annual report - Banco Popolare

Transcription

A N N U A L R E P O RT
2009
Annual Report for financial
Year 2009
Banco Popolare Società Cooperativa
Registered office and Headquarters: Piazza Nogara, 2 - 37121 Verona
Share Capital as at 31st December 2009: euro 2,305,735,923.60 fully paid
Tax code, VAT no. and Registration no. in the Verona Enterprise Registry: 03700430238
Member of the Interbank Fund for Deposit Protection and of the National Guarantee Fund
Parent company of Gruppo Bancario Banco Popolare
Registered in the Banking Groups Registry
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CORPORATE BOARDS, MANAGEMENT AND
AUDITING COMPANY AS AT 31 DECEMBER 2009
Supervisory Board
Chairman
Deputy Vice Chairman
Vice Chairman
Directors
Carlo Fratta Pasini
Dino Piero Giarda
Maurizio Comoli (*)
Marco Boroli (*)
Giuliano Buffelli (*)
Guido Duccio Castellotti
Costantino Coccoli (*)
Gabriele Camillo Erba (*)
Gianni Filippa (*)
Andrea Guidi (*)
Pietro Manzonetto (*)
Maurizio Marino (*)
Mario Minoja (*)
Gian Luca Rana (*)
Claudio Rangoni Machiavelli (*)
Fabio Ravanelli (*)
Alfonso Sonato (*)
Angelo Squintani (*)
Sandro Veronesi (*)
Tommaso Zanini (*)
(*) Independent directors under art. 6 of the Corporate Governance Code adopted by Banco Popolare
Management Board
Chairman
Chief Executive Officer and Vice Chairman
Directors
Vittorio Coda
Pier Francesco Saviotti
Franco Baronio
Alfredo Cariello
Aldo Civaschi (**)
Luigi Corsi (**)
Domenico De Angelis
Maurizio Di Maio
Maurizio Faroni
Giorgio Papa
Roberto Romanin Jacur (**)
Andrea Sironi (**)
(**)Independent directors under art. 6 of the Corporate Governance Code adopted by Banco Popolare
Board of Advisors
Standing
Marco Cicogna
Luciano Codini
Giuseppe Bussi
Alternate
Aldo Bulgarelli
Attilio Garbelli
Manager in charge of preparing
corporate financial reports
Gianpietro Val
Auditing firm
Reconta Ernst & Young S.p.A.
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TABLE OF CONTENTS
Notice to convene ........................................................................................................................................................... 7
EXECUTIVE REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
Group Structure ............................................................................................................................................................. 12
Group Geographical Network ........................................................................................................................................ 14
Group financial highlights and ratios ............................................................................................................................. 16
Report on Group operations .............................................................................................................................................. 19
Economic backdrop ........................................................................................................................................................ 21
Noteworthy events for the year ....................................................................................................................................... 23
Banking activities ............................................................................................................................................................ 34
Banche del Territorio - Retail Banks ............................................................................................................................. 34
Investment & Private Banking, Asset Management ....................................................................................................... 56
Leasing and Factoring .................................................................................................................................................. 66
Corporate Center and Other ........................................................................................................................................ 67
Results ........................................................................................................................................................................... 73
Credit intermediation ................................................................................................................................................... 78
Financial assets ............................................................................................................................................................ 83
Investments in associates and companies subject to join control .................................................................................. 84
Shareholders’ equity and solvency ratios...................................................................................................................... 85
Consolidated income statement ................................................................................................................................... 86
Rating and stock performance ..................................................................................................................................... 90
Risk management ........................................................................................................................................................... 92
Planning, auditing and service activities ........................................................................................................................ 103
Human resources ...................................................................................................................................................... 103
Internal audit ............................................................................................................................................................. 108
Compliance ............................................................................................................................................................... 109
Technological and administrative services .................................................................................................................. 109
Technological investments and projects ..................................................................................................................... 114
Communications ....................................................................................................................................................... 122
Performance of the main Companies of the Group ........................................................................................................ 125
Mutuality and shareholders initiatives ........................................................................................................................... 152
Operational outlook ..................................................................................................................................................... 166
Declaration of the Chief Executive Officer and of the Manager responsible for preparing corporate financial reports .... 169
Independent Auditors’ Report on the consolidated financial statements .......................................................................... 173
Consolidated financial statements ................................................................................................................................... 177
Consolidated Balance sheet .......................................................................................................................................... 178
Consolidated Income statement .................................................................................................................................... 179
Statement of Consolidated Comprehensive Income ....................................................................................................... 180
Statement of Changes in consolidated Shareholders’ Equity........................................................................................... 181
Consolidated statement of cash flows ............................................................................................................................ 183
Notes to the consolidated financial statements ................................................................................................................ 185
Section A – Accounting policies .................................................................................................................................. 186
Section B – Information on the consolidated Balance sheet ......................................................................................... 224
Section C – Information on the consolidated Income statement ................................................................................... 272
Section D – Consolidated comprehensive income ....................................................................................................... 288
Section E – Information on risks and relative hedging policies..................................................................................... 289
Section F – Information on consolidated capital .......................................................................................................... 357
Section G – Business combinations ............................................................................................................................. 364
Section H – Information on transactions with related parties ........................................................................................ 370
Section I – Share-based payments ............................................................................................................................ 374
Section L – Segment reporting .................................................................................................................................... 381
Attachments .................................................................................................................................................................... 387
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Soc. Coop. - Sede sociale in Verona, Piazza Nogara, 2 - Capitale sociale Euro 2.305.735.923,60 i.v.
Codice fiscale, Partiva I.V.A. e numero di iscrizione al Registro Imprese di Verona 03700430238
Iscritto all'Albo delle Banche al n. 5668 - Aderente al Fondo Interbancario di Tutela dei Depositi e al Fondo Nazionale di Garanzia
Capogruppo del Gruppo Bancario Banco Popolare - Iscritto all’Albo dei Gruppi Bancari
GENERAL SHAREHOLDERS’ MEETING
NOTICE
TO
CONVENE
Pursuant to art. 22 of the Articles of Association, the General Shareholders’ meeting shall be convened on first call on
Friday, 23rd April 2010, at 9 o’clock, at the Novara's headquarters (Via Negroni, 12) to discuss the following
AGENDA
1)
2)
3)
4)
5)
6)
7)
8)
Report of the Management Board, the Supervisory Board and the Auditing firm on financial year 2009; approval of the
annual report as at 31st December 2009, under articles 20, paragraph 3, item 3, and 41.3 letter a) of the Articles of
Association; presentation of the Consolidated Financial Statements and the Social Report
Resolution on profit allocation and distribution
Calculation of the total amount to be allocated to charity, social solidarity and public interest initiatives, in compliance
with art. 4 bis of the Articles of Association
Authorization to purchase treasury shares to support the stock liquidity
Approval of a stock option plan devoted to employees of the companies of Gruppo Banco Popolare as part of the
corporate bonus envisaged by the national collective agreement and authorization to purchase treasury shares to
provide for the plan
Compensation of Supervisory board members, including Directors filling special offices, under art. 39.12 of the
Articles of Association
Election of ten members of the Supervisory Board for financial years 2010-2011-2012, including the Chairman and
Vice Chairmen
Appointment of the Board of Arbitrators for financial years 2010-2011-2012
Should the meeting fail to reach the legal number, in compliance with art. 22 of the Articles of Association, it shall be held
on second call on Saturday 24th April 2010 at 9 o’clock in Novara, at the Sporting Village, Piazzale dello Sport Olimpico,
2, to resolve on the above agenda in compliance with articles 24 and 25 of the Articles of Association.
---------------------------------Meeting attendance (art. 23 of the Articles of Association)
Shareholders who were entered in the Shareholders’ record at least 90 (ninety) days before and who, at least 2 (two)
working days before the meeting’s first call, namely by 21st April 2010, have given “notice” to Banco Popolare through their
authorized intermediaries as provided for by art. 85, paragraph 4, Legislative Decree n. 58 of 24/2/98 (T.U.F.) and art. 23 of
the joint Order by the Bank of Italy and Consob of 22/2/08, have the right to participate in the Shareholders’ meeting.
Shareholders - whose shares are already deposited in a custody and administration account with the Banks of the Group,
and precisely
- Banca Popolare di Verona – S.Geminiano e S.Prospero
- Banca Popolare di Lodi
- Banca Popolare di Novara
- Banca Popolare di Crema
- Credito Bergamasco
- Banca Popolare di Cremona
- Banca Aletti & C.
- Banca Caripe
- Cassa di Risparmio di Lucca Pisa Livorno
and as such have already been dematerialized - must in any case give specific instructions that the “notice” be executed,
and obtain an immediate copy thereof, to be used as admission ticket to the Shareholder’s meeting.
Shareholders whose shares are deposited with other authorized intermediaries, must instruct the latter to execute the above
“notice” under the mentioned Consob Resolution, and obtain the relevant copy thereof.
Shareholders in possession of shares that have not been dematerialized yet, must turn them in to Banco Popolare, to the
above banks of the Group or to other authorized intermediary for their dematerialization, and give instructions for the
execution of the necessary “notice” to participate in the Shareholders’ meeting.
Whereas the share capital totals Euro 2,305,735,923.60, subdivided into 640,482,201 shares, we specify that, under the
bylaws, each Shareholder is entitled to one single vote, irrespective of the number of shares in his/her possession.
Shareholders are entitled to be represented by another Shareholder at the meeting, provided the latter is not a member of the
Supervisory or Management boards, or employee of Banco Popolare or member of the managing or auditing boards or
employee of the companies directly or indirectly controlled by Banco Popolare, or does not fall under one of the
incompatibility cases envisaged by law, and who is in possession of a written proxy valid under the law, duly filled out and
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whose signature has been authenticated by a public officer or by an employee of Banco Popolare or of one of the above
mentioned banks of the Group. The form at the foot of the “notice” issued to the Shareholder by one of the Group banks or
by another authorized intermediary can be used for this purpose.
Each Shareholder may represent only one other Shareholder by proxy, with the exception of trustees.
Pursuant to art. 26 of the Articles of Association, the Chairman of the Supervisory Board, in his capacity as Chairman of the
Shareholders’ Meeting, has full powers to verify the validity of the proxies, and in general the shareholders’ actual right to
attend the Shareholders’ Meeting, so as to verify whether the meeting has been duly formed, and if the legal number
necessary to pass resolutions has been reached. To this purpose, all Shareholders concerned may submit their proxies at
Banco Popolare’s Head offices, also by way of the Group’s bank branches, by 19th April 2010. Proxies submitted after the
above deadline or at the Shareholders’ meeting must in any case be filled out and authenticated along the same modalities
described above.
Appointment of five members of the Supervisory Board: presentation of candidate slates (art. 39 of the Articles of
Association)
With regard to the expiration of the term of the Supervisory Board members appointed by way of the merger deed, the next
Shareholders’ Meeting shall have to elect 10 (ten) members of the Supervisory Board, including the Chairman and Vice
Chairmen.
Pursuant to our bylaw provisions:
– 4 (four) candidates must be chosen from among shareholders residing in the provinces of BPI’s Original Franchise, i.e.
in the provinces of Lombardy (other than Brescia, Bergamo and Mantua), Tuscany, Liguria and Lazio, Abruzzo, Sicily
and Bologna (Imola area);
– 6 (six) candidates must be chosen from among shareholders residing in the provinces of BPVN’s Original Franchise –
outside of BPI’s Original Franchise, and in particular in the provinces of Veneto, Emilia Romagna (other than Bologna,
Imola area), Piedmont and Valle d’Aosta.
In any case, out of the twenty members of the Board, eight must be residing in the provinces of BPI’s Original franchise –
and among them at least five must be resident or domiciled in the province of Lodi – twelve must be residing in the
provinces of BPVN’s Original Franchise – and among them at least five must be resident or domiciled in the province of
Verona and at least three must be resident or domiciled in the province of Novara.
They shall remain in office for three financial year and their term shall expire on the date of the following General
Shareholders’ Meeting provided for in paragraph two or art. 2364 bis of the civil code. They can be re-elected.
The Members of the Supervisory Board are elected based on slates in compliance with our Articles of Association and
pursuant to existing regulatory and legal requirements.
Now, therefore, pursuant to art. 39.1 of the Articles of Association, each list must be submitted directly, or jointly with the
Supervisory Board, by at least 500 Shareholders with voting rights, irrespective of the total shareholding percentage they
hold, or by shareholders who, individually or jointly, hold an interest representing at least 0.50% of the share capital of
Banco Popolare.
Under penalty of inadmissibility:
a) candidate lists must be arranged in numerical sequence and, on penalty of nullity, must be filed with the registered
office of Banco Popolare at least fifteen days before the date of the general meeting’s first call, i.e., by 8th April 2010. In
order to give evidence of owning the number of shares required to present the lists, shareholders must sign the list and
present a copy of the certificates issued in compliance with existing laws and regulations. The signature of each
presenting shareholder must be certified under the law or the shareholder must sign before a duly authorized employee
of the Company or of the Group banks;
b) in compliance with article 38.1.1, in the event that 10 (ten) Members of the Supervisory Board are to be elected, the
first candidate of the list shall be designated among shareholders residing in BPVN’s Original Franchise (resident or
domiciled in the province of Verona), the second in BPI’s Original Franchise (resident or domiciled in the province of
Lodi), the third in BPVN’s Original Franchise (resident or domiciled in the province of Novara), the fourth in BPI’s
Original Franchise, the fifth and sixth in BPVN’s Original Franchise, the seventh in BPI’s Original Franchise, the eighth
in BPVN’s Original Franchise, the ninth in BPI’s Original Franchise, the tenth in BPVN’s Original Franchise;
c) each shareholder may only present and vote one list of candidates, and each candidate may only run in one list, under
penalty of ineligibility;
d) lists must indicate at list two candidates, and in any case a number of candidates not exceeding the number of Board
members to be elected;
e) each list must be supplemented by the relevant documents, to be filed within the list presentation deadline (8th April
2010) at the registered offices of Banco Popolare, providing complete information on the candidates’ personal and
professional characteristics, together with the statements with which the single candidates accept their candidacy, and
state on their own responsibility that no ineligibility and incompatibility causes exist, that they meet the requirements
prescribed for the office of Member of the Supervisory Board by the applicable law, regulations and corporate
governance provisions and specify the administration and control offices filled in other Companies.
Any list of candidates failing to fully comply with the above procedures shall be deemed not presented.
Pursuant to art. 39.5 of the Articles of Association, the offices of Chairman, Deputy Vice Chairman and Vice Chairman shall
go to the first 3 (three) candidates indicated in the list who obtain the highest number of votes.
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In the event that upon expiration of the term specified in the above item a) only one list of candidates is presented, or only
lists submitted by shareholders who under the applicable laws are deemed connected, Banco Popolare shall immediately
inform the market that additional lists can be presented up to the 5th day after said date, with the consequent lowering of the
thresholds provided for under art. 144 sexies, paragraph five of the Issuers Regulation.
In compliance with applicable regulations, regularly presented lists shall be made available to the public - without delay,
and in any case at least ten days before the General Shareholders’ Meeting - at the registered offices of Banco Popolare and
of Borsa Italiana S.p.A., and shall also be published on the Company website (www.bancopopolare.it).
Pursuant to art. 39.7 of the Articles of Association, should no list be presented within the specified term, the General
Meeting shall decide by relative majority of the attending Shareholders.
Without prejudice to bylaw regulations, for the purpose of harmonizing the activities necessary to prepare and present the
lists of candidates for the appointment of Supervisory Board members, Banco Popolare approved specific operational
procedures. Moreover, to streamline the procedure to present lists of candidates, Heads of Branches, Business Area
Managers and specific Executives of Banco Popolare, of the retail banks Banche del Territorio and of Banca Aletti have
been authorized to authenticate the signature of the Shareholder presenting the list.
The relating documentation is filed with the registered offices of Banco Popolare in Verona, Piazza Nogara, 2 (Ufficio Soci e
Azioni - Shareholding office – tel. 045/8675226), at the disposal of Shareholders; it has also been made available on the
Company website (www.bancopopolare.it).
*****
In compliance with the existing laws, the executive reports and the required documentation covering the proposals on the
agenda shall be filed with Borsa Italiana fifteen days before the General Meeting and published on the Company’s website
(www.bancopopolare.it); moreover, the report on Banco Popolare’s acceptance of the Code of Conduct for Listed
Companies shall be made available in compliance with the existing regulations and laws.
Shareholders are entitled to receive a copy of the documents after their filing.
This notice to convene is published in compliance with legal requirements and is made available on Banco Popolare’s
website.
Verona, 16th March 2010
On behalf of the MANAGEMENT BOARD
The Chairman
(prof. Vittorio Coda)
Published on the Official Gazette of the Italian Republic - Section II n. 34 of 20th March 2010, in compliance with the
corporate Articles of Association
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Executive report and
consolidated financial statements for the year
Group Structure
Aletti & C. Banca di
Investimento Mobiliare
Aletti Gestielle SGR
Aletti Gestielle Alternative SGR
Banca Aletti & C. (Suisse)
Ebanca
Egestioni SGR
Italfortune International Advisors
B.P.I. International (UK)
Valori Finanziaria
Aletti Fiduciaria
Nazionale Fiduciaria
Banca Italease
Mercantile Leasing
Italease Network
Factorit
Italease Finance
Release
12
Banca Popolare di Verona S.Geminiano e S.Prospero
Banca Popolare di Lodi
Banca Popolare di Novara
Credito Bergamasco
Cassa di Risparmio di Lucca Pisa Livorno
Banca Popolare di Crema
Banca Popolare di Cremona
Banca Caripe
Società Gestione Crediti BP
Società Gestione Servizi BP
Holding di Partecipazioni
Finanziarie Banco Popolare
Bipielle Real Estate
Immobiliare BP
Tecmarket Servizi
Bipielle International Holding
AT Leasing Romania
Banco Popolare eská Republika
Banco Popolare Croatia
Banco Popolare Hungary
Banco Popolare Luxembourg
Banche del Territorio (Local retail banks)
Investment & Private Banking, Asset Management
Leasing and Factoring
Others
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GROUP GEOGRAPHICAL NETWORK
Branches of Gruppo Banco Popolare in Italy
Trentino Alto Adige: 24
Lombardia: 585
Valle d’Aosta: 6
Friuli-Venezia Giulia: 16
Piemonte:
239
Veneto: 329
Emilia-Romagna: 255
Marche: 9
Liguria: 136
Toscana: 240
Umbria: 13
Abruzzo: 50
Molise: 8
Lazio: 70
Puglia: 6
Campania: 62
Basilicata: 3
Calabria: 3
Sicilia: 143
Sardegna: 1
The subsidiaries of Gruppo Italease are not included.
14
Branches of Gruppo Banco Popolare (*)
N
Banca Popolare di Verona – S.Geminiano e S.Prospero
547
Credito Bergamasco
251
428
Banca Caripe
51
497
237
44
70
Banca Aletti
36
Efibanca
Total
5
2,166
(*) Excluding treasury branches and Gruppo Italease branches
Foreign operations
Foreign operations comprise the subsidiaries BP Luxembourg, BP Croatia, BP eská Republica, BP Hungary, AT Leasing
Romania, a London branch and Banca Aletti Suisse.
In Asia, the Group is present with Representative Offices in India (Mumbai), China (Beijing, Shanghai and Hong Kong) and
Russia (Moscow).
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GROUP FINANCIAL
HIGHLIGHTS AND RATIOS
Financial highlights
Shown below are the Group’s main financial highlights and ratios, calculated based on reclassified financial statements.
(in millions of Euros)
Income statement
Net interest, dividend and similar income
Net fee and commission income
Net interest and other banking income
Operating expenses
Profit from operations
Income (loss) before tax from continuing operations
Net income (loss) for the year
31/12/2009
31/12/2009
without Italease
31/12/2008 (*)
Changes
2,095.0
1,228.1
3,690.7
2,458.4
1,232.3
502.0
267.0
2,056.4
1,215.0
3,525.3
2,391.7
1,133.6
482.6
202.4
2,226.6
1,261.5
3,740.5
2,328.7
1,411.8
(531.3)
(333.4)
-7.6%
-3.7%
-5.8%
2.7%
-19.7%
(*) Adjusted to comply with IFRS 5 and with the changes introduced by the update of the circular letter n.262/2005 (Banks’ Financial Statements).
31/12/2009
31/12/2009
without Italease
31/12/2008 (*)
Changes
Balance sheet
Total assets
Loans to customers (gross)
Financial assets and hedging derivatives
Shareholders’ equity
135,709.1
99,485.7
14,607.6
11,532.8
125,490.5
88,871.9
14,797.5
11,460.2
121,327.2
83,768.0
12,593.1
9,784.0
3.4%
6.1%
17.5%
17.1%
Customer financial assets
Direct customer funds
Indirect customer funds
- Assets under management
- Mutual funds and Sicav
- Managed accounts invested in securities and funds
- Insurance policies
- Assets under custody
105,183.1
77,212.6
30,974.7
9,996.0
9,908.7
11,070.0
46,237.9
97,880.1
93,131.0
75.090.7
31,301.2
11,867.2
10,959.6
8,474.5
43,789.5
5.1%
2.8%
-1.0%
-15.8%
-9.6%
30.6%
5.6%
20,375
2,292
20,003
2,253
20,410
2,265
Operational structure
Average number of employees (**)
Bank branches
(*)Adjusted to comply with changes introduced by the update of circular letter n.262/2005 (Banks’ Financial Statements).
(**) Monthly arithmetic mean .
16
Group financial ratios and other data
31/12/2009
Profitability ratios (%)
ROE
Net interest, dividend and similar income / Net interest and other
banking income
Net commission income / Net interest and other banking income
Operating expenses / Net interest and other banking income
31/12/2009
without Italease
31/12/2008
2.4%
1.8%
-3.3%
56.8%
58.3%
59.5%
33.3%
66.6%
34.5%
67.8%
33.7%
62.3%
Operational productivity (€/1000)
Customer loans (gross) per employee
Net interest and other banking income per employee
Operating expenses per employee
4,882.7
181.1
120.7
4,442.9
176.2
119.6
4,104.2
183.3
114.1
Credit quality ratios (%)
Net NPLs/ Customer loans (net)
Net substandard loans / Customer loans (net)
Net NPLs / Shareholders’ equity
2.79%
5.70%
23.05%
1.73%
3.77%
12.95%
1.22%
2.50%
10.09%
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Verona, Ponte Pietra
Report on Group operations
Head ofce of Banca Popolare di Verona, Verona
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ECONOMIC BACKDROP
World scenario
In the first part of 2009 the world bore the brunt of the financial crisis that had broken out in 2007 and has been deepening
in second half 2008. According to available estimates, for the first time in its history the world GDP reported a negative
growth rate, brushing an annual 0.6% drop. In 2009, the world trade fell by 12.5% year on year, as compared with a 2.5%
growth in 2008.
The economic crisis has been stanched through massive monetary and fiscal policy measures, and yet, although the general
climate showed some signs of improvement in the second quarter, there has been no clear indication that a widespread
economic growth recovery was actually taking place until the end of summer. The turning point came in the third quarter,
when GDP returned to positive growth both in the US and in Europe, which technically marked the end of the recessive
phase. The climate of confidence across the major industrialized areas remained positive up to year end, bolstering the
favorable sentiment that had already emerged, although the appearance of conflicting signals prevented a recovery from
taking root, especially in most highly industrialized countries.
Recession produced important effects that are still weighing against the frail economic recovery underway, thus dampening
its import. The labor market in all major industrialized countries grew weaker during the year, slumping back to structurally
high unemployment rates (10% in USA, 9.8% in EMU).
Based on recent data, the US reported an annual 2.5% drop in GDP growth rate, driven down by consumer spending,
which fell by 0.6% annually, non residential private investments, down by 17.6%, and inventory, which dropped by 0.9%.
A weaker dollar favored the recovery of foreign trade: net exports, with a 1.1% contribution, had a positive impact on GDP,
also thanks to the 15% fall in imports.
Among the other advanced economies, Japan was hard hit by recession, despite the unexpected growth recovery in the
second quarter of 2009 spurred by hefty public investments, and at year end it reported an annual GDP contraction of
5.5%, with consumer prices still on a deflationary trend dropping by 0.9% year on year.
The recessive phase proved so deep that it affected also emerging countries, which still reported a positive growth rate, yet
clearly much lower than the previous year. Based on available data, China and India reported an annual GDP growth rate of
respectively 8.7%, driven by the strong acceleration posted in the second quarter bolstered by the significant economic
stimulus measures adopted at the beginning of the period, and 6.7%. Russia was affected by falling oil prices, which drove
GDP down by 7.9% annually.
In the Euro Area, after a decline in the first part of the year, GDP started growing again in the third quarter, and the
improving trend continued through December. As a result, GDP decreased by 4.1% annually in 2009 in the Euro Area (4.2% in the EU27 area), driven down by a negative contribution of consumptions, which fell by about 1.1%, and of
investments, which decreased by about 10.1%. Finally the contraction of international trade affected exports, which fell by
about 14.7% over the previous year. In some EU Countries, among which Germany and France, GDP was back to positive
already in the second quarter of the year. Despite the weak economic cycle, the area posted a positive inflation rate (+0.3%
year on year at the end of 2009) also owing to an upswing towards year-end.
Italy
Similarly to the other main Euro Area economies, the official data for the last two quarters of the year confirmed that also the
Italian economy is showing signs of recovery. After a significant fall in the first half of the year and following five running
quarters of contraction, GDP in Italy started to grow quarter to quarter between July and September (+0.6% QoQ and -4.6%
YoY). Globally however, in 2009 GDP fell by 5.0% annually, as a result of the negative contribution made by household
spending, which fell by 1.8%, and gross fixed investments, down by -12.1%. On the contrary, with an increase of 1.1%,
public spending made a positive contribution – owing to a budget policy supportive of the weak economic cycle. As a
whole, in 2009 domestic demand, net of inventory, decreased by 3.5%. The crisis of international trade caused an annual
decrease of 19.1% in Italian exports, whose negative contribution to GDP came close to 1.2%.
The effects of the crisis affected the labor market throughout the period, with a greater impact towards the end of the year,
when the jobless rate exceeded 8%. The weak economic cycle favored a sideways movement of the inflation rate, which
however towards the end of the period became much livelier and at year-end published a growth rate of 1.0% with regard
to the consumer price index referring to the entire domestic community (so called NIC), and of 1.1% year on year with
respect to the harmonized consumer price index (HCPI).
Public accounts were affected by the expansionary fiscal policies that were adopted to support domestic demand and stave
off the effects of the recession: in 2009 government spending (85.9 billion euro) increased by 31.6 billion euro over 2008
(54.3 billion euro), reaching 5.6% of nominal GDP.
21
Monetary and financial markets
In first half 2009, the Governments and Central Banks of the major countries sustained demand and employment with
highly expansionary fiscal and monetary policies. In keeping with the intention declared by the G20 to deeply reform the
current financial system, G8 leaders agreed on the need to develop a set of principles and common rules on propriety,
integrity and transparency in international economic and financial activities. In the second half of the year, having given the
interest rate lever full play, the monetary authorities of the major industrialized countries resorted to quantitative easing
measures to keep on supporting the banking industry, while starting to think about the most appropriate “exit strategy”
actions, to back away from the emergency phase that had led to the adoption of extraordinary monetary measures.
No doubt, the timely and massive intervention of fiscal and monetary authorities at the end of 2008 prevented the crisis
from spreading in 2009. Yet it also gave rise to two highly negative effects: on the one side the creation of a large monetary
base by Central Banks represented a cause of potential price acceleration; on the other side, widespread public
interventions to sustain real economy produced a rapid and marked deterioration of public finance.
With regard to monetary policy, the Federal Reserve first drove FED Fund rates to 0.25% and the discount rate to 0.50%
(December 2008), then kept them unchanged until the end of the year. The European Central bank on 13th May 2009 cut the
main refi rate by other 25 bps to a new record low of 1%, and it narrowed the standing facilities corridor available to eligible
counterparties on their own initiative from 200 to 150 bps. Credit support by Central Banks was crucial, and as mentioned it
caused a hefty increase in base money: in the Euro Area, in October M1 had grown by 11.8% annually.
Short term rates in major industrialized countries moved in tune with highly expansionary monetary policies. In the US, the
interbank rate fell in line with the official rate (0.25%). In the Euro Area, from July the 3-month Euribor dropped below the
base rate, and at the end of 2009 closed at about 0.70%. Towards the end of the period Eonia went so far as to hit a record
low of 0.32%. As to lending terms, surveys carried out by Central Banks suggested that in the third quarter lending criteria to
households and businesses in the United States and in the Euro Area became less strict. The return to a less negative
economic climate triggered an adjustment phase also on the government securities market: during the year in the Euro area
yield spreads over ten-year German Bunds, while still high, yet dropped significantly with respect to the peaks reached at
the beginning of 2009.
Italian banking industry
The deep crisis did not miss the domestic banking industry, although its impact was slightly less dramatic than in the other
primary European countries. While in 2009 within the Euro area the recession phase was characterized by a significant
general slowdown of total loans to business companies, the contraction was definitely less marked within the Italian
banking sector, which also retained a positive dynamic of loans to the private sector in general, despite the appreciable
deceleration of their growth rate, also owing to a declining demand for loans for productive investments by enterprises.
Moreover, market conditions and the difficulties caused by the crisis obliged the banking industry to adopt more stringent
lending criteria.
In greater detail, according to preliminary data, in December total loans to Italian residents belonging to the private sector
published a trend growth rate of 1.7%; household and non-financial business loans grew by 0.5% annually. With respect to
maturities, short term loans (one year or below) in December decreased by 7.5% over the previous year, while medium/long
term loans (above one year) grew by 4.0% annually. At the end of 2009, loans to households to purchase homes posted a
recovery, with a trend growth rate in December of 6.1%. The aggregate’s breakdown into households and businesses shows
that the dynamic of loans to non-financial businesses in December reported a 2.4% decline as compared to the end of
2008. Loans to consumer households instead grew by 6.9%.
A persisting risk aversion, supported by the sideways drift of the monetary market yield curve, favored bank deposits over
other market instruments, especially with regard to its more liquid component. At year-end, bank total customer funds,
represented by resident customer deposits and bonds, grew by 9.3% year on year. As to the single constituents, resident
customer deposits rose by 8.0%, while bank bonds grew by 11.2%. Checking accounts went up by 11.7% over the end of
2008. On the contrary, retail repos diminished in value: in December they posted a drop a tad below 24%. According to the
most recent available data, in November foreign deposits were trending down (-12.8%).
The weighted average interest rate for total loans to households and non-financial businesses went further down: in
December 2009 it was standing at 3.76% (its record low), 233 bps below the December 2008 level. The interest rate on
euro-denominated deposits of households and non-financial businesses in December was 0.68%, as compared with 1.99%
one year before. For euro-denominated checking accounts, the interest rate was 0.31% as compared with 1.53% a year
before. The average interest rate on customer funds (households and non-financial businesses) at the end of 2009 was
standing at 1.59% against 3.00% in December 2008.
In December 2009, the spread between the average household and non-financial business lending and deposit rates stood
at 217 bps, shedding about 92 bps with respect to December 2008. In December, the mark-up (the spread between the
average interest rate on household and non-financial business loans and the average BOT yield) went down to 310 bps
from 396 bps in December 2008, while the mark-down (spread between the average Euro-denominated interest rate on
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deposits of households and non-financial business and the average BOT yield) stood at -93 bps against -87 bps in December
2008.
Finally, according to preliminary data, in December, owing to the deteriorated economic cycle, gross non-performing loans
across the Italian banking sector totaled 59.0 billion euro, i.e., 17.7 billion more than in December 2008, reporting a 42.8%
annual change. The NPL to loan ratio was 3.3%, up from 2.4% in December 2008. In December 2009, NPLs net of writedowns came in at 35.9 billion euro, up by 14.3 billion from the end of the previous year.
NOTEWORTHY EVENTS FOR THE YEAR
Illustrated below are the most noteworthy events in financial year 2009.
Agreement on Gruppo Banca Italease
On 15th March 2009 the Board of Directors of Banco Popolare, Banca Popolare dell’Emilia Romagna (BPER), Banca Popolare
di Sondrio (BPS) and Banca Popolare di Milano (BPM) approved a combined operation to reorganize and restructure the
business activities of the Group led by Banca Italease, to be implemented through:
x the launch by Banco Popolare of a voluntary tender offer (VTO or Offer) on all outstanding common shares of
Banca Italease, not directly or indirectly held by Banco Popolare, performed pursuant to and to the effect of
articles 102 and 106, paragraph four of Legislative Decree n. 58 of 24th February 1998. The aim of the VTO was
to take control of Banca Italease;
x the concentration, after completion of the VTO, of part of the assets and liabilities of Gruppo Banca Italease in
two newly formed financial companies - “Newco One” and “Newco Two” - that are to receive respectively part
of the non-performing and performing assets of Gruppo Italease outstanding on 31st March 2009. Shareholders of
the two Newcos shall be Banco Popolare and/or Banca Italease itself, as well as BPER, BPS and BPM, and the
companies shall receive adequate assets, operational structures, personnel and means to perform their business,
with the aim of creating the best possible conditions to favor an efficient management of the transferred business
units, so as to maximize their value.
On 14th May, after Consob approved the Prospectus, the Offer was launched and it was competed on 1st July. 90,479,182
shares of common stock of Banca Italease (corresponding to 77.55% of shares under the Offer) were tendered into the Offer,
totaling euro 135,718,773. As a result, by adding the Banca Italease shares tendered into the Offer to those already held by
the Group, on 1st July Banco Popolare held 142,212,139 shares of Banca Italease, accounting for 84.447% of the subscribed
and paid-in capital.
Based on the above results, the Offer’s condition precedent regarding the Minimum Percentage of Acceptance was not
fulfilled (90% of Banca Italease’s share capital).
In compliance with the Prospectus, Banco Popolare decided to waive the above Condition Precedent for the Offer and to
voluntarily extend the Tender Period from 9th July 2009 to 15th July 2009, at the same price of euro 1.50 per share (namely,
at the same price offered for shares tendered into the offer from 14th May 2009 to 1st July 2009) along the procedures
specified in the Prospectus.
On 8th July 2009, upon transferring the full ownership of the shares onto Banco Popolare, shareholders were paid in cash
the price offered for each Banca Italease share tendered into the Offer from 14th May 2009 to 1st July 2009 - fixed at Euro
1.50 per share and representing an aggregate amount of Euro 135,718,773.
In compliance with the Framework Agreement, and after Banca Italease shares held by BPER, BPS, BPM and Società Reale
Mutua di Assicurazioni were transferred to Banco Popolare, the Shareholders’ Agreement on Banca Italease shares, that had
been originally signed by the above counterparties on 28th February 2008, was terminated effective as of 8th July 2009.
Again on 8th July, upon proposal of an institutional counterparty, Banco Popolare acquired the latter’s bonds issued by
Banca Italease corresponding to a total nominal amount of about 270 million. The purchased securities, expiring 2012 and
2017, are listed on the Luxembourg Exchange.
On 15th July the voluntary extension of the Tender Period ended. At the end of the period, 6,196,773 more Banca Italease
shares (corresponding to 5.311% of shares under the Offer) were tendered into the Offer, representing an aggregate amount
of 9,295,159.5 euro, which was paid on 22nd July.
By adding the Banca Italease shares tendered into the Offer during the Voluntary Extension to the 90,479,182 shares
tendered during the Tender Period (totaling 96,675,955 , corresponding to 82,862% of shares under the Offer), and to those
already directly or indirectly held by the Offeror (51,732,957 shares), Banco Popolare currently owns 148,408,912 Banca
Italease shares, corresponding to 88.127% of the company’s subscribed and paid-in capital.
During the Offer Period and the Voluntary Extension Period, Banco Popolare, did not, either directly or indirectly, purchase
any Banca Italease share outside the Offer.
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Since the shares tendered into the Offer did not make it possible to exceed the thresholds of 90% or 95% of the share
capital, the conditions for the buy-out obligation pursuant to articles 108 paragraph 2, 108 paragraph 1 and 111 of TUF
were not fulfilled, which would have triggered the stock delisting from the Milan stock market.
Business restructuring and reorganization plan for Gruppo Banca Italease
Banca Italease capital actions – covering losses and new share issue
With regard to the capital structure of Gruppo Italease, on 8th September 2009 the Board of Directors of Banca Italease
convened to analyze the initiatives to be implemented to cover the losses that had been recognized on 31st December 2008,
greater than one third of the share capital, and on 30th June 2009, which as a whole drove the shareholders’ capital down to
207 million.
The Board of Directors decided to convene the Special Shareholders’ Meeting to examine and approve the company’s
financial situation as at 30th June 2009, pursuant to art. 2446 Civ. Code, and to pass the consequent resolutions to cover the
losses also through a reduction of the share capital. The Shareholders’ Meeting – which was held on 12th October 2009 having eliminated the indication of the par value expressed by shares, resolved to entirely cover past losses by drawing from
non-restricted reserves and by reducing the share capital, and it approved the proposal to vest the Board of Directors,
pursuant to art. 2443 of the civil code, with the power to approve a capital increase against payment of Banca Italease
through a right issue to be offered to shareholders, for a maximum total amount (inclusive of share premium) of 1.2 billion,
to be executed within 12 months, upon receipt of the required authorizations.
The above capitalization actions were made necessary to restore Banca Italease’s share capital, as well as to bring capital
ratios back in line with supervisory regulations and to ensure appropriate management conditions for Banca Italease and its
subsidiaries in the future.
To this end, Banco Popolare undertook to subscribe also for the shares unsubscribed by the other shareholders.
Then, on 28th October, in fulfillment of the powers granted by the Special Shareholders’ Meeting, the Board of Directors of
Banca Italease determined that the 1.2 billion share capital increase would be carried out through a rights issue, by offering
in option common shares with regular dividend rights to company shareholders against payment and with a possible share
premium, upon inception of the subscription period, proportionately to the number of shares held.
On 23rd November 2009, the Board of Directors of Banca Italease defined the final terms and conditions for the rights issue.
The capital increase was carried out by issuing max. 1,683,989,730 shares, to be offered in option to Banca Italease
shareholders at a price of 0.712 euro for each new share (of which 0.612 euro as a share premium), based on a share ratio
of 10 new common shares for each share held on inception of the subscription period, for a maximum total amount of euro
1,199,000,687.76. The implied accounting parity of each newly issued share was fixed to 0.10 euro.
After Consob issued its authorization to publish the prospectus, the rights were tradable on the Italian Stock Exchange from
7th December to 16th December 2009 and could be exercised between 7th December 2009 and 23rd December 2009.
On 23rd December 2009 the offer of preemptive rights on the common shares underlying the Capital Increase was closed:
Banco Popolare, either directly or through its subsidiaries Credito Bergamasco and Holding di Partecipazioni BP, subscribed
for its attributable stake, corresponding to 1,621,129,970 newly issued shares totaling 1,154.2 million, which brought its
interest up to 91.225%.
Banco Popolare fully exercised its option rights proportionately to its direct and indirect shareholding in Banca Italease. As a
result, it subscribed for its attributable share of capital increase corresponding to 1,484,089,120 newly issued shares,
totaling 1,056,7 million.
At the end of the offer period, 6,285,976 option rights remained unexercised, which entitled to the subscription of
62,859,760 newly issued shares of Banca Italease, totaling 44.8 million.
Unexercised option rights have been offered on the Italian Stock Exchange by Banca Italease pursuant to art. 2441,
paragraph three of the Civil Code, and were sold out in their first trading session.
Having exercised 6,053,376 unexercised option rights, Banco Popolare subscribed additional 60,533,760 Banca Italease
newly issued shares, totaling 43.1 million.
Upon completion of the capital increase, Gruppo Banco Popolare holds a total of 1,693,031,792 shares, corresponding to
91.397% of Banca Italease’s share capital.
Since the free float was not restored, Banco Popolare must fulfill the obligation to purchase the remaining Banca Italease
shares pursuant to art. 108, paragraph 2, of TUF, as more exhaustively described in the Explanatory Note’s section devoted
to noteworthy events after the balance sheet date.
Banca Italease capital actions - Public exchange offer on bonds issued by Banca Italease
In 2009, in order to optimize the Group’s capital structure following the takeover of Banca Italease, the Management Board
of Banco Popolare approved a public offer for the entire amount of two “Lower Tier II” subordinated floating rate notes,
listed on the Luxembourg Exchange, issued by Banca Italease on 15th October 2004 and 28th June 2006 (with an aggregate
nominal value of 275 million Euro, net of held securities) in exchange for new notes having the same subordination level, to
be issued by Banco Popolare under its EMTN Program, approved on 28th July 2009.
The offer ran from 29th October to 4th November, and upon its completion, notes corresponding to a nominal value of 116.2
million had been tendered into the offer, accounting for 42.27% of the nominal value of the notes under the offer, fulfilling
the minimum quantity condition to which the offer was subject.
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In particular, 77.5 million (51.67%) were tendered for the Lower Tier II callable step-up notes due 2014, which originally
amounted to nominal 150 million, and 38.8 million (31.02%) were tendered for the Lower Tier II floating rate notes due
2016, which originally amounted to 125 million.
The transaction was settled on 12th November 2009, and the amount paid in cash for odd lots and interest accrued on notes
totaled 12.6 million.
In compliance with the Offer Document approved by Consob, the final repurchase prices and exchange ratios correspond to
95% for the “Tier II Subordinated Callable Step-Up Notes due 2014” and 82% for the “Lower Tier II Subordinated Callable
Floating Rate Notes due 2016”.
Based on the information on notes tendered in exchange and as established in the Offer Document, as of 12th November
2009 Banco Popolare issued a new Lower Tier II subordinated note due 12th November 2016 and with a fixed rate annual
5.473% coupon, corresponding to a total nominal value of 300 million, of which 93 million to cover the Offer and 207
million sold to qualified investors and destined to further strengthen our capital structure and to the current operating
business.
Transfers to NewCo One and NewCo Two
In keeping with the Framework Agreement signed on 15th March last by Banco Popolare, Banca Popolare dell’Emilia
Romagna, Banca Popolare di Milano and Banca Popolare di Sondrio, two new companies were formed: the first is to
manage impaired loans - non-performing or substandard – of Banca Italease and its subsidiaries (NewCo One, afterwards
called “Release”) and the second is to manage and develop leasing activities, to support the economies of the market areas
of the shareholding banks, in particular with reference to Small- and Medium-sized Enterprises (NewCo Two, afterwards
called “Alba Leasing”).
Subject to the required authorizations of the Supervisory Authorities, the two new companies came into operation as of 31st
December 2009, concurrently with the effectiveness of the transfer deeds provided for under the reorganization plan.
To this regard, on 23rd December 2009 deeds were signed to transfer the business units comprising Banca Italease’s nonperforming loans to Release; on the same date, a deed was signed for the partial spin-off of the non-performing business units of
Italease Network and Mercantile Leasing to Release. On 24th December 2009 a deed was signed to transfer the business units
made up of the performing loans of Banca Italease and Mercantile Leasing to Alba Leasing.
The transferred or spun-off business units involved a set of assets, liabilities, and legal relations including personnel. With
regard to assets transferred/spun-off to Release, the main balance sheet item is the amount of transferred receivables totaling
about 4.9 billion gross; as to assets transferred to Alba Leasing, the main balance sheet item is the amount of transferred
non-securitized receivables amounting to about 2.5 billion gross, while the risks and benefits associated with securitized
loans originated by the banking channel of about 2.4 billion are attributable to Alba Leasing.
As to Release’s share capital, after the transfer and the related share capital increase and premium to 400 million, and
following the share transfer in January 2010, 80% of it is held by Banca Italease 10.84% by Banca Popolare dell’Emilia
Romagna, 6.24% by Banca Popolare di Sondrio and 2.92% by Banca Popolare di Milano. The company shall receive the
operational structures, the personnel (40 employees) and the means to carry out its business activity, with the purpose of
creating the best possible conditions for an efficient management of the transferred business unit, so as to maximize its
value. In terms of funding commitments, the new company shall be proportionally financed by its shareholders.
After the described transactions, Alba Leasing’s shareholding structure comprises Banca Italease with 32.79%, Banca
Popolare dell’Emilia Romagna with 36.43%, Banca Popolare di Sondrio with 20.95% and Banca Popolare di Milano with
9.83%. The new company, which has been capitalized by the shareholders with 360 million, so as to ensure a Total Capital
Ratio of 7%, shall receive the operational structures, the personnel (350 employees) and the means to carry out its business
activity, with the purpose of focusing the newco’s activities on specific business segments, that are deemed strategic and
worth developing based on the contribution made by each shareholder: the aim is to support the economies – in particular
Small and Medium sized Enterprises – in the market areas of the shareholding and associate banks. In terms of funding, the
new company shall be financed by shareholders other than Banca Italease and/or Banco Popolare.
Finally, it is worth highlighting that Banco Popolare can guarantee to Banca Italease the necessary capital resources to
ensure the compliance with minimum capital requirements under applicable laws and regulations. Banco Popolare shall see
to the financial support of Banca Italease also with regard to the outstanding bond and securitization maturities.
Upon completion of the described Reorganization actions, Banca Italease shall continue to run its business, directly or
indirectly, by managing the outstanding contract and loan portfolio in close coordination with the other Group structures.
Reorganization actions
On 22nd December 2009, as part of the plan to rationalize the organizational structure of the factoring business, and with
the aim of making Factorit independent from an operational and organizational point of view, Banca Italease and Itaca
Service S.p.A. signed the transfer deeds assigning their business units to Factorit, effective as of 31st December 2009.
Moreover, with regard to the transfer of securitized loans originated by the banking channel to Alba Leasing, on 24th
December 2009 Alba Leasing and Banca Italease signed an agreement, based on which, in keeping with what had been
preliminarily defined in the Framework Agreement of March 2009, the risks associated with a possible default of loans
included in the securitizations originated by the banking channel are borne by Alba Leasing and consequently Alba Leasing
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shall reap the corresponding benefits, as if it were the exclusive owner of the portfolio outstanding on 31st December 2009
as of 31st March 2009.
To this regard, Alba Leasing undertook to pay back to Banca Italease: (i) the junior notes relating to the securitized loans
originated by the banking channel, net of individual write-downs, in compliance with the rules and priorities of each
securitization and (ii) the remuneration share of the above junior notes relating to loans originated by the banking channel
accrued by Banca Italease up to 31st March 2009.
Since owing to the complexity of the Agreement on securitized loans it has been impossible to complete its execution, to
date Banca Italease could not precisely define each single aspect characterizing the profitability and financial profiles. To
represent anyway the P&L impacts of the Agreement in the annual report as at 31st December 2009, an external expert was
hired to assess said effects. The Board of Directors of Banca Italease decided to follow the estimate rationale and the
conclusions of the appraisal, based on which a provision of 100 million was set aside, pursuant to IAS 37, “Provisions,
Contingent Liabilities and Contingent Assets”, which was deemed representative of the estimate of the net P&L impacts
generated by the performance of the Agreement.
For more details, please refer to the more exhaustive explanation provided in the explanatory notes.
Next steps
Having successfully completed the first part of the Italease project, aiming - as described above - at setting up the two
Newcos, a reorganization plan was launched, to fully integrate Italease within Gruppo Banco Popolare so as to maximize
cost synergies, also through an appropriate organizational and company rationalization of the former Italease Group, and
the requalification of the existing human resource asset.
Actions to recover bad loans and to dispose of the most significant real estate and securities assets were carried on, so as to
reduce the portfolio concentration risk in compliance with regulations and with the Bank of Italy’s guidelines, in particular
with regard to Release S.p.A.
The plan covering the so called “phase two” has been subdivided into the following actions:
x delisting of Banca Italease;
x company rationalization: the goal is to examine and implement appropriate rationalization actions for Banca
Italease subsidiaries;
x Credit process: harmonization of Italease’s rules, processes and procedures with those implemented in Gruppo
Banco Popolare;
x Operations: the goal is to rationalize and optimize administrative and IT costs, also by centralizing activities at the
Parent company’s;
x Human Resources: outplacement and re-training of redundant personnel as a result of the reorganization
activities;
x valorization of Release’s real estate assets.
Application to issue the financial instruments provided for by LD 185/08
On 10th March 2009, in relation to the publication of the Ministerial Decree of 25th February 2009, enacting Law Decree n.
185/08, in the Official Gazette of the Italian Republic of 7th March 2009, Banco Popolare submitted a formal application to
the Italian Ministry of Economy and Finance and to the Bank of Italy to issue the financial instruments under art. 12 of the
above mentioned Law Decree, for an amount of 1.45 billion.
On 26th March, the Ministry of Economy and Finance, after acknowledging the opinion issued by the Bank of Italy and after
consulting with the Global Advisory and Guarantee Committee (pursuant to the Prime Minister’s directive of 15th October
1993), authorized Banco Popolare’s application.
On 19th June, the Minister for Economy and Finance approved the subscription of the instruments issued by Banco Popolare
for the requested amount of 1.45 billion by the Ministry.
In the meantime, the Chief Executive Officer of Banco Popolare and the Director General of the Treasury signed a
memorandum of understanding – pursuant to article 2, paragraph 2, of the ministerial decree of 25th February 2009 –
containing provisions for the subscription of the financial instruments convertible into shares of common stock of Banco
Popolare, and which provides for:
x the adoption by the Group of a Code of Ethics containing, among other things, provisions regulating top
management remuneration policies;
x the Group’s commitment to:
o make more loans available to Small- and Medium-sized Enterprises over the next three years, i.e., on average 6%
more per year than the average loans granted in 2007 and 2008, provided that the credit quality is adequate, in
conformity with the principle of sound and prudent bank management;
o apply more favorable conditions to the beneficiaries of loans backed by the Central Guarantee Fund for small
and medium-sized enterprises, and make a 21.75 million contribution to the Fund itself;
o suspend payments of home mortgage loans – if requested by the individuals indicated in the Agreement and if
the subjective and objective conditions provided therein are fulfilled – free of charge for the borrower for 12
months;
o assure adequate liquidity levels for creditors of public administrations.
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The Memorandum is effective until the issued financial instruments are outstanding or until Banco exercises the option to
redeem all the instruments subscribed by the Ministry.
On 31st July 2009, the issue of the financial instruments by Banco Popolare in favor of the Italian Ministry of Economy and
Finance was finalized, for an amount of 1.45 billion. The issuance and subscription of the above instruments shall ensure an
adequate capitalization for the Group, also with an eye to the future, and allow to strongly raise lending levels to businesses
and households.
Partial sale of the equity interest in Istituto Centrale Banche Popolari Italiane (ICBPI) and
subsequent capital increase by the associate
On 9th January 2009, Banco Popolare finalized the transfer of a 841,965 share stake, accounting for 7.62% of ICBPI’s share
capital, to Veneto Banca Holding S.p.A.
The sale was made at a unit price of euro 43.35 per share, for a total amount of 36.5 million, and generated a capital gain of
about 3.7 million, gross of tax effect, which was recognized in the P&L of first quarter 2009. Pursuant to the agreement,
50% of the attributable share of dividends accrued in financial year 2008 were collected by the transferring companies. For
Gruppo Banco Popolare this amount represents a supplement to the selling price.
On 31st January 2009, Gruppo Banco Popolare carried out ICBPI’s capital increase approved by the Company’s General
Meeting on 19th November 2008. The increase was performed by issuing 1,578,487 rights offered in option to shareholders
at a par value of 3 euro and a share premium of 40.90 euro.
Gruppo Banco Popolare accepted the offer through its Parent company and the subsidiaries Banca Popolare di Crema and
Holding di Partecipazioni Finanziarie BP, already shareholders of the associate, and subscribed for a total of 399,101 shares for
a total amount of 17.5 million. The subscribed shares’ dividend rights are effective as of 1st January 2009.
Subsequent to the sale and capital increase, Gruppo Banco Popolare holds a 3,173,747 share stake in ICBPI, accounting for
25.133% of the share capital, plus the interest held by Gruppo Banca Italease, corresponding to 0.016% of the share capital.
Voluntary Tender offer of Banco Popolare Croatia
On 9th January 2009, the Management Board of Banco Popolare approved the launch of a Voluntary Tender Offer (VTO) on
Banco Popolare Croatia’s preferred shares, at a unit value of HKR 1.700, for a max. theoretical cost of 18.9 million HKR in
case of full acceptance.
The VTO ended on 9th March 2009: the accepting shareholders tendered 10,052 shares into the offer, for a total amount of
HKR 17.1 million, corresponding to 2.3 million euro.
As a result of the above transaction, Banco Popolare’s stake in the Croatian bank went from 91.442% to 97.984%.
Sale of Delta S.p.A.
On 22nd January 2009, Banco Popolare signed an agreement with Onda and Sviluppo Investimenti Estero (representing
respectively the Management Board of Gruppo Delta and of Cassa di Risparmio della Repubblica di San Marino) aiming at
enabling Banco Popolare to exit from Delta’s shareholding structure, owing to changes in the Group’s strategies and in the
reference market.
The sale by Banco Popolare of a 13.293% interest in Delta, corresponding to 14,140,026 shares, was carried out at a price
of 3.1 euro per share for a total amount of 43.8 million, generating a capital gain of 3.5 million, gross of tax effect.
Acceptance of BPER’s VTO for Meliorbanca
On 6th February 2009, Banco Popolare accepted the Voluntary Tender Offer launched by Banca Popolare dell’Emilia
Romagna (BPER) for Meliorbanca.
As a result, Gruppo Banco Popolare tendered its entire stake, corresponding to 19,513,327 shares, equal to 15.455% of
Meliorbanca’s share capital, at a price of 3.20 euro per share, totaling 62.4 millions.
The acceptance of the VTO had no P&L impacts in 2009, as the equity investment had already been realigned to the value
of the VTO.
Merger by acquisition of Bipielle Finanziaria and Bipitalia Alternative in Holding di Partecipazioni
Finanziarie Banco Popolare
The merger by acquisition of Bipitalia Alternative into Bipielle Finanziaria along a fast-track procedure under art. 2505 c.c.
was finalized on 27th March 2009, while the merger by acquisition of Bipielle Finanziaria into Holding di Partecipazioni
Finanziarie Banco Popolare along a simplified procedure under art. 2505 c.c. was finalized on 31st March 2009.
Accounting and fiscal effects shall run retroactively from 1st January 2009.
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Liquidation of Bipielle Bank (Suisse)
The Shareholders’ meeting of the subsidiary Bipielle Bank (Suisse), fully owned by the Parent company, on 6th May 2009
decided to place the company in liquidation, legally effective as of 13th May 2009; as a result, the Board of Directors was
dissolved and liquidators were appointed.
Sale of the equity investment in Aletti Private Equity
On 17th April 2009, an agreement was signed to sell the Group’s equity interest in Aletti Private Equity to Assietta S.p.A..
The sale was finalized on 26th October, after receiving the required authorization, at a price of 1,4 million, practically in line
with the company’s asset value.
For financial year 2009 the contribution of the subsidiary, which was fully consolidated, to the consolidated financial
statements was recognized under item 310 of the P&L (Profit/loss after tax from non-current assets held for sale and
discontinued operations), in compliance with the accounting standard IFRS 5.
Change of legal form of the Subsidiary Società Gestione Crediti BP to a consortium joint-stock
company
On 1st October, the change of legal form to a consortium joint-stock company of Società Gestione Crediti BP S.p.A., that
had been approved by the Management Board on 16th June 2009, was finalized. As a result the company changed its name
into Società Gestione Crediti BP Soc. Consortile per Azioni.
Sale of Banco Popolare eská Republica
On 1st December 2009, the Management Board approved the sale of the entire 100% equity interest held by the parent
company in Banco Popolare eská Republica to Società PA Holdings Limited belonging to the UK private equity fund
AnaCap; the sale agreement was signed on 9th December 2009. The price, referring to 31st December 2008, was fixed to
about 1,210 million crowns, corresponding to about 47 million euro, to be adjusted based on the shareholders’ equity on
the date of finalization, which in 2010 is contingent upon the obtainment of the necessary authorizations from competent
authorities and the satisfactory completion of a due diligence. As a result of the above transaction, Gruppo Banco Popolare
should generate an estimated capital gain of about 7 million. The contribution made to the consolidated financial statements
by the subsidiary, which was fully consolidated, was recognized under items 150 of Assets (Non-current assets held for sale
and discontinued operations), 90 of Liabilities (Liabilities associated with non-current assets held for sale and discontinued
operations) and 310 of the P&L (Profit/loss after tax from non-current assets held for sale and discontinued operations), in
compliance with the accounting standard IFRS 5,.
Reorganization of the Group’s insurance brokerage business line
On 29th May 2009, an agreement was signed to sell the Bipitalia Broker business unit to Arena Broker. The transaction, that
had been approved by the Management Board of Banco Popolare on 7th April 2009, involved the entire business unit
comprising the assets, liabilities and legal relations, including the employees, of Bipitalia Broker. The net book value of the
assets and liabilities being sold totaled 0.3 million euro.
The sale, aiming at achieving an efficiency gain in the insurance brokerage business by concentrating the structures
belonging to the former BPVN and BPI groups in a single entity, was finalized on 1st June 2009.
With the sale of the business unit, Bipitalia Broker ceased its operations.
On 30th September 2009, the merger by acquisition of Bipitalia Broker into Holding di Partecipazioni Finanziarie Banco
Popolare was finalized through a fast-track procedure under art. 2505 c.c.. On the same occasion, also the merger by
acquisition of Efimmobiliare into Holding di Partecipazioni Finanziarie Banco Popolare was finalized through a fast-track
procedure under art. 2505 c.c.. The legal and accounting effects of both mergers run retroactively from 1st January 2009.
Reorganization of the real estate business line
On 12th October, the Shareholders’ Meeting of Bipielle Real Estate approved the merger by incorporation trough a fast-track
procedure under art. 2505 c.c., of Andromeda Immobiliare, Antares Immobiliare, Antilia Immobiliare, Azimuth
Immobiliare, Pegaso Immobiliare and Perseo Immobiliare. On the same date, a similar resolution was passed by the
Shareholders’ Meetings of the acquirees. The merger deeds were finazied on 18th December 2009, with retroactive
accounting effectiveness from 1st January 2009.
Agreement between Parmalat and Gruppo Banco Popolare
On 18th February 2009, Parmalat S.p.A., the Commissioner for the extraordinary administration of the Companies of Gruppo
Parmalat, and Banco Popolare reached a final out-of-court settlement upon their respective relations and the claims to the
Banks belonging to the former Gruppo Banco Popolare di Verona e Novara referring to the period before the Parmalat
Group filed for bankruptcy (December 2003).
28
Under the above agreement, the cost for the Banks of the Group (Banca Popolare di Verona SGSP and Credito Bergamasco)
totaled 24.2 million, with no negative impact on the P&L, as all the necessary provisions had already been set aside in due
time.
Parmalat and the Commissioner of the Companies of Gruppo Parmalat under extraordinary administration that did not take
part in the composition, shall waive any existing or future claw-back action and/or compensation claim or any other action
against Gruppo Banco Popolare, while the above Banks shall waive their rights to loans that have already been included
among liabilities under the bankruptcy procedure and to the inclusion of the sums being paid under this agreement.
Agreement with Pandette Finanziaria S.r.l.
On 23rd February 2009, Banco Popolare and Pandette Finanziaria signed an agreement on the put and call option contracts
on shares of common stock of RCS MediaGroup S.p.A. that had been entered on 29th November 2006 and 19th April 2007,
respectively.
Under the agreement, the option contract relating to 18,300,000 shares of common stock of RCS was regularly executed
upon the original expiration date, namely, 3rd March 2009. The option contract relating to 25,300,000 shares of common
stock of RCS was instead postponed by 5 years, whereas the voting right associated with said shares shall continue to be
exercised by Pandette.
Actions in favor of Group customers who subscribed index-linked policies backed by securities
issued by defaulting financial organizations
In order to increase customer loyalty, the Group decided to launch important initiatives with a view to supporting customers
who subscribed to policies distributed by the Group Banks and are currently uncertain as to whether they will recover their
invested capital due to the default of the financial organizations (Lehman Brothers and Icelandic banks) which had issued
the securities backing the subscribed policies. The proposed actions are intended to give customers the certainty of
recovering their entire invested capital. In some cases the actions were carried out in joint agreement with the insurance
counterparties, as was the case with the index-linked policies issued by the associate Popolare Vita, whose underlying
securities had been issued by the Lehman Brothers Group. On 22nd January 2009, 56.2 million were deposited in Popolare
Vita’s future capital increase account, to provide the company with the necessary financial resources to support the planned
action. To this regard, note that the charge related to the above action and attributable to Gruppo Banco Popolare had
already been expensed to income in financial year 2008.
Significant actions were planned during the year, in favor of customers who subscribed policies backed by securities issued
by defaulting Icelandic banks. In particular, on 1st December 2009 Banco Popolare decided to launch a voluntary public
exchange offer, proposing holders of index-linked policies “Bipielle Aphrodite II Serie Index I/2005”, “Bipielle Magnolia
Index II/2005”, “Bipielle Azalea Index III/2005” issued by UGF Assicurazioni (former Aurora Assicurazioni), “Bipielle
Aphrodite Serie II”, “Bipielle Magnolia”, “Bipielle Azalea” issued by Eurovita Assicurazioni, backed by securities issued by
the Icelandic banks Landsbanki Islands, Glitnir Banki and Kaupthing Bunadarbanki, to exchange each policy with zerocoupon senior bonds issued by Banco Popolare, plus a possible balance payment in cash. The offer is promoted in Banco’s
own name and on behalf of the Group Banks(Banca Popolare di Lodi, Banca Caripe, Banca Popolare di Crema, Banca
Popolare di Cremona, Cassa di Risparmio di Lucca Pisa Livorno) which sold the policies to their customers, and to which
the policies tendered into the Offer shall be transferred. The Offer is addressed exclusively to eligible policy-holders or
beneficiaries of the capital rights or of other rights attached to the policies resident or domiciled in Italy, and it covers max.
8,535 policies corresponding to total nominal premiums paid of 138.7 million, referring to policies that have not been
liquidated yet.
Participants in the Offer have been assigned five-year unstructured zero-coupon senior bonds to be issued by Banco
Popolare at the exchange date, fixed on 12th April 2010, for a total maximum amount of 150 million. The issue price of the
bonds offered in exchange has been fixed to 807.5 euro, i.e., 80.75% of the unit nominal value of 1,000 euro.
As consideration, each participant shall receive a total nominal value upon expiration of the replacement securities
corresponding to the single premium paid for each policy, net of issuance expenses and inclusive of a balance payment in
cash in case the paid premium is not a multiple of the minimum bond denomination of 1,000 euro.
The Offer is irrevocable and is not conditional to reaching a minimum level of participation or to any other condition
precedent.
To guarantee the success of the Offer, in the event that not all the policies under the Offer are tendered, the distributing
Banks undertook to subscribe the residual amount of replacement securities, proportionally to the value of the policies they
have distributed, as well as an additional amount of securities up to a total nominal value of 150 million.
As described in the section devoted to noteworthy events after the balance sheet date, the Tender Period, which started on
8th February, ended on 12th March 2010, with a participation rate of 98,11%.
Accordingly, costs of about 16 million have been charged to income for the year, to top up the provisions already
earmarked when preparing the 2008 annual report.
29
Banco Popolare convertible bond issuance
In the meeting held on 23rd November 2009, the Management Board and Supervisory Board of Banco Popolare approved
the proposal, to be submitted to the Shareholders’ Meeting of Banco Popolare on 30th January 2010, to give the
Management Board, under art. 2420-ter of the civil code, the power to issue bonds convertible into shares of the Company’s
common stock within maximum two years of the resolution date up to a maximum amount of 1 billion. Based on the
proposal, the convertible bonds are to be offered in option to shareholders and holders of convertible bonds under the
2000/2010 4.75% Subordinated Convertible Bond (“TDF” )– ISIN IT 0001444360 program, issued by Banco Popolare.
The main features of the convertible bonds are:
- repayment unsubordinated to other company debts (senior ranking);
- 4 year maturity;
- fixed rate annual yield (4.75%);
- bond-holders can convert the bonds into shares of the company’s common stock at any time starting from the
eighteenth month after the issue date and until maturity;
- as of the eighteenth month after the issue date and until maturity, the company can early redeem the bonds
thorough a partial or full payment in shares;
- cash repayment upon maturity of convertible bonds whose conversion option was not exercised; repayment can
also take place by converting the bonds into company shares;
- listing of the convertible bonds on the Electronic Market (Mercato Telematico Azionario) of Borsa Italiana S.p.A.,
also subsequent to their issue.
Bonds can also be redeemed early through a partial or full payment in cash.
As more exhaustively described in the section devoted to noteworthy events after the balance sheet date, the Special
Shareholders’ Meeting almost unanimously approved the above described convertible bond issue, whose offer on the
market ended in the month of March 2010.
Owing to the instrument’s nature and peculiarities (so called soft mandatory loan), this deal represents a highly flexible
financing facility, as it can be used right away to finance business activities, and, to the discretion of the company, it can be
permanently converted into share capital.
In particular, this initiative allows the company to shore up its share capital while at one time expanding the range of
instruments to support the needs of households and businesses in the Group’s market territories.
EIB – Banco Popolare Agreement for Small and Medium-sized Enterprises and Local Authorities
Banco Popolare and the European Investment Bank signed an agreement on 12th June 2009 to provide aggregate financing
of 300 million euro subdivided into two facilities: 200 million euro shall be allocated for SMEs loans to develop investment
projects and initiatives in the manufacturing, service and tourism industries; 100 million euro shall be earmarked for Public
Entities and Utilities.
Under the partnership, the funds made available by EIB for SMEs shall be passed on through the retail branches of Gruppo
Banco Popolare to enterprises with less than 250 employees, via medium term loans with a maturity of up to 12 years, a
fixed or floating rate, up to a maximum amount of 12.5 million euro per project.
This operation will open up new resources to support businesses, which shall gain access to low-cost funds to start business
growth and development plans. Thanks to this initiative, Banco Popolare shall count on supplementary resources, with a
simple, swift and flexible access, to offer a concrete support to enterprises against the current crisis.
Loans financed under the 100 million facility allocated for Public entities and Utilities must support projects for the creation
of small and mid-sized infrastructures in the energy, environment, education and healthcare sectors. To qualify for
financing, eligible projects must not exceed a total investment cost of 25 million euro, and each single loan cannot exceed
50% of the project total cost, up to 12.5 million Euro. The maximum maturity for the loans will be 20 years.
Banco Popolare joined the agreement on the debt moratorium for SMEs
On 1st September 2009, Banco Popolare formally joined the “Small Business Act” signed by the Italian Banking Association
(Abi), the Italian Government and Business associations to suspend the payment of debts for Small and Medium-sized
Enterprises (SMEs). The agreement, which aims at supporting SMEs in distress, was signed by all the Group Banks and
confirms our commitment to back this customer class, which represents the backbone of our domestic economy.
The agreement is addressed to companies with less than 250 employees and annual sales below 50 million euro, which,
albeit under temporary distress, have an adequate outlook for business growth and continuity.
The actions envisage a 12 month suspension of mortgage and lease principal payments, postponing the maturities of shortterm trade receivables by up to 270 days and, for businesses implementing capital strengthening actions, the possibility of
accessing a specific loan facility.
Banco’s commitment in favor of SMEs is witnessed also by the agreements signed with various trade associations and
institutions. To mention the most recent ones, in addition to the above described agreement entered with E, Banco signed a
memorandum of understanding promoted by the Ministry for Tourism, which has approved a 200 million facility in favor of
30
tourism enterprises. Moreover, Banco Popolare contributed 21.75 million to the capital strengthening of the Guarantee Fund
for SMEs.
Reorganization of the Direct Banking business
In May, Banco Popolare started reorganizing the Group’s “Banca Diretta” business, specializing in online and electronic
services.
More specifically, an ad hoc function in charge of launching and developing electronic products has been added to the
other functions dealing with the other major classes of products/services; the sales network of the Group’s commercial
banks is responsible for commercial operations, while SGS, the Group’s service company, provides specialist customer
services.
Reorganization of Retail Services
Unlike the current structure, which is organized in segments and products (households, investment and protection, small
businesses), the reorganization of the Retail Service in based on a concept where structures are specialized by
product/service areas, hinging on the provision of a dedicated and all-round service by type of product, regardless of the
segment they are geared to, so as to promote the development of centers of excellence that can guarantee high-quality
service levels to the retail banks (Banche del Territorio). The plan envisages also the creation of discrete segment desks
disjoint from the structures dedicated to product development, to guarantee a functional correspondence with their peer
structures in the Banche del Territorio. Moreover, the so called Reti Esterne Specializzate (RES – External Specialized
Networks) – in charge of approving loans and in particular mortgages – are going to be closed down as ”stand-alone
entities", and repositioned partly in the loan and lending policies service with regard to loan approval and risk governance
issues, and partly in the retail service for all aspects regarding sales, marketing and product definition issues. Again, the goal
is to ensure the best possible management of both aspects (risk and sales issues), by bringing it back under the bank’s
consistent and collective control with all the other typical activities/products.
The new organization chart comprises four departments directly reporting to the retail service: retail performance planning
and analysis, product marketing and communication, res mortgages, market research and development.
The reorganization was defined in agreement with Trade Unions and it involves 61 employees, of which 42 shall be placed
in the branch network and 19 in SGS.
Activities connected with the reorganization of the consumer credit business
In July, following the finalization by Crèdit Agricole and Banco Popolare on 22nd December 2008 of the consumer credit
joint-venture combining their consumer credit companies Agos and Ducato, the migration of Ducato’s IT procedures onto
Agos’s target information system was completed.
The outcome was a single IT platform for consumer credit, which was a pre-requisite to obtain the potential cost synergies
from this operation.
On 19th October 2009, the Shareholders’ Meetings of Agos and Ducato approved the simplified merger by acquisition
under art. 2505 c.c. of Ducato into Agos. The merger was carried out with no capital increase on the part of the acquirer,
and was finalized in December: in the meanwhile, the acquirer changed its company name in Agos - Ducato S.p.A.
Finally, a specific operational agreement is being negotiated to optimize and rationalize the distribution operational
processes and the support activities provided to the joint-venture.
Completion of activities connected with the sale of Banca Popolare di Mantova
Following the sale to Banca Popolare di Milano on 22nd December of the shareholding held by Banca Popolare di Lodi in
Banca Popolare di Mantova, in performance of the agreement signed by the parties on 23rd July 2008, the IT migration of
Popolare di Mantova onto the target information system of Banca Popolare di Milano was successfully completed, this being
the last steppingstone allowing Popolare di Mantova to gain its full autonomy in its new Banking Group of belonging.
Audit by the Bank of Italy
In 2009, the Bank of Italy carried out a sector audit across the Group to assess the adequacy of the credit risk management
and control processes, in the light of the integration process after the recent merger that led to the formation of the BP
Group, as well as of the considerable complexity that of late has been characterizing credit and financial market scenarios.
The heads of the Parent company’s operational and control structures were interviewed, and the governance systems and
instruments have been thoroughly analyzed, together with the related processes.
Based on the outcome of the above audit, the Group has already implemented or is implementing the required adequacy or
improvement interventions. It should be noted that the Group is constantly engaging in activities to develop and enhance
our risk governance systems, not only to comply with prudential supervisory regulations, but also in keeping with market
best practices.
31
Implementation of Organizational Changes
In the meeting held on 27th January 2009, after prior opinion of the Supervisory Board, the Management Board started to
implement the framework resolution of 14th November 2008, by:
x appointing Mr. Massimo Alfonso Minolfi as “single” General Manager, who then, as specified later on, tendered
his resignations;
x delegating the groundwork activities for the Group’s organizational and business innovation and development
and the management of business partnerships to Mr. Franco Baronio.
In the meeting held on 10th February 2009, the Management Board proceeded with the implementation of the above
mentioned resolution of 14th November 2008, by:
x appointing Mr. Maurizio Faroni as Banco’s CFO, who shall be in charge of Group finance, equity investments,
business planning and control, investor relations, special projects, M&A, as well as of the strategic reporting by
Banca Aletti and the finance product companies, and shall report directly to the CEO. Mr. Faroni shall resign from
his office as Managing Director of Banca Aletti at the approval of the 2008 annual report;
x consolidating ALM, banking book, repo desk and proprietary portfolio management activities at the Parent
company’s;
x consolidating Banca Aletti’s monitoring and control activities under the management of Banco’s CEO.
In the meeting held on 15th September 2009, the Supervisory Board authorized the guidelines of the review of the Top
management structure of Banco Popolare as resolved by the Management Board. The new structure shall have a summit
represented by the Chief Executive Officer, and seven departments: Corporate, Retail, Lending, Finance, Legal Affairs and
Compliance, Operations, Human Resources.
The review of the Top management structure stems from the opportunity to put in place an organizational layout that is
consistent with the business plan and with the goal territorial proximity, and blends with the corporate governance plan,
whereby the decision-making and management processes are organized along criteria of utmost efficiency: constant risk
control, rapidity, minimum information flow dispersion, clear identification of responsibility centers for the various
operational areas, rationalization of direct reporting.
In keeping with our bylaws, the review does not foresee the presence of a general manager. This was made possible by the
fact that the structure shall require that:
x the most important functions be concentrated in the Head offices;
x direct reporting to the CEO be downsized;
x specific Committees be set up, to ensure that all managers have a comprehensive view, accountability and
crosscut knowledge of risks. This new organizational arrangement lays a strong emphasis on Committees (Steering
Committee, Risk Committee, Finance and ALM Committee), which are expected to meet on a high frequency
basis and to record the minutes so as to keep track of decision-making processes;
x greatest attention be paid to risk monitoring and control functions;
x the Group’s corporate structure, where the retail banks (Banche del Territorio) are incorporated as joint stock
companies and their top management sits in the Parent company’s Management Board and in a specific Group
Committee chaired by the Chief Executive Officer.
The nimbleness of the structure, the transparency and accountability of decision-making processes reflect on the most
appropriate operational modalities of the business plans.
Changes in executive positions
On 29th January 2009, Mr. Enrico Maria Fagioli Marzocchi resigned from his office as member of the Management Board of
Banco Popolare and Managing Director of Efibanca.
On 8th April 2009, the employment contract between Massimo Minolfi and Banco Popolare was consensually terminated,
and concurrently Mr. Minolfi quit all his positions at the Group.
The Parent company Shareholders’ Meeting held on 25th April elected five additional members of the Supervisory Board of
Banco Popolare, who shall serve a three-year term from 2009 to 2011, thus bringing the total number of Members to 20, as
provided for by the merger agreement between BPVN and BPI.
The new directors, elected based on the number of votes received, belonging to the two filed slates of candidates and
chosen according to bylaw criteria, are Sandro Veronesi, Gabriele Camillo Erba, Gianni Filippa, Andrea Guidi and
Tommaso Zanini, the latter representing minority shareholders.
The Supervisory Board of Banco Popolare on 28th July 2009 unanimously appointed Giorgio Papa as member of the
Management Board, in the position of executive director, thus partially restoring the composition of the Management Board.
In the meeting held on 15th September 2009, the Supervisory Board unanimously appointed Aldo Civaschi as member of the
Management Board, thus fully reconstituting the Management Board.
32
Appointment of new managers in charge of corporate financial reporting in the Group
In compliance with art. 154bis of TUF (Consolidated Finance Act) implementing the changes introduced with Legislative
Decree 195 of 6.11.2007 (Transparency- Implementation of 2004/109/EC directive on the harmonization of transparency
requirements in relation to information about issuers whose securities are admitted to trading on a regulated market), the
subsidiaries Banca Aletti S.p.A and Efibanca S.p.A appointed their own Managers responsible for corporate financial
reporting. Their appointment was required as both Efibanca and Banca Aletti are “listed issuers having Italy as home
member state”.
33
BANKING ACTIVITIES
Banche del Territorio – Retail banks
The key element underlying the country-wide development of Gruppo Banco Popolare’s banking activities and customer
relations are our “Banche del Territorio”, the retail banks, which are the foundation of the Group’s organizational structure:
Banca Popolare di Verona – SGSP; Banca Popolare di Lodi, Credito Bergamasco, Banca Popolare di Novara, Cassa di
Risparmio di Lucca Pisa Livorno, Banca Caripe, Banca Popolare di Cremona and Banca Popolare di Crema.
Banco Popolare has direct operations in 20 regions with 2,237 distribution structures, that break down as follows:72% in
Northern Italy, 15% in the Center of Italy, 13% in Southern Italy and in the Islands. The Group’s historical stronghold
regions are of course characterized by a deeper entrenchment: Veneto, Lombardy, Piedmont, Tuscany, Emilia Romagna,
Liguria, Abruzzo and a noteworthy presence in Sicily.
Shown below is the percentage distribution by region of the Group’s retail bank branches as at 31/12/2009:
Lombardy
Veneto
Emilia Romagna
Piedmont
Tuscany
Sicily
Liguria
Lazio
Campania
Abruzzo
Trentino Alto Adige
Friuli Venezia Giulia
Umbria
Marche, Molise, Puglia, Valle d’Aosta, Basilicata, Calabria and Sardinia
Total
26%
15%
12%
11%
11%
7%
6%
3%
3%
2%
1%
1%
1%
1%
100%
At Group level the banking business is supervised by the Retail and Corporate Departments, which are both in charge of
defining and coordinating market development strategies within their area of competence, with a special focus on
supporting our retail banks (Banche del Territorio) and on an ongoing product innovation activity, to meet the needs of
existing and prospective customers.
Since 2008, the customer deposit business is coordinated at Group level, with the introduction of the Single Issuer, i.e., the
Parent Company, which acts also as counterparty for the single Banche del Territorio, thus smoothing out any operating
mismatch that might be generated.
Interest income generated by customer funds at the end of December decreased to 1,970.4 million. At the end of the prior
year it amounted to 2,593.0 million.
The pro-forma income statement, which factors in the impact of the midyear discontinuation of maximum overdraft
commissions, shows a interest income generated by deposits and loans of 1,959.0 million, down by 14.7% with respect to
the prior year. This was mainly the result of the plunge of the mark-down on deposits, -117 bps, which was only partly offset
by an improved mark-up on loans, +41 bps.
Total loans to customers as at 31.12.2009 came in at 75,844.5 million, up by 3.1% as compared to the actual year-end
figure of the prior year, i.e. 73,568.4 million.
Gross average loans to customers of the Banche del Territorio at year end totaled 75,032.5 million, up by 1.3% with respect
to the prior year’s average of 74,097.6 million, and they generated an interest income of 1,888.2 million. Short term loans
totaled 31,128.2 million, while medium/long term loans amounted to 43,904.4 million.
Gross average retail loans totaled 32,144.0 million, up by 3.9% from 30,943.7 the year before, while corporate loans came
in at 38,590.5 million, up by 0.7% from 38,305.1 in the prior year.
Total customer funds for the Banche del Territorio as at 31.12.2009 stood at 77,541.9, down by 1.1% as compared to the
actual data as at 31.12.2008, totaling 78,387.1 million.
In 2009, “overall” average direct funds (inclusive of the Parent company’s bonds distributed by the Banche del Territorio)
totaled 64,847.7 million, up by 5.3% from 61,571.4 million the prior year, and an interest income of 116.7 million as
compared to 831.1 million in 2008. The drastic contraction of interest on deposits was the result of the market rate trends
throughout the year, as already explained above.
34
Overall average direct retail deposits and funds totaled 48,402.5 million, up by 7.7% from 44,960.7 million in 2008, while
in the corporate segment they came in at 11,250.5 million, down by 2.5% from 11,540.6 million in 2008.
The spread between loans and overall direct deposits generated by the Banche del Territorio in 2009 was 2.64%, in the proforma income statement prepared to factor in the effects of the regulatory change regarding maximum overdraft
commissions. The prior year the spread had been 3.33%. In a year marked by interest rates at their historical low , this
dynamic has been experienced by the entire banking industry.
Net commissions generated by the Banche del Territorio in 2009 totaled 1,393.7 million, up by 16.4% from 1,196.9 million
in 2008.
Average indirect customer funds totaled 54,263.7 million in 2009, down by 17.6% as compared to the previous year’s
average assets amounting to 65,837.4 million.
Retail
As a whole, our Retail business counts 2.3 million accountholding customers (individuals and companies).
Shown below is the breakdown of our Retail customers by Group retail bank:
Banca del Territorio – Retail Bank
Banca Popolare di Verona – SGSP
Credito Bergamasco
Cassa di Risparmio di Pescara
Total Retail Accountholding Customers
% Nr. accountholding
customers
26%
22%
22%
12%
11%
3%
2%
2%
2.3 million
The Group’s Retail customers are subdivided into two macro-segments – Private Individuals and Small Businesses – that in
turn are broken down into sub-segments with specific needs and characteristics, upon which the Retail Department
specifically focuses when developing marketing actions and product innovation. The sub-segments are:
x shareholders, households, students, the young, foreigners and senior customers (as part of the Private Individuals
segment);
x firms, shopkeepers, artisans, professionals, women businesses (as part of the Small Businesses segment).
Household products and services
When developing products and services devoted to households, we focused in particular on:
x covering mass market segments having a high growth and development potential, for example: the Youth,
Immigrants, and the low-cost acquisition channel by definition: the web, by innovating products, services and
processes on checking accounts, savings deposits and online services;
x “Smart” mortgages, ” proposed to reward the loyalty and to support the financial needs of households, together
with a full range of consumer credit products to support the financing needs of each family member across the
different stages of life;
x New payment card solutions, to foster the knowledge and interest of households towards secure, customizable
and readily accessible products.
In the meanwhile, the product offer was rationalized and simplified by reducing the complexity of the portfolio, so as to
facilitate the selling process and standardize the offer structure across the entire Gruppo Banco Popolare.
Special attention has been devoted to strengthening customer retention and customer satisfaction levers, by organizing
among other things loyalty programs, contests, extra-banking services, etc.
35
Checking accounts
The number of commercial checking accounts opened with the Banche del Territorio by Retail customers at the end of
December was 1.87 million, of which about 1.5 million referring to household customers (Universals + Affluents).
Shown below is the breakdown of outstanding checking accounts at the end of 2009:
Banca del Territorio
Credito Bergamasco
Total n. commercial checking accounts
% Nr. Commercial
checking account
25%
22%
22%
12%
12%
3%
2%
2%
1,87 million
In 2009 the above volume growth was driven by the opening of about 262 thousand new checking accounts, of which
about 190 thousand by Universals and Affluents.
Within the Checking Account offer, in 2009 the Group Banks were busy marketing the new offer, “Let’s Bank”, dedicated to
youth between the ages from 12 to 30 yrs. This challenging and innovative project was launched at the end of 2008 and
gave origin to three different types of accounts:
x Discover (Scoprire) 12-17 yrs is a deposit account dedicated to minors at their first banking experience;
x Study (Studiare) 18-29 yrs dedicated to University or master students;
x Work (Lavorare) 18-29 yrs is the checking account for young workers.
In particular, Discover 12-17 yrs received a prestigious award from the specialized newspaper Milano Finanza: the jury of
MF Innovazione Award 2009 awarded the first prize for the category Young 0-18 years to Banco’s deposit account.
The success of the Let’s Bank product range has been testified also by customers, who went well beyond our estimated
targets: about 25,000 youth during the year set up new accounts, which combine regular checking account services with a
wide range of extra-banking services.
With regard to products for junior customers, at the end of 2009 Brucoconto, the passbook dedicated to customers from 0 to
11 years of age, that was offered in 2008 by all the Banks of the Group in its new nominal version, reached the threshold of
40,000 accounts.
Banco has always entertained a special and privileged relation with its Registered shareholders, which reflects also in the
development of dedicated products, as Insieme Soci and Insieme Soci Giovani. Insieme Soci is a well consolidated
relationship program that has been extended across all the banks of the Group, designed to make the Shareholder feel he is
part of an exclusive club. The package includes the common banking services, combined with extra-banking services like
discounts and allowances, and with the loyalty-building program “Valore Insieme Soci” with its traditional prize catalogue
that was renewed until March 2010.
A “light” version was introduced in 2009, to give the opportunity to make a gradual entry into the Insieme Soci world,
featuring more contained costs and services.
The favor granted to this offer reserved to Banco Registered shareholders at the end of 2009 produced about 83 thousand
dedicated checking accounts, of which 63 thousand “Insieme Soci” accounts.
The Group has always been particularly attentive to the needs of foreign citizens who live and work in Italy and has
developed an entire dedicated range of products and services called “Formula Friend Service”. Formula Friend Account is a
fixed-fee checking account that includes various free-of-charge services and a special insurance coverage specifically
designed to meet the needs of people who live far away from their home country.
Formula Friend Transfer is a highly inexpensive money transfer service.
Romanian and Moroccan customers can also benefit from Formula Friend TwinAccount: this is a unique service in Italy,
whereby thanks to the agreement signed with Groupe Société Générale, they can open a checking account in their home
country at no charge (with BRD Groupe Société Générale and SoGen Maroc) just with a simple phone call.
2009 has been a very important year for the immigrants project. In January the Ethnic Team was officially set up, made up of
Ecuadorian, Romanian and Moroccan developers. Société Générale works with Banco as partner of excellence for this
initiative on the Italian market, sharing costs as well as the direct experience it has already accrued in similar projects.
The goals of the Ethnic Team are:
x develop and promote the product offer of Banco and Société Générale (Twin Account);
x report possible agreements with embassies, consulates and other institutional organizations;
x identify intermediaries and opinion leaders at local level (e.g. cultural mediators);
x promote marketing and communication initiatives geared to the Community.
36
We started the analysis to identify or set up new specialized distribution structures tactically located in the local banks’
market territories.
For retail customers looking for liquidity remuneration instruments, a new range of deposit accounts was launched in June
2009 called RendiConto, characterized by almost zero costs and very favorable interest rates.
Almost 6,000 RendiConto accounts were opened in only six months, which testifies the interest generated by an offer that
was distributed only through the Branch network and by word of mouth, as we decided not to invest in a dedicated
communication action and not to benefit from the support of any kind of advertising campaign.
With regard to the “flagship” of the Checking Account offer, 2009 marked the consolidation and harmonization of the
“Specchio” range across all the Group Banks. This range had been launched in 2007 to meet the different needs of our
customers and is based on four main product solutions:
• Tuttofare: aimed at customers who regularly use their checking account for normal transactions, that are included
in the monthly fee, without limits and additional charges;
• Tuttotasso: geared to customers who keep significant amounts deposited on their accounts, thanks to a
competitive rate of return;
• Tuttoperuno: geared to customers who rarely use their checking account for their transactions; in this case the
account has no monthly fee, and charges depend exclusively on its actual use;
• Tuttonline: aimed at customers who prefer a “self-service” use of their checking account; this solution has no
monthly fee or additional commissions if transactions are executed on-line.
The above described “Specchio” range has been further complemented with product solutions dedicated to specific
commercial initiatives designed to increase the loyalty of existing customers and acquiring new ones. By the end of the year,
the contribution of all the initiatives implemented in 2009 produced a total of almost 200,000 outstanding Specchio
accounts.
Retail mortgages
In spite of the marked slowdown experienced by the market with respect to prior years (in Q3, mortgages granted in 2009 at
national industry level shrank by about 15% as compared with the same period last year), Gruppo Banco Popolare reported
an overall new business growth of about 40% compared to 2008.
Outstanding retail mortgages in Banco Popolare at the end of 2009 totaled about 16 billion euro (residual debt), and their
breakdown by retail bank is as follows:
Banca Popolare di Verona - SGSP
Credito Bergamasco
Breakdown of residual debt
28%
22%
20%
14%
10%
2%
2%
2%
In 2009 the Group Marketing structures focused on two main areas:
x support households against the current economic crisis;
x meet customer housing needs by proposing innovative products.
Actions to support households
Against a market backdrop characterized by deep changes in terms of real economy, capital markets and regulatory
framework, the Italian government and the Country’s primary economic players took action to deal with the present
situation.
Banco Popolare was very proactive with respect to these initiatives: it joined agreements proposed by the Government, as
well as by Agencies, Trade Associations and Institutional entities, and also launched its own initiatives on the territory.
All these actions aim at supporting the social and economic fabric during a highly complex economic cycle, and they can
be grouped in three macro areas of intervention, reflecting three different goals:
x softer terms to favor access to loans (mortgages, loans, credit lines);
x actions to guarantee payment deferrals;
x actions to support liquidity and investments.
37
The table below gives a brief description of Banco Popolare’s main initiatives, specifying the target beneficiary groups.
Initiative
“Law Decree 4%”
Tremonti Bond –
payment suspension
C.I.G.S Advance
Initiatives for
Abruzzo
Description
Proposers
Reduction of interest rates of floating
rate mortgages for main home (public Ex. D.L.185/08
allowance that turns into a tax credit (Tremonti Bis)
for Banks with the Inland Revenue
Service)
Suspension of home mortgage
payments (main home purchase) for
12 months at no additional charge
(for individuals specified in ABI-MEF
protocol)
Inclusion in catalog of wages
guarantee fund advance product
(Cassa Integrazione Guadagni)
Setting up soft loans to rebuild
residential buildings damaged by the
earthquake (ABI-CDP agreement)
Agreement with ABI to suspend
mortgage payments until 31/12/2009
for people hit by the earthquake
Subscription/
Launch
Participating
Banks
Target customers
1 January 2009
Gruppo BP
Retail
1 July 2009
Gruppo BP
Retail
1 April 2009
Gruppo BP
Retail under
Wages Guarantee
Fund (CIG)
1 June 2009
Banca Caripe
Retail (Abruzzo)
1 June 2009
Banca Caripe
Retail (Abruzzo)
Product innovations
Also in 2009 we continued to propose new products characterized by a highly innovative content.
Following the government actions aiming at meeting family housing needs (Home Plan - Piano Casa), in addition to our
mortgage product range all the Group’s retail banks, Banche del Territorio, started to distribute “Mutuo 3”: a loan
specifically designed to take advantage of the opportunities offered by the Government’s Home Plan. This product offers
special terms and innovative ways of financing home extensions of up to 20% of the original volume, demolitions and
remodeling (with extension) of residential buildings or purchase of houses belonging to new urban settlements built under
the joint action of Government, Regions and local authorities.
Faced with a market characterized by interest rates at their historical low and by customers favoring floating rates (similarly
to what had already happened between 2003 and 2006, which then caused many customers to be in financial hardship due
to increasing interest rates and bloating mortgage payments), Banco Popolare supplemented its rich mortgage catalog with
“Mutuo Partenza Facile”: a mortgage/real estate mortgage loan with maturities from 10 to 30 years, which gives customers
the opportunity to benefit from the current low interest rates while protecting themselves with a fixed rate. Mutuo
PartenzaFacile has:
x a fixed entry rate for the first 12 months, tied to the ECB rate (as a result, the fixed entry rate stands at the same
levels of floating rate mortgages, and the customer can benefit from the current level of market interest rates);
x a subsequent standing fixed rate that is “pegged” at the time of signing the loan contract (as a result, the standing
fixed rate is determined already when setting up the loan, i.e. when interest rates are low).
Consumer Credit
As to commercial results, in spite of the marked slowdown experienced by the market with respect to prior years (in Q3, at
national industry level new business in 2009 shrank by about 12% as compared with the same period last year), Gruppo
Banco Popolare reported an overall growth of about 2% with respect to new business in 2008.
38
In particular, shown below is the breakdown of Agos-Ducato personal loans (accounting for about 92% of Banco Popolare’s
total business) by retail bank (Banche del Territorio):
Credito Bergamasco
% Agos-Ducato Granted Loans
29%
22%
21%
12%
13%
1%
1%
1%
This is the outcome of a “successful” model based:
x on a specialized product company (Agos-Ducato), leading to an optimization of the product range and a much
quicker response time to customers in terms of loan approval time (while carrying out a constant and careful
credit review and monitoring of the loan quality);
x and on the pervasiveness and the service focus characterizing the distribution network of our Group.
In 2009 again our strong focus on keeping the product range evolution consistent with customer needs substantiated into a
number of initiatives to broaden and diversify our offer. In particular, a new dynamic product, called “Versatilo” Loan, was
created, that supplements the Agos-Ducato personal loan range and is designed to satisfy all our customers’ needs,
especially for sophisticated customers who require tailored products. This product is a classical personal loan with a predefined rate, which however features the following distinguishing characteristics, which make it very flexible:
a) possibility to change the payment amount during the repayment plan;
b) possibility to skip a payment in case of distress, deferring it until the end of the amortization plan.
The new product was expressly set up to provide customers with a solution, as they are guaranteed the possibility to face
up to future needs (which obviously cannot be foreseen at the time of the loan issue), allowing them to reduce the payment
amount or defer it in time.
In order to provide a material support to those households which have been most harshly hit by the current economic
situation, Banco Popolare joined the initiative promoted by the Italian Banking Association (ABI) and the Italian Episcopal
Conference (CEI) to set up a microcredit program for families in need due to the economic crisis.
The program is addressed to families with at least 3 school-children, or where one of its members is disabled or critically ill,
which have lost all their employment or self-employment income as a result of the economic crisis.
A key pre-requisite to access the program is a project for reinstatement to work or for setting up a business activity.
Eligible applicants shall be given the chance to receive a loan, called “Prestito della Speranza” (loan of hope), of maximum
6,000 euro at a favorable interest rate and backed by a guarantee issued by a Fund set up with CEI.
Again in 2009, the distribution process of the pension/payroll-secured loan, Cessione del Quinto dello Stipendio/Pensione,
set up with the cooperation of Soluzio Quinto Finanziaria (a Company of Gruppo Agos-Ducato), became fully operational.
This product is a secured personal loan, with a fixed rate and an up to 120 month maturity, where payments are directly
deducted from the payroll (or pension) by the employer (or by the Welfare agency), so that even customers who in the past
had problems with banks are given the opportunity to obtain a loan.
Online channels (“By” Services)
“By Services” represent the multi-channel offer designed for retail customers and include all the different interaction modes
a customer can use in addition to branch services.
The available channels (Internet, call center, voice response, ATM, sms messaging and e-mail) are characterized by an
ongoing evolution in terms of learning curve quality and quantity of operational options, and therefore call for a permanent
project-development activity.
Among the various projects launched in 2009, worth mentioning is the renewed management of security codes to access By
Services: in addition to the established solution based on the installation of a digital certificate on the customer’s PC, as of
February 2010 a time-synchronized OTP Card shall be introduced. Our Bank shall be the first in Italy to adopt this
innovative instrument, that has the form and practicality of a credit card. When the customer presses a specific key, a code
will be displayed on the screen for thirty seconds, that will allow him to use multi-channel services anywhere and in total
security.
39
In 2009, the rationalization of the By Services started in 2008 with by Web continued. The by Call service set up a single
toll-free number for all Group customers, and harmonized logics and commissions across all our retail banks (Banche del
Territorio), to simplify customer communications and the understanding of the services.
ATM
A renewed attention was devoted to the ATM channel: harmonization, development and innovation are the guidelines that
in 2009 directed activities in this field and that will keep the Group busy also in the coming period.
During the year, numerous implementations were extended to the Group’s almost 2,500 ATM. In particular:
x a pilot project was launched for the acceptance of the European EAPS circuit (Euro Alliance of Payment Schemes).
This new scheme, born of the agreement reached by the main national circuits (for example our Bancomat),
represents the European-wide harmonized solution to bring SEPA (Single Euro Payments Area) into being. Through
the harmonization of the different circuits, the project aims at increasing the development of the payments
systems;
x a more modern and personalized interface was created for our Group, based on a 3D logic, with moving slides to
capture the user’s attention;
x the approach used to represent the different services by the single bank was improved, within the framework of a
single and synergic structure;
x a series of standardized advertising images and videos were introduced regarding the various Banche del
Territorio that run when terminals are in stand-by mode;
x the offer of the main services has been harmonized.
Payment instruments
Debit cards
In keeping with the strategies decided the prior year, in 2009 the various ongoing activities have been further consolidated
through a constant growth of the product’s penetration rate among our customers.
Changes in n. of debit cards (in thousand and %)
FY 2006
FY 2007
FY 2008
FY 2009
Of which first half
Of which second half
- 17 (-1.7%)
- 13 (-1.3%)
+77 (+8.0%)
+ 87 (+8%)
+ 49
+ 38
YoY debit card volume changes
MoM debit card changes in 2009
75,8
80,4
84,0
68,9
56,8
84
62,6
48,7
40,2
31,5
24,9
77
15,9
7,8
gen
--17
-13
2006
2007
2008
feb
mar
apr
mag
giu
lug
ago
set
ott
nov
dic
2009
Data in thousands of euros
In spite of economic difficulties, the increase in cards issued, together with the various initiatives that had been launched in
2008, favored the growth in absolute terms of card transactions.
To simplify our customer relations and improve their transparency, all operating activities linked to this product have been
further enhanced, in particular by:
x introducing the automated renewal of expiring cards with delivery to the cardholder’s home;
x using a new card without changing the Pin code;
40
x simplifying and standardizing the names used in the various communications sent to the customer (e.g.,
information sheets, account statements, etc).
To relaunch and promote two of our historical brands, Cassa di Risparmio di Imola and Banco di Chiavari, ATM cards have
been created with their logos on the front and back of the product.
Finally, in 2009 we laid the foundations to face the challenges associated with the adoption of PSD, scheduled for the first
months of 2010, and to fully implement SEPA instructions.
Credit cards
In line with the strenuous effort made by the banking industry to reduce inefficiencies associated with cash management,
that has been so well described for some time now by the expression “War on Cash”, in 2009 the Group Banks have
focused on increasing the dissemination of cards among their customers, launching an important campaign that was
internally referred to as “More Cards” (“Più Carte”). Supported by “Master in Card”, a training and motivational event
attended by the bank tellers of all the Banks, the campaign featured the “turnkey” delivery of classic and gold credit cards,
with exemption from paying the card fee for one year. Numerous account-holders were given the chance to freely
familiarize with the most comprehensive electronic money instrument, experimenting its efficacy and convenience. In 2010
the Group Banks will then fully benefit from the use of the new cards, also from a profit standpoint, by those customers who
shall appreciate the product and decide to keep it in their wallet.
In addition to the strong focus devoted to training and marketing, a major effort was made also to update the product range,
with the introduction of the Black card and the launch of the distribution of the first credit card supported by a contactless
interface on the MasterCard PayPass circuit. The Black card was designed for a more selected niche of sophisticated and
demanding customers in terms of offered services and disposable income, while the contactless technology represents a
great opportunity, with a potential for boosting the electronic payments sector.
Finally, thanks to a new framework agreement, American Express products are available on the shelves of all the Group’s
bank branches, i.e., credit cards that can supplement banking products and that can be used as customer care-oriented
commercial tools for customer retention.
Bancassurance - Protection
In 2009, the work carried out by Avipop Assicurazioni, the joint-venture between Gruppo Banco Popolare and Gruppo
Aviva, in constant coordination with Banco Popolare’s Retail Department produced an expansion of the product range,
which was supplemented with new insurance solutions in line with the Group’s goal of developing insurance products
dedicated to individual, home, family and business protection. Among credit protection insurance products (CPI), made
available to customers and linked to credit facilities, worth mentioning are:
x “CPI NON Finanziata” designed to protect holders of newly extended mortgages, featuring the option of paying
upfront a single premium without including it in the loan itself. This solution is particularly suited for mortgage
subrogation from other banks. As with all protection products, also in this case a special rate was dedicated to all
Banco Registered Shareholders;
x CPI policy to protect loans to SMEs, in particular in addition to the traditional CPI products associated with
business unsecured or mortgage loans, we introduced also CPI products to protect lines of credit or short term
credit facilities such as Idea Credito and Idea Bullet, which represent an absolute novelty in the Italian CPI
insurance world.
In addition to credit protection insurance products, two new insurance policies for individual, home and family protection,
supplementing the existing range, were distributed across the Group network in 2009:
x Healthcare policy "Diaria da ricovero" (Hospitalization Allowance) which guarantees the payment of a daily
amount in case of hospitalization;
x "Tre-30" accident insurance, a novelty in the Group’s protection product range, as it gives all customers with
children the opportunity to protect them from severe accident risks, ensuring them not only to simply continue
with their school education, but also a guaranteed annual income for a set period of 10 or 20 years.
Both products, as with all the Avipop range, have special versions devoted to Registered Shareholders and to Group
employees.
Thanks to the product range evolution mentioned above, in 2009 the Group retail bank networks reported total premiums
written of about 210 million euro.
Savings/Investment products and services
This range includes products and services meeting the savings/investment needs of Group customers, such as:
x Direct funding instruments: for example bonds and repurchase agreements;
x Asset management products: mutual funds and managed accounts;
x Investment instruments: for example certificates, administered accounts;
x Life insurance policies.
41
In the year under examination, customers favored conservative investment choices, reducing asset management products in
their investment portfolios (in favor, for example, of Government bonds and Gruppo Banco Popolare bonds).
A heavy selling activity of Group bonds represented one of the main features of the commercial activities performed in 2009
in the investment product and service area, together with a renewed interest for traditional insurance policies.
Group bonds
In 2009, Group bonds were issued to satisfy diversified customer requirements, totaling about 12,000 million, of which
about 5,500 million were structured products and more than 1,200 million were bonds issued by third parties.
Sales showed that customers favored more simple form of investments, for example “Plain Vanilla” medium term fixed rate
or zero coupon bonds. Similarly, customers preferred diversified issues of structured bonds, with notes featuring stepping up
coupons and early redemption (Step Up Callable). In the last quarter, we also proposed floating rate bonds, but with a
prefixed coupon (floor and cap).
As to the secondary market of Group bonds, in compliance with ABI’s guidelines for the transposition of Consob’s third
level MiFID regulation (so called Illiquid financial instruments), the time between the offering and the trading of securities
has been drastically reduced: as of November all issues have been listed after 90 days of the closing of the offer.
In keeping with the development targets of Banco Popolare’s funding activity, ordinary Group bonds have been
complemented in 2009 by specific bond issues at particularly competitive terms in order to acquire new customers and
raise new funds; in 2009 these issues reached a sales volume of about 3,200 million. The growth of new customer and
funding volumes was supported by the offer of specific short-term funding products (for ex. 12-month repos). This activity
towards the end of the year was incremented and shall continue also next year to increase the Group’s customer base and
market share. Moreover, our Registered Shareholders could benefit from liquidity investment transactions with repos at
highly competitive rates.
As to bonds issued by third parties, in the first part of the year we distributed some issues from primary Italian banks with a
highly reliable rating, aiming at offering the best capital invested protection to investors.
Other investment instruments and initiatives to support customers
The strong volatility of financial markets offered some interesting opportunities, that were seized by part of our customers,
whose risk profile shows a greater penchant for equity investments. For these investors, the Group offered Aletti Certificates,
that is, medium term investment certificates linked to financial markets with protection forms that at times are conditional.
To protect customers affected by the financial distress situations and bankruptcy of some issuers, the Group during the year
offered its support and legal aid in case of affidavits of debt to customers holders of bonds issued by Lehman Brothers,
Icelandic banks and General Motors.
With regard to the Lehman Brothers default, in January 2009 Gruppo Banco Popolare completed its action aiming at
protecting the subscribers of Index-linked policies backed by securities issued by the defaulting US bank. Practically, by
replacing the policy, customer can receive/recover the nominal value of the paid-in capital at a deferred maturity with
respect to the original.
As a result of the financial and credit crisis that among others hit Iceland, Gruppo Banco Popolare decided to take action
also in favor of those customers who had subscribed index-linked policies backed by Icelandic bank instruments.
Overall, there were 6 policies issued by UGF Assicurazioni (former Aurora Assicurazioni) and Eurovita Assicurazioni,
distributed by the branches of former Gruppo BPI. Four policies expired in March and May 2009, while the last 2 indexlinked policies shall come due in June 2010 next.
Owing to the financial crisis of the Icelandic banks, Insurance Companies could not pay benefits to the policy-holders,
whose capital invested in the policies has been totally impaired. Even the subsequent international moratorium for debtors
most likely will not make it easy to rapidly and fully recover the original premium paid.
The action planned by Gruppo BP is part of an effort to build loyalty and restore a climate of trust between customers and
Banks, with the aim in the future to guarantee and favor the continuation and development of business relations, and of
course to avoid negative impacts that could tarnish our reputation.
In December, after the Parent company’s Management Board approved the action, the necessary documentation was filed
with Consob to launch a voluntary public exchange offer (PEO) of the index-linked policies with 5-year zero coupon bonds
issued by Banco Popolare, plus, in case, a cash balance for residual amounts.
As a result, upon expiration of the bond offered in exchange for the index-linked policy, the customer will recover the
original invested capital, net of taxation on accrued interest.
As of September, the Group, assisted by the specialized support offered by Banca Aletti, helped customers who wished to
repatriate their assets held abroad, taking advantage of the possibility to repatriate capitals under the “Scudo Fiscale ter”
(Tax Shield) safe-conduct.
Asset Management
Market conditions caused the asset management sector to report a performance characterized by redemption flows that in
2009 produced a net outflow from Retail customers mutual funds and managed assets of about 2.5 billion.
42
In 2009, the managed accounts product range was rationalized, with an effort to keep customers’ changing investment and
saving needs always in focus.
In particular, in step with market trends, the Group’s mutual fund range in 2009 underwent a rationalization and
simplification process, leading to a consolidation process and to a marked reduction of Aletti Gestielle SGR Funds
(currently 22). The pension funds managed by the SGR have been combined into similar compartments, so that the
compartments coming with the Banks before the merger of the new Banking Group have been merged together.
Also with regard to Arca SGR, the CinqueStelle fund range has been rationalized, and two bond funds were launched, with
a prefixed maturity, called Arca Cedola Governativo Euro Bond I and II and Arca Cedola Corporate Bond I and II.
Finally, in 2009 for the Discretionary Asset Management arm three new compartments of Aletti Gestioni “Multilinea” were
launched, in addition to the existing 8 compartments.
As of the second half of 2009, the Banks proposed again the balanced line “Protezione Più 0-50” to their customers, i.e., an
Asset Management product backed by guarantee, with invested capital guarantee upon expiration of the product’s 5-year
maturity period.
Life Bancassurance
In this area, upon termination of the prior exclusivity agreements with other business partners, in 2009 the entire Gruppo
Banco Popolare operated through the company “Popolare Vita”, a joint-venture with the insurance partner Fondiaria Sai,
and with the Irish subsidiary “The Lawrence Life Assurance”.
In 2009, Popolare Vita’s offer was constantly complemented with the distribution of new products that provide a “complete”
solution to the insurance investment needs of our Group customers.
Also in this sector the market performance affected the development of sales activities, generating in 2009 a new business of
about 3,500 million, of which about 2,320 million on Index Linked policies, about 1,150 million on Life insurance policies
(Ramo I) and the remaining on investment-linked insurance policies (Ramo V) and Unit-Linked policies.
The Group’s product range underwent the following actions:
x Distribution of a Life policy (Ramo I) with very low entry loads, and penalties in case of early exit, called
“Beldomani Futuro Garantito Flex”. It adds up to the previous version of the traditional policy with a minimum
return guaranteed;
x launch of a new favorable rate for the traditional policy, reserved to Shareholding customers and Group
employees;
x restyling of the investment-linked policy (Ramo V) to manage business liquidity.
The sale of Index Linked products resumed in May with the distribution of 4 index-linked policies issued by the Irish
company; they feature: bonds issued by Banco Popolare as underlying asset as capital guarantee upon maturity, a fixed
coupon structure and index linking to world equity market.
The distributed tranches, called “Popolare Life Cedola Plus” (May 2009), “Popolare Life Multicedola” (June 2009),
“Popolare Life Top Index 1 and 2” (September and October 2009) enjoyed a great success, due to the fact that the
investment combines fixed coupon flows with the typical advantages of insurance products.
Finally, Popolare Vita’s pension offer saw the restyling of the Supplementary Pension Scheme “Popolare Vita Previdenza”, a
product that in the last months of the year raised much interest among investors.
Mifid
Throughout 2009 we worked to improve the operational processes, the IT procedures and the organizational model that the
Group has been using since the introduction of MiFID.
In particular, in compliance with current regulatory requirements:
x disclosure to customers on transparency and incentives received by Banks in return of distribution services has
been gradually automated;
x all those financial instruments on the secondary market (issued before November 2007, when the directive came
into effect) have been reclassified, that were not in line with the profile of the new products issued in compliance
with the criteria defined by the Group;
x Branch networks have been prompted to update investment service contracts for customers that had not been
reached yet or had not availed themselves of the Banks’ services.
With regard to the adoption of level 3 measures regarding the so called “illiquid financial products”, a dedicated project
was launched to implement the regulation that requires of Intermediaries to behave with fairness and transparency when
they offer illiquid products.
By the end of December, more than 860,000 retail customers holders of financial instruments have been contacted by the
bank branches and “profiled” based on the MiFID profiling questionnaire.
Advisory Platform for Private Managers (Affluents and Universals)
In 2009, the new Advisory platform has been released on all the Group branches, to support Private Managers when
providing advisory services on their customers’ savings/investment product portfolio.
43
In their periodic meetings with customers, Managers can use this tool to obtain: information for portfolio analysis and a
summary report on the customer’s position with respect to the portfolio assigned to the customer’s profile. The tool also
makes it possible to identify proposals to “rebalance” the portfolio, putting forward recommendations after checking the
adequacy of the suggested transactions.
For the purpose of ease-of-use, a dedicated on-line training course has been made available to the networks, in addition to a
set of extensive user guides on how to use the platform, and training meetings were organized with the retail banks, Banche
del Territorio.
Products and services for SMEs
In 2009, Gruppo Banco Popolare devoted a great attention to the SME segment, with the expansion of the dedicated
checking accounts, loans and credit facilities product ranges.
Owing to the economic crisis, we also took a number of actions to facilitate access to loans and sustain the liquidity of
companies at a time of a rough business cycle.
Checking accounts
In spite of the crisis, in 2009 Gruppo Banco Popolare strongly expanded its customer base. Commercial checking accounts
and deposit accounts reported a positive delta of about 19,000 accounts (difference between opened and closed accounts),
up by 7% over the prior year. The best performance was published by Banca Popolare di Lodi and Cassa di Risparmio di
Lucca Pisa Livorno, with a growth rate of 10% and 11% over 2008, respectively.
In 2009 another goal was to consolidate the good results obtained with the launch of the new “Idea” checking accounts, a
highly innovative range, developed along a sub-segmentation logic.
In 2008 we launched Idea Professionisti (professionals), Idea Artigiani (artisans), Idea Commercianti (shopkeepers), Idea
Farmacie (pharmacies), Idea Aziende (firms), Idea Turismo (tourism) and Idea On Line. Since inception, about 62,000
customers chose Idea products, accounting for more than 20% of the total number of checking accounts.
this number is bound to grow even further in 2010, considering that the range is going to be complemented with new lines
dedicated to other sub-segments (e.g., farmers).
In 2009, we launched Idea Risparmio, the first deposit account in the Idea range, designed to satisfy the investment and
liquidity management needs of Small business. It comprises two specific lines: Idea Risparmio “Libero” and Idea Risparmio
“3 mesi”.
In December 2009, a new version of the Idea Commercianti account was launched, called Idea Commercianti Sviluppo: an
instrument with favorable terms on expiration that was made available to Branches and Retail business developers to
acquire new SME customers.
Loans and Credit facilities
Also in 2009, in spite of the difficult economic cycle, Gruppo Banco Popolare continued to take heed of the loan needs
expressed by SME customers, and as a result it increased the loan offer and it joined anti-crisis industry-wide initiatives,
such as the moratorium on SME debts.
More than 3.5 billion euro in MLT loans were granted, representing a growth rate of 10% with respect to the volumes
extended in 2008 and of 25% in terms of number of loans, with particularly satisfying results for unsecured loans (which
grew by about 30%).
The granting of mortgage, real estate and construction loans to SMEs was in line with loans issued in 2008, which is justified
by the fact that the demand for this type of investment by our customers declined.
The main new loans launched in 2009 to support SMEs were:
Idea Bullet
Unsecured loan with a distinctive characteristic: capital is fully repaid on loan maturity, and throughout the amortization
period the customer makes quarterly interest-only payments;
Idea Credito su misura
Unsecured loan with a maturity between 6 and 48 months, geared to support the investment and financial needs of SMEs;
Idea Anticipo Pos
It is an uncommitted credit facility, with which the customer, a shopkeeper user of a POS terminal, can receive a line of
credit to be repaid with POS takings;
Smobilizzo crediti verso lo Stato – tax credit financing
It is a credit facility through which the Banche del Territorio favor access to loans by SMEs, by creating new liquidity flows
for Customer businesses that claim a sure, liquid and refundable tax credit with the Public Administration.
44
Actions to support companies as a result of the crisis
Owing to the economic crisis that characterized 2009, Gruppo Banco Popolare on 31st August 2009 joined the Small
Business Act (signed at the presence of the Minister of Economy and Finance by ABI and the trade associations of the
Osservatorio banche-imprese) aiming at supporting the revitalization of SMEs after a period marked by economic
difficulties.
To favor the revitalization of companies that are facing a liquidity crisis, a series of actions were planned in favor of SMEs:
12-month suspension of principal payments on mortgages and leases, extension up to 270 days of short term commercial
loan maturities.
Eligible companies are firms with less than 250 employees and annual sales of less than 50 million euro (or with balance
sheet assets not exceeding 43 million euro), which, albeit under temporary distress, have an adequate outlook for business
growth and continuity.
Under the agreement, the participating Banks also undertook to favor the financial strengthening of small and mid-sized
enterprises by setting up a specific credit facility, corresponding to a multiple of the capital increase actually paid in by
shareholders.
So, Idea Capitale was launched, an unsecured mortgage loan aiming at supporting companies that carry out capital
strengthening actions with new share issues against payment.
The Bank grants a medium term loan to the company presenting a corporate capitalization plan, whose amount is a multiple
of (at least twice) the capital increase amount approved and paid in by the shareholders, up to a maximum of 200,000 euro.
The only constraint is that the share capital increase must be deposited with our Banca del Territorio.
Among the initiatives developed by the Government to sustain liquidity and access to loans by enterprises that Banco joined
in we can mention:
x The 21.75 million euro contribution to the Guarantee Fund (to build up a loan volume of about 400 million)
managed by Medio Credito Centrale and aiming at facilitating the access to loans by SMEs by issuing specific
guarantees to banks;
x implementation of the M.D. establishing the criteria and modalities regulating the issue of demand guarantees and
counter-guarantees eligible for SGFA (Soc. Gest. Fondi Agroalimentari) on behalf of ISMEA (Ist. Serv. per il
Mercato Agricolo Alimentare). The guarantees must back MLT loans to support farming activities (research,
technological innovation, purchase of equipment,…);
x after the subscription of the Tremonti Bond, commitment to grant more loans to SMEs over the next three years, at
an annual average rate of 6% over the 39.8 billion euro of the 2007-2008 period (average of actual year-end
data);
x subscription of two new lending agreements between BP and EIB (European Investment Bank) to issue MLT credit
facilities to support investment projects and industrial initiatives proposed by SMEs, Public Entities and Public
Utilities up to an aggregate financing of 300 million euro.
Again to support the enterprises, Banco entered a series of agreements with the Regions of Veneto, Emilia Romagna,
Lombardy, Liguria, Tuscany.
At the end of 2009, after a flood struck the provinces of Lucca, Pisa and Perugia, our Banking Group set up an extraordinary
action plan to support our business customers whose offices were located in the flooded areas. The plan envisages two
loans, an unsecured loan and a bullet loan up to maximum 75,000 euro, to support the expenses necessary to reconstruct
the damaged structures, or to indemnify the partial and/or total production loss.
As part of the government project “Italia & Turismo” (aiming at supporting new investments by enterprises and at favoring
the revitalization of a strategic industry for the Country’s economic development) Banco Popolare joined the agreement
signed by the Minister of Tourism and the National Trade Associations (Assoturismo, Confturismo, Federturismo). This was
the origin of “Plafond Turismo”: an initiative envisaging the earmarking of a 200 million euro credit line ceiling “Rilancio
Attività Turistiche”. The offer is geared to tourism operators and features to loan products (Idea Credito and Idea Bullet
issued against a Confidi guarantee) and the checking account package Idea Turismo, that includes services designed for this
type of customers.
Insurance coverage
The interest of Small Business customers for non-life insurance products was confirmed also by new business volumes in
2009, that enjoyed a growth rate of 200% over the prior year for CPI premiums (Creditor Protection Insurance) for newly
issued and outstanding loans.
To broaden the product range of Banco Popolare and to satisfy the growing protection needs expressed by our SmallBusiness customers, two additional products were released within the non-life insurance line: the policies Multirischi
Commercio and Multirischi Impresa.
Customer can choose their guarantees from among Fire, Theft, Civil Liability, Electronics, Legal Protection and Consultation,
they can define the insurance maximums and can thus build their own personalized coverage, tailored to their specific
needs.
In a few months we distributed about 3,000 policies, a rather satisfying number if we consider the complexity of the product
structure, and that it is bound to progressively grow in 2010 in the light of our customers’ needs.
45
Actions and commercial initiatives for SMEs
The SME segment is one of the key elements of the Group’s business growth; hence, in 2009 just as in 2008, a special
attention was paid to commercial initiatives, in particular:
Against the current scenario of economic uncertainty, Banco developed Check-up “Stato di salute”: it is an initiative aiming
at setting up instruments to monitor the operating and financial evolution of our SME customers; to better understand how
they are tackling the crisis and what are their needs; to sharpen our perception of the risk level inherent in our loan book.
To this end, a specific action was launched, based on a proactive schedule of contacts and visits to our SME customers, with
the goal of gauging their health status. Customers were approached and submitted a questionnaire made up of 4 sections to
collect more detailed information on their business performance, their business strategy, their financial needs and their
recourse to borrowings.
In 2009 we also launched many commercial initiatives on the market:
Prendi Quota
Action to increase assets originated by short term commercial loans (invoice advances and trade receivable financing).
Chirografari in scadenza (Due unsecured loans)
Based on our CRM application, on a monthly basis we contact our SME customers who have an unsecured loan falling due
and propose an early replacement of the outstanding loan with a new one.
13ª/14ª F24 Imposte e Tasse (thirteenth and fourteenth extra month’s pay, tax return and taxes)
Periodic campaign to help SMEs pay their taxes through the F24 tax return. The sales network has been provided with a
financing product to support the liquidity needs of their customers, who can thus have access to the necessary funds to pay
their taxes.
Fido Potenziale
Campaign which allows to identify SME customers that at the time of the survey meet specific creditworthiness
requirements. A proposal is submitted to the identified customers, through a simplified inquiry procedure, to raise a new
credit line or increase the existing facilities according to prefixed amounts or limits;
Liste Prospect (Lists of Prospects)
Action aiming at acquiring prospective customers to increase the net checking account balance, thus guaranteeing the
growth of the Bank’s customer base. To this end, about 200,000 prospective SME names have been made available to the
sales network, and the Branches used the lists to approach them and carry out business development actions;
Retention
Fine-tuning of the system to identify and report names that show the typical behavior of customers who have abandoned the
Bank in recent months. The reports highlight irregular banking activity or very limited banking activity. The Branches and
the Managers can use some commercial levers to restore trust and customer relations.
Direct Banking product and services
The Direct Banking offer – “Banca Diretta” - includes all the “electronic multi-channel” products and services offered to the
Group’s various customer segments: Retail, SME, Corporate, Large Corporate.
The importance of this business area is well evidenced by the dimensional indicators illustrated below:
Products/Services
Phone Banking customers – by Call
Home Banking customers – by Web
Web Online Trading customers
Mobile customers – by Alert
Remote Banking customers
POS terminals
ATM terminals
End 2009
233,363
314,453
39,322
145,611
200,552
59,806
2,497
Thanks to the quality of our services, the efficacy of our actions and to our innovation, the customers using direct channels
have been constantly increasing. For our customers the direct channels are becoming more and more instruments of daily
relationship with our bank.
This prodded us to carry out a double effort: offer functional, stable, user-friendly solutions to our customers, while setting
up for our sales network all the information supports they need to acquire a good knowledge and sell our wide range of
products.
Traditionally, the best results come from leveraging the potentials offered by information technology, in a complicated
marriage of multi-channels, business and interoperability, where the final goal is to improve the loyalty of our customer
base.
This was precisely the focus of the various initiatives launched by our Group also in 2009, where a special attention was
devoted to the needs expressed by the market, while supporting our retail banks with the “Multicanale” offer, also through
“Electronic Specialists” to assist them.
46
Home Banking – by Web
Also in 2009, the number of customers subscribing to the Home Banking - by Web service increased (+25%), hand in hand
with a corresponding growth in use, both for inquiries and for transactions. The quality of our services and the unrelenting
focus on the evolution of content, graphics and functionalities contributed to these results.
Mobile - by Alert
Customers confirmed their favor for alerting services through the “mobile” channel. By now these services can be
considered “consolidated” in terms of contents and generally accepted/required by the market, thanks also to their ease-ofuse, rapidity and full availability on various devices, via the SMS standard.
The alerting service linked to channel security (web/cards) and payment instructions was particularly appreciated.
We think that further significant developments will go through the mobile channels, in step with the expectations of a part of
the market that turns to the banking world.
Remote Banking
The Remote Banking service reported a + 7% growth rate in the number of users, that were well in excess of 200,000.
During the year we organized ad hoc focus groups with our Banche del Territorio to better identify the areas of development
and enhancement of sales processes and business logics.
Customers met with great favor the service offered through the “Vantaggio” technological platform, which this year began to
be turned into a Portal for Enterprises “Vantaggio - tutto in un clic” – all in one click.
Also in this case, an unrelenting attention was devoted to the evolution of functions made available to customers, to enable
them to make the best use of what has become an electronic branch on the customer’s desk, available 24h/24h. In 2009, we
worked in particular to provide our customers with all the best tools to increase their IT security.
All Remote Banking channels are constantly up-to-date with the CBI Service standards (Corporate Banking Interbancario), of
which our Group is an active member.
POS
Two important initiatives were carried out in the POS area:
x A renewed focus on e-commerce. During the year, we set up the by Pos service, the new virtual Pos solution of
Banco Popolare, to manage takings via web with credit cards.
x Launch on the market of the new contactless POS terminals, i.e., state-of-the-art terminals that enable contactless
payment transactions. This new collection mode was adopted because of the benefits shopkeepers can enjoy from
it: simplicity, speed, convenience and innovation. All the Banks of our Banking Group can propose these
innovative terminals to their customers. Also MasterCard is involved in this initiative with its PayPass brand.
Among the activities carried out during the year with regard to the POS service offer, worth mentioning are:
x The new agreement with American Express to manage acquiring transactions;
x Dematerialization of account statements;
x Thanks to our partnership with KCCS (Key Client Cards & Solutions), launch of the new service portal for
accredited shopkeepers to access accounting data and information, also by way of a detailed research engine;
x Launch on the market of the new “SSL” terminals, for shopkeepers with web connection, leading to the
optimization of performance and costs.
In the POS arena, the technological evolution of the numerous and different solutions offered on the market continues to be
highly dynamic also in our Group.
Our terminal fleet continues to grow (+9%), at a rate greater than the prior year, a comforting evidence that we made the
right choices.
Contact Center
The Contact Center delivers inbound and outbound information services to Group customers. The structure seeks
information or carries out transactions in response to customer requests by phone, e-mail, by web, from our public and
private websites, and by IVR (Interactive Voice Response).
The “traditional” Phone-Banking activities (by Cal service, up by 14%) go along with help desk services for home-banking
customers, support to the sales network for Popolare Vita services and MIFID regulations, fraud detection activities
(checking suspicious transactions performed abroad to identify possible debit card clonation events), and general customer
information services (toll-free numbers).
The Contact Center is a daily operational reference for our customers and for the Group network.
Among the most important activities involving this area, worth mentioning are:
x Adoption of a new call center technological platform, that makes it possible to offer a better service to our
customers, while guaranteeing a high performance level and the interaction with the internet channel;
x Customer service within the extended Consumer Credit joint-venture originating from the combination of Agos
and Ducato;
47
x Consolidation in a single toll-free number (800.024.024) of services that previously were offered through different
phone numbers by the various Banche del Territorio: now with this single number it is possible to access by Call
Phone Banking Services and the by Service Customer Service.
In addition to these inbound activities, we have numerous proactive Telemarketing, Customer Care and Customer Service
activities, also by resorting to outsourcers.
Our “Welcome Call” has consolidated, and is by now a traditional activity whereby new customers are contacted to
develop a more solid Bank/customer relation and to assess the level of satisfaction with respect to the products and services
offered by the Group.
Corporate
The Group corporate network is dedicated to the Corporate segment, cuts across the various retail banks, our Banche del
Territorio, can count on 76 Corporate Centers (Centri Imprese) with 370 Corporate managers, plus the branches of Credito
Bergamasco, which serves corporate customers through these sophisticated structures on its market territory.
Clients belonging to the Corporate segment to date remain at the same levels as in 2008 (about 60,000) with slight
percentage differences as compared to the prior year in the breakdown by Bank (fig. 1-2).
2009
BPL Aggr.; 24.4%
CRLUPILI; 11.0%
BPV - SGSP; 26.7%
CREBERG; 19.6%
BPN; 18.3%
2008
BPL Aggr.; 24.2%
CRLUPILI; 10.6%
BPV - SGSP; 27.3%
CREBERG; 20.2%
BPN; 17.7%
Fig. 1-2. Breakdown of Corporate customers by Bank (Counterparties in Corporate portfolios to date. BPL Aggregate includes BPL SpA, BP Crema, BP Cremona,
Caripe).
48
The breakdown of customers by sales classes reveals a significant concentration on lower classes (up to 50 million euro), up
0.2% with respect to 2008 (fig. 3-4).
2009
3.7%
1.4%
3.0%
6.1%
0 - 25 MLN
25 - 50 MLN
50 - 100 MLN
100 - 150 MLN
oltre 150 MLN
85.8%
2008
4.0%
6.6%
1.4%
2.9%
0 - 25 MLN
25 - 50 MLN
50 - 100 MLN
100 - 150 MLN
oltre 150 MLN
85.1%
Fig. 3-4. Breakdown of Corporate customers by sales classes (million/euro).
49
The customer breakdown by business sector shows that the Service sector, even though it slipped slightly, still has the lion’s
share, (fig. 6-7).
2009
3.9%
4.3%
3.3%
3.1%
5.2%
5.4%
Other services
2.9%
2.7%
2.0%
1.9%
1.8%
1.5%
6.5%
Services to trade
Building and construction
Metal products
Other manufacturing equipment
Machines and mechanical equ.
Textile and clothing
Transportation and communications
Other
9.4%
Food
P.A., Healthcare and extra-terr. sv.
24.8%
Electric materials and supply
Non-ore mineral processing
Rubber and plastics
21.3%
Paper and publishing
Agriculture
2008
4.0%
4.4%
3.2%
2.9%
5.3%
5.7%
6.4%
Other services
2.6%
2.1%
2.0%
1.8%
1.5%
2.4%
Services to trade
Building and construction
Metal products
Other manufacturing equipment
Machines and mechanical equ.
Textile and clothing
Transportation and communications
Other
9.3%
Food
P.A., Healthcare and extra-terr. sv.
25.2%
Electric materials and supply
Non-ore mineral processing
Rubber and plastics
21.2%
Paper and publishing
Agriculture
Fig. 5-6. Breakdown of Corporate customers by Business sector.
50
As to intermediated assets, the average loan balance increased to about 39 billion euro as at 31st December 2009 (fig. 7-8).
Total loans 2009/2008
39.1
38.0
2008
2009
Total loans
BPL Aggr.; 22.7%
CRLUPILI; 11.0%
CREBERG; 16.5%
BPV - SGSP; 32.3%
BPN; 17.5%
Fig. 7-8. Comparison of the Monthly Average Balance of Total Loans in 2009 and 2008 on a like-to-like basis based on the 2009 customer segmentation.
Breakdown of total Corporate loans by Banca del Territorio (Monthly average balances measured on 31-12-2009).
In detail, Mid Corporate loans (sales between 2.5 million euro to 250 million euro) on 31st December 2009 soared to about
28 billion euro, 73% of total corporate loans (fig. 9-10).
Total MID Corporate loans 2009/2008
28.4
27.4
2008
2009
Total MID Corporate loans
BPL Aggr.; 22.6%
CRLUPILI; 12.3%
CREBERG; 17.8%
BPV - SGSP; 29.4%
BPN; 17.9%
Fig. 9-10. Comparison of the Monthly Average Balance of Total Mid Corporate Loans in 2009 and 2008 on a like-to-like basis based on the 2009 customer
segmentation. Breakdown of total Mid Corporate loans by Banca del Territorio (Monthly average balances measured on 31-12-2009).
51
The breakdown by loan maturity shows that the Medium/Long Term made a greater contribution to volume growth during
the year. The reason lies in the peculiar economic situation, which on the one hand caused companies to cut back on
investments and focus more on short term planning, while on the other it drove the demand for committed MLT loans up.
S/T loans came in at about 21 billion euro (fig.11-12).
Short term loans 2009/2008
20.9
20.6
2008
2009
Short term loans
BPL Aggr.; 21.2%
CRLUPILI; 8.8%
CREBERG; 20.7%
BPV - SGSP; 29.1%
BPN; 20.2%
Fig. 11-12. Comparison of the Monthly Average Balance of Short Term Loans in 2009 and 2008 on a like-to-like basis based on the 2009 customer
segmentation. Breakdown of total S/T loans by Banca del Territorio (Monthly average balances measured on 31-12-2009).
ML/T loans stood at 18.3 billion euro, corresponding to about 48% of total corporate loans (fig.13-14).
ML/T loans 2009/2008
18.3
17.3
2008
2009
ML/T loans
BPL Aggr.; 24.3%
CRLUPILI; 13.4%
CREBERG; 11.7%
BPV - SGSP; 36.2%
BPN; 14.4%
Figure 13-14. Comparison of the Monthly Average Balance of Medium/Long Term Loans in 2009 and 2008 on a like-to-like basis based on the 2009 customer
segmentation. Breakdown of ML/T loans by Banca del Territorio (Monthly average balances measured on 31-12-2009).
52
Extended direct Corporate customer funds (i.e., Raccolta diretta allargata, RDA: direct customer funds + bonds issued and
distributed by the banks) at the end of 2009 went up to 11.6 billion euro (fig.15-16).
Extended direct customer funds (RDA) 2009/2008 comparison
11.6
10.5
2008
2009
Extended direct customer funds (RDA)
BPL Aggr.; 24.3%
CRLUPILI; 7.8%
BPV - SGSP; 29.4%
CREBERG; 23.0%
BPN; 15.5%
Fig. 15-16. Comparison of the Monthly Average Balance of Extended Direct Customer Funds in 2009 and 2008 on a like-to-like basis based on the 2009
customer segmentation. Breakdown of Expanded Direct Customer Funds by Banca del Territorio (Monthly Average balances measured on 31-12-2009).
Last year was characterized by a particularly difficult economic situation for the Italian and world economy, which deeply
affected the relations between the banking industry and the corporate world. In the light also of these events, a number of
important strategic choices were made to pursue our primary objectives, while improving/increasing the efficiency and
efficacy of the retail bank’s commercial activities, standing even closer to companies in these hard-pressed times.
Listed below are the priorities identified and pursued in 2009, which were developed keeping in mind the afore mentioned
systemic crisis and in compliance with Group strategic guidelines:
x targeted growth of corporate loans, with a special focus on our “core” sector (mid-sized companies), setting up
actions to support the economic recovery and limiting the exposure to “pure” loans;
x favor medium/long term finalized loans, keeping total exposure under control to comply with funding needs and
requirements, both in terms of volumes and costs;
x targeted pricing adjustment in view of changing market conditions and creditworthiness, by gradually introducing
“risk-adjusted pricing” models and instruments to guarantee the correct corporate loan remuneration as a function
of the capital-at-risk;
x strong increase in corporate Direct funds, also to sustain the necessary self-financing for loan growth;
x support the commission component of Net interest and other banking income, by developing so called value
added products and services (e.g., Foreign operations, Risk Hedging and Corporate Finance).
In keeping with its mission and with the identified priorities, the Corporate Department carried out a series of actions and
launched important activities directed at a greater efficiency and effectiveness of the commercial action, as well as at
increasing the quality of the support provided to our Banche del Territorio.
Among the main activities, worth mentioning are:
x the creation of a service model centralized in the Parent company for Large Corporate and Institutional customers,
and a specific model for Local Large Corporate segments (covered by the Banche del Territorio) and Mid-sized
enterprises with large lines of credit (so called MID PLUS), where specific commercial and lending coordination
mechanisms have been put in place across the Group Banks;
x actions aiming at improving and innovating the product catalog, to give companies, whether customers or not,
the necessary support, considering among other things last year’s hard-pressed economic backdrop;
x the dissemination of commercial behaviors, instruments, pricing indications and products aiming at optimizing
profitability as a function of risk, bringing about a way of working across the sales network that is consistent with
53
the need for an efficient allocation of Banco’s capital;
x the strong commitment of resources to make a tangible contribution to the sales training program for the
Corporate salespeople of the Group Banks;
x joining ABI’s “Small Business Act” for the debt moratorium for SMEs.
Large Corporate, Institutions and Public Entities
The Large Corporate, Institutions and Public Entities Service is in charge of dealing with large manufacturing and business
companies, i.e., Large Corporate, with Italian and foreign financial institutions , Institutional customers, Local Authorities, as
well as their associates, and Public Entities.
The Service’s three activities share a common characteristic, namely they manage the commercial and lending needs of the
customer segment they are responsible for with the support of a team of managers and analysts that are dedicated
exclusively to the management of the assigned customer relations.
In particular, Domestic Large Corporate was set up as a result of a resolution passed by the Management Board on 7th April
2009, which establishes that the commercial management and the decisions as to the lending ceiling of the 103 Groups of
large customers be centralized at the Parent Company’s, Banco Popolare.
For this purpose, 6 teams were created, each with a Manager (called Global Relationship Manager, GRM) and an
Analyst/Assistant, located in Lodi, Bergamo, Verona, Modena, Lucca and Rome, in charge of supervising the commercial
relation with the assigned customers, ensuring that the latter are applied the same economic terms across the entire Banking
Group and enjoy a coherent commercial offer, while the operational management of the relationship still lies in the Banche
del Territorio.
GRM are also in charge of setting the global lending ceiling and of allocating the loans to the retail banks on behalf of the
Lending Department, which then sees that this information is reported to the competent Corporate Boards.
The Institutions and Public Entities Function was set up as a result of a resolution passed by the Management Board on 16th
June 2009, which establishes that a new coordination model be set up at Group level for risk management and control for
Institutional Counterparties, i.e., Banks and Banking Groups, Insurance Companies and Insurance Groups, financial
companies, mainly associates of Banks and Insurance companies. To this end, the Institutional Counterparty Manager was
put in place.
The above Function is also in charge of coordinating the activities of all the Group Banks with respect to the Public Entities
Segment (mainly Local Entities, Public Utilities, Healthcare Organizations and Institutions, Social Security Agencies, Welfare
Agencies, Schools), assisted by a dedicated team of specialists.
Mid Corporate
The Mid Corporate Service was set up to help the sales network pursue the loan and deposit growth targets within this
segment, together with the related margins, in keeping with the group strategy of focusing on Small and Medium-sized
Enterprises.
In 2009, the economic crisis was particularly harsh on SMEs, as they not only had to face a reduction in sales and orders
and worsening payment terms, but had to come to grips also with the systemic weakness of their financial and capital
structure.
Hence, the service focused on providing the sales network with the tools and information that could favor the support and
access to loans by enterprises, while keeping a close watch on risk and optimizing capital absorption.
The segment’s main activity was to promote sales, based on the following initiatives:
x introduction of the management model for mid corporate customers with large credit lines (so called MID PLUS)
across the Banche del Territorio to improve risk control and profitability, also thanks to dedicated product and
services;
x analysis of the needs of mid-sized enterprises, together with opportunities, guarantee and soft financing
instruments to favor access to loans by SMEs (training meetings on financial instruments and soft financing
opportunities for enterprises have been promoted across the network with local Confidi trade association
representatives and regional authorities);
x development of an integrated offer for the Corporate segment in coordination with Banca Aletti. During the year a
fruitful collaboration was started between Mid Corporate and Banca Aletti’s Capital Market Service to optimize
the synergies between our offer and the capital market as additional growth opportunity for companies;
x support to sales initiatives by innovating products and launching marketing campaigns;
x monitoring of the health status of our companies (a questionnaire was sent to 2,200 companies belonging to this
segment), of the adopted strategies to tackle the crisis, their financial requirements, to better define the room for
improvement of our commercial proposition;
x preparation of sector and geographical market analysis to support the sales/advisory activities of corporate
managers.
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Strategic Planning
In addition to planning, monitoring and developing sales activities, in 2009 the Corporate Strategic Planning Service
launched the project “Gestione Valore Cliente” (Customer Value Management), in close cooperation with the Group
Corporate Center (Business Planning and Control) and Risk Management.
Following the introduction of Basel 2 and the consequent complying changes introduced by the Bank, it was necessary to
bring activities and sales resources in line with the new operational modality introduced by the regulation.
The goal of the Gestione Valore Cliente project was to develop a “risk-based” business model to optimize RWA (Risk
Weighted Assets) with respect to generated returns, acting on customer portfolios, products and on the sales strategy.
In brief, the model implementation involved:
x the definition of performance indicators at managerial and operational level, that take the cost of risk according to
the Basel 2 FIRB approach into due account;
x identification of a set of operating levers to guide the commercial action on the customer portfolio, and in general
steering a gradual change in working modalities through a detailed program on customers with a high risk/return
ratio;
x creating the necessary empowering factors to support the dissemination of the model across the Network: a
training Roll Out program for the Corporate Manager Network and the CREBERG Branch Managers (as a whole
more than 670 resources), the development of instruments to support the adoption of the “risk-based” model
(including pricing) to be made available to the Sales Network.
Towards the end of the year, a unit was set up, reporting to the Strategic Planning Service, called “Gestione Valore Cliente”,
in charge of coordinating the activities of the Banche del Territorio, and ensuring the effective and efficient implementation
of the defined models across the sales network.
The Sales Planning and Reporting Function, which reports to Strategic Planning, is in charge of developing dedicated sales
guidelines for this segment in line with Group objectives, and of defining sales initiatives to support the retail banks, based
on the analysis of the customer base and on performance monitoring to identify sales opportunities.
Finally, towards the end of the year the Strategic Planning Service set up a dedicated structure to control pricing at Group
level, with actions to define guidelines, to rationalize and harmonize pricelists (which goes also in favor of transparency),
and to monitor the applied terms through the development of ad hoc reports and instruments.
Corporate products and services
In 2009 “Programma Banco Imprese” was released, a product offer supplementing the traditional one, aiming at sustaining
strategic corporate investment plans devoted to research and development, technological, product and process innovation,
as well as at supporting corporate growth and competitiveness.
Banco Imprese features 4 lines of intervention, each responding to specific corporate needs with a diversified product offer:
x Circolante (working capital): the goal is to help companies manage the slowdown of their working capital
turnover as a result of longer payment collection times in a more efficient way, providing them with a sort of
financial buffer helping them to face the pressure generated by the economic crisis;
x Sviluppo (development): the goal is to sustain companies with productive investments, including most innovative
ones with respect to energy saving;
x Capitale (capital): the goal is to help companies improve their capital structure with ad hoc financial actions;
x Estero (foreign operations): the goal is to guide Italian SMEs along the internationalization process, through a
structured offer of banking and non-banking instruments, from loans to insurance of the foreign sales operations,
to regular advisory and customer services throughout the entire process.
Foreign Operations
The Foreign Operations Function in 2009 strove to further increase its contribution to Corporate Net interest and other
banking income, by developing and proposing high value added products - i.e., featuring a corresponding higher
commission stream, as well as by giving Companies financial support, by systematically making our customers aware of the
wide range of short term and ML/T financial products that they could use, also from a “risk-based” perspective.
As a result, the contribution to the Corporate Net interest and other banking income by Foreign Operations grew
significantly, confirming our group’s ability to work side by side with customers operating on foreign markets, with
appropriate services, products and loans, even in particularly critical circumstances for the world economy.
Important centralization processes were launched and implemented, to bring accounts with foreign Banks onto Banco
Popolare, and once fully operational, with Documentary Loans and guarantees in the name of Banco Popolare, this will
allow us to gain a greater visibility and greater commercial power on international markets.
To contain risks taken with foreign banking counterparties, in the interest of our exporting customers, an important
agreement was signed in the name of Banco Popolare with IFC-World Bank, based on which all our Banche del Territorio to
transfer all of part of its foreign banking risks, guaranteed by Basel 2 compliant commitments.
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Risk Hedging
The Risk Hedging Function is in charge of supervising corporate hedging derivative products, and it manages and updates
the product catalog, keeping the commercial processes and methodologies abreast with market changes and with regulatory
or legal developments.
In 2009, the product catalog was further simplified, by eliminating strategies belonging to the Conditional Hedge and Active
Management product families. More than 95% of new deals closed with customers in 2009 belong to the Effective Hedge
products, and are mainly split between Fixed Rate (Irs) and Maximum Rate (Cap). As to the management of the existing
product portfolio, Gruppo Banco Popolare continued to cancel transactions belonging to the Active Management family, so
that by now they make up a marginal component of the total portfolio.
On 31st December, 95% of the customer derivatives portfolio was made up of effective hedge transactions, corresponding to
a notional commercial value of about 92% of the total value.
As to processes, the Risk Hedging Function further developed the applications used to provide advisory services on OTC
derivatives, to make them compliant with the requirements raised by the levels III and IV of MiFid regulation, as well as to
favor and promote the sales action of the banking network.
Corporate Finance
In 2009, the Corporate Finance Function engaged in both a specific technical segment-oriented activity as well as a
planning activity.
An effort was made to harmonize the processes of the retail banks and to coordinate them and help them structure financial
interventions, as well as to define technical instruments available to segment specialists, to support parent company
structures on specific projects, to manage some activities directly (typical of an Agency) when the group played a pivotal
role vis-à-vis the banking industry in connection with programs linked to corporate restructuring processes, and to
collaborate with the Group Training School on specialized training programs for corporate managers.
With regard to segment results, the Corporate Finance activities carried out by the Commercial Banks reported a positive
growth and increased its contribution to the Group’s total non-interest income.
Out of total segment revenues – in excess of 31 million worth of commissions – structured corporate lending accounted for
about 32%, real estate deals for 28%, actions associated with acquisitions for 10%, and the remaining 30% referred to the
outstanding portfolio.
An increase in the number and quality of structured deals with Large Corporate customers was reported with respect to the
prior year, as a result of centralizing in the Parent company the segment’s customer relations management, with a general
and positive growth in activities that generated a commission income that was not linked to new financing and a general
improvement of returns from single actions. In key with the market trend, real estate or M&A financing abated and focused
on selected initiatives.
Corporate Lab
The Corporate Lab, whose mission is to favor the growth or repositioning of companies within the new competitive scenario
by analyzing the productive capacity of our traditional market territories, and by fostering a direct dialogue with primary
local entrepreneurs, this year also engaged in the in-house training of employees who are in close contact with enterprises.
Research focused on the new production pipelines. The research studies of the 15 sectors that had been analyzed in the past
have been revised in the light of the current crisis.
Investment & Private Banking, Asset Management
The private and finance activities are carried out in the subsidiaries Banca Aletti with regard to private and investment
banking, Efibanca for merchant banking, Aletti Gestielle for fund management, Aletti Gestielle Alternative for funds of hedge
fund management and Aletti Fiduciaria for fiduciary mandates.
Illustrated below are the main activities performed by the Investment & Private Banking and Asset Management structures.
Capital Market
Banca Aletti’s Capital Market structure, subdivided into Equity Capital Market and Debt Capital Market, is in charge of
coordinating origination, arranging and syndication activities on primary market transaction on behalf of the Banks and
Companies of the Group.
Equity Capital Market
Owing to the protraction of the crisis, also in 2009 the Italian primary equity market was largely characterized by capital
increases and tender offers, totaling 30 deals with respect to only 6 IPOs, of which 5 on AIM Italy (Alternative Investment
Market), the exchange regulated market recently launched by Borsa Italiana, where the subsidiary Banca Aletti was
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authorized to operate as a Nomad (the Nominated Advisor who is responsible before Borsa Italiana for ensuring that the
prospective issuers are suitable for admission on AIM Italia) and with 4 key executives.
In January, Eurofly SpA concluded its capital increase totaling about 33 million euro, with the subsidiary Banca Aletti acting
as Financial Advisor. During the year, the subsidiary Banca Aletti also acted as Financial Advisor and Intermediary in charge
of coordinating the collection of tenders into the offer for shares of FMR-Art’è, Management & Capitali and Mirato, and as
Intermediary in charge of coordinating the collection of tenders into the offer for shares of IPI.
In June, the subsidiary Banca Aletti joined the underwriting syndicate for ENEL’s capital increase, with an underwriting of
about 27.5 million euro. The subsidiary Banca Aletti also took a sub-underwriting for a maximum amount of 60 million euro
in the rights issue launched in December 2009 for the 4.25% 2009-2013 Convertible Bond of Credito Valtellinese, which
should be closed in January 2010.
In 2009, it acquired a mandate as specialist for Marcolin shares, while the mandates referring to the following units and
shares expired: Fondo BNL Portfolio Immobiliare Crescita as a result of the liquidation of the fund, Mirato due to delisting,
and Bastogi and Retelit. As at 31st December 2009, 13 specialist mandates are effective.
Debt Capital Market
In the first half of 2009, the subsidiary Banca Aletti, in its capacity as Sole Arranger, concluded the structuring of the
securitization of residential mortgages originated by the Specialized External Networks (Reti Esterne Specializzate), for about
1,1 billion euro.
On the contrary, the securitization of commercial loans of Ducato S.p.A. totaling about 500 million euro, where the
subsidiary Banca Aletti acted as Sole Arranger, was not carried through as Agos S.p.A. (company into which Ducato
merged) decided to buy back the entire loan pool from the SPV.
In June, the subsidiary Banca Aletti participated in the Public Offering of ENI 2009-2015 fixed and floating rate bonds, and
collected tenders for more than 147 million euro.
In second half, the subsidiary Banca Aletti took part in the underwriting and placement of the first two bond issues of Banco
Popolare destined to institutional investors after the outbreak of the financial crisis.
In the first deal, launched in July, with a three year maturity and a 1 billion euro issue, then increased in September by additional
350 million euro, the subsidiary Banca Aletti acted as Joint-Lead Manager, raising almost 500 million euro worth of subscriptions.
In the second deal, launched in October, with a 5 year maturity and a 1 billion euro issue, the subsidiary Banca Aletti, for the first
time acting also as a Book runner, raised about 600 million euro worth of subscriptions.
In November, the subsidiary Banca Aletti took part in the Public Offering of Mediobanca 5-year, fixed and floating rate
bonds, raising subscriptions for about 45 million euro.
Equity Research
Banca Aletti’s Equity Research Structure engages in research studies on stocks listed or on their way to being listed on the
Italian market and develops financial economic models.
Against a marked economic deterioration and a growing illiquidity of certain asset classes, in 2009 the Equity Research
office focused on preserving its analysis scope and on stabilizing the number of counterparties. Considering the Group’s
franchise, the research coverage still hinges on Italian Small/Mid Cap and is spreading over to mid caps, due to the
persistent illiquidity of the reference niche. This was made possible by the fact that some securities with limited free float
and capitalization stopped being covered by our research, and our team was joined by new professionals, who included
new securities and sectors marked by a wider capitalization in the research scope. Marketing activities with main
counterparties and with the management (road show) of some listed companies continued to be implemented.
Commercial services
The Sales structure of Banca Aletti, divided into “Private Banking Commercial” services and “Corporate and Institutional
Sales Commercial” services, offers integrated investment services to Private, Corporate and Institutional customers, in
cooperation with the Group Sales Service.
Private banking commercial services
At the end of 2009, the subsidiary Banca Aletti published total assets under management (managed and administered assets)
of euro 14.5 billion, of which 0.3 billion from institutional customers.
2009 was characterized by a decline in Net interest and other banking income with respect to the previous year, albeit with
the monthly trend constantly and gradually rising. The persistence of these rough market conditions induced many
customers to take defensive stances and interest income was squeezed by interest rate dynamics.
With regard to asset management, actions were taken to strongly revitalize this business area, by focusing on medium term
investment portfolios.
During the year, we constantly and firmly pursued the goals of increasing assets and broadening our customer base.
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In the second half of the year, the repatriation of financial assets as a result of the Italian tax amnesty (so called “scudo fiscal
ter”) kept us particularly busy.
Net inflows (euro 1,582 million in the private segment alone) were particularly significant and well above the commercial
targets for the period (121% of the budget).
Also customer acquisition proved significant, with 1,330 new customers coming in, confirming Aletti’s brand perceived
quality on the market and the extensive sales actions implemented by the Private Banking Network.
The “private-corporate cross-selling” program – called “Pri-Corp” - has been rolling for three years now. It is implemented
by the Private Banking network of the subsidiary Banca Aletti in synch and cooperation with the Group branch networks.
Results are steadily and constantly growing: since the launch of the project (2006), 2,043 million euro were raised, of
which 834 million euro in 2009.
In order to multiply development opportunities, as in prior years, strategies were set up to create contact opportunities with
prospective customers, for example by organizing a series of events on the territory (about 80 in 2009).
At the end of 2009, Banca Aletti’s network comprised 9 Areas, 36 Units and 178 Private Bankers.
Corporate and Institutional Sales Commercial services
The “Corporate and Institutional Sales Commercial” structure is made up of “Group Networks Distribution”, “Institutional
Sales” and “Large Corporate Sales”.
Group Networks Distribution
In 2009 the activities of the Group Networks Distribution structure were strongly influenced by market dynamics, by the
high volatility of stock markets and credit spreads, by the widespread uncertainty and by the low risk propensity of investors.
Distribution strategies and product structuring and selling activities were focused on simple and transparent products, with
capital guaranteed and short-term maturities.
Interest rate indexing prevailed, to the detriment of equity markets, and the favored issuer was Banco Popolare as compared
to third-party issuers.
More than 60% of the investment structured products sold by the retail banks during the year (about 9.6 billion euro) was
represented by bonds issued by the Group.
In spite of the customers’ high risk aversion and the falling volumes with respect to 2008, the subsidiary Banca Aletti still
maintained a leading position on the Italian certificates market, participating in the sector’s main events and organizing
product road-shows, and it received much credit from investors.
A project was put in place to improve branch post-sale information on structured products, by developing dynamic product
sheets available on the Internet, so as to increase our customer-relation advisory content with the subscribers of our
products.
The offer of Euribor Cap CWs to floating-rate mortgage holders resumed momentum. Hedged assets in 2009 totaled about
760 million euro, more than double with respect to the prior year.
As to asset management sales, we focused on improving sales-supporting instruments, by defining periodic bulletins and ad
hoc reports that allow our networks to give advice to customers in at particularly difficult time for the asset management
industry.
In June, in cooperation with the Parent company’s Retail Department, a joint action was planned to revitalize this business
segment, by identifying a new graphic layout for the asset management families making up the product range, by launching
new investment solutions to complement the current catalog and by planning a number of road-shows with the retail banks
(Banche del Territorio).
Institutional Sales
With regard to business development with non-captive customers, the banks privileged direct funding with plain vanilla
bonds, therefore the derivative hedging of bond issues decreased.
A penchant for simpler structures and a disposition oriented towards Italian issuers, favored the Bank’s activity as arranger
for Banco Popolare issues.
There were interesting developments on the primary market: the subsidiary Banca Aletti was joint-lead manager for Banco
Popolare’s first issuances of the year , and for the first time book runner in the last issuance of the year.
Private placements in excess of 320 million euro were placed with institutional investors.
On the secondary market we benefitted from the repositioning of many institutional investors on less risky investments, such
as bonds, with an intermediated volume of 1,300 million euro and the acquisition of 15 new customers.
As to the distribution of Banca Aletti products, in 2009 we reported a three-fold increase in certificates with respect to 2008,
with 21 issuances for banking networks and 14 issuances for financial advisor networks.
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Also for interest rate risk hedging products, Cap Warrant volumes reported a four-fold increase over 2008 driven by the
expectation of rising interest rates.
The sale of asset management products to non-captive networks on the contrary reported a net outflow, due to the harsh
time the entire asset management industry is experiencing, which induced investors to prefer direct funding products and
products with an insurance content, such as investment-linked policies.
Equity Brokerage was ailing also in 2009, due to the troublesome market conditions that caused institutional investors
interested in the equity market to privilege large caps.
Nevertheless, during the year new accounts were opened with UBS and Henderson, and an extensive commercial action
was carried out, by organizing various meetings with our Italian and foreign customers, with investors and with company
management in Italy and in Switzerland.
In 2009, a strong impulse was given to the cooperation project between the Institutional Sales Function and Aletti’s Private
Banking network, with a special focus on asset management sales.
In second half 2009, in cooperation with the Investment Management Sales Office, a project was set up to develop our
relations with the Pension Funds. Various activities were carried out, among which the participation in 5 calls for bids for
the selection of fund managers, 10 commercial visits and various meetings with advisors, as well as participation in events
and trade seminars.
Large Corporate Sales
In 2009 the “Large Corporate Sales” structure continued to manage financial risk for customers accredited by the Group
Banks with the subsidiary Banca Aletti and, in cooperation with the Parent company’s Corporate Department and with the
retail banks, it engaged in business development to attract prospective accreditable customers.
During the year, a total of 40 customers were called upon to present our range of services and to consolidate acquired
relations. At times, joint meetings were held with the Macroeconomic Strategy and Analysis Office to give accredited
customers the necessary advice.
During the period, interest rate and exchange rate risk hedging transactions were closed with 22 counterparties of primary
standing, corresponding to a total notional amount of about euro 1,13 billion.
Effective hedge products were mainly used to manage the interest rate risk; in particular, to take advantage of the
exceptionally low levels of the Euro curve, large corporations privileged interest rate swaps or the purchase of interest rate
caps, in line with their specific medium/long term debt profile.
Exchange rate hedges regarded mainly the US dollar and were mostly carried out through simple futures transactions or
plain vanilla option structures.
In the second half of the year, in cooperation with the Capital Markets Function and with the Parent company’s Corporate
Service, the Large Corporate Sales Function launched a marketing project involving the group networks and prospective
customers, aiming at identifying target companies that may require assistance in case of corporate actions on the capital
markets.
Investment Banking
The Investment Banking structure, comprised of Structured Products, Brokerage, Trading and Treasury, is in charge of
coordinating and guaranteeing the development of the primary and secondary market business in the equity, bond and
securitization areas for the Banks and the Companies of the Group.
Structured Products
The Structured Products structure comprises “Fixed Income Structured Products”, “Equity Structured Products” and
“Financial Engineering”.
Fixed Income Structured Products
In 2009 the corporate hedging segment was characterized by a decreasing business volume with Group customers; closed
transactions reached a nominal amount of 7.4 billion euro from 10,3 billion euro in 2008, which however included about 2
billion worth of cancellations of outstanding transactions, and reported an increase of transactions closed with Large
Corporate customers (1.1 billion euro from 150 million euro).
As to retail structures sold by the Group networks, the tendency in favor of simplified structures continued, as well as the
reallocation towards simpler structures linked to interest rates. About 7 billion worth of interest rate linked issues were
structured and sold, as compared with 3.8 billion euro in 2008. Cap warrants structured by Aletti more than doubled in
volume, buoyed by monetary rates at their all-time low and by the expectation of future hikes in interest rates.
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After a severe crisis in the first half of the year, in second half credit spreads narrowed sharply, to the advantage of the value
on the secondary market of many securities that in the past had been sold by the Group networks.
From a strategic and organizational standpoint, in 2009 the management of the secondary market for the entire Structured
Products Service was centralized in the Fixed Income Structured Products Function, so as to achieve a better credit risk
management within the Service and improve relations with Issuers.
Equity Structured Products
The severe uncertainty that has been surrounding financial markets in last year’s fourth quarter is still persisting in the first
quarter of this year. Concerns that the measures undertaken by the governments and central banks of the main industrialized
countries could be ineffective and unable to tackle the world financial crisis, and thus lead to possible recessive economic
consequences, drove stock and commodity prices down to new lows (with the only exception of copper) and credit spreads
up to new highs.
In the second quarter, the situation improved noticeably, after the main governments reached practical agreements on
actions to be undertaken to protect the financial industry and guarantee the bloodstream to the entire economic system.
Stock and commodity prices rebound almost to where they used to be at year-start, and also credit spreads narrowed
considerably. This trend further consolidated throughout the second half of the year, and stock and commodity prices hit
their highs at year closing.
In this scenario, volatility and (implied and realized) correlation levels remained sensibly high, albeit lower than the year
before.
Against this backdrop, equity trading was characterized by the search for spot hedging positions, to reduce as much as
possible risk positions held in the books, without having to give up positions on the volatility and correlation market, albeit
limited to more liquid underlying assets.
The structuring of Equity-linked products strongly shrank owing to the lower volumes associated with these products
distributed by the group networks. Only Index-linked policies and similar products were an exception – few numerically but
making up a considerable amount – although it should be noted that the equity component making up these products is
very limited. On the contrary, structuring and pricing for institutional customers not belonging to the group sharply
increased.
Market making on the regulated markets IDEM and SEDEX was in line with the previous year.
The exchange rate market was no exception with respect to the general climate of uncertainty shrouding the entire financial
industry. As a result, the demand for short term hedge instruments by corporate customers was weak.
The high levels of implied and realized volatility that have been characterizing this half-year gave in any case rise to ample
opportunities on this markets, on which we concentrated our proprietary trading activities.
Financial Engineering
In 2009 the existing pricing and hedging tools continued to be upgraded and extended.
The development covered both functional aspects (automation of some hedging procedures and of the control of maturity
schedules), as well as purely methodological aspects (upgrade of pricers for equity options, inflation derivatives, short/long
term interest rate spread options).
In particular, new pricing and calibration models (SABR) were developed for CMS rate options, as well as stochastic
volatility models for equity derivatives (Heston).
Both activities are part of the regular benchmarking process against market best practice that the Function is constantly
keeping up.
In the first half of the year, the entire exotic equity derivatives book was migrated from models having a native Montecarlo
engine in our position keeping system, to entirely proprietary models.
This important achievement guarantees a greater autonomy compared to the position keeping system, and it already
significantly expanded the desk’s business opportunities (hybrid ir/eq., inflation/eq, fx/eq derivatives).
In second half, we started developing a new “general-purpose” Montecarlo pricing framework for interest rate derivatives.
This tool will feature a high flexibility and with just a small additional implementation effort, it shall enable us to rapidly and
easily assess the pricing of many types of interest rate derivatives traded on the market, whose risk we might have to manage
in the future.
The Function during the year regularly calculated the future potential exposure indicator for derivatives included in the
corporate catalog, and it estimated the potential return of all financial products the Group offers to its customers.
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Brokerage
The Brokerage structure comprises “Equity Brokerage”, “Retail Banking” and the “Repo Desk”.
After a negative start at the beginning of the year, as of the second quarter equity indices began to show more solid
recoveries, picking up a bullish trend that at the end of 2009 resulted in two-digit increases. Rising stock prices apparently
rekindled the predisposition towards equity investments, this time however marked by caution and restrained optimism.
Despite the recovery, the turnover of equity trades on Borsa Italiana’s stock market dropped by about 35% over the previous
year; this was partly due to the unwinding of portfolios by Asset Managers owing to incoming redemption requests, as well
as to the loss of value of shares, which express much lower values although their free-float remains unchanged. Against this
backdrop, also the subsidiary Banca Aletti reported declining intermediated volumes on domestic markets, primarily
associated with institutional counterparty trades, only partly mitigated by the resumption of Private and Retail trades.
Trading and Treasury
The Trading and Treasury structure comprises “Fixed Income” and “Equity Proprietary Trading and G.S.F.”.
Fixed Income
In 2009, the government bond market had a diverging performance depending on the yield curve time frame taken into
consideration.
While the short-term yield curve continued to benefit from the interest rate cuts and from the liquidity injections by Central
banks, on the longer term the yield curve underperformed as a result of the large amount of government securities offered
on the primary market to finance bloating state deficits.
These two events put together caused the curve to get steeper and steeper until it hit all time levels.
In all this, also the marked narrowing of spreads in countries belonging to the Euro area played an important role, in
particular between the notes of euro-regional peripheral nations and German bonds.
If the forced sales in 2008 caused yield spreads among euro-area notes to hit their all time highs since the creation of the
single currency, the return to an abundant liquidity triggered the reverse process, causing spreads to backtrack almost
completely, with the exception of a few countries, like Greece and Ireland.
After a generalized credit spread widening in 2008 and in the first months of 2009, corporate bonds staged one of the
biggest rallies in the history of credit, as a result of the economic policy measures implemented by Governments and Central
Banks.
A very important factor that contributed to buoy up the market was the liveliness of new corporate issues, which allowed a
wide number of issuers to raise capital on the financial markets to refinance and extend their debt profile.
Retail customer transactions on the Hi-Mtf and Group Securities Market platforms came in big volumes.
These combined factors, together with the strategies we adopted, allowed us to obtain much greater profit than we expected
from managing our bond portfolios.
Equity Proprietary Trading & G.S.F.
During the year the bank continued to engage in market making on Italian single-stock futures on 46 underlying stocks. The
increase in intermediated volumes over 2008 allowed us to hold a significant market share of 10.78%.
With regard to our trend trading portfolio, owing to the high volatility characterizing the first half of the year, we privileged a
merger arbitrage strategy involving low-risk takeovers. In the second part of the year, the progressive raising of the ban on
short selling allowed us to start implementing market neutral arbitrage strategies again, involving companies belonging to
the same sector, without being exposed to market trends.
During the year, the basket trading strategy on the Spanish index Ibex35 was progressively consolidated, and Delta 1 trading
on foreign stocks listed on Liffe was increased with good results.
The liquidity crisis that had been characterizing this industry in 2008 had had a positive impact on bond lending volumes as
well as on the related trading spreads. The gradual ebbing of this phenomenon brought total volumes back to pre-crisis
levels and partly restarted the equity segment, confirming that the subsidiary Banca Aletti is among the leading players in the
Italian market within this area.
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Investment Management
Banca Aletti’s “Investment Management” structure is in charge of adding value to the Group’s Asset Management Customer
relations (Retail, Private and Institutional) by optimizing all portfolio analysis, management and assessment activities relating
to the single management mandates.
In 2009 equity markets reported a very positive performance, with practically uninterrupted advances since the month of March.
MSCI WORLD indexes in local currency on industrialized and emerging equity markets published a rise of 23% and 61%,
respectively. This performance was sustained by a subsiding risk aversion, by the progressive improvement of the macroeconomic
scenario with the overcoming of recession in all areas, and by the constant improvement of corporate earnings.
Among most industrialized countries, US equity indexes performed relatively better than the European and the Japanese.
The Nasdaq and S&P 500 indexes increased by 44% and 23.5%, respectively, as compared with 28.5% and 19% for the
Eurostoxx 600 and Nikkei indexes.
In 2009 the overall performance of the government bond market was marginally positive (+0.75%), marked by a marked
volatility, especially in the second part of the year, on the wake of the recovery perspectives of the macroeconomic scenario
and of the estimated interest rate trend. At area level, the negative performance of the US dollar denominated government
debt (-3.7%) was counterpoised by the positive performance of the euro denominated debt (+4.4%) and of the emerging
countries (+29.7%). The high standing corporate bond segment during the year posted a clearly positive performance.
The forex market was mainly characterized by the inherent weakness of the US dollar, especially after the first quarter, and
by the appreciation of the currencies of emerging countries most highly exposed to commodity prices. At the end of the
year, the US dollar reported a greater than 2% depreciation against the euro, while among emerging country currencies, the
Brazilian Real appreciated by about 30% against the US dollar.
Returns on managed products were highly positive, both in absolute terms and with respect to benchmark indexes, by
taking advantage of the favorable market performance of the different asset classes.
At 31st December 2009, assets under management added up to about 11,920 million euro, up by 6.1% during the year, in
stark contrast with the 26% reduction reported during 2008: after hitting a low in March, inflows reported a constant uprise.
The year 2009 marks a break in the managed assets outflow trend that has been characterizing the entire Italian sector both
in 2007 and 2008.
As to the managed asset makeup, just as in 2008 inflows for investment lines for private, VIP and institutional customers
performed well, while Retail products, quantitative products and capital guaranteed products suffered an outflow.
During the year we continued to enrich our commercial catalog, that had been introduced in the first months of 2008;
worth mentioning is the Multilinea product, specifically geared to retail customers, and replacing Sistema Mosaico: the goal
is to match as efficiently as possible the different investor profiles with products featuring different management styles.
As to structures reporting to the Investment Management Function, after the business consolidation phase characterizing
2008, in 2009 the Advisory Desk, which is in charge of the direct Private customers of the subsidiary Banca Aletti, which
had in turn been accredited by the Group Banks, intensified its effort to seek and develop new business in close cooperation
with the commercial network. As at 31st December 2009, the structure counted 83 active contracts, corresponding to about
185 million euro, well above the results reported in 2008 (40 active contracts for about 105 million euro).
Merchant Banking
During the year, in the Merchant Banking sector Efibanca conformed to the general guidance of Gruppo Banco Popolare
pointing at rightsizing the overall portfolio of private equity and merchant banking investments.
On 31st December 2009, total investments in securities and shares and in units of closed-end mutual funds, or equivalent
Italian or foreign instruments owned by the bank (balance sheet items 40, 100 and 140, according to IAS) came in at 276.7
million euro, down by 11.2% from 311.6 million euro on 31st December 2008.
Total securities and equity investments carried out during the year added up to a cost of 23 million euro, as compared with
59.1 million euro in 2008, that breaks down as follows:
x 14.8 million euro for incremental purchases of shareholding units in funds already held in portfolio (for 2.6
million euro) and payment of closed-end private equity funds and/or similar instruments (for 12.2 million euro),
for cash calls against subscription commitments for a total original amount of 243.9 million euro (attributable to
Efibanca) and reduced at the end of 2009 to 83.5 million euro;
x 7.9 million euro being the carrying amount of new equity investments or equity financial instruments expressed
by corporate borrowers after finalized financial restructuring actions with their groups;
x The residual difference is a follow-on, i.e., equity actions involving companies already included in our equity
portfolio.
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During the year, 19.7 million euro worth of disposals were carried out, as compared with 82.2 million euro the prior year.
In particular, they break down as follows:
x total disposal of industrial and financial equity investments of 17.6 million euro;
x repayments the Bank received from closed-end funds and similar entities as a result of divestitures carried out by
the funds for 2.1 million euro.
During the year, the business generated about 5.1 million revenues (capital gains and dividends) and write-downs of 18.8
million euro.
Asset Management
Aletti Fiduciaria
In financial year 2009, Aletti Fiduciaria confirmed its growth trend, especially in the last quarter, when it obtained numerous
fiduciary mandates as a result of the repatriation of foreign assets. In particular, the portfolio increased by 60%, from 502
mandates on 31st December 2008 to 803, and also its fiduciary assets enjoyed a marked expansion.
The trust portfolio underwent the expected contraction from 23 to 11 trusts. This reduction is simply one of the effects of the
plan to rationalize the Group fiduciary business, that among other things envisaged the creation of a trust company where
all trust relations, trustee business and trust advisory services are to be combined.
Financial year ended on 31st December 2009 was characterized also by a significant support to Banca Aletti’s private
network and to the networks of the retail banks, thanks to which Aletti Fiduciaria could continue to develop and/or
consolidate its role as qualified partner for fiduciary services.
Business volumes
Net asset value of managed funds
Subscriptions
Redemptions
31/12/2009
31/12/2008
Changes
7,340.6
2,266.6
3,700.2
8,163.5
6,105.2
13,548.9
-10.1%
-62.9%
-72.7%
In 2009, the product range was rationalized through a merger by acquisition effective as of 30/5/2009. As a result, funds
decreased from 50 in 2008 to 31.
In 2009, the Company reported a 10% drop in assets under management from 8,163 million at the end of 2008 to 7,341
million on 30/12/2009.
In terms of net asset flows for the year, a total outflow was reported from Aletti Gestielle’s 31 mutual funds of 1,433.6
million.
With regard to the performance of managed funds, during the year Gruppo Banco Popolare slipped to number fourteen from
number ten in the asset management groups ranking, with a market share of 1.96% and total assets under management of
8,435 million, of which 7,341 million managed by the company.
The table below shows a NAV comparison between the various fund classes under management (the changes in each fund
class are affected by the merger that took place during the year):
Equity funds
Fixed income funds
Balanced funds
Flexible funds
Non-harmonized funds
Net assets under management
30/12/2009
30/12/2008
Changes
1,621
4,872
395
215
238
7,341
1,264
6,350
164
122
264
8,164
28.2%
-23.3%
140.8%
76.2%
-9.9%
-10.1%
Evidencing the unrelenting effort devoted to asset management, also in 2009 the company won the credit of the asset
management industry and was awarded the Premio Alto Rendimento organized by Gruppo Il Sole 24-Ore and CSF Rating
as:
x First Best Italian Mutual Fund Manager – BIG Class;
x Best America Fixed Income Fund with the Gestielle Bond Dollars Fund.
Also this year the commitment to ethical finance was worth of notice: with the creation of the Gestielle Etico per AIL fund,
the planned annual donation was channeled towards a single beneficiary which implements country-wide extensive and
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continuous projects. Thanks to the assets accrued in this fund, AIL (Italian Association against Leukemia-lymphomas and
myeloma) received a contribution of 164 thousand euro.
The donation made in 2009 will help realize a project of paramount importance: the creation of a single “AIL Home Care”
model across Italy, geared on the needs of hematological patients, that will then lead to the quality certification of AIL’s
home care on the domestic territory. The project shall start in Rome and will then be extended to services in other towns.
As to the development of the so called non-captive market (i.e., sales activities through banks and networks not belonging to
Gruppo Banco Popolare), 2009 posted a positive inflow and a solid growth of AuM. Non-captive networks ended 2009 with
a net balance between subscriptions and redemptions of +16.7 million euro, while assets generated by “extra-group”
networks increased by 5.6% over the previous year, and at year-end totaled 1,378.2 million euro, accounting for 18.7% of
the SGR’s total assets under management. Although uncertainty still prevailed, which in 2009 caused this industry to report
a year-end total net outflow of -2,957 million, of which -12,668 million from Italian funds, the Company obtained positive
results on the non-captive market thanks to the unfailing and incremented support lent to the distribution networks.
As to the Open-end Pension Fund Gestielle Pensione e Previdenza, Net Assets for the Distribution of Benefits at the end of
the prior year (combining the two pension funds managed by the Company together) totaled 65.2 million (15.0 million for
Gestielle Pensione e Previdenza and 50.2 million for Bipitalia Multiprev), while at the end of 2009 they reached 80.6
million (after the merger by acquisition of the Bipitalia Multiprev Fund in the pension fund Gestielle Pensione e Previdenza
effective as of 31/10/2009), up by 23.62%. The total number of members decreased by 261 units from 4,697 to 4,436.
Illustrated below are intercompany relations with Banco and with the other Group subsidiaries:
x Banca Popolare di Verona - SGSP SpA, Credito Bergamasco S.p.A., Banca Aletti & C S.p.A., Banca Popolare di
Novara S.p.A., Banca Popolare di Lodi S.p.A. Cassa di Risparmio di Lucca Pisa e Livorno S.p.A., Banca Popolare
di Crema, Banca Popolare di Cremona, Banca Popolare di Mantova, Banca Caripe engaged in the sale and
distribution of managed funds;
x Banco Popolare e del Credito Bergamasco S.p.A (the latter until 31/05/2009) acted as Custodian Banks for the
managed funds.
Business volumes
Subscriptions
Redemptions in 2009 including Side Pocket
30/12/2009
30/12/2008
Changes
826.46
24.29
577.84
2,098.66
146.97
1,161.41
-1,272.20
-122.68
-583.57
In 2009, the Company’s Board repeatedly intervened in the management and on the structure of managed UCITS to protect
investors’ interests.
The effects of the financial crisis which broke out in 2008 induced the Company to review its investment process, so as to
adjust it to the new market context, especially with regard to hedge funds, that underwent a sudden change as a result of the
crisis and of associated events. As part of this new investment process, the Company elected to do without the services of its
Advisors, Union Bancaire Privée and FIM Advisers LLP, and terminated the related service agreements.
Moreover, the high number of redemptions on managed funds especially in the second half of 2008, combined with the
financial crisis, which persisted until the month of March 2009, have been thoroughly discussed in the Board meetings of
Aletti Gestielle Alternative of 15 January, 22 January and 23 April 2009. In order to guarantee a more regular and orderly
management of this period and to ensure the best possible investment protection to our investors, the Board made a number
of important decisions, as summarized below:
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1) In the light of the issue of L.D.185 of 28 November 2008 and the following issue of the enacting Bank of Italy Order of
16/12/2008, which abolished the maximum ceiling of 200 members for each speculative fund, the Board of Directors on 15
January 2009 decided to rationalize the product range and to merge the following low and medium volatility funds:
Acquired Funds
Gestielle Hedge Arbitrage
Gestielle Hedge Defensive
Gestielle Hedge Protection
Gestielle Hedge Conservative
Gestielle Hedge Composite
Gestielle Hedge Market Neutral
Gestielle Hedge Alpha Fund
Gestielle Hedge Alternative
Gestielle Hedge Dynamic
Gestielle Hedge Concentrated Low 2
Acquiring Fund
Gestielle Hedge Low-Volatility
Gestielle Hedge Multi-Strategy
The merger came into effect on 30/01/2009 and was carried out at the NAV per share of 31/12/2008.
x 2) The Board of Directors also decided to adopt the redemption gate at the NAV per share of 31/12/2008 on the
following quarterly low volatility funds, fixed at 20% of the fund total assets (max cap permitted by the
management policies, art.7.5 paragraph 8):
x GH Low Volatility
x GH Arbitrage
x GH Defensive
x GH Alpha Fund
x GH Alternative Fund
x GH Composite
x GH Conservative
x GH Market Neutral
x GH Protection.
3) The Board of Directors on 23 April 2009 decided to repeat the adoption of the redemption gate at the NAV per share of
31/03/2009 for the Gestielle Hedge Low Volatility Fund (acquirer fund of the low volatility quarterly range), again fixed at
20% of the fund total assets.
The possibility of using redemption gates was provided also in L.D.185 of 28 November 2008 and in the enacting Bank of
Italy Order of 16/12/2008 as a means to contend with the deepening financial crisis that caused an increase in the illiquidity
of invested target hedge funds. The gate makes it possible to modulate redemption requests to protect the interest and
guarantee an equal treatment of participants.
The liquidity level of the Gestielle Hedge Low Volatility Fund, together with the normalization of customer redemption
flows and a generalized improvement of the liquidity of underlying hedge funds, in particular those that had imposed a
suspension or delay of redemptions, induced the Board of Directors not to repeat the adoption of the redemption gate
starting from redemptions at the NAV per share of 30/06/2009.
4) As to the monthly range, the marked reduction in the portfolio liquidity, combined with the numerous redemption
applications submitted by participants, induced the Board of Directors of Aletti Gestielle SGR on 22 January 2009 to set up
side-pockets, in compliance with L.D. 185/2008 (“Decree”) and the Bank of Italy Order of 16/12/2008, for the products
belonging to the Concentrated range.
In order not to impair the interests of participants, art. 14, paragraph 6, letter b) of the Decree allows asset management
companies to transfer the illiquid assets of the speculative fund in an ad hoc closed-end mutual fund (so called side-pocket)
until 31 December 2009.
The transaction was carried out by partially demerging the speculative fund, whereby liquid assets were kept in the
speculative fund, while illiquid assets were transferred in the new entity. The participants in the speculative fund received
an equal number of shares in the closed-end fund to their share in the speculative fund. Based on the side-pocket
mechanism, the participants in the speculative funds – whose redemption applications were not liquidated or settled before
the setting up of the new vehicle – have been repaid partly in cash and partly with shares in the new fund, proportionately
to the assets transferred in the side-pocket.
Shown below are the liquid asset and side-pocket percentages as at 31/12/2008:
Fund
Gestielle Hedge Concentrated Medium 1
% Side Pocket
% Liquid
54%
33.5%
46%
66.5%
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The downsized but liquid speculative fund continued to operate in compliance with the investment policy provided in the
management policy, while the strategy followed for the closed-end fund, which cannot issue new shares, was to unwind
illiquid assets, and redeem shares every time assets were liquidated.
In 2009 the Company carried out three distributions of available liquidity to customers of the two closed-end funds Gestielle
Hedge Concentrated Low – Side Pocket (“S1”) and Gestielle Hedge Concentrated Medium – Side Pocket (“S2”). The three
distributions together added up to about 51.9 million euro for S1 and 5.3 million euro for S2, which, with respect to the
assets transferred in the side-pocket funds when demerged from their parent funds, account for 46.47% for S1 and 47.24%
for S2. These figures are in line with the plan to unwind the illiquid assets transferred in the side-pocket funds, which had
estimated to redistribute 45% of the assets during 2009, for both S1 and S2.
As a result, the product range managed by the Company to date comprises 8 speculative funds, and two closed-end sidepocket funds, as illustrated below:
Fund
Type
Gestielle Hedge Low Volatility
Gestielle Hedge Multi-Strategy
Gestielle Hedge High Volatility
Gestielle Hedge Opportunity
Gestielle Hedge Long/Short World
Gestielle Hedge Credit Fund
Gestielle Hedge Concentrated Medium 1
Gestielle Hedge Concentrated Low – Side Pocket
Gestielle Hedge Concentrated Medium – Side Pocket
Low volatility speculative fund with quarterly liquidity
Medium volatility speculative fund with quarterly liquidity
High volatility speculative fund with quarterly liquidity
High volatility speculative fund with six-month liquidity
Speculative fund specialized in equity strategies with monthly liquidity
Speculative fund specialized in credit strategies with quarterly liquidity
Low volatility speculative fund with monthly liquidity
Medium volatility speculative fund with monthly liquidity
Closed-end side-pocket fund
Closed-end side-pocket fund
In 2009 the Company did not set up new funds. Note however, that in July 2009 the Company applied with the Supervisory
Authorities to extend its business to include non-speculative open-end funds to launch a new non-EU compliant open end
fund (fund of funds) called “AGA Absolute Return”. Although it belongs to the “alternative” strategies universe, the fund is
going to invest in EU-compliant UCITS III vehicles, featuring a greater liquidity compared to traditional hedge funds.
During the year, the Company reported a decrease in assets under management, net of investments in in-house funds, from
1,662.02 million euro on 31/12/2008 to 820.29 million euro on 31/12/2009.
As noted above, this contraction followed a strong flow of redemptions reported in the second half of 2008, which continued
also in first quarter 2009. Redemption flows started to subside in the second quarter 2009, also thanks to the good performance
reported by all the managed funds during the year, from +3.22% of Gestielle Hedge Concentrated Medium 1 to +11.32% of
Gestielle Hedge Credit Fund, while the new product scheduled to be rolled out in the new year is going to contribute to the
resumption of inflows. Against a still rough backdrop for the hedge industry, in 2009 the Company continued to support the
sales networks, assisting private salespeople, and staged monthly conference calls with updates on market analysis,
performance of managed funds and ongoing initiatives, as a supplement to monthly reports.
The inflow crunch hit the entire hedge fund industry worldwide. At domestic level, total assets managed by speculative Sgr
went from 20,795.2 million euro on 31/12/2008 to 13,008.7 million euro on 31/12/2009. In relative terms, as compared to
the competition and considering the ranking prepared by Mondohedge listing Italian assets net of foreign management
mandates, the Company’s market share went from 7.20% on 31/12/2008 to 6.43% on 31/12/2009.
Leasing and Factoring
Gruppo Banco Popolare engages in leasing and factoring through its subsidiary Banca Italease and the latter’s subsidiary
companies, which joined our consolidation scope in July 2009 after the voluntary Tender Offer launched by Banco
Popolare.
The ability of the former Gruppo Banca Italease to develop its core business and generate profit was strongly affected since
2008 by the deteriorating macroeconomic backdrop, the paucity and expensiveness of available financial resources and by
a marked increase in loan impairments due to the concentration of its loan portfolio and to its exposure to the real estate
sector. This factors, together with the intervening capital shortage, continued to strongly affect results also in 2009, and
Banca Italease had to resort to a big capital increase.
Leasing
Based on Assilea (Italian leasing association) data, in 2009 the negative trend reported by the Italian leasing market in 2008
deepened further, in key with the general trend of the domestic economy and in particular of investments. On 31 December
2009, the annual decline hit 33% and the market volume of executed lease contracts went from about 39 billion to about euro
26 billion. The segment which suffered the strongest contraction was aircraft, watercraft and railway equipment leases, which
shrank by 57%. The other sectors saw their volumes scaled down by about one third with respect to executed leases in 2008:
car leases dropped by 33%, equipment leases – negatively affected by the industry’s decrease in production and in incoming
orders – fell by 31%; real estate leases – influenced by the negative performance of its reference market – declined by 30%.
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With respect to December 2008, out of total executed lease contracts, the share of equipment leases (at 32.7%) and real
estate leases (at 40.6%) increased, to the detriment of aircraft, watercraft and railway equipment leases (at 4.9%). The
contribution of the automotive segment remained basically unchanged (at 21.8%).
Against this market scenario, the marked capital shortfall caused by the large losses suffered in financial years 2008 and
2009 deprived Banca Italease and its subsidiaries of the possibility to increment loans. For this reason, if in the prior year, in
consideration of the financial constraints experiences by Banca Italease, new business volumes were very carefully
governed, in 2009 it was necessary to restrain the start of new contracts, and process the outstanding lease business.
For these reasons, on 31 December 2009 Banca Italease reported a scant volume of executed lease contracts at
consolidated level (totaling euro 110 million, down by 94% over the end of 2008), and new income-producing lease
business came in at euro 466 million, down by 79% over 2008.
Factoring
Provisional market surveys produced by the trade association Assifact, based on the preliminary indications of its members,
report a slight decrease over 2008 in the total volume of factored receivables, as a result of declining company sales and the
of the slowdown of the Italian real economy.
In spite of the GDP drop, factoring continues to represent an anti-cyclical tool that companies can use to supplement their
working capital and to manage and protect themselves from the risk of default of debtors. As a result, the trend that was
reported throughout 2009 was confirmed, pointing at an expansion of both the outstanding receivables volume, as well as
of the share financed by factors. However, the increase in outstanding receivables and advances against a fall in turnover
volumes reported by the industry confirm that the average receivables collection period is growing longer and that the
economic cycle is critical.
The sector is characterized by a high volume concentration, influenced by factors belonging to primary banking groups, and
in this context Factorit ranks a solid fourth and remains a point of reference for the market with its 10% market share.
In 2009 Factorit generated a turnover volume of euro 11,491 million, down by 15.9% over 2008. The troublesome
economic backdrop and the events associated with the reorganization of the parent company Banca Italease deeply affected
the performance of the company in terms of volumes.
Running against the stream of market dynamics, Factorit’s commercial policy pointed at controlling risks – i.e., avoid raising
the concentration levels and limit big-ticket deals and actions on receivables with a slower turnover – and at increasing the
loyalty of the most appealing customers, who feature a good risk/return ratio and are more interested in receiving highly
tailored factoring products.
We modulated our engagement in sectors that are still under the impact of the past months’ strong criticalities (Tourism and
Organized Retailers), as well as in the intermediation of receivables that companies claim against the Public Administration.
As to the mix of offered products, the lion’s share goes as usual to solutions featuring an interaction between receivables
servicing and financing (maturity and without recourse factoring). This distinctive feature, together with the pursuit of an
appreciated level of excellence in an ever competitive market, helped us defend our volumes and our customer portfolio,
while the volumes generated in the Foreign business compartment confirmed their negative performance, especially in the
import sector. At the end of 2009, volume contraction was followed by a progressive, sensible and guided reduction in
average loans.
Under such complex circumstances, the distinctive and positive feature of Factorit’s business activity is its ability to hold its
primacy in intermediated receivables turnover efficiency, thus optimizing capital employment. In 2009, the average
collection turnover did not exceed 100 days.
In keeping with Banca Italease’s decision to assess possible opportunities to maximize Factorit’s valuation also by way of
corporate actions, negotiations with some counterparties were started in the second half of 2009, leading to an agreement
signed in February 2010 with Banca Popolare di Sondrio and Banca Popolare di Milano, based on which Banca Popolare di
Sondrio is to acquire the control over Factorit with a 60.5% share, while Banca Popolare di Milano is to take a 30% share.
The remaining 9.5% share will remain with Gruppo Banco Popolare.
The deal is described in greater detail in section A of the consolidated Explanatory Notes – sub-section 4 Noteworthy events
after the balance sheet date.
Corporate Center and Other
Foreign banks
Italian companies wishing to operate in foreign markets on the long term, alongside the traditional export and import of
goods and services, can rely on Banco to receive information and tailored assistance, allowing them to assess possible
solutions to do business abroad, to take advantage of the evolutions of new markets and facilitate their access.
A network of dedicated specialists is active on the territory, supported by central structures that focus in particular on high
potential markets for Italian companies, such as China, India, Russia and other East European Countries (specific Desks have
been created for these countries).
Gruppo Banco Popolare has own operating Banks also in Croatia, Hungary and the Czech Republic, with a Leasing
company in Romania, and Representative offices in China (Hong Kong, Shanghai, Beijing), India (Mumbai) and Russia
(Moscow), where customers can count on a bespoke service. As to the subsidiary Banco Popolare eská Republica, on 9
December 2009 an agreement was signed to sell 100% of the share capital, to be finalized in first half 2010.
67
Our international network can count also on the Luxembourg and Swiss Banks and on the London Branch, which are more
focused on financial services, but provide also commercial services.
Banco Popolare Croatia d.d.
After three years with a positive bottom line (about 1 million euro cumulative in spite of significant investments), 2009 for
the first time ended with a negative result, with a loss of about 7.7 million euro, caused by a number of combined, mostly
one-time factors, such as the impairment of some loan positions, a one-off loss caused by the order issued by the Croatian
National bank to modify the pricing policy on the kuna/euro exchange rate (which practically reduced the spread on the
official exchange rate applied to these transactions, impacting the P&L as a result of the impairment of euro-linked loans),
and the change of the information system.
The current financial year shall be characterized by a sweeping strategic revision to achieve efficiency gains and return
profitable.
Banco Popolare Hungary Kft
2009 ended with a deficit of about 3.9 million euro, strongly affected by the troublesome economic context ailing the
country, which caused lending activities to be reined back, although the loan portfolio reported a slight growth. The loss is
greater than the prior year in spite of an operating result basically in line with 2008. However, unlike the previous year
during which marked loan write-backs were reported, in 2009 net loan impairments came in at 0.9 million euro. In 2010
the target is to work to approach breakeven, which however shall be reached only in 2011 through a gradual and prudent
implementation of intermediated assets.
Banco Popolare eská Republica a.s. (under disposal)
Banco Popolare eská Republica at the end of 2009 posted a loss of 2.7 million euro.
During the year, the bank focused on growing direct customer funds, which reached 82 million euro, almost double the
previous year figure. Gross loans to customers totaled about 114 million euro, up by 35% with respect to 2008. The
uncertainty surrounding the hinted disposal and the business slowdown, in particular loans, in the second half of the year
had a negative impact on the operating result.
Actual Operating expenses were in line with the budget, as were net loan impairments, which in 2009 were below 0.2
million euro.
During the year, thanks to business development actions, the number of customers and of accounts constantly increased,
reaching about 3,200 customers and 5,700 accounts, more than double with respect to 2008.
For 2010, the budget estimated a pro-rated loss for the Group (until disposal).
AT Leasing Romania
The Company’s P&L data reflect the dire situation of the Romanian economy (GDP fell by 7.5% and the local currency
strongly depreciated), especially for the leasing industry, which saw its new business plummet by 70%. Despite the
generation of an operating income, provisions in 2009 had a drag-down effect causing a net loss of 1.3 million euro.
For 2010, given the likely persistency of the crisis in the region, a limited loss has been estimated, with a profit comeback in
2011, mainly as a result of cost cutting actions and a stringent control on credit risks.
Banco Popolare London Branch
The Branch’s 2009 financial statements evidence that although it did not generate new loans, the branch managed the assets
inherited with the contributions of the two previous branches BPL and BPV-SGSP, and was able to generate an excellent
treasury additional income. In spite of this, the year ended with a big loss of 88 million euro, as a result of the negative
impact of some big, non-recurring doubtful loans. The net impact generated by provisions charged to income was quite
harsh: 104 million, of which 82 million referring to Glass Italy and Stichting Glass (from former BPL London), in addition to
positions originated by the Branch (Icelandic banks 3.5 million), or by the Head Office (Compass 9.9 million), and other exBPL loans. Next year we expect the branch to be back to profit.
Banco Popolare Luxembourg S.A.
The year closed with a net income of 3.2 million euro, net of provisions of 1.2 million. The main objective in such
troublesome circumstances was to strengthen the traditional customer service, to consolidate results and acquired volumes,
with a special focus on risk management, especially credit risk, which often goes hand in hand with the deterioration of the
economic and financial context. Considering these combined factors and the foreign asset repatriation under the Italian
“scudo fiscale” measure, the 2010 plan estimates a slight contraction of earnings.
Group Services: Group Finance
The Parent company coordinates and controls the management policies of its structural asset and liability items, as well as
those of the other Group companies, to optimize available capital, identify adequate funding strategies and transactions for
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the Group, through actions on domestic and international markets, and to control liquidity requirements and dynamics.
To this end, the Parent company launched a series of initiatives in 2009, aiming at streamlining the Group organization, by
concentrating a number of financial activities, that were previously managed by the subsidiary Banca Aletti, in the Group
Finance Service.
Illustrated below are the main changes introduced in the Finance, Corporate Center and Equity Investment Department:
x Setting up and assigning the role of CFO of Banco Popolare to Mr. Maurizio Faroni, in charge of Group Finance
activities and having Banca Aletti and the other operating companies of the Finance Area strategically reporting to
him;
x Treasury and foreign exchange, and Proprietary portfolio management for all accounting classes centralized at the
Parent company’s,
With a description of the activities carried out by the Group Finance structures.
Group Finance activities are performed by the following organizational structures: ALM & Asset Backed Funding, Capital
Management & Wholesale Funding, Group Treasury and Proprietary Portfolio Management.
ALM & Asset Backed Funding
Interest rate risk
Structural interest rate risk management and containment policies confirmed the same strategies pursued in the past. In
particular, domestic and international bond issues characterized by structural pay-offs and fixed rate bond issues have been
fully hedged along the fair value option methodology. Since July 2008, under the “Banco Popolare single issuer” project,
also the interest rate risk originated by the Holding company and connected with bonds distributed by the commercial
network was effectively hedged.
In the second half of 2009, the Bank adopted the hedge accounting method only for the new EMTN bond issues sold to
institutional investors.
Owing to the bullish view on interest rates and the positive results reported also in the first quarter 2009, in the second
quarter the fixed-rate position set up on Banco Popolare to partly offset the bullish position of the retail banks was closed.
More precisely, 19 securities of the Loans & Receivables (“L&R”) portfolio of Banco Popolare were hedged, corresponding
to a total nominal value of about 4.5 billion euro. Since the remaining 3 securities, corresponding to a total nominal value
of about 1.3 billion euro, were shortly due and the impact of a possible interest rate increase would have been most
presumably, it was decided not to intervene.
Liquidity position
The liquidity risk is generated by the time mismatch between expected inbound and outbound cash flows on a very short
time horizon. In addition to the difficulty or impossibility of hedging against said mismatches, the liquidity risk may also
entail an interest rate risk caused by the need to raise/use funds at unknown rates, that as a result could be potentially
unfavorable.
In the second quarter of 2009, the operating management of treasuries of all the Group banks was transferred over from the
subsidiary Banca Aletti to Banco Popolare.
Among other things, the Group liquidity policy and the liquidity contingency plan were approved; new estimate models
were implemented for behavioral and/or optional parameters (on demand items; prepayment on expiring transactions;
derivative margining with credit support annex; risk of credit line available margin calls; etc.) and operating limits have been
revised and updated.
The first-line defense against liquidity risk is the daily monitoring and control of the cumulative operating liquidity
mismatch, generated by transactions with interbank and institutional counterparties, over the following timeframes:
overnight, 14 days, 1 month, 3 months and 6 months.
The ALM and Asset Backed Funding Function of the Group Finance Service is in charge of the operating liquidity risk
monitoring, i.e., the first line defense; the Transformation and Operational Risk Function of the Risk and Capital Service is in
charge of the second-line defense.
The second-line defense against the liquidity risk is the monitoring of possible structural liquidity mismatches, generated by
transactions of the entire banking portfolio, over the following timeframes: 14 days, 1 month, 3 months and 6 months.
The Transformation and Operational Risk Function of the Risk and Capital Service is in charge of monitoring the structural
liquidity risk limits.
The third-line defense against the liquidity risk is the measurement and management of the structural liquidity risk by the
ALM & Asset Backed Funding Function of the Group Finance Service.
The measurement of the structural liquidity risk, namely the availability of the necessary cash funds to cover financial
outlays, is based on the spreadsheets generated by the Operating Asset & Liability Management (ALMO) procedure, in
particular, the simulation module that is used also to measure the interest rate risk.
The structural liquidity risk is measured both statically, by examining liquidity requirements based on the single time frames
of the liquidity gap (difference between due loans and deposits), and dynamically, by identifying liquidity requirements
under different settings, where the financial factors that may affect the time profile of liquidity are varied.
In 2009 the Group continued to pursue the goal of incrementing the eligible securities portfolio, and carried out three
69
securitizations (BPV Mortgages, BPL Mortgages series 3 and BPL Mortgages series 4) of loans originated by the Banche del
Territorio for a total nominal value of about 8 billion euro.
Capital Management & Wholesale Funding
Capital optimization
To increase the Group’s capitalization, on 31.07.2009 Banco Popolare issued 1.45 billion euro worth of financial
instruments pursuant to art.12 of Law Decree n. 185/08 in favor of the Ministry of Economy and Finance (so called Tremonti
Bond).
After acquiring the control over Banca Italease, Banco restructured the subordinated components of the subsidiary’s
regulatory capital, by launching a PEO on the entire outstanding subordinated debt, amounting to 275 million euro, Euros,
in exchange for new debt securities having the same subordination level. As a result, 300 million euro worth of new Lower
Tier II bonds were issued, of which 116 to be used for the above mentioned public exchange offer.
Additional 103 million subordinated Lower Tier II bonds were issued and sold to institutional customers.
In 2009, the credit risk transfer activities implemented in 2007 and 2008 by setting up a single-name CDS portfolio were
followed by a marked decrease in hedged positions. Hedges for a nominal amount of 478 million euro were cancelled as
they were considered to be inefficient with respect to the optimization of capital absorption.
On 31 December 2009, outstanding hedges totaled 270 million euro.
Proprietary Portfolio Management
Directional proprietary portfolio
With respect to asset management, the following positions in HFT, HTM, AFS securities and Mutual Funds are outstanding:
x HFT positions – At year-end, the bond exposure totaled about 510 million euro, and was mainly made up of
fixed-rate securities of financial issuers, which gave rise to a significant and positive P&L impact in terms of
income stream; with respect to directional position, note that in 2009 the position in RCS Mediagroup securities
was reduced (classified as HFT);
x HTM positions – At the end of 2009, the Held to Maturity portfolio, which had been set up in 2004 to obtain a
stable capital remuneration, comprised 300 million worth of fixed-rate securities at market value with maturities
ranging between one and three years, of government issuers, and to a lesser extent of financial corporate issuers of
high credit standing. The securities in this portfolio are highly liquid, since they are almost exclusively eligible for
refinancing with the ECB, and therefore readily convertible into cash to face possible liquidity crisis without
having to dispose of the portfolio on the market;
x AFS positions – During the year the bond portfolios classified as AFS were sensibly increased. They include 250
million euro worth of inflation-linked BTP due in 2019, which were swapped and report a significant return in
excess of the 3-month Euribor, while about 400 million euro are represented by other Italian and Spanish
government securities;
x Positions in Mutual Funds – The final stage of the centralization of UCITS investments with the Parent company’s
was carried out; they contributed to the particularly brilliant performance of the entire portfolio.
Investment portfolios
As of 1 April 2009, the management of the HFT portfolio, that had been previously delegated to the subsidiary Banca Aletti,
was centralized at the Parent company’s in the Group Finance Service.
Against a backdrop of deep economic crisis and high uncertainty of financial markets, the management policy of the
proprietary HFT portfolio of Banco Popolare maintained a conservative strategic approach, seeking, whenever possible, to
stabilize returns, seek the right balance between interest income and capital gains and ensure a high portfolio funding.
The average duration of assets made up of fixed rate government securities was maintained at conservative levels, i.e., by
closing risks almost completely towards the end of the year. In 2009, existing investments, almost exclusively Italian
government issues, were held in portfolio, and they reported higher yields than the German bonds, while investments were
diversified by adding government securities of other European countries, like Spain and Belgium, and by shifting our focus
on supranational bonds and bonds issued by government agencies enjoying a top-tier credit standing.
In order to curb performance volatility, exposure to short-term - max. 5 years - securities has been retained. Part of the
duration risk has been mitigated with derivative hedges using bond futures and swaps, while for the cost of funding, hedging
techniques were based swaps (Overnight Index Swap). The mark to market valuation of this position produced a positive
result, mainly stemming from the narrowing of the yield spread between German bunds and the government securities of
other European countries. An additional positive contribution to the year-end result was made by the movement of the
short-term end of the yield curve, as a result of the interest rate cuts introduced by the main Central banks, and by the
positive steepness (yield spread between a 10-year and a 2-year government security) reported by the yield curves of the
main world economies.
70
The floating-rate government securities compartment had significant initial positions, that were substantially reduced in
2009, as a result of the natural maturity of securities, as well as for precise portfolio management choices. On 31 December
2009, the investment in CCT amounted to a total nominal value of about euro 850 million.
During the year, purely trading oriented arbitrage transactions on government interest rate curves were carried out. In
particular, owing to the widening yield spreads, Italian government bonds transactions against the German and US yield
curve were executed.
As to the non-governmental portfolio component (bonds issued mainly by banks and financial institutions), during the year
the strategy was based on a prudent approach, dictated by the strong uncertainty. Corporate investments have been held
stably at about 30% of the total portfolio, seeking to improve the distribution of investments among companies belonging to
different economic sectors, while slightly extending the average investment maturity.
This investment remained prevailingly focused on the financial sector, with securities with short/medium term maturities
and a current average Standard and Poor’s single A rating.
Out of the total exposure of the non-governmental bond portfolio, about one third belongs to the “loans & receivables”
accounting class. In September 2008, Banco Popolare had decided to make use of the option to change the accounting
class of some issues from “held for trading” to “loans & receivables”, corresponding to a nominal amount of about 550
millions. At year-end, as a result of ABS amortization and redemptions, the nominal amount decreased to about euro 470
million.
Securities from securitizations, and thus belonging to the ABS asset class (primarily RMBS), that have been in the portfolio
for more than two years, are concentrated on AAA issues, they are not subject to US or European subprime mortgages (so
called toxic securities), and correspond to a total amount of about euro 100 million.
Equity investments have been managed along a tactic and diversified approach, with a contained exposure in the first
months of the year, that was then gradually increased during the year up to important levels to take advantage of the
positive macroeconomic news, as well as of the reduction in risk premiums on risk-bearing investments. Equity trades were
carried out by using derivative instruments that made it possible to optimize the portfolio’s risk profile management at a time
of high uncertainty. As with the other asset classes held in the portfolio, risks were reduced towards the end of the year.
In 2009, the alternative investment portfolio, after ailing from a negative performance throughout 2008, posted positive
returns, in line with the main world markets. Already active investment positions in Aletti Gestielle Alternative funds of
funds were held, that were based on low and medium volatility strategies.
Group Treasury
As of 1 April 2009, treasury and foreign exchange activities, that were previously carried out in
centralized with the Parent company’s in the Group Finance Service.
Banca Aletti, were
Money Market
The expansionary policies introduced in September 2008 by the main Governments and Central Banks were instrumental in
restraining the collapse of economic indicators in 2009 and stave off the demise of the financial system.
Although we are far from experiencing a regaining of trust among market players, that was badly shaken by the Lehman
case, still in 2009 we saw a gradual resumption of deals on capital markets.
Although in an uncoordinated way, Central Banks acted to expand the opportunities offered by their monetary policies,
introducing Quantitative Easing elements to keep the cost of money close to zero and guarantee an unlimited access to
liquidity.
New operating models were imposed on monetary markets: looking for counterparties with an adequate capitalization
(required also by regulators and governments), cash exchange through collateralized instruments and additional guarantees
to cover against financial and credit risks.
As to market rates in the Euro area, the abundant liquidity injected in the system through monetary policy actions drove
short term rates well below the ECB base rate, which remained pinned at 1% since May.
After the peaks in 2008, also Euribor rates (-2.24% on the three-month maturity) and the Euribor-Eonia spread (-0.93%) which measures the credit risk perception on the very short term - were caught in a down-draft.
The ample liquidity in the system and the consequent carry trade opportunities translated into a significant and generalized
interest rate reduction, and into a substantial resizing of both corporate and government credit spreads, including those of
emerging countries.
The curve slope remained positive as a result of a market that is discounting a possible exit from economic stimulus
measures by Central Banks.
Against this backdrop, Banco Popolare’s money market deals focused on optimizing collateral management to support the
Group’s liquidity requirements.
In step with structural initiatives, we sought a progressive extension of maturities by diversifying the funding channels which
privileged opportunity logics in favor of the overall funding cost by resorting to collateralized instruments.
The recourse to the monetary policy actions of the European Central Bank, often updated, was instead occasional and
71
mainly aimed at diversifying the funding channels.
Extensive volumes were exchanged on the collateralized interbank market (Mic), which allowed us to optimize the use of
eligible collateral with positive impacts on the cost of funding.
Forex
Forex deals were characterized by a progressive depreciation of the dollar against the euro, especially in the second half of
2009, which between the lows of March (1.2460) and the highs of the beginning of December (1.5130) reported a
percentage variation of about 21%. Only in the last days of December a quick retracement repositioned the exchange rate
in the 1.44 area by year end.
Taking advantage of the market volatility, we focused mainly on short term, and significantly increased intra-day trading,
which reported a marked rise in terms of volumes and number of trades, with good returns.
Also in the second part of the year, the structure supported all the ancillary activities deriving from the transfer of the Office
at the Parent company’s (market disclosure, contracts, operating instruments, credit facilities). In October, the “Single
Exchange Rate Risk Position” project was completed, whereby all Exchange risk positions of the retail banks (Banche dei
Territori) were concentrated in Banco Popolare’s single position, thus simplifying the risk structure and the flow
management.
72
RESULTS
Consolidated Balance sheet
Reclassified assets
(in thousands of euro)
Cash and cash equivalents
Due from banks
Customer loans
Investments in associates and companies subject to joint control
Property and equipment
Intangible assets
Non-current assets held for sale and discontinued operations
Other assets
Total
31/12/2009
580,798
14,607,639
9,566,348
95,350,225
1,637,221
1,442,462
5,294,942
1,915,762
5,313,694
135,709,091
31/12/2009
31/12/2008 (*)
without Italease
580,788
14,797,455
10,105,649
85,951,262
2,796,815
1,259,539
5,288,116
281,573
4,429,285
125,490,482
710,004
12,593,074
12,482,048
81,096,693
1,457,405
1,329,149
5,333,248
186,691
6,138,918
121,327,230
Changes
-129,216
2,204,381
-2,376,399
4,854,569
1,339,410
-69,610
-45,132
94,882
-1,709,633
4,163,252
-18.2%
17.5%
-19.0%
6.0%
91.9%
-5.2%
-0.8%
50.8%
-27.8%
3.4%
(*) Adjusted in compliance with IFRS 5 and pursuant to the changes introduced by the update of circular n.262/2005 (Bank Financial Statements).
Reclassified liabilities
Due to banks
Due to customers, securities issued and financial
liabilities measured at fair value
Financial liabilities and hedging derivatives
Provisions
Liabilities associated with non-current assets held for sale and
discontinued operations
Other liabilities
Minority interests
- Share capital and reserves
- Net income (loss) for the period
Total
31/12/2009
31/12/2009
31/12/2008 (*)
without Italease
Changes
8,420,417
7,454,602
8,357,652
-903,050
-10.8%
105,183,120
4,047,105
1,474,904
97,880,079
3,863,018
1,280,884
93,130,974
3,424,803
1,403,816
4,749,105
438,215
-122,932
5.1%
12.8%
-8.8%
960,065
117,159
22,561
94,598
419.3%
3,511,268
579,373
11,532,839
11,265,801
267,038
135,709,091
3,059,779
374,760
11,460,201
11,257,828
202,373
125,490,482
4,799,765
403,644
9,784,015
10,117,387
-333,372
121,327,230
-1,739,986
-28,884
1,676,186
1,140,441
535,745
4,163,252
-36.3%
-7.2%
17.1%
11.3%
n.s
3.4%
(*)Adjusted in compliance with IFRS 5 and pursuant to the changes introduced by the update of circular n.262/2005 (Bank Financial Statements).
The reclassified balance sheet simply aggregates the items required in the balance sheet presentation under the Bank of
Italy’s circular letter N. 262 dated 22nd December 2005.
73
Consolidated income statement
Reclassified income statement
Interest margin
Profit (loss) on investments in associates and companies subject to
joint control carried at equity
Other revenues
Net financial income
Other operating income
Personnel expenses
Other administrative expenses
Net impairment of property and equipment and intangible assets
Operating expenses
Net impairment of loans, guarantees and commitments
Net impairment of other financial activities
Net provisions for risks and charges
Goodwill and equity investment impairments
Profit (Loss) on disposal of equity and other investments
Tax on income from continuing operations
Income (loss) after tax from continuing operations
Income (Loss) after tax of merchant banking investments and
non-current assets held for sale (*)
After tax integration charges
Net income (loss)
Minority interests
Parent company’s net income (loss)
2009
2009
without Italease
2008 (*)
Changes
1,991,236
1,952,692
2,240,242
-12.8%
103,779
103,741
-13,618
2,095,015
1,228,113
181,669
185,856
1,595,638
3,690,653
-1,522,758
-773,865
-161,744
-2,458,367
1,232,286
-749,022
-31,680
-56,569
-9,132
116,141
502,024
-240,275
261,749
2,056,433
1,215,016
-14,429
268,251
1,468,838
3,525,271
-1,488,698
-746,680
-156,293
-2,391,671
1,133,600
-673,993
-31,680
-50,730
-9,131
114,532
482,598
-262,154
220,444
2,226,624
1,261,531
55,516
196,792
1,513,839
3,740,463
-1,485,363
-672,949
-170,358
-2,328,670
1,411,793
-1,170,053
-199,457
-200,922
-873,796
501,175
-531,260
140,258
-391,002
-7.6%
-3.7%
n.s
36.3%
-3.0%
-5.8%
0.2%
11.0%
-8.3%
2.7%
-19.7%
-42.4%
-84.1%
-74.8%
-99.0%
-77.1%
n.s
n.s
n.s
-3,810
257,939
9,099
267,038
-11,710
125,093
-36,249
-302,158
-31,214
-333,372
n.s
n.s
n.s
-79.6%
n.s
208,734
-6,361
202,373
(*) Inclusive of results of subsidiaries acquired through merchant banking investments.
Shown below are the reclassifications with respect to the balances illustrated in the official income statement:
x the figurative cost to fund the financial assets purchased to produce structured financial products for trading was
reclassified from interest expense (item 20) to net financial income;
x dividends from shares classified among assets available for sale and assets held for trading (item 70) have been
reclassified under net financial income;
x profit or loss on disposal of loans (item 100) have been consolidated with net write-downs/write-backs on
impairment of loans, guarantees and commitments and credit derivatives;
x profit or loss on disposal or repurchase of financial assets available for sale and financial liabilities (to be found
under item 100) have been reclassified under net financial income;
x tax and other expense recoveries (under item 230) have been directly deducted from G&A expenses instead of
being itemized under other operating income;
x the depreciation of expense for improvements to third party assets (accounted for under item 230) was recognized
in combination with impairment of property and equipment and intangible assets, instead of being itemized under
other operating income and expense;
x the share of profit of associates carried at equity (item 240) was recognized under a specific item, that in
combination with the interest margin makes up the aggregate called net interest, dividend and similar income;
x integration charges were shown in a specific item called “After-tax integration charges” instead of the relevant
items making up the aggregate of Operating expenses and the associated tax;
x in the reclassified income statement, charges and expenses of associates referring to the merchant banking
activities carried out by the Group, which do not fall within the application scope of IFRS 5 but practically
represent discontinued operations, are recognized under the item Profit/(Loss) after tax on non-current assets held
for sale and discontinued operations.
Attached to this annual report is a chart comparing the income statement items prescribed by the Bank of Italy’s Circular n.
262, of 22nd December 2005 with the reclassified income statement.
74
Since 8 June 2009, after the closing of the Tender Offer period launched on all outstanding shares of common stock of
Banca Italease, Banco Popolare acquired the majority of shares outstanding and as a result the control over the company. As
of the second half, Banca Italease and its subsidiaries joined the consolidation scope of Banco Popolare. In compliance with
IFRS 3, the consolidated financial statements of Gruppo Banco Popolare include the financial assets and liabilities pertaining
to Gruppo Banca Italease as at 31 December 2009, while the 2009 income statement includes the income contribution of
the companies belonging to Gruppo Italease only as at the second half.
The 2009 annual report was prepared by recognizing the effects of the acquisition of Gruppo Italease in compliance with
the applicable international accounting standards, in particular IFRS 3, as the purchase price allocation process has been
completed, and was determined to amount to 225.1 million with respect to the effective date of the acquisition (8 July
2009).
Against this cost, the share of acquired shareholders’ equity (based on its book value) of the companies of Gruppo Italease
totaled 226 million. The difference between the purchase price and the book value of assets and liabilities acquired through
this transaction was allocated to the balance sheet assets and liabilities acquired through the business combination and, net
of the minority interests, it came in at 190.6 million (difference between the fair value and the book value of the above
balance sheet items). The residual difference, amounting to 191.5 million, was recognized through profit and loss as other
operating income.
The main differences between the fair value and the book value of purchased assets and liabilities involved:
x property and equipment: difference between the fair value estimated on 1 July 2009 and the book value of some
buildings;
x non-current assets held for sale: difference between the fair value estimated on 1 July 2009 and the book value of
the assets and liabilities of Factorit S.p.A.;
x securities in issue: difference between the fair value estimated on 1 July 2009 and the book value of securities
issued by Banca Italease. The marked difference is explained by the material change in creditworthiness attributed
to Banca Italease on 1 July 2009 as compared with the issue date of the single debt securities;
x provisions for risks and charges: estimate of a contingent liability not recognized in Banca Italease’s balance sheet
on 1 July 2009, as associated with the framework agreement signed by Banco Popolare and the other banks that
at present make up the shareholding structure of Alba Leasing S.p.A. (Banca Popolare dell’Emilia Romagna, Banca
Popolare di Sondrio and Banca Popolare di Milano). The agreement sets forth the modalities to transfer the risks
and benefits deriving from securitized performing loans originated by the banking channel from Banca Italease
and its subsidiaries to Alba leasing;
x tax liabilities: tax effect calculated on the above described differences between the fair values and the book
values.
The 2009 result was therefore impacted by the residual acquisition difference and by the recognition through profit and loss
of the differences - with respect to the acquisition date - between the value at which the assets and liabilities acquired with
the business combination have been recognized in the financial statements of the related companies of Gruppo Italease and
their fair value as measured upon allocating the purchase price.
Illustrated below are the resulting P&L impacts:
x Interest income: the P&L impact was – 60.7 million on 31 December 2009 (-32 million in third quarter and 28.7
million in fourth quarter), and was generated by the lower value recognized during PPA to securities issued by
Banca Italease as part of the business combination. The negative impact was due to the consequent addition of
interest expense recognized by Banca Italease against said debt securities for the portion that was not repurchased
after 1 July 2009;
x Other revenues: the impact was + 191.5 million on 31 December 2009. It’s the badwill resulting from the PPA
referring to 1 July 2009 that was recognized through profit and loss in the fourth quarter;
x Net financial income: the impact was – 69.6 million on 31 December 2009 (-57 million in third quarter and -12.6
million in fourth quarter), again due to the lower value recognized during PPA to securities issued by Banca
Italease as part of the business combination. The negative impact was due to the repurchase of said debt securities
after 1 July 2009;
x Depreciation of property and equipment: the impact was + 7 million on 31 December 2009 as a result of the
realignment of the value of some buildings to their fair value as measured by Banca Italease in fourth quarter
2009. The lower fair value had already been accounted for when measuring badwill;
x Provisions for risks and charges: the impact was + 100 million on 31 December 2009 as a result of the
recognition by Banca Italease in fourth quarter of a provision for the contingent liability associated with the
agreements signed with Alba Leasing S.p.A. and regarding the sale of the securitized loans originated by the
banking channel. Also this provision had already been accounted for when measuring badwill;
x Profit on disposal of investments: the impact was – 7.2 million on 31 December 2009 and was due to the sale by
Banca Italease in fourth quarter of buildings which had been recognized at a greater than their book value upon
allocating the purchase price.
Net of +191.5 million referring to the badwill recognized in the third quarter, listed below are the P&L impacts in the third
and fourth quarter 2009:
x net interest and other banking income: - 89 million in third quarter and – 41.3 million in fourth quarter;
x profit from operations: - 89 million in third quarter and – 34.3 million in fourth quarter;
75
x income/loss before tax : - 89 million in third quarter and + 58.5 million in fourth quarter;
x income tax:+ 28.8 million in third quarter and – 14.2 million in fourth quarter;
x minority interests: + 7.3 million in third quarter and – 5.8 million in fourth quarter.
The overall impact on the consolidated net income came in at -14.8 million on 31 December 2009 (-52.9 million in third
quarter and + 38.1 million in fourth quarter).
Including badwill, the total impact on the consolidated net income was +176.7 million on 31 December 2009 (+138.6
million in third quarter and + 38.1 million in fourth quarter).
As required by the adopted accounting standards, once the PPA was completed, the third quarter 2009 income statement,
that had already been published, was restated to recognize the above described impacts with the correct timing.
The income statement of Gruppo Banco Popolare – both in 2009 and in the prior-year comparison - includes also P&L
impacts deriving from the allocation of the merger difference referring to the business combination of Gruppo Banca
Popolare Italiana on 1 July 2007.
For a full and transparent disclosure, illustrated below are the impacts generated from the recognition of profit adjustments
reported by the income-generating units acquired by Gruppo Italease and Gruppo Banca Popolare Italiana due to the higher
values recognized in the consolidated financial statements on the date of effectiveness of the business combinations as a
result of applying the accounting standard IFRS 3:
x Interest margin: the P&L impact was – 153.9 million on 31st December 2009 (-34.5 million in Q4) and -199.1
million on 31st December 2008, and is mainly attributable to the greater value recognized during PPA to loans
acquired under the business combination;
x Other operating income: the impact was – 44.0 million on 31st December 2009 (-11 million in Q4 2009),
primarily represented by the amortization of intangible assets having a defined useful life recognized upon the
PPA. The impact on the income statement as at 31st December 2008 was – 83.0 million, of which 36.2 million
relating to the greater value recognized during PPA to a minority stake sold as part of our merchant banking
business, and 50.2 million to the amortization of the above mentioned intangible ass.
The following P&L impacts in the financial years under comparison were reported:
x net interest and other banking income: - 198 million in 2009 and – 282.2 million in 2008;
x profit from operations: - 202.1 million in 2009 and – 289.1 million in 2008;
x income/loss before tax : - 207.4 million in 2009 and – 780.1 million in 2008;
x income tax:+ 68 million in 2009 and +95.6 million in 2008;
x net loss on discontinued operations: -13 million in 2008;
x minority interests: +10 million in 2009 and +12.4 million in 2008.
The overall effect on the consolidated net income came in at -129.4 million on 31st December 2009 and -685 million on
31st December 2008.
Summarized below are the effects generated by material non-recurring events or transactions on the consolidated operating
result of the periods under comparison.
The following criteria are followed to identify non-recurring items:
x profit on the disposal of all fixed assets is considered non-recurring (Investments in associates and companies
subject to joint control, tangible assets, financial assets available for sale, investments held to maturity and NPL
portfolios);
x profit and loss on non-current assets held for sale are considered non-recurring;
x income components associated to combination or restructuring transactions (for ex. redundancy fund charges) are
considered non-recurring;
x material income components that are not destined to repeat frequently (for ex. sanctions, impairment of fixed
assets, effects caused by changes in regulations, exceptional results, etc.) are considered non-recurring;
x conversely, results generated by the Group’s merchant banking business and the material operating impacts
caused by valuation aspects and/or by changes in parameters used in generally applied valuation methods are
considered recurring.
Listed below are the income items classifiable as non-recurring, that have generated a total negative impact of 23.8 million
on the operating result generated in 2009:
- positive 22.1 million impact on profit (loss) on investments in associates and companies subject to joint control
carried at equity as a result of the dividend paid by Agos S.p.A upon distributing the 2008 earnings, that were
generated before the acquisition of the equity investment by Banco Popolare;
- other revenues include 191.5 million revenues linked to the badwill from the combination of Gruppo Banca
Italease;
- negative 350.5 million impact on net financial income as a result of the increase in the book value of debt
securities in issue measured at fair value owing to the improved creditworthiness of Banco Popolare in 2009;
- profit on the disposal of stakes classified as available for sale, among which Delta S.p.A. and SIA-SSB S.p.A., had
an overall impact on net financial income of 8.9 million;
- costs incurred for early retirement schemes, totaling 13.2 million, posted in personnel expenses;
76
- charges associated with the planned closedown of some branches, totaling 7.2 million, recognized in impairment
of tangible and intangible assets and provisions for risks and charges;
- an overall 9.1 million impact on impairment of goodwill and investments in associates and companies subject to
joint control, as result of the write-down of the consolidated carrying value of some Investments in associates
and companies subject to joint control held by the Group, and carried at equity;
- 105 million profit made by the subsidiary Immobiliare BP, recognized in profit/loss on disposal of equity and
other investments, as a result of the transfer of heritage buildings of high artistic value to the closed-end real
estate fund “Eracle”, owing to the expiration of the preemption right held by the Italian Monuments and Fine Arts
Service (Sovrintendenza alle Belle Arti), as part of the plan launched the prior year to valorize and rationalize the
Group’s real estate assets;
- profit on the partial sale of the equity investment held by the Group in Istituto Centrale Banche Popolari Italiane
(3.7 million) and on the sale of other investments for 7.4 million, again recognized in profit/loss on disposal of
equity and other investments;
- 52.1 million charges, classified as income tax for the period on continuing operations, generated by the decision
to settle almost all tax litigations regarding the pre-merger conduct of some companies belonging to the former
Gruppo Banca Popolare Italiana, by resorting to a fast-track composition with immediate tax audit and remedy.
This item was also positively impacted by the 31.8 million benefit from IRAP reimbursements and other
contingent assets;
- 3.8 million loss after-tax on discontinued operations almost entirely attributable to the disposal of merchant
banking investments currently under finalization.
Note, that in the fourth quarter the charge debited in the second quarter and referring to the 21.7 million contribution to the
Guarantee Fund for small- and medium-sized enterprises as a result of the issue of the “Tremonti bonds” was derecognized
from the P&L and was directly deducted from equity reserves, as this accounting procedure is consistent with the nature of
this charge, namely ancillary costs for the issued “Tremonti bonds”, that are classified as equity instruments.
Reclassified consolidated income statement – Quarterly evolution
For a full and transparent disclosure in compliance with Consob Regulation n. 11971 of 14 May 1999 and following
amendments, regarding the preparation of quarterly reports, shown below is the quarterly evolution of operating results.
Reclassified income statement
Interest margin
Profit (Loss) on investments in associates and companies subject to joint control
carried at equity
Other revenues
Net financial income
Other operating income
Personnel expenses
Other administrative expenses
Net impairment of property, equipment and intangible assets
Operating expenses
Net impairment of loans, guarantees and commitments
Net impairment of other financial transactions
Impairment of goodwill and investments in associates and companies subject to
joint control
Profit (Loss) ) on disposal of equity and other investments
Profit (Loss) after tax from discontinued operations (****)
Net income (loss) for the period
Minority interests
FY 2009 (*)
IV Q
III Q (***)
II Q
I Q (**)
480,725
487,646
502,446
520,419
46,393
20,093
23,742
13,551
527,118
341,422
14,118
-14,500
341,040
868,158
-409,053
-182,229
-44,917
-636,199
231,959
-256,167
-15,015
-20,271
507,739
296,334
171,832
-66,880
401,286
909,025
-382,024
-200,926
-40,895
-623,845
285,180
-222,531
-4,662
12,178
526,188
325,184
-5,001
-13,930
306,253
832,441
-362,414
-194,615
-38,331
-595,360
237,081
-137,493
-8,817
-32,577
533,970
265,173
720
281,166
547,059
1,081,029
-369,267
-196,095
-37,601
-602,963
478,066
-132,831
-3,186
-15,899
-5,983
-
-3,149
-
1,107
-64,370
-9,591
-73,961
19,626
-54,335
4,942
-49,393
13,436
83,601
15,382
98,983
4,973
103,956
8,296
112,252
820
55,865
-36,669
19,196
-28,006
-8,810
-5,590
-14,400
100,778
426,928
-209,397
217,531
-403
217,128
1,451
218,579
(*) Adjusted for comparison to account for changes in consolidation scope and in discontinued operations under IFRS 5.
(**) -11 million reclassified from "Net financial income” to “Interest margin” for comparability.
(***) 21.2 million reclassified from "Net financial income" to “Interest margin".
(****) Inclusive of the results of the subsidiaries acquired through our merchant banking business.
77
Credit intermediation
To analyze the performance of the main balance sheet and P&L items for financial year 2009 on a like-to-like basis with the
prior year, data as at 31 December 2009 were presented also without the contribution of the companies belonging to
Gruppo Banca Italease, after the date of acquisition. Restated data are shown in column A of the tables below. For the sake
of completeness, similar detailed tables are presented referring to the performance reported in the period by Gruppo Banca
Italease, compared with the prior year’s data adjusted for comparison to account for discontinued operations under IFRS 5.
Direct funding
Direct Funding
120,000
(in millions of euro)
100,000
80,000
97,880.1
93,131.0
60,000
40,000
20,000
31/12/2008
31/12/2009 without Italease
On 31 December 2009, direct funding reached 105,183.1 million; net of the contribution of the Group led by Banca
Italease it totaled 97,880.1 million, as compared with 93,131 million on 31 December 2008, up by 5.1%. As to the various
deal types, repurchase agreements reported a sharp reduction from 13,319.4 million to 8,547.4 million (-35.8%) as did
certificates of deposits and other securities, down by 1,277.8 million (-36.9%).
However this dynamic was offset by the growth in traditional direct customer funds (checking accounts and deposits), which
went from 37,152 million at the end of 2008 to 43,622 million on 31 December 2009 (+ 17.4%). Also bonds enjoyed a
marked year on year increase of 10.6%. The quarter on quarter increase was 4.5%. Household and small businesses funds
increased by 9% year on year.
Customer funds strictly speaking
- checking accounts and demand deposits
- time deposits
- certificates of deposit and other securities
Repurchase agreements
Bonds
Total direct funding
31/12/2009
31/12/2009
(A)
31/12/2008
(B)
Abs.change
(A-B)
% Change
(A/B)
47,107,600
43,622,032
1,153,305
2,332,263
8,416,526
49,658,994
105,183,120
46,942,372
43,622,032
1,136,970
2,183,370
8,547,399
42,390,308
97,880,079
41,494,197
37,151,989
880,988
3,461,220
13,319,440
38,317,337
93,130,974
5,448,175
6,470,043
255,982
-1,277,850
-4,772,041
4,072,971
4,749,105
13.1%
17.4%
29.1%
-36.9%
-35.8%
10.6%
5.1%
In the period under examination the Group led by Banca Italease showed the following dynamics:
Customer funds strictly speaking
- time deposits
- certificates of deposit and other securities
Bonds
Total direct funding
31/12/2009
(A)
30/06/2009
adjusted
31/12/2008
Adjusted (B)
Abs. change
(A-B)
% Change
(A/B)
165,228
16,335
148,893
270,821
8,100,059
8,536,108
154,042
5,193
148,849
194,467
11,496,145
11,844,654
149,167
149,167
254,561
13,392,775
13,796,503
16,061
16,335
-274
16,260
-5,292,716
-5,260,395
10.8%
-0.2%
6.4%
-39.5%
-38.1%
Direct funding attributable to Gruppo Italease mainly comprised 1,115.2 million liabilities associated with outstanding
securitizations and other 6,984.9 million worth of bonds issued. In the second half, Gruppo Italease did not carry out new
securitizations or bond issues, while it early redeemed a 5 million euro bond on 27 October 2009, featuring a step-up
structure and an original maturity on 27 October 2017. Under the Securitized loan agreement, liabilities associated with
securitizations decreased by 1.5 billion for securitization securities sold on the market.
78
The aggregate includes 148.9 million worth of Preferred Securities (nominal value of 150 million), classified in other
securities.
Measured at market values, at the end of December indirect customer funds totaled 77,212.6 million, up by 2.8% from
75,090.7 at the end of the prior year.
As of the second quarter, also indirect customer funds started to report a trend reversal: after an uninterrupted volume
decrease until 31st March 2009, the aggregate posted a growth rate of 3.9% in Q2, of 2.7% in Q3 and of 0.6% in Q4.
Within the asset management aggregate, the marked drop in mutual funds and SICAV (-15.8%) and managed assets (-9.6%)
was partly offset by the increase in insurance policies (+30.6%), mainly associated to the issue and sale of policies through
Lawrence Life, under the bancassurance agreements signed with Gruppo Fondiaria-SAI. These new sales are partly backed
by bonds issued by the Parent company (1,587.6 million included in the direct funding aggregate).
Also assets under administration reported a positive dynamic, from 43,789.5 million on 31st December 2008 to 46,237.9
million on 31st December 2009, up by 5.6%.
100,000
80,000
60,000
75,090.7
77,212.6
31/12/2008
40,000
20,000
0
31/12/2009
31/12/2008
Abs. change
% change
Assets under management
- mutual funds and SICAV
- managed accounts invested in securities and in funds
- insurance policies
of which: Lawrence Life policies
Assets under administration
Total indirect customer funds
30,974,667
9,995,987
9,908,714
11,069,966
1,587,622
46,237,939
77,212,606
31,301,160
11,867,152
10,959,558
8,474,450
43,789,533
75,090,693
-326,493
-1,871,165
-1,050,844
2,595,516
1,587,622
2,448,406
2,121,913
-1.0%
-15.8%
-9.6%
30.6%
5.6%
2.8%
Excluding administered and managed funds of institutional customers (mutual funds, banking foundations, merchant banks,
leasing and factoring companies, investment companies, SICAV, fund managers, insurance companies, pension and other
superannuation funds, central supervisory authorities and banking trade associations), managed and administered funds
totaled 58,254.1 million, down 0.9% from 58,783.2 million on 31 December 2008.
Total funding (direct funding + indirect customer funds), net of direct funds underlying insurance policies, added up to
180,808.1 million, up by 7.5% as compared with 31 December 2008.
On 31 December 2009, Gruppo Italease had no outstanding indirect funding transactions.
79
Loans to customers
On 31 December 2009, gross loans reached 99,485.7 million, 88,871.9 without the contribution of Gruppo Italease, up by
6.1% from 83,768 million on 31 December 2008 (+1.8% in Q4). Also in the fourth quarter growth centered in households
and small businesses, which loans increasing by 3.8% (+8.7% year on year) and 3% (+5.1% year on year), bearing witness
of the unfailing support the Group is lending to the economies of its market territories. Loans below 250 thousand euro
account for 93% of total loans, evidencing their high degree of granularity.
Gross customer loans
100,000
80,000
88,871.9
83,768.0
60,000
40,000
20,000
0
31/12/2008
31/12/2009
31/12/2009
(A)
31/12/2008
(B)
Abs. change
(A-B)
% change
(A/B)
Mortgages
Checking accounts
Finance leases
Credit lines and other loans
Total net loans to customers
42,943,825
17,024,840
9,313,281
2,016,603
24,051,676
95,350,225
41,801,744
17,116,382
35,598
2,016,603
24,980,935
85,951,262
39,817,532
17,032,460
88,567
1,250,578
22,907,556
81,096,693
1,984,212
83,922
-52,969
766,025
2,073,379
4,854,569
5.0%
0.5%
-59.8%
61.3%
9.1%
6.0%
Net of total write-downs and of the contribution of the group led by Banca Italease, loans came in at 85,951.3 million, up
by 6% from 81,096.7 million on 31 December 2008.
Worth highlighting are mortgages, that increased from 39,817.5 million to 41,801.7 million (+5%) and repurchase
agreements, which on 31 December 2009 totaled 2,016.6 million from 1,250.6 at year-end 2008. Also other loans reported
a significant increase to 24,980.9 million (+ 2,073.4 million).
The portfolio of the group led by Banca Italease in the period under examination had the following makeup:
31/12/2009
(A)
30/06/2009
adjusted
31/12/2008
Adjusted (B)
Abs. change
(A-B)
% change
(A/B)
Mortgages
Finance lease
Credit lines and other loans
Total net loans to customers
1,666,135
8,815,588
2,159,237
12,640,960
2,077,727
14,275,063
1,120,077
17,472,867
2,157,288
15,408,928
1,404,781
18,970,997
-491,153
-6,593,340
754,456
-6,330,037
-22.8%
-42.8%
53.7%
-33.4%
On 31 December 2009 loans to customers stood at 12,641 million, confirming the downtrend that has been characterizing
the whole prior year and 2009, with a 27.7% decrease over the end of June 2009 (-33.4% from year-start). The marked
capital shortfall suffered by Banca Italease owing to the reported losses obliged the bank not to promote the production of
new contracts and to manage the lease business already outstanding with customers, while in fact the portfolio continued to
undergo its natural amortization.
At the end of 2009, about 4.8 billion net customer loans were transferred to the company Alba Leasing, i.e., on 31
December 2009 they were no more part of the Group consolidated assets; 2.4 billion of the above loans are net nonsecuritized loans, while 2.4 billion are net securitized loans, whereby under the mentioned Securitized loan agreement all
risks and benefits are transferred to Alba Leasing. This same agreement provides that, from within Banca Italease’s customer
loans at the end of 2009, 1.3 billion emerge referring to junior notes and senior securities that were not sold on the market,
and corresponding to the portfolio transferred to Alba Leasing.
80
The tables below show cash loans to customers on 31 December 2009 compared with 31 December 2008.
31/12/2009 31/12/2009 (A) 31/12/2008 (B)
Gross impaired loans
Doubtful loans
Substandard loans
Restructured loans
Past dues
Gross performing loans
Total gross loans
Write-downs of impaired loans
Doubtful loans
Substandard loans
Restructured loans
Past dues
Write-downs of performing loans
Total write-downs
Net impaired loans
Doubtful loans
Substandard loans
Restructured loans
Past dues
Net performing loans
Total net loans
13,306,786
4,856,731
6,651,290
860,323
938,442
86,178,879
99,485,665
-3,562,346
-2,198,437
-1,212,062
-106,155
-45,692
-573,094
-4,135,440
9,744,440
2,658,294
5,439,228
754,168
892,750
85,605,785
95,350,225
8,455,387
3,056,138
3,968,416
674,685
756,148
80,416,505
88,871,892
-2,423,408
-1,572,359
-730,194
-82,943
-37,912
-497,222
-2,920,630
6,031,979
1,483,779
3,238,222
591,742
718,236
79,919,283
85,951,262
Abs. change(A% change(A/B)
B)
5,492,216
2,105,564
2,758,548
150,520
477,584
78,275,820
83,768,036
-1,937,401
-1,118,529
-729,678
-32,058
-57,136
-733,942
-2,671,343
3,554,815
987,035
2,028,870
118,462
420,448
77,541,878
81,096,693
2,963,171
950,574
1,209,868
524,165
278,564
2,140,685
5,103,856
486,007
453,830
516
50,885
-19,224
-236,720
249,287
2,477,164
496,744
1,209,352
473,280
297,788
2,377,405
4,854,569
54.0%
45.1%
43.9%
348.2%
58.3%
2.7%
6.1%
25.1%
40.6%
0.1%
158.7%
-33.6%
-32.3%
9.3%
69.7%
50.3%
59.6%
399.5%
70.8%
3.1%
6.0%
The effects of the economic crisis clearly unfolded in the dynamic of credit quality. On 31 December 2009, total impaired
loans (doubtful loans, substandard loans, restructured loans and past dues/overdrafts), gross of write-downs and net of
Gruppo Italease, totaled 8,455.4 million, up by 54% from 5,492.2 million of 31 December 2008. Among impaired loans,
gross doubtful loans (3,056.1 million) increased by 45.1% with respect to 31 December 2008. Substandard loans were the
most hardly affected, with an increase of 1,209.9 million, from 2,758.5 million on 31 December 2008 to 3,968.4 million on
31 December 2009. However, upon preparing the 2008 annual report, it had already been highlighted that performing
loans included positions for 502.7 million that in the first months of 2009 had already been reclassified as substandard
loans.
Gross past dues increased by 58.3%, from 477.6 million on 31 December 2008 to 756.1 million at the end of 2009, net of
Gruppo Italease. The growth in past dues reported in the fourth quarter (+34%) is attributable to the first time adoption of
the new classification criteria introduced by the Supervisory Authority during the year, which among other things lowered
the time threshold for some loan classes to be classified as past due to 90 days.
10,000
8,000
8,455.4
6,000
4,000
5,492.2
2,000
0
31/12/2008
On 31 December 2009, the impaired to total customer loan ratio – gross of write-downs – stood at 9.51%, up by 2.96%
with respect to 31 December 2008 (6.56%). Net of write-downs, it went from 4.38% on 31 December 2008 to 7.02% at
year-end 2009.
The NPL to loan ratio – gross of write-downs – came in at 3.44%, as compared with 2.51% on December 2008. Net of
write-downs, it stood at 1.73% from 1.22% on 31 December 2008.
81
Gross NPL/Gross loans
3.44%
2.51%
31/12/2009 senza Italease
31/12/2008
On 31 December 2009 write-downs of impaired loans accounted for 28.7% of their total gross amount, with respect to
35.3% on 31 December 2008. More precisely, at the end of the year write-downs of doubtful loans accounted for 51.4% of
their total gross amount (53.1% on 31 December 2008). Note, however, that as a whole 92% of doubtful loans have been
written-down, written-off or collateralized.
The cash loan situation of the group led by Banca Italease shows the following dynamic:
31/12/2009
(A)
30/06/2009
adjusted
31/12/2008
Adjusted (B)
Abs. change
(A-B)
% change
(A/B)
Doubtful loans
Substandard loans
Restructured loans
Past dues
Total gross loans
Doubtful loans
Substandard loans
Restructured loans
Past dues
Total write-downs
Net impaired loans
Doubtful loans
Substandard loans
Restructured loans
Past dues
Net performing loans
Total net loans
4,851,253
1,800,497
2,682,824
185,638
182,294
9,005,651
13,856,904
-1,138,938
-626,078
-481,868
-23,212
-7,780
-77,006
-1,215,944
3,712,315
1,174,419
2,200,956
162,426
174,514
8,928,645
12,640,960
4,870,028
1,514,728
3,235,310
9,295
110,695
13,826,821
18,696,849
-1,118,846
-548,346
-559,324
-793
-10,383
-105,136
-1,223,982
3,751,182
966,382
2,675,986
8,502
100,312
13,721,685
17,472,867
4,462,164
631,587
3,651,466
7,802
171,309
15,559,637
20,021,801
-952,596
-287,784
-650,718
-773
-13,321
-98,208
-1,050,804
3,509,568
343,803
3,000,748
7,029
157,988
15,461,429
18,970,997
389,089
1,168,910
-968,642)
177,836
10,985
-6,553,986
-6,164,897
186,342
338,294
-168,850
22,439
-5,541
-21,202
165,140
202,747
830,616
-799,792
155,397
16,526
-6,532,784
-6,330,037
8.7%
185.1%
-26.5%
2279.4%
6.4%
-42.1%
-30.8%
19.6%
117.6%
-25.9%
2902.8%
-41.6%
-21.6%
15.7%
5.8%
241.6%
-26.7%
2210.8%
10.5%
-42.3%
-33.4%
With regard to Gruppo Italease, gross consolidated impaired loans reported a strong acceleration from the end of 2008. In
spite of the fact that on 31 December 2009 about 240 million gross impaired loans (of which: non-performing about 90
million, substandard about 100 million, restructured about 6 million and past due about 44 million) were transferred to Alba
Leasing (a company which is not part of the full consolidation scope), total impaired loans (non-performing, substandard,
restructured, past-due/overdraft), gross of write-downs on 31 December 2009, totaled 4,851.3 million, up by 8.7% from
4,462.2 million on 31 December 2008. Gross non-performing loans (1,800.5 million) increased by 185.1% with respect to
31 December 2008. Substandard loans instead decreased by 968.6 million, from 3,651.5 million on 31 December 2008 to
2,682.8 million on 31 December 2009.
This evolution is a direct consequence of the impact of the macroeconomic events that took place between 2008 and the
beginning of 2009 on the loan portfolio, characterized by large exposures on the real estate sector originated at the time
when Gruppo Italease was having a strong commercial growth, pursued until the first months of 2007.
The high concentration level of these impaired positions is confirmed by the fact that at the end of December 2009 about
72% of gross non-performing loans tied in with 30 business groups with contracts mainly referring to the real estate sector,
and about 80% of gross substandard loans tied in with 30 business groups with contracts mainly referring to the real estate
sector.
On 31 December 2009, the NPL to total gross customer loan ratio was 12.99%, up from 8.10% (adjusted) on 30 June 2009
(3.15% on 31 December 2008). This evolution was mainly due to entry of a restricted number of customers with big-ticket
finance lease contracts on real estate assets. On the other hand, since these positions are effectively backed by guarantees
represented by real estate, their entry caused the coverage ratio to decrease from 36.2% at the end of June 2009 to 34.8% in
December 2009 (45.6% at the end of 2008).
Net of write-downs of 626.1 million, on 31 December 2009 net doubtful loans stood at 1,174.4 million, accounting for
9.3% of total net customer loans (5.5% at the end of June 2009 and 1.8% on 31 December 2008).
82
The gross substandard loan to total gross customer loan ratio was 19.4% on 31 December 2009, up from 17.3% on 30 June
2009. Write-downs of substandard loans came in at 481.9 million, generating a coverage ratio of 18%. Net of write-downs,
net substandard loans stood at 2,201 million, accounting for 17.4% of total net customer loans (15.3% at the end of June
2009).
As a whole, write-downs of impaired loans on 31 December 2009 accounted for 23.5% of their total gross amount, up from
23% on 30 June 2009 (21.4% on 31 December 2008).
Financial assets
On 31 December 2009, Group financial assets totaled 14,607.7 million; net of the contribution of Gruppo Italease, which
was affected also by the intercompany subscriptions of securities issued by Banca Italease, they added up to 14,797.5
million, up by 17.5% from 12,593.1 million on 31 December 2008, mainly as a result of the trading book. The aggregate
breaks down as follows:
31/12/2009
31/12/2009
(A)
31/12/2008
(B)
Abs. change
(A-B)
% change
(A/B)
Financial assets held for trading
Financial assets measured at fair value
Financial assets available for sale
Investments held to maturity
Hedging derivatives
Total
11,930,649
183,526
2,056,466
306,240
130,758
14,607,639
12,196,848
183,526
2,049,115
306,240
61,726
14,797,455
10,033,368
311,375
1,625,154
530,296
92,881
12,593,074
2,163,480
-127,849
423,961
-224,056
-31,155
2,204,381
21.6%
-41.1%
26.1%
-42.3%
-33.5%
17.5%
31/12/2009
31/12/2009
(A)
31/12/2008
(B)
Abs. change
(A-B)
% change
(A/B)
Debt securities
Equity securities
UCITS units
Trading and hedging derivatives
Total
8,888,939
1,039,745
1,201,184
3,477,771
14,607,639
9,320,125
1,038,868
1,201,184
3,237,278
14,797,455
7,543,346
1,009,561
875,433
3,164,734
12,593,074
1,776,779
29,307
325,751
72,544
2,204,381
23.6%
2.9%
37.2%
2.3%
17.5%
Illustrated below is the breakdown by asset class:
The tables below illustrate the breakdown by balance sheet item and by asset class of financial assets of the group led by
Banca Italease in the period under considerations:
Hedging derivatives
Total
Debt securities
Equity securities
Trading and hedging derivatives
Total
31/12/2009
(A)
30/06/2009
31/12/2008
(B)
Abs. change
(A-B)
% change
(A/B)
181,143
7,351
151,333
339,827
161,395
58,391
150,109
369,895
139,218
58,643
124
123,006
320,991
41,925
-51,292
-124
28,327
18,836
30.1%
-87.5%
31/12/2009
(A)
30/06/2009
31/12/2008
Adjusted (B)
Abs. change
(A-B)
% change
(A/B)
6,474
877
332,476
339,827
57,514
877
311,504
369,895
57,890
877
262,224
320,991
-51,416
70,252
18,836
-88.8%
0.0%
26.8%
5.9%
23.0%
5.9%
For Gruppo Banca Italease financial assets held for trading are represented by derivatives, mainly with corporate customers
for OTC trading derivatives, where an out-of-court settlement is being reached on some contracts.
Financial assets available for sale on 31 December 2009 were mainly represented by debt securities; no financial assets
measured at fair value and Investments held to maturity were reported.
83
On 31 December 2009, financial assets held for trading, net of Gruppo Italease, accounted for 82.4% of the Group financial
assets, up by 21.6%. Shown below is the breakdown by type of financial instruments of financial assets held for trading.
31/12/2009
31/12/2009
(A)
31/12/2008
(B)
Abs. change
(A-B)
% change
(A/B)
Debt securities
Equity securities
UCITS units
Financial and credit derivatives
Total
7,350,093
395,937
837,606
3,347,013
11,930,649
7,787,753
395,937
837,606
3,175,552
12,196,848
6,201,595
299,916
460,004
3,071,853
10,033,368
1,586,158
96,021
377,602
103,699
2,163,480
25.6%
32.0%
82.1%
3.4%
21.6%
Financial assets measured at fair value are mainly represented by investments in Undertakings for Collective Investments in
Transferable Securities.
Debt securities
Equity securities
UCITS units
Total
31/12/2009
31/12/2009
(A)
31/12/2008
(B)
Abs. change
(A-B)
% change
(A/B)
9,814
3,118
170,594
183,526
9,814
3,118
170,594
183,526
50,202
6,075
255,098
311,375
-40,388
-2,957
-84,504
-127,849
-80.5%
-48.7%
-33.1%
-41.1%
31/12/2009
31/12/2009
(A)
31/12/2008
(B)
Abs. change
(A-B)
% change
(A/B)
1,222,792
640,690
192,984
2,056,466
1,216,318
639,813
192,984
2,049,115
761,253
703,570
160,331
1,625,154
455,065
-63,757
32,653
423,961
59.8%
-9.1%
20.4%
26.1%
Shown below is the breakdown of financial assets available for sale.
Debt securities
Equity securities
UCITS units
Total
Investments held to maturity are exclusively represented by debt securities, of which part is used for repos.
Debt securities
Total
31/12/2009
31/12/2009
(A)
31/12/2008
(B)
Abs. change
(A-B)
% change
(A/B)
306,240
306,240
306,240
306,240
530,296
530,296
-224,056
-224,056
-42.3%
-42.3%
Investments in associates and companies subject to joint control on 31 December 2009 totaled 1,637.2 million, from
1,457.4 million on 31 December 2008.
The detailed analysis of companies under a significant influence (associates) is illustrated in the Explanatory Notes, Section
B, Sub-section 10; described below are the year’s main transactions involving investments in associates and companies
subject to joint control carried at equity.
As illustrated in the section devoted to noteworthy events for the year, on 26 January 2009 the Group subscribed the new
share issue of the associate Popolare Vita for a total amount of 56.2 million. The deposit was tied in with the restructuring of
the index-linked policies issued by Novara Vita (merged into in Popolare Vita), to protect the assets of Gruppo Banco
Popolare customers.
In January we finalized the partial sale of the stake held in Istituto Centrale delle Banche Popolari Italiane corresponding to
36.9 million.
Again in January 2009, the Group subscribed the new share issue of the associate Istituto Centrale Banche Popolari Italiane
(ICBPI) for a total amount of 17.5 million, thus raising the Group’s stake to 25.133%, plus the 0.016% interest held by
Gruppo Banca Italease.
On 20 April 2009, the Group made a 6 million deposit in the future capital increase account of the associate Avipop
Assicurazioni, in keeping with the decision met by the Special Shareholders’ Meeting of the associate to carry out a 22.5
million capital increase.
84
In May 2009, after part of the credit facilities granted by Efibanca to Pantex International S.p.A. as part of its merchant
banking activities were converted into risk capital, the Group increased its shareholding to 49.847%. As a result, Pantex
International, which was previously recognized in financial assets available for sale, in this consolidated annual report is
carried at equity at a consolidated carrying amount of 4.3 million.
On 7 May 2009, the liquidation of the associate Evoluzione 94 was completed, owing to which in October the Group
recognized total net proceeds of 1.6 million. In this consolidated annual report, the shareholding is recognized at its
realizable value, considering the past effects of the equity-method measurement.
In July, we subscribed Agos’s new share issue, as was approved by the company’s Special Shareholders’ Meeting of 8 July
2009, for a total amount of 22.1 million. In October, upon then finalization of the stock option plan, a further 8.4 million
capital increase was carried out; the share subscribed by the Group amounts to 3.3 million.
Owing to the takeover of Gruppo Banca Italease, also the companies Alba Leasing S.p.A. (118 million), Renting Italease
S.r.l. (2.1 million) and Aosta Factor S.p.A. (1.9 million) are carried at equity, while unlike 31 December 2008, Banca
Italease and its subsidiaries are no longer carried at equity (77.6 million), but are consolidated on a line-by-line basis.
Finally, the carrying amount of equity investments held for sale is posted in item 150 “Non-current assets held for sale and
discontinued operations”. On 31 December 2009, this item included also the consolidated carrying amount of the equity
investments in Finoa (60 million) and Efibanca Palladio Finanziaria (0.4 million).
Shareholders’ equity and solvency ratios
On 31 December 2009, the consolidated shareholders’ equity, inclusive of valuation reserves and of Net income (loss) for
the year, totaled 11,532.8 million. Net of the negative impact generated by the consolidation of Gruppo Italease (totaling
72.6 million, of which 64.6 million resulting in less net income), the shareholders’ equity came in at 11,460.2 million. Of
the increase reported over the period, 1,450 million originated from the issue on 31 July 2009 of the hybrid financial
instruments under art. 12 of LD 185/08.
Consolidated shareholders’ equity
12,000
11,460.2
10,000
9,784.0
8,000
6,000
4,000
2,000
31/12/2008
On 31 December 2009, the consolidated regulatory capital totaled 9,958 million, while Tier 1 amounted to 7,124.8 million.
On 31 December 2009, the Group’s TIER 1 capital ratio (Tier 1 capital over RWA) came in at 7.69%, while the total capital
ratio (regulatory capital plus third level subordinated securities issued to cover market risks over risk weighted assets) was
10.75%.
85
Reconciliation between the Parent company’s and the consolidated shareholders’ equity and net
income
Balance as at 31/12/2009 as in Parent company’s accounts
Write-off of dividends collected in the period from fully consolidated companies and companies
carried at equity
Derecognition of intercompany capital gains from discontinuing and contributing operations
Difference between the shareholders’ equity of consolidated associates and their carrying
amount, net of minority interests
Net income (loss) for the period of consolidated associates, net of minority interests
Difference between the pro-rata value of the shareholders’ equity and the carrying amount of
Investments in associates and companies subject to joint control carried at equity
Group’s share of profit for the period of associates carried at equity
Balance as at 31/12/2009 as in consolidated accounts
Shareholders’
equity
Net income (loss)
for the year
10,355,274
240,047
-540,038
-193,570
-386
1,201,052
505,948
170,083
11,532,839
61,467
267,038
Illustrated below, are the dynamics of the key profitability highlights for financial year 2009, reported also without the
contribution of the group led by Banca Italease for the second half, compared with the previous year. As already explained,
restated data are shown in column A of the tables below.
In a scenario characterized by rapidly plummeting interest rates, interest margin stood at 1,991.2 million. Net of the
contribution of Gruppo Italease, it totaled 1,952.7, down by 12.8% from 2,240.2 million in 2008. On a more comparable
basis, if we strip out the contribution of the 33 branches sold on 1 September 2008 to Credito Emiliano from the 2008
interest income, it declined by 12% from 31 December 2008. This drop is mainly attributable to the marked fall of market
rates in the last twelve months, with the one-month Euribor diving from 4.04% at the end of 2008 to 0.45% at the end of
2009. As of the third quarter, interest income was also negatively affected by the elimination of the maximum overdraft
commission. Interest margin in Q4 came in at 480.7 million, as compared with 487.6 million in third quarter.
Also Gruppo Italease reported a sizable drop-off of its interest margin, which went from 219.4 million in 2008 to 164.6
million at the end of 2009, mainly driven by a decrease in loans, which in turn was caused by the need to manage new
business, within the restraints posed by financial funding and by the intervening capital shortfall, as well as by the increase
in the average cost of funding. Gruppo Italease’s contribution in the second half of the year was 38.5 million.
Net interest income
2,800
2,450
2,100
2,240.2
1,952.7
1,750
1,400
1,050
31/12/2008
Profit/loss on investments in associates and companies subject to joint control carried at equity totaled 103.8 million, and
includes the share of profit/loss of the main associates, among which Agos-Ducato for 64.8 million, Istituto Centrale delle
Banche Popolari Italiane for 13.1 million, Arca SGR for 2.8 million, Popolare Vita for 12.7 million, Avipop Assicurazioni for
-8.7 million, Energreen for -1.8 million and Centrosim for -1 million.
It also includes the dividend paid by Agos-Ducato upon the profit distribution carried out before Banco Popolare acquired
the equity investment, totaling 22.1 million and considered a non-recurring item.
In 2008, companies carried at equity made a negative contribution of -13.6 million, owing to 47.9 million non-recurring
items from the associate Popolare Vita.
86
Net interest, dividend and similar income added up to 2,095 million, 2,056.4 million net of the contribution of the group
led by Banca Italease, down by 7.6% from 2,226.6 million in 2008.
Net fee and commission income stood at 1,228.1 million, 1,215 million net of the Italease Group, down by 3.7% from
1,261.5 million in 2008. In the fourth quarter, net fee and commission income was 341.4 million, as compared with 296.3
million in the third quarter. The year on year reduction of commission income is mainly due to the contraction of
management, brokerage and advisory services (-78.2 million, -12%) and more precisely to the flows generated by asset
management (-87.3 million, -38%). However, this negative performance was partly offset by the growth of other
commissions (+31.7 million, +5.2%).
Net commission income
1,500
1,200
1,261.5
1,215.0
31/12/2008
900
600
300
0
Management, brokerage and advisory services
Administration and management of checking accounts
and other loans to retail customers
and overdraft facility fee (so called CDC)
Payment and collection services
Guarantees given
Other services
Total net fees and commissions
2009
2009
(A)
2008
(B)
Abs. change
(A-B)
% change
(A/B)
573,035
573,687
651,897
-78,210
-12.0%
388,028
112,294
54,084
100,134
1,227,575
388,041
112,726
54,458
86,104
1,215,016
364,423
120,843
53,169
71,199
1,261,531
23,618
-8,117
1,289
14,905
-46,515
6.5%
-6.7%
2.4%
20.9%
-3.7%
The table below shows a breakdown of net commissions on management, brokerage and advisory services.
Asset management
Distribution of third party services
Securities sale and distribution
Custodian bank
Order collection
Trading of financial instruments
Currency trading
Securities custody and administration
Advisory services
Off-branch sale of securities, products and services
Total
2009
2009
(A)
2008
(B)
Abs. change
(A-B)
% change
(A/B)
142,561
296,940
47,061
15,043
52,937
12,130
4,311
4,962
2,119
-5,029
573,035
142,561
297,592
47,061
15,043
52,937
12,130
4,311
4,962
2,119
-5,029
573,687
229,877
274,793
67,200
22,745
37,744
15,931
5,208
3,446
5,552
-10,599
651,897
-87,316
22,799
-20,139
-7,702
15,193
-3,801
-897
1,516
-3,433
5,570
-78,210
-38.0%
8.3%
-30.0%
-33.9%
40.3%
-23.9%
-17.2%
44.0%
-61.8%
-52.6%
-12.0%
Also Gruppo Italease experienced a drop in Net fee and commission income (-19.4% over 2008), as a result of the sizable
contraction of new lease business and of medium/long term loans.
Other revenues stood at 181.7 million; net of the contribution of Gruppo Italease, amounting to 196.1 million, of which
191.5 million generated by the recognition of the badwill upon allocating the purchase price, net revenues came in at 14.4
million. In the prior year, net revenues totaled 55.5 million, which included net positive non-recurring items for 94.1 million
related to the sale of a business line comprising 33 branches.
Net financial income added up to 185.9 million, 268.3 million excluding the effect of the consolidation of Gruppo Italease
of -82.4 million, mainly as a result of the recognition of the reversal effects of PPA, as compared with 196.8 million in the
87
prior year. Net financial income includes also the effect of the book value increase of debt securities in issue, measured at
fair value, owing to the upgrading of the creditworthiness of Banco Popolare with respect to end 2008. The negative P&L
impact for the year was 350.5 million (-17.2 million in Q4), as compared with a positive impact of 215.7 million in 2008.
Net of this impact and of other minor non-recurring items, net financial income on 31 December 2009 added up to 609.8
million, as compared with the loss of 47.8 million posted in 2008, against a backdrop dominated by the market crisis. This
result was also positively affected by the effect of interest rate derivatives entered in 2008 to offset the negative effects on
interest income as a result of the expected decrease in interest rates. The actual decline of interest rates led to the
recognition of proceeds generated by the collection of spreads and the fair value change of derivatives as compared to yearstart of about 120 million.
Illustrated below is the breakdown of the main constituents of net financial income:
2009
2009
(A)
2008
(B)
Abs. change
(A-B)
495,387
500,282
-191,847
692,129
-8,264
30,373
8,589
6
21,778
-303
99,914
8,949
6
90,959
-3,620
48,049
49,531
5
-1,487
-3,317
51,865
-40,582
1
92,446
-342,225
-342,225
309,695
-651,920
-350,513
-350,513
215,740
-566,253
10,585
10,583
34,515
-23,932
-69.3%
185,856
268,251
196,792
71,459
36.3%
Net trading income and income from
proprietary portfolio
Fair value changes in hedge relationships
Profit/loss from purchase / sale:
- financial assets available for sale (AFS)
- Investments held to maturity (HTM)
- financial liabilities
Profit/loss on financial assets and liabilities
measured at fair value
of which: creditworthiness
Dividends from investments in associates and
companies subject to joint control
Total
% change
(A/B)
-91.6%
107.9%
-81.9%
20.0%
The consolidation of Gruppo Italease generated a negative impact on net financial income of 82.4 million; in addition to the
mentioned PPA reversal effect, it was also impacted by the charges associated with OTC trading derivatives as a result of
settlements and contract terminations with customer and banking counterparties, and of fair value changes on outstanding
hedging transactions.
Other operating income (operating income other than interest, dividend and similar income) totaled 1,595.6 million,
1,468.8 million net of Gruppo Italease, as compared with 1,513.8 million in 2008.
Net interest and other banking income (net interest, dividend and similar income + other operating income) added up to
3,690.7 million, 3,525.3 net of Gruppo Italease, down by 5.8% from 3,740.5 million on 31 December 2008. Net of nonrecurring items, it came in at 3,844.8 million with respect to 3,455.3 million in 2008 (+ 11.3%).
Total income
5,000
4,000
3,000
3,740.5
3,525.3
2,000
1,000
0
31/12/2008
Personnel expenses stood at 1,522.8 million, 1,488.7 net of Gruppo Italease, reporting a slight increase from 1,485.4
million on 31 December 2008 (+0.2%). Net of non-recurring costs for early retirement schemes for redundant personnel
after the reorganizations (13.2 million), personnel expenses decrease by 0.7% over the prior year.
Other administrative expenses totaled 773.9 million, 746.7 million without Gruppo Italease, up by 11% from 672.9 million
in 2008. This increase was generated by the fact that since the beginning of the year VAT started to be applied to
intercompany service provisions (58 million), as well as by the recognition of higher rents (48 million) as a result of the
finalization of the contribution of a significant number of operating real estate units owned by the Group to the real estate
88
fund Eracle at the end of last year. The real estate contribution was immediately followed by the sale of all fund units to
institutional investors and to draw up the rental contracts for the above real estate units.
Net impairment of property, equipment and intangible assets totaled 161.7 million, 156.3 net of Gruppo Italease, as
compared with 170.4 million the year before. The decrease is due to the fact that as of 2009 the depreciation referring to the
real estate units transferred to the Eracle fund is missing. The reported D&A takes already into account the charge generated
by the reduction in useful life of the assets of branches that are planned to be closed as part of the general branch
reorganization plan (5.1 million). Net of these discontinuity elements, represented by the change in fiscal regulations and
the effect of transferring the real estate units to the Eracle Fund, expenses decreased by 32 million (-4.6%) with respect to
the previous year, reflecting our constant effort to contain costs.
As a result, operating expenses came in at 2,458.4 million, 2,391.7 million net of Gruppo Italease, up by 2.7% from 2008.
Net of non-recurring items, the above described increase in revenues drove our cost income ratio down to 61.7% from
67.4% at year-end 2008.
Profit from operations amounted to 1,232.3 million, 1,133.6 million net of Gruppo Italease, as compared with 1,411.8
million on 31 December 2008. Net of non-recurring items, it came in at 1,471.4 million, up by 30.6% from 1,126.6 million
the prior year.
Net impairment of loans, guarantees and commitments totaled 749 million, of which 75 million attributable to Gruppo
Italease. The extraordinary events occurred in 2008 had a significant impact on that year’s write-downs, which ran up to
1,170.1 million and included the impact of the major defaults at international and domestic level.
The cost of credit, represented by net loan write-downs to net loan ratio, was 76 b.p. year on year.
Net impairments of other financial activities amounted to 31.7 million (199.5 million on 31 December 2008) and were
almost entirely represented by the impairment of securities classified as financial assets available for sale to realign their
value to the fair value expressed by market quotes at the end of the year. The 2008 quarterly figures were affected by nonrecurring items represented by the impairment of securities held in portfolio, among which Lehman Brothers, Hopa and
Banca Network Investimenti.
Net provisions for risks and charges added up to 56.6 million, 50.7 net of Gruppo Italease, from 200.9 million in 2008.
They include the additional charge deriving from the commitments undertaken by the Group to protect customers holding
index-linked policies backed by securities issued by Icelandic financial institutions.
Impairments of goodwill and investments in associates and companies subject to joint control totaled 9.1 million, and refer
to the impairment of the carrying amount of some investments in associates and companies subject to joint control held by
the Group, consolidated along the equity method (among which Gruppo Comital for 3.1 million, Efibanca Palladio
Finanziaria for 3.2 million, Centrosim for 1.4 and Ch&f Bertolini for 1.1 million). No goodwill impairment was recognized.
The previous year, against an unprecedented backdrop, impairments of goodwill and investments in associates and
companies subject to joint control totaled 873.8 million.
Profit/loss from sale of equity and other investments totaled 116.1 million, 114.5 million net of Gruppo Italease, and
includes the capital gain of 105 million, gross of tax effect, generated by the transfer to the Eracle fund of the heritage
buildings with high artistic value as part of the plan launched the prior year to valorize and rationalize the Group’s real
estate assets. This item also includes the profit on the partial sale of the stake held by the Group in Istituto Centrale Banche
Popolari Italiane (ICBPI), of 3.7 million, plus additional net profit on the disposal of minor equity and other investments of
7.4 million. In 2008, it came in at 501.2 million and it included the capital gain on the transfer of unencumbered property
to the Eracle Fund.
Income/Loss before tax from continuing operations posted a positive balance of 502 million, 482.6 million net of the
contribution of the group led by Banca Italease, as compared with a loss of 531.3 million the year before. Net of nonrecurring items, it came in at 717.8 million.
Profit/loss after tax on discontinued operations posted a negative balance of 3.8 million (11.7 million net of Gruppo
Italease), mostly as a result of the sales under finalization of merchant banking investments. In 2008 it showed a profit of
125.1 million and it included the contribution, inclusive of the capital gain on disposal, of Ducato and Banca Popolare di
Mantova, that were sold at the end of the year.
Tax on income from continuing operations added up to 240.3 million (262.2 million net of the consolidation effects of
Gruppo Italease) and include additional charges of 52.1 million (on top of what already set aside for this purpose in the
financial statements of 31 December 2008) as a result of the decision to settle outstanding tax litigations regarding the conduct
of some companies belonging to the former Gruppo Banca Popolare Italiana, by resorting to a fast-track composition with
immediate tax audit and remedy. It also includes 31.8 million net non-recurring revenues generated among others by the
recognition of IRAP tax credits referring to previous years and for which a reimbursement application was filed.
89
Net of a minority interests of 9.1 million, net income (loss) for the year came in at 267 million, as compared with the 333.4
million loss posted in FY 2008. Italease made a positive contribution of 64.6 million, resulting from the sum of the loss
reported by Italease after the takeover by Banco Popolare (-112.1 million) and the gain from the recognition of the “badwill”
net of PPA’s reversal effects (+176.7 million).
Net of Italease’s contribution and the impact of the above described non-recurring items, Gruppo Banco Popolare would
have generated a net income (loss) for the year of 376.8 million.
Rating and stock performance
Group Rating
In 2009 the Group entertained a constant dialogue with all three rating agencies. 8 meetings and 1 conference call were
organized, to analyze the financial profile, the risk profile and the strategy of Gruppo Banco Popolare.
In March 2009, following the announcement of the Tender Offer on Banca Italease, the rating firms Fitch and S&P
downgraded both the short and long term ratings of Banco Popolare by one notch, on 19/03/2009 and 26/03/2009,
respectively. Still on 19/03/2009, Fitch put the long term rating on watch for a possible downgrading, while Standard &
Poor’s put the long term rating on watch for a possible downgrading on 19/12/2009. In addition to hinting at a desirable
capital strengthening in an operational context that was perceived as being riskier, these actions reflect the expectation of a
negative impact from the consolidation of Banca Italease on the Group’s financial profile. As to Moody’s Investors Service,
on 17 March 2009 it had put Banco Popolare’s ratings on watch for a possible downgrading, then confirmed the ratings on
1 July 2009.
The table below compares the Group ratings on 31/12/2009 with those on 31/12/2008.
Rating firm
Rating
Ratings on 31/12/2009
(‘Outlook’ or ‘Watch’ in brackets)
Ratings on 31/12/2008
(‘Outlook’ in brackets)
A(negative ‘Watch’) (*)
F2
A2
(stable ‘Outlook’)
P-1
A(negative ‘Watch’) (**)
A-2
A
(negative ‘Outlook’)
F1
A2
(stable ‘Outlook’)
P-1
A
(negative ‘Outlook’)
A-1
Long term (IDR)
Fitch
Short term (IDR)
Long term
Moody’s
Short term
Long term
S&P
Short term
Long term ratings refer to senior debt.
(*) put on watch on 19th March 2009 (‘Rating Watch Negative’).
(**) put on watch on 17th December 2009 (‘CreditWatch Negative’).
The table below summarizes the ratings of Gruppo Banco Popolare and those of its main subsidiaries, including ratings
other than those referring to short and long term debt (data updated on 15 March 2010).
Fitch
Moody’s
S&P
Rating
Banco
Popolare
Long term (IDR)
Short term (IDR)
Individual
Support
Long term
Short term
Financial Strength
Long term
Short term
A- (*)
F2
C
2
A2
P-1
CAA-2
Credito Bergamasco
Banca
Aletti
Banca
Italease
BBB+ (**)
F2 (**)
E
2
Baa3
P-3
E+
AA-2
AA-2
Long term ratings refer to senior debt.
(*) put on watch on 19 March 2009 (‘Rating Watch Negative’).
(**) put on watch on 7 July 2009 (‘CreditWatch Negative’).
The ratings of Credito Bergamasco and Banca Aletti tracked the ratings of Banco Popolare. Instead, all the main ratings of
Banca Italease were upgraded at the end of the Tender Offer launched by Banco Popolare.
Banco Popolare stock
The Banco Popolare stock is listed on Borsa Italiana; trading started on July 2nd, 2007, following the merger between Gruppo
BPVN and Gruppo BPI. On January 2010, 640,482,201 shares of common stock of Banco Popolare were outstanding, with
a par value of euro 3.60 each, corresponding to euro 2,305,735,924.00.
90
The table below summarizes the weight of Banco Popolare in some of the main Italian and European indexes where the
stock was represented in January 2010.
Index
% Weight
FTSE Italia All-Share
FTSE Italia All-Share Banks
DJ Euro Stoxx
DJ Euro Stoxx Banks
1,038
3,437
0,135
0,783
NB: weighted values were updated on 25 January 2010 (source: Bloomberg).
The chart below shows the performance of the shares of Banco and of Credito Bergamasco, also listed on Borsa, as of
01/02/2009, compared to the performance of the FTSE MIB index (which represents 40 primary Italian securities).
In 2009, the Italian stock market had an overall positive performance, stock prices hit their lowest low in March, when the
economic and financial crisis was at its worst, then gradually recovered in the following months and closed the year at
+21% (including distributed dividends) compared with year end 2008. The Banco Popolare stock in 2009 had a more
volatile performance, mainly owing to the vicissitudes associated with Banca Italease, on which Banco on 15/03/2009
announced the launch of a tender offer. Its price was at its lowest in March at 1.88 euro, in synch with equity markets, then
suddenly picked up in the two following months, reaching its highest high for the year at 7.24 euro, then consolidated at
around 5 euro in June and July. The stock went back to 7 euro in the third quarter, along the track of the equity market
rallies, driven by the growing expectations of an economic recovery from 2010, and finally ended the year at 5.27 euro, at
the same level of the end of 2008.
Banco Popolare and Credito Bergamasco stock performance
as compared with FTSE MIB (02/01/2009 – 30/12/2009)
60%
40%
20%
0%
-20%
-40%
-60%
Banco Popolare
Credito Bergamasco
18/12/09
04/12/09
20/11/09
06/11/09
23/10/09
09/10/09
25/09/09
11/09/09
28/08/09
14/08/09
31/07/09
17/07/09
03/07/09
19/06/09
05/06/09
22/05/09
08/05/09
24/04/09
10/04/09
27/03/09
12/03/09
27/02/09
13/02/09
30/01/09
16/01/09
02/01/09
-80%
FTSE MIB
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RISK MANAGEMENT
Generic Risks
Main risks and uncertainties facing the Group
Illustrated below are the main risk classes to which the Group is exposed as a result of its business activities.
Credit risk: is the risk that a Group borrower (which includes also counterparties in financial transactions with OTC
derivatives – in this case it is more precise to speak of counterparty risk) may fail to perform on an obligation, or that his or
her credit standing deteriorates. Closely connected with credit risk, if not an actual constituent, is the concentration risk,
emerging from exposures to a group of counterparties that are connected to one another or belong to the same economic
sector, or perform the same business, or belong to the same geographical area. The assessment of possible losses that could
be incurred with regard to a single credit exposure or to the total loan portfolio is an inherently uncertain activity and
depends upon many factors, among which, the general economic performance, or the economic performance of single
manufacturing sectors, the change in the rating of single counterparties, structural and technological changes within
borrowing companies, a deterioration of the competitive position of counterparties, the possible mismanagement of
companies or of the borrowing counterparties, the growing indebtedness of households and other exogenous factors, such
as legal and regulatory requirements.
The lending policy adopted by the banking Group devotes a strong attention to containing risk through a stringent credit
analysis at the time of granting the loan, geographical and sector diversification of loans, acquisition of guarantees,
whenever necessary, securing the granted loan, and an accurate monitoring of the evolution of the lending relation. In
general, the Group’s lending activity is mainly performed in areas characterized by a diversified business and
entrepreneurial structure. As a result, the loan book risk is spread across various business sectors. The banking Group keeps
its loan book under constant monitoring, analyzing the evolution of its risk-profile, of lines of credit, and line utilization by
economic sector, region, customer segment and type of loan.
A special focus is devoted to having internal rules and regulations clearly define corporate functions/units in charge of
managing risk determinants and the procedures to be adopted to monitor and contain risk within preset levels in
compliance with assigned targets.
As to guarantees, the residual risk is managed, associated with the possibility that generally accepted techniques to mitigate
credit risk used by banks may turn out to be less effective than expected. An internal policy has been implemented
throughout the entire Group to deal with this risk, governing the acquisition, finalization and management of guarantees.
A special focus was devoted by Gruppo Banco Popolare to the assessment of creditworthiness of banks and institutional
counterparties (investment banks and financial companies), in particular with regard to financial transactions (trading of
derivatives and money market instruments, lending, investments in bonds).
The key principles underlying the management of risk originated by these counterparties are:
x centralization of the lending process at the parent company;
x internal system for rating assignment and periodic revision (supplementing the rating assigned by international
rating firms);
x daily measurement and control systems monitoring credit exposure and the compliance with ceilings;
x minimization of the risk generated by OTC derivative trading by making a wide use of mechanisms documenting
collateral arrangements (Credit Support Annex agreements with all the main counterparties).
Market risk: is represented by the possibility that the Group may generate less revenues than expected, or suffer from
depreciation of balance sheet items or capital losses from financial open positions, due to sharp and adverse movements in
market rates or prices, in particular interest rates, stock prices, exchange rates, and the associated volatilities (generic risk),
or due to events that may impair the issuer’s redemption capability (specific risk). Market risks can materialize both with
regard to the trading book, which includes trading and treasury financial instruments and the associated derivative
instruments, and with regard to the banking book, which includes all other financial assets and liabilities. In this case, it can
also be called banking book Interest Rate Risk, referring to the possibility of loss caused by potential changes in interest
rates, and banking book Equity Risk, referring to the possibility of a decrease in fair value of equity securities in the banking
book in relation to the market volatility or to the situation of single issuers.
With regard to trading books, the market risks stemming from the commercial activities performed by the Group banks are
systematically transferred over to the subsidiary Banca Aletti. The risk exposures falling on the Parent company are associated
with the investment portfolios, whose sub-advisory is delegated to Banca Aletti (residual exposures falling on the commercial
banks are marginal). The main risk factor is the interest rate associated with bond portfolios, most of which have a floating rate
or are hedged by asset swap structures, with a very contained total duration. Also the risk associated with single equity or bond
issuers is managed very conservatively. The main market risks taken on by Banca Aletti are associated with interest rate and
equity risk exposures as part of the trades carried out on cash and derivative markets. The exposure to the exchange rate risk is
marginal.
Market risk is measured by way of specific estimate and control models with specific risk limits, assigned to the function in
charge of managing this risk, and adequate monitoring and check procedures.
In key with the market’s financial innovation, in particular in the area of derivatives, the Group pursues a constant evolution
of financial instrument valuation and risk assessment methodologies and systems, especially with more complex instruments
and their related market parameters.
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As to the interest rate risk associated with banking books, the Group adopted a system of prudential limits, targeted for the
single companies and approved by the competent corporate Boards, aiming at pegging the possible impact from sudden
hikes or drops of market interest rates on interest income and on capital value.
Liquidity risk: is represented by a possible instability caused by a negative mismatch between incoming and outgoing cash
flows, which can occur in particular on the short term, if not adequately covered by liquidity reserves represented by
available for sale securities and eligible for refinancing with the European Central Bank. A special attention is paid to this
risk, which may possibly materialize mostly in the presence of exceptional events, such as market liquidity crunches, and
may result in the banks being unable to fulfill payment obligations. This risk is managed and minimized by changing the
funding source mix, and by increasing the reserves of securities eligible for refinancing to counter unexpected cash
outflows. Right from its incorporation, the Group adopted a set of limits, both for the so called operating or treasury
liquidity, and for the structural liquidity generated in the banking book, which is constantly monitored and fine-tuned.
Moreover, upon approval of the Corporate Boards, a Liquidity Policy was implemented, supplemented with a specific
Liquidity Contingency Plan, to guarantee a timely and efficient management in case of liquidity crisis or stress. The Plan
fixes specific early warning indicators that can forewarn of liquidity stress conditions associated with market crises or
Group-specific crises; these indicators are monitored and controlled on a daily basis.
Operational Risk: is the risk of incurring losses as a result of the inappropriateness or the malfunctioning of procedures, of
mistakes or shortcomings of human resources and internal systems, or external events. The legal risk is included, while the
strategic and reputational risks are not. Among the main sources of operational risk there are: the instability of operational
processes, insecure information systems, a growing use of automation, the outsourcing of corporate functions, the use of a
small number of suppliers, strategy changes, frauds, mistakes, personnel recruitment, training and retention, and finally
social and environmental impacts. It is not possible to identify a prevailing source of operational risk constantly present
within the Group, since said risk is inherent in all corporate processes and activities. This leads to the implementation of
widespread risk mitigation and management actions, in particular by transferring the risk over by way of insurance
instruments and/or outsourcing, by constantly improving process efficiency (control enhancement and re-engineering) and
by checking that the latter are compliant with existing regulations.
Business risk: is the risk of incurring losses, in terms of a decrease in expected net interest and other banking income (net of
the credit and market risks), due to changes in the macro- or micro-economic environments, leading to a volume reduction
and/or income squeeze, that may weigh down on the bank’s ability to make profits.
To this regard, the Group is exposed to the risk of fluctuations of commission income from investment services. This risk is
managed and minimized through commercial policies and actions aimed at building customer loyalty, so as to favor a
stable service provision activity with a constant income flow, and at maintaining a high value added and innovative
business offer, in line with our customers’ present and future needs.
Strategic risk: is the risk of suffering from a decrease in income or capital as a result of changes in the competitive scenario
or of wrong strategic business decisions, of an inappropriate implementation of strategic decisions, of a poor or missing
reaction to changes in the competitive scenario. For example, the risk may come from an unexpected evolution of key
indices used as a key reference for the strategic plan (for example projected levels of GDP or inflation, household savings,
expected corporate investments in different economic sectors or geographical areas, etc.), diverging from market
expectations, leading to a positive effect on the Group’s expected results, which then upon consolidation may not be fully
realized.
The constant monitoring of operating performance, of the company’s key financials and of all the other important variables,
be they internal or external to the Group, allows corporate boards in charge of making strategic decisions to minimize this
risk, making it possible to take timely corrective and/or adjustment actions should competitive or market circumstances
change.
Reputational risk: is the risk of suffering from a decrease in income or capital as a result of a negative perception of the
bank’s image in the eyes of customers, counterparties, bank shareholders, investors or supervisory authorities, as a result of
specific critical events hitting for example given operational, product or process areas. Gruppo Banco Popolare keeps a
watchful eye on the constant improvement of its image and on the consolidation of its reputation, and it implements a
preventive policy on various fronts, in particular:
x customer protection, by guaranteeing an adequate information flow that puts them in a position to make
knowledgeable financial decisions;
x careful and deep verification, not only formal, of the consistency between operational procedures and company
behaviors and external and internal regulations and policies.
The strategic risk and the reputational risk are characterized by the fact that they are risk classes that are mainly monitored
by group structures. For these two risk classes however, activities are underway to experiment and develop also quantitative
assessment methodologies.
Real estate risk: is the risk of suffering from a decrease in the market value of proprietary real estate assets, as a result of
price changes on the Italian real estate market. This risk is monitored by specific technical structures set up within the
Group.
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Securitization risk: is the risk that the economic substance of a securitization is not fully reflected in risk assessment and
management decisions. To deal with this risk, Banco set up a specialized structure in charge of defining securitizations of
own assets. Among other things, this structure is in charge of selecting the portfolio under disposal, of defining the structure
to be adopted and of revising the documents prepared by the hired lawyer.
Compliance risk: is the risk of incurring administrative and legal penalties as a result of nonconformance between external
regulations and internal regulations (and corporate procedures), between corporate governance codes and internal codes of
conduct. Compliance risk also arises in situations of nonconformance that may cause material financial losses and
reputational damages. For further information on the management and control of the compliance risk, please refer to the
specific paragraph in this report.
Risk-taking, management and hedging objectives and policies
Gruppo Banco Popolare and the companies of belonging conform their activities to the criteria of prudence and low risk
exposure, with regard to:
x the need for stability with respect to its banking activities;
x its investors’ profile;
x its cooperative origin and the values of cooperative lending (credito popolare).
Gruppo Banco Popolare exercises its risk propensity by identifying a restricted portion of its capital, unavailable to risktaking, destined to medium-long term going concern purposes, to a gradual capital strengthening, to ensuring business
flexibility conditions and the capital coverage of impacts caused by the occurrence of stressful events.
In keeping with its risk propensity, the Group and its subsidiaries pursue the following goals:
x stable growth, that is, characterized by a limited variability of results and of corporate value;
x shareholders value creation as compared to financial investments having a comparable risk-return profile;
x creation of value added for shareholders as compared to financial investments having a comparable risk-return
profile;
x strong credit risk distribution, in line with the objective of financing prevailingly small and medium enterprises
and households;
x exposure to the structural interest rate risk roughly in line with the industry best practice, to be pursued also
through a progressive hedging of risks associated with items repayable on demand;
x market risk-taking closely related to commercial needs;
x exclusion of risks that are unrelated to core activities and accurate assessment of initiatives that introduce new
types of risks;
x development of more and more accurate and comprehensive risk monitoring methodologies, also in view of the
validation of internal models for supervisory purposes;
x active management of corporate risks, based on state of the art techniques;
x disclosure of decision-making and negotiation processes, also based on a clear assignment of competences and
responsibilities;
x utmost risk exposure transparency to the market.
The Group can count on an organizational structure, corporate processes, human resources and skills that are well suited to
guarantee the identification, monitoring, control and management of the sundry risks characterizing its business activity, in
order to protect the Group’s financial solidity and reputation against undesired events.
The entire risk management and control process is coordinated by Banco Popolare, in its twin capacity as Parent company
and entity in which all the Group’s joint and mutual interest functions are combined.
The risk management, control and hedging process runs at different levels of the organizational structure.
The key player in managing and controlling risks is the Supervisory Board, which decides the strategic approach, approves
risk management policies and assesses the efficiency and adequacy of internal controls, in particular with regard to risk
control.
The Audit Committee, comprised of members of the Supervisory Board, is responsible for overseeing the functionality of the
global internal audit system, reviews the entire process and verifies its formal and substantial adequacy.
The Parent company’s Management Board and the Board of Directors of the subsidiaries define the risk-taking operational
and business approaches and guidelines rand approve their Regulation on risk limits, establishing guidelines, risk limits and
control procedures in conformity with those set by the Supervisory Board.
The Risk Management policy is developed by the Group Risk Committee and the Finance Committee, which are both
organizational units of the Parent company. An important role is played by the Risk Management Service and by the Group
Audit Function, that are part of the Parent company’s Governance structure.
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The Group Risk Committee, which is made up of the Chief Executive Officer and the representatives of the Parent
company’s main functions, assists the Parent company’s Management Board and the single Boards of Directors in the
formulation of risk policies and takes action to correct situations that do not comply with said policies.
The Finance Committee meets periodically and oversees market and liquidity risk management actions, defining the
Group’s funding policies.
For further information on the risk management and control system, please see Section E of the Explanatory Notes.
Other risk factors
Illustrated below are the risk factors and/or criticalities, both generic and specific, to which Banco Popolare and the Group it
heads may be exposed to.
Risks associated with shareholding caps and with the exercise of voting rights
Art. 30 of the Single Banking Act states that in a cooperative bank (banca popolare) no shareholder may possess an interest
exceeding 0.50% of the share capital, except for UCITS, that are subject to the limits set by their own specific regulations.
Should Banco Popolare determine that said limit has been exceeded, and in any case in compliance with existing
regulations, it shall give immediate notice of the breaching to the shareholder and the intermediary. Excess shares must be
alienated within one year of the objection, after which the relevant capital rights accrued until their alienation are acquired
by Banco Popolare.
Art. 30 of the Single Banking Act states that the registered shareholders of cooperative banks are entitled to only one vote,
under the “one member – one vote” rule, irrespective of the number of shares they hold. Art. 23 of the Articles of
Association states that each registered shareholder may represent only one other registered shareholder under a written
proxy, provided he/she is not a member of the supervisory or management boards, or a Company employee, or a member of
the administrative and auditing boards or employee of the companies directly or indirectly controlled by Banco Popolare.
Risks associated with pending legal proceedings
Banco Popolare and the Group Companies are involved in a number of court proceedings, that are part of the normal
business activity of a company. Although it is impossible to foresee the outcome with absolute certainty, we deem that an
unfavourable result of said proceedings would not, be it singularly or globally, entail material negative repercussions on the
financial and operating situation of Gruppo Banco Popolare. Below is a detailed description of the main risk positions.
Clawback action instructed by Italgest bankruptcy trustees against former Banca Popolare di Novara S.c. a r.l.
In November 2004, the Naples Court pronounced its decision in first instance on the clawback action under examination. In
first instance the court condemned Banco Popolare di Verona e Novara to pay €129.2 million plus any interest and legal
expenses. Banco Popolare filed an appeal (still pending) against this decision. To be noted, that the actual contingent
liability shall not in any case exceed the net bankruptcy liability balance, that has already been expensed. At present,
bankruptcy assets are still being measured.
Total loans included in bankruptcy liabilities, net of Banco Popolare’s credit (amounting to about 4.5 millions) total 59.5
million. Note that various court denials of insolvency are pending against the Municipalities, regarding the preemptive rights of
the admitted credits. Banco also instructed an equal number of clawback actions under art. 102 of the bankruptcy act (now art.
98) against the Municipalities to which the Treasuries belonged (representing credits accounting for about 72% of the admitted
bankruptcy liabilities), since criminal procedures ascertained the non liability of former BPVN’s officers on the one side, and on
the other the criminal liability of most Municipal officers. During said clawback proceedings, upon instruction of the Court, the
Official Receiver ordered the trustees to take part in the proceedings, to require the revocation of credits. All revocation
requests filed up to now refer to credits included in the bankruptcy liabilities for a total amount of about 44.7 million.
Italgest Bankruptcy trustees also instructed a legal proceeding against former Banco Popolare di Verona e Novara (now
Banco Popolare) invoking the latter’s responsibility, also under art. 2049 c.c., on the assumption that ex BPVN and its
officers contributed to causing the insolvency by keeping up the lines of credit with Italgest. The required claims are equal
to the entire bankruptcy liabilities outstanding at the time of application (lire 107 billion, equivalent to Euro 55,260,888.21).
We deem this legal action (the proceeding is still in first instance) to be groundless, supported also by the criminal court
decisions acquitting BPVN’s employees and condemning Municipal employees, as well as by the dismissal of the
counterparty’s requests for inquiry to demonstrate the extent of the alleged suffered damages. Banco Popolare decided not
to set aside any provision against the requested claims, in keeping with the counsel expressed by defendant’s lawyers.
On 22.5.2007 a third party filed a bankruptcy agreement proposal for the Italgest S.p.A. Bankruptcy. Against the order
issued by the Naples Appeal Court on 24.4.2009, filed on 19.5.2009 - which, rectifying the order of the Naples Court,
accepted the bankruptcy agreement - the trustee, the Ministry of Economy and Finance and Banca della Campania S.p.A.,
proposed to appeal to Cassation Court. The proposer of the bankruptcy agreement opposed the three appeals, asking the
adversary appeal to be declared inadmissible or be rejected, and to confirm the order of the Appeal Court, after having
consolidated the appeals. In the proceeding instructed by appeal of the trustees, he also proposed an incidental appeal,
objecting to the lack of legitimacy of the trustees. Banco Popolare and the Municipality Calvizzano opposed the appeals
with an equal number of counter-appeals. The Municipality of Boscoreale proposed a late joint incidental appeal, asking the
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appeals of the plaintiff to be accepted. The proposer of the bankruptcy agreement opposed also this late appeal. With
respect to all the proceedings, the appointment of the Rapporteur and the hearing dates are pending.
Litigation against Giovanni Cerea
On 23rd January 2001, Mr. Giovanni Cerea filed a civil action with the Civil Court of Milan demanding to condemn BPI to
pay a 38.5 million euro claim for an alleged mandate the plaintiff would have received from BPI in relation to the
acquisition of the controlling stake of Banca Popolare di Crema.
On 2nd January 2002, Mr. Ernesto Preatoni and the company Parin S.r.l. appeared before the court and filed claims both
against the plaintiff and the defendant.
With decision n. 7332/04, the first instance Court accepted the defensive argument of BPI, rejected all the claims by the
plaintiff and successive third parties, and condemned the latter to refund the trial expenses to BPI.
This decision was appealed against by all losing parties, who in July 2004 served BPI with two summons to appear in appeal
court for a full reversal of judgment n. 7332/04, based on the same reasons put forward as ground for the claims at first
instance.
The actions, which were instituted separately, were joined in the II Section of the Appeal Court of Milan.
On 8th June 2005, BPI signed an out-of-court agreement with Parin S.r.l. and Mr. Preatoni, based on which Parin S.r.l. and
Mr. Preatoni waived the legal action and the associated claims (compensation and annulment of takeover) and in turn BPI
waived its claim for compensation against Parin S.r.l. and Mr. Preatoni.
Under the above agreement, Parin and Preatoni waived their requests also against Mr. Cerea, who in turn accepted to waive
his action against them; as a result the Appeal court, with judgment 2392/05, declared the action and legal proceedings
between Preatoni, Parin and BPI (on the one side) and between Preatoni, Parin and Cerea (on the other side) to be
extinguished. The only action still outstanding is the suit between BPI and Mr. Cerea.
In September 2009, the parties reached an out-of-court agreement, with consequent commitment to extinguish the appeal
decision, which is being formalized.
Litigation against Area S.p.A.
In July and September 2009, Banco Popolare and Banca Popolare di Lodi S.p.A., together with others, were summoned
before the Court of Milan, with separate actions by two separate groups of former minority shareholders of Area S.p.A.
In the first proceeding, the 42 plaintiffs asked to condemn the defendants to refund alleged damages, quantified in 13.15
million euro. The alleged liability would stem from a supposed agreement between Banca Popolare di Lodi S.c. a r.l. and
Banca Intesa S.p.A., which among other things would have caused the ousting of the minority shareholders of Area S.p.A.,
depriving them of their share and without recognizing any right, in particular the due consideration had they be allowed to
exercise their right of withdrawal as a result of the merger of Area S.p.A. into Bipielle Investimenti S.p.A. The first hearing
was fixed on 18th May 2010.
In the second proceeding, the 76 plaintiffs asked to condemn Banco Popolare, Banca Popolare di Lodi S.p.A. and Mr.
Fiorani – after ascertaining his supposed personal criminal liability and the liability under art. 5 Lgs. D. n. 231/2001 of the
two banks – to refund alleged damages, quantified in 25.2 million, after deducting the same profiles put forward in the
previous proceeding. The first hearing took place on 23rd February 2010.
Banco Popolare and Banca Popolare di Lodi consider the plaintiffs’ claims totally groundless and therefore did not set aside
any provision.
Litigation against the Trust for the safeguard of former Banca Popolare di Crema Shareholders
With deed filed on 27th October 2008, the “Trust for the safeguard of former Shareholders of Banca Popolare di Crema”
subpoenaed Mr. Gianpiero Fiorani, Banco Popolare Soc. coop. and Banca Popolare di Lodi S.p.A. before the Court of
Tempio Pausania, This trust (under English law) acquired the ownership of the capital, claim and credit rights (current and
future) and the relative powers of 424 former shareholders of Banca Popolare di Crema associated with the alleged damage
suffered as a result of the sale of a total number of 450,249 ordinary shares, corresponding to euro 58,255,838.00.
The plaintiff trust claims that Banca Popolare di Lodi S.c. a r.l., under the management of Mr. Gianpiero Fiorani, from 1995
to 2000 took control of Banca Popolare di Crema’s capital in a covert manner and breaching regulations governing the
acquisition of a significant or controlling stake in companies listed on regulated markets, at a distorted average price,
completely different from the official price that was artificially offered by Banca Popolare di Lodi S.c. a r.l. in the following
take-over bid in 2000.
With decision dated 25 February 2010, the Court rejected all the claims raised by the Trust against Banco Popolare and
Banca Popolare di Lodi, condemning the plaintiff to refund all legal expenses. Banco and Banca Popolare di Lodi S.p.A. had
not set aside any related provision for risks and charges.
Litigation against Antonio Aiello and CGI – Compagnia di Gestione e Iniziative S.r.l.
On 31st October 2008, Banca Popolare di Lodi S.p.A. was summoned before the Court of Rome by Mr. Antonio Aiello and
CGI – Compagnia di Gestione e Iniziative S.r.l.
The counterparty’s claim asked the Court to ascertain alleged grave liabilities plus repayment of damages caused to the
plaintiffs between 2005 and 2007 by the behavior of Banca Popolare di Lodi S.p.A., with regard to groundless charges,
widely covered also by the press, against Mr. Aiello.
The claims for damage, both monetary and non, amount to 10 million.
With regard to this litigation, Banca Popolare di Lodi S.p.A. deemed it unnecessary for the time being to set aside any
provisions for risks and charges.
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Parmalat and Cirio positions
With regard to the criminal proceeding underway at the Court of Parma, dealing with the financial crack of Gruppo
Parmalat, on 17th December 2008 Banco Popolare and Banca Popolare di Lodi S.p.A. were summoned as they were
considered liable under civil law.
Likewise, with regard to the criminal proceeding underway at the Court of Rome as a result of the financial crack of Gruppo
Cirio, authorization was given to the summons of Banco Popolare Soc. coop. and Banca Popolare di Lodi S.p.A. –
considered liable under civil law.
To date, it is impossible to exactly assess possible risk profiles, in terms of liabilities to be borne by Banco and Banca
Popolare di Lodi. In case the former executives of BPI were to be charged guilty, BPI, Banco and Banca Popolare di Lodi
may suffer capital damages as they are liable under civil law. However, it should be underlined that the Civil court of Rome
in February 2008 had completely rejected the claims for damage against Banco and BPI in the Cirio trial, while it charged
some other defendant. After this first-instance opinion, on 16th December 2008 Banco Popolare was summoned in Appeal.
With regard to these positions, Banco and Banca Popolare di Lodi deemed it unnecessary for the time being to set aside any
provisions for risks and charges.
Litigation against Gian Paolo Zini
With summons dated 21st July 2004, Parmalat Finanziaria S.p.A. ("Parmalat Finanziaria") and Parmalat S.p.A. ("Parmalat")
summoned Lawyer Gian Paolo Zini and Messrs. Calisto Tanzi, Stefano Tanzi, Luciano Del Soldato, Giovanni Tanzi,
Giovanni Bonici, Gianfranco Bocchi, Claudio Pessina, Franco Gorreri and Fausto Tonna.
Parmalat Finanziaria and Parmalat instituted an action for compensation (under articles 2392, 2393, 2394, 2447, 2448,
2449 of the civil code, as well as for contract and out-of-contract liability under article art. 2043 of the civil code) against
the defendants, stating that in their various capacities they were responsible for the default of the two companies of the
Group owned by Mr. Calisto Tanzi. Hence, a claim for damages of 2.63 billion in favor of Parmalat and 9.273 billion in
favor of Parmalat Finanziaria. In the course of the trial, the newco Parmalat S.p.A., being the “assumptor” of the judicial
compositions, joined the claims and submitted the same requests.
With summons on third party complaint, Lawyer Zini summoned a number of entities to appear in court, among which also
BPI, asking for the alleged joint liability of the defendants to the alleged plaintiffs to be ascertained.
With deed dated 4th January 2005, BPI appeared before the court asking that the third party summons issued by Lawyer Zini
against BPI be verified and declared inadmissible, as they fail to meet legal requirements and/or for lack of passive
legitimacy. To this regard, BPI also requested that all the adversary claims be rejected, since they are totally groundless in
fact and by right.
In the joint hearing held on 26th May 2006, some of the parties summoned by Parmalat and Parmalat Finanziaria raised the
objection to extinguish the judgment under art. 8 of Law D. 5/2003 as the plaintiffs had not duly and/or regularly sent them
the notification of the date of the hearing. A new hearing was therefore fixed on 20th September 2006 for the oral discussion
of said objections.
In this hearing, the Court decided to suspend the judgment.
In particular, since the Court attested that Parmalat S.p.A. under extraordinary administration acted as a plaintiff for damages
in a criminal proceeding for the same events, which were objected in the case under examination (thus unequivocally
transferring the civil action in a criminal case), it declared:
1. the extinguishment of the civil action promoted by Parmalat S.p.A. under extraordinary administration;
2. the suspension of the civil case under examination, determining that it may resume between the assumptor
(newco Parmalat S.p.A. which as we said stepped in the civil action but did not formally institute a civil action in
a criminal case), the defendants and third parties (among which BPI), only upon resolution of the criminal case.
The reason is that, in consideration of the preliminary nature of one case over the other, the judgment resolving
the criminal proceeding may be material and opposable in the civil action.
To date, the civil action is suspended until the resolution of the criminal proceeding.
Without prejudice to what illustrated above with regard to BPI’s defense and the entity of the claims put forward by Lawyer
Zini, it is impossible to predict the possible outcome of the court decision.
BPI’s Board of Directors deemed it unnecessary to set aside any provisions for risks and charges.
Litigation against Immobiliare Valadier
On 29th July 2008, the subsidiary Banca Popolare di Lodi S.p.A. was notified that its 76.6 million euro senior loan had not
been admitted as a proof of debt in the bankruptcy procedure against Immobiliare Valadier S.r.l. of Roma, that was declared
bankrupt by the Court of Rome in January 2008, against a mortgage loan granted in 2006.
Obviously, the decision was challenged, considering the regular finalization of the mortgage and the regular acquisition of
the consolidated and enforceable lien on guaranteeable assets, where the mortgage was also backed by the transfer of lease
payments as guarantee. On 14th October 2009, the Rome Court passed its motivated order, with which it accepted the
reasons of Banca Popolare di Lodi S.p.A, and regularly included the Bank’s loan into the bankruptcy procedure,
condemning the bankruptcy commissioner to refund legal expenses.
Then, on 12th November 2009, the Bankruptcy commissioner of Immobiliare Valadier appealed with the Cassation court
against the above order, hence Banca Popolare di Lodi through its lawyers immediately prepared and filed its counterappeal.
To date, the subsidiary Banca Popolare di Lodi decided not to carry out specific write-downs related to the court proceeding
pending with the Supreme Court, with the exception of those relating to the realizable timeframe, also considering the
positive outcome of the appeal.
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Another litigation is pending: Valadier’s Bankruptcy commissioner on 24th November 2008 summoned the subsidiary Banca
Popolare di Lodi to ascertain and declare the simulation of the mortgage contract and the consequent charge to pay back
the total amount of 9.7 million received by the Bank as a repayment of mortgage payments or pre-amortization payments,
in addition to interest and revaluations.
The court proceeding was postponed to the hearing on 2nd February 2010 and to date, although the Bank certain of its
reasons that are also supported by circumstantial external opinions, yet it deemed it appropriate to set aside a conservative
provision to cover the legal action costs.
Fingruppo Holding
On 21st August 2008, the Court of Brescia rejected Fingruppo Holding’s filing for bankruptcy owing to the finalization on
August 20th of a restructuring agreement on Fingruppo’s debt under and in compliance with art. 182 bis of the bankruptcy
law. No challenges were raised in the hearing held on 24th September 2008, therefore the authorization of the restructuring
agreement was finalized. Gruppo Banco Popolare shows an exposure of 158 million euros to Fingruppo Holding through its
subsidiary Banca Popolare di Lodi S.p.A., which was recognized under watchlist loans. Banca Popolare di Lodi entered the
workout agreement, which provides that any loan outstanding between the parties to the agreement and Fingruppo shall not
bear interest as of 1st July 2008. As to the principal, under the agreement, Banca Popolare di Lodi’s loan is to be repaid first
of all through the proceeds generated by the market sale of Hopa shares and Banca Popolare di Lodi 2002-2012 bonds held
by Fingruppo and deposited as collateral in favor of Banca Popolare di Lodi. 10.3 million related to the sale of Hopa shares
and 25.4 million related to the sale of Banca Popolare di Lodi shares were deposited with Banca Popolare di Lodi with
value date 30th December 2008 and 10th June 2009, respectively. On 26th February 2009, as first down-payment and loan
repayment, 23 million were credited to Banca Popolare di Lodi, Considering also the coupons collected by Banca Popolare
di Lodi, after the approval of the restructuring agreement, with regard to the above mentioned bonds, the Gruppo Banco
Popolare’s residual credit went down to 98 million. After joining the agreement, the Group companies submitted their
Fingruppo and Hopa loans to a new measurement to reassess their value.
The finalization of the restructuring agreement represented one of the main pre-conditions to the performance of the letter of
intent signed on 23rd July 2008 between Mittel S.p.A. and Equinox Two S.c.p.a., one the one side, and Banco Popolare Soc.
Coop. and Banca Monte dei Paschi di Siena S.p.A., on the other. This agreement provides the creation of a new company,
where Mittel and Equinox shall jointly hold 66.6%, while Banco Popolare and Banca Monte dei Paschi di Siena shall hold
an equal share of the remaining 33.3%.
The acquisition of the interest in the newco, Tethys S.p.A., entailed a 5 million investment for Banco Popolare. Tethys
acquired all the Investments in associates and companies subject to joint control held by Fingruppo and the Hopa shares
purchased by the above mentioned banks. In 5 years time Tethys is entitled to acquire the additional Hopa shares held by
Banco Popolare and MPS at a price of euro 0.10 per share (call option). Banco Popolare’s stake in Hopa is represented by n.
101,019,756 shares (corresponding to 7.3% of its share capital) belonging to the AfS portfolio (assets available for sale). The
agreement provides that the business partners of Mittel and Equinox are in charge of managing and valorizing the acquired
Investments in associates and companies subject to joint control, and they are entitled in 5 years time to acquire the share
in Tethys held by Banco Popolare and MPS for 10 million euro. Following the signing of the above agreement, Banco
Popolare reassessed the value of the above shares, in line with the call option exercise price that would be recognized to
Tethys. The described agreement, together with the supplementary agreements signed in August 2009, provide the granting
by Banco Popolare and Banca Monte Paschi di Siena of some guarantees to Tethys against possible contingent assets and
liabilities that were not reported in Hopa’s balance sheet on which the above agreements were based.
Penalty procedure for breach of anti-money laundering regulations.
In October 2008, the Verona Tax Police (Guardia di Finanza) notified two reports to Banco Popolare, which is bound jointly
and severally, disclosing irregularities regarding the compulsory reporting of suspicious transactions, attributed to two
employees who had been successive Branch Mangers in Sommacampagna (VR) between 2003 and 2007, that might give
rise to a substantial administrative fine. An expert Professional was hired to assist Banco Popolare in the proceedings, and a
conservative provision of 4,926,290.93, corresponding to 50% of the maximum total fine has been set aside.
Raffaele Viscardi S.r.l.
The litigation, reflecting a claim of about 46 million, hinges on the conduct of the Salerno branch of Banca Popolare di
Novara with regard to transactions executed by the bank as part of credit lines granted to the plaintiff company. In
particular, the plaintiff maintains it was induced to subscribe for Banco bonds to back extended loans, and therefore the
bank would have abused its dominant position, thus breaching contract rules, as well as CONSOB regulations. Moreover,
the plaintiffs claim a damage for being reported to the Credit Bureau, which caused a false representation of the company’s
true conditions.
The action is in the fact-finding phase.
With regard to this litigation, for the time being it was deemed unnecessary to set aside a provision for risks and charges.
Described below are the main risk positions regarding Gruppo Italease.
Investigations and lawsuits
With regard to the lawsuit against some members of the former managing board of Banca Italease, including Mr. Faenza and
some mediators, the Bank brought a civil action in the proceedings to obtain full compensation for damages, both
compensatory and general, suffered as a result of the defendants’ criminal conduct, of which they were charged in the order
of indictment.
98
The Bank also asked and obtained the precautionary seizure of personal property and real estate registered in the name of
most of the defendants and parties with civil liabilities, who were summoned as jointly and severally liable. The
precautionary measure was confirmed by the special Court (“Tribunale del riesame”) to which some defendants and their
lawyers had appealed to have their case re-examined.
Banca Italease believes it can legitimately claim the personal property and real estate currently under precautionary seizure
to be repaid of the material damages suffered as a result of the detrimental actions carried out against the company.
In the hearing of 24 March 2009, the Judge of the Preliminary Hearing upheld two of the four plea bargaining requests and
sentenced the two defendants to a 1 year and 6 months term in prison (the sentence was suspended). As to the other two
defendants, which applied for a fast-track trial, the Judge upheld the request and sentenced them to a 2 year and 8 month
term in prison, and to pay a provisional fine of respectively euro 15.4 million and euro 7.1 million to compensate Banca
Italease for damages. The Bank’s lawyers asked for the precautionary seizure of the defendants’ assets to be converted into a
distraint under art. 686 of the Code of Civil Procedure.
Proceedings against the other defendants who did not apply for alternative trials or whose plea bargaining requests have
been dismissed shall continue,
As part of the various criminal proceedings currently pending before the Italian Public Prosecutor’s Office at the Milan
Court, in which Banca Italease is for one reason or another involved, on 17 November 2009 the Bank was notified the
notice of closure of preliminary investigation on alleged crimes for obstructing Supervisory Authorities, rigging the market
and perpetrating an accounting fraud charged against the former Chief executive Officer, Mr. Faenza, and the former
General Manager. In this proceeding, pursuant to Lgs.D. 231/2001. Banca Italease was summoned as a result of the
corporate crimes with which the former CEO and the former General Manger have been charged with. The proceeding is in
its investigation phase and therefore no question was posed yet to the Bank.
Since dailies published news of protests that would have been registered with the Milan Public Prosecutor’s Office by some
minority shareholders of Banca Italease, asking the Court to verify the correctness of Banca Italease’s financial statements as
at 31st December 2007 and 31st December 2008, it should be noted that neither Banca Italease, nor – to our understanding
– any of its board members received any notification by the Milan Public Prosecutor’s Office with regard to the
aforementioned petitions, and what is in the knowledge of the Bank is only what was published on newspapers.
Administrative proceedings Consob – Banca Italease
With an appearance and defense brief filed on 29th January 2009, Consob joined the proceeding instituted to challenge the
sanctioning measures pursuant to Consob’s Resolution n. 16651/08, regarding alleged procedural shortcomings and other
breaches of regulations governing investment service operations.
The first hearing on the challenge to the Resolution was held on 4th March 2009 at the Milan Court. In addition to the challenge
proposed by Banca Italease, an independent challenge was filed also by some former corporate executives, while others joined
the Bank’s challenge . The Court combined the appeals and on request of the parties adjourned the debate on 7th October
2009, granting joint deadlines to file the defense briefs on 30 June 2009 and 20 September 2009. The joint hearing was held on
25th November 2009. With order filed on 17th February 2010, the Appeal Court of Milan dismissed the objection raised by
Banca Italease and by the former executives, and after acknowledging the death of Mr. Lucio Rondelli, reduced the total
amount to be paid by Banca Italease by the amount of the latter’s fine, owing to his death. The Bank and its lawyers are
considering the opportunity of appealing to the Cassation Court against said decision.
On 29th January 2009 Consob filed an appearance and defense brief in the proceeding instituted to challenge the
sanctioning measures pursuant to Consob’s Resolution n. 16650/08, regarding the alleged delayed disclosure to the public
of information on derivatives trading activities and on events occurred in first half 2007.
The first hearing on the challenge to the Resolution was held on 4th March 2009 at the Milan Court. This proceeding, other
than the previous one, was not combined to it. The Court adjourned the hearing to the 7th October 2009, setting the
deadlines for Banca Italease to file its defense brief on 30 June 2009 and 20 September 2009. The joint hearing was held on
25th November 2009. With order filed on 11 February 2010, the Milan Appeal Court dismissed the challenge made by
Banca Italease.
Challenge to Banca Italease’s Annual Report as at 31st December 2006
As to the sentence regarding the challenge to the 2006 Annual Report, on 14th January 2009, Consob notified the request to
set a hearing restricted to the following breaches: “incorrect assessment and recognition of OTC structured derivatives
subscribed with customers” and “failure to disclose the types of OTC derivatives and the inherent risks in the financial
statements”.
On 30th April 2009, the Milan Court passed its first instance decision regarding the challenge to the 2006 annual report
made by Consob. The sentence upholds the reasons for challenging the annual report referring to the measurement and
recognition of OTC derivatives, and therefore repeals the resolution approving the annual report as at 31st December 2006,
and on the same grounds declares the nonconformity of the consolidated financial statements as at 31st December 2006.
On 27 August 2009, the Board of Directors of Banca Italease, also based on the favorable opinion of its legal advisors,
resolved to appeal against the first instance decision passed by the Milan Court. The Milan Appeal Court set the first
discussion hearing on 13th April 2010.
The Court decision, to date, is void of any executive efficacy and is susceptible of revision in the following court instances,
and in any case does not affect the representation of the financial and operating situation made in the annual report or in
recently approved financial reports.
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Egerton Capital Limited
In March 2008, Banca Italease was summoned to the Milan Court by Egerton Capital Limited (on its own behalf and on
behalf of the funds Egerton Capital European Fund plc, Egerton Capital Partners L.P., Egerton Investement Partners L.P., the
Egerton European equity Fund Ltd, The Egerton European Dollar Fund Ltd., CF Egerton Sterling Investment Fund).
The objection regarded the investment of the aforementioned funds in Banca Italease shares between 25 January 2007 and
10 May 2007. In this time period the above mentioned funds purchase a total of n. 2,697,346 shares, for euro
136,322,797.34. Owing to the stock plunge, the same funds between 4 June and 2 July 2007 sold the entire stake for euro
55,141,748.15.
Egerton brought the civil action to obtain compensation of 105 million euro, of which 81,181,049.19 euro for the ensuing
damage (trading loss) and 23,856,489.50 euro for missed profit (the amount was calculated by the plaintiff and should
correspond to the assumed annual return the company would have received if it had invested in other securities).
Banca Italease objected to the counterparty’s deductions, arguing that the fund had no active legitimacy to bring the action,
that the alleged damage the plaintiff maintains it has suffered is inexistent, as is the breach of art. 114 TUF by Banca
Italease, that there is no etiological connection between the latter’s behavior and the damage suffered by the plaintiff, and
asking for the corporate trial procedure to be replaced by an ordinary trial.
Having dispelled the reservations raised in the hearing before the Milan Court on 26 November 2009 – the objections put
forward by the Bank were partly upheld, with regard to the proof of the procedural legitimacy of the plaintiff Egerton Capital
Limited (in its capacity as General Partner of Egerton Capital Limited Partnership) to act on behalf of the funds indicated as
plaintiffs (with the exception of CF Egerton Sterling Investment Fund), and the plaintiff was given 60 days time to summon
the person in charge of representing the funds before the court.
In the hearing held on 25 March 2010, after the debate the court reserved judgment on the request for a technical advice by
a court-appointed expert made by the lawyers of Banca Italease.
Kevios
With notice sent on 18th December 2009, Kevios S.p.A. summoned Banca Italease before the Milan Court to obtain
satisfaction of a claim for damages of about 65 million, based on the following alleged existence of multiple offences: abuse
of economic dependence, abuse of right and breach of contract, in thesi, ascribed to the Banca. The first hearing was fixed
on 22 May 2010.
Banca Italease shall fully challenge the claims made by the plaintiff, as they are deemed to be groundless and require no
provisioning.
Exposure to Gruppo Zunino
In July the Public Prosecutor’s Office of Milan filed a bankruptcy petition against the Group led by Luigi Zunino, operating
on the real estate market with Risanamento. The group was hit by the industry crisis and by a huge indebtedness, and
submitted to the court a debt restructuring agreement under art. 182 bis of the Bankruptcy Law, supported also by primary
lending institutions, to which the Zunino group has a large exposure, and which undertook to finance the continuation of
the ongoing real estate operations.
The Milan Bankruptcy Court, which was asked by the Public Prosecutor’s Office to assess a possible bankruptcy declaration,
dismissed this request with order filed on 10 November 2009, and accepted the debt restructuring agreements entered by
Gruppo Risanamento with various banks, among which Gruppo Banco Popolare.
On 31st December 2009, the Group had an exposure of about 294 million, classified as substandard loans, referring to
mortgages and loans granted by Banca Popolare di Lodi, plus the exposure attributable to Gruppo Italease totaling 223
million, which were also recognized under substandard loans. The exposures were adequately provided for and their book
value was impaired in the financial statements of the previous financial years and in 2009.
As described in the section devoted to noteworthy events after the balance sheet date, on 1st March 2010 a Framework
Agreement was signed by Risanamento and Bipielle Real Estate, which on 31st December 2009 had an exposure of about
100 million for down payments and deposits referring to the Milano Santa Giulia project. Under this agreement,
Risanamento shall sell the stakes in the companies Sviluppo Comparto 6 S.r.l. (100%), Sviluppo Comparto 8 S.r.l. (100%)
and Mariner S.r.l. (50%), to Bipielle Real Estate, in addition to the proceeds generated by selling some property.
As to the exposure of Gruppo Italease, which was fully allocated to the subsidiary Release, on 29 January 2010 three lease
contract were consensually terminated, having a gross total value of about 116 million, and Release was given back the
underlying buildings, while another real estate contract of about 81 million was transferred by Risanamento to one of the
SPV acquired by Bipielle Real Estate under the aforementioned framework agreement. As a result, the residual exposure of
Gruppo Italease comprises now a gross credit of 26 million with Risanamento and non-performing loans referring to two
buildings directly owned by Luigi Zunino for a total gross amount of about 19 million.
Exposure to Gruppo Delta
In May 2009, Delta S.p.A., the Holding company of Gruppo Delta, engaging in consumer credit, and Sedici Banca S.p.A.
(banking institution belonging to Gruppo Delta) were put by the Bank of Italy under temporary management owing to the
serious management irregularities that had come to light.
The two banks were then admitted to extraordinary administration; the Bank of Italy appointed 3 commissioners, Prof Bruno
Inzitari, Dott. Enzo Ortolan and Dott. Antonio Taverna. Cassa di Risparmio di San Marino (CRSM), Delta’s parent company,
appointed its own advisors: Professors Lusignani and Lamandini e KPMG.
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The plan prepared by CRSM’s advisors provided for the sale of Sedici Banca and of part of the assets of the Group (sales
network, insurance company, etc.) to Intesa SanPaolo (ISP). The assets of the operating companies (Carifin, Plusvalore and
Detto Factor) would be used to pay the debts with creditors, mostly represented by banks. After due diligence, ISP expressed
its unwillingness to finalize the purchase, which caused the restructuring agreement prepared by CRSM’s advisors to fail.
Owing to the failure to close an agreement, the Commissioners presented a new plan to the banks.
The plan, which applies art. 182 bis of the Italian Bankruptcy Law, was submitted to the Bank of Italy on 23rd March 2010.
Based on the assumptions made by the Commissioners, about 65% of the nominal value of the loans of the operating
companies should be collected, the exception being transactions operated with earmarked assets, that should be 100%
repaid .
On 12th February 2010 the banks of Gruppo Banco Popolare grant Gruppo Delta credit facilities for 230.7 million and
utilization 206.4 million. Main utilizations regarded:
x a transaction with earmarked assets of 100 million
x a credit line in favor of the parent company Delta per 40 million.
Assuming that a workout agreement can be reached with CRSM to safeguard the 40 million credit line to Delta, the
estimated loss for Banco Popolare is fully covered by the loss provisions that had already been charged to income totaling
25 million. The position is classified under loans under restructuring.
The Bank of Italy expects 100% of the banks to join the Restructuring Agreement and required an answer by 31 March
2010.
Risks associated with tax audit notices issued by the Inland Revenue Service
With regard to the significant fiscal litigations generated by a series of transactions finalized among various companies
belonging to Gruppo Banca Popolare Italiana in financial years from 2001 to 2005, Banco Popolare’s Management Board –
in the special meeting held on 8th May 2009 – assessed the risks and charges that would ensue from both assuming an outof-court settlement, and proceeding with legal actions.
Considering that a considerable room for uncertainty hovers over the final outcome of each action, and that this uncertainty
is particularly high when dealing with tax issues; considering that court proceedings are set to drag for many years, the
Management Board – supported by the affirmative opinion of authoritative advisors – deemed it against the interest of
Gruppo Banco Popolare to instruct such a material tax proceeding in court, and thus retain a significant potential risk onto
the Group for a long period of time.
Hence, the Management Board decided to go for an out-of-court settlement of the above disputes. Upon preparing the 2009
Q1 report, the total charge to be incurred to settle the dispute had been estimated to be about 170 million, therefore the
provisions that had already been set aside were further supplemented and 57.5 million were charged to income for the first
quarter.
The charge, which includes what claimed by the Tax Authorities in terms of more taxes, penalties and interest, in addition to
the considerations to be paid to external consultants who were hired to manage the dispute, has been fully recognized in
the income statement under the item “tax”.
Following the approval of the Q1 report, the out-of-court settlement of the above pending actions was finalized with no
additional charges to the Group’s income statement.
As a result of the out-of-court settlement and with no negative consequences for the Group as to other minor disputes,
contingent liabilities associated with notified tax audits, which on 31st December 2008 totaled 578 million, were brought
down to about 66 million.
As to the tax situation of the main companies of the Group, please refer to part B – section 14 of the consolidated
explanatory notes.
Future evolution of Group risks/objectives
The Group selects, takes on, controls and mitigates risks originating in its banking and financial business, to pursue stable
and sustainable growth objectives, in keeping with the general guidelines approved by the Supervisory Board on proposal of
the Management Board and regulated by the “Group Regulation or risk limits”.
Said guidelines in particular point at: spreading out credit risk in keeping with the objective of financing mainly households
and SMEs, taking on market risks when closely related to business needs, closely monitoring liquidity to make sure that
expected and unexpected financial needs can be rapidly satisfied, and excluding risks that are unrelated to our core
business.
The implementation of the above described guidelines is an assurance for the Group that it is best prepared to tackle
possible adverse and even unforeseeable evolutions of the economic and financial scenario.
For the time being, the great uncertainty around the depth and evolution of the Italian and world economic recovery does
not harbinger a possible and longed-for ebbing of corporate risks, especially credit risks.
A worsening of the economic backdrop, rather unlikely according to major analysts, or, in alternative, a persisting
stagnation may cause a deterioration of corporate creditworthiness also at industry-wide level, with possible negative
repercussions on the financial statements of the banking industry.
The credit policy objectives pursued by the Group aim among other things at diversifying its loan portfolio, limiting the
101
concentration of exposures, and at supporting the development of businesses in its market territory, taking advantage of its
close relationship with customers: these objectives aim at minimizing the risks associated with a possible adverse business
cycle. Moreover, as part of the impact assessment programs defined by the supervisory authorities, the Group was keen on
performing stress testing exercises applied to credit risk, as a tool to check the resilience over time to a possible strong
deterioration of the economic scenario.
As to liquidity risk, on the one side, the Group continued to enhance the existing controlling tools and adopted assessment
models to simulate the effects extreme scenarios may have on liquidity; on the other side, it implemented a risk
management approach favoring a constant improvement of the liquidity profile, in terms of balanced financial maturities,
increased liquidity reserves and implementation of new instruments (for ex., covered bonds and soft mandatory bonds),
which will allow us to withstand with a sudden and significant liquidity crunch at system level.
To this regard, how and when the prudential regulation revision proposed by the Basel Committee is adopted will be a key
issue for the financial industry, because in the next two years this may spawn an excessive issuance of medium/long term
bank debt instruments by the domestic and international banking industry, with potential impacts on the liquidity position of
single banks, as well as on the profitability of the entire banking industry.
With regard to the interest rate risk, in case of possible interest rate increases induced by restrictive measures adopted by the
supervisory authorities, the Group is well positioned in terms of the positive impact this dynamic would have on interest
income. On the other hand, in addition to the positive impact on income, the described scenario could also cause interest
rates to be volatile, with consequent risks (i.e., potential decrease in market value) both for the regulatory trading portfolio
and for the banking book. The constant management and control of these risks, also through caps, ensure the balance sheet
sustainability of the assumed scenario.
As to the integration processes of former Gruppo Banca Italease, we are determined to reduce the risk of the defaulted loan
book, with a special focus on large exposures.
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PLANNING, AUDITING AND SERVICE ACTIVITIES
Human resources
Personnel makeup
Shown below is Gruppo Banco Popolare’s personnel breakdown by category and gender as at 31st December 2009:
Categories
Executives
Management
Employees
Other staff
Foreign companies
Total
of which
Apprentices
Training employment contracts or entrance
contracts
Permanent employment contracts
Temporary employment contracts
Men
Full time
Women
Part time
Total
Full time
Part time
Total
Total
306
5,840
5,815
90
165
12,216
10
86
5
101
306
5,850
5,901
95
165
12,317
22
1,743
4,457
9
406
6,637
153
1,464
3
1
1,621
22
1,896
5,921
12
407
8,258
328
7,746
11,822
107
572
20,575
198
-
198
231
-
231
429
89
-
89
78
-
78
167
11,899
30
101
-
12,000
30
6,285
43
1,621
-
7,906
43
19,906
73
The above headcount include also the personnel of the former Gruppo Banca Italease, which on 31 December 2009 had
435 employees, excluding the 350 resources destined to the newly formed company called “Alba” (which is not part of
Banco’s consolidated scope) and the 145 resources of the Company Factorit, recognized in compliance with IFRS 5
(company under disposal).
Hiring policies
In 2009, Banco Popolare’s employment policy was primarily focused on preserving the jobs of the Group employees –
including temps – by slowing down employee turnover and promoting early retirement schemes to stimulate a generational
churn, in line with the 2007-2010 business plan.
A growing attention was dedicated to the possibility of organic growth through career pathways and the enhancement of
tools to assess the performance and the potentials of employees. The hiring of employees under temporary contracts made
the generational change even smoother, allowing us to further the development of the new resources and offer them
professional opportunities.
We still turned to the labor market, albeit less than in the past, to look for specialized profiles that were not present in the
Group, in particular in the field of regulatory and risk control and Retail Business Development.
In any case we continued to hire young newly graduates, especially in the local branch networks, by activating more
flexible employment contracts, and in some cases, for special needs, we resorted to staff supply contracts.
The new Recruitment and Selection process for first-time hires is now fully operational throughout the Group, based also on
the centralized Selection Assessment, which is the first steppingstone along the professional career in Banco Popolare, to
assess and guide the future development of each single resource.
To preserve and strengthen our ties with our market territory, we continued to carry out attitudinal tests and candidate
selections directly in the single provinces. The School Project was extended to the entire national territory: 6 Banche del
Territorio joined the project and involved 37 schools, where we met more than 1,500 students.
Professional mobility management
In 2009, actions to achieve efficiency gains and the standardization of internal organizational models and work processes
across the Group moved ahead; in particular, the Parent company structures were deeply revised to improve the control and
coordination of activities and processes.
The revision of the Holding company’s organizational model gave rise to the need to strengthen the Parent company’s
structures, both qualitatively and quantitatively: this prompted us to resort to professional mobility, so as to favor also the
career growth of our resources by building up their experience both at the Head Office and at the Retail Banks.
To this end, the various Human Resource Management functions worked in team to satisfy the different needs, streamlining
intercompany mobility and developing professional opportunities both at the Parent Company and in the Retail Banks.
In the second half of the year, actions were taken to terminate the numerous personnel secondments across the Group
Companies, by stabilizing the working relationship in the Company where the employees are working.
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This led to more than 360 transfers, and the process will continue also in the first half of 2010 so as to stabilize structures
and professional positions over a longer timeframe.
Practical training and Internships
Agreements entered with Universities and Local Institutions reinforced the Group ties with local agencies and with the
academic world. Internships (which in 2009 were more than 20) proved to be a useful tool for young newly graduates and
graduating students, who had the opportunity to make a training and orientation experience in the various companies of the
Group.
The well established cooperation between Banco Popolare and the most prestigious Italian educational centers promoted a
fruitful exchange of knowledge both for our Institute and for the teachers who led the trainees along their training courses,
and who had for the most part an economic or legal education background.
Human Resource Development
The most noteworthy activities in 2009 were:
x the “Branch Manager development project”;
x growth and development activities for our Talents, that is, 100 high-potential resources identified in 2008;
x launch of the “Value project” devoted to resources who ranked between the 101 and 200 position in the Talent
scouting list;
x course dedicated to the Heads of Headquarter Functions and Office;
x Executives development seminar;
x Development project for all Human Resource Managers.
The main goal of the development project for Branch Managers, that in 2009 is in its second year, is to build a consistent
work model and style throughout the Group. A special focus is dedicated to the need to create a strong integration between
this position and the market territory, to support and assist businesses and households.
In 2009 also the Talent project was in its second year. The selected employees follow a three-year development path, that is
designed to provide them with the necessary skills to cover key positions within the Group, provided the identified
potentials make themselves manifest in practice.
The focus of development is on three core highly-strategic areas:
x integration and communication,
x global view of macro economic and social scenarios,
x strategic leadership.
Human Resource Managers have been involved in a development path aiming at bringing different cultures together and at
mainstreaming the role’s typical skills and competences, to create a harmonized and established “community”.
The project devoted to Heads of Headquarter Functions and Offices moved ahead. Its goal is to develop harmonized
behaviors and an effective role interpretation to improve internal processes and provide a value added service to external
customers.
In the second half of 2009, managerial development meetings were held for Executives in charge of Group structures. In
particular, they focused on improving the key competence of “Communication”.
Training
In 2009 we scaled up our training activity to enhance the professional skills of all human resources within the Group.
The development of new work models and processes and the analysis of different business contexts brought to light the
need to “plan” people’s growth by carrying out actions that are functional to the filled position. To this end, we decided to
develop differentiated training paths geared to the specific professional roles, aiming at providing the necessary tools to
acquire the skills and competences required by the position in a standardized and uniform way across all the Group Banks.
To guarantee a high standard of the training offering, in 2009 we decided to measure the validity of training actions, by
setting up various review processes:
x training requirements, by introducing a specific identification tool, for Network and Headquarter position, and
developing technical assessments for branch managers;
x training satisfaction surveys, by enhancing the existing questionnaires;
x learning curve, by introducing entry and exit tests;
x training efficacy, by creating a review process, with the active participation of the supervisors of the course
attendees.
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In 2009, a total of 862,675 training hours were delivered, equivalent to 115,023 man/days, up by 4.89% with respect to the
prior year’s volumes. The table below provides a summary of the training activities in 2009:
Category
Executives
Managers
Employees
Other
Total
Attendees
277
7,151
10,081
582
18,091
DevelopSkill
Role Courses
ment
Enhancement
300
73,936
3,270
77,506
174
59,855
114,420
13,097
187,546
29,521
21,488
180
51,189
Mandatory Project-based
training
training
2,725
129,396
195,783
45,284
373,188
4,670
70,802
47,588
2,168
125,228
Training on Total training
demand
hours
212
23,420
23,982
404
48,018
8,081
386,930
406,531
61,133
862,675
Assessment
The Assessment Center, which became fully operational in 2009 after its launch in the summer of the prior year, is in charge
of assessing managerial skills, that is, competences that are generally defined as “crosscutting” or even “transferable”
because they can be enhanced and maximized within the organization, irrespective of the technical and professional
content required by the different organizational work settings.
In 2009, its activities took different courses and spanned the Banche del Territorio and the Group companies.
Remuneration policies and incentive schemes
Group remuneration policies ensure an equal and consistent treatment throughout all the companies belonging to the
Group. Without neglecting the specificities of the single companies and the needs to contain personnel costs, these policies
pursue a series of common objectives, such as the acknowledgement of merit, the stability of employment relations,
attracting talents, directing behaviors toward corporate priorities, internal and external equity.
2009 was characterized by a growing attention to remuneration policies – caused by the economic crisis – both by news
media and by national and international Supervisory Authorities. In June, in compliance with transparent disclosure
requirements, our Group prepared a remuneration policy report. Later on, the G-20 Financial Stability Board first, then the
Bank of Italy, published documents setting out guidelines and operating instructions for compensation policies and incentive
schemes. As a result, our remuneration policy report was updated on 16 march 2010 in line with these documents, whereby
some aspects of our internal regulations on incentive schemes were revised, in particular with regard to top managers. A
new policy was implemented, requiring top managers to achieve results over a three-year time span, and eliminating
incentives exceeding fixed compensation. In any case, an in-depth evaluation of the pay-mix was carried out for all
professional classes.
In order to implement the above compensation policies along objective criteria, our periodic evaluation of managerial
positions was carried out, to compare the organizational roles within the various business sectors across our Group. Thus
we will be able to apply consistent and harmonized criteria, in particular with regard to the variable wage component of
managerial positions of equal value. These analyses are also used to update compensation comparisons with the same
positions in peer external companies.
As a corollary to the revision of remuneration policies, we carried out a self-assessment of compensation methodologies and
practices, as required by the Bank of Italy, covering a variety of aspects, among which: the remuneration policy structure;
the pay-mix structure for top managers, heads of audit and control functions, traders and branch network supervisors; the
criteria to define bonuses in incentive schemes; risk control by setting up a series of mechanisms to guide given behaviors
and assess the congruity between the paid bonuses and the attained results; how long results must be assessed before
granting bonuses; payment modalities. The self-assessment outcome was submitted to the Bank of Italy: the Group shall
keep abreast of the latest regulatory developments in this delicate field and over time shall introduce the adequate updates.
The special events described above were add-ons to the already ongoing and thorough analysis of compensation practices
in the Group companies, through which we can carry out a comparison among companies, pursue integration within the
Group, verify that the adopted policies are correct and define new policies. A study is well underway to gain access to more
sophisticated analysis tools.
The consistency of compensation policies was further refined also by redefining the incentive scheme regulations of the
Group companies operating on the financial market, or based abroad.
In 2009, the value attached to the quality of the work carried out by our resources was once again endorsed. Incentive
schemes promoted the achievement of customer satisfaction objectives (as assessed ad hoc by a specialized company), the
compliance with MIFID directives, and the quality of extended loans. All these qualitative elements had a direct effect on
the accrual of premiums within the incentive schemes of all the Banche del Territorio.
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The quantitative elements reported in the consolidated financial statements, in particular with regard to variable wage
payments, are:
2009 Personnel costs = 1,489 million euro;
cost of the company bonus provided for by the contract and paid in 2009 based on 2008 results = 83 million (5.6%
Personnel cost in 2009);
cost of incentives paid in 2009 based on 2008 results = 34 million (2.3% Personnel cost in 2009).
Health and safety
For the Group, employee health and safety are of paramount importance, and to this end it adopted a prevention-oriented
strategy based on the analysis and assessment of risks at work so as to identify the most suited actions to eliminate or reduce
hazards and their potential consequences.
The Prevention and Protection Service put in place emergency plans for all Group sites, depending on the specific risks of
the working environment and based on the potential and foreseeable emergency conditions linked to the activities
performed, such as fire, natural disasters (earthquakes, floods), robbery and sickness; to this regard, in 2009 emergency
evacuation drills were held in premises that are deemed at greater risk among Group offices.
The banking industry reports contained risk indexes compared to other industrial sectors, as shown by the surveys
conducted by the Italian Statistics Institute. The most frequent accident takes place off time and off work.
As to Gruppo Banco Popolare, in 2009 we had 289 accidents (of which 103 on-work and 186 off-time and off-work),
leading to 7,608 days of absence, as shown in the table below. As explained in note 1 and note 2, data reflect different
corporate scopes between 2008 and 2009 (note 1 and note 2).
Accidents
in-work accidents
off-work accidents
in-work days of absence
off-work days of absence
Total
FY 2009 (*)
FY 2008 (**)
103
186
2,797
4,811
289 accidents
7,608 days of absence
65
203
1,350
4,862
268 accidents
6,212 days of absence
(*) 2009 data include all Group companies except Aletti Fiduciaria, Aletti Trust and Aletti Gestielle.
(**)2008 data include only the Group Banks and SGS BP.
Based on the identification of the surveyed occupational risks, a single healthcare plan for all the Group Banks/Companies
was prepared, that defines the application guidelines, the operational procedures and the contents of the Healthcare
Surveillance under L.D. 81/08.
Also in 2009, the healthcare protocol adopted by the Group Banks/Companies covered employee categories mainly
exposed to the risk deriving from the use of video-terminals, and to a lesser extent those exposed to the risks of noise,
manual load handling and nightshifts.
Risk of exposure to external violence at work - the duty to “assess all risks” stems from art.21 of law n. 39 of 1st March 2002,
that transposes the duties deriving from Italy being a member country of the European Union through the “2001 EC Law”.
The lawmaker is even more circumstantial and with L.D. 81/08 defines also the formal terms regarding how this assessment
must be conducted and clarifies that all risks must be assessed, even those that, though not directly related to the employer’s
purview, may still potentially exist in the working sites and may damage the employees, among which the risk of “external
violence - robbery”.
The assessment of this type of risk calls for a different approach than the traditional one used in the working environment. In
case of “external violence”, risk factors are on the one side connected with the employer’s organizational processes and
choice, on the other they are caused essentially by criminal behaviors by external individuals that can be foreseen only in
terms of probability of occurrence.
The preventive measures enacted by the Group Banks/Companies to reduce risks can be broken down into two categories,
depending on whether they are intended to:
x reduce the probability of occurrence, in this case they will be active/passive defense measures, identified with the
help of the “support tool for the assessment of robbery risk”, developed by ABI’s technical group;
x mitigate the damage, with specific actions regarding safety procedures, information and training of employees and
with support services for employees who fell victims of criminal events.
By developing training initiatives and safety information especially directed to newly hired employees, atypical employees,
employees in charge of emergencies, employees exposed to specific risks and to the robbery risk, and by stimulating the
active participation of all personnel in identifying dangers and managing preventive measures, a culture of prevention is
taking root in our structures.
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In 2009, 4,159 training days to 3,913 employees at Group level were delivered, as shown in the table below.
Course
M. D. 388/2003 (First aid)
M. D. 388/2003 art.3. c.5 – First aid
Robbery emergency procedures
Lgs. D. 81/08 (Newly hired)
Lgs. D. 81/08 and M.D. 10.03.98 (Medium Risk)
Total
Total Trained
Employees
Total training
hours
Training days
675
876
1,460
173
729
3,913
8,100
3,504
11,680
2,076
5,832
31,192
1,080
467
1,557
277
778
4,159
Gruppo Banco Popolare industrial relations
Relations with Trade Unions
In 2009 consultations with Trade Unions aimed at seeking an accord and at striking a balance among the harmonization of
employment regulations, operating cost control, protection of youth employment by stabilizing contracts, the promotion of
work and social cohesion.
The revision of corporate premiums – while in any case safeguarding the purchasing power of wages – allowed us to direct
the freed up economic resources to the stabilization of positive employment relations with temps, more than 900 resources
under an apprenticeship contract, entrance contract or temporary contract. The agreements reached in the field of
employment give evidence of the special attention social partners devoted to new generations, to grant them the right
conditions for a progressive consolidation, and allow the Group not to disperse the key qualitative asset inherent in new
professional positions.
It was also possible to increase minimum company contributions to supplementary pension schemes and better guarantee
the future of our youths, who are less favored by the public pension system.
Consistent and uniform pay-grade systems were agreed at Group level, with regard to the target organizational model of the
sales network: as a result, career paths and personnel development are better defined and certain, and human resource
management is more efficient.
Again, consultations with trade unions led to the development of specific training actions in favor of employees, in
particular for professional outplacement and reinstatement and workplace safety, subsidized by the Bilateral training funds
and the Solidarity fund.
No significant worker demonstrations were staged at Group level; only two days of strike were called in one Company.
The integration with former Gruppo Banca Italease relied on this spirit of social dialogue and solidarity and of joint
protection of the enterprise and of jobs to define, in accord with trade unions, how to manage the impacts on employees
and favor their reinstatement in new companies.
Supplementary pension schemes
In 2009 also for this delicate sector we started a process to harmonize the administrative structures across the group and to
set up a single integrated software system, while respecting autonomies. In 2010, a web platform shall be available to active
and retired employees, allowing them to interact with their welfare schemes.
The Group Welfare Function, in cooperation with a primary advisory company, Prometeia, is working on a new investment
compartment structure, to provide members with useful tools, options and information to manage their welfare positions in
a flexible and informed way, adjusting them to their own personal and family choices and characteristics (Life cycle).
Social affairs
In 2009, the activity called “Progetto Persona” was developed further: it is an initiative in favor of employees, aiming at
promoting health and wellbeing and at providing human resource managers with the necessary tools to better and more
effectively manage situations of malaise on the workplace. The Project was set up in cooperation with the Multifunctional
Center Don Calabria, and follows this schedule:
1. Consolidation Phase 2008/2009 with consolidation in Verona and rollout in Lodi and Modena;
2. Expansion Phase 2009/2010 with consolidation in Verona, Lodi, Modena and rollout in the market territories of
Banca Popolare di Novara and Credito Bergamasco.
Individual outreach services
This Service provides support to overcome specific situations of individual malaise. It provides support to individuals and to
HR managers in the following ambits:
x support to employees who suffer from situations of distress or difficulties with negative repercussions on their
working life;
x advice and support to employees to analyze issues that impact upon the organizational wellbeing (disability,
addictions, depression, etc.);
x advice to disabled employees to find the best match between their abilities and their job;
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x advice to improve the working mainstreaming of people with disability/difficulties/distress;
x activation of social services on the territory;
x mediation between employee and company in case of incident.
The Service is managed by two professional experts from Centro Polifunzionale Don Calabria. Interested employees and HR
managers may refer to them for advice and support, on a voluntary basis and respecting the individual’s privacy.
Labor disputes and disciplinary measures
In 2009 the total number of labor disputes at Group level remained basically unchanged compared to the previous year,
confirming once again that our dispute trend is below the industry average; the number of new lawsuits equals that of
settled ones.
Litigations were managed uniformly and consistently throughout all the Group Companies, in compliance with criteria that
whenever possible favored a settlement of lawsuits out of court.
Internal audit
In 2009, the Parent company’s Group Audit activities were in line with the objectives addressing the constant assessment of
the adequacy of the internal auditing system not only in the Parent company, but also in the entire Group. Audits were
conducted to verify that regulatory, operational and business requirements were met, and that they were then transposed in
information, assessments and recommendations regarding the correctness of the business activity and the effectiveness of
the auditing system, while pointing out possible improvement areas.
The Parent company’s Group Auditing Service is in charge of conducting institutional, coordination and service audits. In
particular, on site and remote activities were performed regarding the Parent company’s central and peripheral structures,
with a special focus on particularly critical processes, the Parent company’s Group structures in Italy and abroad, as well as
the central and peripheral structures of the banks and companies covered by a specific outsourcing agreement, in virtue of
which a global or partial auditing service is delivered. The individual auditing functions of the subsidiary companies and
banks, when existing, are in charge of the remaining activities that have not been outsourced, still in coordination with the
Parent company’s Auditing Service.
More specifically, outsourced activities mainly covered audits on central structures, and also specialized areas such as ICT
auditing, the specialized operational support to the Surveillance Bodies set up in the single group companies under Law D.
231/01, as well as the remote monitoring of the banks’ branch networks in terms of credit, accounting-operational, antimoney laundering and financial risks.
During the year, the function prevailingly carried out audits on credit (loan granting and monitoring, management of
substandard loans), on term management and on the provision of investment services.
During the year, the Group Audit service carried out all the internal audit activities indicated by prudential Supervisory
regulations. In particular, specific audits were conducted regarding first pillar risks (credit, operational and market risks), and
transparency of disclosure (III pillar), revision of the internal credit rating system, revision of operational risk management
and of ICAAP (Internal Capital Adequacy Assessment Process).
As required by supervisory regulations, we verified the modalities through which the conformity of compensation practices
to the regulatory framework is guaranteed. The main goal was to verify organizational compliance of compensation and
incentive systems with Bank of Italy regulations, and the outcome evidenced that our organizational setup guarantees the
compliance with relevant regulations. The outcome was reported to the competent boards and functions.
Audits on the sales networks of the single banks did not identify any special criticality and confirmed the compliance of
operations, in line with prior years.
In order to implement/rationalize the information system dedicated to remote audits, a new application was deployed in the
Parent company to identify the most critical areas at Group level and set in motion appropriate targeted actions to remove
the identified issues. Thanks to this system, it is possible to identify which branches and business areas of the sales networks
of the Italian banks show the most significant criticalities, and instruct also the local auditing functions as to where it would
be advisable to carry out a closer monitoring.
The service also constantly supported the other business functions by helping them verify regulations to be issued. A
significant support was provided to the Supervisory Board, the Control Committee, the Management Board and the Chief
Executive Officer, as well as to the Boards of Statutory Auditors and the Auditing Firms of the Group companies, by
suggesting possible improvements to risk management policies, measurement tools and procedures.
In addition to the specific activities assigned to the Service, in 2010 we will continue to keep operations up to date with
operational and legislative changes and evolutions, and to implement and develop tools and methodologies, proceeding
with the planned steps of the project to coordinate audit activities from a methodological standpoint, aiming at integrating
and systematizing activities that are being monitored and analyzed in view of the global assessment of the Internal Audit
System (SCI – Sistema Controlli Interni). This project was launched by the Service at the end of 2008 and moved ahead in
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2009 in cooperation with the competent Group and company functions. The aim in 2010 is to map risks and activated
controls, assess the adequacy and functionality of the existing system components and define a specific management
information system.
Compliance
Gruppo Banco Popolare attaches a specific importance to the control of non-compliance risks, based on the tenet that the
observance of rules and business integrity are key to the banking business, which by its own nature is founded on trust.
The first control against compliance risk is the identification of the compliance manager among one of the Group top
managers and the creation of the Compliance Service. In 2009, the number of employees of the Compliance Service was
increased, and the new organizational model of the Legal and Compliance Department, to which the Compliance Service
reports, was approved. The new organizational model provided for the creation of a function reporting directly to the
Compliance manager, in charge of pre-verifying the compliance of matters to be approved by the Management Board, and
to develop the organization of the Compliance Service, which gradually must extend its supervision to include different
business process and activities, also by way of ex-post controls especially (but not only) in the field of investment services.
As part of this reorganization, Finance Complaints were handed over to the Parent company’s Quality Service, while the
overall supervision and the obligations with respect to the periodic reporting to Corporate Boards are still under the
competence of the Compliance Service.
Complaints on banking services must be managed by the auditing structures of the Banche del Territorio.
The activities carried out during the year focused on those that are considered the most meaningful areas in terms of noncompliance risk, in particular:
- Intermediation activities – Provision of investment services – Distribution of insurance products
- Transparency towards the customer – Credit intermediation
- Insider List and prevention of market abuses
- Management of conflicts of interest
- Usury prevention
- Countering anti-money laundering and terrorism
- Consistency of the rewarding system
- Protection of personal data
Among the various activities carried out by the Compliance Service, the following activities were particularly significant
with respect to the above issues:
x participation in the “III Level Mifid Project”, (so called “Illiquid Products Project”), aiming at defining and
implementing procedures to transpose Consob’s guidelines on the duties for a correct and transparent distribution
of financial illiquid products;
x participation in the “Conflict of interest Project”, including controls on how intercompany resolutions are met;
x participation in the “Anti-usury Project”, focusing on the transposition of the new regulations issued by the Bank
of Italy;
x participation in the “Transparency Project”, aiming at transposing the new regulations issued by the Bank of Italy,
with in-depth analysis of the decision-making processes regarding changes in interest rates;
x response to reports of the Audit structures evidencing non-compliance risks, within the scope of its competence;
x training to the Group operational structures on specific issues (e.g., preventing market abuses, managing conflicts
of interest)
x participation in the definition of the Incentive system and the assessment system for the branch network, in
compliance with the principles of equity defined by the Supervisory Authorities; validation (within its area of
competence) of incentive campaigns for employees. The Compliance Manager worked directly with the Human
Resource Department and with the top management for the definition of top management compensation
processes and criteria, in constant communication with the Supervisory Authorities;
x certification of the rulebook describing the tasks of the Manager Responsible of preparing corporate financial
reports pursuant to law 262/05.
In compliance with the Supervisory Instructions issued by the Bank of Italy on 10 July 2007 regarding the Compliance
Function, in 2009 the mapping of the main non-compliance risks to which the Group and its constituents are exposed was
completed, as part of the “extended Basel 2 Project” launched by the Compliance Service. This activity, which will help the
Group acquire a global view on this issue, further confirmed and renewed our commitment towards regulatory/procedural
update programs, to improve the adoption of the various laws and regulations protecting and controlling our business
activities.
Technological and administrative services
The Group’s technological and administrative services have been centralized in Società Gestione Servizi BP S.p.A.
(hereinafter SGS), which is the “operational engine” of the Group.
Once the integration was completed, activities were directed towards the consolidation of IT systems and applications and
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work processes, focusing on optimizing technical and human resources to guarantee the best service support to the business
activities of the Group banks at the lowest possible cost.
Innovative projects were implemented involving the technological infrastructure and IT procedures, in particular for the
Credit and Finance area, which resulted in a greater user-friendliness of applications and the availability of more
sophisticated risk monitoring and control tools.
Also work processes, procedures to produce accounting data and management control procedures were enhanced, to
accelerate the production of data and thus also the decision-making process underlying the planning of strategic and
business actions.
In 2009, the spotlight was on system projects aiming at making procedures compliant or at installing new applications to
manage services and provide reports in compliance with new national, European and International interbank regulations.
Administrative services constantly guaranteed a valid support both to the business activities of the retail bank branches, and
to the launch of innovative projects.
The Group Safety and Security service constantly monitored physical and IT intrusion risks, so as to activate the most
appropriate prevention systems; it developed the Business Continuity plan and conducted controls to test its validity.
Technological services
In 2009, actions were largely directed towards the optimization of the technological infrastructure and the achievement of
efficiency gains to guarantee the best service to Corporate Clients, while identifying possible processing power recovery
opportunities in view of our strong focus on cost containment.
The specific initiatives carried out in the different sectors are summarized below.
Development of applications for the investment area
Custodian Bank
The centralization at the parent company of the Custodian Bank activities for mutual funds that were previously performed
by Banca Popolare di Verona SGSP, Banca Popolare di Lodi, Banca Popolare di Novara and Credito Bergamasco was
completed.
The necessary Custodian Bank-related information system implementations were put in place, to improve the monitoring
and control processes and to comply with the instructions issued by the Bank of Italy.
Funds and Sicav
A specific project was launched to reduce operational risks and manual activities for the Back Office, with the release of
new functionalities for the underwriting procedure, the management of multi-currency accounts, intercompany
transferability, feeds to the capital gain procedure for the accounting treatment of capital losses associated with foreign
UCITS (Undertakings for Collective Investments in Transferable Securities).
Evolution of front office/position keeping systems
In 2009, activities in this area developed along two complementary and distinctive lines. On the one hand, the supporting
tools for Banca Aletti’s Business were strengthened, by consolidating the architecture and expanding the functionalities of
the Risque position keeping application. On the other hand, the application architecture used in the Group Finance
activities of Banco Popolare was revised, and it was decided to implement a more sophisticated position keeping system in
line with market standards (Kondor+ to replace Merlino).
Therefore, with respect to Banca Aletti’s Front Office, the main goals of the Risque position keeping system enhancements
were: optimizing operational processes; risk monitoring (especially the operational risk); consolidating the system’s
application architecture to guarantee a more adequate performance and reliability.
The activities instrumental to the installation of the new application release (live since October 2009) were essential to
achieve:
x the release of new business supportive functionalities (in particular, analysis based on more effective interest rate
risk indicators);
x the consolidation of the system’s technological architecture (in particular, revision of the database and of the
internal communication infrastructure);
x the activation of more performing data processing processes, which for example reduced the time necessary to
process month-end accounting data.
Other operations were implemented on the Risque application to help the activities of the middle and back office structures,
among which:
x the production of reports and the development of control functionalities for traders, for the Middle Office and for
the Head Office;
x the reconciliation with back office systems;
x the automation of processes to acquire deals carried out on the market;
x the compliance with interbank regulations (PSD, Supervisory Reporting).
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Development of applications for payment collections and electronic money
ATM
The 2009 marketing plan actions were implemented to achieve the functional alignment and an improved communication
by redesigning ATM screens (microcircuit). Displays were totally revised, and new graphics have been introduced, more
modern and more in key with the Group brand.
The Group’s ATMs now include the EAPS circuit (Euro Alliance of Payment Schemes), within SEPA, which of course also the
Bancomat Consortium has joined. As a result, more than 200 million cards distributed in Italy, Germany, United Kingdom,
the Netherlands, Spain and Portugal will be able to carry out transactions in the other member countries (2 million POS and
190,000 ATMs) as if they were operating on their own national circuit.
Electronic Payments/POS
To support the development of internet payments, a new solution called “By Pos” was activated to manage web-based
collections with credit cards. With this new product, every virtual retailer can accept credit card payments. The new
product can be used by retailers with a website having a “virtual shop-window”, as well as by other retail businesses such as
hotels, travel agencies, tour operators, movie theaters, which do not have an actual virtual shop but accept credit card
payments based on the same modalities of mail orders.
Other operations were made on the POS retailer master data application and on the card distribution application to allow
our Group to take part in the “PayPass” initiative on the Milan marketplace. With this innovative system, it is no longer
necessary to conduct a standard chip and Pin transaction, but simply hold the card to the “Contactless” reader to pay.
Local Treasuries
As part of the business development of Local agency treasuries, operations were made at the University of Verona and at the
Azienda Consortile Acquedottistica di Pescara. In the latter case, the company supported Cassa di Risparmio di Pescara by
activating the micro-payment system, which allows about 500,000 inhabitants of 64 municipalities of the provinces of
Pescara and Chieti to pay their water bills at any of the branches of the above mentioned Bank.
Car Registration Service (Documentate Auto)
Our Group was among the first to join the “UNRAE Registration Process”, with the creation of a technological platform
connecting Car manufacturers, Car dealers, Banks and the Motor-vehicle Licensing Agency on a web portal.
With a few exceptions, the declaration of conformity, without which no vehicle can be sold and that is used as guarantee
for car financing, has now been dematerialized at national level. Thanks to dematerialization, more than 2 million paperbased certificates, that were sent to the Banks when cars were delivered to the Car dealers, have been eliminated, and most
of them are now processed electronically by our Group network through our web portal PDA (Portale Documentate Auto)
that can be accessed by all our branches. Mazda and the Volkswagen Group are among our major car manufacturing
customers.
Microcircuit updates
In 2009 we completed the migration of the machines of the former Gruppo BPI, and about 340 ATMs were replaced with
the microcircuit version, so that now 85% of our ATM fleet is up to date with the new technology.
The progressive changeover of the ATM fleet combined with a more effective maintenance produced also a service level
improvement, with a service availability rate of 98%.
Development of applications for internet banking and telecommunications
“By web” Service
Services provided to Retail customers via the Internet have been further improved, the website graphics have been revised
and new functionalities introduced, and now the “By” Service offer is uniform across all the Banks of the Group. For
example, the depth of the inquiry on checking account movements was expanded from 90 days to one year, new research
keys were added, including text, and it is now possible to view booked matches.
Customers who joined this service and gave an email address or a mobile phone number can now take advantage of the
Personal Mail (dematerialization in PDF format of main banking communications) on accounts with single account-holder.
This operation allows the customers to view immediately their mail and obtain guaranteed electronic storage for 10 years.
Since June, when the new deposit product called “RendiConto” was released, it is possible to inquire movements by web
and to instruct for bank transfers to checking accounts that were pre-authorized at the branch.
“By alert” Service
A number of operations were made on the infrastructure to monitor and improve the customer information system mainly
with respect to security, by making it more robust so as to support larger transaction numbers, and by managing sending
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priorities, so that SMS classified as important are sent to the customer first (for example, an anti-fraud SMS as compared with
an account information), and to have a view on the status of sent SMS.
More than 18 million SMS were managed on the platform in 2009.
Vant@ggio: Remote Banking service for Corporate clients
In 2009 we followed two main guidelines: guarantee a greater security level to counteract the increasing fraud attempts, and
release the services planned by the CBI Consortium.
With respect to security, in addition to activating a messaging system to customers every time they make bank transfers from
Italy to a Foreign country, since October OTP tokens (One Time Password) were distributed by a Tecmarket Servizi
company in all branches to counteract Remote Banking frauds. These are devices to be used by customers, that
automatically generate dynamic security codes to be keyed in when accessing and authorizing payments. SGS acted on the
user master data system and developed a new procedure to manage the devices and to monitor stocks at the branches.
In compliance with regulations on digital signatures for transaction flows sent via CBI, in their capacity as passive bank,
branches were released a procedure to send the received instructions without having to send specific authorizations by
traditional channels (fax). Then again for the CBI service, the dematerialization of account statements has been activated for
a good number of pilot customers of the “Vant@ggio” service. Customers will thus receive their banking documentation in
PDF format: checking account statements, securities, mortgages, portfolio, accounts receivable advances.
Projects for improvements and efficiency gains
Single Treasury in Foreign currencies and centralization of settlements on Banco Popolare – Estero Pr.E.M.I.A
The Single Treasury in Foreign currencies was activated at the Parent company, and foreign currency settlements with
Foreign correspondent banks were centralized. The first Bank of the Group to benefit of this new function was Banca
Popolare di Novara as of 14 September.
The new operational model envisages:
x the centralization at Banco Popolare of foreign currency and euro denominated accounts with Foreign
correspondent banks, and closing of those currently open at the retail banks (Banche del Territorio);
x the routing of Swift messages referring to foreign currency transactions within the Group onto Banco Popolare, as
it now occurs for Euro transactions;
x the centralization at Banco Popolare of currency and repo bookings;
x the management of exchange rate and interest rate risks on Banco Popolare’s single position.
The project was completed with the release of this function to Banca Popolare di Verona-SGSP, Credito Bergamasco and
then all the Banks in October 2009.
Cash management centralized at the Parent company
The goal of this project was to set up a single “Central Cash Treasury” to be managed at the Parent company from an
accounting point of view, allowing Banco to act as a single entity with the Bank of Italy when carrying out deposit and
withdrawal transactions with the Central Bank. Managing transactions became much easier, because the spate of
transactions between single banks was fully automated through a procedure that guarantees entries to single Banks and
branches involved in the transfers. The in-house benefits were:
x the current level of service to branches was retained, and for them the changeover to the single central cash
treasury was “transparent”;
x the operational accounting management of the Central Cash Treasury was simplified (28 “accounting rooms”
across the territory as compared to 100 in the past) and the number of transactions was reduced, leading to a
consequent reduction in personnel;
x the overall cash freezing was reduced, by taking advantage of synergies generated by the centralization;
x the operational processes of external companies in charge of accounting audits or transportation were
streamlined, leading also to an operational risk reduction.
The Production Department actively supported the regular operations and the annual tests for Business Continuity,
departmental environments, the Host central system, the AS400 environment and the network infrastructure.
Centralized administrative services
In 2009 the Administrative services provided by SGS BP to the entire Gruppo Banco Popolare focused in particular on the
centralization of Middle Office and Back Office activities within the Company itself, and on the development of Information
Systems to support and automatically manage transactions and services.
These actions generated sizable cost synergies and paved the way to the Group Banks to offer high quality and distinctive
products and services.
The most important activities in which the Administrative Service Department was involved were:
x the creation of the Single Treasury and the centralization of settlements at Banco Popolare;
x the creation of the Group Central Cash Treasury;
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x
x
x
x
x
x
x
x
the launch of SEPA Direct Debit operations;
the reorganization of operational processes and operational risk control for OTC derivatives;
launch of daily margining for “Credit Support Annex” contracts;
launch of the Single Securities Custodian with centralization of all assets in Banca Aletti and Banco Popolare;
centralization of the Fund Custodian Bank at Banco Popolare;
the reorganization of operational processes for the sale of UCITS products;
administrative management of asset repatriation and/or regularization transactions called “scudo-ter”;
the drawing up and release of the new Group policy for proprietary securities pricing and for bond issues of
Gruppo Banco Popolare;
x the speeding up of month-end accounting closings.
Group Safety and Security
In 2009 we focused on the consolidation of all the areas making up the Group Safety and Security Department, along the
same centralization logic pursued the year before, which led to the reorganization of the Department’s entire organizational
structure.
IT Security
With respect to IT Security, we constantly upgraded and enhanced data integrity tools, and monitored external threats on a
daily basis to keep our anti-intrusion systems constantly up to date.
A special focus was devoted to the deployment of defensive and preventive actions to minimize fraud risks in the Group,
aiming at guaranteeing a greater effectiveness and timeliness in adopting countermeasures, and at generating synergies with
other corporate functions. In particular, on-line payment systems (home banking) and payments with electronic cards issued
by the Group are constantly monitored, in case of clones the cards are immediately replaced, new authorization logics were
developed, together with new intrusion prevention, fraud detection and malware tools.
Physical Safety
As part of the changes to the organizational structure introduced in 2009, specific local desks were set up in charge of
physical safety and health on the workplace, which report directly to the new Security and Safety Function. These desks
work jointly with the central Security and Safety offices and guarantee a greater efficacy and a more harmonized action.
Among ongoing projects, worth mentioning are the enhancement of the branch remote control systems, transferred on a
data transmission network instead of dedicated channels, which improved the cost/benefit ratio, and the IT integration of
flows originated by department stores as part of the procedure to manage the transportation of valuables to the branches.
From an infrastructural standpoint, we improved crime prevention and deterrence by using new control systems integrated
with physical safety, by partitioning cash, integrating alarm systems and developing CCTV solutions.
As a result, less “successful” robberies and thefts were reported at Group level in 2009.
In addition to internal actions, we continued to collaborate with law enforcement agencies (Police departments, Police
prefects, Carabinieri provincial stations and Tax Police - Guardia di Finanza), to favor the fight against robberies and thefts
in bank branches.
Health and Safety
In addition to actions carried out to comply with national regulations, the management of temporary and mobile worksites
for the renovation of Group structures and buildings was centralized at the Technical Service of BP Property Management,
where all the responsible are, especially with respect to the “project manager”.
The Prevention and Protection Service set up emergency plans for all Group premises, geared to the specific risks of the
working environment and based on the potential and foreseeable emergency conditions linked to the activities performed,
such as fire, natural disasters (earthquakes, floods), robbery and sickness; to this regard, in 2009 emergency evacuation drills
were held in premises that are deemed at greater risk among Group Offices.
Business Continuity
The goal of the Group Business Continuity Plan prepared by the Business Continuity Function and approved by the Parent
company’s Management Board is to manage critical situations caused by sector-wide accidents or catastrophes impairing
the integrity of key structures. Other critical situations that do not entail material destruction are taken into consideration, as
for example the non-availability of personnel as a result of epidemics.
In 2009 new tests were carried out, which gave a positive outcome, and involved Organizational Units of Banco Popolare,
Banca Aletti and SGS in various simulation sessions, where selected offices would become unavailable and would be
restored in other towns in keeping with operational manuals. In particular, we simulated with success a scenario of sudden
unavailability of the Group Treasury, based in Bergamo, and the stepping in of units based in Lodi, which carried out
correctly all the planned tasks.
In September 2009, we successfully conducted the annual information system disaster recovery test, with the activation of
the backup site in Milan, and bringing in operation 10 Group branches, at least one for each Banca del Territorio.
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As suggested by the Supervisory Authority, we constantly maintained the plan, by taking corrective, enhancing or upgrading
actions, within the size, functional and technical scopes.
Technological investments and projects
Rationalization of the geographical network and network organization model
In 2009 we revised the Network organization model of Credito Bergamasco to harmonize it with Group models and
professional roles, and introducing also in this Bank a greater specialization by customer segments and the two Group
branch organizational models (Specialized branches and Small branches).
To make our presence on the territory more efficient, new local retail branches were opened for the Banche del Territorio
while overlapping branches on the same marketplace were consolidated (CR Lucca Pisa Livorno, Creberg, BPV-SGSP).
For the same reason, during the year a number of rationalization actions were taken, as summarized below:
x branch operational configuration (standalone – light);
x reference branches for foreign operations;
x branch transfers in new premises;
x Business Area remodeling (BPN: consolidation of the Business Areas of Alessandria – Asti; BPL: rationalization of
Business Areas in Liguria; Banca Caripe: consolidation of two existing Business Areas);
x organization of Corporate Centers in the single Business Areas;
x elimination of Head Offices in Liguria and Sicily (BPL).
A Business Area specialist was introduced at Group level to support Branches with subsidized loans to retail customers,
which is considered a rather delicate matter at a time of troubled markets and of constant regulatory updates.
Transformation of service companies into consortia
During the year we completed the project aiming at transforming the service companies from for-profit joint-stock
companies to non-profit consortia.
This transformation regarded Società Gestione Servizi BP, BP Property Management and Società Gestione Crediti BP, and it
highlighted the value of the synergies they created as cost centers.
In order to implement this organizational solution, the consortia’s shareholding structures had to be extended to include the
Group client companies.
The share of each company is determined based on the level of utilization of consortium services.
Italease
Banco Popolare carried out a complex project to restructure Gruppo Banca Italease, in keeping with the guidelines set out
in the agreement signed by the shareholding banks in March 2009.
On 31.12.2009 two new companies became fully operational: Release, engaging and specializing in credit recovery - an
associate of Banca Italease – which received by Banca Italease and its subsidiary nonperforming, substandard or impaired
loans, and Alba Leasing – an associate of Banco Popolare – which received the performing loans of Banca Italease and its
subsidiaries and engages in the development and distribution of lease financing through the networks of its shareholding
banks.
In 2009, Banco Popolare took numerous actions on Banca Italease’s capital and capital structure: in June/July the Tender
Offer on all its common shares, in October/November the Public Exchange Offer on Italease subordinated bonds in
exchange for Banco Popolare fixed rate securities, in December 2009/January 2010 the capital increase to reach a 91.397%
interest.
Numerous actions were carried out to rationalize and improve the efficiency of the entire organizational structure of Banca
Italease and its subsidiaries, taking advantage of the many opportunities in terms of synergies and centralization with the
operational structures of the Parent company, Banco Popolare, and the Group service companies, SGC, SGS, BP Property.
In Q3, all the activities necessary to achieve a full integration of the organizational structures, and of processes and systems
to identify, measure, manage, mitigate, control and report risks were launched and are still underway, in order to ensure
their consistency with risk control strategies, policies and regulations developed by the Parent company Banco Popolare.
We also started to carry out preliminary estimates of the exposure of the new group to the main corporate risks, based on
widely accepted risk measurement methods and systems, supplemented by qualitative and quantitative assessments, and in
case of lack of internal data, we resorted to regulatory requirements. Based on preliminary results, with respect to the
second half of 2009 there were no negative elements, from a management standpoint, impacting the capital adequacy of the
new Group.
Migration of BP Croatia
The migration of Banco Popolare Croatia is part of a master project for the migration of the Group foreign banks onto the
Group information system.
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Two banks at present are operating on this system:
x BP eská Republica (migrated in March 2008)
x BP Croatia (migrated in June 2009).
The decision to create a target platform for our Foreign banks was constrained by some strategic choices, for example the
difficulty of managing and controlling multiple systems and suppliers, the high license cost and the lack of synergies when
evolving each single system.
The benefits we reaped from this choice were many: the greater robustness of the system, scalability, lower management
costs, the Parent company can control the systems and check current operations.
The migration project of Banco Popolare Croatia was carried out in about 12 months, most of which were devoted to the
gap analysis between the old and the new system and to make the new IT platform compliant with the Country’s regulatory
and procedural constraints.
A big training effort was made to teach how to use the new system, with training delivered to almost all the 270 employees
of the Bank with a series of internships organized also in Italy.
The migration as usual was preceded by a general test (warm-up 23-24 May), and was then carried out in the week-end of
13-14 June. On Monday, 15 June the Bank was operating regularly using the new system.
With its 35 branches, the Bank represents the largest foreign bank of the Group, and to date it operates efficiently; the trend
of executed transactions is constantly rising, evidencing the excellent learning curve of the system and the solidity of the
training activities delivered to users.
Manager responsible for the preparation of corporate financial reports (L.262/2005)
Considering the increasing number of Managers Responsible within the Group, and to improve the management of the
“Control Model for the preparation of corporate financial reports”, a new “Group Rulebook for the Manager Responsible”
was developed.
In addition to harmonizing the adoption of procedures across all the Group companies that make a significant contribution
to the preparation of the Consolidated Financial Statements, the rulebook also gives a more exhaustive description of other
key aspects, such as the interrelation between the Parent company’s Manger Responsible and the Managers Responsible of
subsidiaries and other Group companies, operational flows between Corporate Boards/Structures and the Mangers
Responsible of the Parent company and of the single subsidiaries, the activities and development of the methodological
component, control over IT processes that affect financial disclosure.
Administrative liability of Companies
Banco Popolare’s organizational and management model pursuant to Lgs. D. 231/01 requires the Company to periodically
revise the mapping of corporate processes and activities that may give rise to the risk of committing one of those crimes
expressly mentioned in the aforesaid legislative decree.
To this end, the Group Organization Service activated a project to map the “231 risk” areas, covering 203 Organizational
units, more than 70 key officers and 13 top managers between 7 April and 4 November 2009.
The outcome of this mapping were summarized in a report, which in practice shows that the “control systems” set up to
mitigate potential “231 risks”, and the actions to improve or consolidate the effectiveness of this control system proved
adequate.
Anti-money laundering
Numerous initiatives were takes as part of the anti-money laundering project, leading to the creation of a Group Anti-Money
Laundering Manager, i.e., the Head of the Research and Investigation Function of Banco Popolare’s Legal Service.
Each single Bank and Company of the Group in the meanwhile appointed an anti-money laundering responsible/desk in
charge of transposing the instructions given by the Group Manager into the local structures.
Again to harmonize information and operational procedures, all reporting power delegations issued by the Group Banks to
report suspicious transactions and violations under art. 49 of Lgs.D. 231/07 have been centralized at the Research and
Investigation Function, and an IT procedure was released to manage suspicious transaction reports.
Mifid/Consob Compliance
In order to adopt the regulatory guidelines set out in Consob’s Communication 9019104 of 2 March 2009 "The duty of
intermediaries to act correctly and transparently in the distribution of illiquid financial products”, the Group activated a
specific project coordinated by the Parent company Governance structures, to establish ad hoc procedures to manage the
regulatory measures for transparency and correctness.
The main novelties were:
x shorter lag between the time of distribution of the financial instrument and the time when it can actually be traded
on the Group Securities Market (Mercato Titoli Gruppo) for Bonds issued by the Group and Bonds issued by third
parties and distributed exclusively by the Group Banks. As of 1 November 2009, this must occur within 90
calendar days of the settlement date of the transaction executed on the primary market;
x introduction of specific policies to identify illiquid financial products and referring to pricing issues;
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x ex-ante transparency with disclosure of OTC derivative prices;
x identification and activation of the monitoring process for the correlation of OTC derivative transactions executed
by customers for interest risk hedging.
To comply with the above requirements, a number of technological actions had to be taken, among which:
x we developed a procedure for OTC derivative transactions, to identify the correlation between the debit position
of the customer and the associated hedging transaction (for interest rate hedging products);
x we completed the necessary application adjustments for a correct management of outstanding relations with
qualified counterparties;
x we made Post Trade Transparency processes and procedures compliant with new Consob instructions;
x we completed the steps to automate Aletti’s advisory model;
x we fine-tuned the process to manage retail customer relations;
x we introduced a new procedure to manage conflicts and to keep the related record, automatically integrated with
sector procedures for distribution and trading;
x we released the MIFID-compliant insurance questionnaire for advisory services when distributing index-linked,
unit-linked and capital guaranteed policies;
x we completed activities to include in all transaction forms (with graphics more in tune with the advisory service)
all the regulatory disclosure requirements to be provided to the customer at the time of proposal and upon
confirming the order execution.
Transparency
Following the coming into effect of the new Supervisory Instructions issued by the Bank of Italy for the transparency of
banking and financial services and transactions and a correct relation between intermediaries and investors, published on
29 July 2009, an ad hoc working group was set up, in charge of analyzing the impacts the new regulation will have on the
organizational structure and on the operations of Gruppo Banco Popolare.
The working group acted promptly to adopt the new instructions aiming at safeguarding Customers, while improving the
quality of customer relationships.
The goals of the working group were:
x adjustment of customer management and customer communications with respect to the changes in “linked
interest rates” and the implementation and automation of the process to enter the justified reason for customer
communications as a result of changes required by the Bank Head Offices;
x management of customer communications in case of “expiring” terms and conditions;
x management of changes regarding individual customer accounts (unilateral when on the bank’s initiative and
bilateral when agreed with customer) and automatic production of contract forms.
Once the activities were completed in the month of October 2009, we started planning new implementations to be carried
out in 2010, following the issue by the Bank of Italy of a new version of the Regulation on transparency of banking
transactions.
Usury
The new regulation issued by the Bank of Italy in August 2009 called for the revision of the existing anti-usury IT tools.
Considering that usury is a criminal offense, the activity required the collaboration and the support of other Group
structures, such as Legal Advisory office, Compliance, Group Organization, Retail and Corporate Departments. At the end of
2009 we identified the necessary contingency solutions to guarantee correct operations as of 1 January 2010. In any case
the project will continue also in the first months of 2010 to complete the procedural actions and change internal policy
rules.
Fondo Unico Giustizia (FUG)
L.D.143 of 16 September 2008 prescribed the duty for Banks to set up a fund (so called FUG) where all the money coming
from seizures and forfeitures must be channeled. Under the regulation, a monthly report must be sent to Equitalia Giustizia
SpA; for this reason SGS developed a tool for the automated and integrated management of a master database containing
records and reports.
Sepa and Payment Services Directive
The first step of the SEPA project called “Credit Transfer” had been completed at the beginning of 2008, and in keeping with
the National Migration Plan of the SePa Project, in November 2009 we started to manage the new payment collection tool
Sepa Direct Debit (SDD) to run side by side with the already operational Sepa Credit Transfer (SCT).
It is a new European service of pre-authorized debiting directly agreed by creditor and debtor and comparable to the Italian
RID. Thanks to this scheme, debiting procedures will be swifter and more secure, and the debtor’s bank will have no need
to carry out additional checks. SGS started to make the necessary adjustments to the Portfolio Procedure – Receivables
Collection to manage this new type of transaction within the deadline fixed by the directive, and on 2 November last we
released the new functionalities to all the Banks of the Group to manage the “debit” side of the transaction (checking
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account debiting). The “credit” side (payment collection instructions by customers) will be released as soon as the Payment
Services Directive shall be transposed into domestic law (February 2010).
Thanks to these developments, the Group can already support the migration from domestic instruments to the new panEuropean instruments.
In 2009 we also launched a Project for the analysis and implementation of necessary adjustments to comply with the
Payment Services Directive 64/2007 EC (PSD) which has been transposed in January 2010; the PSD is the key juridical
foundation through which existing regulatory differences among EC member countries can be overcome. It defines new
transparency, efficiency and security rules, and it strengthens the protection and rights of customers. The new regulation
cuts across various areas of the bank-customer relation, among which, for example, execution time and value date,
mandatory use of the IBAN code, disclosure to customers, full revision of contracts for payment and collections services.
At the end of December 2009, even though PSD had not been transposed yet into domestic law, SGS implemented a project
to identify which areas are affected and define and develop all the technological and process implementations necessary to
comply with the directive. About 66 products currently distributed by the Group Banks had to be modified, 70 operational
processes revised and about 50 IT operations were carried out. Customer contract forms had to be made compliant and
existing contracts with some suppliers had to be verified (external services). To guarantee compliance by 1 November 2009
it was necessary to commit Group internal resources from the impacted areas (SGS, Organization, Legal Affairs, Sales, etc.),
corresponding to about 2,900 man days, plus those of suppliers.
To date the project can be considered over, although a grace period until May 2010 has already been scheduled for the
Collection procedure and for payments made by Public Administration. The directive came into force on 1 March 2010.
Streamlining the Lending processes
Loan granting process
To support the sales network and improve the information set used when granting loans, the decision-making system for
Retail customers was revised, based on Basel 2 calculation logics using the PD parameter (Probability of Default) also for
loans to retail customers of all the Banche del Territorio. SGS delivered the going live of the application tool for the
calculation of decision powers and the automatic renewal of uncommitted credit facilities, including the activation of the
decision-making engine Sco.Pri., all fully integrated with the decision-making strategies defined by the Group Lending
Policies.
The new decision-making system for the Small Business segment was released by making the necessary application
changes, and the new Decision-making system was released across the entire sales network at the end of November 2009.
Actions were made to facilitate the control of larger customer Groups, which will improve counterparty assessment, and
important administrative activities to support the lending process (guarantee management) started to be centralized at the
Parent company.
At the same time, we continued to work on IT integration to extend the “New ELISE Mortgage and Loan Procedure” for
Retail non-subsidized loans to all the Group Banks. Side by side with the launch of the new platform, we also launched the
new loan processing procedure at the “Subsidized Loan” structure (“Crediti Speciali”), based on which minutes are sent to
the branches within the second working day of the receipt of the complete documentation at the competent offices. The
target was attained and consistently maintained as of June 2009, also thanks to the development of the “Automatic Minutesmaker” and to micro-organizational actions made within the structure.
In 2009, the entire Lending sector was busy complying with the numerous measures designed by the Government and the
Italian Banking Association (ABI) to support Households and Small Businesses, owing to the harsh economic cycle that has
been characterizing the entire year. To mention the main ones, there were the “Tremonti” measures, the initiatives in favor
of families and enterprises hard hit by the earthquake in Abruzzo, and the “Debt Moratorium for SMEs” based on the
guidelines of ABI, Government and Trade Associations (Small Business Act) to suspend debt payments by SMEs, and of
course all the necessary IT implementations were developed, and we are now extending them to other segments (Household
Plan).
Monitoring Process
Actions were made to improve loan monitoring, strengthening the sales network structures and revising procedures so as to
enable a more effective and timely systematic monitoring of corporate customers by upgrading and enhancing the
instruments supporting the customer loan monitoring process.
We focused on the one side on optimizing the Performance Management process (G.AN.C. Procedure), by reducing our
risk-taking level through the early detection of a restricted number of impaired loans to be closely monitored; on the other
side, we focused on the opportunity to use the low risk loan portfolio profitably, to promote sales initiatives.
The tool is being used by all the Banche del Territorio and periodic notification letters have been prepared, that are
automatically sent to users (CPC, Renewals and Average Approval Time, etc.). The project is now dealing with the
development of management reports for the Group Performance Department.
Process to manage doubtful loans
In 2009 a new process was released to manage payment defaults by retail customers, triggering the intervention of external
entities, such as contact centers and doorstep loan collection firms.
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To further improve the process, the Banche del Territorio handed over the management of substandard and restructured
loans for single names or Groups exceeding the one million euro unit amount to Società Gestione Credito (SGC) of Gruppo
Banco Popolare, specializing in doubtful loans.
Actions in case of defaulted financial instruments
As part of the services offered to our customers, the bank took a number of actions in favor of customers holding bonds
issued by some companies which defaulted in 2008- 2009.
For all customers involved in the default of the Lehman Brothers Group, the Icelandic banks and General Motors we took
over directly the management of the obligations associated with said positions for the affidavits of debt in compliance with
the procedures defined from time to time by competent Authorities, and in any case we paid for legal charges and provided
these services free of charge.
The group is closely monitoring the situation, so as to keep our customers informed as to how things are progressing.
To retain and improve customer relations, at the beginning of 2010 the Group launched an initiative to protect investments
in index-linked policies backed by securities of Icelandic banks.
To this end, it voluntarily offered to exchange the above policies with bonds issued by Banco, plus a possible cash balance
settlement.
By participating in the PEO, customers can recover the capital originally invested in the policies upon expiration of the
bonds received in exchange.
Pattichiari
With the purpose of lending momentum to the strategy of increasing the competitiveness on the retail market, on 31
December 2008 Banco Popolare as a Group joined the New PattiChiari Consortium (Nuovo Consorzio PattiChiari), which
came into operation on 1 January 2009, this being the pre-requisite for the effectiveness of the sector action plan, based on
a continuous relation to improve business relations between banks and customers.
In keeping with the above goals, the Consortium introduced important changes to its governance and to rules to participate
in its initiatives, requiring new undertakings from banks, that will translate into practical benefits for customer relationships.
In particular, the most important undertakings implemented up to now are:
x Automatic RID transferability (RID – B2C pre-authorized direct debiting);
x Automatic transferability of mortgage data and payments;
x Automatic Ri.Ba. transferability Ri.Ba. - B2B pre-authorized direct debiting);
x Protection against unlawful use of cards.
By 31/12/2010 the following undertakings must be implemented:
x Automatic bank transfer transferability;
x Automatic credit card account statement transferability;
x Automatic transferability of securities accounts.
UNI EN ISO 9001:2008 certification – project development and provision of treasury and cash
management services to public agencies
A Quality Management System implies the existence of a certified operational model to manage and monitor the activities
of an organization that wishes to guarantee customer satisfaction.
After extending it to all the Group Banks, Banco Popolare obtained the certification of compliance with the new 2008
version of the UNI EN ISO 9001 standard: our quality certification for the design and provision of services to public
agencies is still at top levels.
This certification will enable the Banks of the Group to consolidate and foster their “community bank” vocation, and to
strengthen the ties that have been established over time with local governments, guaranteeing high service standards that
meet the stringent quality requirements of the ISO standards.
Bancassurance
In 2009, the partnership agreements between Banco Popolare and Gruppo Fondiaria SAI (investment-linked, savings and
retirement scheme life policies) and Gruppo AVIVA (non-life and protection insurance products) were developed further.
Since April 2009, the Banche del Territorio started to distribute Lawrence Life Policies, an Irish company of Gruppo
Fondiaria-SAI; as a result, Popolare Vita’s product offering was expanded.
Since July 2009 the new Insurance Company Avipop Vita is operational, and will work with Avipop Assicurazioni to design
and offer protection products.
With Gruppo Aviva we are also revising the product sales processes and procedures for the Group branches.
In the unrelenting pursuit of customer service improvement, in May 2009 back office activities associated with
bancassurance products were transferred over to SGS BP to achieve a greater operational efficiency.
This led to the deployment of implementations to bring the post-sale management of policies on a single application.
Groundwork activities have been carried out to distribute new life and non-life policies.
With respect to non-life products, actions were taken to manage the distribution of the new products “Multirischi Impresa”
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and “Multirischi Commercio”, and a project was launched to implement a new web-based distribution procedure
developed by the Insurance Company.
With respect to life products:
x the Fondiweb application for the distribution of Life Products was released also to the banks of former Gruppo
BPI;
x all the groundwork has been carried out to distribute the new Irish policies issued by Lawrence Life;
x the new products Popolare Vita Beldomani Futuro Garantito 2009 Soci e Dipendenti were implemented.
Enterprise architecture
In 2009 we designed a new strategy for the business process mapping and description system. Considering the increasingly
stringent requirements in the field of compliance, we decided to point the system’s focus towards this ambit, and we
designed and implemented a progressive integration among risk and control processes and systems. The Internal Auditing
and Risk Management sub-systems were involved in the implementation. At first, the new strategy was aimed at supporting
the Internal Control Development project, to obtain as quickly as possible a general mapping of the main Basel II risks
within the different business processes (ICAAP standard). In the meantime it was decided to include the Internal Regulation
of the various Group Companies in the mapping, and to analytically identify the associated process for each Regulationbased activity, together with the related risks and controls, if in place. The purpose was to obtain a gradual descriptive
harmonization of the different Regulations, and extend it to the link between activities and the different business processes.
Strengthening of Parent company Governance
In 2009, the role of the Parent company was progressively strengthened, in particular with respect to risk monitoring and
control activities.
In April treasury and forex activities, as well as the management of Banco Popolare’s proprietary portfolio (which were
previously carried out by Banca Aletti for the Group Banks) were centralized at the Parent company.
In June, a new differentiated sales management model for “large corporate” customers was activated at Group level,
whereby the sales management and the creditworthiness assessment of corporate customers of national import and complex
financial requirements were to be centralized at the Parent company, with the appointment of dedicated specialists (Global
Relationship Managers – GRM).
In July Custodian Bank activities were centralized at Banco Popolare.
In September the following actions were taken:
x activation at Group level of a new model to coordinate risk control and customer relations with institutional
counterparties, i.e., domestic Banks and Banking groups, foreign Banks and Banking groups, non-banking
Institutional Counterparties (Insurance companies, Insurance groups and Financial companies mainly associates of
Banks and Insurance companies). Here as well, the relationship management and the assessment of the
creditworthiness were centralized at the Parent company, and activities are to be coordinated by dedicated
specialists (Institutional Counterparty Managers);
x activation at Group level of a new model to manage “nostro” and “vostro” accounts with foreign correspondent
banks, centralized at the Parent company;
x centralization at the Parent company of some activities generally performed by the Loan Secretary offices of the
retail banks (update, management and monitoring of Credit Bureau reports; preparation, execution and filing of
documents referring to guarantees, collaterals and atypical guarantees);
x centralization at SGC BP SpA of the management of substandard and restructured loans with a unit amount above
one million euro, to be added to the already ongoing management of non-performing loans.
Again in September 2009, the top management structure of Banco Popolare was revised to include the Chief Executive
Officer and seven Departments:
x Corporate
x Retail
x Lending
x Finance, Corporate Center and Investments in associates and companies subject to joint control
x Legal Affairs and Compliance
x Operations
x Human Resources.
This action was in key with the corporate governance plan, whereby the decision-making and management processes are
organized along criteria of utmost efficiency: constant risk control, minimum information flow dispersion, clear
identification of head departments for the various operational areas, rationalization of direct reporting.
Also the Parent company Committees were likewise revised to ensure clarity of vision, responsibility, crosscut knowledge of
risks, traceability of decision-making processes.
After the revision of the top management structure of Banco Popolare, and in step with the progressive strengthening of the
controlling role of the Parent company, towards the end of the year the organizational models of the Corporate, Retail,
Lending, Legal Affairs and Compliance Departments and of the Equity Investment service were equally revised.
In December 2009 it was decided to have the Planning and Management Control structures of the retail banks functionally
report to the peer structure at the Parent company.
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Basel 2
In 2009, as part of the “Extended” Basel 2 program, Banco Popolare moved ahead with the necessary activities to obtain the
authorization from the Supervisory Authority to use internal rating systems to calculate minimum capital requirements.
Described below is the work-in-progress of this and other projects as at 31 December 2009.
Credit Risk
In 2009, Gruppo Banco Popolare moved ahead with pre-validation activities with the Supervisory Authority to obtain the
authorization to use internal rating systems (Internal Rating Based – IRB) to calculate capital requirements.
Credit risk models
Pre-validation activities called for:
x the recalibration of “Probability of default” (PD) internal models for “Corporate” customers across the entire
Gruppo Banco Popolare;
x the development and deployment of the PD model to adopt the advanced internal rating system (AIRB) for
“Retail” customers;
x the reassessment of the “Loss Given Default” (LGD) model.
The Group intends to continue adopting risk analysis and measurement methods: the first step for the extension of the LDG
parameter LGD (Loss Given Default) has already been reached in loan granting processes, and the parameter is used for the
automatic renewal of credit facilities (December 2009).
Decision-making engines for Retail customers and Small Businesses have been released to the various Banks, with strategies
adequately integrated to take into account the unit Expected loss (EL), calculated by multiplying PD, Probability of Default
times LGD, Loss given default.
The project is now focusing on extending the management utilization scope of LGD and developing a new engine to
calculate effective LGD.
Liquidity Risk
Gruppo Banco Popolare completed the project for the fine-tuning of its management and control system for the liquidity
risk, through the following steps:
x approval of the Group Liquidity Policy and of the Liquidity Contingency Plan to guarantee a timely and efficient
management in case of liquidity stress or crisis;
x fine-tuning of quantitative methodologies to estimate cash flows associated with balance sheet items with an
indefinite or recurring maturity, and related revision of existing risk limits;
x fine-tuning of the stress test methodologies;
x consolidation of a methodology to quantify economic capital absorption for liquidity risk (Basel II Second pillar).
Market Risks
During 2009 the Group continued to fine-tune the methodology to measure market risk, both from a technological and
methodological standpoint. In the latter case, the methodology was made more suitable for the factoring in of market
volatility risks in its risk measures.
Back-testing procedures were developed, allowing us to verify ex-post the correctness and robustness of the model against
risks that have actually occurred.
In 2009 we also added detailed limits for each risk factor to the measurement and daily reporting of risks based on the VaR
methodology, to allow a better control and a more careful management of the different market risk factors.
Internal regulations on risk limits have been revised so as to harmonize measures across all the banks of Gruppo Banco
Popolare.
In 2010 we will develop risk analyses to verify the economic impact in case of extreme movements of market risk factors.
Project to certify the internal market risks model
The project to certify the internal model to calculate regulatory capital requirements to replace the standard methodology
was launched in 2008 and in 2009 it went through a series of important evolutions from a functional, technological, scope
and process standpoint.
At functional level we developed the back-testing system to monitor the predictive quality of the risk management system
with respect to actual portfolio profits and losses.
Trade-off analyses are underway to assess whether to use the internal model, because the changes made to supervisory
regulations by the Basel Committee (July 2009) tend to significantly reduce the benefits of using the internal model instead
of the standard model currently in use.
120
Operational Risks
Gruppo Banco Popolare implemented a model to calculate capital requirements based on the standardized approach rules
prescribed by the new Supervisory Directives, and is moving ahead with the development and fine-tuning of a model to
calculate capital absorption based on VaR logics for management and regulatory purposes, also in view of the plan to adopt
the advanced methods to quantify capital requirements in the medium term.
We implemented all the necessary infrastructures to manage operational risk, and in particular we:
x defined the new Group risk policy;
x integrated and implemented risk identification and assessment processes, as well as the new integrated model to
measure capital requirements;
x defined new risk exposure reporting and assessment models;
x implemented self-assessment workshops on the risk management system.
The internal operational risk policy was approved by the Group corporate bodies in February 2008, followed by the
adoption of the organizational model. Methodological analyses have been carried out to develop models and tools to
measure capital requirements based on more advanced methods (so called Advanced Measurement Approach – A.M.A.).
The scope of the internal model covers the companies of the Group that adopt the standardized approach also on an
individual basis.
In order to provide the competent structures with an effective tool to monitor operational risk, we developed a remote
monitoring system to check the performance of the so called Centri di Responsabilità (CdR – Responsibility Centers) based
on an application whose parameters can be fully specified by the user. The new application is managed by the Centralized
Controls Function, and allows the periodic and/or on demand detection of potentially irregular phenomena due to failure to
perform line controls or to non-compliant behaviors that could give rise to operational losses or risks.
160 types of events are monitored thanks to this procedure. Based on the parameters specified by the user, the procedure
checks for anomalies and reports them to the Responsibility Centers to take the necessary actions; with this procedure it is
possible to backtrack also single basic events that caused the anomaly. The procedure is fed by the sub-systems Administration,
Finance and Loans, and was released in February 2009 to all the Group Banks.
Capital adequacy assessment
As part of the activities to adopt the new supervisory regulations (so called “Basel 2”), we moved ahead with the adoption of
the so called “Second Pillar”, which requires a discrete process to measure the capital’s adequacy to face all material risks,
that now include a wider class of risks than in the First Pillar. The process is called Internal Capital Adequacy Assessment
Process or ICAAP.
Based on this process, in April 2009 the Management and Supervisory Boards of the Parent company approved the second
“ICAAP Report” to be submitted to the Bank of Italy (the first report had been sent at the end of October 2008), thus bringing
the annual ICAAP assessment and reporting procedure to full operation.
The process requires first of all the measurement of quantifiable risks based on management metrics to be defined
autonomously, also based on the materiality of risks to be assessed; the Group uses as much as possible internal
statistical/quantitative methodologies (VaR or Value at Risk), based on market practice.
The ICAAP report showed a satisfactory level of capital adequacy for the Group, both with respect to 31 December 2008
(so called “current assessment”) and to 31 December 2009 (so called “prospective” assessment), to adequately face the set
of identified risks.
ICAAP calls also for a qualitative analysis of organizational checkpoints, to assess for each risk the competent organizational
structures, the supporting IT systems, internal policies, controls, reports etc. that have been put in place to control and
mitigate these risks.
The analysis depicted a positive picture of the existing organizational checkpoints for risk mitigation and control.
In addition to risk control, the Group pays special attention also to its capitalization level, to make sure it can maintain and
strengthen its support to the households and SMEs of its market territory, also in case of economic crisis.
The issue of 1.45 billion worth of financial instruments under L.D. 185/08 (so called “Tremonti Bonds”), and the issue of
convertible bonds up to a maximum amount of 1 billion (“soft mandatory”) were based on the above rationale.
Risk limit system
To regulate corporate risk-taking, in 2009 the Group adopted a consistent and comprehensive risk limit system, where the
risk limits represent the maximum level of risk to be taken, consistently with available capital and with the Group risk
propensity (indicative to this regard is the allocation of a capital reserve not destined to cover current risks but set aside for
capital strengthening purposes and to cover possible severe stresses).
The responsibility to comply with each limit is assigned to specific corporate functions/bodies, which can determine risk
dynamics by using managerial levers.
As to liquidity risk, caps are set to ensure the sustainability of the financial flows generated by the expiration of outstanding
intermediation transactions.
121
Market disclosure
In April 2009 a specific public disclosure document, under Basel 2 Pillar Three, was published on the website of the Parent
company, giving qualitative and quantitative information on the Group’s capital adequacy, on its risk exposure and on the
general characteristics of the systems put in place to identify, measure, manage and control risks.
Technologies to monitor the Group interest rate/liquidity risk
To improve the application supports used by the Finance and Risk Management structures, a new procedure (Eagle) was
implemented to monitor the performance of corporate liquidity based on aggregate and detailed views. The new application
supports both Treasury requirements, by providing a valid tool to liquidity risk hedging strategies, as well as control
functions (ALM and Risk Management), through specific reports developed to control the Group’s inventory and availability
of eligible assets (Counterbalancing Capacity) and the related operational limits. In 2009 we completed the acquisition of
revision flows from procedures and we released the complete set of counterbalancing capacity reports.
“Controls on CSA Contracts” Project
The negotiation of Credit Support Annex contracts (CSA) allowed us to effectively monitor OTC contracts with market
counterparties, improving the efficacy of counterparty risk controls, as debt positions are covered with the periodic
exchange of guarantees. Considering the increase in the number of counterparties involved and even more important the
need to carry out daily controls, we decided to go for a double approach.
First of all we joined the interbank circuits (triResolve by Trioptima) which provide their members with standardized systems
to control outstanding positions. These tools (control reports, master data and single transaction assessment details,
threshold and limit controls, etc.) are used by SGS’s Back Office for its daily controls, at present it is operational on a limited
set of counterparties, and the goal is to complete the coverage within the first months of 2010.
We then developed a new application (called “MATCH/CSA”) to guarantee also the control on outstanding positions with
counterparties that are not members of the above interbank circuits, so as to ensure a comprehensive governance of control
operations performed by SGS’s Back Office, through functionalities to automatically verify the alignment with counterparties
positions.
Early Warning
In order to improve the control over transactions outstanding with banking borrowing counterparties, in October we
completed the application development of the monitoring system for different types of credit facilities, such as OTC,
deposits, bonds in portfolio, securities lending. The system must provide a daily monitoring of material positions (to date,
about 1,000 banks with 35 billion euro worth of credit facilities), by spotting possible symptoms of relationship deterioration
from among market, performance and financial signals. The project is strongly oriented towards an effective process
management and is based on threshold logics with a traffic light format, mainly linked to: market price of risk (CDS); rating;
comparison with country rating; comparison with sector averages; financial statements.
Among the various functions we developed, worth mentioning is “watch list”, a sort of final summary of the different signals,
highlighting counterparties on the basis of criticalities.
Communications
Based on the defined communication guidelines, in 2009 Gruppo Banco Popolare developed its communication initiatives
primarily to consolidate its brand, reinforce the Banks’ ties with their historical franchises and share with its stakeholders,
from shareholders to employees, its values and strategies, by clearly and fully expressing our “popolare” Group vocation
and nature in all our communication initiatives.
Communications and External Relations
Press relations in 2009 were intense, and reported an increase in initiatives with respect to the previous year. 212 press
releases were issued, from price sensitive, to commercial, corporate and institutional communiqués, and reports illustrating
the charity and social initiatives of the companies of the Group. More than 20 press conferences were held, covering the
numerous activities performed by the Group banks and highlighting initiatives closely tied to our territory. Banco’s coverage
on local TV and radio stations was widely used to disseminate market and product information. We also increased our
collaborations with numerous newspaper columns dealing with economy, finance and credit topics of interest for the
general public.
With regard to institutional communications, we focused on strengthening and spreading the Group brand name, values and
image through targeted national advertising campaigns and a greater focus on local actions on the market territories, by
running the 2008 positioning campaign themes on the press and the Internet. The Banco Popolare brand was strengthened
further by the various local initiatives taken by the Banks in their franchises, thus reinforcing the association between the
Gruppo Banco Popolare brand and the local brands of retail banks.
A number of nation-wide cultural, musical and sports initiatives organized and sponsored by the Group in 2009 further
122
contributed to spreading Banco Popolare’s brand. Worth mentioning are: the consolidation of the magazine “Rivista del
Banco Popolare”, a six-monthly publication in its second year, featuring authoritative articles, spanning topics of general
interest, from economy to culture, to innovation, and targeting a wide national public including the Group’s main
stakeholders; the success of the sponsored exhibition “Corot e l’arte moderna. Souvenirs et impressions” at Palazzo della
Gran Guardia in Verona, a national event stemming from the agreement between the Verona Museums and the Louvre in
Paris; the support to the thirtieth edition of the Meeting for friendship amongst peoples, tagged “Knowledge is always a
happening”, held in Rimini at the end of August. As to sports, our agreement with the soccer team Juventus F.C. is still
ongoing.
In the eighth edition of ABI’s event “Invito a Palazzo”, Banco Popolare for the first time participated in the extraordinary
opening of heritage buildings having historical, artistic and architectural value with eleven corporate premises, tallying
almost six-thousand visitors: Palazzo Altieri in Rome, Palazzo Scarpa in Verona, Palazzo Tacoli and Palazzo Carandini in
Modena, Palazzo “Ex Albergo pei Poveri” in Bergamo, Palazzo Fossa in Reggio Emilia, Palazzo Ferrari Schizzi in Cremona,
the Historical Head office and the Corporate Center of Banca Popolare di Lodi in Lodi, Palazzo Pantaleoni in Imola and
Palazzo Spinola Gambaro in Genoa were opened to the public. Banca Aletti, in collaboration with the local Banche dei
territori, organized meetings on foreign assets repatriation (Scudo Fiscale) in the various towns.
In our historical franchises, also in 2009 the Group Banks kept on consolidating their traditional ties with their communities,
by supporting and organizing various initiatives. Among musical show initializes, there was the seventh edition of “Estate in
Concerto”, a series of summertime pop music events organized by Banca Popolare di Verona – S.Geminiano e S.Prospero in
well established towns in Veneto, Emilia Romagna, Trentino and Friuli Venezia Giulia. In the franchise of Banco
S.Geminiano e S.Prospero, worth mentioning are also the concerts of the Corale Rossini in Modena and of the Virtuosi
Italiani in Reggio Emilia.
Worth mentioning are the sponsorships of the music event “Estate Teatrale Veronese” and of the Teatro Filarmonico on the
part of Banca Popolare di Verona, and the uninterrupted support in Lodi to the Bipielle Art Center, permanent seat in the
corporate premises of an exhibition area open to the public. To this regard, the exhibition devoted to Fabrizio De Andrè in
the tenth anniversary of his death was highly appreciated: “Sguardi randagi” retraces the artistic life of the Genoese singersongwriter through the pictures of the photographer and friend of a lifetime, Guido Harari. Significant was also Banca
Popolare di Lodi’s contribution in Pavia, at Castello Visconteo, for the exhibition “Da Velazquez a Murillo”, spanning one
hundred years of Spanish paintings with the collections kept at the Hermitage in Saint Petersburg.
Cassa di Risparmio di Lucca Pisa e Livorno also in 2009 sponsored the initiative “Banca delle Piazze”, which strengthens its
ties with the towns of its franchise, which is also the objective of the support given to “Giugno pisano” and the sponsorship
of the first edition of Lucca Maraton.
As to sports events, Banca Popolare di Verona confirmed its commitment as main sponsor of AC Chievo Verona, as did
Banca Popolare di Lodi with Amatori Hockey (A1 league) and Banca Popolare di Cremona as second sponsor of Triboldi
Basket (A2 league). Other examples of support to the territory and its institutions is the long standing relationship of Banca
Popolare di Verona with Ente Veronafiere, for well-established and successful shows such as “Vinitaly”, “Fiera Cavalli”, as
well as with the Industrial Association of Verona. Certainly we cannot forget the initiatives undertaken by Banca Popolare di
Novara and Credito Bergamasco to promote and support areas of excellence on their territories. For example, in the sports
arena, Credito Bergamasco sponsored Atalanta Bergamasca Calcio for the 2009/2010 championship and Volley Bergamo
Foppapedretti, national and international “excellence” in women’s volleyball (with the 2008-2009 edition, the Bergamo
team reached the sixth “Champions League”). Banca Popolare di Novara supported Novara Calcio and Asystel Volley.
In the cultural and artistic ambit, in addition to the traditional conferences on topical issues, Credito Bergamasco also
organized and hosted in its historical corporate premises the exhibition dedicated to Gianfranco Bonetti, a primary Bergamo
painter, who died too soon in July 2007, and the show “Longaretti. La metafisica delle cose”, first anthological exhibition of
oil paintings on canvas and board of the renowned local author, which was highly appreciated by the public with more
than 10,200 visitors. Not to mention Banca Popolare di Novara’s interventions in support of the areas of Verbano, Cusio and
Ossola, the promotion of the unique and valuable collection of more than fifty Sicilian corals of the XVII-XVIII century from
Trapani and Western Sicily kept in Palazzo Bellini, and again the support lent by Banca Popolare di Novara with Banco
Popolare to the Genoa Aquarium.
With regard to internal communications, in 2009 the graphics of the internet portals of the Companies of the Group have
been revised and the content distribution improved to reinforce their role as timely source of information for Group
employees. BANCO&NOI, the corporate bimonthly magazine for Group employees, had a circulation of more than 30
thousand copies per issue and represented an effective showcase for initiatives that saw the active participation of retail
banks in their franchises, by widely informing its readers.
A variety of events were also planned and organized for the Group employees, with the primary goal of fostering the quality
of decision-making processes through the exchange of knowledge and experiences.
Investor relations
Illustrated below are the activities carried out by Investor Relations in 2009, together with an overview on registered and
ordinary shareholders, while ratings and stock performance are dealt with in specific sections. For further details, an Investor
Relations section is present on the corporate website (www.bancopopolare.it).
Investor Relations Activities
In 2009, Banco Popolare managed 75 events, generally with the participation of the Group’s top management, and reached
more than 270 between investors and financial analysts, as illustrated in the table below.
123
N° events
Presentations of Banco Popolare (webcast conference calls)
Trade conferences
Roadshows (equity) in other European countries
Other meetings (one to one and group of investors)
Phone and video conferences
Meetings with rating firms
Total events/participants
5
11
6
28
16
9
75
% N° participants
6.7%
14.7%
8.0%
37.3%
21.3%
12.0%
100%
5 (*)
139 (**)
26
62
31
9
272
%
1.8%
51.1%
9.6%
22.8%
11.4%
3.3%
100%
(*)Participants in presentations and rating meetings organized by Banco Popolare are counted as only one.
(**)Excluding investors who attended ‘floor presentations’ in trade conferences.
During the year, Banco Popolare organized four webcast conference calls to update the market on the Group’s financial
performance and strategy, and a phone conference with webcast to explain Banca Italease’s restructuring plan to the
market. Significant was our participation in 11 trade conferences, organized primarily in London by primary equity research
and intermediation firms or promoted by Borsa Italiana, which allowed us to reach about 51% of our stakeholders, as well
as in one on one meetings and group meetings. During the year, the Investor Relations Function promoted 6 equity
roadshows – all staged in European countries except Italy and the United Kingdom – covering about 10% of investors and
analysts. Finally, investors and analysts had the opportunity to communicate with the management of Banco Popolare by
way of about 40 other contacts (other direct meetings, conference calls and videoconferences). Banco Popolare’s stock is
actively covered by about 25 equity research firms, and the Investor Relations Function entertains a constant open dialogue
with their “sell-side” analysts.
Shareholders
Banco Popolare’s share capital is subdivided between retail investors, marked by a very strong fragmentation reflecting the
Group’s retail nature, and institutional investors in Italy and abroad.
According to Consob, in January 2010, one institutional investor held a greater than 2% interest in Banco Popolare, as
shown in Table 2.
Key shareholders of Banco Popolare (Source: Consob; snapshot as at 22/01/2010)
Shareholders
Blackrock Investment Management (UK) Limited
124
% of share capital
3.543%
PERFORMANCE OF THE MAIN COMPANIES OF
THE GROUP
For a more in-depth analysis, below is a brief overview of the performance of the main companies of the Group.
Banco Popolare Soc. Coop.
Banco’s role within the Group
Banco Popolare Società Cooperativa is the Parent company of the Banking Group Banco Popolare. The structure adopted by
the Group sees the presence of a Holding Bank, Banco Popolare, which is a listed Cooperative company acting as Parent
company, and is vested with management and control functions over the subsidiary Retail Banks (Banche del Territorio), the
Specialized Banks, the Operating Companies, and the Service Companies.
The Parent company Banco Popolare has a specific organizational structure that allows a uniform and coordinated
management of service, support, management and control functions, centralized and segregated by business functions.
The Holding company hosts functions that allow the definition of development strategic guidelines, organizational structure,
business, administration and accounting planning, risk, credit and personnel management policies, audits and all the other
functions that put the Parent company in a position to perform its role, as institutionally defined also by the applicable
regulations.
Results
Income statement (millions of euro)
Operating costs
Profit from operation
Net income (loss)
Balance sheet (millions of euro)
Total assets
Customer loans (gross)
Structure and operating productivity
Average number of employees (*)
Bank branches
31-12-2009
(A)
31-12-2008
(B)
Changes
593.5
15.0
770.5
- 271.1
499.4
296.2
240.0
240.0
210.3
9.7
306.4
- 271.1
35.3
- 975.5
- 493.9
- 493.9
54.6%
-
71,317.5
39,212.2
14,550.7
9,596.6
10,355.3
54,640.4
24,106.5
4,426.5
8,231.3
8,681.3
30.5%
62.7%
16.6%
19.3%
1,388
2
1,480
2
(**)
-6.2%
-
(*) Monthly weighted average.
(**) Restated in compliance with update of Circular 262/05 of the Bank of Italy.
With regard to the update of 18 November 2009 of the Bank of Italy’s Circular n. 262/2005 on financial statements and
compilation rules, the comparative 2008 data have been adjusted to guarantee a like-to-like comparison with the new
regulations adopted in the current year. The adjustments had impacts on both the official and reclassified financial
statements and on the summary tables.
Customer funds
On 31 December 2009, direct customer funds, including debt securities in issue, stood at 39,212.2 million from 24,106.5
million the prior year. The 62.7% increase (+15.1 billion) is mainly attributable to the sale of bonds classified as “Financial
liabilities measured at fair value” to retail customers of the retail banks.
Financial liabilities measured at fair value comprise bonds issued by Banco Popolare that have been fair value hedged with
derivatives. By exercising the fair value option instead of Hedge accounting to measure financial liabilities we can eliminate
misalignments caused by the different accounting recognition criteria between derivatives and bonds, which would
otherwise be measured at amortized cost.
125
Customer loans
Customer loans are mainly represented by bonds issued by SPEs in securitizations performed by Group banks and
companies, and by loans granted by the London branch included in “Other loans”.
Banco Popolare’s financial assets and hedging derivatives amounted to 9,596.6 million, up 16.6% with respect to the prior
year.
On 31 December 2009, equity investments in companies under significant influence and joint controlled companies stood
at 12,151.6 million from 11,249.8 million the year before.
The table below shows equity investment changes during the year.
Investments in associates and companies
subject to joint control - item 100
Balance sheet assets
Aletti & C. Banca di Investimento Immobiliare
S.p.a.
Aletti Gestielle SGR SpA
Auto Trading SA
Banca Popolare di Lodi Capital Company LLC
Banca Popolare di Lodi Capital Company LLC II
Banca Popolare di Lodi Capital Company LLC III
Banca Popolare di Lodi SpA
Banca Popolare di Novara SpA
Banca Popolare di Verona - SGSP SpA
Valori Finanziaria SpA
Banco Popolare Croatia dd
Bipielle Bank Suisse SA in liquidation
Bipielle International (UK) Ltd
Bipielle International Holding SA
Bipielle Real Estate SpA
Società Gestione Crediti BP Società Consortile
per azioni
Bipitalia Alternative Spa
Bipitalia Broker ex Ducato Insurance
Bipielle Fianaziaria Spa
BP Property Management Soc. consortile a r.l.
Carfid
Cassa di Risparmio di Lucca Pisa Livorno SpA
Compagnia finanziaria Ligure Piemontese COFILP SpA (in liquidation)
Credito Bergamasco SpA
Efibanca SpA
Holding di Partecipazioni Finanziarie Banco
Popolare SpA
Banco Popolare Hungary Zrt.
Immobiliare BP Srl
Italfortune International Advisors SA
Partecipazioni Italiane
Royle West Ltd in Voluntary Liquidation
Seefinanz S.A. (in liquidation)
Società di Gestione Servizi - BP Soc. consortile
p.Az.
Tecmarket Servizi SpA
Tiepolo Finance Srl
BP Covered Bond srl
Banco Popolare Ceskà Republika a.s.
Popolare Vita SpA
126
Decrements
Book value
31 12 2008
Increments
Decrements
Book value
31 12 2009
of which
impairment
losses
Direct
shareholding
%
133,908
-
-
-
133,908
60.47%
11,860
5,698
1,012
980
26,593
2,051,109
813,467
2,266,695
49,297
36,577
32,559
21,564
10,027
387,760
198
2,319
29,080
1,460
-
(1,538)
(226)
(1,458)
-
(1,538)
(226)
(1,458)
-
11,860
4,160
1,012
980
26,367
2,051,109
813,467
2,266,695
49,495
38,896
32,559
49,186
1,460
10,027
387,760
21.63%
99.97%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
99.79%
97.98%
99.97%
100.00%
82.00%
100.00%
100.00%
99,290
-
(83,404)
-
15,886
16.00%
988
1,525
266,812
36,983
48
1,549,710
9,736
-
(988)
(1,525)
(266,812)
(33,382)
(48)
-
-
13,336
1,549,710
0.00%
0.00%
0.00%
27.31%
0.00%
78.92%
12,146
-
-
-
12,146
100.00%
1,004,177
541,931
18,841
-
(151,353)
(151,353)
1,023,018
390,578
88.99%
93.69%
188,304
433,337
-
-
621,641
100.00%
35,200
325,387
735
13,607
0
11,062
82
-
-
-
35,282
325,387
735
13,607
0
11,062
100.00%
100.00%
100.00%
7.31%
99.00%
100.00%
77,824
1,157
(57,847)
-
21,134
20.50%
1,425
10
2,576
-
(1,407)
-
-
2,593
10
87.13%
60.00%
37,500
77,910
6
29,655
(37,500)
-
-
6
107,565
60.00%
100.00%
25.61%
Investments in associates and companies
subject to joint control - item 100
Balance sheet assets
Agos-Ducato SpA
Arca SGR
Banca per il Leasing - Italease SpA
Centrosim SpA
Evoluzione 94 in liquidation
Finanziaria ICCRI - Bruxelles Lambert
Istituto Centrale delle Banche Popolari Italiane
SpA
Società Coop. Banche Popolari "L. Luzzatti"
S.c.r.l.
Aosta Factor
BPI Residential
Total
Decrements
Book value
31 12 2008
Increments
Decrements
Book value
31 12 2009
of which
impairment
losses
Direct
shareholding
%
1,000,000
14,209
33,191
1,975
1,484
1,259
26,651
993,391
347
-
(1,075)
(1,831)
(12)
(1,075)
(12)
1,026,651
14,209
1,026,583
900
1,247
39.00%
10.28%
70.55%
7.50%
0.00%
50.00%
65,908
28,385
(36,924)
-
57,369
15.31%
123
18
-
-
141
26.69%
11,249,827
1,855
0
1,579,093
(677,328)
(155,662)
1,855
0
12,151,592
13.79%
4.00%
During the year, Banco Popolare launched a Tender Offer on all the outstanding common shares of Banca Italease S.p.A., to
acquire its control. At the deal closing, Banco Popolare had raised its interest from 13.14% to 70.549%, corresponding to a
total amount of 147.6 million. After the takeover, Banco Popolare subscribed its share of capital increase, aiming at
covering the losses reported by the neo-subsidiary, against payment of 845.9 million. Finally, at the end of the capital
increase subscription period, Banco Popolare purchased unexercised option rights on the market, corresponding ditto a total
amount of 43.1 million. These options were then exercised in January 2010, bringing its total stake to 73.817%.
Still in 2009 a project was carried out to convert some service subsidiaries from for-profit joint stock companies to consortia.
This conversion called for the reallocation of the equity investments in Società di Gestione Servizi BP, BP Property
Management, and Società Gestione Crediti BP within the Group, depending on the level of utilization of consorted services.
At the end of the reorganization, Banco Popolare’s interest in Società di Gestione Servizi BP Società consortile per azioni
had been reduced to 20.5%, in BP Property Management Soc. consortile a responsabilità limitata to 27.308% and in
Società Gestione Crediti BP Soc. consortile per azioni to 16%.
The 14.8 million net loss generated by the reallocation of equity investments in consortia has been deducted from net equity
in compliance with the relevant regulations.
As to the reorganization of the other controlling equity investments, the main deals were the acquisition by Holding di
Partecipazioni Finanziarie Banco Popolare of Bipielle Finanziaria and Bipitalia Broker for a total amount of 268.3 million,
which in addition to the capital increase of 165 million carried out during the year, produced an increase in the carrying
amount of the equity investment of 4,333 million.
During the year, Banco Popolare subscribed also the capital increase of Bipielle Bank Suisse in liquidation for a total
amount of 29.1 million and purchased 784,961 shares of the subsidiary Credito Bergamasco from retail customers for a total
amount of 18.84 million, raising its interest in the company to 88.99%.
The main equity investments increments regarded the subscription of the capital increase of Agos - Ducato S.p.A for 22.1
million and the deposit in Popolare Vita S.p.A.’s future capital increase account of 28.8 million provide the company with
the necessary financial resources to purchase from Group customers its index-linked policies whose underlying securities
had been issued by the Lehman Brothers Group.
The main equity investments decrements for the year refer to:
the sale of part of the stake held in Istituto Centrale Banche Popolari to Veneto Banca Holding leading to a capital
gain of 16.5 million. During the year a capital increase launched by the same institute was subscribed for 11.9
million;
the reclassification in discontinued operations of the equity investment held in Banca Popolare Ceska Republica
for 375 million;
the impairment losses reported during the year, of which 151.4 million refer to the equity investment held in
Efibanca S.p.A..
Income statement
Interest margin in 2009 came in at 59.2 million. The growth over the prior year’s figure (a loss of 317.6 million) is mainly
attributable to the positive effect of interest rate hedges of bonds at amortized cost, issued by the retail banks, to
counterbalance the negative effects on interest income generated by the interest rate fall. Interest margin also benefitted
from the centralization in Banco Popolare of forex and money market operations that were previously managed by the
subsidiary Banca Aletti S.p.A..
Dividend income came in at 534.3 million of which 509.9 million paid by fully consolidated companies as a result of
profits generated in 2008.
127
Net interest, dividend and similar income as a result added up to 593.5 million.
Net fee and commission income totaled 15 million, up by 55.4% over the previous year.
Other revenues amounted to 196,1 million. In particular, service fees, net of recoveries, charged to Group companies in
2009 totaled 203.5 million.
The net financial result posted a loss of 34.1 million.
The net fair value changes in hedge relationships totaled 1.6 million.
Profit on disposal of financial assets available for sale totaled 7.2 million and were mainly represented by the sale of the
equity investment in Delta S.p.A., for 3.5 million, of the interest held in Centrale dei Bilanci for 1.5 million, and by the sale
of the equity stake held in S.I.A. - SSB S.p.A. for 1.4 million.
Net loss on financial assets and liabilities designated at fair value through profit and loss added up to 195.6 million. In
detail, the loss on financial liabilities measures at fair value (the algebraic calculation of fair value changes in bonds and
associated hedging derivatives) came in at 228.8 million. The worsening with respect to the previous year is mainly
attributable to two factors. First of all the change in the criterion used to measure debt securities issued and sold to retail or
similar customers.
The second cause of the loss on financial assets and liabilities measured at fair value was the measurement of debt securities
sold to institutional customers. The method used to measure the fair value of these liabilities has remained unchanged and
therefore it factors in also changes caused by the fluctuation of the issuer’s creditworthiness. The upgrading of Banco
Popolare’s creditworthiness last year caused the impairment of the debt securities and the consequent charge to income.
Net profit on financial assets measured at fair value totaled 33.2 million, of which 25 million were generated by capital
gains on debt securities (of which 21.8 million attributable to the revaluation of bonds of the subsidiary Creberg), and 12
million by the capital gains on UCITS units, of which 11.5 million attributable to Hedge Funds managed by the subsidiary
Aletti Alternative SGR. The 3.8 million capital losses are entirely attributable to UCITS units.
The net financial result includes also dividends from financial assets held in portfolio totaling 5.4 million.
On 31 December 2009, personnel expenses stood at 158.8 million, while other administrative expenses added up to 111
million, and depreciation and amortization amounted to 1.3 million. Operating costs totaled 271.1 million, basically
unchanged with respect to the previous year.
Net impairments of loans, guarantees and commitments totaled 29.3 million, and are mainly represented by impairments
recognized on syndicated loans granted to the Icelandic banking industry of 3.7 million, impaired loans of the London
branch of 16.9 million (of which 7.7 million non-performing loans, 6.6 million substandard loans and 2.6 million
restructured loans). The loan to Equilon S.p.A. was further impaired for 9.9 million. The loan portion whose repayment is
subordinated to the collection of a consumer credit portfolio (25 million) by now has been fully impaired. Collective
impairments totaled 0.3 million, while write-backs and profit on loan sales consist of 0.7 million worth of write-backs on
bank country risk, 0.8 million collective impairments and 0.08 million losses on sale of securities classified in the loan
portfolio.
Net impairments of other financial activities totaled 13.3 million, and are mainly represented by impairments recognized on
equity investments below 20% and debt securities shown under financial assets available for sale. The main losses charged
to income for the year refer to the equity investments held in Banca Network S.p.A. of 6.7 million, in Archimede 1 S.p.A. of
1.3 million and in Blue Square Fund of 2.2 million.
Net impairment of equity investments and goodwill totaled 155.7 million, and consists of equity investment write-downs
charged to income as a result of impairment losses. The main impairments involved the equity investments in: Efibanca
S.p.A. for 151.4 million, Auto Trading SA for 1.5 million, Bipielle Bank Suisse SA in liquidation for 1.5 million and Centro
SIM S.p.A. for 1.1 million. Profit on sale of equity and other investments totaled 16.9 million, and were mainly represented
by the sale of the equity investment held in Istituto Centrale Banche Popolari for 16.5 million.
Tax on income for the period totaled 56.1 million. It includes 51.8 million representing the charge incurred to settle out of
court a number of tax litigations inherited ager the merger with Banca Popolare Italiana. The item includes also 7.1 million
charges deriving from the impairment of a part of deferred tax assets that is unlikely to be recovered, and 4.4 million
revenues from recognizing the credit resulting from the Irap refund application referring to prior years.
128
Banca Popolare di Verona - S.Geminiano e S.Prospero
Income statement
Operating expenses
Balance sheet
Total assets
- Managed accounts invested in securities and in mutual funds
Other data
Bank branches
31/12/2009
31/12/2008
% Changes
463.0
367.3
824.6
-559.9
264.6
63.1
16.3
16.3
725.5
334.3
1,242.1
- 580.1
662.0
419.7
267.4
267.4
-36.2%
9.9%
-33.6%
-3.5%
-60.0%
-85.0%
-93.9%
-93.9%
32,304.8
25,603.4
419.9
2,364.8
31,397.9
23,781.9
427.4
2,581.2
2.9%
7.7%
-1.8%
-8.4%
26,978.1
20,513.5
7,674.0
3,021.7
1,724.0
2,928.3
12,839.5
26,541.4
18,550.4
7,990.4
3,447.2
1,949.3
2,593.9
10,560.0
1.6%
10.6%
-4.0%
-12.3%
-11.6%
12.9%
21.6%
4,169
547
4,265
547
(*) Monthly arithmetic mean.
On 31 December 2009 “extended” direct funds, inclusive of sold Parent company bonds, reached 31,381.1 million euro,
from 27,984.4 million on 31 December 2008, posting an increase in absolute terms of 3,396.7 million euro (+ 12.14%).
The increase reported for extended funds is confirmed also when considering only direct customer funds. Significant was the
growth reported by checking accounts and deposits, running at 1,847.3 million (+19.3%), a springboard for the growth of
loans to customers, in spite of the decrease in repos. The volume of repurchase agreements outstanding on 31 December
2008 was the result of a very competitive selling policy from a return standpoint, which had been launched in the last
quarter of 2008, and when it expired it was not renewed in the current year.
Securities issued and financial liabilities reported a sizable drop due to the fact that in the current year bonds for about 726
million euro expired, while other bonds for about 520 million euro were early redeemed, as too expensive. These issues
were not replaced, because already since September 2008 the Bank sells to its customers securities issued by the Parent
company and its own funding requirements are met by intercompany interbank financing.
In 2009 the above sales reported a substantial increase in volume (2,960 million growth in absolute terms).
Marked to market indirect customer funds totaled 20,513.5 million euro, up by 10.58% as compared with 18,550.3 million
euro last year.
Also restricted indirect funds under custody (i.e., mutual funds, banking foundations, merchant banks, leasing and factoring
companies, SIM, SICAV, fund managers, insurance companies, pension funds and other superannuation funds, central
supervisory authorities and banking associations) decreased by about 680.4 million euro in absolute terms (-7.46%),
because the Bank privileged the sale of the Parent company’s debt securities, which somehow partially eroded the stock of
other securities held by customers.
Hence, driven only by the growth in sold Parent company bonds, total indirect funds grew in absolute terms by 1,963.1
million euro (+10.58%), but net of this component, restricted indirect customer funds decreased by 996.8 million euro (5.83%).
Total customer funds, (direct + indirect) on 31 December 2009 came in at 47,491.6 million euro, up by more than 956.7
million euro compared with 31 December 2008 (+ 2.06%). The volume-related decrease in restricted indirect customer
funds, amounting to 1,757.7 million euro, was only partly offset by the price-related increase in value, totaling 760.8
million euro.
129
Loans to customers
In keeping with the previous year, in 2009 we consolidated the policy which on the one side focused lending activities on
the typical business sectors of a retail bank, in particular small and medium enterprises and retail customers, and on the
other side reduced the exposure to the Large Corporate sector.
As a result, at year end loans, gross of write-downs, reached 25,603.3 million euro, up by 7.40% from 23,840.1 million
euro on 31 December 2008.
The actual figure on 31 December 2009 includes also 406 million euro worth of loans to Banca Italease until 30 December
and that at the balance sheet date had been transferred to Release S.p.A., which is not a bank and therefore the related loans
have been included in customer loans.
Gross of write-downs, loans increased by 1,763.2 million euro in absolute terms (1,357.2 without Release S.p.A.), but about
845.4 million euro were absorbed by the hefty increase in impaired loans. Growth in performing loans was driven both by
corporate loans (about 734 million euro), and by retail loans (about 685 million euro).
31/12/2009
31/12/2008
Impaired assets
Doubtful loans
Substandard loans
Restructured loans
Past dues
Performing loans
Total gross loans
Individual adjustments
Collective adjustments
Total net loans
2,417,431
935,516
946,749
284,061
251,105
23,185,915
25,603,346
-618,317
-107,497
24,877,532
1,429,664
686,182
497,783
101,090
144,609
22,410,480
23,840,144
-475,593
-190,450
23,174,101
Changes
987,767
249,334
448,966
182,971
106,496
775,435
1,763,202
-142,724
82,953
1,703,431
69.1%
36.3%
90.2%
181.0%
73.6%
3.5%
7.4%
30.0%
-43.6%
7.4%
Total impaired loans to customers reported a significant increase in 2009, along the prior year’s uninterrupted trend.
Gross of write-downs and including impaired securitized loans (totaling 103 million euro), they came in at 2,417.4 million
euro from 1,429.7 million euro on 31 December 2008 (+ 69.09%).
The increase of this aggregate was caused by the growth of all classes of impaired loans.
In particular, doubtful loans went from 686.2 million euro to 935.5 million euro, posting a net increase of more than 249
million euro (+36.34%), as a result of new classifications of about 529 million euro, of which about 470 million from
substandard loans at the end of last year, net of loan collections of 86.4 million euro and write-offs of about 192.4 million
euro. The NPL coverage ratio was 45.35%, down from 47.48% last year, however this decrease is linked to significant
accelerated write-offs carried out last year. Should we include said losses, the coverage ratio would rise to 54.28%
compared to 53.75% last year.
Particularly significant was the rise reported by substandard loans, from 497.8 million euro last year to 946.7 million on 31
December 2009, posting an increase of 449 million euro in absolute terms (90.19%). During the year, new substandard
classifications totaled more than 1.3 billion euro (of which 403.7 million directly reclassified from past dues), while about
470 million euro worth of loans were reclassified from substandard to non-performing and more than 305 million euro from
substandard to performing loans. As with non-performing loans, the coverage ratio went from 19.11% last year down to
15.99% the current year, however the decline is due to the fact that some sizable loans with significant write-downs
outstanding on 31 December 2008 were reclassified as non-performing in 2009, pushing down the coverage level. We
should also consider that the figure as at 31 December 2009 include 4 loans under restructuring for a total exposure of
110.8 million euro and write-downs of 26.7 million euro. Net of these positions, the average coverage ratio of substandard
loans would come in at 12.43%.
In 2009, a sizable number of new restructured loans were recognized for about 203.9 million euro, for which about 17
million euro write-downs were posted. One single large position, amounting to 23 million euro, was reclassified as
performing. The average coverage ratio for this class of loans was 11.21%, down by more than seven percentage points
compared to last year. This decrease is due to the fact that some of the new sizable restructured position did not give way to
write-downs because the restructuring process did not require sacrifices from a profitability standpoint and the workout
plans are being complied with. Net of the above hefty positions, the average coverage ratio for cash exposures came in at
about 18%, in line with last year.
With respect to past dues, it should be noted that the comparison between the two years is not on a like-to-like basis, as this
year has been impacted by the new regulations issued by the Bank of Italy as of June 2009, prescribing that loans to real
estate companies and mortgages due for over 90 days must be classified as past dues. The impact of this new regulation is
quantifiable in about 120-130 million euro. With respect to write-downs, the coverage ratio went down to 4.33% al 31
December 2009 in compliance with a policy issued by the Parent company, which at the end of the financial year asked all
the retail banks belonging to Gruppo Banco Popolare to bring the past due impairment criteria in line with the specified
percentage rate, based on the recent history of the banks in terms of recoverability analysis of past dues.
Moreover, last year the past due coverage ratio (25.2%) exceeded that of substandard and restructured loans (18.98%) as
130
past dues included individual adjustments of some sizable corporate loans that in the first months of 2009 have been
reclassified as substandard loans. Net of these exposures and write-downs, the average coverage ratio of past dues on 31
December 2008 went down to 9.73%.
At the end of 2009 the impaired to total customer loan ratio, gross of write-downs, amounted to 9.46% as compared with
6.01% in the same period last year.
As a result of the above described dynamics, write-downs of impaired loans at the end of the year accounted for 25.58% of
their total gross amount, with respect to 33.29% on 31 December 2008.
The rising trend of gross impaired loans is confirmed also by the same ratio net of write-downs, which soared from 4.13%
on 31 December 2008 to 7.24% at year-end.
This trend is linked to the progressive deterioration of the economic environment in 2009, during which the distress signals
from the manufacturing industry that had started to emerge in Q4 2008 grew even worse.
Write-downs of performing loans totaled 0.46% of gross loans on 31 December 2009 from 0.85% on 31 December 2008,
and include only collective write-downs. Note that last year individual adjustments had been carried out on performing
loans that had shown signs of deterioration or of requiring a workout plan in the first two months of 2009 and before the
approval on 4 March 2009 of the draft annual report as at 31 December 2008, such as to call for individual adjustments.
These loans, corresponding to an exposure of about 200 million euro, were then classified as impaired loans in the first
months of this year.
Should we consider only collective write-downs, the coverage ratio of performing loans on 31 December 2008 went down
to 0.47% , in line with last year’s coverage ratio, that had suffered from a worsening of the parameters referring to
“probability of default” (PD) and “Loss Given Default” (LGD), as a result of the shift forward of one year of the five-year
historic series taken as a reference to calculate them.
Operating performance
2009 data are not comparable with the previous year as the corporate scope differs between the two years, as a result of the
corporate actions carried out in the second half of 2009.
Net interest, dividend and similar income totaled 462.9 million euro, as a result of an interest income of 1,027.3 million
euro and an interest expense of 564.3 million euro.
The main constituent of interest income is net customer interest, totaling 319.9 million euro, resulting from a loan interest
income of 878.5 million euro and interest expense from checking accounts and savings deposits of 188.3 million euro and
on securities and certificates of deposit in issue of 370.4 million euro.
Additional interest income came from financial assets held in portfolio for 19.8 million euro and from other assets for 0.6
million euro, as well as a interest margin towards banking counterparties of 89.6 million euro.
The decrease in net interest, dividend and similar income reported in 2009 is attributable to the unfavorable movements of
interest rates, which have been diving suddenly and constantly throughout 2009. In particular, it was customer funds that
made a lower contribution to interest margin, as the combined effect of lower average volumes with respect to 2008, and
foremost the narrowing spreads caused a decrease in the overall contribution of this income source of about 170 million
euro. This contraction was partly offset by the customer loan repricing policy, so that, with average volumes of granted
loans remaining basically unchanged in 2008 and 2009, yet we obtained a higher P&L contribution of more than 90 million
euro. After considering the remaining constituents, the result is the above interest, dividend and similar income contraction.
More than 70% of the above drop is attributable to the BPV network, and breaking it down into the various segments, it was
largely caused by the Retail segment, followed by Private and Others, partly offset by the growth reported only by the
Corporate segment.
Net fee and commission income came in at 367.3 million euro (334.3 million euro in 2008), as a result of a commission
income of 392.2 million euro and a commission expense of 24.9 million euro. Commissions from management, brokerage
and advisory services account for 65.15% of total net commissions (61.6% in 2008).
Commissions from “other services” refer to ATM and credit card services for 13.2 million euro (14.6 million in 2008) and to
securitization servicing for 1.9 million euro (2.5 million in 2008).
Among management, brokerage and advisory services, securities sales is the constituent that made the greater P&L
contribution in 2009. In particular, in addition to the commissions paid by the Parent company for the sale of its bonds, this
sub-item includes commissions received from “other companies” of Gruppo Banco Popolare for funds sold to customers of
about 23.3 million euro (41.5 million in 2008) and securities of about 15.9 million (22.5 million in 2008).
Also commissions from distribution of third party services made a significant contribution, made up of 42 million euro (50.8
million in 2008) referring to insurance products (of which 24.1 for Lawrence Life Index-linked policies), Ducato consumer
lending products (21.2 million), credit cards (14.2 million) and 2.8 million from other products. This item includes also the
sale of asset management products that generated net commissions of 6.6 million, as compared with 12.8 last year.
Net financial income totaled 45.5 million euro (11.8 million in 2008)
This aggregate is the result of a net trading loss of 5.9 million euro, that include charges paid on customer transactions
regarding some leveraged derivative positions and provisions on other positions at risk for a total amount of 1.6 million euro
(21.9 million in 2008).
131
We also reported a currency trading loss of about 3.5 million euro, offset by profits and capital gains generated by the
trading portfolio of 0.9 million and by derivatives trading of about 4 million euro.
The net result also includes the 5.8 million negative effects of credit default swaps that were executed to hedge against the
credit risk of customer loans and reduce regulatory capital absorption (the contribution of these derivatives in 2008 had
been in excess of +5.9 million).
Net financial income also incorporates the net loss on debt securities measured at fair value and the associated derivatives
of 38.9 million euro (+23.4 million euro on 31 December 2008), of which 40.5 million referring to the recognition through
profit or loss of capital gains accrued until 31 December 2008 on bonds issued as a result of loan market variations due to
the change in their recognition criterion, as more exhaustively described in the section dealing with noteworthy events for
the year. On 31 December 2008 this component had posted a positive P&L contribution of 27.4 million euro.
Total personnel expenses came in at 284.5 million euro (299.4 million in 2008), net of recoveries associated with personnel
seconded in other Group companies. This aggregate includes non-recurring costs produced by the ongoing integration
process, amounting to 2.1 million euro (5.7 million in 2008, of which 2.6 due to early retirement schemes).
Other administrative expenses totaled 259.3 million euro (268.4 million in 2008), of which 86.6 million euro referring to
direct costs (104.5 million in 2008), the remaining part being charges due to Group companies. In particular, costs payable
to the Parent company refer to charges for functions provided centrally.
Depreciation and amortization totaled 16.1 million euro (12.4 million in 2008): 5.7 million euro refer to own property and
equipment (5 million in 2008), 7.6 million euro (7.5 million in 2008) to leasehold improvements mainly for the renovation
of rented buildings occupied by our branches, and 2.7 million euro to leasehold improvement adjustments, not fully
depreciated on 31 December 2009, referring to branches to be closed or transferred according to the plan approved on 15
December 2009.
Net loan impairments totaled 195.3 million (228.8 million in 2008) and include a profit on non-recourse sales of impaired
loans of 1.5 million euro (1.2 million in 2008). Net of these sales, net write-downs would rise to 196.8 million euro (230
million in 2008).
Net loan impairments have inevitably been largely affected by the deterioration of real economy, as well as by write-downs
related with substantial provisions at the Bank and totaling about 42.5 million euro, which are an anomaly with respect to
the pursued credit policy. Net of these positions, total write-downs would have amounted to 152.9 million euro.
This year’s figure includes also about 17 million worth of supplementary write-downs required by the Bank of Italy as a
result of the Group audit.
Net income (loss) for the year in 2009 amounted to 16.3 million euro (267.4 million in 2008), after an income tax of 46.8
million (152.3 million in 2008).
132
Income statement
Operating expenses
Balance sheet
Total assets
Gross Loans to customers (*)
Direct customer funds (**)
- Assets under custody (***)
Other data
Average number of employees (****)
Bank branches
31/12/2009
31/12/2008
% Changes
417.36
264.91
661.49
-481.08
180.41
64.87
30.82
30.82
506.19
196.94
698.23
-507.33
190.90
-55.93
-55.31
-55.31
-17.5%
34.5%
5.3%
-5.2%
-5.5%
n.s.
n.s.
n.s.
19,114.2
14,060.7
300.7
1,432.3
19,334.1
14,339.7
429.1
1,402.4
-1.1%
-1.9%
-29.9%
2.1%
14,294.6
14,868.7
3,511.9
1,398.8
515.1
1,598.0
11,356.8
14,778.5
13,564.0
3,131.9
1,544.0
482.9
1,105.0
10,430.2
-3.3%
9.6%
12.1%
-9.4%
6.7%
44.6%
8.9%
3,405
505
3,425
518
(*) inclusive of loans to Ducato S.p.A. for 0.1billion (1.8 billion in 2008)
(**) inclusive Holding company bonds for 17.3 billion (15.9 billion in 2008)
(***) inclusive of Holding company bonds for 2.9 billion (1.1 billion in 2008)
(****) Monthly arithmetic mean
Total assets under administration (direct and indirect customer funds) totaled 29,163 million, up by 2.9% from 28,342
million on 31 December 2008.
Retail customer funds stood at 14,294.6 million euro (-483.9 million, -3.3 % over 31.12.2008); the decline was mainly
attributable to the decrease of issues following the centralization of the role of single issuer at the parent company Banco
Popolare, in spite of the marked increase in checking accounts and deposits. Should we include also Holding company’s
bonds, this item would add up to 17.3 billion (15.9 billion in 2008), corresponding to a growth rate of 8.8%
On 31 December 2009, retail assets under management (Mutual funds, Managed accounts, Sicav and insurance products)
stood at 3,512 million euro, on the upside with respect to the end of the previous year (+380 million, +12.1%)
Gross customer loans totaled 14,060 million euro, down by 279 million (-1.9%) from 31.12.2008. Loss provisions
(including NPV discounting effects) added up to 650.4 million (+25 million, -4.0% over 31.12.2008), therefore net customer
loans came in at 13,410 million euro, down by 304 million (-2.2%) over 31.12.2008.
Performing loans amounted to 12,548 million euro gross and 12,437 million net of collective write-downs (the aggregates
reported a -2.6% and -2.7% increase over 31.12.2008); impaired loans, made up of non-performing loans, substandard
loans, restructured loans or under restructuring and past dues, added up to 1,512.3 million gross (+4.3% over 31.12.2008)
and 972.8 million net of write-downs (+4.0% over 31.12.2008).
31/12/2009
31/12/2008
Impaired loans
- Non-performing loans
- Substandard loans
- Restructured loans
- Past dues
Other performing loans
Total gross loans
Individual write-downs
Collective write-downs
Total net loans
1,512,287
486,398
900,415
31,919
93,555
12,548,446
14,060,733
-539,449
-111,002
13,410,282
1,450,432
407,677
949,267
5,845
87,643
12,889,259
14,339,691
-514,595
-110,993
13,714,103
Changes
61,855
78,721
-48,852
26,074
5,912
-340,813
-278,958
24,854
9
-303,821
4.3%
19.3%
-5.1%
446.1%
6.7%
-2.6%
-1.9%
-4.8%
0.0%
-2.2%
133
On 31 December 2009, net interest, dividend and similar income stood at 417.4 million. Interest income totaled 680.9
million and are mainly referred to interest accrued on customer loans (including securitized loans) of about 586 million and
loans to other banks of 51.2 million. Interest expense added up to 283.2 million and mainly refer to interest accrued on due
to customers of 93.4 million, on debt securities of 159.6 million and on due to other banks of 30.2 million. Dividend
income from Investments in associates and companies subject to joint control totaled 19.7 million.
Net fee and commission income came in at 264.9 million; commission income amounted to 281.7 million, while
commission expense stood at 16.8 million. The most significant component of commission income was commissions from
management, brokerage and advisory services, amounting to 155.1 million.
Other revenues/charges totaled -1.7 million, net of recoveries of indirect taxes and sundry expenses (totaling 24.6 million, of
which 28.2 million were tax recoveries, 0.7 million recoveries from real estate expenses and rents, 1.2 million recoveries
from Group companies for services provided by Bpl and 4 million recoveries of other expenses) and of reclassified D&A as a
result of leasehold improvement of 7.9 million that incremented net write-downs of tangible and intangible assets. The
aggregate shows a negative sign owing to revenues from periodic charges debited on checking accounts that were
reclassified from Other revenues/charges to Net fee and commission income.
Net financial income/loss incorporates net trading income and income from assets and liabilities measured at fair value, as
well as the profit/loss on disposal of other financial assets or on repurchase of financial liabilities. On 31 December it added
up to -19.1 million, as it includes -23.7 million euro associated with the change in creditworthiness.
Operating expenses amounted to 481 million euro and break down into personnel expenses of 228.6 million, other
administrative expenses of 237.9 million and depreciation and amortization of 14.5 million.
Net write-downs on impairment of loans, guarantees and commitments totaled 97.3 million, resulting from:
x write-downs and provisions of 182.1 million, with the following breakdown: write-downs of 56.2 million on
substandard loans, 82.3 million on non-performing loans, 5.4 on restructured loans, 4.8 on past dues, 12.9
million for loan losses and 20.5 million for the increase in collective impairment of performing loans;
x write-backs of 85.4 million (of which 36.5 million on substandard loans and 34.3 on non-performing loans, 3.5
on past dues, 8.2 on restructured loans and 2.9 million from decrease in collective impairment);
x profit on disposal of non-performing loans of 0.4 million;
x write-downs of guarantees backing substandard loans of 1 million and write-downs of guarantees backing nonperforming loans of 0.03 million euro.
Net impairment of other financial assets available for sale came in at 11.7 million euro, and refer to write-downs on
subordinated securities from the securitizations Tiepolo Finance II (11.3 million) and Tiepolo Finance I (0.4 million).
Provisions for risks and charges totaled 6.3 million and incorporate provisions net of write-backs of 7.7 million for legal
disputes and 1.2 million for write-backs of other assets.
As a result, an Income (loss) before tax from continuing operations of 64.9 million was posted.
Income tax totaled 34.1 million euro and include current taxes of 26.8 million of which 9.4 IRES and 17 IRAP, changes in
deferred tax assets of 7.9 million, changes in deferred tax liabilities of 6.6 million and a release of tax provisions of 7.3 million.
Net of income tax, Net income (loss) for the year as at 31 December 2009 totaled 30.8 million.
Other noteworthy events in the year
Summarized below are the main noteworthy events impacting BPL in 2009:
x by-law changes to make the Articles of Association compliant with Statutory Directives on corporate governance
and harmonize all the by-laws of the Group retail banks (Banche del Territorio);
x approval by the Board of Directors of Banca Popolare di Lodi of the Corporate Governance Plan, the Institutional
counterparty Plan, the Large and Mid Corporate plans, the Group Lending Policies, which set out the lending
guidelines and general principles for Gruppo Banco Popolare and regulates the Lending Role of the subsidiary
Banks and Companies, and of the Operational rules of the Board of Directors and on information flows in
compliance with the Bank of Italy directives;
x approval by the Board of Directors of BPL of a plan to centralize the relationship management of foreign
(commercial and financial) Clearing Counterparties, with respect to flows of foreign currency payments and
collections for the single Banks of the Group and for the accounting centralization of cash management at the
Parent company;
x compliance with Lgs.D. 231/07 to adopt the regulatory novelties and strengthen the processes and controls in the
field of anti-money laundering and terrorism financing, with the additional purpose of preventing a direct
involvement of the Group companies in similar crimes;
134
x launch of a project to identify specific initiatives to optimize our Branch Network, aiming at increasing the
Group’s commercial and profitability performance;
x approval of the new version of the Risk Assessment Document pursuant to Lgs.D. 81/2008 on healthcare
protection and security on the workplace;
x adoption of the Group Regulation on the Manager responsible for the preparation of financial reports (L.
262/2005).
Income statement
Operating expenses
Balance sheet
Total assets
- Managed assets invested in securities and in mutual funds
- Insurance policies (Index)
- Holding company bonds
Assets under custody
Other data
Bank branches
31/12/2009
31/12/2008
% Changes
430.8
322.5
706.7
-435.2
271.5
142.2
83.1
83.1
508.1
274.7
805.1
-431.6
373.5
231.1
142.8
142.8
-15.2%
17.4%
-12.2%
0.8%
-27.3%
-38.5%
-41.8%
-41.8%
16,402
13,915
803
1,066
18,944
13,158
751
979
-13.4%
5.8%
6.9%
8.9%
13,436
19,136
6,221
1,089
1,203
3,929
12,915
4,053
32,572
16,508
20,167
6,399
1,479
1,480
3,440
13,768
1,602
36,675
-18.6%
-5.1%
-2.8%
-26.4%
-18.7%
14.2%
-6.2%
153.0%
-11.2%
3,229
428
3,259
426
On 31 December 2009, direct customer funds totaled 13,436 million euro, down by 3,072 million (-18.6%) over
31.12.2008. The aggregate includes the Balance sheet items n. 20 (due to customers), n. 30 (debt securities in issue) and n.
50 (financial liabilities measured at fair value) and it incorporates Liabilities from assets sold and not derecognized offset
through loans from securitizations. The decrease spanned all the constituents, and in absolute terms it was particularly
significant for repos and other payables (-1,507 million), and percentagewise (except for time deposits that are almost down
to zero) for securities issued (-69,2%); conversely, checking accounts and deposits basically held (-121 million, -1.5%).
This nosedive was the consequence also of specific factors: on the one side, the outflow of sizable volumes (incidentally,
transferred to the Parent company) due to the centralization of Custodian Bank activities at the Holding company (which
caused decreases especially in repo funds); on the other side, the Group liquidity management policy set out in 2008, based
on which the role of “Single Issuer” for the Group’s entire bond funding has been centralized at the Holding company,
while the retail banks (including of course BPN) are in charge of selling the bonds to their Retail customers. In 2009 the
direct issue of bonds by BPN was marginal, and its issued bond portfolio shrank significantly as a result of expirations or
early redemptions.
135
On 31 December 2009, total assets under management (Mutual Funds, Managed assets, Sicav and insurance products) –
including Banca Aletti managed accounts invested in securities and in mutual funds sold by BPN – totaled 6,221 million
euro, down 178 million (-2.8%) year on year. This dynamic is ascribable to Mutual funds and Sicav, which in twelve
months fell by -390 million, and to the performance of Managed Assets, down by -277 million. Conversely, the insurance
policy portfolio reported a considerable increase (+489 million).
On the same date, customer assets under custody stood at 12,915 million, down by 853 million year on year (-6.2%); this
dynamic is basically attributable to the outflow of considerable volumes, transferred to the Parent company as a result of the
already mentioned centralization of Custodian Bank activities. Note, that as part of the decision to centralize the role of
single issuer for all the Group’s direct bond funding at the Parent company, as of March 2008 we started selling Bonds
issued by the Holding company, and at the end of 2009 the sold bond portfolio totaled 4,053 million; said bonds are now
incorporated in total Assets under custody.
Total assets under administration (direct + indirect customer funds) amounted to 32,572 million, down by 11.2% from
36,675 million on 31 December 2008.
Loans to customers
Gross retail customer loans added up to 13,915 million euro, up by 757 million (+5.8%) over 31.12.2008. The aggregate
includes assets sold and not derecognized relating to securitized loans (that must be still recognized since they do not meet
the requirements to be actually derecognized). Write-downs (inclusive of NPV discounting) totaled 383 million (+77
million, +25.1% over 31.12.2008); as a result, net loans added up to 13,532 million euro, up by 681 million (+5.3%) over
31.12.2008.
Performing loans stood at 12.416 million euro gross and 12,332 million net of write-downs (the aggregates increased by 69
million, +0.6%, and 80 million, +0.7% respectively over 31.12.2008). Impaired loans, consisting of non-performing loans,
substandard loans, restructured loans or under restructuring and past dues, added up to 1,499 million gross (+688 million,
+84.9% YoY) and 1,200 million net of write-downs (+ 601 million, +100.3% over 31.12.2008).
Gross of write-downs, the performing loan to customer loan ratio was 89.23% (93.84% at year-end 2008); the impaired
loan to customer loan ratio was 10.77% (6.16% on 31 December 2008). The net performing loan to customer loan ratio
was 91.13% (95.34% on 31.12.2008); as a result, the net impaired loan to customer loan ratio was 8.87% (4.66% at yearend 2008). The above dynamics were correlated to the well known effects of the economic and financial crisis.
31/12/2009
31/12/2008
Impaired loans
- nonperforming
- substandard
- restructured
- past due
Performing loans
Total gross loans
Total net loans
1,498,777
491,329
704,061
131,971
171,416
12,416,184
13,914,961
299,117
83,988
13,531,856
810,755
305,407
350,768
38,798
115,782
12,346,820
13,157,575
204,221
101,968
12,851,386
Changes
688,022
185,922
353,293
93,173
55,634
69,364
757,386
94,896
-17,980
680,470
84.9%
60.9%
100.7%
240.1%
48.1%
0.6%
5.8%
46.5%
-17.6%
5.3%
Net interest, dividend and similar income totaled 430.8 million euro (-77.3 million, -15.2% YoY), resulting from an interest
income of 670.0 million euro and interest expense of 239.2 million euro.
The main constituent of interest margin is net customer interest, totaling 328.2 million euro, deriving from interest income
on loans of 555.5 million euro and interest expense on checking accounts, savings deposits and bonds of 227.3 million
euro. Interest income on financial assets held in portfolio totaled 18.5 million euro. The interbank spread generated an
income of 45.4 million. All the above constituent suffered a contraction YoY, which percentagewise was particularly
marked for interbank interest income.
Spreads on derivatives linked to financial liabilities measured at fair value (which up until 2008 were incorporated in net
spreads on hedging transactions) generated an income of 25.4 million, while in 2008 they had posted a loss of similar
amount (-26.4 million).
136
Net spreads on hedging transactions, which in 2008 posted a loss of -12.8 million, in 2009 showed a total positive balance
of 13.3 million, basically as a result of the favorable trend of market rates associated with financial derivatives used to hedge
demand items on the liabilities-side of the balance sheet (checking account and deposits) totaling 24.2 million euro (as
compared with the -17.2 million loss in 2008). This evolution more than offset the negative performance of spreads on
hedges of other items (AFS securities, mortgages, cash flow hedges), which posted a loss of -10.9 million (as compared to
+4.4 million in 2008).
Commission income came in at 338.4 million (up by 44.3 million YoY) and are mainly represented by revenues from
management, brokerage and advisory services (195.7 million euro), accounting for about 58% of total commissions. This
item was impacted by a reclassification – in keeping with the instructions set out in the update of circular 262 issued by the
Bank of Italy – requiring revenues from periodic charges debited on customer checking accounts (40.3 million euro,
incidentally well below the 51.7 million reported at the end of 2008) to be reclassified from Other revenues/charges to Net
fee and commission income. Commission expense totaled 15.9 million (-3.5 million with respect to 31.12.2008):
accounting for 39% of total commission expense, management and brokerage service charges (6.2 million) are the main
constituent, mostly represented by payments to other Companies of the Group in exchange for outsourced activities. As a
result, Net fee and commission income added up to 322.5 million (274.7 million on 31 December 2008).
On 31 December 2009, we posted a net financial loss of -44,0 million, down by 71.3 million from the prior year. This
evolution is mainly attributable to the loss on assets and liabilities measured at fair value (-43.3 million, with respect to
+22.6 million on 31 December 2009); in particular this constituent includes the charge generated by the recognition
through profit or loss, in this case a loss, of all the capital gains associated with credit spread changes reported in previous
years (-49.0 million), as a result of the methodology changes effective as at 31 March 2009 to measure creditworthiness
changes. On 31 December 2008, based on the method used at that time, we had posted a profit of 27.2 million. This P&L
component is considered a non-recurring item: in recurring terms we would have posted a net financial income of 5.0
million (-4.6 million on 31 December 2008).
Other revenues/charges came in at -2.6 million; on 31 December 2008 they amounted to -4.9 million. This result was
caused by the already mentioned considerable reallocation of revenues from periodic charges debited on customer
checking accounts to be reclassified from Other revenues/charges to Net fee and commission income.
Other operating income (operating income other than net interest, dividend and similar income) amounted to 275.9 million,
-7.1% with respect to one year before. In recurring terms, it totaled 324.9 million (267.7 in 2008).
As a result of the above performance, net interest and other banking income came in at 706.7 million euro (-98.4 million, 12.2% compared to 31 December 2008). The corresponding recurring aggregate was 755.7 million (775.8 million in 2008,
-2.6%).
Operating expenses totaled 435.2 million euro, posting a YoY increase (+3.6 million, +0.8%) and break down in personnel
expenses of 231.0 million (+0.2 million, +0.1%), other administrative expenses of 196.5 million (+1.3 million, +0.7%) and
net impairment of tangible and intangible assets of 7.7 million (+2.1 million, +37.8%). Net of non-recurring items (2.3
million for Personnel expenses, as in 2008, and 0.6 million for higher D&A associated with residual charges for leasehold
improvements in branches that are going to be closed, recognized in impairment of tangible and intangible assets),
Operating expenses stood at 432.3 million (429.3 million in 2008).
Profit from operations was 271.5 million euro, down by 102.0 million compared to one year before (-27.3%). The
corresponding recurring profit totaled 323.4 million (-23.1 million, -6.7% YoY).
Net write-downs on impairment of loans and guarantees and commitments totaled -128.9 million, resulting from writedowns and provisions of 194.7 million, write-backs of 65.6 million and a net balance of profit/loss on loan sale resulting in
a profit of 0.2 million (in the reclassified P&L this profit is stated under net loan impairments). On 31 December 2008 it
came in at 114.1 million, resulting from the algebraic sum of write-downs and provisions of 135.2 million, write-backs of
27.0 million and a net loss on loan sale of 5.9 million. Net of non-recurring items (i.e., the above profit on loan sale), net
impairments rise to 129.1 million (108.2 million in 2008).
Net write-downs for impairment of other assets totaled 2,000 euro and refer to the impairment of the SACE S.p.A. stock
(non-recurring item); on 31 December 2008 the same write-downs (again non-recurring) totaled 16.7 million and referred
almost exclusively to the impairment of the Lehman Brothers securities, while about 41,000 euro were linked to the SACE
stock.
Net provisions to risks and charges totaled 0.4 million, as compared with 11.5 million in 2008. Here again we have a nonrecurring item (-0.2 million) resulting from the estimate of charges associated with already approved branch closings.
Income (loss) before taxes of continuing operations came in at 142.2 million euro (231.1 million one year before).
After accounting for income taxes of 59.0 million, net income on 31 December 2009 totaled 83.1 million, down by -41.8%
compared to twelve months before (142.8 million).
137
Non-recurring items included in gross income as at 31 December 2009 add up to a loss of about 51.9 million, while in
2008 they produced a profit of 3.7 million. Also income tax included non-recurring items bearing a positive sign (+2.7
million in 2009 and +3.3 million in 2008). Considering only recurring items, the 2009 Income (loss) before tax was 194.1
million, down by 33.2 million (-14.6%) as compared with 31.12.2008 (227.3 million).
As to net income (83.1 million, with respect to 142.8 million in 2008), the non-recurring portion was -32.7 million (against
4.5 million in 2008) and the recurring one 115.8 million (138.3 million in 2008).
Noteworthy events in the year
BPN’s operating report describes numerous events, mostly developed under the management and control of the Parent
company, that are considered noteworthy from a corporate standpoint, and in view of the present or future effects they are
going to have on the bank’s business from an operational, commercial, administrative/regulatory viewpoint.
Summarized below are the most noteworthy events:
x launch of a project to identify specific initiatives to optimize our Branch network, with the aim of improving the
Group’s commercial and operating performance; as a result, it was decided to turn some Branches in Light
Branches and other ones in Detached Branches, and to close some branches (as already mentioned when talking
about the evolution of the income statement);
x closing of the Office in charge of Custodian Bank and Delegated Activities, as a result of the mentioned
centralization of these activities at the Holding company;
x capital increase of the company Centro Interportuale Merci di Novara CIM S.p.A., one of the primary logistics
hubs in Northern Italy;
x approval of Policies and Projects (BPN Lending Enacting Rules, which forms an integral part of the Group Lending
Policy, Corporate Governance Project, Institutional Counterparties Project, Large Corporate and Mid Corporate
Plus Projects) of consequence for the growth of the Group, and within its scope, for the Bank itself.
Credito Bergamasco
Income statement
Net interest and other
banking income
Operating expenses
Balance sheet
Total assets
Customer funds
Total funding
of which: - Direct customer funds
- Indirect customer funds
of which: - Assets under management
- Mutual funds and SICAV
Other data
Bank branches
31/12/2009
31/12/2008
% Changes
343.7
182.8
384.6
166.0
-10.6%
10.2%
500.3
580.2
-13.8%
267.1
233.2
130.2
85.2
261.3
319.0
195.1
119.6
2.3%
-26.9%
-33.3%
-28.7%
14,534.7
11,885.1
241.6
1,323.0
14,041.6
11,226.7
243.4
1,306.5
3.5%
5.9%
-0.8%
1.3%
21,579.7
11,328.3
10,251.3
3,032.9
844.4
801.4
1,387.1
7,218.4
20,628.4
11,600.4
9,028.0
2,805.6
888.7
847.1
1,069.8
6,222.4
4.6%
-2.3%
13.6%
8.1%
-5.0%
-5.4%
29.7%
16.0%
1,969
250
0.5%
0.4%
1,979
251
(#)
The close ties forged with the served territory and its households and businesses enabled the bank to keep its satisfactory
characteristic operating levels safe, despite the adverse business cycle.
On 31.12.2009 Credito Bergamasco reported direct customer funds amounting to 11,328.3 million, compared with
11,600.4 million one year before (-2.3%); note, that in 2009 the bank redeemed a bond with a nominal value of 400 million
138
subscribed in 2007 by Banco Popolare following the issuance by the Parent company, in its own name and on behalf of
Credito Bergamasco, of an equivalent amount of two-year Medium Term Notes.
Among the various types of funding sources, significant was the increase posted by due to customers (mainly represented by
checking accounts and deposits or time accounts) which increased YoY by 21.9% reaching 8,767.6 million.
At operating level, the so called “extended direct funds”, i.e., direct customer funds plus bonds issued by Banco Popolare and
sold by the Creberg branches to their customers (amounting to 1,781.9 million on 31.12.2009 and 761.5 million on
31.12.2008), added up to 13,110.2 million, with an annual growth rate of 6.1%.
Indirect customer funds – including the above mentioned bonds issued by the Parent company and net of a “Large
Corporate” custody account that has already been dealt with in previous reports and that on 31.12.2009 totaled 1,022
million – stood at 9,229.4 million, up by 14% from 8,096.1 million on 31.12.2008.
Among the constituents of indirect customer funds, assets under management came in at 3,032.9 million, reporting an
increase of 8.1% from 2,805.6 million at the end of 2008.
In particular, Banca Aletti’s managed accounts distributed by the branch network of Credito Bergamasco amounted to 801.4
million, reporting a 5.4% drop from 847.1 million at the end of 2008, while mutual funds came in at 844.4 million (-5%
YoY). Total insurance policies reached 1,387.1 million, thus hitting a 29.7% increase from 1,069.8 million at year-end
2008.
Indirect customer funds under custody totaled 6,196.5 million, up by 17.1% from 5,290.4 million on 31.12.2008.
Including also the “large corporate” custody account mentioned above, indirect customer funds reached 10,251.3 million,
up by 13.6% from 9,028 million at year-end 2008.
Net customer loans stood at 21,579.7 million, up by 4.6% from 20,628.4 million on 31.12.2008.
On 31 December 2009, gross loans reached 11,885.1 million, as compared with 11,226.7 million at the end of 2008
(+5.9%).
Net customer loans stood at 11,648.3 million, up by 5.7% from 11,017.5 million on 31.12.2008. This evolution, which is
totally in key with the objectives pursued by the commercial policy developed for 2009 – is the outcome of highly
differentiated changes across different customer segments, with a progressive exposure reduction to “large corporate”
customers not belonging to our franchise (-18.5% the annual average operating balance) and the growth in loans to
households and SMEs, the backbone of our local economy.
The balance sheet breakdown by loan product shows that total retail and corporate mortgages reached 5,395.3 million, up
by 9.7% with respect to the adjusted figure at the end of 2008.
The table below analyzes cash customer loans by loan grade on 31 December 2009 as compared with 31 December 2008.
31/12/2009
31/12/2008
Non-performing loans
Substandard loans
Restructured loans
Past dues
Total gross loans
Total net loans
837,223
280,538
396,474
55,758
104,453
11,047,908
11,885,131
-175,111
-61,763
11,648,257
544,797
193,804
317,562
3,342
30,089
10,681,876
11,226,673
-152,100
-57,039
11,017,534
Changes
292,426
86,734
78,912
52,416
74,364
366,032
658,458
-23,011
-4,724
630,723
53.7%
44.8%
24.8%
-%
-%
3.4%
5.9%
15.1%
8.3%
5.7%
In spite of the relentless and effective credit risk control exercised by the bank’s competent functions, still the difficulties
experienced by our domestic and local economy affected the dynamic of impaired loans.
The impaired to total customer loans ratio, gross of write-downs on 31 December 2009 stood at 7.04% from 4.85% at the
end of 2008. Net of write-downs, the ratio on a like-to-like basis came in at 5.68% against 3.56% at the end of 2008.
Taking non-performing loans alone, the NPL to customer loans ratio on 31.12.2009 – gross of write-downs – was 2.36%
from 1.73% on 31.12.2008. Net of write-downs, it came in at 1.34% against 0.86% on 31.12.2008.
Write-downs on impaired loans on 31 December 2009 accounted for 20.92% of their gross total amount, as compared with
27.92% on 31 December 2008. In particular, write-downs on non-performing loans on 31.12.2009 accounted for 44.27%
of their gross total amount, compared with 50.90% on 31.12.2008. Write-downs of performing loans on 31.12.2009
accounted for 0.56% of their total amount as compared with 0.53% at the end of 2008.
Interest margin totaled 316.4 million, down by 15.4% from 373.8 million on 31.12.2008. Profit from Investments in
associates and companies subject to joint control carried at equity, including a negative impact of 1.4 million generated by
the change introduced by the associate Efibanca in the method to measure the fair value of financial liabilities issued by
Efibanca itself, and Creberg’s share of loss of 3.3 million from the associate Banca Italease, amounted to 27.3 million, as
compared with 10.7 million one year before, inclusive of Creberg’s non-recurring 12.1 million share of loss from Efibanca.
139
Net interest, dividend and similar income added up to 343.7 million, down by 10.6% from 384.6 million one year before
(348.4 million being the recurring net interest, dividend and similar income, -12.2% YoY).
Other operating income was 156.6 million, compared to 195.7 million the year before (-20%). On a recurring basis, other
operating income reached 191.7 million, reporting an annual growth rate of 17.4%. This aggregate incorporates net service
commissions of 182.8 million, up by 10.2% from 166 million adjusted for comparison the year before.
Other revenues stood at 2.6 million, from 3.7 million the year before.
Net financial income/loss – which was impacted by a non-recurring negative amount of 35.1 million, as compared to nonrecurring positive items of 32.3 million on 31 December 2008 – posted a loss of 28.8 million, as compared to the 26 million
income on 31.12.2008.
The 2008 P&L included a positive impact of 25.6 million generated by the impairment of financial liabilities issued by the
bank and measured at fair value and 6.7 million worth of profit on disposal of assets available for sale. On 31.12.2009 –
besides reporting an 0.1 million worth of profit on disposal of assets available for sale and an 0.3 million charge from the
measurement of financial liabilities issued by the bank and sold to institutional customers (incidentally this type of liability
has a marginal weight on the bank’s financial statements) – the financial statements were affected by a negative P&L impact
of 34.9 million as a result of the change in the methodology used to measure the fair value of bonds issued by the bank and
sold to retail customers or “similar”.
Net of non-recurring components, net financial income came in at 6.3 million, as compared with the 6.3 million loss one
year before.
Net interest and other banking income reached 500.3 million, as compared to 580.2 million one year before. Net of nonrecurring items, net interest and other banking income stood at 540.1 million, as compared with the 560 million adjusted
for comparison the year before (-3.6%).
On 31.12.2009, net of recoveries, personnel expenses reached 154.1 million, posting a slight increase (+1.2%) from 152.2
million one year before; net of non-recurring items (totaling 0.9 million in 2009, and referring to the solidarity fund
provision and to the early retirement scheme as compared to 3.8 million in 2008), personnel expenses stood at 153.2
million, posting an annual growth rate of 3.2%.
Net of recoveries, other administrative expenses stood at 106.9 million, up by 3.9% YoY, mainly as a result of the new
intercompany VAT regulation; depreciation and amortization of tangible and intangible assets came in at 6.2 million, as
compared with 6.1 million one year before.
As a result, on 31.12.2009, total Operating expenses added up to 267.1 million, up by 2.3% from 261.3 million on
31.12.2008 (+3.8% being the annual increase on a recurring basis).
The cost/income ratio was 53.4%, as compared with 45% at the end of 2008; on a recurring basis, the ratio came in at
49.3% from 45.8% on 31.12.2008.
Profit from operations totaled 233.2 million, from 319 million one year before; on a recurring basis, it stood at 273.8
million, down by 9.8% from 303.5 million on 31.12.2008.
The desire to keep the risks inherent in the loans granted by the bank under constant control, in the face of the business
cycle trend, caused net write-downs on loan impairment to be increased, so that on 31.12.2009 they reached 98.9 million,
against 73.1 million the year before; net write-downs on impairment of other assets amounted to 0.2 million, while net
provisions for risks and charges totaled 1.4 million, from 5.3 million on 31.12.2008.
Net impairment of goodwill and Investments in associates and companies subject to joint control came in at 4.3 million (of
which 3 million worth Crebergis share in the goodwill impairment carried out by the associate Efibanca and 1.3 million
from the impairment of Investments in associates and companies subject to joint control held by Efibanca and Banca Aletti),
as compared to 46.3 million one year before (of which 30.5 million referring to the impairment of the equity investment in
Banca Italease and 15.8 million to the goodwill impairment of some associates that impacted the measurement of
Investments in associates and companies subject to joint control carried at equity); profit on disposal of equity and other
investments totaled 1.7 million, from 0.8 million on 31.12.2008.
Income (loss) before tax from continuing operations came in at 130.2 million, against 195.1 million one year before; net of
non-recurring items, Income (loss) before tax stood at 173.5 million, down by 22.6% from 224.2 million on 31.12.2008.
Tax on income came in at 45 million and net income added up to 85.2 million, as compared with 119.6 million on
31.12.2008; on a recurring basis, net income was 114.9 million, down by 22.5% from 148.1 million one year before.
On 31 December 2009 regulatory capital ratios were notable: the Tier 1 Capital ratio – measured in compliance with the
update of the Bank of Italy Circular n. 262, issued on 18.11.2009 – stood at 15.89%, while the Total Capital ratio reached
15.95%.
The operating report of Credito Bergamasco describes numerous events, mostly developed under the management and
control of the Parent company, that are considered noteworthy from a corporate standpoint, and in view of the present or
future effects they are going to have on the bank’s business from an operational, commercial, administrative/regulatory
viewpoint.
Summarized below are the most noteworthy events:
x revision of the distribution system, leading to the adoption of a model specialized by customer segment to
guarantee the best and most efficient operational conditions to the entire sales network. In particular, as regards
the Business Areas – which provide branches with the appropriate support for the commercial management of
customers – the new model requires the creation of an SME Business Manager, a Retail Business Manager and a
Mid Corporate Business Manager to organize and coordinate the activities of the branch network, and to launch
marketing campaigns for their respective customer segments;
140
x creation of Loan Committees for the Business Areas to improve even more the efficacy of our presence on the
market territory at a time of adverse economic cycle;
x acquisition of a shareholding in Welfare Italia Servizi S.r.l., a company founded in February 2009 by Consorzio
Nazionale CGM – with which the bank entertains longstanding relations – aiming at promoting the wellbeing of
the community by planning and creating quality services at accessible prices, managed by a pervasive domestic
network of nonprofit cooperative companies. The services offered by Welfare Italia Servizi hinge in particular on
the “proximity healthcare” sector (dentistry practices, specialized outpatient’s clinics, light rehab centers), and the
aim is to expand onto “social housing” and “family services”. This investment entails a big social value for the
bank’s market territories, with positive returns in terms of institutional and business relations.
Income statement
Operating expenses
Balance sheet
Total assets
- Assets under custody including institutional
Other data
Bank branches
31/12/2009
31/12/2008
% Changes
227.2
141.8
349.8
-228.8
121.0
50.4
25.2
25.2
314.6
116.8
454.6
-227.7
227.0
178.4
114.0
114.0
-27.8%
21.4%
-23.1%
0.5%
-46.7%
-71.7%
-77.9%
-77.9%
10,981.4
8,206.4
192.9
1,242.7
11,396.8
8,527.3
155.2
1,254.4
-3.6%
-3.8%
24.3%
-0.9%
7,737.8
6,101.5
1,987.2
800.8
416.8
769.6
4,114.3
8,636.8
4,716.2
1,952.1
1,020.7
436.9
494.5
2,764.1
-10.4%
29.4%
1.8%
-21.5%
-4.6%
55.6%
48.8%
1,679
237
1,680
236
-0.1%
0.4%
(*) Monthly arithmetic mean
On 31 December 2009 direct customer funds totaled 7,737.8 million euro (-899.0 million, -10.4% with respect to
31.12.2008); the aggregate includes the Balance sheet items n.20 (due to customers), n. 30 (securities issued) and n. 50
(financial liabilities measured at fair value, i.e., bonds under the fair value option). Customer funds include “Liabilities from
assets sold and not derecognized” as an offset to outstanding securitized loans.
The decrease is mainly attributable to the decline in “Debt securities in issue” (-72.9%) and “Liabilities measured at fair
value” (-12.1%), whereas customer funds reported an increase in checking accounts and deposits of 15.1%.
On 31 December assets under management (Funds, Managed accounts, Sicav and Insurance Products) amounted to
1,987.2 million euro, reporting a modest increase with respect to the end of the previous year (+ 35.2 million, +1.8%).
This dynamic is attributable on the one side to the decrease reported by Mutual funds, down by 220.0 million (-21.5%), on
the other side to the increase in Insurance Policies, up by 275.2 million (+55.7%).
On the same date, customer assets under custody stood at 4,039.1 million, up by 1,366.5 million from December 2008
(+51.1%).
Bank and Institutional assets under custody came in at 75.2 million euro, down by 16.3 million with respect to 31.12.2008
(-17.8%).
141
Total administered funds (direct + indirect funds) amounted to 13,839.3 million, reporting a moderate growth with respect
to the end of 2008 (486.4 million +3.6%).
Customer loans
On 31 December 2009 gross loans to retail customers stood at 8,206.4 million euro, down by 320.9 million (-3.8%) as
compared with 31.12.2008. The aggregate incorporates net assets sold and not derecognized of 1,021.4 million (436.1
million on 31.12.2008), representing securitized loans that must be still recognized since they do not meet the requirements
to be actually derecognized.
Performing loans added up to 7,457.8 million euro, gross of collective write-downs, and to 7,415.2 million net of writedowns (the two aggregates decreased by -7.3% and -7.4% respectively over 31.12.2008); impaired loans, consisting of nonperforming loans, substandard loans, restructured loans or under restructuring and past dues, totaled 748.6 million gross
(+55.4% over 31.12.2008) and 561.3 million net of write-downs (+73.5% over 31.12.2008).
The net performing loan to total customer loan ratio was 93.0%, the weight of net impaired loans was 7.0%. At the end of
2009, the impaired loan to total customer loan ratio gross of write-downs was running at 9.1% from 5.6% on 31 December
2008.
Loan loss provisions (inclusive of NPV discounting effects) added up to 229.9 million (+32.6 million, +16.5% over
31.12.2008), hence net customer loans amounted to 7,976.5 million euro, down by 353.5 million (- 4.2%) with respect to
31.12.2008.
Impaired loans
- nonperforming
- substandard
- restructured
- past due
Performing loans
Performing loans
Total gross loans
Total net loans
31/12/2009
31/12/2008
748,576
275,219
396,223
8,989
68,145
7,457,839
7,457,839
8,206,415
-187,233
-42,646
7,976,536
481,789
199,232
224,203
2,907
55,447
8,045,500
8,045,500
8,527,289
-158,176
-39,075
8,330,038
Changes
266,787
75,987
172,020
6,082
12,698
-587,661
-587,661
-320,874
-29,057
-3,571
-353,502
55.4%
38.1%
76.7%
209.2%
22.9%
-7.3%
-7.3%
-3.8%
18.4%
9.1%
-4.2%
The volume dynamic reported in 2009 combined with interest rates at historical lows on financial markets caused interest
margin, and as a consequence net interest, dividend and similar income to post a balance of 227.2 million euro, down by
27.8% as compared to year-end 2008.
Interest income decreased by 35.2% over December 2008 and stood at 421.0 million euro, while interest expense, as a
result of the re-composition of the funding mix, amounted to 193.8 million euro, down by 42.2% as compared to the end of
2008.
Commission income came in at 148.0 million, on the rise with respect to the previous year (+20.8%), and is mainly
represented by commissions on sale and distribution of third party services and order collection (81.4 million), accounting
for about 55.0% of total commissions, then 24.8% is commissions on checking account management and administration,
8.0% commissions on payments and collections, and the remaining part is essentially made up of commissions received for
other services and guarantees given, accounting for 12.2%. Commission expense added up to 6.2 million, up with respect
to the previous year (+10.1%), and breaks down as follows: 54.6% payment and collection commissions, 17.2%
management and brokerage commissions, and the remaining part is essentially made up of other services and guarantees
given (28.2%). Net fee and commission income as a result added up to 141.8 million, down by 25.0 million (+21.4%) over
2008.
Other revenues/charges reported a negative balance of 1.4 million euro, posting a 1.0 million decrease (+266.8%) with
respect to 31.12.2008. This reversal was mainly due to the decrease of other revenues, which in the prior year had benefited
from non-recurring net postings of about 0.6 million. The reclassified P&L, which is what is being analyzed here, shows this
aggregate net of indirect tax recoveries and sundry expenses (of which 15.0 million referring to recoveries of indirect taxes
and 3.4 million to recoveries of other expenses), that were restated as a deduction to “Other administrative expenses”, and
net of depreciation on leasehold improvements (1.8 million), restated in “net impairment of tangible and intangible assets”.
In particular, the result was affected by “Profit/loss on financial assets and liabilities measured at fair value”, due to the fact
that when measuring securities sold to retail customers – including Banking foundations – creditworthiness is no longer
factored in, generating a P&L charge of 23.8 million (in 2008 it reported a revenue of 16.4 million). Moreover, the prior year
benefited from an additional positive effect of 3.0 million generated by currency futures included in “Net trading
142
income/loss”. As to the changes in “Financial assets available for sale” (AFS), in 2008 they had benefited from the sale of the
equity investment in Centrale dei Bilanci for about 2.6 million.
Other operating income (operating income other than interest, dividend and similar income) added up to 122.7 million,
down by 17.3 million with respect to 2008.
As a result, net interest and other banking income stood at 349.8 million euro (-104.8 million, -23.1% over 31 December
2008).
Operating expenses totaled 228.8 million euro, down by 1.2 million with respect to the previous year. They break down as
follows: personnel expenses of 118.5 million (+1.4 million), other administrative expense of 106.4 million, basically
unchanged, and net impairment of tangible and intangible assets of 3.9 million (+0.3 million).
Profit from operations came in at 121.0 million, down by 106.0 million with respect to 31 December 2008.
Total write-downs on impairment of loans and guarantees and commitments amounted to 65.6 million, up by 25.1 million
over 2008 (+62.1%)
Net impairment of other financial transactions amounted to 1.0 million euro. They refer to “Financial assets available for
sale”, and regard write-downs of debt securities generated by the Tiepolo Finance s.r.l. securitization.
Net provisions for risks and charges came in at 2.2 million.
Income (loss) before tax from continuing operations, net of the above write-downs, amounted to 50.4 million euro, down by
128.0 million over 31 December 2008 (-71.8%).
Tax income came in at 25.2 million euro, and incorporate current taxes of 26.5 million, of which 16,1 million for IRES, 10.0
million for IRAP, 0.4 million for substitute tax.
Net of income tax, net income as at 31 December 2009 added up to 25.2 million.
Integration plan
Although at the end of 2008 the integration plan had been formally completed, in 2009 a number of actions were taken to
adjust the structure to the intervening regulatory changes and to do some fine-tuning.
Worth mentioning, among the various actions taken, are the centralization of activities at the Parent company, in keeping
with the business plan that aimed at achieving greater synergies and at setting up a model where retail banks focus on
commercial customer services and management, while all those common services and activities that are shared by all the
Group companies are to be centralized respectively in the Parent company, and in the service and product companies.
Changes to the Articles of Association
The shareholders’ meeting held on 30 June 2009 approved the changes to the Articles of Association of Cassa di Risparmio
di Lucca Pisa Livorno S.p.A. to conform them to the new “Supervisory Directives on Bank Corporate Governance and
Organization”, issued by the Bank of Italy, and on the same occasion it seized the opportunity to harmonize Cassa’s Bylaws
to the Articles of Association of the Parent company and of the other retail banks.
Banca Aletti & C.
Income statement
Operating expenses
Balance sheet
Total assets
Other data
Bank branches
31/12/2009
31/12/2008
% Changes
337.6
-104.9
232.7
162.6
301.6
-115.6
185.8
91.4
11.9%
-9.4%
25.2%
77.8%
10,691.9
596.3
15,306.9
25,394.6
432.1
14,053.5
-57.9%
38.0%
8.9%
467
36
492
39
-5.1%
-7.7%
Banca Aletti is organized along three departments that work in close synergy with the Group’s sales networks:
x Private Banking;
x Investment Management;
x Investment Banking.
143
Private Banking
Financial year 2009 was characterized by a decrease in net interest and other banking income with respect to the prior year,
although the monthly trend showed a constant and gradual recovery. The persisting market turbulences kept many
customers on defensive positions and the interest rate dynamics compressed interest margin. As to asset management, a
strong revitalization action has been put in place to restore medium term portfolios.
In Private Banking, on 31 December 2009, Banca Aletti reported total assets under management (under administration and
management) of 25.156 billion, of which euro 14.530 billion from private customers and the remaining euro 10.626 billion
from institutional customers. Last year has been characterized by a constant focus on increasing assets and expanding our
customer base, with significant results in terms of net inflows and of new customers, supported also by the repatriation of
assets held abroad under the tax amnesty law “Scudo Fiscale Ter” of 837 million euro under the physical repatriation
procedure and 781 million euro under the declaration procedure.
Investment Management
In 2009, stock markets posted a very positive performance, with basically uninterrupted rises since the month of March:
local currency MSCI WORLD indexes on industrialized and emerging stock markets rose by about 23% and 61%,
respectively. The overall performance of the government bond market was only marginally positive (+0.75%), marked by a
high volatility, especially in the second part of the year, on the wake of the macroeconomic recovery perspectives and
interest rate projections.
At 31 December 2009, assets under management totaled about 11,920 million euro, up by 6.1%, in stark contrast with the
26% drop reported in 2008: after bottoming out in March, AuM started to report a constant increase. 2009 represents a year
of discontinuity of the outflow trend that has been characterizing the entire Italian asset management industry in 2007 and
2008.
Investment Banking
Derivative and Structured Products - Financial Engineering
2009 has been a very harsh year on all financial markets. The credit crunch after the Lehman crack has been the talk of the
day throughout the first half of the year, which has been characterized by a strong volatility and illiquidity on all major
markets. The main topic was fly to quality; all market players liquidated their risky positions and invested in Treasuries, and
as a result the five-year swap spread skyrocketed to almost 100bps at the beginning of 2009.
Central banks reacted by rapidly decreasing interest rates and injecting a lot of liquidity not only on overnight but also on
longer maturities. In the Euro area, ECB’s Term Refinancing Operation carried out in June 2009 was key (12 month liquidity
at a 1% rate for 440 bn euro). In the second half of the year, liquidity caused all main financial assets to rally, and many
indicators (for example the credit spreads of many corporate securities) bounced back to pre-Lehman default levels.
Against this context, equity trading was characterized by the search for spot hedging positions, to reduce as much as
possible the risk positions on risk books, without having to give up on taking positions on the volatility and correlation
market, albeit limited to more liquid underlying assets.
As to interest rate derivatives, 2009 was characterized by a decrease in corporate hedging transactions with Group
customers, while with respect to retail structures distributed by the Group network, the trend continued towards a
simplification of structures and the reallocation towards simpler interest-linked structures.
Stock markets
After a negative start, as of the second quarter stock indexes began to score more convincing upturns, picking up a bullish
trend that at the end of 2009 resulted in two digit percentage increases.
During the year Banca Aletti continued to engage in market making on Italian single-stock futures on 46 underlying stocks.
The increase in intermediated volumes with respect to 2008 allowed us to hold a significant market share of 10.78%.
With respect to our trend trading portfolio, in view of the high volatility that characterized the first six months of the year,
we privileged a merger arbitrage strategy involving low-risk takeovers. In the second part of the year, with the progressive
reopening of short selling, we started implementing market neutral arbitrage strategies again, involving companies belonging
to the same sector without exposure to market trends.
During the year, we progressively consolidated our basket trading strategy on the Spanish index Ibex35 and we scaled up
Delta 1 trading of foreign stocks listed on the Liffe with good results.
Bond markets
In 2009, the government bond market had a diverging performance depending on the yield curve segment taken into
consideration. While the short-term yield curve continued to benefit from the interest rate cuts and from the liquidity
injections by Central banks, on the longer term the yield curve underperformed as a result of the spate of government
securities offered on the primary market to finance bloating state deficits. These two events put together caused the curve to
get steeper and steeper until it hit all time levels. In all this, also the marked narrowing of spreads in countries belonging to
the Euro area played an important role, in particular between the notes of euro-regional peripheral nations and German
bonds. If the forced sales in 2008 caused yield spreads among euro-area notes to hit their all time highs since the creation of
144
the single currency, the return to an abundant liquidity triggered the reverse process, causing spreads to backtrack almost
completely, with the exception of a few countries, like Greece and Ireland.
After a generalized credit spread widening in 2008 and in the first months of 2009, corporate bonds staged one of the
biggest rallies in the history of credit, as a result of the economic policy measures implemented by Governments and Central
Banks. A very important factor that contributed to buoy up the market was the liveliness of new corporate issues, which
allowed a wide number of issuers to raise capital on the financial markets to refinance and extend their debt profile.
Retail customer transactions on the Hi-Mtf and Group Securities Market platforms came in big volumes. These combined
factors, together with the strategies we adopted, allowed us to obtain much greater profit than we expected from managing
our bond portfolios.
Securities Lending
The liquidity crisis that had been characterizing this industry in 2008 had had a positive impact on bond lending volumes as
well as on the related trading spreads. The gradual ebbing of this phenomenon brought total volumes back to pre-crisis
levels and partly restarted the equity segment, confirming Aletti among the leading players in the Italian market within this
area.
Capital Market
Debt Capital Market
In 2009, Banca Aletti completed the structuring of the securitization of residential mortgages originated by the Specialized
External Networks (Reti Esterne Specializzate) of about 1.1 billion euro. In June, Banca Aletti took part in the Public Offering
of ENI 2009-2015 fixed and floating rate bonds, raising orders in excess of 147 million euro. In the second half, Banca Aletti
participated in the underwriting and placement of the first two bond issues of Banco Popolare limited to institutional
investors after the outbreak of the financial crisis.
In November Banca Aletti also participated in the Public Offering of Mediobanca five-year fixed and floating rate bonds,
raising orders for about 45 million euro.
Equity Capital Market
Owing to the protraction of the crisis, also in 2009 the Italian primary equity market was largely characterized by capital
increases and tender offers, totaling 30 deals with respect to only 6 IPOs, of which 5 on AIM Italy (Alternative Investment
Market), the exchange regulated market recently launched by Borsa Italiana, where Banca Aletti was authorized to operate
as a Nomad and with 4 key executives.
Equity Research
Against a marked economic deterioration and a growing illiquidity of certain asset classes, in 2009 the Equity Research
office focused on preserving its analysis scope and on stabilizing the number of counterparties. Considering the Group’s
franchise, the research coverage still hinges on Italian Small/Mid Cap and is spreading over to mid caps, due to the
persistent illiquidity of the reference niche. This was made possible by the fact that some securities with limited free float
and capitalization stopped being covered by our research, and our team was joined by new professionals, who included
new securities and sectors marked by a wider capitalization in the research scope. Marketing activities with main
counterparties and with the management (road show) of some listed companies continued to be implemented.
Forex and Money Market
The reorganization process that as of 1 April 2009 brought all money market activities back at the Parent company kept the
structure busy for the entire first part of the year dealing with the transfer of operations (market disclosure, contracts,
operating instruments, credit facilities).
Hence, money market operations were limited to trading and were focused on funding optimization by effectively managing
collaterals.
In order to take advantage all funding opportunities, we kept a close watch on the numerous extraordinary initiatives taken
by regulators to stabilize the market and make it thicker.
As to the forex market, on the wake of the last months of 2008 also the first six months of this year were characterized by a
scarce liquidity, favoring volatile and erratic movements. After an initial appreciation of the dollar against the euro, the
exchange rate rapidly settled on the 1.35 – 1.40 range and has been since drifting sideways.
We focused mainly on short term trades, to the detriment of intra-day, which led to a contraction of the number of
transactions and traded volumes, with good returns.
In the first part of the year, the structure supported all the ancillary activities deriving from the transfer as of 1 April 2009, of
the Office at the Parent company’s (market disclosure, contracts, operating instruments, credit facilities).
Corporate & Institutional Sales
In 2009 the activities of this Function were strongly influenced by market dynamics, by the high volatility of stock markets
and credit spreads, by the widespread uncertainty and by the low risk propensity of investors.
Distribution strategies and product structuring and selling activities were focused on simple and transparent products, with
capital guaranteed and short-term maturities.
Interest rate indexing prevailed, to the detriment of equity markets, and the favored issuer was Banco Popolare as compared
to third-party issuers.
145
In spite of the customers’ high risk aversion and the falling volumes with respect to 2008, Banca Aletti still maintained a
leading position on the Italian certificates market, participating in the sector’s main events and organizing product roadshows, and it received much credit from investors.
With regard to business development with non-captive customers, the banks privileged direct funding with plain vanilla
bonds, therefore the derivative hedging of bond issues decreased.
A penchant for simpler structures and a disposition oriented towards Italian issuers, favored the activity as arranger for
Banco Popolare issues.
There were interesting developments on the primary market: Banca Aletti was joint-lead manager for Banco Popolare’s first
issuances of the year , and for the first time book runner in the last issuance of the year.
Private placements in excess of 320 million euro were placed with institutional investors.
Banca Aletti closed financial year 2009 posting a 77.76% increase in net income, from 91,449 thousand euro on 31
December 2008 to 162,558 thousand euro on 31 December 2009.
However, non-recurring items went from 124,803 thousand euro on 31 December 2008 to 165,284 thousand euro on 31
December 2009, up by 32.44 % tantamount to 40.48 million euro.
If we analyze recurring net income, total recurring income increased by 11.90%, reaching 337,534 thousand euro (301,628
thousand euro on 31 December 2008).
Recurring interest margin came in at 53,073 thousand euro on 31 December 2009, on the downturn with respect to 2008
(103,207 thousand euro) mainly as a result of the impact of the transfer of liquidity, interest rate and exchange rate risk
management activities from Banca Aletti to Banco Popolare.
Other recurring Operating Income increased overall by 43.36% driven by the considerable increase in financial income,
which rose from 113,531 thousand euro on 31 December 2008 to 218,114 thousand euro on 31 December 2009, whole
Net fee and commission income dropped by 19.9 %, from 80,009 thousand euro on 31 December 2008 to 64,070 on 31
December 2009 and other revenues fell from 4,881 thousand euro on 31 December 2008 to 2.277 thousand euro on 31
December 2009, corresponding to -53.4%.
Recurring Operating expenses decreased by 8.52% from 114,711 thousand euro on 31 December 2008 to 104,942
thousand euro on 31 December 2009, due to the transfer of activities from Banca Aletti to Banco Popolare, and to the
achievement of economies of scale after the BPI-BPVN integration.
Efibanca
Income statement
Net write-downs on impairment of loans and Investments in associates and
companies subject to joint control
Profit/Loss from financial operations
Operating expenses
Goodwill impairment
Income (Loss) before tax from continuing operations
Net income (Loss) for the year
Balance sheet
Customer loans
Financial assets and Investments in associates and companies subject to joint
control
Intangible assets
Debt securities in issue and financial liabilities measured at fair value
Other data
Net non-interest income / Net interest and other banking income
Cost / Income ratio
ROE
31/12/2009
31/12/2008
% Changes
45.6
5.0
34.2
74.8
11.1
147.7
-39.0%
-55.0%
-76.8%
-122.3
-355.6
-65.6%
-88.1
-32.9
-70.0
-191.0
-139.9
-208.0
-41.0
-230.0
-479.0
-353.4
-57.6%
-19.8%
-69.6%
-60.1%
-60.4%
2,973.9
3,539.8
-16.0%
276.7
303.1
-8.7%
0.0
1,417.3
419.2
70.0
2,686.1
576.9
-100.0%
-47.2%
-27.3%
147.8%
96.2%
-25.0%
58.2%
27.8%
-38.0%
Financial year 2009 ended with a net loss of 139.9 million, and was affected by the persisting financial crisis, which fully
unfolded at the end of 2008 and caused the deterioration of the performance of many economic sectors.
Against this backdrop, also in 2009 some corporate clients started to show a progressive deterioration of their financial and
operating situation, and the close monitoring carried out by Efibanca in cooperation with the Parent company’s Loan
Service highlighted the impaired loan positions, in some cases shared with other Banks of the Group, which in some cases
we tried to solve through workout agreements; nevertheless, 103.4 million loan write-downs were recognized.
With respect to our equity investment portfolio, the assessment of both actual and when available perspective P&L and
146
financial data of the held Investments in associates and companies subject to joint control and funds led to the recognition
of write-downs of 18.8 million. As a result total impairments affecting the bottom line came in at 122.3 million.
During the year other factors affected the year-end result, in particular:
x the contraction of the average loan volume (-494.1 million) which was not offset by an equal decrease in funding
(-226.2 million), mainly as a result of the increase in non-performing loans which negatively impacted interest
margin;
x the limited volume of new loans (315 million against 966 million in 2008) which for various reasons has
characterized the year and affected commission income;
x the downsizing of the merchant banking and private equity businesses did not produce noteworthy revenues;
x the impact generated by the Parent company instructions not to factor Banco’s creditworthiness in as of 31.03.09
when calculating the fair value of bonds issued, generating a non-recurring negative effect of 31.9 million;
x the goodwill impairment loss that produced a non-recurring negative effect of 70 million.
As to key P&L highlights:
x interest margin decreased by 35% from 65.1 to 42.6 million, driven by a 67% drop in average loan volumes with
respect to 2008 (from 966 to 315 million) and by the increase in non-performing loans;
x net commissions decreased by 55% (from 11.1 to 5.0 million), as they are strictly related to decreasing loan
volumes;
x dividends and similar income declined by 69% (from 9.8 to 3.0 million);
x profit on disposal of financial assets available for sale and Investments in associates and companies subject to
joint control dropped by 96% (from 49.5 to 2.1 million);
x profit/loss on financial assets and liabilities measured at fair value reported a loss of 19.5 million, as compared
with the 14.7 million profit the prior year, due to the above mentioned change to the fair value calculation
procedure (-31.9 million);
x as a result, net interest and other banking income fell by 77% (from 147.7 to 34.2 million);
x net impairments of loans and Investments in associates and companies subject to joint control totaled 122.3
million, and although they have decreased (-66%) when compared to 355.6 million in 2008, yet they still
evidence the ongoing risk profile deterioration, that has emerged outright towards the end of the prior year;
x Operating expenses declined by 20% (from 41.0 to 32.9 million), mainly as a result of personnel expense
reductions.
x the item Goodwill impairment reflects the goodwill impairment loss.
Key balance sheet items evidence that:
x customer loans reported a 16% fall (from 3,540 to 2,974 million).
x the merchant banking portfolio decreased by 10% (from 311.6 to 276.7 million) because of both disposals and
write-downs;
x goodwill was fully impaired;
x tax assets increased by 35% (from 129.5 to 174.3 million): the change refers to the recognition of tax credits on
excess loan write-downs and goodwill impairment;
x assets under administration fell by 12% (from 3,686.7 to 3,259.1 million) due to shrinking loans and of the equity
investment portfolio;
x shareholders’ equity decreased by 27% (from 576.9 to 419.2 million) owing to net income and to the decrease
(-17.9 million) in reserves for securities available for sale;
x capital ratios rose driven by a change in the calculation method and exceeded the regulatory threshold: both the
Tier1 and the Total capital ratio stood at 15.04% with respect to a Tier1 and a Total capital ratio of 10.93%
reported in 2008.
Financial year 2009 was characterized by important initiatives and projects involving the organizational, regulatory and
technological ambits of the bank.
In October we approved the bank reorganization plan aiming at gaining a greater efficiency and productivity, together with
a better control on credit risk and a more stringent monitoring, as well as the full integration and harmonization with the
procedures of Gruppo Banco Popolare, including actions for IT compliance with Group standards.
Summarized below are the plan key elements:
x reorganization of the Commercial Structure, with the decommissioning of local branches and the creation of the
CRM (“Client Relationship Manager”), in charge of active monitoring activities and of trade promotion in
cooperation with peer structures at the Parent company;
x personnel rationalization, with headcount to be reduced to about 130 employees by the beginning of the second
quarter of 2010, also through the complete implementation of the functional centralization actions at the Parent
company leading to a decrease in fixed operational costs.
During the year various regulatory and procedural update projects were launched in cooperation with the Group, among
which the implementation of the 231/2001 form, the compliance with the anti-money laundering directive and the creation
of the Procedure to manage subsidies under L. 488.
147
Income statement
Net income/loss for the year
Balance sheet
Total assets
Business volumes
Subscriptions
Redemptions
Other data
31/12/2009
31/12/2008
% Changes
21.77
0.04
-0.73
38.60
-19.82
-19.10
-43.6%
100.2%
96.2%
103.54
70.61
114.80
71.30
-9.8%
-1.0%
7,340.6
2,266.6
3,700.2
8,163.5
6,105.2
13,548.9
-10.1%
-62.9%
-72.7%
95
105
(*) Monthly arithmetic mean
In 2009 the range of managed funds was rationalized through a merger by acquisition effective as of 30/5/2009. The
number of funds went from 50 the prior year to 31.
In 2009, the Company reported a 10% drop in assets under management from 8,163 million at the end of 2008 to 7,341
million on 30/12/2009.
With respect to net asset flow for the year, the 31 Aletti Gestielle funds reported an outflow of (1,433.6) million.
As to the performance of the managed funds, during the year Gruppo Banco Popolare slipped from number tenth to number
fourteenth in the asset management groups ranking, with a market share of 1.96% and total assets under management of
8,435 million, of which 7,341 million managed by the company.
The table below compares the net asset values of the different classes of managed funds (the changes in each fund class
were affected by the changes caused by the merger that took place during the year):
Equity funds
Fixed income funds
Balanced funds
Flexible funds
Non-harmonized funds
Net assets under management
30/12/2009
30/12/2008
Changes
1,621
4,872
395
215
238
7,341
1,264
6,350
164
122
264
8,163
28.2%
-23.3%
141.7%
76.5%
-9.9%
-10.1%
Evidencing the unrelenting effort devoted to asset management, also in 2009 the company won the credit of the asset
management industry and was awarded the Premio Alto Rendimento organized by Gruppo Il Sole 24-Ore CSF Rating as:
x First Best Italian Mutual Fund Manger – BIG class;
x Best America Fixed Income Fund with Gestielle Bond Dollars.
Also this year the commitment to ethical finance was worth of notice: with the creation of the Gestielle Etico per AIL fund,
the planned annual donation was channeled towards a single beneficiary which implements country-wide extensive and
continuous projects. Thanks to the assets accrued in this fund, AIL (Italian Association against Leukemia-lymphomas and
myeloma) received a contribution of 164 thousand euro.
The donation made in 2009 will help realize a project of paramount importance: the creation of a single “AIL Home Care”
model across Italy, geared on the needs of hematological patients, that will then lead to the quality certification of AIL’s
home care on the domestic territory. The project shall start in Rome and will then be extended to services in other towns.
As to the development of the so called non-captive market (i.e., sales activities through banks and networks not belonging to
Gruppo Banco Popolare), 2009 posted positive net inflows and a solid growth of AuM. Non-captive networks ended 2009
with a net balance between subscriptions and redemptions of +16.7 million euro, while assets generated by “extra-group”
networks increased by 5.6% over the previous year, and at year-end totaled 1,378.2 million euro, accounting for 18.7% of
the SGR’s total assets under management. Although uncertainty still prevailed, which in 2009 caused this industry to report
a year-end total net outflow of -2,957 million, of which -12,668 million from Italian funds, the Company obtained positive
results on the non-captive market thanks to the unfailing and incremented support lent to the distribution networks.
148
As to the Open-end Pension Fund Gestielle Pensione e Previdenza, Net Assets for the Distribution of Benefits at the end of
the prior year (combining the two pension funds managed by the Company together) totaled 65.2 million (15.0 million for
Gestielle Pensione e Previdenza and 50.2 million for Bipitalia Multiprev), while at the end of 2009 they reached 80.6
million (after the merger by acquisition of the Bipitalia Multiprev Fund in the pension fund Gestielle Pensione e Previdenza
effective as of 31/10/2009), up by 23.62%. The total number of members decreased by 261 units from 4,697 to 4,436.
Illustrated below are intercompany relations with Banco and with the other Group subsidiaries:
x Banca Popolare di Verona - SGSP SpA, Credito Bergamasco S.p.A., Banca Aletti & C S.p.A., Banca Popolare di
Novara S.p.A., Banca Popolare di Lodi S.p.A. Cassa di Risparmio di Lucca Pisa e Livorno S.p.A., Banca Popolare
di Crema, Banca Popolare di Cremona, Banca Popolare di Mantova, Banca Caripe engaged in the sale and
distribution of managed funds;
x Banco Popolare e del Credito Bergamasco S.p.A (the latter until 31/05/2009) acted as Custodian Banks for the
managed funds).
Banca Italease and its subsidiaries
Income statement - consolidated (*)
Operating expenses
Net income/loss for the year
Balance sheet - consolidated (*)
Total assets
Other data - consolidated
Average number of employees (**)
Number Branches and other Offices
31/12/2009
31/12/2008
Pro forma
Changes
164.6
28.6
199.9
-132.2
67.7
-303.7
-297.9
-276.2
219.4
35.5
271.6
-185.4
86.2
-999.9
-1,137.1
-1,093.7
-24.9%
-19.4%
-26.4%
-28.7%
-21.4%
-69.6%
-73.8%
-74.7%
17,056.2
13,856.9
340.8
1,293.8
22,664.1
20,021.8
321.8
415.7
-24.7%
-30.8%
5.9%
211.2%
830
23
979
42
-
(*): Data at 31 December 2008 are adjusted for comparison to include the updates of 18 November 2009 of circular n. 262 and the classification criteria of
the accounting items of the Parent company Banco Popolare and are pro-forma to account for the transfer of Factorit in discontinued operations under
IFRS 5
(**) Monthly arithmetic mean.
Net customer loans at the end of December 2009 totaled euro 12,641.0 million.
At the end of 2009, about euro 4.8 billion worth of net customer loans were transferred to the company Alba Leasing,
therefore on 31 December 2009 they were no more part of Banca Italease consolidated assets: about euro 2.4 billion are net
non-securitized loans, while euro 2.4 billion are net securitized loans, under an agreement signed on 24 December 2009 by
Banca Italease and Alba Leasing (the ”Agreement on securitized loans”), based on which all risks and benefits are
transferred to Alba Leasing. Under the same Agreement, Banca Italease’s customer loans at the end of 2009 must
incorporate euro 1.3 billion worth of junior notes and senior securities not sold on the market corresponding to the portfolio
transferred to Alba Leasing through the Securitized loan agreement, and said securities shall be owned by the Bank.
Net of these components, the decline in customer loans confirms the downward trend that had been characterizing the prior
year. The sizable capital shortfall experience by Banca Italease as a result of the losses reported in 2008 and 2009, and the
confirmed scarcity and expensiveness of financial resources, obliged the Bank to restrain the start of new contracts and limit
itself to processing the outstanding lease business, while the portfolio continued to go through its natural impairment
process.
In detail, on 31 December 2009: (i) euro 8,815.6 million refer to net lease-related loans; (ii) euro 1,666.1 million refer to
mortgages and (iii) euro 868.0 million to other net loans, including among other things assets under construction and those
pending to go under finance lease (totaling 462.1 million).
149
31/12/2009
31/12/2008
Changes
- nonperforming
- substandard
- restructured
- past due
Other gross assets
5,023,252
1,847,272
2,771,802
185,638
218,540
10,373,287
10,373,287
4,548,999
671,521
3,690,199
7,802
179,477
17,120,939
17,120,939
474,253
1,175,751
-918,397
177,836
39,063
-6,747,652
-6,747,652
10.4%
175.1%
-24.9%
2279.4%
21.8%
-39.4%
-39.4%
Total gross loans - consolidated
Total net loans - consolidated
15,396,539
-1,192,597
-89,236
14,114,706
21,669,938
-997,340
-108,595
20,564,003
-6,273,399
-195,257
19,359
-6,449,297
-28.9%
19.6%
-17.8%
-31.4%
Credit quality data include both in 2008 and 2009 loans to Factorit customers.
The events that in 2008 had already caused a marked deterioration of the loan portfolio of Banca Italease and its
subsidiaries continued to affect also 2009, generating an additional increase of impaired loans, in particular non-performing
loans. Note, that although about euro 240 million worth of gross impaired loans (of which: non-performing of about euro 90
million, substandard of about euro 100 million, restructured of about euro 6 million and past due of about euro 44 million)
have been transferred to Alba Leasing (a company that does not fall within the consolidation scope) effective as at 31
December 2009, gross consolidated impaired loans rose to euro 5.0 billion on 31 December 2009.
Evidence of the high concentration level of the impaired loan portfolio, at the end of December 2009 : (i) about 72% of
gross non-performing loans was represented by 30 industrial groups, (ii) about 80% of gross substandard loans is
represented by 30 industrial groups, (iii) about 99% of gross restructured loans is represented by 2 industrial groups and (iv)
about 74% of gross past dues is represented by 30 industrial groups.
On 31 December 2009, the gross NPL to customer loan ratio was 12.0%, well above 3.1% reported on 31 December 2008.
The gross substandard loan to customer loan ratio was 18.1% on 31 December 2009, basically unchanged with respect to
17.0% on 31 December 2008. Finally, restructured loans and past dues accounted for 1.2% and 1.4% of gross customer
loans (0.04% and 0.8% at the end of 2008).
The NPL coverage ratio went from 47.6% at the end of 2008 to 35.9% on December 2009, due to the inflow of a big
amount of loans validly backed by guarantees represented by real estate. Also the substandard loan coverage ratio, coming
in at 17.9% and therefore almost in line with prior year’s 18.0%, factors in the weight of the real estate product in the
aggregate. The coverage ratio of restructured loans rose from 9.9% to 12.5%, while for past dues it went from 7.9% to 4.4%.
Net of provisions, non-performing loans stood at euro 1,183.4 million, substandard loans at euro 2,275.9 million,
restructured loans at euro 162.4 million and past dues at euro 208.9 million.
On 31 December 2009 tax assets amounted to euro 174.9 million, and they included deferred tax assets of euro 100.1
million. We reported euro 107.3 million worth of deferred tax assets net of deferred liabilities (inclusive of deferred tax
assets net of deferred liabilities of Factorit or euro 11.2 million, classified on 31 December 2009 in non-current assets held
for sale and discontinued operations). This is the same amount that was reported in the consolidated half-year report,
because some of the assumptions on which the standalone recoverability estimates were based faded, and when Banca
Italease asked the Parent company for a guidance on the possibility of recovery as part of tax consolidation, Banco Popolare
answered that for the time being it had not made any decision as to the possibility of proposing to Banca Italease and or one
of its subsidiaries to join the Group taxation option, and it specified that if and when this decision were to be made, in any
case the share of deferred tax assets to be recognized to Banca Italease and its subsidiaries following a recovery based on
the taxable income of the other companies of Gruppo Banco Popolare is to be mutually agreed by the parties.
We should also consider that the multiannual plan of Gruppo Banco Popolare incorporating the business activities of Banca
Italease and its associates (“leasing business”) will be presumably developed and submitted to the approval of the competent
bodies during the year. In view of the sizable amount of potential deferred tax assets of Banca Italease, a complete
assessment of their recovery probability, even under the perspective of Gruppo Banco Popolare, shall be possible only
based on a multiannual plan that takes into consideration also the future contribution of the leasing business.
This being said, Banco Popolare informed Banca Italease that, based on preliminary analyses, Banco Popolare shall make
sure that that Banca Italease and its subsidiaries may at least recover the amount of deferred tax assets (net of deferred
liabilities) posted in the consolidated half-year report as at 30 June 2009, amounting to euro 107.3 million.
Not recognized net potential tax assets total euro 395.5 million.
On 31 December 2009, due to banks stood at euro 5,709.0 million, down by 18.7% from the prior year. Note, that for euro
2.4 billion this decline in due to banks was caused by the transfer of said liabilities to the company Alba Leasing.
Securities issued decreased by 39.1%, reaching euro 8,249.0 million, as in 2009 Banca Italease did not carry out any new
public securitizations and made no new bond issuances. Liabilities associated with outstanding securitizations at the end of
December 2009 totaled euro 1,115.2 million, while bonds amounted to euro 6,984.9 million. A Preferred Securities deal of
euro 148.9 million (par value of euro 150 million) is underway.
As a result of the Agreement on securitized loans, securitization-related liabilities decreased by euro 1.5 billion referring to
the consolidation of part of the securitized securities sold on the market.
150
The increase in provisions for risks and charges with respect to the prior year was mainly driven by the other provisions,
which include euro 106.5 million set aside in 2009 to provide for the estimated one-off and non-recurring effects of the
execution of an agreement to transfer securitized loans to Alba Leasing, and partly for the guarantee given to Alba Leasing
on the ownership, the origin and the status of the transferred loans.
At the end of 2009 the provision for litigation risks stood at euro 33.2 million.
On 31 December 2009, the consolidated shareholders’ equity stood at euro 1,293.8 million, up by 211.2% from euro 415.7
million on 31 December 2008. The difference was mainly caused by the end of the offering period for the Capital increase,
through which we raised euro 1,153 million.
Thanks to the completion of the first phase (offering period) of the Capital Increase and to the deconsolidation of risk
weighted assets as a result of the finalization of the Reorganization Operations, the consolidated capital ratios of Banca
Italease improved significantly, to go well above the prudential regulatory thresholds fixed by bank regulators. The
consolidated pro-forma Core Tier 1 Ratio on 31 December 2009 was about 9%, the Tier 1 Ratio was about 10% and the
Total Capital Ratio was about 11% .
With respect to 31 December 2008 interest margin plummeted from euro 219.4 million to euro 164.6 million. This
evolution was mainly driven by a: (i) decrease in loans, caused by the need to restrain new business, due to the constraints
dictated by funding and the intervening capital shortfall, (ii) growth in the average cost of funding and (iii) volume of cost –
bearing funding greater than interest-bearing loans, due to the progressive deterioration of the portfolio’s quality.
Also the decline in Net fee and commission income (-19.4% against 2008), which came in at euro 28.6 million at the end of
2009, was due to the marked contraction of new lease business and medium/long term loans.
Net interest and other banking income, which at the end of December 2008 stood at euro 271.6 million, on 31 December
2009 amounted to euro 199,9 million.
Cost containment actions are reporting positive results. Other administrative expenses decreased by 7.3% with respect to 31
December 2008, reaching euro 50.7 million and personnel expenses dropped by 27.3% compared to the previous year,
running at euro 65.4 million thanks to the personnel cuts carried out under the master turnover management project. The
consolidated average headcount (including non-employees) went from 979 units in 2008 to 830 in 2009.
Net impairment of tangible and intangible assets, which on 31 December 2008 included euro 31.5 million that were mainly
linked to write-downs of real estate assets held for investment by the subsidiary Italease Gestione Beni, at the end of
December 2009 reached euro 16.1 million, including a 1 million write-down associated with a single building held for
investment by Banca Italease and euro 6 million worth of write-downs on 4 buildings held for investment by the subsidiary
Italease Gestione Beni for legal or technical-urban planning problems.
Net loan impairments at the end of December 2009 broke down as follows:
x net individual loan write-downs of 235.6 million, of which about euro 163.0 million write-backs for discounting
interest accrued during the year and recognized in income. The most important reason underlying the above
write-down trend (excluding write-backs) is the increase in total impaired loans reported in 2009;
x net performing loan write-downs of euro 19.3 million, up from euro 7.0 million in 2008 despite the reduction of
the loan portfolio they refer to because of the progressive adjustments to PD parameters (Probability of Default) on
customer loan portfolios in response to the general loan quality deterioration, only partly offset by improving PD
parameters on the bank loan portfolio.
Net write-downs include also write-downs for guarantees given of euro 2.6 million, related to the increase in counterparty
risk of some loans transferred to Alba Leasing, that under the agreement are to return in Banca Italease’s assets in 2010.
Net provisions for risks and charges, which at the end of December 2008 (euro 9.3 million) were largely linked to legal
litigation provisions, on 31 December 2009 broke down as follows:
x euro 14.7 million for provisions set aside during the year for legal litigations and bankruptcy procedures;
x euro 106.5 million for provisions set aside to account for the estimated one-off and non-recurring effects of the
execution of an agreement to transfer securitized loans to Alba Leasing (the ”Agreement on securitized loans”
more exhaustively described later on), and partly for the guarantee given to Alba Leasing on the ownership, the
origin and the status of the transferred loans;
x euro 1.7 million for other risks.
On 31 December 2009, profit on disposal of equity and other investments, totaling euro 9 million incorporated among others:
(i) a euro 8 million capital gain from the sale of operating real estate in Turin, Corso Ferrucci 100/A, and Milan, Via Tortona 7,
and (ii) a euro 0.4 million capital gain from the sale of three buildings held for investment by Italease Gestioni Beni.
Profit after tax on discontinued operations on 31 December 2009 (euro 18.9 million) represents the entire net income of the
subsidiary Factorit, down by 42.3% over the prior year.
As a result of the above described factors, on 31 December 2009 we posted a net loss of euro 276.2 million.
Relations with subsidiaries and associates
Please, refer to the Explanatory Notes, Section H, for a more detailed illustration of transactions with related parties.
151
MUTUALITY AND SHAREHOLDERS
INITIATIVES
Criteria followed in managing social actions to fulfill our mutuality purpose
This paragraph was prepared in compliance with article 2545 of the Civil Code, according to which directors of
cooperatives, also when not prevailingly mutual, must “explicitly indicate the criteria followed in managing social actions to
fulfill their mutuality purpose" in the report on operations.
Banco Popolare adopted the dual corporate governance system (art. 2409-octies and following articles of the civil code). It
is organized along a listed Parent Holding company (Banco Popolare), with management and coordination functions –
pursuant to art. 61, paragraph four, Lgs. D. n. 385, 1 September 1993 – towards the companies that fall within the corporate
consolidation scope, i.e., the retail banks (Banche del Territorio), the specialized Banks and the Operating companies
(product factories). The mutuality purpose is therefore primarily fulfilled through the Parent company’s directions to its Retail
Banks and its main subsidiaries, while respecting specific company peculiarities and prerogatives.
Article 4 of the Articles of Association provides a first important guidance on the company object and its mutuality nature,
by specifying its business activity scope ("the objects of the Company are to collect and maintain saving funds and issue
loans and credit, in its various forms …"), identifying the entities to which banking services are offered ("… both its
registered shareholders and non-shareholders") and performing banking activities in keeping with "the principles underlying
Cooperative Credit". Moreover, in keeping with its cooperative credit origin (art. 4 bis), the Company gives special regard to
the market territory of its subsidiaries, through the pervasive proximity of its distribution network to Small and Medium-sized
Enterprises, cooperative companies and households. Finally, in keeping with its institutional mission, Banco extends
favorable conditions, also through its subsidiaries, to its customer-shareholders for the use of specific services.
Accordingly, Banco Popolare interprets mutuality both in its strict definition - the relationship between shareholders who
contribute capital to the bank and receive services as customers - and in a more general sense as the interaction between
the bank and its social and economic setting, based on the spirit of localism at the service of civil society.
From a corporate point of view, on 31 December 2009, Gruppo Banco Popolare had 209.595 registered Shareholders, of
which about 80% holders of a commercial checking account, mostly resident in the five historical franchises of its Banks:
Veneto, Lombardy, Piedmont, Emilia Romagna and Tuscany. Moreover, on that same date registered shareholders with
shares deposited with the banks of the Group were more than 186,000. This once again confirms the importance of the joint
Shareholder-customer identity that has always been a distinctive feature of cooperative “popolari” banks, whose foundations
lie on reciprocal trust and loyalty. In 2009, the Banco Popolare Shareholders’ Office received and handled 35,892 new
applications for admission as registered shareholders, quite a big number demonstrating the lively interest to join the
shareholding structure. Applications are always approved in compliance with bylaw provisions and with applicable laws
regulating shareholding thresholds (at present, 0.5%). To this regard, 12 shareholders who exceeded this threshold will
have to sell the overhang shareholding under the law.
The General Shareholders’ Meetings of Banco Popolare represent the key event of direct participation for the registered
Shareholder to the Bank’s corporate life, as demonstrated also by the fact that the annual report is submitted to the approval
of the Shareholders’ meeting. The thorough monitoring over the observance of legal and statutory regulations governing the
status of Registered shareholder and corporate life represents an indispensable corollary. Accordingly, Banco Popolare is
committed to favoring the highest shareholders attendance to the important engagement with the General Annual Meeting,
to promote the principle of shareholding democracy and to encourage the direct participation of shareholders in the passing
of resolutions. From an organizational viewpoint, this is achieved by predisposing a large and adequate venue to host a
large number of participants, and from an organizational viewpoint, by putting shareholders in a position to exercise their
corporate rights in the best way possible.
This year the General Meeting of Banco Popolare’s shareholders took place on 25 April 2009, with a total attendance of
5,418 Shareholders for the special session and 9.548 for the regular session, in line with a tradition of wide participation
that has been characterizing for decades the corporate life of the Group Banks. The Shareholders’ meeting approved the
second annual report of Banco Popolare and, through the mechanism of voting lists, it appointed five members of the
Supervisory Board, which brings to twenty the number of members of this Board in charge of strategic planning and control
as provided by the Articles of Association and by applicable regulations.
On 30 January 2010, the Special Shareholders’ Meeting of Banco Popolare was convened, with an attendance of 3,603
Shareholders. The two items on the agenda were approved almost unanimously: the issuance of a convertible “soft
mandatory” bond and some amendments to by-law articles. As a result, the Shareholders’ Meeting gave the Management
Board the power to issue convertible bonds redeemable in shares, subject to the prior favorable opinion of the Supervisory
Board, up to a maximum amount of 1 billion, to be offered in option to shareholders and to convertible bond holders.
The next Annual Shareholders’ Meeting of Banco Popolare shall be convened on 23 April 2010 on first call (if required, on
24 April on second call), and will be asked to approve the 2009 statutory financial statements and to elect through the
152
voting list mechanism 10 Supervisory Board members, whose term is expiring, including the Chairman and Vice-chairmen,
who had been appointed at the time of the merger between BPVN and BPI; they can be re-elected and the term of the office
is three years.
Through its Banche del Territorio, Banco Popolare offers to its Shareholders an exclusive complete and manifold package of
products and services that interpret and strengthen the tie between them and the Bank. a The main program is dedicated to
Registered shareholders and it is called “Insieme Soci”. It features a fixed fee checking account with a wide range of
banking, insurance and non-banking services, including an unlimited number of transactions, two debit cards and up to two
credit cards, also Gold, at no charge, no account and securities administration expenses, and it gives free of charge access
to all on-line services of the Bank. Moreover, the holders of this package are entitled to take part in the point collection
program, called "Valore Insieme Soci", that rewards the ownership and use of some products and banking services, and
features a loyalty bonus rewarding shareholding seniority, and gives the possibility of offering the accumulated point to
some social associations: Fondazione Zanotto, Unicef or Fondazione Exodus.
At the end of 2009 about 83 thousand Shareholders had subscribed our dedicated offers, of which about 63 thousand chose
the “Insieme Soci” program.
“Insieme Soci Giovani” was geared to Shareholders below 36 years of age, and has the same characteristics of Insieme Soci
at an even lower cost. The “Insieme Soci” range was then extended to sole proprietorships with an offer called “Insieme Soci
Impresa”.
A number of novelties were introduced in 2009: the new “Insieme Soci Passbook” was distributed, linked necessarily to the
Insieme Soci account and designed to give more value to the liquidity of account holders who prefer more traditional
savings products. Specific solutions have been designed in the personal and family protection area, featuring a lower
premium for Shareholders. As to loan offers dedicated to Shareholders, they are offered particularly advantageous terms on
mortgages and personal loans. Each Shareholder is also exempted from custody rights on Banco Popolare shares deposited
with the Banks of the Group.
The second main class of initiatives through which Banco pursues its mutuality purpose is its support to the civil and social
fabric of its traditional franchises. In turn, they can be broken down into two main areas: banking activities and charity.
With regard to banking activities, Banco Popolare serves its customers through a very close-knit network of branches,
concentrated in its franchises, with a strong and pervasive coverage of the territory. This allows the bank to offer credit
services not only to large metropolitan areas, but also to smaller municipalities, guaranteeing the same qualitative standards
and range of solutions, which is a feature that definitely allows the Group to be the bank of choice for many local
communities. The strong ties with its historical market territories allow the bank to focus its attention on the entities that
characterize the social and economic system of its franchises: households and small and medium companies, that make up
the vast majority of the Group’s customer base.
Against this backdrop, and again in line with the overriding principle of mutuality, this is the rationale underlying the
actions made both in terms of support to economic development, and in terms of charity, referring to Shareholding
customers and initiatives in support of the civil and social fabric of the Group’s historic market territory.
The Group’s national outreach did not undermine its localism, as our banking activities are keyed to relationship banking
and this allowed us to retain a strong focus on local community issues and safeguard our deeply rooted ties with our market
territory.
Social solidarity, charitable and public interest activities are yet another institutional goal of Banco Popolare and a qualified
way to pursue its mutuality purposes. To this regard, the articles of association (art. 4 bis) state that “the banks whose share
capital is directly and fully owned by Banco Popolare can destine to charitable, social solidarity and public interest activities
the net income share provided by their articles of association, up to a maximum amount to be decided every year by the
Shareholders’ Meeting of Banco Popolare”. This amount is distributed among the market territories of the retail banks based
on a precise proportion set out by the above mentioned bylaw provision. Moreover, the Supervisory Board issues directives
and guidelines regarding the expenditure and social responsibility policies of the Group.
Group charitable activities are performed either directly by the Banche di Territorio or through the Foundations they have
set up, and that are guaranteed a primary support by the articles of association. Although each Foundation has its own
distinctive traits, they all share a common denominator: pursue charitable aims in favor of local communities. Specific areas
for action are schooling and education, social solidarity initiatives, safeguarding architectural and artistic heritage, as well as
promoting culture, publishing and sports.
A brief review of the main charitable activities performed in the past year is illustrated in the following paragraph.
Finally, every year the Group prepares its Social report, which gives a detailed description of initiatives in favor of
stakeholders, among which a great attention is devoted to charitable initiatives, and illustrates the many aspects of corporate
relations that contribute to the fulfillment of the mutuality purpose.
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Charitable, social solidarity and public interest initiatives
Despite the unprecedented and unusually severe economic cycle, Banco Popolare did not deviate from the founding tenets
of cooperative credit and from its mutuality purposes, over and above its primary role in serving the economy.
Therefore, in spite of the spare means available, Banco Popolare made a major effort, especially through its Retail banks, to
take heed of emerging needs and daily requests and to give concrete answers, which bears witness to our undertaking to
strengthen the fruitful ties with our communities, a commitment that was nurtured day in, day out, as it is the expression of
the Group’s deeply rooted position within the community, and of its role as the partner of choice to turn to for help and
support.
Well aware of the role we are called to play to meet the needs of civil society, the Management Board, after favorable
opinion of the Supervisory Board, submitted a number of proposals to the approval of the Shareholders’ Meeting aiming at
safeguarding the observance of the mutuality purposes provided by a specific bylaw provision. On 25 April 2009, the
Special Shareholders’ meeting approved the amendment to article 4 bis, second paragraph of the Articles of Association, to
be immediately effective, then the GAM approved the distribution of Euro 10 million in FY 2009 for donations to charity,
social solidarity and cultural initiatives by the banks fully owned by Banco.
In compliance with the third paragraph of the aforesaid article, and in keeping with the guidelines of the Charity Committee,
also in 2009 Banco took advantage of its vested prerogative as provided by the Articles of Association, and in order to favor
an equitable and fair distribution of funds across the Group, it issued guidelines and indications with respect to the
destination of available resources.
To this end, and without prejudice to the distribution criteria set out by the Articles of Association, everybody endorsed the
possibility for Banca Popolare di Lodi to draw from Banca Popolare di Novara’s and Banca Popolare di Verona–SGSP’s
profit allocation share, as determined upon approving the 2008 annual report, to pursue its charity purposes; as a result of
commitments made in the past, Banca Popolare di Verona–SGSP was also required to pay Euro 416,000.00 to Fondazione
di Culto San Geminiano San Prospero drawn from its disposable funds deriving from the bank’s profit allocation share.
Even after the above allocations, Popolare di Novara and Popolare di Verona were still left with adequate means to go
ahead with their supportive and furthering actions in favor of the civil and social fabric of their market territories.
Considering the unprecedented times we are experiencing, as part of its guidance, Banco expressed the need to make
smaller donations to ensure the continuity of Banco’s presence across its wide operational reach. It also underscored the
importance of privileging most hard hit economic contexts, social initiatives and voluntary services, provided that the most
worthy initiatives must have the priority and be covered completely.
Nevertheless, the significant overall reduction in available resources to be devoted to charity was hard felt, especially
whenever we had to blend the need to keep faith with the solidarity values that are the foundation of a cooperative bank
having close ties with its territory, with the need to satisfy the growing number of issues and the wide variety of social needs
that began to emerge with the critical deterioration of the economic, social and environmental setting. Gruppo Banco
Popolare addressed this highly complex situation with a purposeful and genuine approach, that was expressed through the
important actions made in the various areas by the Group companies, as described below, bearing witness to the deep
consideration our Group has always given to the growing needs of the local communities of our market territories.
Banca Popolare di Lodi and Fondazione Banca Popolare di Lodi
In 2009, Banca Popolare di Lodi, through its Charity Committee and the Committees of the Genoa, Romagna and Catania
Areas, made important donations to support voluntary services and initiatives of local associations in the field of education,
recreation, schooling, religion, health-care and social outreach, scientific research. Summarized below are the main ones.
Education and culture
Economic support was lent to:
- the Municipalities of Somaglia (LO) and Melegnano (MI) to stage historical reenactments of important events that
had taken place in the territory;
- to the Rome section of AVIS to organize the conference “Blood donation –citizens’ protection and prevention”;
- to the Association Roberto Malusardi – Amici del cuore Onlus in Lodi, for a concert to raise funds for scholarships
to further education in the field of cardiology;
- to the Emergency Ward of the Codogno Hospital (LO), to organize a conference for physicians, nurses and
paramedics on “The hot topics of emergency-urgency”;
- to the Health-care Organization of the Province of Lodi for the initiative “Continuous training, primary ultrasound
and telemedicine” aiming at favoring a health-care sustainable development of rural communities in Madagascar;
- to the Association Il Porto dei Piccoli Onlus in Genova to “train entertaining and educational hospital operators”.
Contributions were made to the Università Cattolica del Sacro Cuore in Milano for scholarships for young students in need
of financial assistance and to the Fondazione San Bassiano di Lodi Vecchio (LO) to award “merit grants” to mid- and highschool students.
Recreational events
Donations to support numerous initiatives were granted, in particular:
- to roll out the first edition of the “European Special Bocce Olympic Games” (an Italian version of bowling) held
in Lodi, with more than 250 disabled athletes coming from various European countries;
- to the Municipality of Imola for the show “Imola in musica 2009”;
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to the Associazione Emilia Romagna Festival di Imola to organize “Itinerari musicali 2009”;
for the concert season of the Società Filarmonica di Sestri Levante (GE) and the Giovine Orchestra Genovese;
to the Associazione Culturale di Noto (SR) “Corteo Barocco” for the show “Infiorata di Noto”;
to the Municipality of Cogorno (GE) for the exhibition “I Borghi dei Fieschi” and “I concerti dei Fieschi”.
Additional donations were made to various Sports associations to support their activities.
Health-care and social outreach
We contributed to the purchase of a multidisciplinary ultrasonograph for the ill elderly residents of Fondazione “Ing. P.
Zoncada” Onlus di Borghetto Lodigiano (LO) and to the purchase of a vehicle for the transportation of patients of
Fondazione Castellini di Melegnano (MI).
Financial support was offered to Fondazione Serena di Milano to implement the equipment and expand the structure of the
“Centro Clinico Nemo” (NEuroMuscular Omnicentre) and to Interplast Italy – Volunteering in Reconstructive Plastic
Surgery, Lodi section.
Generous donations were made to the Italian Red Cross Catania Committee to purchase telephone and IT equipment, and to
the Lodi Committee – female section, to the Opera Diocesana Madonna del Bambino Villaggio del Ragazzo di San
Salvatore di Cogorno (GE), to the multiple sclerosis association “Lega Italiana Sclerosi Multipla ONLUS” in Milano, to
support activities in favor of needy and ill people.
We also collaborated with the Curia Arcivescovile di Chiavari (GE) and with Virtus Entella di Chiavari (GE) to carry out two
solidarity projects in favor of the homeless and of deprived people.
Religious initiatives
Resources were destined to Parishes and Parish Youth clubs to support small renovation works, among which the most
significant contribution went to the Parish of Briga Marina (ME) to restore the canonicals destroyed by the flood last
October.
Scientific research
A donation was made to FON.CA.NE.SA. Onlus in Catania, a foundation for the study and treatment of blood neoplastic
diseases.
At the suggestion of the Charity Committee, part of the funds were used in the Areas and Branches located in the historical
marketplaces of Banca (Lodi, Pavia, Gallarate, Parma and Piacenza) for small-sized actions to be chosen autonomously in
favor of Associations and Agencies for sports events and events linked to local traditions.
By taking part in the fund raising for the people hit by the earthquake in Abruzzi, promoted by Banca Caripe and other
Abruzzi Casse in cooperation with the Abruzzi newspaper “Il Centro”, Banca Popolare di Lodi achieved an important goal:
the raised amount was destined to the “Progetto mensa di Celestino” aiming at building a structure to host the church, a
soup kitchen and shelters for the poor.
Banca Popolare di Lodi and Fondazione Banca Popolare di Lodi
Fondazione Banca Popolare di Lodi pursued its purposes to promote and further the wellbeing of the Lodi area and used its
funds to support numerous initiatives marked by a high social utility in favor of its community.
In 2009, through its Charity Committee and its Board of Directors, the foundation undertook itself to support various sectors,
in particular the social sector which has become a priority with the worsening of the economic crisis.
Note, that in 2009 the Foundation made some amendments to its Articles of Association, that were approved by the Board
of Directors of Banca Popolare di Lodi, among which the possibility of allocating part of its contributions directly. This
option, in addition to FOA (funding opportunity announcements), allowed the Foundation to be more effective in urgent
cases, where an actual call for bid procedure would have required too much time.
With the first funding opportunity program announcement “Bando per settori di intervento”, that was publicized in the Lodi
territory by local newspapers, the Foundation received 180 proposals for a total amount of about 24 million.
In the first screening carried out to identify priority interventions, that is, those that could promote innovation and
development initiatives for the territory, at first the Foundation selected 72 projects, and a few months after other 42 projects
were added in by way of direct actions, with a fair distribution across the territory.
Religious initiatives
Contributions were made for the renovation, restoration, preservation and remodeling of the historical and architectural
heritage of religious buildings such as churches and related buildings, like museums, libraries, parish youth clubs. For
example in Lodi we contributed to the renovation of the Church of the San Fereolo Parish and the youth club of the Parish
of Santa Maria Assunta.
Liberal contributions were assigned to the Parish of Santo Stefano Lodigiano to renovate the church damaged by the
earthquake in 2008 and to the Parish of Castiglione d'Adda to build a multifunctional sporting center.
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Schooling and education
14 initiatives were financed, aiming at promoting education at every school grade and level, also by creating or updating IT
labs, with a special focus on disabilities and learning impairments.
Resources were destined to initiatives to foster a renewed environmental awareness, the promotion of local culture and the
integration and mainstreaming of different cultures living in the Lodi territory.
Recreational events
32 interventions were supported, aiming at favoring social, cultural and non-professional sports cohesion.
Health-care and social outreach
Consideration has been given to social projects and interventions aiming at promoting and developing the dignity of human
beings and at providing financial support to families in need as a result of the economic crisis (a few thousand families in
the Lodi area). The Foundation made a contribution to the Solidarity Fund for Families created by the Diocese of Lodi and
another to the Provincial Anti-crisis Solidarity Fund jointly set up by trade unions and the Consortium of Municipalities for
Social Services, the Province and the Municipality of Lodi, and the network of municipalities of the Lodi area, to support the
families of workers who lost or are losing their jobs.
Additional donations were assigned to centers sheltering people in need; in particular:
- to Associazione “Il Cammino” to build mini-apartments for adults who recovered from drug and alcohol addiction
at Senna Lodigiana;
- to Cooperativa Amicizia at Codogno and Fondazione Danelli in Lodi for centers for the disabled, in particular
autistic children and adults;
- to the social cooperative “Marcellino” at Borghetto Lodigiano for a center that shelters children referred by the
Juvenile Court, who suffered from violence and abuse;
- to the nursing home of Sant’Angelo Lodigiano and of Codogno;
- to the rehab Community for the recovery of drug-addicts managed by the Fondazione Don Leandro Rossi through
the Cooperativa Amicizia.
A similar initiative with related purposes regarded also the Lodi Consortium for social services, made up of almost all the
municipalities of the Lodi area, to set up a team to follow minors who have committed crimes, for their rehabilitation and
mainstreaming in society.
Additional contributions were assigned to oncologic and pediatric projects and initiatives. Worth mentioning are for
example the donations to A.L.A.O. to purchase a van in Lodi for patients living in the Lodi area who must undergo
treatments outside the territory, and to “Il Samaritano” to set up a working group of volunteers in Codogno to manage
hospices for terminal patients.
Other grants were given to A.B.I.O to purchase an ultrasonograph for the pediatric ward of the Lodi hospital, and to the
Associazione “Amici di Serena” to train and recruit people to assist pediatric patients during transfers from the emergency
ward to the pediatric ward.
Scientific research
Two projects submitted by the Polo Universitario and by the Parco Tecnologico Padano passed our scrutiny: the first deals
with the opening of a research and continuous training center for laparoscopic surgery to train surgeons in the innovative
techniques of mini-invasive and robotic surgery; the second, which benefited from funds received at the time of the
incorporation of Banco Popolare, concerns the applied research for the development of advanced analytical genomic and
chemistry technologies to guarantee food safety, promote agricultural and zootechnical produces and protect typical
products.
As to direct interventions carried out by the Foundation, the following liberal contributions were assigned:
- to the “Prozoo” project developed by the Parco Tecnologico Padano and the Istituto Sperimentale Italiano
“Lazzaro Spallanzani”.;
- to the Provincial Anti-crisis Solidarity Fund, that needed additional financial help to secure that all the persons
entitled could be subsidized;
- to Associazione Progetto Insieme to build three two-room flats in Caviaga di Cavenago to be assigned on an
annual turnover basis to people in special need;
- to Istituto delle Suore Missionarie del Sacro Cuore di Gesù in Sant'Angelo Lodigiano to create a multifunctional
center to offer educational services and assistance to children between 3 and 6;
- to Tiro a Segno Nazionale in Lodi to renovate the structure hosting it: it is a shooting range where the Police
carries out its firearms practice.
The Foundation also purchased part of the personal archive of the renowned Lodi poet Ada Negri, who lived between the
end of 1800 and the first half of 1900. The massive documentation (manuscripts, letters, autographed typescripts and a small
photographic archive) supplements what had already been given to the Lodi Association “Poesia, la vita” by the grandson
prof. Gianguido Scalfi. The initiative will open the way to more in-depth philological studies on the renowned Italian poet,
who in 1940 was admitted among Italy’s Academics.
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At the end of the archiving process, on 30 December 2009, the Department of Heritage Libraries of the Lombardy Region
(Soprintendenza ai Beni Librari della Regione Lombardia) issued a Decree declaring the archives of cultural interest
pursuant to Lgs. D. 42/04.
Cassa di Risparmio di Lucca Pisa Livorno S.p.A.
In 2009, Cassa di Risparmio di Lucca Pisa Livorno revitalized its support to actions in favor of the protection of artistic and
architectural heritage and to social solidarity initiatives, cultural events and research activities.
Artistic and architectural heritage protection
An additional concrete support was lent to:
- the restoration of the Church of San Pietro in Vinculis in Pisa completed in March 2009: the intervention was
started in 2002 and called for the entire architectural renovation of the monumental complex better known as S.
Pierino. Over the years, also thanks to the Bank’s help, it was possible to consolidated the entire structure, set up
new functional systems, in particular restore the façade to its original state, re-insert the floor tiles and integrating
the missing parts, and renovating the frescos mostly located in the crypt;
- the renovation of the rooms of the Parish Youth Club of Madonnina di Lucca through the Association for the
“Cappella di S.Cecilia”;
- the renovation and furnishing of the Museo Diocesano di Arte Sacra through the Diocese of Livorno.
Social solidarity
Contributions were assigned to the deprived.
Of great importance were the initiatives in favor of Caritas Diocesana of Pisa to support families in need due to the current
economic crisis and in favor of the Croce Verde of Viareggio to purchase a new ambulance, because the old one was
seriously damaged by the railroad disaster on 29 June last.
Donations were also made to the families who were hit by the same disaster. On that occasion, Cassa gave its financial and
organizational help to set up a concert in the town of Viareggio, and the entire proceeds were donated to the victims of the
railroad disaster.
Liberal contributions were made in favor of various associations with ongoing projects in Third World countries, for
example the Tuareg Association and the Kalama Association.
A financial support was given to the families and businesses located in the flooded areas of the river Serchio which
overflowed on Christmas night.
For the Christmas holidays, contributions were made to various Dioceses located in the market territory of Cassa to support
their projects.
Education and Research
Resources were destined to the Faculty of Economics of the University of Pisa, to grant scholarships to the most worthy
young students who attended Masters in finance.
By way of the Associazione Confartigianato, organizer of the contest “Artigianato e Scuola”, involving all the schools of the
province of Lucca, prizes were awarded to single students, specific classes or schools.
Resources were committed to a project on bio-ethics developed by the Diocese of Terni-Narni-Amelia.
Cultural events
A concrete support was lent to the numerous initiatives organized by Associations, both as musical events and conferences:
suffice it to mention the contribution made to the Teatro del Giglio for their 2009 artistic season and the donation to the
Associazione Musicale Lucchese to organize their 2009 concert season.
Contributions were granted to the Associazione Scoprendo l’Italia to organize the conference “Convegno su Caravaggio” at
Orbetello and the exhibition “Chagall ed il Mediterraneo” in Pisa.
Credito Bergamasco and Fondazione Credito Bergamasco
Since its foundation, Credito Bergamasco has always been very sensitive to the social issues emerging in its market territory,
so much so that it introduced a constraint in its articles of association in favor of charity, social assistance or liberal
contributions, which at present is set at 6% of net income for the year. As always, also in 2009 a great attention and
commitment were devoted to charitable activities, which were directed towards solidarity actions, support to initiatives and
projects developed by local social organizations in the social, care, cultural, religious and sports ambits, as well as scientific
and medical research.
All the initiatives, some of which span multiple years, have been either carried out directly by Credito Bergamasco or
through its Foundation, which among other things is in charge of organizing charitable events. Summarized below are the
most noteworthy examples.
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Social outreach
Donations were made to the following initiatives:
- Association “NEPIOS Onlus” in Bergamo, a nonprofit charity association which operates on the Bergamo territory
in favor of children and families, in close cooperation with the town’s local authorities and agencies, supported
also by the liberality of local businesses and institutions. The Association has launched two pilot projects in
Bergamo and three international projects: the former two deal with a research on the early diagnosis of
neuropsychomotory and cognitive development disorders in selected “high-risk” children, and with the secondary
prevention of psychic malaise in children and adolescents living in disrupted social and family conditions, in
cooperation with the Centro Famiglia di Longuelo (Bg); the international projects regard the construction of the
village “Silvia e Michele Citaristi” at Azimganj in India, the support to the activities of St. Mary’s Lacor Hospital at
Gulu in Uganda, and the start of a dress-making business in Ecuador employing “deprived” female workers;
- Fondazione della Comunità Bresciana in Brescia to carry out social cooperation and social care/solidarity
projects. 23 projects were financed, submitted by nonprofit associations or agencies located in the municipalities
of the Brescia area served by 47 branches of the bank;
- Associazione Cure Palliative Onlus to fund G&A expenses, and the construction of the 12 rooms of the Bergamo
Hospice (Borgo Palazzo district) where terminal patients can be hosted, treated and cared for;
- “Consorzio Solco” – an agency comprising about 60 social cooperatives operating in the Bergamo province –
whose goal is to help the weak and deprived population groups (elderly, youth in difficulty, immigrants, disabled);
- Associazione Animazione Educazione Prevenzione e Reinserimento (AEPER) in Bergamo, a social solidarity
cooperative whose volunteering focuses on proximity to psychiatric patients and outcasts.
Smaller contributions were made to Fondazione Casa Serena Onlus at Leffe, for the project “Quartiere bene comune”
launched by the Social Cooperative In Cammino in San Pellegrino Terme, for third world missions where Bergamo
missionaries are present to Associazione Pro Jesu “Canta La Pace”, for the creation a new infirmary in the center of the
Comunità Don Lorenzo Milani in Sorisole, for the creation of a Day center for Alzheimer patients to the Cooperativa Sociale
Servire, and finally for the creation of innovative social and healthcare services to Welfareitalia – Gruppo Cooperativo Cgm
in Brescia.
Arts and Culture
Liberal contributions were granted to:
- the Association “Bergamoscienza” in Bergamo, of which the Bank is a member, to organize the Science Festival
from 3 to 18 October 2009, which offered 124 events free of charge (conferences, round tables, etc.) with highly
authoritative participants and speakers;
- Pro Universitate Bergomensi to support and further the University of Bergamo by organizing extra-curricular
activities, research labs, seminars and conferences, special projects aiming at promoting the servicing role the
University plays for its local community;
- Università degli Studi di Bergamo to enrich university libraries, in particular for the Department of Juridical
Science;
- Centro Studi Valle Imagna, a cultural association operating in the Imagna Valley, to revive and promote the social
history of the communities populating those mountain areas;
- Istituto di Istruzione Superiore Paolina Secco Suardo in Bergamo to build a climbing wall in the new gymnasium.
Health-care and medical-scientific research
Generous donations were made to:
- Associazione Paolo Belli - Lotta Alla Leucemia in Bergamo, to support the creation of the “Nuova casa del Sole”,
a project to build a center to host patients treated at the Hematology Department of the Ospedali Riuniti in
Bergamo, and their relatives;
- Istituto Ricerche Farmacologiche Mario Negri in Bergamo to support medical- scientific research;
- Fondazione Humanitas in Milano to assure a psychological support to hospital volunteers working in the field of
oncology care;
- Associazione Italiana Parkinsoniani in Milano to support physiotherapy activities;
- Lega Italiana per la Lotta contro i Tumori in Bergamo to support the research and prevention of cancer and to
assure care and support to the more deprived social groups.
Architectural heritage protection and promotion
Either directly or through its Foundation, Credito Bergamasco has always devoted a special attention to the promotion of
culture and art in the town of Bergamo, and as a confirmation thereof it financed numerous interventions, among which the
most noteworthy are:
- Parish of S. Sisto In Colognola for the conservative restoration of four important paintings;
- Parish of S. Bartolomeo Apostolo in Colere to purchase the painting of the painter Allegretti, depicting “Il
Battesimo di Gesù” – the baptism of Jesus;
- Parish of S. Martino Vescovo in Alzano Lombardo to restore the premises of the Alzano Museum;
- Church of S. Andrea Apostolo di Mornico al Serio to restore and consolidate the decorations of the Church
devoted to St. Andrew;
- Fondazione Adriano Bernareggi in Bergamo to restore the wooden statues belonging to the Diocesan network of
Archeological museums;
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- Church of S. Martino Vescovo di Sarnico to support the restoration of its stuccos and frescos;
- Parish of S. Maria Assunta in Romano di Lombardia to support the prestigious Museo di Arte e Cultura Sacra;
- Patronato San Vincenzo in Bergamo to restore and revive a building to be used to host a cultural and spiritual
center.
Other minor contributions were granted to the Clarisse Monastery in Bergamo, the Parish S. Giuseppe Artigiano Fiorine in
Clusone, to the Association Amici della Biblioteca in Bergamo, and to the Civic Library Angelo Mai in Bergamo to restore
the portrait of Antonio Tiraboschi, to the Parish S. Giovanni Battista di Bagnatica (to restore the organ), the Parish Natività S.
Agata di Martinengo (to restore the wooden choir), to the Parish SS. Martino Carlo Borromeo e Natività della B.V. di Adrara
S. Martino (to restore a painting of the XVIII century, Madonna con Bambino e S. Carlo), and to the Parish S. Maria Assunta
di Verteva (to restore frescos).
Sports and leisure time
Numerous sports and leisure time initiatives were financed, among which those organized by the Parish of S. Pio X Celadina
in Bergamo for a parish soccer field; by Club Alpino Italiano in Bergamo to organize the historical contest “Trofeo
Parravicini” of ski touring, and for the refurbishment of the refuge Benigni in the Municipality of Ornica.
A financial support was lent to numerous non-professional sports societies for activities characterized by a high community
proximity, a wide participation and a practical social role for children and the young.
Fairs and music shows
Liberal contributions were granted to associations and organizations, in particular: to Promoberg (Promozioni Bergamo Ente Manifestazioni Fieristiche) for fair exhibitions promoting the produce and business activities of the province of
Bergamo; to the International Center for Competitiveness Studies in The Aviation Industry (“ICCSAI”) to promote and set up
a Research Center on air transportation, in cooperation with other Bergamo authoritative organizations and businesses, and
involving researchers and experts from other universities and research centers; to the Association Anymore to organize the
21st edition of the “Festival Danza Estate 2009” with the patronage of the Ministry for Cultural Heritage and Resources, the
Lombardy Region and the local Bergamo agencies and the collaboration of the newspaper Eco di Bergamo, at the former
Church of S. Agostino (Piazzale della Fara) in Bergamo Alta,; to the Foundation Centesimus Annus in Rome for spiritual and
cultural initiatives.
As to Fondazione Credito Bergamasco, for years it has been pursuing the promotion of art, culture and medical-scientific
research, and illustrated below are examples of the numerous interventions, some particularly significant, carried out in
these ambits: artistic, publishing, cultural, and last but not least health-care, scientific research and protection of
architectural heritage.
Publishing
Generous donations were made to publish the following volumes, some entirely financed by the Foundation:
- “La Basilica di S. Martino e le sue Sagrestie in Alzano Lombardo” edited by Riccardo Panigada and published by
Moma Editrice. This work is the natural corollary to the numerous restorations of masterpieces by Fantoni and
other art works kept in the Museum of Sacred Art S. Martino in Alzano, financed by the bank in recent years;
- The new edition of Leopardi’s “Canti” (Florence 2006) by Prof. Franco Gavazzeni, that had been long out of print.
The reprint, sponsored by the Accademia della Crusca in Firenze, on which Franco Gavazzeni had been working
in recent years with his students, has been complemented with the commented edition of “Poesie disperse”, and
with the commented edition of the “Canti”, thus turning it into a must for the scholars and readers of the Recanati
poet.
Among other publishing initiatives, worth mentioning are the publications promoted by the “Accademia Guardia di
Finanza” in Bergamo, the support to the Association Giovanni Testori Onlus to publish the volume “Roberto Longhi
Bibliografia” (great Italian art critic), the work promoted by the Parish SS. Redentore in Seriate (Bg) for the bibliography of
“Mons. Carozzi”, archpriest of Seriate between 1919 and 1970, the volume prepared by the Associazione ex alunni
dell’Oratorio dell’Immacolata di Bergamo on San Leonardo da Noblac. A financial support was lent also to the preparation
of the “Saggi in onore di Trancredi Bianchi”, for the volume “Bergamo Urbs Picta”.
Music and artistic events
The Foundation organized a number of events, for example:
- the concert held at Teatro Creberg in Bergamo of the renowned jazz pianist Stefano Bollani, as part of the seventh
edition of the event “Dai credito alla solidarietà”, whose costs have been entirely financed by the Foundation,
while the proceeds have been donated to the “Associazione Paolo Belli/Lotta alla Leucemia Onlus”;
- the exhibition hosted in the Bank’s headquarter dedicated to the Bergamo painter Gianfranco Bonetti, who died
prematurely in 2007, and the support to the side-initiatives organized at the Liceo Artistico Statale di Bergamo in
memory of the Bergamo teacher and painter;
- the VII edition of the event “Invito a Palazzo”, whereby the head office of Credito Bergamasco was opened to the
public for the event “Longaretti. La metafisica delle cose”, exhibiting numerous magnificent works of the
celebrated Maestro, and the public was given the opportunity to visit the frescos and bas-reliefs decorating the
Bank’s premises.
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Renewing the collaboration between Fondazione Credito Bergamasco and Fondazione/Museo Bernareggi, in 2009 cultural
events were programmed such as: at the former Parish Youth club of San Lupo in Bergamo, the solo exhibit of the Greek
artist Jannis Kounellis, a historical representative of contemporary Arte Povera (Italian minimal art), and the videoinstallation “Ascesi e Caduti” by Ferdinando Ferrario at the annual event of Macabre Dances and the exhibition of
“Gianriccardo Piccoli “Stanze per Villa Panza” at Villa Panza (Varese).
Liberal contributions were granted to protect the frescos of the Accademia Carrara (Bg), to support some events at the “Fiera
Nuova” of Bergamo to promote art, culture and shows publicizing the Bergamo territory, to the cultural Project “Ultima
cena di Leonardo”, and to support the “Stagione di Prosa e di Operetta” and the “Stagione Lirica e di Balletto” of Teatro
Donizetti di Bergamo.
Worth mentioning is also the initiative promoted by the Foundation, that was welcomed with great success by the
community, to distribute complimentary copies of the newspaper “L’Eco di Bergamo” for three months to patients of the
Ospedali Riuniti di Bergamo, as well as the contribution, in addition to the bank’s donation, for the Diocese of Brescia to
organize the visit of Pope Benedict XVI in Brescia.
Also in 2009 we continued to support:
- the Fondazione San Martino, as part of an agreement between Fondazione S. Martino and Ospedali Riuniti di
Bergamo, aiming at supporting the activities of the “Research center for liver diseases – CeLiveR”;
- the development of research on prevention, diagnosis and medical-surgical treatment of “heart failure” at the
Cardiovascular Department of Ospedali Riuniti di Bergamo;
- the Surgery Department II° Breast Diseases and Anatomo-Pathology Unit of Ospedali Riuniti di Bergamo, by
supplying them with diagnostic kits and disposables to complete the donation made by the Foundation of a
medical equipment “GeneSearch”, that based on bio-molecular techniques can rapidly and reliably detect to
what degree the cancer has spread to the breast.
Preservation and promotion of architectural heritage
Either directly or through its Foundation, Credito Bergamasco has always devoted a special attention to the promotion of
culture and art in the town of Bergamo, in particular to Accademia Carrara, either by giving precious works of art under
gratuitous bailment, or by shouldering the burden of important exhibitions, and especially by financing the restructuring of
the facilities that shall host the Gallery of Modern and Contemporary Art (Galleria d’Arte Moderna e Contemporanea).
Driven by its keen interest for the promotion and dissemination of art among the public, in 2008 the bank promoted the
creation of an Underground Hall in the yard opposite the Accademia Carrara in Bergamo, and saw to its executive design.
However, since the possibility of building an Underground Hall must be considered unfeasible owing to insurmountable
difficulties, recently Fondazione Credito Bergamasco informed the Municipality of its availability to examine an alternative
project, to provide the town with an exhibition hall to support Accademia Carrara – to replace the planned Underground
Hall – to be built in the area between the former Convento delle Dimesse e delle Servite and the Suardi Park in Bergamo,
provided that said availability is subject to a number of sine qua non conditions, as the Municipality in due time must:
• approve the urban plan (P.G.T.) and transpose the remarks raised by the “Ateneo di Scienze Lettere ed Arti di
Bergamo” and by other private citizens;
• purchase the area;
• approve the new framework program and the agreement to supplement or replace the former one.
The Foundation in 2009 also paid the last tranche of a multiannual commitment for the restoration of the “Duomo di
Bergamo”.
Fondazione Banca Popolare di Novara per il territorio
Founded in 2002 after the merger between Banca Popolare di Novara Scarl and Banca Popolare di Verona - Banco San
Gemignano e San Prospero Scarl, Fondazione Banca Popolare di Novara per il territorio, in keeping with the tenets set out
in its articles of association, promotes and finances ideas and projects in the areas of education, schooling, socialization,
social and healthcare assistance, religion and scientific research, evaluating also their correct integration within the social
fabric of its market territory.
The Foundation, which operates mainly in the Bank’s Original Franchise, finances two main types of interventions: microcharity, devoted to small associations, and liberal donations to large projects to favor initiatives with a strong impact on the
territory. Both ambits are characterized by social actions aiming at furthering the social and economic conditions of civil
society.
All the actions approved by the Foundation have an impact on various aspects of the territory and are the result also of
suggestions made by members of the Charity Committee, so as to make choices resting on a prudent distribution of the
available financial resources.
This year the Board of Directors of the Foundation, in the light of the social emergencies caused by the delicate economic
situation, decided it was important to privilege social support and solidarity, in particular in the labor world.
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Against this bleak economic cycle and in keeping with the principle of social solidarity that must be safeguarded across its
community, the Foundation focused on people who lost their jobs. At Christmas, in addition to the traditional donations to
social organizations, the Foundation decided to destine part of its resources to the “Fondo Emergenza Lavoro”, an initiative
that was jointly developed by the Fondazione della Comunità del Novarese Onlus with the contribution of the Novara
Diocese. The Foundation also turned its attention to the neighboring territory of Vercelli and participated in the project
“Fondo di Garanzia a sostegno prestito d’onore ai lavoratori”, to try and alleviate situations of serious deprivation.
As usual, funds were used to finance numerous initiatives.
Funds were used to purchase equipment to be donated to the Local Healthcare Organization of Vercelli (equipment and
furniture for the Emergency ward), to the Università del Piemonte Orientale “A. Avogadro” - Facoltà di Medicina e Chirurgia
di Novara (portable echocardiograph).
Financial support was given to the Università degli Studi del Piemonte Orientale “A. Avogadro” - Facoltà di Medicina e
Chirurgia di Novara, for a specialized clinic devoted to the treatment of skin cancer, to the Association Idea Insieme Onlus
in Novara, to set up a Master in Palliative Care in cooperation with the Faculty of Oncology of the Università del Piemonte
Orientale “A. Avogadro” di Novara, to the Ambulatorio di Pronta Accoglienza Centro Città di Novara, for health care
volunteering activities to help people in need, to the Fondazione Malattie Renali del Bambino Onlus based in the Ospedale
Gaslini di Genova, for a research project on pediatric nephrology, and to the Research Center on Neuromuscular Diseases
CMN in Milano, for its research activities.
Social outreach
The Foundation’s constant solicitude for the outcast did not recede, and we continued to support numerous charity
organizations such as Caritas Diocesana in Novara, in Verbania and Vercelli, the Nursing Home “Borsetti Sella Facenda Opera Pia Guelpa” at Mosso Santa Maria (BI) (renovation of the Center for the Elderly), the Parish Santuario Sacro Cuore di
Gesù in Novara (the soup kitchen), and Comunità di Sant’Egidio Piemonte Onlus in Novara.
Other funds were used to support the Associazione Novarese Volontari per Anziani in Novara (to purchase food for the
town’s elderly in need), the Associazione Nazionale Mutilati Invalidi Civili - Sezione Provinciale di Novara (to purchase a
vehicle for the disabled) and many others.
Schooling and education
Generous contributions were made to theater events, in particular for Fondazione Teatro Regionale Alessandrino indi
Alessandria and Fondazione Teatro Coccia in Novara.
As to the schooling area, worth mentioning are the donations to Università del Piemonte Orientale “A. Avogadro” - Facoltà
di Economia di Novara, to support the 7th edition of the Master in Economy and Financial Intermediation Management and
the 1st edition of the Master in Management to Promote and Publicize Healthy and Agro-food Products, and to Università
degli Studi di Scienze Gastronomiche Pollenzo - Bra (CN), for research activities.
Music shows and events
In keeping with a well established tradition, worth mentioning is the support lent to the Municipality of Stresa for the “Notte
Jazz, New Orleans sbarca a Stresa” as part of the Jazz Festival of Ascona, the contribution to the Municipality of Orta San
Giulio (NO) for the 2009 Horticulture program, the generous donation to the Municipality of Novara to organize important
artistic and music events in addition to the traditional Estate Novarese, events that had positive repercussions not only on
the town’s life, but also on its tourist appeal.
Protection and promotion of architectural heritage
Massive funds have been committed to finance also in part the restoration and renovation of the architectural heritage.
Worth mentioning are the restoration of the Insigne Basilica di San Gaudenzio in Novara, the Cappelle del Crocifisso e
dell’Angelo Custode, the Cappella “Il primo sogno di San Giuseppe”, located in the ancient complex of Nazareth, in the
Riserva Naturale Speciale del Sacro Monte di Varallo (VC), the Cappella di Sant’Antonio Abate in the Parish Church of San
Gaudenzio di Baceno (VB), the Northern façade of the Church in the Parish S. Ambrogio di Savona and of the Via Crucis at
the Parish Maria Vergine Assunta in Armeno (NO).
Contributions were given also to the Municipality of Livorno Ferraris (VC), to preserve the Council Hall of Palazzo Ferraris,
to the Municipality of Mollia (VC), to restore the XVIII century Casa Belli featuring the typical architectural style of the
Valsesia area.
The Foundation renewed its support to the activities of Ente Giardini Villa Taranto Cap. Neil McEacharn of Verbania
Pallanza, whose botanic assets are renowned all over the world and every year attract more than 150,000 visitors.
Fondazione di Culto Banco S.Geminiano e S.Prospero
Thanks to the allocation of euro 416,000 made by Banca Popolare di Verona – SGSP, also in 2009 Fondazione di Culto
Banco S.Geminiano e S.Prospero could pursue its peculiar purposes, supporting initiatives in favor of local parishes and
religious activities of the Dioceses located in the Emilia territory.
In particular, the above funds were granted to:
- the Archdiocese of Modena-Nonantola, to build the parish complex Gesù Redentore di Modena, to restore the
presbytery of Montecuccolo (Pavullo), and to restructure the Parish S.Anna ai Torrazzi in Modena;
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Also in 2009 resources were devoted to training and pastoral initiatives;
- the Diocese of Reggio Emilia-Guastalla to restore the Episcopal Seminary in Marola and to restore the parish
complex of Villalunga (Casalgrande);
- the Diocese of Carpi to restructure buildings to be used for educational activities in favor of the youth (A.C.E.G.).
Fondazione Giorgio Zanotto
While keeping faith with our commitment to honor and recall the memory of Professor Giorgio Zanotto, the precious and
longstanding collaboration between Banca Popolare di Verona and the Foundation grew deeper and the numerous cultural,
social and scientific initiatives it engendered revived the spirit, the thought and the work of the unforgettable Chairman of
the Bank.
The Foundation’s main areas of intervention were:
Education and University activities
- The project promoted by the Accademia di Belle Arti GB Cignaroli and implemented by the company Edulife to enhance
training tools and methodologies for a constantly evolving learning;
- The Francesco Geminiani Award, sponsored with the Bank, to give high quality instruments as a free loan to talented
young musicians of any nationality. The winners took part as soloists in some concerts of the Orchestra “I virtuosi Italiani”.
- A scholarship granted to a researcher of the I Clinical Department of General Surgery of Ospedale Civile di Verona to go
and study at the Cancer Center of the Yale University.
Worth mentioning in the research ambit is the contribution to finance the organization of the 2009/2010 Master in Business
Intelligence and Knowledge Management.
Publishing
The Foundation promoted the publication by Marsilio of the volume on the activities of Giorgio Zanotto banchiere written
by the journalist and writer Giancarlo Galli. Under the agreement with the Verona University, Faculty of Jurisprudence, the
Foundation supported the Research Center VeronaInnova, to research, collect documentation and evaluate proposals on
public administration using innovative electronic means.
A similar support was lent also to the publication of the periodical Magazine of Jurisprudence, to the publication of the
handbook La stanza creativa – forme e colori delle emozioni, written by Piera Legnagli, adopted in rehab therapies for the
disabled and to subscriptions to the bimonthly magazine “La Società”, dealing with culture and research on the Church’s
social doctrine.
Cultural initiatives
The Foundation supported conferencing activities by organizing the conference “Oltre il conflitto di civiltà: il dialogo tra le
culture – la sfida dell’integrazione”, in collaboration with the Center for European Culture Sant’Adalberto, and in memory of
the tenth anniversary of the death of Giorgio Zanotto, the conference “Oltre l’ideologia della crisi: lo sviluppo, l’etica e il
mercato” in collaboration with Banca Popolare di Verona.
Again in collaboration with the Center for European Culture Sant’Adalberto, we organized the conference “Il seme di
Nasirijah. Dal dolore alla speranza” held in December.
Among cultural events, the Foundation paid a special attention to the exhibition “Alcide De Gasperi – Un Europeo venuto
dal futuro”, to recall the role and commitment of the Italian statesman.
Social initiatives and solidarity
Important contributions were granted to the 2009 edition of “Sensazionale”, organized by the Association Più di Uno in
favor of the intellectually disabled of all ages and their families, to activities to promote social responsibility among the
young organized by Unione Sportiva Atlas and for the 2009 activity program of the Music Association “Arti Mestieri
Musica”.
A generous donation was granted to the Parish of S. Andrea a Romagnano (VR) to restore three art works kept in the
Church.
Particularly significant were the Foundation’s interventions:
- to build the Istituto di Certificazione Etica nello Sport, to promote the quality and the management of ethics in
Sports:
- in favor of the Fondo Nominativo Aldo Tavella, which in 2009 – also through the Painting school - organized
courses, guided tours to exhibitions, and organized figurative and paining arts awards for emerging artists;
- in favor of the BURUNDI Project – Università degli Studi Verona, to build a Didactic Center in Ngozi, equipped
with electronic systems to use for teleconferences, tele-education and telemedicine.
Banca Popolare di Verona - S.Geminiano S.Prospero S.p.A.
The Bank’s deep ties with its market territory, of which the Bank is a living and profound expression, are manifested in the
various actions made to safeguard our deep relations with our civil community.
In addition to the commitment made in the past to devote part of the earnings to Fondazione di Culto Banco S.Geminiano e
S.Prospero in Modena and to the constant collaboration with Fondazione Zanotto, as mentioned above, also in 2009, in
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keeping with its cooperative nature, Banca Popolare di Verona - S.Geminiano S.Prospero S.p.A. took special heed of the
needs of its market territory, which stretches out to include Veneto, Emilia Romagna, Friuli Venezia-Giulia, and Trentino
Alto Adige, and supported numerous initiatives in the field of care, charity and public interest, as summarized below.
University and professional education and Schooling
As usual, a concrete support was given to the academic world by granting 25 scholarships for specific projects identified by
the Verona Hospital Organization, and by supporting the research activities of the Università degli Studi di Verona with four
Ph.D. scholarships.
A generous donation was given to the Jurisprudence Faculty to purchase ancient law texts for the library, and we should not
forget the completion of the restoration (started in 2007) and extension of the “ex–Zitelle” building, and the inauguration of
the Faculty’s Auditorium.
Our close relation with Professional Organizations did not fail, and we supported the Itinera Project promoted by the
Comitato Provinciale per l’Orientamento Scolastico e Professionale in Verona (COSP) to allow students attending the last
year of high-school to get acquainted with the labor world.
A special attention was devoted to the Order of Medical Surgeons and Dentists of Reggio Emilia which received a
contribution to reprint their Professional Register.
The Bank continued with its unfailing support to schools. Among the numerous donations, worth mentioning are the
renovation of the integrated nursery school managed by the Parish of S. Pio X in Verona, the extension and bringing into
compliance of the nursery school “Nido dei Sogni” at Caselle di Sommacampagna, the installation of a fire escape and an
elevator at the kindergarten “Nori Princivalle” in Verona, and the bringing into compliance of systems and replacement of
ceilings at the Kindergarten Don Riccardo Adani at Mirandola (Mo).
A concrete aid was given to Istituto Don Nicola Mazza in Verona to build two new classrooms of the Liceo Scientifico, to
Istituto Salesiano S.Zeno to set up a multimedia classroom and to the Scuola alle Stimate to create an IT lab, as wellas to the
Association Alma Graduate School in Bologna to organize the XXI edition of the Profingest Master.
A significant support was lent to E.D.S.E.G. Città dei Ragazzi in Modena to create the new Youth Center.
Restoration and Promotion of Artistic and Architectural Heritage
As in the past, donations were given to restructure monumental architectural complexes and artifacts of great artistic value
to be protected against the deterioration of time. Worth mentioning are first of all the significant preservative interventions
started in 2004 on the Basilica di Santa Anastasia: in 2009, once the transept was fixed, the presbytery started to be restored,
to be followed by the Giusti Chapel and the Rosario Chapel. Works should be completed by the end of 2010 and by then
the entire monumental complex of the Basilica, a landmark for the in citizens and the history of Verona, will be admired in
all its revived splendor.
As to the Basilica di San Zeno, the restoration of the apse was completed: after replacing the windowpanes, the preservative
intervention addressed the walls of the apse and the presbytery; great relevance was given after two years of restoration to
the famous Pala by Mantegna reinstated on the high altar during the celebration of the Patron of Verona, San Zeno, on 21
May. With the bank’s support, soon the restoration of the façade with its valuable Rose window will begin.
Worth mentioning are the contributions given for the restructuring, completed in 2009, of the eastern wing of the monastery
complex of S.S. Vito Modesto e Crescenzia at Badia Calavena and for the restoration and bracing of the Church of San Gallo
Abate di Pesina at Caprino Veronese.
We took heed of the appeal made by the Verona community to support the urgent bracing of the vault and of the roof of
Pieve di Santi Apostoli in Verona, damaged by exceptional weather events and by prolonged water infiltrations.
Numerous parishes in 2009 received donations to restore their Churches or precious works of art; other funds were assigned
to the extraordinary maintenance of restructuring of Centers for youth cohesion.
In Mantua we funded the overhaul of the lighting system of the Rotonda di San Lorenzo, while in Montorso Vicentino we
donated a contribution to restore the façade of the Church of San Biagio.
Donations were made to complete the restructuring and bringing into compliance of the systems of the Social Tourist Center
Dolomiti Pio X in Borca di Cadore, and for the artistic restoration and static buttressing, started in 2005, of the Cathedral of
Reggio Emilia.
Social and Health-care assistance
The Bank has always been close to associations acting in the volunteering of health-care services, among which the local
organizations of AVIS, Croce Verde, Croce Rossa, FIDAS and many others.
Among the most significant donations worth mentioning are those to the Association P.A. Volontari S.O.S. in Valeggio sul
Mincio and to the Comitato pro Ambulanza Croce Verde in Grezzana, in both cases to purchase an ambulance, to
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Fondazione per l’Incremento dei Trapianti d’Organo e di Tessuti in Padua to organize training courses for medical and
paramedical personnel, and to the Association Rosa Gallo in Verona to create a National Center for Desmoid Tumors.
Noteworthy also the contribution to the Bussolengo Hospital to equip the Pediatric and Neonatal Pathology Department
with two devices to be used for the respiratory impairment of preterm infants and to assess the respiratory function in
infants, as well as the support lent to the Hospital “Villa Santa Giuliana” for the project “Mens sana in corpore sano” to
assist psychiatric patients.
A significant financial support was given to FEVOSS in Verona – a well known and appreciated association working in favor
of suffering people – to roll out a wandering project “La carovana della solidarietà”, aiming at raising the consciousness of
the citizens of the province of Verona.
Worth mentioning also the contribution made also this year to the Istituto Oncologico Veneto in Padua to complete the
research project stated in 2007 “Innovative treatment strategies in tumors associated with the “von Hippel Lindau disease”.
Social initiatives
Significant donations were made to help people in need and difficulty, in particular:
- to the project “Novastrada” organized by the local section of Padua, Vicenza and Verona of the National
Association Guida Legislazioni Andicappati Trasporti;
- to Associazione Trentina Nuovi Orizzonti Onlus in Villalagarina to help and carry out preventive actions for
people in difficulty;
- to Società Mutua per l’Autogestione in Verona;
- to Ceis – Centro di Solidarietà di Modena .
In the Emilia area numerous interventions were carried out in the name of Banco S.Geminiano e S.Prospero; worth
mentioning is the significant support to the project “Scopri il respiro di Modena e Reggio Emilia” promoted by the
Associazione Italiana per la Ricerca Medica Epidemiologica e Farmaeconomica, to give the citizens of Modena and Reggio
Emilia the opportunity to have expert lung specialists test free of charge their respiratory function; the research outcome hae
been publicly presented in Verona and will soon be in Reggio Emilia.
Cultural initiatives, music events and shows
A special attention was devoted to cultural events promoted by various organizations, among which the renewed
collaboration with the Literary Society in Verona, to organize the International Festival “Verona Poesia 2009” and with the
Accademia di Agricoltura Scienze e Lettere in Verona to support their 2009 cultural program, as well as the support to the
Fondazione Culturale Antonio Salieri for the 2008/2009 theater season performed at the Teatro Salieri in Legnago.
Noteworthy also the support lent also in 2009 to the Associazione Giochi Antichi di Verona for various activities, in
particular to organize the international event “Tocatì”.
The Bank made also a significant contribution to art events, for example:
- to Fondazione Arena di Verona to organize the 2009/2010 artistic season of the Teatro Filarmonico;
- to the Municipality of Verona for the event “Estate Teatrale Veronese 2009”;
- to the Municipality of Modena for the 18th edition of “Serate Estensi 2009”.
Moreover, we renewed our contributions to Fondazione Teatro Comunale in Modena and to Emilia Romagna Teatro
Fondazione for the 2008/2009 artistic season, as well as to Fondazione Atlantide di Verona for the 2009/2010 artistic
season.
The Bank remains close to local culture also by supporting other theater events, concerts and conferences.
As to initiatives promoted by Agencies, local bodies and organizations, we renewed our collaboration with Fondazione
Studium Generale Marcianum in Venezia, an authoritative institution aiming at transmitting and processing knowledge, a
meeting and sharing point of different cultures.
Worth mentioning is the contribution given to the Municipality of Sant’Ambrogio di Valpolicella to create a “Centro Servizi
del Marmo”, with the restructuring of Villa Bassani – Brenzoni, where the new school of marble will be hosted.
A significant donation was made to the Municipality of Ferrara di Monte Baldo to renovate the building called “Ex
Convento”, to be used as a town cultural center.
Noteworthy were also the contributions to support the expenses to place the monument “Filo spinato” created by the
Maestro Giuseppe Castagna dedicated to the Italian victims of deportations in the Second World War, and the contribution
to the Associazione Nazionale ex Deportati Politici nei Campi Nazisti of Verona, to place a memorial stone in the Sanctuary
of the Madonna of Lourdes (ex Forte S. Leonardo) in memory of all the people who were imprisoned and died there during
the last world war in the name of liberty, justice and peace.
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The Bank also contributed to the expenses to make a marble and bronze sculpture to honor the Arma dei Carabinieri; the
statue was placed on the lakeshore of Peschiera.
In the Modena area, we renewed our commitment in favor of Fondazione Casa Natale Enzo Ferrari di Modena to set up an
Exhibition Gallery and a museum in memory of the unforgettable car manufacturer from Modena; donations were also
made to the Archdiocese of Modena and Nonantola, of the Municipality and Province of Reggio Emilia to set up Guarantee
funds to help people in temporary financial difficulties.
Fondazione Ermanno Gorrieri in Modena received a contribution to support the historical-biographical and scientific
research study on the works and teaching of Ermanno Gorrieri, a protagonist of the Italian catholic movement of the last
century.
Conferences and symposia
Either directly or by hosting events in its premises, the Bank gave a concrete support to Azione Cattolica Italiana of Rome to
organize two conferences for the trainers and operators of Azione Cattolica and to the Camera Internazionale Triveneta di
Verona which in cooperation with the town’s Bar organized the legal conference “Il regolamento Roma II”. In 2009 we lent
our support also to Fondazione Marco Biagi in Modena to support conferences and seminars.
Religious institutions.
We took heed also of numerous charitable and training initiatives having an evangelizing aim in Italy and abroad.
Worth mentioning are also our interventions in favor of:
- Facoltà Teologica del Triveneto in Padua for educational and training activities;
- Istituto Teologico S. Antonio Dottore dei Frati Minori Conventuali in Padua to update the book assets of the
Library “S. Antonio Dottore”;
- Conferenza Episcopale Italiana in Roma for religious and cultural activities promoted in the Italian Dioceses;
- Diocese of Verona to publish the new four-monthly magazine “Ars et Ratio” aiming at disseminating the
knowledge of the artistic heritage of the Diocese.
At Christmas, we renewed our support to the Municipality of Verona for the event “Natale vero” to the benefit of the people
in developing countries.
Moreover the Bank solicitously adhered to the invitation made by the Committee “Progetto Verona per l’Abruzzo”,
contributing with a concrete donation to the reconstruction of the areas hit by the earthquake in Abruzzi.
Worth mentioning is the contribution granted to the Association Amici del Basket in Verona to build a basketball
playground in Jericho to help young Palestinians, and to Associazione Bertoni in Verona to send a food container to the
people of Georgia.
In addition to actions on our home territory, other interventions regarded missions in Africa, Asia and South America by
supporting congregations, parishes, religious institutes and associations. Worth mentioning is the renewed contribution to
the Association Amici di Quixadà Onlus to open a Faculty of Medicine at the Catholic University of “Rainha do Sertao” in
the Diocese of Quixadà in the Northeast of Brazil, to make the structure compliant with the educational needs of the
hospital “Maternidade Jesus Maria Josè” where the Oncology and Respiratory Cardiology clinics are still under construction.
Sports
In this field the Bank made numerous interventions in favor of various sporting groups, with a special focus on youth: for
example, the support to BluVolley Verona for their “Volley School” project, involving 40 primary and secondary schools of
the province of Verona and to C.U.S. Centro Universitario Sportivo in Verona to disseminate the social and educational
values of rugby among youngsters.
A special attention was devoted to Associations working with disabled athletes: in particular in favor of Divi Sport in
Altavilla Vicentina for the “Festa dello Sport”, of EOS – Michele Dusi Onlus in Verona for initiatives in favor of the disabled
who engage in sailing, and of Associazione Pier Giorgio Frassati in Verona to help young disabled who play mini-basket on
a wheelchair.
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OPERATIONAL OUTLOOK
As projected, in the last part of 2009 the world economy strengthened, albeit at different pitches depending on the country
or the area. In major advanced economies the domestic product crept up slowly, while in emerging economies the
acceleration was more prominent.
In general, recovery continued to benefit from accommodating economic and monetary policies, with positive impacts also
on the climate of confidence of businesses and households, and on financial markets, that were back to normal.
In view of the performance of the last months of 2009, 2010 projections have been revised upwards: according to the
OECD, advanced economies should gradually increase their domestic product by about 2%, with a more favorable trend in
USA, less so in the Euro area.
Yet, many uncertainties still linger as to the robustness of the recovery: first of all, the temporary nature of many public
stimulus measures that have been implemented to date, the likewise temporary nature of inventory increases, and finally the
possible slowdown effects generated on consumer demand by a labor market with rising unemployment rates.
In the Euro area, the improving climate of confidence has not translated yet in a similarly strong increase in production
output and consumption, as demonstrated for example by the weak performance of the German economy in the last
months.
In Italy production output progressed at a very modest pace, mainly driven by exports; domestic demand remains lukewarm
and the country’s economic growth for 2010 is estimated to linger in the 0.6% and 0.8% range, and reach about 1% in
2011.
The credit market in our Country is still under the influence of the long production activity slowdown, which translated into
a stagnation of loan demand, especially by companies which saw their financial requirements dwindle.
The most recent economic cycle surveys on credit point at a break in the downturn of demand by business companies and a
somehow less restrictive offer by banks, in particular with respect to the terms and conditions made to large corporations.
As to household loans, lending policies are still marked by caution, especially in home mortgages, in view of the income
perspectives and the creditworthiness of consumers.
As to customer deposits and funds, the latest data show a partial, albeit modest, growth recovery of the aggregates, driven in
particular by the acceleration of resident deposits, that offset the contraction of repos. As to wholesale markets, with
liquidity coming back to normal conditions, access is becoming less and less difficult.
With respect to the Group’s outlook, in the coming months we shall move ahead with the numerous activities we have put
in place to come to grips with an extremely complex scenario, so as to efficiently compete on the market and continue to
provide our household and business customers with all the support that a large cooperative banking group can offer, with
responsibility and efficacy.
Banca Italease’s integration is rolling out in compliance with the planned schedule and procedures. After the conclusion of
the compulsory buy-out of the residual shares of Banca Italease pursuant to art. 108, paragraph 2, of Lgs.D. n. 58, of 24
February 1998, at the date of payment of the consideration (31 March 2010) Banco Popolare shall hold a 98.853% stake in
Banca Italease, therefore, having exceeded the 95% threshold, it shall exercise its right to purchase the residual Banca
Italease shares still outstanding pursuant to art. 111 TUF, and shall comply with the obligation to purchase under art. 108,
paragraph 1, TUF.
As to the business reorganization plan – where the capital increase has played a key role as it brought the company’s
perspective financial position on safe ground – actions are successfully centered on reducing the risk profile and on
disposing of non-core assets, such as the equity investment in Factorit, described in another section of this Report.
Once the transfers to the Newcos are over, Banca Italease’s loan book shall feature a high fragmentation and sector
diversification, and the plan is to progressively scale it down in the coming financial years.
Also Release, the company in charge of managing the non-performing loan portfolio, is stabilizing, both from a financial
and risk standpoint. In this case the loan book is much more concentrated on few large positions in the real estate sector
(backed by valuable real estate assets), but numerous selling agreements have already been formalized, which will lead to a
strong reduction in the above exposures.
In the current year we will continue to evaluate other initiatives for a progressive capital strengthening of the Group: after
the issuance last July of 1.45 billion worth of financial instruments subscribed by the Ministry for Economy and Finance, we
had another debt issuance of about 1 billion (“Banco Popolare 2010/2014 convertible bond redeemable in shares”), and the
announced disposals of Banco Popolare eská Republica and Factorit.
The guidelines that in the coming months shall underlie the Group’s strategies for traditional credit intermediation – where
we operate through banks that are in most cases the territory’s banks of choice – point at further strengthening and lending
continuity to our ability to entertain relations with the social and business entities we serve, well aware of the fact that
customer satisfaction is a key to success.
With respect to our internal organization, in April 2010 a project was launched to optimize the sales network. Neighboring
branches of some Group banks shall be involved in the transfer of activities. The aim is to eliminate geographical overlaps
that developed also as a result of the combination processes, in order to promote the opening of new branches on market
places that are important for the strengthening of our distribution network.
This action will involve 33 branches of Banca Popolare di Lodi, 5 branches of Cassa di Risparmio di Lucca Pisa e Livorno,
12 branches of Banca Popolare di Novara and 34 branches of Banca Popolare di Verona – SGSP, which shall be closed and
their relations transferred to other nearby branches.
166
The main objectives of the retail customer strategy are first the acquisition of new customers, by promoting offering policies
focused on “savings and protection” products, as well as by promoting the sale of more traditional banking products. Loans
to small and medium-sized enterprises, which are our traditional catching areas, shall be the priority, keeping a close watch
over pricing.
For corporate loans, we shall continue to stabilize the Large Corporate portfolio (the strategic management of these loans
has been centralized at the Parent company to ensure harmonization and a better risk control), with a greater weighting to
smaller corporations and a progressive increase of commercial loans.
As to funding policies, based on the data reported in the last months, the retail segment has been making a positive
contribution, especially with demand deposits.
This strategy is bound to stay even if the improvement of financial markets and the positive performance of Banco’s credit
spreads have recently opened up the doors of the institutional funding market again: as of last August, Banco performed 5
new issues, totaling 3.9 billion, of which 2.9 billion under EMTN programs and 1 billion (with one program out of a total of
5) of Bank Covered Bonds. All issues have enjoyed a wide participation by the market, especially asset managers and
insurance companies, which allowed us to extend the maturities of liabilities and to further strengthen the Group’s liquidity
profile, that has been constantly improving over time, at economic conditions in line with the planned profit targets.
Among other things, this is allowing us to guide the retail banks’ distribution networks towards intermediating financial
assets with a higher value added and profitability, that can also meet the growing request for welfare and insurance contents
by customers and make a stable contribution to the growth of non-interest income.
Governing the efficiency and cost profiles of the Group will be key, against a macroeconomic scenario that is still calling for
caution with respect to revenue growth estimates. Personnel expenses shall remain under control, also thanks to a partial
replacement of the natural turnover with redundancies from the branch closedown plan.
We will continue to keep a close watch on assets risk profiles, as the Group always did, which is what allowed us to close
financial year 2009 with a cost of credit in line with expectations. 2010 shall still be affected by the long wake of this
cyclical slowdown, so that we do not anticipate noticeable reductions on the short term.
A positive contribution to the Group’s profitability will continue to come from the progressive efficiency gains and
profitability improvements attained by Banca Popolare di Lodi. After a number of years of losses, it reported an actual
turnaround, and is back to profit, thanks to the brilliant commercial dynamics in its core-business sectors, to a gradual
alignment with the productivity and risk benchmarks of the other retail banks and to its revitalized ability to appeal to new
customers.
Noteworthy events after the balance sheet date
In keeping with the special regulations issued by the Bank of Italy, noteworthy events after the balance sheet date are
illustrated in the Explanatory Notes, Section A, Sub-section 3.
Verona, 30 March 2010
The Management Board
167
Bergamo, piazza Vecchia
Declaration of the Chief Executive Officer
and of the Manager responsible for preparing
Head ofce of Credito Bergamasco, Bergamo
170
Certification of the consolidated financial statements pursuant to
art. 81-ter of Consob Regulation n. 11971 of 14 May 1999 and
following amendments and additions
1. We, the undersigned, Pierfrancesco Saviotti, as Chief Executive Officer of Banco Popolare Soc. Coop., and Gianpietro
Val, as Manager responsible of preparing the corporate financial reports of Banco Popolare Soc. Coop., in keeping also with
art. 154-bis, paragraphs 3 and 4, of Legislative decree n. 58 of 24 February 1998, herewith certify that the administrative
and accounting procedures followed to prepare the 2009 consolidated financial statements:
x
were adequate with regard to the company features, and
x
were effectively applied.
2. The assessment of the adequacy and of the effective application of the administrative and accounting procedures for the
preparation of the financial statements as at 31 December 2009 took place against a backdrop characterized by the
finalization of the business combination of Gruppo Banca Italease and the consequent launch of an extensive reorganization
of the acquired companies. The valuation was based on an internal model defined by Banco Popolare Soc. Coop., in
conformity with the model issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO
Report”), representing the generally accepted standard worldwide for internal auditing systems.
3. We also certify that:
3.1 the consolidated financial statements:
a) were prepared in compliance with the applicable international accounting standards adopted by the
European Union pursuant to the EC Regulation n. 1606/2002 of the European Parliament and Council of
19 July 2002;
b) are congruous with accounting books and book-keeping entries;
c) are fit to provide a truthful and correct representation of the financial and operating situation of the
Issuer and of the companies falling within the consolidation scope.
3.2 The report on operations includes a reliable analysis of the operating performance and results, as well as of the
situation of the Issuer and of the companies falling within the consolidation scope, together with the description of
the major risks and uncertainties they are exposed to.
Verona, 30 March 2010
Pierfrancesco Saviotti
Chief Executive Officer
Gianpietro Val
Manager responsible of preparing
Signed on the original
Signed on the original
171
Novara, Basilica di San Gaudenzio
Independent Auditors’ Report
on the consolidated financial statements
Head ofce of Banca Popolare di Novara, Novara
Lodi, piazza Duomo
Consolidated financial statements
Head ofce of Banca Popolare di Lodi, Lodi
CONSOLIDATED BALANCE SHEET
Assets
(thousands of euro)
10
20
30
40
50
60
70
80
90
100
120
130
Financial assets designated at fair value through profit and loss
Due from banks
Loans to customers
Hedging derivatives
Fair value change of financial assets in hedged portfolios
Property and equipment
Intangible assets
of which: goodwill
140 Tax assets
a) current
b) deferred
150 Non-current assets held for sale and discontinued operations
160 Other assets
Total
Liabilities and shareholders’ equity
(thousands of euro)
10
20
30
40
50
60
70
80
90
100
110
120
140
160
170
180
190
200
210
220
Due to banks
Due to customers
Securities issued
Financial liabilities held for trading
Financial liabilities designated at fair value through profit and loss
Hedging derivatives
Fair value change of financial liabilities in hedged portfolios
Tax liabilities
a) current
b) deferred
Liabilities associated with non-current assets held for sale and discontinued operations
Other liabilities
Employee termination benefits
Provisions for risks and charges
a) post-employment and similar obligations
b) other provisions
Valuation reserves
Equity instruments
Reserves
Share premium reserve
Share capital
Treasury shares ( - )
Minority interests
Net income (loss)
Total
31/12/2009
31/12/2008 (*)
580,798
11,930,649
183,526
2,056,466
306,240
9,566,348
95,350,225
130,758
710,004
10,033,368
311,375
1,625,154
530,296
12,482,048
81,096,693
92,881
7,267
1,637,221
1,442,462
5,294,942
4,474,030
2,358,414
249,737
2,108,677
1,915,762
2,948,013
135,709,091
9,142
1,457,405
1,329,149
5,333,248
4,469,851
2,214,391
365,466
1,848,925
186,691
3,915,385
121,327,230
31/12/2009
31/12/2008 (*)
8,420,417
53,191,863
25,227,520
3,878,649
26,763,737
168,456
8,357,652
51,352,417
24,252,656
3,374,818
17,525,901
49,985
41,518
731,499
41,353
690,146
960,065
2,738,251
415,688
1,059,216
244,280
814,936
35,720
1,452,534
2,622,787
4,880,038
2,305,736
-31,014
579,373
267,038
135,709,091
70,555
1,217,207
571,692
645,515
22,561
3,512,003
417,746
986,070
192,278
793,792
-8,825
2,534
2,968,874
4,880,035
2,305,735
-30,966
403,644
-333,372
121,327,230
(*) Adjusted to comply with changes introduced by the update of circular n.262/2005 (Bank financial statements). Herewith attached is a table reconciling
the balance sheet published in the 2008 annual report and the one restated in this table.
.
178
CONSOLIDATED INCOME STATEMENT
Income statement
(thousands of euro)
10
20
30
40
50
60
70
80
90
100
110
120
130
140
170
180
190
200
210
220
230
240
260
270
280
290
300
310
320
330
340
Interest and similar income
Interest and similar expense
Interest margin
Fee and commission income
Fee and commission expense
Dividend and similar income
Profits (losses) on trading
Fair value adjustments in hedge accounting
Profits (Losses) on disposal or repurchase of:
a) loans
b) financial assets available for sale
c) investments held to maturity
d) financial liabilities
Profit (loss) on financial assets and liabilities designated
at fair value
Net losses / recoveries on impairment of:
a) loans
c) investments held to maturity
d) other financial activities
Net income from banking activities
Net income from banking and insurance activities
Administrative expenses:
a) personnel expenses
b) other administrative expenses
Net adjustments to / recoveries on property and equipment
Net adjustments to / recoveries on intangible assets
Other operating expenses (income)
Operating expenses
Profit (Losses) on investments in associates and companies subject to joint control
Goodwill impairment
Profits (Losses) on disposal of investments
Income (Loss) after tax from
discontinued operations
Net income (loss)
Minority interests
2009
2008 (*)
4,098,864
-2,130,069
1,968,795
1,361,451
-133,876
1,227,575
560,693
-69,398
-8,264
31,799
1,426
8,589
6
21,778
6,195,258
-3,940,376
2,254,882
1,410,963
-149,919
1,261,044
447,999
-522,804
-3,620
32,567
-15,482
49,531
5
-1,487
-308,301
3,402,899
-872,144
-823,050
-29,251
-19,843
2,530,755
2,530,755
-2,604,945
-1,624,672
-980,273
33,730
-109,978
-109,556
564,154
-2,226,595
76,236
112,487
492,883
-229,099
263,784
199,117
3,669,185
-1,353,754
-1,140,237
-176,492
-23,575
-13,450
2,315,431
2,315,431
-2,701,592
-1,622,443
-1,079,149
-204,422
-126,005
-136,735
655,922
-2,512,832
-271,410
-485,776
397,368
-557,219
139,631
-417,588
-5,845
257,939
9,099
267,038
115,430
-302,158
-31,214
-333,372
(*) Adjusted to comply with IFRS 5 and with the changes introduced by the update of circular n.262/2005 (Bank financial statements). Herewith attached is
a table reconciling the income statement published in the 2008 annual report and the one restated in this table.
179
STATEMENT OF CONSOLIDATED
COMPREHENSIVE INCOME
(thousands of euro)
10. Net income (loss)
Other comprehensive income (net of tax)
20. Financial assets available for sale
30. Property and equipment
50. Hedges of foreign investments
60. Cash flow hedges
100. Share of valuation reserve connected with investments carried at equity
110. Total other comprehensive income (net of tax)
120. Comprehensive income (Items 10+110)
130. Consolidated comprehensive income attributable to minority interests
140. Consolidated comprehensive income attributable to the Parent company
180
31/12/2009
31/12/2008
257,939
-302,158
59,066
1,036
-50
2,789
-14,519
48,322
306,261
-7,862
314,123
-141,306
-3,916
-145,222
-447,380
30,098
-477,478
403,644
9,784,015
Minority interests
Group shareholders’ equity
-30,966
-333,372
Treasury shares
2,534
Equity instruments
2,540
-
-
-
-
-
-2,540
342,730
-8,825
-
Valuation reserves
b) other
-
-
-
-
2,540
Changes in
opening
balance
2,626,144
2,968,874
a) retained earnings
4,880,035
Reserves:
-
2,305,735
2,305,735
Opening
balance as at
1/01/2009
b) other shares
a) ordinary shares
Share capital:
31 December 2009
(thousands of euro)
403,644
9,784,015
-333,372
-30,966
2,534
-11,365
345,270
2,626,144
2,971,414
4,880,035
-
2,305,735
2,305,735
Opening
balance on
1/01/2009
-
-
-
-
-
-
333,372
-333,372
-333,372
Reserves
Dividends
and other
allocations
-
-
183,591
-15,303
-48
-
14,023
-29,278
-15,255
Changes
in
reserves
-
4
-
-
-
-
3
-
1
1
Changes over the year
-
-
-
-
-
-
-
-
-
-
1,450,000
- 1,450,000
-
-
Changes in
equity
instruments
Extraordinary
dividends
Purchase of
treasury
shares
Operations on shareholders’ equity
Derivatives on
treasury
shares
Allocation of net income
from previous year
-
-
-
Stock
options
Issue of new
shares
-
-
-
-
-
-
-
-
-7,862
314,123
267,038
47,085
11,532,839
267,038
-31,014
1,452,534
35,720
359,293
2,263,494
2,622,787
4,880,038
-
2,305,736
2,305,736
Group
Comprehensive shareholders’
equity on
income for the
31/12/2009
year
579,373
-9,099
-200
-
2,029
208,367
195,415
403,782
39,685
129
143,047
143,176
Minority
shareholders’
equity on
31/12/2009
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY
1
18
Minority interests
Group shareholders’ equity
402,756
10,672,032
617,223
2,534
-28,163
Equity instruments
Treasury shares
141,953
335,436
Valuation reserves
b) other
2,417,293
2,752,729
a) retained earnings
4,880,023
Reserves:
-
2,305,733
2,305,733
Opening balance as
at 1/01/2008
b) other shares
a) ordinary shares
Share capital:
31 December 2008
(thousands of euro)
-
-
-
-
-27,851
-
-595,883
595,883
595,883
Reserves
-21,340
-21,340
Dividends and
other
allocations
Allocation of net income from
previous year
Changes over the year
-1,359
-20,209
-6,672
7,294
-20,831
-13,537
-
14
-
-
-
-
12
-
2
2
-
-3,930
-2,803
-1,127
-1,127
-
-
-
-
-365,074
-365,074
-365,074
-
-
Changes in
Purchase of
Changes in
Issue of new
Extraordinar
reserves
treasury
equity
shares
y dividends
shares
instruments
Derivatives
on treasury
shares
Operations on shareholders’ equity
-
-
-
Stock
options
-
-
-
-
-
-
-
30,098
-477,478
-333,372
-144,106
9,784,015
-333,372
-30,966
2,534
-8,825
342,730
2,626,144
2,968,874
4,880,035
-
2,305,735
2,305,735
Group
Comprehensi shareholders’
equity on
ve income for
31/12/2008
the year
403,644
31,214
-222
-
791
6,593
177,443
184,036
41,475
211
146,139
146,350
Minority
shareholders’
equity on
31/12/2008
CONSOLIDATED STATEMENT OF CASH FLOWS
Direct method (thousands of euro)
A. Operating activities
-
1. Cash flow from operations
interest income received (+)
interest expense paid (-)
dividend and similar income (+)
net commissions (+/-)
personnel expenses (-)
other costs (-)
other revenues (+)
taxes (-)
costs/revenues associated with discontinued operations, net of tax effect (+/-)
2. Cash flow from / used in financial assets
financial assets held for trading
financial assets designated at fair value through profit and loss
financial assets available for sale
loans to customers
due from banks: repayable on demand
due from banks: other loans
other assets
3. Cash flow from / used in financial liabilities
due to banks: repayable on demand
due to banks: other payables
due to customers
debt securities issued
financial liabilities held for trading
financial liabilities designated at fair value through profit and loss
other liabilities
Net cash flow from / used in operating activities
31/12/2009
31/12/2008
1,332,528
4,098,864
-2,130,069
560,693
1,227,575
-1,588,416
-1,061,119
459,944
-229,099
-5,845
-15,498,320
-1,025,908
-770,511
-460,563
-15,079,174
-92,239
3,010,531
-1,080,456
12,639,610
557,846
-495,081
1,839,446
974,864
503,831
9,237,836
20,868
-1,526,182
2,279,885
6,199,444
-3,941,067
447,999
1,061,009
-1,571,986
-725,422
553,760
139,867
116,281
5,111,408
1,102
739,550
11,011
2,442,128
518,268
1,132,798
266,551
-6,422,699
-1,517,535
-3,244,772
224,916
-5,899,191
250,197
5,574,819
-1,811,133
968,594
292,790
39,063
225,233
28,295
199
-377,600
-233,762
-685
-78,286
-64,867
-84,810
940,180
13,909
277,013
645,541
3,717
-1,336,154
-1,044,593
-100,394
-130,872
-60,295
-395,974
31,786
1,450,000
1,481,786
-129,206
-168,231
-365,074
-21,340
-554,645
17,975
31/12/2009
31/12/2008
710,004
-129,206
580,798
692,029
17,975
710,004
B. Investing activities
-
1. Cash flow from:
sales of investments in associates and companies subject to joint control
sales/reimbursements of investments held to maturity
sales of property and equipment
sales of intangible assets
2. Cash flow used in:
purchases of investments in associates and companies subject to joint control
purchases of investments held to maturity
purchases of property and equipment
purchases of intangible assets
Net cash flow from / used in investing activities
C. Financing activities
- issues/ purchases of treasury shares
- issues / purchases of equity instruments
- dividend distribution and other
Net cash flow from / used in financing activities
Net increase/decrease in cash and cash equivalents
Reconciliation
- Cash and cash equivalents at beginning of period
- Net increase/decrease in cash and cash equivalents
Cash and cash equivalents at end of period
183
Lucca, piazza Anteatro
Notes to the consolidated financial statements
Head ofce of Cassa di Risparmio di Lucca Pisa Livorno, Lucca
SECTION A – ACCOUNTING POLICIES
A.1 – IN GENERAL
Introductory note
Since 1 July 2009, at the end of the Tender Offer period launched on all the outstanding ordinary shares of Banca Italease,
Banco Popolare acquired the majority of outstanding shares and therefore the control over the company. Since the
beginning of the second half, Banca Italease and its subsidiaries have joined the full consolidation scope of Banco
Popolare.
Therefore, the consolidated financial statements of Gruppo Banco Popolare as at 31 December 2009 include Gruppo Banca
Italease’s balance sheet assets and liabilities at that date. The consolidated income statement of Gruppo Banco Popolare on
31 December 2009 incorporates the contribution of Gruppo Banca Italease limited to the income generated after 1 July
2009.
As a result of the above business combination, the consolidated balance sheet and income statement of Gruppo Banco
Popolare on 31 December 2009 are not readily comparable with the same statements as at 31 December 2008.
However, to guarantee an adequate disclosure on the operating performance of the Group, the report on operations shows
the specific balance sheet and income statement of Gruppo Banco Popolare without the contribution of Gruppo Italease, for
a like-to-like comparison with the same statements of the year before.
Sub-section 1 - Statement of conformity with International Accounting Standards
This consolidated annual report, in compliance with Legislative Decree n. 38 of 28 February 2005, was prepared in
compliance with IAS/IFRS standards issued by the International Accounting Standard Board (IASB) and the related
interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC) and adopted by the
European Commission, as defined in the EC Regulation n. 1606 of 19 July 2002.
The following documents have been used to interpret and apply the international accounting standards, although they have
not been specifically adopted by the European Commission:
x Framework for the preparation and presentation of Financial Statements (“Framework”);
x Implementation Guidance, Basis for Conclusions, together with other documents prepared by IASB or IFRIC as a
supplement to issued accounting standards.
The accounting standards applied to prepare these financial statements are those in effect on 31 December 2009 (including
the SIC and IFRIC interpretation documents).
For an overview of the standards transposed in 2009 and those transposed in prior years, whose adoption is expected on
financial year 2009 (or future years), see the following “Sub-section 5 – Other aspects”, that illustrates also the main impacts
on the Group.
Sub-section 2 – General accounting principles
The consolidated financial statements comprise the balance sheet, the income statement, the statement of comprehensive
income, the statement of changes in shareholders’ equity, the statement of cash flows and the explanatory notes, and is
supplemented with the Executive Report on operations and on the general performance of the companies falling within the
consolidation scope.
The financial statements and the contents of the explanatory notes have been prepared in keeping with the directives
released by the Bank of Italy in Circular n. 262 of 22 December 2005 “Bank financial statements: layouts and compilation”,
and following update of 18 November 2009. As to the latter update, the following “Sub-section 5 – Other aspects” illustrates
the main novelties that have been introduced and the associated financial statement reclassifications and changes in the
tables of the explanatory notes in FY 2008 with respect to those published last year, to guarantee a like-to-like comparison
with data on 31 December 2009.
This annual report adopted the Euro as functional currency.
The amounts shown in the financial statements and the data illustrated in the explanatory notes are expressed in thousands
of Euro, unless specified otherwise.
The consolidated financial statements were drawn up so as to provide a clear, fair and correct representation of the assets
and liabilities, profit and loss and financial performance generated during the year by Banco Popolare and by its
subsidiaries. The financial statements used to prepare the consolidated annual report are those prepared by the subsidiaries
as at 31 December 2009, adjusted, if necessary, to comply with IAS/IFRS.
186
Should the information required by the international accounting standards and by the above mentioned Circular not suffice
to provide a truthful and correct representation, the notes to the accounts provide relevant supplementary information.
If, in exceptional cases, the adoption of a provision under the international accounting standards is incompatible with a
truthful and correct representation of the assets and liabilities, profit and loss and financial performance, said provision shall
not be applied. The notes shall give an explanation for this possible deviation and shall illustrate the impact on the
representation of assets and liabilities, profit and loss and financial performance.
The financial statements were drawn up in compliance with the following general principles:
x Going concern: financial statements are drawn up on the assumption that the Group shall continue as a going
concern;
x Accrual basis of accounting: financial statements are prepared using the accrual basis of accounting, except for
cash flow information;
x Consistency of presentation: the presentation and classification of items in the financial statements are retained
from one financial year to the next, unless a standard or an interpretation require a presentation change, or a
different presentation or classification proves to be more appropriate than what required by IAS 8. In this case, the
notes to the financial statements shall contain due disclosure of the changes introduced as compared with the
previous year.
x Materiality and aggregation: the balance sheet and income statement faces are made up of items (marked by
Arabic numerals), by sub-items (marked by letters), and by further details (“of which” in items and sub-items).
Items, sub-items and the related details make up the financial accounts. The presentation complies with the
guidelines released by the Bank of Italy in Circular n. 262 of 22 December 2005. Additional items can be added
to these charts if their content cannot be associated with any of the items already shown in the faces and only if
they represent material amounts. Sub-items can be grouped together when one of the following conditions occur:
a) the sub-item amount is immaterial;
b) the aggregation favors a clear financial statement presentation; in this case, the notes to the accounts shall give
a disaggregated description of the sub-items that have been consolidated.
The balance sheet and income statement do not include accounts that show no amounts for the current balance
sheet year, nor for the previous year.
x Substance over form: transactions and other events are recognized and shown in compliance with their substance
and financial reality and not only based on their legal form;
x Offsetting: assets and liabilities, income and expense shall not be offset unless permitted or required by an
international accounting standard or its interpretation, or by the prescriptions contained in the above mentioned
Circular released by the Bank of Italy;
x Comparative information: each item of the balance sheet and income statement is matched with a comparative
item referring to the previous year. The previous year’s data can be adjusted, if necessary, to guarantee the
comparability with current year data. This is clearly the case with this consolidated annual report, as comparative
information must be adjusted based on the new provisions set out in the 1st update of Circular n. 262. In case of
non-comparability, adjustments or failure to do so, said events shall be duly disclosed and commented in the
notes to the accounts.
The explanatory notes are subdivided into sections: Accounting policies, Notes to the consolidated Balance sheet, Notes to
the consolidated Income statement, Consolidated statement of comprehensive income, Risks and associated hedging
policies, Consolidated shareholders’ equity, Business combinations, Transactions with related parties, Share-based
payments, Segment reporting.
Each section is organized in sub-sections, and each sub-section describes a single business element.
Uncertainty associated with the use of estimates to prepare the annual report
The application of certain accounting standards necessarily requires the use of estimates and assumptions that affect the
values of assets and liabilities recognized in the balance sheet and the reporting of potential assets and liabilities.
The assumptions underlying estimates take into account all information available at the balance sheet date, as well as
assumptions deemed to be reasonable, in the light of historical data and of this unique time financial markets are going
through. To this end, it is important to keep in mind that the situation caused by the current economic and financial crisis
has called for forward-looking assumptions marked by significant uncertainty.
In view of this situation of pervasive uncertainty, it cannot be ruled out that the assumptions we relied on, as reasonable as
they could be, may well find no confirmation in the future scenarios against which the Group shall operate. Therefore,
future reported results may differ from the estimates developed to prepare this annual report, and as a result, possible
adjustments to the book value of recognized assets and liabilities might prove necessary, that cannot be foreseen or
estimated today.
The balance sheet items that are most exposed to uncertainty situations are loans, financial assets, Investments in associates
and companies subject to joint control, intangible assets, deferred tax assets, Financial liabilities designated at fair value
through profit and loss, provisions for risks and charges and tax provisions.
Illustrated below are the measurement processes that call for a greater use of estimates and assumptions to calculate the
values to be recognized in the balance sheet:
187
Calculation of estimated incurred impairments of loans and other financial assets recognized under balance sheet assets
Loan write-downs are estimated based on evidence put together through a careful and constant monitoring of how
outstanding relations with borrowers evolve, together with their operating and financial position. The calculation of
cumulative portfolio write-downs is based on historical data, reported in terms of impaired loan decay rates and recovery
rates with respect to loan classes that show homogeneous characteristics as compared with those under measurement at the
balance sheet date.
Write-downs of financial assets that are not measured at fair value are estimated based on evidence coming from the careful
and constant monitoring of issuers’ operating and financial positions.
To this regard, note that the protraction or worsening of the current economic and financial crisis could cause a further
deterioration of the financial position of borrowers and issuers, which may generate losses on granted loans or purchased
financial assets greater than what can be currently projected and thus considered upon preparing the balance sheet.
Estimated losses on intangible assets and Investments in associates and companies subject to joint control
On a yearly basis, upon preparing the financial statements, intangible assets and Investments in associates and companies
subject to joint control recognized on balance sheet assets are tested for impairment. The impairment test is generally
conducted by determining the value in use and the fair value of assets and verifying that the value at which the intangible
asset or the equity investment has been recognized in the balance sheet is lower than its value in use or fair value, net of
selling costs, whichever is greater.
The financial and economic crisis that fully unfolded in 2008 has deeply changed the backdrop scenarios that had been
taken into consideration when preparing the business plans approved by the Group at the end of March 2008, so much so
that the full accomplishment of the projected income targets cannot be expected anymore. Owing to the uncertainty of
future backdrop scenarios, the Group to date does not have an updated business plan that can be used as a significant base
to project the value in use of Investments in associates and companies subject to joint control and of cash flow generating
units to which intangible assets with indefinite useful lives are assigned. Hence, the impairment test was based exclusively
on the calculation of fair value as compared with the carrying value of balance sheet assets under measurement. The fair
value of Investments in associates and companies subject to joint control and of cash flow generating units to which
intangible assets with indefinite useful lives were allocated has been calculated by referring both to the adoption of market
parameters to income and balance sheet values of the Investments in associates and companies subject to joint control /
generating units being tested, as well as the consideration actually applied to recently performed comparable transactions.
With regard to income items to which market parameters were applied, note that they were derived from the adjustment of
corporate expected economic performance data for financial year 2010 that should conservatively take into account the
changes intervened in the relevant financial and economic backdrop. Clearly, considering this unique situation of market
turbulence, we cannot rule out that the assumptions we made, as reasonable and prudential as they might be, could be
invalidated by the future scenarios against which the Group will operate.
Moreover, the current resilient market volatility does not allow us to exclude, that measurements based on market
parameters and on the values of recently performed transactions may in the long term fail to fully reflect the fair value of
assets under impairment test.
Business combination
The recognition of business combinations requires that the acquired assets and liabilities be assigned the difference between
their purchase price and their net book value. For most assets and liabilities this is done by recognizing assets and liabilities
at their fair value. The residual cost of acquisition if positive is recognized as goodwill; if negative it is charged to income as
a revenue. When allocating the purchase price, Gruppo Banco Popolare takes into account all the available information;
however, by definition, this process requires the use of very complex and subjective estimates.
Calculation of the fair value of financial assets and liabilities
When the fair value is not directly observable on active markets, more highly subjective elements lie in the choice of
measurement models, as well as of input parameters, since also the latter may not be observable on the market. In case of
illiquid markets, it is necessary to use more complex measurement processes, characterized by a greater subjectivity.
Estimate of the recoverability of deferred tax assets
The Group presents significant deferred tax assets among its balance sheet assets, mainly due to temporary differences
between the income statement recognition date of given business costs and the date when said costs can be deducted. Said
deferred tax assets recognized in the balance sheet refer to temporary differences, and to a lesser extent to losses
recoverable over a very long period of time. Deferred tax assets are impaired to the extent they are deemed to be nonrecoverable with respect to income prospects and the associated expected taxable income. The measurement procedure is
based on the same income prospects taken into consideration for the impairment test of Investments in associates and
companies subject to joint control and intangible assets.
Estimate of provisions for risks and charges, post-employment benefit provisions and tax provisions
The companies belonging to the Group are defendants in a wide range of lawsuits and fiscal proceedings. The complexity of
the situations and corporate deals that underlie outstanding legal actions, together with the interpretational issues as to the
applicable law, make it difficult to estimate the liabilities that may result when pending lawsuits are settled. The difficulties
lie in assessing if and what is due, as well as how much time will elapse before liabilities materialize.
For the 2009 annual report, an additional source of uncertainty represented by provisions for risks and charges was caused
by the securitized loans agreement signed by Banca Italease and Alba Leasing on 24 December 2009. The complexity of the
188
agreement, both from an interpretational and execution standpoint, prevented the parties to come to a final quantification of
impacts in time to prepare this annual report. Although the measurement of the effects described in Section B – Sub-section
12 of the explanatory notes represents the best estimate based on available information, we cannot rule out that the
assumptions based on which the agreement might be executed can differ from the ones used to calculate the estimates for
this annual report.
We provide the above list of measurement procedures simply to allow our readers to gain a better understanding of the
main areas of uncertainty, and in no way it should be construed as implying that to date alternative assumptions could
prove more appropriate. Moreover, balance sheet measurements are based on the going concern principle, as no risks have
been identified that could impair our normal course of operation. The report on risks, in particular the liquidity risk, is
illustrated in Section E – Risks and associated hedging policies.
Sub-section 3 - Consolidation scope and methods
The consolidated annual report illustrates the financial and operating situation of the Parent company and its direct and
indirect subsidiaries.
The consolidation scope is defined in compliance with the provisions set forth in IAS 27. Also all associates are included in
compliance with IAS 28 and 31.
The concept of control goes beyond the percentage interest in the share capital of an investee, and is rather defined as the
power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities.
Investments in associates and companies subject to joint control held for sale are accounted for in compliance with IFRS 5,
which prescribes the accounting of non-current assets held for sale.
The consolidated annual report date coincides with the Parent company’s individual balance sheet date. Companies whose
financial year ends on a date other than that of the Parent company prepare an ad hoc balance sheet and income statement
as at the reference date.
Full consolidation is the line-by-line combination of assets, liabilities, profit and loss of subsidiaries. Upon the identification and
recognition of minority interests in net assets and net income under a specific item, the carrying amount of the investment is
eliminated as an offset to the residual portion of the subsidiary’s equity. Any difference resulting from the above operation, if
positive – after being accounted for under the subsidiary’s assets or liabilities – shall be initially recognized as goodwill under
the item “Intangible assets” upon the first consolidation, and then under “Other reserves”. Negative differences are charged to
income.
The purchase price allocation of business combinations is measured provisionally, as permitted by international accounting
standards. Paragraph 62 of IFRS 3 prescribes that the initial accounting of business combination must be completed within
twelve months of the date of acquisition.
Assets, liabilities, revenues and expenses among consolidated companies are eliminated in full.
The operating performance of a subsidiary acquired during the period is included into the consolidated financial statements
as from the date of acquisition. The operating performance of a subsidiary which has been disposed of is included in the
consolidated financial statements until the date of disposal. The difference between the proceeds from the disposal and its
carrying amount as of the date of disposal, including any exchange rate difference recognized period by period in equity
upon consolidation, is recognized in income. If necessary, the financial statements of consolidated companies, when
prepared in compliance with different accounting standards, shall be uniformed to the Group’s accounting procedures.
Investees on which the Group exercises a significant influence (so called “associates”), that is, enterprises in which the
Group has the power to participate in the financial and operating policy decisions, but is not in control over those policies,
and which are neither a subsidiary nor a joint venture, are carried at equity. If an associate applies other accounting
standards than those used by the Group, adjustments are made to the associate’s financial statements used by the Group to
apply the equity accounting method.
Under the equity method, the investment is initially recognized at cost and the carrying amount is then adjusted based on
the proportionate interest in the investee. The difference between the carrying amount of the investment and the investee’s
equity is treated similarly to the line-by-line consolidation differences described above. In measuring the pro-rata share of
net assets, potential voting rights are not considered. The pro-rata share of net income from the associate is recognized
under a specific item of the consolidated income statement.
Investments in jointly controlled companies are recognized using the equity method. Joint control is the contractually
agreed sharing of control over an economic activity, and exists only when a unanimous consensus by all venturers (i.e., the
parties to a joint venture, having joint control over it) is required to make strategic financial and operational decisions.
Shares received as pledge have not been considered for the purpose of consolidation, as they are not aimed at exercising
control or influence on the business policies of an enterprise so as to obtain benefits from its activities.
The balance sheet and P&L statements of the consolidated companies whose functional currency is not the Euro, are
translated based on the following rules:
189
x balance sheet assets and liabilities are translated at the exchange rate in effect at year-end;
x P&L revenues and costs are translated at the year’s average exchange rate;
x all exchange rate differences originated by the conversion are recognized in a specific and separate reserve under
shareholder’s equity. Said reserve is eliminated through profit or loss when the equity interest is disposed of.
Shown below are Investments in associates and companies subject to joint control in subsidiaries, associates and joint
ventures (full or proportionate consolidation method)
Head Office
Shareholding
Type of
relation (a)
Company
% Share
Voting right
% (b)
A. Companies
A.1 Line by line consolidation
Banco Popolare soc. coop.
Verona
Acque Minerali Riunite S.p.A. (*)
Aletti & C. Banca di Investimento Mobiliare
S.p.A.
Rome
Milan
Parent
company
(1)
(1)
Efibanca
100.000%
Banco Popolare
60.472%
Credito Bergamasco
20.864%
16.560%
Valori Finanziaria
2.104%
100.000%
Aletti Fiduciaria S.p.A.
Milan
(1)
Banca Aletti & C.
Aletti Gestielle SGR S.p.A.
Milan
(1)
Banco Popolare
21.630%
Credito Bergamasco
12.994%
65.376%
78.796%
Aletti Gestielle Alternative SGR S.p.A.
Milan
(1)
Credito Bergamasco
21.204%
Aletti Trust S.p.A.
Milan
(1)
Banca Aletti & C.
Arena Broker S.r.l.
Verona
(1)
57.300%
Auto Trading Leasing IFN s.a.
RO - Bucharest
(1)
Banco Popolare
99.967%
100.000%
0.033%
B.P.I. International (UK) Ltd.
UK - London
(1)
Banco Popolare
82.000%
Banca Aletti & C. (Suisse) S.A.
CH - Lugano
(1)
BP Luxembourg
100.000%
Banca Caripe S.p.A.
Pescara
(1)
95.000%
Banca Italease S.p.A.
Milan
(1)
Banco Popolare
73.027%
15.173%
Credito Bergamasco
3.025%
Banca Italease Funding LLC
Delaware
(1)
Banca Italease
100.000%
Banca Popolare di Crema S.p.A.
Crema
(1)
Banca Popolare di Cremona S.p.A.
Cremona
(1)
Banca Popolare di Lodi S.p.A.
Lodi
(1)
Banco Popolare
100.000%
Banca Popolare di Lodi Capital Company LLC
USA - Delaware
(1)
Banco Popolare
100.000%
Banca Popolare di Lodi Capital Company LLC II
USA - Delaware
(1)
Banco Popolare
100.000%
Banca Popolare di Lodi Capital Company LLC III USA - Delaware
(1)
Banco Popolare
100.000%
Banca Popolare di Novara S.p.A.
Novara
(1)
Banco Popolare
100.000%
e S. Prospero S.p.A.
Verona
(1)
Banco Popolare
100.000%
Banco Popolare Ceská Republika, a.s. (*)
CZ - Prague
(1)
Banco Popolare
100.000%
Banco Popolare Croatia d.d.
HR - Zagreb
(1)
Banco Popolare
97.984%
Banco Popolare Hungary Zrt.
H - Budapest
(1)
Banco Popolare
100.000%
L - Luxembourg
(1)
Banco Popolare
99.969%
94.468%
99.590%
Banca Popolare di Verona - S. Geminiano
H - Budapest
(1)
BP Hungary
Bio Energy International S.A.
L - Luxembourg
(1)
Efibanca
Bipielle Bank (Suisse) S.A. in liquidation
CH - Lugano
(1)
Banco Popolare
100.000%
Bipielle International Holding S.A.
CH - Lugano
(1)
Banco Popolare
100.000%
Bipielle Real Estate S.p.A.
Lodi
(1)
Banco Popolare
100.000%
BRF Property S.p.A.
Parma
(1)
51.114%
BP Covered Bond S.r.l.
Milan
(1)
Banco Popolare
60.000%
Bormioli Rocco & Figlio S.p.A.
Fidenza
(1)
81.114%
Efibanca
Bormioli Rocco S.A.S.
190
0.031%
Banco Popolare Service Kft.
F - S. Sulpice
(1)
Bormioli Rocco France
100.000%
99.998%
14.314%
100.000%
98.713%
Head Office
Bormioli Rocco (Spain) S.A.
E - Guadalajara
Shareholding
Type of
relation (a)
(1)
Company
Bormioli Rocco Intern.
Bormioli Rocco & Figlio
% Share
74.070%
25.930%
Bormioli Rocco Glass Co. Inc. S.C.
USA - New York
(1)
100.000%
Bormioli Rocco International S.A.
L - Luxembourg
(1)
100.000%
Bormioli Rocco France S.A.
F - S. Sulpice
(1)
56.640%
43.360%
Bormioli Rocco Valorisation S.A.S.
F - Masnieères
(1)
Verreries de Masnières
BP Property Management Soc. Consortile a r.l.
Verona
(1)
Banco Popolare
27.309%
Banca Popolare Lodi
10.000%
Banca Popolare Novara
20.000%
BPV-SGSP
20.000%
Credito Bergamasco
100.000%
10.000%
Immobiliare BP
4.615%
Banca Aletti & C.
1.000%
C.R. Lucca Pisa Livorno
1.000%
Banca Popolare Crema
1.000%
Banca Popolare Cremona
1.000%
Banca Caripe
1.000%
1.000%
S.G.S. BP
1.000%
0.538%
Braidense Seconda S.r.l.
Milan
(1)
Efibanca
Cassa di Risparmio di Lucca Pisa Livorno S.p.A.
Lucca
0.538%
100.000%
(1)
Banco Popolare
Castimm S.r.l.
Livorno
Compagnia Finanziaria Ligure Piemontese S.p.A.
Milan
(in liq.)
Credito Bergamasco S.p.A.
Bergamo
(1)
100.000%
(1)
Banco Popolare
100.000%
(1)
Banco Popolare
Decoro Fidenza S.r.l.
Fidenza
(1)
Efibanca S.p.A. (***)
Lodi
(1)
Banco Popolare
Credito Bergamasco
78.923%
88.990%
100.000%
93.695%
90.600%
6.305%
6.097%
Efigestioni SGR S.p.A.
Milan
(1)
Efibanca
Essegibi Promozioni Immobiliari S.p.A.
Milan
(1)
Italease Gestione Beni
100.000%
Factorit S.p.A.
Milan
(1)
Banca Italease
100.000%
Itaca Service
90.154%
n.s.
FIN.E.R.T. S.p.A (in liquidation)
Marano (NA)
(1)
SE.RI.
100.000%
HCS S.r.l.
Holding di Partecipazioni Finanziarie Banco
Popolare S.p.A.
Immobiliare BP S.r.l.
Milan
(1)
100.000%
Verona
(1)
Banco Popolare
100.000%
Verona
(1)
Banco Popolare
100.000%
Istituto Pisano Leasing S.p.A. (in liquid.)
Pisa
(1)
100.000%
Itaca Service S.p.A.
Milan
(1)
Banca Italease
100.000%
Italfortune International Advisors S.A.
L - Luxembourg
(1)
Banco Popolare
100.000%
Italease Finance S.p.A.
Milan
(1)
Banca Italease
70.000%
Italease Gestione Beni S.p.A.
Milan
(1)
Banca Italease
100.000%
Italease Network S.p.A.
Milan
(1)
Banca Italease
100.000%
Lido dei Coralli S.r.l.
S.T. di Gallura (SS)
(1)
100.000%
Mercantile Leasing S.p.A.
Florence
(1)
Banca Italease
100.000%
Milano Leasing S.p.A. (in liquidation)
Milan
(1)
Efibanca
Monticchio Gaudianello S.p.A. (*)
Melfi
(1)
Acque Minerali Riunite
100.000%
Nadir Immobiliare S.r.l.
Lodi
(1)
100.000%
Nazionale Fiduciaria S.p.A.
Brescia
(1)
Banca Aletti & C.
100.000%
Novara Invest SIM S.p.A. (in liquidation)
Milan
(1)
Banco Popolare
Voting right
% (b)
99.999%
99.000%
1.000%
Parchi del Garda S.p.A.
Milan
(1)
Efibanca
73.636%
Partecipazioni Italiane S.p.A.
Milan
(1)
Glass Italy
92.653%
92.679%
(1)
Banco Popolare
7.312%
7.321%
Release S.p.A.
Milan
(1)
Banca Italease
80.392%
Royle West Ltd. (in voluntary liquidation)
IRL - Dublin
(1)
Banco Popolare
99.000%
Seefinanz S.A. (in liquidation)
CH - Lugano
(1)
Banco Popolare
100.000%
191
Head Office
Shareholding
Type of
relation (a)
Company
Servizi Riscossione Imposte SE.R.I. S.p.A. (in liq.) Naples
(1)
Banco Popolare
Sirio Immobiliare S.r.l.
Lodi
(1)
Società Gestione Crediti BP Soc. Cons. p.az.
Lodi
(1)
Banco Popolare
16.000%
Banca Popolare Lodi
20.000%
20.000%
BPV-SGSP
20.000%
Credito Bergamasco
10.000%
10.000%
1.000%
1.000%
Banca Caripe
1.000%
Efibanca
Società Gestione Servizi BP Soc. Consortile p. az. Verona
(1)
Tecmarket Servizi S.p.A.
Verona
(1)
Tiepolo Finance S.r.l.
Lodi
(1)
Tiepolo Finance II S.r.l.
Lodi
80.000%
100.000%
1.000%
Banco Popolare
20.500%
Banca Popolare Lodi
15.000%
15.000%
BPV-SGSP
15.000%
Banca Aletti & C.
10.000%
Credito Bergamasco
10.000%
10.000%
0.750%
0.750%
Banca Caripe
0.750%
0.750%
0.500%
Immobiliare BP
0.500%
0.500%
Banco Popolare
87.132%
Credito Bergamasco
12.868%
Banco Popolare
60.000%
(1)
BP S.G.C.
60.000%
Tirrena Professional Factor S.p.A. (in liquidation) Pisa
(1)
69.498%
Valori Finanziaria S.p.A.
Verona
(1)
Banco Popolare
99.786%
Verona e Novara (France) S.A. (in liquidation)
F - Paris
(1)
BP Luxembourg
Verreries de Masnières S.A.
F - Masnieères
(1)
Bormioli Rocco France
100.000%
Banca Italease Capital Trust
Delaware
(4)
100.000%
Banca Popolare di Lodi Investor Trust I
USA - Delaware
(4)
Banca Popolare di Lodi Investor Trust II
USA - Delaware
(4)
Banca Popolare di Lodi Investor Trust III
USA - Delaware
(4)
Bipitalia Residential S.r.l. (**)
Milan
(4)
Banca Italease Funding LLC
Capital Company LLC
Capital Company LLC II
Capital Company LLC III
Banco Popolare
BP Mortgages S.r.l. (**)
Brescia
(4)
-
0.000%
BPL Mortgages S.r.l.
(**)
Conegliano V. (TV)
(4)
-
0.000%
BPV Mortgages S.r.l.
(**)
Verona
(4)
-
0.000%
Erice Finance S.r.l.
Conegliano V. (TV)
(4)
-
Gestielle Harmonia Dinamico
Milan
(4)
Banco Popolare
54.482%
Gestielle Harmonia Vivace
Milan
(4)
Banco Popolare
71.736%
Gestielle Hedge Long Short World
Milan
(4)
Banco Popolare
85.721%
Banca Aletti & C.
Banco Popolare
99.686%
100.000%
100.000%
100.000%
4.000%
0.000%
9.121%
Gestielle Hedge Multi Strategy
Milan
(4)
Glass Italy B.V.
NDL - Amsterdam
(4)
Efibanca
5.001%
Italfinance RMBS S.r.l.
Trento
(4)
-
0.000%
Italfinance Securitisation VH 1 S.r.l.
Conegliano V. (TV)
(4)
Banca Italease
9.900%
Italfinance Securitisation VH 2 S.r.l.
Conegliano V. (TV)
(4)
-
0.000%
Leasimpresa Finance S.r.l.
Conegliano V. (TV)
(4)
-
Mercantile Finance S.r.l.
Florence
(4)
Mercantile Leasing
Banca Aletti & C.
192
% Share
Stichting Glass Italy
47.443%
3.957%
94.999%
0.000%
10.000%
Voting right
% (b)
Head Office
Shareholding
Type of
relation (a)
Company
% Share
Pami Finance S.r.l.
Milan
(4)
-
0.000%
Stichting Glass
NDL - Amsterdam
(4)
-
0.000%
Voting right
% (b)
A.2 Proportionate consolidation
N/A
(a) Types of relation:
(1) Control under art. 2359 of the civil code, paragraph 1, n. 1, (majority of voting rights in general shareholders’ meetings)
(4) Other forms of control
(b) The actual voting right percentage in the General Annual Meeting is indicated only if it differs from the shareholding percentage.
(*)
Discontinued operation under IFRS 5.
(**) Majority of benefits and risks (SIC-12 Consolidation – Special Purpose Company).
(***) When calculating the shareholding, treasury shares held by Efibanca were not accounted for, because capital rights are attributed to the other
shareholders (proportionately to the shareholding)).
The calculation of the voting right percentage is inclusive of treasury shares, because these shares are accounted for in the share capital to determine
the Shareholders’ meeting constitutive and deliberative quorum, although the voting right is suspended (art. 2357 ter c.c.).
Changes in consolidation scope
The main changes in consolidation scope compared to the situation on 31 December 2008 are attributable to the takeover
of the Group led by Banca Italease, upon completion of the Tender Offer in July 2009.
In particular, as of 8 July 2009, the full consolidation scope incorporates the following companies:
- Banca Italease S.p.A. (previously carried at equity)
- Factorit S.p.A.
- Mercantile Leasing S.p.A.
- Italease Network S.p.A.
- Italease Gestione Beni S.p.A.
- Itaca Service S.p.A.
- HCS S.p.A.
- Essegibi Promozioni Immobiliari S.p.A.
- Banca Italease Funding LLC
- Banca Italease Capital Trust
- Erice Finance S.r.l.
- Italfinance RMBS S.r.l.
- Italfinance Securitisation VH1 S.r.l.
- Italfinance Securitisation VH2 S.r.l.
- Leasimpresa Finance S.r.l.
- Mercantile Finance S.r.l.
- Pami Finance S.r.l.
On 5 August 2009, as part of the reorganization of the Group led by Banca Italease, Banca Italease incorporated the
company Tramonto S.p.A. Later on, the company, which is to receive part of the non-performing assets of Gruppo Italease,
changed its company name into Release S.p.A. and, as of the closing of the current quarter, is consolidated on a line by line
basis.
After the acquisition on 22 September 2009 of 50% of the share capital of BP Covered Bond S.r.l., a company engaging in
the purchase of loans as part of covered bond issues pursuant to art. 7-bis of Law n. 130 of 30 April 1999, Gruppo Banco
Popolare reached a total interest of 60% and therefore acquired the control of the company, with is consolidated on a line
by line basis.
As of financial year 2009, the subsidiaries Banco Popolate eská Republica and Factorit make a compound contribution to
the financial statements in items 150 of assets (Non-current assets held for sale and discontinued operations), 90 of liabilities
(Liabilities associated to discontinued operations) and 310 of the income statement (Income/loss after tax on discontinued
operations) as they are going to be sold, in compliance with IFRS 5. The sale was finalized in October.
A similar classification was adopted also for Aletti Private Equity: as a result of the sale to third parties finalized in the fourth
quarter of the year, the P&L of the associate up to the time of the sale is incorporated in income/loss after tax on
discontinued operations.
The merger by acquisition of the subsidiary Bipitalia Alternative in Bipielle Finanziaria was finalized on 27 March,
conducive to the following merger on 31 March of Bipielle Finanziaria into Holding di Partecipazioni Finanziarie Banco
Popolare.
At the end of September we formalized the mergers of Bipitalia Broker and of Efimmobiliare in Holding di Partecipazioni
Finanziarie Banco Popolare, while in December the real estate companies Andromeda, Antares, Antilia, Azimuth, Pegaso
and Perseo were merged into Bipielle Real Estate and Crifefi Sim into Banca Aletti. The above deals did not produce
changes in the consolidation scope as the companies involved were owned 100%.
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With respect to companies carried at equity, as explained above the equity investment in Banca Italease S.p.A. is no more
part of this category, as it is consolidated on a line to line basis together with its subsidiaries. The acquisition of Gruppo
Italease caused the company Aosta Factor S.p.A. to be carried at equity, while before it was recognized in financial assets
available for sale, as the total interest held by Gruppo Banco Popolare totals 20.69%. Similarly, as of the current
consolidated quarterly report, the Investments in associates and companies subject to joint control held by Banca Italease in
the associates Alba Leasing S.p.A. and Renting Italease S.r.l. are carried at equity.
An addition to this category was the equity investment in Pantex International S.p.A., held by Efibanca as part of its
merchant banking activity, accounting for 50% of its share capital.
On 9 January, the partial sale of stakes held by the Parent company and some of its subsidiaries in Istituto Centrale Banche
Popolari Italiane (ICBPI) to Veneto Banca Holding was formalized; as a result, the associate continues to be carried at
equity, as the interest held by the Group went from 32.731% to 25.133%, after the associate’s capital increase, plus the
0.016% stake held by Gruppo Banca Italease.
In the first half of the year the associate Evoluzione 94 was fully liquidated, after the approval by the shareholders’ meeting
on 7 May 2009 of the final liquidation report. The final liquidation distribution, amounting to 1.6 million, was collected by
the Group on 12 October 2009, in keeping with the term prescribed by art. 2493 of the Civil Code (90 days from filing the
liquidation report). As a result, with respect to the preparation of this consolidated annual report, the equity investment was
deconsolidate.
Similarly, due to Efibanca’s failure to subscribe the capital increase of the associate Comital, after its capital had been
slashed down by the incurred losses, the Group’s interest in Comital was reduced to zero and was therefore deconsolidated.
In December, Banca Italease purchased 33.333% of the real estate company Centro Milano S.p.A. from third parties, and
the company is now carried at equity.
Finally, during the period, some associates changed their company names:
x Holding di Partecipazioni Finanziarie Popolare Verona e Novara S.p.A. in January changed its name into Holding
di Partecipazioni Finanziarie Banco Popolare S.p.A.;
x Banca Valori S.p.A. on 26 January 2009 changed its name in Valori Finanziaria S.p.A., and moved its registered
office from Brescia to Verona;
x Società Gestione Servizi BP S.p.A., after turning into a consortium company as approved by the Special
Shareholders’ Meeting on 26 February 2009, changed its name into Società Gestione Servizi BP Soc. Consortile
per Azioni;
x BPVN Immobiliare S.r.l. changed its name into BP Property Management S.r.l. and after turning into a consortium
company as approved by the Special Shareholders’ Meeting on 6 March 2009, changed its name into BP Property
Management Società Consortile a responsabilità limitata;
x Carfid S.r.l.’s Special Shareholders’ Meeting held on 12 May 2009 approved the transformation of the company
into a joint-stock company (S.p.A.), the change of the company name into Aletti Trust S.p.A. and the change of
the company object: in addition to the fiduciary activity, it can act also as trustee, guardian, enforcer or protector
of trusts under the Hague convention of 01/07/1985;
x Società Gestione Crediti BP S.p.A., after turning into a consortium company on 1 October 2009, changed its
company name into Società Gestione Crediti BP Soc. Consortile per Azioni.
Sub-section 4 – Subsequent events after the balance-sheet date
Illustrated below are the most significant events occurred between the balance sheet date and the approval of the draft
annual report by the Management Board.
Compulsory buyout of Banca Italease common shares pursuant to art. 108, paragraph 2, of Lgs. D.
58/1998: price fixing and authorization by Consob to publish the Prospectus.
At the closing of the capital increase in the first days of January 2010, Banco Popolare held 91.397% of Banca Italease’s
share capital: Banco declared it did not intend reconstituting the free float, while it intended performing the obligation to
purchase the remaining Banca Italease shares.
On 4 March 2010, pursuant to art. 108 of TUF, Consob set the consideration related to the performance of the compulsory
buyback of Banca Italease common shares to 0.797 euro, for a total maximum amount of Euro 127,011,686.16 for the
159,362,216 residual shares, and authorized the publishing of the prospectus for the Mandatory Offer procedure.
The Procedure started on 8 March 2010 and ended on 26 March 2010, and raised 138,124,468 residual shares. By adding
these shares to those already directly and indirectly held by Banco Popolare, at the payment date of the consideration, set
on the 31 March 2010, the Group shall hold a 98.853% stake in Banca Italease. Having exceeded the 95% threshold of
Banca Italease’s share capital, the prerequisites are met for Banco Popolare to execute the Joint Procedure: therefore, as
declared in the Prospectus, Banco Popolare shall exercise its right to purchase, at the same price of 0.797 euro per share,
the remaining outstanding shares pursuant to art. 111 TUF, and at the same time it shall fulfill the buyout obligation under
art. 108, paragraph 1, of TUF. As of 8 April 2010, Banca Italease shares shall be delisted.
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Agreement for the sale of Factorit S.p.A.
The Corporate boards of Banca Popolare di Sondrio, Banca Popolare di Milano, Banco Popolare and Banca Italease on 25
February 2010 approved the sale of 90.5% of the share capital of Factorit S.p.A. The company, which is currently 100%
owned by Gruppo Banco Popolare through Banca Italease, was founded in 1978 by a group of cooperative banks (banche
popolari); it engages in factoring and related services and ranks fourth among the largest factoring companies in Italy by
turnover.
Under the agreement, Banca Popolare di Sondrio will acquire a 60.5% controlling stake in the company, while Banca
Popolare di Milano will take 30%. The remaining 9.5% will remain with Gruppo Banco Popolare. The agreement was
finalized on 22 March 2010.
The price was agreed by the parties based on a company value of 170 million, in line with the company’s consolidated
carrying value. Therefore, Popolare Sondrio and Popolare Milano shall expend about 103 million and 51 million,
respectively. Immediately after the contract is signed, whose execution is subject to prior authorization by competent
Authorities, and before the shares are transferred, the buyers will carry out a confirmatory due diligence on Factorit.
Exercise of put option issued in favor of Fondazione Cassa di Risparmio di Lucca
On 6 May 2005, Banca Popolare Italiana had entered an option contract with Fondazione Cassa di Risparmio di Lucca,
based on which the Foundation can exercise a put option on 143,997,909 common shares of Cassa di Risparmio di Lucca
Pisa e Livorno (corresponding to 20.39% of the share capital) and Banco Popolare, which after the merger took on all the
commitments of former BPI, must purchase these shares at a price equal to the net equity of Cassa di Risparmio di Lucca
Pisa e Livorno, as published in the last financial statements approved before executing the option, multiplied by the
multiplier agreed upon in the contract and equal to 1.3054. On 11 February 2010, the Foundation fully exercised the put
option. For this financial year, the consideration due by Banco Popolare and estimated based on the book value of
shareholders’ equity posted in the annual report as at 31st December 2009, totals 312.9 million. Under the agreement, the
option must be settled by 5 July 2010.
Under the contract, Banco Popolare must pay the price by transferring, under the law, equity financial instruments issued by
companies belonging to Gruppo Banco Popolare and regularly quoted and traded on an Italian regulated market to the
Foundation. In this case, the option exercise by the Foundation would have no significant impact on the regulatory capital
and on the consolidated capital ratios of Banco Popolare, as the repurchase of the minority share in Cassa di Risparmio di
Lucca Pisa e Livorno would be offset by the concomitant sale of a minority stake in a listed company belonging to Gruppo
Banco Popolare (Credito Bergamasco). Whereas the contract performance provides exclusively for the delivery of Group
listed securities, Banco will assess with Fondazione Cassa di Risparmio di Lucca possible alternative settlement modalities.
Therefore, should the settlement modality agreed upon by the parties differ from the one envisaged by the contract, the
effect of the contract performance on the regulatory capital and therefore on the consolidated capital ratios of Banco
Popolare could also change.
For accounting aspects please refer to the following “Section 5 – Other aspects”.
Liquidation of Royle West
On 11 January 2010 the Irish company Royle West Limited, 99% owned by Banco Popolare, went into voluntary
liquidation, therefore the company name was changed into Royle West Limited (In Voluntary Liquidation).
Covered bank bond program
As part of a multiannual Program for the issue of a total of 5 billion worth of Covered Bank Bonds, in January 2010 a
Covered Bank Bond issuance (Obbligazioni Bancarie Garantite “OBG” or “Covered Bond”), geared to institutional investors,
was rolled out at Group level. Banco Popolare acts as issuer of the Covered Bonds, while the retail banks (Banche del
Territorio) belonging to the Group act as transferors of the assets under art. 7-bis of law n. 130 of 30 April 1999 (“Law 130”).
The issuance of Covered Bonds is part of the Group’s strategic plan, to diversify funding sources, reduce the relative cost,
extend liability maturities: in particular, the issuance of Covered Bonds is of particular interest at a time when institutional
investors are barely active on the securitization market, with very penalizing spreads. According to the Program, the Banche
del Territorio involved will unwind the self-securitization transactions they have originated, by repurchasing the loans that
had been previously sold and then selling them back to the Program’s SPV. In particular, it is worth highlighting that
investors shall also benefit from an irrevocable and unconditioned demand guarantee, granted by BP Covered Bond S.r.l.,
the program’s SPV, covering a pool entirely made up of high-quality residential mortgages, originated by the retail banks of
Gruppo Banco Popolare.
In January we already unwound the BPL Mortgages 1 and BPL Mortgages 2 deals and sold a first pool to back the bonds to
the SPV BP Covered Bond, for a total amount of about 1.4 billion euro; in February the opening issue was completed of
fixed rate Covered Bonds for about 1 billion euro, 7 year maturity, devoted to institutional investors.
Banco Popolare 2010/2014 4.75% convertible bonds redeemable in shares
The Special Shareholders’ Meeting of Banco Popolare held on 30 January 2010 approved the issuance of a convertible bond
for a total maximum amount of 1 billion: specifically, the Shareholders gave the Management Board the power to issue
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bonds convertible into shares of the Company’s common stock, subject to the favorable opinion of the Supervisory Board,
up to an amount of 1 billion euro, to be offered in option to shareholders and holders of “Banco Popolare 4.75% 2000/2010
Subordinated Convertible Bonds, resulting in a splittable share capital increase to service the conversion for a maximum
total amount of Euro 1 billion, including the share premium, through the issue of Banco Popolare common shares.
The resolution passed by the Shareholders give the Management Board of the Bank, subject to the favorable opinion of the
Supervisory Board, the power to decide on: the denomination of the bond; the nominal value; the subscription price and the
option ratio of the convertible bonds; the coupon amount; the conversion ratio and its adjustment modalities; the settlement
of the convertible bonds, and the making of all the necessary changes that may be required by the Supervisory Authorities
and by the stock exchange; the redemption procedure and the maturity; the maximum number of newly issued shares to
service the conversion; the maximum nominal amount of the capital increase that can be split to service the conversion and
that in any case may not exceed the maximum amount of Euro 1 billion; any other term and condition regulating the issue
and offer of the convertible bonds and the subsequent underlying capital increase.
The Shareholders’ Meeting consequently has approved the amendment of article 6 of the Articles of Association, “Share
Capital”, by introducing a new paragraph specifying the amount, procedure and deadlines of the share capital changes as a
result of the issue of the Convertible Bond and the exercise of the associated option rights.
Finally, as regards the second item on the agenda, the Shareholders’ meeting has approved the additional amendments to
the Articles of Association proposed by the Supervisory Board. The changes involved articles: 6, Share capital; 33.2,
Exclusive competences (Management Board); 39.1 Lists of candidates (to elect the Supervisory Board); 41.2 Strategic
supervisory and directional functions (of the Supervisory Board); 46, Management Team; 52, Distribution of earnings.
In keeping with the resolution passed by the Special Shareholders’ meeting held on 30 January 2010 and with the favorable
opinion of the Supervisory Board, on 25 February 2010, the Management Board approved the terms of the “Banco Popolare
2010-2014 4.75% convertible bond redeemable in shares” to be offered in option to Company shareholders and/or holders
of convertible bonds under the “Banco Popolare 4.75% 2000/2010 Subordinated Convertible Bond (“TDF”)– ISIN IT
0001444360. On 1 March 2010 Consob authorized the publication of the prospectus regarding the offer in option and the
admission to listing on the MTA electronic market of the convertible bonds.
The issue of the convertible bonds totals 996,386,475.15 euro, with the issue of 162,014,061 convertible bonds having a
nominal value of euro 6.15 each, to be offered to shareholders and/or holders of the afore mentioned convertible bonds
based on a conversion ratio of n. 1 convertible bond every n. 4 shares and 43 convertible bonds every 400 convertible
bonds.
The issue price for each convertible bond has been fixed at par at 6.15 euro.
The convertible bonds shall be listed on the MTA Electronic Market managed by Borsa Italiana, they shall pay a fixed
coupon to bond holders, corresponding to 4.75% gross annual of the nominal value of the convertible bonds, and will have
a term running from 24 March 2010 to 24 March 2014. They have a senior ranking, whereby theif redemption shall not be
subordinated to any other Company debt.
The convertible bonds shall:
- give bond holders the possibility to convert bonds into shares of Banco Popolare common stock – with a price
equal to 6.15 euro - at any time, starting from the eighteenth month after the issue date and until maturity;
- give Banco Popolare the possibility, as of the eighteenth month after the issue date and until maturity, to early
redeem the bonds by paying them fully or partly with shares, recognizing a premium on the bond nominal value
of 10%;
- give the Company the possibility upon maturity to redeem the convertible bonds whose conversion option has
not been exercised by paying them in cash and/or shares, based on the most recent market price of the Banco
Popolare stock and corresponding to an amount not below the bond nominal value.
The Subscription Period shall run from 1 March 2010 to 24 March 2010.
The Management Board also approved a splittable share capital increase to cover the conversion for a total maximum
amount of 996,386,475.15 euro, including the share premium, through the issue of n. 162,014,061 shares of the Company’s
common stock having a par value of Euro 3.60 each, with regular rights, and featuring the same characteristics as those
outstanding on the issue date, to be used exclusively for the conversion.
During the offer period, a total of 160,128,993 bonds were subscribed, accounting for 98.84% of the total, corresponding to
a total value of 984.8 million. On indication of Borsa Italiana, starting on 31 March 2010 the bonds shall be traded on the
MTA Electronic Equity Market.
PEO on Index-linked policies issued by UGF Assicurazioni and Eurovita Assicurazioni
As more thoroughly explained in the operating report section devoted to noteworthy events for the year, the voluntary
Public Exchange Offer (PEO) launched by Banco Popolare closed on 12 March, with 98.11% of policies tendered into the
offer. The offer was devoted to holders of the following policies: “Bipielle Aphrodite II Serie Index I/2005” "Bipielle
Magnolia Index II/2005” "Bipielle Azalea Index III/2005”, issued by UGF Assicurazioni S.p.A., former Aurora Assicurazioni
S.p.A., and “Bipielle Aphrodite Serie II”, “Bipielle Magnolia”, “Bipielle Azalea”, issued by Eurovita Assicurazioni S.p.A.
During the tender period, running from 8th February 2010 to 12 March 2010, a total o f 8,374 policies were tendered into
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the offer for a nominal value of premiums paid of 136.7 million, corresponding to a total value of 136.3 million in terms of
unstructured senior Zero Coupon bonds offered in replacement.
Banco Popolare shall issue additional senior bonds for 13.7 million to comply with the supervisory regulatory requirements
regulating bank issuances exceeding 150 million. The banks which had distributed the policies to be replaced (Banca
Caripe, Banca Popolare di Crema, Banca Popolare di Cremona, Cassa di Risparmio di Lucca Pisa Livorno and Banca
Popolare di Lodi) undertook to subscribe the additional bonds, proportionately to the value of the policies they had
distributed.
Optimization of the Group network
Banco Popolare launched the process to optimize the group network, aiming at improving its competitive position on the
territory, by eliminating existing overlaps and improving the branch performance. In April, 86 branches are going to be
closed, and 6 shall be turned into detached branches. This operation involves 199 employees, who shall be all outplaced
with no redundancies. This reorganization also aims at identifying investment opportunities to strengthen our presence on
specific historic and high worth territories. Precisely, the operation covers 42 branches of Banca Popolare di Verona, 33 of
Popolare di Lodi, 12 of Popolare di Novara and 5 of Cassa di Risparmio di Lucca Pisa e Livorno.
Debt restructuring for the Statuto group
On 2 February 2010, the corporate boards of Banco Popolare, in its capacity as Parent company of Banca Italease and
Release (a subsidiary of Banca Italease), within their respective competence, approved an agreement with the group led by
the entrepreneur Giuseppe Statuto, outlining the key terms of a global debt restructuring for the Statuto real estate group.
The deal, whose performance is subordinated to the negotiation and finalization of the specific contract instruments,
involves a total gross risk of about 1.027 billion as at 31 December 2009 (of which about 880 million with respect to
Release and about 147 million with respect to Banca Italease).
This exposure is represented by 21 lease contracts, 20 of which are real estate leases.
Among other things, the agreement provides:
x the reduction of the total exposure from 1.027 billion to about 700 million by way of: (i) the agreed termination of
lease contracts on 3 buildings and (ii) the early repayment of 2 lease contracts;
x a series of initiatives aiming at bringing the remaining positions back to regular terms, for example: (i) payment of
part of the accrued outstanding debt of about 26 million, (ii) contract renegotiation, (iii) allocation of rents from
buildings still under lease, (iv) capital injections by the entrepreneur on some of the companies concerned,
totaling 35 million (of which 10 million cash and 25 million distributed over three years) and (v) granting of cash
facilities of about 40 million backed by VAT credits and securities.
The described deal is consistent with the strategy to reduce and regularize large exposures classified as impaired loans of
Banca Italease and its subsidiaries, which is the ultimate objective of the reorganization of the former Gruppo Banca Italease
and, in particular, the creation of the company Release.
In the event that the final contracts negotiations are successfully closed and the suspending conditions under the agreement
are fulfilled, the restructuring is scheduled to be completed by the month of April 2010.
Sub-section 5 – Other aspects
Annual report approval and publication term
Art. 154-ter of Lgs.D. 59/98 (T.U.F.), as amended by Lgs.D. 195 of 6 November 2007 – transposing the EC Directive
2004/109/EC (so called Transparency Directive) – prescribes that the annual financial statements and the annual report
consisting of the individual and the consolidated financial statements, the report on operations and the responsibility statement
pursuant to article 154-bis, paragraph 5, must be approved and published within one hundred and twenty days of the end of
the financial year.
The draft annual report was approved by the Management Board on 30 March 2010 and shall be submitted to the approval of
the Shareholders’ Meeting on 24 April.
Audit
The individual and consolidated financial statements have been audited by the auditing firm Reconta Ernst & Young S.p.A.
pursuant to Lgs. D. 58/98, in execution of the 2007/2015 engagement assigned to this company with the shareholders’
resolution of 1 April 2007. The integral auditors’ report is published with the annual report, pursuant to art. 154-ter of Lgs.
D. 58/98.
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Changes to accounting standards adopted by the European Commission
Described below are the main changes to accounting standards, approved by IASB and adopted by the European
Commission, that are relevant to the Group and were therefore complied with when preparing the 2009 consolidated
financial statements.
Revised IAS 1 “Presentation of financial statements” – adopted with EC Reg. n. 1274 of 17 December 2008
The standard, applicable as from 1 January 2009, requires that the “Statement of Changes in shareholders’ equity” must
show only transactions among shareholders. For this reason, a new statement was introduced, called “Statement of
Comprehensive Income”, that shows the costs and revenues directly recognized in equity; in other terms, these are changes
in equity that are not attributable to transactions with shareholders (“non-owner changes in equity”).
For example, this statement may include:
- changes in valuation reserves for property plant and equipment and intangible assets (IAS 16 and IAS 38);
- foreign exchange gains and losses from foreign operations (IAS 21);
- reserve changes as a result of fair value measurement of financial assets available for sale (IAS 39);
- the effective share of profit or loss on qualified derivatives in a cash flow hedge relationship (IAS 39).
In particular, IAS 1 prescribes that all costs and revenues, included those directly recognized in equity, can be presented in
a single statement or in two separate statements. The Bank of Italy, as specified in the update of the aforementioned Circular
n. 262, elected to present two separate statements, which the Group complied with.
The statement of comprehensive income shows the net income (loss) for the year as reported in the income statement and
the “Other comprehensive income”, i.e., the value changes in assets recognized during the year through the valuation
reserves (after tax).
It was also necessary to change the “Statement of changes in shareholders’ equity” to specify the share of change in equity that
is not attributable to transactions with shareholders (the latter being for example a capital increase, dividend distribution, …),
but stem from the “Statement of comprehensive income”.
This is a disclosure standard, and has no impact on the measurement of balance sheet assets and liabilities.
IFRS 8 “Operating segments” – adopted with EC Reg. n. 1358 of 21 November 2007
As from 1 January 2009, financial statements shall have to apply the new accounting standard IFRS 8 “Operating segments”,
replacing IAS 14 “Segment reporting”.
In keeping with IAS 14, IFRS 8 specifies that if the financial statements set includes both the consolidated and the individual
financial statements, segment reporting is required only in the consolidated report.
The new standard does not impact on the measurement of balance sheet assets and liabilities and therefore on the
calculation of the year’s net income, as it is a pure disclosure standard. In summary, IFRS 8 requires that segment reporting
be based on information prepared for internal management decisions (so called management-approach) and replaces the
need to identify the Group’s primary reporting segment (business segment) and the secondary reporting segment
(geographical segment). Therefore the defining of operating segments must be based on the internal reports that are regularly
reviewed by the management to allocate resources to the various segments and on performance analyses.
Note, that the Group deemed the operating segments definition and measurement criteria under IFRS 8 to be substantially in
line with the prior procedure under IAS 14; it was necessary to introduce the new operating segment “Leasing and
Factoring” exclusively owing to the finalization of the takeover of Banca Italease.
For the annual report , IFRS 8 requires to disclose information about revenues and assets in foreign Countries, irrespective of
whether this information is used for internal reporting.
Amendment IFRS 1 “First time adoption of International Financial Reporting Standard” and IAS 27 “Consolidated and
separate financial statements” – adopted with EC Reg. n. 69 of 23 January 2009
The new version of IFRS 1 allows companies that for the first time adopt IAS/IFRS (“First Time Adopters”), and that elected to
recognize Investments in associates and companies subject to joint control on a cost basis in separate financial statements,
to determine said cost using the deemed cost method. This cost may be represented, alternatively, by the fair value at the
date of transition under IAS 39 or by the carrying amount of the equity investment under the previous accounting standards.
Moreover, prior to the mentioned amendment, IAS 27 required the parent company, which measured Investments in
associates and companies subject to joint control at cost, to recognize the dividend income as an income generated before
the acquisition and to be deducted from the investment cost.
This provision would have been a potential problem for First-Time Adopters, because if the parent company had acquired
an equity investment before the date of transition to IFRS, it would have been necessary to calculate the income generated
before the acquisition in compliance with IAS/IFRS.
For this reason IASB decided to eliminate from IAS 27 the different accounting treatment of dividends in profit or loss before
or post acquisition, as a guideline to assess whether the dividend is a recovery on the investment made or not.
The new version of IAS 27 requires that all dividends be recognized in profit or loss when the right to receive the dividend is
established.
To avoid that new dividend recognition rules might cause an overvaluation of the equity investment, two new specific
impairment indicators were introduced in IAS 36, as might result from dividend distribution.
Amendment IFRS 7 “Financial instruments: disclosures” – adopted with EC Reg. n. 1165 of 27 November 2009
The amendment to IFRS 7 represents IASB’s response to improve the transparency of disclosures in the aftermath of the
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financial market crisis, by requiring more disclosure on fair value measurement and on liquidity risk.
In particular, for financial instruments measured at fair value it is now necessary to give evidence of how the fair value is
measured based on a 3-level hierarchy (level 1, 2, 3) depending on the extent to which market inputs are observable, as
described in sub-section “A.2 – Section on main balance sheet aggregates”, to which you may refer for additional details. In
particular, the additional information required by the new IFRS 7 can be summarized as follows:
- specify the fair value hierarchy level under which the fair value measurement can be classified;
- reasons for movements from level 1 to level 2, if significant;
- reconciliation between the opening balance and the year-end balance for financial instruments classified under
level 3;
- for level 3 instruments, i.e., instruments whose fair value is significantly measured based on unobservable inputs,
and therefore marked by a certain subjectivity, it is necessary to give evidence of the impacts, if material, deriving
from a change in the assumptions underlying the fair value measurement.
As to the liquidity risk, the amendments to IFRS 7 introduced a new definition of risk regarding the difficulties in paying
financial liabilities settled by cash or other financial assets. Moreover, additional disclosures are required for derivatives and
other financial liabilities. The need to provide disclosure on financial assets held to manage the liquidity risk is confirmed, if
material with respect to the assessment of the nature and measurement of risk; this necessarily applies to a financial
institution where the management of maturities of financial liabilities is closely integrated with that of financial assets (Asset
& Liability Management).
The above changes, which are pure disclosure changes, are to be adopted on financial statements of financial year starting
on 1 January 2009; for the first year of adoption there is the possibility of being exempted from giving comparative
information. The Group elected to follow the three-level fair value hierarchy also with respect to 2008 comparative data, so
as to guarantee the utmost transparency and comparability with the current year. For more information on the fair value
hierarchy, see Sub-section “A.3 - Fair value disclosure”.
The liquidity risk disclosure, prepared based on the directives set out in Circular n. 262, is reported in Section E – Risks and
associated hedging policies, Sub-section 1.3 – Liquidity risk.
The following is a comprehensive list of standards endorsed in 2009 or in prior years, whose adoption has become
mandatory as from financial year 2009. Except for the above changes, the other standards did not give rise to any material
impact related to the preparation of this annual report.
Accounting standards and
interpretations
Remarks
Adopting EC
Regulation
Effective for annual
periods beginning on:
New standards
IFRS 8 – Operating Segments
Changes to existing standards
IFRS 1 – First time adoption of
International Financial Reporting
Standard
IAS 27 – Consolidated and separate
financial statements
IFRS 2 – Vesting conditions and
cancellations
IFRS 7 – Enhancing disclosures
about fair value and liquidity risk
IAS 1 – Presentation of financial
statements
IAS 23 – Borrowing costs
EC Reg. n. 1358 of 21
Replaces IAS 14 and requires a disclosure consistent
November 2007 and n.
with internal operating reports reviewed by the chief
1 January 2009
1126 of 3 November
operating decision maker
2008
Upon FTA it allows to take the carrying amount of
Investments in associates and companies subject to
joint control as a substitute for cost. In separate
EC Reg. n. 69 of 23
financial statements, dividends from subsidiaries,
associates and joint ventures are always recognized January 2009
as revenues in profit or loss
It clarifies that vesting conditions are service and
performance conditions only and gives indications
as to the accounting treatment of cancellations
EC Reg. n. 1261 of 16
December 2008
It introduces a three-level fair value hierarchy for
the purposes of disclosure
It modifies the analysis of liquidity, in particular for EC Reg. n. 1165 of 27
November 2009
derivative instruments
It introduces the need to include the statement of
comprehensive income
In case of restatement of balances due to the
adoption of new accounting standards, three
complete statements of financial position must be
presented
The capitalization of borrowing costs directly
attributable to the construction of qualifying assets
becomes mandatory
1 January 2009
1 January 2009
1 January 2009
EC Reg. n. 1274 of 17
December 2008
1 January 2009
EC Reg. n. 1260 of 10
December 2008
1 January 2009
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interpretations
Remarks
IAS 32 and IAS 1 – Puttable
If contract provisions state that the repayment be
instruments and obligations arising linked to the issuer’s operating results, the
on liquidation
instruments repayable at any time or upon
liquidation are classified as equity instruments
IAS 39 e IFRIC 9 – Clarification
It clarifies the accounting treatment of derivatives
regarding assessment of embedded embedded in financial assets that are to be
derivatives
reclassified to reflect the IAS 39 amendment of
October 2008
Improvements to IFRSs (approved
by IASB in May 2008)
New interpretations
IFRIC 13 – Customer Loyalty
Programs
Minor changes
Adopting EC
Regulation
EC Reg. n. 53 of 21
January 2009
1 January 2009
EC Reg. n. 1171 of 30
November 2009
1 January 2009
EC Reg. n. 70 of 23
January 2009
1 January 2009
(30 June 2009 for IFRS
5 amendments)
It identifies the accounting treatment of loyalty
award credits granted by the company to customers EC Reg. n. 1262 of 16
to acquire goods and services when buying
December 2008
products/services (e.g., points)
1 January 2009
For the sake of completeness, listed below are the standards that were endorsed by the European Commission in financial
year 2009, but were not adopted in the financial statements as at 31 December 2009, and for which the Group did not opt
for the early adoption, when permitted:
interpretations
Remarks
Adopting EC
Regulation
Changes to existing standards
IFRS 3 – Business combinations
IAS 27 – Consolidated and
separate financial statements
IAS 32 – Classification of rights
issues
IAS 39 – Eligible hedged items
It allows the recognition of minority goodwill (full
goodwill). The acquisition or loss of control entail the
recognition of revenues and charges in profit or loss;
upward or downward changes in interest without the
loss of control are considered transactions among
owners and are recognized in equity
It clarifies how to recognize certain rights when issued
instruments are denominated in a currency other than
the issuer’s functional currency
It establishes the conditions necessary to allow the
hedging of the inflation risk of a hedged item and it
specifies that the hedged risk does not include the time
value of a purchased option
EC Reg. n. 494 and 495
1 July 2009
of 3 June 2009
EC Reg. n. 1293 of 23
December 2009
1 February 2010
EC Reg. n. 839 of 15
September 2009
1 July 2009
March 2009
1 January 2010
July 2009
1 January 2010
EC Reg. n. 460 of 4
June 2009
1 July 2009
New interpretations
IFRIC 12 – Service concession
arrangements
IFRIC 15 – Agreements for the
Construction of Real Estate
IFRIC 16 – Hedges of a net
investment in a Foreign
operation
IFRIC 17 – Distributions of noncash assets to owners
IFRIC 18 – Transfers of assets
from customers
It defines how to recognize the rights and obligations
under a concession based on the type of service
concession arrangement
It provides guidance as to when revenue from the
construction of real estate should be considered as a
sale of goods (IAS 18) or as construction services (IAS
11)
It clarifies how to adopt IAS 21 and IAS 39 in the event
that an entity hedges the foreign currency risk arising
from its net investments in foreign operations
It establishes that non-cash assets distributed to owners
must be measured at fair value
It establishes the accounting treatment of items of
Property and equipment received from customers to
provide the customers with ongoing supply of goods or
services
EC Reg. n. 1142 del 26
1 November 2009
November 2009
EC Reg. n. 1164 of 27
November 2009
1 November 2009
Finally, the adoption of the new standard IFRS 9, that had been initially scheduled by the end of 2009, was postponed. The
new standard is part of the more general revision of IAS 39, based on a three-phase project:
- Classification and measurement;
- Impairment methodology;
- Hedge accounting.
With respect to the first phase, in November 2009 IASB approved the new standard IFRS 9, dealing with the classification
and measurement of financial assets. Basically, the new standard divides financial assets into three categories (“Financial
assets designated at fair value through profit and loss through profit or loss”, “Financial assets measured at amortized cost”,
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“Instruments measured at fair value recognized in equity”) depending on the business model and on the characteristics of
the instrument (“Basic loan future”). The new standard must be adopted in 2013.
As mentioned above, the adoption process was suspended when on 12 November 2009 IFRAG, i.e., the committee that
helps the European Commission with the technical evaluation of standards, stated that it needed more time to fully assess all
the effects of the new standard, in particular with regard to the evaluation of the number of assets to be measured at fair
value.
As to the second phase of the revision project, in November 2009 IASB issued an Exposure Draft (ED), providing for the
recognition of expected losses on financial assets (expected loss approach). This model differs from the current one, in
which losses on financial assets are recognized only when the impairment event takes place (incurred loss approach).
An ED for the third phase, Hedge Accounting, is scheduled for the first quarter of 2010.
Change in the method to measure the fair value of financial liabilities issued under fair value option
In first quarter 2009, more precisely as from the end of February, Banco Popolare’s credit spreads as reflected by the
quotations of Credit Default Swap (CDS) suddenly soared, driven by extraordinary factors, associated among others with the
events involving the subsidiary Banca Italease and its restructuring assumptions. This led to an increasing illiquidity on the
CDS market with respect to Banco Popolare, which was particularly evident at the end of March. At this point it was
questionable whether prices determined on the basis of a measurement technique which considers only CDS quotations as
inputs reflecting creditworthiness could effectively be representative of a fair value. In view of the unique illiquidity on the
CDS market and of a confirmed pricing policy for the repurchase of financial liabilities on the secondary market of retail
customers aiming at adopting credit spreads in line with those outstanding at the time of issue, starting from the first quarter
operating report as at 31 March 2009 some changes were introduced to the method used to measure the fair value of
financial liabilities issued by the Group and designated at fair value, in particular the method to calculate changes in Banco
Popolare’s creditworthiness. With regard to financial liabilities sold to retail customers, the change entailed the use of prices
actually quoted on the secondary market of securities issued, setting aside the use of valuation methods and maximizing the
use of actual prices directly observable on the market considered to be active. In other words, when preparing this annual
report, the fair value measurement did not consider the changes in creditworthiness which occurred since the issue date if,
based on the observed market practice, transaction prices did not undergo any specific adjustment to price in the
creditworthiness; these are issues destined to retail customers from a substantial viewpoint. As a result of this change, 211
million were charged to income for the period, corresponding to the profit recognized in financial years 2008 and 2007 on
the fair value measurement of the financial liabilities under examination. As reported in the annual report as at 31
December 2008, the above losses would have been in any case recognized in the P&L of future financial years if the
liabilities had not been repurchased at a price in line with their book values.
As to financial liabilities sold to institutional customers, whose fair value measurement includes among its significant factors
the change in Banco Popolare’s creditworthiness, the same measurement method in use on 31 December 2008 was
confirmed. For these issues, the charge debited to income in 2009 as a result of the upgrading of Banco Popolare’s
creditworthiness totaled 139.5 million.
The net loss recognized in 2009 in “110. Profit or loss on financial assets and liabilities measured at fair value” associated
with the effects of Banco Popolare’s creditworthiness, as specified above, came in at 350.5 million.
Exercise of the put option issued in favor of Fondazione Cassa di Risparmio di Lucca
As described in the above Sub-section 4 – Noteworthy events after the balance sheet date, on 31 December 2009 Banco
Popolare had an option contract outstanding with Fondazione Cassa di Risparmio di Lucca based on which the Foundation
can exercise a put option on 143,997,909 common shares of Cassa di Risparmio di Lucca Pisa e Livorno (corresponding to
20.39% of the share capital) in exchange for equity instruments issued by companies belonging to Gruppo Banco Popolare,
in this case shares of Credito Bergamasco. On 11February 2010, the Foundation fully exercised the put option put, and the
settlement is due by 5 July 2010.
From an accounting viewpoint, the deal did not give rise to any recognition in the consolidated financial statements as at 31
December 2009 (except for the commitment made upon purchasing the shares), as it was considered as a derivative
underlying the exchange two equity instruments, both considered representative of a residual interest in the Group’s net
assets.
At the date of execution of the contract, the impact on the consolidated financial statements shall depend upon the carrying
value of the Investments in associates and companies subject to joint control. Under the contract, changes in the interest
held in Cassa di Risparmio di Lucca Pisa e Livorno and in Credito Bergamasco must be recognized as if it were equity
transactions among owners, as the Group will retain control over both companies. In this case, the book values of the
shareholders’ equity of the Group and of third parties must be adjusted to reflect the changes in the percentage interest and
the difference between the acquired and the sold third party equity shall be directly recognized as a change in equity. Based
on the carrying amounts posted in the consolidated financial statements as at 31 December 2009 and on the estimated
change in equity interest, the exchange should cause a decrease in the Group’s equity of about 100 million, owing to the
higher carrying amount given to the shares of Credito Bergamasco to be assigned to third parties as compared to the
decrease in third party equity associated with the sale of Cassa di Risparmio di Lucca Pisa e Livorno to the Group.
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Description of main changes introduced by the 1st update of 18 November 2009 of Circular n. 262
– change in classification criteria
On 18 November 2009 the Bank of Italy published the 1st update of Circular n. 262/2005 on financial statements and
compilation rules.
The update reflects the new standards and changes to existing standards, described in the previous paragraph “Changes to
accounting standards adopted by the European Commission”. In particular:
- the revision of IAS 1 called for the introduction of a new statement called “Consolidated statement of
comprehensive income” and of a new section of the consolidated explanatory notes - Section D – to provide
detailed information (amounts before and after tax, fair value changes, recognition through profit or loss);
- changes to IFRS 7 regarding the fair value hierarchy required the creation of a specific sub-section “A.3 – Fair
value disclosure”, in Section A – Accounting policies, and to add the itemization of the level breakdown in the
tables illustrating the composition of financial assets and liabilities portfolios measured at fair value. The Bank of
Italy requires the same level of detail also with respect to “Investments held to maturity” on the assets side, and to
“Securities issued” on the liabilities side;
- the disclosure on reclassified securities out of portfolios of “financial assets held for trading” and “financial assets
available for sale”, as provided by the amendment of IAS 39 in October 2008, was incorporated in sub-section
“A.3 – Fair value disclosure”, in Section A – Accounting policies.
In addition, the changes introduced by the update are a follow-up to the requests raised by the Italian Banking Association
(ABI) aiming at rationalizing and simplifying financial disclosure and at providing clarification to specific interpretational
issues. Described below are the main changes that were introduced, and that, with respect to the Group, had an impact on
the financial statements or on the explanatory notes, requiring a reclassification of the prior year’s data to make a like-to-like
comparison with the current year possible. For this reason, the balance sheet balances or the details shown in the
explanatory note tables may differ from those published in the 2008 annual report as approved by the Shareholders’
Meeting.
Description of the main changes having an impact on balance sheet items
To comply with the compilation rules for bank financial statements, the following reclassifications were made for the 2008
annual report:
- some tax items, that were previously tied in with “Tax assets / Tax liabilities”, were posted in “Other assets / Other
liabilities”, as it was specified that the first aggregate must include only assets/liabilities recognized under IAS 12,
i.e., income tax-related items;
- some payables and receivables linked to the provision of financial services (for ex. distribution of financial
products) that could be recognized in the residual items “Other assets / Other liabilities” have been restated in the
items “Due from customers/banks”, “Due to customers/banks”, depending on the counterparty;
- proceeds from periodic or variable expenses charged to customer checking accounts, that were previously posted
in “Other revenues” if referring to payable checking accounts, were recognized in “Commission income”, unless
they represented a refund of incurred expenses;
- in “Administrative expenses” some charges were more specifically tied in to the sub-item “b) other administrative
expenses”, instead of sub-item “a) personnel expenses”.
In addition, the Circular specified that performance bonuses for the year but to be paid in the following year must be
recognized in “personnel expenses” through the balance sheet item “other liabilities”. In view of the rationale underlying
this requirement, in the 2009 annual report liabilities associated with employee provisions were tied in to “other liabilities”
or to “provisions for risks and charges – other”, depending on the time the payment is due, which in turn depends on
whether the obligation is certain or not. In particular, “other liabilities” incorporate obligations that are certain, and whose
payment is generally due the following year, while the item “provisions for risks and charges – other” includes obligations
whose amount or contingency date are considered uncertain at the date of preparation of this report, in line with IAS 37. In
both cases, the P&L offset account is “personnel expenses”, giving a greater weighting to their substantial nature. Based on
these criteria, for comparability reasons the data of the prior year have been restated accordingly, mostly in “other
liabilities".
In order to give an idea of the quantitative impacts of the above reclassifications, the attachments include a reconciliation
between the prior year’s restated balance sheet and income items and the original data published in the 2008 annual report.
Moreover the income statement was changed to retrospectively reflect the P&L effects linked to the equity investment in
Banco Popolare eská Republica, which on 31 December 2009 was classified as “discontinued operation”, in compliance
with IFRS 5.
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Description of the main changes having an impact on details to be provided in the explanatory notes
In general, in the explanatory notes the disaggregation of consolidated data in operational groups (banking group, insurance
companies, other companies) was eliminated and replaced by the obligation to provide this detail.
In addition, described below are the main changes introduced by the Circular that had an impact on the disclosure details
required to be shown in the tables of the Explanatory Notes, considering that:
- assets sold and not derecognized and the associated liabilities, and impaired assets that in the 2008 annual report
had to be shown separately in the table itemizing the balance sheet and income statement data, must now be
posted based on their original deal type. Disclosure on credit quality and on selling transactions is included in
Section E of the Explanatory Notes. Accordingly, we redefined the tables with the breakdown by type of
instrument, the annual changes and the breakdown by debtor/issuer, if required, for the following sections of the
balance sheet assets:
x Section 2 – Financial assets held for trading – item 20;
x Section 3 – Financial assets designated at fair value through profit and loss – item 30;
x Section 4 – Financial assets available for sale – item 40;
x Section 5 – Investments held to maturity - item 50;
x Section 6 – Due from banks – item 60;
x Section 7 – Due from customers – item 70
For the tables of section 7 we also specified performing assets and impaired assets for each deal type.
In addition, payables associated with the disposal of financial assets, that do not meet the IAS 39 requirements
due to their full derecognition, have been tied in to “other payables”, with the exception of repurchase
agreements executed with treasury shares that are posted in their specific item “Repurchase agreements”, together
with similar transactions executed with securities from reverse repurchase agreements. In compliance with the
above instructions, we restated the prior year data referring to “Sub-section 1 – Due to banks – item 10” and “Subsection 2- Due to customers”.
- for the tables of “Sub-section 1 – Interest income/expense - items 10 and 20”, 2008 data have been stated to take
into consideration the elimination of the details required for assets sold and not derecognized and associated
liabilities, and impaired assets. In addition, spreads on derivatives operationally linked to trading assets and
liabilities or derivatives linked with the fair value option according to accounting requirements must be posted,
depending on their algebraic sign, as interest income or interest expense in “financial assets held for trading –
other transactions” and “financial liabilities held for trading – other transactions”. As a result, it was necessary to
restate the 2008 spreads accordingly, as previously they were generally posted in “hedging derivatives” ;
- derivatives disclosure has been rationalized and combined prevailingly in Section E; Section B of the explanatory
notes continues to include information on the grand totals. In the tables in Section E, Sub-section 2 – Market
risks, 2.4 Derivative instruments, comparative information on notional and fair values shown in the 2008 annual
report was restated, when required, to take into account the new breakdown of “underlying assets / types of
derivatives”.
- the disclosure required in Section E, Sub-section 1 – Credit risk, “A. Credit quality” and “Distribution and
concentration of credit exposures”, now covers only credit exposures. As a result, equity securities and UCITS
units exposures included in items 20, 30, 40 of the balance sheet assets are no longer shown here. Based on these
specifications, we restated the prior year’s comparative data.
For the sake of completeness, note that as a footnote to balance sheet tables it is now necessary to detail the
equity securities issued by entities classified as being impaired or substandard by the bank, specifying accrued
write-downs and write-downs carried out during the year.
Update of Circular n. 272 “Supervisory Reports” of 10 December 2009 – change in the definition of
“Objective substandard loans” and “Past dues and/or overdrafts” –
With respect to credit quality, the Bank of Italy has recently changed the definition of impaired loans to be used for
statistical supervisory reports for banks on an individual and on a consolidated basis. The new definitions are bound to be
consistently applied also to classify balance sheet loans. The introduced changes refer in particular to the classification
criteria of “past dues and/or overdrafts” and of “objective substandard loans”, that were duly adopted as from the annual
report of 31 December 2009.
The most significant impacts on the 2009 annual report come from the new wording of the criteria to identify “past dues
and/or overdrafts” (so called past dues).
According to the previous regulations, for most of the prudential portfolios past dues and/or overdrafts were determined
along the “single borrower” approach, which in summary required:
- the presence of an overdraft for more than 180 uninterrupted days;
- the possibility to net outstanding past dues and overdrafts on some lines of credit with available margins on other
lines of credit granted to the same borrower;
- the presence of relevant thresholds: the total exposure towards a borrower had to be classified as past due and/or
overdraft if at the supervisory report date, the greater of the two following values was equal or higher than the 5%
threshold:
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x average of the past due and/or overdrawn portion out of the entire exposure measured on a daily basis in the
previous quarter;
x past due and/or overdraft portion out of the entire exposure as at the date of the supervisory report).
This recent regulation, applicable to banks that calculate the capital requirement for credit and counterparty risk along the
standardized method (Basel II), as it is the case in Gruppo Banco Popolare, requires that real estate-backed loans be
considered as “past dues and/or overdrafts” based on a “single transaction” approach. Single loans that have been past due
and/or overdrawn uninterruptedly for more than 90 days (instead of 180 days) must be considered past dues; no netting is
permitted with available margins on other lines of credit granted to the same borrower or relevant thresholds, as with the
“single borrower” approach.
The introduction of more stringent criteria drove loans classified as “past dues and/or overdrafts” on 31 December 2009 up;
this must be taken into due consideration when assessing the evolution of credit quality as compared with the situation on
31 December 2008, which was based on the previous criteria.
A.2 – MAIN ACCOUNT ITEMS
The annual report as at 31 December 2009 was prepared by adopting the same accounting standards used to prepare the
consolidated financial statements of the year before, except for changes illustrated in sub-section 5 – Other aspects, A.1 In
General.
Below are the applied accounting standards, illustrated by account item.
1- Financial assets held for trading
This category includes only debt and equity securities, UCITS units, the positive value of derivatives that are held for trading,
as well as derivatives related to assets/liabilities measured at fair value. Derivative contracts include those embedded in
structured financial instruments that have been recognized separately from their host contract because:
x their economic characteristics and risks are not closely related to those of the host contract;
x a separate instrument with the same terms as the embedded derivative would meet the definition of derivative;
x the hybrid instruments to which they belong are not measured at fair value with changes in fair value through
profit or loss.
Financial assets are initially recognized on the settlement date in case of debt and equity securities, and on the subscription
date for derivative contracts.
Upon their initial recognition, financial assets held for trading are measured at fair value, which generally corresponds to the
consideration paid, excluding transaction costs or proceeds that are directly associated to the financial instruments, that are
recognized through profit or loss. Any embedded derivative in complex contracts, which is not closely related to its host
contract and qualifies as derivative, is separated from its host contract and measured at fair value, while the host contract is
accounted for along its relevant accounting standard.
Subsequent to initial recognition, financial assets held for trading are measured at fair value, with recognition of changes
through profit or loss.
To determine the fair value of financial assets quoted on an active market, quoted market prices are used. In the absence of
an active market, estimate methods and valuation models are used, that take into account all the risk factors associated with
the instruments and that are based on market inputs, such as: methods based on the fair value of other quoted instruments
that are substantially the same, discounted cash flow analysis, option pricing models, recent arm’s length market
transactions. For further details, please see paragraph “18- Other information, Fair value measurement of financial
instruments”.
In case no reliable estimate of the fair value is possible in keeping with the above guidelines, equity instruments and related
derivatives are measured at cost and are written down in case of impairment losses. Said impairment losses cannot be
reversed.
Financial assets are derecognized when the contractual rights to receive the cash flows generated by the assets have
expired, or when the financial asset is disposed of, and all risks and rewards of ownership of the assets have been
substantially transferred.
Trading profits or losses and gains or losses as a result of the trading portfolio measurement are recognized in income in the
item “80. Profit (losses) on trading”, except for income or loss on derivatives connected with the fair value option that are
classified in item “110. Profit or loss on financial assets and liabilities measured at fair value”.
Reclassifications to other classes of financial assets (Loans, Financial assets available for sale, Investments held to maturity)
are possible only in rare circumstances or if certain conditions are met as explained in the following paragraph “18- Other
information, Reclassifications among financial assets portfolios (IAS 39 amendment)”.
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2- Financial assets available for sale
This category includes non-derivative financial assets not designated as Loans, Held-for-trading assets, Held-to-maturity
assets or Assets measured at fair value.
In particular, this category includes also shareholdings that are not held for trading and do not qualify as interests in
subsidiaries, associates and joint ventures, including private Investments in associates and companies subject to joint
control, as well as the portion of subscribed syndicated loans that had been designated at origin as available for sale.
Financial assets are initially recognized on the settlement date in case of debt and equity securities, and on the origination
date in case of other financial assets not classified as loans.
Upon their initial recognition, assets are measured at cost, meaning their fair value, including transaction costs or proceeds
directly associated with the instrument itself. If recognition follows a reclassification of Investments held to maturity or of
Financial assets held for trading, assets will be recognized at their fair value at the time of reclassification, which shall
represent the new amortized cost for debt securities. Recognition following a reclassification of “Financial assets held for
trading” can take place only in rare circumstances and in any case only if the asset is no longer held for trading in the short
term as described in the following paragraph “18- Other information, Reclassifications among financial assets portfolios (IAS
39 amendment)”.
Subsequent to initial recognition, available-for-sale assets continue to be measured at fair value with recognition of the
corresponding amortized cost value through profit or loss, while profits or losses generated by changes in fair value are
recognized in a specific Equity reserve until the financial asset is derecognized or an impairment loss is recognized, and the
entire difference between the carrying value and the sale price or fair value is recognized through profit or loss.
The fair value is measured using the same criteria illustrated for financial assets held for trading.
In case no reliable estimate of the fair value is possible in keeping with the above guidelines, equity securities and related
derivatives are measured at cost and written down in case of impairment.
Impairment tests to assess if there is an objective evidence of impairment are conducted at each balance sheet or interim
reporting date. For further details on events reflecting an impairment loss, please see the following paragraph “18- Other
information, Financial assets impairment test”.
For equity securities, a possible sign of impairment is represented by a significant or prolonged reduction in fair value below
the original book value. In particular, the Group considered a fair value reduction to be significant when in excess of 30%
and prolonged when it progressed without interruptions for 24 months. Barring exceptional circumstances, the violation of
one of the two thresholds requires the security to be impaired, causing a P&L impact.
In the absence of a violation of the above automatic thresholds, qualitative analyses are carried out to check for impairments
in case of :
x debt securities that show a fair value decrease greater than 20% of the original book value, discounted of
amortized cost;
x equity securities that show a fair value decrease greater than 20% of the original book value or by a fair value loss
protracting for more than 12 months.
In the latter cases, a difference between the fair value and the carrying amount is not by itself sufficient to conclude that an
impairment loss has occurred. This evidence must be supplemented by a qualitative analysis, to identify possible negative
effects, that may lead to believe that the assets’ carrying value is not recoverable in its entirety.
In case of objective evidence, the impairment loss is charged to income as a cost. If the reasons for an impairment loss are
no more valid due to an event occurring after the impairment was originally recognized, write-backs are recognized through
profit and loss if referring to debt securities or loans, or else to a specific equity reserve in case of equity securities. For debt
securities and loans, the write-back in any case cannot exceed the instrument’s amortized cost in the absence of previous
adjustments.
Financial assets available for sale can be reclassified as “Investments held to maturity” if:
- a change occurs in the intent or ability to hold the asset to maturity;
- no reliable fair value measurement is available (a rare circumstance);
- the tainting rule period has expired and the portfolio of Investments held to maturity can be reinstated.
It is also possible to carry out a reclassification in the “Loans” portfolio, when conditions are met as described in the
following paragraph “18- Other information, Reclassifications among financial assets portfolios (IAS 39 amendment)”.
3- Investments held to maturity
This category includes debt securities with fixed or determinable payments and fixed maturity date, that the Group has the
positive intention and ability to hold to maturity. If a held-to-maturity investment must be sold as a consequence of a
reconsideration or of an event beyond the entity’s control, the asset is reclassified as available for sale.
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Financial assets are initially recognized on the settlement date. Upon initial recognition, financial assets designated as held
to maturity are measured at cost, i.e., the fair value of the exchanged amount, including any directly associated costs or
revenues. If the recognition in this category follows a reclassification from Assets available for sale or Financial assets held
for trading, the fair value of the asset at the time of reclassification is recognized at the asset’s new amortized cost. For
reclassifications of Financial assets held for trading, which occurs only in rare circumstances, please refer to the following
paragraph “18- Other information, Reclassifications among financial assets portfolios (IAS 39 amendment)”.
Subsequent to initial recognition, Investments held to maturity are measured at amortized cost, using the effective interest
method. Gains or losses from fair value changes in assets held to maturity are recognized through profit and loss at the time
of derecognition. The assessment of objective evidence of impairment losses is carried out at each balance sheet or interim
reporting date. In case of objective evidence, the impairment is computed as the difference between the asset’s carrying
value and the present value of estimated future cash flows, discounted at the original effective interest rate. The impairment
loss is recognized through profit and loss. If the reasons for an impairment loss are no more valid due to an event occurring
after the impairment was originally recognized, write-backs are recognized through profit and loss.
The only possible reclassification out of this portfolio is to the portfolio of “Financial assets available for sale”. If a significant
amount of held-to-maturity investments are sold or transferred before their maturity, the entire portfolio must be reclassified
as available for sale and it is then prohibited to classify any assets as held-to-maturity for the current and next two full
annual financial periods (so called tainting rule), unless the sales and the reclassifications:
- are so close to maturity or to the option date of the financial asset that the fluctuations of the interest rate on the
market would have no material effect on the fair value of the financial asset;
- occur after having received practically all the original capital of the financial asset;
- are attributable to an isolated event, out of the company’s control, non recurring and that could not reasonably be
foreseen, for example a material downgrading of the creditworthiness of the entity who issued the financial asset.
4– Loans
Loans include loans to customers and to banks, either originated or acquired, with fixed or determinable payments, that are
not quoted in an active market and that were not designated from inception as financial assets Available for sale. Loans
include receivables, loans originating from financial leases and securities acquired as a result of a private placement or
subscription, with fixed or determinable payments, not quoted on an active market. As to loans acquired without recourse,
they are classified as loans, provided there are no contract provisions significantly changing the risk exposure of the
assignee company.
This category also includes “repurchase agreements” requiring the security to be sold at a stated time and “securities
lending” transactions backed by the deposit of a collateral in cash. Said transactions are recognized as loans and do not give
rise to any change in the proprietary portfolio.
Loans are initially recognized on the origination date or, in case of debt security, on the settlement date, based on the fair
value of the financial instrument, the recognition being equal to the extended amount, or subscription price, including
costs/revenues directly associated to the individual loan and that can be determined from the start of the transaction,
although settled later on. Costs are excluded, that, although carrying the above characteristics, are refunded by the
borrowing counterparty or fall under normal internal administrative costs.
If the recognition into this category is due to a reclassification from Financial assets available for sale or held for trading, the
recognition value shall correspond to the fair value at the date at which the reclassification was approved, and this shall be
considered the asset’s new amortized cost. For further details, please see the following paragraph “18- Other information,
Reclassifications among financial assets portfolios (IAS 39 amendment)”.
For loans that are not negotiated at arm’s length market conditions, the fair value is computed using specific valuation
techniques; the difference with the extended amount or the subscription price is recognized directly in income.
After initial recognition, loans are valued at amortized cost, equal to the initial recognition value decreased/increased by
capital repayments, write-down/write-backs and the amortization – computed along the effective interest rate method – of
the difference between the extended amount and the amount repayable at maturity, typically comparable to the
costs/revenues directly associated to the individual loan. The effective interest rate is determined by computing the rate that
equals the loan’s present value of future principal and interest cash flows, to the extended amount including costs/rewards
associated with the loan. This accounting method, based on a financial logic, spreads the economic effect of costs/revenues
throughout the loan’s expected residual life. The amortized cost method is not used for short-term loans, whose limited life
span makes the discounting effect immaterial. Said loans are measured at historical cost and their costs/revenues are
recognized in profit and loss linearly throughout the loan contract life. The same measurement criterion is used for demand
loans.
At each balance sheet or interim report date, loans are reviewed to identify loans that due to events occurred after their
initial recognition, show objective evidence of an impairment loss, as explained in the following paragraph “18- Other
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information, Financial assets impairment test”. These are loans classified as non-performing, substandard or restructured
under the current rules of the Bank of Italy, in line with IAS requirements.
Said impaired loans undergo an analytical, or individual valuation, whereby the write-down of each loan is equal to the
difference between the loan’s book value at the time of measurement (amortized cost) and the present value of expected
future cash flows, using the original effective interest rate. Expected cash flows factor in the expected recovery time, the
estimated realizable value of collaterals, and possible costs incurred to recover the credit exposure. The cash flows of loans
that are expected to be recovered within a short period of time are not discounted. The original effective interest rate of each
loan remains unchanged over time, unless a loan restructuring or workout agreement has been negotiated that changes the
contractual interest rate, or unless in practice the transaction bears no contractual interest.
The write-down is charged to income. The original loan value is reinstated in following financial years whenever the
reasons for their original write-down no longer apply, provided said evaluation is objectively correlated to an event
occurred after the write-down. Write-backs are recognized through profit or loss and in any case cannot exceed the loan’s
amortized cost had no write-downs been carried out in the past.
Impaired loans include also past dues, that is, loans reporting uninterrupted overdrafts or payment delays, automatically
identified by the Group’s IT procedures, based on the current rules established by the Bank of Italy. The impairment of this
type of loans, albeit measured along a forfeit/statistical calculation, is reported as “Specific write-downs”, in compliance
with the instructions set out in the Bank of Italy Circular n. 262.
Individual loans that give no objective evidence of impairment, that is generally speaking performing loans, including loans
to counterparties residing in countries at risk, undergo a collective valuation. This valuation is carried out by loan classes
carrying similar credit risk characteristics and their percentage loss is estimated by taking into account their historical loss
experience, adjusted on the basis of current observable data, so as to estimate the loss latent in every loan group.
Collectively determined write-downs are charged to income. At each balance sheet and interim report date, any additional
write-down or write-back is recalculated differentially making reference to the entire performing loan book on the same
date.
Sold loans are derecognized only if the sale entails the substantial transfer of all risks and rewards associated to the loans.
On the contrary, should the risks and rewards associated with the sold loans be retained, the loans will continue to be
recognized, although from a legal point of view the loan ownership has been actually transferred. In case the substantial
transfer of risks and rewards cannot be verified, loans are derecognized if control of the loans has been relinquished.
Otherwise, if be it even a partial control has been retained, the loans will continue to be recognized to the extent of the
Group’s residual involvement, based on the exposure to the changes in value of the sold loans and to their changes in cash
flows. Finally, sold loans are derecognized in case the contractual rights to receive the relevant cash flows are retained, with
the concurrent obligation to pay said flows, and nothing more, to third parties.
5- Financial assets designated at fair value through profit and loss
A financial asset is measured at fair value through profit or loss upon initial recognition only when:
1. it is a hybrid contract containing one or more embedded derivatives, and the embedded derivative significantly
changes the financial flows that would otherwise be expected from the contract;
2. the measurement at fair value through profit or loss makes it possible to provide a more reliable information as:
i. it eliminates or considerably reduces the inconsistent treatment, that would otherwise be caused by
measuring assets or liabilities or recognizing the associated profit and loss on a different basis;
ii. a group of financial assets, or financial liabilities, or both is managed and its performance measured at fair
value based on a documented risk management or investment strategy, and group reporting is provided
internally to managers in charge of strategic functions based on this approach.
These financial assets are designated to be measured at fair value on initial recognition, i.e., on the settlement date. Initial
revenues and costs are directly recognized through profit or loss.
The fair value is measured based on the criteria illustrated for Financial Assets held for trading.
6- Hedges
Assets and liabilities include hedging financial derivatives, which at the balance sheet date reported a positive and negative
fair value, respectively.
A hedge aims at neutralizing potential losses associated with a given financial instrument or a group of financial
instruments, attributable to a specific risk, by offsetting them with the profit associated with a different financial instrument
or group of financial instruments in case that given risk should actually materialize.
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IAS 39 provides for the following categories of hedges:
x a fair value hedge, that is, a hedge of the exposure to changes in fair value of a recognized asset or liability
attributable to a particular risk;
x a cash flow hedge, that is, a hedge of the exposure to variability in cash flows attributable to a particular risk
associated with a recognized asset or liability;
x a hedge of foreign currency transactions or operations;
x fair value macro-hedging, to reduce fair value fluctuations, attributable to the interest rate risk, of a monetary
amount deriving from a financial asset and liability portfolio (including “core deposits”). Net amounts deriving
from the mismatch of assets and liabilities cannot be macro-hedged.
With regard to the consolidated financial statements, only instruments involving an external counterparty to the Group may
be designated as hedging instruments. Any result associated with intercompany internal transactions is eliminated.
The derivative instrument can be designated as a hedge provided that the hedging relationship between the hedged and the
hedging instruments is formally documented, and it is effective at the time of origination and prospectively throughout its
entire life. The hedge effectiveness depends on the extent to which the changes in the fair value or in the expected cash
flows of the hedged item are actually offset by those of the hedging instrument. As a result, effectiveness is measured by
comparing said changes, while considering the aim pursued by the company when the hedge was established.
A hedge is effective (within a range of 80 to125%) when changes in the fair value (or in the cash flows) of the hedging
instrument neutralize almost completely the changes in the hedged item attributable to the hedged risk. Hedge effectiveness
is assessed at each reporting date, using:
x prospective tests, that justify the application of hedging accounting in that they demonstrate its expected
effectiveness;
x retrospective tests, demonstrating the hedge’s actual effectiveness achieved over the period being examined. In
other words, they measure to what extent actual results diverge from a perfect hedge.
Should the above tests give evidence of a hedge ineffectiveness, both retrospectively and prospectively, hedge accounting,
as described above, is discontinued. The hedged instrument is recognized in its class of belonging at a value equal to its fair
value at the time ineffectiveness triggered in, and goes back being measured based on the criteria in use in its original class
of belonging.
Hedges are measured at fair value; in particular:
x in case of a fair value hedge, the change in fair value of the hedged item is offset against the change in fair value
of the hedging instrument. Said offset is recognized by recognizing in profit or loss the value changes referring
both to the hedged item (referring to the changes generated by the underlying risk factor), as well as to the
hedging instrument. Any resulting difference, which reflects the partial hedge ineffectiveness, represents a net
income effect. The recognition of fair value changes through profit or loss referring to the hedged item,
attributable to the risk being hedge, is applied even when the hedged element is a financial asset available for
sale; in the absence of a hedge, the change would be recognized through equity;
x in case of cash flow hedge, the portion of changes in the fair value of the derivative that are determined to be an
effective hedge is recognized directly through equity, while it is recognized through profit and loss only when the
hedged cash transaction affects profit or loss gives rise to changes in the cash flows to be offset. The portion of the
profit or loss of the hedge that is considered ineffective is recognized through profit or loss. Said portion is equal
to the difference between the cumulated fair value of the hedge and the cumulated fair value of the hedged
instrument; in any case, the variations in fair value between the hedged item and the hedge must lie within the
80%-125% range;
x hedges of foreign currency transactions are accounted for similarly to cash flow hedges.
Hedging assets and liabilities are derecognized when the contractual rights to receive the cash flows generated by the assets
have expired, or when the financial asset or liability is disposed of, and all risks and rewards of ownership of the asset have
been substantially transferred.
7- Investments in associates and companies subject to joint control
This item includes interest held in associates or jointly controlled companies, which are carried at equity.
Associate companies are enterprises on which the Group has a significant influence and are not subsidiaries. By significant
influence we assume all cases in which the Group holds 20% or more of voting the power of the investee, and, irrespective
of the shareholding percentage, whenever it can partake in business and financial decisions of the investees.
Jointly controlled companies are enterprises where the joint control is based on a contract or other agreement whereby it is
necessary to obtain the unanimous consensus of all the parties sharing the control to make strategic financial and operating
decisions.
Financial assets are initially recognized on the settlement date. Upon initial recognition, financial assets classified under this
category are recognized at cost. The book value is subsequently increased or decreased to reflect the share of profit or loss
of the investees attributable to the Group generated after the acquisition date, through the consolidated income statement
item “240. Profit (Loss) on Investments in associates and companies subject to joint control”. Dividends received from an
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investee are deducted from the book value of the equity investment.
Should it be necessary to carry out write-downs caused by changes in shareholders’ equity of the investee that have not
been recognized in income by the latter (for ex. as a result of the fair value measurement of financial assets available for
sale, revaluation of Property and equipment), the share of the above changes attributable to the Group is recognized directly
in the equity item “140. Valuation reserves”.
If there is any indication that an investment in an associate may be impaired, the recoverable value of the associate is
estimated, i.e., the higher of the fair value, net of selling costs, and its value in use. The value in use is calculated by
discounting to present value the future cash flows that the equity investment could generate, including the final disposal
value of the investment. Should the resulting recoverable amount be lower than the carrying amount, the difference is
recognized in profit and loss. Whenever the reasons of the impairment loss are no longer valid due to an event occurring
after the recognition of said impairment, write-backs are recognized through profit and loss.
8- Property and equipment
Tangible assets (PPE) include land, operating property, real estate investments, technical plants, furniture, fittings and
equipment of any type. Said tangible assets are held to be used for the production or provision of goods and services, to be
rented to third parties, or for administrative use, and they are expected to be used for more than one period. This item
includes also assets used under finance lease contracts, provided that the legal ownership of the assets rests within the
leasing company. Said item also includes improvements and incremental expenses incurred on third party assets, whenever
they are represented by identifiable and distinguishable tangible assets.
Tangible assets are initially recognized at cost, which includes the purchase price and all expenditures directly attributable
to the acquisition of the item and to bring the asset to working conditions. Non-recurring maintenance costs entailing
probable future economic benefits are included in the asset’s carrying amount, while other repairs and maintenance are
charged to income.
Leasehold improvements for rented buildings are capitalized under the rationale that throughout the lease contract life the
lessee retains the control over the assets and may obtain future economic benefits from it. Leasehold improvements of
rented buildings are depreciated over a period not exceeding the lease contract life.
Tangible assets, including “non-operating” property, are measured at cost, less any depreciation and impairment. Tangible
assets are systematically depreciated throughout their useful life, along the straight-line method, with the exception of:
x land, whether purchased separately or as part of the buildings standing on it, in that land has an unlimited life. In
case its value is embedded in the value of the buildings built on it, in virtue of the application of the approach by
components, land is considered a separate asset from the building; the separation between the land and the
building values is based on the survey of independent experts;
x works of art, because the useful life of a masterpiece cannot be estimated and its value normally is destined to
increase with time.
At each balance sheet date, if there is an indication that an asset may be impaired, the asset’s carrying amount is compared
with its recoverable amount, that is equal to the higher of the asset’s fair value, net of sale costs, and its value in use,
meaning the present value of future cash flows originated by the asset. Any write-downs are charged to income. Whenever
the reasons of the impairment loss are no longer valid, write-backs are recognized, that must not exceed the asset’s value
had no impairment taken place in the past, net of accrued depreciation.
A tangible asset is derecognized from the balance sheet at the time of disposal or when the asset is permanently withdrawn
from use and no future economic benefits are expected from its disposal.
9- Intangible assets
Intangible assets are non-monetary, identifiable and non-physical assets, owed to be used for several years. Intangible assets
are carried at cost, adjusted to account for accessory charges, only if it is likely that the future economic benefits attributable
to the asset will be realized, and if the cost of the asset can be measured reliably. Otherwise, the cost of the intangible asset
is recognized through profit or loss in the year in which it was incurred.
Goodwill is the positive difference between the cost of acquisition (including accessory charges) and the fair value of the
acquired assets and liabilities. It can be recognized as intangible asset if said difference is representative of future economic
benefits to be generated by the subsidiary (goodwill). Should this difference be negative (badwill or negative goodwill) or in
the assumption that goodwill is not justified by the anticipated future economic benefits generated by the subsidiary, the
difference is directly recognized through profit or loss.
Goodwill is not amortized, and it must be regularly tested for impairment to verify the adequacy of its book value.
Goodwill must be tested any time there is evidence of impairment, and in any case at least once a year. To this end, the
cash-generating unit to which the goodwill is allocated is identified. The impairment amount is calculated based on the
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difference between the goodwill’s carrying amount and its recoverable amount, if lower. Said recoverable amount is equal
to the higher of the fair value of the cash-generating unit, net of selling costs, and its value in use. The value in use is the
current value of future financial flows expected from cash-generating units to which goodwill was allocated. Any resulting
write-down is charged to income. Subsequent write-backs cannot be recognized.
Other intangible assets are recognized as such if they are identifiable and stem from legal or contract rights.
The cost of intangible assets is amortized on a straight-line basis over their useful life. If their useful life is not definable,
amortization will not be applied, and periodically the assets will be tested for impairment. At each balance sheet date, if
there is evidence of impairment losses, the asset’s recoverable amount is estimated. The loss, which is charged to income,
is equal to the difference between the asset’s carrying amount and its recoverable amount.
An intangible asset is derecognized from the balance sheet at the time of disposal and whenever no more future economic
benefits are expected.
10- Non-current assets held for sale and discontinued operations and liabilities associated with non-current assets held for
sale and discontinued operations.
This item includes non-current assets/liabilities that are available for immediate sale and their sale is highly probable, and
discontinued operations that either have been disposed of or are held for sale. In particular, these assets/liabilities are
measured at the lower of fair value less costs to sell and their carrying amount. Any gains or charges are recognized in profit
or loss in a separate item net of tax effect. In case the disposal groups are depreciable, starting from the year they have been
classified as non-current assets held for sale, the depreciation process is discontinued. The associated revenues and charges
are recognized in profit or loss in a separate item net of tax effect when they refer to discontinued operations; in this case
the same P&L information is disclosed in a separate item also for the comparative periods shown in the report.
11- Tax assets and liabilities
These items include current and deferred tax assets, and current and deferred tax liabilities.
Income tax, calculated in compliance with current tax regulations, is recognized through profit and loss based on the
accrual principle, in line with the method used to recognize the costs and revenues that generated it. Taxes on items
credited or debited directly to equity represent an exception, as they as well are consistently recognized directly through
equity.
Deferred tax assets and liabilities are based on temporary differences arising between the tax base of assets and liabilities
and their carrying amounts, without any time limits.
Deferred tax assets are recognized in the annual or half-year report when it is probable that they can be recovered,
measured based on the ability of the company concerned and of the Group, as a result of the so called “tax consolidation”
option, to continue to generate positive taxable income in future financial years. Deferred tax liabilities are recognized in
the annual or half-year report, with the exception of assets recognized at an amount higher than the value recognized
fiscally and of reserves under tax suspension, where it is reasonable to believe that no operations will be performed
deliberately that would trigger taxation.
Recognized deferred tax assets and liabilities are systematically measured to account for any regulatory or tax rate changes,
as well as for any changes in the position of the single Group companies.
Current tax assets and liabilities are shown as a net balance in the balance sheet, in case the settlement is executed based on
the net balance, owing to the existence of a legal right to netting.
Deferred tax assets and liabilities are shown as open balances, without any kind of netting.
Tax liabilities include earmarked funds, in compliance with IAS 37, set aside to provide for charges that may be generated
by already notified tax audits or in any case outstanding disputes with legal authorities.
12- Provisions for risks and charges
Provisions for risks and charges include liabilities whose amount or maturity are uncertain and are recognized only if:
- there is a present obligation (legal or constructive) as a result of past events;
- it is likely that an outflow of resources will be required to produce economic benefits to settle the obligation;
- the obligation amount can be reliably estimated.
The item “Provisions for risks and charges” includes provisions for long-term benefits and post-employment benefits covered
by IAS 19 as well as provisions for risks and charges covered by IAS 37.
Provisions for risks and charges do not include write-downs caused by an impairment of guarantees given, and equated
credit derivatives under IAS 39, recognized under item “Other liabilities”.
The sub-item “other provisions for risks and charges” includes provisions for possible losses on lawsuits, including clawback
actions, estimated outlays for customer complaints regarding securities brokerage, as well as a reliable estimate of other
outlay due to any other legal or implicit obligation outstanding at the balance sheet or interim report date.
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Whenever the time factor is significant, provisions are discounted using current market rates. The effect of discounting to net
present value is recognized in profit and loss, as is the provision increase as a result of the passing of time.
Provisions are re-examined at each balance-sheet date and adjusted to reflect the best current estimate. If it is unlikely that
resources shall have to be used to fulfill the obligation, the liability is derecognized.
Each provision must be used to pay for outlays for which the provision itself had been originally set aside.
As explained in the following paragraph “18- Other information, Employee termination benefits”, the sub-item “postemployment provisions and similar obligations" shows defined-benefit plans, namely pension funds backed by a capital
repayment and/or return guarantee in favor of beneficiaries. Benefits to be paid in the future are measured by an external
actuarial, using the “projected unit credit method”, as required by IAS 19.
13- Due to banks and customers and securities issued
The items “Due to banks”, “Due to customers” and “Securities issued” include various forms of interbank and customer
loans and funding through certificates of deposit and bonds outstanding, net of any repurchased amount. Also loans
registered by lessees as part of financial leases are included, as well as repurchase agreements and lent securities against a
cash collateral.
These financial liabilities are first recognized when the raised amounts are received or the securities issued. The initial
recognition is based on the fair value of liabilities, generally the consideration received or the issue price, plus any
additional costs/revenues directly attributable to the single funding or issue operation and not refunded by the lending
counterparty. Internal administrative costs are excluded.
Repurchase agreements with obligation to repurchase are recognized as funding transactions for the amount paid spot.
After initial recognition, financial liabilities are measured at amortized cost along the effective interest rate method. Shortterm liabilities are an exception, if the time factor is immaterial: they are stated at their received value and any incurred
costs are charged to income on a straight-line basis over the liability contract life. Note, that Funding instruments under an
effective hedge are measured along the standards prescribed for hedges.
For structured instruments, provided that the requirements under IAS 39 are satisfied, the embedded derivative is separated
from the host contract and measured at fair value as a trading liability. In this case the host contract is recognized at the
amortized cost.
Financial liabilities are derecognized from the annual or half-year report when expired or cancelled. Derecognition takes
place also in case of repurchases of securities issued. The difference between the carrying amount of liabilities and the
consideration paid is registered in the income statement. The subsequent sale of own debt instruments following their
repurchase is considered as a new issue, recognized at the new selling price, with no P&L effect.
14- Financial liabilities held for trading
This item includes the negative amount of trading derivative contracts measured at fair value and cash financial liabilities
held for trading.
It also includes the negative value of derivatives associated with the assets and liabilities measured at fair value, embedded
derivatives, which were separated from their host financial instruments under IAS 39, as well as liabilities originating from
technical overdrafts generated by securities trades.
Initial recognition is based on the fair value of liabilities, that generally corresponds to the collected amount, excluding
transaction costs or proceeds directly associated with the instruments, that are directly recognized through profit or loss.
Gains and losses from changes in the fair value and/or from the sale of trading instruments are recognized through profit or
loss.
Financial liabilities are derecognized from the annual or half-year report when expired or cancelled.
Trading profits or losses and gains or losses on valuation of the trading portfolio are recognized through profit or loss in the
item “80. Profit (losses) on trading”, except for those related to derivatives associated with the fair value option that are
classified in item “110. Profit (loss) on financial assets and liabilities measured at fair value”.
15- Financial liabilities designated at fair value through profit and loss
A financial liability is designated at fair value through profit or loss upon initial recognition only when:
1. it is a hybrid contract containing one or more embedded derivatives, and the embedded derivative significantly
changes the financial flows that would otherwise be expected from the contract;
2. or when the designation at fair value through profit or loss makes it possible to provide more reliable information
as:
i. it eliminates or considerably reduces the inconsistent treatment, that would otherwise be caused by
measuring assets or liabilities or recognizing the associated profit and loss on a different basis;
ii. a group of financial assets, or financial liabilities, or both is managed and its performance measured at fair
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value based on a documented risk management or investment strategy, and group reporting is provided
internally to managers in charge of strategic functions based on this approach.
The financial liabilities under examination are measured at fair value right from the initial recognition. Initial revenues and
charges are immediately recognized through profit or loss.
Financial liabilities are derecognized from the annual or half-year report when expired or cancelled. In case of financial
liabilities represented by securities issued, derecognition is carried out also in case or repurchase: the difference between
the book value of the liability and the amount paid to purchase it is recognized through profit or loss. The sale of own
securities on the market after their repurchase is considered a new issue, with recognition at the new selling price, with no
P&L effect.
For a more in-depth analysis on the scope of liabilities under fair value option, on the method used to measure the fair value
and the quantification of the creditworthiness, please refer to the following paragraph “18- Other information, Fair value
measurement of financial instruments”.
16- Foreign currency transactions
Upon initial recognition, foreign currency transactions are recognized in the functional currency, and the exchange rate
applied to the amount expressed in foreign currency is the one in effect at the date of the transaction.
At each balance sheet date, items expressed in foreign currencies are measured as follows:
x cash items are translated at the exchange rate in effect at the closing date;
x non-cash items measured at their historical cost are translated at the exchange rate in effect at the date of
transaction;
x non-cash items measured at fair value are translated based on the exchange rates in effect at the closing date.
Exchange rate differences originated by the settlement of cash items, or by the translation of cash items at rates other than
the initial ones, or by the conversion of the previous financial statements, are recognized in profit and loss at the time of
their accrual.
When a gain or loss from a non-cash item is carried at equity, the relevant exchange rate difference is also carried at equity.
Conversely, when a gain or loss is recognized through profit or loss, also the associated exchange rate difference is
recognized through profit or loss.
17- Insurance assets and liabilities
No insurance companies fall under the consolidation scope.
18- Other information
a) other balance sheet items
This item includes legal tender, including foreign paper notes and coins and demand deposits with the Central Bank of the
Country or Countries where the Group is active with companies or branches.
The item is recognized at its face value. For foreign currencies, the face value is translated into Euro at the closing exchange
rate in effect at year-end.
Fair value change of financial liabilities in hedged portfolios
These items indicate the positive or negative balance of fair value changes of assets or liabilities in portfolios hedged against
interest rate risk (macro-hedging).
Other assets
This item includes assets that do not belong to the other balance sheet assets items. This item for example may include:
a) gold, silver and precious metals;
b) accrued income other than those that are to be capitalized onto the associated financial assets;
c) any inventories under IAS 2;
d) improvements and incremental expenses incurred on third party assets other than those associated with the item
“Property and equipment”. In particular, assets that are form an integral part with the goods they belong to and
cannot be used separately are classified under this item. Said costs are recognized under other assets, because,
owing to the lease contract, the tenant company has control over the goods and can obtain a future economic
benefit from their use;
e) receivables associated with providing non-financial goods or services.
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Also balances (“debit balance”) of temporary or suspense items that have not been allocated to the relevant accounts can be
presented under this item, but only if the amount is immaterial.
Other liabilities
This item includes liabilities that cannot be associated with other balance sheet liability items.
For example, this item may include:
a) payment agreements that under IFRS 2 must be classified as debts;
b) the initial recognition of guarantees issued and the equated credit derivatives under IAS 39, as well as the
following impairment write-downs;
c) payables associated with the payment of non-financial goods or services received;
d) accrued liabilities others than those to be capitalized onto the relevant financial liabilities.
Employee termination benefits
Following the supplementary pension reform, under Legal Decree n. 252 of 5 December 2005, new regulations were
introduced for employee termination benefits beginning from 1 January 2007.
From an accounting perspective, beginning 1 January 2007 termination benefits are considered a “defined contribution
plan” based on IAS 19; the charge to be incurred by companies is limited to the benefits defined under the Civil Code,
without applying any actuarial methodology.
The termination benefit provision accrued up to 31 December, 2006 continues to be accounted for as a defined benefit plan
under the classification indicated by IAS 19. The liability associated with the accrued termination benefits however must be
measured at actuarial value without applying the pro-rata of the rendered service since the benefit to be measured may be
considered fully accrued.
Pension plans and liabilities associated with the so called “personnel seniority bonuses” are distinguished between defined
benefits and defined contributions.
In defined contribution plans the cost is represented by contributions accrued during the year, since the company must only
pay the contributions defined by contract to an external fund, and has therefore no legal or implicit obligation to pay other
amounts in addition to said contributions in case the fund does not have sufficient assets to pay all the benefits to
employees.
In defined benefit plans, liabilities are measured based on the actuarial methodology prescribed by IAS 19, as the actuarial
and investment risk, namely the risk that contributions are insufficient or that the assets in which contributions are invested
do not generate a sufficient return, is borne by the company. The measurement of the actuarial values under the above
standard is carried out by an external independent actuarial.
In particular, commitments associated with plans, where the company has guaranteed capital repayment and/or return in
favor of beneficiaries, are recognized in “Post-employment funds and similar obligations”, while seniority bonuses are
recognized in “Provisions for risks and charges – other”.
For all defined benefit plans, actuarial profits and losses are recognized immediately through profit or loss. Actuarial profits
or losses are caused by changes in the actuarial assumptions, owing to what is actually being experienced or as a result of
changes to the assumptions themselves.
Valuation reserves
This item includes valuation reserves for financial assets available for sale, net investment hedging, cash flow hedging, and
for foreign currency translation adjustments, as well as for “individual assets” under disposal and discontinued operations. It
also includes the revaluation reserves recognized in compliance with special revaluation regulations, also if tax exempt.
Share capital and treasury shares
Share capital includes common and preferred stock issued by the bank net of any capital already subscribed but not yet paid
in at the balance sheet date or at the date of the interim report. This item includes any treasury stock held by the bank. The
latter are shown with a minus sign in the item bearing their name under balance sheet liabilities.
The original cost of repurchased treasury shares and the gain or loss originated by their subsequent sale are recognized as
changes to shareholders’ equity.
Minority interests
This item shows the portion of consolidated shareholders’ equity attributable to shares owned by minority shareholders
based on “equity ratios”. The amount is net of any treasury shares repurchased by consolidated companies.
b) other significant accounting treatments
Dividends and revenue recognition
Revenues are recognized when received or in any case when it is likely that future benefits will be received and that said
benefits can be reliably measured. In particular:
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x default interests, if provided for by the contract, are recognized in profit and loss only when actually collected;
x dividends are recognized in profit and loss when the legal right to collect them ensues, hence when their
distribution is ratified;
x revenues from the brokerage of trading financial instruments are recognized in profit and loss when the
transaction is recognized, based on the difference between the transaction price and the instrument fair value,
using measurement techniques that are based on the most favorable input parameters that are observable on the
market. The resulting fair value is then adjusted for the recoverability risk of any positive margin, depending on
the specific counterparty with which the financial instrument has been negotiated (credit risk adjustment);
x proceeds from financial instruments whose fair value cannot be measured based on observable market parameters
are distributed over time taking into account the instrument’s nature and life (for ex. capital guaranteed or capital
protected products);
x revenues on bond issues generated by the difference between the transaction cost and the instrument’s fair value
are recognized through profit and loss at the issue date if the fair value can be measured based on observable
parameters or on recent transactions observable on the same market where the instrument is traded. In the event
that said parameters cannot be directly observed on the market, as with all other retail market issues, the
measurement technique used to measure the fair value takes the commercial spread as adjusting factor to
discount cash flows to net present value. The resulting fair value corresponds to the collected consideration:
hence, no profit is accounted for on the issue date. In order to guarantee a substantial representation of the cost of
the funding transaction based on the correlation between costs and revenues, in case of fees and commissions
paid to companies that do not belong to the Group, and that are charged to income at the issue date, on the same
date a revenue is recognized, represented by the commercial spread, until the cost of the distribution fees and
commissions is topped out.
Share-based payments
Share based payment are payments made to employees, as a consideration for the work done, based on capital shares, that
may be represented for example by the assignment of:
x stock options;
x stock grants.
Considering how difficult it is to directly estimate the fair value of received working services in exchange for the assignment
of shares, it is possible to measure the value of received services indirectly, by referring to the fair value of the equity
instruments at their assignment date. The fair value of payments settled through the issue of shares is recognized as
“Personnel expenses”, offset by a corresponding increase in “Reserves”, based upon the accrual principle.
In particular, when assigned shares are not immediately “usable” by the employee, but they will be when the employee has
completed a given service term, the enterprise shall recognize the cost as a consideration for the provided service
throughout their vesting period.
Securitizations
When first adopting international accounting standards, the Group made use of the option not to recognize assets
underlying securitizations performed before 1 January 2004, that had been derecognized from the balance sheet based on
the previous accounting standards. As a result, only the subscribed securities are shown in the balance sheet assets of the
originating bank.
For deals finalized after the above mentioned date, the sold loans are not derecognized from the balance sheet if a
substantial amount of risks and benefits is still retained, although formally they have been sold without recourse to a special
purpose entity. This may occur for example, when the bank subscribes tranches of Junior notes or similar exposures, as in
this case it shall bear the risk of the initial losses, and likewise it shall benefit from the return on the deal. As a result, loans
are shown in the balance sheet as “Assets sold and not derecognized” against the loan received by the special purpose
entity, net of the securities issued by the latter and subscribed by the originating bank. Similar representation criteria, based
on substance over form, are applied to measure accruals.
Reclassifications among financial assets portfolios (IAS 39 amendment)
On 13 October 2008, IASB approved an amendment to IAS 39 and IFRS 7, adopted along a fast-track procedure by the
European Commission on 15 October 2008 with Regulation n. 1004/2008.
Based on said amendment, under given circumstances it is now possible to reclassify financial instruments, that when
purchased had been recognized as “Financial assets held for trading” or “Financial assets available for sale”, into another
category. Prior to said amendment, the general rule prohibited reclassifications to other categories, with the exception of
reclassifications between “Financial assets available for sale” and “Investments held to maturity”.
Based on what prescribed in paragraphs 50D and 50E of the new version of IAS 39, the following financial instruments can
be reclassified:
x financial instruments, other than derivatives, previously classified as financial assets held for trading. It is not
possible to reclassify financial instruments belonging to the category of “Financial assets designated at fair value
through profit and loss” as a result of the so called “fair value option”. The new accounting category of destination
is “Loans”. To qualify for reclassification, the financial instrument at the date of the reclassification must meet the
214
prescribed requirements to be classified in the “Loans” portfolio, and the company’s intent must be to stop trading
the financial instruments being reclassified and hold them for the foreseeable future or to maturity;
x non-derivative financial instruments classified as “Financial assets available for sale” can be reclassified as
“Loans” if at the reclassification date the financial instrument met the “Loan” definition and the company now
wants to and can hold it for the foreseeable future or to maturity.
Any other non-derivative debt or equity instrument can be reclassified from the category “Financial assets held for trading”
to the category “Financial assets available for sale” or from the category “Financial assets held for trading” to “Investments
held to maturity” (debt instruments only), whenever said instruments are no more held for trading in the short term; this
however is admitted only in rare circumstances, as illustrated in paragraph 50 B.
The reclassified financial asset is recorded in the new category (“Loans”, “Investments held to maturity”, “Financial assets
available for sale”) at its fair value on the reclassification date, representing the new cost or amortized cost.
Once reclassified, financial instruments shall comply with the recognition and measurement rules of the category of
destination, except for what specified below; therefore, the effective rate of return must be calculated to be used as of the
reclassification date for assets measured at the amortized cost.
For reclassified assets, any future positive change in estimated cash flows contributes to the calculation of the effective
interest rate when the projection is reviewed, and shall be accounted for throughout the instrument’s residual life instead of
changing the asset’s book value with offset accounting through profit or loss, as prescribed for non-reclassified assets.
Vice versa, any future reduction in estimated cash flows as of the reclassification date shall comply with prior regulations,
therefore they shall be immediately charged to income in case it represents an impairment loss.
Gains and losses that were previously suspended in equity reserves for Financial assets available for sale, if referring to an
instrument with a fixed maturity shall be amortized along the entire investment term along the amortized cost principle;
vice versa, if the instrument has no fixed maturity (for ex. perpetual instruments), it shall remain suspended in the equity
reserve until sold or cancelled.
In case the financial asset is reclassified and up until its expiration, it is necessary to report the consequent effects and those
that would have arisen in the absence of the reclassification, as explained in the following sub-section “A.3 – Fair value
disclosure”.
Business combinations and Goodwill
A business combination is the merger of separate enterprises or businesses into a single reporting entity.
A combination can give rise to an equity interest connection between the acquiring Parent company and the acquired
subsidiary. In this case, the acquirer shall adopt IFRS 3 in the consolidated financial statements, while in the separate
financial statements it shall report the acquired interest as an equity investment in a subsidiary, adopting IAS 27
“Consolidated and separate financial statements”.
A combination can entail also the purchase of the net assets of another entity, excluding goodwill, or the purchase of the
equity of another entity (mergers, transfers, acquisitions of business lines). This combination does not translate into an equity
interest connection similar to that arising between a parent company and a subsidiary so in this case IFRS 3 is applied also
in the acquirer’s separate financial statements.
Business combinations are accounted for using the purchase method, according to which the price of the business
combination is determined and then allocated, at the acquisition date, to the acquired assets, liabilities and contingent
liabilities.
In particular, the cost of a business combination is the result of the sum of:
- the fair value, at the exchange date, of assets sold, liabilities incurred or taken over and equity instruments issued
by the acquirer in exchange for the control over the acquiree;
- accessory costs directly attributable to the business combination.
In case of a step acquisition, the combination cost is the overall cost of the single transactions, the exchange date is the date
of each exchange transaction, while the acquisition date is when control is obtained over the acquiree.
The business combination cost is then allocated by recognizing assets, liabilities and contingent liabilities of the acquiree at
their fair value at the acquisition date.
The positive difference between the business combination price and the Group’s interest in the fair value of acquired assets,
liabilities and contingent liabilities represents goodwill, which is initially recognized at cost.
After initial recognition, goodwill is recognized at cost less any accrued impairment losses. In order to assess it for
impairment, at acquisition date goodwill arising on a business combination is allocated to the Group’s single cashgenerating units, or to a group of cash-generating units that should benefit from the combination synergies, irrespective of
whether other acquiree’s assets or liabilities are assigned to said units or group of units.
When goodwill is part of a cash-generating unit (or group of cash-generating units), and part of the internal assets belonging
to said unit are sold, goodwill associated with the sold assets is included in the accounting value of the assets to measure the
profit or loss on the sale. Goodwill sold under said circumstances is measured by reference to the relative values of the sold
assets and to the portion of unit still outstanding.
Any negative difference between the business combination price and the Group’s interest in the fair value acquired assets,
liabilities and contingent liabilities is immediately recognized through profit or loss as a revenue in item “Other revenues”,
after a re-measurement has been performed to verify that the purchase price allocation has been correctly executed.
The measurement of the fair value of the acquiree’s assets, liabilities and contingent liabilities can be carried out
215
provisionally at the end of the financial year in which the business combination has been carried out and must be finalized
within twelve months of the acquisition date.
Reorganizations involving two or more companies or business activities belonging to Gruppo Banco Popolare are not
considered business combinations. International accounting standards do not apply to transactions between entities under
common control, that are accounted for using the predecessors value method, where financial statements are a continuation
of amounts that had been reported previously, in compliance with IAS 8 par.10, stating that in the absence of an IFRS that
specifically applies to a transaction, event or condition, management uses its judgment in selecting and applying an
accounting policy that results in relevant, reliable and prudent financial information, reflecting the transaction’s economic
content.
Bank capitalization instruments under D. L. 185/ 2008 (so called “Tremonti Bond”)
The representation of the financial instruments provided by D.L. 185/2008 issued by Banco Popolare in favor of the Ministry
of Economy and Finance complies with the instructions set out in the joint Bank of Italy/Consob/Isvap document n. 3 of 21
July 2009, based on which the economic content of these instruments – as resulting from the overall consideration of all the
contract provisions (no redemption, remuneration based on the issuer’s performance, loss absorption on a going concern
basis pari passu with the other shareholders, convertibility, in favor of the company, of a fixed number of issuer’s shares) – is
consistent with their classification under the balance sheet item equity instruments (consolidated item “160. Equity
instruments”).
A similar representation criterion is applied to recognize financial considerations (interest expense and accessory charges).
The liability associated with the remuneration due to the instruments under examination is recognized by debiting equity
reserves at the date the liability is considered to be certain and collectible, as if it were a dividend distribution. Similarly,
liabilities for accessory charges represented by the contribution to the guarantee fund for loans to small and medium
enterprises, under article 11 of L.D. 185/2008, is recognized by directly deducting them from the consolidated equity item
“170. Reserves”.
Fair value measurement of financial instruments
The fair value represents the consideration at which an asset could be traded or a liability cancelled, in a free transaction
performed at arm’s length between independent and knowledgeable parties, at a given measurement date.
The fair value is the price that would be paid in an ordinary transaction, that is, a transaction involving market participants
who wish to negotiate, thus excluding any kind of forced transaction.
The fair value measurement of financial instruments is based on the assumption that the company is a going concern,
namely it is assumed that the company shall continue to be fully operational and will not liquidate or significantly reduce its
operations, nor will it carry out transactions at unfavorable terms.
Financial assets and liabilities held for trading, Financial assets designated at fair value through profit and loss, Financial
assets available for sale, Hedging derivatives
A “fair value policy” is in effect for the above financial instruments that are measured at fair value, that attaches the top
priority to official prices available on active markets (mark to market) and a lower priority to the use of non-observable
inputs, as they are more discretional (mark to model).
Mark to Market
To measure the fair value, the Bank uses information based on market data, any time it is available, obtained from
independent sources, in that it is considered to be the best evidence of fair value. In this case, the fair value is the market
price of the financial instrument under valuation – that is, without changes or recomposition of the instrument - derived
from the quotes expressed by an active market. A market is considered to be active when price quotations reflect normal
market transactions, are regularly and promptly available through the Stock exchanges, quote services, brokers, and when
said prices represent actual and regular market transactions.
Generally, the following are considered active markets:
x regulated securities and derivative markets, with the exception of the “Luxembourg” marketplace;
x organized trading systems;
x some OTC electronic trading circuits (for ex. Bloomberg), under given circumstances based on the presence of a
certain number of contributors with executable offers, characterized by bid-ask spreads – i.e., the difference
between the price a seller is offering for a security (ask price) and the price a buyer is willing to pay (bid price) –
lying within a given tolerance threshold;
x the secondary market for UCITS units, expressing the official NAV (Net Asset Value), based on which the issuing
asset management company must settle units. The NAV can be adequately adjusted to account for the fund’s
diminished liquidity, i.e., the time span between the redemption application date and that of the actual
redemption, as well as for possible exit commissions.
Mark to Model
When the Mark to Market policy is not applicable, because there are no market prices directly observable on active
markets, it is necessary to turn to measurement techniques that maximize the use of information available on the market,
based on the following measurement approaches:
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1. Comparable approach: in this case the instrument’s fair value is derived from the prices observed in recent
transactions of similar instruments in active markets, adequately adjusted to account for differences in the
instruments and in the market conditions;
2. Valuation Model: in the absence of observable transaction prices for the instrument under measurement or similar
instruments, it is necessary to apply a valuation model; the model must provide proven reliability for the estimate
of hypothetical “operational” prices and therefore must be generally accepted by market participants.
In particular:
x debt securities are measured based on the expected cash flow discounting method, adequately adjusted to
account for the issuer risk;
x derivative contracts are measured based on a multiplicity of models, depending on the input factors (interest rate
risk, volatility, exchange rate risk, price risk, etc.) which affect their measurement;
x unquoted equity securities are measured based on direct transactions of the same security or similar securities
observed over an adequate time frame as compared to the measurement date, on the peer company market
multiples method, and subordinately on financial, P&L and balance sheet valuation methods.
As a result of the above described “fair value policy”, fair value goes through a three-tiered hierarchy, based on the
availability of market parameters:
1. Price quotations derived from active markets (Level 1):
The measurement is based on the market price of the instrument itself, derived from the price quotations
expressed by an active market.
2. Measurement methods based on observable market parameters (Level 2)
The measurement of the financial instrument is not based on the market price of the financial instrument under
measurement, but on prices that can be derived from market prices of similar assets or through measurement
techniques whereby all significant factors – including credit and liquidity spreads – are derived from observable
market data. This level entails a limited level of discretion, because all parameters are derived from the market (for
the same security or similar securities) and the calculation methods make it possible to replicate price quotations
expressed on active markets.
3. Measurement methods based on non-observable market parameters (Level 3)
Fair value measurements rely on measurement techniques, that are extensively based on significant inputs that
cannot be derived from the market, and therefore they call for estimates and assumptions made by the
management.
The above hierarchy is in line with the amendments to IFRS 7 “Financial instruments: disclosures”, adopted with EC
Regulation n. 1165 of 27 November 2009, which require to provide a disclosure on levels fair value three, as described in
the following sub-section “A.3 – Fair value disclosure”.
Financial liabilities designated at fair value through profit and loss and assessment of own creditworthiness
“Financial liabilities designated at fair value through profit and loss” include securities issued by the bank, that are already
under the “Fair Value Option”. In particular, the Fair Value Option scope covers le following issues:
x plain vanilla fixed rate bond programs;
x structured bonds whose pay-off is linked to equity components (securities or indices) or to exchange rate
components;
x structured bonds whose pay-off is linked to interest rate or inflation rate structures or similar indices.
In these cases, the adoption of the Fair Value Option makes it possible to avoid the otherwise ensuing accounting mismatch,
by measuring the bond at its amortized cost and the related derivative at fair value.
In addition to simplifying the administrative and accounting management of hedges, the reason why the Group opted to
make use of the Fair Value Option, instead of Hedge Accounting, is closely linked to the actual modalities through which
the Group carries out its hedging policies, by managing its market exposure globally and not through a discrete relation with
the issued bond.
Unlike Hedge Accounting, whose accounting rules require that only fair value changes attributable to the hedged risk be
measured on hedged instruments, the Fair Value Option requires the recognition of all fair value changes, irrespective of the
risk factor that generated them, including the issuer’s credit risk.
As of the second half of 2009, in order to reduce the P&L volatility caused by the fluctuations of own creditworthiness, the
Group decided to apply Hedge accounting rules for some new issues of significant amount, hedged with derivative
instruments. In particular, we are referring to some issues which are considered as institutional issues under and by effect of
what explained below. To evidence the actual transfer of the hedged risk outside the Group and pass the effectiveness test at
consolidated level, traceable hedging transactions have been executed for each single bond issue, as required in the above
paragraph “6- Hedges”.
In addition, hedge relationships for the bond issues of the subsidiary Banca Italease, which joined the Group’s consolidation
scope in second half 2009 after the Tender Offer, are managed in Hedge Accounting at Group level.
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For own bond issues, the Group’s fair value policy as adopted starting from the quarterly report of 31 March 2009 prescribes
a distinction depending on the factors that are considered significant by market participants to fix the exchange price of a
hypothetical transaction on the secondary market.
When measuring fair value, creditworthiness changes occurred after the issue date are not taken into consideration if this
reflects the practice observed on the reference market. This happens, for example, for retail issues, dedicated to Group
customers, that are quoted on an organized trading system based on a pricing policy that tends to confirm credit spreads
outstanding at the issue date. In this case, the fair value shall be equated with the price of Group securities observed on the
organized trading system, as it is considered an active market.
For bond issues whose subsequent transactions are impacted by changes in own credit spread, the same methodology used
in the 2008 annual report is confirmed, based on cash flow discounting, where the curve used for discounting is equal to
the risk-free interest rate, plus the creditworthiness curve. This policy applies for example to issues dedicated to institutional
customers, where the price observed on the market or applicable in a hypothetical transaction considers creditworthiness
changes occurred after the issue date as a significant input. As illustrated above, for some significant bond issues in second
half 2009 belonging to the latter type, the Group adopted the Hedge Accounting rules instead of the Fair Value Option, to
sterilize the economic impact associated with changes in own creditworthiness; for prior issues, the Fair Value Option rules
are confirmed, since designation is irrevocable.
Note, that the issuance of this type of bonds, that are hedged against the interest rate risk, is generally reserved to the Parent
company – Banco Popolare.
The creditworthiness curve is plotted by maximizing the use of observable and significant market parameters, as a function
of the relative liquidity. Starting from financial year 2008, the market reference that could best express our creditworthiness
was considered to be the Credit Default Swap (CDS) curve – senior or subordinated – as a function of the issue’s
subordination grade and the maturity date.
Note, that for all the Companies of the Group, the reference CDS curve is the Parent company’s – Banco Popolare – the
latter being the guarantor of last resort, with no additional adjustment.
Once the appropriate market parameters that can best reflect one’s creditworthiness have been identified, the fair value
change attributable to the factor under examination, between the issue date and the measurement date, is obtained by
calculating the difference between the pricing received - all risk factors being considered to which the bond is exposed,
including credit risk - and the fair value resulting when considering the same factors, except the credit risk change arising in
the period.
When discounting cash flows, the measurement technique takes into consideration a spread adjustment, so as to sterilize
right from the issue date any profit deriving from the difference between the fair value and the consideration collected by
the customer, net of transaction costs. As shown in the item “Dividend income and revenue recognition”, this spread
adjustment is equal to the commercial spread implied in the issue, net of distribution commission expense paid to third
party companies, that is fully charged to income at the issue date. As a result, at the issue date a profit is recognized
amounting to the distribution commission expense, and both are posted in the P&L item “110 Profit (Loss) on financial assets
and liabilities measured at fair value”.
Due to and from banks and customers, Securities issued, Investments held to maturity
For the other financial instruments recognized at their amortized cost and basically classified as due to and from banks or
customers, debt securities in issue or Investments held to maturity, a fair value was measured for reporting purposes in the
Explanatory notes. In particular:
x for medium/long term impaired loans (non-performing and substandard), the fair value is measured by discounting
contract flows at a risk-free market rate, net of expected losses. For medium/long term performing loans, the fair
value measurement is based on a risk-aversion approach: the discounting of expected cash flows, adequately
adjusted to account for expected losses, is based on a risk-free market rate, incremented by an amount considered
to reflect risk aversion, so as to take into account additional factors other than the expected loss;
x for assets and liabilities on demand or with a short-term or indefinite maturity, the book value at which they have
been recognized is considered a good approximation of fair value;
x for bond programs measured at the amortized cost, basically floating rate bonds, fair value is measured by
discounting the note’s cash flows based on the risk-free interest rate curve, adequately adjusted to account for
changes in creditworthiness, whenever this is considered a material factor by market participants, based on the
methodology described for “Financial liabilities designated at fair value through profit and loss”;
x for debt securities classified as “Investments held to maturity” or as “Loans to banks or customers”, even following
a portfolio reclassification, the fair value is measured by using prices obtained on active markets or measurement
models, as described above for financial assets and liabilities designated at fair value.
Financial assets impairment test
At each balance sheet date, all financial assets, except those measured at fair value through profit or loss, undergo an
impairment test to verify whether there is an objective evidence of impairment losses that may impair the recoverability of
the investment.
In particular, the objective evidence of an impairment loss affecting an asset or a group of financial assets can be associated
with the following negative events:
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x
x
x
x
x
x
significant financial difficulties experienced by the issuer or the borrower;
breach of contract, for example a default or failure to make any interest or principal payment when due;
giving the beneficiary an allowance, that the bank took in consideration primarily for economic or legal reasons
linked to the beneficiary’s financial difficulties, and which otherwise would not have been granted;
probability that the borrower may file for bankruptcy or other financial restructuring procedures;
disappearance of an active market related to the financial asset under examination due to the issuer’s financial
difficulties. However, the disappearance of an active market caused by the fact that the company’s instruments are
not publicly traded any more is no evidence of a fair value reduction;
events that point at a significant decrease in the issuer’s future cash flows (which include the general local or
domestic economic conditions against which the issuer operates).
Furthermore, an objective evidence of impairment loss for an investment in an equity instrument may materialize in the
presence of the following additional negative events:
x
significant changes negatively affecting the technological, economic or regulatory environment in which the issuer
operates, indicating that the investment cannot be recovered anymore;
x
a prolonged or significant fair value reduction below the purchase price.
In case an objective value reduction occurs as a result of one or more events that occurred after the initial recognition of the
asset, it is necessary to calculate the impairment loss, along different rules depending on whether we are dealing with
financial instruments measured at the amortized cost or assets measured at fair value with changes carried at equity.
With regard to the measurement of impairment losses, please refer to what described for “Investments held to maturity”,
“Loans to banks and customers” for assets measured at amortized cost, and “Financial assets available for sale” for assets
measured at fair value through a specific equity reserve.
A.3 – FAIR VALUE DISCLOSURE
A.3.1 Transfers between portfolios
A.3.1.1 Reclassified financial assets: carrying amount, fair value and impact on comprehensive income
On 15 October 2008 the European Commission approved Regulation n. 1004 transposing the amendments to IAS 39
regarding the reclassification of financial instruments and to IFRS 7 regarding disclosure requirements.
Based on these amendments, it is now possible, under certain circumstances, to reclassify financial instruments, that at the
time of purchase had been recognized as financial assets held for trading or financial assets available for sale, to another
accounting category, as described in greater detail in the above “Section A.2”.
Based on the above regulatory changes, in the meeting of 28 October 2008, the Management Board of Banco Popolare
decided to reclassify the unquoted financial assets held for trading, with a nominal value of 594.1 million, corresponding to
a carrying amount of 565.2 million, as loans, as the crisis that was raking the world financial markets was preventing the
bank from reasonably pursuing the intents that had justified the recognition of these financial instruments in the category of
financial assets held for trading, and in fact was forcing it to hold them for the foreseeable future or to maturity. As provided
by the amendment to IAS 39, owing to this exceptional circumstance, the transfer was performed based on the prices of 1
July 2008, as the reclassification had been resolved before 1 November 2008.
In 2009, the Board of Directors of Efibanca decided to reclassify UCITS units, amounting to 8.6 million, held in closed-end
private equity funds from the “Financial assets held for trading” portfolio to the “Financial assets available for sale” portfolio.
This reclassification replicated that of other similar investments, that Efibanca had already classified in item 40 – Financial
assets held for sale, in view of the expected stability for this form of investment, and considering also that the financial
market crisis would have prevented trading in the short term.
As the reclassification was resolved after 1 November 2008, the recognition value in the new category is represented by the
fair value as at 30 June 2009, i.e., at the date of the reclassification resolution, as provided by the relevant accounting
standards.
219
On 31 December 2009 the book value of the reclassified UCITS units totaled 7.2 million, taking into account the additional
cash calls of 0.4 million after the transfer.
Type of
financial
instrument
Old portfolio
New portfolio
Book value
at
31.12.2009
Income components in
Fair value at the absence of transfer
(before tax)
31.12.2009
Valuation
Debt
securities
Debt
securities
UCITS units
Financial assets held for
trading (item 20)
trading (item 20)
Loans to banks
(item 60)
Customer loans
(item 70)
Financial assets
available for sale
trading (item 20)
(item 40)
Total
Other
Income components
reported for the year
(before tax)
Valuation
Other
155,103
148,364
22,172
3,320
-
4,795
342,804
336,305
34,151
9,954
-
12,646
7,165
7,165
-1,835
-
-1,835
-
505,072
491,834
54,488
13,274
-1,835
17,441
Debt securities
On 31 December 2009, the reclassified portfolio represented by “Debt securities” comprised 18 corporate securities –
primarily banks and financial institutions and 16 Asset Backed Securities (ABS), plus UCITS units reclassified by Efibanca.
Since reclassification - 30 September 2008 – to date no trading-related changes occurred in reclassified securities, in
keeping with our intents; the only change referred to the early redemption of some ABS (of which 2 full redemptions), with a
nominal value of 53.9 million euro.
On 31 December 2009, the residual nominal value of reclassified securities totaled 540.2 million, corresponding to a
carrying amount of 505.1 million (gross of end-of-period accruals).
In particular, with respect to ABS, reclassified positions corresponded to a carrying amount on 31 December 2009 of 112
million (NV 114.7 million), and represented almost all the Group’s structured credit products. All ABS belong to the senior
class, which takes priority over other unsecured or junior debt when making principal and interest payments. The
underlying assets are generally represented by residential mortgages from Italy and other European countries, and Italian
government securities; ratings generally range between double A and triple A.
With respect to corporate securities, having a nominal value of 425.5 million, corresponding to a carrying amount of 385.9
million, they are mainly represented by issues of primary banks and financial institutions from USA (42%), Europe (38%),
and Italy (17%); there are no structured credit securities. In detail, 68% of securities are plain vanilla issues (non-structured
issues exposed only to the interest rate and counterparty risk), and the remaining 32% are subordinated issue, mostly from
European and Italian banks.
The cumulative reclassification effect on 31 December 2009 was a gain of 13.2 million (as resulting from the difference
between the column “Book value at 31.12.2009” and “Fair value at 31.12.2009”), as detailed below:
x failure to recognize net losses as a result of the 6.8 million fair value change (compared with 64.2 million net
capital gains on 31 December 2008). The resulting positive P&L impact would be 57.4 million;
x recognition of income components represented by an additional interest income of 6.4 million as a result of the
adoption of the amortized cost for reclassified assets (compared with 1.3 million on 31 December 2008). The
amortized cost for the year, recognized in the 2009 P&L, was 5.2 million.
In the absence of the reclassification, the 2009 P&L result would have been 52.2 million higher than the posted bottom line
(corresponding to the difference between column “Income components in the absence of transfer” and column “Income
components reported for the year”).
UCITS units
For these securities, income components of -1.8 million reported for the year were the result of the combined effect of the
recognition of impairment losses of 2 million charged to income and the positive fair value change of 0.2 million
recognized through a specific equity reserve.
This impact would have taken place also in the absence of the transfer, the only difference being that in the latter case the
positive fair value change would have been recognized through profit or loss instead of equity.
A.3.1.2 Reclassified financial assets: impact on comprehensive income before reclassification
Under IFRS 7, in the year of the reclassification it is required to disclose the effects on comprehensive income before
reclassification.
In particular, for UCITS units reclassified in 2009, losses through profit and loss before the reclassification date totaled 1.7
million, as shown in the following table:
220
Type of
financial
instrument
UCITS units
Old portfolio
New portfolio
Gains/losses through
profit and loss
(before tax)
Gains/losses through
shareholders’ equity
(before tax)
31/12/2009 31/12/2008 31/12/2009 31/12/2008
(item 20)
Financial assets available for
sale (item 40)
Total
(2)
(1,745)
-
-
(2)
(1,745)
-
-
A.3.1.3 Reclassification of financial assets held for trading
For the reasons underlying the reclassification, please read the previous paragraph A.3.1.1.
Finally, note that at the time when Banco Popolare had carried out the reclassification, IABS had expressly considered the
deterioration of the world’s financial markets that had occurred during the third quarter as a possible example of rare
circumstances, as stated in their news release of 13 October 2008.
A.3.1.4 Effective interest rate and cash flows expected from reclassified activities
Debt securities
On 31 December 2009, the effective interest rate of reclassified debt securities, weighted according to the debt securities
outstanding, amounted to 2.46%. The estimated value of foreseeable principal-related cash flows totaled 515.7 million; the
difference with respect to the book value net of accruals, amounting to 19.5, shall be recognized in interest margin, as a
result of the amortized cost, in addition to the interest-related cash flows under the contracts. In particular, for the two
Lehman Brothers securities, with a reported nominal value of 35 million, the estimated recovery is 30% of the total
exposure, while for the other securities we expect to recover the entire nominal value.
Interest margin recognized in financial year 2009 totaled 17.4 million euro, of which 5.2 million of additional interest
income deriving from the adoption of the amortized cost.
A.3.2 Fair value hierarchy
A.3.2.1 Accounting portfolios: breakdown by fair value levels
The growing complexity of financial instruments and the recent financial market turbulences called for the need to provide a
complete and transparent disclosure on how fair value is measured, both qualitatively and quantitatively.
This need underlies the amendments to IFRS 7 “Improving Disclosure about Financial Instrument”, approved by IASB on 5
March 2009 and adopted with EC Reg. n. 1165 of 27 November 2009.
Shown below is the disclosure required by IFRS 7 for portfolios of financial assets and liabilities measured at fair value based
on the three-level hierarchy illustrated in paragraph “Fair value measurement of financial instruments” in Section “A.2 –
Main account items”. To provide this disclosure we complied with the guidelines set out in the “Regulation on criteria and
market parameters to account for financial instruments”, approved by the Group in 2009, to define the methodological
approach and the operational model used to valuate financial instruments measured at fair value.
(thousands of euro)
Financial assets/liabilities measured at fair
value
1. Financial assets held for trading
Financial assets designated at fair value
2.
through profit and loss
3. Financial assets available for sale
4. Hedging derivatives
Total
1. Financial liabilities held for trading
Financial liabilities designated at fair value
2.
through profit and loss
3. Hedging derivatives
Total
31/12/2009
Level 1
Level 2
7,410,298
4,429,888
166,791
3,001
1,029,118
8,606,207
245,146
31/12/2008 (*)
Level 3
Level 1
Level 2
Level 3
90,463
5,411,911
4,573,178
48,279
13,734
245,356
10,885
55,134
509,874
130,758
5,073,521
3,629,306
517,474
621,671
4,197
645,006
6,302,273
496,675
375,835
92,881
5,052,779
2,869,003
604,313
707,726
9,140
13,728,051
13,035,686
-
86,244
17,439,657
-
13,973,197
168,456
16,833,448
4,197
582,919
49,985
20,358,645
9,140
(*) for comparative data as at 31 December 2008, level 1 corresponds for almost all financial instruments to what indicated as “quoted” in the tables showing
the breakdown of financial assets and liabilities published in the prior year’s consolidated financial statements; similarly, the sum of securities in level 2
and level 3 generally correspond to what indicated as “unquoted”. The differences are due to some instruments listed on markets that are generally
considered active, where however there was the need to measure their fair value again as the prices expressed by said markets were not representative. As
to Financial assets designated at fair value through profit and loss, hedge funds classified as “unquoted” in the financial statements have been classified in
level 1 with respect to the fair value hierarchy due to their periodic measurement of the fund NAV and their characteristic liquidability.
221
Financial assets
Financial instruments measured based on prices derived from active markets (Level 1) or on parameters observable on the
market (Level 2) account for 95.7% of total Financial assets designated at fair value through profit and loss.
Instruments significantly measured based on non observable parameters (Level 3) are but a minor portion (4.3%) and are
represented by 83.2% by financial assets available for sale, mostly all minority Investments in associates and companies
subject to joint control measured on the basis of internal models (income, equity or mixed models) and private equity funds.
The remaining positions regard a limited number of illiquid securities or securities with complex structures, mainly issued by
Italian banks, where fair value was mainly derived from information provided by external contributors, based on nonpublicly available sources; the latter fair values have been prudentially classified in level 3.
Financial assets consist of 3,476 million worth of derivative instruments held for trading and hedging; they are mostly Over the
Counter contracts (OTC) measured with models that make a significant use of parameters observable on the market or drawn
from independent sources (Level 2).
On 31 December 2009 the breakdown of the financial assets portfolio based on the three-level fair value hierarchy is
basically in line with the prior year.
Financial liabilities
Financial liabilities held for trading are mainly represented by derivative instruments, whose fair value was measured
making a significant use of observable market parameters (Level 2). Positions included in level 3 refer to a limited number of
contracts relating to options sold in connection to capital guaranteed managed assets.
Financial liabilities designated at fair value through profit and loss are represented by bonds issued hedged with derivatives,
for which the fair value option was exercised. On 31 December 2008, for most bonds the fair value was measured using
observable market parameters (Level 2), including one’s own creditworthiness, as illustrated in the above “Section A.2 –
Main account items”. On 31 December 2009 bonds were basically equally distributed between level 1 and level 2; the
change with respect to the prior year is due to the fact that as from 31 March 2009 the pricing method to price issues sold to
retail customers was changed, using quotations derived from the organized trading system relating to Group securities,
considered to be an active market. For further details on changes to the method used to measure financial liabilities under
the fair value option, please see sub-section 5 – Other aspects of Section “A.1 – In General”.
Except for what illustrated for bonds under the fair value option, in 2009 no additional material transfers were carried out
between Level 1 and Level 2.
A.3.2.2 Annual changes in Financial assets designated at fair value through profit and loss (level 3)
FINANCIAL ASSETS
(thousands of euro)
1. Opening balance
2. Increases
2.1 Purchases
of which: business combinations
2.2 Profits recognized through:
2.2.1 Profit and loss
of which: gains
2.2.2 Equity
2.3 Reclassifications from other levels
2.4 Other incremental changes
3. Decreases
3.1 Sales
3.2 Redemptions
3.3 Losses recognized through:
of which: losses
3.3.2 Equity
3.5 Other decremental changes
4. Closing balance
held for trading
designated at fair
value
48,279
62,915
44,438
1,121
1,121
1,102
55,134
7,182
1,501
5,367
5,367
4,333
15,416
1,940
(20,731)
(17,202)
(990)
(1,017)
(1,017)
(815)
314
(48,582)
(42,089)
(6,075)
(6,075)
(3,288)
(1,522)
90,463
(418)
13,734
Available for sale
604,313
77,512
34,839
92
8,374
3,029
5,345
175
34,124
(164,351)
(88,408)
(3,264)
(70,290)
(25,886)
(13,779)
(44,404)
(2,389)
517,474
hedging
-
“Other incremental changes” of financial assets available for sale mainly refer to UCITS units that have been reclassified in
2009 from the held-for-trading asset portfolio, and equity instruments received as a result of loan restructuring agreements.
222
A.3.2.3 Annual changes in Financial liabilities designated at fair value through profit and loss (level 3)
FINANCIAL LIABILITIES
(thousands of euro)
1. Opening balance
2. Increases
2.1 Issues
2.2 Losses recognized through:
of which: losses
2.2.2 Equity
2.4 Other incremental changes
3. Decreases
3.1 Redemptions
3.2 Repurchases
3.3 Profits recognized through:
of which: gains
3.3.2 Equity
3.5 Other decremental changes
4. Closing balance
held for trading
designated at fair
value
hedging
9,140
804
804
-
-
(5,747)
(5,747)
(5,747)
-
-
4,197
-
-
A.3.3 Disclosure on so called “day one profit/loss”
Pursuant to IFRS 7 paragraph 28, the Group financial instruments included options sold in connection with capital
guaranteed managed assets, whose fair value measured upon initial recognition (transaction price) and the amount
calculated at that same date using the so called “Day 1 Profit” measurement method differ. In view of the type of products,
the fact that input parameters are not observable and no reference prices exist for similar products on an active market, the
difference was distributed pro-rata temporis, as described in “Section A – Accounting policies” in the paragraph “Dividends
and revenue recognition”. The amount recognized through profit or loss in “Net trading income or loss” on 31 December
2009 was a profit of 5.7 million; the residual difference still to be recognized totals 4.2 million.
223
SECTION B – INFORMATION ON THE
CONSOLIDATED BALANCE SHEET
Similarly to the financial statements, the following tables of the Explanatory notes show the data for the period under
examination and the corresponding comparative data restated in compliance with the changes provided by the update of
Circular n. 262/2005 (Bank Financial Statements). The Attachments include a reconciliation table between the financial
statements published in the 2008 annual report and the one restated in this annual report.
ASSETS
Sub-section 1 – Cash and cash equivalents – Item 10
1.1 Cash and cash equivalents: breakdown
(thousands of euro)
31/12/2009
31/12/2008
565,170
15,628
580,798
680,710
29,294
710,004
a) Cash
b) Demand deposits with Central Banks
Total
Sub-section 2 - Financial assets held for trading
2.1 Financial assets held for trading: breakdown by instrument
(thousands of euro)
A
B
Cash assets
1. Debt securities
1.1. Structured securities
1.2. Other debt securities
2. Equity securities
3. UCITS units
4. Loans
4.1. Repurchase agreements
4.2. Other
Total A
Derivatives
1. Financial derivatives
1.1 Trading
1.2 Under fair value option
1.3 Other
2. Credit derivatives
2.1 Trading
2.2 Under fair value option
2.3 Other
Total B
Total (A+B)
31/12/2009
L1
L2
31/12/2008
L3
L1
L2
L3
6,103,948
16
6,103,932
395,897
827,742
7,327,587
1,157,745
1
1,157,744
7,841
1,165,586
88,400
88,400
40
2,023
90,463
4,445,137
17
4,445,120
299,660
456,868
5,201,665
1,711,571
4
1,711,567
1,711,571
44,887
3
44,884
256
3,136
48,279
82,711
82,686
25
82,711
7,410,298
3,262,794
3,107,563
67,856
87,375
1,508
716
792
3,264,302
4,429,888
90,463
210,246
210,246
210,246
5,411,911
2,827,619
2,672,401
145,913
9,305
33,988
33,988
2,861,607
4,573,178
48,279
On 31 December 2009, financial assets held for trading amounted to 11,930.6 million, up by 18.9% from 10,033.4 million
on 31 December 2008.
On 31 December 2009, cash assets added up to a 8,583.6 million (+ 23.3% compared to 31 December 2008), of which
71.9% were represented by debt securities, mostly issued by governments (with Italian treasuries having the lion’s share)
and financial and banking issuers. The equity component is marginal, in line with the portfolio’s overall low risk profile.
The portfolio does not include investments with a high financial complexity, in line with the portfolio profile that privileges
highly liquid securities and eligible for refinancing with the ECB.
Derivatives under fair value option are represented by derivatives that are operationally linked to issues of bonds where the
Group made use of the fair value option, in compliance with IAS 39, paragraph 9. For “level 3” financial assets, please refer
to Section A.3 of Section A – Accounting policies of these Explanatory Notes.
224
The table below shows the breakdown of UCITS units.
(thousands of euro)
a)
b)
c)
d)
e)
f)
g)
Equity Funds
Balanced Funds
Fixed Income Funds
Liquidity Funds
Flexible Funds
Hedge Funds
Real Estate Funds
Total
Total
31/12/2009
Total
31/12/2008
30,951
5,657
97,253
419,611
171,875
112,225
34
837,606
28,402
3,012
74,131
144,599
182,678
27,155
27
460,004
31/12/2009
31/12/2008
7,350,093
4,699,427
34,912
1,968,515
647,239
395,937
41,386
354,551
36,420
47,380
270,750
1
837,606
8,583,636
6,201,595
4,158,509
34,485
1,537,086
471,515
299,916
45,649
254,267
33,495
50,428
170,343
1
460,004
6,961,515
2,578,639
1,950,599
768,374
3,347,013
11,930,649
1,121,254
3,071,853
10,033,368
2.2 Financial assets held for trading: breakdown by debtor/issuer
(thousands of euro)
A
B
CASH ASSETS
1. Debt securities
a) Governments and Central banks
b) Other public entities
c) Banks
d) Other issuers
2. Equity securities
a) Banks
b) Other issuers:
- insurance companies
- financial companies
- non-financial companies
- other
3. UCITS units
4. Loans
a) Governments and Central banks
c) Banks
d) Other counterparties
Total A
DERIVATIVES
a) Banks
- fair value
b) Customers
- fair value
Total B
Total (A+B)
225
2.3 – Cash financial assets held for trading: annual changes
(thousands of euro)
A. Opening balance
B. Increases
1. Purchases
of which: for business combinations
2. Positive fair value changes
3. Other changes
C. Decreases
1. Sales
2. Redemptions
3. Negative fair value changes
4. Transfers to other portfolios
5. Other changes
D. Closing balance
Debt securities
Equity
securities
UCITS units
Loans
Total
6,201,595
60,346,350
60,035,393
103,622
207,335
(59,197,852)
(57,150,065)
(1,922,039)
(16,038)
(109,710)
7,350,093
299,916
27,354,062
26,730,788
23,848
599,426
(27,258,041)
(26,572,591)
(72)
(20,376)
(665,002)
395,937
460,004
779,821
569,954
23,436
186,431
(402,219)
(392,142)
(990)
(210)
(8,630)
(247)
837,606
-
6,961,515
88,480,233
87,336,135
150,906
993,192
(86,858,112)
(84,114,798)
(1,923,101)
(36,624)
(8,630)
(774,959)
8,583,636
Sub-section 3 - Financial assets designated at fair value through profit and loss – Item 30
3.1 Financial assets designated at fair value through profit and loss: breakdown by instrument
(thousands of euro)
1
2
3
4
Debt securities
1.1 Structured securities
1.2 Other debt securities
Equity securities
UCITS units
Loans
4.1 Structured
4.2 Other
Total
Cost
31/12/2009
L1
121
166,670
166,791
243,640
L2
31/12/2008
L3
4
4
2,997
3,001
3,342
9,810
9,810
3,924
13,734
12,696
L1
L2
3
245,353
245,356
349,212
7,369
7,369
3,202
314
10,885
27,264
L3
42,833
42,833
2,870
9,431
55,134
71,831
Financial assets designated at fair value through profit and loss are mainly represented by investments in Hedge Funds: the
designation at fair value lies on the need to manage and represent a portfolio of financial instruments in consistency with a
given investment strategy and based upon a performance target.
Insurance contracts recognized under “equity securities”, as they are correlated to the performance of equity securities, are
designed to build up the provision required to pay out supplementary pension benefits to some managers upon their
retirement. The fair value designation of this investments is linked to the cost of employee benefits, that is recognized under
retirement provisions in compliance with IAS 19. The table below shows the breakdown of UCITS units.
(thousands of euro)
a)
b)
c)
d)
e)
f)
g)
226
Equity Funds
Balanced Funds
Fixed Income Funds
Liquidity Funds
Flexible Funds
Hedge Funds
Real Estate Funds
Total
31/12/2009
31/12/2008
170,113
481
170,594
254,596
502
255,098
3.2 Financial assets designated at fair value through profit and loss: breakdown by debtor/issuer
(thousands of euro)
1
2
3
4
31/12/2009
31/12/2008
9,814
4
9,810
3,118
29
3,089
2,986
103
170,594
183,526
50,202
32,051
18,151
6,075
39
6,036
904
5,132
255,098
311,375
Debt securities
a) Governments and Central Banks
c) Banks
d) Other issuers
Equity securities
a) Banks
b) Other issuers:
- other
UCITS units
Loans
c) Banks
Total
3.3 Financial assets designated at fair value through profit and loss: annual changes
(thousands of euro)
A
B
C
D
Opening balance
Increases
1. Purchases
(of which for business combinations)
3. Other changes
Decreases
1. Sales
2. Redemptions
4. Other changes
Closing balance
Debt
securities
Equity
securities
UCITS
units
Loans
Total
50,202
5,971
3,492
2,479
-46,359
-7,537
-32,917
-5,905
9,814
6,075
576
353
219
4
-3,533
-185
-3,348
3,118
255,098
91,564
78,286
13,251
27
-176,068
-97,044
-3,684
-75,340
170,594
-
311,375
98,111
78,639
0
16,962
2,510
-225,960
-104,766
0
-32,917
-3,684
-84,593
183,526
Sub-section 4 - Financial assets available for sale – Item 40
4.1 Financial assets available for sale: breakdown by instrument
(thousands of euro)
1
2
3
4
Debt securities
Equity securities
2.1 Measured at fair value
2.2 Measured at cost
UCITS units
Loans
Total
31/12/2009
L1
815,635
815,635
133,303
133,262
41
80,180
1,029,118
31/12/2008
L2
L3
L1
L2
L3
399,727
399,727
110,147
107,045
3,102
509,874
7,430
7,430
397,240
349,763
47,477
112,804
517,474
447,911
447,911
140,739
140,737
2
56,356
645,006
274,123
274,123
101,712
98,684
3,028
375,835
39,219
39,219
461,119
414,707
46,412
103,975
604,313
Financial assets available for sale on 31 December 2009 amounted to 2,056.5 million, up by 26.5% from 1,625.2 million
the previous year.
227
About 31% of portfolios available for sale are made up of shareholdings that do not qualify as controlling interest, jointly
controlled or associate interest, and of bonds of high creditworthy issuers, with complex pay-offs and medium to long term
maturities.
Most bonds have been hedged with derivatives, as shown in the following table “4.3 Financial assets available for sale
under specific hedging”, to obtain absolute returns on short term interest rates.
The table below shows the breakdown of UCITS units.
(thousands of euro)
a)
b)
c)
d)
e)
f)
g)
Equity Funds
Balanced Funds
Fixed Income Funds
Liquidity Funds
Flexible Funds
Hedge Funds
Real Estate Funds
Total
31/12/2009
31/12/2008
135,549
5,824
23,020
28,591
192,984
104,595
20,876
26,061
8,799
160,331
31/12/2009
31/12/2008
1,222,792
793,780
6,167
208,476
214,369
640,690
159,221
481,469
18,727
115,169
336,247
11,326
192,984
2,056,466
761,253
344,336
189,558
227,359
703,570
243,233
460,337
21,261
186,390
240,669
12,017
160,331
1,625,154
31/12/2009
31/12/2008
889,234
843,469
45,765
889,234
447,077
402,247
44,830
98
98
447,175
4.2 Financial assets available for sale: breakdown by debtor/issuer
(thousands of euro)
1
2
3
4
Debt securities
c) Banks
d) Other issuers
Equity securities
a) Banks
b) Other issuers:
- other
UCITS units
Loans
c) Banks
Total
4.3 Financial assets available for sale under specific hedging
(thousands of euro)
1
2
228
Financial assets under specific fair value hedging
a) interest rate risk
b) price risk
c) exchange rate risk
d) credit risk
e) multiple risks
Financial assets under specific cash flow hedging
b) exchange rate risk
c) other
Total
4.4 Financial assets available for sale: annual changes
(thousands of euro)
A
B
C
D
Opening balance
Increases
1. Purchases
3. Write-backs
- through profit and loss
- carried at equity
4. Transfers from other portfolios
- Financial assets held for trading
- Investments held to maturity
5. Other changes
Decreases
1. Sales
2. Redemptions
4. Impairments
- through profit and loss
- carried at equity
6. Other changes
Closing balance
Debt
securities
Equity
securities
UCITS
units
Loans
Total
761,253
609,986
487,317
57,514
67,547
55,122
(148,447)
(57,633)
(33,806)
(4,856)
(12,902)
(12,902)
(39,250)
1,222,792
703,570
129,908
46,094
877
62,449
21,365
(192,788)
(132,885)
(45,394)
(12,085)
(12,085)
(1,857)
(567)
640,690
160,331
67,286
46,858
9,460
1,764
1,764
8,630
8,630
574
(34,633)
(24,056)
(3,049)
(4,264)
(4,264)
(3,264)
192,984
-
1,625,154
807,180
580,269
58,391
139,456
1,764
1,764
8,630
8,630
77,061
(375,868)
(214,574)
(33,806)
(53,299)
(29,251)
(29,251)
(1,857)
(43,081)
2,056,466
Outcome of the impairment tests on financial assets available for sale
On 31 December 2009, an impairment test was carried out to verify the objective existence of impairment losses and the
consequent recognition of write-downs to be charged to income. As described in “Section A – accounting policies”, the
impairment test is triggered by a negative fair value change greater than 20% of the historic cost, and for equity securities
alone with a negative change in fair value lasting more than twelve months. The qualifying securities underwent a
qualitative analysis based on income projections and the development outlook of the issuing company, considering all the
information available on the market.
Sub-section 5 - Investments held to maturity – Item 50
5.1 Investments held to maturity: breakdown by instrument
31/12/2009
(thousands of euro)
1
2
Debt securities
1.1 Structured
1.2 Other
Loans
Total
Book value
306,240
306,240
306,240
31/12/2008
Fair value
Level 1
301,582
14,639
286,943
301,582
Level 2
Level 3
-
10,500
10,500
10,500
Book value
530,296
530,296
530,296
Fair value
Level 1
514,991
514,991
514,991
Level 2
Level 3
-
10,500
10,500
10,500
On 31 December 2009, Investments held to maturity amounted to 306.2 million, down by 42.3% from 530.3 million at the
end of 2008.
At the end of 2009, this portfolio, that had been set up to obtain a stable capital remuneration, was largely made up of fixed
income securities, with maturities ranging from one to three years, issued by governments and to a smaller extent by
financial institutions with a high credit standing.
Securities held in the portfolio have a high liquidability, as they are almost exclusively represented by securities eligible for
refinancing with the European Central Bank and therefore are readily available to address possible liquidity crises without
having to sell securities held in portfolio.
Impaired assets, totaling 10.5 million, are senior notes issued by Lehman Brothers Holding, with a fixed 4% rate expiring in
2011, with a nominal value of 35 million.
229
The criteria followed to measure the fair value are illustrated in Section A of these Explanatory Notes.
5.2 Investments held to maturity: breakdown by debtor/issuer
31/12/2009
31/12/2008
306,240
255,129
36,323
14,788
306,240
312,082
530,296
425,877
40,611
63,808
530,296
525,491
31/12/2009
31/12/2008
4,287
4,287
4,287
-
Debt
securities
Loans
Total
530,296
14,981
685
14,296
-239,037
-22,705
-202,528
-13,804
306,240
-
530,296
14,981
685
14,296
-239,037
-22,705
-202,528
-13,804
306,240
(thousands of euro)
1
2
Debt securities
c) Banks
d) Other issuers
Loans
c) Banks
Total
Total Fair Value
5.3 Investments held to maturity under specific hedging
(thousands of euro)
1
2
Financial assets under specific fair value hedging
b) price risk
c) exchange rate risk
d) credit risk
e) multiple risks
Financial assets under specific cash flow hedging
c) other
Total
5.4 Investments held to maturity: annual changes
(thousands of euro)
A
B
Opening balance
Increases
1. Purchases
2. Write-backs
3. Transfers from other portfolios
4. Other changes
C Decreases
1. Sales
2. Redemptions
3. Write-downs
5. Other changes
D Closing balance
Sales refer to Bipielle Bank (Suisse) S.A. in liquidation.
230
Sub-section 6 – Due from banks – Item 60
6.1 Due from banks: breakdown by instrument
(thousands of euro)
A
B
Due from Central Banks
1. Time deposits
2. Compulsory reserve
3. Reverse repurchase agreements
4. Other
Due from banks
1. Checking accounts and demand deposits
2. Time deposits
3. Other loans:
3.1 Reverse repurchase agreements
3.2 Finance lease
3.3 Other
4. Debt securities
Total (book value)
Total (fair value)
31/12/2009
31/12/2008
1,454,941
80,085
1,359,679
15,177
8,111,407
1,967,770
4,112,244
1,856,236
1,003,596
17,136
835,504
175,157
175,157
9,566,348
9,566,348
1,471,488
16,150
1,427,955
27,383
11,010,560
1,875,531
2,208,511
6,625,183
4,205,522
2,419,661
301,335
301,335
12,482,048
12,482,048
On 31 December 2009, due from banks totaled 9,566.3 million, down by 23.4% from 12,482 million the prior year.
“Due from Central banks” include 1,282.8 million referring to the compulsory reserve that the Parent company lends out to
the Bank of Italy on behalf of the Group banks to guarantee its exposure to other Lending institutions and time deposits
associated with trades on the Securitized Interbank Market (MIC – mercato interbancario collateralizzato).
6.2 Due from banks under specific hedging
No loans to banks are under specific hedging.
6.3 Finance lease
31/12/2009
Minimum Payments
Impaired
exposures
- On demand
- Up to 3 months
- Between 3 months
and 1year
- Between 1 and 5
years
- Over 5 years
- Undefined term
Net total
of which residual
guaranteed value
Principal
Gross investment
of which residual
non-guaranteed
value
Interest
-
255
546
-
20
55
275
601
1
-
2,339
-
200
2,539
1
-
11,831
-
625
12,456
3,310
-
1,307
858
17,136
-
195
1,095
1,502
861
18,234
166
3,478
The finance leases shown in the table above refer to Banca Italease and its subsidiaries, which joined Gruppo Banco
Popolare as from the second half of the year.
231
Sub-section 7 - Loans to customers – Item 70
7.1 Loans to customers: breakdown by instrument
(thousands of euro)
1
2
3
4
5
6
7
8
Checking accounts
Reverse repurchase agreements
Mortgages
Credit cards, personal loans and payroll secured loans
Finance lease
Factoring
Other transactions
Debt securities
Total (book value)
Total (fair value)
31/12/2009
Performing
31/12/2008
Impaired
15,455,583
2,016,603
39,165,647
374,033
5,476,141
27,104
21,356,382
1,727,352
1,727,352
85,598,845
87,906,467
1,569,257
3,778,178
21,068
3,347,823
90
1,024,441
10,523
10,523
9,751,380
9,821,771
Performing
Impaired
15,871,875
1,250,578
38,074,902
492,232
41,899
46,392
21,329,521
434,480
434,480
77,541,879
80,568,968
1,160,585
1,742,630
20,127
276
620,519
10,677
10,677
3,554,814
3,519,976
On 31 December 2009 gross loans totaled 99,485.7 million. Net of total write-downs of 4,135.5 million, net loans came in
at 95,350.3 million.
On 31 December 2008, “impaired assets” and “assets sold and not derecognized” totaled 3,483.9 million and 5,759.2
million, respectively. Both categories have been reclassified to their original deal type of belonging.
Worth mentioning in this aggregate is the increase in mortgages, that went from 39,817.5 million to 42,943.8 million, and
of repurchase agreements which on 31 December 2009 amounted to 2,016.6 million against 1,250.6 at the end of 2008.
The increase in finance leases is almost totally attributable to Banca Italease and its subsidiaries.
7.2 Loans to customers: breakdown by debtor/issuer
(thousands of euro)
1
2
232
Debt securities
a) Governments
c) Other issuers
- other
Loans to:
a) Governments
c) Other counterparties
- other
Total
31/12/2009
Performing
1,727,352
1,727,352
27,514
1,624,959
74,879
83,871,492
68,269
515,254
83,287,969
59,348,575
6,390,635
599,071
16,949,688
85,598,844
31/12/2008
Impaired
10,523
10,523
10,523
9,740,858
2
4,209
9,736,647
8,137,973
273,704
11,243
1,313,727
9,751,381
Performing
434,480
434,480
34,732
375,990
23,758
77,107,399
77,340
445,236
76,584,823
52,248,235
8,307,666
103,396
15,925,526
77,541,879
Impaired
10,677
10,677
10,677
3,544,137
8,758
3,535,379
2,656,495
159,621
43
719,220
3,554,814
7.3 Loans to customers under specific hedging
(thousands of euro)
31/12/2009
31/12/2008
1
8,429,682
8,429,682
1,976,889
1,976,889
10,406,571
202,150
202,150
127,805
80,285
45,866
1,654
329,955
2
Loans under specific fair value hedging:
c) credit risk
d) multiple risks
Loans under specific cash flow hedging:
c) other
Total (book value)
7.4 Finance lease
31/12/2009
Minimum payments
Impaired
exposures
- On demand
- Up to 3 months
- Between 3 months and
1year
- Between 1 and 5 years
- Over 5 years
- Undefined term
Net total
Principal
-
of which residual
guaranteed value
Gross investment
of which residual
non-guaranteed
value
Interest
45,641
200,997
-
8,281
42,838
53,920
243,835
759
4,940
-
681,797
-
167,366
849,164
30,762
3,347,823
3,347,823
2,139,316
2,229,451
179,234
5,476,436
-
520,023
412,421
1,150,929
2,652,208
2,661,956
179,234
6,640,317
170,100
897,863
1,104,424
The above finance lease refer to Banca Italease and its subsidiaries, which joined Gruppo Banco Popolare as from the
second half of the year.
On 31 December 2008 the Group had customer finance lease receivables totaling 42 million, almost exclusively referring to
the Romanian subsidiary Auto Trading Leasing IFN S.A.
Sub-section 8 - Hedging derivatives – Item 80
8.1 Hedging derivatives: breakdown by type of hedging and level
31/12/2009
Fair value
(thousands of euro)
L1
A) Financial derivatives
1. Fair value
2. Cash flows
3. Foreign investments
B) Credit derivatives
1. Fair value
2. Cash flows
Total
31/12/2008
L2
-
130,758
130,623
135
130,758
NV
L3
-
1,074,451
1,049,898
24,553
1,074,451
Fair value
L1
L2
-
92,881
92,881
92,881
NV
L3
-
22,524
22,524
22,524
233
8.2 Hedging derivatives: breakdown by hedged portfolio and by type of hedge (book value)
Fair Value
Specific
(thousands of euro)
Interest Exchange
rate risk rate risk
1
2
3
4
5
1
2
1
2
Financial assets available
for sale
Loans and receivables
Financial assets held
to maturity
Portfolio
Other transactions
Total assets
Portfolio
Total liabilities
Expected transactions
Financial assets and liabilities
portfolio
Cash flows
Credit
risk
Macro
Multiple
Price risk
risks
Specific
Foreign
invest.
Macro
-
-
-
X
-
X
X
-
X
X
X
X
X
X
69,032
69,032
X
X
X
X
X
X
X
X
X
X
X
X
X
X
61,591
61,591
X
X
-
X
X
X
X
X
X
135
135
X
X
X
X
X
X
X
-
X
-
-
X
Specific hedges under hedging test are attributable to Banca Italease and refer entirely to the fair value hedging of structured
and non-structured bond issues.
Macro-hedging refers to the positive changes in interest rate derivatives entered to hedge the fair value of a portfolio made
up of customer checking accounts (core deposits). The change in fair value of hedged liabilities is recognized in the balance
sheet liabilities item “70 Fair value change of financial liabilities in hedged portfolios”.
Sub-section 9 – Fair value change of financial assets in hedged portfolios – Item 90
9.1 Fair value change of financial assets in hedged portfolios: breakdown by hedged portfolios
(thousands of euro)
1
2
Positive fair value changes
1.1 in specific portfolios:
a) loans and receivables
1.2 Aggregate
Negative fair value change
2.1 in specific portfolios:
a) loans and receivables
2.2 Aggregate
Total
31/12/2009
31/12/2008
7,267
7,267
7,267
7,267
9,142
9,142
9,142
9,142
The change in fair value of macro-hedged financial assets refers to a portfolio of mortgages included in item “Customer
loans”. The total amount of loans under macro-hedging is shown in the following table 9.2.
The associated hedging derivatives, which on 31 December 2009 posted a negative fair value change, are shown in the
balance sheet liabilities item “60 Hedging derivatives”.
Profit or loss on fair value changes associated with hedging derivatives and the hedged portfolio are recognized in item 90
“Net fair value changes in hedge relationships”.
234
9.2 Interest rate risk macro-hedging
(thousands of euro)
1
2
3
Loans and receivables
Portfolio
Total
31/12/2009
31/12/2008
142,026
142,026
158,920
158,920
Sub-section 10 – Investments in associates and companies subject to joint control – Item 100
10.1 Investments in companies subject to joint control (carried at equity) and in companies subject to a significant influence:
information on equity stakes
Name
Head office
A. Companies carried at equity
A.1 Companies under joint control
Polo Finanziario S.p.A.
Verona
A.2 Companies under significant influence (associates)
AF Mezzanine SGR S.p.A.
Milan
Agos-Ducato S.p.A.
Milan
Alba Leasing S.p.A.
Milan
Type of
relation
(a)
Shareholding
Company
% share
(7)
BPV-SGSP
33.333%
(8)
(8)
(8)
50.000%
39.000%
32.790%
n.s.
35.000%
13.793%
6.897%
10.280%
7.568%
5.310%
5.118%
34.000%
49.999%
22.330%
20.000%
10.000%
7.500%
4.852%
2.500%
0.300%
37.300%
33.330%
45.000%
43.368%
20.795%
0.186%
50.000%
29.346%
33.333%
Alfa Iota 2002 S.r.l.
Aosta Factor S.p.A.
Milan
Aosta
(8)
(8)
Arca SGR S.p.A.
Milan
(8)
Assipromos S.r.l. (in liquidation)
AviPop Assicurazioni S.p.A.
Bertani Holding S.p.A.
Bussentina S.c.a.r.l.
Centrosim S.p.A.
Livorno
Milan
Verona
Rome
Milan
(8)
(8)
(8)
(8)
(8)
Co.Ge.Vi. S.A.
Co.Im.A. S.r.l.
Energreen S.A.
Estates Capital Venture S.A.
Eurocasse SIM S.p.A. (in liquidation)
E - Guadalajara
Acireale (CT)
L - Luxembourg
L - Luxembourg
Milan
Finanziaria ICCRI BBL S.p.A. (in liquidation)
G.I. Holding S.p.A.
GEMA Magazzini Generali BPV-BSGSP S.p.A.
Gruppo Operaz. Underwriting Banche Popolari
S.r.l.
HI-MTF S.p.A.
Immobiliare Centro Milano S.p.A.
Istituto Centrale delle Banche Popolari Italiane
S.p.A.
Milan
Milan
Castelnovo Sotto (RE)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
Efibanca
Banco Popolare
Banca Italease
Mercantile Leasing
Efibanca
Banco Popolare
Banca Italease
Banco Popolare
Banca Pop. di Cremona
Banca Pop. di Crema
Efibanca
Banco Popolare
Banca Pop. di Crema
Banca Pop. di Cremona
Banca Italease
Bormioli Rocco(Spagna)S.A.
Efibanca
Efibanca
Banco Popolare
Banco Popolare
Efibanca
BPV-SGSP
Milan
(8)
Banca Aletti
20.000%
Milan
Milan
(8)
(8)
Banca Aletti
Banca Italease
20.000%
33.333%
Milan
(8)
Banco Popolare
15.313%
(8)
(8)
(8)
(8)
Banca Pop. di Crema
Banca Italease
Efibanca
Efibanca
6.386%
0.921%
0.014%
49.000%
50.000%
40.000%
24.388%
Novara Promuove S.r.l.
Pantex Sud S.r.l.
Phoenix S.p.A.
Popolare Vita S.p.A.
Novara
Pescara
Verona
Verona
Voting right
% (b)
30.412%
235
Name
Portone S.c.a.r.l. (in liquidation)
Renting Italease S.r.l.
Soc. Coop. fra le Banche Pop. "L.Luzzatti" S.c.r.l.
Tre Pi S.p.A. (agreement with creditors)
Triera Power S.p.A.
B. Companies under proportionate consolidation
N/A
Type of
relation
(a)
Head office
Ravenna
Rome
Rome
Rome
Rovigo
(8)
(8)
(8)
(8)
(8)
Shareholding
Company
% share
Banco Popolare
Efibanca
Bio Energy
Voting right
% (b)
30.000%
50.000%
26.693%
20.000%
30.000%
(a) Type of relation:
(7) Joint control
(8) Associate
(b) Effective voting right percentage in General Annual Meeting is indicated only if different from shareholding percentage.
10.2 Investments and companies subject to joint controland companies subject to significant influence:
financial highlights
Total
assets
A. Companies carried at equity
A.1 Companies under joint control
Polo Finanziario S.p.A. (1)
63,056
A.2 Companies under significant influence (associates)
AF Mezzanine SGR S.p.A.
2,177
Agos S.p.A.
20,063,261
Alba Leasing S.p.A.
360,000
Alfa Lota 2002 S.r.l.
205
Aosta Factor S.p.A.
110,813
Arca SGR S.p.A.
163,136
Assipromos S.r.l. (in liquidation)
131
AviPop Assicurazioni S.p.A.
126,654
Bertani Holding S.p.A.
23,877
Bussentina S.c.a.r.l.
445
Centrosim S.p.A.
143,055
Co.Ge.Vi. SA
4,609
Co.Im.A. S.r.l.
79
Energreen S.A.
558,359
Estates Capital Venture S.A.
5,315
Eurocasse SIM S.p.A. (in liquidation)
9,269
Finanziaria ICCRI BBL S.p.A. (in liquidation)
2,880
G.I. Holding S.p.A. (2)
26,680
GEMA Magazzini Generali BPV - BSGSP S.p.A.
5,942
Gruppo Operaz.Underwriting Banche Popolari S.r.l.
104
HI-MTF S.p.A.
4
Immobiliare Centro Milano S.p.A.
120
Istituto Centrale delle Banche Popolari Italiane (2)
7,019,372
Novara Promuove S.r.l.
160
Pantex Sud S.r.l.
11,011
Phoenix S.p.A.
178
Popolare Vita S.p.A.
7,725,102
Portone S.c.a.r.l. (in liquidation)
42
Renting Italease S.r.l.
49,070
Società Coop. fra le Banche Pop. "L. Luzzatti" S.c.r.l.
5,621
Tre Pi S.p.A. (arrangement with creditors)
4,630
Triera Power S.r.l.
489
B. Companies under proportionate consolidation
Notes
* Unquoted company
(1) Shareholders’ equity is net of capital subscribed and not yet paid in
(2) Data refer to the consolidated financial statements
236
Total
revenues
Income
(Loss)
202
-407
59,663
2,277
1,635,872
2
6,445
173,591
4
44,217
11,054
5
37,959
11,978
5
44,423
5
52
118
37,600
1,652
34
2,126
913,023
151
21,966
1
2,265,917
19
21,851
0
129
6
410
197,726
-12
701
10,686
-9
407
405
-4,622
-1
-4,045
-244
-745
-105
-252
-459
7
121
58,147
13
-670
-47
37,865
-593
5,084
-196
2
1,832
1,673,514
360,000
120
27,532
113,125
-29
45,638
11,444
-278
12,964
713
15
80,156
2,248
-16,650
2,494
1,653
4,394
97
3,967
120
544,186
131
2,925
80
324,835
26
4,180
-29
-20,705
34
Book value
14,887
14,887
1,622,334
831
1,079,539
118,044
42
5,696
39,705
9,274
5,211
3,264
266
6
41,838
975
1,247
773
1,306
20
794
40
137,652
64
4,323
128
166,849
8
2,090
1,449
900
Fair value
X
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
10.3 Investments in associates and companies subject to joint control: annual changes
A. Opening balance
2009
2008
1,457,405
870,477
B. Increases
B.1 Purchases
B.2 Write-backs
B.3 Revaluations
B.4 Other changes
341,867
233,762
108,105
1,099,676
1,044,593
55,083
C. Decreases
C.1 Sales
C.2 Write-backs
C.3 Other changes
-162,051
-39,063
-9,132
-113,856
-512,748
-13,909
-345,799
-153,040
1,637,221
1,457,405
-525,340
-516,208
D. Closing balance
E. Total revaluations
F. Total impairments
Purchases made as part of capital strengthening actions refer to the deposit of 56.2 million as capital contribution to the
subsidiary Popolare Vita in January. The deposit was carried out as a result of the restructuring of the index-linked policies
issued by Novara Vita (merged into Popolare Vita) to protect the assets of the customers of Gruppo Banco Popolare.
In January the Group also subscribed the capital increase of the associate Istituto Centrale Banche Popolari Italiane (ICBPI)
for 17.5 million.
In April the Group made a 6 million deposit in the future capital increase account of the associate Avipop Assicurazioni,
following the resolution met by the Special Shareholders’ Meeting of the associate to carry out a capital increase of 22.5
million.
In July, the capital increase of Agos was subscribed for 22.1 million, resolved by the Special Shareholders’ Meeting of the
company on 8 July 2009. In October, having finalized the stock option plan, an additional capital increase of 8.4 million
was performed; the attributable share subscribed by the Group totaled 3.3 million.
Purchases to acquire control over Gruppo Banca Italease include the companies Renting Italaese (2.1 million), Aosta Factor
S.p.A. (1.9 million) and Alba Leasing S.p.A. (118.0 million).
As part of our merchant banking business, purchases include the acquisition of 50% of Pantex Sud S.r.l. for 4.3 million.
Other increases include 93.9 million profit from the valuation under the equity method, and the 3.7 million profit on
disposal of Investments in associates and companies subject to joint control (see sub-section 16 of the Income statement for
further details).
Sales represent the value of disposals executed during the year and refer to part of the share in Istituto Centrale Banche
Popolari Italiane for 36.9 million and the total amount (2.1 million) collected at the end of the liquidation procedure of the
associate Evoluzione 94.
Impairments totaled 9.1 million (see sub-section 16 of the Income statement for further details).
Other decreases include a 12.0 million loss from the valuation under the equity method (see sub-section 16 of the Income
statement for further details).
Finally they include the 77.6 million decrease as a result of the takeover of Banca Italease and its subsidiaries, as a result of
which Banca Italease, as compared with 31 December 2008, is no longer carried at equity.
Criterion used to determine the recoverable amount of Investments in associates and companies subject to joint control for
the preparation of the annual report as at 31 December 2009
In order to quantify impairment losses, the carrying amount and the recoverable amount of Investments in associates and
companies subject to joint control were compared. Based on IAS 36 the recoverable amount is the higher of fair value net of
selling costs and value in use.
Illustrated below are the valuations of the main Investments in associates and companies subject to joint control:
x In the light of the existing stock option plan, to value the equity investment held in Agos Ducato we decided to
use the Dividend Discount Model (“DDM”), based on which the value of a company is a function of its predicted
dividend stream. More precisely, we used the Excess Capital version of the DDM method, which expresses
economic value as the sum of the current value of future cash flows generated in a given projection horizon, that
could be paid out to shareholders while retaining an adequate capitalization level to guarantee the future
expected growth, and the Terminal Value corresponding to the perpetual capitalization of the discounted
dividend in the last year of the Plan, based on a pay-out ratio as a function of a stable profitability. In particular,
the Plan was adjusted assuming a return of the cost of risk, i.e., total allowances to Loan loss provision, on values
consistent with the average in recent years and with Agos’s projections.
237
x to value our equity investment in Istituto Centrale delle Banche Popolari Italiane we referred to the capital
increase subscribed by Iccrea in October 2009.
x to value our equity investment in Arca Sgr we used the same methods applied to measure the fair value of the Sgr
(asset management companies) of Gruppo Banco Popolare described in the sub-section Intangible Assets.
For the valuation of the Investments in associates and companies subject to joint control held in Popolare Vita and in
Avipop Assicurazioni, please refer to the following sub-section 13.
With regard to our equity investment in Alba Leasing, please refer to the description of the restructuring of the former
Gruppo Banca Italease, carried out in the second half of the year under examination, in SECTION G of these explanatory
notes.
10.4 Commitments relating to investments in jointly controlled companies
No commitments relating to investments in jointly controlled companies were reported.
10.5 Commitments relating to investments in associates
The Special Shareholders’ Meeting of Avipop Assicurazioni on 24 April 2009 approved a capital increase of 22.5 million. It
also decided that the above capital increase be immediately subscribed but paid in only in the amount of 12 million. As a
result, Gruppo Banco Popolare, though its subsidiary Holding di Partecipazioni Finanziarie BP, on the same date paid 6
million, and has a commitment outstanding with the company of 5.25 million.
Commitments under the consumer credit agreements with Credit Agricole
Banco Popolare signed a shareholders’ agreement with Sofinco (Gruppo Credit Agricole), which became binding on 22
December 2008. Among other things, the agreement provides that in the event that Banco should own another company
engaging in consumer credit, as part of a business combination plan with other Institutes which own a consumer credit
company or in case it acquires a new entity which has a controlling interest in a consumer credit company, it must offer the
new indirectly acquired consumer credit entity at a market price to Agos. Assuming that Banco does not sell the new entity
to third parties in the mean time and does not renew the commercial agreements signed with Agos on their second
expiration date, Sofinco will be entitled to purchase from Banco, that in turn will be committed to sell, 5% of the share
capital of Agos S.p.A. at its nominal value.
Commitments under bancassurance agreements
Commitments towards Fondiaria SAI
Provisions under the shareholders’ agreements give FonSAI the control over Popolare Vita and the granting of reciprocal
put&call options in case of partnership dissolution. In particular, under the shareholders’ agreement, Fondiaria-Sai can resell
50% plus one share of Popolare Vita’s share capital to Banco Popolare, should the following conditions occur:
x change of control of Banco Popolare;
x breach of the exclusive granted by Banco Popolare under the distribution agreement and/or serious breach of the
latter;
x failure to renew the distribution agreement by Banco Popolare;
x failure to renew the distribution agreement by Popolare Vita as a result of a decision made with the favorable vote
of Fondiaria-SAI;
x Banco Popolare, also through its subsidiary Holding di Partecipazioni Finanziarie BP, is no longer holding an
interest below 50% less one share of the share capital of Popolare Vita.
In case the option is exercised, the value of the transaction would be determined based on current market methods by an
independent expert hired by the parties.
The distribution agreement between Popolare Vita and the distribution networks of Banco Popolare has a ten year term,
renewable for additional 5 year periods.
Commitments towards Aviva Italia Holding
Banco Popolare and Aviva Italia Holding signed a shareholders’ agreement to regulate the business aspects of their
partnership and the corporate governance rules of Avipop Assicurazioni. Among other things, the agreement provides for
put&call options in case of partnership dissolution.
In particular, under the shareholders’ agreement, Aviva Italia Holding can resell its 50% interest (plus one share) Avipop
Assicurazioni’s share capital to Banco Popolare, should the following conditions occur:
x change of control of Banco Popolare;
x breach of the exclusive granted by Banco Popolare under the distribution agreement and/or serious breach of the
latter;
238
x failure to renew the distribution agreement by Banco Popolare;
x failure to renew the distribution agreement by Avipop Assicurazioni as a result of a decision made with the
favorable vote of Aviva Italia Holding;
x the coming into effect of a law and/or issuance of an order abolishing the exclusive bond provided by the
distribution agreement, within the first expiration date of the agreement;
x the issuance of an order obliging Banco Popolare to distribute protection insurance products with entities other
than Avipop Assicurazioni within the first expiration date of the agreement;
x the occurrence of an underperformance event (i.e., in any three-year period as from 1 January 2009, a total
product sales volume – gross of redemptions - 20% below the one set for the same period by the business plan,
in terms of premiums written).
In case the option is exercised, the value of the transaction would be determined based on current market methods by an
independent expert hired by the parties.
The distribution agreement between Avipop Assicurazioni and the distribution networks of Banco Popolare has a ten year
term, renewable for additional 5 year periods
Sub-section 11 - Technical insurance reserves reassured with third parties – Item 110
The Group has no shareholding in insurance companies.
Sub-section 12 - Property and equipment – Item 120
On 31 December 2009, property and equipment amounted to 1,442.4 million, up by 8.5% from 1,329.1 million the year
before.
12.1 Property and equipment: breakdown of assets measured at cost
(thousands of euro)
A) Operating property
1. Owned
a) land
b) buildings
c) furniture
d) electronic systems
e) other
2. Under financial lease
a) land
b) buildings
c) furniture
d) electronic systems
e) other
Total A
B) Investment property
1. Owned
a) land
b) buildings
2. Under financial lease
a) land
b) buildings
Total B
Total (A+B)
31/12/2009
31/12/2008
1,215,725
327,572
615,139
53,433
49,260
170,321
43,295
19,314
23,867
114
1,259,020
1,248,584
331,246
628,312
52,208
52,517
184,301
43,884
10,450
33,408
26
1,292,468
123,427
49,959
73,468
60,015
33,203
26,812
183,442
1,442,462
36,681
10,204
26,477
36,681
1,329,149
Set out below is the estimated useful life of depreciated property and equipment, by class of asset:
land
indefinite
buildings
33 years
investment property
33 years
furniture
7-9 years
equipment
3-7 years
12.2 Property and equipment: breakdown of assets measured at fair value or revalued
The Group has no tangible assets measured at fair value or revalued.
239
12.3 Operating property and equipment: annual changes
(thousands of euro)
A)
B)
C)
D)
E)
Gross opening balance
A.1 Net impairments
A.2 Net opening balance
Increases:
B.1 Purchases
B.2 Capitalized expenditure on improvements
B.3 Write-backs
B.4 Positive fair value changes carried at:
a) equity
b) income
B.3 Write-backs
B.5 Positive exchange differences
B.6 Transfer from investment
property
B.7 Other changes
Decreases
C.1 Sales
C.2 Depreciation
C.3 Impairment losses charged to:
a) equity
b) income
C.4 Negative fair value changes charged to:
a) equity
b) income
C.2 Depreciation
C.3 Impairment losses charged to:
C.5 Negative exchange differences
C.6 Transfer to:
a) investment property, plant
and equipment
b) discontinued operations
C.7 Other changes
Net closing balance
D.1 Net impairments
D.2 Gross closing balance
Measured at cost
Land
Buildings
Furniture
Electronic
systems
Other
Total
344,753
-3,057
341,696
26,188
2,098
2,087
-
942,668
-280,948
661,720
33,894
16,298
8,396
7
-
227,783
-175,575
52,208
13,567
13,289
1,612
-
414,542
-362,025
52,517
24,494
19,047
1,599
-
787,980
-603,653
184,327
42,234
41,464
1,009
-
2,717,726
-1,425,258
1,292,468
140,377
92,196
14,703
7
-
-
-
2
32
-
34
24,090
-20,998
-8,443
-
17,589
-56,608
-13,238
-29,949
276
-12,342
-268
-97
-11,944
5,415
-27,751
-5,238
-22,305
770
-56,126
-1,070
-40,888
48,140
-173,825
-28,257
-97
-105,086
-859
0
-859
-1,793
0
-1,793
-
-
-322
0
-322
-2,974
0
-2,974
-9,371
-7,182
-2
-104
-26
-84
0
-354
-28
-17,095
-9,371
-2,325
346,886
6,075
352,961
-
-3,675
-3,507
-4,446
639,006
311,528
950,534
-
-104
-24
53,433
191,460
244,893
-
-84
-98
49,260
385,705
434,965
-
-354
-13,492
170,435
645,595
816,030
-
-3,675
-13,420
-20,385
1,259,020
1,540,363
2,799,383
-
Impairment losses charged to income and totaling 2.9 million include mainly write-downs carried out by the subsidiary
Bipielle Real Estate to bring the carrying amounts of owned property (land and buildings) in line with the lower values
shown in surveys carried out by independent companies at the balance sheet date.
240
12.4 Investment property and equipment: annual changes
Land
Buildings
Total
10,204
76,443
52,826
52,420
7,680
15,937
-3,485
-112
0
-152
-152
-3,221
83,162
105,266
26,477
83,898
71,842
71,455
3,675
8,381
-10,095
-135
-1,804
-159
-159
-7,997
100,280
145,729
36,681
160,341
124,668
123,875
11,355
24,318
-13,580
-135
-1,804
-112
-311
-311
-11,218
183,442
250,995
(thousands of euro)
A)
B)
C)
D)
E)
Opening balance
Increases
B.1 Purchases
B.2 Capitalized expenditure on improvements
B.3 Positive fair value changes
B.4 Write-backs
B.5 Positive exchange differences
B.6 Transfer from operating property
B.7 Other changes
Decreases
C.1 Sales
C.2 Depreciation
C.3 Negative fair value changes
C.4 Impairment losses
C.6 Transfers to other asset portfolios
a) operating properties
b) non-current assets held for sale
C.7 Other changes
Closing balance
Measurement at fair value
12.5 Commitments to purchase property and equipment
No commitments to purchase property and equipment were reported.
Sub-section 13 – Intangible assets – Item 130
13.1 Intangible assets: breakdown by type of asset
31/12/2009
(thousands of euro)
A.1
A.2
Goodwill
A.1.1 attributable to the Group
A.1.2 attributable to third parties
Other intangible assets
A.2.1 Assets measured at cost:
a) Internally generated intangible assets
b) Other assets
A.2.2 Assets measured at fair value:
a) Internally generated intangible assets
b) Other assets
Total
Definite useful
life
X
X
X
584,512
584,512
584,512
584,512
31/12/2008
Indefinite useful
life
4,474,030
4,474,030
236,400
236,400
236,400
4,710,430
Definite useful
life
X
X
X
626,997
626,997
626,997
626,997
Indefinite useful
life
4,469,851
4,469,851
236,400
236,400
236,400
4,706,251
13.1.1 Intangible assets: impairment test
Allocation of goodwill and of other intangible assets with an indefinite useful life to their cash-generating units
In keeping with paragraph 66 of IAS 36, if there is any indication that an asset may be impaired, the recoverable amount
should be estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset,
an enterprise should determine the recoverable amount of the cash-generating unit to which the asset belongs.
With regard to goodwill, paragraph 80 states that in testing for impairment, goodwill arising on acquisition on the
acquisition date must be allocated to each of the acquirer’s cash generating unit, or group of cash-generating units, that may
benefit from synergies generated by the combination, irrespective of the fact that other assets or liabilities of the acquired
company are allocated to the same unit or group of units. Each unit or group of units to which goodwill is allocated must:
241
(a) represent the minimum level within the enterprise whose goodwill is being monitored for internal auditing;
(b) not be greater than a segment based on the enterprise’s primary or secondary segment format determined in compliance
with IFRS 8 Segment reporting.
In order to identify the cash-generating units to which assets to be submitted to the impairment test are to be allocated, it is
necessary that the potentially identified units generate cash inflows that are largely independent of those from other
potentially identified units.
Consistently with the annual report as at 31 December 2008, the cash-generating units to which goodwill and other
intangible assets with an indefinite useful life (trademarks) must be allocated do not coincide with the single legal entities
making up the economic sectors representing the primary format of segment reporting. The single retail banks (Banche del
Territorio) can no longer be considered cash-generating units largely independent of one another for the following reasons:
x concentration at the Parent company of the treasury management and of the issue of bonds destined to both
institutional and retail customers;
x Banche del Territorio turned into providers of standardized products created in the product factories, including
the joint-ventures in which the Parent company has a shareholding interest;
x strategies as to the kind of products to be distributed by the Banche del Territorio decided at Parent company
level;
x standardization of compensation and incentive policies for the branch network personnel;
x reorganization of the branch network by swapping bank branches between different retail banks to maximize their
global profitability and efficiency through a stronger territorial penetration guaranteed by the presence of a single
brand in the Group’s market territories;
x optimization of the branch network based on a plan approved by the Management Board of the Parent company
in December 2009 and coordinated by the Retail structure;
x strengthening of the Parent company structures to bring about a greater coordination across lending and loan
monitoring policies;
x completion of the Large Corporate project, with the transfer at the Parent company of all the customer relations
belonging to this segment, in addition to centralizing at Banco Popolare the commercial management of
customers having a national scope and no specific local market, and characterized by complex financial
requirements;
x layout of the reporting and internal audit system to guarantee a direct monitoring of the performance of the
Banche del Territorio CGU and thus allow the Parent company a more efficient exercise of its strategic planning
and direction functions.
With regard to the Private & Investment Banking CGU, the latter includes Banca Aletti and the fully owned fiduciary
companies (Aletti Fiduciaria, Nazionale Fiduciaria and Aletti Trust) as their business is ancillary to that of the parent
company.
As a result, the impairment test to prepare the annual report as at 31 December 2008 was conducted by comparing the
carrying amount of the single CGU in the consolidated financial statements with the higher of the of the value in use and the
fair value of the same entities.
The impairment test conducted to prepare the annual report as at 31 December 2008 had evidenced a total impairment of
486 million, which break down as follows:
C.G.U.
(millions of euro)
Banche del Territorio
Banco Popolare eska
Banco Popolare Croatia
Banco Popolare Hungary
AT Leasing
Bipielle Suisse
Private and Investment Banking
Aletti Gestielle
Aletti Gestielle Alternative
Efibanca
Bormioli
BRF Property
Avipop Assicurazioni
Popolare Vita
Other minor
Total
242
Goodwill
Trademarks
Total
Impairment
(FY 2008)
3,338
8
30
22
4
4
896
53
11
246
155
9
77
102
1
4,956
236
236
3,574
8
30
22
4
4
896
53
11
246
155
9
77
102
1
5,192
8
30
22
4
4
41
9
246
122
486
In consistency with the method used in the prior year, when preparing the annual report as at 31 December 2009, the
impairment test on intangible assets with an indefinite useful life was conducted based on:
x a CGU incorporating all retail banks (Banche del Territorio): Banca Popolare di Verona-S.Geminiano e
S.Prospero, Banca Popolare di Novara, Banca Popolare di Lodi, Cassa di Risparmio di Lucca Pisa Livorno, Credito
Bergamasco, Banca Popolare di Crema, Banca Popolare di Cremona and Banca Caripe
x a CGU corresponding to the companies engaging in Private & Investment Banking
x several CGUs corresponding to the single Asset Management Companies - Sgr (Aletti Gestielle, Aletti Gestielle
Alternative)
x several CGUs corresponding to the single companies engaging in Bancassurance (Popolare Vita, Avipop
Assicurazioni)
x other CGUs corresponding to the single companies where intangible assets with an indefinite useful life have
been allocated
Criterion used to measure the recoverable amount of cash-generating units for the preparation of the annual report as at 31
December 2009
Generally, impairment tests represent one of the most complex and critical aspects of business management. The current
environment made things even more complex. In particular, when conducting tests of this kind, the high volatility of
financial markets and the strong uncertainty pervading economic and financial development scenarios significantly increase
the risk of making errors in estimating values.
In the light of the uncertainty shrouding future scenarios, to date Gruppo Banco Popolare does not have an updated
business plan that can be used as a significant base to estimate the value in use of Investments in associates and companies
subject to joint control and of cash-generating units to which intangible assets with indefinite useful life have been
allocated.
Gruppo Banco Popolare therefore decided to use Market Multiples (Stock Multiples and Comparable Transaction multiples)
in general to measure the Fair Value of the Group CGUs (expressing 4,516 million worth of assets with an indefinite life) for
the Impairment Test, with the exception of the recoverable value of bancassurance cash-generating units and of the
investment in Gruppo Bormioli (expressing 212 million worth of goodwill), which instead is based on their values in use.
When conducting the impairment test, we took into due consideration the recommendations contained in the joint letter
issued by the Bank of Italy, Consob and Isvap on 3 March 2010, in particular the existence of an impairment indicator for
Banco Popolare, represented by a market capitalization significantly below its consolidated shareholders’ equity.
These methodologies and implementation procedures have been chosen in order to manage the risks of
over/underestimating the identified value and the risks associated with the current economic and financial environment. By
using Stock multiples, in view of the volatility of financial markets and the conservative prices expressed by the markets
themselves, we may run the risk of identifying conservative values, especially if they were to be applied to income and
financial key figures of the entities under valuation over a purely short term timeframe, strongly influenced by contingent
factors. However, should we rely only on Comparable Transaction multiples, and put Stock Multiples aside, we might miss
important changes in the economic and financial scenario against which the entities under valuation actually operate.
Therefore, in order to limit the above risks, we decided to use the Stock price average calculated over a 6 month horizon to
stabilize quotations, and to apply an adjusted income, namely stripped of non-recurring items and/or contingent on the
current environment. Whenever possible, in addition to Stock Multiples, we also took into consideration Comparable
Transaction Multiples.
In particular, with regard to the Retail Banks CGU, the Goodwill/AuM multiple was adjusted with the multiplier obtained
from peer company transactions. This decision was supported by the availability of a considerable sample of recent
transactions regarding commercial banks, and by the historic analysis conducted on Stock multiples that evidenced that the
current level of this multiple shows a definite misalignment with respect to the past on a long time horizon.
Procedure to measure the fair value of cash-generating units: basic information
With respect to the CGUs under valuation, the analyses was based on 2009 preliminary data, on the 2010 budget and on
the 2010 adjusted budget.
The 2010 adjusted budget takes the 2010 budget as a starting point, and then prudentially assumes constant assets, stripping
out non-recurring or contingent positive and negative components, also in view of the unprecedented economic backdrop;
these adjustment are justified and sustained by specific projections made by the Group or evidence made available by
External Sources (e.g. Prometeia).
For the Retail Banks CGU, the 2010 adjusted budget was calculated taking the 2010 budget as a starting point, and
adjusting it to take the following factors into consideration:
x interest margin has been “adjusted” based on the reference macro-economic scenario, which over the 2010-2012
timeframe projects a 180 bps increase in market rates (1 month Euribor: 93 bps in 2010, 273 bps in 2012);
x the 2010 budget was “adjusted” by applying an average cost of credit of 45 bps, more consistent with a context of
macroeconomic stability, as expected in the reference scenario;
x the 2010 budget of the Banche del Territorio was “adjusted” by derecognizing additional charges generated by
the levy of VAT on intercompany services, as this tax regime is considered transitory;
243
x the 2010 budget of the Banche del Territorio was “adjusted” to take into account the drying up of the income
stream as a result of customers being transferred to the Parent company under the “National Large Corporate”
plan, whereby Large Corporate customers having a national scope will be passed over to the Parent Company;
x the 2010 budget of the Banche del Territorio was “adjusted” to factor in the progressive reduction in the
commission stream due to the change in retrocessions paid by Aletti Gestielle Sgr and correspondingly Aletti
Gestielle Sgr’s budget was “adjusted” by an equal amount;
x the adjustments did not assume increments of the other income components with respect to the 2010 estimate.
The adjusted 2010 budget of the Private & Investment Banking CGU was calculated based on the 2010 budget, adjusted to
take into account the following factors:
x transfer of business activities carried out by the Money Market and Forex offices;
x changes introduced by Isvap to index-linked policies;
x transfer of the management of Banco Popolare’s proprietary portfolio;
x reduction in the estimate of performance fees accrued in 2009, as deemed not entirely duplicable in financial
year 2010;
x the 2009 net income also benefitted from the narrowing of credit spreads as a result of the stabilization of
financial markets after Lehman’s default in September 2008;
The adjusted 2010 budget of the Asset Management CGU was calculated based on the 2010 budget, adjusted to take into
account the following factors:
x decline of rebate rates to captive networks,
x stripping Client Relationship amortization (intangible asset with a definite life) away from costs,
x reduction of costs associated with non-recurring UCITS merger,
x accounting for commission benefits linked to the launch of new products
x stripping Client Relationship amortization (intangible asset with a definite life) away from costs
Procedure to measure the fair value of cash-generating units: adopted valuation methods
With respect to the CGUs of Banche del Territorio, of Private & Investment Banking and of asset management companies,
the valuation was conducted with the Market Multiple method, based on the analysis of peer listed companies or
comparable transactions and by applying the obtained parameters to the values of the enterprise/CGU under valuation.
Multiples represent the ratio between the peer company valuation, expressed by stock prices, or prices paid in M&A
transactions, and the related income and financial key figures.
The Market Multiple method was implemented as follows:
x identification of peer listed companies and of Comparable Transactions (when applied), taking into consideration
various factors such as the industry and country of belonging, the company risk and size, profitability and
capitalization, and for listed companies the share turnover;
x definition of the time horizon for the analysis, based on its goals; in order to make information implied in stock
prices available and to limit/reduce the high volatility effect that is currently affecting stock markets, the time
horizon taken into consideration was 6 months;
x identification of most significant multiples, based on the characteristics of the industry to which the company
under valuation belongs. Generally, both income and capital multiples are used, if they can provide a link
between P&L/balance sheet data and the enterprise value.
Peer listed companies were chosen from among the most similar to the CGU under valuation in terms of core business. To
calculate the multiples of the comparables, companies with an annual volume turnover ratio below 10% (over Share
Capital) were excluded, as they were considered illiquid. The financial data of comparables were derived from the latest
available official documents, while profitability data, in consistency with the data used for the entities under valuation, were
calculated on Adjusted Earnings (Source Bloomberg) according to analyst consensus.
Consistently with the impairment test conducted for the 2008 annual report, the identified multiples were: i) Adjusted
Price/Earnings, calculated as the ratio between the average 6-month market capitalization and the adjusted income ratio,
taken as the average analyst consensus (source Bloomberg); ii) Goodwill/AuM, calculated as the ratio between the
difference between the average 6-month market capitalization and the Tangible Net Equity and total assets. The latter
parameter, drawn from official reports (financial statements of peer companies), is equal to the sum of direct and indirect
customer funds in case of the Retail Banks CGU, or assets under management for the Private & Investment Banking CGU
and the Asset Management Companies. Negative multiples have been excluded from the samples as considered non
significant, while Adjusted Price/Earnings above 20x were prudentially excluded as considered too optimistic.
With regard to the Retail Banks CGU, also following the historic analysis of Stock Multiples, it was decided to take also
Comparable Transactions into consideration for the capital multiple alone. For the Private & Investment CGU and in
particular with regard to Banca Aletti, the value was measured by splitting the Bank’s business into Investment Banking and
Asset Management; the assumed breakdown was based on historic data, and allocated 80% of activities to Investment
244
Banking and the remaining 20% to Asset Management. With regard to the latter component and to Asset management
companies, the equity multiple was not obtained by averaging out comparables, but rather through the regression of
Goodwill/AuM on their Net income/AuM. The use of the average multiple would have given rise to much higher results.
When applying the Adjusted P/E (hereinafter, also Adj P/E), valuations were conducted by considering the capitalization
level of the CGU, so as to adequately reflect any over/under-capitalization of the entity with respect to regulations or with
respect to peer entities (also called “adjustment for Excess/Deficit Capital”).
When applying the Adjusted P/E Multiple, the consideration of the Excess/Deficit Capital implies a correction of the adjusted
2010 budget used in the valuation so as to reflect the impact of the different assumed capital profile on income.
The Fair Value deriving from the income multiple is therefore equal to the sum of the Excess/Deficit Capital and the Adj P/E
multiple applied to the current adjusted income as a result of the Excess/Deficit Capital.
For prudential reasons, the difference between the adjusted 2010 budget and the 2010 budged was deducted from the
outcome of the income multiple.
Shown below are the multiples used:
P/E Adjusted
GW/AuM Total
15,11X
14,39X
15,26X
5.22%
1.36%
n.d.
Asset Management (1)
Investment Banking
(1) for Asset Management the multiple used refers to GW/AuM. The multiples of peer companies (whose average is mentioned above) have been scaled down
depending on their profitability; therefore the multiple applied ends up being different for the various entities under valuation.
With regard to Bancassurance companies, the calculation of the Recoverable amount was based on the Appraisal Value
method (generally used to value Insurance Companies, and in particular for those engaging in Bancassurance), based on the
same valuation elements used when selling the above mentioned stakes. Base on this method, the value of a company is
defined as the sum of i) Adjusted Net Equity (ANE), calculated on the basis of the book value of the shareholders’ equity at
the reference date of the valuation, adjusted to discount balance sheet assets and liabilities to current market values and/or
estimates; ii) In Force Value (VIF, generally estimated only for Life insurance companies), calculated on the basis of
actuarial methodologies as the actual value of net income to be generated by the existing portfolio at the reference date of
the valuation, net of reinsurance, tax, associated operating costs and figurative charges deriving from keeping the
capitalization levels necessary to meet existing supervisory requirements; iii) value referring to future new business
(Goodwill), corresponding to the actual value of net income to be generated by the new subscribed business, calculated on
the basis of actuarial methodologies similar to those used to calculate VIF. These analysis showed that even when using
highly conservative and prudential assumptions, the carrying amounts are well below recoverable amounts.
As to the Investments in associates and companies subject to joint control in Bormioli Rocco e Figlio, since a business plan
is available and considering that it is a manufacturing company, we decided to use the Discounted Cash Flow (“DCF”)
method. Based on this method, the economic value of a company corresponds to the sum of the following components: i)
net operating cash flows that the company can generate within a specific planning period, discounted by a discount rate
corresponding to the Weighted Average Cost of Capital, or WACC; ii) the Terminal Value, expressing the enterprise value
after the given period, calculated as a perpetual income from a cash flow sustainable over the long term; iii) the company’s
net financial position expressed at market values.
The valuation of BRF Property was made by adjusting the statutory Shareholders’ equity posted in the company’s financial
statements as at 31 December 2009 based on the valuation at market values of its main real estate assets.
The table below summarizes the results of the impairment test:
C.G.U.
(millions of euro)
Private and Investment Banking
Aletti Gestielle
Aletti Gestielle Alternative
Avipop Assicurazioni
Popolare Vita
Bormioli
BRF Property
Other minor
Total
Goodwill
Trademarks
Total
Impairment
(FY 2009)
3,342
896
12
2
77
102
33
9
1
4,474
236
236
3,578
896
12
2
77
102
33
9
1
4,710
-
245
As a result of the Impairment Tests conducted in compliance with IAS 36, the carrying amounts of all Group business
activities held, in particular with reference to core and strategic businesses, such as the Banche del Territorio.
In keeping with paragraph 134 of IAS 36, with regard to CGUs that did not report any Impairment losses, shown below are
the multiples that (holding all else constant and according to the adopted methodologies) give a Fair Value equal to the
carrying amount:
x Adj P/E for retail banks (Banche del Territorio): 12.79X if the multiple is applied as a standalone; 6.77X if the
multiple is applied in combination with the GW/AuM multiple;
x GW/Total AuM for Banche del Territorio: 2.35% if the multiple is applied as a standalone; 1.25% if the multiple is
applied in combination with the Adj P/E multiple;
x Adj P/E Private & Investment Banking (for the investment banking arm): 12.78X
This analysis further confirmed the significance of the process and the inputs used to measure the recoverable value of
intangible assets with an indefinite life, as the impairment test of most intangible assets with an indefinite life shown in the
financial statements of Gruppo Banco Popolare (4,474 million out of 4,737 worth of total intangible assets) would have
been passed also by applying much lower multiples than the ones used for the valuation.
Sensitivity analysis
In view of the current volatility of financial markets, it is difficult to identify stock multiples, without running the risk of
over/underestimating the entities under analysis. In order to overcome this difficulty, in addition to using six-month price
averages, historic multiples (stock multiples of Italian commercial banks from 2000 to 2008) were analyzed for the most
significant cases (Banche del Territorio). These analysis evidenced that the Goodwill/Total AuM multiple currently
observable on the market is highly penalized, so much so as to induce us to consider also Comparable Transactions for this
multiple.
Considering the present economic and financial scenario, it is also difficult to identify viable Comparable Transactions.
Appropriate sensitivity analysis were therefore conducted, changing the observation time horizon or the benchmark sample.
All the above sensitivities confirmed values greater than the carrying amount.
In particular, we:
x modified the reference time horizon, using the average market capitalization of peer companies at 3 instead of 6
months;
x worsened the assumptions underlying the adjustment of 2010 budgets, assuming a deteriorating adjusted income;
in particular, the 2010 adjusted budget was reduced by 20% for the Retail Banks CGU and by 10% for the
remaining CGUs;
x changed the comparables sample used for the Retail Banks CGU, both for listed companies (taking a sample
made up of Italian and European banks) and for Comparable Transactions (using only the three worst transactions
and those executed between 2008 and 2009, during the financial crisis);
x changed the capitalization levels when calculating the Excess/Deficit Capital for the Private & Investment Banking
CGU;
x changed the contribution margin to the operating result between Investment Banking and asset management for
the Private & Investment Banking CGU;
x set the entire Terminal Value to zero for the Bancassurance CGU and, with reference to Popolare Vita, we also
carried out an additional stress test simulating the cancellation of all the pension product business.
Exogenous impairment signs
It should be noted, that there is a misalignment between the quotations of Gruppo Banco Popolare expressed by financial
markets and its book values. However, the current quotations appear to be characterized by conservative values and by a
high volatility. In particular, the quotations of primary Italian banks are traded at a discount over the book value of their
shareholders’ equity; also the market capitalization to net equity ratio is below the last ten year average.
This misalignment is essentially a consequence of the recent global financial crisis that was particularly harsh on the
banking industry; we should also recall that before the crisis the valuations expressed by financial markets, unlike today,
were well above net equity and more in line with the historical average.
Market values stem from the valuations of the financial community, and by their own nature they rely on short term
objectives and estimates, and therefore do not fully reflect the medium to long term growth potentials of a company.
Instead, valuations expressed by executives are not characterized by the volatility inherent in stock prices, as they represent
an exercise aiming at extrapolating the economic value of an enterprise based on a normal income generation capability,
which by the way is not even fully acknowledged by financial markets. This valuation covers a longer timeframe than the
one taken into consideration by the financial community and, although it does take the current financial and economic
context into due account, however it is not directly correlated.
The analyses we conducted, in particular the calculation of implied multiples and the sensitivity analysis, confirmed the
validity of the goodwill values that had been recognized in the financial statements for all the Group CGUs, therefore there
was no need to impair intangible assets with an indefinite life.
246
As a further guarantee thereof, an independent expert (KPMG Advisory S.p.A.) issued a fairness opinion on the
appropriateness and correctness of the parameters, valuation methods and sensitivity analysis used in the estimate
procedure.
13.2 Intangible assets: annual changes
Other intangible assets
(thousands of euro)
Internally
generated
Goodwill
DEF
A.
Opening balance
A.1 Net impairments
A.2 Net opening balance
B. Increases:
B.1 Purchases
B.2 Increase in internal intangible assets
B.3 Write-backs
B.4) Positive fair value changes carried at
- equity
- income
B.5) Positive exchange differences
B.6) Other changes
C. Decreases
C.1 Sales
C.2 Impairment losses
- Amortization
- Impairment charged to
+ equity
+ P&L
C.3 Negative fair value changes charged to
- equity
- P&L
C.4 Transfers to non-current assets
held for sale
C.6 Other changes
D. Net closing balance
D.1 Net impairments
E. Gross closing balance
F.
Measured at cost
4,955,627
(485,776)
4,469,851
4,179
4,087
X
X
Other
INDEF
DEF
Total
INDEF
X
X
92
X
X
X
X
-
-
1,190,827
(563,830)
626,997
67,378
67,296
6,516
82
(109,863)
(199)
(109,470)
(109,151)
(319)
(319)
-
236,400
236,400
-
6,382,854
(1,049,606)
5,333,248
71,557
71,383
6,516
82
92
(109,863)
(199)
(109,470)
(109,151)
(319)
(319)
-
4,474,030
(485,776)
4,959,806
-
-
-
(60)
(86)
(48)
584,512
(675,679)
1,260,191
-
236,400
236,400
-
(60)
(86)
(48)
5,294,942
(1,161,455)
6,456,397
-
The other intangible assets with a definite useful life include 498.1 million worth of intangibles recognized upon Purchase
Price Allocation (P.P.A.) regarding the valuation of Client Relationships.
13.3 Other information
On 31 December 2009, no commitments referring to intangible assets were reported.
247
Sub-section 14 - Tax assets and liabilities – Item 140 of assets and Item 80 of liabilities
14.1 Deferred tax assets: breakdown
(thousands of euro)
A) Through Profit and Loss
Goodwill impairment deductible in
coming financial years
Loan impairment deductible in coming financial years
Provisions and impairments deductible in
coming financial years
Fair value measurement of financial assets and liabilities
deductible in coming financial years
Deferred taxes on intercompany capital gains
eliminated upon consolidation
Personnel costs and termination benefit provisions
Impairment of Investments in associates and companies
subject to joint control
Losses from prior financial years
Depreciation of non-operating property
Other
Total A
B) Through Net Equity
Fair value measurement of financial assets
available for sale
Other
Total B
Total (A+B)
IRES
IRAP
Other
31/12/2009
31/12/2008
699,610
793,541
119,267
-
-
818,877
793,541
751,520
496,798
157,235
762
-
157,997
193,980
51,425
7
-
51,432
39,813
25,476
-
-
25,476
25,499
47,225
-
-
47,225
47,565
5,488
10,627
-
-
5,488
10,627
5,488
20,426
1,014
129,527
1,921,168
17,911
137,947
1,794
1,794
1,014
149,232
2,060,909
807
178,256
1,760,152
13,994
26,430
40,424
1,961,592
3,517
3,712
7,229
145,176
115
115
1,909
17,511
30,257
47,768
2,108,677
36,664
52,109
88,773
1,848,925
IRES
IRAP
Other
31/12/2009
31/12/2008
4,714
6
-
4,720
21,557
45,419
4,815
-
50,234
11,971
28,226
1,971
-
30,197
16,766
4,791
24,199
8,257
311
70
-
13,118
24,510
20,781
31,088
381,859
42,543
531,751
65,592
61,061
142,013
4,899
4,969
447,451
108,503
678,733
315,672
220,167
638,002
3,295
3,690
6,985
538,736
3,162
255
3,417
145,430
1,011
1,011
5,980
6,457
4,956
11,413
690,146
6,025
1,488
7,513
645,515
14.2 Deferred tax liabilities: breakdown
(thousands of euro)
A) Through Profit and Loss
Fair value measurement of financial instruments
taxable in coming financial years
Goodwill impairments deducted but not
yet charged to income
Other impairments deducted but not
yet charged to income
Deferred taxes on retained earnings of companies
carried at equity
Capital gains taxable in coming financial years
Impairments taxable in coming financial years
referring to business combinations (PPA)
Other
Total A
B) Through Net Equity
Fair value measurement of financial assets
available for sale
Other
Total B
Total (A+B)
248
14.3 Changes in deferred tax assets (through profit and loss)
(thousands of euro)
1. Opening balance
2. Increases
2.1 Deferred tax assets recognized during the year
a) referring to prior years
b) due to changes in accounting standards
c) write-backs
d) other
2.2 New taxes or tax rate increases
2.3 Other increases
3. Decreases
3.1 Deferred tax assets derecognized during the year
a) transfers
b) impairment of non-recoverable
items
c) changes in accounting standards
d) other
3.2 Tax rate reductions
3.3 Other decreases
4. Closing balance
2009
2008
1,760,152
533,547
413,607
76,897
336,710
1
119,939
107,730
(232,790)
(231,193)
(197,598)
919,124
1,198,651
1,153,483
24,988
1,128,495
19,997
25,171
1,550
(357,623)
(293,805)
(293,630)
(22,538)
(11,057)
(1,597)
2,060,909
(175)
(2,187)
(61,631)
(40,826)
1,760,152
In the absence of a plan, the valuation of the probability to recover deferred tax assets for the companies currently falling
under the tax consolidation agreement of Banco Popolare for financial year 2009 was conducted on the basis of the only
available information, i.e., the estimate of taxable income derived from the 2010 budget and from the “adjusted” budget,
that is, the document approved by the Management Board summarizing the management forecast of the potential expected
recurring income.
In particular, with regard to IRES deferred tax assets referring to past tax losses and IRAP deferred tax assets pertaining to the
Parent company, the estimated taxable base was calculated by considering only the expected profitability of the Parent
company.
As to the other IRES deferred tax assets referring to deductible temporary differences pertaining to the companies falling
under the current scope of the “tax consolidation” agreement, we took into consideration the sum of the expected taxable
income of the companies concerned.
The test on IRAP deferred tax assets pertaining to the Parent company showed that temporary differences deductible in
financial year 2010 will only be partly covered by the estimated IRAP taxable income based on the 2010 budget. The
deferred tax assets referring to the share of deductible temporary difference that most likely will not be recoverable were
impaired. The impairment amounted to 7.2 million.
Also the test on IRES deferred tax assets pertaining to the Parent company and generated by past tax losses, whose recovery
period under the law shall expire in 2011, led us to consider the related recognized deferred tax assets as non unlikely to be
recovered. As a result, also these assets have been impaired by 11.2 million.
For the other Group companies, the recoverability test led to an additional total impairment of 4.1 million.
As a result of the tests conducted on the basis of the estimated results projected in the 2010 budget and in the “adjusted”
budget, considering also foreseeable tax planning opportunities, we believe that the remaining deferred tax assets
recognized in the financial statements are likely to be recovered.
249
14.4 Changes in deferred tax liabilities (through profit and loss)
(thousands of euro)
1. Opening balance
2. Increases
2.1 Deferred tax assets recognized during the year:
c) other
2.3 Other increases
3. Decreases
3.1 Deferred tax assets derecognized during the year:
a) transfers
b) changes in accounting standards
c) other
3.3 Other decreases
4. Closing Balance
2009
2008
638,002
195,461
82,434
248
82,186
113,027
105,596
(154,730)
(147,801)
(131,487)
(16,314)
(6,929)
678,733
702,833
202,697
131,326
27,689
103,637
6,456
64,915
3,774
(267,528)
(210,410)
(182,344)
(28,066)
(456)
(56,662)
(15,001)
638,002
Net IRES deferred tax assets not recognized in the financial statements added up to Euro 395.5 million and are entirely
referred to Banca Italease: 101.0 million derive from tax losses that can be carried forward and the remaining part from
deductible temporary differences, mostly referring to loss impairments exceeding the maximum direct deductibility
threshold under tax regulations. These assets have not been recognized in the consolidated financial statements because a
full and exhaustive evaluation of their recoverability can be carried out only after defining the scope of Banco Popolare’s
new tax consolidation agreement and after approving the Group multiannual plan. Banco Popolare shall take all the
necessary actions, in accordance with applicable tax regulations, to recover also deferred tax assets that at present have not
been recognized.
14.5 Changes in deferred tax assets (through equity)
(thousands of euro)
1. Opening balance
2. Increases
2.1 Deferred tax assets recognized during the year
c) other
2.3 Other increases
3. Decreases
3.1 Deferred tax assets derecognized during the year
a) transfers
b) impairment of non-recoverable items
c) changes in accounting standards
d) other
3.3 Other decreases
4. Closing balance
250
2009
2008
88,773
7,462
6,621
6,621
841
(48,467)
(48,391)
(48,390)
(1)
(1)
(75)
47,768
142,321
30,402
15,537
15,537
1
14,864
(83,950)
(75,951)
(75,951)
(7,999)
(7,892)
88,773
14.6 Changes in deferred tax liabilities (though equity)
(thousands of euro)
1. Opening balance
2. Increases
2.1 Deferred tax assets recognized during the year:
c) other
2.3 Other increases
3. Decreases
3.1 Deferred tax assets derecognized during the year:
a) transfers
b) changes in accounting standards
c) other
3.3 Other decreases
4. Closing balance
2009
2008
7,513
6,040
2,764
2,764
3,276
(2,140)
(1,869)
(780)
(1,089)
(271)
11,413
50,488
2,557
2,511
2,511
46
(42,338)
(32,251)
(30,813)
(1,438)
(177)
(13,104)
(11,423)
7,513
Fiscal position of the Group
Fiscal position of former Banco Popolare di Verona e Novara s.c.ar.l.
At the balance sheet date, only fiscal years 2005, 2006 and 2007 are still open from the point of view of direct taxes and
VAT.
In 2007 a 3.73 million tax levy had been notified, for IRAP settlement, fines and default interest for FY 2003. The fiscal
claim refers to the IRAP rate applicable to the net value of production in the Veneto region, corresponding to the premium
rate of 5.25% instead of the ordinary rate of 4.25%. A petition against said assessment and tax levy was filed with the
Provincial Tax Commission, which accepted the petition and cancelled the assessment and tax levy. In 2008 the Inland
Revenue appealed to the Regional Tax Commission, which in 2009 partially upheld the objection and fixed the applicable
rate at 4.75%.
An appeal against this decision is being filed with the Cassation Court.
In 2008 another tax levy was notified for 4.8 million referring to fiscal year 2004, for the same reasons. In particular, it
referred to the IRAP tax rate applicable to the value of production in the Veneto Region (applied tax rate of 5.25% instead of
4.25%) and in the Tuscany Region (tax rate of 4.40% instead of 4.25%) , plus fines and default interest. A petition was filed
with the Provincial Tax Commission, which in 2008 upheld the petition and cancelled the assessment and the tax levy. In
2009 the Inland Revenue appealed to the Regional Tax Commission.
In 2009 another tax levy was notified for 6.5 million euro for fiscal year 2005, referring to the IRAP tax rate applicable to the
value of production in the Veneto Region (applied tax rate of 5.25% instead of 4.25%), plus fines and default interest. A
petition against said assessment and tax levy was filed with the Provincial Tax Commission.
Potential liabilities deriving from the above litigations have been classified as possible.
Fiscal position of former Banca Popolare Italiana soc. coop and its subsidiaries
On 31 December 2008 a number of tax assessments and notification reports were pending against Banca Popolare Italiana
and some of its subsidiaries (for additional information on litigations please see the detailed description in the 2008 Annual
Report), so to deflate the litigation front it was deemed appropriate to file tax settlement proposals. The Inland Revenue Agency
declared its willingness to accept an out-of-court settlement, and therefore in a special meeting held on 8 May last the
Management Board of Banco Popolare thoroughly examined the risks and charges associated with two available options, i.e.,
out-of-court settlement or going to court. Considering that the final outcome of any controversy always allows for some
uncertainty and that, in the light of the latest decisions passed by the Cassation Court, in these cases the uncertainty is rather
high because in-court litigations are bound to last for many years, both because of the length of every lawsuit (about eight
years) and for the multiannual span of some objections, the Board, supported by the opinion of authoritative advisors, deemed
it was not to Banco Popolare’s interest to bring a huge tax litigation to court while exposing the Group to a significant potential
risk for many years. For this reason, the Board decided to settle the above litigations out of court.
251
The total cost for finalizing the settlement was about 168 million, of which 57.5 million were charged to income in financial
year 2009.
Illustrated below is the fiscal situation after the above mentioned out-of-court settlement.
Fiscal position of former Banca Popolare Italiana soc. coop.
Fiscal years 2005, 2006 and 2007 are still open for the purpose of direct taxes and VAT.
A ruling is pending before the Milan Regional Tax Commission regarding the higher value assigned by Lodi’s Inland
Revenue Office to a business line, that in 2004 had been transferred from Banca Eurosistemi S.p.A. (then combined into
Banca Popolare Italiana Soc. Coop.) and Banca Popolare di Lodi Soc. Coop. The additional stamp duty objected in the
rectification notice totaled 7 million. The first instance court rejected the appeal filed by the company. The liability has been
classified as probable.
The rulings are pending before the Cassation court regarding the rectification and settlement notices with which in 2005 the
Milan Inland Revenue office reclassified a number of real estate transfers as business line transfers. The reclassified transfers
had taken place in 2002 among Cassa di Risparmio di Lucca S.p.A., Cassa di Risparmio di Livorno S.p.A., Cassa di
Risparmio di Pisa S.p.A. (now combined into Cassa di Risparmio di Lucca Pisa e Livorno S.p.A.), Banca Bipielle Centrosud
S.p.A., Banca Eurosistemi S.p.A., Bipielle Investimenti S.p.A., ICCRI Banca S.p.A. (now combined into Banco Popolare Soc.
Coop.) as transferors and Bipielle Immobili S.p.A. (now Bipielle Real Estate S.p.A.) as transferee. In the first two court
instances the company saw its petition rejected. The potential liability classified as probable adds up to 2.6 million, plus
legal fees (co-obligee Bipielle Real Estate S.p.A.).
The ruling is pending before the Regional Tax Commission regarding the notice to pay taxes and fines notified to the former
Banca Popolare Italiana (as acquirer of Reti Bancarie Holding, former Banco di Chiavari e della Riviera Ligure), with a tax
claim totaling 13.6 million for the reclassification of the transfer deed among companies regarding a business line. The
Milan Provincial Tax Commission accepted the petition in full. The Inland Revenue Agency filed an appeal. The potential
liability as a result was classified as possible.
Fiscal position of Banca Popolare di Crema
Fiscal years 2005, 2006, 2007 and 2008 are still open for the purpose of direct taxes and VAT.
In January 2010 the Cremona Tax police completed the tax assessment covering direct tax and VAT obligations of Banca
Popolare di Crema in fiscal year 2008. To reduce the outstanding litigation, the tax claim of 0.3 million euro has been
settled pursuant to art. 5-bis of Lgs.D. n. 218/97 by filing a remedial action to the notification report.
Fiscal position of Banca Popolare di Cremona
The disputes against the IRPEG and ILOR assessment notices for fiscal years 1978, 1979, 1980 and 1982 and the disputes
regarding withholding agent returns for fiscal years 1982 and 1983 are still pending before the Central Tax Commission. Tax
liabilities total about 1 million euro. The outcome of the litigation is favorable in both first and second instance.
Fiscal position of Banca Caripe
Fiscal position of Cassa di Risparmio di Lucca Pisa e Livorno
The term is pending to appeal before the Regional Tax Commission against the decision of the Pisa Provincial Tax
Commission which rejected the petition against the notice to settle the main stamp duty on the reclassification as business
line transfer of the securities sale carried out in 2002 between Cassa di Risparmio di Pisa s.p.a. (now Cassa di Risparmio di
Lucca Pisa e Livorno s.p.a.) and Banca Popolare Italiana soc. coop..
The tax levy of 14.5 million euro was paid, regarding the assessment carried out by the Pisa Local Inland Revenue Office,
pending the appeal decision. The amount paid was recognized as a tax credit because the potential liability is still
considered possible and not probable.
Fiscal position of Bipielle Real Estate
The ruling is pending before the Cassation court referring to the notice to pay the taxes and fines regarding the
reclassification as business line transfers of a number of real estate transfers notified to Cassa di Risparmio di Lucca Pisa e
Livorno S.p.A.. The outcome of the litigation was negative both in first and second instance.
The tax levy of 16.4 million euro (inclusive of fines in excess of 5 million) was paid regarding the assessment carried out by
the Pisa Local Inland Revenue Office, pending the appeal decision. With respect to the fines, a petition was filed to request
their refund, and an equal amount was recognized as tax credit.
The ruling is pending before the Milan Regional Tax Commission referring to a settlement notice for taxes and fines
regarding a business line transfer to Reti Bancarie Holding (former Banco di Chiavari e della Riviera Ligure) leading to a total
tax claim of 13.6 million euro. The Milan Provincial Tax Commission upheld the petition in full.
252
Fiscal position of Bipitalia Gestioni SGR
The assessments and tax levies of 1.6 million (notified in 2007) and of 21.9 million euro (notified in 2008) were cancelled
by the Finance Administration.
Fiscal position of Banca Valori
A ruling is pending before the Regional Tax Commission regarding a tax levy of 0.4 million euro notified after an automatic
assessment of the 2005 Consolidated tax return filed for fiscal year 2004. The Provincial Tax Commission rejected the
petition, therefore the tax levy was paid, pending the appeal decision.
Fiscal position of Efibanca
No litigations are outstanding.
Fiscal position of Banca Popolare di Novara
On 21 October 2009 Banca Popolare di Novara S.p.A. was notified the tax assessment issued by the Inland Revenue
Agency – Central Assessment Department upon completion of a tax audit covering fiscal year 2004. The audit focused on a
securities lending transaction.
Through the above tax notification report, the Agency objects to the bank that it abused the provisions under art. 109,
paragraph 8, of TUIR, by executing the transaction to generate an extra return with no other reason other than to obtain a
tax benefit. The tax claim raised by the Financial Administration totals 3.6 million euro for IRAP plus the associated fines
and default interest, and 26 million euro for Ires, plus the associated fines and default interest. A petition was filed against
the above objections with the tax court. The potential liability is considered possible.
Fiscal position of Credito Bergamasco
In 2007 the Inland Revenue Agency notified a tax levy of € 0.2 million, inclusive of fees and default interest. The tax claim
refers to the IRAP rate applicable in 2003 to the net value of production in the Veneto Region, which should have been
5.25% instead of the ordinary tax rate of 4.25%. The Provincial Tax Commission upheld the petition against this tax levy.
The Inland Revenue Agency appealed to the Regional Tax Commission, which rejected the claim. At present, the term to
appeal to the Cassation court is pending.
For the same reason, in 2008 a petition was filed with the Provincial Tax Commission against a tax levy of euro 0.3 million
notified by the Inland Revenue Agency for fiscal year 2004. The Commission upheld the petition, and the term to appeal is
pending.
Again for the same reason, in 2009 a tax levy of euro 0.2 million was notified for fiscal year 2005. The petition filed against
said claim is pending before the plus the associated fines and interest Provincial Tax Commission.
Fiscal position of Banca Italease
The appeal filed with the Cassation court by the Inland Revenue Agency is pending, referring to Euro 32.4 million overassessed IRPEG – plus the same amount due for administrative fines – for fiscal years 1995, 1996 and 1997. In second
instance the claims of the Financial Administration had been fully rejected.
With respect to the litigation over the Euro 4.4 million over-assessed IRPEG - plus the same amount due for administrative
fines – for fiscal years 1998, The Regional Tax Commission partly upheld the appeal filed by the Inland Revenue Agency.
An appeal against this decision was filed with the Cassation court by both parties.
In 2008 we paid the euro 1.3 million tax levy issued as a result of the court decision in second instance.
In 2008, following tax audits at the counterparties’, two tax assessments were notified referring to fiscal years 2003 and
2004, with which the Financial Administration objects the wrong application of VAT on two leasing transactions. In
particular, the objection regards the non-taxability of lease payments referring to a contract for a real estate asset, following
the receipt of the related letter of understanding.
On 8 February 2010 the Milan Provincial Tax Commission issued its decision, and upheld the petition filed by the company
for fiscal year 2003, while it rejected the petition for fiscal year 2004. Based on the analysis we carried out, there are solid
reasons to appeal against the decision with which the petition is rejected, as it goes against the guidance expressed by the
Supreme Court with respect to the legal qualification of leasing.
The tax over-assessment is euro 0.2 million plus euro 0.3 million for fines and default interest.
In 2009 a tax assessment for fiscal year 2004 was notified, transposing in full the objections raised as a result of the tax audit
conducted in November 2007 – July 2008, referring to the application of a cut VAT rate and it reflects similar objections
raised to all nautical leasing companies. The VAT over-assessment was 0.2 million euro, plus 0.3 million euro for default
interest and fines.
In the same year, a tax levy of 34.1 million euro was notified, owing to the failure by the Inland Revenue to recognize the
tax payments made for fiscal year 2005. The Milan Provincial Tax Commission upheld our petition against this tax levy.
Again in 2009, to settlement notifications for mortgage and cadastral duties for fiscal year 2006 were notified. The settled
253
taxes amounted to euro 3.2 million. The petitions filed with the Provincial Tax Commission are pending.
The potential liabilities were classified as possible.
On 18 December 2009, the Milan Inland Revenue Office notified a notification report to Banca Italease as a result of the
audit on big-ticket real estate leases, carried out between 2005 and 2007, including also a minor objection referring to
personal property leases. The objections refer to both VAT and direct taxes, and they add up to Euro 340.4 million as a
result of undeductible VAT and higher direct taxes, in addition to fines and default interest that can be quantified only when
the tax assessment is issued.
Fiscal position of Leasimpresa (company acquired by Banca Italease)
The appeal filed with the Cassation court is pending, against the decision of the Regional Tax Commission that cancelled
the VAT fines amounting to Euro 0.3 million referring to fiscal year 2003.
Other litigations are outstanding for minor amounts.
The potential liability is classified as possible.
Fiscal position of Factorit
In 2008 and 2009 two tax assessments were notified regarding the 2003 and 2004 VAT. The VAT over-assessment totaled
Euro 1.7 million, plus Euro 2.3 million of fines and default interest for 2003 and Euro 2.3 million plus Euro 3.1 million of
default interest and fines for 2004. The petitions against the above assessments are pending before the Provincial Tax
Commission.
With respect to the 2003 tax assessment, a tax levy was notified totaling Euro 1.0 million, following the entry in the tax roll
of 50% of the assessed taxes. The suspension of the tax levy was accepted. On 26 February 2010, the decision of the Milan
Provincial Tax Commission was issued, which upheld the petition filed by the company.
With respect to the 2004 tax assessment, a tax levy was notified totaling Euro 1.3 million, following the entry in the tax roll
of 50% of the assessed taxes.
The potential liabilities are classified as possible.
On 18 June 2009, the Tax Police started a general VAT audit in Factorit for fiscal years from 2005 until the access date for
VAT purposes, and for years 2006 and 2009 for income tax purposes. The audit was completed on 13 October 2009.
A notification report was issued, whereby the objections raised mainly lie on the assumption that the purpose of the notified
transactions was not a credit facility but rather a loan management activity. The VAT over-assessment totals 40.5 million
euro for years from 2005 to 2009 in addition to fines and default interest that can be quantified only when the tax
assessment is issued.
Fiscal position of Mercantile Leasing
In 2008, a tax assessment was notified referring to 2003 VAT as a result of the tax audit on some nautical leases. The VAT
over-assessment totaled Euro 1.4 million, plus Euro 1.9 million of default interest and fines. The Florence Provincial Tax
Commission only partly upheld the petition, therefore an appeal will be filed against the first instance decision.
In 2009, two tax assessments were notified referring to IRES, IRAP and VAT for fiscal years 2004 and 2005 as a result of the
audits on some real estate and nautical leases. The tax over-assessment totaled 138 million euro, plus a default interest of 15
million euro and fines of 309 million euro. The petitions filed before the tax court against the above tax assessments are
pending.
The potential liability has been classified as possible.
Fiscal position of Italease Gestione Beni
With respect to the Inland Revenue audit started in May 2009, on 18 December 2009 the Milan Inland Revenue Office
completed its audit on fiscal year 2006 and notified the related notification report regarding direct taxes and to a lesser
extent VAT objections, claiming that costs, entertainment expenses and loan losses are not tax-deductible. The claims add
up to about Euro 1.6 million euro in terms of direct tax over-assessment, in addition to fines and default interest that can be
quantified only when the tax assessment is issued.
Fiscal position of the other companies of the Group
With regard to the other companies belonging to the Group, small tax controversies are outstanding for immaterial amounts.
In summary, the requests notified by the State Finance Administration with the tax assessments illustrated above total about
679 million (additional assessed taxes and associated fines).
The companies of the Group were also notified notification reports whereby the Financial Administration is making requests
totaling 761 million euro.
In the majority of cases we deem that there are valid and well grounded reasons to object to the requests raised by the
Finance Administration, as maintained also by well founded external opinions.
Potential liabilities classified as probable in relation to the tax assessments received to date total about 24 million and are
fully covered by provisions earmarked as tax liabilities. The remaining 655 million were classified as possible but not
probable liabilities, in the light of the reference accounting standard.
254
National Tax Consolidation Regime
The Group opted for the national tax consolidation regime under articles from 117 to 129 of DPR n. 917 of 22nd December
1986.
This option, covering fiscal period from 2007 to 2009, refers to all the Group companies that meet the requirements set forth
by the above regulation, namely:
1. Aletti Fiduciaria S.p.A.;
2. Aletti Gestielle SGR S.p.A.;
3. Aletti Gestielle Alternative SGR S.p.A.;
4. Banca Aletti & C. S.p.A.;
5. Banca Caripe S.p.A.;
6. Banca Popolare di Crema S.p.A.;
7. Banca Popolare di Cremona S.p.A.;
8. Banca Popolare di Lodi S.p.A.;
9. Banca Popolare di Novara S.p.A.;
10. Banca Popolare di Verona - SGSP S.p.A.;
11. Bipielle Real Estate S.p.A.;
12. BP Property Management S.r.l.;
13. Cassa di Risparmio di Lucca Pisa Livorno;
14. Credito Bergamasco S.p.A.;
15. Efibanca S.p.A.;
16. Holding di Partecipazioni Finanziarie;
17. Immobiliare BP S.r.l.;
18. Lido dei Coralli S.r.l.;
19. Nadir Immobiliare S.r.l.;
20. Nazionale Fiduciaria S.p.A.;
21. Parchi del Garda S.p.A.;
22. Sirio Immobiliare S.r.l.;
23. Società Gestione Crediti BP S.p.A.;
24. Società Gestione Servizi BP S.p.A.;
25. Tecmarket Servizi S.p.A..
26. Valori Finanziaria S.p.A.
In 2009, the interest in Aletti Private Equity SGR S.p.A. was disposed of, therefore the company is no longer partaking in the
tax consolidation agreement.
During the year, Bipielle Finanziaria S.p.A. (which in turn had acquired its subsidiary Bipitalia Alternative SGR S.p.A.) and
Bipitalia Broker S.p.A. were merged into the company Holding di Partecipazione Finanziaria.
Critefi Sim S.p.A. was merged into Banca Aletti & C. S.p.A..
As a result, consolidated companies add up to twenty-six, as compared to thirty-one the year before, plus the holding
company Banco Popolare Società Cooperativa.
The advantages of exercising the national consolidation option in 2009 are mainly linked:
x to the fact that taxes are levied on one single taxable income, resulting from the summation of the taxable income
of the above companies that exercised the option;
x to the possibility of offsetting the undeductible portion of interest expense against the possible Gross Operating
Income availability (G.O.I.), pertaining to other Companies of the Group, under art. 96 paragraph 4) T.U.I.R.
G.O.I. is the core business gross operating income calculated as the difference between the value of production
and the cost of production under letters A) and B) of art. 2425 of the Civil Code, excluding depreciation and
amortization and finance lease payments for capital goods;
x to the full deductibility of interest expense of banks and other financial entities – accrued against entities
participating in the tax consolidation – up to the total amount of interest expense accrued by the participating
entities in favor of entities not included in the tax consolidation.
With the adoption by Banco Popolare soc. coop. of Group taxation and the fiscal consolidation of the above mentioned
subsidiaries, its administrative responsibilities and duties have increased, as illustrated below:
x exclusive responsibility for the fulfillment of duties associated with the calculation of the group’s total
consolidated income;
x joint responsibility for any increased tax, fines and interest on the total taxable income of each consolidated
company;
x joint responsibility with all the relevant companies for the failure to pay what due based on the consolidated
income tax return.
255
To this end, and in compliance with the regulatory changes introduced by the 2008 Budget law, Banco prepared the
“consolidation agreements” governing Banco’s relations with the above mentioned subsidiaries that joined the consolidated
taxation treatment. The agreements were approved by the individual Boards of Directors.
In no case did we opt for the fiscal transparency regime under articles 115 and following of DPR 917-1986.
Sub-section 15 - Non-current assets held for sale and discontinued operations, and
associated liabilities – Item 150 of assets and Item 90 of liabilities
15.1 Non-current assets held for sale and discontinued operations: breakdown by type of asset
(thousands of euro)
A. Single assets
A.1 Financial assets
A.2 Investments in associates and companies subject to joint control
A.3 Property and equipment
A.4 Intangible assets
A.5 Other non-current assets
Total A
B. Discontinued operations (disposal groups)
B.1 Financial assets held for trading
B.2 Financial assets designated at fair value through profit and loss
B.3 Financial assets available for sale
B.4 Investments held to maturity
B.5 Due from banks
B.6 Loans to customers
B.7 Investments in associates and companies subject to joint control
B.8 Property and equipment
B.9 Intangible assets
B.10 Other assets
Total B
C. Liabilities associated with single assets
available for sale
C.1 Payables
C.2 Securities
C.3 Other liabilities
Total C
D. Liabilities associated with discontinued
operations
D.1 Due to banks
D.2 Due to customers
D.3 Debt securities in issue
D.4 Trading liabilities
D.5 Financial liabilities measured at fair value
D.6 Provisions
D.7 Other liabilities
Total D
31/12/2009
31/12/2008
60,370
42,864
54,621
2,420
160,275
60,000
60,842
2,420
123,262
75,467
1,579,657
26,565
27,117
46,681
1,755,487
441
28,671
16,705
17,612
63,429
36,317
36,317
-
696,433
117,416
32,081
77,818
923,748
4,833
4,299
13,429
22,561
No other material information is reported.
15.3 Information on Investments in associates and companies subject to joint control in companies under significant
influence not carried at equity
There are no associate companies under significant influence not carried at equity.
256
Sub-section 16 - Other assets – Item 160
16.1 Other assets: breakdown
(thousands of euro)
Receivables from Inland Revenue (not classifiable in tax assets)
Receivables for sale of goods and provision of services
Commission receivables
Other receivables
Checks and other valuables
Items still under processing
Temporary items among branches
Illiquid items for portfolio transactions
Securities and coupons to be settled
Other transactions to be settled
Improvements and similar expenses on third party assets
Sundry accrued income and deferred charges
Other entries
Total
31/12/2009
31/12/2008
878,777
116,395
13,977
88,986
114,646
313,090
222,228
5,388
147,830
166,731
66,907
37,302
775,756
2,948,013
473,517
132,835
30,637
150,501
164,569
499,187
311,719
70,914
612,623
140,352
81,237
28,807
1,218,487
3,915,385
This item incorporates tax credits such as VAT, IRPEG/ILOR tax, withholding tax and other tax credits that are not
recognized in item 140 “Tax assets” owing to the new bank financial statements compilation rules set out in the first update
issued on 18 November 2009 of the Bank of Italy circular 262/05.
“Items still under processing” include account debit entries for utility bills received by external companies that have not
come due yet and are pending to be debited on our customers’ checking accounts”.
“Improvements and similar expenses on third party assets” include expenses incurred for assets that do not fall under the
item “Property and equipment”, whose depreciation is recognized in the P&L item 220 “Other operating income and
expense”.
“Other entries” include 148.7 million worth of assets referring to the Pension Fund, 142.1 million inventories under IAS 2
entirely attributable to Bormioli, and 484.9 million worth of other assets, such as for example 100.2 million worth of down
payments and advances paid by Basileus S.p.A and Bipielle Immobili Strumentali S.p.A in 2005, transferred to Bipielle Real
Estate in 2006, following the preliminary agreement signed to purchase residential property and offices in the real estate
complex called “Milano Santa Giulia”.
257
LIABILITIES
Sub-section 1 - Due to banks – Item 10
1.1 Due to banks: breakdown by instrument
(thousands of euro)
1. Due to central banks
2. Due to banks
2.1 Checking accounts and demand deposits
2.2 Time deposits
2.3 Loans
2.3.1 repurchase agreements
2.3.2 other
2.4 Commitments to repurchase own equity instruments
2.5 Other payables
Total
Fair Value
31/12/2009
31/12/2008
2,617,438
5,802,979
1,294,493
2,392,665
2,079,591
1,209,251
870,340
36,230
8,420,417
8,420,417
8,357,652
736,648
2,961,425
4,590,848
3,645,785
945,063
68,731
8,357,652
8,357,652
On 31 December 2008, due to banks totaled 8,420.4 million, up by 0.8% from 8,357.6 million the year before.
For due to banks the fair value measurement is almost identical to their book value as they are mostly short term loans.
“Due to central banks” refer to the Parent Company Banco Popolare and it incorporates time deposits linked to trades on the
MIC (Mercato Interbancario Collateralizzato) and those backed by ECB rated loans of the Banche del Territorio to guarantee
the granting of credit facilities at ECB rates.
1.2 Breakdown of item 10 “Due to banks”: subordinated loans
At the balance sheet date, similarly to the end of the previous year, no material subordinated loans payable to banks were
reported.
1.3 Breakdown of item 10 “Due to banks”: structured debts
At the balance sheet date, similarly to the end of the previous year, no structured debts payable to banks were reported.
1.4 Due to banks under specific hedging
(thousands of euro)
1. Payables under specific fair value hedging
c) multiple risks
2. Payables under specific cash flow hedging
c) other
Total
258
31/12/2009
31/12/2008
69,062
69,062
189,556
189,556
258,618
190,710
190,595
115
190,710
1.5 Finance lease payables
31/12/2009
Minimum payments
(thousands of euro)
Principal
Finance lease payables
Up to 3 months
Between 3 months and 1 year
Between 1 and 5 years
Above 5 years
Indefinite term
Total
Gross investment
Interest
876
2,976
15,660
16,948
36,460
281
803
3,246
771
5,101
1,120
3,335
17,331
17,719
39,505
The finance leases shown in the above table basically refer to Banca Italease and its subsidiaries, which joined Gruppo
Banco Popolare in the second half of the year.
On 31 December 2008, due to banks for finance leases, as shown in table 1.1 “Due to banks: breakdown by instrument”,
were mainly represented by payables referring to some real estate lease contracts entered by Group companies (Credito
Bergamasco and Banco Popolare) and Banca Italease totaling 16.3 million.
Sub-section 2 - Due to customers – Item 20
2.1 Due to customers: breakdown by instrument
(thousands of euro)
31/12/2009
31/12/2008
1. Checking accounts and demand deposits
2. Time deposits
3. Loans
3.1 repurchase agreements
3.2 other
4. Commitments to repurchase own equity instruments
5. Other payables
Total
Fair Value
43,622,032
1,153,305
7,662,160
7,108,959
553,201
754,366
53,191,863
53,186,152
37,151,989
880,988
11,407,877
8,372,500
3,035,377
1,911,563
51,352,417
51,347,039
On 31 December 2009, due to customers stood at 53,191.9 million euro, down by 3.6% from 51,352.4 million euro
reported the year before.
On 31 December 2008, 2,893.4 million euro worth of “liabilities associated with assets sold and not derecognized” had
been posted. In compliance with the new layout required for financial statements this year, these liabilities have been
reclassified in their original deal type of belonging.
2.2 Breakdown of item 20 “Due to customers”: subordinated loans
At the balance sheet date, no material subordinated loans payable to customers were reported.
2.3 Breakdown of item 20 “Due to customers”: structured debts
At the balance sheet date, as in the previous year, no structured debts payable to customers were reported.
2.4 Due to customers under specific hedging
At the balance sheet date, no material payables to customers under specific hedging were reported.
259
2.5 Finance lease payables
31/12/2009
Minimum payments
(thousands of euro)
Principal
Finance lease payables
Up to 3 months
Between 3 months and 1 year
Between 1 and 5 years
Above 5 years
Indefinite term
Total
Gross investment
Interest
510
1,555
8,970
17,848
28,883
237
686
2,984
1,032
4,939
747
2,241
11,954
18,880
33,822
The finance leases shown in the table refer to Banca Italease and its subsidiaries, which joined Gruppo Banco Popolare as
from the second half of the year.
Sub-section 3 - Securities issued – Item 30
3.1 Securities issued: breakdown by instrument
Total
31/12/2009
(thousands of euro)
Book value
A. Securities
1. Bonds:
1.1 structured
1.2 other
2. Other securities:
2.1 structured
2.2 other
Total
21,164,702
1,515,583
19,649,119
4,062,818
4,062,818
25,227,520
Total
31/12/2008
Fair value
Level 1
Level 2
Book value
Level 3
3,341,480 17,894,141
- 1,519,639
3,341,480 16,374,502
- 3,941,029
- 3,941,029
3,341,480 21,835,170
-
19,023,939
15,559
19,008,380
5,228,717
5,228,717
24,252,656
Fair value
Level 1
Level 2
3,161,264 15,570,958
15,392
3,161,264 15,555,566
5,228,690
5,228,690
3,161,264 20,799,648
Level 3
-
On 31 December 2009, securities issued totaled 25,227.5 million, up by 4.0% from 24,252.7 million the prior year. The fair
value, that was measured along the criteria described in “Section A – accounting policies” stood at 25,176.7 million.
3.2 Breakdown of item 30 “Securities issued”: subordinated securities
At the balance sheet date, subordinated debt securities issued totaled 4,497.4 million (4,714.4 million at the end of 2008) of
which 751.8 million are represented by perpetual instruments (preferred shares). During the year, the Parent company
issued 2 subordinated securities totaling 352 million and redeemed 4 EMTN bonds having a book value of 769.5 million.
The characteristics of subordinated loans calculated for regulatory purposes are illustrated in Section F, “Consolidated
Shareholders’ Equity”.
3.3 Securities issued: securities under specific hedging
(thousands of euro)
1. Payables under specific fair value hedging:
c) multiple risks
2. Payables under specific cash flow hedging:
c) other
Total
Cash flow hedges refer to floating rate bonds issued to fund fixed rate loans.
260
31/12/2009
31/12/2008
5,869,153
5,869,153
422,078
422,078
6,291,231
71,766
71,766
71,766
Sub-section 4 - Financial liabilities held for trading – Item 40
4.1 Financial liabilities held for trading: breakdown by instrument
31/12/2009
(thousands of euro)
A. Cash liabilities
1. Due to banks
2. Due to customers
3. Debt securities
3.1 Bonds
3.1.1 Structured
3.1.2 Other bonds
3.2 Other securities
3.2.1 Structured
3.2.2 Others
Total A
B. Derivatives
1. Financial derivatives
1.1 Trading
1.2 Associated with
fair value option
1.3 Other
2. Credit derivatives
2.1 Trading
2.2 Associated with fair
value option
2.3 Other
Total B
Total (A+B)
31/12/2008
FV
NV
L1
142
34,013
34,155
X
X
X
X
X
X
X
X
146
34,386
34,532
L2
L3
-
874,234 2,960,911
874,102 2,851,308
132
-
FV*
146
- 34,386
X
X
X
X
- 34,532
4,197
4,197
FV
NV
L1
58
75,596
75,654
X
X
2,428
107,175
4,775
4,671
-
X
X
X
X
X
X
104
874,234 2,965,686
908,766 2,965,686
4,197
4,197
X
X
X
X
X
X
X
X
L2
983
71,188
72,171
FV*
L3
-
-
424,504 2,868,363
424,433 2,837,270
9,140
9,140
71
-
983
71,188
X
X
X
X
72,171
X
31,093
640
640
-
X
X
424,504 2,869,003
496,675 2,869,003
9,140
9,140
X
X
X
X
X
FV = Fair value
FV* = Fair value calculated excluding value changes caused by a change in the issuer’s credit standing with respect to the issue date
NV = Nominal value
L1 = Level 1
L2 = Level 2
L3 = Level 3
Item “Cash liabilities – Due to customers” includes exclusively technical overdrafts on quoted equity securities, issued by
other companies, of the subsidiary Aletti & C. Banca di Investimento Mobiliare S.p.A.
4.2 Breakdown of item 40 “Financial liabilities held for trading”: subordinated liabilities
At the balance sheet date, similarly to the end of the previous year, no subordinated financial liabilities were reported.
4.3 Breakdown of item 40 “Financial liabilities held for trading”: structured debts
At the balance sheet date, similarly to the end of the previous year, no structured debts were reported among trading
liabilities.
4.4 Cash trading financial liabilities (excluding “technical overdrafts”): annual changes
No cash trading financial liabilities are reported, as due to banks are entirely represented by technical overdrafts and there
were no changes during the year.
261
26
6,901,635
845,653
6,055,982
6,901,635
NV
13,728,051
414,578
13,313,473
13,728,051
L1
13,035,686
2,272,982
10,762,704
13,035,686
-
FV*
NV
L1
X
X
X
X
26,787,421
X
X
26,787,421
18,009,265
3,681,041
14,328,224
18,009,265
86,244
86,244
86,244
17,439,657
3,451,797
13,987,860
17.439,657
L2
FV
L3
FV
L2
FV = Fair value
FV* = Fair value calculated excluding value changes caused by a change in the issuer’s credit standing with respect to the issue date
NV = Nominal value
L1 = Level 1
L2 = Level 2
L3 = Level 3
1. Due to banks
1.1 Structured
1.2 Other
2. Due to customers
2.1 Structured
2.2 Other
3. Debt securities
3.1 Structured
3.2 Other
Total
(thousands of euro)
31/12/2008
31/12/2009
5.1 Financial liabilities designated at fair value through profit and loss: breakdown by instrument
Sub-section 5 - Financial liabilities designated at fair value through profit and loss – Item 50
L3
-
X
X
X
X
17,900,098
X
X
17,900,098
FV*
Financial liabilities designated at fair value refer to own bond issues, namely fixed rate plain vanilla securities, or indexed to
equity components, exchange rates, inflation rates or to interest rate structures and hedged with derivatives. In this case, the
use of the Fair Value Option satisfies the need to eliminate or significantly reduce an accounting inconsistent treatment, in
alternative to Hedge Accounting methodologies. Otherwise, derivatives would be still measured at fair value, while bonds
would be measured at amortized cost.
For the scope of securities under fair value option and the method used to measure fair value, please refer to “Section A –
Accounting policies”.
For value changes due to the changes in creditworthiness, please refer to the next table 5.3.
5.2 Breakdown of item 50 “Financial liabilities designated at fair value through profit and loss”: subordinated liabilities
On 31 December 2009, financial liabilities designated at fair value represented by subordinated liabilities totaled 749.3
million, from 661.4 million the year before.
The characteristics of subordinated bonds measurable for regulatory purposes are described in Section F, “Consolidated
shareholders’ equity”.
5.3 Financial liabilities designated at fair value through profit and loss: annual changes
(thousands of euro)
A.
B.
Opening balance
Increases:
B.1 Issues
B.2 Sales
B.3 Positive fair value changes
B.4 Other changes
C. Decreases
C.1 Purchases
C.2 Redemptions
C.3 Negative fair value changes
C.4 Other changes
D. Closing balance
Due to
banks
Due to
customers
Debt securities
issued
Total
-
-
17,525,901
15,726,516
14,314,961
25
537,698
873,832
(6,488,680)
(2,882,963)
(2,830,349)
(38,628)
(736,740)
26,763,737
17,525,901
15,726,516
14,314,961
25
537,698
873,832
(6,488,680)
(2,882,963)
(2,830,349)
(38,628)
(736,740)
26,763,737
Items B.3 and C.3 include, respectively, the positive and negative fair value annual changes that were recorded under Item
110 “profit/loss on financial assets and liabilities designated at fair value” of the income statement. The same item includes
the fair value changes of derivatives under the fair value option, whose positive and negative valuations at the balance sheet
date are shown in tables 2.1 of sub-section 2 of the balance sheet assets and 4.1 of sub-section 4 of balance sheet liabilities
in Section B – Notes to the consolidated balance sheet of these explanatory notes.
Item B.4 “Increases: other changes” includes accrued interest as at 31 December 2009, recognized under item 20 “interest
expense on financial liabilities measured at fair value” of the income statement, as well as losses on the disposal or
extinguishment of said financial liabilities, recorded under item 110 “profit/loss on financial assets and liabilities designated
at fair value” of the income statement.
Item C.4 “Decreases: other changes” includes deducted accrued interest as at 31 December 2009, recognized under item
20 “interest expense on financial liabilities measured at fair value” of the income statement, as well as profits on the
disposal or extinguishment of said financial liabilities, recorded under item 110 “profit/loss on financial assets and liabilities
designated at fair value” of the income statement.
Fair Value Option – Credit spread change
As described in Section A of the Explanatory Notes, in the section devoted to changes in the application of accounting
standards, the Group opted for the possibility of measuring hedged debt securities in issue at fair value in order to reduce
inconsistent accounting treatments in alternative to the hedge accounting method.
In 2009 the Gruppo changed the procedure used to measure the fair value of financial liabilities, specifically how changes
in creditworthiness of Banco Popolare are measure, as described in Section A, sub-section 5 – Other aspects of these
explanatory notes.
In particular, for issues classified as “institutional or similar”, creditworthiness was measured on the basis of the senior or
subordinated Credit Default Swap – CDS curve, depending on the payment priority of the loans. For the remaining issues,
we used prices observable on the secondary market of Group securities, or prices resulting from a measurement technique
that does not include changes in creditworthiness among its significant factors, as in market practice.
263
Nota integrativa consolidata
For bonds outstanding on 31 December 2009 the creditworthiness change as compared to their issuance date generated a
lower liability fair value of 23.7 million (obtained from the difference between the FV column and the FV* column of FY
2009 in the above table 5.1). Accordingly, on 31 December 2008 the change in credit risk had caused the recognition of a
lower liability of 374.2 million.
This change is attributable for 211 million to the different method used to determine the credit spread, as described above,
and to the improved creditworthiness as compared to the issuance date for most loans, totaling 139.5 million.
The operating effect in FY 2009 was negative and totaled 350.5 million, as shown in the income statement table “7.1 Fair
value change in financial assets and liabilities designated at fair value: breakdown”.
Note that net accrued capital gains recognized on 31 December 2009 as a result of changes in own creditworthiness, which
translated into a reduction in the book value of won liabilities, amounted to 23.7 million and are bound to create a negative
impact on future years’ income statements, proportional to the mismatch between the liabilities repurchase price and their
book value.
For the sake of completeness, note that, based on the current supervisory regulations, net accrued capital gains attributable
to the deterioration of one’s own creditworthiness do not contribute to the measurement of the regulatory capital owing to
the adoption of prudential filters.
Sub-section 6 - Hedging derivatives – Item 60
6.1 Hedging derivatives: breakdown by type of contracts and underlying assets
(thousands of euro)
A)
Financial derivatives
1. Fair value
2. Cash flows
3. Foreign investments
B) Credit derivatives
1. Fair value
2. Cash flows
Total
31/12/2009
L1
L2
-
31/12/2008
L3
NV
168,456
131,994
36,258
204
168,456
-
L1
3,576,611
3,177,027
370,000
29,584
3,576,611
L2
-
L3
NV
49,985
30,265
19,720
49,985
-
206,495
110,978
95,517
206,495
Legend
NV = nominal value
L1 = Level 1
L2 = Level 2
L3 = Level 3
6.2 Hedging derivatives: breakdown by hedged portfolios and by type of hedge
Fair value
Interest Exchange
rate risk rate risk
264
Foreign
investments
Specific
(thousands of euro)
1. Financial assets
available for sale
2. Loans
3. Investments held
to maturity
4. Portfolio
5. Other
Total Assets
1. Financial liabilities
2. Portfolio
Total Liabilities
1. Expected transactions
2. Portfolio of financial assets
and liabilities
Cash flows
Credit
risk
Price risk
Multiple
risks
Generic
Specific
Generic
36,851
14,919
1,089
-
-
X
-
X
X
-
X
X
X
X
51,770
79,135
79,135
X
X
1,089
X
X
X
X
X
X
X
X
X
X
X
X
X
X
27,645
27,645
-
X
8,613
X
8,613
X
X
X
X
X
X
X
-
X
-
X
X
X
X
X
204
204
X
X
X
-
Sub-section 7 Fair value change of financial liabilities in hedged portfolios – Item 70
7.1 Fair value change of financial liabilities in hedged portfolios
(thousands of euro)
1. Positive fair value change of financial liabilities
2. Negative fair value change of financial liabilities
Total
31/12/2009
31/12/2008
41,518
41,518
70,555
70,555
This item refers to the fair value change recorded on the funding of payable checking accounts under item due to customers,
that were put under a fair value derivative macro-hedging. Profit or loss on value adjustments referring to hedging
derivatives and to the hedged portfolio are recognized under item 90 “Fair value change of financial assets in hedged
portfolios”.
7.2 Financial liabilities hedgedd by macrohedging of interest rate risk: breakdown
(thousands of euro)
1.
2.
3.
4.
5.
6.
Due to customers
Securities issued
Subordinated liabilities
Portfolio
Due to banks
Total
31/12/2009
31/12/2008
1,002,944
1,002,944
1,973,063
1,973,063
Sub-section 8 - Tax liabilities – Item 80
This Section was illustrated in Sub-section 14 of the balance sheet assets in Section B – Notes to the consolidated balance
sheet of these explanatory notes.
Sub-section 9 - Liabilities associated with non-current assets held for sale and discontinued
operations – Item 90
This Section was illustrated in Sub-section 15 of the balance sheet assets in Section B – Notes to the consolidated balance
sheet of these explanatory notes.
Sub-section 10 - Other liabilities – Item 100
10.1 Other liabilities: breakdown
(thousands of euro)
Due to Inland revenue for sums to be paid on behalf of third parties
Due to Personnel
Due to Welfare Agencies
Due to Suppliers
Payable for sundry items related to the Inland Revenue Service
Items in transit between branches not yet allocated to destination accounts
Amounts available to be paid to third parties
Bank transfers to be cleared
Items associated with securities transactions
Other items under processing
Adjustments for illiquid portfolio entries
Accrued costs and deferred revenues not assignable to a specific item
Other entries
Total
31/12/2009
31/12/2008
150,090
136,804
25,502
376,091
44,292
55,477
111,316
395,816
24,892
218,301
423,045
56,366
720,259
2,738,251
170,164
171,113
22,205
414,822
39,244
335,888
192,629
476,091
140,872
320,276
330,876
22,072
875,751
3,512,003
265
Nota integrativa consolidata
Sub-section 11 - Employee termination benefits – Item 110
11.1 Employee termination benefits
(thousands of euro)
A.
B.
Opening balance
Increases
B.1 Provisions for the year
B.2 Other increases
C. Decreases
C.1 Termination benefits paid
C.2 Other decreases
D. Closing balance
2009
2008
417,746
43,218
21,550
21,668
(45,276)
(25,487)
(19,789)
415,688
436,982
87,127
31,914
55,213
(106,363)
(61,585)
(44,778)
417,746
31/12/2009
31/12/2008
244,280
814,936
304,246
189,025
321,665
1,059,216
192,278
793,792
304,892
151,007
337,893
986,070
Sub-section 12 - Provisions for risks and charges – Item 120
12.1 Provisions for risks and charges: breakdown
(thousands of euro)
1. Post-employment benefits
2. Other provisions for risks and charges
2.1 legal controversies
2.2 personnel charges
2.3 other
Total
Provisions for risks and charges on 31 December 2009 totaled 1,059.2 million.
Item “post-employment benefits” includes two types of funds. The first is defined benefit funds totaling 114.4 million, which
the Group has set up to guarantee benefits in favor of retired employees. The second is defined contribution funds
amounting to 129.9 million, fed through an annual payment of a contribution borne by the main

annual report - Banco Popolare

Transcription

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