not address the still controversial issue of macrohedging, subject to 

further study, is intended by the IASB to achieve the following: 

• to align the accounting treatment with a risk management approach; 

• to introduce a standard that is more focused on the objective to be achieved when a hedge 

contract is taken out and on the procedures with which it is to be achieved. 

233

Briefly, the new proposals contained in the exposure draft concern the following: 

• a change in the recognition of fair value hedges; 

• the introduction of the possibility of changing the weighting of the hedging ratio of the 

hedging relationship by “rebalancing” it, if it is still in line with the initial purpose; 

• the introduction of the possibility of performing hedges using a “layer approach”; 

• the possibility of hedging net positions; 

• the elimination of the compulsory 80%-125% limits for quantitative tests performed on 

the effectiveness of a hedge; 

• the elimination of the possibility of hedging financial instruments, the measurement of 

which does not affect profit and loss; 

• recognition of the time value premium of options. 

To complete the project in question the IASB added a further phase for “Asset and Liability 

Offsetting”. On 28 th January 2011, the IASB released an exposure draft, entitled “Offsetting 

Financial Assets and Financial Liabilities”. Its purpose is to address the issue of offsetting 

positions on derivative contracts and other financial instruments in the financial statements, 

which might involve significant differences in the reporting of financial institutions. 

List of the main IFRS standards endorsed by the European Commission 

IAS/IFRS ACCOUNTING STANDARD ENDORSEMENT 

IAS 1 Presentation of financial statements Reg. 1274/2008, 

53/2009, 70/2009, 

494/2009, 243/2010, 

149/2011 

IAS 2 Inventories Reg. 1126/2008 

IAS 7 Statement of cash flows Reg. 1126/2008, 

1274/2008, 70/2009, 

494/2009, 243/2010 

IAS 8 Accounting policies, changes in accounting estimates and errors Reg. 1126/2008, 

1274/2008, 70/2009 

IAS 10 Events after the reporting date Reg. 1126/2008, 

1274/2008, 70/2009, 

1142/2009 

IAS 11 Construction contracts Reg. 1126/2008, 

1274/2008 

IAS 12 Income taxes Reg. 1126/2008, 

1274/2008, 495/2009 

IAS 16 Property, plant and equipment Reg. 1126/2008, 

1274/2008, 70/2009, 

495/2009 

IAS 17 Leases Reg. 1126/2008, 

243/2010 

IAS 18 Revenues Reg. 1126/2008, 69/2009 

IAS 19 Employee benefits Reg. 1126/2008, 

1274/2008, 70/2009 

IAS 20 Accounting for government grants and disclosure of government 

assistance 

Reg. 1126/2008, 

1274/2008, 70/2009 

IAS 21 The effects of changes in foreign exchange rates Reg. 1126/2008, 

1274/2008, 69/2009, 

494/2009, 149/2011 

IAS 23 Borrowing costs Reg. 1260/2008, 70/2009 

IAS 24 Related party disclosures Reg. 632/2010 

IAS 26 Retirement benefit plans Reg. 1126/2008 

IAS 27 Consolidated and separate financial statements Reg. 494/2009 

IAS 28 Investments in associates Reg. 1126/2008, 

234

1274/2008, 70/2009, 

494/2009, 495/2009, 

149/2011 

IAS 29 Financial reporting in hyperinflationary economies Reg. 1126/2008, 

1274/2008, 70/2009 

IAS 31 Interests in joint ventures Reg. 1126/2008, 

70/2009, 494/2009, 

149/2011 

IAS 32 Financial instruments: presentation Reg. 1126/2008, 

1274/2008, 53/2009, 

70/2009, 495/2009, 

1293/2009, 149/2011 

IAS 33 Earnings per share Reg. 1126/2008, 

1274/2008, 495/2009 

IAS 34 Interim financial reporting Reg. 1126/2008, 

1274/2008, 70/2009, 

495/2009, 149/2011 

IAS 36 Impairment of assets Reg. 1126/2008, 

1274/2008, 69/2009, 

70/2009, 495/2009, 

243/2010 

IAS 37 Provisions, contingent liabilities and contingent assets Reg. 1126/2008, 

1274/2008, 495/2009 

IAS 38 Intangible assets Reg. 1126/2008, 

1274/2008, 70/2009, 

495/2009, 243/2010 

IAS 39 Financial instruments: recognition and measurement Reg. 1126/2008, 

1274/2008, 53/2009, 

70/2009, 494/2009, 

495/2009, 824/2009, 

839/2009, 1171/2009, 

243/2010, 149/2011 

IAS 40 Investment property Reg. 1126/2008, Reg. 

1274/2008, Reg. 70/2009 

IAS 41 Agriculture Reg. 1126/2008, 

1274/2008, 70/2009 

IFRS 1 First-time adoption of international financial reporting standards Reg. 1126/2009, 

1164/2009, 550/2010, 

574/2010, 662/2010, 

149/2011 

IFRS 2 Share-based payment Reg. 1126/2008, 

1261/2008, 495/2009, 

243/2010 , 244/2010 

IFRS 3 Business combinations Reg. 495/2009, 149/2011 

IFRS 4 Insurance contracts Reg. 1126/2008, 

1274/2008, 1165/2009 

IFRS 5 Non-current assets held for sale and discontinued operations Reg. 1126/2008, 

1274/2008, 70/2009, 

494/2009, 1142/2009, 

243/2010 

IFRS 6 Exploration for and evaluation of mineral resources Reg. 1126/2008 

IFRS 7 Financial instruments: disclosures Reg. 1126/2008, 

1274/2008, 53/2009, 

70/2009, 495/2009, 

824/2009, 1165/2009, 

574/2010, 149/2011 

IFRS 8 Operating segments Reg. 1126/2008, 

1274/2008, 243/2010, 

632/2010 

SIC/IFRIC INTERPRETATION DOCUMENTS ENDORSEMENT 

235

IFRIC 1 

Changes in existing decommissioning, restoration and similar Reg. 1126/2008, 

liabilities 

1274/2008 

IFRIC 2 

Members' shares in co-operative entities and similar 

Reg. 1126/2008, 

instruments 

53/2009 

IFRIC 4 Determining whether an arrangement contains a lease 

Reg. 1126/2008, 

70/2009 

IFRIC 5 

Rights to interests arising from decommissioning, restoration Reg. 1126/2008 

and environmental rehabilitation funds 

IFRIC 6 

Liabilities arising from participating in a specific market - waste Reg. 1126/2008 

electrical and electronic equipment 

IFRIC 7 

Applying the restatement approach under IAS 29 “Financial Reg. 1126/2008, 

reporting in hyperinflationary economies” 

1274/2008 

IFRIC 9 Reassessment of embedded derivatives 

Reg. 1126/2008, 

495/2009, 1171/2009, 

243/2010 

IFRIC 10 Interim financial reporting and impairment 

Reg. 1126/2008, 

1274/2008 

IFRIC 12 Service concession arrangements Reg. 254/2009 

IFRIC 13 

Reg. 1262/2008, 

Customer loyalty programmes 

149/2011 

IFRIC 14 

Reg. 1263/2008, Reg. 

Prepayments of a minimum funding requirement 

1274/2008, 633/2010 

IFRIC 15 Agreements for the Construction of Real Estate Reg. 636/2009 

IFRIC 16 

Reg. 460/2009, Reg. 

Hedges of a net investment in a foreign operation 

243/2010 

IFRIC 17 Distributions of non-cash assets to owners Reg. 1142/2009 

IFRIC 18 Transfers of assets from customers Reg. 1164/2009 

IFRIC 19 Extinguishing financial liabilities with equity instruments Reg. 662/2010 

Reg. 1126/2008, 

SIC 7 Introduction of the euro 

1274/2008, 494/2009 

Government assistance – no specific relation to operating Reg. 1126/2008, 

SIC 10 

activities 

1274/2008 

SIC 12 Consolidation – special purpose entities Reg. 1126/2008 

SIC 13 

Jointly controlled entities – non-monetary contributions by Reg. 1126/2008, 

venturers 

1274/2008 

SIC 15 Operating leases – Incentives 

Reg. 1126/2008, 

1274/2008 

SIC 21 Income taxes – Recovery of revalued non-depreciable assets Reg. 1126/2008 

SIC 25 

SIC 27 

SIC 29 

Income taxes – Changes in the tax status of an enterprise or its 

shareholders 

Evaluating the substance of transactions in the legal form of a 

lease 

Service concession arrangements: disclosures 

Reg. 1126/2008, 

1274/2008 

Reg. 1126/2008 

Reg. 1126/2008, 

1274/2008, 70/2009 

SIC 31 Revenue – Barter transactions involving advertising services Reg. 1126/2008 

SIC 32 

Intangible assets – Website costs 

Reg. 1126/2008, 

1274/2008 

For full information and to supplement the information given in the interim reports for the 

period in question, on 19 th February 2011 Regulation No. 149/2011 was published in the 

Official Journal of the EU. It introduces various marginal amendments to international reporting 

standards as part of the annual improvement process designed to simplify and clarify them. 

These amendments, which become compulsory for the financial year 2011 at the latest, concern 

various financial reporting standards as can be seen from the details given in the list above. 

236

A.2 – THE MAIN ITEMS IN THE FINANCIAL STATEMENTS 

1. Financial assets and liabilities held for trading and financial 

assets and liabilities at fair value 

This category includes: 

1.1. Definition of financial assets and liabilities held for trading 

A financial asset or liability is classified as held for trading (Fair value through profit or loss – 

FVPL) and is recognised under either item 20 “Financial assets held for trading” or item 40 

“Financial liabilities held for trading”, if it is: 

• acquired or incurred for sale or repurchase in the short term; 

• part of a portfolio of identified financial instruments which are managed together and for which 

there is evidence of a recent and effective strategy of short term profit taking; 

• a derivative (except for derivatives designated and effective as a hedging instrument – see the 

relative section below). 

1.1.1. Derivative financial instruments 

A “derivative” is defined as a financial instrument or other contract with the following 

characteristics: 

• its value changes in response to the change in an interest rate, in the price of a financial 

instrument, in a commodity price, in a foreign currency exchange rate, in a price, interest rate 

or credit rating index, or credit worthiness index or other specific variable; 

• it requires no initial investment, or a net initial investment that is smaller than would be 

required for other types of contract from which a similar response to changes in market factors 

would be expected; 

• it is settled at a future date. 

The UBI Group holds derivative financial instruments for both trading and for hedging purposes 

(see the relative section below for information on the latter). All derivatives held for trading are 

stated initially at fair value which generally is the same as cost. Subsequently derivative contracts 

are stated at fair value, which is the value that the Group would pay or receive if it terminated the 

contract at the date of valuation. Each change measured in the fair value is recognised in the 

income statement within the item 80 “Net trading income (loss)”. 

The fair value of derivatives is measured by applying the methodology described in the section 

below “Measurement Criteria”. 

1.1.2. Embedded derivative financial instruments 

An "embedded derivative financial instrument" is defined as a component of a hybrid (combined) 

instrument which also includes a “host” non derivative contract such that some of the cash flows 

of the combined instrument behave in a way similarly to the derivative as a stand-alone 

instrument. The embedded derivative is separated from the host contract and treated in the 

accounts as a stand-alone derivative if and only if: 

• the economic risks and characteristics of the embedded derivative are not closely related to the 

economic risks and characteristics of the host contract; 

• a separate instrument with the same conditions as the embedded derivative would satisfy the 

definition of a derivative; 

• the hybrid (combined) instrument is not recognised within financial assets or liabilities held for 

trading. 

The fair value of separated derivatives is measured by applying the methodology described in the 

section below “Measurement criteria”. 

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1.2. Definition of financial assets and liabilities at fair value 

Financial assets and liabilities may be designated on initial recognition under “financial assets 

and liabilities at fair value” and recorded under items 30 “Financial assets held at fair value” and 

50 “Financial liabilities at fair value”. 

A financial asset/liability is designated at fair value through profit or loss on initial recognition 

only when: 

a) it is a hybrid contract containing one or more embedded derivatives and the embedded 

derivative significantly alters the cash flows that would otherwise be generated by the contract; 

b) the designation at fair value through profit or loss allows better information to be provided 

because: 

• it eliminates or considerably reduces an asymmetry in the valuation or in the recognition, 

which would otherwise result from the valuation of assets or liabilities or from recognition 

of the relative profits and losses on a different basis; 

• a group of financial assets, financial liabilities or of both is managed and its performance 

is valued on the basis of its fair value according to a documented risk management 

procedure or investment strategy and the information on the group is provided internally 

on that basis to senior managers with strategic responsibilities. 

1.3. Recognition criteria 

The financial instruments “Financial assets and liabilities held for trading and financial assets at 

fair value” are recognised at the time of settlement if they are debt securities or equity 

instruments, or at the trade date if they are derivative contracts and they are valued at cost, 

intended as meaning the fair value of the instrument without considering any transaction costs or 

income directly attributable to the instruments themselves. 

1.4. Measurement criteria 

Subsequent to initial recognition, the financial instruments in question are measured at fair value 

with changes recognised in the income statement under item 80 “Net trading income (loss)”, for 

assets/liabilities held for trading and under item 110 “net income/expense on financial assets 

and liabilities at fair value” for financial assets/liabilities at fair value. The measurement of the 

fair value of the assets and liabilities held in a trading portfolio is based on prices quoted on active 

markets or on internal valuation models which are generally used in financial practice and are 

described below. 

1.4.1. Methods of measuring fair value 

1.4.1.1. Securities listed and unlisted 

For securities listed on active markets, the measurement of fair value is based on prices quoted 

on the relative market (that on which the greatest volume of trading occurs) as obtained from 

international providers and registered on the last day of the financial year or reporting period. A 

market is defined as an active market if the prices quoted reflect normal market transactions, are 

readily and regularly available and represent actual and regularly occurring market transactions. 

Hedge funds are valued on the basis of the official end of period NAV. In its absence, the last 

available NAV is used prudentially adjusted if external observations show evidence of lower 

values. 

For unlisted securities fair value is measured by using valuation techniques that measure the 

price that an instrument would have had at the valuation date in a free transaction motivated by 

normal market considerations. Measurement of the fair value is performed by applying methods 

commonly used on international markets and also internal valuation models. More specifically, for 

unlisted bonds, models which discount expected future cash flow to present value (using interest 

rates that take proper consideration of the sector that the issuer operates in and the rating class 

where available) and price option models are used. For equity instruments, prices based on 

238

comparable transactions, the market multiples of directly comparable companies and mixed 

capital and income measurement models are used. 

1.4.1.2. Derivatives: listed and unlisted 

For listed derivatives the measurement of fair value is based on prices taken from active markets. 

For unlisted derivatives the fair value is measured by using models which discount future cash 

flows to present value and which are also weighted for the credit risk associated with the financial 

instrument. For derivatives traded with institutional counterparties, this risk is considered 

virtually nil because of compensation agreements (CSA) designed to minimise credit risk. 

1.4.1.3. Private Equity and Merchant Banking Interests 

For equity instruments not classified as held for control, but held for merchant banking and 

private equity activities, the measurement of fair value is performed by using methods commonly 

accepted in market practice. For equity instruments held in listed companies, the last available 

and significant price quoted in the period is used; for unlisted companies resort is made to prices 

inferred from recent transactions concerning assets similar to those that are being valued, market 

multiples of directly comparable companies or capital, income and mixed valuation models. 

1.5. Derecognition criteria 

“Financial assets and liabilities held for trading and financial assets at fair value” are 

derecognised in the accounts when the rights to the cash flows from the financial assets or 

liabilities expire or when the financial assets or liabilities are transferred with the substantial 

transfer of all the risks and rewards deriving from ownership of them. The result of the transfer of 

financial assets or liabilities held for trading is recognised in the income statement under item 80 

“net profit (loss) on trading”, while the result of the transfer of financial assets or liabilities at fair 

value is recognised under item 110 “Net income/expense on financial assets and liabilities at fair 

value”. 

2. Available-for-sale financial assets 

2.1 Definition 

Available-for-sale financial assets (AFS) are defined as non-derivative financial assets designated 

on initial recognition as such or that are not classified as: 

(1) loans and receivables (see section below); 

(2) financial investments held until maturity (see section below); 

(3) financial assets held for trading and measured at fair value recognised in the income 

statement (see section below). 

These financial assets are recognised under item 40 “Available-for-sale financial assets”. 

2.2 Recognition criteria 

Available-for-sale financial assets are recognised initially when, and only when, the company 

becomes a party in the contract clauses of the instrument and that is on the date of settlement, at 

fair value which generally coincides with the cost of them. This value includes costs or income 

directly connected with the instruments themselves. 

The recognition of available-for-sale financial assets may result also from the reclassification out 

of “held-to-maturity investments” or, but only and only in rare circumstances and in any case 

only if the asset is no longer held for sale or repurchase in the short term, out of “financial assets 

held for trading”; in this case the recognition value is the same as the fair value at the moment of 

reclassification. 

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2.3 Measurement criteria 

Subsequent to initial recognition, available-for-sale financial assets continue to be recognised at 

fair value with interest (resulting from application of the amortised cost) recognised in the income 

statement and changes in fair value recognised in equity under item 140 “Fair value reserves”, 

except for losses due to impairment, until the financial asset is derecognised, at which time the 

profit or loss previously recognised in equity must be recognised in the income statement. Equity 

instruments for which the fair value cannot be reliably measured according to the methods 

described are recognised at cost. 

At the end of each financial year or interim reporting period, objective evidence of impairment is 

assessed, which in the case of equity instruments is held to be significant or prolonged. 

As concerns the significance of the impairment, significant indications of impairment exist where 

the market value of an equity instrument is less than 35% of its historical cost of acquisition. In 

this case impairment is recognised through profit or loss without further analysis. If the 

impairment is less then it is recognised only if the valuation of the instrument performed on the 

basis of its fundamentals does not confirm the soundness of the company and that is its earning 

prospects. 

As concerns the permanence of the impairment, it is defined as prolonged when the fair value 

remains below its historical cost of purchase for a period of longer than 18 months. In this case 

the impairment is recognised through profit or loss without further analysis. If the fair value 

continues to remain below its historical purchase cost for periods shorter than 18 months, then 

the impairment to be recognised through profit or loss is determined by considering, amongst 

other things, whether the impairment is attributable to general negative performance by stock 

markets rather than to the specific performance of the individual counterparty. 

If there is permanent impairment, the cumulative change, including that previously recognised in 

equity under the aforementioned item, is recognised directly in the income statement within item 

130 “Net impairment losses on b) available-for-sale financial assets”. 

Permanent impairment loss is recognised when the acquisition cost (net of any repayments of 

principal and amortisation) of an available-for-sale financial asset exceeds its recoverable amount. 

Any recoveries of value, which are only possible when the causes of the original permanent 

impairment no longer exist are treated as follows: 

• if they relate to investments in equity instruments, then with a balancing entry directly in the 

equity reserve; 

• if they relate to investments in debt instruments, they are recognised in the income statement 

under item 130 “Net impairment losses on b) available-for-sale financial assets”. 

The amount of the reversal of the impairment loss may not in any case exceed the amortised cost 

which, in the absence of previous value adjustments, the instrument would have had at that time. 

Because the UBI Group applies IAS 34 “Interim financial reporting” to its half year interim reports 

with consequent identification of a half year “interim period”, any impairment incurring is 

recognised historically at the end of the half year. 

2.3.1 Methods of measuring fair value 

See the sub section on “Financial assets and liabilities held for trading and financial assets at fair 

value. 

2.4 Derecognition criteria 

Available for sale financial assets are derecognised in the accounts when the contractual rights to 

the cash flows from the financial assets expire or when the financial assets are sold with the 

substantial transfer of all the risks and benefits deriving from ownership of them. The result of 

the disposal of available-for-sale financial assets is recognised in the income statement under 

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item 100 “Income (loss) from the disposal or repurchase of b) available for sale financial assets”. 

Upon derecognition any corresponding amount of what was previously recognised in shareholders’ 

equity under 140 “Fair value reserves” is written off against the income statement. 

3. Held-to-maturity investments 


Held-to-maturity investments (HTM) are defined as non derivative financial assets with fixed or 

determinable payments and fixed maturity that an entity intends and is able to hold to maturity. 

Exception is made for those: 

(a) held for trading and those designated upon initial recognition at fair value through profit or 

loss (see previous section); 

(b) designated as available for sale (see previous section); 

(c) which satisfy the definition of loans (see section below). 

When annual and interim reports are prepared the intention and ability to hold financial assets 

until maturity is assessed. 

The assets in question are recognised under item 50 “Held-to-maturity investments”. 


Held-to-maturity investments are recognised initially when, and only when, the company becomes 

a party in the contract clauses of the instrument and that is on the date of settlement, measured 

at cost inclusive of any costs and income directly attributable to it. If the recognition of assets in 

this category is the result of the reclassification out of “available-for-sale financial assets” or, but 

only in rare circumstances, if the asset is no longer held for sale or repurchase in the short term, 

out of the “financial assets held for trading”, the fair value of the assets as measured at the time 

of the reclassification is taken as the new measure of the amortised cost of the assets. 


Held-to-maturity investments are valued at amortised cost using the criteria of the effective 

interest rate (see the section below “loans and receivables” for a definition). The result of the 

application of this method is recognised in the income statement under the item 10 “Interest and 

similar income”. 

When annual financial statements or interim reports are prepared objective evidence of the 

existence of an impairment of the value of the assets is assessed. If there is permanent 

impairment, the difference between the recognised value and the present value of expected future 

cash flows discounted at the original effective interest rate is included in the income statement 

under the item 130 “Net impairment losses on c) held-to-maturity investments”. Any recoveries of 

value recorded, should the cause that gave rise to the previous recognition of impairment loss no 

longer exist, are recognised under the same item in the income statement. 


The fair value of held-to-maturity investments is given for the sole purpose of information. A 

description of the measurement is given in the section “Financial assets and liabilities held for 

trading and financial assets and liabilities at fair value”. For effective hedging of currency risk or 

of loans, the fair value is calculated in relation to the risk that is hedged for valuation purposes. 


Held-to-maturity investments are derecognised when the rights to the cash flows from the 

financial assets expire or when the financial assets are sold with the substantial transfer of all the 

241

isks and rewards deriving from ownership of them The result of the disposal of held-to-maturity 

financial assets is recognised in the income statement under the item 100 “Income (loss) from the 

disposal or repurchase of c) held-to-maturity investments”. 

4. Loans and receivables 


Loans and receivables (L&R) are defined as non-derivative financial assets with fixed or 

determinable payments that are not quoted in an active market. The following are exceptions: 

(a) those which it is intended to sell immediately or in the short term, that are classified as held 

for trading and those that may have been designated on initial recognition as at fair value 

through profit or loss; 

(b) those designated upon initial recognition as available for sale; 

(c) those for which the holder may not recover substantially all of its initial investment, other 

than because of credit deterioration; in this case they are classified as available-for-sale. 

loans and receivables are recognised under the items 60 “Loans to banks” and 70 “Loans to 

customers”. 


Loans are initially recognised in the accounts when the company becomes part of a loan contract, 

which is to say when the creditor acquires the right to the payment of the sums agreed in the 

contract. That moment corresponds to the date on which the loan is granted. 

Recognition in this category may result also from the reclassification out of “available-for-sale 

financial assets” or, but only in rare circumstances, if the asset is no longer held for sale or 

repurchase in the short term, out of “financial assets held for trading”. 

The amount initially recognised is that of the fair value of the financial instrument which is the 

same as the amount granted inclusive of costs or income directly attributable to it and 

determinable from the outset, independently of when they are paid. The amount of the initial 

recognition does not include all those expenses that are reimbursed by the debtor counterparty or 

that are attributable to internal expenses of an administrative character. 

If the recognition is the result of reclassification, the fair value of the asset recognised at the time 

of the reclassification is taken as the new measure of the amortised cost of the assets. 

For loans not granted under market conditions, the initial fair value is calculated by using special 

measurement techniques described below; in these circumstances the difference between the fair 

value that is calculated and the amount granted is included directly in the income statement 

within the item interest. 

Contango and repo agreements with the obligation or right to repurchase or resell at term are 

recognised in the accounts as funding or lending transactions. For transactions with a spot sale 

and forward repurchase, the spot cash received is recognised in the accounts as borrowings while 

the spot purchase transactions with forward resale are recognised as lending for the spot amount 

paid. 


Loans are measured at amortised cost using the criteria of effective interest. 

The amortised cost of a financial asset or financial liability is the amount at which the financial 

asset or financial liability was measured upon initial recognition net of principal repayments, plus 

or minus the cumulative amortisation using the effective interest criterion on any difference 

between that initial amount and the maturity amount, and minus any reduction (arising from an 

impairment or uncollectability). 

The effective interest criterion is a method of calculating amortised cost of an asset or liability (or 

group of assets and liabilities) and of distributing the interest income or expense over its relative 

242

life. The effective interest rate is the rate that exactly discounts the estimated flow of future cash 

payments or receipts until the expected maturity of the financial instrument. To determine the 

effective interest rate, the cash flows must be estimated taking into consideration all the 

contractual conditions of the financial instrument (e.g. payment in advance, a purchase option or 

similar), but future impairments of the loan are not considered. The computation includes all fees 

and basis points paid or received between parties to the contract which are integral parts of the 

effective interest, the transaction costs and all other premiums or discounts. 

At each reporting date or when interim reports are prepared, any objective evidence that a 

financial asset or group of financial assets has suffered impairment loss is assessed. This 

circumstance occurs when it is probable that a company may not be able to collect amounts due 

on the basis of the original contracted conditions or, for example, in the presence of: 

(a) significant financial difficulties of the issuer or debtor; 

(b) an infringement of the contract such as default or failure to pay interest or repay principal; 

(c) the lender, because of the economic or legal factors relating to the financial difficulties of the 

debtor, granting a concession to the latter which the lender would not otherwise have 

considered; 

(d) the probability of the beneficiary declaring procedures for loan restructuring; 

(e) the disappearance of an active market for that financial asset due to financial difficulties; 

(f) available data which indicate a substantial decrease in expected future cash flows for a 

similar group of financial assets since the time of the initial recognition of those assets, 

although the decrease cannot yet be identified with the single financial assets of the group. 

The measurement of non-performing loans (loans which, according to Bank of Italy definitions, 

are non performing, impaired, restructured and past due, including exposures in arrears for 

between 90 and 180 days secured by property mortgages) is performed on a case-by-case basis. 

The remaining loans are measured using, collective, statistical methods which group uniform 

classes of risk together. 

The method for determining the impairment losses recognised on non-performing loans is based 

on discounting expected future cash flows for principal and interest, taking account of any 

guarantees attached to positions and of any advances received. The basic elements for 

determining the present value of cash flows are the identification of the estimated receipts, the 

relative maturity dates and the discount rate to apply. The amount of the loss is equal to the 

difference between the recognised value of the asset and the present value of expected future cash 

flows, discounted at the original effective interest rate. 

The measurement of performing loans relates to asset portfolios for which no objective evidence of 

impairment exist and which are therefore valued collectively. Percentage rates of loss calculated 

from historical data series are applied to the estimated cash flows from the assets, grouped into 

uniform classes with similar characteristics in terms of credit risk for the network banks of the 

Group, according to Basel 2 regulations. 

If a loan is subject to individual measurement and shows no objective impairment loss, it is 

placed in a class of financial assets with similar credit risk characteristics and subjected to 

collective measurement. 

Permanent impairment that is found is immediately recognised in the income statement within 

the item 130 “Net impairment losses on a) loans” as are recoveries of part or all of the amounts on 

which impairment loss was previously recognised. Reversals of impairment losses are recognised 

where there is an improvement in credit quality sufficient to provide reasonable certainty of 

prompt collection of the principal and the interest according to the original conditions of the 

original loan contract, or in the presence of a progressive reversal of the present value calculated 

at the time of recognising the impairment loss. Where loans are measured on a collective basis, 

any upward value adjustments or reversals of impairment losses are recalculated as differences in 

relation to each performing loan at the measurement date. 

243


The fair value of loans is measured by considering future cash flows discounted at the 

replacement rate or the market rate existing at the measurement date and relating to a position 

with the same characteristics as the loan measured. The fair value is measured for all loans for 

information purposes only. For loans subject to effective hedging, the fair value is calculated in 

relation to the risk that is hedged for measurement purposes. 


Loans are derecognised the statement of financial position when the rights to the cash flows from 

the financial assets expire or when the financial assets are sold with the substantial transfer of all 

the risks and rewards deriving from ownership of them. Otherwise loans continue to be 

recognised on statement of financial position for an amount equal to the remaining involvement, 

even if legal title has been transferred to a third party. 

The assets in question are derecognised in the statement of financial position even when the Bank 

maintains the contractual right to receive cash flows from them, but when at the same time it has 

a contractual obligation to pay those cash flows to a third party. 

The profit or loss on the disposal of loans is recognised in the income statement under the item 

100 “Income (loss) from the disposal or repurchase of a) loans”. 

5. Hedging derivatives 


Hedging transactions are designed to neutralise potential losses on a specific item (or group of 

items) attributable to a determined risk, by means of the gains realised on another instrument or 

group of instruments if that particular risk should actually result in losses. 

The UBI Group uses the following type of hedging transactions, appropriately represented in the 

accounts and described below: 

• a fair value hedge: the objective is to offset adverse changes in the fair value of the asset or 

liability hedged; 

• a cash flow hedge: the objective is to hedge against the exposure to variability in expected cash 

flows with respect to the initial expectations. 

Derivative contracts stipulated with external counterparties are designated as hedging 

instruments. 


As with all derivatives, derivative financial instruments used for hedging are initially recognised 

and subsequently measured at fair value and are classified in the statement of financial position 

within the asset item 80 “Hedging derivatives” and within liabilities item 60 “Hedging derivatives”. 

A relationship qualifies as a hedge and is appropriately represented in the accounts if, and only if, 

all the following conditions are satisfied: 

• at the start of the hedging transaction the relationship is formally designated and documented, 

including the company’s risk management objective and strategy for undertaking the hedge. 

This documentation includes identification of the hedging instrument, the item or transaction 

hedged, the nature of the risk being hedged, and how the entity will assess the hedging 

instrument's effectiveness in offsetting the exposures to changes in the fair value of the item 

hedged or in the cash flows attributable to the risk hedged; 

• the hedging is expected to be highly effective; 

244

• the planned transaction hedged, for hedging cash flows, is highly probable and presents an 

exposure to changes in cash flows that could have effects on the income statement; 

• the effectiveness of the hedging can be reliably measured; 

• the hedging is measured on an ongoing basis and is considered highly effective for all the 

financial years in which it was designated. 

5.2.1 Methods for testing effectiveness 

A hedge relationship is judged effective, and as such is appropriately represented in the accounts, 

if at its inception and during its life the changes in the fair value or cash flows of the hedged item 

attributable to the hedged risk are almost always completely offset by the changes in the fair 

value or cash flows of the hedging instrument. This conclusion is reached when the actual result 

falls within a range of between 80% and 125%. 

The effectiveness of hedging is tested at inception by means of a prospective test and when annual 

reports are prepared by means of a retrospective test; the outcome of the test justifies the 

application of hedging accounting because it demonstrates its expected effectiveness. 

Retrospective tests are conducted monthly on a cumulative basis where the objective is to 

measure the degree of effectiveness of the hedging in the reporting period and therefore to verify 

whether the hedging has actually been effective in the period. 

Derivative financial instruments that are considered hedges from a profit and loss viewpoint but 

which do not satisfy the requirements to be considered effective instruments for hedging are 

recognised under item 20 “Financial assets held for trading” or under item 40 “Financial liabilities 

held for trading” and the profits and losses under the corresponding item 80 “Net trading income 

(loss)”. 

See the section “financial assets and liabilities held for trading” and “financial assets and 

liabilities at fair value” for a description of the methods used to calculate the fair value of 

derivatives 


5.3.1 Fair value hedging 

Fair value hedging is treated as follows: 

• the profit of loss resulting from measuring a hedging instrument at fair value is included in the 

income statement under item 90 “Net hedging income (loss)”; 

• the profit or loss on the item hedged attributable to the hedged risk adjusts the value in the 

accounts of the hedged item and is recognised immediately, regardless of the type of asset or 

liability hedged, in the income statement within the aforementioned item. 

Hedge accounting is discontinued prospectively in the following cases: 

1. the hedging instrument expires or is sold, terminated, or exercised; 

2. the hedge no longer meets the hedge accounting criteria described above; 

3. the entity revokes the designation. 

In case 2, if the assets or liabilities hedged are valued at amortised cost, the higher or lower value 

resulting from valuing them at fair value as a result of the hedge becoming ineffective is 

recognised in the income statement, according to the effective interest rate method prevailing at 

the time of revocation of hedge. 

The methods used for measurement of the fair value of the risk hedged in the assets or liabilities 

hedged are described in the notes that comment on available-for-sale financial assets, loans and 

held-to-maturity investments. 

245

5.3.2 Cash flow hedging 

When a derivative is designated as a hedge of exposure to changes in expected cash flows from an 

asset or liability in the statement of financial position or a future transaction considered highly 

probable, the accounting treatment of the hedge is as follows: 

• the profits or losses (from the measurement of the hedging derivative) attributable to the 

effective portion of the hedge are recognised in a special reserve in equity named 140 “Fair 

value reserves”; 

• the profits or losses (from the measurement of the hedging derivative) attributable to the 

ineffective portion of the hedge are recognised directly in the income statement under item 90 

“Net hedging income (loss)”; 

• the asset or liability hedged is measured according to the class of asset or liability to which it 

belongs. 

If a future transaction occurs which involves recognising non financial assets and liabilities, the 

corresponding profits or losses initially recognised under item 140 “Fair value reserves” are then 

transferred from that reserve and included as an initial cost of the asset or liability that is 

recognised. If the future hedged transaction subsequently involves recognition of a financial asset 

or liability, the associated profits or losses that were originally recognised within item 140 “Fair 

value reserves” are reclassified to the income statement in the same reporting period or periods 

during which the assets acquired or liabilities incurred have an effect on the income statement. If 

a portion of the profits or losses recognised in the fair value reserve are not considered 

recoverable, it is reclassified to the income statement under item 80 “Net trading income (losses)”. 

In all cases other than those already described, the profits or losses initially recognised under the 

item 140 “Fair value reserves” are transferred to the income statement to reflect the time and 

manner in which the future transaction is recognised in the income statement. 

An entity must discontinue hedge accounting prospectively in each of the following 

circumstances: 

(a) the hedging instrument expires or is sold, terminated, or exercised (for this purpose the 

replacement or exchange of one hedging instrument with another hedging instrument is not a 

conclusion or termination if that replacement or exchange forms part of an entity’s 

documented hedging strategy). In this case the total profit (or loss) on the hedging instrument 

continues to be recognised directly in equity until the reporting period in which the hedge 

became effective and it continues to be recognised separately until the programmed hedging 

transaction occurs; 

(b) the hedge no longer satisfies the criteria for hedge accounting. In this case the total profit or 

loss on the hedging instrument continues to be recognised directly in equity starting from the 

reporting period in which the hedge became effective and it continues to be recognised 

separately in equity until the programmed hedging transaction occurs; 

(c) it is no longer considered that the future transaction should occur, in which case any related 

total profit or loss on the hedging instrument recognised directly in equity starting from the 

reporting period in which the hedge became effective must be recognised through profit or 

loss; 

(d) the entity revokes the designation. For hedges of a programmed transaction, total profits or 

losses on the hedging instrument recognised directly in equity starting from the reporting 

period in which the hedge became effective continues to be recognised separately in equity 

until the programmed transaction occurs or it is expected that it will no longer occur. 

If it is expected that the transaction will no longer occur the total profit (or loss) that had been 

recognised directly in equity is transferred to the income statement. 

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5.3.3 Hedging portfolios of assets and liabilities 

Hedging of portfolios of assets and liabilities (“macrohedging”) and appropriate accounting 

treatment is possible after first: 

- identifying the portfolio to be hedged and dividing it by maturity dates; 

- designating the risk to be hedged; 

- identifying the interest rate risk to be hedged; 

- designating the hedging instruments; 

- determining the effectiveness. 

The portfolio for which the interest rate risk is hedged may contain both assets and liabilities. 

This portfolio is divided on the basis of expected maturity or repricing dates of interest rates after 

first analysing the structure of the cash flows. 

Changes in the fair value of the hedged instrument are recognised in the income statement under 

item 90 “Net hedging income (loss)” and in the statement of financial position within item 90 “Fair 

value change in hedged financial assets” or within item 70 “Fair value change in hedged financial 

liabilities” 

Changes occurring in the fair value of the hedging instrument are recognised in the income 

statement under item 90 “Profits (losses) on hedging” and on the assets side of the statement of 

financial position within item 80 “Hedging derivatives” or on the liabilities side within item 60 

“Hedging derivatives”. 

6. Equity investments 


6.1.1 Associates 

An “associate” is defined as a company in which at least 20% of the voting rights are held or over 

which the investing company exercises significant influence and which is neither a subsidiary nor 

a company subject to joint control by the investing company. Significant influence is the power to 

participate in the financial and operating policy decisions of the company invested in but not to 

control or have joint control of it. Investments in associates are valued using the equity method. 

6.1.2 Companies subject to joint control 

A “company subject to joint control” is defined as a company governed by a contractual 

arrangement whereby two or more parties undertake an economic activity that is subject to joint 

control. 

Investments in companies subject to joint control are recognised by adopting either the equity 

method or the proportionate method 


Equity investments are recognised in the financial statements by applying the methods described 

in the preceding sections. 


Any objective evidence that an equity investment has been subject to impairment is assessed as 

at each annual or interim reporting date. The recoverable amount is then calculated, considering 

the present value of the future cash flows which may be generated by the investment, including 

the final disposal value. If the recoverable amount calculated in this way is less than carrying 

value the difference is recognised in the income statement under 240 “Profits (losses) of equity 

investments” (valued at equity). Any future recoveries of value are also included in the item where 

the reasons for the original write down no longer apply. 

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Equity investments are derecognised in the statement of financial position when the contractual 

rights to the cash flows from the financial assets expire or when the financial assets are sold with 

the substantial transfer of all the risks and rewards deriving from ownership of them. The result 

of the disposal on investments valued using the equity method recognised in the income 

statement under item 240 “Profits (losses) of equity investments” (valued at equity); the result of 

the disposal of equity investments other than those valued using the equity method is recognised 

in the income statement under item 270 “Profits (losses) on the disposal of investments”. 

7. Property, equipment and investment property 

7.1 Definition of assets for functional use 

“Assets for functional use” are defined as tangible assets possessed to be used for the purpose of 

carrying on a company’s business and where the use is planned to last longer than one year. 

Assets for functional use also include properties rented to employees, ex employees and their 

heirs, as well as works of art. 

7.2 Definition of investment property 

“Investment property” is defined as properties held in order to earn rentals or for capital 

appreciation. As a consequence, investment property is to be distinguished from assets held for 

the use of the owner because they generate cash flows that are very different from the other assets 

held by the banking group. 

Finance lease contracts are also included within tangible assets (for functional use and held for 

investment) even if the legal title to the assets remains with the leasing company. 


Property, equipment and investment property assets, functional and other, are initially recognised 

at cost (item 120 Property, equipment and investment property), inclusive of all costs directly 

connected with bringing it to working condition for the use of the assets and purchase taxes and 

duties that are not recoverable. This amount is subsequently increased to include expenses 

incurred from which it is expected future benefits will be obtained. The costs of ordinary 

maintenance are recognised in the income statement at the time at which they are incurred, while 

extraordinary maintenance expenses (improvements) from which future benefits are expected are 

capitalised by increasing the value of the relative asset. 

Improvements and expenses incurred to increase the value of leased assets from which future 

benefits are expected are recognised: 

– under the most appropriate category of item 120 “Property, equipment and 

investment property” if they are independent and can be separately identified, 

whether they are third parties assets held on the basis of a ordinary leasing 

contract or whether they are held under a financial leasing contract; 

– within 120 “Property, equipment and investment property”, if they are not 

independent and cannot be separately identified, as an increase to the type of 

assets concerned if held by means of a financial leasing contract or within item 160 

“Other assets” if they are held under an ordinary leasing contract. 

The cost of property, equipment and investment property is recognised as an asset if, and only if: 

• it is probable that the future economic benefits associated with the asset will flow to the 

enterprise; 

• the cost of the asset can be reliably determined. 

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Subsequent to initial recognition, items of property, equipment and investment property for use in 

operations are recognised at cost, as defined above, net of accumulated depreciation and any 

permanent cumulative impairment. The depreciable amount, equal to cost less the residual value 

(i.e. the amount that would be normally obtained from disposal, less disposal costs, if the asset 

was normally in the conditions, including age, expected at the end of its useful life), should be 

allocated on a systematic basis over the asset's useful life by adopting the straight line method of 

depreciation. The useful life of an asset, which is reviewed periodically to detect any significant 

change in estimates compared to previous figures, is defined as: 

• the period of time over which it is expected that the asset can be used by a company or, 

• the quantity of products or similar units that an entity expects to obtain from the use of the 

asset. 

Since property, equipment and investment property may consist of items with different useful 

lives, land, whether by itself or as part of the value of a building is not depreciated since it 

constitutes a fixed asset with an indefinite life. The value attributable to the land is deducted from 

the total value of a property for all buildings in proportion to the percentage of ownership. 

Buildings, on the other hand, are depreciated according to the criteria described above. 

Works of art are not depreciated because they generally increase in value over time. 

Depreciation of an asset starts when it is available for use and ceases when the asset is written off 

the accounts, which is the most recent of when it is classified as for sale and the date of 

elimination from the accounts. As a consequence depreciation does not stop when an asset is left 

idle or is no longer in use, unless the asset has already been fully depreciated. 

Improvements and expenses which increase the value are depreciated as follows: 

– if they are independent and can be separately identified, according to the presumed useful 

life as described above; 

– if they are not independent and cannot be separately identified, then if they are held under 

an ordinary leasing contract, over the shorter of the period in which the improvements and 

expenses can be used and that of the remaining life of the contract taking account of any 

individual renewals, or if the assets are held under a finance lease contract, over the 

expected useful life of the assets concerned. 

The depreciation of improvements and expenses to increase the value of leased assets recognised 

under item 160 “Other assets” is recognised within item 220 “Other net operating income 

(expense)”. 

At the end of each annual or interim reporting period the existence of indications that 

demonstrate the impairment of the value of an asset are assessed. The loss is determined by 

comparing the carrying amount of the tangible asset with the lower recoverable amount. The 

latter is the greater of the fair value, net of any sales costs, and the relative use value intended as 

the present value of future cash flows generated by the asset. The loss is immediately recognised 

in the income statement under item 200 “Net impairment losses on property, equipment and 

investment property tangible assets”; the item also includes any future recovery in value if the 

causes of the original recognition of impairment no longer exist. 

7.4.1 Definition and measurement of fair value 

7.4.1.1 Properties 

The fair value is measured on the basis of the market value intended as meaning the best price at 

which the sale of a property might reasonably be expected to have been completed unconditionally 

for cash consideration on the date of valuation, assuming: 

− that the seller and the purchaser are independent counterparties; 

− the intention of the seller to sell the assets is real; 

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− that there is a reasonable period (having regard to the nature of the property and the state 

of the market) for the proper marketing of the property and for the agreement of price and 

terms necessary to complete the sale; 

− that the market trend, level of values and other circumstances were, at the date of signing 

the preliminary contract of purchase and sale, identical to those existing at the date of 

valuation; 

− that no account is taken of bids by purchasers for whom the property has characteristics 

which make it “outside the market range”. 

The procedures adopted for determining the market value are based on the following methods: 

• the direct comparative or market method, based on a comparison between the asset in 

question and other similar asset subject to sale or currently on sale on the same market or 

competing markets; 

• the income method based on the present value of potential market incomes for a similar 

property, obtained by capitalising the income at a market rate. 

The above methods are performed individually and the values obtained are appropriately 

averaged. 

7.4.1.2 Determination of the value of land 

The method used for identifying the percentage of the market value attributable to land is based 

on an analysis of the location of the property, taking account of the type of construction, the state 

of conservation and the cost of rebuilding the entire building. 

7.5 Property, equipment and investment property acquired through finance 

leases 

A finance lease is a contract that substantially transfers all the risks and rewards incident to 

ownership of an asset. Legal title may or may not be transferred at the end of the lease term. 

The beginning of the lease term is the date on which the lessee is authorised to exercise his right 

to use the asset leased and therefore corresponds to the date on which the lease is initially 

recognised. When the contract commences, the lessee recognises the financial lease transactions 

as assets and liabilities in its statement of financial position at the fair value of the asset leased 

or, if lower, at the present value of the minimum payments due. To determine the present value of 

the minimum payments due, the discount rate used is the contractual interest rate implicit in the 

lease, if practicable, or else the lessee’s incremental borrowing rate is used. Any initial direct costs 

incurred by the lessee are added to the amount recognised for the asset. 

The minimum payments due are apportioned between the finance charges and the reduction of 

the residual liability. The former are allocated over the lease term so as to produce a constant rate 

of interest on the residual liability. 

The finance lease contract involves recognition of the depreciation charge for the asset leased and 

of the finance charges for each financial year. The depreciation policy used for assets acquired 

under finance leases is consistent with that adopted for owned assets. See the relative paragraph 

for a more detailed description. 


Property, equipment and investment property are derecognised in the statement of financial 

position when they are disposed of or when they are permanently retired from use and no future 

economic benefits are expected from their disposal Any gains or losses resulting from the 

retirement or disposal of the property, equipment and investment property, calculated as the 

difference between the net consideration on the sale and the carrying amount of the asset are 

recognised in the income statement under item 270 “Profit (loss) on the disposal of investments”. 

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8. Intangible assets 


An intangible asset is defined as an identifiable non monetary asset without physical substance 

that is used in carrying on a company’s business. 

The asset is identifiable when: 

• it is separable, which is to say capable of being separated and sold, transferred, licensed, 

rented, or exchanged; 

• it arises from contractual or other legal rights, regardless of whether those rights are 

transferable or separable from other rights and obligations. 

An asset possesses the characteristic of being controlled by the enterprise as a result of past 

events and the assumption that its use will cause economic benefits to flow to the enterprise. An 

entity has control over an asset if it has the power to obtain future economic benefits arising from 

the resource in question and may also limit access by others to those benefits. 

Future economic benefits arising from an intangible asset might include receipts from the sale of 

products or services, savings on costs or other benefits resulting from the use of the asset by an 

enterprise. 

An intangible asset is recognised if, and only if: 

(a) it is probable that the expected future economic benefits attributable to the asset will flow to 

the entity; 

(b) the cost of the asset can be reliably measured. 

The probability of future economic benefits occurring is assessed on the basis of reasonable and 

supportable assumptions that represent the best estimate of the economic conditions that will 

exist over the useful life of the asset. 

The degree of probability attaching to the flow of economic benefits attributable to the use of the 

asset is assessed on the basis of the sources of information available at the time of initial 

recognition, giving greater weight to external sources of information. 

In addition to goodwill and software used over several years, brands, core deposits, assets under 

management and assets under management recognised following the merger of the former BPU 

Banca and the former Banca Lombarda e Piemontese are also considered as intangible assets. 

8.1.1 Intangible assets with a finite useful life 

A finite useful life is defined for an asset where it is possible to estimate a limit to the period over 

which the related economic benefits are expected to be produced. 

Intangible assets considered as having a finite useful life include software, core deposits and 

assets under management. 

8.1.2 Intangible assets with an indefinite useful life 

An indefinite useful life is defined for an asset where it is not possible to estimate a predictable 

limit to the period over which the asset is expected to generate economic benefits for the Bank. 

The attribution of an indefinite useful life to an asset does not arise from having already 

programmed future expenses which restore the standard level of performance of the asset over 

time and prolong its useful life. 

Intangible assets considered as having an indefinite useful life include goodwill. 


Assets recognised within statement of financial position item 130 “Intangible assets” are stated at 

cost and any expenses subsequent to the initial recognition are only capitalised if they are able to 

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generate future economic benefits and only if those expenses can be reliably determined and 

attributed to the Assets. 

The cost of an intangible asset includes: 

• the purchase price including any non recoverable taxes and duties on purchases after 

commercial discounts and bonuses have been deducted; 

• any direct costs incurred in bringing the asset into use. 


Subsequent to initial recognition intangible assets with a finite useful life are recognised at cost 

net of total amortisation and any impairment losses that may have occurred. Amortisation is 

calculated on a systematic basis over the estimated useful life of the asset (see definition included 

in the section “Property, equipment and investment property ”) using the straight line method for 

all intangible assets with the exception of intangible assets relating to customer accounts 

recognised following the purchase price allocation resulting from the merger of the former BPU 

Banca and the former Banca Lombarda e Piemontese In this case the amortisation is calculated 

using percentage rates of amortisation which represent the probability of the customer accounts 

ending over time. 

Amortisation begins when the asset is available for use and ceases on the date on which the asset 

is eliminated from the accounts. 

Intangible assets with an indefinite useful life (see, goodwill, as defined in the section below if 

positive) are recognised at cost net of any impairment loss resulting from periodic reviews when 

tests are performed to verify the appropriateness of the carrying amount of the assets (see section 

below). As a consequence amortisation of these assets is not calculated. 

No intangible assets arising from research (or from the research phase of an internal project) are 

recognised. Research expenses (or the research phase of an internal project) are recognised as 

expenses at the time at which they are incurred. 

An intangible asset arising from development (or from the development phase of an internal 

project) is recognised if, and only if the following can be demonstrated: 

(a) the technical feasibility of completing the intangible asset so that it becomes available for sale 

or use; 

(b) the intention of the company to complete the intangible asset to use it or sell it; 

(c) the capacity of the company to use or sell the intangible asset. 

At the end of each annual or interim reporting period the existence of potential impairment of the 

value of intangible assets is assessed. The impairment is given by the difference between the 

carrying amount of the assets and the recoverable amount and is recognised, as are any 

recoveries of value, within item 210 “Net impairment losses on intangible assets”, with the 

exception of impairment losses on goodwill which are recognised within item 260 “Net impairment 

losses on goodwill”. 

8.4 Goodwill 

Goodwill is defined as the difference between the purchase cost and the fair value of assets and 

liabilities acquired as part of a business combination which consists of the union of separate 

enterprises or businesses in a single entity required to prepare financial statements. The result of 

almost all business combinations consists in the fact that a sole entity, an acquirer, obtains 

control over one or more separate businesses of the acquiree. When an entity acquires a group of 

activities or net assets that do not constitute a business it allocates the cost of the group to 

individual assets and liabilities identified on the basis of their relative fair value at the date of 

acquisition. 

A business combination may give rise to a holding relationship between a parent company and a 

subsidiary in which the acquirer is the parent company and the acquiree is the subsidiary. 

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All business combinations are accounted for using the purchase method of accounting. 

The purchase method involves the following steps: 

(a) identification of the acquirer (the acquirer is the combining enterprise that obtains control of 

the other combining enterprises or businesses); 

(b) determination of the acquisition date; 

(c) determination of the cost of the business combination, intended as the consideration 

transferred by the purchaser to the shareholders of the acquiree; 

(d) the allocation, as at the acquisition date, of the cost of the business combination by means of 

the recognition, classification and measurement of the identifiable assets acquired and the 

identifiable liabilities assumed; 

(e) recognition of any existing goodwill. 

Business combination transactions performed with subsidiary undertakings or with companies 

belonging to the same group are recognised on the basis of the significant economic substance of 

the transactions. 

In application of that principle, the goodwill arising from those transactions in the separate 

financial statements is recognised: 

(a) within asset item 120 of the statement of financial position if significant economic substance 

is found; 

(b) as a deduction from equity if it is not found. 

These transactions are eliminated from the consolidated financial statements and are therefore 

recognised solely as the relative costs incurred in relation to parties external to the Group. 

8.4.1. Allocation of the cost of a business combination to assets and liabilities and 

contingent liabilities 

The acquirer: 

(a) recognises the goodwill acquired in a business combination as assets; 

(b) measures that goodwill at its cost to the extent that it is the excess of the cost of the business 

combination over the acquirer's share of interest in the net fair values of the acquiree's 

identifiable assets, liabilities and contingent liabilities. 

Goodwill acquired in a business combination represents a payment made by the acquirer in the 

expectation of receiving economic future benefits from the asset which cannot be identified 

individually and recognised separately. 

After initial recognition, the acquirer values the goodwill acquired in a business combination at 

the relative cost net of cumulative impairment. 

The goodwill acquired in a business combination must not be amortised. The acquirer tests the 

asset for impairment annually or more frequently if specific events or changed circumstances 

indicate that it may have suffered a reduction in value, according to the relative accounting 

standard. 

The standard states that an asset (including goodwill) has suffered an impairment loss when the 

amount recognised in the accounts exceeds the recoverable amount understood as the greater of 

the fair value, net of any sales expenses and its value in use, defined by section 6 of IAS 36. 

In order to test for impairment, goodwill must be allocated to cash generating units or to groups of 

cash generating units, in observance of the maximum aggregation limit which cannot exceed the 

operating segment identified in accordance with IFRS 8. 

8.4.2. Negative goodwill 

If the acquirer’s share of the net fair value of the identifiable assets, liabilities and contingent 

liabilities exceeds the cost of the business combination the acquirer: 

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(a) reviews the identification and measurement of the identifiable assets, liabilities and 

contingent liabilities of the acquiree and the determination of the cost of the business 

combination; 

(b) immediately recognises any excess existing after the new measurement in the income 

statement. 


Intangible assets are derecognised in the statement of financial position following disposal or 

when no economic future benefit is expected from its use or disposal. 

9. Liabilities, securities issued (and subordinated liabilities) 

The various forms of interbank and customer funding are recognised within the statement of 

financial position items 10 “Due to banks”, 20 “Due to customers” and 30 “Securities issued”. 

These items also include liabilities recognised by a lessee in financial leasing operations. 


The liabilities in question are recognised in the statement of financial position at the time when 

the funding is received or when the debt securities are issued. The amount recognised is the fair 

value, inclusive of any additional expenses/income that are directly attributable to the 

transaction and determinable from the outset regardless of when they are paid. The amount of the 

initial recognition does not include all those costs that are reimbursed by the creditor 

counterparty or that are attributable to internal costs of an administrative character. 


After initial recognition, financial liabilities are measured at amortised cost using the effective 

interest method, as defined in previous paragraphs. 


Financial liabilities are derecognised in the statement of financial position when they expire or are 

extinguished. 

The repurchase of own securities issued results in derecognition of the securities with the 

consequent redefinition of the liability for debt instruments issued. Any difference between the 

repurchase value of the own securities and the corresponding carrying amount of the liabilities is 

recognised in the income statement under the item 100 “Income (loss) from the disposal or 

repurchase of d) financial liabilities”. Any subsequent re-issue of the securities previously subject 

to derecognition in the accounts constitutes a new issue for accounting purposes with the 

consequent recognition at the new issue price without any effect in the income statement. 

10. Tax assets and liabilities 

Tax assets and liabilities are stated in the statement of financial position within the items 140 

“Tax assets” and 80 “Tax liabilities”. 

10.1. Current tax assets and liabilities 

Current tax for the current and prior periods is recognised as a liability to the extent that it has 

not yet been settled; any excess compared to the amount due is recognised as an asset. 

Current tax liabilities (assets) for the current and prior years, are measured at the amount 

expected to be paid to/recovered from taxation authorities, using the tax rates and tax laws in 

force. 

254

Current tax assets and liabilities are derecognised in the accounts in the year in which the assets 

are realised or the liabilities are extinguished. 

10.2. Deferred tax assets and liabilities 

Deferred tax liabilities are recognised for all taxable temporary differences unless the deferred tax 

liability arises from: 

• goodwill for which amortisation is not deductible for tax purposes or 

• the initial recognition of an asset or a liability in a transaction which: 

− is not a business combination and 

− at the time of the transaction, affects neither the accounting nor the taxable profit. 

Deferred tax assets are not calculated for higher values of assets for which the tax regime has 

been suspended relating to equity investments and to reserves for which the tax regime has been 

suspended because it is considered there are no reasonable grounds to assume they will be taxed 

in future. 

Deferred tax liabilities are recognised within the statement of financial position item 80 “Tax 

liabilities b) deferred”. 

A deferred tax asset is recognised for all deductible temporary differences if it is probable that a 

taxable income will be used against which it will be possible to use the deductible temporary 

difference, unless the deferred tax asset arises from: 

• negative goodwill which is treated as deferred income; 

• the initial recognition of an asset or liability in a transaction which: 

− is not a business combination and 

− affects neither the accounting profit nor the taxable profit at the time of the transaction. 

Deferred tax assets are recognised within statement of financial position item 140 “Tax assets b) 

deferred”. 

Deferred tax assets and deferred tax liabilities are subject to constant monitoring and are 

measured using the tax rates that it is expected will apply in the period in which the tax asset will 

be realised or the tax liability will be extinguished on the basis of the tax regulations established 

by laws currently in force. 

Deferred tax assets and deferred tax liabilities are derecognised in the accounts in the year in 

which: 

• the temporary difference which gave rise to them becomes payable with regard to deferred tax 

liabilities or deductible with regard to deferred tax assets; 

• the temporary difference which gave rise to them is no longer valid for tax purposes. 

Deferred tax assets and deferred liabilities must not normally be discounted to present values nor 

offset one against the other, 

11. Non current assets and disposal groups held for sale – 

Liabilities associated with disposal groups held for sale 

Non current assets and liabilities and groups of non current assets and liabilities for which it is 

expected that the carrying amounts will recovered by selling them rather than by continued use 

are classified respectively within items 150 “Non current assets and disposal groups held for sale” 

and 90 “Liabilities associated with disposal groups held for sale”. 

In order to be classified within these items the assets or liabilities (or disposal groups) must be 

immediately available for sale and there must be active, concrete programmes to sell the assets or 

liabilities in the short term. 

255

These assets or liabilities are measured at the lower of the carrying amount and their fair value 

net of disposal costs. Profits and losses attributable to groups of assets or liabilities held for sale 

are recognised in the income statement under item 310 “Pre-tax profit from discontinued 

operations. Profits and losses attributable to individual assets held for disposal are recognised in 

the income statement under the most appropriate item. 

12. Provisions for risks and charges 

12.1. Definition 

A provision is defined as a liability of uncertain timing or amount. 

A contingent liability, however, is defined as: 

• a possible obligation, the result of past events, the existence of which will only be confirmed by 

the occurrence or (non occurrence) of future events that are not totally under the control of the 

enterprise; 

• a present obligation that is the result of past events, but which is not recognised in the 

accounts because: 

− it is improbable that financial resources will be needed to settle the obligation; 

− the amount of the obligation cannot be measured with sufficient reliability. 

Contingent liabilities are not recognised in the accounts, but are only reported, unless they are 

considered a remote possibility. 

12.2. Recognition criteria and measurement 

A provision is recognised if and only if: 

• there is a present obligation (legal or implicit) that is the result of a past event; 

• it is probable that the use of resources suitable for producing economic benefits will be 

required to fulfil the obligation; 

• a reliable estimate can be made of the amount arising from fulfilment of the obligation. 

The amount recognised as a provision represents the best estimate of the expenditure required to 

settle the present obligation at the reporting date and reflects the risks and uncertainties that 

inevitably characterise a number of facts and circumstances. The amount of a provision is 

measured by the present value of the expenditure that it is assumed will be necessary to settle the 

obligation where the effect of the present value is a substantial aspect. Future events that might 

affect the amount required to settle the obligation are only taken into consideration if there is 

sufficient objective evidence that they will occur. 

Provisions made for risks and charges include those for the risk attaching to any existing tax 

litigation. 

12.3. Derecognition criteria 

The provision is reversed when it becomes improbable that the use of resources suitable for 

producing economic benefits will be required to settle the obligation. 

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13. Foreign currency transactions 

13.1. Definition 

A foreign currency is a currency other than the functional currency of the entity, which is the 

currency of the primary economic environment in which an entity operates. 

13.2. Recognition criteria 

A foreign currency transaction is recorded at the time of initial recognition in the functional 

currency applying the spot exchange rate between the functional currency and the foreign 

currency ruling on the date of the transaction. 

13.3. Measurement criteria 

At each reporting date: 

(a) foreign currency 3 monetary amounts are translated using the closing rate; 

(b) non-monetary items 4 carried at historical cost in foreign currency are translated using the 

exchange rate at the date of the transaction; 

(c) non-monetary items carried at fair value in a foreign currency are translated using the 

exchange rates that existed on the dates when the fair values were determined. 

Exchange rate differences arising from the settlement of monetary items, or from the translation 

of monetary items at rates different from those at which they were translated when initially 

recognised during the year or in previous financial statements, are recognised in the income 

statement for the period except for exchange rate differences arising on monetary items that form 

part of a net investment in a foreign operation. 

Exchange rate differences arising from a monetary item that forms part of a net investment in a 

foreign operation of an entity that prepares financial statements are recognised in the income 

statement of the separate company financial statements of the entity that prepares the financial 

statements or the separate company financial statements of the foreign operation. These exchange 

rate differences in the financial statements that include the foreign operation (e.g. in the 

consolidated accounts when the foreign operation is a subsidiary) are initially recognised as a 

separate component in equity and are recognised in the income statement at the time of the 

disposal of the net investment. 

When a profit or loss on a non monetary item is recognised directly in equity, each change in that 

profit or loss is also recognised directly in equity. However, when a profit or loss on a non 

monetary item is recognised in the income statement each change in that profit or loss is 

recognised in the income statement. 

The financial statements of foreign subsidiaries and associates which employ an accounting 

currency that is different from that of the Parent are translated using the exchange rates ruling at 

the reporting date 

14. Other information 

14.1 Treasury shares 

Treasury shares if present in the UBI Group portfolio are deducted from equity No profit or loss 

arising from the purchase, sale, issue or cancellation of treasury shares is recognised in the 

3 “Monetary” items are defined as relating to determined sums in foreign currency, which is to say to assets and liabilities 

which must be received or paid for a determined amount in foreign currency. The defining characteristic of a monetary 

item is the right to receive or an obligation to pay a set or calculable number of foreign currency units. 

4 See the note on “monetary” items for the contrary. 

257

income statement. The differences between the purchase and sale price arising from these 

transactions are recorded in equity reserves. 

14.2 Provisions for guarantees granted and commitments 

Provisions made on a cases by case and collective basis to estimate possible payments to be made 

connected with the assumption of credit risks attaching to guarantees granted and commitments 

assumed are calculated by applying the same criteria as that reported for loans. 

These provisions are recognised within the item 100 “Other liabilities” against item in the income 

statement 130d “Net impairment losses on: other financial transactions”. 

14.3 Employee benefits 

14.3.1 Definition 

Employee benefits are defined as all forms of consideration given by an enterprise in exchange for 

services rendered by employees. Employee benefits can be classified as follows: 

• short-term employee benefits (not including benefits due to employees for severance payments 

and benefits paid in the form of equity instruments) due entirely within twelve months after the 

service is rendered by employees; 

• post-employment benefits due after the contract of employment has terminated; 

• post-employment benefit plans subsequent to the termination of the employment contract and 

that is agreements whereby the enterprise provides benefits subsequent to the termination of 

the employment contract; 

• long term benefits, other than the previous, due entirely within the twelve months subsequent 

to the end of the financial year in which employee rendered the relative service. 

14.3.2 Post-employment benefits and defined benefit plans 

14.3.2.1 Recognition criteria 

Following the reform of supplementary pensions pursuant to Legislative Decree No. 252/2005, 

portions of post-employment benefit funds maturing from 1 st January 2007 constitute a “defined 

benefit plan”. 

The liability relating to those portions is measured on the basis of the contributions due without 

the application of any actuarial methods. 

However, post-employment benefits maturing up until 31 st December 2006 continue to constitute 

a “post employment benefit” belonging to the “defined benefit plan” series and as such require the 

amount of the obligation to be determined on an actuarial basis and to be discounted to present 

values because the debt may be extinguished a long time after the employees have rendered the 

relative service. 

The amount is accounted for as a liability amounting to: 

(a) the present value of the defined benefit obligation as at the reporting date; 

(b) plus any actuarial gains (less any actuarial losses) recognised in a separate reserve in equity; 

(c) less any pension costs relating to past service rendered not yet recognised; 

(d) less the fair value at the reporting date of any assets at the service of the plan. 

14.3.2.2 Measurement criteria 

As concerns the accounting treatment for actuarial gains/losses, the UBI Group has opted for 

direct recognition of these items within fair value reserves in equity. 

“Actuarial gains/losses” comprise adjustments arising from the reformulation of previous 

actuarial assumptions as a result of actual experience or from changes in the actuarial 

assumptions themselves. 

258

The Projected Unit Credit Method is used to calculate the present value. This considers each 

single period of service as giving rise to an additional unit of post employment benefit and 

measures each unit separately to arrive at the final obligation. This additional unit is obtained by 

dividing the total expected service by the number of years that have passed from the time service 

commenced until the expected payment date. Application of the method involves making 

projections of future payments based on historical analysis of statistics and of the demographic 

curve and discounting these flows on the basis of market interest rates. The rate used for 

discounting to present value is calculated as the average of the swap, bid and ask rates at the 

measurement date appropriately interpolated for intermediate maturity dates. 

14.3.3 Stock Options 

Stock option plans are defined as operations where an employee or a third party renders service 

for a consideration paid in the equity instruments (including options on shares) of the enterprise 

which benefits from the service. 

The cost of these transactions is measured at the fair value of equity instruments granted and is 

recognised in the income statement under item 180 “Administrative expenses a) personnel 

expense” on a straight line basis over the original life of the plan. The fair value determined relates 

to the equity instruments granted at the time of grant and takes account of market prices, if 

available, and the terms and conditions upon which the instruments were granted. 

14.4 Segment reporting 

Segment reporting is defined as the manner in which financial information on an enterprise is 

reported by operating segment. 

An operating segment is intended as a component of an entity: 

• that engages in business activities that generate revenues and expenses; 

• whose operating results are reviewed regularly by the entity’s chief operating decision 

maker, to make decisions about the resources to be allocated to the segment and assess 

its performance; 

• for which discrete financial information is available. 

Segment reporting is based on elements that senior management uses to make operating 

decisions (a “management approach”) and consequently the identification of operating segments is 

performed on the basis of the current system of reporting to management which is based 

primarily on management analysis of legally recognised entities. 

Segment reporting is completed by information on the geographical areas in which revenues are 

produced and assets are held. 

14.5 Revenues 

14.5.1 Definition 

Revenues are the gross inflow of economic benefits resulting from business arising from the 

ordinary operating activities of an enterprise when these inflows create an increase in equity other 

than an increase resulting from payments made by shareholders. 

14.5.2 Recognition criteria 

Revenues are measured at the fair value of the consideration received or due and are recognised 

in the accounts when they can be reliably estimated. 

The result of the rendering of services can be reliably estimated when the following conditions are 

met: 

• the amount of revenue can be measured reliably; 

• it is probable that the economic benefits arising from the transaction will flow to the company; 

• the stage of completion of the operation as at the reporting date can be measured reliably; 

• the costs incurred, or to be incurred, to complete the transaction can be measured reliably. 

259

Revenue recognised in return for services rendered is recognised by reference to the stage of 

completion of the transaction. 

Revenue is only recognised when it is probable that the economic benefits arising from the 

transaction will be enjoyed by the company. Nevertheless when the recoverability of an amount 

already included within revenues is uncertain, the amount not recoverable, or the amount for 

which recovery is no longer probable is recognised as a cost instead of adjusting the revenue 

originally recognised. 

Revenue arising from the use by third parties of the company’s assets which generate interest or 

dividends are recognised when: 

• it is probable that the economic benefits arising from the transaction will be received by the 

enterprise; 

• the amount of the revenue can be reliably measured. 

Interest is recognised on an accruals basis that takes into account the effective yield of the asset. 

In detail: 

• interest income includes the amortisation of any discounts, premiums or other differences 

between the initial carrying amount of a security and its value at maturity; 

• arrears of interest that are considered recoverable are recognised within the item 10 “Interest 

and similar income”, but only the part considered recoverable. 

Dividends are recognised when shareholders acquire the right to receive payment. 

Expenses or revenues resulting from the sale or purchase of financial instruments, determined by 

the difference between the amount paid or received for the transaction and the fair value of the 

instrument are recognised in the income statement on initial recognition of the financial 

instrument when the fair value is determined: 

• by making reference to current and observable market transactions in the same 

instrument; 

• by using valuation techniques which use, as variables, only data from observable 

markets. 

14.6 Expenses 

Expenses are recognised in the accounts at the time at which they are incurred while following 

the criteria of matching expenses to revenues that result directly and jointly from the same 

transactions or events. Expenses that cannot be associated with revenues are recognised 

immediately in the income statement. 

Expenses directly attributable to financial instruments measured at amortised cost and 

determinable from the outset, regardless of the time at which they are settled, flow to the income 

statement by applying the effective interest rate, a definition of which is given in the section 

“Loans”. 

Impairment losses are recognised through profit and loss in the year in which they are noted. 

A.3 – INFORMATION ON FAIR VALUE 

A.3.1 Transfers between portfolios 

No reclassifications have been performed in the UBI Banca Group either in the current year, or in 

the previous year in financial asset portfolios from asset classes recognised at fair value into 

classes recognised at amortised cost with regard to the possibilities introduced by EC Regulation 

No. 1004/2008 of the European Commission. 

260

A.3.2 Fair value hierarchy 

The fair value used for measuring financial instruments is determined on the basis of criteria, 

listed below, which involve the use of what are termed observable or unobservable inputs. 

Observable inputs are parameters developed on the basis of available market data and they reflect 

the assumptions that market participants should use when they price financial instruments. On 

the other hand, unobservable inputs are parameters for which market data are not available and 

which are therefore developed on the basis of the best available information on the assumptions 

that market participants should use when they price financial instruments. 

Fair value determined on the basis of level 1 inputs: 

the measurement is based on observable inputs, i.e. prices listed on active markets for identical 

financial instruments to which the entity can gain access on the valuation date of the instrument. 

A market is defined as active when the prices quoted reflect normal market transactions, are 

regularly and readily available and if those prices represent actual and regular market trading. 

Fair value determined on the basis of level 2 inputs: 

the measurement is performed using methods that are used if the instrument is not listed on an 

active market and is therefore based on inputs that are different from those of level one. The 

measurement of the financial instrument is based on prices inferred from market quotations for 

similar assets or by using measurement techniques for which all the significant factors – credit 

spreads and liquidity spreads – are inferred from observable market variables. Although this is 

the application of a measurement technique, there is basically no element of discretion in the 

resulting price, because the most important parameters used are drawn from markets and the 

calculation methods used replicate quotations existing on active markets. 

fair value determined on the basis of level 3 inputs: 

the measurement is performed using methods which consist of measuring unlisted instruments 

by employing significant inputs not inferable from markets and which therefore involve the use of 

estimates and assumptions made by management. 

The choice of the method of measuring fair value is not optional, because the methods must be 

applied in hierarchical order. 

Level 1 

Equity instruments quoted on regulated markets, bonds quoted on the EuroMot circuit and those 

for which prices that represent actual and regular market transactions continuously available 

from the main contribution platforms occurring on the basis of a normal reference period with 

price fluctuations over the last five days which occur at intervals considered normal are 

considered as quoted on an active market. 

Those derivatives for which a quotation on an active reference market (e.g. IDEM) are also 

considered as quoted, to the extent that the markets are considered highly liquid. 

The fair value of these instruments is calculated on the basis of the relative closing prices on the 

last day of the month on the markets on which they are quoted. 

The hedge funds issued by Capitalgest for which the NAV made available periodically by the fund 

managers and for which it is considered that no adjustment need be made to take account of 

liquidity risk and/or counterparty risk are also considered as quoted. 

Level 2 

Where no prices are available on active markets, the fair value of instruments is measured by 

using measurement models which make use of market inputs. The resulting measurement is 

therefore based on factors inferred from official quotations, essentially similar in terms of risk 

factors, by applying a determined method of calculation. 

With regard to derivatives, almost all the trading instruments consist of over the counter 

derivatives and they are therefore measured using internal models that use market inputs. The 

options implicit in structured bonds and in the respective hedging derivatives are measured using 

261

appropriate pricing models which make use of directly observable market inputs (e.g. interest rate 

curves, volatility matrices and correlations, exchange rates). The calculation methodologies used 

replicate the prices of financial instruments listed on active markets without making discretionary 

assumptions which might influence the final price. 

As concerns equity instruments recognised within the available-for-sale portfolio, these are 

classified as within level two if they are measured on the basis of measurement methods which 

consider transactions occurring in the instrument in a reasonable period of time with respect to 

the date of measurement and in some cases, by means of stock market multiples for comparable 

companies. 

Finally the “plain vanilla” bonds in issue and the “plain vanilla” component of structured bonds 

are valued by discounting future cash flows to present values. The curve used for subordinated 

issues is obtained by applying the UBI subordinated spread observed for transactions with a 

duration equal to the residual life of the bond to the risk free curve. The curve used for senior 

issues destined for institutional customers is the UBI EMTN curve. Finally the curve used to 

determine the fair value of issues subscribed by ordinary customers is obtained by applying the 

spreads observed in the last quarter for issues with a maturity equal to the residual life of 

individual bonds to the risk free curve. 

Level 3 

Level three is defined as the fair value determined using measurement models which use inputs 

that are not directly observable on markets and which involve the use of estimates and 

assumptions by management. 

Hedge funds not managed by Capitalgest to which adjustments have been made to take account 

of liquidity and/or counterparty risk are included in level three, and they do not therefore assume 

that the NAV reported by the managers is totally reliable. 

Complex OTC derivatives are measured using internal models that use implicit assumptions; the 

credit risk component is also considered explicitly for these. 

The remaining part of the equity instruments classified as available-for-sale are measured using 

methods based on an analysis of the fundamentals of the company in question and, as an 

alternative of last resort, at cost. 

It is necessary to use valuation models to measure the level three fair value of options with 

underlying equity instruments that involve the use of market inputs that are not directly 

observable and which involve the use of estimates and assumptions in the measurement. More 

specifically the measurement instruments are designed using appropriate calculation methods 

based on specific assumptions that regard: 

o the performance of future cash flows, affected by future events to which 

probabilities are assigned based on historical experience or on behavioural 

o 

assumptions; 

determined input parameters not observable on active markets which are estimated 

from financial instruments observable on the market but not identical to the 

instruments measured. 

Finally, with regard to bonds issued, these are recognised within level 3 and measured at cost if 

this correlates directly with the financing operation. 

Information on the valuation models used for securities and derivatives 

The target instrument used for pricing securities and derivatives in the UBI Group is the software 

application Mxg2000 by Murex. This software takes account of all market factors in measuring 

the value of financial instruments. 

The majority of the market data is acquired through the information provider Reuters, partly in 

real time (i.e. prices, yield curves and exchange rates) and partly at preset times (ATM volatility for 

swaptions and ATM volatility and smile curves for caps and floors). The application is also fed “on 

demand” with a series of market parameters supplied by the provider Bloomberg: correlations, 

dividend yields, index and forex volatility. 

Fair value is calculated daily as follows: 

262

• the market parameters acquired in real time by Mxg2000 (prices, yield curves and 

exchange rates) are crystallised at 4.45 p.m. and used as reference data for calculating the 

mark-to-market. The last update of the day for the volatilities of swaptions and caps/floors 

(and the other market data acquired on demand if necessary) is performed at 4.45 p.m.; 

• at the end of the day closure (which occurs at 9.00 p.m.), a series of software procedures 

are performed which extract various information from Mxg2000 including the reference 

mark-to-market for the day. 

The pricing of unlisted financial assets is currently calculated using the software application Risk 

Watch by Algorithmics, before the full migration of Group portfolios onto the Mxg2000 Front 

Office target system takes place. For these instruments the future cash flows are discounted to 

present values using interest rates which take into account the specific nature of the issuer 

(credit spread). 

OTC derivatives on interest rates and exchange rates and derivatives used to hedge bonds (with 

interest rates and currencies as the underlying) are valued using the target software (Mxg2000). 

Values are measured for all contracts which can be priced using closed formula models. In detail, 

the main pricing models used in Mxg2000 for OTC derivatives are: Black Yield, Black Fwd, Black 

Swap Yield, Cox Fwd, Trinomial, Lnormal and CMS Convexity Analytical. 

Derivative instruments that are not managed in Murex, relating to embedded options in 

structured bonds issued and in the respective derivative hedges are valued using internal models 

(stochastic models with MonteCarlo simulations). 

Pricing for unlisted “plain vanilla” liabilities securities and the “plain vanilla” component of 

structured securities is currently calculated on the Front Office Mxg2000 target system. 

The pricing models employed for securities and derivatives are used continuously over time and 

are only modified when substantial market changes occur. 

A.3.2.1 Accounting portfolios: distribution by fair value level 

31.12.2010 31.12.2009 

Financial assets/liabilities measured at fair value 

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 

1. Financial assets held for trading 2.038.701 584.841 109.209 590.022 955.942 29.800 

2. Financial assets at fair value 116.208 - 31.078 108.819 - 64.908 

3. Available-for-sale financial assets 8.874.363 1.296.198 82.058 4.548.203 1.754.222 83.832 

4. Hedging derivatives - 591.127 - - 633.263 - 

Total 11.029.272 2.472.166 222.345 5.247.044 3.343.427 178.540 

1. Financial liabilities held for trading 410.453 543.970 - 112.595 742.792 - 

2. Financial liabilities at fair value - - - - - - 

3. Hedging derivatives - 1.228.056 - - 927.319 - 

Total 410.453 1.772.026 - 112.595 1.670.111 - 

263

A.3.2.2 Annual changes in financial assets recognised at fair value (level 3) 

FINANCIAL ASSETS 

held for trading 

meas ured at fair 

value 

available-for-sale hedges 

1. Opening balances 29.800 64.908 83.832 - 

2. Increases 90.867 8.341 29.604 - 

2.1. Purchases 4.076 3.563 13.840 - 

2.2. Profits recognised in: 

2.2.1. Income statement 2.601 1.815 973 - 

- of which gains 2.246 484 960 - 

2.2.2. Equity X X 2.014 - 

2.3. Transfers from other levels 80.375 - 5.526 - 

2.4. Other increases 3.815 2.963 7.251 - 

3. Decreases (11.458) (42.171) (31.378) - 

3.1.Sales (8.6 22) (39.636) (29.032) - 

3.2. Redemptions (3 15) - - - 

3.3. Losses recognised in: 

3.3.1. Income statement (2.0 84) (2.535) (264) - 

- of which losses (2.0 84) (2.028) (243) - 

3.3.2. Equity X X (1.806) - 

3.4. Transfers to other levels - - (260) - 

3.5. Other decreases (4 37) - (16) - 

4. Closing balances 109.209 31.078 82.058 - 

The amount in line 2.3 “Transfers from other levels” under the column for financial assets held for 

trading relates exclusively to Centrobanca Spa. The transfer relating to equity instruments (equity 

investments for merchant banking) is the result of a more precise classification than that 

performed in 2009, in compliance with the methods described in sub-section A.3.2. 

The item for that same line under the column available-for-sale financial assets relates essentially 

to the instrument SF Equitalia 11 TVP. 

A.3.2.2 Annual changes in financial liabilities recognised at fair value (level 3) 

No financial liabilities recognised at fair value level 3 exist in the UBI Group. 

264

Part B – Notes to the consolidated statement 

of financial position 

ASSETS 

SECTION 1 Cash and cash equivalents – Item 10 

1.1 Cash and cash equivalents: composition 

31/12/2010 31/12/2009 

a) Cash in hand 609.040 683.845 

b) Deposits with central banks - - 

Total 609.040 683.845 

SECTION 2 Financial assets held for trading – Item 20 

2.1 Financial assets held for trading: composition by type 

Items/Amounts 3 1 /12 /2 01 0 31/12/2010 3 1/1 2/ 20 09 

31 /1 2/2 0 09 

L 1 L 2 L 3 L 1 L 2 L 3 

A. On-balance sheet assets 

1. Debt instrum ents 1 .964 .31 9 1 1.0 13 - 1 .97 5.33 2 4 79. 546 150 .58 2 - 6 30. 128 

1 .1 Structur ed instrum ents 8 2.7 92 - 2.80 0 107 7 .91 6 - 8. 023 

1 .2 Other d ebt instrum ents 1 .964 .31 1 8.2 21 - 1 .97 2.53 2 4 79. 439 142 .66 6 - 6 22. 105 

2. Equity instrum en ts 72 .85 6 2 104. 082 17 6.94 0 1 09. 266 80 .59 2 2 0.5 35 2 10. 393 

3. Un its in O .I .C.R. 

(collective investment instruments) 51 2 54 1. 601 2.16 7 628 8 8.6 42 9. 278 

4. Financing - 6 4.1 71 - 6 4.17 1 - 3 .13 4 - 3. 134 

4.1 Reverse repurchase agreements - - - - - - - - 

4 .2 Other - 6 4.1 71 - 6 4.17 1 - 3 .13 4 - 3. 134 

Total A 2 .0 37 .6 87 75 .2 4 0 10 5. 68 3 2 .2 18 .6 10 58 9. 44 0 23 4 .3 16 29 .1 77 85 2. 93 3 

B. Der iva tive instrument s 

1. Financial derivatives 1 .01 4 50 9.6 01 3. 526 51 4.14 1 582 721 .62 6 6 23 7 22. 831 

1 .1 for trading 1 .01 4 50 4.6 59 3. 526 50 9.19 9 582 707 .65 0 6 23 7 08. 855 

1.2 connected with fair value options - - - - - - - - 

1 .3 other - 4.9 42 - 4.94 2 - 13 .97 6 - 13. 976 

2. Credit derivatives - - - - - - - - 

2.1 for trading - - - - - - - - 

2.2 connected with fair value options - - - - - - - - 

2.3 other - - - - - - - - 

Total B 1.014 509.601 3.526 514.141 582 721.626 623 722.831 

Total (A+B) 2.038.701 584.841 109.209 2.732.751 590.022 955.942 29.800 1.575.764 

Equity instruments also include equity investments held for merchant banking activity, performed 

mainly by Centrobanca Spa. 

Item 1.2 “Other debt instruments – Level 2” includes impaired assets consisting of bonds issued 

by Lehman Brothers for a nominal amount of 10 million euro recognised at 8,625% of the 

nominal amount. 

During the year part of those instruments with a nominal amount of 2,5 million euro were 

disposed of, with the realisation of a profit of approximately 309 thousand euro. 

Item 3 “OICR units (collective investment instruments)” relates exclusively to remaining 

investments in hedge funds. 

Item 4 “ Financing – Level 2” relates to salary backed loans of the the subsidiary Prestitalia Spa to 

be sold to third parties. 

265

2.2 Financial assets held for trading: composition by debtors/issuers 

31/12/2010 31/12/2009 

A. ASSETS 

1. Debt instruments 1.975.332 630.128 

a) Governments and Central Banks 1.906.508 450 .38 4 

b) Other public authorities 7 14 2 

c) Banks 35.394 82 .87 4 

d) Other issuers 33.423 96 .72 8 

2. Equity instruments 176.940 210.393 

a) Banks 5.400 8 .01 4 

b) Other issuers: 171.540 202 .37 9 

- insurance companies 3.605 7 .49 3 

- financial companies 47.368 64 .87 9 

- non financial companies 116.713 126 .30 9 

- other 3.854 3 .69 8 

3. Units in O.I.C.R. (collective investment instruments) 2.167 9.278 

4. Financing 64.171 3.134 

a) Governments and Central Banks - - 

b) Other public authorities - - 

c) Banks - - 

d) Other 64.171 3 .13 4 

Total A 2.218.610 852.933 

B. DERIVATIVE INSTRUMENTS 

a) Banks 

- fair va lue 159.984 348 .20 0 

b) Customers 

- fair va lue 354.157 374 .63 1 

Total B 514.141 722.831 

Total (A+B) 2.732.751 1. 575.764 

2.3 Financial assets held for trading: annual changes 

Changes/Underlying assets Debt instruments Equity instruments Units in O.I.C.R. Financing Total 

A. Opening balances 630.128 210.393 9.278 3.134 852.933 

B. Increases 12.593.333 181.832 4.741 64.171 12.844.077 

B. 1 Purchases 12.137. 235 171.944 4.128 - 12.313.307 

B. 2 Positive changes in f air value 18. 763 5.622 117 - 24.502 

B. 3 Other changes 437. 335 4.266 496 64.171 506.268 

C. Decreases ( 11.248.129) (215.285) (11. 852) (3.134) (11. 478. 400) 

C. 1 Sales (10.990. 281) (201.431) (3. 918) - (11. 195.630) 

C. 2 Redempti ons (108. 759) - (7. 656) - (116.415) 

C. 3 Negative changes in fair value (20. 178) ( 7.473) (275) - (27.926) 

C.4 Transfers to other portfolios - - - - - 

C. 5 Other changes (128. 911) ( 6.381) (3) (3.134) (138.429) 

D. Final balances 1.975.332 176.940 2.167 64.171 2.218.610 

Within debt instrument item B.3 “Other changes” (increased), the amount of 409,3 million euro 

relates to uncovered short positions existing at the end of the year. Similarly, item C.5, “Other 

changes” (decreased) includes an amount of 111 million euro relating to the total uncovered short 

positions existing at the end of the year before. 

266

Section 3 Financial assets at fair value –Item 30 

3.1 Financial assets at fair value: composition by type 

Items/Amounts 31/12/2010 Total 31/12/2009 

Total 

L 1 L 2 L 3 L 1 L 2 L 3 

1. Debt instruments - - - - - - - - 

1.1 Structured instruments - - - - - - - - 

1.2 Other debt instruments - - - - - - - - 

2. Equity instruments - - - - - - - - 


(collective investment instruments) 116.208 - 31.078 147.286 108.819 - 64.908 173.727 

4. Financing - - - - - - - - 

4.1 Structured - - - - - - - - 

4.2 Other - - - - - - - - 

Total 116.208 - 31.078 147.286 108.819 - 64.908 173.727 

Cost 116.208 - 31.078 147.286 108.819 - 64.908 173.727 

: 103000O|1 – NOTA 

Item 3, “OICR units (collective investment instruments)”, relates exclusively to units in hedge 

funds subscribed by UBI Banca Scpa. The decrease in the total is attributable to a decision by 

management to reduce investments in this area. 

Investments in hedge funds were classified within “Level 1” for which the NAV is communicated 

regularly and for which the assets of the fund are totally liquid. 

However, hedge funds were classified within “Level 3” for which the NAV was replaced by prudent 

measurement methods devised internally because there are no prospects of redemption in the 

short term (suspended redemptions, exit gates or side pockets) and where recovery of the 

investment is therefore probable in instalments over time. 

Information on the impacts on profit and loss are given in “Part C – Notes to the income 

statement” at the foot of table 7.1. “Net value change in financial assets/liabilities at fair value”, 

which may be consulted. 

3.2 Financial assets at fair value: composition by debtors/issuers 

Items/Amounts 31/12/2010 31/12/2009 

1. Debt instruments - - 


b) Other public author ities - - 

c) Banks - - 

d) Other issuers - - 

2. Equity instruments - - 

a) Banks - - 

b) Other issuers: - - 

- insurance companies - - 

- financial companies - - 

- non financial companies - - 

- other - - 


4. Fi nancing - - 



c) Banks - - 

d) Other - - 

Total 147.286 173.727 

267

3.3 Financial assets at fair value: annual changes 

Debt instruments Equity instruments Units in O.I.C.R. Financing Total 

A. Opening balances - - 173.727 - 173.727 

B. Increases - - 12.167 - 12.167 

B. 1 P urchases - - - - - 

B. 2 Positive changes in f air value - - 7.873 - 7.873 

B. 3 Other changes - - 4.294 - 4.294 

C. Decreases - - (38.608) - (38.608) 

C. 1 Sales - - - - - 

C. 2 Redempti ons - - ( 36.073) - (36.073) 

C.3 Negative changes in fair value - - (2.028) - (2.028) 

C.4 Other changes - - (507) - (507) 

D. Final balances - - 147.286 - 147.286 

SECTION 4 Available-for-sale financial assets – Item 40 

4.1 Available-for-sale financial assets: composition by type 

Items/Amounts 31/12/2010 Total 31/12/2009 

Total 

L 1 L 2 L 3 L 1 L 2 L 3 

1. Debt instruments 8.509.464 1.115.988 10.255 9.635.707 4.041.201 1.573.093 6.586 5.620.880 

1.1 Structured instruments 177.191 - - 177.191 128.752 41.798 - 170.550 

1.2 Other debt instruments 8.332.273 1.115.988 10.255 9.458.516 3.912.449 1.531.295 6.586 5.450.330 

2. Equity instruments 346.586 73.614 70.357 490.557 489.825 71.083 75.540 636.448 

2.1 At fai r value 346.586 73.588 46.008 466.182 489.825 71.057 31.823 592.705 

2.2 At cost - 26 24.349 24.375 - 26 43.717 43.743 


(collective investment instruments) 18.313 106.596 - 124.909 17.177 110.046 260 127.483 

4. Financing - - 1.446 1.446 - - 1.446 1.446 

Total 8.874.363 1.296.198 82.058 10.252.619 4.548.203 1.754.222 83.832 6.386.257 

Equity instruments are recognised within “Level 3” if, for example, in the absence of a price 

quoted on an active market, their fair value is estimated by assuming the value at cost or the 

quota of the equity corresponding to the interest held. 

In consideration of the particular nature of the shareholding, the equity investment held by Banca 

Carime Spa in the Bank of Italy of approximately 422 thousand euro is recognised at cost. 

Amounts recognised at cost also include all the equity investments held by the Group for the 

purposes of a more solid presence on its local markets and for the development of commercial 

agreements. 

The units held in “OICR units” (collective investment instruments) relate mainly to investments in 

private equity funds. The units held in “Level 1” OICR units” relate mainly to the book value of 

Polis funds. 

268

4.2 Available-for-sale financial assets: composition by debtors/issuers 

Items/Amounts 31/12/2010 31/12/2009 

1. Debt instruments 9. 635.707 5. 620.880 

a) Governments and Central Banks 7. 779.641 3. 675.786 


c) Banks 890.267 1. 070.838 

d) Other issuers 965.799 874.256 

2. Equity instruments 490.557 636.448 

a) Banks 332.655 494.958 

b) Other issuers: 157.902 141.490 

- insurance companies 4.499 4.518 

- financial companies 54.758 47.092 

- non financial companies 95.883 87.171 

- other 2.762 2.709 


4. Fi nanci ng 1.446 1.446 



c) Banks - - 

d) Other 1.446 1.446 

Total 10.252.619 6.386.257 

Equity instruments include shares acquired by the network banks following partial conversions of 

restructured loans. 

|1 - NOTA 

4.3 Available-for-sale financial assets: hedged assets 

Items/Components 31/12/2010 31/12/2009 

1. Financial assets subject to fair value specific hedge 

a) interest rate risk 5. 694.419 3. 768.135 

b) price risk - - 

c) currency risk - - 

d ) credit risk - - 

e) multiple r isks - - 

2. Financial assets subject to cash flow specific hedge 

a) interest rate risk - - 

b) currency risk - - 

c) other - - 

Total 5. 694.419 3. 768.135 

Investments in available-for-sale financial assets (government securities – and other debt 

instruments) subject to specific fair value hedges on interest rate risk were increased during the 

year. 

As summarised in section 5.1 of the part on the income statement, item 90 “Net hedging income”, 

the valuation of hedging contracts and the underlying assets led to the recognition of a net loss of 

2,2 million euro. 

269

4.4 Available-for-sale financial assets: annual changes 

Debt instruments Equity instruments Units in O.I.C.R. Financing Total 

A. Opening b alances 5. 620.880 636. 448 127. 483 1. 446 6. 386. 257 

B. Increases 8.799.516 145.982 20.497 - 8.965. 995 

B. 1 Purchases 8. 611.208 128.429 16.605 - 8.756. 242 

B.2 Positive changes in fair value 39.176 5.329 3.521 - 48.026 

B.3 Reversal of impairment losses - - - - - 

- recognised in the income statement - - - - - 

- recognised in equity - - - - - 

B.4 Transfers from other portfolios 2 409 - - 411 

B. 5 Other changes 149.130 11.815 371 - 161. 316 

C. Decreases ( 4. 784. 689) ( 291. 873) (23. 071) - (5.099.633) 

C. 1 Sales (4. 080.323) (119.465) (18. 336) - (4.218. 124) 

C. 2 Redempti ons (335.290) - (2. 900) - (338. 190) 

C.3 Negative changes in fair value (336.746) (8.068) (1.583) - (346.397) 

C.4 Impairment losses (474) (164.286) (249) - (165.009) 

- recognised in the income statement (474) (40.240) (249) - (40.963) 

- recognised in equity - (124.046) - - (124.046) 

C.5 Transfers to other portfolios - - - - - 

C. 6 Other changes (31.856) (54) (3) - (31. 913) 

D. Final balances 9.635.707 490.557 124.909 1.446 10.252.619 

Purchases of debt instruments consisted mainly of investments in government securities 

(approximately eight billion euro), while the remaining part consisted of purchases of bonds 

issued by major banks. 

Again with regard to debt instruments, the decrease in fair value was attributable to the serious 

economic situation on markets (especially in the last quarter of the year). The mark-to-market 

recognition of instruments was performed in a separate fair value reserve in equity. 

Investments in equity instruments included the following purchases: ETF TRACK EURXX50 for 20 

million euro, Autostrade Padane Spa for 0,8 million euro, Autostrada Pedemontana Spa for 6,7 

million euro, RBC DEXIA INV SE BK for 92 million euro and other equity investments acquired as 

part of loan restructuring including GGP Greenfield Azioni A3 for 4,2 million euro and Greenvision 

Ambiente Spa for 2,8 million euro. 

The purchase of RBC DEXIA INV SE BK was performed as part of the operation to contribute the 

depository bank operations. UBI Banca later disposed of those instruments during the year. 

In addition to RBC DEXIA just mentioned, the main sales of equity instruments concerned 

Cartasi Spa amounting to 23,4 million euro. 

The decreases in fair value recognised through profit and loss consisted of 2,7 million euro 

relating to A2A Spa and 36,8 million euro relating to Banca Intesa Sanpaolo Spa. 

The effects in the income statement and the movements in the reserve are given below for the 

latter investment. 

historical values 

values 

31/12/2009 

movements in reserves and in the 

income statement to 31/12/2009 

values 

31/12/2010 

movements in reserves and in the 

income statement to 31/12/2010 

No. shares unit price cost unit price fair value 

reversal of share 

to reserve (gross of 

tax) 

recognition in the 

income statement 

(already 

perfo rmed to 30th 

June 2009) 

unit price fair value 

fair value change 

of share in reserve 

(gross of tax) 

recognition in the 

income statement 

145.022.912 5,686 824.600 3,1654 459. 056 126.069 32.369 2, 0423 296.180 (126.069) (36. 807) 

270

SECTION 5 Held-to-maturity investments – Item 50 

5.1 Held-to-maturity investments: composition by type 

At the end of the 2009, the Parent disposed of its entire portfolio of held-to-maturity investments 

and therefore no items of this type exist for the UBI Group. 

5.2 Held-to-maturity investments: debtors/issuers 

No items of this type exist in the UBI Group. 

5.3 Held-to-maturity investments: hedged 

No items of this type exist in the UBI Group. 

5.4 Held-to-maturity investments: annual changes 

No movements in the item occurred in 2010. 

Table 2: 105030O|1 - NOTA 

Section 6 Loans to banks – Item 60 

6.1 Loans to banks: composition by type 

Type of transaction/ Amounts 31/12/2010 31/12/2009 

A. Loans to C entral Banks 739.508 641.788 

1. Term deposits - - 

2. Compulsory reserve requi rement 739.508 641.751 

3. Reverse repur chase agreements - - 

4. Other - 37 

B. Loans to banks 2. 380.844 2. 636.476 

1. Current accounts and deposits 1. 161.396 1. 019.692 

2. Term deposits 466.445 728.828 

3. Other loans 753.003 887.956 

3.1 Reverse repurchase agreements 988 99.889 

3.2 Finance leases 165 313 

3.3 other 751.850 787.754 

4. Debt instruments - - 

4.1 Structured instruments - - 

4.2 Other debt instr uments - - 

Tot al (carrying a mount) 3. 120.352 3. 278.264 

Tot al (fa ir value) 3. 120.509 3. 278.360 

Deteriorated loans to banks as at 31/12/2010 amounted to 67 thousand euro. 

The item “Other loans other” consists mainly of mortgages, cheques drawn on third parties and 

pooled financing. 

6.2 Loans to banks: assets subject to specific hedging 

There were no loans to banks subject to specific hedging. 

271

6.3 Finance leases 

Duration 

det eriorated 

exposures 

minimum payments 

quota of principal 

of which guaranteed 

remaining value 

quota of inte rest 

gross investment 

of which non guar anteed 


on demand - - - - - - 

up to 3 months - 16 - 1 17 - 

between 3 months and 1 year - 51 - 3 54 - 

from 1 year to 5 years - 9 8 - 2 10 0 - 

mor e than 5 years - - - - - - 

indeterminate maturity - - - - - - 

total gross value - 165 - 6 171 - 

SECTION 7 Loans to customers – Item 70 

7.1 Loans to customers: composition by type 

31/12/2010 

31/12/2009 

Type of transaction/ Amounts 

Perfor ming Deteriorated Performing Det eriorate d 

1. Current account over drafts 12.656. 534 1.067.391 13.164.385 921.874 

2. Reverse r ep urcha se agreements 3 23. 597 - 29 2.12 7 - 

3. Mortgages 51.431.308 2.512.658 48.045.671 2.104.763 

4. Credit cards, personal loans and salary backed loans 6.200. 764 144.009 6.482.139 106.801 

5. Finance leases 8.821. 521 769.279 8.905.062 664.558 

6. Factoring 2.971. 751 16.946 2.484.931 48.846 

7. Other transactions 14.097.107 749.846 13.978.709 684.392 

8. Debt instruments 51. 118 1.000 101.512 2.825 

8.1 Structured instruments 3.409 - 31.113 - 

8.2 Other debt instruments 47.709 1.000 89.056 2.825 

Total (carrying amount) 96.553.700 5.261.129 93.473.193 4.534.059 

Total (fair value) 98.756.310 5.260.108 95.797.250 4.564.415 

On the basis of Bank of Italy instructions, from 31 st December 2009 impaired assets include loans 

that have been past due and/or in arrears for more than 90 days backed by property mortgages 

amounting to 294,8 million euro. 

Reverse repurchase agreement transactions amounting to 0,3 million euro were performed with 

Cassa di Compensazione e Garanzia (central counterparty clearing). 

Other transactions included a security deposit with the Cassa di Compensazione e Garanzia 

amounting to 690 million euro. 

Table 3: 107000O|1 - NOTA2_ASS 

272

7.2 Loans to customers: composition by debtors/issuers 

Type of transaction/Amounts 

31/12/2010 31/12/2009 

Performing Deteriorated Performing Deteriorated 

1. D e b t ins t ru m e n t s 5 1.118 1.0 0 0 10 3 .3 3 7 1.0 0 0 

a) Governments - - - - 

b) Other public authorities 8.026 - 8.456 

c) Other issuers 43.092 1.000 94.881 1.000 

- non financial companies 5.524 - 5.523 - 

- financial companies 37.568 1.000 79.346 1.000 

- insurance companies - - 10.012 - 

- o ther - - - - 

2. Financing to 96.502.582 5.260.129 93.371.681 4.531.234 

a) Governments 91.716 1 122.763 - 

b) Other public authorities 1.001.685 2.323 993.651 2.067 

c) Other 95.409.181 5.257.805 92.255.267 4.529.167 

- non financial companies 55.995.639 3.958.314 55.961.312 3.404.354 

- financial companies 4.981.460 68.283 4.570.089 166.657 

- insurance companies 124.449 112 53.942 104 

- o ther 34.307.633 1.231.096 31.669.924 958.052 

To tal 96.553.700 5.261.129 93.475.018 4.532.234 

273

7.3 Loans to customers: assets subject to specific hedge 

Type of transaction/Amounts 31/12/2010 31/12/2009 

1. Loans subject to fair value specific hedge: 

a) interest rate risk 370.600 755.617 

c) currency risk - - 

d) credit risk - - 

e ) multiple risks - - 

2. Loans subject to cash flow specific hedge: 



c) other - - 

Total 370.600 755.617 

7.4 Finance leases 

Duration 

deteriorated 

exposures 

minimum payments 

quota of pr incipal 

of which 

guaranteed 


quota of interest 

gross investment 

of which non 

guaranteed 


on demand 67. 600 284.701 - - 284.701 - 

up to 3 months 24. 276 287.370 15.187 8 3.960 371.330 

between 3 months and 1 year 29. 929 863.933 50.345 229.919 1. 093.852 

from 1 year to 5 years 108. 843 2.959.7 63 294.194 839.851 3. 799.614 

more than 5 years 200. 951 3.460.4 59 814.000 842.466 4. 302.925 

indeterminate maturity 337. 680 965.294 - - 965.294 - 

total 769.279 8.821.520 1.173.726 1.996.196 10.817.716 - 

The lending portfolio for the finance leases of UBI Leasing Spa, the product company of the Group 

in the leasing sector, consists of 83.699 contracts, composed as follows: 

− 72% property leases; 

− 18% plant and equipment; 

− 6% auto; 

− 4% aeronautical sector. 

The ten most significant exposures had a total remaining value amounting to 270.121 thousand 

euro. 

Potential lease instalments (equal to the index value of the instalments) were recognised 

amounting to 130.578 thousand euro. 

274

Section 8 Hedging derivatives – Item 80 

8.1 Hedging derivatives: composition by type of contract and underlying assets 

Type of derivative/Underlying 

assets 

31/12/2010 31/12/2009 

L 1 L 2 L 3 Total nominal amount L 1 L 2 L 3 Total nominal amount 

A) Financial derivatives - 591.127 - 591.127 19.718.767 - 633.263 - 633.263 27.452.549 

1) Fair value - 560.918 560.918 19.117.091 - 625.529 625.529 27.081.756 

2) Cash flow - 30.209 - 30.209 601.676 - 7.734 - 7.734 370.793 

3) Foreign investments - - - - - - - - - - 

B) Credit derivatives - - - - - - - - - - 

1) Fair value - - - - - - - - - - 

2) Cash flow - - - - - - - - - - 

Total - 591.127 - 591.127 19.718.767 - 633.263 - 633.263 27.452.549 

8.2 Hedging Derivatives: composition by portfolios hedged and type of hedge 

Fair Value 

Cash flow 

Tr ansactions /Type of 

hedging 

Inte rest rate 

risk 

Currency 

risk 

Specific Macro-hedge Specific Macro-he dge 

Credit risk 

Price risk 

Multiple 

risks 

Foreign 

investments 

1. Availa ble-for -sale financial 

943 - - - - X - X X 

assets 

2. Loans 897 - - X - X - X X 

3. Held-to-matur ity 

investments 

X - - X - X - X X 

4. Portfolio X X X X X 12 .44 5 X - X 

5. Other transactions - - - - - X - X - 

Tot al assets 1.840 - - - - 12.445 - - - 

1. Financial liabilities 546.633 - - X - X 30.209 X X 

2. Portfolio X X X X X - X - X 

Total liabilities 546.633 - - - - - 30.209 - - 

1. Expected transactions X X X X X X - X X 

2. Portfolio of fina ncial assets 

and liabilities 

X X X X X - X - - 

275

SECTION 9 Fair value change in hedged financial assets – Item 90 

9.1 Fair value change in hedged assets: composition by portfolios hedged 

Fair value change in hedge d assets/Group components 31/12/2010 31/12/2009 

1. Positive adjustments 

1.1 of specific portfolios: 475.219 337.916 

a) loans 475.219 337.916 

b) available-for-sale assets - - 

1. 2 general - - 

2. Negative adjustments 

2.1 of specific portfolios (46.146) (36.064) 

a) loans (46.146) (36.064) 

b) available-for-sale assets - - 

2. 2 general - - 

Total 429.073 301.852 

09000O|1 - NOTA 

9.2 Assets of the banking group subject to interest rate risk macro hedge: composition 

Hedged assets 31/12/ 2010 31/12/ 2009 

1. Loans 12. 523.038 8. 561.145 

2. Availa ble-for -sale assets - - 

3. Portfolio - - 

Total 12.523.038 8.561.145 

276

SECTION 10 Equity investments – Item 100 

10.1 Equity investments in companies subject to joint control (valued using the equity 

method) and in companies subject to significant influence: information on 

investments 

Details of investment 

Name Headquarters Type of ow nership 

% of votes 

Investing company 

% hel d 

B. Companies 

1. Arca SGR Spa Milan Significant influence 

UBI Banca Scpa 23,124% 


25,000% 

2. Aviva Assicurazioni Vita Spa Milan significant influence UBI Banca Scpa 49,999% 49,999% 

3. Aviva Vita Spa Milan significant influence UBI Banca Scpa 50,000% 50,000% 

4. Capital Money Spa Milan significant influence UBI Banca Scpa 20,671% 20,671% 

5. Ge.Se.Ri. Spa in liquidazione Cuneo significant influence Banca Regionale Europea Spa 100,000% 100,000% 

6. Lombarda China Fund Management Co. Shenzen (China) significant influence UBI Banca Scpa 49,000% 49,000% 

7. Lombarda Vita Spa Brescia significant influence UBI Banca Scpa 40,000% 40,000% 

8. Prisma Srl Milan significant influence UBI Banca Scpa 20,000% 20,000% 

9. SF Consulting Srl Mantua significant influence UBI Banca Scpa 35,000% 35,000% 

10. Sider Factor Spa Milan significant influence UBI Factor Spa 27,000% 27,000% 

11. Sofipo Fiduciarie Sa Lugano significant influence Banque de Depots et de Gestion Sa 30,000% 30,000% 

12. SPF Studio Progetti Finanziari Srl Roma significant influence Banca Popolare di Ancona Spa 25,000% 25,000% 

13. Tex Factor Spa in liquidazione Milan significant influence UBI Factor Spa 20,000% 20,000% 

14. UBI Assicurazioni Spa Milan significant influence UBI Banca Scpa 49,999% 49,999% 

15. UFI Servizi Srl Rome significant influence Prestitalia Spa 23,167% 23,167% 

The financial statements as at and for the year ended 31 st December 2010 included exclusively 

equity-accounted investees. 

The larger equity investments were subjected to impairment testing, in some cases using the 

average of the multiples of a sample of comparable companies, while in other cases reference was 

made to market transactions occurring during the last financial year. 

Greater information is given on the market values relating to the more significant equity 

investments recognised in the consolidated financial statements of UBI Banca. Additionally, the 

market value for the insurance companies Aviva Assicurazioni Vita Spa, Aviva Vita Spa and 

Lombarda Vita Spa was calculated on the basis of a sample of companies quoted on active 

European stock markets considering the multiple price/book value (P/BV) adjusted for minority 

interests and for intangible assets. The source for the amounts used was Bloomberg. The equity 

value was compared with the carrying amount of the equity investments in the consolidated 

financial statements. 

‐ Aviva Vita Assicurazioni Spa – the equity attributable to the Parent, amounting to 53,6 

million euro, inclusive of profit to 31 st December 2010 and also of a positive consolidation 

difference amounting to 2,6 million euro compared to an equity value (pro rata) of 67,2 million 

euro; 

‐ Aviva Vita Spa: the equity attributable to the Parent, amounting to 76,4 million euro, 

inclusive of profit to 31 st December 2010 compared to an equity value (pro rata) of 104,7 

million euro; 

‐ Lombarda Vita Spa – the equity attributable to the Parent, amounting to 159,2 million euro, 

inclusive of profit to 31 st December 2010 and a positive consolidation difference amounting to 

36,6 million euro compared to an equity value (pro rata) of 163,3 million euro. 

As concerns UBI Assicurazioni Spa, the equity attributable to the Parent amounted to 38,7 

million euro, inclusive of the result at the end of the year and of a positive consolidation difference 

amounting to 5,6 million euro. An analysis of changes during the year in the market multiples of 

comparable listed insurance companies and of the multiples of comparable transactions 

performed in the sector showed that the book value of the investment was appropriate. 

277

For further details “Part A. Accounting policies – Section 3 – Consolidation scope and methods” of 

this report may be consulted. 

10.2 Equity investments in companies subject to joint control and in companies subject to 

significant influence: accounting information 

Name Total assets Total revenues Profit (Loss) Equity 

Consolidated 

carrying amount 

A. Equity accounted investees 

1. Arca SGR Spa 169.767 172.590 7.647 113.772 30.386 

2. Aviva Assicurazioni Vita Spa 2.491.807 289.623 5.000 101.896 52.558 

3. Aviva Vita Spa 4.384.400 119.400 2.000 152.798 77.449 

4. Capital Money Spa 10.574 10.032 - 3.615 1.565 

5. Ge.Se.Ri. Spa in liquidazione 35 - (35) (329) - 

6. Lombarda China Fund Management Co. 16.119 8.755 (299) 13.747 6.736 

7. Lombarda Vita Spa 5.657.451 1.496.909 30.785 324.711 159.250 

8. Prisma Srl 828 1.012 (117) 127 25 

9. SF Consulting Srl 6.119 5.045 46 556 195 

10. Sider Factor Spa 93.050 2.346 669 3.357 907 

11. Sofipo Fiduciarie Sa 3.117 763 3.938 2.443 733 

12. SPF Studio Progetti e Servizi Finanziari Srl 1.155 839 6 143 38 

13. Tex Factor Spa in liquidazione 1.635 598 (222) 1.635 327 

14. UBI Assicurazioni Spa 598.768 189.640 (4.337) 66.189 38.687 

15. UFI Servizi Srl 464 347 60 224 38 

B. Proportionately consolidated companies 

1. By You Spa 15.706 43.375 5.466 6.558 xxx 

2. By You Piemonte Srl 732 2.959 (442) (44) xxx 

3. By You Mutui Srl 6.927 15.329 1.565 1.866 xxx 

4. By You Liguria Srl 1.222 4.639 (249) (68) xxx 

5. By You Adriatica Srl 443 1.384 (12) 126 xxx 

6. Polis Fondi SGR Spa 12.344 5.855 934 9.710 xxx 

7. Sintesi Mutuo Srl 212 52 29 116 xxx 

8. UBI Trust Company Ltd. 32 13 (75) 23 xxx 

TOTAL 13.472.907 2.371.505 52.357 803.171 368.894 

For companies subject to significant influence valued using the equity method, the fair value is 

not used because they are investments in companies that are not listed on active markets. 

278

10.3 Annual changes in equity investments 

31/12/2010 31/12/2009 

A Opening balances 413.943 246.099 

B Increases 34.868 169.777 

B.1 Purchases 13.988 55.032 

B.2 Reversals of impairment losses - - 

B.3 Revaluations - - 

B.4 Other changes 20.880 114.745 

C Decreases (79.917) (1.933) 

C.1 Sales (36.812) - 

C.2 Impairment losses - - 

C.3 Other changes (43.105) (1.933) 

D Final balances 368.894 413.943 

E Total revaluations - - 

F Total impairment losses - - 

The amount recognised on line B.1 “Purchases” is the result of the increases in the share capital 

subscribed and paid up by the Parent for Lombarda Vita Spa. 

The amount recognised on line B.4 “Other changes” consists of the following: 

‐ an amount of 536 thousand euro for positive exchange rate differences; 

‐ an amount of 90 thousand euro for increases in reserves; 

‐ profits for the year totalling 20.254 thousand euro. More specifically: 

o Aviva Vita Spa 2.000 thousand euro 

o Lombarda Vita Spa 14.146 thousand euro 

o Aviva Vita Assicurazioni Spa 1.500 thousand euro 

o Arca SGR Spa 2.224 thousand euro 

The amount recognised on line C.1 “Sales” relates to the sale to third parties of a 9,9% interest in 

the share capital of Lombarda Vita Spa for 36.716 thousand euro and the disposal of 100% of 

Secur Broker Srl for 96 thousand euro. 

The amount recognised on line C.3 “Other changes” is composed as follows: 

‐ dividends of 23.199 thousand euro; 

‐ losses for the year for a total 2.460 thousand euro including 2.168 thousand euro relating 

to UBI Assicurazioni Spa and 147 thousand euro to Lombarda China Fund Management 

Co.; 

‐ other decreases of 17.466 thousand euro relating almost totally to changes in the fair 

value reserves of UBI Assicurazioni Spa amounting to 3.037 thousand euro and to 

Lombarda Vita Spa amounting to 14.307 thousand euro. 

10.4 Commitments relating to equity investments in subsidiaries 

Commitments relating to the possible exercise of options 

Banca Popolare Commercio e Industria/Banca Carime/Banca Popolare di Ancona – banc 

assurance agreement with the Aviva Group: this agreement between UBI Banca and Aviva 

involves three call options granted to UBI on equity investments in banks (BPCI, Carime and 

Popolare di Ancona) for which the trigger events are connected with the performance of the jointventure 

or the termination of the distribution agreement or the exclusive distribution condition. If 

UBI fails to exercise the call options, Aviva will have the right from 30 th September 2016 (from 1 st 

279

January 2020 in the case of the investment in Popolare di Ancona), to exercise a put option on the 

same investments at a price equal to the fair value at the time of exercise. 

10.5 Commitments relating to equity investments in companies subject to joint control 

Commitments connected with the possible payment of further tranches of the price 

Nothing to report. 

10.6 Commitments relating to equity investments in companies subject to significant 

influence 

Commitments relating to the possible exercise of options 

Lombarda Vita Spa: as part of the renewal of life banc assurance agreements with the Cattolica 

Assicurazioni Group concluded on 30 th September 2010, the options on the respective 

investments in the Lombarda Vita joint venture were reformulated with purchase options only, 

exercisable on the basis of the occurrence of predetermined conditions. 

Lombarda China Fund Management Company: the partnership agreement signed between UBI 

Banca and Goudu Securities Banca Ltd. in the asset management sector, focused on the Chinese 

market, involves a series of intersecting put/call options which can be exercised if determined 

trigger events occur concerning the respective investments held in Lombarda China Fund 

Management. 

Aviva Vita Spa: on 23 rd February 2011 UBI Banca subscribed and paid up its part – amounting 

to five million euro – of a share capital increase performed by Aviva Vita Spa for a total 10 million 

euro. This payment is the first tranche of an operation to recapitalise the associate company for a 

total of 20 million euro. The remaining ten million euro may be called by the company by 31 st 

December 2012. 

280

SECTION 11 Technical reserves of reinsurers – Item 110 

No items of this type exist. 

SECTION 12 Property, equipment and investment property – Item 120 

12.1 Property, equipment and investment property: composition of assets valued at cost 

Assets/amounts 31/12/2010 31/12/2009 

A. As sets us ed in operations 

1.1 owned 1.891.547 1.932.480 

a) land 884.296 904.231 

b) buildings 814.977 822.851 

c) furnishings 50.393 51.985 

d) electronic equipment 62.646 70.430 

e) other 79.235 82.983 

1.2 acquired through finance leases 44.075 48.409 

a) land 22.123 23.011 

b) buildings 21.518 23.820 

c) furnishings 203 164 

d) electronic equipment 113 154 

e) other 118 1.260 

Total A 1.935.622 1.980.889 

B. Assets held for investment 

2.1 owned 177.042 125.946 

a) land 103.864 65.703 

b) buildings 73.178 60.243 

2.2 acquired through finance leases - - 

a) land - - 

b) buildings - - 

Total B 177.042 125.946 

Total (A+B) 2.112.664 2.106.835 

12.2 Property, equipment and investment property: composition of the assets at fair value 

or revalued 

No property, equipment and investment property at fair value are held. 

281

12.3 Property, equipment and investment property used in operations: annual changes 

Land Buildings Furnishings 

Electronic 

equipment 

Othe r 

Total 

A. Gross opening balances 1.031.684 1.536.298 219.471 424.558 394.786 3.606.797 

A.1 Total net reductions in value (104.442) (689.627) (167.32 2) (353.974) (310.543) (1.625.908) 

A.2 Net opening balances 927.242 846.671 52.149 70.584 84.243 1.980.889 

B. Increases 26.071 58.008 10.482 31.407 27.915 153.883 

B.1 Purchases 11.4 97 24.748 10.326 30.680 27.854 105.105 

B.2 Capitalised improvement expenses - 2.124 - - - 2.124 

B.3 Reversal of impairment losses - - - - - - 

B.4 Positive changes in fair value recognised in: - - - - - - 

a) equity - - - - - - 

b) income statement - - - - - - 

B.5 Positive exchange rate differences 2.6 09 4.214 70 502 7 7.402 

B.6 Transfers from properties held for investment 

5 53 699 - - - 1.252 

B.7 Other changes 11.4 12 26.223 86 225 54 38.000 

- business combinations - - - - - - 

- other changes 11.4 12 26.223 86 225 54 38.000 

C. Decreases (46.894) (68.184) (12.035) (39.232) (32.805) (199.150) 

C.1 Sales (8.082) (7.090) (3 2) (7.017) (145) (22.366) 

C.2 Depreciation - (43.285) (10.06 3) (29.554) (23.566) (106.468) 

C.3 Impairment losses recognised in: - - (1 2) - - (12) 

a) equity - - - - - - 

b) income statement - - (1 2) - - (12) 

C.4 Negative changes in fair value - - - - - - 

a) equity - - - - - - 

b) income statement - - - - - - 

C.5 Negative exchange rate differences - - - - - - 

C.6 Transfers to: (3 8.806) (16.869) - - - (55.675) 

a) tangible assets held for investment (3 8.806) (16.869) - - - (55.675) 

b) assets held for sale - - - - - - 

C.7 Other changes (6) (940) (1.92 8) (2.661) (9.094) (14.629) 

- business combinations - - - - - - 

- other changes (6) (940) (1.92 8) (2.661) (9.094) (14.629) 

D. Final net balances 906.419 836.495 50.596 62.759 79.353 1.935.622 

D.1 Total net reductions in value (119.861) (567.431) (150.29 5) (353.349) (303.018) (1.493.954) 

D.2 Final gross balances 1.026.280 1.403.926 200.891 416.108 382.371 3.429.576 

The sum of the amounts for “Increases - Other changes” on line B.7 under the column “Land” and 

the column “Buildings” totals 37.635 thousand euro. That amount includes approximately 30 

million euro of land and buildings reclassified out of the item “assets held for disposal” and profits 

on disposal of approximately seven million euro. 

The reclassification out of the item “assets held for disposal” related mainly to properties owned 

by BPB Immobiliare already transferred in 2009. The table giving changes in property, equipment 

and investment property for 2009 may be consulted in this respect. 

12.4 Annual changes in tangible assets held for investment 

Total 

Land 

Buildings 

A. Opening balances 65 .7 03 60 .2 43 

B. Increases 39 .7 87 19 .2 08 

B.1 Purchases 3 399 

B.2 Capitalised imp rovement expenses - - 

B.3 Pos itive changes i n fair value - - 

B.4 Reversals of imp airm ent losses - - 

B.5 Positive exchange rate differences - - 

B.6 Transfers from prope rtie s used in operation s 38.806 16.869 

B.7 Other changes 978 1.940 

C. Decreases (1.626 ) (6.273 ) 

C.1 Sales (1.068) (2.218) 

C.2 Depreciation (2) (3.356) 

C.3 Negative changes i n fair value - - 

C.4 Impairment losses - - 

C.5 Negative exchange rate differences - - 

C.6 Tra nsfers to other as set portfo li os (553) (699) 

a) prop erties for us e in operations (553) (699) 

b) non c urren t asse ts h eld for dis posal - 

C.7 Oth er changes (3) - 

D. Final balances 103 .8 64 73 .1 78 

E. F air value 147.827 146.233 

282

Given that land and buildings are recognised at cost for accounting purposes, in order to 

determine the fair value (market value) of the properties, the Parent had external appraisers value 

the entire stock of properties. 

The estimate was based on generally accepted valuation principles, by applying the following 

valuation criteria: 

• the direct comparative or market method, based on a comparison between the asset in 

question and other similar assets subject to sale or currently on sale on the same market or 

competing markets; 

• the income method, based on the present value of potential market incomes for a property, 

obtained by capitalising the income at a market rate. 

The valuation methods just described have been performed individually and the values obtained 

appropriately averaged 

As already reported above, external appraisers were appointed to test the value of all property, 

equipment and investment property assets for impairment at the end of the financial year. 

The appraisals performed basically confirmed the appropriateness of the carrying amounts. 

283

12.5 Commitments for the purchase of property, equipment and investment property 

Assets/amounts 31/12/2010 31/12/2009 

A. Assets used in operations 

1.1 owned 9.558 7.061 

- land - - 

- buildings 1.959 2.008 

- furnishings 222 1.769 

- electronic equipment 3.710 1.728 

- other 3.667 1.556 

1.2 Finance lease - - 

- land - - 

- buildings - - 

- furnishings - - 

- electronic equipment - - 

- other - - 

Total A 9.558 7.061 

B. Assets held for investment 

2.1 owned 633 - 

- land - - 

- buildings 633 

2.2 Finance lease - - 

- land - - 

- buildings - - 

Total B 633 - 

Total (A+B) 10.191 7.061 

SECTION 13 Intangible assets – Item 130 

13.1 Intangible assets: composition by type of asset 

Ass ets/amounts 

31/12/2010 31/12/2009 

Finite life 

Inde finite life 

Finite life 

Indefinite life 

A.1 Goodwill X 4.416.660 X 4.401.911 

A.2 Other intangible assets 1.058.688 37 1.121.453 37 

A.2.1 Assets valued at cost: 1.058.688 37 1.121.453 37 

a) Internally generated intangible assets 409 - 612 - 

b) Other assets 1.058.279 37 1.120.841 37 

A.2.2 Assets at fair value: - - - - 

a) Internally generated intangible assets - - - - 

b) Othe r ass ets - - - - 

Total 1.058.688 4.416.697 1.121.453 4.401.948 

284

Details of the item “Goodwill” are given below. 


31.12.2010 31.12.2009 changes 

UBI Banca Scpa 521.245 521.245 - 

Banco di Brescia Spa 1.267.763 1.377.754 ( 109.991) 

Banca Carime Spa 812.454 812.454 - 

Banca Regionale Europea Spa 309.121 430.683 ( 121.562) 

Banca Popolare di Ancona Sp a 249.049 249.049 - 

Banca Popolare Commercio e Industria Spa 232.543 82.423 150.120 

UBI Pramerica SGR Spa 205.489 188.124 17.365 

UBI Leasing Spa 160.337 160.337 - 

Banco di San Giorgio Spa 155.265 151.738 3.527 

Banca di Valle Camonica Spa 103.621 103.621 - 

Banca Popolare di Bergamo Spa 100.044 22.028 78.016 

B@nca 24-7 Spa 71.132 71.132 - 

UBI Factor Spa 61.491 61.491 - 

IW Bank Spa 65.846 54.631 11.215 

Prestitalia Spa 24.895 8.298 16.597 

UBI Banca Private Investment Spa 20.189 20.189 - 

Centrobanca Spa 17.785 16.672 1.113 

UBI Banca International Sa 15.080 15.080 - 

UBI Management Company Sa 9.155 9.155 - 

Twice Sim Spa - 8.688 ( 8.688) 

By You Spa 3.459 3.459 - 

InvestNet International Sa 2.719 2.719 - 

UBI Sistemi e Servizi SCpA 2.122 2.122 - 

UBI Insurance Broker Srl 2.094 2.094 - 

UBI Fiduciaria Spa 2.052 2.052 - 

CB Invest Spa - 993 ( 993) 

UBI Gestioni Fiduciarie Sim Spa 778 778 - 

Sintesi Mutui Srl 685 - 685 

Solimm Spa 172 172 - 

Capitalgest Alternative Investments SGR Spa - 17.365 ( 17.365) 

Gestioni Lombarda (Suisse) Sa - 4.145 ( 4.145) 

Barberini Sa - 1.026 ( 1.026) 

Other goodwill 75 194 ( 119) 

TOTAL 4.416.660 4.401.911 14.749 

The goodwill recognised in the consolidated financial statements of UBI Banca Group (“goodwill 

arising on consolidation” resulting from the elimination of the equity investments in subsidiaries) 

is the result of all the goodwill items relating to some of the companies controlled by UBI Banca. 

The goodwill recognised in the financial statements of UBI Banca amounting to 521,2 million euro 

(unchanged compared to 31 st December 2009) was the result of the merger between the former 

Banche Popolari Unite Group and the former Banca Lombarda e Piemontese Group, which 

occurred on 31 st April 2009) That transaction was recognised in accordance with IFRS 3, in 

application of the purchase method, according to which the acquirer (BPU) allocated the cost of 

the transaction at the fair value of the assets and liabilities of the acquired company (BLP), 

recognising what remained after the allocation within the item “goodwill”. 

Following the introduction of EU Regulation No. 494/2009, which became compulsory from the 

financial year 2010, IAS 27 requires any changes in percentage ownership which do not result in 

285

the loss or acquisition of control to be considered as transactions between shareholders and as a 

consequence the relative effects must be recognised as either an increase or a decrease in equity. 

In this respect, only changes in the consolidation scope which have resulted in the acquisition or 

loss of control determine the appearance or disappearance of goodwill. Further changes may be 

attributable to impairment losses recognised following impairment tests, which in compliance 

with IAS 36 are performed at the end of each year or more frequently if doubts arise from an 

analysis of internal or external conditions over the recoverability of the value of the assets. 

As concerns the changes shown above in the table “Details of the item goodwill”, those for Banco 

di Brescia Spa, Banca Regionale Europea Spa, Banco di San Giorgio Spa, Banca Popolare 

Commercio e Industria Spa and Banca Popolare di Bergamo Spa relate to the operation to 

optimise branch networks already mentioned. These differences offset each other totally and 

regard the goodwill of the individual branches subject to intragroup transfer. The difference 

amounting to 110 thousand euro relates to Banca Regionale Europea and is due to goodwill 

recognised in relation to the opening of a branch at Antibes in France. 

The increase in the goodwill of UBI Pramerica SGR Spa is equal to the decrease for CapitalGest 

Alternative Investments Spa merged into UBI Pramerica in order to simplify the structure of the 

Group with the consequent elimination of expenses and overlap of operating units. 

The comment at the foot of Table 13.2 “Intangible assets: annual changes” may be consulted for 

other changes in the item “goodwill”. 

“Other finite life intangible assets” amounting to 1.058.688 thousand euro were comprised mainly 

of the following: 

• “brands” totalling 337.861 thousand euro arising from the purchase price allocation 

performed on 1 st April 2007 following the merger of the BPU Banca and Banca Lombarda 

banking groups. That amount relates to the value of the brands of the banks in the former 

Banca Lombarda Group as follows: 

Banco di Brescia Spa 207.939 

Banca Regionale Europea Spa 97.735 

Banca di Valle Camonica Spa 20.800 

Banco di San Giorgio Spa 11.387 

TOTAL 337.861 

As already reported, the impairment tests applied from the financial year 2010 to those 

brands resulted in a change in their useful life from indefinite life to finite life (18 years 

remaining); 

• “core deposits”, intangible assets associated with customer relationships totalling 

324.992 thousand euro. These assets arose from the purchase price allocation already 

mentioned and from that relating to Banco di S. Giorgio Spa following its acquisition, at 

the beginning of 2009, of operations consisting of 13 branches from Banca Intesa San 

Paolo Spa. In view of their close dependence on customer relationships, they are by 

definition finite life assets and are subject to systematic amortisation according to a 

schedule that takes account of the probability of current accounts being closed; 

• “asset management business” consisting both of the actual management and the relative 

distribution activities totalled 165.008 thousand euro. These assets are amortised over the 

useful remaining life of the customer relationships; 

• “asset under administration” business totalling 54.097 thousand euro; 

• the remaining balance consists almost exclusively of software, allocated mainly to UBISS 

scpa, the UBI Group service company. Software is amortised over three years. 

Finite life intangible assets include a remaining amount of 21.018 thousand euro, which relates to 

the identification within the amount of the interest acquired in the By You Spa of the intangible 

assets consisting of the value of the benefits accruing from customer relationships. The amount at 

historical cost is 29,9 million euro, while the useful life was considered to be ten years on the 

basis of the average life of the mortgages. 

286

13.2 Annual changes in intangible assets 

Other intangible assets: internally 

Other intangib le assets: other 

generated 

Balances as at 

Goodwill Finite life Indefinite life Finite life Inde finite life 31/12/2010 

A Opening gross balances 4.590.703 4.406 - 1.276.957 37 5.872.103 

A.1 Total net reductions in value ( 188.792) ( 3.794 ) - ( 156.116) - ( 348.702) 

A.2 Net opening balances 4.401.911 612 - 1.120.841 37 5.523.401 

B. Increases 20.039 - - 71.086 - 91.125 

B.1 Purchases 685 - - 68.976 - 69.661 

B.2 Increases in intangible internal assets X - - - - - 

B.3 Reversal of impairment losses X - - - - - 

B.4 Positive changes in fair value - - - - - - 

- in equity X - - - - - 

- in the income statement X - - - - - 

B.5 Positive exchange rate differences - - - - - - 

B.6 Other changes 19.354 - - 2.110 - 21.464 

C. Decreases ( 5.290) ( 203) - ( 133.648) - ( 139.141) 

C.1 Sales - - - ( 811) - ( 811) 

C.2 Impairment losses ( 5.171) ( 203) - ( 130.297) - ( 135.671) 

- Amortisation X ( 203) - ( 125.795) - ( 125.998) 

- Impairment losses ( 5.171) - - ( 4.502) - ( 9.673) 

+ equity X - - - - - 

+ income statement ( 5.171) - - ( 4.502) - ( 9.673) 

C.3 Negative changes in fair value - - - - 

- in equity X - - - - - 

- in the income statement X - - - - - 

C.4 Transfers to non current assets held for sale. - - - ( 2.406) - ( 2.406) 

C.5 Negative exchange rate differences - - - - - - 

C.6 Other changes ( 119) - - ( 134) - ( 253) 

D. Final net balances 4.416.660 409 - 1.058.279 37 5.475.385 

D.1 Total impairment losses ( 188.792) ( 3.949 ) - ( 273.437) - ( 466.178) 

E. Final gross balances 4.605.452 4.358 - 1.331.716 37 5.941.563 

F. Value at cost - - - - - - 

The column “Goodwill” consists of the following: 

‐ Line B.1, Purchases: 

Sintesi mortgages Srl – acquisition of 100% by By You mortgages Srl for 685 thousand 

euro. 

‐ Line B.6 Other changes: 

Prestitalia Spa – increase in goodwill arising on consolidation as a result of the 

acquisition of 100% of Barberini Sa by UBI Banca which resulted in 100% control of 

Prestitalia Spa amounting to 16.597 thousand euro; 

IW Bank Spa – increase in goodwill, as a result of the merger of the company Twice Sim 

Spa into IW Bank Spa, amounting to 2.527 thousand euro; 

Centrobanca Spa – increase in goodwill, as a result of the merger of the company CB 

Invest Spa into Centrobanca Spa, amounting to 120 thousand euro; 

Banca Regionale Europea Spa – recognition of goodwill, following the opening of a 

branch at Antibes (France), amounting to 110 thousand euro. 

‐ Line C.2 Impairment losses: 

Barberini Sa – the effect of the valuation of shares acquired by UBI Banca with a 

consequent impairment loss on the investment amounting to -1.026 thousand euro; 

Gestione Lombarda Suisse sa – adjustment following recognition of an impairment loss 

on the interest held in BDG Banque Sa amounting to -4.145 thousand euro. 

287

‐ Line C.6, Other changes: 

Permicro Spa – the result of exclusion from the consolidation (reduction in percentage 

held) amounting to -76 thousand euro; 

UBI Trust Company Ltd – result of company put into liquidation amounting to -43 

thousand euro. 

13.3 Other information 

Software 

The useful life of software considered for the purposes of amortisation is three years. 

Contracted commitments to purchase intangible assets amounted to 17.667 thousand euro for 

the acquisition of software. 

Goodwill 

The goodwill recognised in the consolidated financial statements of UBI Banca (“consolidation” 

resulting from the elimination of the equity investment in subsidiaries) is the result of all the 

goodwill items and all the goodwill arising from the consolidation of some of the companies 

controlled by UBI Banca. In detail, following the merger of Banca Lombarda e Piemontese into 

BPU Banca, which took effect on 1 st April 2007, goodwill was recognised in the consolidated 

financial statements of the BPU Banca Group (which changed its name from 1 st April 2007 to UBI 

Banca) amounting to 3.181 million euro as the goodwill that arose from a comparison of (i) the 

purchase price paid by UBI Banca for the control of the company Banca Lombarda e Piemontese 

amounting to 6.546 million and (ii) the current value of the assets acquired (i.e. the fair value of 

the assets, liabilities and contingent liabilities acquired in proportion to the interest held by the 

acquirer), inclusive of the intangible assets identifiable that were not previously recognised in the 

accounts of the entity acquired (e.g. the brands of the banks of the former Banca Lombarda e 

Piemontese Group). 

In order to test goodwill for impairment, the criterion followed in allocating it considers the 

minimum level at which it is monitored for the purposes of internal management control, which 

coincides with the legal entities of the Group. As concerns the goodwill that arose from the merger 

between the BPU and Banca Lombarda e Piemontese groups, the allocation for the purposes of 

impairment testing followed the same logic as that employed for the purchase price allocation. In 

detail, the goodwill attributable to synergies from which the companies in the former acquiring 

group (BPU Group) benefit was allocated to the individual units of the acquiring group, while the 

goodwill arising from the difference between the fair value of the former equity investments of the 

Banca Lombarda e Piemontese and their equity adjusted for the fair value of loans, properties and 

bonds was allocated to individual units. The goodwill of the units of the former BPU Group not 

affected by synergies created by that merger was tested for impairment along the same lines as in 

previous years. 

For cash generating units (CGU) that are not wholly owned, for impairment purposes goodwill was 

restated on a notional basis including the goodwill attributable to minority interests (not 

recognised in the consolidated financial statements) by means of “grossing up” (goodwill 

attributable to the Parent/percentage ownership attributable to the Parent) in accordance with 

example seven in IAS 36. The value measurement used to calculate the recoverable amount of the 

business units to which goodwill was allocated was that of their value in use or the fair value if 

the value in use was lower than the carrying amount. The value in use was estimated on the basis 

of the financial criterion and the book value of the CGUs was determined on the basis of the 

criterion used to estimate the recoverable value. 

The recoverable amount was the same as the value in use for all the CGUs except for the CGU, 

Banco di Brescia, although the value in use was almost the same as the book value (-0,5%). 

288

The impairment test, for which the procedure was approved prior to the examination of the draft 

financial statements by the Management Board, was performed with methodological support from 

an external appraiser of high standing and with account taken of the following factors: 

(i) reasonable and demonstrable assumptions which represent the best estimate that can be made 

by management of the range of possible economic conditions that may manifest over the useful 

life of the asset in question; 

(ii) the 2011 budget approved by the competent corporate bodies of UBI Banca and of its 

subsidiaries and the forecasts made by management for the period 2012-2015 on the basis of 

guidelines approved by the Management Board of the Parent and by the Boards of Directors of the 

subsidiaries. 

These forecasts for the network banks (to which more than 80% of the total goodwill is allocated) 

are based on: 

a) an estimate for short term interest rates (one-month Euribor rate) of 3,35% for 2015, up 

by approximately 225 b.p. compared to the average annual short term interest rates used 

for the purposes of the 2011 budget (1,10%) and sufficient to ensure a progressive 

normalisation of the markup and markdown; an estimate for end of 2015 interest rates in 

line with the implied yield to maturity for interest rates; 

b) an annual average growth rate for business (lending to customers, direct and indirect 

funding) in the explicit forecast period of approximately 4,3%; 

c) a progressive reduction in the cost of risk (net impairment losses on loans/loans to 

customers) forecast for 2015, down by 13 basis points compared to 2010 levels and by six 

basis points compared to the 2011 budget and consistent with long term historical data 

and risk management forecasts; 

d) stable operating costs over the explicit forecast period. 

(iii) a rate of growth in profits for the network banks – beyond the explicit forecast period – that is 

stable and does not exceed the long term growth rates for the banking sector nationally (0,82%); a 

rate of growth for the other CGUs operating in the non-banking financial sector of between 0,34% 

and 2,00%, not sufficient to exceed future inflation. These growth rates, together with opportunity 

costs for capital reported in the following point (iv), ensure rates of return on equity (cost of equity 

– rate of long term growth in profit) in line with the rates of return expressed by analysts who 

cover the UBI share; 

(iv) a discount rate used for calculating the present value of cash flows corresponding to the 

return on equity required by investors/shareholders for investments with similar risk/return 

characteristics. The cost of equity was estimated on the basis of the following: 

a) a CAPM estimation criterion was applied (Capital Asset Pricing Model – the criterion used 

by the Group for the purposes of estimating value in use, considering the reference made 

to it in appendix A of IAS 36); 

b) the beta coefficient for the banking segment was calculated on the basis of the 

performance of the UBI share, while the beta coefficient for business segments was 

obtained on the basis of the beta coefficients of comparable listed companies; 

c) a cost of equity was considered for the main business segments of the Group, as reported 

by analysts who follow the UBI Banca share and published after the announcement of the 

2010 third quarter results; 

d) a different cost of equity was used for each year due to the use of different yields to 

maturity for risk free securities, in accordance with appendix A of IAS 36 A21. The yields 

to maturity for risk free securities for each year are consistent with the interest rate 

forecasts made by the corporate bodies. 

The cost of equity was estimated on this basis for each business unit/segment The cost of equity 

reported below is the long term cost (i.e. the opportunity cost of equity used to estimate the 

terminal value). 

289

Network Banks 

Assets Under Management Other Companies 

Cost of equity after tax 8,82% 9,77% 8,10% - 9,25% 

The analyses performed are based on an analysis of the difference between actual and budgeted 

figures, where the aim is to use budgeted figures and Business Plan projections for value 

measurement purposes. In this respect the total negative difference in terms of profit between 

budgeted and actual figures for the network banks was entirely attributable to the difference 

between the forecast for the Euribor rate made on the date when the 2010 budget was prepared 

(and based and aligned on the forward yield curve as at 31.12.2009) and the Euribor rate actually 

observed during 2010. This difference in the rate was of a systematic nature and therefore to be 

incorporated in the rate for discounting to present values for income. This is the main reason for 

the increase in the opportunity cost of capital that occurred between 31.12.2009 and 31.12.2010 

(1%), attributable entirely to the higher premium requested by investors to cover the risk 

connected with the interest rate scenario. 

The recoverable amounts of the single CGUs defined above are greater than their respective 

carrying amounts and no impairment losses have therefore occurred. For the Banco di Brescia 

CGU, the value in use is slightly less than the carrying amount. Since the fair value less the cost 

to sell is greater than the value in use, this measurement of value was used for the impairment 

test. For this CGU, the fair value less the cost to sell was calculated on the basis of funding 

multiples (direct and indirect) implicit in comparable transactions. The main problem with the use 

of multiples of comparable transactions is that the transactions relate mainly to a pre-crisis 

context. Consequently, it was considered best to reconstruct prices implicit in transactions as 

homogeneous as possible on the basis of a “momentum” variable able to capture the conditions of 

the banking market (profit, growth and risk expectations perceived by market operators) in the 

period immediately before the deal. The variable chosen was the average daily Euribor three 

month rate observed in the month prior to the deal, once it was verified that higher Euribor rates 

(as in the pre-crisis period) corresponded to higher multiples. This variable represents a proxy for 

markdown expectations (and therefore for the profits of the branches acquired) of banking 

operators participating in the market. In order to obtain the best comparability it was decided to 

employ maximum granularity for the deal, which in the case of the banking sector is given by the 

disposal of branches. The branches were ranked on the basis of the geographical location after 

verifying the statistical significance of the relationship between the premium paid and the 

location. For the purposes of measuring the value of Banco di Brescia using this method, the 

network bank was conceived of as an aggregate of branches co-ordinated by a corporate unit. On 

the basis of these considerations the fair value of Banco di Brescia can be reconstructed on the 

basis of two positive amounts and one negative amount. 

Positive amounts: 

- goodwill for funding based on the location of the branches and adjusted downwards on the basis 

of the current market momentum (as incorporated by the present level of the Euribor rate). 

- the equity (net of intangible assets) of the bank. 

Negative amount: current amount of corporate costs (structural) before tax, projected in 

perpetuity on the basis of the same capitalisation rate used for estimating the value in use of the 

network banks. 

The fair value of Banco di Brescia calculated in this manner gives an implicit multiple aligned 

with that paid in transactions involving banks performed in 2010. This value is 22% higher than 

its book value and is an indicator of the prudence that characterised the estimates of the value in 

use (which gave a recoverable amount almost the same as the book value). 

290

Finally a sensitivity analysis was performed to identify the variation in key variables that would 

render the recoverable amount of the different CGUs equal to their carrying amounts in the 

consolidated financial statements. The table below gives the maximum tolerable increase in the 

cost of equity and the cost of risk for each CGU for the recoverable value to equal the book value. 

Rise in the cost of 

equity required to 

make the value in 

use equal to the 

carrying amount 

Rise in the cost of risk* 

required to make the value 

in use equal to the carrying 

amount 

Banca Popolare di Bergamo Spa 11,95% 1,01% 

Banco di Brescia Spa n.a. n.a. 

Banca Popolare Commercio e Industria Spa 2,41% 0,35% 

Banca Regionale Europea Spa 0,56% 0,09% 

Banca Popolare di Ancona Spa 1,30% 0,17% 

Banca Carime Spa 0,31% 0,08% 

Banca di Valle Camonica Spa 0,90% 0,18% 

Banco di San Giorgio Spa 0,62% 0,10% 

Centrobanca Spa 0,08% 0,01% 

Banca 24-7 Spa 1,08% 0,07% 

UBI Leasing Spa 0,31% 0,03% 

UBI Factor Spa 2,04% 0,23% 

UBI Banca International Sa 2,84% 0,47% 

UBI Private Investment Sa 5,50% 1,18% 

IW Bank Spa 8,85% 2,59% 

Asset Management 1,68% n.s. 

* cost of risk = net impairment losses on loans/loans to customers 

The analysis shows that in the case of the network bank CGUs the lowest margin of tolerance 

regarded the Banca Carime CGU, for which an increase of 0,31% in the cost of equity or a rise in 

the cost of risk of 0,08% would bring the recoverable amount into line with the book value. As 

concerns the GCUs operating in non banking financial sectors, the table shows that for the CGU 

UBI Leasing, a rise in the cost of equity of 0,31% or in the cost of risk of 0,03% would make the 

recoverable amount equal to the carrying amount. 

Finally, because the UBI Group presents costs that were not allocated to single CGUs, a second 

level impairment test was performed on the Group as a whole in accordance with paragraphs 101 

and 103 of IAS 36. The second level impairment test, which compared the total recoverable 

amount for UBI Banca with the consolidated equity of the Group did not result in impairment 

losses. 

291

SECTION 14 Tax assets and tax liabilities – Asset item 140 and Liability 

item 80 

14.1 Deferred tax assets: composition 

31/12/2010 31/12/2009 

Balancing entry in the income statement 885.951 802.142 

Balanc ing entry in equity 187.103 33.610 

Total 1.073.054 835.752 

for the following re as ons : 

- impairment loss on loans to banks and customers and guarantees not deducted 443.311 352.665 

- losses - 2.710 

- post em ploym ent benefits 8.841 3.317 

- maintenance expenses 1.972 1.665 

- application of IFRS (amortised cost in particular) 84.468 84.708 

- advance depreciation and am ortisation 8.045 6.375 

- property, equipment and investment proper ty 36.127 26.260 

- personnel expense 16.353 28.060 

- entertainment expenses 134 271 

- provisions for risks and charges not deducted 56.251 52.087 

- sales price adjustments, long term costs and non recurring transactions 2.305 5.359 

- intangible assets and goodwill 227.549 236.822 

- fair value change in securities and equity investments 167.299 26.180 

- impairment losses on properties 962 962 

- purchase price allocation of bonds 194 597 

- revaluation of hedged subordinated liabilities 46 413 

- non recurring expenses not deducted 629 491 

- cash flow hedges 295 286 

- other 18.273 6.524 

14.2 Deferred tax liabilities: composition 

31/12/2010 31/12/2009 

Balancing entry in the income statement 188.200 219.269 

Balanc ing entry in equity 363.756 432.601 

Total 551.956 651.870 

O|1 - NOTA 

14.3 Changes in deferred tax assets (balancing entry in the income statement) 

31/12/2010 31/12/2009 

1. Opening balance 802.142 659.316 

2. Increases 196.861 294.076 

2.1 Deferred tax assets arising during the year 182.823 233.841 

a) relating to prev ious years 5.633 5.211 

b) due to changes in accounting policies - - 

c) reversals of impairment losses - 53 

d) other 177.190 228.577 

2.2 New taxes or increases in tax rates - - 

2.3 Other increases 14.038 60.235 

3. Decreases (113.052) (151.250) 

3.1 Deferred tax assets derecognised during the year (110.369) (98.569) 

a) reversals of temporary d ifferences (110.009) (98.569) 

b) imp airment losses on non-recoverable items (360) - 

c) due to changes in accounting policies - - 

d) other - - 

3.2 Reductions in tax rates - - 

3.3 Other d ecreases (2.683) (52.681) 

Final amount 885.951 802.142 

292

Deferred tax assets are recognised on the basis of the probability of there being sufficient future 

taxable income and also taking into account the consolidated tax regime adopted in accordance 

with articles 117 et seq of Presidential Decree No. 917/86 

No deferred tax assets were recognised for impairment losses on equity investments which 

satisfied the requirements for participation exemption. 

The rates generally used for calculating deferred tax assets for IRES (corporation tax) and IRAP 

(local production tax) purposes are 27,50% and 4,82%. 

The difference between the “Increases” and the “Decreases” of “deferred tax assets” recognised in 

the income statement does not correspond to the item “Change in deferred tax assets”, reported in 

table 20.1 of the income statement section “Taxes on income for the year from continuing 

operations“ amounting to approximately 8.553 thousand euro. An amount of approximately 4.302 

thousand euro relates to the different classification of deferred tax assets due to the operation to 

optimise the branch network, classified mainly within item 2.3 “Other increases”. The new 

difference of approximately 12.855 thousand euro is attributable almost totally to deferred IRES 

relating to the tax loss transferred to the tax consolidation in which the Parent participates as the 

consolidating company as a result of options exercised jointly with other companies in the Group. 

14.4 Changes in deferred tax liabilities (balancing entry in the income statement) 

31/12/2010 31/12/2009 


2. Increases 38.480 123.031 

2.1 Deferred tax liabilities arising during the year 32.329 54.040 

a) relating to previous years 869 1.228 


c) other 31.460 52.812 

2.2 New taxes or increases in tax rates 445 - 

2.3 Other increases 5.706 68.991 

3. Decreases (69.549) (142.670) 

3.1 Deferred tax liabilities derecognised during the year (66.0 34) (94.587) 

a) reversals of temporary d ifferences (65.8 17) (92.879) 


c) other (2 17) (1.708) 


3.3 Other d ecreases (3.5 15) (48.083) 

4. Final balance 188.200 219.269 

14040O|1 - 

NOTA 

Deferred tax liabilities were recognised on the basis of temporary differences between the financial 

accounting value of an asset or liability and its value for tax purposes. The recognition was made 

on the basis of the tax legislation in force. 

No deferred taxes were recognised on untaxed reserves, because no events occurred to remove the 

tax exemption regime. 

The difference between the “Increases” and the “Decreases” of the “deferred tax liabilities” 

recognised in the income statement does not correspond to the item “Change in deferred tax 

liabilities”, reported in table 20.1 of the income statement section “Taxes on income for the year 

from continuing operations“ amounting to approximately 5.380 thousand euro. An amount of 

approximately 5.082 thousand euro regards the different classification of deferred tax liabilities 

due to the operation to optimise the branch network, classified mainly within item 2.3 “Other 

increases”. 

293

14.5 Changes in deferred tax assets (balancing entry in equity) 

31/12/2010 31/12/2009 


2. Increases 161.061 12.627 

2.1 Deferred tax assets arising during the year 149.610 12.425 

a) relating to previous years 9.515 769 


c) other 140.095 11.656 

2.2 New taxes or increases in tax rates - 14 

2.3 Other increases 11.451 188 

3. Decreases (7.568) (85.256) 

3.1 Deferred tax assets derecognised during the year (7.434) (54.585) 


b) imp airment losses on non-recoverable items - - 

c) due to changes in accounting principles - - 


3.3 Other d ecreases (134) (30.671) 

4. Final balance 187.103 33.610 

14.6 Changes in deferred tax liabilities (with balancing entry in equity) 

31/12/2010 

31/12/2009 


2. Increases 10.913 30.339 

2.1 Deferred tax liabilities arising during the year 7.823 30.299 

a) relating to previous years 5.185 119 


c) other 2.638 30.180 

2.2 New taxes or increases in tax rates 2 - 

2.3 Other increases 3.088 40 

3. Decreases (79.758) (128.011) 

3.1 Deferred tax liabilities derecognised during the year (79.734) (58.625) 



c) other (5.314) (260) 


3.3 Other decreases (24) (69.386) 

4. Final balance 363.756 432.601 


The tables above contain the aggregate figures giving all the information on the line-by-line 

consolidated individual companies. Tables 14.3 “Changes in deferred tax assets (balancing entry 

in the income statement)” and 14.4 “Changes in deferred tax liabilities (balancing entry in the 

income statement)” recorded movements due to the consolidation entries which determined 

changes in the consolidated profit. 

Finally taxes of 6.490 thousand euro in respect of dividends that will be paid by subsidiaries in 

2011 have been recognised within deferred tax liabilities with the balancing entry in the income 

statement (9.931 thousand euro as at 31 st December 2009). 

294

SECTION 15 Non current assets and liabilities and groups of assets and the 

associated liabilities held for disposal – Asset item 150 and Liability item 90 

15.1 Non current assets and disposal groups held for sale: composition by type of asset 

31/12/2010 31/12/2009 

A. Individual assets 

A.1 Financial assets - - 

A.2 Equity investments - - 

A.3 Property, equipment and investment property 6.023 44.052 

A.4 Intangible assets 2.406 - 

A.5 Other non current assets - - 

Total A 8.429 44.052 

B. Groups of assets (discontinued operating units) 

B.1 Financial assets held for trading - - 

B.2 Financial assets at fair value - - 

B.3 Available-for-sale financial assets - - 

B.4 Held-to-maturity investments - - 

B.5 Loans to banks - - 

B.6 Loans to customers - 71.158 

B.7 Equity investments - - 

B.8 Property, equipment and investment property - - 

B.9 Intangible assets - 1.733 

B.10 Other assets - 9.476 

Total B - 82.367 

C. Liabilities associated with non current assets held for 

disposal. 

C.1 Borrowings - - 

C.2 Securities - - 

C.3 Other liabilities - - 

Total C - - 

D. Liabilities associated with disposal groups held for disposal 

D.1 Due to banks - - 

D.2 Due to customers - 645.567 

D.3 Securities issued - - 

D.4 Financial liabilities he ld for trading - - 

D.5 Financial liabilities at fair value - - 

D.6 Provisions - - 

D.7 Other liabilities - 753 

Total D - 646.320 



15.3 Information on equity investments in companies subject to significant influence not 

valued using the equity method 


295

SECTION 16 Other assets - Item 160 

16.1 Other assets: composition 

Description/Amounts 31/12/2010 31/12/2009 

Consolidation adjustments - 7.865 

Tax credits relating to prior years and related interest 3.794 3.198 

VAT tax credits and payments on account 4.491 28.692 

Credits for withholding taxes paid on behalf of third parties 6.931 6.767 

Payments on account for stamp duty on banking documents and deeds 111.813 137.944 

Tax credits for personal income tax and post-employment benefits on account 450 656 

Withholding tax on merger losses - 1.805 

Tax credits on withholding tax 2.508 4.597 

Items in transit 264.565 544.020 

Debtor items in transit not yet posted to destination accounts 124.695 152 .859 

Bills, securities, coupons and fees to be debited to customers and correspondents 155.603 141 .275 

Cheques drawn on the bank 23 353 

Improvements to third party leased assets 42.883 43 .872 

Accrued income not attributed to specific items 10.529 21 .095 

Prepaid expenses not attributed to specific items 102.404 96 .833 

Sundry debtor items 342.200 330.383 

Total 1.172.889 1.522.214 

296

LIABILITIES 

SECTION 1 Due to banks – Item 10 

1.1 Amounts due to banks: composition by type 

Description/Values 31/12/2010 31/12/2009 

1. Due to central banks 2.219.152 639.753 

2. Due to banks 3.164.825 4.684.681 

2.1 1. Current accounts and deposits 692.788 2.590.978 

2.2 Term d eposits 1.199.455 809.405 

2.3 Financing 1.149.003 1.191.381 

2.3.1 Repurchase agreements 290.737 347.603 

2.3.2 Other 858.266 843.778 

2.4 Amounts due for commitments to repurchase own equity instruments - - 

2.5 Other payables 123.579 92.917 

Total 5.383.977 5.324.434 

Fair value 5.375.821 5.310.965 

ab 

Item 1, “Due to central banks”, contains a short term deposit of 2,1 billion euro received from the 

Bank of Italy. 

ella 1: 

1.2 Details of the item 10 “Due to banks”: subordinated liabilities 

No subordinated liabilities due to banks have been recognised. 

1.3 Details of the item 10 “Due to banks”: structured debts 

No structured debts due to banks have been recognised. 

1.4 Amounts due to banks subject to specific hedge 


1. Liabilities subject to fair value specific hedge: 170.058 893.520 

a) interest rate risk 170.058 893.520 


c) multiple risks - - 

2. Liabilities subject to specific cash flow hedge: - - 



c) other - - 

Total 170.058 893.520 

1.5 Amounts due for finance leases 

No amounts due to banks for finance leases have been recognised. 

297

SECTION 2 Due to customers – Item 20 

2.1 Amounts due to customers: composition by type 

Des cription/Values 31/12/2010 31/12/2009 

1. Current accounts and deposits 45.209.037 46.056.955 

2. Term deposits 1.341.501 950.761 

3. F inancing 11.152.853 5.156.697 

3.1 rep urchase agreements 11.011.766 5.143.394 

3.2 other 141.087 13.303 

4. Amounts due for commitments to repurchase own equity instruments - - 

5. Other payables 962.766 700.548 

Total 58.666.157 52.864.961 

Fair value 58.666.278 52.893.491 

Financial liabilities for repurchase agreements include a transaction with the Cassa di 

Compensazione e Garanzia (central counterparty clearing) amounting to 9,2 billion euro. 

Tabel 

2.2 Details of item 20 “Due to customers”: subordinated liabilities 

No subordinated liabilities due to customers have been recognised. 

2.3 Details of item 20 “Due to customers”: structured debts 

No structured debts due to customers have been recognised. 

2.4 Amounts due to customers subject to specific hedge 

No amounts due to customers subject to specific hedge have been recognised. 

Tabella 2: 202030O|1 - NOTA 

2.5 Amounts due for finance leases 

Amounts due to customers for finance leases totalled 1.334 thousand euro. Details of these are as 

follows: 

Counterparty Total amount Contract expires 

Amount for final 

purchase 

S.Paolo Leasint Spa 1.965 01/09/2011 196 

ABF Leasing Spa 1.859 25/07/2011 310 

ABF Leasing Spa 837 13/02/2012 217 

The total amount relates to three property contracts signed by UBI Banca Scpa (two contracts) 

and by UBI Leasing Spa. 

The residual life of those debts is as follows: 

Residual life UBI contrac ts UBI Leasing contracts Total 

up to 3 months 60 - 60 

between 3 months and 1 year 358 359 717 

from 1 year to 5 years 217 - 217 

more than 5 years - - - 

total 635 359 994 

298

SECTION 3 Securities issued – Item 30 

3.1 Securities issued: composition by type 

31/12/2010 31/12/2009 

Type securitie s / 

Fair Va lue 

Fair Value 

Amounts 

Carrying 

Carrying 

Amount Level 1 Le vel 2 Level 3 Amount Level 1 Leve l 2 Level 3 

A. Securities 

1 . bonds 40.880.256 16.007.7 31 2 1.430.817 5.070. 534 39. 514.741 13. 333.949 23.650.248 2.594.9 85 

1.1 structured 7.750.255 1.473.6 36 5.164.983 959. 907 6. 998.963 1. 698.438 4.961.009 408.4 82 

1.2 other 33.130.001 14.534.0 95 1 6.265.834 4.110. 627 32. 515.778 11. 635.511 18.689.239 2.186.5 03 

2 . other securities 5.213.632 - 5.766.494 200. 352 4. 834.703 - 4.636.184 183.0 49 

2.1 structured - - - - 

2.2 other 5.213.632 5.766.494 200. 352 4. 834.703 - 4.636.184 183.0 49 

Total 46.093.888 16.007.731 27.197.311 5.270.886 44.349.444 13.333.949 28.286.432 2.778.034 

Structured bonds listed on an active market (Level 1) include a convertible bond issued on 10 th 

July 2009 by the Parent for a remaining amount of 652,3 million euro, inclusive of amounts 

maturing. The fair value of the unbundled option was recognised as a loss of 601 thousand euro 

within item 80 of the income statement “Net trading income (loss)”. 

At the end of the year covered bonds issued amounted to 3,7 billion euro. 

Bond issues consisting of issues on the EMTN market totalled 11,2 billion euro. 

3.2 Details of item 30 “Securities issued”: subordinated securities 

Des cription/Value 31/12/2010 31/12/2009 

Subordinated securities issued 4.177.319 4.061.145 

Details of item A.1 “Subordinated securities” are also given. 

299

300

As reported in a press release of 22 nd December 2010, the UBI Banca Group will not proceed 

to redeem innovative equity instruments still in issue consisting of the three issues listed in 

the table “Subordinated securities”, because the regulatory framework governing the 

composition and quality of supervisory capital will only become fully clear when Basel three 

recommendations are implemented in national regulations. On the basis of currently available 

indications, the outstanding equity instruments will remain eligible for inclusion in tier one 

capital until the end of 2012. Subsequently, when the capital assumptions on which those 

issuances were made are no longer valid, the Group will consider whether to proceed to 

redeem them. 

3.3. Securities issued subject to specific hedge 

31/12/2010 31/12/2009 

1. Securities subject to specific fair value hedge: 25.945.089 23.208.842 

a) interest rate risk 25.943.029 23.208.842 

b) currency risk - 

c) multiple risks 2.060 - 

2. Securities subject to specific cash flow hedge: 766.343 1.181.614 

a) interest rate risk - 

b) currency risk 766.343 1.181.614 

c) other - 

A 

Greater use of bond issues and the performance of interest rates led to a corresponding 

increase in positions subject to fair value hedging on interest rates. As reported in section 5.1 

of the part on the income statement, the net fair value change on hedge contracts and the 

underlying securities issued, generated a gain of 18,4 million euro recognised within item 90 

in the income statement “Net hedging income (loss)”. 

301

SECTION 4 Financial liabilities held for trading – Item 40 

4.1 Financial liabilities held for trading: composition by type 

Type transact ions / Items of group 

NA 

31/12/2010 

FV 

FV* NA 

31/12/2009 

FV 

FV* 

L1 L2 L3 L1 L2 L3 

A. On-statement of financial position 

liabil it ies 

1 . Due to banks 111 .500 110 .65 7 - - 110 .65 7 8 0.80 0 8 6.8 57 - - 8 6.8 57 

2 . Due to customers 299 .500 298 .60 5 - - 298 .60 5 2 0.34 2 2 1.7 78 - - 2 1.7 78 

3. Debt instruments - - - - - - - - - - 

3.1 Bonds - - - - - - - - - - 

3.1.1 Structured - - - - X - - - - X 

3.1.2 Other bonds - - - - X - - - - X 

3.2 Other securities - - - - - - - - - - 

3.2.1 Structured - - - - X - - - - X 

3.2.2 Other - - - - X - - - - X 

Total A 411.000 409.262 - - 409.262 101.142 108.635 - - 108.635 

B. Der iva tive instrument s 

1 . Financi al derivatives 1 .19 1 54 3.9 70 - 3.9 60 7 42. 792 - 

1.1 For trad ing X 1 .19 1 52 9.0 34 - X X 3.9 60 7 12. 874 - X 

1.2 Connected with fair value options X - - - X X - - - X 

1.3 Other X - 1 4.9 36 - X X - 29. 918 - X 

2. Credit derivatives - - - - - - 

2.1 For trading X - - - X X - - - X 

2.2 Connected with fair value options X - - - X X - - - X 

2.3 Other X - - - X X - - - X 

Total B X 1.191 543.970 - X X 3.960 742.792 - X 

Total (A+B) X 410.453 543.970 - X X 112.595 742.792 - X 

204000O|1 - NOTA 

On-statement of financial position liabilities include uncovered short positions in debt securities. 

Key 

FV = fair value 

FV* = Fair value calculated excluding changes in value resulting from a change in the credit rating of the issuer since the date of issue 

NA = nominal or notional amount 

L = listed 

UL = unlisted 

bella 3: 

302

4.2 Details of item 40 “Financial liabilities held for trading”: subordinated liabilities 

No subordinated financial liabilities held for trading have been recognised. 

4.3 Details of item 40 “Financial liabilities held for trading”: structured debt 

No structured debt financial liabilities held for trading have been recognised. 

4.4 Financial liabilities held for trading (excluding “uncovered short positions”): annual 

changes 

No financial liabilities held for trading have been recognised. 

SECTION 5 Financial liabilities held at fair value – Item 50 

The UBI Group has not applied the option under IFRS to designate financial liabilities at fair value 

(fair value option). 

SECTION 6 Hedging derivatives – Item 60 

6.1 Hedging derivatives: composition by type of hedge and hierarchical level 

Ty pe of der iva tive / 

Fair Value 31/12/2010 Nominal 

Fair Value 31/12/2009 

Nominal 

U nderlying a ssets 

L1 L2 L3 amount L1 L2 L3 amount 

A. Financial derivatives - 1.228.056 - 24.047.341 - 927.319 - 16.457.827 

1) Fair value - 1.226.673 - 23.949.961 - 874.833 - 15.646.867 

2) Cash flow - 1.383 - 97.380 - 52.486 - 810.960 

3 ) Foreign investments - - - - - - - - 

B. Credit deriv ativ es - - - - - - - - 

1 ) Fai r value - - - - - - - 

2 ) Cash flow - - - - - - - 

Total - 1.228.056 - 24.047.341 - 927.319 - 16.457.827 

303

6.2 Hedging derivatives: composition by portfolios hedged and type of hedge 

Fair Value 

Cash flow 

Tran sac ti ons /Type of hedge 

Interest 

rate risk 

Currency 

ris k 

Specific 

Credit ri sk 

Price risk 

Multiple 

risks 

Ma crohedge 

Specific 

Ma crohedge 

Foreign 

in vestments 

1. Available-for-sale financial assets 579.271 - - - - X - X X 

2. Loans 102.018 - - X - X - X X 

3. Held-to-maturity investments X - - X - X - X X 

4. Portfolio X X X X X 498.931 X - X 

5. Ot her transact io ns - - - - - X - X - 

Total assets 681.289 - - - - 498. 931 - - - 

1. Financial liabilities 46.454 - - X - X 1.383 X X 

2. Portfo lio - - - - - - - - X 

Total liabilities 46.454 - - - - - 1.383 - - 

1. Expected transactions X X X X X X - X X 

2. Portfolio of financial assets and liabilities X X X X X - X - - 

SECTION 7 Fair value change in macro-hedged financial liabilities – Item 70 


SECTION 8 Tax liabilities – Item 80 

Details of tax liabilities are reported in assets section 14. 

SECTION 9 Liabilities associated with assets held for disposal – Item 90 

See assets section 15 for details 

304

SECTION 10 Other liabilities – Item 100 

10.1 Other liabilities: composition 


Balance of illiquid portfolio items 857.981 570.197 

Credit items in transit in departments or branches pending posting to accounts 134.104 228.085 

Sums available to customers and banks for transactions in the course of payment 158.461 578.087 

Items payable to tax authorities on behalf of third parties 38.999 68.149 

Items in transit 95.497 229.419 

Sums due to customers but not available due to various restrictions 121 202 

Tax withheld on income paid to third parties 123.897 107.737 

Indirect taxes payable 16.647 11.220 

Social security contributions for third parties in the course of payment 2.143 2.229 

Dividends and sums due to shareholders 363 2.449 

Amounts due to staff pension funds, inclusive of accessory costs 7.937 15.203 

Accrued expenses not attributed to specific items 43.271 43.894 

Deferred income not attrib uted to spe cific ite ms 167.377 89.436 

Payables for educational, cultural, charitable and social purposes 13.356 15.527 

Debt for post-employment benefit/welfare schemes 19.322 29.655 

Doubtful overall outcomes on guarantees granted and commitments 48.221 44.766 

Due to personnel 179.761 257.506 

Residual creditor items 692.707 791.245 

Total 2.600.165 3.085.006 

210000O|1 - NOTA 

SECTION 11 Post-employment benefits – Item 110 

11.1 Annual changes in post-employment benefits 

31/12/2010 31/12/2009 

A. Opening balances 414.272 433.094 

B. Increases 30.226 21.021 

B.1 Allocation for the year 7.039 6.221 

B.2 Other changes 23.187 14.800 

C. Decreases (5 1.335 ) (39.843) 

C.1 Payments made (46.564) (29.722) 

C.2 Other changes (4.771) (10.121) 

D. Final balances 393.163 414.272 

305


The demographic and actuarial hypotheses adopted to measure the post-employment benefit provision and leaving 

entitlements 

Mortality rate 

The “RGS48” tables (prepared by the State General Accounting Office) were used 

appropriately modified on the basis of historical data for the Group. 

Post-employment benefit The probability of advance payments, calculated on the basis of historical data for the 

advances 

Group, is 2% while the average amount requested is between 45% and 100% of the 

available provision. 

Inflation rates Long term forecasts of the scenario for inflation led to the use of a rate of 2%. 

Present value discount 

rate 

A discount rate of 4,071%, was used, calculated as the weighted average of the EUR 

Composite A curve as at 31.12.2010, using, as weights, the ratios between the amount paid 

and advanced for each maturity date and the total amount to be paid and advanced until 

the extinction of the population considered. This was performed because IAS 19 states that 

reference should be made to the market yields of “high quality corporate bonds”, or to 

yields on securities with a low credit risk. By making reference to the definition of 

“investment grade” securities, where a security qualifies for that classification if its rating is 

equal to or higher than BBB for S&P or Baa2 for Moodys, it was decided to consider only 

securities issued by corporate issuers with a class “A” rating with the assumption that this 

class identifies an average level for “investment grade” securities and thereby excludes 

higher risk securities. Since IAS 19 makes no explicit reference to a specific market sector 

for the bonds, it was decided to opt for a “composite” market curve which therefore 

summarises the prevailing market conditions on the valuation date for securities issued by 

companies belonging to different sectors, including utilities, telephone, financial, banking 

and industrial sectors. The euro area was used for the geographical area. 

The demographic and actuarial hypotheses adopted to value the post-employment benefit provision and leaving 

entitlements as at 31/12/2009 

Mortality rate 

The “RGS48” tables (prepared by the State General Accounting Office) were used 

appropriately modified on the basis of historical data for the Group. 

Post-employment benefit The probability of advance payments, calculated on the basis of historical data for the 

advances 

Group, is 2% while the average amount requested is between 45% and 100% of the 

available provision. 

Inflation rates Long term forecasts of the scenario for inflation led to the use of a rate of 2%. 

Present value discount 

rate 

A discount rate of 4,871% was used, calculated as the weighted average of the EUR 

Composite A curve as at 30.12.2009, using, as weights, the ratios between the amount paid 

and advanced for each maturity date and the total amount to be paid and advanced until 

the extinction of the population considered. This was performed because IAS 19 states that 

reference should be made to the market yields of “high quality corporate bonds”, or to 

yields on securities with a low credit risk. By making reference to the definition of 

“investment grade” securities, where a security qualifies for that classification if its rating is 

equal to or higher than BBB for S&P or Baa2 for Moodys, it was decided to consider only 

securities issued by corporate issuers with a class “A” rating with the assumption that this 

class identifies an average level for “investment grade” securities and thereby excludes 

higher risk securities. Since IAS 19 makes no explicit reference to a specific market sector 

for the bonds, it was decided to opt for a “composite” market curve which therefore 

summarises the prevailing market conditions on the valuation date for securities issued by 

companies belonging to different sectors, including utilities, telephone, financial, banking 

and industrial sectors. The euro area was used for the geographical area. 

306

SECTION 12 Provisions for risks and charges – Item 120 

12.1 Provisions for risks and charges: composition 

Items/Components 31/12/2010 31/12/2009 

1. Comp any pension funds 68.082 71.503 

2. Other provisions for risks and charges 235.490 214.120 

2.1 litigation 113.868 107.993 

2.2 personnel expense 41.423 18.768 

2.3 other 80.199 87.359 

Total 303.572 285.623 

Provisions for personnel consist of an actuarial valuation of length of service bonuses provided for 

under supplementary labour agreements, company bonus provisions, for which negotiations are 

in progress with trade union organisations and a prudent provision made by Banca Carime, 

amounting to 3.408 thousand euro, the result of an improved estimate to-date of the greater 

liabilities arising from a refinement of the formula employed to calculate the pension fund, with 

particular reference to periodic payments made to participants in the fund. That amount is 

recognised within personnel expense. 

Provisions for risks and charges – Other provisions – include a provision made by Banca 24-7 Spa 

totalling 8,9 million euro. This provision includes an amount of eight million euro to cover 

possible operational risks relating to salary backed loan business for loans originated by the 

company Ktesios Spa and transferred to Banca 24-7 Spa. 

Ktesios Spa specialises in granting secured loans to workers with permanent employment 

contracts, repaid directly from wage packets with a payment authorisation, At the beginning of 

February 2011 it informed B@nca 24-7, that it was experiencing constant cash flow difficulties 

and had made proposals to its governing bodies to take appropriate corporate ownership 

initiatives, including a possible proposal to go into voluntary liquidation. Subsequently with a 

provision of 8 th March 2011, the Bank of Italy removed the company from the special list 

pursuant to Art. 107 of the Consolidated Banking Act. Therefore, from that date the company is 

only registered in the general list pursuant to Art. 106 of that decree and may not undertake new 

transactions. 

12.2 Provisions for risks and charges: annual changes 

Items/Components 

Pension funds 

Total 

Other provisions 

A. Opening bal ances 71.503 214.120 

B. Increases 4.571 83.839 

B.1 Allocation for the year 3.051 77.286 

B.2 Changes due to time value of money 1.093 4.117 

B.3 Changes due to changes in discount rate - 400 

B.4 Other changes 427 2.036 

C. Decreases (7.992) (62.469) 

C.1 Use for the year (7.959) (35.908) 

C.2 Changes due to changes in discount rate - (161) 

C.3 Other changes (33) (26.400) 

D. Final balances 68.082 235.490 

307

12.3 Defined benefit company pension funds 

The balance in the financial statements for defined benefit company pension funds was composed 

of Banca Carime Spa funds amounting to 43.647 thousand euro, Banca Regionale Europea Spa 

funds amounting to 23.526 thousand euro and Centrobanca Spa funds amounting to 909 


12.3.1 Description of the funds 

BANCA CARIME SPA 

Three defined benefit company pension funds existed as at 31.12.2010. 

1. The fund to supplement I.N.P.S. (national insurance institute) benefits for compulsory 

invalidity, old age and survivors insurance for retired personnel of the former Cassa di Risparmio 

di Calabria e Lucania (Reg. No. 9059 in the Pension Fund Register); 


invalidity, old age and survivors insurance for retired staff of the former Cassa di Risparmio di 

Puglia (Reg. No. 9124 in the Pension Fund Register); 


invalidity, old age and survivors insurance for retired staff of the former Cassa di Risparmio 

Salernitana (Reg. No. 9053 in the Pension Fund Register). 

The funds pay the following welfare benefits as a direct pension for: 

• old age, when the participants have reached 60 years of age if men and 55 years of age if 

women, provided that they have participated in the fund for at least 15 years; 

• length of service, at any age when the participants have participated in the fund for 35 years if 

men and 30 years if women; 

• invalidity at any age when permanently and completely unable to work through disability and 

participating in the fund (in addition, for the fund of the former Cassa di Risparmio di Puglia, the 

invalidity must be caused by work and for the fund of the former Cassa di Risparmio Salernitana, 

participation for at least 5 years is required). 

Furthermore, survivors of participants receive an ‘indirect pension’ if a participant dies while in 

service and a surviving dependent’s pension if a participant dies, provided a direct pension has 

been paid. 

Description of the main actuarial hypotheses 

The defined benefit plan funds were subjected to actuarial valuation which in the technical audit 

as at 31.12.2010 resulted in an amount for the mathematical reserve which on average, in the 

actuarial sense, will allow the pensions granted to pensioners and their surviving dependents to 

be paid. 

The valuations were performed in compliance with accounting standard IAS 19, with the 

legislation governing the relative pensions schemes and with company regulations. More 

specifically, the criterion used to calculate the liability is consistent with the projected unit credit 

method required under IAS 19. 

The following demographic hypotheses were assumed: 

• for the probability of death of pensioners, those for the Italian population censused by ISTAT in 

2002, separately by gender; 

308

• for the probability of death of permanently and completely disabled pensioners, those adopted in 

the INPS (national insurance institute) model for projections to 2010, separately by gender; 

• for the probability of leaving a family, those published separately by gender in pension fund 

reports; 

• for the probability of widowers and widows remarrying, those taken from ISTAT 1960/62 

marriage tables; 

• for the probability of death of widowers and widows, those for the Italian population censused by 

ISTAT in 2002, while for orphaned minors, the probability of death assumed is nil. 

The economic and financial hypotheses used in the actuarial valuation were as follows: 

Former Carical 

pension fund 

Former 

Caripuglia 

pension fund 

Former Carisal 

pension fund 

a) Discount rates 4,50% 4,50% 4,50% 

b) Expected rates of increase in remuneration 0,00% 0,00% 0,00% 

c) Inflation rate 2,00% 2,00% 2,00% 

Actuarial valuations 

The table below gives the results from the actuarial valuations performed as at 31 st December 

2010 in relation to the different groups. 

Changes in liabilities in 2010 for IAS 19 purposes 

Former Carical 

pension fund 

Former 

Caripuglia 

pension fund 

Former Carisal 

pension fund 

Total 

A. Opening balances 35.834 9.758 612 46.204 

B. Increases 2.430 480 45 2.955 

B.1 Interest expense balancing entry in the income statement 

"personnel expense" 

2.430 480 45 2.955 

B.2 Actuarial gains balancing entry in "fair value reserves" - - - - 

B.3 Provisions - - - - 

B.4 Other changes - - - - 

C. Decreases (4.370) (1.064) (78) (5.512) 

C.1 Pension benefits paid (4.370) (1.064) (78) (5.512) 

C.2 Actuarial losses balancing entry in "fair value reserves" - - - - 

C.3 Other changes - - - - 

D. Final balances 33.894 9.174 579 43.647 

The average present value of pensions currently being paid (immediate costs) was identified as 

constituting the economic commitments of the fund as at 31 st December 2010, 

A sufficiently prudent system of financial capitalisation was adopted that is able to guarantee the 

full cover of the benefits to be paid to the group of pensioners existing as at 31 st December 2010 

with the accumulated reserves at any moment. 

309

CENTROBANCA SPA 

This is a supplementary pension fund in which there are now 10 remaining pensioners from 

Centrobanca participating. 

The number of participants reduced by one compared to the previous year. In 2009, on the other 

hand, they had reduced by six who had accepted a proposal of a lump-sum capital payment 

amounting to 671 thousand euro. 

The contribution for the 2010, as specified by the “Fund Regulations” was calculated on the basis 

of the weighted average rate used in the valuation performed (3,7%). 

Against that contribution the Bank benefited from the returns on using the assets of the fund. 

The sums in the fund are not invested in specific assets. 

Except for the amount for asset item 120a), no “other” liabilities and/or assets were recognised in 

the financial statements of the bank 

The main actuarial hypotheses on which the valuation of the fund as at 31.12.2010 was based 

are as follows: 

- demographic hypotheses from ISTAT (Italian National Office for Statistics) 2007 mortality tables; 

- the present value discount rate determined on the basis of zero coupon interest rates calculated 

on same maturity swap rates for the date 31 st December 2010 (source Bloomberg). 

The present value of the fund, calculated on the basis of those hypotheses, resulted in an 

“actuarial loss” of 33 thousand euro (point C.3). 


PENSION FUND CENTROBANCA 

A. Opening balances 1.001 

B. Increases 38 

B.1 Interest expense balancing entry in the income statement "personnel expense" 38 

B.2 Actuarial gains balancing entry in "fair value reserves" 

B.3 Provisions 

B.4 Other changes 

C. Decreases (130) 

C.1 Pension benefits paid (97) 

C.2 Actuarial losse s balancing entry in "fair value res erves" 

C.3 Other changes (33) 

D. Final balances 909 

BANCA REGIONALE EUROPEA SPA 

As at 31.12.2010 there was a fund to supplement compulsory invalidity, old age and survivors 

insurance for the staff of Banca Regionale Europea originally from the former Cassa del Monte di 

Lombardia and from the former Cassa di Risparmio di Cuneo. 

The fund pays the following welfare benefits as a direct pension for: 

• old age, when the participants have reached the age limits set in the contracts in force at the 

time, provided that they have participated in the fund for at least 15 years; 

• length of service, when the participants have reached the minimum age limits set in the 

contracts in force at the time; 

• invalidity when, having obtained acknowledgement of the condition of invalidity and whatever 

the age, a length of service of at least five years has been served, or whatever the length of service, 

if the invalidity is permanent and caused by work. 

Furthermore, survivors of participants receive an ‘indirect pension’ if a participant dies while in 

service after one year of participation in the fund or after any period if death was caused by work 

and a surviving dependent’s pension if a participant dies, provided a direct pension has been 

paid. 

310

Description of the main actuarial hypotheses 

The defined benefit plan fund was subjected to actuarial valuation which in the technical audit as 

at 31.12.2010 resulted in an amount for the mathematical reserve which on average, in the 

actuarial sense, will allow the pensions granted to pensioners and their surviving dependents to 

be paid. 

The valuations were performed in compliance with accounting standard IAS 19, with the 

legislation governing the relative pensions schemes and with company regulations. More 

specifically, the criterion used to calculate the liability is consistent with the projected unit credit 

method required under IAS 19. 

The following demographic hypotheses were assumed: 

• for the probability of death of pensioners, direct and/or indirect, those for the Italian population 

taken from “RGS48” tables prepared by the State General Accounting Office, separately by gender; 

• for the probability of death of permanently and completely disabled pensioners, those adopted in 

the INPS (national insurance institute) model for projections to 2010, separately by gender; 

• for the probability of leaving a family, those published separately by gender in pension fund 

reports; 

• for the probability of widowers and widows remarrying, those taken from ISTAT 1960/62 

marriage tables; 

The economic and financial hypotheses used in the actuarial valuation were as follows: 

• discount rate 4,50% 

• expected rate of increase in remuneration 3,50% 

• annual inflation rate of 2,00%. 

Actuarial valuations 

The table below gives the results from the actuarial valuations performed as at 31 st December 

2010 in relation to the different groups. 


Former B.M.L. 

pension fund 

Former C.R.C. 

pension fund 

Total 

A. Opening balances 9.896 14.402 24.298 

B. Increases 552 1.026 1.578 

B.1 Interest expense balancing entry in the income statement "personnel expense" 445 648 1.093 

B.2 Actuarial gains balancing entry in "fair value reserves" 35 378 413 

B.3 Provisions 59 - 59 

B.4 Other changes 13 - 13 

C. Decreases (716) (1.634) (2.350) 

C.1 Pension benefits paid (716) (1.634) (2.350) 

C.2 Actuarial losses balancing entry in "fair value reserves" - - - 

C.3 Other changes - - - 

D. Final balances 9.732 13.794 23.526 

The average present value of pensions currently being paid (immediate costs) was identified as 

constituting the economic commitments of the fund as at 31 st December 2010, 

A sufficiently prudent system of financial capitalisation was adopted that is able to guarantee the 

full cover of the benefits to be paid to the group of pensioners existing as at 31 st December 2010 

with the accumulated reserves at any moment. 

|1 - NOTA 

311

12.4 Provisions for liabilities and charges – other provisions 

31/12/2010 31/12/2009 

1. Provision for revocation risks 29.161 36.938 

2. Provision for bonds and default 10.155 12.385 

3. Other provisions for risks and charges 40.883 38.036 

Total 80.199 87.359 

12.5 Contingent liabilities 

31/12/2010 31/12/2009 

for personnel litigation 246 1.061 

for revocation risks 2.857 7 

for bonds in default - 60 

for compounding of interest 1.394 1.781 

for claim risks 660 500 

for tax litigation 183.600 135.400 

for other litigation 73.390 42.152 

Total 262.147 180.961 

The liabilities governed by IAS 37, characterised by the absence of certainty over the timing or the 

amount of future expense required to settle presumed liabilities, can be classified as being of two 

types: 

• probable liabilities; 

• contingent liabilities (possible or remote). 

The correct identification of the nature of liabilities is of fundamental importance because it 

determines whether or not the risk deriving from an obligation must be recognised in the financial 

statements. 

The recognition of a provision for risks and charges in the financial statements represents a 

probable liability of uncertain timing or amount 5 and the amount recognised in the accounts 

represents the best estimate of the expenditure required to settle the obligation existing as at the 

reporting date and reflects the risks and uncertainties that inevitably characterise a number of 

different facts and circumstances. 

The amount of a provision is measured by the present value of the expenditure that it is assumed 

will be necessary to settle the obligation where the effect of the present value is significant. 

Future events that might affect the amount required to settle the obligation are only taken into 

consideration if there is sufficient objective evidence that they will occur. 

The measurement of provisions is periodically reviewed to verify that they are reasonable. 

The general and theoretical legal parameters which the govern the process of determining the 

present value of provisions, which is performed for each single case of litigation and for the 

relative residual life, are given below: 

• type/nature of the litigation, to be assessed in the light of the legal claims formulated by the 

counterparty. Various “macro-families” are identifiable in this respect such as corporate litigation, 

5 Details of the criteria for recognising provisions are given in Part A.2 of the notes to the financial statements “The main 

items in the financial statements”, section 12 “Provisions for risks and charges”, which may be consulted. 

312

labour law cases, financial intermediation litigation, litigation generically definable as 

compensation for damages (resulting from non performance of contract obligations, illegal actions, 

violation of regulations) etc.; 

• degree of “innovation” in the litigation, to be assessed by considering whether the issues 

turn on matters already known and “weighed” by the Bank or on completely new matters which 

therefore require study (e.g. resulting from a change in the legislation or in legal orientations); 

• degree of “strategic importance” of the litigation to the bank: for commercial reasons the 

Bank might for example decide to end a case very rapidly even if it had grounds of defence that 

would allow it to resist in court for a long time; 

• average length of litigation, to be weighted taking account of geographical factors, which is to 

say the location of the jurisdiction in which the case is tried and the state of progress of the trial. 

In this respect a decision must be taken on the source of the statistics from which data is 

obtained and assistance can be obtained from the lawyers who represent the Bank in litigation 

and who have direct knowledge of the jurisdictions concerned for each case; 

• the “nature” of the counterparty (e.g. a private individual or a legal entity, a professional 

operator or not, a consumer or not, etc.). 

A contingent liability is defined as: 

• a possible obligation, the result of past events, the existence of which will only be confirmed 

by the occurrence or (non occurrence) of future events that are not totally under the control of 

the enterprise; 

• a present obligation that is the result of past events, but which is not recognised in the 

accounts because: 

− 

− 

it is improbable that financial resources will be needed to settle the obligation; 

the amount of the obligation cannot be measured with sufficient reliability. 

Contingent liabilities are not recognised in the financial statements but are only reported, unless 

they are considered a remote possibility. In the latter case, in compliance with IAS 37, no 

information is given on them in the notes to the financial statements. 

Amounts for contingent liabilities are also subject to periodical verification because it is possible 

that events may occur which make them remote or probable with the possible need, in the latter 

case, to make a provision for them in the financial statements. 

The Group was subjected to a significant number of tax inspections during the year followed by 

tax assessment reports, from which notices of tax assessment can arise generally towards the end 

of the legal time limits. Where tax consolidation for IRES (corporation tax) purposes exist, with 

joint liability, these inspections are duplicated for the Parent as the consolidating company. A 

summary is given below of the companies affected by these events for each year. 

313

NOTICES OF TAX ASSESSMENT 

BPB Immobiliare (2003) increased taxation of 16,5 million euro, fines of 17,6 million euro 

This was a contribution of company property operations considered by the tax authorities as the 

disposal of assets. 

A ruling was given fully in favour of the company by the Tax Commission of the Province of 

Bergamo against which the tax authorities appealed to the Regional Tax Commission of 

Lombardy. The relative hearing is set for June 2011. 

Banca Carime (2003) increased taxation of 14,4 million euro, fines of 22,6 million euro 




Cosenza against which the tax authorities appealed to the Regional Tax Commission of Calabria. 

The date for the relative hearing has not yet been set. 

UBI Banca (2003) increased taxation of 5,3 million euro, fines of 6,4 million euro 




Bergamo against which the tax authorities appealed to the Regional Tax Commission of 

Lombardy, to be discussed in a hearing in April 2011. 

UBI Banca (2004 and 2005) increased taxation of 8,83 million euro, fines of 10,86 million euro 

This was based on the alleged failure to apply a withholding tax on interest paid to a foreign 

subsidiary on deposits made by the subsidiary, which were classified by the tax inspectors as 

financing. These were complex transactions designed to strengthen capital performed in 2001 

with the authorisation of the Bank of Italy. On the basis of expert opinion it is considered that the 

tax regime applied by the bank – which was then Banca Popolare di Bergamo and Banca Popolare 

Commercio e Industria – complied with the requirements of contracts and the law. Since the 

question involves more than one year, notices of tax assessment for 2004 and 2005 have been 

received so far. An appeal has been presented for the latter year, while for 2004 the Tax 

Commission of the Province of Milan ruled in a hearing held on 2 nd December 2010 that collection 

of the amount demanded should be suspended, with a hearing scheduled for 3 rd March 2011. 

Banco di Brescia (2004 and 2005) increased taxation of euro 3,16 million euro, fines of 3,92 

million euro 

This was based on the alleged failure to apply a withholding tax on interest paid to a foreign 

subsidiary on deposits made by the subsidiary, which were classified by the tax inspectors as 

financing. These were complex transactions designed to strengthen capital performed in 2000 

with the authorisation of the Bank of Italy. On the basis of expert opinion it is considered that the 

tax regime applied by the bank complied with the requirements of contracts and the law. The 

relative tax demands were appealed against before the Tax Commission of the Province of Milan. 

While the verdict is pending for 2004 a collection order for 953 thousand euro was issued which 

the Bank paid. 

UBI Leasing (2004) increased taxation of euro 2,15 million euro, fines of 2,3 million euro 

This is a case of alleged improper application of a subsidised VAT rate on marine lease 

transactions or undue deduction of VAT on invoices for non existent transactions and improper 

quantification of the recognition of impairment losses on loans for IRES (corporate income tax) 

purposes. At present the tax authorities have issued an interim collection order limited to the 

IRES (corporate income tax) demands for a total of 22 thousand euro. 

Banco di Brescia (2004) increased taxation of 1,5 million euro, fines of 1,5 million euro 

An alleged error in the technical recognition of expenses and improper valuation of securities 

owned. The tax authorities have issued the relative collection order. As part of a second level 

314

assessment, the tax authorities issued a collection order on the bank for 901 thousand which it 

paid. 

UBI Banca Private Investment (2004) increased taxation of 0,3 million euro, fines of 0,3 million 

euro 

An alleged error in the technical recognition of expenses, including supplementary personnel 

redundancy indemnities. The hearing for plea bargaining before the court of first instance was 

held on 1 st July 2010 with an unsuccessful outcome for the bank. The bank reserves the right to 

appeal. As part of a second level assessment, the tax authorities issued a collection order for 169 

thousand which the bank paid. 

Grifogest (2004) increased taxation of 0,15 million euro, fines of 0,15 million euro 

This was a case of alleged infringement of the rules for the period in which income and expenses 

are recognised. The Tax Commission of the Province of Florence ruled fully in favour of the 

company’s appeal. The tax authorities have lodged an appeal with the relative Regional Tax 

Commission. 

UBI Leasing (2008) increased taxation of 0,30 million euro, fines of 0,30 million euro 

Alleged mistaken use of the tax base for land registry and mortgage duties following the 

termination of two finance lease contracts. 

Finally, following the tax consolidation opted for in 2004 and the assessment notices for IRES 

(corporate income tax) received by the subsidiaries/consolidated companies Banco di Brescia, 

UBI Private Investment, UBI Leasing and Grifogest, the tax authorities issued an interim 

collection order through Equitalia, for a total of 1,1 million during the last quarter of 2010. 

Without prejudice to the grounds given in both the first and second level appeals, the 

Parent/consolidating company settled the collection order and charged the amounts on to the 

individual companies subject to tax assessment pursuant to articles 117 et seq. of the 

Consolidated Income Tax Act. 

TAX ASSESSMENT REPORTS 

Centrobanca (2006) increased taxation of three million euro 

The tax authorities do not approve the criteria employed for the recognition of the disposal of 

loans to customers or the recognition of impairment losses on those same loans notwithstanding 

the tax derivation principle introduced for IAS entities in 2005. The conduct of the company is 

also supported by the reputable opinions of external advisors. Observations were presented 

against the claims in the tax assessment report as permitted by the taxpayers’ statute (Law No. 

212/2000). In consideration of the amount of the claims, the inspectors referred the case to the 

Public Prosecutor’s Office of Milan, where the hearing is still in progress. A positive result is 

expected because the issue is centred almost entirely on the complex aspect of the taxation of 

entities subject to IFRS. 

UBI Sistemi e Servizi (2005) increased taxation of 0,02 million euro 

These are alleged infringements concerning the application of accrual and matching principles to 

some expenses. Observations were presented against the claims in the tax assessment report as 

permitted by the taxpayers’ statute (Law No. 212/2000). A payment was made in December 2010 

to settle the matter. 

UBI Banca (2006) increased taxation of 4,4 million euro 

These are the same types of infringement as those reported for the notices of tax assessment 

relating to 2004 and 2005. 

315

Banco di Brescia (2006) increased taxation of 1,5 million euro 

These are the same types of infringement as those reported for the notices of tax assessment 

relating to 2004 and 2005. 

Banco di Brescia (2006) increased taxation of two million euro 

This is a case of presumed irregularities in the quantification of the recognition of impairment 

losses on loans for the year. Observations were presented against the claims in the tax 

assessment report as permitted by the taxpayers’ statute (Law No. 212/2000) and an appeal was 

subsequently lodged. 

UBI Leasing (2005-2007) increased taxation of 3,7 million euro 

These are the same types of infringement as those reported for the notice of assessment relating 

to 2004. 

Banca Popolare Commercio e Industria (2006) increased taxation of 0,3 million euro 


losses on loans for the year. An application for full settlement by consent of the tax assessment 

report was made and also by the consolidating company UBI Banca. The relative payment 

amounts to 350 thousand euro and will be paid within the set time limits. 

Banca Popolare di Bergamo (2006) increased taxation of 0,06 million euro 


losses on loans for the year. This bank, together with the consolidating company UBI Banca, has 

agreed to accept the findings of the tax assessment report (Art. 5 bis of Legislative Decree No. 

218/1997). On 21 st October 2010 the payment was made to settle the claim. 

Silf (2007) increased taxation of 0,4 million euro 

This is a case of presumed irregularities in the deductibility of some expenses during the year (in 

particular, those related to commission expenses paid to financial advisors) and of loan losses as 

well as the quantification of the recognition of impairment losses on loans for the year. 

Observations were presented against the claims in the tax assessment report as permitted by the 

taxpayers’ statute (Law No. 212/2000). 

UBI Banca (2003) increased taxation of 18 million euro 

This is a case of presumed undue corporate income tax deductions of expense items in relation to 

contributions of operations performed in 2003 which gave rise to the formation of the former 

Banche Popolari Unite Group. The Parent not only pleaded the lack of grounds, but also raised 

the objection during the inspection that the assessment was null and void because it related to a 

year (2003) for which the time limit for assessment had expired on 31 st December 2008, while the 

inspection was performed in 2010. 

316

OTHER TAX LITIGATION 

Further tax litigation exists, relating mainly to years prior to 31/12/2007, which regard the 

following issues: 

UBI Banca (years between 1976 and 1984) increased taxation of 18,6 million euro 

These consist of cases pending before the Central Tax Commission, for most of which favourable 

decisions have been given in 2010 and in the absence of an appeal to the Supreme Court of 

Cassation these will become final judgements by the end of the year. They are based on the 

deductibility criteria for IRPEG (former corporate income tax) and ILOR (former local income tax) 

purposes of various expense items, because they relate specifically to assets from which income 

and proceeds subject to taxation is derived. They are also based on the non taxability for IRPEG 

and ILOR purposes of interest due to the tax authorities on tax credits, in the light of legislation 

in force at the time (pre Consolidated Income Tax Act, pursuant to Presidential Decree No. 

917/1986). 

UBI Banca (1980-1984), increased taxation of 2,2 million euro 

These consist of cases pending before the Central Tax Commission, for which favourable decisions 

have been given in 2010 and in the absence of an appeal to the Supreme Court of Cassation, 

these will become final judgements by the end of the year. They concern the non applicability of 

the withholding tax pursuant to Art. 26, paragraph 3 of Presidential Decree No. 600/1973 on 

interest paid by foreign banks to Italian banks relating to deposits and current accounts held by 

the latter on their own account with the former. 

Banca Regionale Europea (2003), fines of 1,2 million euro 

This is an appeal to the Supreme Court of Cassation by the tax authorities against a ruling in the 

court of second instance in favour of the bank concerning the criteria employed by the bank to 

rectify its tax returns which it is claimed resulted in a non payment of IRPEG (former corporate 

income tax), for which a fine of 1,2 million euro was imposed. 

Banca Carime (2003, 2004), increased taxation of 0,6 million euro 

These are two cases for which favourable decisions were given in the court of first instance, which 

are currently subject to appeal by the tax authorities before the competent Regional Tax 

Commission. They concern the alleged failure to document withholding taxes on interest paid on 

treasury postal bonds issued prior to 1997. 

Finally, requests for the refund of taxes are in progress in courts at various levels and also out-ofcourt 

for a total of 15,6 million euro. 

* * * 

Except for some of the cases just reported, for which probable risks exist (demands for increased 

taxation, interest and fines amounting to 13,6 million euro) and which as a consequence justified 

recognition of provisions amounting to 11,6 million euro, on the basis of careful consideration by 

the organisational units concerned, backed by external expert opinion, the remaining disputes 

were felt to constitute only possible risks not requiring the recognition of specific provisions. 

317

SECTION 13 Technical reserves – Item 130 

No amounts were recognised within item 130 “Technical reserves” either as at 31/12/2010 or as 

at 31/12/2009. 

SECTION 14 Redeemable shares – Item 150 

14.1 Redeemable shares: composition 

No shares have been issued with redemption clauses. 

SECTION 15 Equity attributable to the Shareholders of the Parent – Items 

140, 160, 170, 180, 190, 200 and 220 

15.1 “Share capital” and “Treasury shares”: composition 

31/12/2010 31/12/2009 

Number of ordinary shares 639.145.902 639.145.902 

nominal unit value in e uro 2,50 2,50 

Number of treasury shares - - 

nominal unit value in e uro 0,00 0,00 

- NOTA 

318

15.2 Share capital – Number of shares of the Parent: annual changes 

Ordinary 

Other 

A. Shares existing at the beginning of the year 639.145.902 - 

- fully paid up 639.145.902 - 

- not fully paid up - - 

A.1 Treasury shares (-) - - 

B.2 Outstanding shares: initial number 639.145.902 - 

B. Increases - - 

B.1 New issues - - 

- by p ayment: - - 

- business combination transactions - - 

- conversion of bonds - - 

- exercise of warrants - - 

- other - - 

- free of charge: - - 

- in favour of employees - - 

- in favour of directors - - 

- other - - 

B.2 Sale of treasury shares - - 

B.3 Other changes - - 

C. Decreases - - 

C.1 Cancellation - - 

C.2 Purchase of treasury shares - - 

C.3 Company disposal operations - - 

C. 4 Other changes - - 

D. Outstanding shares: closing balances 639.145.902 - 

D.1 Treasury shares (+) - - 

D.2 Shares outstanding at the end of the year 639.145.902 - 

- fully paid up - - 

- not fully paid up - - 

319

15.3 Share capital: other information 

UBI Banca ordinary share 2009/2011 warrants 

On 9 th May 2009 an ordinary shareholders’ meeting of UBI Banca approved an increase in the 

share capital in tranches for a maximum nominal amount of 79.893.237,50 euro by the issue of 

up to 31.957.295 ordinary shares with a nominal value of 2,50 euro each and regular dividend 

entitlement corresponding to that of the UBI Banca shares outstanding at the time of the issue, in 

order to service the issue of 639.145.900 warrants “Warrant azioni ordinarie UBI Banca 

2009/2011”. 

The warrants were allotted free of charge to the shareholders of the Bank on 18 th May 2009 on a 

basis of one warrant for each UBI share held. 

The warrants grant shareholders or their assignees the right to subscribe one share for every 20 

warrants held at a price of 12,30 euro. The holders of the warrants can exercise their rights to 

subscribe for a period of 30 calendar days from 1 st June 2011 until 30 th June 2011. 

Convertible bond issue “UBI 2009/2013 convertibile con facoltà di rimborso in azioni” 

On 18 th June 2009, the Management Board of UBI Banca, following the decisions taken on 27 th 

May 2009 and in implementation of the authorisation granted by a shareholders’ meeting of 9 th 

May 2009, approved the final conditions for the convertible bond “UBI 2009/2013 convertibile con 

facoltà di rimborso in azioni”, offered as a rights issue to the shareholders of UBI Banca. 

The issuance of the convertible bonds was performed for a total nominal amount of 639.145.872 

euro, through the issue of 50.129.088 convertible bonds for a nominal amount of 12,75 euro 

each, offered as a rights issue to the shareholders of UBI Banca at a ratio of four convertible 

bonds for every 51 ordinary shares of UBI Banca possessed. The issue price of each convertible 

bond was 12,75 euro. 

The convertible bonds confer the right on the holders to the payment of a fixed coupon equal to 

5,75% gross per annum of the nominal amount of the convertible bonds to be paid annually and 

which will have a term running from 10 th July 2009 until 10 th July 2013. 

The Management Board also decided to increase the share capital at the service of the convertible 

bonds by a maximum amount of 639.145.872 euro through the issue of a maximum of 

255.658.348 ordinary shares of UBI Banca, with a nominal value of 2,50 euro each, normal 

dividend entitlement and having the same characteristics of the ordinary shares of UBI Banca 

outstanding on the date of issue. 

As concerns the conversion and redemption rights attaching to the convertible bonds, when 18 

months have elapsed since the issue date of the convertible bonds: 

• bondholders shall have the right to convert the convertible bonds into UBI Banca shares at a 

ratio of one ordinary share for every one convertible bond held. If the conversion right is exercised, 

UBI Banca shall have the right to pay a sum of money in place of the shares, not less than the 

nominal amount of the bonds, calculated on the basis of the stock market share price of the UBI 

Banca shares; 

• UBI Banca shall have the right to call the convertible bonds by payment in cash and/or in UBI 

Banca shares, with the addition of a premium equal to 10% of the nominal amount of the 

convertible bonds. 

The convertible bonds shall be redeemed at par on the maturity date. UBI Banca shall have the 

right to perform the redemption by payment in cash and/or ordinary shares of UBI Banca, in an 

amount not less than the nominal value of the convertible bonds. 

320

15.4 Reserves of profits: other information 

The reserves of profits in the consolidated financial statements increased by 69.878 thousand 

euro. That increase was almost entirely the result of the allocation of the profit for the year ended 

31.12.2009 amounting to 270.099 thousand euro, the distribution of a dividend for 2009 and the 

allocations of profits made by the governing bodies of the Bank and its subsidiaries. 

SECTION 16 Minority interests – Item 210 

16.1 Minority interests: composition 

31/12/2010 31/12/2009 

Share capital 514.687 435.440 

Share premiums 78.777 85.839 

Reserves 327.818 347.883 

Treasury shares - 

Fair value reserves 27.876 52.132 

Equity instruments - 

Profit for the year attributable to minority interests 13.602 17.048 

Total 962.760 938.342 

Minority interests net of fair value reserves and profits (losses) for the year increased by 

approximately 52.120 thousand euro. The changes that occurred were due mainly to the impacts, 

already mentioned, of the operation to optimise the branch network concluded at the end of July 

by the sale to UBI Banca Scpa, Banca Regionale Europea Spa and the Monte di Lombardia 

foundation of the shares held by individual banks following the increases in the share capital. 

The effects of that operation and those due to non recurring transactions that occurred during the 

reporting period (the merger of UBI Pramerica Alternative Investments SGR and Capitalgest 

Alternative Investments into UBI Pramerica SGR, the merger of Twice SIM into IW Bank and the 

merger of CB Invest into Centrobanca) on minority interests were as follows: 

share capital: increase of approximately 79,2 million euro of which: 

Banca Popolare Commercio e Industria Spa +151.677 thousand euro 

Banca Regionale Europea Spa 

- 59.526 thousand euro 

Banco di San Giorgio Spa - 6.572 thousand euro 

Twice Sim Spa - 3.365 thousand euro 

UBI Pramerica Alternative Investments SGR - 1.872 thousand euro 

Capitalgest Alternative Investments SGR - 525 thousand euro. 

Minority interests included 9.844 thousand euro consisting of savings shares and 26.246 

thousand euro consisting of the privileged shares of Banca Regionale Europea Spa. 

Share premiums decreased by approximately 7,1 million euro of which: 

Banco di San Giorgio Spa - 6.168 thousand euro 

Twice Sim Spa - 425 thousand euro. 

Reserves decreased by approximately 20 million euro. That decrease was determined 

primarily by an increase of 17 million euro (2009 profit) and by a decrease of 

approximately 43,5 million euro due to the distribution of dividends and other outgoings. 

321

The remaining differences related to changes in percentage holdings due to the purchase or sale 

of shares from or to minority shareholders during the year. 

The effect of the transfer to the income statement of asset items when the purchase price 

allocation was performed had a negative impact on profit attributable to minority interests 

amounting to approximately 10.034 thousand euro (15.519 thousand euro as at 31 st December 

2009). 

OTHER INFORMATION 

1. Guarantees granted and commitments 

Transactions 31/12/2010 31/12/2009 

1) Guarantees granted of a financial nature 1.832.763 1.586.143 

a) Banks 226.696 222.671 

b) Customers 1.606.067 1.363.472 

2) Guarantees granted of a commercial nature 4.686.558 4.450.885 

a) Banks 191.074 65.832 

b) Customers 4.495.484 4.385.053 

3) Irrevocable commitments to pay funds 6.691.440 7.387.905 

a) Banks 111.933 143.090 

i) of certain use 107.773 141.809 

ii) of uncertain us e 4.160 1.281 

b) Customers 6.579.507 7.244.815 

i) of certain use 579.994 651.512 

ii) of uncertain us e 5.999.513 6.593.303 

4) Commitments underlying credit derivatives: protection sales - - 

5) Assets pledged to guarantee obligations to third p arties - - 

6) Other commitments 3.632.315 2.836.715 

Total 16.843.076 16.261.648 

bella 4: 301000O|1 – NOTA 

2. Assets pledged to secure own liabilities and commitments 

Portfolios 31/12/2010 31/12/2009 

1. F inancial assets held for trading 1.827.624 374.822 

2. Financial assets at fair value - 

3. Available-for-sale financial assets 7.892.169 4.247.467 

4. Held-to-maturity investments - 

5. Loans to b anks - 

6. Loans to customers 48.152 73.068 


Total 9.767.945 4.695.357 

322

The financial assets contained in the table relate to securities and loans implemented by the 

banks in the Group as reported in detail below: 

Portfolios 

Guarantees of liabilities or commitments 

Financial assets held for trading 

Repurchase agreements 1.771.526 

Other transactions 50.098 

1.821.624 

Available-for-sale financial assets 

Bank of Italy advances 724.159 

Repurchase agreements 6.544.626 

Issue of bankers' drafts 13.046 

Interbank market collat. 575.524 

Other transactions 34.814 

7.892.169 

Loans to customers 

Mortgages 48.152 

48.152 

3. Information on operational leases 


4. Composition of investments for unit-linked and index-linked policies 


323

5. Management and intermediation on behalf of third parties 

Type of services 

Amounts 

1. Execution of orders on behalf of customers 7.369.901 

a) Purch as es 3.245.068 

1. Settled 3.199.800 

2. Not settled 45.268 

b) Sales 4.124.833 

1. Settled 4.121.265 

2. Not settled 3.568 

2. Portfolio managements 36.384.763 

a) Individual 17.4 23.131 

b) Collective 18.9 61.632 

3. Custody and administration of securities 214.085.887 

a) Securities of third parties held on deposit: connected with depository bank activity (not including 

portfolio managemen t) 

638.717 

1. Securities issued by companies included in the consolidation 

2. Other securities 638.717 

b) Other third party securities held on deposit (not including portfolio managements): other 129.2 75.473 

1. Securities issued by companies included in the consolidation 

2. Other securities 129.2 75.473 

c) Securities belonging to third parties, deposited with third parties 81.2 56.843 

d) Own securities deposited with third parties 2.914.854 

4. Other transactions 44.402.864 

324

PART C – Notes to the consolidated income 

statement 

SECTION 1 Interest – Items 10 and 20 

1.1 Interest income and similar: composition 

Items/Type 

Debt 

instruments 

Financing 

Other 

transactions 

2010 2009 

1. F inancial asse ts held for trading 30.701 - 933 31.634 18.210 

2. F inancial asse ts at fair value - - - - - 

3. Available-for-sale financial ass ets 328.149 - - 328.149 176.804 

4. Held-to- maturity investments - - - - 59.659 

5. Loans to b anks - 29.42 1 361 29.782 40.260 

6. Loans to c ustome rs 2.349 3.129.22 6 2 .387 3.133.962 3.916.330 

7. Hedging derivatives X X - - - 

8. Other ass ets X X 1 .785 1.785 2.685 

Total 361.199 3.158.647 5.466 3.525.312 4.213.948 

ble 4: 501000O|1 - NOTA3_ALTRE 

Interest on impaired assets relates almost entirely to loans to customers and totalled 181.814 


1.2 Interest income and similar: hedging differentials 

The interest balance for hedging differentials to 31 st December 2010, showed a loss. 

Details are given in Table 1.5 later in this section. 

1.3 Interest and similar income: other information 

Items/Amounts 2010 2009 

Interest income on financial assets held in foreign currency 32.970 50.635 

Interest income on finance lease transactions 253.920 300.088 

ble 5: 501030O|1 - NOTA 

325

1.4 Interest expense and similar: composition 

Items/Type Borrowings Securities 

Other 

transactions 

2010 2009 

1. Due to Central Banks (14.115 ) - - (14.115) (3.339) 

2. Due to banks (29.382 ) X (590) (29.972) (45.871) 

3. Due to customers (195.937 ) X (645) (1 96.582) (374.578) 

4. Securities issued X (1.069.742) - (1.0 69.742) (1.195.592) 

5. Financial liabilities held for trading (9.108) - - (9.108) (810) 

6. Financial liabilities at fair value - - - - - 

7. Other liabilities and funds X X (789) (789) (1.406) 

8. Hedging derivatives X X (58.406) (58.406) (96.724) 

Total (248.542) (1.069.742) (60.430) (1.378.714) (1.718.320) 

e 6: 502000O|1 - NOTA3_ALTRE 

1.5 Interest expense and similar: hedging differentials 

able 7: 502010O|1 - NOTA 

Items 2010 2009 

A. Positive d ifferentials on hed ging transactions 918.121 641.146 

B. Negative differentials on hedging transactions (976.528) (737.870) 

C. Balance (A-B) (58.407) (96.724) 

1.6 Interest expense and similar: other information 

Items/Amounts 2010 2009 

Interest expense on liabilities held in foreign currency (33.072) (34.551) 

Interest expense on finance lease transactions (631) (146) 

Table 8: 502020O|1 - NOTA 

326

SECTION 2 Commissions – Items 40 and 50 

2.1 Commission income: composition 

Type of services/Segments 2010 2009 

a) guarantees granted 42.648 41.069 

b) credit de rivatives - - 

c) management, trading and advisory services: 683.743 656.798 

1. trading in financial in strume nts 39.462 37.830 

2. foreign exchange trading 12.259 11.510 

3. portfolio management 273.077 258.769 

3.1. individual 72.968 73.660 

3.2. collective 200.109 185.109 

4. cus tody and administration of securities 15.788 19.188 

5. depository banking 7.751 21.022 

6. placement of securities 105.533 78.411 

7. receipt and transmission of orders 43.565 48.681 

8. advisory activities 6.062 5.965 

8.1 on investments 5.958 5.965 

8.2 on financial structure 104 - 

9. distribution of third party services 180.246 175.422 

9.1. p ortfolio management 68 - 

9.1.1. individual 68 - 

9.1.2. collective - - 

9.2. insurance products 127.927 105.233 

9.3. other products 52.251 70.189 

d) collection and payment services 146.820 156.170 

e) servicer ac tivities for securitisation transactions - - 

f) services for factoring transactions 26.995 26.799 

g) tax collection and payment s erv ices - - 

h) management of multilateral trading systems - - 

i) current account administration 213.902 225.262 

j) other services 264.009 223.086 

Total 1.378.117 1.329.184 

The sub item j) “Other services” for 2009 includes “Other commission income” consisting of: 

- customer finance 184.720 thousand euro 

- foreign transactions 10.889 thousand euro 

- issue of bankers' drafts 13 thousand euro. 

With regard to “day one profit/loss” transactions, Centrobanca Spa performed limited 

transactions during the financial year, with the recognition of commissions amounting to 678 

thousand euro (these commissions totalled 4,2 million euro in 2009). 

327

2.2 Commission expense: composition 

Services/S egments 2010 2009 

a) guarantees received (80 9) (765) 

b) credit derivatives - - 

c) management and trading services: (90.27 6) (82.311) 

1. trading in financial instrume nts (16.36 8) (17.093) 

2. foreign exchange trading (28 1) (84) 

3. portfolio management (5.77 2) (2.877) 

3.1. own (5.08 3) (1.653) 

3.2. on behalf of third parties (68 9) (1.224) 

4. custody and administration of securities (8.56 9) (10.687) 

5. placement of financial instruments (4.94 2) (3.774) 

6. financial instruments, products and services distributed through indirect networks (54.34 4) (47.796) 

d) collection and payment services (60.89 9) (64.034) 

e) other services (44.90 8) (51.899) 

Total (196.892) (199.009) 

Table 9: 505000O|1 - NOTA1_BANCHE 

The sub item e) “Other services” for 2009 includes “Other commission expense” consisting of: 

- stock market orders 13.828 thousand euro 

- banking business 6.958 thousand euro 

- issue of bankers' drafts 34 thousand euro. 

Table 10: 505000O|1 - NOTA3_ALTRE 

SECTION 3 Dividends and similar income – Item 70 

3.1 Dividend and similar income: composition 

2010 2009 

Items/Income 

Income from 

Income from 

Dividends OICR units Dividends OI CR units 

instruments) 

(collective invest ment 

instruments) 

(colle ctive investment 

A. Financial assets held for trading 3.35 0 27 4.132 45 

B. Available-for-sale financial assets 18.29 8 2.424 4.581 1.851 

C. Financial asse ts at fair value - - - - 

D. Equity investments - X - X 

Total 21.648 2.451 8.713 1.896 

The increase in dividends received is primarily attributable to the distribution of a dividend by 

Banca Intesa Sanpaolo Spa. The dividend received in 2010 amounted to approximately 11,6 million of euro. 

328

SECTION 4 Net trading income (loss) – Item 80 

4.1 Net trading income (loss): composition 

Transactions/Components of income 

Gains 

(A) 

Income from 

trading 

(B) 

Losses 

(C) 

Losses from 

trading (D) 

Net result [(A+B) 

- (C+D)] 

1. Financial assets held for trading 15.561 85.345 (61.541) (243.918) (204.553) 

1.1 Deb t instruments 8.704 14.297 (20.45 8) (22 .935) (20.392) 

1.2 Equity instruments 5.752 3.314 (7.50 0) (5 .940) (4.374) 

1.3 Units in O.I.C.R. (collective investment instruments) 117 548 (9 7) (181) 387 

1.4 Financing - - - - - 

1.5 Other 988 67.186 (33.48 6) (214 .862) (180.174) 

2. Financial liabilities held for trading 10.529 1 (40) (11) 10.479 

2.1 Deb t instruments 10.450 - (4 0) - 10.410 

2.2 Deb ts - - - (8) (8) 

2.3 Other 79 1 - (3) 77 

3. Other financial assets and liabilities: exchange rate differences X X X X 2.204 

4. Derivative instruments 495.180 2.142.572 (225.304) (2.277.469) 134.979 

4.1 Financial derivatives 495.180 2.141.638 (225.30 4) (2.275 .746) 135.768 

- on debt instruments and interest rates 233.543 2.127.635 (160.85 5) (2.260 .740) (60.417) 

- on equity instruments and share indices 5.321 8.200 (6.67 6) (5 .210) 1.635 

- on currencies and gold 240.069 X (47.401) X 192.668 

- other 16.247 5.803 (10.37 2) (9 .796) 1.882 

4.2 Cred it derivatives - 934 - (1 .723) (789) 

Total 521.270 2.227.918 (286.885) (2.521.398) (56.891) 

The amount shown in line 1.5 “Other” relates principally to the exchange rate differences for 

certificates of deposit denominated in yen and it is linked to the amount shown in line 4.1 

“Financial derivatives on currencies and gold”. 

SECTION 5 Net hedging income (loss) – Item 90 

5.1 Net hedging income (loss): composition 

Income components/Amounts 2010 2009 

A. Relative income 

A.1 Fair value hedge derivatives 459.121 354.334 

A.2 Hedge d financ ial ass ets (fair value) 643.067 486.311 

A.3 Hedge d financ ial liabilities (fair value ) 318.069 78.921 

A.4 Cash flow hedge financial derivatives - - 

A.5 Assets and liabilities in foreign currency 32 - 

Total income from hedging activity (A) 1.420.289 919.566 

B. Relative expense 

B.1 Hedging derivatives at fair value (929.827) (499.582) 

B.2 Hedged financial assets (fair value) (241.699) (191.931) 

B.3 Hedged financial liab ilities (fair value) (180.529) (211.041) 

B.4 Cash flow hedge financial derivatives (1.025) (962) 

B.5 Ass ets and liabilitie s in foreign currency - (90) 

Total expense from hedging activity (B) (1.353.080) (903.606) 

C. Net hedging income (loss) (A-B) 67.209 15.960 

329

SECTION 6 Income/expense from disposals/repurchases – Item 100 

6.1 Income/expense from disposals/repurchases: composition 

2010 2009 

Items/Income components 

Profits Losses Net result Profits Losses Net result 


1. Loans to b anks 1.463 - 1.4 63 - - - 

2. Loans to customers - (5.313) (5.313) - (81) (81) 

3. Available-for-sale financial assets 32.127 (882) 31.2 45 33.583 (3.067) 30.516 

3.1 Debt instruments 19.670 (581) 19.0 89 27.756 (2.720) 25.036 

3.2 Equity instruments 10.418 (298) 10.1 20 5.463 - 5.463 

3.3 Units in O.I.C.R 

(collective investment instruments) 2.039 (3) 2.0 36 364 (347) 17 

3.4 Financing - - - - - - 

4. Held-to-maturity investments - - - 37.441 - 37.441 

Total assets 33.590 (6.195) 27.395 71.024 (3.148) 67.876 

Financial liabilities 

1. Due to banks - - - - - - 

2. Due to customers - - - - - - 

3. Securities issued 6.574 (16.912) (1 0.338) 65.001 (10.762) 54.239 

Total liabilities 6.574 (16.912) (10.338) 65.001 (10.762) 54.239 

With regard to available-for-sale financial assets, the disposal of debt instruments generated a 

profit of approximately 17,4 million euro. These disposals related mainly to the Parent and the 

subsidiary IW Bank Spa. 

As concerns equity instruments, the most significant transaction was the disposal of the interest 

held in Cartasì which generated a profit of approximately 9,1 million euro. 

The loss shown in the table above on financial liabilities is attributable to the sale and redemption 

of own issue bonds. Compared to the previous year, the result for financial liabilities included 

profits of approximately 60,5 million euro arising from the “public exchange offer” conducted in 

the period from 10 th to 18 th June 2009 which regarded outstanding innovative equity instruments 

(preference shares) and five series of tier two subordinated liabilities called in exchange for senior 

debt securities. 

SECTION 7 Net income/expense on financial assets and liabilities at fair 

value – Item 110 

7.1 Net value change in financial assets/liabilities at fair value: composition 


Gains 

(A) 

Income from 

trading 

(B) 

Losses 

(C) 

Losses from 

trading 

(D) 

Net result 

[(A+B) - (C+D)] 

1. Financial assets 7.873 1.331 (2.028) (507) 6.669 

1.1 Deb t instruments - 

1.2 Equity instruments - 

1.3 Units in O.I.C.R. (collective investment instruments) 7.873 1.3 31 (2.028) (507) 6.669 

1.4 Financing - 

2. Financial liabilities held for trading - - - - - 

2.1 Deb t instruments - 

2.2 Due to banks - 

2.3 Due to customers - 

3. Other financial assets and liabilities: exchange rate differences X X X X - 

4. Credit and financial derivatives - - - - - 

Total 7.873 1.331 (2.028) (507) 6.669 

330

With the exception of Capitalgest positions, which is a Group member company, an internal due 

diligence investigation was performed on the portfolio of remaining hedge funds, designed to 

assess the redemption schedules and the absence of default positions. 

The value of the hedge funds was measured on the basis of the official NAVs or an estimate of 

them when this gave a more conservative result. Furthermore, further prudent impairment losses 

were recognised for all positions and especially for those least punctual in meeting redemption 

payments. The total impairment loss recognised, following the prudent valuation just mentioned 

and including impairment already recognised in previous years, amounted to 4,6 million euro. 

The following table gives the changes that occurred in the hedge fund portfolio in 2010: 

des criptio n 

opening 

balances 

reductio ns 

pro fit / 

losses 

gains / 

losses 

exchange 

rate effects 

closing 

balance 

Capitalgest funds 108.819 - - 7.389 - 116.208 

Other hedge funds 64.908 (36.703) 825 (1.544) 2.963 30.449 

Total 173.727 (36.703) 825 5.845 2.963 146.657 

In the previous year full impairment losses were recognised on the DD GROWTH PREMIUM fund 

amounting to 25,2 million euro and on the SV SPECIAL fund amounting to 8,1 million euro. 

331

SECTION 8 Net impairment losses on loans – Item 130 

8.1 Net impairment losses on loans: composition 

Transactions/Components of 

income 

Full impairment 

losses 

Impairment losses (1) Reversals of impairme nt losses (2) 

Specific 

Specific 

Portfolio 

Po rtfol io 

of intere st 

Other reversals 

of impairment 

losses 

of inte rest 

Other reversals 

o f impairment 

losses 

2010 2009 

A. Lo ans to b anks - (4) - - 2 - 10 8 (3. 482) 

- Financing - (4) - - 2 - 10 8 (3.482) 

- Debt instruments - - - - - - - - - 

B. Lo ans to c ustomer s (125. 279) (740.756) (115. 483) 38. 884 196.180 - 39. 514 (706.940) ( 861. 729) 

- Financing ( 125. 279) (74 0.6 80) (115.483) 38. 884 1 96.180 - 39. 514 (706.864) (860.863) 

- Debt instruments - (76) - - - - - (76) (866) 

C. Tot al (125. 279) (740.760) (115. 483) 38. 884 196.182 - 39. 524 (706.932) ( 865. 211) 

Table 11: 514000O|1 - NOTA1_BANCHE 

: 514000O|1 - NOTA3_ALTR 

Other 

332

8.2 Net impairment losses on available-for-sale financial assets: composition 

Impairment losses (1) 

Reversals of impairment losses (2) 



losses 

Specific 

Ot her 

of inte rest 

Specific 

other reversals of 

impair ment lo sses 

2010 2009 

A. Debt instr uments - (4 74) - - (4 74) - 

B. Equity instruments - (40.240) X X (40.240) (34.799) 

C. Units in O.I. C.R. 

(collective investment instruments). - (1.6 50) X - (1.6 50) (9.084) 

D. Loans to banks - - - - - - 

E. Loans to customers - - - - - - 

Total - (42.364) - - (42.364) (43.883) 

The main impairment losses on equity instruments related to Banca Intesa Sanpaolo Spa, for which the valuation on 31 st December 2010 

resulted in recognition of impairment amounting to 36,8 million euro (32,4 million euro in 2009). Permanent impairment was also recognised on 

the investment in A2A Spa amounting to 2,7 million euro. 

The impairment of OICR units (collective investment instruments), amounting to 1,6 million euro, relates entirely to the TLCom fund. This 

impairment loss, the result of the adoption of a policy for the impairment testing of available-for-sale financial assets reported in part A.2 of the 

notes to the consolidated financial statements, was performed in relation to the lower value of the units with respect to the historical cost of 

purchase. The impairment loss recognised in 2009 related to the Polis fund. 

8.3 Net impairment losses on held-to-maturity investments: composition 

This type of item is not present for the UBI Group. 

333

8.4 Net impairment losses on other financial transactions: composition 

Impairment losses (1) 

Reversals o f impa irment losses (2) 

Transactions / Components of 

income 


losse s 

Specific 

Other 

portfolio 

o f inter est 

Specific 

other reversals of 

impair ment lo sses 

of interest 

por tfo lio 

other rever sals of 

impairment losses 

2010 2009 

A. Gua rantees granted - (5.380) (5.424) - 2.888 - 1.560 (6.356) (3.990) 

B. Credit derivatives - - - - - - - - - 

C. Commitments to pay funds - - (1.093) - - - 231 (862) (1.279) 

D. Other tr ansactions - (195) - - 56 - - (139) (7) 

Total - (5.575) (6.517) - 2.944 - 1.791 (7.357) (5.276) 

334

SECTION 9 Net premiums – Item 150 

9.1 Net premiums: composition 

Premiums from insurance activities Direct work Indirect work 31/12/2010 31/12/2009 

A. Life 

A.1 Gross premiums recognised (+) - - - - 

A.2 Premiums reinsured (-) - X - - 

A.3 Total - - - - 

B. Non life 

B.1 Gross premiums recognised (+) - - - 191.847 

B.2 Premiums reinsured (-) - X - (18.479) 

B.3 Change in gross premiums reserve (+/-) - - - (656) 

B.4 Chan ge in re ins urer pre mium rese rve s (+/- ) - - - (3.536) 

B.5 Total - - - 169.176 

C. Total net premiums - - - 169.176 

Since UBI Assicurazioni has been consolidated as an equity-accounted investee since 1 st January 

2010, no “Net insurance premiums” have been recognised. 

12: 516000O|1 - NOTA 

Section 10 Other income/expense of insurance operations – Item 160 

10.1 Balance of other income/expense of insurance operations: composition 

Items 2010 2009 

1. Net change in technical reserves (4.191) 

2 Claims paid during the year (139.913) 

3. Other income and expense on insurance operations (5.023) 

Total - (149.127) 


2010, no “Other income and expenses of insurance operations” have been recognised. 

10.2 Composition of the sub-item “Net change in technical reserves” 

Net change in technical reserves 2010 2009 

1. Life - - 

A. Mathematical reserves - - 

A.1 Gros s ann ual amount - - 

A.2 (-) Portion borne by reinsurers - - 

B. Other technical reserves - - 

B.1 Gross an nual amoun t - - 

B.2 (-) Portion borne by re insure rs - - 

C. Technical reserves where the investment risk is borne by the insurers - - 

C.1 Gross an nual amoun t - - 

C.2 (-) Portion borne by re insure rs - - 

Total reserves life - - 

2. Non life - - 

Changes in other non life technical reserves other than claims reserves net of reinsurance 

- (4.191) 


2010, no “Net changes in technical reserves” have been recognised. 

335

10.3 Composition of the sub-item “Claims paid during the year” 

Costs for claims 2010 2009 

Life sector: costs of claims net of reinsurance 

A. Amounts paid - - 

A.1 Gross annual amount - - 

A.2 (-) Portion borne by reinsurers - - 

Change in math ematical rese rve s - - 

B. Change in reserves for sums to be paid - - 

B.1 Gross annual amount - - 

B.2 (-) Portion borne by reinsurers - - 

Total life sector claims - - 

Non life sector: cost of claims, net of recoveries and reinsurance 

C. Amounts paid - 1 36.496 

C.1 Gross annual amount - 1 58.779 

C.2 (-) Portion borne by reinsurers - (22.283) 

D. Change in recoveries net of portion borne by reins urers - (1.663) 

E. Changes in claims reserve - 5.080 

E.1 Gross annual amount - 22.437 

E.2 (-) Portion borne by reinsurers - (17.357) 

Total non life sector claims - 139.913 


2010, no “Claims paid during the year” have been recognised. 

Table 13: 517020O|1 - NOTA 

SECTION 11 Administrative expenses – Item 180 

11.1 Personnel expense: composition 

Type of expense/Segments 2010 2009 

1) Employees (1.411.084) (1.423.361) 

a) Wages and salaries (948.075) (974.448) 

b) Social security charges (250.714) (264.733) 

c) Post-employment benefits (62.432) (60.006) 

d) Pension expense (105) (111) 

e) Provision for p ost-employment benefits (10.817) (17.407) 

f) Provision for pension and similar: (4.144) (6.660) 

- defined contribution - (156) 

- defined benefits (4.144) (6.504) 

g) Payments to external supplementary pension plans: (50.411) (50.338) 

- defined contribution (50.363) (50.188) 

- defined benefits (48) (150) 

h) Expenses resulting from share based payments - (179) 

i) Other benefits for permanent employe es (84.386) (49.479) 

2) Other personnel in service (18.130) (31.031) 

3) Directors and statutory auditors (22.118) (22.701) 

4) Expenses for retired personnel (252) (107) 

Total (1.451.584) (1.477.200) 

336

11.2 Average number of employees by category 

2010 2009 

EM PLOYEES 18.994 19.557 

a) senior managers 510 554 

b) middle managers 7.561 7.617 

c) remaining employees 10.923 11.386 

OTHER PERSONNEL 677 858 

“Other personnel” also includes the directors and statutory auditors of Group member companies. 

14: 519010O|1 - NOTA 

11.3 Defined benefit company pension funds: total expenses 

See section 12.3 “Defined benefit company pension funds” in the statement of financial position 

liabilities section. 

11.4 Other benefits for employees 

The item “Other benefits for employees” consists mainly of expenses relating to the leaving 

incentive plan amounting to 35,7 million euro, expenses for luncheon vouchers amounting to 21,4 

million euro and insurance expenses of 13,1 million euro. 

11.5 Other administrative expenses: composition 

2010 2009 

A. Other administrative expenses (712.876) (722.215) 

Rent payable (77.847) (80.090) 

Professional and advisory services (102.647) (108.421) 

Rentals hardware, software and other assets (38.679) (36.869) 

Maintenance of hardware, software and other assets (40.842) (43.373) 

Tenancy of premises (51.748) (58.178) 

Property maintenance (27.816) (24.970) 

Counting, transport and management of valuables (16.503) (17.893) 

Membership fees (10.818) (11.541) 

Information services and land registry searches (13.168) (16.718) 

Books and periodicals (1.901) (1.970) 

Postal (31.906) (37.759) 

Insurance premiums (45.806) (27.331) 

Adve rtising (24.663) (28.033) 

Entertainment expenses (2.099) (2.385) 

Telephone and data transmission expenses (69.934) (67.817) 

Services in outsourcing (51.223) (47.597) 

Travel expenses (23.476) (24.396) 

Credit recovery e xpenses (46.103) (42.468) 

Forms, stationery and consumables (13.304) (13.545) 

Transport an d removals (6.987) (8.414) 

Security (9.651) (11.368) 

UBI Group merger expenses - (5.886) 

Other expenses (5.755) (5.193) 

B. Indirect taxes (210.714) (216.195) 

Indirect taxes and duties (40.467) (45.157) 

Stamp duty (129.567) (133.620) 

Municipal prop erty tax (9.029) (9.818) 

Othe r taxes (31.651) (27.600) 

Total (923.590) (938.410) 

Table 15: 519000bO|1 - NOTA 

337

SECTION 12 Net provisions for risks and charges – Item 190 

12.1 Net provisions for risks and charges: composition 

Provisions 

Uses 

Net provisions in 

2010 

Net provisions in 

2009 

Additions to and uses of revocation provisions (8.385) 6.945 (1.440) (1.881) 

Additions to and uses of personnel expense provisions (1.626) 1.547 (79) - 

Additions to and uses of provisions for bonds in default (1.470) 1.516 46 (739) 

Additions to and uses of litigation provisions (24.860) 7.936 (16.924) (17.610) 

Other additions to and uses of prov isions for risks and 

charges 

(16.187) 7.375 (8.812) (16.702) 

Total (52.528) 25.319 (27.209) (36.932) 

T 

able 16: 520000O|1 - NOTA 

Table 12.2 “Provisions for risks and charges – annual changes” in the statement of financial 

position liabilities section may be consulted for provisions and uses of provisions for risks and 

charges 

SECTION 13 Net impairment losses on property, equipment and investment 

property – Item 200 

13.1 Net impairment losses on property, equipment and investment property: composition 

Assets/Components of income 

Depreciation 

(a) 

Impairment losses 

(b) 

Reversals of 


(c) 

Net result 

(a+b-c) 

A. Property, equipment and investment property 

A.1 Owned (109.295) (12) - (109.307) 

- for operational use (105.937) (12) (105.949) 

- for investment (3.358) (3.358) 

A.2 Acquired through finance lease (531) - - (531) 

- for operational use (531) (531) 

- for investment - - 

Total (109.826) (12) - (109.838) 

: 

521000O|1 - NOTA3_ALT 

338

SECTION 14 Net impairment losses on intangible assets – Item 210 

14.1 Net impairment losses on intangible assets: composition 

Assets/Components of income 

Amortisation 

(a) 

Impairment losses 

(b) 

Reversals of 


(c) 

Net result 

(a+b-c) 

A. Intangible assets 

A.1 Owned (125.998) (4.502) - (130.500) 

- Internally generated by the company (203) (203) 

- other (125.795) (4.502) (130.297) 

A.2 Acquired through finance lease - 

Total (125.998) (4.502) - (130.500) 

Details are given in the footnote to Table 13.2 in the statement of financial position assets section, 


SECTION 15 Other net operating income/expense – Item 220 

15.1 Other operating expense: composition 

2010 2009 

Other operating expenses (80.285) (116.036) 

Fines and charges for late tax payments (500) (900) 

Depreciation of improvements to third party leased assets (6.898) (7.889) 

Ordinary maintenance of investment properties - - 

Other expenses and prior year expense (72.887) (107.247) 

- of which costs relating to finance lease contracts (7.169) (8.176) 

Table 17: 523000O|1 - NOTA1 

15.2 Other operating income: composition 

2010 2009 

Other operating income 319.715 351.078 

Charges to third parties for expenses on deposit and current accounts 1 3.745 26.565 

Rec ove ry of insurance premiums 3 3.125 31.787 

Other income for property management 1.450 1.629 

Recovery of taxes 15 3.846 155.308 

Rent income 7.509 6.307 

Other income, expense recoveries and prior year income 11 0.040 129.482 

- of which recoveries on lease contracts 14.020 13.946 

Table 18: 523000O|1 - NOTA2 

339

SECTION 16 Profits (losses) of equity investments – Item 240 

16.1 Profits (losses) of equity investments: composition 

Income components/segments 2010 2009 

1) Jointly controlled entities 

A. Income - - 

1. Revaluations - - 

2. Profits on sale - - 

3. Reversals of impairment losses - - 

4. Other income - - 

B. Expense - - 

1. Impairment losses - - 

2. Impairment losses due to deterioration - - 

3. Losses on sale - - 

4. Other expense - - 

Net result - - 

2) Companies subject to significant influence 

A. Income 10 1.641 36.254 

1. Revaluations - - 

2. Profits on sale 81.387 203 

3. Reversals of impairment losses - - 

4. Other income 2 0.254 36.051 

B. Expense (2.614) (676) 

1. Impairment losses - - 

2. Impairment losses due to deterioration - - 

3. Losses on sale (154) - 

4. Other expense (2.460) (676) 

Net result 99.027 35.578 

Total 99.027 35.578 

Table 19: 525000O|1 - NOTA 

The amount in line A.2 of section 2 “Profits on sale” relates to the sale of 9,9% of Lombarda Vita 

Spa to Cattolica Assicurazioni in September 2010 for 81.095 thousand euro. 

The amounts in lines A.4 “Other income” and B.4 “Other expense” of section 2 represent the 

profits and losses respectively of equity-accounted investees. 

Details are given in the note at the foot of Table 10.3 “Equity investments: annual changes” in the 

statement of financial position section. 

SECTION 17 Net result of fair value measurement of property, equipment 

and investment property and intangible assets – Item 250 

17.1 Net result of the fair value measurement (or at revalued amount) of property, 

equipment and investment property and intangible assets 

No “Net result of the fair value measurement of property, equipment and investment property and 

intangible assets” was recognised. 

340

SECTION 18 Net impairment losses on goodwill – Item 260 

18.1 Net impairment losses on goodwill: composition 

Impairment losses of 5.172 thousand euro recognised in 2010 related to impairment losses on the 

goodwill of Barberini Sa (1.027 thousand euro) and of Gestioni Lombarda Suisse Sa (4.145 

thousand euro). Further information is given in the Statement of Financial Position Assets Section 

13 “Intangible assets”. 

SECTION 19 Profits (losses) on disposal of investments – Item 270 

19.1 Profits (losses) on disposal of investments: composition 


A. Properties 7.789 4.448 

- Profits on sale 7.837 4.448 

- Losses on sale (48) - 

B. Other assets 6.669 95.691 

- Profit on sale 6.808 96.396 

- losses on sale (139) (705) 

Net result 14.458 100.139 

Profits on disposals in 2010 relating to item A “Properties” consisted primarily of profits on the 

disposal of assets belonging to UBI Banca Scpa, BPB Immobiliare Srl and Banco di Brescia Spa. 

Profits on disposals contained in item B “Other assets” relate to the disposal in the fourth quarter 

of 2010 of two branches of BDG Banque for 6.596 thousand euro. 

Profits on disposals in 2009 related principally to the following: 

‐ disposal of 50% plus one share of UBI Assicurazioni Spa for 45.838 thousand euro; 

‐ disposal of part of the investment in Banca Popolare di Ancona Spa for 32.435 thousand 

euro; 

‐ disposal of the entire share capital of Mercato Impresa Spa for 12.840 thousand euro; 

‐ disposal of part of the investment held in IW Bank Spa by Centrobanca Spa for 5.045 


341

SECTION 20 Taxes on profit for the year from continuing operations – Item 

290 

20.1 Taxes on profit for the year from continuing operations: composition 


1. Current taxes (-) (357.990) (466.651) 

2. Change in current taxes of prior years (+/-) (2.800) (5.834) 

3. Reduction in current taxes for the year (+) - - 

4. Change in deferred tax assets (+/-) 92.361 147.141 

5. Change in deferred tax liabilities (+/-) 36.449 88.459 

6. Tax es for the year (-) (-1+/-2+3+/-4+/-5) (231.980) (236.885) 

Comments on changes in income taxes are given in Statement of Financial Position Asset Section 

14. 530 

20.2 Reconciliation between theoretical taxation and actual taxation recorded in the 

accounts 

IRES (CORPORATE INCOME TAX) Taxable income IRES % 

Theoretical IRES payable 423.406 (116.437) 27,50% 

P ermanent increases 

- Non deductible interest expense 58.212 (16.008) 3,78% 

- Non deductible impairment losses on AFS securities 41.111 (11.306) 2,67% 

- Taxes on dividends of UBI subsidiaries (7.597) 1,79% 

- Tax effect of branch switches (18.294) 4,32% 

- Other minor impacts 14.799 (4.070) 0,96% 

Permanent decreases 

- Gains 95% PEX exempt (91.247) 25.093 -5,93% 

- Dividends not taxed (22.894) 6.296 -1,49% 

- Valuation of equity-accounted investees (17.426) 4.792 -1,13% 

- Other minor impacts 5.329 -1,26% 

Effective IR ES p ayable 405.961 (132.202) 31,22% 

IRAP [LOCAL PRODUCTION TAX] taxable income IRAP % 

Theoretical IRAP payable 423.406 (20.408) 4,82% 

P ermanent increases 

- Personnel expense + administrative expenses not deductible for IRAP purposes 1.482.429 (71.453) 16,88% 

- Non deductible impairment losses on AFS securities 49.721 (2.397) 0,57% 

- Impairment of tangible and intangible assets not deductible for IRAP purposes 10.022 (483) 0,11% 

- Net impairment losses on loans not deductible for IRAP purposes 713.719 (34.401) 8,12% 

- Non deductible interest expense 92.610 (4.464) 1,05% 

- Provisions for risks and charges not deductible for IRAP purposes 29.041 (1.400) 0,33% 

- Other minor impacts 7.090 (342) 0,08% 

Permanent decreases 

- Dividends (12.050) 581 -0,14% 

- Gains not taxed for IRAP purposes (80.790) 3.894 -0,92% 

- Tax wedge deductions (428.744) 20.665 -4,88% 

- Valuation of equity-accounted investees (17.426) 840 -0,20% 

- Other minor impacts 3.884 -0,92% 

Effective IR AP p ayable 2.269.030 (105.483) 24,91% 

Total effective IRES and IRAP tax expense 423.406 (237.685) 56,14% 

342

SECTION 21 Post-tax profit from discontinued operations – Item 310 

21.1 Post-tax profit from discontinued operations: composition 


Asset/liability group 

1. Income 8.490 

2. Expense (1.000) 

3. Results of fair value measurement of assets and associated liabilities - 

4. Profit (loss) on sale 8 9.072 - 

5. Taxes and duties (5.704) (2.335) 

Profit (loss) 83.368 5.155 

Table 20: 532000O|1 - NOTA 

Profit from discontinued operations amounting to 89,1 million euro, relates to the operation to 

dispose of an equity investment in RCB DEXIA Investor Services (net of the relative expenses) 

resulting from the contribution of depository banking operations, while 15 thousand euro relates 

to the disposal of a property located in Brescia. 

21.2 Details of taxes on profit from discontinued operations 

2010 2009 

1. Current taxation (-) (5.704) (1.695) 

2. Change in deferred tax assets (+/-) - 

3. Change in deferred tax liabilities (-/+) (640) 

4. Taxes on income for the year (-1+/-2+/-3) (5.704) (2.335) 

Taxes recognised on the item discontinued operations amounting to 5.704 thousand euro 

consisted of 5.699 thousand euro for IRES (corporate income tax) and IRAP (local production tax) 

tax on the disposal of the equity interest acquired with the contribution of depository banking 

operations just mentioned and of five thousand euro for IRES on the profit on the sale of the 

property. 

Table 21: 530010O|1 - NOTA 

SECTION 22 Profit for the year attributable to minority interests – Item 330 

22.1 Details of the item 330 “Profit for the year attributable to minority interests” 

Profit attributable to minority interests, inclusive of the effects of consolidation entries, totalled 

18.233 thousand euro and was composed as follows: 

2010 2009 

UBI Pramerica SGR Spa 11.279 11.520 

Banca Carime Spa 2.642 8.829 

Banca Popolare Commercio e Industria Spa 2.769 1.083 

IW Bank Spa - 668 

Banca Popolare di Ancona Sp a 1.048 - 

Centrobanca Spa 403 502 

Banca di Valle Camonica Spa - 410 

Other companies 92 409 

Total 18.233 23.421 

343

22.2 Details of the item 330 “Loss for the year attributable to minority interests” 

Losses attributable to minority interests, inclusive of the effects of consolidation entries, totalled 

4.631 thousand euro and were composed as follows: 

2010 2009 

Banca Regionale Europea Spa (848) (3.554) 

Banco di San Giorgio Spa (954) (1.279) 

Banca Popolare di Ancona Spa - (1.149) 

UBI Leasing Spa (792) (299) 

Banca di Valle Camonica Spa (637) - 

IW Bank Spa (92) - 

Investnet International Sa (1.305) (92) 

Other companies (3) - 

Total (4.631) (6.373) 

SECTION 23 Other information 

No situations exist which require further information. 

SECTION 24 Earnings per share 

Introduction 

With the adoption of international accounting standards, all listed companies, or companies for 

which listing is in progress, which are required to prepare separate company and/or consolidated 

financial statements in compliance with IFRS (Legislative Decree No. 38/2005), must report the 

calculation of their earnings per share (EPS) in their financial statements in accordance with IAS 

33. 

More specifically that standard requires both basic earnings per share and diluted earnings per 

share to be reported: 

(i) basic EPS has been calculated by dividing the profit attributable to the ordinary 

equity holders of the Parent (numerator) by the weighted average number of ordinary 

outstanding shares (denominator) during the year 

(ii) diluted EPS has been calculated by taking into account the dilutive effect of potential 

ordinary shares, i.e. financial instruments and/or contracts which assign rights to the 

holders to acquire ordinary shares. 

Earnings per share for the year ended 31 st December 2010 

Calculation of basic EPS 

On the basis of what has been stated above, the numerator for calculating basic EPS amounts to 

173.627 thousand euro. 

With regard to the denominator of this indicator, the weighted average of outstanding ordinary 

shares is equal to the number of ordinary shares outstanding as at 31 st December 2010, which 

was 639.145.902. 

In this respect: 

(i) as at 1 st January 2010 the outstanding ordinary shares of UBI Banca numbered 

639.145.902, 

(ii) in 2010 UBI Banca issued no new ordinary or privileged shares, 

(iii) as at 31 st December 2010 UBI Banca held none of its own shares in portfolio. 

344

Calculation of diluted EPS 

For the purposes of calculating diluted EPS, as already stated, account must be taken of the 

dilutive effect on the ordinary shares of the Parent resulting from the presence of “potential” 

ordinary shares that are outstanding, such as for example: 

(i) instruments representing debt or equity, including preference shares, that are 

convertible into ordinary shares, 

(ii) options and warrants, 

(iii) shares to be issued if the conditions defined in contractual agreements are met. 

As already fully reported in the statement of financial position section 15 “Equity attributable to 

the Parent”, potential ordinary shares of UBI Banca existed as at 31 st December 2010 due to the 

subscription rights of warrant holders (a maximum of 31.957.295 new ordinary shares) and to the 

possible conversion of the convertible bond issue (a maximum of 255.658.348 new ordinary 

shares). 

The warrants, however, may only be exercised from 1 st June 2011, while the right to convert the 

convertible bonds into shares of UBI Banca did not occur in 2010. 

It therefore follows that the “diluted” earnings per share are identical to the “basic” earnings per 

share 

To summarise: 

EPS 2010 2009 

Consolidated profit attributable to the Parent (thousands of euro) 168.291 264.029 

Weighted average number of ordinary shares outstanding 639.145.902 639.145.902 

Basic earnings per share (in euro) 0,2633 0,4131 

Diluted earnings per share (in euro) 0,2633 0,4131 

The table that follows contains: (i) a reconciliation of consolidated profit attributable to the Parent 

and profit attributable to ordinary equity holders and also (ii) the dilutive effect on the average 

number of outstanding ordinary shares. 

EPS 2010 2009 

EPS with recognised profits 


Profit not attributable to owners of ordinary equity instruments (thousands of euro) (3.830) (6.070) 


Number of shares existing at the beginning of the year 639.145.902 639.145.902 

Number of shares issued during the year - - 

Weighted average shares issued during the year - - 

Weighted average number of ordinary shares outstanding 639.145.902 639.145.902 

Weighted dilutive effect resulting from the exercise of potential ordinary shares - - 

Weighted average number of ordinary shares for diluted ca pital 639.145.902 639.145.902 

Basic earnings per share (in eu ro ) 0,2633 0,4131 

Diluted earnings per share (in euro) 0,2633 0,4131 

345

Part D – Consolidated statement of comprehensive 

income 

Items 

31/12/2010 

Gross amount Tax on income Net amount 

10. Profit (loss) for the year X X 185.722 

Other comprehensive income 

20. Available-for-sale financial assets: (603.161) 147.144 (456.017) 

a) changes in fair value (483.469) 147.632 (335.837) 

b) transfer to income statement (128.968) 8.939 (120.029) 

- impairment losses (131.102) 9.517 (121.585) 

- profits (losses) on sale 2.134 (578) 1.556 

c) other changes 9.276 (9.427) (151) 


40. Intangible assets - 

50. Foreign investment hedges - - - 

a) changes in fair value - 

b) transfer to income statement - 

c) other changes - 

60. Cash flow hedges: 2.003 (647) 1.356 

a) changes in fair value 2.003 (647) 1.356 



70. Currency translation differences: - - - 




8 0. Non cu rrent as sets held for s ale: - - - 




90. Actuarial gains (losses) on defined benefit plans: (17.174) 4.637 (12.537) 

100. Portion of fair value reserves attributable to equity-accounted investees: (40.026) 9.628 (30.398) 

a) changes in fair value (54.355) 13.827 (40.528) 

b) transfer to income statement (7.734) 1.866 (5.868) 

- impairment losses (9.916) 2.399 (7.517) 

- profits (losses) on sale 2.182 (533) 1.649 

c) other changes 22.063 (6.065) 15.998 

110. Total other comprehensive items (658.358) 160.762 (497.596) 

120. Comprehensive income (items 10+110) (311.874) 

130. Consolidated comprehensive income attributable to minority interests 7.017 

140. 

Consolidated comprehensive income attributable to the shareholders of the 

parent 

(318.891) 

346

Part E - Information on risks and the relative 

hedging policies 

Section 1 - Banking Group Risks 

In compliance with current regulations, the UBI Group has adopted a risk control system which 

disciplines and integrates the organisational, regulatory and methodological guidelines of the 

system of internal controls with which all Group member companies must comply in order to 

allow the Parent to perform its activities of strategic, management and operational control in an 

effective and economical manner. 

Group member companies co-operate pro-actively in identifying risks to which they are subject 

and in defining the relative criteria for measuring, managing and monitoring them. 

The key principles on which Group risk analysis and management are based for the pursuit of an 

increasingly more knowledgeable and efficient allocation of economic and supervisory capital are 

as follows: 

- rigorous containment of financial and credit risks and strong management of all types of 

risk; 

- the use of a sustainable value creation approach to the definition of risk appetite and the 

allocation of capital; 

- definition of the Group’s risk appetite with reference to specific types of risk and/or 

specific activities in a set of policy regulations for the Group and for the single entities 

within it. 

The propensity to risk helps to define the strategic positioning of the Group and it is defined in 

such a manner as to be consistent with its mission and its strategy and its business and value 

creation objectives. 

The definition of the UBI Group’s appetite for risk includes quantitative and qualitative factors: 

• from a quantitative viewpoint, the risk appetite is given by the amount of capital that the 

Bank is willing to put at risk and it helps to define the strategic positioning of the Group; 

• from a qualitative viewpoint, risk appetite relates to the Group’s desire to strengthen its 

management and monitoring systems and the efficiency and effectiveness of its system of 

internal controls. 

Activity is continuing with the Basel 2 project to achieve recognition of the use of internal models 

for the purposes of estimating minimum capital requirements and implementing the second and 

third pillars of the New Accord on Capital. In view of the recent proposals to modify banking 

regulations (Basel 3) which will be introduced gradually from 2013 and of the financial crisis 

which has impacted over the last two years, the objective of the general plan of the project is to 

perform a first calculation of the minimum capital requirement using the AIRB approach for credit 

risk by the end of 2012. 

With regard to the second pillar, the ICAAP report as at 31 st December 2010 is to be filed with the 

supervisory body in April 2011 and it will include first pillar risks, second pillar risks specified by 

347

egulations and risks identified independently by the Group. The structure of the report gives 

details of the following: strategic lines of development and the forecast horizon considered by the 

Group business plan; a description of corporate governance, organisational structures and 

systems of control related to ICAAP; exposure to risks, methods of measuring and aggregating 

them and stress tests; the components, estimates and methods of allocating internal capital; the 

relationship between internal capital, supervisory requirements and supervisory capital; and 

finally the self assessment of ICAAP, which identifies areas for further growth in the 

methodological model. 

When the ICAAP report is filed, a report will be made available to the public at the same time on 

the UBI Banca website (www.ubibanca.it), in the investor relations sector, in compliance with the 

third pillar requirements. The regulations introduce obligations to publish information on capital 

adequacy, exposure to risks and the general characteristics of the systems designed to identify, 

measure and manage them. 

The information to be provided favours greater transparency in the ways in which banks manage 

risk. The Bank of Italy has made special tables available in this respect in which the quantitative 

and qualitative information which banks must publish is classified, thereby making the data 

comparable. 

This part – sections 1 to 4 6 - furnishes information on the risk profiles listed below, on the relative 

management and hedging policies pursued by the Group and its activities relating to financial 

derivative instruments: 

a) credit risk; 

b) market risks: 

interest rates, 

price, 

currency, 

c) liquidity risk; 

d) operational risks. 

Sections 5 and 6 also provide information on the risks pertaining to the insurance companies and 

other companies in the consolidation. 

A report on the general framework of the risks and uncertainties to which the UBI Group is 

exposed is given in a special section of the report on operations, prepared in compliance with 

Legislative Decree No. 32 of 2 nd February 2007, which implements EC Directive No. 2003/51/EC. 

6 Sections 1 to 4 provide information for the banking group only, except in cases where explicit reference is 

made to all the companies in the consolidation. 

348

1. CREDIT RISK 

Qualitative information 

1.1 General aspects 

The strategies, policies and instruments for the assumption and management of credit risk are 

defined by the Risk Management Area of the Parent in co-operation with the Credit Area and with 

support and co-ordination of the relative specialist units. 

There is a particular focus in the formulation of policies to manage credit risk on maintaining an 

appropriate risk/yield profile and on assuming risks that are consistent with the risk appetite 

defined by senior management and, more generally, with the mission of the UBI Group. 

The priorities in the orientation of the Group's credit management policies are to support local 

economies, families, businessmen, professionals and small-to-medium sized enterprises. 

The particular attention paid to maintaining relationships established with customers and to 

developing them over the years is one of the strong points of the Group and it helps to eliminate 

information asymmetries and offers continuity in customer relationships with a view to long term 

support. 

Even in the current difficult economic situation, while conserving the credit quality of its assets, 

the Bank is ensuring that the economy has adequate access to credit, by participating, amongst 

other things, in “Agreements” stipulated between the Italian Banking Association, the Ministry of 

Finance and trade associations. 

Specific credit policies are pursued with regard to the corporate and small business markets to 

guide and grow the credit portfolio in terms of geographical area, economic sector and credit 

rating class. Credit policies act to support the distribution network in evaluating the 

attractiveness of business with a view to value creation in particular areas and sectors and with 

particular counterparties and in assessing the creditworthiness of counterparties. 

Credit policies are implemented in the distribution network by means of: 

- loan assessment procedures which are made easier for counterparties belonging to 

attractive clusters; 

- initiatives designed to contain risk profiles and limit the negative impact on value creation 

in the portfolio (corrective pricing action/acquisition of security and guarantees/revision of 

credit lines) for counterparties belonging to unattractive clusters. 

Finally particular attention is paid to the definition of guidelines for the treatment of new 

products, with adequate reporting to senior management concerning observance of risk/yield 

objectives, the calculation of minimum interest rates for granting loans, the quality of borrowers, 

guarantees received and expected rates of recovery in cases of insolvency. 

1.2 Policies for the management of credit risk 

1.2.1 Organisational aspects 

In the performance of its traditional banking business, the Group is exposed to the risk that the 

loans it grants will not be repaid by borrowers when they are due and that partial or full 

349

impairment losses must be recognised on them. More specifically the risk profile for lending is 

sensitive to the performance of the economy as a whole, to the deterioration in the financial 

position of counterparties (shortage of liquidity, insolvency, etc.), or to changes in their 

competitiveness, to structural or technological changes in corporate debtors and to other external 

factors (e.g. changes in legislation, deterioration in the value of financial guarantees connected 

with market performance). A further risk factor to which the Group pays particular attention is 

the degree of diversification in the lending portfolio among different borrowers and among the 

different sectors in which they operate. 

The organisational model on which the units which manage lending activity is based is as follows: 

• Parent units for centralised monitoring and co-ordination; 

• the General Managements of banks and Group companies, to which the following report: 

- Credit Departments; 

- Local Loan Approval Centres; 

- Branches; 

- Corporate Banking Units (CBUs); 

- Private Banking Units (PBUs). 

The characteristics of that organisational model not only ensure strong standardisation between 

the units of the Parent and the corresponding units in the network banks, with consequent 

linearity in the processes and the optimisation of information flows, but they also provide a clear 

separation between commercial and credit functions. Loan granting activity is also differentiated 

by customer segment (retail/private banking/corporate and institutional) and specialised by the 

status of the loan: “performing” (managed by retail, private banking and corporate lending units) 

and “default” (managed by problem loan units). 

Furthermore, the introduction of decentralised Local Approval Centres (LACs) in the banking area 

to support retail branches and units for private banking customers guarantees effective coordination 

and liaison between different units operating on the various markets. The Parent 

oversees policy management, overall portfolio monitoring, the refinement of assessment systems, 

problem loan management and compliance with regulations through the Credit and Credit 

Recovery, Risk Control, Strategic Development and Planning and the Parent and Group Audit 

Macro Areas. 

For all those entities (individual companies or groups) with authorised credit from banks and 

companies in the Group (including risk activities involving issuer and related risks), which totals 

more than 50 million euro, the Parent must set an operational limit which is the maximum credit 

that may be authorised for the counterparty at UBI Group level. The Management Board of the 

Parent is responsible for granting, changing and renewing operational limits on the proposal of 

the UBI Credit Area after first consulting the UBI Credit Committee. 

The banks and companies of the Group must also request a prior, consultative, non binding 

opinion from the Parent for combinations of a) amounts of authorised credit and b) determined 

internal rating classes. It is the Parent’s duty to assess whether it is consistent with the credit 

policies of the Group, according to the criteria and parameters laid down in the credit 

authorisation regulations of the Group. A prior opinion is not required for credit authorisations 

for single counterparties or groups of companies which fall within the operational limits that have 

been set. 

In consideration of the specific federal organisation of the UBI Group, the Parent decided to adopt 

a “focused” model for the management of corporate customers common to more than one network 

bank on the basis of which, briefly: 

350

- decisions relating to credit risk management, pricing and the formulation of commercial policies 

for customers common to two or more banks are centred on a lead bank, termed the pivot bank, 

thereby avoiding the generation of a decrease in the overall profitability on the counterparty; 

- non pivot banks abstain from opening new accounts and/or from granting new credit facilities 

A Pivot Bank may be defined as the bank which has the best chances, with its own business 

units, of arranging new business and/or intensifying existing business with the customer in 

common, in order to draw the greatest possible benefit for the whole banking Group. It therefore 

directs the other banks involved with regard to the most appropriate conduct to follow to improve 

business with the customer as a whole. 

The various organisational units in banks and product companies are responsible for credit and 

commercial activities and they also hold responsibility for monitoring both the activity they 

perform directly and that performed by those units which report to them. More specifically, 

responsibility for managing and monitoring performing loans lies in the first instance with the 

account managers who handle daily relationships with customers and who have an immediate 

perception of any deterioration in credit quality. Nevertheless, all employees of Group member 

companies are required to promptly report all information that might allow difficulties to be 

identified at an early stage or which might recommend different ways of managing accounts, by 

concretely participating in the monitoring process. 

In the second instance, the organisational unit responsible for monitoring credit risk is the Credit 

Quality Management and Monitoring Unit, which carries out monitoring, supervision and analysis 

of performing positions on both a case by case and a collective basis, where the intensity and 

degree of detail of the analysis is a function of the risk class attributed to the counterparties and 

the seriousness of the performance problems. This unit, not involved in loan approval procedures, 

either on its own initiative or on submission of a proposal, may assess a position and decide (or 

propose to a superior decision-making unit when the decision does not lie within its powers), to 

change the classification of performing counterparties to a more serious status. In these cases it 

asks, through its Credit Department, the Credit Area of UBI Banca to issue a prior non binding 

opinion in those cases where Credit Authorisation Regulations require it. The Credit Quality 

Management and Monitoring Service in the Credit Area of UBI Banca is responsible for coordinating 

and defining guidelines for monitoring the lending portfolio, overseeing the 

development of monitoring tools, monitoring credit policies and preparing management reports. 

Furthermore an “arrears management” model was introduced in 2010 designed to preserve and 

protect customer relationships through the prompt resolution of lending irregularities (late 

repayments/unauthorised overdrafts) detected on performing private individual and “small 

economic operator” customer positions by providing centralised support contact with customers 

to normalise problem loan positions. 

The Risk Management Area is located in the Risk Control Macro Area and it performs the 

following through its Credit Risk Service: 

– it defines, in co-operation with the Methods and Models Service, Group criteria and 

methodologies for the development of internal rating models – probability of default (PD), 

loss given default (LGD), and exposure at default (EAD) – in line with regulatory 

requirements and best practices; 

– it works with the Rating Desk and the Major Borrowers Rating units in that same Area, on 

the definition of methods for assigning counterparty ratings; 

– it produces periodical analyses which illustrate the risk profile of the total lending portfolio 

and the commercial sub-portfolios at Group level and at the level of individual legal 

351

entities, in terms of distribution by rating class, LGD and expected loss, loan impairment 

rates and concentration in the largest customers; 

– it develops methods, in co-operation with the Tax and Administration Area, for calculating 

collective provisions to be recognised in the financial statements on the basis of internal 

credit ratings for the network banks and Centrobanca and loan impairment rates for the 

other banks and product companies; 

– it calculates loan deterioration rates for the Group and defines the relative calculation 

methods for individual legal entities; 

– it works with the Commercial Macro Area and with the Planning and Management Control 

Area to provide input parameters (PD, LGD, EAD) for product pricing activities. 

Furthermore, the Credit Risk Service plays a key role within the Basel 2 project: 

– it formulates guidelines on credit risk matters generally and also with regard to periodic 

reporting to the Supervisory Authority; 

– it draws up roll-out plans for models implemented at the Parent; 

– it monitors the extent to which regulatory provisions are covered by internal rating models; 

– it co-ordinates activities for the development and maintenance of internal rating processes 

and systems. 

Finally, the Risk Policies Service forms part of the Risk Management Area and it formulates 

policies for the assumption and management of credit risk. 

More specifically, the Service formulates the operational details of policies by preparing 

regulations to implement them which define aspects relating to the definition, use, monitoring 

and reporting of risk in relation to compliance with the guidelines and the indicators that are set. 

These documents are implemented by the organisational units of Group entities, which must have 

a knowledge of the risk profile and the risk management policies defined by the senior 

management of the Parent and which must contribute, each within the scope of their 

responsibilities, to the implementation, consistent with the reality of their companies, of the risk 

management strategies and policies decided by the senior management of the Parent. 

Finally, the Service provides specialist support for the operational implementation of the policies 

and regulations for them, concerning the assumption and management of credit risk and it 

periodically monitors their consistency with Group operations, and proposes corrective action if 

necessary. 

The Area then defines in detail, and undertakes, active credit portfolio management action 

designed to optimise the creation of value on the loan portfolio and also takes initiatives to 

mitigate, monitor and transfer credit risk (e.g. securitisations), assessing the impact on economic 

capital and on supervisory capital requirements. As concerns the production and distribution of 

products which involve the assumption of credit risk by Group member companies, it 

participates, together with the Commercial Macro Area, in the definition of the relative convention 

agreements. 

1.2.2 Management, measurement and control systems 

The Credit Risk Service is responsible for Group reporting on credit risk in order to monitor 

changes in the risk attached to lending for individual banks and commercial portfolios. The 

reports are submitted quarterly to the Boards of Directors of the individual network banks. For 

the network banks and Centrobanca the reports describe distributions by internal rating classes, 

352

LGD and expected loss and for the network banks they also give changes in average risk for the 

corporate market, the small business portfolio in the retail market and for the affluent and mass 

market portfolios again in the retail market. Reporting for the product companies is based on the 

specific risk for the various types of lending and products marketed. Special reports on specific 

matters are also prepared on the main components of credit risk. In 2010 the quarterly report to 

the network banks was broadened to include a special section on the monitoring of policies 

(monitoring the level of expected loss and the distribution of loans by class of risk) for each 

network bank. 

The set of models which constitute the internal rating system (IRB) of the Group are managed by 

the Risk Management Area and by the Credit Area. 

The system at present involves the use of automatic models for private individuals and smallsized 

businesses, automatic models supplemented by qualitative questionnaires and a geosectoral 

module for medium-to-large size businesses, and a mainly judgemental model for major 

borrowers (i.e. groups of companies with authorised credit of greater than 20 million euro). 

Automatic models summarise ratings statistically on the basis of the following risk factors 

appropriately calibrated according to the type of counterparty or model: 

- economic and financial factors; 

- performance factors (internal and external); 

- qualitative factors (competitive positioning, corporate structure, etc.); 

- geo-sectoral factors. 

The major borrower model integrates an economic and financial assessment with a structured 

judgmental component which examines aspects such as the shareholder base, management, 

sector, competitive environment and financial flexibility, giving great consideration to factors 

relating to the group of companies to which the counterparty belongs. 

As part of the Basel 2 project activities, which involve an initial validation on the network banks 

and Centrobanca limited to the “businesses” supervisory portfolio, a series of activities were 

performed designed to bring a new generation of rating and LGD estimation models into operation 

in 2011 for that portfolio. This was also the result of interaction with the Supervisory Authority. 

The main features of this new generation of rating models are as follows: 

• the revision of the credit risk segmentation, which defines which model is applied to each 

counterparty; 

• the development of a new quantitative component, which uses internal models for the 

analysis of the financial component, abandoning the use of a model furnished by an 

external provider; 

• the development of new software engines to integrate the different components of 

quantitative analysis; 

• the development of new qualitative questionnaires; 

• a different procedure for incorporating information on the group of companies to which a 

counterparty belongs within automatic rating models; 

• a different procedure for updating ratings designed to ensure an optimum mix between 

the need to incorporate up-to-date information and maintain a low level of volatility. 

With regard to LGD, the parameters for operational use were updated in December 2010 and a 

supervisory model was developed for parallel running in 2011. 

353

As concerns rating models that are currently operational, the periodic update of PD (probability of 

default) estimates was performed for all models (except for the Major Borrowers model which will 

be abandoned in 2011). 

The processes generated or directly impacted by the introduction of internal credit rating systems 

within the network banks are as follows: 

• identification of a model for the calculation of counterparty credit ratings; 

• assignment of a first loan disbursement rating; 

• assignment of a performance rating: ratings are assigned to all counterparties on the basis 

of operational risk and qualitative and statement of financial position variables where 

present; 

• rating change (override): requests are made by account managers and by central credit 

units of network banks to modify ratings calculated by the system; 

• monitoring of ratings: performance ratings are verified with periodic recalculations after 

the first disbursement; annual verification of ratings: the input data for calculating ratings 

are updated by the staff concerned (e.g. account managers). 

The operational units involved in the loan disbursement and renewal process use internal credit 

ratings, which constitute necessary and essential evaluation factors for credit authorisations 

when these are assessed and revised. Powers to authorise loans are based on the risk profiles of 

the customers or the transactions as given by the credit rating, while they are managed using 

Pratica Elettronica di Fido (electronic credit authorisation) software. The credit ratings are used 

both by the management reporting system and in the information made available to units in 

banks involved in the lending process. 

The assignment to rating classes that are different from those calculated by the internal rating 

system on the basis of the models adopted is made by proposing an override on the rating for 

which the methods of presentation, examination and validation are different for cases of: 

• higher rating override; 

• lower rating override. 

These changes are made on the basis of information not already considered by the rating model, 

not adequately weighted by the model or where it is intended to anticipate the future influence of 

the information. 

In addition to the process for the disbursement, renewal and monitoring of credit and to the 

departmental reporting process just described, the processes directly affected by internal ratings 

or in which internal estimates of PD and LGD are described below. 

The calculation of collective impairment losses on performing loans 

The calculation methodologies used for the calculation of collective impairment losses on 

performing loans in the network banks and at Centrobanca are different from those used by the 

main product companies of the Group. 

More specifically a method is employed for loans (and guarantees) to customers in network banks 

and at Centrobanca based on internal estimates of PD (probability of default) associated with 

internal ratings and estimates of LGD (loss given default). The latter uses operational corrective 

factors with respect to the parameters used for regulatory purposes. It should be noted that the 

percentages of impairment resulting from the application of the PD and LGD are also used for 

354

“irrevocable commitments of uncertain use” to which the supervisory credit conversion coefficient 

is also applied. 

The approach currently used for those product companies most subject to credit risk is that 

based on impairment rates for loans which uses a broader definition of default that includes 

changes of classification from performing to impaired and non-performing classes (B@nca 24/7 

and UBI Leasing) and internal estimates of LGD. As concerns LGD, different internal estimates 

are used at UBI Leasing for different types of product, while expert values are applied at Banca 

24/7. Special “danger rates” need to be applied to render the definitions of default used for 

impairment rates and estimates of LGD consistent. For both UBI Leasing and Banca 24/7, these 

are estimated on internal data and differentiated by product. Further refinements and updates of 

parameters were performed within this methodological framework in 2010. They involved an 

update of the historical data series to estimate them, the inclusion of new types of exposures (in 

the property sector with disbursements when work in progress is at an advanced stage for UBI 

Leasing) and the incorporation of a special treatment which recognises low risk for new 

disbursements following a structural break in lending policies for some of Banca 24/7’s products. 

The calculation of risk adjusted pricing levels 

Expected loss is one of the inputs for the calculation model for theoretical minimum pricing levels 

which guarantee achievement of a return on risk adjusted capital (RORAC). According to the risk 

adjusted pricing policy pursued, theoretical minimum pricing matrices are defined by market and 

segment, product and type of guarantee, rating and maturity. 

Creation of value, capital allocation and incentive schemes 

As part of its capital management processes, the UBI Group applies multi-period methodologies to 

assess risk adjusted performance that are designed to measure and summarise the effects of 

economic, asset, risk and capital variables that impact the creation of wealth for shareholders. 

With regard to the incentive scheme, one of the quantitative objectives of the scheme is the cost of 

credit on loans, which incorporates the collective impairment loss component, calculated using 

measurements of PD and LGD. 

Stress tests 

Stress tests for credit risk are performed in relation to the ICAAP Report, as support in the 

preparation of business plans and in response to specific requests by the Bank of Italy. More 

specifically, stress tests are performed on those exposure classes that can present greater 

variability in the ratio between risk weighted assets (RWA) and the corresponding amount of the 

exposure. 

The scenarios analysed involve an increase in the average ratio between the amount of the 

exposure and RWAs of differing dimensions, estimating the impact on capital ratios. 

The Group intends within the framework of the Basel 2 project to apply for authorisation from the 

supervisory body to use its own internal rating and LGD ratings for the purpose of determining 

minimum supervisory requirements firstly for the “corporate” and then subsequently for “retail 

exposure” supervisory portfolios. The Group pursues the objective of maintaining a level of 

capitalisation that is adequate for the actual risk of its lending portfolio and therefore of using the 

rating and LGD calculation systems which are already used for operating purposes also for 

supervisory purposes. 

355

As recommended by the Bank of Italy circular No. 263/2006, New Supervisory Instructions for 

Banks, the Group currently adopts the standardised approach for the determination of 

supervisory capital. It was decided to make use, for the “businesses and other” supervisory class 

of exposures in particular, of external credit ratings, where available, furnished by the agencies 

Moody’s and Cerved Group (formerly Lince), which are ECAIs (External Credit Assessment 

Institutions) recognised by the Bank of Italy. 

Activity also continued in 2010 to revise, update and adopt policies and regulations for credit risk 

management. 

Existing policies are listed below together with the principal contents. 

Credit Risk Policy 

A project was completed in the first four months of 2010 designed to unify regulations for the 

management of different types of credit risk in a single document, which were previously 

contained in separate policies. This project led in the first four months of 2010 to the approval of 

a “Credit Risk Policy” and the relative regulations to implement it. 

The activity resulted in a common approach to the assumption of risk and procedures to manage 

it and it standardised risk indicators, while taking account of the specifics of each class of risk. 

The policy gives details of limits and it regulates the procedures for assuming risk for the following 

types of risk: 

- credit risk (including counterparty risk): the risk of incurring losses resulting from the 

default of a counterparty with whom a position of credit exposure exists. Credit risk 

can be divided into the following two types: 

- credit risk relating to business with ordinary customers, with a specific focus on: 

− credit risk relating to Centrobanca’s business involving structured finance; 

− credit risk relating to Centrobanca’s private equity business; 

- credit risk relating to business with institutional customers and with ordinary customers 

resident in high risk countries; 

- concentration risk: risk resulting from the existence of large exposures to single 

counterparties (or groups) or resulting from exposures to groups of counterparties 

which operated in the same economic sector or which are located in the same 

geographical area. Concentration risk is divided into two types: 

− 

− 

single name concentration risk; 

sector concentration risk. 

Ordinary customers 

Standards, principles and limits to manage credit risk are set for ordinary customers both at 

consolidated level and for individual legal entities, on the basis of the availability of risk drivers 

generated by the internal rating model (rating class, probability of default and loss given default). 

The definition of the limits is based on a series of indicators expressed in terms of: capital 

allocation, values for maximum risk (i.e. target and maximum expected loss and cost of credit), 

356

limits on the assumption of risks in terms of the distribution of exposures by credit rating class 

and the management of credit quality. 

The Credit Risk Management Service prepares quarterly reports on the indicators set for all the 

Areas concerned and for the governing bodies of the Parent and the individual banks and 

companies in the Group. 

Structured Finance 

A specific focus was placed on structured finance business performed by Centrobanca. 

The term structured finance operations refers to non standard finance operations, formulated on 

the basis of the specific requirements of customers, usually performed for industrial or 

infrastructure investments, or to acquire listed and unlisted companies. It may be promoted by 

institutional investors. 

Specific limits are set for this business which combine the achievement of budget targets 

in terms of volumes disbursed and profitability with appropriate management in terms of 

distribution by rating and transaction classes, concentration for single exposures and 

maximum duration. 

The Centrobanca Credit Monitoring Service introduced a target process for monitoring limits, with 

monthly reporting. 

Private equity 

A specific focus was placed for ordinary customers on private equity business which consists of 

acquiring stakes in a target company either by purchasing existing shares from third parties or by 

subscribing new share issues to bring new capital to the target company. More specifically the 

mission and relative strategies are specified, distinguishing between the acquisition of direct 

interests and the subscription of units in private equity funds formed by entities within the Group 

or outside it. 

Institutional counterparty and country risk 

The policy for institutional and ordinary customers resident in high risk countries sets standards, 

principles and limits designed to ensure proper management of the entire process of the 

assumption, management and monitoring of credit risk in this area. 

Limits are set for maximum exposure to credit risk as follows: 

− 

− 

− 

maximum exposure limits: maximum limits on total authorised credit for the different risk 

classes of the exposures (combinations of counterparty ratings and country ratings) at Group 

and individual company level; 

single name concentration limits: maximum limits on total authorised credit for each 

borrower for the different risk classes (combinations of counterparty ratings and country of 

residence ratings) defined at Group level; 

country concentration limits: maximum limits on total authorised credit for each country 

defined at Group and individual company level. 

357

Concentration risk 

Sector concentration risk is dealt with as part of second pillar risks. The policy sets a specific 

capital requirement to take account of the higher sensitivity of a more concentrated portfolio. 

Single name concentration risk is addressed by setting maximum exposure limits on single 

counterparties in order to limit risks of instability that would arise from high rates of 

concentration for loans to major borrowers if one of these should default. The limits set by the 

policy are based on counterparty ratings and the type of transaction. 

The contents of the policy have been incorporated in a set of regulations approved by the 

Management Board. 

Policy for the distribution of mortgages through brokers 

This policy regulates the procedures for the use of external distribution networks for granting 

mortgages to non captive customers in order to mitigate potential credit, operational and 

reputational risks. 

The policy defines the following: 

− 

− 

− 

minimum capitalisation limits for the brokerage companies and a prohibition on direct 

agreements with mortgage brokers and real estate agents; 

minimum contents for agreements between distribution networks and banks or companies in 

the UBI Group including, for example, the specification of a minimum list of risk indicators to 

be monitored for which there must be a provision in the agreement that requires the network 

to remain within certain limits. Once those limits are exceeded penalties are applied (if 

maximum risk limits are exceeded) or bonuses are paid (if particularly low levels of risk are 

achieved) to the distribution network; 

an obligation by banks entering into agreements to put a process in place to monitor changes 

in the risk indicators just mentioned, with support from the Parent. 

Policy on the portability, renegotiation, substitution and early repayment of the mortgages of direct 

customers of the network banks 

The policy on the portability, renegotiation, substitution and early repayment of mortgages of the 

UBI Group furnishes guidelines for portability (in both directions), the renegotiation (including the 

rescheduling of instalments as regulated by the agreement between the Ministry of the Economy 

and Finance and the Italian Banking Association), the substitution and early repayment (partial 

or total) of mortgages. It is designed (by setting minimum standards of service amongst other 

things) to minimise processing times, conditions and related costs and also to equip the Group 

with appropriate processes and instruments to manage the relative risks (credit, operational and 

reputation). 

The policy also defines objectives for the maximum time limits for responding to customers for 

which a specific monitoring process has been launched. 

358

Policy on the portability, renegotiation, substitution and early repayment of mortgages granted 

through brokers 

As was defined for the mortgages of direct customers of the network banks, the policy on the 

portability, renegotiation, substitution and early repayment of brokered mortgages sets, for this 

specific type of business, maximum time limits for responding to customers for which the 

necessary monitoring process must be put in place. 

Risk-adjusted pricing policy 

The risk-adjusted pricing policy defines a process to formulate and implement risk-adjusted 

pricing approaches for various products which involve the assumption of credit risk. 

The price setting process involves a detailed process of defining and using prices to ensure that: 

− 

− 

the prices approved become the reference used by the Credit Committee of the Parent and 

the loan approval units of the individual banks and they must be given in all loan approval 

proposals; 

appropriate operational and IT procedures are defined to implement the pricing 

framework. 

Policy on risks resulting from securitisations 

The “Policy on risks resulting from securitisations” sets guidelines for the Group to manage risks 

relating to securitisations defined as “the risk that the underlying economic substance of a 

securitisation is not fully reflected in decisions made to measure and manage risk”. This risk 

relates to both conventional and synthetic securitisations originated by the Group which involve 

the transfer, at least partial, of the risk attaching to the securitised assets. 

In order to ensure proper risk management of securitisations, the UBI Group intends to introduce 

an internal approval and monitoring system for new securitisations, which will also ensure that 

the process is monitored by all the appropriate units at the Parent. 

The approval process must involve stating the objective of the transaction, the role played by the 

Group in it and verification that it is fully compliant with the requirements contained in Title II, 

chapter 2, part two, of section two, entitled “Minimum requirements for the transfer of credit risk” 

of Bank of Italy Circular 253 “New regulations for the prudent supervision of banks” of 27 th 


The UBI Group will make sole use when assigning ratings to the bonds and/or the tranches 

issued of agencies recognised by the Bank of Italy (ECAI – External Credit Assessment 

Institution). 

359

Policy on Residual risk 

The “Policy on residual risk” formulates strategic orientations relating to the management of 

“residual risk”, defined as the risk of incurring losses resulting from the unforeseen 

ineffectiveness of established methods of mitigating credit risk used by the UBI Group. 

The policy contains a definition of the process of control over the acquisition and use of 

techniques to reduce credit risk in order to mitigate that risk. 

That process is centred on the definition of appropriate risk management processes designed 

firstly to ensure the verification of compliance with supervisory regulations, distinguishing 

between: 

• “general requirements”, such as “legal certainty”, the “speed of implementation” and 

“organisational requirements”; 

• “specific requirements”, with particular attention to revaluation and monitoring of 

collateral and guarantees and verification of the absence of substantial correlation 

between the ability of the debtor to repay and the collateral. 

1.2.3 Techniques for mitigating credit risk 

The Group employs standard risk mitigation techniques used in the banking sector by acquiring 

security such as properties and financial instruments as well as personal guarantees from 

counterparties for some types of loan. Determination of the total amount of credit that can be 

granted to a given customer and/or group of companies to which the customer belongs takes 

account of special criteria for assigning weightings to the different categories of risk and to 

guarantees. Prudent "haircuts" are applied to the estimated value of collateral depending on the 

type of security. 

The main types of security accepted by the Group are as follows: 

- real estate mortgage 

- pledge. 

In the case of mortgage collateral, a distinction is made between specially regulated “land” 

mortgage loans and ordinary mortgage loans with regard to the amount of the loan, which in the 

former case must comply with limits set in relation to the value or the cost of the assets used as 

collateral. 

Pledges represent the second general class of collateral used and different possible types of pledge 

exist within the Group depending on the instrument which is used as the collateral. They are as 

follows: 

- pledges on dematerialised financial instruments such as for example government 

securities, bonds and shares in listed companies, customer portfolio managements, bonds 

of the Group, etc.; 

- pledges of material securities, e.g. valuables and/or sums deposited on current accounts 

or bearer or named savings accounts, certificates of deposit, units in mutual funds, shares 

and bonds issued by unlisted companies; 

- pledges on insurance policies; 

- pledges of quotas held in limited liability companies, which by law must be formed by a 

notarial deed and are subject to registration. 

360

A pledge on the value of financial instruments is performed using defined measurement criteria 

and special “haircuts” which reflect the variability in the value of the security pledged. In the case 

of financial instruments denominated in foreign currency, the “haircut” applied for the volatility of 

the exchange rate must be added to that for the volatility of the security. 

As concerns pledges on rights arising from insurance policies, these may only be constituted on 

life insurance policies for which the regulations expressly allow the possibility of a pledge in 

favour of the Bank and only if determined conditions are met (e.g. once the time limit for 

exercising redemption rights has expired, policies which pay only in “case of death” must be 

excluded, and so forth). Special measurement criteria and “haircuts” are also defined for 

insurance policies. 

In order to ensure that general and specific requirements are met for recognition of collateral, as 

part of its credit risk mitigation techniques (CRM) (in accordance with Bank of Italy Circular No. 

263 of 27/12/2006 and subsequent updates), for prudent purposes the UBI Group has performed 


- redefined credit processes relating to the acquisition and management of collateral. With 

particular regard to mortgages, in network banks it is compulsory to enter all data on a 

property needed to render collateral eligible in account manager software systems. 

Particular attention was paid to the compulsory nature of expert appraisals and to the 

prompt recovery of the relative information, including notarial information (details of 

registrations), essential for guarantees to be accepted; 

- recovered, for existing mortgages, all the information required to ensure that they are 

admissible, in line with the provisions of Basel 2 in terms of specific requirements. 

Organisational and IT procedures were generally put firmly in place in 2010 for the management 

of collateral, based on set processes to approve, value and monitor them. 

1.2.4 Impaired financial assets 

The classification of the problem loan portfolio complies with official regulations and can be 

summarised as follows: 

• exposures past due and/or continuously in arrears; 

• restructured positions; 

• impaired loans; 

• non-performing loans. 

In addition to those classes, there remains a type of problem loan in respect of “country risk” for 

unsecured exposures to institutional and ordinary customers belonging to countries considered 

as “at risk” as defined by the supervisory authority. With regard to “impaired” loans, in order to 

optimise management and solely for operational purposes, these are divided into positions for 

which it is considered that the temporary situation of objective difficulty can be overcome in a 

very short period of time (normally nine months, extendable, under exceptional circumstances for 

another three) and the remaining positions, for which it is felt best to disengage from the account 

with credit recovery out of court over a longer period of time. Additionally, loans past due and/or 

continuously in arrears are subject to controls to decide, within a maximum operational period of 

60 days, whether to reclassify them as either “performing” or into another non-performing loan 

class. 

361

The management of problem loans is performed on the basis of the level of risk. It is performed by 

the organisational units for the management of problem loans of individual banks for exposures 

past due and/or continuously in arrears, for impaired loans and “restructured loans”. However, 

“non-performing” positions are managed by the Non-Performing Loans Service of the Credit Macro 

Area and Credit Recovery Area of the Parent, where the process of centralising management of 

this was completed. 

Assessment of the appropriateness of impairment losses recognised is performed on a case by 

case basis for individual positions to ensure adequate levels of cover for expected losses. 

The analysis of deteriorated exposures is performed continuously by the single operational units 

which manage risks and by the Parent. 

The resolution of difficulties by counterparties is a determining factor for the return of positions to 

“performing” status. This event occurs principally and above all for accounts which are past due 

and/or continuously in arrears and for impaired accounts. 

Quantitative information 

A. Credit quality 

A.1 Deteriorated and performing credit exposures: amounts, impairment losses, 

changes, economic and geographical distribution 

A.1.1 Distribution of financial assets by portfolio and according to credit quality 

Portfolios/quality 

Nonperforming 

loans 

Impaired 

loans 

Banking group 

Restructured 

exposures 

Past due 

ex posures 

Other companies 

Other assets Dete riorated Ot her 

1. Financial assets held for tradi ng 2.200 8.014 2. 462 5.0 93 2. 535.700 - 175 2. 553.644 

2. Availa ble-f or -sale financial assets - - - - 9. 636.654 - 500 9. 637.154 

3. Held-to-maturity investments - - - - - - - - 

4. Loans to banks 68 - - - 3. 079.096 - 41.188 3. 120.352 

5. Loans to customers 1.938.182 2.031.71 8 828. 492 459.4 80 96. 496.075 3. 258 57.624 101. 814.829 

6. Financial assets at fair value - - - - - - - - 

7. Financial assets held for disposal - - - - - - - - 

8. Hedging deriva tives - - - - 591.127 - - 591.127 

31/12/2010 1.940.450 2.039.732 830.954 464.573 112.338.652 3.258 99.487 117.717.106 

31/12/2009 1.332.217 1.845.860 438.397 916.994 104.231.236 8.627 195.025 108.968.356 

Total 

362

A.1.2 Distribution of credit exposures by portfolio and by credit quality (gross and net 

amounts) 

Por tfolios/quality 

Gross expo sure 

Impaired assets 

Specific 


Ne t exposure 


Othe r asse ts 

Por tfolio 


Net exposure 

Total (net 

exposure) 

A. Banking group 

1. Financial assets held for tradi ng 26.488 (8. 719) 17.769 2.535.704 (4) 2.535.700 2.553.469 

2. Availa ble-f or -sale financial assets - - - 9.636.654 - 9.636.654 9.636.654 

3. Held-to-maturity investments - - - - - - - 

4. Loans to banks 177 (109) 68 3.079.131 (35) 3.079.096 3.079.164 

5. Loans to customers 7. 728.051 (2.470. 179) 5.257.872 97.015.750 (519. 675) 96.496.075 101.753.947 

6. Financial assets at fair value - - - - X - - 

7. Financial assets held for disposal - - - - - - - 

8. Hedging deriva tives - - - 591.127 X 591.127 591.127 

Total A 7.754.716 (2.479.007) 5.275.709 112.858.366 (519.714) 112.338.652 117.614.361 

B. Othe r consolida ted undertakings 

1. Financial assets held for tradi ng - - - 175 X 175 175 

2. Availa ble-f or -sale financial assets - - - 500 - 500 500 

3. Held-to-maturity investments - - - - - - - 

4. Loans to banks - - - 41.188 - 41.188 41.188 

5. Loans to customers 5.423 (2. 165) 3.258 57.770 (146) 57.624 60.882 

6. Financial assets at fair value - - - X X - - 

7. Financial assets held for disposal - - - - - - - 

8. Hedging deriva tives - - - X X - - 

Total B 5.423 (2.165) 3.258 99.633 (146) 99.487 102.745 

31/12/2010 7.760.139 (2.481.172) 5.278.967 112.957.999 (519.860) 112.438.139 117.717.106 

31/12/2009 6.393.267 (1.851.172) 4.542.095 104.915.227 (488.966) 104.426.261 108.968.356 

Details of renegotiated performing financial assets (total for the "Banking Group" and "Other consolidated undertakings") 

Performing 



Portfolio 

impairment 

losses 

Net exposure 

1. Financial assets held for trading - - - 

2. Available-for-sale financial assets - - - 

3. Held-to-maturity investments - - - 

4. Loans to banks - - - 

5. Renegotiated loans to customers 933.180 - 5.482 927.698 

5. Renegotiated loans to customers - Past due from 0 to 90 days 911.222 - 5.052 906.170 

5. Renegotiated loans to customers - Past from 90 to 180 days 21.958 - 430 21.528 

6. Financial assets at fair value - - - 

7. Financial assets held for disposal - - - 

8. Hedging derivatives - - - 

Total (T) 933.180 -5.482 927.698 

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Details of non renegotiated performing financial assets (total for the "Banking Group" and "Other consolidated undertakings" 

Performing 



Portfolio 

impairment 

losses 

Net exposure 

1. Financial assets held for trading 2.535.879 -4 2.535.875 

-Past due from 0 to 90 days 2.521.679 -4 2.521.675 

-Past due from 90 to 180 days 14.200 0 14.200 

2. Available-for-sale financial assets 9.637.154 0 9.637.154 

-Past due from 0 to 90 days 9.637.154 0 9.637.154 

-Past due from 90 to 180 days 0 0 0 

3. Held-to-maturity investments 0 0 0 



4. Loans to banks 3.120.319 -35 3.120.284 

-Past due from 0 to 90 days 3.120.319 -35 3.120.284 


5. Loans to customers 96.140.340 -514.339 95.626.001 

-Past due from 0 to 90 days 95.948.334 -503.904 95.444.430 

-Past due from 90 to 180 days 192.006 -10.435 181.571 

6. Financial assets at fair value - Past due from 0 to 90 days 0 0 0 



7. Financial assets held for disposal - Past due from 0 to 90 days 0 0 0 



8. Hedging derivatives - Past due from 0 to 90 days 591.127 0 591.127 

Total (T) 112.024.819 -514.378 111.510.441 

364

A.1.3 Banking Group - On- and off-statement of financial position credit exposures to 

banks: gross and net amounts 

Type of ex posur e/amounts 

Gro ss ex posur e 

Specific impairment 

losses 

Portfolio 


Net exposure 

A. On- st atement o f fi na nci al posi tio n expo sure 

a) Non per forming loans 177 ( 109) X 68 

b) Impaired loans - - X - 

c) Restructured exposures - - X - 

d) Past due exposures - - X - 

e) Other assets 4.004. 792 X (35) 4. 004.757 

Tot al A 4. 004. 969 (109) (35) 4. 004.825 

B. Off-state ment of financia l position exposures 

a) Deteriorated - - X - 

b) Other 1.072. 691 X (534) 1. 072.157 

Total B 1.072.691 - (534) 1.072.157 

Tot al A+B 5. 077. 660 (109) (569) 5. 076.982 

A.1.4 Banking Group - On-statement of financial position credit exposures to banks: 

changes in gross deteriorated exposures 

Description/categories 

Nonperfo 

rming 

lo ans 

Impaire d lo ans 

Restructured 

exposures 

Past due 

exposures 

A. Initial gross exposure 175 3.764 - 316 

- of which: exposures transferred not derecognised - - - - 

B. Increases 2 - - - 

B.1 trans fers fro m perfo rming expo s ures - - - - 

B.2 transfers from other categories of impaired exposures - - - - 

B.3 other increases 2 - - - 

C. Decreases - (3.764) - (316) 

C.1 trans fers to perfo rming expo s ures - - - - 

C.2 derecognitions - - - - 

C.3 payments received - - - - 

C.4 from disposals - (1.463) - - 

C.5 trans fers to o ther catego ries o f impaired expo s ures - - - - 

C.6 other decreases - (2.301) - (316) 

D. Final gro s s expo s ure 177 - - - 


365

A.1.5 Banking Group - On-statement of financial position credit exposures to banks: 

changes in total net impairment losses 

Description/categories 

Nonperfo 

rming 

lo ans 


Restructured 

exposures 

Past due 

exposures 

A. To tal initial net impairment (107) (3.471) - - 

- o f which: expo s ures trans ferred no t dereco gnis ed - - - - 

B. Increases (4) - - - 

B.1 derecognitions (4) - - - 

B.2 trans fers fro m o ther catego ries o f deterio rated expo s ures - - - - 

B.3 other increases - - - - 

C. Decreases 2 3.471 - - 

C .1 unre a lis e d re ve rs a ls o f im pairm e nt lo s s e s 2 - - - 

C.2 revers als o f impairment lo s s es - - - - 

C.3 impairment losses - - - - 

C.4 transfers to other categories of impaired exposures - - - - 

C.5 other decreases - 3.471 - - 

D. To tal clo s ing net impairment (109) - - - 

- o f which: expo s ures trans ferred no t dereco gnis ed - - - - 

A.1.6 Banking Group - On- and off-statement of financial position credit exposures to 

customers: gross and net amounts 

Type of ex posur e/amounts 

Gro ss ex posur e 

Specific impairment 

losses 

Portfolio 


Net exposure 

A. On- st atement o f fi na nci al posi tio n expo sure 

a) Non per forming loans 4.051. 975 (2.112. 810) X 1. 939.165 

b) Impair ed loans 2.319. 550 (287. 669) X 2. 031.881 

c) Restructured exposures 889. 069 (60. 577) X 828.492 

d) Past due exposures 474. 355 (14. 732) X 459.623 

e) Other assets 1 07.764. 959 X (519.679) 107. 245.280 

Tot al A 115. 499. 908 (2.475.788) ( 519. 679) 112. 504.441 

B. Off-state ment of financia l position exposures 

a) Deteriorated 248. 745 (23. 399) X 225.346 

b) Other 16.371. 430 X (35.726) 16. 335.704 

Tot al B 16. 620. 175 (23.399) (35. 726) 16. 561.050 

Tot al A+B 132. 120. 083 (2.499.187) ( 555. 405) 129. 065.491 

366

A.1.7 Banking Group - On-statement of financial position credit exposures to customers: 

changes in gross deteriorated exposures 

Des criptio n/catego ries 

Nonperfo 

rming 

lo ans 


Restructured 

exposures 

Past due 

exposures 

A. Initial gross exposure 2.751.588 2.201.604 478.861 937.573 

- of which: exposures transferred not derecognised 5.870 29.246 4.177 10.235 

B. Increases 1.855.452 2.484.935 1.046.349 1.808.197 

B.1 transfers from performing exposures 617.319 1.258.197 181.571 1.617.511 

B.2 transfers from other categories of deteriorated exposures 1.113.584 780.327 372.139 30.112 

B.3 other increases 124.549 446.411 492.639 160.574 

C. Decreases (555.065) (2.366.989) (636.141) (2.271.415) 

C.1 transfers to performing exposures (1.606) (294.251) (28.559) (1.228.549) 

C.2 derecognitions (285.856) (82) (1.521) - 

C.3 payments received (227.183) (283.215) (505.297) (53.422) 

C.4 from disposals (29.486) - - - 

C.5 transfers to other categories of impaired exposures (3.013) (1.378.738) (31.858) (882.553) 

C.6 other decreases (7.921) (410.703) (68.906) (106.891) 

D. Final gross exposure 4.051.975 2.319.550 889.069 474.355 


A.1.8 Banking Group - On-statement of financial position credit exposures to customers: 

changes in total net impairment losses 

Des criptio n/catego ries 

Nonperfo 

rming 

lo ans 


Restructured 

exposures 

Past due 

exposures 

A. Total initial net impairment (1.420.141) (362.559) (40.785) (21.748) 


B. Increases (1.159.795) (232.749) (41.096) (11.702) 

B.1 impairment losses (708.256) (167.855) (17.492) (7.561) 

B.2 transfers from other categories of deteriorated exposures (175.644) (6.013) (12.165) (597) 

B.3 other increases (275.895) (58.881) (11.439) (3.544) 

C. Decreases 467.126 307.639 21.304 18.718 

C.1 unrealised reversals of impairment losses 89.298 19.414 896 6.214 

C.2 reversals of impairment losses 74.864 38.973 9.698 2.873 

C.3 derecognitions 285.856 82 1.521 - 

C.4 transfers to other categories of impaired exposures 1.090 184.783 136 8.410 

C.5 other decreases 16.018 64.387 9.053 1.221 

D. Total closing net impairment (2.112.810) (287.669) (60.577) (14.732) 


367

A.2 Classification of exposures on the basis of external and internal ratings 

A.2.1 Banking Group - Distribution of on- and off-statement of financial position exposures by class of external rating 

Exposures External rating classes With no rating Total 

Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 

A. On-statement of financial 

position exposure 2.923.872 7.839.852 1.727.206 4.397.149 3.748.661 3.837.484 92.048.139 116.522.363 

B. Derivatives 769.750 66.114 729 36.238 22.898 15.123 194.416 1.105.268 

B.1 Financial derivatives 769.750 66.114 729 36.238 22.898 15.123 194.416 1.105.268 

B.2 Credit derivatives - - - - - - - - 

C. Guarantees granted 313.674 2.059.948 95.500 198.684 115.614 132.909 3.602.992 6.519.321 

D. Commitments to grant funds 357 458.253 24.964 166.778 244.249 395.954 5.400.885 6.691.440 

Total 4.007.653 10.424.167 1.848.399 4.798.849 4.131.422 4.381.470 101.246.432 130.838.392 

A.2.2 Banking Group - Distribution of on- and off-statement of financial position exposures by class of internal rating 

The classes on the “Master Scale” consist of PD (probability of default) intervals within which PDs corresponding to the single classes of 

the different internal rating models are mapped. The rating classes are presented in decreasing order of creditworthiness: the best 

creditworthiness in rating class 1; the worst creditworthiness in rating class 14. 

The distribution shows the aggregates of exposures, (i.e. net of intercompany eliminations) to the ordinary customers of UBI Banca and 

the network banks of the Group (Banca Popolare di Ancona Spa, Banca Carime Spa, Banca Popolare di Bergamo Spa, Banca Popolare 

Commercio e Industria Spa, Banca di Valle Camonica Spa, UBI Banca Private Investment Spa, Banca Regionale Europea Spa, Banco di 

Brescia Spa, Banco di San Giorgio Spa) to which internal credit ratings have been assigned. 

The management report may be consulted for information on the organic extension of standard and uniform rating systems to other 

companies in the UBI Group 

368

A.3 Distribution of guaranteed/secured credit exposures by type of guarantee 

A.3.1 Banking Group - Secured/guaranteed credit exposures to banks 

369

A.3.2 Banking Group – Guaranteed/secured credit exposures to customers 

370

B. Distribution and concentration of credit exposures 

B.1 Banking group - Distribution by sector of on- and off-statement of financial position exposures to customers 

(carrying amount) 

371

B.2 Banking group – Geographical distribution of on- and off-statement of financial position exposures to 

customers (carrying amount) 

372

B.3 Banking group – Geographical distribution of on- and off-statement of financial position exposures to banks 

(carrying amount) 

B.4 Large exposures 

31/12/2010 

Number of positions 5 

Exposure 22.164.767 

Risk p ositions 1.782.442 

373

C. Securitisation and the transfer of assets 

C.1 Securitisation transactions 


Underlying objectives strategies and processes of securitisations 

The securitisation of loans allows direct access to capital markets with the diversification of 

the sources of finance and the reduction of risk activities for the purposes of solvency 

coefficients without excluding the originator from managing the relationship with the 

customer. 

Law No. 130/99 “Measures on the securitisation of loans” introduced the possibility into the 

national legislation of performing securitisation transactions using specially formed Italian 

registered companies (termed special purpose entities). Five companies in the Group have 

taken advantage of this law for the following securitisations: UBI Finance 2 Srl, UBI Finance 3 

Srl, Lombarda Lease Finance 4 Srl, UBI Lease Finance 5 Srl, Albenza 3 Società per la 

Cartolarizzazione Srl – Orio Finance nr 3 plc, Sintonia Finance Srl and 24-7 Finance Srl. 

On 30 th July 2010, the Lombarda Lease Finance 3 securitisation was closed down in advance 

because the originator (UBI leasing Spa) exercised its option under the contract to repurchase 

all the loans held in portfolio for a total amount of 47.515.716,70 euro and recognised them 

within its asset portfolio. Consequently on receipt of the sales price the special purpose entity 

redeemed all the securities issued. 

* * * 

The UBI Finance 2 Srl transaction (which performs the Banco di Brescia Spa securitisation) 

was concluded in the first few months of 2009. On 13 th January 2009 the contract for the 

transfer of a loan portfolio was signed, which consisted of 2.093.238.616,49 euro of 

performing loans to small-to-medium sized businesses, while the issuance of the relative 

securities, fully subscribed by the originator (Banco di Brescia), was performed on 27 th 

February 2009. 

The main characteristics of the UBI Finance 2 securities issued in 2009 are as follows: 

• class A securities (senior tranches): nominal amount 1.559.500.000,00 euro at 

floating rate, assigned the highest rating by Fitch. These securities have been 

made available to the Parent, UBI Banca, by means of repurchase agreements 

to be used as collateral in refinancing transactions with the ECB or to 

guarantee intraday transactions with the Bank of Italy; 

• class B securities (junior tranches): nominal amount 519.850.000,00 euro with 

no rating and with a yield equal to the additional return on the transaction, 

which allow the originator, Banco di Brescia, to benefit from the excess spread 

on the underlying portfolios. 

In order to comply with new requirements for the eligibility of securitised instruments as 

collateral in refinancing operations with the ECB, in the first quarter of 2011, Moody’s, the 

rating agency, was asked to assign a second rating to the class A securities. The rating 

assigned was Aaa. At present the senior tranche has been assigned the highest ratings by both 

Fitch and Moody’s. 

In the second half of 2010 a new securitisation transaction was initiated by transferring loans 

to small to medium sized enterprises, classified as performing and held by Banca Popolare di 

Bergamo Spa, to the special purpose entity UBI Finance 3 Srl. 

The transaction will be completed in two stages: 

• the transfer of the loans by the originator Banca Popolare di Bergamo to the 

special purpose entity UBI Finance 3 on 6 th December 2010, for an amount of 

approximately 2,8 billion euro; 

• the issue of securities by UBI Finance 3 has not yet taken place. 

374

When the mortgages were transferred, servicing and sub-servicing contracts were signed by 

which UBI Banca as the Parent performs the role of servicer, while the collection of payments 

and managing relations with customers for the securitised assets has been delegated to the 

originator, Banca Popolare di Bergamo, as the sub-servicer (here too, except for those 

positions reclassified as non-performing, which will be handled by the Credit Area of the 

Parent). The consideration due to UBI Banca for that activity (performed only in the month of 

December in 2010) will be paid in 2011 on the first scheduled payment date. 

The Lombarda Lease Finance 4 Srl securitisation was performed by means of a number of 

interconnected contracts, with the following structure: 

• on 11/05/05 a contract was signed for the periodic transfer without recourse by the UBI 

Leasing Spa to Lombarda Lease Finance 4 S.r.l. (LLF4) of loans relating to leasing 

contracts, against payment of the nominal value of the loans transferred by the special 

purpose entity (LLF4). On 19/10/05, UBI Leasing Spa transferred to LLF4, under the 

transfer contract signed, loans relating to lease contracts for an amount equal to the loans 

transferred which had expired; 

• the amount of the loans transferred in the first transfer was 1.100.007.686 euro and the 

amount for the first transfer scheduled under the “revolving” programme was 63.637.298 

euro 

• collection of the repayments was managed by the “originator” as the “servicer” of the 

transaction on specific mandate of the transferee; 

• on 15/06/05 LLF4 issued notes with different redemption characteristics to fund the 

transaction; 

• class A-B-C “senior and mezzanine” notes subscribed by institutional investors; 

• class D “Junior” securities subscribed by the originator. 

The UBI Lease Finance 5 Srl securitisation was performed by means of a number of 

interconnected contracts, with the following structure: 

• on 13/11/08 a contract was signed for the transfer without recourse by UBI Leasing Spa 

to UBI Lease Finance 5 S.r.l. (LF5) of the principal of implicit performing loans recognised 

in the accounts as at 31/10/2008 relating to leasing contracts, against payment of the 

nominal amount of the loans transferred by the special purpose vehicle (LLF5); 

• the amount of the loans transferred was 4.024.051.893,21 euro; 

• collection of the repayments was managed by the “originator” as the “servicer” of the 

transaction on specific mandate of the transferee; 

• on 28/11/09 UBI LLF5 issued notes with differing redemption characteristics; 

• class A-B “senior and junior” notes subscribed by the originator. 

The securitisation Albenza 3 Società per la Cartolarizzazione Srl was performed in 2001 on 

performing loans resulting from mortgages granted to private individuals resident in Italy. The 

transfer contract was structured as follows: 

• the transfer without recourse of the loans to the special purpose entity Albenza 3 Società 

per la Cartolarizzazione Srl, in which 389.532.000 euro is not held by the UBI Banca 

Group; 

• funding of the operation by the issue of a single Albenza 3 Società per la Cartolarizzazione 

Srl note (unrated); 

• the note was purchased by BPB International Finance Plc (liquidated in 2004) and 

securitised, again with the assistance of the Irish registered special purpose entity, Orio 

Finance nr. 3 plc. 

The Orio Finance nr 3 plc securitisation was performed in 2002 on the securities present in 

the BPB International Finance plc portfolio amounting to 390.000.000 euro and on the 

375

Albenza 3 notes already mentioned, together with other MBS securities (Holmes Funding nr 1 

plc; Holmes Funding nr 2 plc). 

The transfer contract was structured as follows: 

• transfer of securities to the special purpose vehicle Orio Finance nr 1 plc, in which the UBI 

Group holds no interest; 

• funding of the operation by the issue of bonds divided into three classes: 

• class A securities (senior securities): floating rate notes equal to the Euribor 

three months + 0,260% for an amount of 427.200.000 euro assigned ratings 

AAA (S&P) and Aaa (Moody’s); 

• class B securities (mezzanine securities): floating rate bonds equal to the 

Euribor three month + 0,70% for an amount of 17.800.000 euro, assigned 

ratings A (S&P) and A2 (Moody’s); 

• class C securities (junior securities): floating rate notes equal to the Euribor 

three month + 1,00% , for an amount of 21.600.000 euro (unrated); 

• the different types were assigned a different degree of subordination in the definition of 

payment priorities for both the interest and principal components. The class C notes were 

recognised within the trading portfolio of UBI Banca Scpa, and were eliminated in the 

consolidation against the junior securities recognised within liabilities in the statement of 

financial position of Orio Finance nr 3 plc. 

The Sintonia Finance s.r.l. securitisation is of the multi-originator type performed on 23 rd 

December 2002 on performing loans, 67% of which were residential mortgages granted to 

private individuals and the remainder were commercial mortgage loans granted to firms 

resident in Italy. 


• the transfer without recourse of loans amounting to 166.313.107 euro to the special 

purpose vehicle Sintonia Finance Srl, in which the UBI Group holds no interest; 

• funding of the transaction by the issue of bonds by Sintonia Finance Srl divided into three 

classes: 

• class A securities (senior securities): floating rate notes equal to the Euribor 

three month + 0,45% for an amount of 302.790.000 euro, assigned ratings AAA 

(S&P) and AAA (Fitch); 

• class B securities (mezzanine securities): floating rate notes equal to the Euribor 

three month + 0,60% for an amount of 21.040.000 thousand euro, assigned 

ratings AA (S&P) and AA (Fitch); 

• class C securities (junior securities): fixed rate 2,00%, notes, for an amount of 

17.383.000 thousand euro 

• the different types were assigned a different degree of subordination in the definition of 

payment priorities for both the interest and principal components. The class C notes were 

all fully subscribed by the two originators, including 7.984.000 euro by Centrobanca, and 

they were eliminated in the consolidated financial statements against the liability 

recognised in the statement of financial position of the special purpose entity. 

The 24-7 Finance Srl securitisation was performed in 2008 on: 

• performing loans resulting from mortgages granted to private individuals resident in Italy, 

secured by a prime grade mortgages on residential properties located in Italy all fully built; 

• performing loans resulting from salary backed loans to private individuals resident in Italy, 

secured by a “deducted for non payment” clause and by a loan loss insurance policy; 

• performing loans resulting from personal loans and dedicated loans to private individuals 

resident in Italy. 


• the transfer without recourse of the loans to the special purpose entity 24/7 Finance Srl in 

which UBI Banca Spa holds a 10% interest; 

• funding of the transaction by the issue of notes divided according to the sub-transaction 

as follows: 

376

• mortgages: 

class A securities (senior securities): floating rate notes equal to the Euribor 

three month + 0.02% for an amount of 2.279.250.000 euro, assigned a rating 

Aaa (Moody’s); 

class D securities (junior securities): notes with a yield equal to the “additional 

return”, for an amount of 225.416.196 euro; 

• salary backed loans: 

class A securities (senior securities): floating rate notes equal to the Euribor 

three months for an amount of 722.450.000 euro assigned a rating Aaa 

(Moody’s); 


return”, for an amount of 113.728.307 euro; 

• consumer loans: 

class A securities (senior securities): floating rate notes equal to the Euribor six 

month + 0.35% for an amount of 2.128.250.000 euro, assigned a rating Aaa 

(Moody’s); 


return”, for an amount of 435.940.122 euro. 

The transactions described above form part of a strategy to expand Group lending, freeing up 

at the same time the part of the supervisory capital relating to the loans transferred. 

The entities of the UBI Banca Group involved in the securitisation transactions and the 

respective roles played are listed below: 

UBI Finance 2 

Originator 

Issuer 

Servicer 

Subservicer 

Collection Account Bank 

Investment Account Bank 

Cash Manager 

Quotaholder 

UBI Finance 3 

Originator 

Issuer 

Servicer 

Subservicer 



Cash Manager 

Quotaholder 

Lombarda Lease Finance 4 

Originator 

Issuer 

Servicer 



Cash Manager 

Quotaholder 

UBI Lease Finance 5 

Originator 

Issuer 

UBI Banco di Brescia Spa 

UBI Finance 2 Srl 

UBI Banca Scpa 

UBI Banco di Brescia Spa 


The Bank of New York Mellon 



UBI Banca Popolare di Bergamo Spa 

UBI Finance 3 Srl 







UBI Leasing Spa 

Lombarda Lease Finance 4 Srl 


UBI Banca International Sa 





UBI Lease Finance 5 Srl 

377

Servicer 


Cash Manager 

Calculation Agent 

Account Bank 

Albenza 3 

Originator 

Issuer 

Servicer 



Orio Finance 3 

Originator 

Issuer 

Servicer 


Cash Manager 

Sintonia Finance 

Originator 

Issuer 

Servicer 



Cash Manager 

24-7 Finance 

Originator 

Issuer 

Servicer 

Quotaholder 


Cash Manager 



Class D Notes Depository 





The Bank of New York Sa Italian Branch 


Albenza 3 Società per la Cartolarizzazione Srl 



Centrobanca Spa 

UBI Banca (ex BPB Inte Fin – Dublino) 

Orio Finance nr 3 plc 

Citibank N.A. 

Citibank N.A. 

Citibank N.A. 

Multioriginator – The originator belonging to the 

UBI Group is Centrobanca S.p.A. 

Sintonia Finance Srl 



Citibank N.A. London Branch 

Citibank N.A. London Branch 

B@nca 24-7 Spa 

24-7 Finance Srl 

B@nca 24-7 Spa 


The Bank of New York 

The Bank of New York - London Branch 

The Bank of New York - London Branch 

The Bank of New York 

Monte Titoli 

Internal risk measurement and monitoring systems connected with securitisation 

transactions including measurement, for those transactions originated by the Group, 

where risks were transferred to third parties. Illustration of the organisational 

structure for managing securitisation transactions including systems for reporting to 

senior management or to a similar body. 

It was decided to outsource corporate servicing to TMF Management Italy Srl for these 

securitisations described above: UBI Finance 2, UBI Finance 3, Lombarda Lease Finance 4 

and UBI Lease Finance 5. A professional firm of consultants was appointed for the remaining 

securitisations with the exception of 24-7 Finance, for which corporate servicing was 

performed by Zenith Service. 

It was decided not to outsource IT and accounting operations related to servicer activities. 

Continuous cash collection activities were performed by the originators making use, amongst 

other things, of the main Group accounting system. This was also useful for reconstructing 

movements in the accounts of the securitisation companies and therefore for providing them 

with the information needed by the corporate servicers for preparing financial statements. 

378

In order to ensure continuity and effectiveness in the performance of their servicer functions, 

appropriate technical and organisational units were created to monitor the various phases of 

the securitisation process. Accounting and reporting systems in particular were designed, 

which took account of the need to be able to reconstruct all transactions at any moment. 

The major part of the management of securitisations is performed by the Finance Function, 

the Management Control Function, the Risks Area and the Mortgage Back Office Function. 

The roles and tasks relating to the performance of the various operational phases of servicing 

and to monitoring performance data were defined in those units. 

A set of reports monitoring each individual securitisation transaction is prepared quarterly for 

senior management, with half year reports for the Boards of Directors and the Boards of 

Statutory Auditors of the various companies involved in the transactions in question. 

In compliance with regulatory guidelines, the Internal Auditing Function performs its activities 

to monitor securitisation operations, with particular reference to servicer activities, for 

compliance with Law No. 130/99, with the company prospectuses and the contracts entered 

into and it reports the results of periodic monitoring half yearly to the Management Board and 

to the Board of Statutory Auditors 

Description of the hedging policies adopted to mitigate risks connected with 

securitisations, including the strategies and processes adopted to continuously 

monitor the effectiveness of these policies. 

All the securitisations are hedged by swap derivative contracts where the main objective is to 

stabilise the flow of interest generated by the securitised portfolios and to protect the special 

purpose entity from interest rate risk. 

Swap contracts were entered into for each securitisation between the respective special 

purpose entities and the respective swap counterparties who, in order to be able to “close” the 

risk with the originators, signed contracts identical in form but opposite in their effects with 

UBI Banca which in turn renegotiated further mirror swaps with the respective originators. 

The only particular case was the Sintonia Finance securitisation, which Centrobanca Spa 

closed directly, without going through the Parent, hedging the risk by means of a swap 

contract. 

379


C.1.1 Exposures resulting from securitisation transactions by quality of the underlying assets 

On-statement of financial position exposure 

Guarantees granted 

Credit lines 

Senior Mezzanine Junior Senior Mezzanine Junior 

Senior Mezzanine Junior 

Quality of underlying assets/Exposures 


Net exposure 


Net exposure 


Net exposure 


Net exposure 


Net exposure 


Net exposure 

Gross exp osure 

Net exposure 


Net exposure 


Net exposure 

A. With own underlying assets: 

a) Deteriorated - - - - - - - - - - - - - - - - - - 

b) Other - - - - - - - - - - - - - - - - - - 

B. With underlying assets of others: 

a) Deteriorated - - - - - - - - - - - - - - - - - - 

b) Other 89.051 89.051 - - - - - - - - - - - - - - - - 


C.1.2 Exposures resulting from the principal “own” securitisation transactions by type of securitised assets and by type of exposure 

No exposures resulting from “own” securitisation transactions exist. 

380

C.1.4 Exposures resulting from the principal “third party” securitisation transactions by type of securitised assets and by type of exposure 

On-statement of financial position exposure Guarantees granted Credit lines 

Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior 

Type of underlying assets/Exposures 


Impairment losses/reversals 

















A.1 CBO INVESTMENT JERSEY LTD 

Securities - - - - - - - - - - - - - - - - - - 

A.2 Cartolarizzazione INPS 19 TV - Società SCCI 89.051 369 

ABS Securities - - - - - - - - - - - - - - - - - - 

A.3 Cartolarizzazione INPS 18 TV - Società SCCI - - - 

ABS Securities - - - - - - - - - - - - - - - - - - 

A.4 Cordusio RMBS Securitisation Srl - - 

RMBS securities - - - - - - - - - - - - - - - - - - 

A.5 Cordusio RMBS 3 UBCasa 1 Srl - - 

RMBS securities - - - - - - - - - - - - - - - - - - 

381

C.1.4 Exposures to securitisations by financial asset portfolio and by type 

Exposure/portfolio Trading At fair value 

Available-forsale 

Held-to-maturity Loans 31/12/2010 31/12/2009 

1. On-statement of financial 

position e xposures - - 89.051 - - 89.051 20 0.722 

- Senior - - 89.051 - - 89.051 20 0.722 

- Mezzanine - - - - - - - 

- Junior - - - - - - - 

2. Off-statement of financial 

position e xposures - - - - - - - 

- Senior - - - - - - - 

- Mezzanine - - - - - - - 

- Junior - - - - - - - 


C.1.5 Total amount of the securitised assets underlying the junior securities or other forms of 

lending support 

No securitised assets underlying the junior securities or other forms of lending support exist. 


C.1.6 Interests in special purpose entities 

Name Registered address % interest 

Lombarda Lease Finance 4 Srl Via XX Settembre, 8 - Brescia 10 % 

UBI Lease Finance 5 Srl Via Foro Bonaparte, 70 - Milano 10% 

24-7 F inance Srl Via XX Settembre, 8 - Brescia 10 % 

UBI Finance Srl Via Foro Bonaparte, 7 0 - Milano 60 % 

UBI Finance 2 Srl Via XX Settembre, 8 - Brescia 10 % 

UBI Finance 3 Srl Via XX Settembre, 8 - Brescia 10 % 

382

C.1.7 Servicer activity – payments received on securitised loans and redemptions of securities issued by the special purpose entity 

Securitised assets 

(end of pe riod figure) 

Percentage of securities redeemed (the end of period figure) 

Servicer Special purpose entity Senior Mezzanine Junior 

Impaire d 

assets 

Performing 

as sets 

Payments received on 

loans during ye ar 

UBI Banca Scpa Albenza 3 Società per la cartolarizzazione Srl 1.147 36.294 147 16.729 - - - - - - 

UBI Banca Scpa UBI Finance 2 Srl (1) - - - - - - - - - - 

UBI Banca Scpa UBI Finance 3 Srl (1) - - - - - - - - - - 

Centrobanca Spa Sintonia Finance Srl 3.827 20.066 342 6.838 - - - - - - 

UBI Leasing Spa Lombarda Lease Finance 3 Srl - - 2.790 61.493 - - - - - - 

UBI Leasing Spa Lombarda Lease Finance 4 Srl 23.036 216.179 4.534 129.397 - - - - - - 

UBI Leasing Spa UBI Lease Finance 5 Srl 56.162 2.393.846 1.843 763.852 - - - - - - 

B@nca 24/7 Spa 24-7 Finance Srl (1) - - - - - - - - - - 

Impaired 

ass ets 

Performing 

assets 

Impaired 

assets 

Performing 

assets 

Impaired 

assets 

Performing 

assets 

Impaired 

assets 

Performing 

ass ets 

(1) These transactions are not reported in detail in these notes to the financial statements in view of the repurchase by the originator of all the 

liabilities issued by the special purpose entity. 

C.1.8 Special purpose entities belonging to the banking group 

No special purpose entities belonging to the banking group existed. 

383

C.2 Transfers 

C.2.1 Financial assets transferred not derecognised 


Key: 

A = Financial assets transferred and fully recognised (carrying amount) 

B = Financial assets transferred and partially recognised (carrying amount) 

C = Financial assets transferred and partially recognised (entire amount) 

384

C.2.2 Financial liabilities resulting from financial assets transferred not derecognised 

Total 

Financial assets held 

for trading 

F inancial assets 

at fair value 

Availab le-for-sale 

financ ial as sets 

Held-to-maturity 

investments 

Loans to banks 

Loans to 

customers 

31/12/2010 31/12/2009 

A. Due to customers 1.756.274 - 6.536.815 - - - 8.293.089 2.181.795 

1. from assets fully recognised 1.756.274 - 6.536.815 - - - 8.293.089 2.181.795 

2. from assets partially recognised - - - - - - - - 

B. Due to banks 19.232 - 101.949 - - - 121.181 1.068.066 

1. from assets fully recognised 19.232 - 101.949 - - - 121.181 1.068.066 

2. from assets partially recognised - - - - - - - - 

31/12/2010 1.775.506 - 6.638.764 - - - 8.414.270 

of which deteriorated 

31/12/2009 307.150 - 2.942.711 - - - - 3.249.861 

of which deteriorated 

385

C.3 Banking Group – Covered bond operations 

Objectives 

In 2008 the Management Board of UBI Banca Scpa passed a resolution to proceed to implement a 

structured programme for the issue of covered bonds designed to produce benefits in terms of 

funding while containing the cost at the same time. 

In detail, the Management Board performed the following: 

• it identified the objectives of the programme; 

• it identified the basic structure of an operation to issue covered bonds in the light of the 

legislation and explained and examined the main elements, including the portfolio of loans, the 

criteria for selecting them, the structure of the financial transaction and the relative tests; 

• it assessed and approved the impacts and the organisational, IT and accounting changes that 

would be required. These changes were performed to ensure proper risk management by the 

Parent and also by the single banks participating. Account was also taken, in drawing up the 

procedures, of the requirements set by regulations issued by the Bank of Italy; 

• it assessed the risks connected with the operation to issue covered bonds; 

• it assessed the organisational and operating structure of the special purpose entity concerned 

in order to ensure that the contracts involved in the operation contained clauses that would 

guarantee the proper and efficient performance of the functions of the special purpose entity 

itself; 

• it assessed the legal aspects through an in-depth examination of the parties and contract 

documents used, with particular attention paid to the nature of the guarantees given by the 

special purpose entity and the relations between the issuing bank, the originator banks and the 

special purpose entity. 

The structure 

The basic structure of the operation to issue covered bonds involved the performance of the following 

activities: 

• one bank (the originator) transfers a set of assets with determined characteristics to a special 

purpose entity to form a separate set of assets termed a “cover pool”; 

• the originator bank (acting here as a financing bank) grants a subordinated loan to the special 

purpose entity designed to fund the purchase of the assets by the entity; 

• the bank (the issuing bank) issues covered bonds backed by a primary, unconditional and 

irrevocable guarantee given by the special purpose entity to the sole benefit of the holders of the 

covered bonds and the hedging counterparties involved in the transaction. The guarantee is 

backed by all the assets transferred to the special purpose entity and which form part of the 

cover pool. 

As part of the structure described above, the UBI Banca Group has launched a programme for issues 

of ten billion euro of covered bonds. The structure that was adopted also allows the transfer of the 

portfolios which constitute the segregated assets of the special purpose entity from more than one 

originator bank, which are not issuer banks. 

To achieve this, a special purpose entity, UBI Finance Srl was formed, which as the guarantor of the 

issue performed by UBI Banca acquired a portfolio of residential mortgages transferred to it from 

network banks of the Group, which participated in the programme both as originator banks and as 

financing banks. 

The roles of master servicer, calculation agent and cash manager of the transaction were performed 

by the Parent, while that of paying agent was performed by Bank of New York (Luxembourg) Sa. The 

representative of the bondholders is BNY Corporate Trustee Services Limited. 

UBI Banca then delegated responsibility for servicing activity, consisting of collecting payments and 

managing relations with customers for the portfolio transferred by each originator, to the originator 

banks as sub-servicers. The originator banks also perform the role of swap counterparties in the 

“balance guarantee swaps” stipulated with the special purpose entity in order to normalise the cash 

flows generated by the mortgage portfolio. 

386

A summary of the main features of the structure of UBI Banca’s covered bond programme is given 

below. 

Asset 

Monitor 

Loan granted 

Interest on loan 

Annual Coupon (fixed) 

Covered Bond 

Funding from Covered 

Bond Issue 

Covered Bond Investors 

Guarantee 

Interest on subordinated loan 

Sellers 

Euribor + spread 

Asset swaps 

UBI Finance SRL 

Euribor + floating spread 

LIABILITY SWAPS 

Interest on cover pool 

Coupon (fixed) 

Subordinated Loan Granted 

Mortgage Cover Pool 

a) Covered Bonds. UBI Banca Scpa issues covered bonds under the programme. 

b) Bond Loan. In order to allow the funding acquired on institutional markets from the issue of 

covered bonds to flow back to the originator banks, these banks may issue bonds and the right to 

require subscription of them by UBI Banca, within the limits of their quota of participation in the 

programme. These bonds shall have the same maturity as the covered bonds and a yield equal to (or 

slightly higher than) that of the covered bonds. 

C) Subordinated Loans. In order to fund the purchase of mortgages by the special purpose entity, the 

originator banks grant subordinated loans to it. The yield on these loans is calculated as a “premium” 

or “extra spread” equal to the amount of the interest received, which remains in the accounts of the 

special purpose entities once priority amounts in the chain of payments have been deducted, relating 

to items such as the expenses incurred by the entity, payments to swap counterparties and 

allocations to “reserve accounts”. 

D) Swaps to hedge interest rate risk. If the covered bonds are issued at a fixed rate, UBI Banca hedges 

the interest rate risk by entering into swap contracts with market counterparties, thereby 

transforming the exposure to a variable rate. These swaps lie outside the perimeter of the covered 

bond programme and are entered into with a view to interest rate risk management as part of the 

Parent’s ALM. 

E) Asset swaps. Asset swap contracts are entered into between the originator banks and the special 

purpose entity to normalise the cash flows consisting of the interest instalments on the portfolios 

transferred. Each of these swaps has an initial notional value equal to the value of the portfolios 

transferred to UBI Finance by each originator. These notional amount are then adjusted monthly on 

the basis of the contraction of the portfolio and increases due to the addition of new mortgages. The 

duration of the swaps are related to the maturities of the mortgages in each portfolio transferred. 

Since the individual originator banks are not assigned ratings themselves and as a consequence 

would not comply as swap counterparties with the criteria set by the rating agencies to rate the 

programme, UBI Banca will back the payments between the originator banks and UBI Finance by 

signing a guarantee. 

387

The swap contracts involve the monthly flow back to the originator banks of the interest received on 

the loans present in each portfolio (net of the expenses of the special purpose entity and of provisions 

in its accounts as indicated in the chain of payments) against the payment of a sum equal to the 

notional return indicated at the Euribor rate plus a spread. 

F) Liability swaps. Liability swap contracts are entered into for each variable rate or public issue of a 

series of covered bonds between UBI Banca and UBI Finance. They are designed to protect against 

interest rate, currency and/or other risks which might affect the cash flows received from the special 

purpose entity (including those from the asset swaps) and the amounts due from the special purpose 

entity to investors (fixed rate coupons on the covered bonds) in the event of default by UBI Banca. 

The structure of the liability swaps only requires the exchange of cash flows between UBI Banca and 

the special purpose entity in the event of default by UBI Banca or when UBI Banca assigns a swap 

contract to another eligible counterparty (if UBI Banca is downgraded below an F-2 and P-2 rating). 

Both the asset and the liability swaps are structured in a manner to comply with all the conditions 

required by the rating agencies and they incorporate all the standard provisions required by the 

market for a downgrade. 

G) Current accounts. The operation involves a complex system of current accounts to pay and receive 

the cash flows involved in the operation. A series of accounts were opened in the name of the special 

purpose entity for each originator bank as follows: 

• collection account at UBI Banca Scpa linked to each originator bank into which sums received 

are paid consisting of interest and principal on the portfolios of each originator, and, where 

applicable, other assets transferred to the special purpose entity under the programme (e.g. 

eligible assets and top-up assets); 

• interest account at UBI Banca International Sa linked to each originator bank into which all 

interest paid into the collections accounts will be paid on a daily basis and also all amounts 

paid to the special purpose entity by the counterparties of the swap contracts. 

• principal account at UBI Banca International Sa linked to each originator bank, into which all 

the principal repayment amounts paid into the collection account will be paid on a daily basis; 

• expense account, into which the amounts required to meet the expenses of the special 

purposes entity will be paid, drawn from interest accounts, in proportion to the quota of 

participation in the programme of each originator bank; 

• reserve fund account, into which interest accruing on the covered bonds is paid monthly in 

order to guarantee the payment of current coupons. 

Effectiveness tests 

Effectiveness tests are performed monthly on the whole cover pool and separately on the portfolios 

transferred by each originator, in order to determine the financial integrity of each bank’s portfolio. 

As required by the regulations, because it is a multioriginator programme, with cross-collateralisation 

of the originator banks’ portfolios, the only valid test for investors is that performed on the whole 

cover pool, while the tests performed on the individual portfolios are used to determine the integrity 

of each originator’s portfolio for the purposes of cross-collateralisation between the different 

originator banks. 

In detail: 

• the nominal value test verifies whether the nominal value of the loans in the transferred 

portfolio is greater than the nominal value of the covered bonds issued. In order to ensure an 

adequate degree of over collateralisation in the portfolio, while the covered bonds are 

considered at their nominal value, the loans in the portfolio are weighted on the basis of the 

relative collateral backing them and the total amount is further reduced by an asset 

percentage; 

• the net present value test verifies whether the present value of the loans remaining in the 

portfolio is greater than the present value of the covered bonds issued; 

388

• the interest cover test verifies whether the interest received and held in accounts and the cash 

flows from interest to be received net of the entity’s expense is greater than the interest to be 

paid to the holders of the covered bonds; 

• amortisation test (similar to the nominal value test, but only performed if UBI Banca is 

downgraded by rating agencies); 

• the top-up assets test verifies whether, before UBI Banca defaults, the total amount of 

additional assets and liquidity is not 15% greater than the nominal value of the loans 

remaining in the portfolio transferred, in compliance with the Ministry of the Economy and 

Finance and Bank of Italy instructions. 

If all the tests are passed simultaneously, then the special purpose entity may proceed to pay all the 

parties involved in the programme, including the originator banks as the lenders of the subordinated 

loan, in the order indicated in the “payment chain”. 

However, if the results of the tests are negative, then the contract states that the UBI Banca Group 

must increase the collateral of the portfolio by transferring new mortgages to it and that is “top up” 

with extra assets. Failure to pass the tests, once the time limit allowed for the Group to add assets 

has passed, results in an “issuer event of default” with a consequent enforcement of the guarantee 

issued by UBI Finance. In this event the originator banks would only receive the repayments of the 

subordinated loans granted after the redemption of the covered bonds by the special purpose entity 

and within the limits of the remaining funds. 

Organisational action and control procedures 

As part of an organisational analysis process, four general processes were identified to which the 

main activities of the programme were assigned. In detail: 

1. identification of the liquidity requirements and approval of the operation by the competent 

bodies: this general process involves assessment of proposals for the issue of covered 

bonds by the Finance Committee of UBI Banca and approval of the basic outline by the 

Management Board. Subsequently the network banks involved are informed, which assess 

the proposals and their involvement in the issues on the basis of the information received. 

In this context an “arranger” is identified who will supervise the operation and the internal 

organisational units involved are also brought in; 

2. planning and arrangement of the transaction: this general process involves verifying the 

criteria for extracting and validating the assets which form part of the portfolio which is to 

cover the issue. It interfaces with the rating agencies and external auditors and 

preparatory work is done for proper segregation of the asset portfolio and for transfer to 

the special purpose entity and all the relative contracts are prepared by internal units of 

the bank and external advisors; 

3. management of the operations: this general process involves opening current accounts for 

the operations of the special purpose entity, granting the subordinated loan, writing 

derivatives contracts between the network banks and the special purpose entity, once the 

“chain of payments” has been determined, performing tests on the effectiveness of the 

portfolio and identifying the mortgage loans to top-up the cover pool which backs the 

covered bonds issued. These activities are performed on a continuous basis; 

4. regulatory controls: this general process involves putting internal and external controls 

required by regulations in place to: analyse and monitor obligations to ensure the quality 

and integrity of the assets transferred to back the portfolio; to define effectiveness tests 

and to produce summary reports; to verify compliance with limits set on the transfer of 

eligible assets; to verify cover for financial risks; to verify compliance by the special 

purpose entities with the obligations resulting from the guarantee given; to verify the 

contract documents employed; and to verify the completeness of the controls to be 

performed by the Parent. External controls are also put in place to ensure compliance of 

the measurement criteria applied by the bank with those required for the preparation of 

annual financial statements and also to guarantee the proper performance of the 

transaction and the validity of the guarantee given to back redemption of the covered 

bonds. 

389

The UBI Banca ten billion euro covered bond programme 

In the context of the organisational structure just described, the Bank commenced a ten billion euro 

programme for the issue of covered bonds with the first transfers of mortgages performed by two 

banks in the Group, Banco di Brescia and Banca Regionale Europea, in July 2008 for a total amount, 

as at that time, of approximately two billion euro. 

The Bank performed its first public issue of covered bonds for one billion euro in September 2009 

with the assistance of Barclays Capital as the arranger. 

Banca Popolare di Bergamo also joined the programme at the end of 2009, by transferring a part of 

its mortgage portfolio to back the second public issue, again for one billion euro, performed in 

December 2009, again with the assistance of Barclays Capital as the arranger. 

Details of the two issues are given below. 

Name Issue date Maturity date Nominal amount Coupon 

UBI BANCA 3,625% CB due 23.09.2016 23.09.2009 23.09.2016 1.000.000.000,00 36.250.000,00 


Both the issues were assigned an AAA/Aaa rating by Fitch and Moody’s. 

After a framework agreement between the EIB (European Investment Bank) and the UBI Group for 

the grant of medium-to-long term loans to corporate clients was signed on 30 th April 2010, the Bank 

issued privately placed bonds fully subscribed by the EIB. 

Details of the issue are given below. 

Name Issue date Maturity date Nominal amount Coupon (1) 

UBI BANCA TV CB due 30.04.2022 30.04.2010 30.04.2022 250.000.000,00 2.271.200,00 

(1) The coupon is six monthly, floating rate. The amount indicated refers to the coupon maturing in the first half of 2011. 

Also the BPCI, CARIME, BVC and UBI PI portfolios relate to only one quarter only, having been transferred on 

01.10.2010. The BPA and BSG portfolios relate to eight months, having been transferred on 01.05.2010. 

In May 2010 Banco di San Giorgio and Banca Popolare di Ancona also joined the covered bond 

programme, with the transfer of assets in the third transfer operation in which those originator banks 

already participating in the programme were also involved. Total assets of 2,7 billion euro were 

transferred with that operation performed on 1 st May 2010. 

A fourth public issuance took place on 15 th September 2010 for a further one billion euro, details of 

which are given below. 



Full participation in the programme by the network banks was completed in the last quarter of 2010 

when the following banks joined the programme with the transfer of mortgages for a total amount of 

2,4 billion euro on 1 st October 2010: Banca Popolare Commercio ed Industria, Banca Carime, Banca 

di Valle Camonica and UBI Banca Lombarda Private Investment. 

A further public issue took place in October for 500.000.000 euro, with a fifteen year maturity, 

details of which are given below. 


UBI BANCA 3,125% CB due 18.10.2015 18.10.2010 18.10.2015 500.000.000,00 15.625.000,00 

Consequently the following banks formed part of the programme as at 31 st December 2010: Banco di 

Brescia, Banca Regionale Europea, Banca Popolare di Bergamo, Banca Popolare di Ancona, Banco di 

390

San Giorgio, Banca Popolare Commercio & Industria, Banca Carime, Banca di Valle Camonica and 

UBI Banca Lombarda Private Investment. 

The cover pool for the issues, which for accounting purposes is recognised within the assets of each 

originator bank, consisted of more than 31 billion euro of remaining principal debt as at 31 st 


The table below gives the distribution of the portfolio (remaining principal debt) for each originator 

bank and the total by class of credit quality as at 31.12.2010. 

originated 

by Banca 

Regionale 

Europea 

originated 

by 

Banco di 

Brescia 

originated 

by 

Banca 

Popolare di 

Bergamo 

originated 

by 


Popolare di 

Ancona 

originated 

by 

Banco di 

San 

Giorgio 

originated 

by 


Popolare 

Commercio 

& 

Industria 

originated 

by 


Carime 

originated 

by 

Banca di 

Valle 

Camonica 

originated by 

UBI Banca 

Private 

Investment 

Total 

Type of loan portfolio 

(Remaining principal debt – figures in thousands of euro) 

Performing 

loans 6.979.152 692.768 1.557.899 1.744.256 557.254 256.096 1.241.366 626.354 184.517 118.641 

Delinquent 

loans 712.481 64.211 255.359 114.360 49.067 50.418 87.921 43.443 31.436 16.267 

Portfolio 

Collateral (1 + 

2) 7.691.633 756.979 1.813.258 1.858.616 606.321 306.514 1.329.287 669.797 215.953 134.908 

Defaulted 

loans 46.907 7.002 16.621 12.308 3.989 2.295 3.230 403 785 274 

Total UBI 

Finance 

portfolio 7.738.540 763.981 1.829.879 1.870.924 610.310 308.809 1.332.517 670.200 216.738 135.182 

In 2010 this portfolio generated total payments received of approximately 1,2 billion euro, distributed 

as follows among the portfolios of the different originators: 

originated 

by 


Regionale 

Europea 

originated 

by 

Banco di 

Brescia 

originated 

by 


Popolare di 

Bergamo 

originated 

by 


Popolare di 

Ancona 

originated 

by 

Banco di 

San 

Giorgio 

originated 

by 


Popolare 

Commercio 

& 

Industria 

originated 

by 


Carime 

originated 

by 

Banca di 

Valle 

Camonica 

originated 

by 

UBI Banca 

Private 

Investment 

Total 

Type of loan portfolio 


Payments 

received in 

2010 (*) 1.167.373 201.319 487.431 278.835 78.817 35.340 63.491 12.337 8.493 1.310 

(*) the BPCI, CARIME, BVC and UBI PI portfolios relate to only one quarter only, having been transferred on 01.10.2010. The 

BPA and BSG portfolios relate to eight months, having been transferred on 01.05.2010. 

The originator banks receive payment for their subservicing activities on the basis of the size of the 

portfolio managed and the payments collected. In 2010 this payment amounted to approximately 700 

thousand euro for Banco di Brescia, approximately 300 thousand euro for Banca Regionale Europea 

and approximately 680 thousand euro for Banca Popolare di Bergamo. The payments amounted to 

151 thousand and 76 thousand euro respectively for Banca Popolare di Ancona and Banco di San 

Giorgio, which commenced servicing activities in May 2010, while for the banks which transferred 

portfolios in the fourth quarter, the relative payments were as follows: 92 thousand euro for Banca 

Popolare Commercio ed Industria, 46 thousand euro for Banca Carime, 15 thousand euro for Banca 

di Valle Camonica and nine thousand euro for UBI Banca Lombarda Private Investment. 

UBI Banca received total consideration of approximately 385 thousand euro in 2010 for servicing 

activity it performed as the Parent. 

To complete the information, in January and February 2011 two more public issuances of covered 

bonds took place for a total of 1,75 billion euro, details of which are given below. 



UBI BANCA 4,500% CB due 22.02.2016 22.02.2011 22.02.2016 750.000.000,00 33.750.000,00 

391

D. Banking group - Models for the measurement of credit risk 

With regard to the measurement of credit risk, the Group has developed a portfolio credit risk model 

using the Algorithmics PCRE calculation engine. The model, which includes PD and LGD used for 

supervisory purposes among its input variables, considers the total risk for a loan portfolio by 

modelling and capturing the component resulting from the correlation of counterparty defaults, 

calculating credit losses and the capital at credit risk at portfolio level. This involves the use of a 

complex method for measuring the total risk of the entire portfolio, designed to capture mutually 

dependent phenomena in changes in counterparty creditworthiness and to determine the distribution 

of total losses for the whole portfolio as the basis for calculating risk 

Calculation of the correlation between defaults therefore makes it possible to establish the 

concentration of risk within a portfolio, which can be used as a basis both for managing and 

mitigating total risk by employing an appropriate diversification strategy and also for implementing 

efficient pricing policies The model proposed uses an approach similar to that of the Merton model 

(1974). Counterparty creditworthiness is given by an intermediate variable, the Credit Worthiness 

Index (affected by two components: a system and a specific component). The future level of this 

variable determines creditworthiness on the basis of specially calculated thresholds and therefore 

also any corresponding losses. 

The analysis of changes in counterparty creditworthiness can be performed over a time period of 

longer than one year with intermediate steps. 

392

2. BANKING GROUP - MARKET RISK 

2.1 Interest rate risk and price risk – supervisory trading portfolio 


A. General aspects 

The considerations that follow relate exclusively to the “trading book”, as defined by supervisory 

regulations. Transactions relating to operations designed to affect sensitivity at Group level and 

equity investments in other companies classified as for trading according to IAS are excluded. 

Management of Group financial risk is centred in general in the Parent and is performed by the 

Finance Area. Exception is made for the portfolio for which management has been delegated to UBI 

Pramerica SGR by the Parent and for portfolios managed directly by Centrobanca, IW Bank, BDG and 

UBI Banca International. 

The risks assumed by the Group in relation to the trading book are as follows: 

• interest rate risk, 

• inflation risk, 

• currency risk, 

• equity risk, 

• volatility risk, 

• credit spread risk, 

• commodities risk. 

The assumption of risks other than those listed above must be approved by the Supervisory Board. 

Price risk is the risk of changes in price as a function of fluctuations in market variables and specific 

factors relating to issuers or counterparties. 

B. Processes for the management and methods of measurement of interest rate risk and price 

risk 

The guidelines for the assumption and monitoring of financial risk in the UBI Banca Group are 

defined in the financial risks regulations and policies of the UBI Banca Group with particular 

reference to market risk on the trading book and to interest rate, currency and liquidity risks on the 

banking book. 

Within the trading book, the monitoring of the consistency of the risk profiles of Group portfolios with 

respect to risk/return objectives is based on a system of limits, which involves the combined use of 

various indicators. The following are defined for each portfolio of the Group: 

• mission, 

• maximum loss limit, 

• VaR limit, 

• type of financial instruments permitted, 

• possible limits on composition. 

393

The main operational limits for the trading book of the UBI Group for 2010, including the 

reallocations and the new limits defined in the second half of the year, are given below. 

• Maximum loss for the UBI Group trading book 

• One day VaR limit for the UBI Group trading book 

• early warning levels on maximum cumulative loss (MCL) 

• early warning levels on VaR 

119,67 million euro 


70% MCL 

80% VaR 

Measurement of risk for individual portfolios and/or globally for the trading book is integrated with 

stress testing and backtesting. Observance of the limits set for each portfolio is monitored daily. 

The summary measurement used to assess the exposure of the Bank to interest rate, exchange rate, 

equity, credit spread, commodities and volatility risks is that of the value at risk It is a statistical 

measurement used to estimate the loss that might occur following adverse changes in risk factors. 

The VaR of the UBI Banca Group is measured using a confidence interval of 99% and a holding 

period of one day. This value is defined in terms of limits consistent with the time horizon for the 

possible disinvestment of the portfolios. The VaR gives the “threshold” of the daily loss which, on the 

basis of probability hypotheses could only be exceeded in 1% of cases. 

The method used for calculating VaR is that of historical simulation. With this approach the portfolio 

is revalued by applying all the changes in risk factors recorded in the two previous years (500 

observations). The values thus obtained are compared with the present value of the portfolio to give a 

hypothetical series of gains or losses. The VaR corresponds to the sixth worst result (confidence 

interval of 99%) of those obtained. 

The Group employs a stress testing programme to identify events or factors which could have a 

significant effect on positions to supplement the risk indicators obtained from the use of VaR. 

Stress tests are by nature both quantitative and qualitative and they consider not just market risks 

but also the effects on liquidity generated by market turbulence. They are based on both specially 

created theoretical shocks and market shocks actually observed in a predetermined historical period. 

The predictive power of the model adopted for risk measurement is currently monitored using daily 

backtesting analysis, which uses an actual P&L calculated by the front office systems of the Group. 

This retrospective test considers changes in the value of the portfolio resulting from the front office 

systems of the Group, determined on day t with respect to positions present at t-1. The actual P&L is 

generated from all the transactions opposite in sign to the initial position for a total amount less than 

or equal to the total of the position t-1 without considering transactions of the same sign as the initial 

position that may have arisen during the day. 

The risk of losses caused by unfavourable changes in the price of traded financial instruments due to 

factors related to the issuer can be the result of daily trading activity (idiosyncratic risk) or of a 

sudden change in price with respect to general market trends (event risk, such as the risk of default 

by the issuer caused by a change in the market’s expectation that an issuer itself will default). 

The UBI model for managing specific risk for debt securities is capable of detecting the first of the two 

components (idiosyncratic risk) because it considers spread curves by economic sector and rating 

class as risk factors. Total risk on equity instruments (and OICR – collective investment instruments) 

is measured by considering single shares as risk factors and it includes both the generic risk 

394

component (i.e. the risk of losses caused by unfavourable trends in the prices of the financial 

instruments traded in general) and a specific component relating to the situation of the issuer. 

As concerns hedge funds, the system of limits on investments and the method of calculating financial 

risks are contained in the financial risks regulations of the UBI Group. 

More specifically, qualitative and quantitative limits are defined to guarantee an adequate degree of 

diversification and liquidity, to set the maximum acceptable loss and to measure the risk profile 

implicit in the portfolio (maximum capital, limits on the composition of the portfolio, liquidity of 

funds, VaR, maximum cumulative loss). 

The VaR on hedge funds is calculated using a “style analysis” method with a confidence interval of 

99% and a holding period of two months (consistent with the average time required to liquidate the 

investment). “Style analysis” is the sensitivity of the returns on a single fund to a limited set of 

market factors, consisting of the performances of the indices of CSFB Tremont funds in relation to 

different strategies for managing hedge funds. A systematic VaR is calculated for each fund which 

identifies the risk component given by the combination of market factors, which is therefore 

diversifiable, and a specific VaR (idiosyncratic), linked to the behaviour of the fund manager. Total 

VaR is given by the combination of systematic VaR and specific VaR, assuming non correlation 

between the two. 

In 2010 the Group continued the process of disinvestment in the hedge funds present in its portfolio. 

At the end of December 2010, the method for calculating VaR was applied to funds amounting to 

approximately 149 million euro (182,4 million euro at the end of December 2009). The VaR used was 

approximately 7,71 million euro (against a limit of eight million euro). The investments were 

denominated exclusively in euro (86% of NAV) and in USD (14% of NAV). 


1. Supervisory trading portfolio: distribution by residual life (repricing date) of the onstatement 

of financial position financial assets and liabilities and financial derivatives 

See the subsequent sub-section which contains an analysis of sensitivity to interest rate risk 

2. Supervisory trading portfolio: distribution of exposures in equities and share indices by the 

principal markets in which they are listed 

3. Supervisory trading portfolio: internal models and other methods of sensitivity analysis 

The graph below shows the changes in daily VaR that occurred in 2010 for the trading portfolios of 

the UBI Banca Group. 

395

Change in market risk: daily market VaR for the UBI Group in 2010 

5,000,000 

4,000,000 

3,000,000 

2,000,000 

1,000,000 

‐ 

04/01/2010 

19/01/2010 

03/02/2010 

18/02/2010 

05/03/2010 

20/03/2010 

04/04/2010 

19/04/2010 

04/05/2010 

19/05/2010 

03/06/2010 

18/06/2010 

03/07/2010 

18/07/2010 

02/08/2010 

17/08/2010 

01/09/2010 

16/09/2010 

01/10/2010 

16/10/2010 

31/10/2010 

15/11/2010 

30/11/2010 

15/12/2010 

30/12/2010 

396

VaR by risk factor calculated on the entire trading book of the UBI Group as at 31 st December. is 

given below. 

Trading book 

Group UBI* 

31/12/2010 average minimum maximum 

Currency risk 152.787 223.067 37.634 563.856 

Interest rate risk 2.862.653 2.207.594 335.432 3.590.279 

Equity risk 1.415.603 1.597.005 783.380 3.115.727 

Credit risk 101.959 166.126 86.810 252.781 

Volatility risk 306.130 229.472 133.909 374.291 

Diversification effect (1) (1.992.286) 

Total (2) 2.846.846 3.084.777 1.891.322 4.400.927 

* amounts in euro 

(1) The diversification effect is due to the imperfect correlation between the 

different risk factors present in the Group’s portfolio. 

(2) The maximum VaR was recorded on 16/06, the minimum VaR on 18/02 

Backtesting analysis 

Backtesting analysis is designed to test the predictive power of the VaR model adopted. It uses an 

actual profit and loss calculated on the basis of returns on positions in the portfolio on the previous 

day. 

A backtesting analysis for the trading book of the UBI Group for 2010 is given below. 

UBI Group trading book: backtesting for 2010 

397

10,000,000. 

9,000,000. 

8,000,000. 

7,000,000. 

6,000,000. 

5,000,000. 

4,000,000. 

3,000,000. 

2,000,000. 

1,000,000. 

0. 

‐1,000,000. 

‐2,000,000. 

‐3,000,000. 

‐4,000,000. 

‐5,000,000. 

Profit & Loss 

VaR 

Actual backtesting analysis of the supervisory portfolios of the UBI Group identified four overshoots, 

i.e. days when the profit and loss was worse than the VaR calculated by the risk management 

system. These overshoots occurred at the same time as the European sovereign debt crisis worsened. 

Theoretical stress tests 

The Group has a stress testing programme designed to analyse the reaction of portfolios to risk factor 

shocks with the objective of verifying the ability of the supervisory capital to absorb very large 

potential losses and to identify possible measures needed to reduce risks and conserve the capital 

itself. 

Stress tests based on theoretical shocks consist of specially created extreme shifts in interest rate 

(short, medium and long term), credit spread, exchange rate, equity price and volatility curves. A brief 

description of the most significant stress tests is given below. 

• Bull/Bear Steepening: a shock on the yield curve where the decrease/increase in short term 

interest rates is greater/smaller than that for long term rates. 

• Bull/Bear Flattening: a shock on the yield curve where the decrease/increase in short term 

interest rates is smaller/greater than that for long term rates. 

• Shock Credit Spread: a widening in the credit spread of 100 basis point for corporate and 

government securities with a rating of less than AAA. 

• Flight to quality: this simulates a shift from investment in high risk to low risk assets. The 

shock applied is a decrease of 100bp in the interest rates for AAA government securities, and 

increase of 100bp in the credit spread on corporate and banking securities, and a 

depreciation in equity instruments of 10%. 

The table below gives the results of the theoretical stress tests performed on the portfolios of the UBI 


398

The effect of theoretical shocks on the trading and banking book of the UBI Group 

Data as at 31/12/10 

UBI GROUP TRADING 

BOOK VIG 31/12/10 

UBI GROUP BANKING 

BOOK 31/12/10 

TOTAL UBI GROUP 

31/12/10 

Change in NAV % Change in NAV % Change in NAV % 

Risk Factors IR 

Shock Shock +1bp -18.796 0,00% -274.850 0,00% -293.872 0,00% 


Shock Shock -1bp 18.633 0,00% 273.389 0,00% 292.248 0,00% 


Shock Shock +100bp -860.659 -0,05% -34.478.652 -0,37% -35.359.849 -0,32% 


Shock Shock -100bp 799.093 0,05% 23.909.339 0,26% 24.734.160 0,23% 


Shock Bear Steepening -4.703.273 -0,29% -257.026.440 -2,78% -261.762.980 -2,40% 


Shock Bull steepening 6.257.279 0,38% 120.626.226 1,31% 126.889.898 1,16% 


Shock Bear Flattening -5.746.312 -0,35% -111.228.284 -1,20% -116.980.473 -1,07% 


Shock Bull Flattening 13.588.587 0,83% 477.978.266 5,17% 491.613.694 4,51% 

Risk Factors Equity 

Shock +10% 3.685.116 0,22% 13.023.612 0,14% 17.129.432 0,16% 

Risk Factors Equity 

Shock -10% -3.309.152 -0,20% -13.023.612 -0,14% -16.753.468 -0,15% 

Risk Factors Volatility 

Shock +20% 20.137 0,00% 625.227 0,01% 645.363 0,01% 

Risk Factors Volatility 

Shock -20% -23.387 0,00% -955.766 -0,01% -979.152 -0,01% 

Risk Factors Forex 

Shock +15% 166.423 0,01% -883.553 -0,01% -717.130 -0,01% 

Risk Factors Forex 

Shock -15% 450.853 0,03% 883.553 0,01% 1.334.407 0,01% 

Risk Factors Credit Spread 

Shock -6.137.630 -0,37% -492.856.346 -5,33% -499.057.361 -4,58% 

Flight to quality scenario -9.022.287 -0,55% -505.879.958 -5,48% -515.386.333 -4,73% 

399

The analysis shows the heightened sensitivity of the UBI Group’s portfolios to credit spread shocks 

(consistent with the presence of Italian government securities and corporate securities, which are 

present in the UBI available-for-sale, the Centrobanca Corporate and the UBI International 

Luxembourg portfolios), to interest rate shocks (consistent with the presence of bonds and interest 

rate derivatives in Group portfolios) and to equity shocks (consistent with the presence of equity 

instruments and derivatives on equity indices in the asset management company mandate and equity 

trading portfolios and funds in the UBI available-for-sale portfolio). 

2.2 Interest rate risk and price risk – banking portfolio 


A. General aspects, management processes and methods of measurement of interest rate risk 

and price risk 

Interest rate risk consists of changes in interest rates which have the following effects: 

• on net interest income and consequently on the profits of the bank (cash flow risk); 

• on the net present value of assets and liabilities, which has an impact on the present value of 

future cash flows (fair value risk). 

The control and management of structural interest rate risk - fair value and cash flow – is performed 

in a centralised manner by the Parent within the framework, defined annually, of a financial risks 

policy, which identifies measurement methods and models and limits or early warning thresholds in 

relation to the economic value of the Group 

The 2010 Financial Risks Policy defines a system of limits on exposure to interest rate risk based on 

indicators measured in a scenario of a +100 bp increase in interest rates. The Supervisory Board has 

set a maximum sensitivity limit of 3,9% of consolidated supervisory capital and a maximum limit in 

terms of impact on net interest income of 4% of budgeted net interest income for 2010. With regard to 

those limits, the Management Board set a positioning range for the level of sensitivity of between -80 

million euro (lower limit) and -400 million euro (upper limit), with an early warning level of -350 

million euro. 

For economic value sensitivity only a policy of basic equilibrium in terms of exposure to interest rate 

risk is defined at individual company level, except for specific early warning thresholds set for 

individual companies and banks in the Group (Banca Carime: -50 million euro; Centrobanca: -20 

million euro, IW Bank: -10 million euro on total exposure and -8,5 million euro in terms of 

contribution to consolidated exposure). 

The early warning threshold for the network banks with no specific exceptions is set at 1% of 

individual supervisory capital. The early warning threshold for the product companies is -5 million 

euro with no specific exceptions. 

Compliance with individual limits is pursued by Group member companies by means of hedging 

derivative contracts entered into with the Parent. UBI Banca may then close the position with 

counterparties outside the Group, acting in accordance with strategic policies and within the 

consolidated limits set by the governing bodies. 

Measurement, monitoring and reporting of interest rate risk exposure is performed at consolidated 

and individual level by the Risk Management Area of the Parent, which performs the following on a 

monthly basis 

• a sensitivity analysis designed to measure changes in the value of assets on the basis of 

parallel shocks on interest rate levels for all the time buckets of the curve; 

400

• a simulation of the impact on net interest income for the current year by means of a static gap 

analysis (i.e. assuming that the positions remain constant during the period), considering 

different hypotheses for the elasticity of demand deposits. 

On the basis of the periodic reports produced, the ALM and Funding Area of the Parent takes 

appropriate action to prevent the limits and early warning thresholds from being exceeded. Exposure 

to interest rate risk is measured by using gap analysis and sensitivity analysis models on all those 

financial instruments, assets and liabilities, not included in the trading book, in accordance with 

supervisory regulations. 

Sensitivity analysis of economic value – which includes an estimate of the impacts resulting from 

early repayment of mortgages and long term loans – is accompanied by sensitivity analysis of net 

interest income, which focuses on changes in profits in the following twelve months. The estimate of 

the change in net interest income includes both an estimate of the impact of reinvesting/refinancing 

maturing interest flows and the effect connected with the viscosity of on demand items (elasticity and 

delay in modifying contracted interest rates when market interest rates change). 

B. Fair value hedging 

Specific and macro hedges were performed at Group level using financial derivative instruments, in 

order to reduce exposure to adverse changes in fair value due to interest rate risk. More specifically 

the following are hedged: fixed interest rate securities in the available for sale portfolio (specific 

hedges) loans to ordinary customers on fixed and mixed interest rate schedules (macro-hedges), 

mortgages with cap options (macro-hedges) and fixed rate bond and covered bond issues (specific 

hedges). 

The derivative contracts used are of the interest rate swap and interest rate cap type. 

The hedging transactions entered into in 2010 were for the following: 

• AFS securities (specific hedges) for approximately 2,6 billion euro; 

• fixed and mixed rate loans (macro-hedges) for approximately 1,1 billion euro; 

• mortgages con caps (macro-hedges) for approximately 600 million euro; 

• covered bond issues (specific hedges) for 1,5 billion euro; 

• other fixed rate issues (specific hedges) for approximately 6,9 billion euro. 

Tests for effectiveness are performed prospectively when a hedge is first implemented and this is 

generally followed by monthly retrospective tests. 

Prospective effectiveness tests are performed by the Finance Area and retrospective tests are 

performed by the Risk Management Area, which keeps official records of effectiveness over time for 

each hedging transaction. 

C. Cash flow hedging 

Details of cash flow hedges are reported in the financial statements of the UBI Group in relation to 

issues of certificates of deposit denominated in Japanese currency (JPY), which are hedged by 

domestic currency swaps (DCS). 

401


1. Banking portfolio: distribution by residual life (by repricing date) of financial assets and 

liabilities 

See the subsequent sub-section which contains an analysis of sensitivity to interest rate risk 

2. Banking portfolio: internal models and other methods of sensitivity analysis. 

The exposure of the Group to interest rate risk, measured in terms of core sensitivity measured on a 

scenario of a increase in interest rates of +100 bp, on items as at 31 st December 2010 amounted to 

approximately -346,38 million euro (-227,93 million euro as at 31 st December 2009 and -290,51 

million euro as at 30 th June 2010), equal to 3,32% of the consolidated supervisory capital as at 31 st 

December 2010, compared to a limit of -400 million euro set on that aggregate by the Group 

Financial Risks Policy for 2010 and an early warning threshold on that same indicator of -350 million 

euro. 

The total level of exposure includes an estimate, consistent with the provisions of the Financial Risks 

Policy, of the impact of the early repayment of loans (approximately +204 million euro in terms of 

sensitivity) and also the effect of structural ALM action taken using derivatives – even if subject to a 

capital requirement for market risk – with the objective of acting on the individual sensitivity of 

Group companies (approximately -94,29 million euro). 

In detail, the core sensitivity originated by the network banks amounted to approximately -92 million 

euro, while approximately -38 million euro is attributable to the activities of the product companies. 

The Parent contributes a total of approximately -216 million euro, including -117 million euro from 

structural and sensitivity action relating to Group member companies. In fact UBI Banca operates as 

the sole counterparty for Group member companies in hedging derivatives contracts and, if 

necessary, it then closes the positions on the market on the basis of positioning with respect to the 

limits set by the Financial Risks Policy and expected scenarios for future interest rate trends. 

The table below reports the exposure, measured in terms of economic value sensitivity in a scenario 

of an increase in reference interest rates of +200 bp, recorded in 2010, given as a percentage of tier 

one capital and supervisory capital at the end of period. 

Risk indicators - annual average 2010 

2009 

parallel shift of +200 bp 

sensitivity/tier I 8,99% 7,15% 

sensitivity/supervisory capital 5,98% 4,78% 

Risk indicators - end of period values 31/12/2010 31/12/2009 

parallel shift of +200 bp 

sensitivity/tier I 9,13% 6,80% 

sensitivity/supervisory capital 6,06% 4,54% 

Sensitivity analysis of net interest income focuses on changes in profits resulting from a parallel 

shock on the yield curve measured over a time period of 12 months. The overall determination of 

exposure contributes to the analysis of the viscosity of on-demand items. The exposure of the UBI 

Group to interest rate risk, estimated in terms of an impact on net interest income of an increase in 

reference interest rates of 100 bp, amounted to +68 million euro as at 31 st December 2010. 

402

The limits set for the trading book are also used for the portfolios in the banking book, which contain 

assets classified for IFRS purposes as available-for-sale (the UBI available-for-sale, the Centrobanca 

Corporate and the IW Bank portfolios) and loans & receivables (the UBI and Centrobanca portfolios), 

and for hedge funds. The main operational limits for the banking book of the UBI Group decided for 

2010, including the reallocations and the new limits set in the second half of the year, are given 

below. 

• Maximum loss for UBI Banking Book portfolios 


• One day VaR limit for UBI Banking Book portfolios 


• Maximum acceptable loss for investments in hedge funds 

16 million euro 

• two month VaR limit for investments in hedge funds: 

8 million euro 

For information purposes, the total VaR for the banking book portfolios of the Group at the end of 

September amounted to 72,33 million euro (55,15 million euro as at 30 th June 2010) with a NAV of 

11.043,51 million euro (11.480,36 million euro as at 30 th June 2010) 7 . 

The graph below shows the changes in daily VaR that occurred in 2010, for the banking book 

portfolios of the UBI Group. 

80,000,000 

75,000,000 

70,000,000 

65,000,000 

60,000,000 

55,000,000 

50,000,000 

45,000,000 

40,000,000 

04/01/2010 

19/01/2010 

03/02/2010 

18/02/2010 

05/03/2010 

20/03/2010 

04/04/2010 

19/04/2010 

04/05/2010 

19/05/2010 

03/06/2010 

18/06/2010 

03/07/2010 

18/07/2010 

02/08/2010 

17/08/2010 

01/09/2010 

16/09/2010 

01/10/2010 

16/10/2010 

31/10/2010 

15/11/2010 

30/11/2010 

15/12/2010 

30/12/2010 

VaR by risk factor calculated on the entire banking book of the UBI Group as at 31 st December 2010 

is given below. 

7 The figures for NAV and VaR are calculated net of intragroup securities and investments in hedge funds. 

403

Banking book 

UBI Group* 

31/12/2010 average minimum maximum 

Currency risk 88.550 114.889 67.173 401.543 

Interest rate risk 67.871.367 56.307.408 41.206.021 77.777.271 

Equity risk (1) 3.702.336 4.499.016 972.312 5.664.519 

Credit risk 10.058.878 12.223.456 9.956.103 22.294.395 

Volatility risk 249.059 622.791 116.914 1.591.196 

Diversification effect (2) (9.635.984) 

Total (1) (3) 72.334.205 57.773.198 41.277.288 75.587.153 

* amounts in euro 

(1) Does not include the VaR on hedge funds 

(2) The diversification effect is due to the imperfect correlation between the 

different risk factors present in the Group’s portfolio. 

(3) The maximum VaR was recorded on 02/12, the minimum VaR on 18/01 

2.3 Currency risk 


A. General aspects, management processes and methods of measuring currency risk 

Currency risk is calculated on the basis of mismatches existing between assets and liabilities in 

foreign currency (spot and forward), relating to each currency other than euro. The main sources of 

risk are as follows: 

• lending and funding in foreign currency with corporate and retail customers; 

• holding financial instruments denominated in foreign currency; 

• holding units in O.I.C.R. (collective investment instruments) for which, even if they are 

denominated in euro, it is not possible to determine the composition in foreign currency of the 

underlying investments and/or for which the maximum limit on investment in foreign 

currency is not known and binding; 

• dealing in foreign bank notes. 

Foreign currency risk in the UBI Group regards banking book exposures originated by the network 

banks and/or by the product companies – resulting from their commercial activities – and their 

positions relating to trading in foreign currency. 

Trading on foreign exchange markets is performed by the Group treasury function which operates by 

using instruments such as forward trades, forex swaps, domestic currency swaps and currency 

options, thereby optimising risks resulting from Group positions in foreign currency. 

404

Exposure to currency risk is calculated starting from the net foreign currency position using a 

method based on supervisory regulations. Equity investments and tangible assets are not included in 

the calculation of the net foreign currency position. 

B. Currency risk hedging 

Foreign currency risk arising from exposures in the banking book is mitigated by systematically 

hedging them with funding and lending transactions in the same currency as the original 

transaction. This activity to contain risk is also performed by the product companies for their own 

banking book positions. The remaining exposures and trading portfolio exposures are fully and 

precisely hedged with spot forex positions. 

For some network banks in the Group (Banca Popolare di Bergamo S.p.A. and Banca Popolare di 

Ancona S.p.A.), issues of certificates of deposit in foreign Japanese currency (JPY) are hedged by 

simultaneously entering into DCS contracts with customers, as already mentioned in the section on 

interest rate risk. The accounting treatment employed for these transactions is that for cash flow 

hedging. 


1. Distribution of assets, liabilities and derivatives by foreign currency in which they are 

denominated 

Currencies 

Items 

US Dollars UK sterling Yen Canadian Dollar Swiss Francs Other currencies 

A. Financial assets 1.028.282 150.632 45.797 6.365 801.294 157.222 

A.1 Debt instruments 39.723 57 .892 - - 8.997 - 

A.2 Equity instruments 396 18 .517 - - 4.929 925 

A.3 Financing to banks 68.520 30 .198 1.269 5.943 44.025 31.285 

A.4 Financing to customers 894.607 44 .025 44.528 422 743.343 125.012 

A.5 Other financial assets 25.036 - - - - - 

B. Other assets 1.280 507 43 62 767 303 

C. Financial liabilities 726.430 138.603 943.112 7.846 528.549 57.721 

C.1 Due to banks 116.031 46 .087 752 1.780 226.729 23.140 

C.2 Due to customers 478.445 55 .048 2.181 6.066 209.968 32.541 

C.3 Debt instruments 131.954 37 .468 940.179 - 91.852 2.040 

C.4 Other financial liabilities - - - - - - 

D. Other liabilities 205 118 - - 2.844 362 

E. Financial Derivatives 108.538 (18.834) 891.117 1.147 (252.298) (107.000) 

E.1 Options 1.905 - (66 9) - - - 

E.1.1 Long positions 482.382 20 .768 2.097 9.160 1.794 6.131 

E.1.2 Short positions 480.477 20 .768 2.766 9.160 1.794 6.131 

E.2 Other derivatives 106.633 (18.834) 891.786 1.147 (252.298) (107.000) 

E.2.1 Long positions 870.869 130 .368 1.110.632 27.575 3.327 137.088 

E.2.2 Short positions 764.236 149 .202 218.846 26.428 255.625 244.088 

Total assets 2.382.813 302.275 1.158.569 43.162 807.182 300.744 

Total liabilities 1.971.348 308.691 1.164.724 43.434 788.812 308.302 

Balance (+/-) 411.465 (6.416) (6.155) (272) 18.370 (7.558) 

2. Internal models and other methods of sensitivity analysis. 

The absorption of capital for currency risk as at 31 st December 2010 was nil, given a general net open 

position in foreign currency of less than two per cent of supervisory capital. 

Exposure to currency risk benefited during the year from a reduction in investments in hedge funds. 

405

2.4 Derivative financial instruments 

A. Financial derivatives 

A.1 Supervisory trading portfolio: end of period and average notional amounts 

Underlying assets/type of derivative 

31/12/2010 31/12/2009 

Over the counter Central counterparties Over the counter Central counterparties 

1. Debt instruments and interest rates 42.886.343 2.607.348 61.564.678 1.767.200 

a) Options 11.170.173 4.366 22.914.562 813 

b) Swaps 31.181.043 - 38.182.339 - 

c) Forwards 1.628 - - - 

d) Futures - 2.602.982 - 1.766.387 

e) Other 533.499 - 467.777 - 

2. Equity instruments and share indices 216.278 48.619 152.748 97.201 

a) Options 211.349 12.001 152.748 1 

b) Swaps - - - - 

c) Forwards 4.929 67 - - 

d) Futures - 36.551 - 97.200 

e) Other - - - - 

3. Currencies and gold 5.530.973 - 4.518.308 - 

a) Options 2.240.278 - 1.466.234 - 

b) Swaps 449.035 - 492.850 - 

c) Forwards 2.841.660 - 2.559.224 - 

d) Futures - - - - 

e) Other - - - - 

4. Commodities 26.300 - 13.281 - 

5. Other underlying - - - - 

Total 48.659.894 2.655.967 66.249.015 1.864.401 

Average amounts 57.454.454 2.260.184 61.880.900 2.270.680 

406

A.2 Banking portfolio: notional, end of period and average amounts 

A.2.1 For hedging 


31/12/2010 31/12/2009 


1. Debt instruments and interest rates 43.000.261 - 42.724.918 - 

a) Options 609.057 - 1.053.566 - 

b) Swaps 42.391.204 - 41.671.352 - 

c) Forwards - - - - 


e) Other - - - - 

2. Equity instruments and share indices - - 3.705 - 

a) Options - - - - 

b) Swaps - - 3.705 - 



e) Other - - - - 

3. Currencies and gold 765.847 - 1.181.753 - 


b) Swaps 8.902 - - - 



e) Other 756.945 - 1.181.753 - 

4. Commodities - - - - 


Total 43.766.108 - 43.910.376 - 

Average amounts 43.838.242 - 37.248.541 - 

407

A.2.2 Other derivatives 


31/12/2010 31/12/2009 


1. Debt instruments and interest rates 36.652 - 70.920 - 

a) Options 36.65 2 - 70.920 - 

b) Swaps - - - - 



e) Other - - - - 

2. Equity instruments and share indices 8.900.492 - 7.938.327 - 

a) Options 8.900.49 2 - 7.938.327 - 

b) Swaps - - - - 



e) Other - - - - 

3. Currencies and gold - - 14.180 - 

a) Options - - 14.180 - 

b) Swaps - - - - 



e) Other - - - - 

4. Commodities - - - - 


Total 8.937.144 - 8.023.427 - 

Average amounts 8.480.285 - 8.758.442 - 

408

A.3 Financial derivatives: gross positive fair value – by type of product 

Positive fair value 

Portfolio/type of derivative 

31/12/2010 31/12/2009 


A. Supervisory trading portfolio 495.701 888 687.568 582 

a) Options 78.646 20 72.006 5 

b) Interest rate swap s 392.669 - 588.499 - 

c) Cross currency swaps 377 - - - 

d) Equity swaps - - - 

e) Forwards 21.442 1 24.995 

f) Futures - 867 - 577 

f) Oth er 2.567 - 2.068 - 

B. Banking portfolio - for hedging 591.127 - 633.263 - 

a) Options - - 132 - 

b) Interest rate swap s 560.918 - 625.177 - 

c) Cross currency swaps - 

d) Equity swaps - 

e) Forwards - - - - 

f) Futures - - - - 

f) Oth er 30.209 - 7.954 - 

C. Banking portfolio - o ther derivatives 17.552 - 34.681 - 

a) Options 17.552 - 34.681 - 

b) Interest rate swap s - - - - 

c) Cross currency swaps - - 

d) Equity swaps - - 



f) Oth er - - - - 

Total 1.104.380 888 1.355.512 582 

409

A.4 Financial derivatives: gross negative fair value – by type of product 

Negative fair value 

Portfolio/type of derivative 

31/12/2010 31/12/2009 


A. Supervisory trading portfolio 528.939 1.191 712.874 3.960 

a) Options 57.498 - 60.670 4 

b) Interest rate swaps 447.098 - 625.005 - 

c) Cross currency swaps - - 1.611 - 

d) Equity swaps - - - 

e) Forwards 21.698 - 24.280 

f) Futures - 1.191 - 3.015 

f) Other 2.645 1.308 941 

B. Banking portfolio - for hedging 1.228.056 - 927.319 - 


b) Interest rate swaps 1.226.673 - 898.104 - 

c) Cross currency swaps - - - - 

d) Equity swaps - - - - 



f) Other 1.383 - 29.215 - 

C. Banking portfolio - o ther derivatives 15.030 - 29.918 - 

a) Options 15.030 - 29.918 - 

b) Interest rate swaps - - - - 

c) Cross currency swaps - - 

d) Equity swaps - - 



f) Other - - - - 

Total 1.772.025 1.191 1.670.111 3.960 

410

A.5 OTC financial derivatives: supervisory trading portfolio – notional amounts, gross positive and negative fair 

values by counterparty – contracts not covered by clearing agreements 

Contracts not covered by clearing 

agreements 

Governments and 

central banks 

Other public 

authorities 

Banks 

Financial companies 

Insurance companies 

Non financial 

companies 

Other 

1) Debt instruments and interest rates 

- notional amount - 2 6.049 2 2.813.517 11.421.762 - 7.032.228 1.592.787 

- positive fair value - 15 202.760 17.229 - 203.483 10.152 

- negative fair value - 10 430.106 25.634 - 8.693 2.283 

- future exposure - 125 148.327 197.313 - 53.028 6.698 

2) Equity instruments and share indices 

- notional amount - - 131.456 4.929 - - 79.893 

- positive fair value - - 435 114 - - - 

- negative fair value - - - 862 - - - 

- future exposure - - 8.035 300 - - - 

3) Currencies and gold 

- notional amount - 3.054.695 1.192.733 608 1.269.169 13.768 

- positive fair value - - 35.531 12.031 2 12.845 310 

- negative fair value - - 48.118 2.254 2 10.106 150 

- future exposure - - 

4) Other securities 

- notional amount - - 20.227 900 - 5.173 - 

- positive fair value - - 414 46 - 334 - 

- negative fair value - - 366 34 - 321 - 

- future exposure - - - - - 

A.6 OTC financial derivatives: supervisory trading portfolio – notional amounts, gross positive and negative fair 

values by counterparty – contracts covered by clearing agreements 

No items of this type exist in the UBI Banca Group. 

411

A.7 OTC financial derivatives: banking portfolio – notional amounts, gross positive and negative fair values by 

counterparty – contracts not covered by clearing agreements 

Contracts not covered by clearing 

agreements 

Governments and 

central banks 

Other public 

authorities 

Banks 

Financial companies 

Insurance companies 

Non financial 

companies 

Other 

1) Debt instruments and interest rates 

- notional amount - - 41.097.528 1.921.059 - - 18.326 

- positive fair value - - 539.239 21.679 - - - 

- negative fair value - - 1.098.536 128.137 - - - 

- future exposure - - 313.286 21.188 - - - 

2) Equity instruments and share indices 

- notional amount - - 2.318.467 2.198.251 4.068.758 282 314.734 

- positive fair value - - 17.549 3 - - - 

- negative fair value - - 13.301 - - - 1.729 

- future exposure - - 110.408 214.195 390.068 23 22.488 

3) Currencies and gold 

- notional amount - - - 5.358 - 1 06.820 653.669 

- positive fair value - - - 455 - 3.859 25.895 

- negative fair value - - - 23 - 210 1.150 

- future exposure - - - 54 - 1.068 6.537 

4) Other securities 

- notional amount - - - - - - - 

- positive fair value - - - - - - - 

- negative fair value - - - - - - - 

- future exposure - - - - - - - 

A.8 OTC financial derivatives: banking portfolio – notional amounts, gross positive and negative fair values by 

counterparty – contracts covered by clearing agreements 


412

A.9 Residual maturity of OTC financial derivatives: notional amounts 

Underlying asset/Residual maturity Up to 1 year From 1 to 5 years More than 5 years Total 

A. Supervisory trading portfolio 23.217.987 13.904.663 11.537.244 48.659.894 

A.1 Financial derivatives on debt instruments and interest rates 17.621.184 13.727.915 11.537.244 42.886.343 

A.2 Financial derivatives on equity instruments and share indices 208.895 7.383 - 216.278 

A.3 Financial derivatives on exchange rates and gold 5.361.608 169.365 - 5.530.973 

A.4 Financial derivatives on other securities 26.300 - - 26.300 

B. Banking portfolio 15.940.594 19.071.273 17.691.385 52.703.252 

B.1 Financial derivatives on debt instruments and interest rates 13.445.361 17.123.363 12.468.189 43.036.913 

B.2 Financial derivatives on equities and share indices 1.729.614 1.947.910 5.222.968 8.900.492 

B.3 Financial derivatives on exchange rates and gold 765.619 - 228 765.847 

B.4 Financial Derivatives on other securities - - - - 

Total 31/12/2010 39.158.581 32.975.936 29.228.629 101.363.146 

Total 31/12/2009 47.044.306 41.790.546 29.347.966 118.182.818 

A.10 OTC financial derivatives: counterparty risk/financial risk – Internal models 

The UBI Banca Group does not use internal models to measure counterparty risk and financial risk for OTC financial derivatives. 

413

B. Credit derivatives 

B.1 Credit derivatives: end of period and average notional amounts 


B.2 OTC credit derivatives: gross positive fair value – by type of product 


B.3 OTC credit derivatives: gross negative fair value – by type of product 


B.4 OTC credit derivatives: gross fair value (positive and negative) by counterparty – 

contracts not covered by clearing agreements 


B.5 OTC credit derivatives: gross fair value (positive and negative) by counterparty – 

contracts covered by clearing agreements 


B.6 Residual maturity of credit derivatives: notional amounts 


B.7 Credit derivatives: counterparty risk/financial risk – internal models 

The UBI Banca Group does not use internal models to measure counterparty and financial risk for 

credit derivatives. 

C. Financial and credit derivatives 

C.1 OTC financial and credit derivatives: net fair value and future exposure by 

counterparty 

No OTC financial and credit derivatives with contracts covered by clearing agreements were 

recognised. 

414

3 BANKING GROUP - LIQUIDITY RISK 


A. General aspects, processes for the management and methods for the measurement of 

liquidity risk 

Liquidity risk is defined in the UBI Group as the risk of the failure to meet payment obligations which 

can be caused either by an inability to raise funds or by raising them at higher than market costs 

(funding liquidity risk), or the presence of restrictions on the ability to sell assets (market liquidity 

risk) with losses incurred on capital account. 

Structural liquidity risk is the risk resulting from inadequate matching of maturities for assets and 

liabilities. 

The primary objective of the liquidity risk management system is to enable the Group to meet its 

payment obligations and to raise additional funding at a minimum cost and without prejudice to 

potential future income. 

The general principles on which liquidity management within the Group is based are as follows: 

• the adoption of a centralised management system run by Group Treasury; 

• diversification of the sources of funding and limits on exposure to institutional counterparties; 

• protection of Group capital in liquidity crisis situations; 

• a proper financial balance between assets and liabilities; 

• a proper level of eligible and/or liquid assets, sufficient to meet liquidity requirements even 

under stress conditions. 

The reference framework for the measurement, monitoring and management of exposure to liquidity 

risk is defined annually as part of the Financial Risks Policy of the UBI Group and the relative 

regulations approved by the corporate governance bodies. These documents contain detailed rules for 

the pursuit and maintenance of an adequate degree of diversification in the sources of funding and a 

proper structural balance between the sources and uses of funds for the network banks and the 

product companies, through the pursuit of co-ordinated and efficient funding and lending policies. 

The objective of the liquidity management model adopted by the Group is also to standardise both the 

procedures for taking action and the criteria for identifying economic conditions across all Group 

member companies, identifying a priori any specific exceptions there may be. 

Corporate risk policies are supplemented by a contingency funding plan (CFP), an emergency plan for 

liquidity management, the main aim of which is to protect the Bank’s assets in situations of liquidity 

drainage, by putting in place crisis management strategies and procedures to find sources of funding 

in cases of emergency. 

The system for the management of liquidity risk defined by the Financial Risks Policy and 

supplemented by the Contingency Funding Plan is based on a system of early warning thresholds 

and limits consistent with the general principles on which liquidity management within the Group is 

based. 

The following is subject to measurement, monitoring and management both at consolidated and 

individual company level: 

• the composition of the sources of funding and the level of exposure to institutional 

counterparties; 

• cash flow projections and the sources of funding at future dates for short term liquidity over a 

time horizon of up to three months; 

• the level of eligible and/or liquid assets to meet Group liquidity requirements; 

• the structural balance between assets and liabilities. 

415

A structured system of continuous monitoring of net interbank debt was introduced in the fourth 

quarter of 2008, both at consolidated and individual company level, in order to be able to promptly 

take the action necessary to comply with limits set by internal policies. 

The following are responsible for liquidity risk management: 

• the Finance Macro Area (1 st level management), which monitors liquidity daily and manages 

risk on the basis of defined limits; 

• the Risk Management Area (2 nd level management), responsible for periodically verifying that 

limits are observed. 

The system for the measurement and monitoring of liquidity risk is structured in the UBI Group in 

accordance with policies and the principles concerning the diversification of the sources of funding, 

short term liquidity management, structural liquidity management and the contingency funding plan 

(CFP). 

The following factors are monitored and subject to periodic reporting: 

• the centralised treasury position and the financial statement aggregate, “Net interbank debt”; 

• the current position and trends for eligible and/or liquid assets; 

• the maturity ladder for net maturing balances over a short term time horizon, to which the 

triggering of the CFP is linked; 

• the expected trend for net interbank debt over the course of the financial year; 

• the composition of sources in terms of types and counterparties; 

• balances of maturity transformation rules; 

• indicators of liquidity requirement coverage. 

Liquidity risk is monitored, with particular reference to the position in terms of structural liquidity, 

by using a liquidity gap model which calculates the net cash flows of the Group or of individual 

companies over time in order to detect any critical points in the expected liquidity conditions. The 

total liquidity requirement is calculated as the sum of the negative gaps (outflows greater than 

inflows) recorded for each individual time period. Any positive gaps found in a time period are used to 

reduce negative gaps in subsequent periods. 

The liquidity requirement calculated in this way is compared to the available liquidity reserve 

(consisting of assets that can be liquidated immediately, assets that can be easily liquidated and 

assets that can be refinanced) in order to determine the cover for the risk generated by a position. 

Liquidity risk reporting prepared by the Risk Management Area is for the UBI Group. 

Finally the Group reports its liquidity position to the Bank of Italy on a daily basis, consisting of the 

net liquidity balance over a three month time horizon, following standard procedures set by that 

supervisory authority. The liquidity position is supplemented, on request by the Bank of Italy, on a 

weekly basis with the following information: 

• the principal maturities, forecast over a time horizon of twelve months, both on the 

institutional and the retail market, with details according to the type of funding instrument 

(e.g. bond issues, repurchase agreements, commercial paper); 

• details of assets available for refinancing transactions with the central bank and of liquid 

assets; 

• the main providers of funds on the interbank market. 

The policy for the management of the financial risks of the UBI Banca Group approved for 2011 and 

the relative regulations giving details of operational limits significantly revised both the system for 

monitoring liquidity risk and that for structural balance between assets and liabilities, in order to 

incorporate the developments and recommendations of the international process in progress to revise 

the regulations governing liquidity risk. 

More specifically, liquidity risk is managed by means of the measurement, monitoring and 

management of the expected liquidity requirement, using a net liquidity balance model of analysis at 

consolidated level over a time horizon of 30 days, supplemented with stress tests designed to assess 

416

the Group’s ability to withstand crisis scenarios characterised by an increasing level of severity. In 

greater detail, the net liquidity balance, which represents the Group’s ability to meet its expected 

commitments over a determined time horizon is measured in a normal going concern context, 

supplemented by stress tests. It is obtained from the daily liquidity ladder by comparing expected 

cash flow projections with counterbalancing capacity over a time horizon of up to three months. The 

cumulative sum of expected cash flows and of the counterbalancing capacity, for each time bucket, 

quantifies liquidity risk measured under different stress scenarios. 

The objectives of stress tests are to measure the vulnerability of the Group to exceptional but 

plausible events and they provide a better assessment of exposure to liquidity risk, the systems for 

mitigating and monitoring them and the length of the survival period under hypotheses of adverse 

scenarios. 

The following risk factors that can alternatively affect the cumulative imbalance of cash inflows and 

outflows or the liquidity reserve are considered in the definition of stress scenarios, divided into base 

stress and regulatory scenarios: 

• wholesale funding risk: shortage of unsecured and secured funding on the institutional 

market; 

• retail funding risk: volatility of on demand liabilities relating to ordinary customers and 

redemptions of own securities; 

• off statement of financial position liquidity risk: use of margins available on irrevocable credit 

lines; 

• market liquidity risk: fall in the value of securities which constitute a liquidity reserve and an 

increase in the margins requested for positions in financial derivative instruments. 

In compliance with supervisory provisions the system for the management of liquidity risk employed 

by the Group also involves monitoring sources of funding both at consolidated and individual 

company level, by using a system of indicators. Limits and thresholds are linked to these indicators 

in order to verify their consistency and sustainability over time – with respect to the current and 

expected liquidity requirement of the Group – and their consistency with the level of dependence on 

institutional markets considered acceptable by the Group. 

Finally the management of structural balance is performed by using models which measure the 

degree of stability of liabilities and the degree of liquidity of assets in order to mitigate risk associated 

with the transformation of maturities within a tolerance threshold considered acceptable by the 


The model employed by the Group to monitor structural balance, which replaces the maturity 

transformation rule method, is designed to incorporate the general lines currently being defined in 

the process to revise supervisory regulations for liquidity risk with specific reference to medium-tolong 

term indicators. 

Measurement of the degree of stability of liabilities and the degree of liquidity of assets is based 

principally on criteria of residual life and on the classification of the counterparties which contribute 

to the definition of the weightings of assets and liabilities. 

Further information on Group activities on the interbank market is given in the Management Report 


417


1.1 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in euro 

418

1.2 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in USD 

419

1.3 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in CHF 

420

1.4 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in GBP 

421

1.5 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in YEN 

422

1.6 Distribution over time by residual contractual maturity of financial assets and liabilities – Denominated in other currencies 

On demand 1 to 7 days 7 to 15 days 

15 days to 1 

month 

1 month to 3 

months 

3 months to 6 

months 

6 months to 1 

year 

1 year to 5 years 

More than 5 

years 

Indeterminate 

maturity 

TOTAL OTHER 

CURRENCIES 

On-statement of financial position assets 44.304 8.466 209 24.805 33.761 30.813 10.286 10.108 - 5.749 168.501 

A.1 Government securities - - - - - - - - - - - 

A.2 Other debt instruments - - - - - - - - - 1.953 1.953 

A.3 Units in OICR 

(collective investment instruments) 

- - - - - - - - - 4 4 

A.4 Financing 44.304 8.466 209 24.805 33.761 30.813 10.286 10.108 - 3.792 166.544 

- Banks 27.613 8.275 190 - - - 1.151 - - 3.792 41.021 

- Customers 16.691 191 19 24.805 33.761 30.813 9.135 10.108 - 125.523 

On-statement of financial position liabilities 33.302 2.982 - 6.826 20.586 1.795 2 - - - 65.493 

B.1 Deposits 33.302 2.982 - 6.826 18.614 1.795 2 - - - 63.521 

- Banks 3.784 1.501 - 6.793 11.312 1.531 - - - - 24.921 

- Customers 29.518 1.481 - 33 7.302 264 2 - - - 38.600 

B.2 Debt instruments - - - - 1.972 - - - - - 1.972 

B.3 Other liabilities - - - - - - - - - - - 

Off-statement of financial position transactions (10) (100.210) 241 (7.837) 685 547 804 140 - (1.280) (106.920) 

C.1 Financial derivatives with 

exchange of principal 

(10) (100.210) 241 (7.837) - 359 - - - (1.280) (108.737) 

- Long positions 54 9.105 138.217 1.972 5.250 26.266 3.900 1.080 - 7.258 193.102 

- Short positions 64 109.315 137.976 9.809 5.250 25.907 3.900 1.080 - 8.538 301.839 

C.2 Financial derivatives w ithout 

exchange of principal 

- - - - 685 - - - - - 685 

- Long positions 5 - - - 685 - - - - - 690 

- Short positions 5 - - - - - - - - - 5 

C.3 Deposits and financing to be received - - - - - - - - - 

- Long positions - - - - - - - - - - - 

- Short positions - - - - - - - - - - - 

C.4 Irrevocable commitments to disburse funds - - - - - - - - - - - 

- Long positions - - - - - - - - - - - 

- Short positions - - - - - - - - - - - 

C.5 Financial guarantees issued - - - - - 188 804 140 - - 1.132 

Details of the securitisations in which Group member companies (originators) subscribe the liabilities issued by special purpose 

entities, at the time of issue, are given in section 1, sub-section 1 – Credit risk, part C “Securitisations and the transfer of assets” in 

these notes and in the management report, which may be consulted. 

423

4 BANKING GROUP - OPERATIONAL RISKS 


A. General aspects, procedures for the management and methods for the 

measurement of operational risk 

Operational risk is defined as the risk of loss resulting from inadequate or failed procedures, 

human resources and internal systems or from exogenous events. This type of risk includes loss 

resulting from fraud, human error, business disruption, system failure, non performance of 

contracts and natural disasters. 

This definition includes the legal risk of losses resulting from violations of laws and regulations, 

and from contractual or non contractual responsibilities or from other litigation, but it does not 

include reputational and strategic risk. 

Operational risk is characterised by cause and effect relations for which one or more trigger 

events generate a prejudicial event or effect which is directly linked to an economic loss. 

An operational loss is therefore defined as a set of negative economic impacts resulting from 

events of an operational nature, recognised in the accounts of a business and sufficient to impact 

on the income statement. 

When formulating its policy to manage operational risk, the UBI Banca Group placed a particular 

focus on maintaining an appropriate risk profile that is consistent with the propensity to risk 

defined by senior management. It is Group policy to identify, measure and monitor operational 

risks within an overall process of operational risk management with the following objectives: 

– to identify the causes of prejudicial events at the origin of operational losses and 

consequently to increase corporate profitability and improve operational efficiency, 

by identifying critical areas and monitoring and optimising the system of controls; 

– to optimise policies to mitigate and transfer risk, such as for example, the use of 

insurance, on the basis of the magnitude and effective exposure to risk; 

– to optimise the allocation and absorption of capital for operational risk and provision 

policies in a perspective of creating value for shareholders; 

– to support decision-making processes concerning the start up of new business, 

activities, products and systems; 

– to develop an operational risk culture at business unit level increasing awareness 

throughout units; 

– to respond to the regulatory requirements of the New Basel Accord on Capital for 

banks and banking groups. 

In the light of the regulatory context as set out by the Bank of Italy in the publication of Circular 

No. 263 of 27/12/2006, the UBI Banca Group has adopted the “traditional standardised 

approach” (TSA) in combined use with the “basic indicator approach” (BIA) for the calculation of 

capital requirements for operational risks and it has started activities to apply to the Bank of Italy 

for authorisation to use an internal “advanced measurement approach” (AMA) in combined use 

with the TSA and BIA approaches (partial AMA, where “partial” is intended as the adoption of the 

AMA approach on some lines of business or Group entities only), currently adopted for 

management purposes only. 

424

The organisational model 

The organisational model for the management of operational risks is based on a combination of 

components based on the responsibilities assigned and the specific position occupied in the 

organisation chart, both centralised and decentralised, consistent with the federal, multifunctional 

and integrated structure of the Group. In this context the Parent performs the 

functions of management, co-ordination and control, and the supervision of business functions, 

which includes supporting the activities of network banks and product companies in their core 

businesses, and it supplies common support services either directly or through subsidiaries. 

The design of the organisational structure is differentiated and based on the size and operational 

complexity of each entity in the Group: Parent, service company, commercial banks, product 

companies. Centralised responsibilities, each within the scope of their functions, are assigned to 


– the Operational Risks Committee is the policy making and governance body which 

oversees the general process of operational risk management in the Group. Its 

composition, functional rules, duties and powers are governed by the General 

Corporate Regulations; 

– Operational Risks Service: as the unit responsible for the general system of 

operational risk management, it plans develops and maintains methods for the 

detection, measurement and monitoring of operational risk and it verifies the 

effectiveness of measures to mitigate operational risk and of the relative reporting 

systems. It is also responsible for policy setting, co-ordination and control of the 

overall system at Group level; 

– the Methods and Models Service is the unit responsible for calculating capital 

requirements for the legal entities of the Group which intend to adopt advanced 

approaches on the basis of validation instructions received from the Models and 

Processes Validation Service and other internal and external bodies according to the 

case. This service forms part of the Operational Risk Service; 

– Models and Processes Validation Service: as a function that is independent of 

persons or units involved in the development of risk management and measurement 

systems, it is responsible for the continuous assessment of the quality of the 

operational risk management system and its compliance over time with legislation 

and regulations, operational requirements and market demands. Its activities 

include verification of the reliability of capital requirement calculations and tests of 

the use of the measurement system in decision making processes and in the 

management of operational risks (use tests); 

– Risk Policies Service is the unit responsible for formulating and revising the 

“Operational Risk Policy of the UBI Banca Group”. It is also involved in assessing 

and taking out insurance policies to mitigate operational risk following procedures 

contained in the Insurance Risk Management Regulations. 

The organisational model is structured with four levels of responsibility for the individual legal 

entities of the Group. 

– Operational Risk Officer (ORO): these are responsible within their legal entities 

(Parent – network banks – product companies) for implementing the overall 

425

framework for the management of operational risks as defined by Group policies and 

the respective regulations to implement it; 

– Local Operational Risk Support Officer (LORSO): the main role acting in support 

of the Operational Risk Officer in the general management of operational risks in the 

entities to which they belong. In the legal entities to which they belong these officers 

also support and co-ordinate the Risk Champions and Risk Owners who liaise with 

those involved in the operational risk management system; 

– Risk Champion (RC): operationally responsible for supervising operational risk 

management (loss data collection – LDC – and self risk assessment) for the purposes 

of overall validation in their business areas, co-ordinating and supporting the 

relative risk owners. They support the risk monitoring process and participate in the 

definition and implementation of mitigation strategies; 

– Risk Owners (RO): their task is to recognise and report loss events (LDC), both 

actual and/or potential, which occur in the course of everyday operations. They 

participate in the implementation of corrective or improvement action decided at 

higher levels designed to reduce exposure to risk. 

Management, measurement and control systems 

The Operational Risk Management System of the Group is composed of the following: 

– a decentralised process for collecting data on operational losses (loss data collection) 

designed for integrated and systematic detection of damaging events that occur 

which result in an actual loss, almost a loss (a “near miss”) or a profitable event. 

Operational losses detected are periodically reconciled in the accounts and updated 

in real time by Risk Owners and/or Risk Champions by means of a software 

application available on the Group intranet, which shows any recoveries that are 

obtained separately, including those resulting from specific insurance policies; 

– a structured process for mapping and assessing risk, operational context factors and 

significant internal control system scenarios (risk assessment) intrinsic to the 

business areas of the Group, supported by a software application for integrated 

management, where the intention is to furnish critical operational self diagnosis of 

potential exposure to the risk of future losses, of the adequacy of controls and of the 

mitigation measures in place; 

– a database of operational losses incurred by the sector nationally since 2003. The 

Group has participated in the DIPO (Italian database of operational losses) project 

launched by the Italian Banking Association to exchange loss data in the sector 

since it commenced; 

– a system for measuring economic and supervisory capital to calculate the absorption 

of supervisory capital by operational risk for each business unit using an AMA and a 

standardised approach. The measurement of operational risk using the AMA system 

is performed using an extreme value theory (EVT) approach, based on all of the three 

sources of information described above (internally detected operational losses [LDC], 

assessment of potential exposure to risk [self risk assessment] and operational losses 

incurred in the national banking sector [DIPO]). 

426

Reporting 

A reporting system has been implemented to support the monitoring of operational risks which 

furnishes the information needed for proper management, measurement and mitigation of the 

levels of risk assumed by the Group. 

That system is structured with the same levels of responsibility employed by the organisational 

model to support the multiple information requirements intrinsic to the federal model of Group 

organisation. The objective is to guarantee standardised information and allow periodic 

verification of the operational risks assumed as input for the definition of management strategies 

and objectives that are consistent with standard levels of acceptable risk. 

Reporting to corporate bodies, the senior management of the Parent and of the main legal entities 

in the Group and to the Operational Risks Committee is periodically performed centrally by the 

Operational Risks Service. It includes an analysis at differing degrees of detail and with differing 

frequencies according to requirements of the following: an analysis of data on internal losses and 

the relative recoveries together with a comparison with external data for the sector nationally; the 

results of the assessment of risk exposure with the identification of areas of vulnerability; and a 

description of the action needed to prevent and mitigate risk and of the relative effectiveness. 

Risk transfer mechanisms 

The UBI Banca Group has taken out adequate insurance policies to cover the principal 

transferable operational risks with due account taken of supervisory regulations (Bank of Italy 

Circular No. 263/2006). The policies were taken out by UBI Banca Scpa in its own name and on 

behalf of the network banks and product companies of the Group concerned. 

Legal risk 

The companies in the UBI Banca Group are party to a number of court proceedings of varying 

nature originating from the ordinary performance of their business. While it is not possible to 

predict final outcomes with certainty, it is considered that an unfavourable conclusion of these 

proceedings, both taken singly or as a whole, would not have a significant effect on the financial 

and operating position of the UBI Banca Group. 

Significant legal proceedings currently pending to which some network banks of the Group are 

party include the following: 

1. claw-back actions in insolvency proceedings against Banca Popolare di Bergamo, 

Banca Popolare Commercio e Industria and Banco di Brescia taken by various 

companies related to Giacomelli Sport S.p.A. (claim made amounting to 84.755.557 

euro); 

2. claw-back actions in insolvency proceedings against Banco di Brescia taken by 

Formenti Seleco Spa, currently under extraordinary administration, with a claim 

amounting to 1.447.453 euro (the case will be updated on 24 th March 2011 for the 

filing of the court appointed expert’s report). Furthermore, in addition to the 

revocation action, the extraordinary administrators of Formenti Seleco Spa, have 

also issued a writ against Banco di Brescia and another 18 legal entities for abusive 

grant of loans for a total claim of 45.608.320 euro. In this respect, it must be 

underlined that the Court of Cassation in combined session made three rulings in 

427

March 2006, to the effect that there were no grounds by which a bankruptcy 

receiver could legitimately take action against banks with a “liability action for 

abusive grant of loans” (rulings No. 7030, No. 7029 and No. 7031 of 28 th March 

2006) confirmed in later rulings of the court (cf Cassation Civ. Sect. I, 13 th June 

2008 No. 16031). It must also be underlined that the Court of Monza – which is the 

court in which the case in question originates – in a recent ruling (12 th September 

2007) peremptorily excluded that the grant of a long term loan under market 

conditions could constitute damages which should be compensated by the company 

granting the loan. In fact no grounds exist for substantial damages to an estate, 

because damages only exist in the legal sense where a legally significant interest has 

been impaired and the grant of a loan, while it may be abusive, does not cause 

damage (after the statements of claim and counter claims were filed, the case was 

returned to the court); 

3. action against Banca Popolare di Bergamo concerning the purchase of covered 

warrants and Olivetti warrants (the latter via internet banking) with a total claim of 

5.630.000 euro. The counterparty, not only alleges failure to receive proper 

information on the risks attaching to covered trades, but also disowned the 

signatures on the contract documents, required by regulations governing financial 

instruments and the capital in question. Investigations performed by the internal 

audit function into the affair found no evidence of liability of the Bank in the 

transactions in question. Later the counterparty accepted that the signatures were 

his, but claimed that he had signed blank forms which had subsequently been filled 

in abusively by the bank. The court has not yet issued a ruling on the matter; 

4. two actions concerning Centrobanca, one of which with a government counterparty 

claiming the restitution of sums collected following the enforcement of a guarantee 

granted for approximately 20 million euro – the case is now pending in appeal after 

a successful conclusion in the court of first instance – and another in which claims 

have been made against Centrobanca in bankruptcy proceedings for 65 million euro, 

still before the judge of the court of first instance. 

In order to meet the claims received, the UBI Banca Group made appropriate provisions on the 

basis of a reconstruction of the amounts potentially at risk and taking account of established 

legal opinion on the matters in question. 

The specific sections of the consolidated management report may be consulted for information on 

corporate litigation not directly related to ordinary business operations and on tax litigation. 

428


The graphs below show that the main sources of operational risk for the UBI Banca Group in the 

period January 2004-December 2010 were “external context” (40% of impacts and 77% of 

frequencies) and “processes” (51% of impacts and 21% of frequencies). 

The “external context” risk drivers included human deeds performed by third parties and not 

directly under the control of the Bank, such as for example thefts and robberies, paper fraud, 

damage caused by natural events (earthquakes, floods, etc.) and other external events. The 

“process” risk driver included unintentional errors and incorrect application of regulations. 

The impact of losses compared to the previous year fell by 65%, due mainly to the reduction in 

litigation with customers. The number of events detected fell by 23% as a result of a decrease in 

card frauds due to preventive action and/or action to reduce operational risk taken during the 

last year. 

Distribution of operating losses by year of detection (January 2004 ‐ December2010) 

30% 

25% 

20% 

15% 

10% 

5% 

0% 

2004 2005 2006 2007 2008 2009 2010 

No. Events 

Impacts 

429

The types of event with the greatest concentration of risk occurring in the period considered (from 

1 st January 2004 to 31 st December 2010) were “External fraud” (73% of the number of events and 

38% of the total losses detected), “Customers, products and professional practices” (8% of the 

number of events and 32% of the total losses detected) and “Execution, delivery and process 

management” (13% of the number of events and 19% of the total losses detected). 

The types of event with greatest concentration of risk occurring in the last financial year were 

“external fraud” (84% of the number of events and 39% of the total losses detected), “customers, 

products and professional practices” (5% of the number of events and 33% of the total losses 

detected) and “execution, delivery and process management” (6% of the number of events and 

14% of the total losses detected). 

430

Capital requirements 

The UBI Banca Group has employed the traditional standardised approach (TSA) in combined use 

with the basic indicator approach (BIA) since 2008 for the calculation of capital requirements on 

operational risk (see Bank of Italy Circular No. 263 of 27/12/2006 relating to the new prudent 

supervisory regulations for banks). 

The capital requirement calculated according to the standardised approach (TSA) is the product of 

the multiplication of gross income (the “significant indicator” consisting of item 120 in the 

mandatory income statement in the consolidated financial statements pursuant to Bank of Italy 

circular No. 262 of 22 nd December 2005), divided into supervisory lines of business, by the “beta” 

coefficients defined in the supervisory regulations (see Bank of Italy circulars No. 263 of 27 th 

December 2006 and No. 155 of 18 th December 1991). The significant indicator for the supervisory 

lines of business was extrapolated from management accounting data, by applying classification 

criteria defined by internal regulations in compliance with supervisory instructions. 

The capital requirement according to the basic indicator approach (BIA) is calculated by 

multiplying total gross income by the “alpha” coefficient defined by supervisory regulations. 

The capital requirement as at 31 st December 2010, calculated as the average of the requirements 

for the last three years, amounted to 489 million euro, consisting of 440 million euro relating to 

the TSA component and 49 million euro to the BIA component. On average the retail banking line 

of business absorbed 50% of the requirement for the TSA component, the commercial banking 

line of business absorbed 27%, retail brokerage 10% and trading and sales 9%. The average 

coefficient of absorption with respect to the significant indicator was 13%. 

The capital requirement was less than in the previous year (-6%) due to a fall in consolidated 

gross income. 

Section 2 - Risks for insurance companies 

The Group controls the brokerage company UBI Insurance Broker and holds interests in the 

share capital of insurance companies as part of banc assurance agreements with major insurance 

groups 8 . 

In terms of risks, these equity investments are deducted from supervisory capital and account for 

less than 0,3% of consolidated assets. 

Section 3 - Risks for other companies 

No significant risks are reported for the remaining companies included in the consolidation which 

are not part of the banking Group and are not insurance companies. 

8 The section “the consolidation area” in the consolidated management report may be consulted for details. 

431

PART F – Information on consolidated equity 

Section 1 – Consolidated equity 

A. Qualitative information 

Equity is defined by international financial reporting standards in a residual manner as “what 

remains of an entity’s assets after all the liabilities have been deducted”. From a financial 

viewpoint equity is the means measured in monetary form contributed by the owners or generated 

by the entity. 

Operational levers are developed on a broader base, consistent with the supervisory aggregate, 

which are characterised not just by equity in the strict sense but also by intermediate 

instruments such as innovative instruments, hybrid instruments and subordinated liabilities. 

As the Parent of the Group, UBI Banca performs supervision and co-ordination activities for the 

companies in the Group and, without prejudice to the independence of each of them in terms of 

business and company by-law, lays down appropriate policies for them. The Parent assesses 

capitalisation requirements in both the strict sense and also by issuing subordinated liabilities or 

hybrid capitalisation instruments of subsidiaries. The senior management of the Parent submits 

proposals to its governing bodies which decide accordingly. 

The proposals, once approved by the governing bodies of the Parent, are then submitted to the 

competent bodies of the subsidiaries 

The Parent analyses and co-ordinates capital requirements on the basis of the Group development 

plan, the related risk profiles and in compliance with supervisory constraints, and it acts as a 

privileged counterparty in gaining access to capital markets applying an integrated approach to 

optimising capital strength. 

The following analysis metrics are used from the viewpoint of capital management to cover risks: 

• supervisory capital, defined as a regulatory measurement of capital – specified in 

regulations – to be held to cover capital requirements (Pillar 1 risks); 

• total capital, or available financial resources (AFR), defined as the sum of capital elements 

that the Group considers can be used to cover internal capital and total internal capital 

requirements 9 (Pillar 2 risks). 

Capital management activity is therefore designed to govern the current and future capital solidity 

of the Group by verifying compliance over time with supervisory requirements (Pillar 1) and by 

continuously monitoring the adequacy of the total capital to meet Pillar 2 risks. 

9 “Internal capital” is defined as risk capital, the capital requirement for a determined risk that the bank considers 

necessary to cover losses above a given expected level. “Total internal capital” is defined as internal capital required for all 

significant risks assumed by the Bank, including possible internal capital requirements due to considerations of a 

strategic character. 

432

B. Quantitative information 

Please refer to the information given in Part B of these notes to the financial statements in 

Liabilities Section 15 – Equity attributable to the Parent. 

B.1 Consolidated equity by type of company 

Equity items 

Banking group 

Insurance 

companies 

Other 

companies 

Consolid ation 

eliminations and 

adjustmen ts 

31/12/2010 

1. Share capital 8.085.838 - - (5.973.286) 2.112.552 

2. Share premiums 8.010.326 - - (831.171) 7.179.155 

3. Reserves 4.790.570 - 6.429 (2.106.799) 2.690.200 

4. Equity instruments - - - - 

5. (Treasury shares) - - - - - 

a) parent - - - - - 

b) subsidiaries - - - - - 

6. Fair value reserves: (85.174) (11.986) 211 (128.902) (225.8 51) 

- available-for-sale financial assets (303.672) - - (52) (303.7 24) 

- Property, equipment and investment property 36.195 - - (19.632) 16.563 

- Intangible assets - - - - - 

- Foreign investment hedges - - - - - 

- Cash flow hedges (683) - - 32 (6 51) 

- Foreign currency differences (243) - - - (2 43) 

- Non current assets held for disposal - - - - - 

- Actuarial gains (losses) on defined benefit p lans (16.834) - - 774 (16.0 60) 

- Share of fair value reserves of equity investments 

value d at equity 

- (11.986) 211 - (11.7 75) 

- Special revaluation laws 200.063 - - (110.024) 90.039 

7. Profit (loss) for the year attributable to the Parent and 

to minority interests 

848.789 16.0 06 3.583 (682.655) 185.723 

Total 21.650.349 4.020 10.223 (9.722.813) 11.941.779 

For greater clarity and comprehension of the amounts relating to consolidated equity by type of 

company, we have included the following reconciliation between total equity and minority 

interests and the equity attributable to the Parent. 

Reconciliation schedule 

Group 

Minority 

interests 

Total 

Share capital 1.597.865 514.687 2.112.5 52 

Share premiums 7.100.378 78.777 7.179.1 55 

Reserves 2.362.382 327.818 2.690.2 00 

Equity instruments 0 0 0 

(Treasury shares) 0 0 0 

Fair value reserves ( 253.727 ) 27.876 ( 225.851) 

Profit (loss) for the year (+/-) attributable to the 

sharehold ers of the Parent and to minority interests 

172.121 13.602 185.7 23 

Equity 10.979.019 962.760 11.941.779 

433

B.2 Fair value reserves of available-for-sale financial assets: composition 

Assets/amounts 

31/12/2010 

Positive reserve 

Negative reserve 


Banking group 


Insurance 

companies 

Positive res erv e 

Other companies 



Negative res erv e 


Negative res erv e 

Consolidation 

eliminations and 

ad jus tmen ts 

1. Debt instruments 2.3 91 (363.542) 64.344 (78.156) - (64.355) 83.097 2.380 (358.601) 

2. Equity instruments 60.6 67 (2.296) 2.062 (1.304) - (6.435) 1.315 56.294 (2.285) 


(collect iv e inv estment instrume nts) 5.7 88 (6.680) 4.544 (3.475) (138) (5.231) 3.680 5.101 (6.613) 

4. F inancing - - - - - - - - - 

Total as at 31/12/2010 68.846 (372.518) 70.950 (82.935) - (138) (76.021) 88.092 63.775 (367.499) 

Total as at 31/12/2009 223.421 (65.603) 37.354 (18.923) - (126) (42.785) 18.924 217.990 (65.728) 

B.3 Fair value reserves of available-for-sale financial assets: annual changes 

Debt 

instrume nts 

Equity 

instrume nts 

Units in 

O.I.C.R 

( ll ti 

Financing 

A. Opening balances (17.205) 171.794 (2.327) - 

2. Positive changes 11.157 6.310 3.310 - 

2.1 Increases in fair value 9.344 4.775 2.361 - 

2.2 Transfer to income statement of negative reserves 1.664 1.487 949 - 

- following losses 340 1.149 949 - 

- from disposal 1.324 338 - - 

2.3 Other changes 149 48 - - 

3. Negative changes (350.173) (124.095) (2.495) - 

3.1 Decrease in fair value (341.956) (7.593) (1.071) - 

3.2 Impairment losses - 

3.3 Transfer to income statement of positive reserves: 

for disposal 

(8.077) (116.500) (1.410) - 

3.4 Other changes (140) (2) (14) - 

4. Closing balances (356.221) 54.009 (1.512) - 

Section 2 – Capital and banking supervisory ratios 

2.1 Scope of application of the regulations 

Supervisory capital is calculated on the basis of capital amounts and profit determined by 

applying IFRS in accordance with Circular No. 263/06 (new regulations for the prudent 

supervision of banks) and Circular No. 155/91 (Instructions for compiling supervisory capital 

reports and capital ratios) both issued by the Bank of Italy, as amended by the 7 th update of 28 th 

January 2011 and by the 13 th update of 9 th February 2011, respectively. 

More specifically, Circular No. 263 sets out prudent principles of a general nature for the 

calculation of supervisory capital and the absorption of capital. 

434

In the case of the UBI Group, the adoption of the new regulations took the form of the 

standardised approach. 

2.2 Banking supervisory capital 


Supervisory capital is calculated as the algebraic sum of a series of positive and negative items, 

which are considered eligible for inclusion – with or without limitations - in relation to the ‘quality’ 

of the capital. The amount of those items is considered net of any tax expenses. Positive 

components of the capital must be fully available to the Bank, so that they can be used without 

restrictions to cover risks to which the intermediary is exposed. 

Supervisory capital is composed of tier one capital and the supplementary capital (tier two), net of 

“prudential filters” 10 and some deductions. 

1. Tier one capital 

Tier one capital includes paid up share capital, share premiums, reserves (considered prime 

quality items), non innovative instruments (not present in the UBI Group) and innovative equity 

instruments, profit for the period, net of the part available for distribution as dividends and other 

forms of distribution and positive prudent filters of tier one capital and instruments subject to 

transition provisions (grandfathering). Treasury shares held in portfolio, goodwill, other intangible 

fixed assets, prior and current year losses, other negative items and negative prudential filters for 

tier one capital (termed negative elements of tier one capital) are deducted from the total of the 

items mentioned previously (termed positive elements of tier one capital). The algebraic sum of the 

positive and negative components of the tier one capital constitutes the “tier one capital before 

items to be deducted”. The tier one capital is constituted by the difference between the “tier one 

capital before items to be deducted” and “items to be deducted from tier one capital”; 

2. Tier two capital 

The tier two capital comprises – with some limits on eligibility for inclusion – the fair value 

reserves, non innovative and innovative equity instruments, hybrid capital instruments, tier two 

subordinated liabilities, other positive elements and positive prudential filters (termed positive 

elements of tier two capital). Other negative items and negative tier two prudential filters (termed 

negative elements of tier two capital) are deducted from the total of those items. 

Details of innovative equity instruments eligible for inclusion in the tier one capital, hybrid 

capitalisation instruments and subordinated liabilities are given in Part B of these notes to the 

financial statements, under Liabilities, Section 3, Securities issued – item 30. 

10 Prudential filters are corrections made to equity items in the statement of financial position made to safeguard the 

quality of the supervisory capital and to reduce potential volatility induced by the application of IFRS. 

With regard to those prudential filters that are most important to the UBI Group, the regulations state that unrealised 

gains and losses on available-for-sale financial assets are divided between equity securities (inclusive of collective 

investment instruments) and debt securities. For each of these aggregates, if the reserve in question is negative it reduces 

the tier one capital and if it is positive the tier two capital is increased by 50% of the reserve. 

435

3. Tier three capital 

The Group has no subordinated debt eligible for inclusion in tier three. 


Use was made by the UBI Banca Group in the calculation of supervisory capital as at 31 st 

December 2010 11 – in compliance with provisions issued by the Bank of Italy in May 2010 – of the 

possibility of completely neutralising the impacts on supervisory capital of gains and losses 

recognised in the fair value reserves relating to government securities issued by EU member 

states held in the “available-for-sale financial assets” portfolio. This approach is in addition to 

that already contained in regulations, which requires losses to be deducted entirely from 

supervisory capital and gains to be only partially included. The option in question has been 

applied across the board by all members of the banking group from 30 th June 2010. 

The consolidated supervisory capital of UBI as at 31 st December 2010 amounted to 10.536,2 

million euro, an increase compared to 31 st December 2009. 

That change is attributable to an increase in the tier one and tier two capital and a fall in the 

deductions, which more than offset the increase in the negative filters. The growth in the tier one 

capital was mainly attributable to the increase in minority interests, following the operations to 

optimise the branch network performed in 2010. As compared to 2009, savings and privileged 

shares amounting to approximately 36 million euro are no longer eligible for inclusion in the core 

capital, although they are included in the tier one capital. 

The increase in supplementary capital – of approximately 95 million euro – was generated almost 

entirely by changes in subordinated bonds. More specifically, the issue of subordinated liabilities 

sold to retail customers of the Group (for 853 million euro nominal) more than compensated for 

issues matured/redeemed/amortised during the year (for a total of 738 million euro). Further 

changes, attributable to filters and deductions, had an aggregate negative impact of approximately 

20 million euro. 

Finally, the Group has no subordinated debt eligible for inclusion in tier three. In consideration of 

the low levels of market risk assumed in the Group and given the forecasts for this risk in the 

future, this type of instrument would run the risk of not being fully efficient. 

11 With a provision of 18 th May 2010 and a later communication of 23rd June 2010 (“Clarification of supervisory measures 

– prudent filters”), the Bank of Italy issued new instructions for the treatment of fair value reserves relating to debt 

instruments held in the “available-for-sale financial assets” portfolio for the purposes of calculating supervisory capital 

(prudent filters). More specifically, as an alternative to the “asymmetric approach” (full deduction of net losses from the tier 

one capital and partial inclusion of net gains in the tier two capital) already provided for by Italian regulations, it is now 

permitted – in compliance with 2004 CEBS guidelines –, limited to securities issued by the central governments of 

countries belonging to the European Union, to completely neutralise gains and losses in the reserves mentioned 

(“symmetrical approach”). The measure is designed to prevent unjustified volatility in supervisory capital, caused by 

sudden changes in the prices of securities that are not related to changes in the credit ratings of the issuers. 

436


31/12/2010 31/12/2009 

A. Tier 1 capital before the application of prudential fil ters 7.255.989 7.016.837 

B. Tier 1 capital prudential filters: (73.593) (58.244) 

B.1 IFRS positive prudential filters (+) 337 662 

B.2 IFRS negative prudential filters (-) (73.930) (58.906) 

C. Tier 1 capital before items to be deducted (A+B) 7.182.396 6.958.593 

D. Items to be deducted from tier 1 capital (134.508) (141.717) 

E. Total tier 1 capital (C-D) 7.047.888 6.816.876 

F. Supplementary capital before the application of prudential fil ters 3.780.644 3.694.015 

G. Supplementary capital prudential filters: (10.139) (10.978) 

G.1 IFRS positive prudential filters (+) - - 

G.2 IFRS negative prudential filters (-) (10.139) (10.978) 

H. Supplementary capital before items to be deducted (F+G) 3.770.505 3.683.037 

I. Items to be deducted from supplementary capital (134.508) (141.717) 

L. Total supplementary capital (tier 2) (H-I) 3.635.997 3.541.320 

M. Items to be deducted from total tier 1 and supplementary capital (147.685) (155.641) 

N. Supervisory capital (E+L-M ) 10.536.200 10.202.555 

O. Tier three capital - - 

P. Supervisory capital incl usive of tier 3 (N+O) 10.536.200 10.202.555 

2.3 Capital adequacy requirement 


Capital adequacy is monitored constantly with a view to the present and the future to maximise 

its efficiency and at the same time to ensure that the Group achieves its capitalisation objectives 

and also constantly complies with minimum limits set by supervisory regulations. 

Compliance with capitalisation objectives is also monitored at both individual company and 

consolidated level and corrective action is immediately taken when objectives change to bring the 

various lines of business back into line with optimum risk/yield profiles 


The table below shows the absorption of supervisory capital as a function of the total capital 

adequacy requirement. 

Compliance with that requirement at the end of the year required capital of 7.548,9 million euro 

(total requirements), against which the Group recorded actual supervisory capital amounting to 

10.536,2 million euro. 

Finally, the table that follows summarises compliance with requirements in terms of ratios. The 

capital ratios as at 31 st December 2010 calculated on the basis of the Basel 2 standardised 

approach, had fallen compared to 31 st December 2009. The core tier one ratio (core tier one 

capital net of preference shares and instruments subject to transition provisions/risk weighted 

assets) stood at 6,95% (7,43% in December 2009). The tier one ratio fell from 7,96% (in December 

2008) to 7,47%, while the total capital ratio stands at 11,17% (11,91% in December 2009). 

437

The contraction in all the supervisory ratios has been generated mainly by changes in risk 

weighted assets (RWA), while supervisory capital increased. 

A substantial increase in RWA occurred – of approximately 9,5 billion euro – because of credit risk 

attributable to factors reported here. The first negative impact was the result of the entrance into 

force of new risk weighting coefficients for the Cerved (former Lince) rating which involved an 

increase in RWA of approximately 4,5 billion euro. The second negative impact is attributable to 

the application of supervisory provisions designed to limit the reduced weighting of mortgage 

collateral for property companies 12 , which resulted in an increase in RWA of approximately 3,7 

billion euro. Those impacts were accompanied by an increase in risk weighted assets due to 

growth in lending to customers. 

The reduction in the capital requirement for market risk was due mainly to the disappearance of 

currency risk, following decrease in net currency positions below 2% of supervisory capital. 

Finally, the decrease in consolidated gross income determined a fall in the capital requirement for 

operational risk. 

Categories/Amounts 

Amounts not weighted 

Weighted amounts/requirements 

31/12/2010 31/12/2009 31/12/2010 31/12/2009 

A. RISK ASSETS 

A.1 Credit and counterparty risk 233.538.031 216.509.841 86.911.561 77.376.453 

1. Standardised approach 233.443.156 216.303.711 86.890.359 76.930.980 

2. Method based on internal ratings - - - - 

2.1 Basic - - - - 

2.2 Advanced - - - - 

3. Securitisations 94.875 206.130 21.202 445.473 

B. SUPERVISORY CAPITAL REQUIREM ENTS 

B.1 Credit and counterparty risk 6.952.925 6.190.116 

B.2 M arket risk 106.636 143.085 

1. Standard methodology 106.636 143.085 

2.Internal models - - 

3. Concentration risk - - 

B.3 Operational risk 489.312 520.959 

1. Basic indicator approach 49.137 47.273 

2. Standardised approach 440.175 473.686 

3. Advanced measurement approach - - 

B.4 Other prudent requirements - - 

B.5 Other cal culations - - 

B.6 Total prudent requirements 7.548.873 6.854.160 

C. RISK ASSETS AND SUPERVISORY RATIOS 

C.1 Risk weighted assets 94.360.908 85.677.000 

C.2 Tier 1 capital/Risk weighted assets (tier 1 capital ratio) 7,47% 7,96% 

C.3 Supervisory capital including tier 3/risk weighted assets 

(Total capital ratio) 

11,17% 11,91% 

Section 3 – Insurance capital and supervisory ratios 


12 The reasoning behind that provision is that the property used as collateral does not meet one of the requirements for the 

admissibility of property used as collateral to mitigate risk. Since the sale and/or the rental of properties to third parties 

constitutes the main business of property companies, in these cases the requirement that the ability of a debtor to pay 

must not depend on the cash flows generated by the property posted as collateral, but on the ability of the debtor to repay 

debt by drawing on other sources of income is not met. 

438

Part G – Business combinations concerning 

companies or lines of business 

SECTION 1 - TRANSACTIONS PERFORMED DURING THE YEAR 

No business combinations involving companies or lines of business were performed by the UBI 

Banca Group in 2010. 

We only report that By You Mutui Srl acquired 100% of Sintesi Mutuo Srl. 

However, the UBI Group holds only a 40% interest in the By You Group which is consolidated 

using the proportionate method. 

SECTION 2 - TRANSACTIONS PERFORMED AFTER THE END OF THE YEAR 

No business combinations were performed after the end of the year. 

439

Part H – Transactions with related parties 

1. Information on the remuneration of directors and senior managers 

See the notes to the separate company financial statements of Banche Popolare Unite Scpa. 

2. Information on transactions with related parties 

With Resolution No. 17221 of 12 th March 2010 – amended by the subsequent Resolution No. 

17389 of 23 rd June 2010 – the Consob (Italian securities market authority) approved a Regulation 

concerning related-party transactions. The new regulations concern the procedures to be followed 

for the approval of transactions performed by listed companies and the issuers of shares with a 

broad shareholder base with parties with a potential conflict of interest, including major or 

controlling shareholders, members of the management and supervisory bodies and senior 

managers including their close family members 13 . 

The key points of the regulations issued are as follows: 

- they strengthen the role of independent board members at all stages of the decision-making 

process concerning related-party transactions; 

- a regime of transparency; 

- the introduction of detailed corporate governance regulations containing rules designed to 

ensure substantial and procedural integrity in related-party transactions (a special regime for 

companies which adopt a two tier system of governance). 

The regulations apply within the UBI Banca Group to UBI Banca Scpa and IW Bank Spa as listed 

companies and to Banco San Giorgio, because that bank has a broad shareholder base. 

In relation to the above, the members of the competent bodies of the banks mentioned have 

approved regulations which govern related-party transactions, within the set time limits. These 

are available on their respective corporate websites and appropriate internal processes have been 

defined to ensure compliance with the new provisions. 

As specifically concerns UBI Banca, the Supervisory Board has appointed a Related Parties 

Committee from among its members to which transactions falling within the scope of the 

regulations must be submitted in advance. 

In this respect the UBI Banca regulations have excluded the following transactions from their 

scope of application and these are consequently not subject to the disclosure obligations required 

under the Consob regulation, but without prejudice to the provisions of Art. 5, paragraph 8, 

where applicable, of the said Consob Regulation: 

(a) shareholders’ resolutions concerning the remuneration of the Members of the Supervisory 

Board passed in accordance with Art. 2364-bis of the Italian Civil Code, including those 

concerning the determination of a total sum for the remuneration of the Members of the 

Supervisory Board assigned particular offices, powers and functions; 

13 Consob Resolution No. 17221 establishes that a party is a related party to a company if: 

(a) either directly of indirectly, even through subsidiaries, trust companies or intermediaries; 

(i) it controls the company, is controlled by it or is under common control; 

(ii) it holds an interest in the share capital of the company such that it is able to exert significant influence over it; 

(iii) it exercises joint control over the company with others; 

(b) it is an associate company of the company; 

(c) it is a joint venture in which the company is a venturer; 

(d) he/she is a member of the key management personnel of the company or of its parent; 

(e) he/she is a close family member of one of the parties referred to in letters (a), or (d); 

(f) it is an entity in which one of the parties referred to in letters (e) or (f) exercises control, joint control or significant influence or holds, 

either directly or indirectly, a significant proportion, and in any case not less than 20%, of the voting rights; 

(g) it is a collective or individual, Italian or foreign, supplementary pension fund, formed for the benefit of the employees of the 

company, or any other entity related to it. 

440

(b) remuneration schemes based on financial instruments approved by shareholders in 

accordance with Art. 22, letter. b), of the Corporate By-Laws and in compliance with Art. 114- 

bis of the Consolidated Finance Act and the relative operations to implement them; 

(c) resolutions, other than those referred to under the preceding letter a) of this article, 

concerning the fees of Members of the Management Board appointed to special positions and 

other key management personnel and also the resolutions with which the Supervisory Board 

determines the fees of the Members of the Management Board on condition that: 

i. UBI Banca has adopted a remuneration policy; 

ii. the Remuneration Committee formed by the Supervisory Board in accordance with 

Art. 49 of the Corporate By-Laws has been involved in the definition of that 

remuneration policy; 

iii. a report setting out the remuneration policy has been submitted for approval or a 

consultative vote to a Shareholders' Meeting; 

iv. the remuneration awarded is consistent with that policy; 

(d) “transactions of negligible amount” are those related-party transactions for which the amount 

is less than 250 thousand euro. If a related-party transaction is concluded with a member of 

the key management personnel, a close family member of that person or with companies 

controlled by or subject to significant influence of those persons, it will be considered a 

transaction of negligible amount if the amount of the transaction is not greater than 100 

thousand euro; 

(e) transactions which fall within the ordinary performance of operating activities and the related 

financial activities concluded under equivalent market or standard conditions; 

(f) transactions to be performed on the basis of instructions for the purposes of stability issued 

by the supervisory authority, or on the basis of instructions issued by the Parent of the Group 

to carry out instructions issued by the supervisory authority in the interests of the stability of 

the Group; 

(g) transactions with or between subsidiaries and also venturers in joint ventures, as well as 

transactions with associates, if no significant interests of other related parties exist in the 

subsidiaries or associates that are counterparties to the transaction. 

Also, in compliance with Consob recommendations, transactions with related-parties of UBI 

Banca performed by subsidiaries are subject to the regulations in question if, under the 

provisions of the Corporate By-Laws or internal regulations adopted by the Bank, the 

Management Board, the Supervisory Board in response to a proposal of the Management Board, 

or even an officer of the Bank, on the basis of powers conferred on that officer, must preliminarily 

examine or approve a transaction to be performed by subsidiaries. 

In compliance with IAS 24, part H of the Notes to the Consolidated Financial Statements provides 

information on statement of financial position and income state transactions between related 

parties of UBI Banca 14 and Group member companies, as well as those items as a percentage of 

the total for each item in the consolidated financial statements. 

Further information is given in the “Report on corporate governance and the ownership structure 

of UBI Banca Scpa” attached to these reports. 

14 Associate companies, key management personnel and their close family members and entities controlled by them, or over which they 

exert significant influence. 

441

Transactions with related parties – principal statement of financial position items 

Financial 

Financial 

Loans to 

Due to Securities 

Guarantees 

assets held for Loans to banks 

Due to banks 

liabilities held 

customers 

customers issued 

granted 


trading 

for trading 

Associates 2 - 89.451 - 290.772 - - 24.992 

Senior managers (1) - - 2.046 - 23.785 490 - - 

Other related parties 50.485 - 272.583 - 118.605 735 - - 

Total 50.487 - 364.080 - 433.162 1.225 - 24.992 

(1) A “senior manager” is intended as meaning “a member of the key management personnel of the entity or of its parent, where a member of the key management personnel is intended as 

meaning those who have power and responsibility for the planning, management and control of the activities of the entity including its directors”. 

Transactions with related parties - percentage 

Financial 


Loans to 

Due to Securities 

Guarantees 

Loans to banks 

Due to banks 

liabilitie s held for 

he ld for trading 

customers 

customers 

issued 

granted 


trading 

With related parties (a) 50.487 - 364.080 - 433.162 1.225 - 24.992 

Total (b) 2.732.751 3.120.352 101.814.829 5.383.977 58.666.157 48.093.8 88 954.423 6.519.321 

Percentage (a/b*100) 1,847% 0,000% 0,358% 0,000% 0,738% 0,003% 0,000% 0,383% 

Summary of principal income statement transactions with related parties 

Net 

Other 

Dividends and 

Personnel Operating 

Net interest 

commission 

administrative 

similar income 

expense income/expenses 


income 

expenses 

Associates (3.484) 19.219 103.377 (582) 8.874 (16.226) 

Senior managers (1) 36 - 157 (16.137) 188 - 

Other related parties 6.360 - 479 (1.666) 3.094 (103) 

Total 2.912 19.219 104.013 (18.385) 12.156 (16.329) 

(1) A “senior manager” is intended as meaning “a member of the key management personnel of the entity or of its parent, where a member of the key management personnel is intended as meaning 

those who have power and responsibility for the planning, management and control of the activities of the entity including its directors”. 

Percentage of income statement transactions with related parties in respect of the consolidated financial statements 

Operating 

Other 

Dividends and Net commission Personnel 

Net interest 

income/expense admin istrative 

similar income income expense 


s expenses 

With related parties (a) 2.912 19.219 104.01 3 (18.385) 12.156 (16.329) 

Total (b) 2.14 6.598 24.099 1.181.225 -1.451.584 239.430 -923.5 90 

Percentage (a/b*100) 0,136% 79,7 50% 8,806% 1,267% 5,077% 1,768% 

442

Principal statement of financial position sheet items with investees subject to significant influence 



held for trading 

Loans to 

customers 

Due to banks 

Financial 

Due to 

liabilitie s held for 

customers 

trading 

Guaran tees 

granted 

Arca SGR Spa - - - - - - 

Aviva Assicurazioni Vita Spa 2 15.175 - 20.7 01 - 24.992 

Aviva Vita Spa - 1 - 48.9 13 - - 

Capital Money Spa - - - 9 - - 

Ge.Se.Ri. Spa in liquidazione - - - - - - 

Lombarda China Fund Management Company - - - - - - 

Lombarda Vta Spa - 54 - 152.0 02 - - 

Prisma Srl - - - - - - 

SF Consulting Srl - - - 2.0 87 - - 

Siderfactor Spa - 71.189 - 1 - - 

Sofipo Fiduciaire Sa - - - - - - 

SPF Studio Progetti Finanziari Srl - - - 26 - - 

Te x Fac tor Sp a in liquidazione - - - - - - 

UBI Assicurazioni Spa - 3.032 - 66.9 98 - - 

UFI Servizi Srl - - - 35 - - 

Total 2 89.451 - 290.772 - 24.992 

443

Principal income statement items with investees subject to significant influence 

Operating 

Other 

Dividends and Net commission Personnel 

Net interest 

income/expense administrative 

similar income inc ome expense 


s expenses 

Arca SGR Spa - 1.619 3.409 - 1 (30) 

Aviva Assicurazioni Vita Spa (481) - 6.553 (44) 374 (162) 

Aviva Vita Spa (465) 2.501 37.072 - (20) - 

Capital Money Spa - - (2.015) - 1 - 

Ge.Se.Ri. Spa in liquidazione - - - - - - 

Lombarda China Fund Management Company - - - - - - 

Lombarda Vta Spa (3.550) 14.979 38.283 - 3.161 (4.405) 

Prisma Srl - - 113 - 29 - 

SF Consulting Srl (2) - 536 - 61 - 

Siderfactor Spa 1.029 - 9 - 175 - 

Sofipo Fiduciaire Sa - - - - - - 

SPF Studio Progetti Finanziari Srl - - (78) - 6 (13) 

Tex Factor Sp a in liquidazione 122 - - - 257 - 

UBI Assicurazioni Spa (137) 120 19.495 (538) 4.829 (11.469) 

UFI Servizi Srl - - - - - (147) 

Total (3.484) 19.219 103.377 (582) 8.874 (16.226) 

444

PART I – Share based payments 


1. Description of payment agreements based on own equity instruments 

The expression “share based payment agreements” refers to situations in which the Bank receives 

services for which it grants share capital instruments as consideration. 

The transactions with which option rights on shares are granted to employees and/or directors 

are regulated by the IFRS 2, “Share-based payments”, the objective of which is to recognise the 

impact on earnings of those operations in the financial statements starting from the time when 

the agreement between the Bank and each person granted options is defined. 

The UBI Banca Group has nothing to report in this section of the notes to the financial 

statements because it makes no share based payments. 

445

Part L – Segment Reporting 

Some changes have been made compared to the previous year in terms of the grouping of the 

individual operating units present in the Group, in order to present the operating results and 

financial position in a manner which is more faithful to the reality of the distribution structure of 

the UBI Banca Group. 

Three segments have been identified, termed banking, non-banking financial and other 

companies as opposed to the four segments presented in past financial years. 

The banking segment comprises the nine network banks of the Group, IW Bank Spa, Banque de 

Depots et de Gestione Sa and UBI International Sa. 

The non-banking financial sector comprises Centrobanca Spa, UBI Leasing Spa, UBI Factor Spa, 

UBI Pramerica SGR Spa, Silf Spa, Prestitalia Spa, UBI Fiduciaria Spa, UBI Gestioni Fiduciarie 

SIM Spa and By You SpA and its subsidiaries. 

The “other companies” segment comprises UBI Banca Scpa, Ubi Sistemi e Servizi Scpa and all 

the remaining Group member companies. That segment also includes all the consolidation entries 

including all the intercompany eliminations with the exception of those relating to the purchase 

price allocations made to the relative individual segments. 

The algebraic some of the three segments identified in this manner represents the income 

statement and statement of financial position of the UBI Banca Group as at and for the year 

ended 31 st December 2010. 

Distribution by business segment: income statement as at 31.12.2010 

Corporate Centre 

(UBI, UBIS, 

Property companies 

+ all intercompany 

and consolidation 

entries) 

item/business segment 

Banking 

(Aggregate) 

Non-banking 

financial 

(Aggregate) 

To tal 

Net interest income 1.653.467 469.404 23.727 2.146.598 

Net commission income 1.068.880 203.146 -90.801 1.181.225 

Other expense/income 25.073 -8.238 41.308 58.143 

Gross income 2.747.420 664.312 -25.766 3.385.966 

Net impairment losses on loans and financial assets 

-367.381 -338.113 -51.159 -756.653 

Net financial income 2.380.039 326.199 -76.925 2.629.313 

Net income from insurance operations - - - - 

Net income from banking and insurance operations 2.380.039 326.199 -76.925 2.629.313 

Administrative expenses -1.915.735 -246.594 -58.999 -2.221.328 

Net provisions for risks and charges -6.021 -20.610 -578 -27.209 

Net impairment losses on property, equipment and 

investment property and intangible assets -140.817 -12.912 -93.508 -247.237 

Other net operating income/(expense) 70.775 43.122 -21.414 92.483 

Operating expenses -1.991.798 -236.994 -174.499 -2.403.291 

Profits (losses) of equity investments 225.042 181 -126.196 99.027 

Net impairment losses on goodwill - - 5.172 

- -5.172 

Profits (losses) on disposal of investments 1.237 132 13.089 14.458 

Pre-tax profit from continuing operations 614.520 84.346 -364.531 334.335 

Taxes on income for the year from continuing operations -189.217 -54.062 11.299 -231.980 

Post-tax profit (loss) from discontinued operations - - 83.368 83.368 

Profit for the period attributable to minority interests -63.728 -10.044 60.170 -13.602 

Profit for the year 361.575 20.240 -209.694 172.121 

446

Distribution by business segment: statement of financial position as at 31.12.2010 


Banking 

(Aggregate) 

Non-banking 

financial 

(Aggregate) 


(UBI, UBIS, Property 

companies + all 

intercompany and 

consolidation entries) 

Loans to banks 10.949.071 5.574.663 

Due to banks 18.787.359 0 

Net financial assets 1.288.499 751.675 9.930.203 

Loans to customers 70.458.541 33.905.443 -2.549.155 

Due to customers 48.146.108 624.635 9.895.414 

Securities issued 27.346.215 15.491.691 5.255.982 

Equity-accounted investees 1.680 602 366.612 

Minority interests 903.494 65.355 -6.089 

Profit for the year 434.322 34.815 -297.016 

The items "Loans to banks" and "Due to banks" have been stated in the three segments on the 

basis of the prevailing balance. 

The item "minority interests" in the "Banking" and "Non-banking financial" segments relates only 

to the portion of equity and of the profit for the year of the companies not wholly owned. It does 

not include minority interests and the part of consolidated items attributable to minority interests 

which have been attributed to the "Corporate Centre". 

447

The same information for the financial year 2009 is also presented in accordance with paragraph 

29 of IFRS 8. 

Distribution by business segment: 2009 income statement 



Banking 

(Aggregate) 

Non-banking 

financial 

(Aggregate) 

(UBI, UBIS, 

Property companies 

+ all intercompany 

and consolidation 

entries) 

To tal 

Net interest income 2.038.616 471.727 -14.715 2.495.628 

Net commission income 1.053.138 215.074 -138.037 1.130.175 

Other expense/income 70.953 -6.682 73.126 137.397 

Gross income 3.162.707 680.119 -79.626 3.763.200 

Net impairment losses on loans and financial assets -500.476 -367.424 -46.471 -914.371 

Net financial income 2.662.231 312.695 -126.097 2.848.829 

Net income from insurance operations - 20.049 - 20.049 

Net income from banking and insurance operations 2.662.231 332.744 -126.097 2.868.878 

Administrative expenses -2.099.072 -296.569 -19.281 -2.414.922 

Net provisions for risks and charges -24.040 -9.719 -3.173 -36.932 

Net impairment losses on property, equipment and 

investment property and intangible assets -155.637 -14.014 -98.701 -268.352 

Other net operating income/(expense) 206.562 61.711 -33.745 234.528 

Operating expenses -2.072.187 -258.591 -154.900 -2.485.678 

Profits (losses) of equity investments 17.044 17.798 736 35.578 

Net impairment losses on goodwill - - - - 

Profits (losses) on disposal of investments -128 - 2.988 

103.215 100.099 

Pre-tax profit from continuing operations 606.960 88.963 -177.046 518.877 

Taxes on income for the year from continuing operations -232.059 -45.875 41.049 -236.885 

Post-tax profit (loss) from discontinued operations 2.530 2.625 - 5.155 

Profit for the period attributable to minority interests -9.559 -12.297 4.808 -17.048 

Profit for the year 367.872 33.416 -131.189 270.099 

Distribution by business segment: statement of financial position as at 

31/12/2009 


Banking 

(Aggregate) 

Non-banking 

financial 

(Aggregate) 


(UBI, UBIS, Property 

companies + all 

intercompany and 

consolidation entries) 

Loans to banks 20.725.436 

Due to banks 18.939.479 3.832.127 

Net financial assets 1.370.039 673.846 5.244.272 

Loans to customers 67.920.378 33.922.600 -3.835.726 

Due to customers 48.770.452 778.180 3.316.329 

Securities issued 34.565.855 8.779.535 1.004.054 

Equity-accounted investees 1.605 679 411.659 

Minority interests 760.651 74.485 103.206 

Profit for the year 367.872 33.416 -131.189 

448

Disclosures concerning the fees of the independent auditors and services 

other than auditing in compliance with Art. 149 duodieces of CONSOB 

(Italian securities market authority) Issuers’ Regulations. 

In accordance with Art. 149 duodieces of Consob Issuers’ Regulations, information concerning 

payments made to the independent auditors KPMG Spa and companies belonging to same 

network for the following services is given in the table below. 

1) auditing services which include: 

• audit of the annual accounts for the purposes of expressing a professional opinion; 

• review of the interim accounts. 

2) certification services which include appointments where the auditor assesses a specific 

element, the determination of which is performed by another who is responsible for it, by 

employing appropriate criteria in order to furnish a conclusion which gives the recipient a 

measure of the reliability of that specific element; 

3) tax consultancy services; 

4) other services. 

The fees presented in the table relating to the financial year 2010, are those contractually agreed, 

inclusive of any indexing (but not of out-of-pocket expenses, nor of supervisory authority 

contributions and VAT). 

Pursuant to the regulations cited, payments made to possible secondary auditors or to firms 

belonging to the respective networks are not included. 

Type of service 

Firm providing the service 

Recipient of the 

service 

Fees 

(thousands 

of euro) 

Auditing 

KPMG Spa, KPMG Sa, KPMG 

LLP, KPMG Sarl 

(*) 

4.013 

Certification services 

KPMG Spa, KPMG Sa, KPMG 

LLP 

(**) 

1.731 

Tax consultancy services KPMG LLP BDG Singapore Pte Ltd 

Other services: 

Support with project activity for the validation of 

internal models adopted for the assessment of Basel 

2 “first pillar” risks. 

Advisory services (risk assessment and gap 

analysis) concerning the project for compliance with 

internal policy for trading in financial instruments. 


analysis) concerning the model for the management 

of hedge accounting activities. 


analysis) concerning the operational management of 

derivative instruments. 

Other services 

Total 

6 

2.483 

KPMG Advisory Spa UBI Banca ScpA 940 




KPMG Advisory Spa, KPMG 

Spa, KPMG Sa 

UBI Banca Scpa, UBI 

Sistemi e Servizi Scpa, 

IW Bank Spa, UBI Factor 

Spa, Prestitalia Spa, 

Centrobanca Spa, 

Banque de Depots et de 

Gestion Sa 

493 

8.233 

449

(*) UBI Banca Scpa, Banca 24/7 Spa, Banca Carime Spa, Banca di Valle Camonica Spa, Banca Popolare Commercio e 

Industria Spa, Banca Popolare di Ancona Spa, Banca Popolare di Bergamo Spa, UBI Sistemi e Servizi Scpa, BPB 

Immobiliare Srl, UBI Leasing Spa, UBI Pramerica SGR SpA, Centrobanca SpA, Centrobanca Sviluppo Impresa SGR 

SpA, UBI Factor Spa, Coralis Rent Srl, IW Bank Spa, SBIM Spa, Solimm Spa, Prestitalia Spa, UBI Gestioni Fiduciarie 

SIM Spa, SILF Spa, UBI Fiduciaria Spa, Banque de Depots et de Gestion Sa, BDG Singapore Pte Ltd, UBI Banca 

International Sa, InvestNet International Sa, InvestNet Italia Srl, Lombarda Lease Finance 3 Srl, UBI Finance Srl, UBI 

Finance 3 Srl, UBI Lease Finance 5 Srl, UBI Management Company Sa, UBI Trustee Sa. 

(**) UBI Banca Scpa, Banca 24/7 Spa, Banca Carime Spa, Banca di Valle Camonica Spa, Banca Popolare Commercio e 

industria Spa, Banca Popolare di Ancona Spa, Banca Popolare di Bergamo Spa, UBI Sistemi e Servizi Scpa, UBI Leasing 

Spa, UBI Pramerica SGR Spa, Centrobanca Spa, Centrobanca Sviluppo Impresa SGR Spa, UBI Factor Spa, IW Bank 

Spa, SBIM Spa, Solimm Spa, UBI Gestioni Fiduciarie SIM Spa, SILF Spa, UBI Fiduciaria Spa, BDG Singapore Pte Ltd, 


450

UBI Banca Group

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