consolidated half-year report at 30 june 2014

Transcription

Gruppo Banca Popolare di Vicenza
Relazione intermedia sulla gestione al 30 giugno 2012
CONSOLIDATED HALF-YEAR REPORT
AT 30 JUNE 2014
(Translation from the Italian original which remains the definitive version)
-1-
-2-
Banca Popolare di Vicenza Group
Half-year report at 30 June 2014
Contents
BPVI GROUP STRUCTURE ...........................................................................................................................................................................- 4 PRINCIPAL DATA AND SUMMARY INDICATORS FOR BPVI GROUP .............................................................................................- 5 TERRITORIAL PRESENCE OF THE BPVI GROUP AT 30 JUNE 2014 ....................................................................................................- 6 ECONOMIC, FINANCIAL AND CREDIT SCENARIO .............................................................................................................................- 8 CHANGES IN THE REGULATORY AND TAX FRAMEWORK ............................................................................................................- 14 GROWTH OF THE BPVI GROUP: ACTIVITIES WITH STRATEGIC IMPORTANCE ........................................................................- 17 OPERATIONAL STRUCTURE ....................................................................................................................................................................- 25 RESEARCH AND DEVELOPMENT ...........................................................................................................................................................- 33 SYSTEM OF STRATEGIC CONTROLS AND AUDITING ......................................................................................................................- 34 CORPORATE SOCIAL RESPONSIBILITY AND IMAGE ........................................................................................................................- 58 TRANSACTIONS WITH RELATED PARTIES, SIGNIFICANT NON-RECURRING AND ATYPICAL AND/OR UNUSUAL
TRANSACTIONS ..........................................................................................................................................................................................- 60 SIGNIFICANT SUBSEQUENT EVENTS ....................................................................................................................................................- 62 MAIN RISKS AND UNCERTAINTIES AND OUTLOOK FOR OPERATIONS ...................................................................................- 62 GLOSSARY .....................................................................................................................................................................................................- 63 CONSOLIDATED STATEMENT OF FINANCIAL POSITION...............................................................................................................- 72 CONSOLIDATED INCOME STATEMENT ...............................................................................................................................................- 74 STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME .....................................................................................................- 75 STATEMENT OF CHANGES IN CONSOLIDATED EQUITY ................................................................................................................- 76 STATEMENT OF CONSOLIDATED CASH FLOWS ...............................................................................................................................- 78 EXPLANATORY NOTES..............................................................................................................................................................................- 79 CERTIFICATION OF THE FINANCIAL REPORTING MANAGER ...................................................................................................- 151 AUDITORS REPORT ON REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS ....................- 153 -
-3-
BPVI GROUP STRUCTURE
The structure of the Banca Popolare di Vicenza Group at 30 June 2014 is analysed below by business
area. For further details concerning the scope of consolidation see section “consolidated results of
operations” of the illustrative notes.
Banks
Private Equity
Banca Nuova S.p.A.
100%
0.04%
Farbanca S.p.A.
66.85%
NEM SGR S.p.A.
100%
1.00%
1.00%
Consumer Loans
Proprietary Trading
Prestinuova S.p.A.
100%
BPV Finance
International Plc
99.99%
1.00%
Services
Servizi Bancari
S.c.p.A.
96%
BPVi Multicredito –
Agenzia in Attività
Finanziaria S.p.A.
100%
0.04%
Immobiliare Stampa
S.c.p.A.
99.92%
Pop. Vicenza
Assessoria e
Consultoria LTDA
99%
-4-
PRINCIPAL DATA AND SUMMARY INDICATORS FOR BPVI GROUP
Statement of Financial Position figures, Regulatory
Capital and Capital adequacy ratios
(in million of euro)
Banking business
- of which Direct funding
- of which Indirect funding
- of which Loans to customers
Net interbank position
Financial cash exposures
- of which Financial assets available for sale
Property, plant and equipment and intangible assets
- of which land and buildings
- of which goodwill
Total Assets
Equity (including net income for the period)
CET 1 / Tier 1 capital (1)
Total Capital / Regulatory Capital (1)
Risk-weighted assets (1)
CET 1 ratio/Core Tier 1 ratio (1)
Tier 1 Capital Ratio (1)
Total Capital Ratio (1)
Reclassified Income Statement figures
(2)
Net financial income
Net operating income
Net operating costs
Net profit from operating activities
Net impairment adjustments
Net income for the period before income tax
Net income
Other information and indicators
Number of employees at the end of the period
Average number of employees (3)
Outlets
Loans to customers / direct deposits (net of CCG) (4)
Total Assets / equity (leverage)
Cost/Income (5)
Net impaired loans /net loans
Net non-performing loans/net loans
Impaired loans coverage (%) (6)
Non-performing loans coverage (%) (6)
Performing loans coverage (%) (7)
Credit cost (8)
(1)
30/06/2014
31/12/2013 30/06/2013
79,010
29,244
19,693
30,073
(4,624)
5,957
5,709
1,577
531
930
46,148
3,704
2,503
2,989
29,279
8.55%
8.55%
10.21%
30/06/2014
81,607
31,663
19,051
30,893
(4,260)
4,263
4,094
1,571
523
927
45,236
3,647
2,585
3,314
28,061
9.21%
9.21%
11.81%
30/06/2014
525.1
1,086.0
(657.0)
429.0
(452.4)
(28.2)
(28.2)
%
(+/-)
%
82,242
-2,597
33,230
-2,419
17,803
642
31,209
-820
(3,595)
-364
7,013
1,694
6,851
1,615
1,565
6
520
8
927
3
46,478
912
3,222
57
2,349
-82
3,201
-325
28,951
1,218
8.11% -0.66 p.p.
8.11% -0.66 p.p.
11.06% -1.60 p.p.
-3.2%
-7.6%
3.4%
-2.7%
8.5%
39.7%
39.4%
0.4%
1.5%
0.3%
2.0%
1.6%
-3.2%
-9.8%
4.3%
-3,232
-3,986
1,890
-1,136
-1,029
-1,056
-1,142
12
11
3
-330
482
154
-212
328
0.44 p.p.
0.44 p.p.
-0.85 p.p.
-3.9%
-12.0%
10.6%
-3.6%
28.6%
-15.1%
-16.7%
0.8%
2.1%
0.3%
-0.7%
15.0%
6.6%
-6.6%
1.1%
268.1
543.0
(328.8)
214.3
(193.0)
17.5
(0.1)
31/12/2013 30/06/2013
5,526
5,281
702
100.8%
12,5 x
57.50%
14.25%
5.69%
31.28%
48.69%
0.38%
1.04%
5,463
5,290
689
99.8%
12,4 x
58.50%
12.66%
5.07%
31.11%
48.74%
0.38%
1.44%
Changes
30/06/14 - 30/06/13
(+/-)
31/12/2013 30/06/2013
278.9
565.3
(331.8)
233.5
(187.0)
39.2
22.0
Changes
30/06/14 - 31/12/13
Changes
Changes
30/06/14 - 31/12/13 30/06/14 - 30/06/13
(+/-)
%
(+/-)
%
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
10.8
4.0%
22.3
4.1%
-3.0
0.9%
19.2
9.0%
6.0
-3.1%
21.7
124.0%
22.1 n.s.
Changes
Changes
30/06/14 - 31/12/13 30/06/14 - 30/06/13
(+/-)
%
(+/-)
%
5,498
63
5,284
-9
690
13
105.7% 0.98 p.p.
14,4 x
0,1 x
58.90% -1.00 p.p.
11.39% 1.58 p.p.
4.60% 0.62 p.p.
30.21% 0.16 p.p.
48.03% -0.05 p.p.
0.39% 0.00 p.p.
1.24% -0.40 p.p.
1.2%
-0.2%
1.9%
28
-3
12
-4.92 p.p.
-1,9 x
-1.41 p.p.
2.86 p.p.
1.09 p.p.
1.07 p.p.
0.66 p.p.
-0.01 p.p.
-0.20 p.p.
0.5%
-0.1%
1.7%
The figures at 31 December 2013 and at 30 June 2014 were determined with the prudential supervisory rules of Basel 2 previously in force.
For the reconciliation between the reclassified income statement data and the Income Statement items prescribed by Bank of Italy Circular
no. 262, reference is explicitly made to the “key” provided in the paragraph “Comments to the income statement” of the explanatory notes,
except for the different numbering of the same items in the individual statement with respect to the consolidated statement. The comparative
figures referred to on 30 June 2013 were redetermined by effect of the retrospective adoption of the new accounting standard IFRS 10
“Consolidated Financial Statements”.
(3) The average number of employees is calculated in accordance with the indications contained in Bank of Italy Circular no. 262 dated 22
December 2005 and subsequent amendments.
(4) The indicator is calculated excluding both from the numerator and from the denominator the operations
intermediate with Cassa
Compensazione e Garanzia.
(5) The indicator is calculated as the ratio between “operating costs” (item 230 of the Income Statement less “net provisions for risks and
charges”) and the “net interest income” (item 120 of the Income Statement).
(6) The coverage is determined including the so-called “liquidations” that pertain to partial write-offs on loans for which bankruptcy
proceedings still in progress at the reporting date.
(7) The coverage is determined excluding intra-group transactions, repurchase agreements, and guarantee margins.
(2)
The indicator is calculated by annualising the ratio between “net impairment adjustments on: loans and advances” and gross customer
loans, guarantee margins and repurchase agreements not being subject to impairment.
(8)
-5-
TERRITORIAL PRESENCE OF THE BPVI GROUP AT 30 JUNE 2014
Presence in Italy
Distribution of BPVi’s Group branches
as of June 2014
2
89
3
5
64
259
BPVi
18
90
Banca Nuova
2
30
Farbanca
1
1
1
15
77
-6-
30/06/2014
The sales network of the
BPVi's Group
Finance
Shops
Branches
Private
Customer
Points
Financial
Spaces
TOTAL
Comp. %
Banca Popolare di Vicenza
Banca Nuova
Farbanca
Prestinuova
BPVi Multicredito
563
93
1
-
11
4
25
4
-
1
-
588
108
1
1
4
83.8%
15.4%
0.1%
0.1%
0.6%
Total
657
15
29
1
702
100.0%
30/06/2014
Geographical distribution of the BPVI's Group
branches
Number
Comp. %
Northern Italy
Central Italy
Southern Italy
440
123
94
67.0%
18.7%
14.3%
Total
657
100.0%
Presence abroad
BPVi Representative Office
BPVi’s Subsidiary
Ireland
BPVi Finance
Russia
Moscow
(Opened in
October 2013)
U.S.A
New York
(Opened in
February 2012)
India
- New Delhi
(2006)
Brasil
San Paulo
(Operating from
January 2011)
-7-
China
- Hong Kong
- Shanghai (2005)
ECONOMIC, FINANCIAL AND CREDIT SCENARIO
OVERVIEW OF THE INTERNATIONAL MACROECONOMIC SCENARIO
In the first part of 2014, the world’s economy continued to expand, albeit by a modest amount and
with differences in intensity between the main areas. In general, growth remained uneven in the
advanced economies, while the slowdown in emerging Countries continued. Among major
industrialised Countries, of note is the US economy’s return to growth, after the standstill of the 1 st
quarter of 2014, tied to the adverse weather conditions. In the 2nd quarter of the year, according to the
most recent measurements, the GDP of the United States resumed its fast acceleration (the
annualised quarterly changed was +4.0%), mainly driven by the positive performance of internal
demand, by the recovery in business investments and by the fast-paced growth in exports. Major
emerging economies, with the exception of India, experienced a decline in GDP, mostly because of
the fragility of domestic demand and the anaemic performance of foreign trade; these adverse factors
were also accompanied by the geopolitical tensions that involved some important economies, like
Russia, as a result of the intensifying crisis with the Ukraine.
In the Euro Area, growth continued, albeit with little intensity and unevenly among its various
Countries. In Italy, in particular, the recovery is still sputtering, giving way to a new recessionary
phase, brought about once again by the weak production and by the persistent fragility of domestic
demand, accompanied by the negative effects of recent geopolitical crises. The domestic industrial
production environment is still uncertain, although the indications provided by the economic surveys
available so far point to a moderate expansion in the months to come, albeit still driven by the
positive contribution of foreign markets.
MACROECONOMIC PERFORMANCE OF THE EURO AREA
In the first part of 2014, the economy of the Euro Area remained along a path to recovery, but at
slow paces and without particular signs of acceleration: in the 1st quarter of the year, GDP grew only
by 0.2% from the previous quarter and remained unchanged in the following quarter. This
performance involved the majority of the Countries in the Area, including major economies like the
German one which, after a sparkling 1st quarter (whose GDP changed by +0.8%), unexpectedly
declined in the 2nd quarter (-0.2%). The performance levels were still disappointing in France (zero
growth in both quarters) and Italy (-0.1% and -0.2% quarterly rate, respectively in the 1st and in the
2nd quarter), where the weakness of domestic expenditure was added to that of exports. The recovery
in Spain, instead, consolidated (+0.4% and +0.6% respectively in the 1st and 2nd quarter), thanks to the
improvement in household consumer spending. The slow growth reflects, in particular, a rather
uncertain trend in production activities, which does not yet show a clear and sound path to
recovery: indeed, industrial production in the Euro Area experienced a further decline in June,
remaining close to the previous year’s levels (+0.6% year on year). While qualitative surveys of
businesses continued to foreshadow a moderate expansion in production, they indicated a slowdown
in recent months.
Domestic demand started to exhibit the first signs of improvement, supported by a series of factors,
including the still accommodating monetary bias, the improvements in lending conditions and the
progress made on the front of balancing public accounts and of structural reforms. Household
spending continued to grow, albeit moderately, and consumer confidence, even in the presence of a
certain variability in monthly measurements, confirms a positive picture in the second quarter of the
year as well. In this environment, the labour market started to stabilise, with the unemployment
rate declining slightly to 11.5% in June from its high of 12.0%, reached in September 2013.
-8-
The performance of foreign trade, which in past year had bolstered the European economy, was
rather stagnant: exports exhibited a rather small change in their rate of growth (+0.9% in the first six
months of 2014 compared to the same period of 2013), negatively affected by the still high exchange
rates of the Euro and by the slowdown in emerging markets.
The general weakness on the front of production and trade is also attested by the inflation rate,
which remained at extremely low levels throughout the first half of 2014, mostly as a result of the
decline in energy and food prices, reaching +0.4% in July (it was +0.8% at the end of 2013). Even
after removing the most volatile components, the core inflation rate decreased to record lows (0.8%
in July), as a direct consequence of the weakness of the recovery.
INTERNATIONAL MONETARY POLICY
In the first months of 2014, the monetary policies in major advanced Countries continue to maintain
their accommodating bias. The FED continued its gradual removal of the quantitative stimulus
started last January (tapering): at the July meeting, the new Chairman, Janet Yellen (in office since last
31 January) confirmed the cut of a further 10 billion Dollars to the plan for the purchase of
securities on the market (it is the 6th round since tapering started), which thus dropped to 25 billion
Dollars versus the initial 85 billion. Tapering is expected to end by October 2014. In March, the FED
also changed its own forward guidance, removing the reference to a threshold value of the
unemployment rate, repeating that the decision to raise the reference rates will take into account a
broad set of indicators pertaining to the labour market, inflationary pressures, inflation expectations
and financial conditions. On the basis of the most recent assessments, the American Federal Reserve
continues to deem likely that the target range of federal fund rates will still remain unchanged for
some time after the end of the monetary stimulus tapering.
The expansionary bias of the Bank of England and of the Bank of Japan was also unchanged: they
both left the reference rates at historic lows (respectively, 0.5% and between 0.0% and 0.1%). In detail,
in February the Bank of England changed its forward guidance, no longer centred on the
unemployment rate threshold, noting that the previously indicated rate (7%) may already have been
reached in the last quarter. Based on the most recent assessments by the Bank of England, the better
than expected results on the front of the Country’s growth and employment levels appear to be
facilitating the re-absorption of unused productive capacity; the Financial Policy Committee
recommended the adoption of new macro-prudential measures to prevent a deterioration in credit
quality in the real estate sector. In turn, the Bank of Japan confirmed the monetary expansion plan,
involving amounts between 60,000 and 70,000 billion Yen per year, with the simultaneous purchase of
maturing government bonds.
At its June meeting, the ECB confirmed the accommodating bias in its monetary policy, with the goal
of bringing inflation back near its 2% target rate and improving the operation of the mechanism for
the transmission of monetary policy, sustaining the process whereby credit is provided to the
economy. Some of the main measures, conventional and otherwise, were:
- New reductions of the reference interest rates: the rate on main refinancing operations was
cut to 0.15%, with a reduction of 10 basis points, as was the rate on banks’ overnight deposits
with the ECB, which became negative for the first time (-0.10%); lastly, the rate on marginal
refinancing operations was cut by 35 basis points, down to 0.40%;
- Targeted long term refinancing operations: activation of a series of Targeted Long Term
Refinancing Operations (TLTRO), directed at providing the banks with liquidity which must
be used to expand the credit granted to the economy. The new refinancing operations, which
will be made available from September to December 2014 and with quarterly periodicity in
the following two years, will have a rate exceeding by 10 basis points the main refinancing
rate, will be restricted to the actual granting of new loans to the economy or be subject to early
-9-
repayment of the loan, and will benefit from the same range of collateral that could be
allocated for the previous LTRO;
- Extension of the main refinancing operations with fixed rate and full award of the amounts
at least until mid 2016.
The ECB also confirmed that, if the risk of excessively low inflation should persist for too long, the
monetary policy action will continue with additional measures.
In 2014, the process for the construction of the European Banking Union continued. On 15 April,
the European Parliament approved the Single Resolution Mechanism (SRM) for banking crises which,
on the basis of the ECB’s assessment as to whether the intermediary is in distress, will be tasked with
initiating the resolution procedure. The establishment of the Single Resolution Fund (SRF) will be
completed in eight years and the annual contributions will be apportioned fairly in the course of the
period. The single resolution mechanism for bank crises will be fully operational from early 2016
onwards.
Lastly, the Comprehensive Assessment of the financial statements and risk profile of banks to be
supervised centrally from November 2014 within the scope of the ECB’s Single Supervisory
Mechanism (SSM) for European intermediaries is currently ongoing.
THE ITALIAN ECONOMY
The Italian economy fell back into recession in the first half of 2014: according to the most recent data
published by ISTAT, in the 2nd quarter of the year the Italian GDP shrank by 0.2% compared to the
previous quarter (when it had declined by 0.1%). While expectations are gradually improving,
recovery in Italy is late in starting, hampered by factors tied to the weak domestic demand, to the
structural problems of the high public debt and to the need to recapitalise the Italian banking system,
and is thus keeping a far slower pace than the main European partners. The signals provided by the
most recent economic indicators point to a slight strengthening of economic activities in the months
to come; the economy should then gather more momentum only from 2015 onwards.
The weakness of the economic environment is confirmed by the still stagnant performance of
industrial production, which seems to have stopped the recovery started in the early months of 2014:
in June, in fact, production activities remained at substantially unchanged levels compared to the
previous years (the annual change of the first six months of 2014 was +0.2%). More favourable
indications are coming from the recent qualitative surveys in the manufacturing sector: in July,
business confidence remained at high levels and the manufacturing PMI (Purchasing Managers’
Index, a survey carried out among the purchasing managers of entities in the manufacturing sector)
remained, for the 13th month in a row, above the level compatible with an economic expansion.
While domestic demand is still lacklustre, it is showing the first signs of stabilisation: household
consumer spending returned to marginal growth in the first quarter of 2014 (+0.1% over the previous
period), for the first time since the start of 2011. Investments in machinery and equipment also
increased (+0.5% over the previous quarter), after ten declining quarters, thanks to more favourable
judgements about demand, attesting to a more optimistic outlook on the part of businesses. In turn,
the index of household confidence, in spite of its slowdown in the past two months, maintained,
in July, its positive trend compared to the previous year, benefiting from more favourable
judgements of the Country’s economic situation and the labour market, whereas assessments of
personal conditions remain highly cautious, indicating that household spending behaviour in
upcoming months will be driven by a certain level of prudence. With regard to the labour market, the
first signs of improvement are observed, as the unemployment rate declined to 12.3% in June,
versus 12.6% in May. In any case, the employment outlook is still critical for the young, the category
that was hardest hit by the prolonged economic decline: youth unemployment (between 15 and 24
years of age) climbed to 43.7%, the highest level since measurements started, and remained nearly
twice as high as the European average (23.1% in June).
- 10 -
The GDP contribution from foreign markets was still positive, in spite of the high exchange rate.
Exports continued to grow in 2014, though not at a particularly lively pace (the change in the first
five months of the year was +1.3% compared to the same period of 2013), benefiting from rising
sales to European Countries (+4.1%) which offset the deceleration in demand for Italian products in
non-EU Countries (-2.0%), affected by the slowdown in some emerging markets, and particularly in
Russia, as a result of the ongoing crisis with the Ukraine. Imports continue to decrease (-2.5% in the
first five months of the year compared to the same period of 2013), as a direct consequence of the
weak consumer spending and of the productive activities of businesses. The most recent qualitative
indicators point to a stronger expansion of exports in upcoming months, facilitated by the recovery
of international demand and by a lower Euro/US Dollar exchange rate.
Inflationary pressures continued to wane in the first part of 2014, affected both by the declining
trend of the energy and food component and by the weak economic environment. In July, the
general consumer price index rose only by +0.1% per year (versus +0.7% at the end of 2013). Net of
the most volatile components, the core inflation rate declined to +0.6% per year, reflecting mainly the
weakness of consumer spending.
Lastly, public finance data provide negative signals. According to the most recent available
information, Italian public debt shows no sign of slowing: in June, it reached its record high at Euro
2,168.4 billion, growing by +4.8% (+Euro 99.1 billion) compared to the end of 2013. Overall, in the
first quarter of 2014 the public debt to GDP ratio rose to 135.6%, from 132.6% in the last quarter of
2013. In comparison with the other major partners of the Euro Area, this ratio is second only to that of
Greece (174.1%).
CREDIT AND SAVINGS DYNAMICS
In this first part of 2014, Italian banks’ operations continued to be affected by the challenging
conditions of the national economy, still characterised by high fragility and an uncertain future
outlook. The first signs of a loosening in lending criteria on the part of banks are expected in
upcoming months as a result of the progressive improvement in Italy’s economy. Consistently with
the reduction in lending, direct funding also declined, especially on the components with longer
maturity. The first part of 2014 confirms the good performance of indirect funding, which benefited
in particular from the good results achieved by banks in placing asset management products.
Concerning the evolution of bank interest rates, the progressive loosening of tensions on the Italian
sovereign debt and the confirmation of an expansionary monetary policy by the ECB led to a
reduction in the cost of funding in the early months of 2014 as well. On the loans front, instead,
there was a slight rise in rates applied to businesses, consistently with the higher risk of this type of
customers, whilst conditions applied to families remained substantially unchanged.
Deposits
In the first 6 months of 2014, Italian banks’ funding activities contracted, as a result of the lower
requirement for funds, connected with the weak lending activity. In June 2014, direct funding1 from
residents of Italian banks declined by an annual rate of 3.5% (the change since the end of 2013 was 1.8%). The negative trend in funding was particularly affected by the sharp drop in the bond
component 2, down by 9.2% per annum in June 2014 (the change since the end of 2013 was -6.4%) and
in repurchase agreements, which shrank by 24.2% compared to the previous year (-8.9% since the
start of the year), because of the reduction in banks’ operations with central counterparties, which
1
The aggregate does not include the bank bonds held in their portfolio by the banks themselves, among which are also the
bank securities issued and simultaneously repurchased by the issuers themselves.
2
See previous note.
- 11 -
nonetheless remained at structurally high levels. On the other hand, deposits continued to expand:
they grew by 1.2% per annum (+0.6% since December 2013), driven by the most liquid forms such as
current accounts, which rose by 4.5% in the past year, offsetting the decline in deposits with pre-set
duration. After the good performance recorded in most of 2013, these deposits declined at an annual
rate of 5.0% in June 2014 (-2.7% since the start of the year), reflecting a partial shift of liquidity
towards other, more rewarding forms of investment (such as assets under management and
Government bonds).
Lastly, deposits from foreign countries continued to decline, shrinking by -9.7% compared to the
levels of June 2013 (-1.4% since the start of the year).
The first 6 months of 2014 confirmed the positive trend of indirect funding, after the good results
achieved in 2013, with banks continuing to place asset management products also thanks to offering
strategies aimed at increasing revenues from services.
According to the most recent data published by Assogestioni (the Italian association of the major asset
management firms in the industry, which monitors asset management market performance) in the
first 6 months of 2014, over Euro 57 billion flowed into funds and asset management products,
thanks to new transfers from investors; of these, nearly Euro 14 billion were in June alone.
In June 2014, total assets under management reached the new historic record high at Euro 1,456
billion, up by 9.5% compared to December 2013 (+Euro 126 billion), thanks both to new transfers and
to the good performance of financial markets.
Bank lending and credit risk indicators
In the first 6 months of 2014, lending in Italy continued to contract, still affected by the Country’s
long recession. On one hand, the weakness of the economic cycle depressed business and household
credit demand, although some initial signs of awakening were observed in the most recent period; on
the other hand, it negatively affected banks’ lending policies because of the deterioration in
borrowers’ creditworthiness.
In June 2014, gross lending to the private sector3 declined by 2.1% compared to the previous year
(the change since December 2013 was -0.9%), which reflects the reduction in banks’ operations with
the other financial institutions, whose loans declined by 5.6% per annum (-1.0% since the start of
the year), as well as the reduction in loans to households and businesses. In particular, loans to
businesses contracted at an annual rate of 1.5%, mainly tied to the banks’ persistently high
perception of counterparty risk. Less unfavourable, but still negative, was the trend in loans to
households, which contracted by 1.34% per annum in June, both because of the decline in the
consumer credit segment and, above all, of the reduction in the stock of mortgage loans, tied to the
prolonged weakness of the real estate market.
More favourable signals are coming from the most recent economic surveys, which show a recovery
in demand for loans, in particular on the part of households: this trend had already been highlighted
by the growth in new loans issued in recent months. The banks’ lending criteria are expected
progressively to loosen, as a result of the forecast improvement in the economy as a whole.
The persistence of the long recession experienced by our Country led to the non-performing loans in
the quality of banks’ loan portfolios, and in June 2014 the stock of gross non-performing loans
exceeded Euro 170 billion from the previous year (+9.3% since the start of the year). However, signs
of stabilisation are coming from the front of the annual growth rate in non-performing loans, which
amounted to 23.3% in June, the lowest value of the past 7 months, and of the ratio of gross nonperforming loans to total lending, which reached 8.87% in June (from 8.91% the previous month: it
was the 1st decline in over 2 years) and which nonetheless grew by 1.8 percentage points since June
2013 (+0.8 percentage points since the end of 2013). The other categories of hardship loans (watchlist,
3
The private sector includes loans to: insurance companies and pension funds, other financial institutions, businesses and
households.
- 12 -
overdue and restructured exposures) increased significantly, and their incidence over total lending,
according to the most recent available data, rose from 6.02% in March 2013 to 6.92% in March 2014,
the last available figure.
Bank interest rates
In the first part of 2014, the cost of funding continued to decline for Italian banks, thanks to the
normalisation of tensions on sovereign debt, to the continuation of the ECB’s expansionary policy and
to the markets’ improved confidence in the Italian credit system. This was confirmed by the trend in
the average rate on deposits (weighted average rate of deposits, repurchase agreements and bonds),
which declined to 1.71%, down by 24 basis points compared to June of the previous year (-17 basis
points since the start of the year). The overall trend comprises the reduction by 22 basis points of the
rate on deposits and repurchase agreements, which reached 0.86% as a result of the sharp drop in the
yield of deposits with pre-set duration and of repurchase agreements (respectively, -64 and -55 basis
points since June 2013), tied to banks’ reduced requirements for funds, while the rate on bonds
declined less markedly, by -10 basis points (-13 basis points since the end of 2013).
On the interest income front, overall there was a slight rise in the conditions applied on the stock of
existing loans with households and businesses (+11 basis points in the last 12 months), consistently
with the higher counterparty risk. In detail, in June the average rate on loans to non financial
companies reached 3.74%, up by 16 basis points compared to the previous year (+6 basis points since
December 2013), whilst conditions applied to households remained substantially stable (+4 basis
points in the last year and +5 points since the end of 2013).
The marked decline in the cost of funding, coupled with the slight rise in lending rates, led to a
broader banking spread, amounting to 2.16% in June, up by a total of 35 basis points compared to
the previous year and by 23 points since December 2013.
- 13 -
CHANGES IN THE REGULATORY AND TAX FRAMEWORK
The main legal and regulatory changes that occurred in the first half of 2014 are described below.
In terms of regulatory measures, on 24 June 2014 the Italian Law Decree no. 91 of 24 June 2014 (socalled Competitiveness Decree) was published in the Official Gazette of the Italian Republic; it
contains “urgent provisions for the farming industry, environmental protection and energy efficiency
of school and university construction, the renewal and development of businesses, the containment of
costs bearing on electricity fees, and for the immediate definition of compliance requirements
deriving from European regulations”. In particular, Section III (“Urgent provisions for businesses”)
amends certain provisions:
–
of Italian Legislative Decree no. 58/1998 (Consolidated Finance Act) on the matters of takeover
bids, shareholder agreements, relevant equity investments and voting rights,
–
of the Italian Civil Code, amending, inter alia, the publicity of the option offer (Article 2441 of the
Italian Civil Code), the procedures for exercising the withdrawal right (Articles 2437-bis and 2437ter of the Italian Civil Code) and on the transformation of partnerships,
–
of Italian Legislative Decree no. 385/1993 (Consolidated Law on Banking and Lending) on
compound interest applied by banks, with particular regard to the issue of the method and times
for the capitalisation of interest in banking transactions, with the additional amendment of Article
120 of the Consolidated Law on Banking and Lending with respect to the previous one,
introduced by the “stability” Law no. 147/2013,
–
of the Italian Bankruptcy Law on the matter of pre-deductibility of receivables arisen on the
occasion or as a result of bankruptcy proceedings;
–
of Italian Law 130/1999 on securitisations: securitisation companies, too, may grant loans to
businesses, in compliance with conditions that enable securitisation companies to act as mini
credit funds.
In addition, Italian Legislative Decree, no. 39 of 4 March 2014, in force since 6 April 2014, amended
Italian Legislative Decree no. 231/01 on the matter of the administrative liability of entities. In
particular, Article 3 of the aforementioned Decree no. 39/2014 included among the offenses entailing
administrative liability, the crime of soliciting minors, prescribed and punished by Article 609undecies of the Italian Criminal Code, which must be addressed in the Organisational Model.
With regard to the measures by the Government, with reference to regulations for payment
instruments, of note is the promulgation of the following Decrees by the Ministry of the Economy
and Finance:
–
Decree 24/01/2014 “Definitions and scope of payments by debit card”, adopted jointly with the
Minister of Economic Development, which introduced the obligation for shopkeepers, from 30
June 2014 onwards, to accept payments by debit card for transactions involving amounts above
Euro 30;
–
Decree no. 51 of 14/02/2014 “Regulations on commissions applied to transactions carried out by
payment card, in accordance with Article 12, Paragraphs 9 and 10, of Law Decree no. 201 of 6
December 2011, converted, with amendments, by Law no. 214 of 22 December 2011” in force since
29 July 2014, which regulates the structure and advertising to customers of the commissions that
Banks and companies issuing payment cards must apply.
Concerning banking and financial regulatory measures, CONSOB, with its Resolution no. 18750 of
19 December 2013 published in the Official Gazette of the Republic of Italy and in the CONSOB
Bulletin on 10 February 2014 and in force since 1 January 2014, approved the new General
regulations on penalty proceedings, which halves the maximum times of penalty proceedings. The
Commission reduced to 180 days the time interval within which the procedures pertaining to
penalties that may be imposed administratively by the supervisory Authority must be completed.
- 14 -
CONSOB, with its Resolution no. 18731 of 18 December 2013, with the concurrence of the Bank of
Italy and Ivass, established that financial promoters must fulfil the obligations adequately to verify
customers, set out by Italian Legislative Decree no. 231 of 21 November 2007 as subsequently
amended, and by the related implementing provisions, complying with the measures, methods and
internal procedures prescribed, for its own personnel, by the intermediary for whom they carry out
their activity. The resolution took effect on 1 January 2014.
On 1 January 2014, the Ruling of the Bank of Italy of 3 April 2013 on adequate customer
verification (anti-money laundering regulations) came into force. Moreover, with reference to antimoney laundering regulations, on 10 March 2014 the Instructions of the UIF for communicating
restitutions in accordance with Article 23, Paragraph 1-bis of Italian Legislative Decree no. 231 of 2007
were published.
In the first half of 2014, Circular no. 285 «Supervisory instruction for banks», issued by the Bank of
Italy on 17 December 2013, was subjected to numerous revisions. Of note is the 1st revision of 6 May
2014, inserting a new Title IV “Corporate governance, internal controls, risk management”, which
includes Chapter 1 “Corporate governance”. The purpose of the revisions of the provisions
pertaining to the organisation and corporate governance of banks was:
–
to assure compliance with European regulations, in particular Directive 2013/36/EU (“CRD IV”)
and the Guidelines issued by the EBA in 2011 on internal governance;
–
to clarify and strengthen the rules on certain aspects emerged by enforcement experiences, to
coordinate them with the clarifications and enforcement guidelines provided to the system
(Clarification Note of February 2009 and Communication of January 2012);
–
to assure consistency with other provisions issued in the meantime (e.g. new rules on internal
controls) or undergoing revision within the scope of the work connected with the endorsement of
CRD IV (e.g. provisions on remuneration and incentive systems).
Subsequently, with the revision of 21 May 2014, two new chapters were added to Part I, Title I:
“Banking Groups” (Chapter 2) and “Register of banks and banking groups” (Chapter 4). At the
same time, amendments were made to Chapter I of Part III “Equity investments that may be held by
banks and by banking groups”.
The revision of 24 June 2014 introduced Chapter 3 “Covered Bonds” to the Third Part of the Circular.
The Chapter, which took effect on 25 June 2014, replaces, repealing them, the corresponding
provisions contained in Title V, Chapter 3, of Circular no. 263 of 27 December 2006, revising them
to conform the Italian rules to the changes introduced by Regulation (EU) no. 575/2013 (CRR)
regarding the prudential treatment of covered bonds and own funds and the prudential requirements
of banks.
With regard to regulatory changes on tax-related matters, the following main changes were provided
in Law no. 147 of 27 December 2013 (2014 Stability Law) containing provisions for the preparation of
the annual and multi-annual State budget, in force since 1 January 2014.
For credit and financial entities per Italian Legislative Decree no. 87 of 27 January 1992, the rules for
the deductibility of losses and impairment adjustments concerning loans and advances to customers
were amended. In particular, starting from the tax period current at 31 December 2013, losses and
impairment adjustments (net of the related write-backs) of loans and advances to customers
recognised in the financial statements under that heading shall be deducted in five equal parts from
the taxable base for the purposes of income taxes, whereas losses realised by disposal against
payments shall instead remain fully deductible in the year of realisation. The new provisions also
provide that net impairment adjustments and write-backs on loans and advances to customers shall
be deducted in five equal parts from the taxable base of the regional tax on productive activities.
- 15 -
The rules, introduced by Italian Law no. 214/2011, which prescribes, upon meeting the requirements
set out by the law, the transformation into tax credits of the deferred tax assets (“DTA”) pertaining to
impairment adjustments to receivables, goodwill and other intangible assets, is also extended to the
“DTAs” concerning the regional tax on productive activities.
With regard to indirect taxes, the 2014 Stability Law, intervening once again on the rules for the
stamp duty to be paid on periodic communications to customers on financial instruments and
products, prescribed that, from 2014 onwards, the proportional stamp duty on such communications
shall increase from 0.15% to 0.2%. At the same time, it eliminated the minimum annual amount due
of Euro 34.20, set previously, and it raised the maximum threshold of the stamp duty due by parties
other than natural persons, which changed from Euro 4,500 to Euro 14,000.
In addition, reference is made to the main provisions introduced by Italian Law Decree no. 66 of 24
April 2014, converted with amendments into Law no. 89 of 23 June 2014.
The aforesaid decree raised from 12% to 26% the rate of the substitute tax in lieu of income tax and of
the regional tax on productive activities and of any surtaxes due by holders of shares of Bank of Italy
capital on the higher values of their respective shares recognised in the financial statements for the
year to 31 December 2013, by effect of Article 6, Paragraph 6 of Italian Law Decree no. 133/2013, and
prescribed the obligation to pay the substitute tax all at once (instead of three instalments) within the
deadline for paying the balance of the income tax due for the year to 31 December 2013.
Shortly after the reform of the taxation of financial income (introduced by Italian Law Decree no.
138/2011 which had unified at 20% the tax rate for financial income), the recent Law Decree no.
66/2014 once again changed the level of taxation of income of a financial nature, raising the tax rate
from 20% to 26%, with effect from 1 July 2014. Similarly to the previous reform, the tax rate of 12.5%
is confirmed for the income (interest, bonuses and other revenue, capital gains and capital losses)
deriving from so-called “privileged securities”, represented by Government bonds and securities
considered equivalent for tax purposes. In addition, specific transitional rules are provided, whereby
the new tax rate is to be applied for income from capital with reference to the proceeds accrued from
1 July 2007, while for capital gains it will be possible to frank the gains accrued on the securities held
at 30 June 2014, net of the related losses, applying the previous rate of 20%.
Moreover, Decree no. 66/2014, “in order immediately to reduce the pressure of taxes and
contributions on labour and with a view to an overall revision of withholdings aimed at the structural
reduction of the tax wedge”, prescribed that, for the year 2014, a credit shall be recognised to
recipients of income from employment and of certain equivalent income sources, in the amount of
Euro 640 per year (i.e. Euro 80 per month from May 2014 onwards), if their total income does not
exceed Euro 24,000. Recipients of incomes above Euro 24,000, but not above Euro 26,000, shall be
entitled to the credit for the part corresponding to the ratio between the amount of Euro 26,000, minus
total income, and Euro 2,000. The credit drops to zero for incomes above Euro 26,000. The credit is
recognised for 2014 alone, while awaiting the permanent introduction of the rule through a structural
intervention by law, which should be carried out subsequently with the Stability Law for the year
2015.
Lastly, with regard to the Regional Tax on Productive Activities, Italian Law Decree no. 66/2014
prescribed that, starting from the tax period following the current one to 31 December 2013 (year 2014
for taxpayers whose fiscal year matches the calendar year) the basic IRAP rates shall be reduced by
10% for all sectors of economic activity, except Administrations and public agencies, whose rate was
confirmed at 8.5%. In particular, the ordinary general rate decreased from 3.9% to 3.5%; for banks and
other financial parties, the ordinary rate was reduced from 4.65% to 4.20%.
- 16 -
GROWTH OF
IMPORTANCE
THE
BPVI
GROUP:
ACTIVITIES
WITH
STRATEGIC
The first half of 2014 was confirmed as a challenging period for the BPVi Group, in view of the
persistent weakness and uncertainty of the macroeconomic and financial environment; nonetheless,
the period was also characterised by the positive change in the main capital, income and financial
indicators. These significant results enable the BPVi Group to sustain the outlined growth process
and to continue to guarantee credit to households and businesses in our communities in the future as
well.
Of note, in particular, was the successful completion of the capital increase by Euro 608 million,
which enabled the Group further to increase the capitalisation level (pro-forma CET 1 at 30 June
2014: 10.7%) and to exceed the threshold of 100 thousand members.
The date of the first half also confirm the soundness of the liquidity profile of the BPVi Group,
achieved by focusing the commercial Network on the development of retail direct funding and
consolidating the presence of Banca Popolare di Vicenza on institutional financial markets (EMTN
and securitisations): at 30 June the ratio of loans to direct deposits (net of repurchase agreements with
central counterparties) remained at adequate, balanced levels (100.8%, substantially unchanged from
the end of 2013) whilst the Liquidity Coverage Ratio, the main liquidity ratio introduced by the new
prudential supervisory regulations (Basel 3), rose to 121.2% from 112.0% at the end of 2013, above the
requirements prescribed by Basel 3 by 2019 (LCR > 100%).
Moreover, in 2014, after 6 years of consolidation, the BPVi Group returned to its growth path,
acquiring 1 branch in Turin from Banca Popolare di Spoleto and 16 branches from Cassa di
Risparmio di Ferrara (14 in Lazio and 2 in Emilia Romagna), expanding its presence in areas of
strategic interest with high commercial potential. Hence, at 30 June the commercial network of the
BPVi Group could count on 702 outlets and on the strengthened freelance professional networks
(120 financial promoters and 200 financial agents at 30 June 2014) supporting branch operations with
the goal of acquiring and gaining the loyalty of a significant number of new customers. Thanks to the
enhancement of the distribution channels and to the effective commercial action, the number of
customers of the BPVi Group rose to over 1.3 million, growing by nearly 40 thousand customers in
the first six months of 2014.
On the front of traditional banking operations, in 2014 the BPVi Group continued to support
households and businesses with the fundamental lending activity, granting more than Euro 1
billion in new loans, over 80% of which went to households and small and medium enterprises, and
experiencing further growth in the stock of gross commercial loans (+0.3% since the end of 2013), in
the face of a further contraction in lending in the Italian banking System (-1.0%). Among the other
important initiatives supporting, in particular, the financial needs of small and medium enterprises,
of note for their innovative nature were the launch of the Minibond project, which saw the
completion and listing of the first two originated by Banca Popolare di Vicenza, and the launch of the
first two listings of customer SMEs on the AIM market of Borsa Italiana.
Among the significant initiatives of the first half of 2014, of note is the continuation of the A-IRB
Project (Advanced Internal Rating Based), aimed at achieving, for all banks in the Group, the shift to
advanced methods in credit, as well as the intense activity required within scope of the process of
comprehensive assessment carried out by the ECB in collaboration with national Supervisory
authorities (the “Comprehensive Assessment”), in view of the shift of Banca Popolare di Vicenza,
together with the other leading Italian credit institutions, to the sole direct supervision by the ECB
from November 2014 onwards.
- 17 -
Every activity of strategic importance that marked the operations of the BPVi Group during the first
half of 2014 is described in greater detail below.
NEW CAPITAL STRENGTHENING OPERATIONS
On 18 February 2014 the Board of Directors of the Bank resolved to start two new capital increases,
one of which is to be completed within the scope of the powers already vested in the Board of
Directors by the Shareholders’ Meeting of 30 April 2011 and the other one through an ordinary capital
increase directed at broadening the shareholder base. The aforesaid capital strengthening operations
involve a total amount of Euro 908 million, of which Euro 608 million offered as options to
Members/Shareholders and to convertible bond holders and Euro 300 million to be offered to new
Members within the scope of a dedicated capital increase.
With these initiatives, the Bank intends, in view of the upcoming shift to the supervision of the
European Central Bank and in an ever more stringent regulatory scenario on the capital base front, to
achieve the best market standards in terms of capitalisation and to continue to support local
communities through lending, as well as to have available capital resources to exploit any growth
opportunities. The aforementioned aims are consistent with the priority action areas indicated in the
2012-2014/16 Business Plan approved by the Board of Directors on 20 March 2012, which called for
the improvement of the Group’s capital base, the continuation of activities in support of local
communities and the assessment of acquisition and investment opportunities.
The tender period of the first capital increase had been set to start on 12 May and end on 8 August
and it entailed the offer of new shares in the ratio of 1 share every 9 shares and of 1 share every 9
convertible bonds held. Subscribers also had the option of simultaneously subscribing 5-year
registered bonds with annual return of 4%, up to an amount equal to the subscribed capital increase.
The shares were offered at the price of Euro 62.5, while the bonds were offered at the nominal value
of Euro 62.5.
Additionally, the capital increase provides for the recognition of a “loyalty bonus”, i.e. the
assignment, without additional outlays, of 1 new share every 4 shares subscribed (25% of the value)
in favour of those who will continuously maintain ownership of the assigned shares and of those
already held at the start of the tender period for a time interval of 36 months.
On 8 August 2014, the expiry date of the tender period, Euro 608 million capital increase was
successfully completed. Demand from current members and from the public as a whole (at over
Euro 700 million) greatly exceeded the offer and it made it necessary to proceed with its allotment
among the many new Members. The pro-forma CET 1 (Common Equity Tier 1) at 30 June 2014
(including the aforesaid capital increase), i.e. the highest quality capital ratio according to Basel 3
regulations, would be equal to 10.7%, and for the first time in the history of Banca Popolare di
Vicenza exceeded the threshold of 100 thousand members (106 thousand members at the end of
August 2014).
The “ordinary” capital increase by Euro 300 million, instead, is aimed at expanding the
membership base. The shares will be offered for a maximum period of three years to parties who do
not own any of the Bank’s share or to shareholders owning fewer than 100 shares. Aspiring new
members, as was the case for the “ordinary” capital increase carried out in the second half of 2013,
will be able to subscribe the shares with their own funds or with funds obtained from a loan made
available by Banca Popolare di Vicenza, in compliance with Article 2358 of the Italian Civil Code. In
this latter case, the number of shares paid with the amounts lent by the Bank will be subject to lockup (obligation not to sell all or part of the shares held) until the maturity of the loan or its full
repayment.
- 18 -
GROWTH IN SIZE AND EVOLUTION OF THE DISTRIBUTION MODEL
As 2014 started, the BPVi Group, after over 6 years dedicated to consolidation, embarked on a new
path to growth. On 1 January, the Parent Bank acquired 1 branch in Turin from Banca Popolare di
Spoleto and on 1 June it acquired 16 branches from Cassa di Risparmio di Ferrara, of which 14 are in
Lazio (13 in Rome and 1 in Guidonia Montecelio in the province of Rome) and 2 in Emilia Romagna
(1 in Forlì and 1 in Cesena). These transactions enable the BPVi Group to expand its presence in
provinces of strategic interest and prestige, in particular Rome, and in the Emilia Romagna region,
entering for the first time the province of Forlì and Cesena with its high commercial potential. As a
result of the aforementioned acquisitions, the BPVi Group now has 702 outlets throughout Italy,
having consolidated its presence in Turin (from 1 to 2 branches) and with 27 branches in the province
of Rome and 18 in the Emilia Romagna region.
The start of a new phase of dimensional growth, also via acquisitions, is one of the main strategic
guidelines identified, in a market context that is rapidly changing from domestic to European.
In the new distribution model of the BPVi Group, whose implementation was started last year as
described in the Report on Operations of the 2013 Financial Statements, the branch network continues
to represent the main contact channel for business development and the management of customer
relations. However, the development strategy of the BPVi Group calls for expanding local presence
through the branch network, but also calls for the development and enhancement of the other
distribution channels, to respond to ongoing changes at market level and to optimise presence in
local markets. To do so, a specific project called “Evoluzione Multicanalità” (“Multi-channel
Evolution”) was recently launched; its purpose is to identify and carry out the priority actions
necessary to implement the BPVi Group’s multi-channel distribution strategy. Briefly, along with and
in support of branches, which remain the essential core of the Group’s distribution model, other
Bank-Customer contact channels will be developed: for instance, the digital channels (e.g.: Internet
banking, mobile banking), contact centres and above all the third-party Networks of agents and
financial promoters, and a new commercial proposition will be created. In relation to third-party
Networks in particular, at 30 June 2014 the BPVI Group, through the subsidiary “BPVI Multicredito”,
can already count on a network consisting of 200 financial agents operating in 43 Italian provinces, in
addition to 120 financial promoters (56 acting for the Parent Bank and 64 for Banca Nuova). The
promoters and agents work in close collaboration and in support of the outlets, in order to develop
the growth of the customer base.
Lastly, regarding the branch network, last year the “star model” was introduced with the goal of
maintaining an active commercial presence in local micro markets, optimising the portfolio of
managed segments (Affluent and Small Business) and providing customers with greater access to
specialist advisory services. With this model, it was possible to obtain benefits in terms of operating
flexibility, leveraging the synergies that could be offered by multiple outlets grouped in a Star Branch.
In the upcoming months, the “star model” will be extended to another group of branches that will
thus be able to benefit from the experience acquired last year and from the improvements to the
commercial and operating processes, which have already been implemented.
INITIATIVES AND RESULTS ON THE LIQUIDITY RISK MANAGEMENT FRONT
In 2014 the BPVi Group further strengthened its structural liquidity profile and improved the
liquidity indicators introduced by the new prudential supervisory regulations (Basel 3). These results,
coupled with the constant effort to contain the cost of funding, were achieved by focusing the
Commercial Network on the development of retail direct funding, in particular with private and
small business customers, placing on the market senior unsecured bonds under the EMTN
Programme and securities pertaining to securitisations of own receivables, with the goal of
- 19 -
consolidating the presence of the BPVi Group on the domestic and international institutional financial
market. Among the latter transactions, in the first half of 2014 the following were completed:
–
A public issue of 3-year senior unsecured bonds under the EMTN Programme for a total
amount of Euro 500 million placed on the primary market. Compared to the size placed on the
market, interests amounting to over Euro 770 million were collected (1.5 times the book). The
placement of approximately 45% of the issue took place with foreign operators.
–
The placement of private issues with Italian and foreign investors (private placement) within
the EMTN Programme, with maturity between 2 and 10 years, for a total amount of Euro 625
million.
–
A securitisation of home mortgages issued by the Banks of the BPVi Group (Parent Bank and
Banca Nuova), called Berica ABS 3, for a total nominal value of approximately Euro 1 billion.
The operation met with great success on the market, considering the significant size of the
senior tranche placed (Euro 835.4 million) and its expected maturity (higher than other issues
placed by Italian originators), i.e. approximately 4.8 years, demand widely exceeded the
original offer (225% of the original amount). The investor base was broad and diversified,
including mutual funds, insurance companies, banks and other financial institutions. The
placement of over 82% of the issue took place with foreign operators, confirming the
recognised reliability of Banca Popolare di Vicenza, active on the securitisation market since
2001.
Thanks to these initiatives, the ratio of loans to direct deposits (net of repurchase agreements with
central counterparties) remained at adequate, balanced levels (100.8% at 30 June 2014), substantially
unchanged from 99.8% at the end of 2013) whilst the main structural liquidity ratio introduced with
Basel 3, the LCR - Liquidity Coverage Ratio, improved markedly, rising from 112.0% at 31 December
2013 to 121.2% at 30 June 2014, above the requirements prescribed by Basel 3 by 2019 (LCR > 100%).
The solid structural liquidity profile achieved by the BPVi Group has also enabled it to proceed, in
August 2014, with the early partial repayment of the long-term refinancing operations with the
ECB (“LTRO”) for a total amount of Euro 2 billion. Currently, existing LTROs amount to Euro 1.3
billion, to be repaid in upcoming months.
INITIATIVES AND RESULTS ON THE FRONT OF SUPPORT TO SMALL AND MEDIUM
ENTERPRISES
In the first half of 2014, although the macroeconomic environment remained challenging, the BPVi
Group confirmed its commitment to support local small and medium enterprises, both with its usual
lending activity and with some innovative initiatives, aimed at promoting the consolidation of the
enterprises’ financial structure.
On the lending front, in the first six months of 2014 the BPVi Group recorded yet more growth in
the stock of gross commercial loans (+0.3% compared to the end of 2013, net of operations with
Cassa di Compensazione e Garanzia), whereas the Italian lending system as a whole contracted yet
again (-1.0% compared to 31 December 2013, net of the central counterparties). This result was
achieved thanks in particular to the constant effort to issue new loans, even though demand as a
whole was weak, as direct consequence of the prolonged recession: in the first half of 2014, the BPVi
Group issued over Euro 1 billion in new loans; more than 80% of them went to households and
small and medium enterprises in the areas where it operates. Banca Popolare di Vicenza’s support
to small and medium enterprises has long been facilitated by the promotion of a system of relations
with the numerous economic players in its areas of operation, which make it easier to access credit: to
date, the Parent Bank has signed 575 agreements and conventions with major Trade Associations,
Credit Guarantee Consortia (Confidi) and Public Agencies in favour of the economy and at the service
of Public Institutions.
- 20 -
In addition to facilitating access to credit through classic banking instruments, in 2014 important
initiatives were launched to provide a practical response to businesses’ structural finance needs
through other than strictly banking instruments of a highly innovative nature. In particular, we refer:
–
to the completion and listing of the first Minibonds originated by Banca Popolare di Vicenza;
–
to the launch of the first two listings on the AIM Italia market (Alternative Investment Market,
the unregulated market of Borsa Italiana dedicated to small and medium enterprises) followed
by a new organisation of the Parent Bank that accompanies businesses on their way to Stock
Market listing.
With regard to Minibonds, this form of long-term financing for small and medium enterprises was
made possible with the benefits introduced in the regulations by the “Italy Development” and
“Destination: Italy” Decrees. Before the aforementioned reform, access to capital markets was
substantially limited solely to listed companies. Banca Popolare di Vicenza, seizing the opportunity
provided by the new regulatory framework, has created an innovative platform with the purpose of
structuring Minibonds, placing them on the primary market and facilitating SMEs’ access to domestic
and international investors. In the first half of 2014 the first two Minibonds originated by the Bank,
totalling Euro 65 million, were completed and listed on the Extra-MOT Pro. Currently, four more
Minibonds are being placed and by the end of 2014 the Bank intends further to expand the number of
Minibonds placed.
In addition to the Minibond project, in order to complete the range of offerings to businesses by
providing full access to capital markets, the Bank recently created a specific Equity Capital Market
unit to accompany SME’s on their way to Stock Market listing. Listing on the Stock Market is a key
financial management decision that creates value for shareholders and for stakeholders, starting a
virtuous cycle on all aspects of the corporate business by accelerating growth and opening new
opportunities for access to risk capital. Banca Popolare di Vicenza recently obtained the qualification
as Nomad - Nominated Adviser (i.e. the company, enrolled in a dedicated register, that advises and
accompanies the company to be listed) on AIM from Borsa Italiana. In a few months, the first two
listings on AIM were launched (they are currently in the placement phase) and other listings are
expected to be completed by the end of the year.
UPDATE OF AIRB - ADVANCED INTERNAL RATING BASED - PROJECT
As has already been described in the Report on Operations of the 2013 Financial Statements, in the
first quarter of 2013, the A-IRB Project (where A-IRB stands for Advanced Internal Rating Based) was
launched with the aim of completing the shift to advanced credit risk management methods. The
Group companies involved in the project are the Parent Bank Banca Popolare di Vicenza and the
subsidiaries Banca Nuova and Farbanca, and the loan portfolios taken into consideration are
Corporate and Retail.
The AIRB Project is one of the Group’s most significant project areas and, as such, it was provided
with a structure that calls for the involvement of the top Corporate Bodies, both of the Parent Bank
and of the subsidiary Banks, directed and coordinated by a Steering Committee that is attended by
the Bank’s top management.
The adoption of the internal rating based method to calculate capital requirements, instead of the
standardised method currently adopted by the BPVi Group, is a further fundamental improvement in
the credit risk management process, complementing external ratings, recognised in the standardised
method and available for a limited number of counterparties, with sophisticated risk measurements
devised by the banks themselves and “validated” by the Supervisory Authority.
Internal rating based models, already in use in the BPVi Group for management purposes, have
undoubted advantages over the use of external ratings, because they are the summarised result of the
analysis of a broad range of information about brokers’ own customers and they also enable to assess
- 21 -
the creditworthiness of entities that typically are not assigned external ratings, e.g. small and medium
enterprises.
The adoption of advanced methods also brings about many other benefits in terms of corporate
management. Among these benefits is the enhancement and better integration of corporate processes
and controls pertaining to managing, monitoring and issuing credit and of strategic and operational
planning processes, the more punctual measurement of capital absorption connected with individual
lending operations, as well as an improvement in the sales approach through pricing policies that are
calibrated according to customer risk measurements obtained with the advanced methods prescribed
by the Supervisory Regulations.
In the first half of 2014, the BPVi Group achieved the significant goal of launching New Rating
Systems (models, processes, procedures, regulations) developed with a view to AIRB for all credit
risk segments: Large Corporate, Sme Corporate, Sme Retail, Small Business and Private.
The Working Group also started the activities for the development of the new data quality
management system, establishing the Data Quality Management AIRB Committee and a dedicated
organisational structure.
To support and sensitise the Network in the Group’s path to change, and to illustrate the main
changes made, between April and June 2014 specific training courses were administered on the new
models and processes for the Small Business and Private counterparties, in line with the courses
administered at the end of 2013 in preparation for the launch of the New Rating System for Company
counterparties in January 2014.
The Project continues with activities in line with the defined plan: in upcoming months, the AIRB
system will be consolidated and the control functions will be tested.
OTHER INFORMATION
The Comprehensive Assessment
As is well known, Banca Popolare di Vicenza is one of Italy’s leading credit institutions (out of 128
European credit institutions from 18 Member States) to be subjected to the single direct supervision
of the ECB from November 2014 onwards and which, therefore, are currently undergoing the
“Comprehensive Assessment”, lasting one year, carried out by the ECB in collaboration with
national Supervisory authorities.
The goals of the Comprehensive Assessment are threefold: enhancing the quality of information
available on the condition of banks, identifying and implementing any necessary corrective actions,
assuring all stakeholders that banks are fundamentally sound and trustworthy.
In detail, the assessment process has been divided into three specific examination activities:
General analysis of risks (Supervisory Risk Assessment), completed at the end of 2013 and
aimed at identifying the risk profiles of individual banks and the key latent risks in individual
financial statements, with the goal of providing the bases for the future single supervisory
mechanism.
Asset Quality Review (AQR) completed in early April and directed at analysing lending and
financial assets.
Stress test: the complementary and final phase of the AQR, directed at examining the resilience
of banks’ balance sheets to stress scenarios.
In particular, the purpose of the Asset Quality Review (AQR) is to assess the adequate level of
provisions on credit exposures, to determine the appropriate value of collateral and to evaluate
complex financial instruments. Operationally, this assessment phase consisted of a process of
selection of the portfolios (of credit exposures and securities) with the purpose of identifying the
- 22 -
areas of greater risk to be subjected to a subsequent examination phase in which, after a general
validation of the information sources (data integrity validation) aimed at assessing the soundness of
IT and organisational procedures, the collateral and classifications were reviewed and the provisions
were evaluated (credit file review). Early in the year (in March), the largest exposures were
considered, whereas in the months from April through June, the examined sampled was gradually
expanded. The results of the credit file review will be projected by the European Supervisory
Authority over the entire credit portfolio, for the purposes of the year as a whole.
The AQR has required an intense effort on the part of the central offices (with particular regard for
the Credit, Accounting, Organisation and Risk Management areas) and network organisations,
leading to the establishment of integrated work teams located at the General Management Office and
called upon promptly to respond to the requirements of the Bank of Italy’s inspectors, who in turn are
coordinated by the European Central Bank. In addition, the entire asset quality review process was
carried at Group level and it involved specialised Banca Nuova and Farbanca personnel in the teams
coordinated centrally at the General Management Office in Vicenza.
After completing the Asset Quality Review, the subsequent stress test phase was started and it is still
outgoing; this is an analysis process that, taking as its starting point the results of the aforesaid AQR,
is aimed at assessing financial institutions’ ability to absorb any negative developments on the
markets, especially in terms of their balance sheets. For the purposes of the stress test, two scenarios
will be applied: a “baseline” scenario, i.e. based on the current economic projections of the European
Commission, and an “adverse” scenario that assumes a stress situation with economic deterioration
compared to the “baseline” scenario. At the end of the tests, the pro-forma CET 1 Ratio will be
quantified for the purposes of the exercise; in the baseline scenario, it may be no lower than 8%, while
in the adverse scenario, i.e. in the more critical scenario for the bank, it may be no lower than 5.5%.
The results of the stress tests and, more in general, the outcome of the Comprehensive Assessment
as a whole shall be disclosed to the banks and the public at large next October, before the formal
start, expected in November, of the European Single Supervisory Mechanism.
Banca Popolare di Vicenza’s Ratings
On 18 December 2013 the rating agency DBRS assigned, for the first time, a long term rating of BBB
(low), and a short term rating of R-2 (low). The outlook is negative for both ratings. Therefore, the
rating assigned by the Canadian agency places BPVi in the “investment grade” category. The rating
by DBRS reflects the adequate and stable market position of the BPVi Group with the Retail
customers and with the SMEs in the main industrial regions of Italy’s North-East, and the risk profile
consistent with its nature as a retail and commercial bank and the quality of the assets in line with the
average of the banking system. The Canadian rating agency nonetheless noted that Italy’s challenging
economic situation has gotten both the Group’s financial performance and its profitability under
pressure.
Rating's agency
Fitch Ratings
DBRS
Long term
Short term
Outlook
Date
BB
B
Stable
16/07/2014
BBB (Low)
R-2 (Low)
Negative
18/12/2013
Notes
First rating
On 4 March 2014 the rating agency Standard & Poor’s updated the rating of Banca Popolare di
Vicenza, confirming the long-term debt rating at BB, the short term to B and the outlook as
- 23 -
“negative”. On this same occasion, Standard & Poor’s, at BPVi’s request, withdrew the rating. On 18
February, within the scope of a rationalisation of the relations with rating agencies, subsequent to the
acquisition of the rating from DBRS, Banca Popolare di Vicenza informed the same agency that it
intended to withdraw from the existing agreement with it.
On 16 July 2014, Fitch Ratings as part of its annual revision of the ratings of Italian medium-sized
banks, updated its rating of the Parent Bank, changing the rating on medium/long term debt from
BB+ to BB and the Viability Rating from bb+ to bb, confirming the short-term rating at B. The outlook
was improved from “negative” to “stable”. The rating reflects the deterioration in asset quality and
the low coverage levels. Fitch recognises that the flow of new impaired loans was reduced in 2014,
but deems that the capital strengthening measures carried out would be necessary to offset the
potentially high loan adjustments that may emerge within the Asset Quality Review currently being
performed by the ECB. The stable outlook, instead, reflects the capitalisation level and the signs of
normalisation of the Italian operating environment. Lastly, Fitch stressed that BPVi is rooted in one of
the wealthiest, most industrialised areas of the Countries, where the density of exporting enterprises,
which are the engine of the Italian economy, is high.
- 24 -
OPERATIONAL STRUCTURE
TERRITORIAL PRESENCE OF THE BANCA POPOLARE DI VICENZA GROUP
This section of the Report on Operations provides information about the territorial presence and
positioning of the branch network and the changes in employment by the BPVi Group.
Traditional distribution channels
In June 2014, the BPVi Group’s network consisted of 657 branches, situated in 15 regions and 67
provinces throughout Italy, accounting for 2.1% of the national total, up from 2.0% at the end of 2013.
Trend of BPVI's Group branches
628
492
500
99
100
61
67
637
638
633
639
657
640
640
3
1
1
94
94
93
1
1
1
1
528
106
106
107
107
95
103
92
94
94
525
541
543
545
563
dec2010
dec2011
dec2012
dec2013
jun2014
2
1
80
332
333
345
dec2004
dec2005
dec2006
429
436
436
dec2007
dec2008
dec2009
BPVI
Cariprato
Banca Nuova
BCF
Farbanca
As shown in the above chart, in June 2014 the BPVi Group increased the number of its branches by
17 compared to 31 December 2013 (640 branches), both by external acquisitions and continuing the
initiatives to reposition the branches geographically. In the first half of 2014, the Parent Bank
acquired, on 1 January 2014), 1 branch located in Turin from Banca Popolare di Spoleto and 16
branches, on 1 June 2014, from Cassa di Risparmio di Ferrara, of which 14 are situated in Lazio (13 in
Rome and 1 in Guidonia Montecelio in the province of Rome) and 2 in Emilia Romagna (1 in Forlì and
1 in Cesena: heretofore, the Group had no presence in this province).
In addition to these acquisitions, in the first part of 2014 the Parent Bank opened 2 new branches (in
the provinces of Padua and Venice) and closed another one (in the province of Treviso).
In the first six months of 2014 Banca Nuova opened 1 new branch (in the province of Messina) and
closed 2 branches (in the provinces of Messina and Trapani), bringing its total number of branches in
Italy to 93 (77 in Sicily, 15 in Calabria and 1 in Rome).
- 25 -
The geographical distribution (regions and provinces) of the BPVi Group’s branches is shown below.
The 5 top provinces in terms of number of branches are, in order: Vicenza (95 branches), Treviso
(52), Brescia (36), Udine (36), and Padua (33).
Geographical distribution of
BPVi's Group branches
30/06/2014
31/12/2013
Change
Veneto
of which Vicenza
of which Treviso
of which Padova
of which Verona
of which Venezia
Friuli Venezia Giulia
of which Udine
of which Pordenone
Lombardia
of which Brescia
of which Bergamo
of which Milano
Emilia Romagna
Liguria
Piemonte
Trentino Alto Adige
NORTHERN ITALY
259
95
52
33
31
27
64
36
14
89
36
24
13
18
5
3
2
440
258
95
53
32
31
26
64
36
14
89
36
24
13
16
5
2
2
436
1
0
-1
1
0
1
0
0
0
0
0
0
0
2
0
1
0
+4
Toscana
of which Prato
of which Firenze
of which Pistoia
Marche
Umbria
Lazio
of which Roma
CENTRAL ITALY
90
31
22
8
1
2
30
27
123
90
31
22
8
1
2
16
13
109
0
0
0
0
0
0
14
14
+14
1
1
77
28
17
15
94
1
1
78
28
18
15
95
0
0
-1
0
-1
0
-1
657
640
17
Abruzzo
Puglia
Sicilia
of which Palermo
of which Trapani
Calabria
SOUTHERN ITALY
TOTAL
- 26 -
The following table shows the changes during the year in the Branch network of each Group bank.
Trend of BPVi's Group branches
30/06/2014 31/12/2013
Change
Banca Nuova
Farbanca
563
93
1
545
94
1
+18
-1
+0
Total
657
640
17
Third Party Networks and the other sale channels of the BPVi Group
In addition to branches, the BPVi Group’s sales network includes 15 finance shops 4 (11 Banca Nuova
and 4 BPVi Multicredito), 29 private customer points5 (25 for BPVi and 4 for Banca Nuova), 1
financial space for Prestinuova, totalling 702 outlets.
From 2013 onwards, a programme for the evolution of the BPVi Group’s distribution model was
launched, providing, inter alia, the enhancement of the networks of freelance professionals
(Financial Promoters and Financial Agents) in support of the branches’ operations, with the goal of
acquiring and gaining the loyalty of a significant number of new customers, both private and small
business, assuring high levels of service and adequate risk management. At 30 June 2014 the network
of financial promoters consisted of 120 professionals (56 for BPVi and 64 for Banca Nuova), 17 more
than in December 2013, while at the same date the number of agents operating with the new
company of the BPVi Group called “BPVI Multicredito Agenzia in Attività Finanziaria Spa” consists
of 200 professionals (168 at 31 December 2013).
Other BPVi's Group distribution
channels
30/06/2014 31/12/2013
Finance Shops
Private Customer Points
Financial Spaces (Prestinuova)
Financial Promoters
Financial Agents
15
29
1
120
200
4
14
32
3
103
168
Change
1
-3
-2
+17
+32
Permanent operating point open to the public where the Bank allows one or more Financial Promoters and/or Agents
appointed with a specific agency agreement to carry out their professional activities exclusively for the bank.
5
Permanent operating point open to the public, dedicated to the operating management of Private Banking customers.
- 27 -
Presence abroad
The BPVi Group has 6 Representative Offices abroad, whose purpose is to facilitate commercial
transactions between Italian companies and the principal international markets, providing
appropriate services for entrepreneurs intending to expand in those areas, and to develop lasting
business relations with the principal and most experienced banking counterparties in these countries.
The offices are located in Hong Kong (China), operating since the Eighties, Shanghai (China), since
2005, New Delhi (India), since April 2006, Sao Paulo (Brazil) operating since January 2011, New York
(USA), operating since mid-October 2011, and Moscow (Russian Federation), opened in October
2013. The BPVi Group also has a subsidiary in Dublin (Ireland), called BPV Finance (International)
Plc, specialised in proprietary trading, which carries out its activities investing in financial
instruments, with a medium-long term perspective, and issuing loans to foreign subsidiaries of
companies that are the Group’s customers.
In Countries where the BPVi Group operates Representative Offices and in the others where it does
not maintain a direct or indirect presence, to provide the best support to companies in international
markets, cooperation agreements have been signed with 71 foreign banks with a total network of
approximately 85,000 branches, located in 47 Countries, including: Australia, Austria, Argentina,
Afghanistan, Albania, Belarus, Bosnia Herzegovina, Bulgaria, Canada, Chile, China, Korea, Croatia,
Ecuador, Egypt, Russian Federation, Philippines, Georgia, Japan, India, Indonesia, Iraq, Kosovo,
Macedonia, Malaysia, Morocco, Mexico, Mongolia, Peru, Poland, United Kingdom, Czech Republic,
Romania, Serbia, Slovakia, Slovenia, Spain, South Africa, United States, Taiwan, Thailand, Tunisia,
Turkey, Ukraine, Hungary, Venezuela, Vietnam.
In the first half of 2014, Banca Popolare di Vicenza entered into 5 cooperation agreements: with the
Ecuadoran bank, Banco Pichincha – Quito, with the Thai bank, Krung Thai Bank of Bangkok, with
the English bank Lloyd’s Bank of London, with the Mongolian bank Golomt Bank of Ulaanbaatar
and with the major Austrian banking group, Raiffeisenbank International – of Vienna. In particular,
the cooperation agreement recently signed with the Raiffeisenbank Group allows to assist customer
companies, mainly SMEs, in all 15 Countries of Central-Eastern Europe where the Austrian group is
active, with over 3,000 Branches.
The BPVi Group also has 4,259 correspondent bank relationships with banks located in 154
Countries, 93 account relationships with banks located in 45 Countries and 507 banks with credit
lines, located in 83 Countries. Through the Irish subsidiary BPV Finance International PLC in
Dublin - Ireland, the banking group is also able to assist the foreign subsidiaries of the Bank’s
customer companies.
- 28 -
HUMAN RESOURCES
At 30 June 2014 the BPVi Group had 5,526 employees, 63 more than in December 2013, an increase of
+1.2% (+28 employees compared to June 2013, i.e. +0.5%).
The breakdown of the changes in number of employees of the companies of the BPVi Group in the
first half of 2014, shown in the following table, shows that the Parent Bank had 107 more employees
compared to the end of 2013, mostly because of the acquisitions of the Turin branch from Banca
Popolare di Spoleto (10 employees) and of the 16 branches (14 in Rome and 2 in the province of Forlì
and Cesena with a total number of 68 employees) from Cassa di Risparmio di Ferrara, and of the
reorganisation and efficiency-boosting initiative carried out with respect to the investee
Prestinuova, which led to the entry of 19 employees into the Parent Bank.
At the investees Banca Nuova and Servizi Bancari, the “Solidarity Fund” was activated for
personnel fulfilling pension requirements; this initiative enabled to neutralise the entry into Banca
Nuova of the employees who came from Prestinuova as a result of the reorganisation and efficiencyboosting activity (11 employees) and entailed a reduction in the number of employees of Servizi
Bancari.
Staff
30/06/2014
31/12/2013
6M change
Number Comp. % Number Comp. %
Banca Popolare di Vicenza (1)
n.
%
30/06/2013
Number
YoY Change
n.
%
4,474
81.0%
4,367
79.9%
107
2.5%
4,397
77
1.8%
715
12.9%
719
13.2%
-4
-0.6%
719
-4
-0.6%
28
0.5%
28
0.5%
0
0.0%
29
-1
-3.4%
5,217
94.4%
5,114
93.6%
103
2.0%
5,145
72
1.4%
PrestiNuova
10
0.2%
41
0.8%
-31
-75.6%
67
-57
-85.1%
BPV Finance
7
0.1%
7
0.1%
0
0.0%
6
1
16.7%
BPVI Multicredito
0
0.0%
0
0.0%
0
n.s.
0
0
n.s.
NEM SGR
9
0.2%
7
0.1%
2
28.6%
3
6
200.0%
245
4.4%
259
4.7%
-14
-5.4%
241
4
1.7%
38
0.7%
35
0.6%
3
8.6%
36
2
5.6%
309
5.6%
349
6.4%
-40
-11.5%
353
-44
-12.5%
5,526
100.0%
5,463
100.0%
63
1.2%
5,498
28
0.5%
Banca Nuova
Farbanca
BANKS TOTAL EMPLOYEES
Servizi Bancari
Immobiliare Stampa
OTHER COMPANIES TOTAL EMPLOYEES
TOTAL EMPLOYEES
(1) The data at June 2013 refered to the Parent Company includes also BPVi's Fondi SGR and Nordest Merchant's staff, which were incorporated on 26th of November 2013
The distribution of personnel of the Central Offices of the Group’s Banks at 30 June 2014, as
shown in the following table, was not significantly different from the end of 2013: approximately
80% of personnel are employed with the branch Network, whilst the remaining 20% work at the
Central Offices, or are not assigned to any office at this time (seconded, on maternity leave, on leave
of absence, etc.).
- 29 -
30/06/2014
BANKS EMPLOYEES
Branch
network
Banca Nuova
Farbanca
BANKS TOTAL EMPLOYEES
Corp.
Center
31/12/2013
Other (1)
% Branch Branch
network
Corp.
Center
Other (1)
% Branch
3,539
738
197
79.1%
3,464
698
205
79.3%
604
85
26
84.5%
607
86
26
84.4%
15
11
2
53.6%
14
12
2
50.0%
4,158
834
225
79.7%
4,085
796
233
79.9%
(1) Includes employees transferred in other companies or on leave, etc.
The breakdown of Group employees by professional category at 30 June 2014 shows that there are 96
executives (-2 compared to December 2013), i.e. 1.7% of the Group’s total number of employees, 2,290
managers (+11 compared to December 2013), i.e. 41.4% of the total, and 3,140 clerical and other
employees (+54 compared to December 2013), i.e. 56.8% of the Group’s employees.
Employees by professional
category 30/06/2014
Category
Senior
managers
Managers
Remaining
staff
Other staff (1)
Total
Banca Nuova
Farbanca
PrestiNuova
BPV Finance
BPVI Multicredito
NEM SGR
Servizi Bancari
Immobiliare Stampa
77
10
0
0
1
0
2
3
3
1,882
295
8
5
1
0
4
80
15
2,514
408
20
5
5
0
3
159
20
1
2
0
0
0
0
0
3
0
4,474
715
28
10
7
0
9
245
38
TOTAL
96
2,290
3,134
6
5,526
1.7%
41.4%
56.7%
0.1%
100.0%
Composition %
(1) Includes employees belonging to the first Area and the first two levels of second Area
At 30 June 2014 the “effective” employment of the BPVi Group, considering the employees of the
Group companies as well as persons on secondment and project workers, totalled 5,546 persons, i.e.
67 more than at 31 December 2013 (+1.2%) and 26 more than in June 2013 (+0.5%).
The following table shows changes reflecting substantially the comments already made in relation to
the trends in the number of employees of the Group’s companies.
- 30 -
The following table shows the actual workforce of BPVi Group companies at 30 June 2014.
30/06/2014
Permanent Staff
Banca Pop. di Vicenza (2)
Banca Nuova
Staff (a)
seconded at
seconded at
other BPVi's
other
Group
companies
companies
(c)
(b)
seconded
from other
companies
(d)
31/12/2013
Other staff
(1)
(e)
Permanent staff
(a-b-c+d+e)
Permanent
Staff
30/06/2013
Permanent
Staff
Change
Change
4,474
40
2
9
16
4,457
4,362
95
4,399
58
715
9
0
5
3
714
723
-9
723
-9
Farbanca
28
0
0
5
2
35
34
1
34
1
PrestiNuova
10
0
0
3
0
13
23
-10
48
-35
BPV Finance
7
0
0
0
0
7
7
0
6
1
BPVI Multicredito
0
0
0
3
0
3
1
2
0
3
NEM SGR
9
0
0
1
0
10
10
0
9
1
245
2
0
23
1
268
280
-13
260
8
38
1
0
4
0
41
40
1
42
-1
5,526
52
2
52
22
5,546
5,479
67
5,520
26
Servizi Bancari
Immobiliare Stampa
TOTAL
(1) Includes contract workers
(2) The data at June 2013 refered to the Parent Company includes also BPVi's Fondi SGR and Nordest Merchant's staff, which were incorporated on 26th of November 2013
Management and development of Human Resources
In relation to the personnel management of the BPVi Group, the first half of 2014 was mainly
characterised by the start of the projects for the aggregation of the Turin branch acquired from Banca
Popolare di Spoleto and of the 16 Branches acquired from Cassa di Risparmio di Ferrara, within
which on the job training an integration work was arranged with the involvement of the personnel of
the BPVi commercial Network by the establishment of dedicated Task Forces.
Among the significant initiatives from the viewpoint of personnel management, of note is the
activation of Product Specialists dedicated to promote commercial efforts within the scope of
consumer credit (personal loans, lending secured against one fifth of salary/pension, loans with
repayment automatically deducted at source), identified among the Network personnel of Banca
Popolare di Vicenza and of Banca Nuova.
Other significant initiatives of the first half of 2014, which had an impact in terms of personnel
management, were the adoption of a new data quality management system as part of the progress of
the AIRB (Advanced Internal Rating Based) Project and the qualitative and quantitative
enhancement of the Risk Management Department, carried out consistently with the Regulatory
Provisions dictated by Bank of Italy Circular no. 263/2006 as subsequently revised.
With regard to “development” activities, of note, inter alia, was the continuation of the Managerial
Training Academy, a curriculum that since November 2013 has involved 16 young colleagues from
the commercial network of Banca Popolare di Vicenza, designated for positions of direct
responsibility.
Another noteworthy initiative, in particular because of its innovative aspect, is the one intended for
Bank Executives: the project carried out by a primary Consulting Firm, by “innovative” means such as
live webinars and access to a well-stocked online library, has the objective of promoting professional
development on managerial issues.
- 31 -
During the first half of the year, moreover, an individual and group development initiative
continued, involving Heads of Regional Offices in coaching and team working activities, with the
support of outside consultants, aimed at the growth of managerial skills.
Lastly, of note is the continuation of a significant initiative for the evaluation and development of
skills, aimed at 215 persons among Managers and Workers in Central Management offices: once the
skills survey was completed, the training and development stage commenced, with colleagues
involved in differentiated initiatives aimed at enhancing their skills and competencies.
Training activities within the BPVi Group
The training activity of the Group for the first half of 2014 continued on the same track as the
previous year, with the completion of ongoing projects and the execution of particular, specific
training initiatives in response to changes in the environment.
One of the most significant projects started in the first half of the year, with the involvement of
colleagues from the Network, is the “Objective Finance” project, addressed to the Group’s Customer
Managers, which will lead to the certification of financial competencies. The training activity has
regularly begun and it will presumably continue throughout 2015 as well.
Another particularly significant project of the first half was the completion of the training curriculum
called “Moving Target”, started in the second half of 2013, addressed to the Managers of “star”
branches and aimed at enhancing the competencies of colleagues who have taken on more
responsibility than they had previously. Overall, the project involved approximately sixty Branch
Managers.
In our Company, the A-IRB (Advanced Internal Rating Based) Project is fully underway; it involves,
inter alia, administering specific training on the subject. Approximately 2,000 colleagues from Banca
Popolare di Vicenza, in various positions, have been involved and have received the related training,
with an extremely high participation rate.
In the first half of the year, moreover, a significant investment was made on the front of knowledge of
the English language.
As usual, training initiatives of various nature, directed at enhancing and developing the technical
and specific skills associated with various positions, also continued. For example, the following
training initiatives were planned: courses on credit management, on Anti Money Laundering
regulations, on the CAI regulations, a curriculum for the Certification of Financial Competencies and
specific courses for Private Banking Managers on the subjects of Family Business and Asset
Protection.
Summarising, during the first half of the year more than 14,010 days of training were administered
in all to employees of the BPVi Group’s Banks (over 11,780 in the Parent Bank alone), in line with the
training activities carried out in the first half of 2013.
Labour-management relations
On the topic of labour-management relations, it should be pointed out that the supplementary
company agreement, valid for all Group companies, was defined in the first half of 2014. The
agreement makes it possible to benefit from unified rules for the employment of personnel working
in the Group, with a view to developing human resources and controlling costs.
Along with the supplementary company agreement, additional agreements were also executed for
the obtainment of financing for the training administered and for accessing the benefits provided by
the Solidarity Fund in relation to the suspension of the work schedule.
- 32 -
In addition, an agreement was signed to regulate the transfer of the employment contracts of the
Cassa di Risparmio di Ferrara personnel involved in the business unit sale that took place on 1 June
2014.
Lastly, the agreement necessary to comply with the prescriptions of the Data Protection Authority
concerning the use of IT systems.
RESEARCH AND DEVELOPMENT
In view of its business and industry sector, the BPVi Group does not generally carry out research and
development as such. As a result, it has not recognised any intangible assets or costs in this regard.
The routine implementation and update of the product catalogue, designed to ensure that each
business offers a complete range of products and services in line with those of major competitors, and
the revision of procedures and internal processes to ensure that the operational structure functions
adequately, do not result in new or significantly improved products, services or processes with
respect to those already present on the market, since they are not the result of research and
development in the strict sense.
- 33 -
SYSTEM OF STRATEGIC CONTROLS AND AUDITING
THE SYSTEM OF INTERNAL CONTROLS AND AUDIT FUNCTIONS
The 15th Revision of Bank of Italy Circular no. 263 of 2006 “New regulations for the prudential
supervision of banks”, issued on 2 July 2013, introduced the new Supervisory Regulations concerning
“Internal Control System”, “Reporting System” and “Operating Continuity”.
The Regulations defined a comprehensive framework of standards and rules undergirding the
Internal Control System, consistent with international best practices and with the recommendations
of the main international bodies (Financial Stability Board, Basel Committee on Banking Supervision,
EBA).
The Internal Control System consists of the set of functions, organisations, resources and processes
directed at assuring, in compliance with sound and prudent management and through an adequate
process for identifying, measuring, managing and monitoring corporate risks, a business
management that is sound, proper and consistent with the pre-set objectives.
The Internal Control System is a fundamental element to assure the protection of the company’s
capital, the efficiency and effectiveness of corporate processes and operations, the credibility of
financial disclosure and compliance with laws and regulations.
The current Supervisory Regulations for internal controls define the ICS (“Internal Control System”
as a fundamental element of the comprehensive bank governance system; it assures that activities are
carried in accordance with corporate strategies and policies and in compliance with the standards of
sound and prudent management.
The controls involve, with different roles, the Strategic Supervision Body, the Management Body, the
Control Body, the Governance Committees and all Group personnel and they are an integral part of
day to day activities. These “controls” must be identified with the goal of mitigating the inherent risks
existing in corporate processes and, consequently, assuring the correct execution of corporate
operations.
The Internal Controls structure comprises the following three tiers:
Line controls;
Risk management controls;
Internal audit.
Line controls
The purpose of line controls is to ensure the correct execution of operations, also by applying a
control involving a check of the regular execution of the processes. They are carried out by the
operating structures themselves (e.g. hierarchical, system-wide and sampling controls) also through
different units reporting to the heads of the operating structures, or performed within the back office;
insofar as possible, they are included in IT procedures.
Line controls, be they carried out by real persons or through IT procedures, can be further
distinguished into:
First level line controls: these are carried out directly by those who perform a certain activity,
or by the IT procedures supporting that activity;
- 34 -
Second level line controls: carried out by persons who do not actually perform the operations
but are tasked with supervising them (“risk owners”). In particular, second level line controls
comprise:
o Functional controls: carried out by corporate structures separate from the operating
structures; they include the functional controls carried out within the scope of specialist
back-office or support activities (e.g., controls carried out by back office units on Network
operations;
o Hierarchical controls: carried out by corporate roles hierarchically above those responsible
for the operation (e.g. controls carried out by Network Managers on operations carried out
by the operators reporting hierarchically to them).
Risk management controls
Risk management controls serve the purpose of ensuring, inter alia:
the correct implementation of the risk management process;
compliance with the operating limits assigned to the various Functions;
the corporate operations’ compliance with regulations.
The Functions tasked with performing these controls are separate from the productive functions; they
contribute to the definition of the risk governance policies and of the risk management process.
Specifically, these controls are carried out by the Corporate risk management Control Functions, as
defined by Bank of Italy (Compliance, Risk Management, Anti Money Laundering and Validation)
and by the Functions that, according to provisions of law, regulations, bylaws or self-regulation, have
prevalent control duties (Financial Reporting Manager).
In particular, with reference to the Corporate risk management Control Functions, the objectives of
the controls are set out below, according to the corporate structures tasked with performing them:
concurring in the definition of risk management methods, check compliance with the limits
assigned to the various operating functions and check the consistency of the transactions carried
out by each production unit with the risk/yield objectives allocated to them (Risk
Management); concurring in monitoring the performance and stability of the first pillar internal
risk management systems used to calculate capital requirements (Validation Function);
concurring in the definition of methods for measuring/assessing the risk of non compliance
with regulations, verifying that corporate processes are capable of preventing the violation of
externally imposed regulations (laws, regulations, etc.) and voluntarily adopted regulations
(codes of conduct, codes of ethics, etc.) (Compliance);
concurring in the prevention of risks connected with use of the financial system for the purpose
of laundering the revenues from criminal activities and financing terrorism, in accordance with
the reference regulations (Italian Legislative Decree no. 231/07) (Anti-money laundering).
Internal audit
The Internal Audit activity serves the purpose of identifying violations of procedures and
regulations, as well as periodically assessing the completeness, functionality, adequacy (in terms of
efficiency and effectiveness) and the reliability of the Internal Control System. Another purpose of the
activity is to bring potential improvements to the attention of the corporate Bodies, with particular
reference to risk governance policies, to the risk management process and to risk measurement and
control instruments. Based on the results of its own controls, the Internal Audit Function submits
intervention requests to corporate structures.
- 35 -
This type of control is carried out by the Internal Audit Function, which operates throughout the
Group. In compliance with independence requirements, this Function reports hierarchically to the
BPVi strategic supervisory Body and, functionally, to the BPVi Control Committee, to the BPVi
control Body and to the BPVi management Body.
The Internal Audit Department is based on:
an Inspection Team, tasked with verifying, on site or remotely, behavioural compliance with
regulations, internal procedures and corporate standards and expressing merit assessments
with respect to certain cases. In addition to serving its main purpose of assessing the internal
control system with respect to “compliance with regulations and corporate standards”, the
inspection activity is also carried out in the interest of the process analysis performed by the
Auditing Team, as well as in the interest of the oversight activity performed by other control
Bodies and Functions (Board of Statutory Auditors, also in its capacity as Supervisory Body,
Control Committee, second level control Functions) or strategic supervision and management
roles (Board of Directors, General Managers). In organisations characterised mainly by
territorial distribution models, as in the BPVi Group, inspections are fundamental in the policy
for the mitigation of credit, financial, operational, and legal/reputational risks.
With regard to the inspections carried out on the Distribution Network of the BPVi Group, in
the first half of 2014 a total of 140 routine inspections were carried out (109 at the Parent Bank
and 31 at Banca Nuova), consisting of on-site audits on Branches, on Private Customer Points
and on Financial Promoters, remote credit audits, etc.
Additionally, a series of in-depth surveys and remote analyses was also carried out (a total of 97
interventions at the Group level), with focus on specific events (e.g., robberies, cases of internal
or external fraud, customer and/or employee operations, etc.). In detail, 63 in-depth surveys
were carried out on Banca Popolare di Vicenza (of which 23 involved the entire Group), 25 on
Banca Nuova, 7 on Farbanca, 2 on Prestinuova;
an Auditing Team, focused on the “core” activity of internal auditing, which consists of the
execution of audits directed at assessing the functionality of corporate processes (rules,
procedures and organisational structures) and the operations of the Central Offices. It is also
focused on advisory activities in support of the Corporate Bodies and the Corporate Functions
of the Group’s Banks and Companies in the definition of internal controls, formulating
proposals for improving the risk control and management processes and corporate governance.
With regard to the activity carried out by the Auditing team, 20 audits of processes and central
offices were carried at Group level out in the first half of 2014, while 7 more are still ongoing.
The audits involved the processes belonging to the credit area (1 audit), finance (6 audits), ICT
(3 audits), governance and support (3 audits), operational processes (3 audits) and second level
controls (4 audits). To these were then added the extraordinary audits carried out within the
scope of the AIRB project.
Auditing is also responsible for performing periodic audits on the adequacy and effectiveness of the
second level control Corporate Functions, on the adequacy and compliance of the risk management
and control system, including the assessment of the effectiveness of the process for defining the Risk
Appetite Framework (RAF), on the compliance of the Internal Capital Adequacy Assessment Process
(ICAAP) and of the Advanced Internal Rating Based (AIRB) Models with the requirements set by
regulations, on the adherence of remuneration and incentive practices with respect to current
provisions and to the policies put in place by the Board of Directors of the Parent Bank.
The Internal Audit Function is carried out centrally by the Parent Bank’s Internal Audit Department
for all Companies in the Group, on the basis of specific outsourcing service agreements and
formalised SLAs. In particular, during the period an audit was carried out on NEM SGR and Servizi
Bancari.
- 36 -
With regard to the activity carried out by the Control Committee of the Parent Bank, in the first half
of 2014, it held 9 meetings, one of which was a joint session with the Supervisory Body of the Parent
Bank.
Some of the main topics discussed were: the New regulations for the prudential supervision of banks
(15th Revision of Bank of Italy Circular no. 263/2006); the Update of the Asset Quality Review; the
Disclosure on the progress of legal disputes concerning compound interest and usury; the Plan of
Activities for the year 2014 of the various second and third level control functions; the periodic
reports on the activities carried out by the Internal Audit, Compliance, Anti Money Laundering
functions and by the Financial Reporting Manager; the periodic reports prepared by the Risk
Management functions on the risk profile of the loan portfolio, on market, interest rate, liquidity,
operational risks, related parties and equity investments that may be held.
In addition, the reports about the audits carried out by the Internal Audit Function, by the
Compliance Function and by the Anti Money Laundering Function were brought to the attention of
the Control Committee.
The Control Committee was constantly informed of the monitoring activity pertaining to the
implementation of the initiatives identified in view of the audits performed by the Internal Audit,
Compliance and Anti-Money Laundering Functions.
In the first half of 2014, the 231/01 Supervisory Body of the Parent Bank held 4 meetings, one of
which was a joint session with the Control Committee of the Parent Bank. In the course of the
meetings, the Supervisory Bodies discussed, inter alia, the revision of the 231 Organisational Model,
the training initiatives carried out in 2013 and those planned for 2014, the 15th Revision of Circular no.
263/2006 in relation to the attributions of the functions of the 231/01 Supervisory Body to the Control
Body, the initiatives carried out with respect to the Management of Health and Safety in the
Workplace, periodic reports on the activities performed by the Internal Audit function, by the
Compliance function and by the Anti Money Laundering function, and the audits conducted by these
Functions that have relevance for the purposes of safeguarding against risks per Legislative Decree
no. 231/2001.
Within the scope of the initiatives connected with the enforcement of the New Regulations for the
Prudential Supervision of Banks with regard to the Internal Control System, Reporting System and
Operating Continuity per the 15th Revision of Circular no. 263 of 27 December 2006, on 22 April 2014
the Board of Directors of the Parent Bank resolved to abolish the 231/01 Supervisory Committee,
assigning its functions to the Board of Statutory Auditors.
Lastly, no reports of possible violations of the Organisational Model for the prevention of crimes
pursuant to Italian Legislative Decree 231 were received during 2013.
- 37 -
GROUP COMPLIANCE AND ANTI-MONEY LAUNDERING FUNCTIONS
The Bodies of the parent bank Banca Popolare di Vicenza, in exercising their prerogatives with regard
to “taking Group-level strategic decisions on the management of risks of non compliance with
regulations (i.e. the risk of incurring judicial or administrative penalties, material financial losses or
reputation damage as a consequence of violations of mandatory or self-imposed rules) and of the risk
of money laundering and terrorism financing”, have established the “Group Compliance Function”
and the “Group Anti Money Laundering Function”.
The Group Compliance Function assures a second level control in the prevention and management
of risks of non compliance with rules, with a view to preserving the good name of the Banca Popolare
di Vicenza Group and the public’s confidence in its operational and managerial integrity,
contributing to the creation of corporate value. The Parent Bank’s Compliance Function performs this
role also on behalf of the Group’s companies that are obligated to establish this Function because they
are recipients of the obligations set out by current provisions regulating the matter.
The Group Anti Money Laundering Function also assures a second level control in preventing and
contrasting the execution of recycling and terrorism financing transactions, in the interest of the entire
Banca Popolare di Vicenza Group. The Parent Bank’s Anti Money Laundering Function performs this
role also on behalf of the Group’s companies that are obligated to establish this Function because they
are recipients of the obligations set out by the Instruction promulgated by the Bank of Italy on 10
March 2011.
The Group organisational Model of the Compliance and Anti Money Laundering Functions is
centralised for all Banks, the SGR of the Group (since 1 December 2013, only NEM SGR S.p.A.), and
for the companies PrestiNuova and BPVi Multicredito Agenzia in Attività Finanziaria S.p.A. (only
Anti Money Laundering Function) and it calls for the appointment of single Contact Persons for the
two Functions with the Subsidiaries.
On 10 September 2013, the Revision of the Regulations, function statements and SLAs of the two
Functions was submitted to the Board of Directors for approval, consistently both with the results of
the Project called “Accountability of the risk of non-compliance at Group level” carried out in 2012
and with the Instructions of the Bank of Italy (15th Revision of Circular no. 263 of 27 December 2006
promulgated on 2 July 2013) entitled “Internal control system, reporting system and operating
continuity”.
In line with these Provisions, which will enter into force, to a large extent, on 1 July 2014, the most
significant change indicated in the Regulations of the Compliance Function within the scope of
regulatory compliance pertains to the “opening” of the Function’s scope of operations.
In addition, in the course of the same session, the new Group policy on contrasting money laundering and
terrorism financing was approved; it defines responsibilities, duties and operating procedures in the
management, at Group level, of the risk of money laundering and terrorism financing.
Lastly, on 4 February 2014 the Board of Directors approved a refinement of the operating model of
the Anti Money Laundering Function, in relation to the entry into force, on 1 January 2014, of the Bank
of Italy Instruction introducing implementing provisions for adequate customer verification. In particular, a
dedicated Office was established, located in Prato, away from the Group’s head office, in order to
achieve a clearer separation, within the Function, between the control activities and reporting and
active collaboration with the Authorities.
- 38 -
In the first half of 2014, the Compliance and Anti Money Laundering Functions performed the
activities for which they are responsible, as prescribed in the respective 2014 Compliance Plan and
2014 Anti Money Laundering Plan, both through preventive assessments (ex ante activities) and
through continuous monitoring and dedicated audits (ex post activities).
The Group Anti-Money Laundering Function also performed the duties traditionally carried out by
the Anti Money Laundering Team (analysis and transmission of suspicious transaction reports;
remote checks of the precise compliance, by sales Network persons, with anti–money laundering
provisions, forwarding notices of violations of the rules on the use of cash and bearer securities to the
Ministry of the Economy and Finance and response to requests from the Authorities).
During the year, the attention was focused ever more closely on regulatory changes and the related
organisational revisions, also through participation in numerous projects and interdisciplinary work
groups, as well as on advisory support within the scope of the most important projects carried out by
the bank (first and foremost in relation to the new capital increase initiated in May 2014). Moreover,
the activities connected with the project called “adequate customer verification” coordinated by the
Anti Money Laundering Function, and launched following the promulgation of the aforementioned
Bank of Italy Instruction of 3 April 2013.
At Group level, the initiatives for the modification of products and processes and the new product
proposals were then evaluated (through the release of “Compliance Opinions for the Products and
Wealth Management Committee”). Additionally, draft Board of Directors resolutions pertaining to
sensitive cases in terms of non-compliance risks and the Commercial Directives about to be
promulgated were evaluated. In relation to these ex ante advisory activities, as at 30 June 2014 a total
number of 96 interventions had been released (comprising “Alerts”, “Compliance assessments”,
“Compliance statements”, “Opinions” and “Due diligence”) for the regulatory contexts of Operations,
Governance & Administration and Financial Markets & Investments, as well as 5 anti money
laundering interventions.
Continuous monitoring activities have enabled to enhance the safeguards and they are leading to a
gradual improvement of the predictive effectiveness of the anomaly indicators available to the
Compliance Function to carry out its audits and plan its initiatives. Monitoring is focused, in
particular: on the data flows originated by the audits performed by the Internal Audit Department
and by line control Personnel at the Group level; specific excerpts in the MiFID Area pertaining to
questionnaires, orders and securities movements; the assessment of adequacy and effectiveness for
the management of conflicts of interest; the rates and conditions applied to verify compliance with the
usury-prevention rules; data on the complaints received from customers at the Group level and
checks on the financial promoter network. As at 30 June 2014, a total number of 58 monitoring results
were released for the areas under the responsibility of the Compliance Function.
The interventions of the Anti Money Laundering Function (40 monitoring actions during the period)
instead pertained to compliance in terms of adequate customer verification, transaction records,
reports of suspicious transactions and limitation to the use of cash.
With regard, instead, to the audits carried out (“Compliance audits”, “In-depth surveys” and
“Follow-ups”) a total number of 11 interventions were carried out for compliance and 15
interventions for anti money laundering.
- 39 -
THE FINANCIAL REPORTING MANAGER AND THE PRINCIPAL CHARACTERISTICS
OF THE SYSTEM OF RISK MANAGEMENT AND INTERNAL CONTROLS OVER
FINANCIAL INFORMATION (also pursuant to article 123-bis, paragraph 2 (b) of the
Consolidated Financial Markets Act)
This section describes the principal characteristics of the “Model for the Governance and Control of
the BPVi Group’s administrative and accounting processes”, which is an integral part of the Banca
Popolare di Vicenza’s system of internal controls and designed to guarantee the credibility, accuracy,
reliability and timeliness of financial information.
The definition of the “Model for the Governance and Control of the BPVi Group’s administrative and
accounting processes” was guided by:
the preliminary identification of a recognised and well-known comparative model;
comparison with reference practices defined or referred to by institutional bodies6;
comparison with domestic and international best practices adopted by organisations
comparable with the BPVi Group.
Based on the Model that has been defined, the Financial Reporting Manager’s operations will develop
along a cycle of sequential activities (the “DP cycle”7), which aims to place the administrative
accounting processes under a plan, assess the adequacy and functionality of the related audits,
ascertain/declare the corporate accounting disclosures required by Law with the knowledge deriving
from the existence/adequacy of processes and the actual performance of accounting controls.
The phases of the cycle of activities fall under the responsibility of the Financial Reporting Manager
who, however, under his direct supervision and coordination, draws on support from other business
functions, including the Internal Audit Department and the Organisation and Safety Department, in
order to increase efficiency while minimising the resources required.
The work performed by the Financial Reporting Manager during the first half of 2014 was in line with
the established program.
On the basis of a web-based application, the Financial Reporting Manager obtained the internal subcertification by the Control Owners on the actual execution of the administrative and accounting
audits during the half year. The Financial Reporting Manager also obtained the certifications of those
responsible for the assessment processes and the results of the audits carried out by other control
functions on behalf of the Financial Reporting Manager.
Analysis of the above processes identified that the Group’s exposure to administrative-accounting
risk is compatible with the requirements to provide correct financial information.
The results achieved provide reasonable certainty to both senior management and the Financial
Reporting Manager that the aforementioned business processes which generate accounting
information are properly monitored and that the related controls have been implemented
effectively, thus enabling the Financial Reporting Manager to certify the accounting information
reported in the 2014 condensed interim consolidated financial statements.
The COSO Report – “Internal Control Integrated Framework” developed by the Committee of Sponsoring Organizations of the Treadway
Commission, comprising the principal US professional accounting and auditing associations was used as a reference for defining the
Financial Reporting Manager's Model. It represents a methodology for the analysis and evaluation of the system of internal controls
recognized at an international level and recommended by ANDAF (National Association of Finance Directors) in a specific position paper,
as well as by ABI in Circular 13 dated 27 April 2007.
7 The operational activities comprising the “DP cycle” are grouped in terms of sequence, nature and purpose into the phases indicated
below:
Phase 1 - Assessment of business controls (Entity Level Control) established by the administrative-accounting Model;
Phase 2 - Definition of scope and planning of activities;
Phase 3 - Formalisation/update of administrative-accounting processes;
Phase 4 - Assessment of risks and design of accounting controls, as well as monitoring of the plan for corrective action (Risk &
Control Assessment);
Phase 5 - Test of controls;
Phase 6 - Assessment of process controls and preparation of the declaration/certification.
6
- 40 -
RISK MANAGEMENT
This section of the report presents key information about the work performed by the Group in the
first half of 2014 to manage banking and financial risks.
The purpose of the Risk Management function is to measure and control risks, both at an individual
level and on a consolidated basis. This mission involves:
the definition and development of models and tools for the measurement and control of
risks at Group level, as well as the systematic and continuous verification of the adequacy of
the risk management models and tools used, while also monitoring developments in the
regulatory framework;
verification that the risk profiles of the Group’s banks and companies comply with the limits
established by the respective Boards of Directors, and by the Board of Directors of the Parent
Bank with regard to the overall risk profile for the Group.
In particular, with reference to credit and concentration risk, the risk management function develops
rating models, and takes part in the definition of methodologies for estimating the general provisions
needed with reference to the related components of risk. More generally, the function also provides
support for the definition of credit measurement methodologies for accounting purposes, with the
exclusion of the “analytical” component. Additionally, the Risk Management Function monitors
changes in the risk profile of the loans portfolio at a consolidated level and for each Group bank. This
activity includes the preparation of monthly and quarterly reports, respectively for senior
management at Group banks and for the respective Boards of Directors. Moreover, when defining the
Risk Appetite Framework (RAF) approved by the Board of Directors, the Risk Management Function:
defines, jointly with the Loans Division, the thresholds of attention and the operating limits
pertaining to the risk level of the performing loans portfolio, as well as the single name and
geographic and industry concentration level;
identifies the “critical industries”, for which specific credit policies are applied and for which
the same Function annually defines specific credit line limits.
In the first quarter of 2013, on the basis of the feasibility study carried out in the final months of 2012,
the A-IRB Project (where A-IRB stands for Advanced Internal Rating Based) was formally launched
with the aim of completing the shift to advanced credit risk management methods.
Concerning counterparty risks, the main activities of the Risk Management Function consist of
proposing a limit in terms of maximum capital absorption within the scope of the definition of the
Risk Appetite Framework; said limit is submitted to the Board of Directors for approval and
periodically monitored by the Risk Management Function.
With regard to market risks, the main activities of the Risk Management Function are to propose,
together with the Finance Function, a system of VaR, stop-loss and operational limits that are
consistent with the Risk Appetite Framework approved by the Board of Directors. The function also
monitors, on a daily basis, compliance with the aforesaid VaR limits, validates and documents the
sources of, and the processes for gathering market data, determines and validates the methodologies
adopted for pricing the financial instruments used by various entities within the Group, and
determines the fair value, for accounting purposes, of most financial instruments held as assets.
In relation to interest rate and liquidity risks, the Risk Management Function develops strategic
Asset & Liability Management (ALM) models and tools, establishes, together with the Finance
Function, operational limits and early warning thresholds consistent with the risk propensity
expressed by the Board of Directors, produces daily and monthly reports for the Corporate Bodies
- 41 -
and Top Management, and conducts hedge effectiveness tests on asset and liability line items under
hedge accounting, and produces liquidity risk indicator for regulatory purposes which, starting from
this year, will be reported to the Supervisory Authority. The Risk Management Function also
prepares, monitors and updates the Contingency Funding Plan, or revises if necessary.
With regard to operational risk, the Function defined a framework for their management, based, on
one hand, on the assessment of the 1st and 2nd level organisational controls, through a self-risk
assessment, and on the construction of the so-called Risk Map and, on the other hand, the loss data
collection procedures at Group level.
Lastly, with reference to the risks underlying the equity investments that may be held and to Risk
assets with Related Parties, the Risk Management Function, in line with the risk policies set forth in
2012, monitors compliance with the maximum exposure limits defined within the scope of the Risk
Appetite Framework approved by the Board of Directors.
Risk profile of the BPVi Group
Consistently with the self-assessment of capital adequacy (ICAAP process) and taking into account
changes in the operating environment, the Board of Directors of the Parent Bank approves, at least
once a year, the Risk Appetite Framework, which defines the Group’s risk propensity, as part of the
strategic planning and budgeting process. In the first half of 2014, the BPVi Group continued the
activities prescribed by the Masterplan deriving from the Gap Analysis carried out as a result of the
publication of the 15th Revision of Bank of Italy Circular no. 263/2006; among the planned initiatives,
of note are the refinement of the overall Risk Appetite Framework, for example with the introduction
of new risk metrics. These changes, which have already been incorporated in the internal regulations
of the Group, shall be applied in the definition of Risk Appetite for the year 2015.
The following discussion covers the management and monitoring of the principal types of risk to be
applied to the Risk Appetite Framework in force in 2014.
Credit risk
Credit risk is defined as the risk of loss due to an unexpected deterioration in the creditworthiness
of a borrower, whether as a result contractual non-performance or otherwise.
With regard to the way credit risk is managed, the BPVi Group approved a policy that describes the
methodologies for the measurement of risk, the roles and responsibilities of the committees and
business functions involved, and the related management reports.
In the first half of 2014, the BPVi Group implemented a new rating system developed in 2013 as a
result of the activation, on the basis of the feasibility study carried out in the last quarter of 2012, of a
project, called A-IRB (Advanced Internal Rating Based) Project, aimed at accomplishing the shift to
advanced methods in the management of credit risk. The internal rating represents a summary
assessment, for the coming year, of the credit quality of the customer expressed as a probability that
the counterparty may become insolvent. This assessment is expressed on internal classification scales
(one for each rating segment) consisting of 11 rating classes for performing accounts and 1 residual
class for those in default. A probability of default is associated with each rating class. The rating
classes are ordered according to credit risk: moving from a lower risk class to a higher risk class
means an increase in the probability of default by the debtor.
The BPVi Group has developed internal rating models that primarily cover the types of
counterparties with which it usually works and to which it is most exposed. These models involved
the following customer segments: retail counterparties, divided into small businesses (mostly
- 42 -
comprising sole traders) and SME Retail (entities with revenues between Euro 0.7 million and Euro
2.5 million), and corporate counterparties, divided into SME Corporate (entities with revenues
between Euro 2.5 million and Euro 150 million) and Large Corporate (entities with revenues above
Euro 150 million). These models were completed during the first half of 2014 and released to all
Group banks.
The adoption of the new rating system is accompanied both by a more structured and comprehensive
preparatory phase of the credit process, and a new procedure for assigning the rating, the “RA –
Rating Attribution”, present in the branch Desktop and called up by the PEF within the granting
procedure.
Upon defining the Risk Appetite Framework of the Group for 2014, and for more effective credit risk
monitoring, a threshold was defined for expected loss levels of the loans portfolio, and the critical
industries were updated, also introducing a maximum credit line threshold for them. The Critical
Industries are those sectors that, based on assessments made on data originating outside and inside
the Bank, exhibit system risk elements that make it appropriate to apply specific credit policies.
Routine monitoring activities are based on the GDC (Credit Management) instrument, aimed at
defining an advanced model for managing loan books based on predetermined strategies (goals,
actions and timing) according to the level of customer risk. This IT tool supports account managers,
allowing them to check on changes in the credit status of customers, and quickly identify any
deterioration in the standing of borrowers. This management tool is based on an Early Warning
monitoring system which promptly identifies anomalies that are indicators of possible deterioration
in customers’ creditworthiness. In greater detail, categories have been identified that include
positions that, while still performing, exhibit performance anomalies: in the last months of 2012, the
“Watch” (SOR) class was established; with a view to rationalising the anomalous credit process and
classes, it partially incorporated the “Observation” – OS - and “High Risk” – AR – classes (the latter
expresses a higher risk level than the former). This action followed, in terms of time, the positive
introduction, in 2012, of the “Pre – Past Due” category, which enabled to carry out focused initiatives
on positions - previously mainly classified as “Observation” and “High Risk” - which had been
continuously above the allowed limit for more than 40 days. Moreover, in light of the current
economic environment, taking into account the growing need to stipulate debt restructuring
agreements with customers, using both the legal instruments introduced by the Bankruptcy Law
reform of 2005 and its subsequent implementing provisions (debt restructuring agreements in
accordance with Article 182-bis of the Budget Law and recovery plans in accordance with Article 67.3,
Letter D) and ordinary debt restructuring operations in general, the class called “To be restructured”
was introduced. These positions are subject to specialised management by dedicated Bank Functions.
In addition, the management of loans is governed by “Lending Policies” that specify how the Bank
intends to accept credit risk in relation to its customers, covering both the granting and the renewal
phases of the lending relationship. The purpose of the policies is to facilitate the balanced growth of
lending to lower risk customers, while limiting, or taking particular care over, lending to customers
that are less creditworthy. In particular, four different credit policies were identified: “development”,
“management and protection”, “re-balance” and “disengagement”. The assessment is made by the
authorised functions, while the system automatically establishes, based on the internal rating and
environmental score taken together, the powers of the network authorisation committees based on
the level of risk (lower powers in the case of high risk and greater powers in relation to more
creditworthy customers).
Lastly, the standard reports on the dynamics of anomalous loans are, via the intranet, now available
to individual account managers within the commercial network.
- 43 -
In January 2013 the Board of Directors of the Parent Bank resolved to carry out the project aimed at
shifting to advanced credit risk measurement methods (Advanced Internal Rating Based – AIRB),
as required by the supervisory regulations in compliance with Basel 2 principles. This project,
launched in the early months of 2013, is aimed at enhancing and more completely integrating,
through the development of processes, procedures and models for credit risk management, the
processes and corporate safeguards pertaining to credit management, monitoring and granting, as
well as strategic and operational planning processes.
Concentration risk
Concentration risk is defined by the BPVi Group as the risk deriving from a concentration of the
exposures in the loans portfolio towards counterparties and groups of counterparties in the same
industry or exercising the same activity or located in the same geographic area. There are two types
of concentration risk:
single name concentration risk (concentration to parties belonging to the same economic group
and/or connected);
sectorial concentration risk (concentration towards particular industries and/or geographic
areas).
Exposures to banks and supervised intermediaries in accordance with Article 107 of the Consolidated
Law on Banking and Lending.
Upon defining the Group’s Risk Appetite Framework for 2014, operating limits and thresholds of
attention were set with respect to the single name concentration levels. In the single name
concentration risk, analysis is focused on companies belonging to the supervisory portfolios
“Companies and other parties”, “Short-term exposures to companies”, and the exposures to
companies contained in the “Past-due loan” and “Exposures guaranteed by real estate” portfolios, as
indicated in the supervisory instructions. Additionally, at the management level the positions with
borrowings exceeding Euro 60 million (Banca Popolare di Vicenza) and exceeding Euro 20 million
(Banca Nuova) are monitored.
The BPVi Group also defines, still within the scope of the Risk Appetite Framework, an attention
threshold relating to the geo-sectorial concentration of the loan portfolio (sectorial concentration
risk). In the sectorial concentration risk, concentration by sector is monitored, using the breakdown
provided by the proposed method of the ABI Study and Research Centre.
The counterparty risk
Counterparty risk is the risk that the counterparty to a transaction involving specified financial
instruments will default prior to settlement (see Title II, Chapter 3 of Bank of Italy Circular 263/2006
as subsequently revised). More in particular, the counterparty risk emerges in the presence of certain
types of transactions with the following characteristics:
the generated risk exposure is equal to any positive fair value generated by the transaction;
they have a market value that changes over time according to the underlying market
variables;
they generate an exchange of payments or the exchange of financial instruments or goods for
payments.
With regard to the way counterparty risk is measured and monitored, the BPVi Group has defined a
dedicated policy that identifies the methodologies for the measurement of risk, the roles and
responsibilities of the corporate Bodies and Functions involved, and the related management reports.
To monitor the counterparty risk within the Risk Appetite Framework, the Group uses the related
- 44 -
consolidated capital requirement calculated according to the supervisory regulations, inclusive of the
Credit Valuation Adjustment (CVA) on transactions involving OTC derivatives, or a capital add-on to
take into account potential impairments deriving from a change in the credit rating of the
counterparty in an OTC derivative contract. The calculation of this additional requirement was
introduced by Regulation (EU) No. 575/2013 of the European Parliament and of the Council
(commonly also known as CRR).
The counterparty risk monitoring prescribed by the Risk Appetite Framework of the BPVi Group
provides for calculating absorption both in normal situations and in predefined stress situations.
Market risk
Market risk is the risk of incurring an adverse change in the value of exposure to financial
instruments, included in the trading portfolio for supervisory purposes, due to unfavourable changes
in risk factors (interest rate curves, interest rate volatility, exchange rates, stock prices, stock market
volatility, yield curves, inflation curves, commodity prices).
With regard to the way market risk is managed, the BPVi Group approved a dedicated policy that
describes the methodologies for the measurement of risk, the roles and responsibilities of the
corporate Bodies and Functions involved, and the related management reports.
For the quantification of market risk, and the consequent definition of the limits, the BPVi Group has
long applied a model based on the Value at Risk (VaR) approach, calculated in full evaluation
through the historic simulation, this method implies the revaluation of the risk position conveyed by
the sensitivities of the portfolio with the shifts in the market parameters that actually occurred in the
last year. The application of the 99% confidence interval to the distribution of probabilities of Profit &
Loss (hereafter P&L) thus obtained, determines the VaR with holding period of 1 day. To test the
forecasting efficiency of the results of the VaR, a backtesting activity is carried out which enables to
compare the loss estimated from the calculation model with the P&L figure resulting from the
revaluation of the position with the actual market data. The analysis pertains to the so-called clean
backtesting approach, which compares the VaR calculated at time t to estimate the expected loss for
time t+1 with the P&L change computed using market parameters between time t and time t+1 for the
same portfolio.
The method for measuring financial risks through the VaR is valid under normal market conditions
and is not capable of providing an adequate measurement of market risks in extreme situations which
may be prejudicial for the Bank’s financial position and income. For this reason, the need arises to
carry out additional analyses to assess the capability of absorbing the effects deriving from significant
shocks in the markets. This type of analysis takes the name of stress test and consists of a revaluation
of the portfolio imposing extremely adverse values, defined according to discretionary logic, to the
risk factors. The VaR then aims t define the risk present in market conditions that have historically
occurred, whereas the stress test tries to quantify the risk existing in market conditions that are
extreme or not contemplated in the reference historical series. The stress test is, de facto,
complementary to the VaR and it measures potential vulnerability upon the occurrence of
exceptional, improbable events that are nonetheless possible. The BPVi Group, in the definition of the
stress test scenarios used, has adopted a grid of extreme, symmetrical changes involving stock
markets, rate curves (parallel shift), trends in exchange rates, volatilities and credit spreads, in
addition to market crash scenarios that reproduce events that have actually taken place in the past.
Compliance with the limits set for VaR should cap, within the established confidence interval, the
maximum daily loss. An individual unit may comply with the established limits on daily VaR, and
report losses over a period of days that fall within these limits; however, the sum of the losses
- 45 -
accumulated over a given period of time may still be deemed excessive. This risk is tackled by
associating indicators with the daily VaR limits designed to monitor any losses arising over longer
periods (Stop Loss). This represents the maximum allowed loss that can be accumulated over a given
period of time (one month and the entire year), at a given level of authorization, without the need to
take specific action. Lastly, for completeness, additional operational limits have been defined in terms
of sensitivity, delta, vega, concentration and credit risk.
The Risk Management Function of the Parent Bank is responsible for the quantification and control of
the VaR limits, while the Financial Control function within the Finance Division of the Parent Bank is
responsible for the daily checking of operational and stop-loss limits.
During the first half of 2014, the Risk Management Function carried out routine monitoring of the
VaR limits as set when the Group’s Risk Appetite Framework was defined. This activity was carried
out for both the Parent Bank and BPV Finance (the only two Group companies with their own trading
books).
The above VaR and operational limits are determined with reference to each trading book. With
reference to the AFS (Available For Sale) portfolio, where investments of this kind are specifically
resolved by the Board of Directors of the Parent Bank, while it does fall under the notion of banking
book and hence is subject to monitoring of the interest rate risk through the ALM internal system, a
risk monitoring activity is carried out both through the VaR and through the use of other risk metrics.
With weekly periodicity, the Risk Management Function carries out a monitoring activity in relation
to the riskiness of the investments included in the aforementioned ceilings for the different
investments and to their level of use. This monitoring activity is the subject of weekly reporting to the
Finance and ALMs Committee and quarterly reporting to the Control Committee and the Board of
Directors.
During the first half of 2014, the VaR, calculated considering a 99% confidence level, with holding
period of 1 day, of the Parent Bank’s trading portfolio amounted, on average, to Euro 1.44 million
(36% in terms of absorption of the limit set to Euro 4 million within the Risk Appetite Framework).
Concerning instead the Covered Call aggregate, relating to the sale of bond options and equity
options with underlying securities in the banking book, the average VaR was Euro 4.43 million
(22.17% in terms of absorption of the limit set to Euro 20 million within the Risk Appetite
Framework). In relation to the subsidiary BPV Finance, the 1-day 99% VaR averaged Euro 651
thousand (26.05% in terms of absorption of the limit, set to Euro 1.2 million within the Risk Appetite
Framework). Within the backtesting activity, in the same period of analysis, no negative clean P&L
figure below the VaR figure was recorded.
Interest-rate risk
The interest rate risk is defined by the Banca Popolare di Vicenza Group as the possibility that
fluctuations in market interest rates may cause significant changes on the financial position and
the income of the bank. The aforesaid changes impact both on income and on balance sheet items, in
that they can change the net interest income (and the level of other operating costs and revenues,
sensitive to interest rates) and the value of the assets and liabilities that are sensitive to the interest
rate risk (and thereby the value of equity, obtained as the difference between the value of assets and
liabilities). Therefore, an effective measurement, control and management system, that maintains
exposure to the interest rate risk within prudential limits, is essential for the soundness of the bank
and for a correct definition of its risk appetite. The financial differences between the assets and the
liabilities present in the balance sheet of the bank, and consequently the potential exposure to interest
rate risk, derive both from customers’ preferences with regard to the financial characteristics of the
- 46 -
investment and debt instruments, and from the bank’s decisions regarding funding and lending
methods.
With regard to the way interest-rate risk is managed, the BPVi Group approved a dedicated policy
that identifies the methods for the measurement of risk, the roles and responsibilities of the corporate
Bodies and Functions involved, and the related management reports.
The Group’s exposure to the change in the interest-rate curve is monitored each month using
ALMPro ERMAS, an Asset & Liability Management tool, which measures in “static” conditions the
effect on the financial margin and equity of a change in interest rates. Operational and strategic
decisions regarding the banking book by the Finance and ALM Committee are designed to minimise
the volatility of the net interest income (considering current profits) expected over the financial year
(12 months) and of total economic value (considering the market value of the banking book) as a
consequence of changes in interest rates.
The Parent Bank’s Board is ultimately responsible for the management of interest-rate risk, as assisted
by the Finance and ALM Committee and the business functions responsible for the strategic and
operational management of such risk, both at Group level and at all individual companies within the
Group. The Parent Bank’s Board of Directors approves the strategic guidelines and operational limits
proposed by the Finance and ALMS Committee, and is periodically informed about changes in the
exposure to interest-rate risk and the way it is managed.
The Risk Management function inputs a complex and continuous flow of data into the Asset &
Liability Management system, and is also responsible for reporting and the monitoring of operational
limits. Lastly, the Finance Division is directly responsible for the operational management of interestrate risk.
Upon defining the Group’s Risk Appetite Framework, the Board of Directors defined, inter alia:
a limit on the indicator of exchange rate risk, both at Group level, and at the level of individual
companies, calculated as the ratio between the value of the banking book, as a result of a
parallel, immediate shock of the interest rate curves amounting to 200 basis points, and the
Regulatory Capital;
“thresholds of attention” for the representation of bucket sensitivity + 100 basis points at Group
level;
a “threshold of attention” for the negative change in net interest income over a time span of 12
months following a parallel, immediate shock of the rate curves amounting to +100 basis points;
“thresholds of attention” in relation to the potential negative Net Market Value of the portfolio
of derivatives pertaining to Cash Flow Hedge and Fair Value Hedge strategies.
In relation to the monitoring of the aforementioned limits, it should be pointed out that, as at 30 June
2014:
the Group’s exposure to the interest rate in terms of sensitivity +200 bps amounted to 21.6% of
the Regulatory Capital, within the set limit, i.e. 30%;
the thresholds of attention for bucket sensitivity +100 bps were all met, as was the threshold of
the negative change in net interest income over a time span of 12 months as a result of a parallel
and immediate shock of the rate curves of +100 basis points is equal to 2.1%, while the limit is
6%;
the risk exposure of all the companies of the BPVi Group was within the set limit;
the “thresholds of attention” for the potential negative Net Market Value of the hedging
strategies under Hedge Accounting were met.
- 47 -
Liquidity risk
The Banca Popolare di Vicenza Group has defined liquidity risk as the risk of being unable to meet
payment obligations, caused by inability to obtain funding (liquidity funding risk) and/or the
presence of restrictions on the ability to sell assets (market liquidity risk). This risk can also take the
form of a loss relative to fair value deriving from a forced sale of assets or, more generally, of a loss in
terms of reputation or business opportunities. Liquidity funding risk is incurred as the prevalent risk
in banking activities when institutional counterparties withdraw their usual funding, or request a
significantly higher return than in normal circumstances. Market liquidity risk, on the other hand,
relates to the risk that the Group may be unable to sell an asset, except at a capital loss, due to the
illiquid nature of the market and/or due to the timing required for the transaction.
With regard to the way liquidity risk is managed, the BPVi Group defined a dedicated policy that
describes the methodologies for the measurement of risk, the roles and responsibilities of the
corporate Bodies and Functions involved, and the related management reports.
The Risk Management function develops models and tools for the measurement of liquidity risk,
produces the daily operational maturity ladder and the monthly structural maturity ladder, and
analyses, maintains and develops the various reports produced, ensuring coordination with the
related functions within the Group’s Banks and Companies.
Following the activation of ALMPro ERMAS at the start of 2010, the Risk Management and Treasury
functions have developed a process for the integrated monitoring of liquidity risk. The high level of
automation in terms of both database input and report production fosters early monitoring of the
risk/operating limit indicators as set when the Group’s risk propensity was defined.
Upon defining the Group’s Risk Appetite Framework, and for more effective monitoring of liquidity
risk, a system of limits and “thresholds of attention” was defined: it is functional to the daily
monitoring of the operational liquidity position and the monthly monitoring of the structural
liquidity position. With regard to the monitoring of the Group’s daily liquidity, this system is based
on the calculation of the selected reference indicator, the Liquidity Coverage Ratio. This indicator
identifies, at Group level, the stock of uncommitted high quality liquid assets held by the Bank,
usable to cover Net Cash Outflows which the Bank might need to cover in the short term. With
regard to monitoring the Group’s structural liquidity position, the selected reference indicator is the
Net Stable Funding Ratio. This indicator identifies the ratio of Available Stable Funding to
Required Stable Funding, which are both calculated as the sum of capital cash flows in the banking
book expiring starting from the time bucket of 1 year, exclusive, up to the end of the time bucket in
which the Group operates.
Similar to structural liquidity issues is the monitoring of the capital balance, which within the Banca
Popolare di Vicenza Group is monitored by the Risk Management Function through the “ratio of
loans to direct deposits” and the “leverage ratio” (ratio between tier 1 capital and total assets in the
balance sheet and off-balance sheet).
In addition to the operating limits for monitoring liquidity risk, with a view to promote a more
precise management of liquidity risk, “thresholds of attention” are also defined on some structural
early warning alert indicators and on the level of concentration of the funding on individual
counterparties, for some types of funding.
- 48 -
In accordance with the “Policy for managing liquidity risk”, the Contingency Funding Plan is
prepared on a quarterly basis, with the purpose of highlighting, by applying two hypothetical
(specific and system) stress scenarios, the Group’s cumulative liquidity gap, thanks also to the start of
specific actions to obtain fund and to the adequacy of the Group’s liquidity reserves.
The operational management of liquidity risk is entrusted to a dedicated function within the
Finance Division of the Parent Bank, whose objective is to maintain the best balance between the
medium-term maturities of loans and short-term funding, while taking care to diversify it by
counterparty and maturity arranged over the counter and in the interbank deposits market. In
addition to usual banking treasury activities (daily monitoring of the Group’s liquidity and
optimization of its short-term management), any medium and long-term imbalances are managed
using appropriate policies established by the Finance and ALMs Committee. Additionally, the
Finance and ALMs Committee is provided a weekly report on the performance of the Loans/Direct
Deposit ratio as further support to monitor the Group’s structural liquidity.
Concerning the monitoring of risk appetite on the liquidity risk, at 30 June 2014, all operating limits
were met.
Operational risks
Operational risk is defined as the risk of losses deriving from inadequate or dysfunctional
procedures, human resources or internal systems, or external events. This category includes, inter
alia, losses deriving from fraud, human error, the interruption of operations, the malfunction and
non-availability of systems, contractual non-performance and natural catastrophes. Operational risk
also includes legal risk, but excludes strategic and reputation risk.
With regard to the way operational risk is managed, the BPVi Group has defined a dedicated policy
that identifies the methods for the measurement of risk, the roles and responsibilities of the corporate
Bodies and Functions involved, and the related management reports.
With regard to the monitoring of operational risks, the Parent Bank was a founding member in 2002
of DIPO, the interbank consortium promoted by ABI that maintains an Italian database of
operational losses. As a consequence, the Group gathers regular information about its operational
losses.
Although the Banca Popolare di Vicenza Group determines its prudent capital requirement for the
coverage of operational risk using the Basic Indicator Approach (BIA), a framework for the
measurement and management of operational risk has also been defined. As a consequence, it has
also been possible to define the “Risk Mapping and Classification Models”, the “Policy and
Governance of Operational Risk Management” and the “Self Risk Assessment Model”.
During the first half of 2014, the Parent Bank has continued to gather data on operational losses for
reporting to DIPO. Commencing from the June 2008 reporting date, Banca Nuova has gathered
information in the same way as the Parent Bank following the extension of activities to them and
adoption of the related regulations.
The risks underlying the equity investments that may be held
The new supervisory instructions on the matter of “Equity investments that may be held by banks
and banking groups”, introduced with the 9th revision of 12 December 2011 of Bank of Italy
Circular no. 263/2006 (Title V - Chapter 4), prescribe that the Control System adopted by banks shall
- 49 -
be capable of assuring the regulatory compliance and consistency of operations and of the
organisations with respect to the strategies defined by the Bank.
Accordingly, in 2012 the BPVi Group introduced a new set of regulations, consisting of the
“Regulations covering the Equity Investments that may be held by the Banca Popolare di Vicenza
Group” and the “Policy for managing the risks underlying the Equity Investments that may be held”,
to contain the risk of excessive illiquidity of the assets deriving from equity investments in financial
and non financial entities and to promote adequate management of risks and conflicts of interest in
accordance with sound and prudent management principles. The regulations are based on the
following fundamental elements:
–
the procedures for measuring and managing the risks underlying the equity investments
through the definition of the criteria for managing risk with reference to the roles and
responsibilities of corporate Bodies and Functions;
–
the procedures for monitoring the risks linked to the equity investment portfolio and
verifying the (regulatory and internal operational) limits assigned to the different operating
organisations and units;
–
the definition of the levels of risk propensity within the definition of the Group’s Risk Appetite
Framework;
–
the reports to corporate Bodies and Functions.
Concerning risk appetite, the Risk Management Function, with the input of the operating
organisations directly involved, annually submits for approval to the Parent Bank’s Board of
Directors the maximum limits of exposure for the individual management portfolios in which the
equity investments are classified and for individual exposures. The aforesaid levels of risk appetite
must reflect the strategic profile and the organisational characteristics of the BPVi Group.
Since the end of 2012, the Risk Management Function has performed 2nd level controls on compliance
both with Supervisory limits and with the operating limits set internally in the Risk Appetite
Framework on the basis of the information provided by the General Accounting Department. The
outcome of this control is reported to the Parent Bank’s Equity Investment Committee and Board of
Directors.
Risk Assets to Related Parties
To comply with the provisions of Title V - Chapter 5 of the 9th revision of 12 December 2011 of Bank
of Italy Circular no. 263/2006 (“New prudential supervisory instructions for banks”) on “Risk assets
and conflict of interest with respect to related parties” the BPVi Group has set down “Regulations for
Transactions with Related Parties” and a “Policy for Managing Risk Assets with respect to Related
Parties”.
In particular, this latter policy, in line with the regulatory provisions, is aimed at providing protection
against the risk that the nearness of certain persons to the Bank’s decision-making centres may
compromise the objectivity and impartiality of the decisions to issue loans and to carry out other
transactions with the same persons, with possible distortions in the resource allocation process,
exposure of the bank to inadequately measured or controlled risks, potential damage for depositors
and stockholders.
The same policy defines the internal policies the BPVi Group intends to apply for the assumption of
risks with respect to “Related Parties” and describes:
- 50 -
–
–
–
the steps and structure of the process for managing transactions with Related Parties, with
particular reference with the assumption of risks with respect to them;
the roles and responsibilities of the corporate Bodies and Functions to assure a correct
management of potential conflicts of interest inherent in transactions with Related Parties;
the reporting system addressed to company Bodies and Functions in relation to the management
of risks connected to transactions with Related Parties.
The core principles of the governance model of the BPVi Group within the assumption of risks with
respect to Related Parties, developed according to a logic consistent with the roles and responsibilities
defined in the ICAAP, prescribe that:
responsibility for defining the guidelines on managing the risks underlying transactions with
Related Parties shall rest with the Parent Bank’s Board of Directors;
the assumption of risks with respect to Related Parties shall be monitored centrally by the Parent
Bank with reference to the individual entities and to the Group as a whole;
individual entities shall comply with the guidelines defined by the Parent Company for the
assumption of risks with respect to Related Parties.
With reference to risk appetite, within the definition of the Group’s Risk Appetite Framework, the
Risk Management Function, with the input of the operating organisations directly involved, annually
submits for approval to the Parent Bank’s Board of Directors the maximum limits in terms of
maximum size of the Risk Assets with respect to Related Parties deemed acceptable in relation to
the Regulatory Capital, with reference to all exposures to Related Parties.
The Risk Management Function, within the scope of its own 2nd level controls, in the first half of 2014
started monitoring the risks connected with transactions with Related Parties, which entails the
following stages:
–
measuring the risks underlying exposures to Related Parties that may be mainly due to credit,
market and counterparty risks;
–
verifying compliance with prudential limits (regulatory limits) at the consolidated level and at
the individual Group bank level;
–
verifying compliance with the limits set in Risk Appetite Framework in terms of risk exposure
to Related Parties.
- 51 -
EXPOSURE TO STRUCTURED CREDIT PRODUCTS DERIVING FROM SECURITISATION
TRANSACTIONS ORIGINATED BY THE GROUP
At 30 June 2014 there were eleven securitisations originated by the BPVi Group and called Berica
Residential MBS 1, Berica 5 Residential MBS, Berica 6 Residential MBS, Berica 8 Residential MBS,
Berica 9 Residential MBS, Berica 10 Residential MBS, Berica ABS, Berica ABS 2, Berica PMI, Piazza
Venezia and Berica ABS 3 (the last one was carried out in 2014).
All the above securitisations were carried out pursuant to Italian Law no. 130/1999 through the
incorporation of a special-purpose entity (SPE) to which the securitised assets (portfolios of
mortgages and unsecured loans) were sold without recourse.
Moreover, the special purpose entities used by the Group within the scope of its securitisations would
fulfil the requirements for “control” in accordance with the new accounting standard IFRS 10.
However, said entities were not consolidated inasmuch as they all have immaterial financial values
relative to those of the Group and that the securitised assets, like the related liabilities, are already
included in the financial statements of the Group, since the various securitisations carried out 8 do not
meet the requirements prescribed by IAS 39 for “derecognition” since the Group substantially
retained the risks and benefits associated with the loans assigned.
In relation to the Berica ABS 3 securitisation completed in the course of the first half, the originators
(the Parent Bank BPVi and the subsidiary Banca Nuova) assigned a portfolio of performing
residential mortgages totalling Euro 1,044 million. The securitisation was completed in June with the
issue of Asset Backed Securities whose senior tranches (Euro 835.4 million in nominal terms) were
entirely placed on the market. In addition, in July the mezzanine tranches (Euro 93.9 million in
nominal terms) were also entirely placed on the market. The junior tranches instead were entirely
subscribed by the originators, in proportion to the share of loans assigned.
The following table shows the details of the exposures held by the Group as at 30 June 2014 deriving
from the Group’s own securitisations.
Exposures
SPE
(in millions of euro)
Berica Residential Mbs 1
Berica 5 Residential Mbs
Berica Abs
Berica Abs 2
Berica PMI
Piazza Venezia
Berica Abs 3
Total
senior
mezzanine
junior
Total
24.0
50.1
302.5
-
18.6
21.1
231.1
464.6
447.0
110.0
0.1
0.6
173.4
93.9
8.2
34.3
1.0
201.5
226.8
228.7
395.5
213.5
638.0
503.0
143.0
50.8
105.5
232.1
201.5
691.4
675.7
505.5
213.6
638.6
978.9
236.9
376.6
1,560.4
2,593.5
4,530.5
With the exception of the Berica Residential Mbs 1 transaction, carried out before 1 January 2004 and which, at
the time of first adoption of IAS-IFRS, the securitised assets were not “reinstated”, as provided by IAS 1.
8
- 52 -
All exposures considered (with the sole exceptions of those referred to the Berica Residential Mbs 1
securitisation) are not reported as assets since the aforesaid securitisations do not qualify for
“derecognition” under IAS 39. Therefore, the assets held were eliminated and the securitized assets
remaining on the date and the related liabilities were written back. The amounts indicated in the table
relate to the residual nominal values of the various tranches of ABS held by the Group and to the
residual amount recoverable in relation to the other exposures.
The following table shows the details of the securitised assets underlying the exposures held by the
Group as at June 2014 deriving from the Group’s own securitisations.
Securitized assets (net exposure)
SPE
Berica Residential Mbs 1
Berica Abs
Berica Abs 2
Berica PMI
Piazza Venezia
Berica Abs 3
Totale
Nonperforming
loans
Whatclist
loans
Restructured Past due
exposures
exposures
Performing
loans
Total
13.2
29.2
18.1
16.7
3.8
2.0
7.0
1.1
1.2
0.2
-
5.5
14.3
29.2
33.0
8.9
9.4
25.9
10.3
17.2
12.6
0.3
0.4
3.1
9.8
2.0
1.3
1.4
1.7
0.8
0.2
0.6
-
0.2
0.5
0.8
0.2
0.2
0.6
0.8
3.6
13.1
-
104.6
162.1
459.3
733.4
795.6
719.5
1,037.0
743.2
1,121.0
819.6
1,031.5
123.7
208.9
516.9
785.9
809.8
732.5
1,072.2
756.2
1,143.2
846.1
1,031.8
92.5
166.6
21.3
20.0
7,726.8
8,027.2
EXPOSURE AS INVESTOR TO STRUCTURED CREDIT PRODUCTS DERIVING FROM
SECURITISATION TRANSACTIONS ORIGINATED BY THIRD PARTIES
As at June 2014, the BPVi Group’s exposure to Asset Backed Securities deriving from securitisations
originated by third parties totals Euro 347.4 million. The table that follows shows the details of the
exposures held, divided according to the type of underlying securitized assets and to the degree of
subordination of the individual tranches of ABS held. For none of the aforesaid securitisations was
the special purpose entity consolidated, since the conditions prescribed by IFRS 10 are not met. All
exposures are recorded under “Loans and advances to customers” and none of them, in the period,
suffered any impairment losses to be recorded in the income statement in accordance with IAS 39.
Type of assets
securitized
RMBS
CMBS
ABS - Loans
ABS - Leasing
ABS - Other asset
Totale
Exposures
senior
mezzanine
junior
14.3
3.8
4.5
251.2
17.7
31.5
7.7
1.9
14.8
-
273.8
73.6
-
Total
32.0
35.3
12.2
1.9
266.0
347.4
The exposures of BPV Finance, totalling Euro 81.4 million, relate to various Asset-Backed Securities
deriving from Residential Mortgage-Backed Securities (RMBS) and Commercial Mortgage-Backed
- 53 -
Securities (CMBS), and to receivables deriving from leases and from collateralised loans to small and
medium enterprises. This subsidiary’s investment policy is to optimise the medium-term value of the
ABS, requiring that they be denominated in Euro and have a minimum rating of single A (unless
approved otherwise by the Board) at the time the investment is made. The geographical breakdown
of the assets underlying these transactions principally encompasses Western Europe and North
America. The total fair value at 30 June 2014 is Euro 79.5 million, representing a negative difference of
approximately Euro 1.9 million with respect to the carrying amount, mainly because of the
“repricing” of such securities in the financial markets and the absence of market liquidity. The
aforesaid difference did not affect the Group’s overall profits, because the entire portfolio held was
reclassified to “Loans and advances to customers” on 1 July 2008, in accordance with the amendments
to IAS 39 published by the IASB on 13 October 2008 and endorsed by the European Commission on
15 October 2008 in EC Regulation 1004/2008. At 30 June 2014, the residual negative reserves recorded
in a specific equity line item, amount to Euro 1.9 million, net of the related tax effect. For complete
disclosure, it is pointed out that value adjustments of Euro 6.8 million were carried out on the
aforesaid exposures in previous years.
The remaining exposures of Euro 266 million are held by the Parent Bank, Banca Popolare di Vicenza
(Euro 120.6 million) and Banca Nuova (Euro 145.4 million) and they mostly comprise ABS issued in
relation to securitisations arranged pursuant to Law no. 130/1999 and originated by construction
firms operating with public institutions, by the Palermo Chamber of Commerce and by Sicilian SMEs.
For the aforesaid transactions, the Group acted as arranger in the structuring of the transactions and
also acts as servicer, calculation agent, cash manager, paying agent and collection account bank for
nearly all of them. Also included, in the amount of Euro 84.7 million, is the ABS subscribed in relation
to the securitisation carried out by Banca Nuova Terra and completed during the half year, in which
the Parent Bank participated together with the other partner banks.
EXPOSURE TO SOVEREIGN DEBT SECURITIES
As a result of the growing interest of the market in exposures held by companies in sovereign debt
securities, and as recommended by the European Securities and Markets Authority (ESMA) in
Document no. 2011/226, the details of the related exposures held by the BPVi Group as at June 2014
are provided below. As indicated in the ESMA document, “sovereign debt” means bonds issued by
central and local governments and government entities, as well as loans issued to said parties.
Country
Exposures to sovereign debt
Italy
Financial assets held for trading
Financial assets available for sale
Totale
Argentina
Total
73.0
4,773.6
1.9
73.0
4,775.5
4,846.6
1.9
4,848.5
Exposures to Italian sovereign debt refer to Government bonds:
–
with fixed rate (Euro 713.9 million, of which Euro 100 million, in nominal terms, are subject to
fair value hedging, limited solely to the interest rate risk component);
–
with floating rate (Euro 206.3 million);
–
inflation linked (Euro 3,926.4 million, of which Euro 251.2 million referred to “BTP Italia” and
the remainder to “BTPei” subject to full hedging of the interest rate and inflation risk, partly in
fair value hedging and partly in cash flow hedging.
- 54 -
Lastly, the residual maturity of the aforesaid exposures is:
–
less than 5 years, for Euro 2 billion;
–
between 5 and 8 years, for Euro 2.5 billion;
–
over 8, years for Euro 0.3 billion.
As at 30 June 2014, sensitivity to changes of 1 bps in the Republic of Italy credit spread for
government securities classified as ”Financial assets held for trading” equalled approximately Euro 4
thousand, while for government securities classified as ”Financial assets available for sale”, the
aforementioned sensitivity equalled Euro 2.9 million.
INFORMATION ABOUT LENDING
The situation of the loan portfolio of our Group is presented below in terms of concentration,
geographical distribution and distribution by economic sector, together with a number of risk
indicators. The data used in this analysis were drawn from the financial statements and the
information reported to the Central Risks Database, including cash loans, guarantees and
derivatives. Group banks and companies are excluded from the aggregates, which however do
include all securitized mortgages, even if derecognised, in order to provide a complete picture of the
way the Group’s loans portfolio is structured.
Concentration of customers
The Group’s loans portfolio is well spread overall, with approximately 295 thousand positions, of
which approximately 276 thousand representing 93.5% of the total have facilities of no more than
Euro 250 thousand. The most numerous band, with facilities of up to Euro 25 thousand represents
52.8% of the total positions, an increase from 51.4% at the end of 2013. The proportion of classes from
Euro 26 thousand to Euro 250 thousand is 40.7%, down from 41.7% in December 2013, whilst facilities
above this latter threshold account for 6.5% of the total, versus 6.9% at the end of 2013.
Considering the amounts drawn down, instead, the bands with facilities up to Euro 25 thousand
account for just 3.4% of total loans granted by the Group (albeit increasing from 3.1% at the end of
2013), while the band from Euro 26 thousand to Euro 250 thousand is much larger (33.6% versus
32.9% in December 2013), and those drawing against greater facilities are at 63.0% (compared to
64.0% at the end of 2012). In particular, facilities in excess of Euro 5 million represent 26.6% of total
loans drawn down, a decline from 27.3% at the end of 2013.
Additionally, concerning the single name concentration risk the Group, in order to assure
appropriately fractioned positions, set specific limits on the total amount granted to customers or
groups of customers whose facilities exceed certain thresholds. In particular:
–
for the Parent Bank, the percentage of credit granted to counterparties, whether individual or in
the same group, with facilities exceeding Euro 60 million, must remain within a maximum limit
of 8% of the bank’s total facilities (net of those pertaining to banking and insurance Groups);
–
for Banca Nuova, the percentage of credit granted to counterparties, whether individual or in
the same group, with facilities exceeding Euro 20 million, must remain within a maximum limit
of 4% of the bank’s total facilities.
In June 2014 the limit had been widely met both by the Parent Bank (6.0%, with the limit at 8%) or by
Banca Nuova (1.8%, whereas the limit is 4%).
- 55 -
Briefly, the data of this paragraph confirm, yet again, the evolution of the Group’s portfolio in the
direction of greater granularity.
Geographical distribution
The geographical distribution of Group lending in June 2014 (excluding repurchase agreements),
considering the region/province of residence of individuals and the registered offices of legal
persons, did not change substantially since the end of December 2013, confirming the strong
concentration of the Group’s loans in its original home regions, like Veneto (39% of total loans, with
the Vicenza province at 16%) and Friuli V.G. (8%).
Distribution by region
Distribution by region
june 2014
Lazio
7%
Sicilia
9%
june 2014
Emilia R.
4%
Toscana
13%
Sicilia
9%
Other
regions
7%
Lombardia
13%
Lazio
6%
Emilia R.
4%
Toscana
13%
Other
regions
7%
Lombardia
13%
Veneto
39%
Friuli V.G.
8%
Veneto
40%
Friuli V.G.
8%
Among the other regions, of particular note is the importance reached by Lombardy and by Tuscany,
with 13% each, followed by Sicily with 9% and by Lazio with 7%. The positioning of the other Italian
regions was substantially unchanged.
Distribution by business sector
Analysis at Group level of the distribution of the loans portfolio by economic sector highlights, in
June 2014, a contraction in the weightings of “Non financial companies” (from 56.7% at the end of
2013 to 56.3%) and of “Financial Companies” (from 4.2% to 4.1%), with an increase in “Households”
(from 31.7% to 32.1%) and for “Personal Businesses” (from 6.7% to 6.8%), confirming the trend
towards higher granularity for the Group’s portfolio, as has been shown already in the paragraph
that discusses concentration.
Financial
Companies
4.1%
Households
32.1%
Distribution by sectors
Distribution by sectors
June 2014
December 2013
Personal
Businesses
6.8%
Other
Sectors
0.7%
Financial
Companies
4.2%
Non
Financial
Companies
56.3%
Households
31.7%
- 56 -
Personal
Businesses
6.7%
Other
Sectors
0.7%
Non
Financial
Companies
56.7%
Concerning “Non Financial Companies” and “Personal Businesses”, which together account for
63.2% of the Group’s loans, they are distributed in highly granular merchandise segments, called
ATECO. For ease of representation, in this Report on Operations these segments are grouped in
macro-segments with the most homogeneous possible characteristics within them.
In view of the above, within our Group ATECO macro-segments are characterised by the following
proportions of the total loan portfolio: “Construction and Real Estate businesses” account for 19.6% of
the total, followed by “Wholesale and retail commerce” with 11.5%, by “Other services” (mainly
personal services) with 5.7%, by “Metal working” (5.6%), by “Financial services and business
services” with 5.2%, by “Other light industry” (which contains industrial sectors other than metal
working, basic industry and textile and clothing) with 4.8%, by “Mining and basic industry” (3.8%),
by “Textile and clothing” at 2.6%, by “Farming” (2.3%) and, lastly, by the companies involved with
“Supply of electricity, gas, water, and waste treatment” with 2.1%.
Other risk indicators
With regard to performing loans, the main instrument for monitoring changes in risk conditions is the
Early Warning system, based on performance indicators of the relationship and on all the information
that comes from the IT systems of the Group’s banks and that can forewarn of a change in the risk
level associated with the counterparty. At Group level, then, the performing positions with
performance anomalies are classified as “Watch” and “Pre-Past Due” (continuous overdrafts
exceeding 40 days and below 90 days).
Concerning the evolution of these categories, the percentage of loans classified as “Watch” relative to
the total portfolio, declined from 6.8% to 5.6% between December 2013 and June 2014, whereas “PrePast Due” loans increased from 2.9% to 3.2%.
In addition, in October 2012 a new category of default loans was introduced, i.e. those To be
restructured (RSD), which includes positions undergoing restructuring and hence awaiting, once all
activities necessary to implement the restructuring agreement are completed, to be classified as
“Restructured”. The original status remains valid in any case for reporting and financial statements
purposes. This stated, at Group level the proportion of this category was 3.0% at the end of June 2014,
versus 2.5% in December 2013.
- 57 -
CORPORATE SOCIAL RESPONSIBILITY AND IMAGE
Banca Popolare di Vicenza and the community
Drawing on the funds allocated by the Shareholders’ Meeting for charitable donations, assistance,
culture and the public interest, during the first six months of 2014 a total amount of Euro 181,484.24
was paid out to 125 worthy causes. 23,2% of the initiatives involved healthcare and solidarity in
favour of disadvantaged social categories.
As for the destination of the funds, health care was once again in first place with 41.7% of the total,
followed by cultural initiatives and the recovery of the historical-artistic heritage (23.6%, by support
to educational, study and research initiatives (13.1%), by initiatives supporting volunteer associations
and local parishes (13.0%) and, lastly, by sporting and various other associations.
Institutional initiatives in support of the local economy
The leading role played by Banca Popolare di Vicenza in the areas where it operates was
characterised by many, highly valuable initiatives, e.g., in the first half of 2014, the institutional
support given to Entities and Trade Associations in Vicenza, of Veneto, of Tuscany and Liguria,
including: Confindustria Vicenza, Ascom Thiene, Confesercenti Prato and Confcommercio Genova.
Support to sports
In the sporting field, the Bank officially sponsored Vicenza Calcio (football), Real Vicenza, Rugby
Rovigo for the 2013-2014 season, Rugby Vicenza, the team Cavalieri Rugby of Prato, A.S.D. Circolo
Tennis of Vicenza and Pallacanestro Reggiana (basketball), and was a partner of Udinese Calcio,
supporting also the 14th Edition of the “Stravicenza” long-distance running event and to the first BPVi
trophy of the DIGA (Diplomatic & International Golf Association) of Rome.
Support to culture
Banca Popolare di Vicenza has always provided concrete support to culture; among its various
initiatives, of note is the partnership with La Fenice Theatre Foundation of Venice, of which the Bank
is an official partners, whereby tickets for La Fenice Theatre shows are sold in all BPVi branches, and
the Institute’s logo is reproduced on tickets and on all promotional support.
In the first half of the year, the Bank renewed its support to the “Vicenza Fiorita 2014” contest,
promoted by the Vicenza section of F.A.I., the Italian Environmental Fund, in collaboration with
Giornale di Vicenza.
Promotion of culture, art and the artistic treasures owned by the Bank
In the first half of the year, the Bank confirmed its commitment to culture, through a series of
significant initiatives, such as the many lectures held in Palazzo Thiene.
The first set of events was the traditional cycle of “Sunday Lectures” organised in the Bank’s
historical headquarters from 12 January to 2 February 2014, accompanying the 2013 Christmas
exhibition “Capolavori che ritornano. Una dinastia di pittori. Jacopo Bassano, i figli e la bottega. Capolavori
della Collezione Banca Popolare di Vicenza” (“Returning Masterpieces: a Dynasty of Painters. Jacopo
Bassano, His Sons and the Workshop. Masterpieces of the Banca Popolare di Vicenza Collection”).
The Sunday lectures by art historians delved into themes tied to the artistic production of the famed
Sixteenth Century workshop.
- 58 -
In January, the columnist Guido Salerno Aletta held a conference on economic topics, followed by the
two lectures by Paolo Savona, Professor Emeritus of Economic Policy, former Minister of Industry in
the Ciampi Government, and by Roberto Luongo, General Manager of the Italian Trade Agency
(ICE).
In addition, a concert was offered by the Bank in April, on Easter Day, with the participation of Solisti
Veneti conducted by Maestro Claudio Scimone, in the fascinating Basilica Cathedral of Prato.
Another cultural initiative was the “Palazzo Thiene Schools Project” for the 2013-2014 school year,
which continued throughout the first half of 2014. This project involved, once again, pupils from
schools in the Veneto and Friuli Venezia Giulia regions, and the provinces of Bergamo, Brescia,
Florence and Prato in a renewed and expanded range of educational visits to the palace and its art
collections. Over 5,000 students participated.
On the art front, to promote and publicise its artistic heritage, in the first half of the year the Bank
loaned some paintings from the BPVi Collections, including the beautiful work by Baldassarre
Franceschini, known as il Volterrano (the man from Volterra), “The Mystic Marriage of Saint Catherine
of Alexandria”, on the occasion of the exhibition entitled “I Papi della speranza” (“The Popes of
Hope”), at Castel Sant’Angelo in Rome.
Concerning the artistic heritage owned by the Bank, in accordance with its acquisition policy, directed
at returning to their original locations works at risk of becoming lost in art markets, among the many
purchases made was an important painting by Francesco Bassano, “L’elemento Fuoco: la fucina di
Vulcano” (“The Fire Element: Vulcan’s Forge”), shown in March at Palazzo Thiene and illustrated in a
lecture by Doctor Fernando Rigon, curator of the Bank’s artistic heritage.
Acquisitions continued in the numismatics field, with the intention of expanding the Bank’s collection
of Venetian coins; of particular note is the significant acquisition of the Giovanni I Corner gold
Zecchino, one of the two coins needed to complete the Bank’s collection of Venetian Zecchini.
In the first half of the year, approval was given for the great exhibition to be organised in the autumn
by BPVi, in collaboration with the Municipality of Prato, with the sponsorship of the Tuscany Region
and with the Patronage of the President of the Republic of Italy, at the prestigious Palazzo Pretorio
Museum in Prato. The initiative, entitled “Capolavori che si incontrano. Bellini, Caravaggio Tiepolo e i
maestri della pittura toscana e veneta della Collezione Banca Popolare di Vicenza” (“Masterpieces put
together: Bellini, Caravaggio Tiepolo and the painting masters of Tuscany and Veneto of the Banca
Popolare di Vicenza Collection” will put on display more than eighty of the Bank’s paintings,
including some that have never been exhibited to the public.
- 59 -
TRANSACTIONS WITH RELATED PARTIES, SIGNIFICANT NONRECURRING AND ATYPICAL AND/OR UNUSUAL TRANSACTIONS
In relation to disclosure on related-party transactions, significant and non-recurring events and
operations, and positions and transactions deriving from atypical and/or unusual transactions, as
prescribed by CONSOB Communication no. 6064293 of 28 July 2006 regarding “Disclosures by listed
issuers and issuers whose financial instruments are held by the general public pursuant to Article 116 of the
TUF – Requirements in accordance with Article 114.5 of Legislative Decree no. 58/98”, the definitions and
qualitative/quantitative criteria prescribed in the Internal Regulations approved by the Board of
Directors at the meeting of 23 January 2007 to identify the aforesaid operations are provided below.
Related-party transactions
For the definition of related-party transactions, please refer to Point 2 of the Chapter “Related-party
transactions” of the Explanatory Notes to this Half-Year Report.
Significant and non-recurring transactions
“Significant and non-recurring” transactions are defined as all transactions that are not repeated
frequently in the ordinary course of the Group’s activities and whose balance sheet and/or economic
value exceeds a certain materiality threshold. In particular:
- Significant transactions:
transactions whose balance sheet and/or economic value exceeds at least one of the following
parameters:
1% of Group equity, as reported in the latest consolidated financial statements;
4% of the Group’s net income for the year, as reported in the latest consolidated financial
statements.
For the purposes of the above calculation, each transaction must be considered separately; if
transactions are strictly and objectively related as part of the same strategic or operational plan, the
calculation must refer to all the related transactions taken together.
If no consideration is agreed for a transaction, its “normal value” must be determined beforehand
to reflect the price at which the transaction would have taken place between independent parties
on arms’ length terms.
Standard funding, lending and investment activities conducted on normal market terms are not
reported as significant transactions.
- Non-recurring transactions:
transactions that are not repeated frequently in the ordinary course of the Group’s activities. The
frequency of transactions must also be assessed with reference to prior years as well as to the
current year.
No significant and non-recurring transactions were arranged during the first half of 2014.
- 60 -
Atypical and/or unusual transactions
These are defined as all “significant” transactions, as defined above, which due to the nature of the
counterparties, the purpose of the transaction, the method of determining the transfer price or the
timing of the event (close to the accounting reference date) may give rise to doubts about the
correctness/completeness of the information reported in the financial statements, possible conflicts of
interest, the safeguarding of assets or the protection of minority stockholders.
Atypical and/or unusual transactions are a subset of significant transactions and are identifiable from
the atypical nature of the counterparty or purpose of the transactions and/or from the unusual way
in which the transfer price is determined or from the timing of the event.
As an example, the following may be atypical and/or unusual transactions:
–
with reference to the nature of the counterparties: the significant transactions entered into with
related parties;
–
with reference to the subject of the transaction: significant transactions involving the transfer of
resources, services or obligations that are not conducted in the ordinary course of the Group’s
activities;
–
with reference to the way the transfer price is determined: significant transactions whose
transfer price is not determined on an arms’ length basis and, in any case, those for which no
consideration is agreed;
–
with reference to the timing of the event: significant transactions entered into close to the
accounting reference date or other relevant dates for the purposes of providing information to
the Stockholders and/or the market.
In the first half of 2014, no atypical and/or unusual transactions with a significant effect on the
Group’s balance sheet, financial position and results of operations were arranged.
- 61 -
SIGNIFICANT SUBSEQUENT EVENTS
There have been no significant events since the date of the condensed interim consolidated financial
statements (30 June 2014) and the date of their approval by the Board of Directors (29 August 2014)
except as described below.
On 16 July 2014, Fitch Ratings as part of its annual revision of the ratings of Italian medium-sized
banks, updated its rating of the Parent Bank, changing the rating on medium/long term debt from
BB+ to BB and the Viability Rating from bb+ to bb, confirming the short-term rating at B. The outlook
was improved from “negative” to “stable”.
On 30 July 2014 the State guarantees on liabilities issued by the Parent Bank were extinguished early,
amounting in total to Euro 2 billion, and used to access the long-term refinancing operations (LTRO)
with the ECB. Consequently, in August the partial repayment of the aforesaid long term financial
operations was carried out, for a total amount of Euro 2 billion. Currently, LTROs amounting to
approximately Euro 1.3 billion remain extant.
On 8 August 2014, the Euro 608 million capital increase was successfully completed. Subscription
requests greatly exceeded the supply (the overall demand exceeded Euro 700 million), so it became
necessary to proceed with the allotment of the offer.
MAIN RISKS AND UNCERTAINTIES AND OUTLOOK FOR OPERATIONS
The preliminary GDP data for the second quarter of 2014 certified the Italian economy's return to
recession. The general situation of economic weakness is influenced both by internal and external
factors, such as the stagnation of some major countries, with Germany foremost among them, which
represent the main outlet markets for our exports. The outline scenario could also be affected by
intensifying geopolitical tensions, with the consequent effects on international trade.
The general situation of uncertainty is also highlighted in the most recent qualitative surveys with
businesses and households, which nonetheless remain on a moderately positive path. The forecasts
available to date outline a substantially stagnant performance of our economy throughout 2014,
with GDP recovery postponed to 2015.
Banking operations in the second half of 2014 will also be affected by the weakness of the economic
environment. In this context, nonetheless, demand for new loans by businesses and, above all, by
households is expected to increase and the banks’ lending criteria are expected to be progressively
loosened. In addition, supply conditions could benefit from the extraordinary measures recently
implemented by the ECB, such as the launch of TLTROs, which will enable the European banking
System to have abundant low-cost liquidity available, to be allocated first of all in support of the
economy.
In the second half, the operations of the BPVi Group will benefit, first of all, from the fully successful
completion of the capital increase which will allow, inter alia, to continue with the fundamental
lending activities to households and businesses. On the income front, the positive trend of net
interest income is expected to continue, thanks in particular to the actions to contain the cost of
funding, already initiated. Good results are also expected on the commission front, mainly as a
result of the positive contribution deriving from assets under management. In spite of the slowdown
in the flow of new loans in default, already recorded in the second quarter of 2014, uncertainty about
the evolution in the cost of credit persists. The cost of credit and on the banking System’s overall
levels of profitability in 2014 may be impacted by the results of the Comprehensive Assessment
carried out by the ECB, which will be disclosed to the banks and to the public next October.
- 62 -
GLOSSARY
ABS (Asset backed
securities)
Financial instruments deriving from securitisations whose return and
repayment are secured by a portfolio of the issuer’s assets (collateral).
Examples of assets serving as collateral are mortgages, loans, bonds,
trade receivables, receivables deriving from credit cards, etc.
ALMS
Asset & Liability Management System. This is an instrument for
measuring interest rate risk relating to interest-bearing assets and
liabilities and identifies how changes in rate curves influence the Bank’s
future profit margins. The ALMS is a valid tool for management allowing
it to assess ex-ante at what level of risk the Bank intends to position itself
in expected financial scenarios and to estimate the value of balance sheet
items by discounting future cash flows, thus keeping the Bank’s value
under constant observation.
Euro Area
The group of countries which have adopted the euro as the single
currency. The Euro area consists of the following countries: Belgium,
Germany, Greece, Spain, France, Ireland, Italy, Cyprus, Luxembourg,
Malta, the Netherlands, Austria, Portugal, Finland, Slovenia, Slovakia
and, starting from 1 January 2014, Estonia.
Assessment
An assessment is an evaluation involving an opinion on the likely turn of
the events assessed.
Asset allocation
It consists of identifying asset classes to be included in the portfolio in
order optimally to allocate financial resources, in view of the reference
time horizon, risk-return preferences and the set of existing assets.
Asset management
The management of wealth on behalf of third parties, comprising
collective management (open-end and closed-end mutual funds, real
estate funds, pension funds and SICAVs), endowment assurance
products and individual management (by banks, brokers and trust
companies).
ATM
Automated Teller Machine: automatic apparatus to enable customers to
perform transactions such as withdrawing cash, depositing cash or
cheques, requesting information on the account, paying utilities, topping
up mobile phones, etc. The customer activates the terminal introducing a
card and entering his/her personal identification number.
Back office
In a financial institution, the organisation that deals with all the
reporting, accounting and administrative requirements relating to
transactions carried out by the operating units (front office).
Back-testing
Retrospective analysis to test the reliability of measurements of the
sources of risk associated with asset positions.
- 63 -
Bancassurance
The offer of typically insurance-related products through the operating
network of credit entities.
Banking book
Generally referred to securities and financial instruments in general,
identifying that part of the investment portfolio held for “proprietary”
activities.
Basel 3
The expression ‘Basel 3’ indicates a set of measures approved by the
Basel Committee on Banking Supervision as a consequence of the 2007-08
financial crisis with the intent to improve the existing prudential
regulations of the banking industry (which in turn are commonly known
as Basel 2), the effectiveness of the supervisory action and the banks’
ability to manage the risks they assume.
β (Beta)
Beta coefficient of an issuer or of a group of comparable issuers,
expression of the inter-relation between the actual return of an equity
and the overall return of the reference market.
Securitisation
A securitisation represents a special issue of bonds with the payment of
coupons and the redemption of principal on maturity funded by the cash
flows deriving from a portfolio of financial assets (mortgages,
commercial paper, leasing contracts) held by the vehicle company issuing
the securitisation. Each securitisation is divided into various tranches of
bonds with different ratings (from AAA to BBB or even lower),
depending on the credit risk involved.
CDO (Collateralised Securities issued as part of securitisation transactions, guaranteed by an
Debt Obligations) underlying represented by loans, securities or other financial assets.
Common Equity
Tier 1 (CET 1)
The primary quality capital of Own Funds (or Regulatory Capital), as
defined by Article 4 of Regulation (EU) no. 575/2013 (CRR). It mainly
comprises instruments issued directly by the bank, which meet the
criteria for classification as ordinary shares according to regulations;
share premium accounts related to the instruments allowed in CET1,
retained earnings and revaluation reserves and other visible reserves.
From these elements are subtracted the deductions defined by the
regulations, the main ones being: goodwill and intangible assets and
deferred tax assets (DTA).
For more information, please refer to Regulation (EU) no. 575/2013
(CRR), Part Two, Title I.
Compliance
function
The compliance function serves to prevent the risk of non-compliance by
company activity with compulsory regulations and laws or selfregulatory ones (for example, articles of association, codes of conduct,
self-regulatory codes etc.).
Confidi (Credit
Guarantee
Associations)
Organisations with co-operative or consortium structure, which provide
collective loan guarantees in favour of member or participating
companies.
- 64 -
CONSOB
The “Commissione Nazionale per le Società e la Borsa” (Italian stock market
regulator), set up under Law no. 216 dated 7 June 1974, is an independent
administrative authority, with a separate legal identity and full
autonomy under Law no. 281/1985, whose activities are aimed at
investor protection, and the efficiency, transparency and development of
the Italian stock market.
Corporate
Customer class consisting of small, medium and large companies.
Cost/income
A performance indicator which expresses in percentage terms the ratio
between a bank’s costs and its income. It is one of the main indicators of
the bank’s operating efficiency: the lower the value expressed by the
indicator, the higher the efficiency of the bank.
Period-on-period
growth
Growth relative to the previous reporting period (for example, the
previous quarter).
Year-on-year growth Growth relative to the same period in the prior year.
Cross selling
This is an indicator of the average number of products held by each
customer; the higher the number of products held, the greater the degree
of customer loyalty and the more profitable the relationship.
Probability of
default (PD)
The probability that a counterparty enters a state of default, even if
temporarily, before the end of the reference period (one year). This
measure is the output of a rating system.
Δ (Delta)
The delta represents the degree of sensitivity of the premium of the
options relative to the performance of the underlying security indicated
in the contract.
ESM
European Stability Mechanism. Permanent crisis management
mechanism, which has replaced the EFSF. The ESM provides financial
support to requesting Euro area member states and it uses the
instruments already available to the EFSF.
Euribor
Euribor (Euro Interbank Offered Rate) is the principal market reference
rate and is calculated as the weighted average of interest rates applied to
financial transactions in euro between prime European banks. It is
published on a daily basis by the European Banking Federation with
quotations for 1 month, 3 month and 6 month maturities.
Fair value
The amount at which an asset could be exchanged, or a liability settled,
between knowledgeable, willing parties in an arm's length transaction.
- 65 -
Financial Stability
Board (FSB)
The Financial Stability Board is an international body in charge of
international coordination of the work of national financial authorities
and the commissions that define international standards. It was
established in April 2009 by the G20, as the successor of the Financial
Stability Forum, and brings together national authorities responsible for
stability (i.e. Central banks, supervisory authorities and Treasury
Departments), international financial institutions, committees of experts
from central banks and international supervisory and regulatory bodies.
Banking spread
Difference between the interest rate applied by the Bank on loans and the
rate recognised on funding.
Governance
The term identifies the set of instruments and rules that regulate
corporate life, with particular reference to the transparency of the
corporate documents and deeds and to the completeness of disclosure to
the market.
House organ
Periodic publication by a business to communicate with its employees
and/or customers.
IAS/IFRS
International Accounting Standards/International Financial Reporting
Standards. These are the international accounting standards issued by
the IASB (International Accounting Standards Board), whose application
is compulsory (under a decree promulgated in November 2004) for the
purposes of preparing separate and consolidated financial statements by
a wide array of companies, including banks.
Impairment
In the context of international accounting standards (IAS), impairment
represents the loss in the value of an asset that is recognized if its
carrying amount exceeds its recoverable value, being the amount that
could be obtained by selling it or using it in the business. Impairment
testing must be performed on all assets, except for those measured at fair
value since, in this case, any losses (or gains) are implicit in such value.
ISTAT
Italy’s publicly-operated central statistics office. It has been in operation
since 1926 and is the principal producer of official statistics in support of
citizens and public policy-makers.
ISVASS
Istituto per la Vigilanza sulle Assicurazioni (Insurance Supervisory
Authority) is a government agency with separate legal identity that
operates to safeguard the stability of the insurance market and to protect
consumers. Established with Italian Law no. 135/2012 (converting Law
Decree no. 95/12 with amendments), the IVASS took over all of the
ISVAP’s functions, authority and powers.
Joint venture
Agreement between two or more entities to carry out a given economic
activity, usually through the establishment of a joint-stock company.
- 66 -
Liquidity Coverage
Ratio
The Liquidity Coverage Ratio (LCR) is a short-term indicator, devised by
the Basel Committee on Banking Supervision, whose purpose is to assure
that a bank will maintain an adequate level of unrestricted high quality
liquid assets that can be converted into cash to meet its liquidity
requirements within 30 calendar days in a particularly acute liquidity
stress scenario specified by the supervisory authorities.
Mark-down
Negative differential relative to a reference indicator, normally an
interbank rate, applied to the rate on customer deposits.
Mark-up
Positive differential relative to a reference indicator, normally an
interbank rate, applied to the rate on loans to customers.
Maturity Ladder
Representation of cash inflows/outflows by settlement date, in order to
highlight cash mismatches (exact and/or cumulative), during various
time buckets.
Mezzanine
In a securitisation, it is the tranche with the intermediate subordination
level between the junior tranche and the senior tranche.
MIFID
Markets in financial instruments directive. European regulations
provided by Directive 2004/39/EC to increase investor protection and
assure the greatest possible transparency through mandatory disclosure
to Customers.
E-money
The set of techniques connected with the use of electronic money.
Multi-channel
activities
The offer of retail banking products and services both through the
traditional channel of branches and through other channels (financial
promoters, agents, electronic channels, call centres, etc.).
OTC (Over The
Counter)
Over the counter market. All those “markets” in which financial assets are
traded other than official regulated ones. The methods of contracting are
not standardized and it is possible to agree “atypical” contracts. Securities
traded on an OTC market are generally less liquid that those traded on
official markets.
POS
POS (Points of Sale) are terminals at cash registers in shops and
supermarkets used for making payments with debit or credit cards.
Rating
A rating expresses the creditworthiness of issuers of bonds using letters
that indicate the debtor’s reliability. For example, a triple A (AAA) rating
represents the highest quality investment grade; the scores descend
progressively (AA, A, BBB, BB, B). Triple C (CCC) ratings are awarded to
the least reliable debtors. The rating is assigned by a specialised agency.
- 67 -
Recession
Negative economic situation featuring a reduction in industrial output, a
fall in consumption, and a decrease in household income. Technical a
Country is in recession with its GDP declines for two consecutive
quarters.
Risk Appetite
Framework (RAF)
The reference framework defining, consistently with the maximum
assumable risk, the business model and the strategic plan, risk
propensity, tolerance thresholds, risk limits, risk governance policies, the
reference processes needed to define them and implement them.
Sensitivity
The term identifies the situation of higher or lower sensitivity with which
determined assets or liabilities react to changes in rates or other reference
parameters.
SGR
SGRs (Società di Gestione del Risparmio) or asset management companies
are companies authorised to promote, set up, organize and manage the
assets of a mutual fund (collective asset management), keeping their own
assets separate from those of the fund. An SGR can also manage funds set
up by other asset management companies.
Single Supervisory
Mechanism (SSM)
Financial supervision system, wherein, from November 2014 onwards,
the European Central Bank will submit significant credit institutions to
direct supervision and act in close cooperation with the competent
domestic authorities for the supervision of all credit institutions, carried
out under the overall oversight of the ECB. The degree of significance of
the institution is determined according to specific criteria. Euro Area
countries automatically participate in the SSM, while countries outside
the Euro Area may opt not to.
Small business
Market segment relating to small and very small businesses (typically
tradesmen and shopkeepers).
Spread
This term normally indicates the difference between two interest rates, the
gap between bid and ask prices in securities trading or the additional
amount the issuer of securities recognises over a reference rate.
Stakeholder
This term is used to indicate all categories of parties which may influence,
be influenced by or hold a stake in the activities of a business/bank, such
as Human Resources, Stockholders, Customers, the National Community
and the State, Suppliers and future generations.
Stagnation
Stagnation is characterised by the persistence, over time, of modest
changes in Gross Domestic Product and per capita income.
Stress test
Simulation used to measure the impact of extreme market scenarios.
Trading Book
Generally referred to securities and financial instruments in general,
identifying that part of the investment portfolio held for trading.
- 68 -
Value at Risk –
VaR
Value at Risk is an estimate of the expected maximum potential loss on a
portfolio of financial instruments in a specified time period, with a
defined level of probability, upon the occurrence of unfavourable market
conditions.
Vega
Coefficient measuring the sensitivity of the value of an option in relation
to a change or an underestimation of volatility.
- 69 -
- 70 -
CONDENSED INTERIM FINANCIAL STATEMENTS
- 71 -
Banca
Popolare
di Vicenza Group
BANCA
POPOLARE
DI
VICENZA GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
in thousands of euro
GLOSSARIO
30 JUNE 2014
Assets
10.
Cash and cash equivalents
20.
31 DECEMBER 2013
172,171
2,389,157
Financial assets held for trading
4,564,818
2,069,062
40.
5,708,668
4,094,277
50.
Financial assets held to maturity
48,287
48,606
60.
Loans and advances to banks
70.
Loans and advances to customers
80.
Hedging derivatives
90.
Remeasurement of financial assets backed by
macro hedges (+/-)
2,398,377
2,794,000
30,073,201
30,892,706
142,277
74,934
63,167
38,064
100. Equity investments
408,160
384,967
120. Property, plant and equipment
628,587
623,300
130. Intangible assets
948,395
of which: - goodwill
929,862
140. Tax assets
a) current
b) deferred tax assets
of which: - of L. 214/2011
33,332
627,779
433,076
947,733
927,362
661,111
160. Other assets
Total assets
570,723
45,216
525,507
424,586
330,282
308,712
46,147,501
45,236,241
The comparative figures referred to on 31 December 2013 were redetermined by effect of the retrospective adoption of the
new accounting standard IFRS 10 “Consolidated Financial Statements”.
- 72 - 72 -
Banca
Popolare
di Vicenza Group
BANCA
POPOLARE
DI
VICENZA GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Equity and Liabilities
10.
Deposits from banks
20.
Deposits from customers
30.
30 JUNE 2014
31 DECEMBER 2013
7,022,706
7,053,463
21,026,949
22,992,714
Debt securities in issue
6,464,060
6,957,740
40.
Financial liabilities held for trading
3,918,126
1,733,166
50.
Financial liabilities at fair value
1,752,973
1,712,199
60.
Hedging derivatives
683,974
411,093
70.
Changes in fair value of portfolio hedged items (+/-)
36,268
(2,824)
80.
Tax liabilities
a) current tax liabilities
b) deferred tax liabilities
321,510
1,689
319,821
100. Other liabilities
110. Provision for severance indemnities
120. Provisions for risks and charges
a) pensions and similar commitments
b) other provisions
187,326
45,723
141,603
1,063,161
387,864
75,841
75,298
57,931
5,386
52,545
60,289
5,681
54,608
140. Valuation reserves
181,727
16,355
160. Equity instruments
3,252
3,332
584,003
586,307
2,727,584
2,767,383
311,178
313,719
170. Reserves
180. Additional paid-in capital
190. Capital stock
200. Treasury shares (-)
(125,704)
(7,752)
210. Minority interests (+/-)
19,924
20,585
220. Net income (loss) for the period (+/-)
22,038
(32,016)
Total Equity and Liabilities
46,147,501
45,236,241
The comparative figures referred to on 31 December 2013 were redetermined by effect of the retrospective adoption of the
new accounting standard IFRS 10 “Consolidated Financial Statements”.
--73
73--
BANCA
POPOLARE
DI VICENZA
Banca
Popolare
di Vicenza Group
GROUP
CONSOLIDATED INCOME STATEMENT
Caption
30 JUNE 2014
30 JUNE 2013
10.
Interest income and similar revenues
611,263
628,884
20.
Interest expense and similar charges
(351,288)
(372,503)
30.
Net interest income
259,975
256,381
40.
Fee and commission income
179,923
175,681
50.
Fee and commission expense
(32,883)
(40,398)
60.
Net fee and commission income
147,040
135,283
70.
Dividend and similar income
80.
90.
9,944
8,332
Net trading income
54,656
29,294
Net hedging gains (losses)
31,304
34,683
100. Gains (losses) on disposal or repurchase of:
29,899
a) loans and advances
54,438
42
53
b) financial assets available for sale
30,996
53,905
d) financial liabilities
(1,139)
110. Net change in financial assets and liabilities at fair value
480
(4,407)
120. Net interest and other banking income
130. Net impairment adjustments on:
a) loans and advances
b) financial assets available for sale
d) other financial transactions
(5,345)
528,411
513,066
(186,464)
(192,986)
(157,442)
(187,398)
(26,813)
(4,546)
(2,209)
(1,042)
140. Net income from financial activities
341,947
320,080
170. Net income from financial and insurance activities
341,947
320,080
180. Administrative costs:
(345,745)
a) payroll
(200,155)
b) other administrative costs
(145,590)
190. Net provisions for risks and charges
200. Net adjustments to property, plant and equipment
(336,929)
(197,779)
(139,150)
(7,325)
(3,804)
(12,029)
(11,186)
210. Net adjustments to intangible assets
(2,176)
(1,980)
220. Other operating charges/income
56,130
47,880
(311,145)
(306,019)
230. Operating costs
240. Profit (loss) from equity investments
8,388
260. Adjustments to goodwill
-
270. Gains (losses) on disposal of investments
280. Profit (loss) on current operations before income taxes
290. Income taxes on current operations
300. Profit (loss) from current operations after tax
310. Profit (loss) from disposal groups, net of tax
320. Net income (loss) for the period
330. Minority interests
18
43
39,208
2,303
(16,666)
(17,478)
22,542
(15,175)
-
15,225
22,542
50
(504)
340. Net income (loss) for the period pertaining to the parent bank
3,424
(15,225)
(113)
22,038
(63)
Earnings per share (basic)
0.268
(0.001)
Earnings per share (diluted)
0.268
(0.001)
The comparative figures referred to on 30 June 2013 were redetermined by effect of the retrospective adoption of the new
accounting standard IFRS 10 “Consolidated Financial Statements”.
- 74 - 74 -
BANCA POPOLARE DI VICENZA GROUP
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
Caption
10.
30 JUNE 2014
Net income (loss) for the year
30 JUNE 2013
22,542
Other post-tax components of income without reversal to
income statement
40. Defined-benefit plans
60. Portion of revaluation reserves from investments valued at equity
Other post-tax components of income with reversal to
income statement
90. Cash-flow hedges
100. Financial assets available for sale
120. Portion of valuation reserves of equity investments carried at equity
(946)
(17)
50
2,137
-
(238,903)
395,521
9,716
(125,836)
98,256
(9,868)
130. Total other post-tax components of income
165,371
(35,311)
140. Total comprehensive income (Lines 10. + 130.)
150. Comprehensive income pertaining to minority interests
187,913
(503)
(35,261)
(116)
160.
187,410
(35,377)
Comprehensive income pertaining to the parent bank
- 75 - 75 -
--76
76 --
-
31,478
-
-
-
(31,478)
(31,478)
-
-
-
-
(1,171)
-
(1,171)
-
-
-
-
-
-
-
-
-
Dividends
and other
allocations
(51)
29,713
-
-
2,459
27,203
29,662
-
-
-
Changes in
reserves
58
(42,339)
-
-
-
-
-
-
-
(39,798)
-
(2,483)
(2,483)
shares (2)
Issue of new
-
(117,952)
-
(117,952)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(80)
-
-
(80)
-
-
-
-
-
-
-
-
Purchase of Extraordinary Change in
treasury
distribution of
equity
shares
dividends
instruments
The “issue of new shares” is stated net of the cancellations recorded during the period.
20,585
3,647,326
(30,307)
(7,752)
3,332
16,343
104,398
484,268
588,666
2,771,763
-
325,866
325,866
Group
reserves
Equity transactions
Balances at 31 December 2013 were redetermined by effect of the retrospective adoption of the new accounting standard IFRS 10 “Consolidated Financial Statements”.
-
-
-
-
-
-
-
-
-
-
Balance at
01/01/2014
Allocation of prior year
results
(2)
20,585
3,647,326
Change in
opening
balances
(1)
Minority interests
Group Equity
(30,307)
(7,752)
Treasury shares
Net income (loss) for the period
3,332
Equity instruments
104,398
b) other
16,343
484,268
a) from earnings
Valuation reserves
588,666
2,771,763
Reserves:
Additional paid-in capital
-
325,866
a) ordinary shares
b) other shares
325,866
Capital stock:
(1)
Balance at
31/12/2013
Changes in the period
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY
-
-
-
-
-
-
-
-
-
-
-
-
-
Derivatives
on treasury
shares
-
-
-
-
-
-
-
-
-
-
-
-
-
Stock
Options
503
187,410
22,542
-
-
165,371
-
-
-
-
-
-
-
Total
comprehensive
income at
30/06/2014
-
3,704,078
22,038
(125,704)
3,252
181,727
106,807
477,196
584,003
2,727,584
-
311,178
311,178
19,924
-
504
-
-
(13)
50
2,797
2,847
4,381
-
12,205
12,205
Group equity
Minority
at
interests at
30/06/2014 30/06/2014
(in thousands of Euro)
- 77- -77 -
-
(59,554)
-
(644)
(40,940)
(41,584)
-
-
-
-
-
-
-
-
-
-
19
1,775
-
-
-
3,004
(1,210)
-
(1,210)
-
-
-
-
Changes in
reserves
(1,744)
(25,095)
-
-
-
-
-
-
-
(24,071)
-
(2,768)
(2,768)
shares (2)
Issue of new
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(38)
-
-
(38)
-
-
-
-
-
-
-
-
Purchase of Extraordinary Change in
treasury
distribution of
equity
shares
dividends
instruments
The “issue of new shares” is stated net of the cancellations recorded during the period.
20,821
3,321,479
101,138
-
-
-
-
59,554
59,554
-
-
-
-
Dividends
and other
allocations
Changes in opening balances refer to the effect of the retrospective adoption of the new accounting standard IFRS 10 “Consolidated Financial Statements”.
-
-
-
-
1,665
(105,762)
106,268
419,989
526,257
2,509,097
-
309,905
309,905
Group
reserves
Equity transactions
(2)
20,821
3,321,479
101,138
-
-
6,775
-
(6,775)
(6,775)
-
-
-
-
balances (1)
Balance at
01/01/2013
Allocation of prior year
results
(1)
Minority interests
Group Equity
Net income (loss) for the period
Treasury shares
1,665
Equity instruments
106,268
b) other
(112,537)
426,764
a) from earnings
Valuation reserves
533,032
2,509,097
Reserves:
-
309,905
a) ordinary shares
b) other shares
309,905
Capital stock:
Balance at
31/12/2012
Change in
opening
Changes in the period
-
-
-
-
-
-
-
-
-
-
-
-
-
Derivatives
on treasury
shares
Stock
Options
-
-
-
-
-
-
-
-
-
-
-
-
-
116
(35,377)
50
-
-
(35,311)
-
-
-
-
-
-
-
-
3,221,804
(63)
-
1,627
(138,074)
105,008
477,249
582,257
2,480,640
-
295,417
295,417
18,568
-
113
5
50
2,294
2,344
4,386
-
11,720
11,720
Group equity
Minority
Total
at
interests at
comprehensive
30/06/2013 30/06/2013
income at
30/06/2013
(in thousands of Euro)
BANCA POPOLARE DI VICENZA GROUP
STATEMENT OF CONSOLIDATED CASH FLOWS
Direct method
30 JUNE 2014
30 JUNE 2013
OPERATING ACTIVITIES
1. Cash generated from operations
- Interest income collected (+)
- Interest expense paid (-)
- Dividends and similar income
- Net fee and commission income (+/-)
- Payroll costs (-)
- Net premium income (+)
- Other insurance income (charges) (+/-)
- Other costs (-)
- Other revenues (+)
- Taxation (-)
-Costs/income relating to groups of assets held for sale, net of tax effect (+/-)
2. Cash generated/absorbed by financial assets
106,773
165,820
517,960
(297,843)
9,944
147,040
(207,107)
(148,199)
137,884
(52,906)
-
544,764
(339,700)
8,332
137,124
(193,955)
(143,325)
150,975
(13,518)
15,123
349,871
451,534
- Financial assets held for trading
- Financial assets at fair value
- Financial assets available for sale
- Loans and advances to customers
- Loans and advances to banks: demand
- Loans and advances to banks: other receivables
- Other assets
(67,231)
(1,151,833)
1,199,010
572,623
(178,539)
(24,159)
(44,095)
(1,530,897)
406,168
978,226
514,966
127,166
3. Cash generated/absorbed by financial liabilities
(2,492,584)
(735,225)
- Due to banks: demand
- Due to banks: other payables
- Due to customers
- Debt securities in issue
- Financial liabilities held for trading
- Financial liabilities at fair value
- Other liabilities
(1,223,370)
1,192,613
(2,337,373)
(493,680)
18,000
40,774
310,452
(641,943)
(273,196)
1,143,799
(845,323)
(69,393)
(115,820)
66,651
Net liquidity generated/absorbed by operating activities
(2,035,940)
(117,871)
B. INVESTING ACTIVITIES
1. Cash generated by
627
5,284
- Disposal of equity investments
- Dividends collected on equity investments
- Disposal/redemption of financial assets held to maturity
- Disposal of property, plant and equipment
- Sale of intangible assets
- Sale of subsidiary companies and business divisions
627
-
10
5,263
1
10
2. Cash absorbed by
(20,902)
(40,985)
- Purchase of equity investments
- Purchase of financial assets held to maturity
- Purchase of property, plant and equipment
- Purchase of intangible assets
- Purchase of subsidiary companies and business divisions
(12,500)
319
(6,221)
(2,500)
(15,036)
(10,728)
(6,904)
(6,210)
(2,107)
Net liquidity generated/absorbed by investing activities
(20,275)
(35,701)
- Issues/purchases of treasury shares
- Issues/Purchases of equity instruments
- Distribution of dividends and other purposes
(160,233)
(38)
(500)
(25,095)
(38)
(40,940)
Net liquidity generated/absorbed by funding activities
(160,771)
(66,073)
(2,216,986)
(219,645)
C. FUNDING ACTIVITIES
TOTAL NET CASH GENERATED/ABSORBED IN THE YEAR
Reconciliation
(in thousands of euro)
30 JUNE 2014
30 JUNE 2013
Captions
Cash and cash equivalents at the beginning of the year
Net liquidity generated/absorbed in the year
Cash and balances with central banks: effect of change in exchange rates
Cash and cash equivalents at the end of the year
2,389,157
(2,216,986)
172,171
409,976
(219,645)
190,331
- 78- 78
- -
EXPLANATORY NOTES
- 79 -
ACCOUNTING POLICIES
GENERAL PART
Declaration of conformity with IFRS
The consolidated half-year report at 30 June 2014 of the Banca Popolare di Vicenza Group includes:
the condensed interim consolidated financial statements, prepared in accordance with the
International Accounting Standards (IAS) and International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board (IASB), endorsed by the
European Commission under the procedure in art. 6 of Regulation (EC) 1606/2002 of the
European Parliament and Council dated 19 July 2002 and in force at the current reporting
date, including the related interpretations of the International Financial Reporting
Interpretations Committee (IFRIC);
the Interim report on operations which describes the significant events that took place during
the first half of the year and their effect on the consolidated half-year report, as well as the
principal risks and uncertainties for the remaining six months of the year;
the certification of the Financial Reporting Manager, as required by art. 154-bis, par. 5, of
Legislative Decree no. 58/98 (Italy’s Consolidated Financial Markets Act – TUF) as amended
by Decree no. 195/2007.
The condensed interim consolidated financial statements consist of the statement of financial position,
the income statement, the statement of comprehensive income, the statement of changes in equity, the
statement of cash flows, drafted in accordance with the layout and preparations rules in the Bank of
Italy Circular 262 of 22 December 2005 (and subsequent amendments) “Banks’ financial statements:
layout and preparation”, as well as these explanatory notes, which provide details of the principal
statement of financial position and income statement aggregates, segment information, and
information about related-party transactions.
Compliance with IAS 34
The condensed interim consolidated financial statements have been prepared in accordance with IAS
34 “Interim Financial Reporting”. As allowed by this standard, they are presented in a condensed
format and, as such, do not make all the disclosures required for annual financial statements.
- 80 -
List of international accounting standards (IAS/IFRS) currently in force
The currently applicable international accounting standards (IAS/IFRS), as endorsed by the European
Commission, adopted to prepare the condensed interim consolidated financial statements are as
follows.
IFRS 1 First-time adoption of IFRS
IFRS 7 Financial instruments: disclosures
IFRS 8 Operating segments
IFRS 10 Consolidated financial statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 1 Presentation of financial statements
IAS 7 Statement of cash flows
IAS 8 Accounting policies, changes in accounting estimates and errors
IAS 10 Events after the reporting period
IAS 12 Income taxes
IAS 16 Property, plant and equipment
IAS 17 Leases
IAS 18 Revenue
IAS 19 Employee benefits
IAS 21 The effects of changes in foreign exchange rates
IAS 23 Borrowing costs
IAS 24 Related party disclosures
IAS 26 Accounting and reporting by retirement benefit plans
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
IAS 32 Financial instruments: disclosure and presentation
IAS 33 Earnings per Share
IAS 34 Interim financial statements
IAS 36 Impairment of assets
IAS 37 Provisions, contingent liabilities and contingent assets
IAS 38 Intangible assets
IAS 39 Financial Instruments: recognition and measurement
IAS 40 Investment property
- 81 -
Basis of preparation
The condensed interim consolidated financial statements are prepared using the Euro as the
accounting currency and the amounts, unless otherwise indicated, are expressed in thousands of
Euro, rounding off as appropriate in accordance with regulatory provisions.
In the preparation of the condensed interim consolidated financial statements, the general reporting
standards, detailed below, prescribed by IAS 1 “Presentation of financial statements” and the
accounting standards illustrated in the “Part relating to the principal financial statement line items”
of these explanatory notes, in compliance with the general provisions included in the “Framework for
the preparation and presentation of the financial standards” (the “framework”) issued by the
International Accounting Standards Board, with particular regard to the fundamental principle of the
prevalence of substance over form, and to the concept of the relevance and significance of the
information.
The general reporting standards prescribed by IAS 1 are summarised below.
Going concern
These condensed interim consolidated financial statements were prepared on a going concern basis.
In this regard, the joint co-ordination committee for IAS/IFRS application between the Bank of Italy,
CONSOB and ISVAP (Italy’s insurance industry regulator) issued its document no. 2 on 6 February
2009 entitled “Disclosures in financial reports on the going concern assumption, financial risks, tests
of assets for impairment and uncertainties in the use of estimates”. This document requires
management to carry out a detailed review in relation to the going concern presumption, in
accordance with the requirements of IAS 1.
In particular, the paragraphs 23-24 of IAS 1 establish that: “When preparing financial statements,
management shall make an assessment of an entity’s ability to continue as a going concern. Financial
statements shall be prepared on a going concern basis unless management either intends to liquidate the entity
or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its
assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the
entity’s ability to continue as a going concern, those uncertainties shall be disclosed. When financial statements
are not prepared on a going concern basis, that fact shall be disclosed, together with the basis on which the
financial statements are prepared and the reason why the entity is not regarded as a going concern”.
The current conditions of financial markets and of the overall economy and the negative
short/medium-term forecasts mean that now the presumption of going concern must be assessed
particularly thoroughly.
Having examined the risks and uncertainties associated with the current macroeconomic context,
taking into account the indications contained in the 2012-2014 Group Business Plan, revised and
extended to 2018 upon resolution by the Parent Bank’s Board of Directors on this past 11 March, the
Group can reasonably expect to carry on its operations in the foreseeable future and so its interim
consolidated financial statements as at 30 June 2014 have been prepared on a going concern basis.
Uncertainties associated with liquidity, credit and earnings risks are not in fact such as to cast doubt
upon the Group’s ability to continue as a going concern, also in view of the Group’s ability to achieve
positive results in a macroeconomic scenario which is objectively difficult, the level of capitalisation
and its proven capacity to access the necessary financial resources.
- 82 -
Recognition on an accrual basis
The condensed interim consolidated financial statements are prepared, with the exception of cash
flow disclosure, according to the principle that costs and revenues are recognised on an accrual basis,
regardless of the time of their actual payment.
Relevance, significance and aggregation
Each relevant class of items, however similar they may be, shall be reported distinctly in the financial
statements. Items with dissimilar nature or destination may be aggregated only if they are not
significant. The presentation and classification of the items of the consolidated Financial statements
complies with the provisions set out in Bank of Italy Circular no. 262 “Banks’ financial statements:
layout and preparation”.
In accordance with the provisions of the aforesaid Circular, statements of financial position, income
statements and comprehensive income statements comprise line items (indicated by numbers), lines
(indicated by letters) and additional information details (the “of which” portions of line items and
lines). The line items, the lines and their information details make up the financial statement accounts.
New items may be added to the aforesaid statements, provided their content is not associated to any
of the items already included in the statements and only if the amounts are relevant. The lines
provided by the statements may be grouped when one of the two following conditions is met: a) the
amount of the lines is irrelevant; b) grouping enhances the clarity of the financial statements.
In this regard, the Group, in preparing the condensed interim consolidated financial statements as at
30 June 2014, did not apply the aforesaid provisions that allow to add new items or to group them.
Line items in the statement of financial position, the income statement, the statement of
comprehensive income are not presented if their balance is zero in both years.
Offsetting
Unless otherwise provided or expressly allowed by international reporting standards or by an
interpretation thereof or by the provision of the aforementioned Bank of Italy Circular no. 262, assets
and liabilities as well as costs and revenues may not be mutually offset.
Uniformity of presentation
The standards for the presentation and classification of Financial statement items are kept constant
from one period to the other in order to assure the comparability of information, unless differently
required by an international accounting standard or by an interpretation or if the need emerges of
making the representation of the information more appropriate in terms of significance. If feasible,
the change is adopted retroactively and the nature, the reason and the amount of the items affected by
the change are indicated.
- 83 -
Comparative information
In addition to the financial information at 30 June 2014, the statement of financial position, the income
statement, the statement of comprehensive income, the statement of changes in equity and the
statement of cash flows also present the following comparative information:
statement of financial position: 31 December 2013
income statement: 30 June 2013;
statement of comprehensive income: 30 June 2013;
statement of changes in equity: 30 June 2013;
statement of cash flows: 30 June 2013.
If changes were made to the presentation or classification of line items, the comparative amounts are
reclassified as well, unless reclassification is not feasible. Non comparability and the adaptation, or its
impossibility, are pointed out and commented in the explanatory notes.
In this regard, it is specified that on 1 January 2014 the new accounting standard IFRS 10 –
“Consolidated financial statements” that replaced IAS 27 Consolidated and separate financial
statements”, and SIC 12 (“Consolidation – special purpose entities”) came into effect. The new
international accounting standard has the purpose of establishing a single reference framework for
the definition of the scope of consolidation for all types of entities. The IASB also issued the new
International Accounting Standards IFRS 11 - “Joint Arrangements” and IFRS 12 – “Disclosure of
Interests in Other Entities” that apply to the recognition of Joint Ventures and to the new disclosure
required in the explanatory notes regarding investments in other entities, respectively.
Consequentially, the standards IAS 27 and IAS 28 were amended: the new IAS 27 applies only to the
separate financial statements of an entity whereas IAS 28 deals with the “equity method” applicable
to associated companies and to Joint Ventures.
The application of the new accounting standards resulted in the extension of the BPVi Group’s scope
of consolidation that now includes the mutual funds managed by the subsidiary Nem Sgr among its
“subsidiaries”. The mutual fund “Giada Equity Fund” instead is included among investments over
which significant influence is exercised. Consequentially, the changes deriving from new standard
were applied retrospectively - as generally established by IAS 8 for all changes in accounting
standards - adjusting the balances of the statement of financial position, the income statement, the
statement of comprehensive income, the statement of changes in equity, and the statement of cash
flows as at 31 December 2013 and 30 June 2013.
It is also specified that the prerequisites of “control” under the new accounting standard IFRS 10
exists with regards to the special purpose vehicle used by the Group in its securitisation transactions.
For these companies, however, the decisions was made to not proceed with the corresponding
consolidation in consideration of the fact that all present financial statement values are irrelevant with
respect to those of the group and that the assets securitised are already included in the Group
financial statements, the prerequisites prescribed by IAS 39 for the so-called “derecognition” not
applying for the various transactions carried out9.
With the exception of the Berica Residential Mbs 1 transaction which was carried out before 1 January 2004,
and for which the securitized assets were not “reinstated” on the first-time adoption of IAS-IFRS, as allowed by
IAS 1.
9
- 84 -
For the sake of completeness, the line items of the layout of the statement of financial position at 31
December 2013 and of the income statement at 30 June 2013 that had been redetermined are shown
below:
Caption
Assets
(in thousand of euro)
60. Loans and advances to banks
70. Loans and advances to customers
31/12/2013
restated
31/12/2013
4,094,277
4,158,242
2,794,000
2,780,542
30,892,706
30,873,999
384,967
355,917
140. Tax assets
570,723
566,575
160. Other assets
308,712
308,445
31/12/2013
restated
31/12/2013
7,053,463
7,053,057
80. Tax liabilities
187,326
186,387
100. Other liabilities
387,864
388,039
Caption
Equity and Liabilities
10. Deposits from banks
140. Valuation reserves
170. Reserves
210. Minority interests (+/-)
220. Net income (loss) for the period (+/-)
Caption
16,355
5,790
586,307
593,082
20,585
20,092
(32,016)
(28,228)
30/06/2013
restated
Income Statement
30/06/2013
10. Interest income and similar revenues
628,884
627,144
20. Interest expense and similar charges
(372,503)
(372,433)
40. Fee and commission income
175,681
177,517
50. Fee and commission expense
(40,398)
(40,393)
b) other administrative costs
(139,150)
(139,010)
220. Other operating charges/income
180. Administrative costs:
47,880
48,272
240. Profit (loss) from equity investments
3,424
5,380
290. Income taxes on current operations
(17,478)
(18,321)
(113)
(119)
330. Minority interests
- 85 -
Scope of consolidation and methodology
The condensed interim consolidated financial statements of the Banca Popolare di Vicenza Group
include the financial and operating results at and for the period ended 30 June 2014 of the Parent
Bank Banca Popolare di Vicenza, its direct and indirect subsidiaries, companies under joint control
and associated companies. As required by IAS/IFRS, the scope of consolidation also includes
companies whose activities are dissimilar to those of the rest of the Group. Companies with
individual and cumulative financial statement values that are irrelevant to the Group consolidated
financial statements are not included in the scope of consolidation. Equity investments in these
companies are valued at cost.
Subsidiaries are defined as investments in companies and investments in entities over which the
Group exercises control in accordance with IFRS 10. More precisely “An investor controls an investee
when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee”. This power requires that the investor
has existing rights that give it the ability to direct the activities that significantly affect the investee's
returns. The power is based on an ability that need not be exercised in practise. The analysis of
control is conducted on a continual basis. The investor must redetermine if it controls an investee
when facts and circumstances indicate that there have been changes in one or more of the factors of
control.
Joint operations are defined as a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.
Those parties are called joint operators. The participants in the Joint Operation have rights to the
assets, and obligations for the liabilities of the arrangement. A joint venture is a joint arrangement
whereby the parties that have joint control of the arrangement have rights to the net assets of the
arrangement. Those parties are called joint venturers. The participants in the joint venture have rights
to the net assets of the arrangement.
Associated companies are defined as all those companies not controlled by Banca Popolare di Vicenza
over which the Parent Bank, directly or indirectly, is able to exercise significant influence. Such
influence is presumed to exist for those companies in which the Group holds at least 20% of the
voting rights, or in which it is able to participate in the determination of financial and operating
policies as a consequence of specific legal arrangements.
With regard to the consolidation methods used, subsidiaries are consolidated on a line-by-line basis,
while associated companies and joint ventures are accounted for using the equity method.
Line-by-line consolidation: under this method, the assets, liabilities, off-balance sheet transactions,
and income and expenses of Group companies are combined on a line-by-line basis. Following the
allocation of the minority interest in equity and the results for the period to separate captions, the
carrying amount of investments is eliminated against the Group’s interest in their equity at the time
of acquisition or initial consolidation; any differences are allocated, as far as possible, to the assets and
liabilities of the consolidated companies concerned and residual amounts are reported as “goodwill”.
Changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control are
accounted for as equity transactions and, consequentially, any difference between the amount by
which the non-controlling interests are adjusted and the fair value of the consideration paid or
received shall be recognised directly in equity and attributed to the owners of the subsidiary”.
Equity method: under this method, equity investments are initially recognized at cost and
subsequently adjusted to reflect changes in the Group’s interest in their equity. Differences between
the cost of an investment and the Group’s interest in its equity at the acquisition or initial
consolidation date are reflected in its carrying amount, if they cannot be attributed to specific assets
or liabilities.
- 86 -
Equity investments classified as “non-current assets held for sale and discontinued operations” in
compliance with IFRS 5 are carried at the lower of their book or fair value, net of selling costs.
Dividends distributed within the Group are reversed back to reserves. Receivables, payables, income
and expenses arising from transactions between Group companies are eliminated, except where
insignificant.
The statements of financial position and income statements used for line-by-line consolidation
purposes were those at and for the period ended 30 June 2014 approved by the Boards of Directors of
the individual companies concerned. In particular, unadjusted information was used if the companies
prepared their half-year accounts under IAS/IFRS, while information adjusted to comply with the
accounting policies adopted by the Parent Bank was used if their half-year accounts were prepared
under Italian accounting standards.
Investments in companies carried at equity that did not prepare half-year accounts at 30 June 2014, or
whose half-year accounts have not yet been approved by their Boards of Directors, are carried at the
equity values reported in their 2013 financial statements (or their latest approved financial
statements).
Lastly, the income statements of companies joining or leaving the scope of consolidation in the period
(or whose method of consolidation changed during the period) are consolidated from the date of
acquisition or until the date of disposal of the interest held.
The scope of consolidation does not include any investments in companies under joint control.
Subsequent events
With regard to information on significant events occurred after the ending date of the condensed
interim Financial Statements, reference is explicitly made to the specific paragraph of the interim
Report on operations.
Other matters
Limited audit of the condensed interim consolidated financial statements
The condensed interim consolidated financial statements have been subject to review by KPMG
S.p.A., an independent firm of auditors, under the engagement for external audit conferred for the
nine-year period from 2010 to 2018 by the Shareholders’ Meeting on 24 April 2010.
Estimation uncertainty and risks
As indicated in the specific sections of these explanatory notes, accounting estimates have been made
in support of the carrying amounts for the more significant items requiring measurement in the
condensed interim consolidated financial statements at 30 June 2014, as required by prevailing
accounting standards and relevant regulations. This process, which largely involved estimating the
future recoverability of amounts reported in the financial statements in accordance with current
regulations, was performed on a going concern basis without considering forced-sale values.
Estimates have been primarily used for determining the fair value of financial instruments, for the
valuation of loans, for determining other provisions for risks and charges and for quantifying current
and deferred taxes. The outcome of this work supports the carrying amount of these items at 30 June
2014. This valuation process was nevertheless particularly complex due to the current macroeconomic
and market conditions, that continue to be characterized by abnormal volatility in all the financial and
- 87 -
non-financial parameters used for measurement purposes and the consequential difficulty in
formulating forecasts of short-term or other trends for such financial and non-financial parameters,
which can have a significant influence on estimated values.
It should be noted that, for the purpose of managing fears regarding the impairment in asset quality
owing to the current macroeconomic conditions and as recommended on 16 May 2013 by the EBA, in
2014, the competent Supervisory Authorities began an asset quality review that also involves the
BPVi Group, with the objective of verifying the classifications and the measurements made in the
loans portfolio. The operation is still underway and the results should be made public to the Group
and the market in October 2014. Should the stress tests, also taking into account the results of the
asset quality review, demonstrate that the Group does not satisfy the capitalisation parameters set by
the EBA, the Supervisory Authority could requests the adoption of measures aimed at making up for
the capital shortages revealed in the stress tests.
- 88 -
Part relating to the principal financial statement line items
The Accounting Standards adopted in the preparation of the condensed interim consolidated financial
statements 30 June 2014 are as follows.
1. Financial assets held for trading
Classification
This line item comprises financial instruments held for trading10 and derivative contracts with a
positive fair value that are not designated as effective hedging instruments. Such financial instruments
must not carry any clause restricting their trading.
Derivative contracts include embedded derivatives which are attached to a primary financial
instrument, known as the “host contract” when they have been recognized separately from the host
and forward transactions in currencies, securities, goods and precious metals. An embedded
derivative is recognized separately from the host contract when all of the following conditions are
satisfied:
its economic characteristics and risks are not closely related to those of the “host” contract;
the separated embedded instrument meets the definition of a derivative;
the hybrid instrument is not measured at fair value through the income statement.
Financial instruments are designated as financial assets held for trading upon initial recognition,
except if former hedging derivatives with a positive fair value at the reporting date are reclassified as
“financial assets held for trading” after a hedging relationship has become ineffective.
Recognition
The initial recognition of financial assets held for trading takes place: i) on the settlement date for debt
securities, equity instruments and units in mutual funds and SICAVs; and ii) on the subscription date
for derivative contracts.
Financial assets held for trading are initially recognized at their fair value, whereas transaction costs or
income are written off immediately, even if directly attributable to the instrument concerned.
The initial fair value of a financial instrument is usually the cost incurred in buying it.
Measurement and recognition of income and expense
After initial recognition, financial assets held for trading are stated at fair value through the income
statement.
For details on the methods used to identify fair value, see paragraph 17.5 below, entitled “Criteria for
determining the fair value of financial instruments”, of “Other information” in part A.2. of this
document.
Gains and losses realized on sale or redemption and unrealized gains and losses deriving from
changes in the fair value of financial assets held for trading are booked to “net trading income” in the
income statement, except for any gains or losses on disposal or valuation relating to derivative
contracts linked to the “fair value option”, which are booked to “net change in financial assets and
liabilities at fair value”.
Positions held for trading are those intentionally acquired for the purpose of sale in the near term and/or to benefit, in the
near term, from differences between the purchase and sale price, or from other changes in price or interest rates. “Positions”
are those held on own account and those arising from customer services or from market making.
10
- 89 -
The profits and losses recognized in “Net trading income” in the income statement also include the
differentials collected and paid on trading derivatives, and those accruing up to the reporting date,
while differentials relating to derivative contracts associated with financial assets and liabilities at fair
value and/or with financial assets and liabilities classified in the trading portfolio are recognized in
“interest income” or “interest expense” depending on whether they are positive or negative
respectively.
Derecognition
Financial assets held for trading are derecognized when the contractual rights over the related cash
flows expire or when the financial asset is transferred together with substantially all the contractual
risks and benefits associated with its ownership.
Classification
This line item comprises monetary financial instruments that are not classified in the other categories
envisaged by IAS 39. It nonetheless includes:
debt securities and loans for which the holder may not recover substantially all the initial
investment, other than because of deterioration in the issuer’s creditworthiness;
equities not quoted in an active market;
unharmonised mutual funds;
junior asset-backed debt securities (ABS) issued by SPVs as part of securitisations by the
Group or by third parties, unless classified as “Financial assets at fair value”;
securities repurchased from customers following complaints/litigation.
Financial instruments are designated to this category upon initial recognition, or following
reclassifications allowed by paragraphs 50 to 54 of IAS 39, as amended by Regulation (EC) 1004/2008
of the European Commission issued on 15 October 2008.
Recognition
Financial assets available for sale (AFS) are initially recognized on the settlement date, on the basis of
their fair value, as uplifted by any directly-attributable acquisition costs/revenues. Costs and revenues
with the above characteristics are excluded if they are reimbursable by the borrower or represent
normal internal administrative costs.
Subsequent to initial recognition, AFS financial assets are stated at fair value; the profits and losses
deriving from any changes in fair value are recorded in a specific equity reserve, recognized in the
statement of comprehensive income, until the financial assets concerned are derecognized or a
permanent impairment of value is recognized.
For details on the methods used to identify fair value, see paragraph 17.5 below, entitled “Criteria for
determining the fair value of financial instruments”, of “Other information” in part A.2. of this
document.
These assets are reviewed at the end of each reporting period for objective evidence of any impairment
in accordance with paragraph 58 et seq. of IAS 39. Such objective evidence in the case of equities
quoted in an active market includes a significant or prolonged reduction in fair value below
acquisition cost. In particular, as stated in the Group’s policy for identifying evidence of impairment of
- 90 -
securities classified as financial assets available for sale, a significant reduction in fair value is defined
as more than 50% and a prolonged reduction in fair value is defined as an unbroken period of more
than 30 months. Any losses identified are charged to the income statement as “net impairment
adjustments to financial assets available for sale”. This amount also includes reclassification to the
income statement of fair value gains/losses previously recognized in the specific equity reserve. If, in a
subsequent period, the fair value of the financial instrument increases and the increase can be
objectively related to an event occurring after the impairment loss was recognized in profit or loss, the
impairment loss must be reversed, with the amount of the reversal recognized in the same line of the
income statement as the original impairment in the case of monetary items (e.g. debt securities) or in
equity in the case of non-monetary items (e.g. equities). Write-backs cannot exceed the cost/amortised
cost that the instrument would have had in the absence of earlier write-downs.
If a financial asset classified in this line item has been reclassified to another category, the related
reserve accumulated up to the date of the reclassification is maintained in equity until such time that
the financial instrument in question is sold, if a non-monetary item is involved; on the other hand, if a
monetary item is involved, the reserve is amortised in the income statement (as “interest income and
similar revenues”) over the residual useful life of the financial instrument to which it refers.
The interest income on these financial assets is calculated using the effective interest method, with the
associated income recognized in “interest income and similar revenues” in the income statement.
Gains and losses on the disposal or redemption of such financial assets are booked to the income
statement as “gains (losses) on disposal or repurchase of: financial assets available for sale” and
include any reversal to profit or loss of fair value gains/losses previously recognized in the specific
equity reserve.
Derecognition
Financial assets available for sale are derecognized when the contractual rights over the related cash
3. Financial assets held to maturity
Classification
This line item reports non-structured debt securities, quoted in an active market, with fixed maturity
and fixed or determinable payments, which the Group has the positive intention and ability to hold
until maturity.
Financial instruments are designated as financial assets held to maturity upon initial recognition or
following reclassification in accordance with paragraphs 50 to 54 of IAS 39, as amended by Regulation
(EC) 1004/2008 of the European Commission issued on 15 October 2008.
Recognition
Financial assets held to maturity are initially recognized on the settlement date, on the basis of their
fair value, as uplifted by any directly-attributable acquisition costs/revenues. Costs and revenues with
the above characteristics are excluded if they are reimbursable by the borrower or represent normal
internal administrative costs.
Subsequent to initial recognition, financial assets held to maturity are measured at amortised cost.
- 91 -
The interest income on these financial assets is calculated using the effective interest method, with the
associated income recognized in “interest income and similar revenues” in the income statement.
Gains and losses on the disposal or redemption of such financial assets are booked to the income
statement as “gains (losses) on disposal or repurchase of: financial assets held to maturity”.
An impairment test is carried out at the reporting date to check for objective evidence of any loss in
value. Any losses identified are charged to the income statement as “net impairment adjustments to
financial assets held to maturity”. If the reasons for such losses cease to apply due to events arising
subsequent to the write-down, the related write-backs are credited to the same income statement line
item. Write-backs cannot exceed the cost/amortised cost that the instrument would have had in the
absence of earlier write-downs.
Derecognition
Financial assets held to maturity are derecognized when the contractual rights over the related cash
4. Loans and receivables
4.1 Loans and advances to banks
Classification
This line item comprises monetary financial assets with banks, whether disbursed directly or
purchased from third parties, which carry fixed or determinable payments and are not quoted in an
active market (current accounts, guarantee deposits, debt securities, etc.).
This balance also includes amounts due from Central Banks, other than unrestricted deposits which
are classified as “cash and cash equivalents”.
Details of the recognition, measurement, derecognition and recording of these loans can be found in
the subsequent note 4.2 on “loans and advances to customers”.
4.2 Loans and advances to customers
Classification
Loans and advances to customers include non-structured monetary financial assets with customers,
whether disbursed directly or purchased from third parties, which carry fixed or determinable
payments and are not quoted in an active market (current accounts, mortgage loans, other kinds of
loans, debt securities etc.).
Financial instruments are designated as loans and advances to customers upon initial recognition, or
following reclassifications allowed by paragraphs 50 to 54 of IAS 39, as amended by Regulation (EC)
1004/2008 of the European Commission issued on 15 October 2008.
Recognition
The initial recognition of a loan takes place on the grant date or, in the case of debt securities, on the
settlement date, with reference to the fair value of the financial instrument, as uplifted by any directlyattributable acquisition costs/revenues.
Costs and revenues with the above characteristics are excluded if they are reimbursable by the
borrower or represent normal internal administrative costs.
- 92 -
The initial fair value of a financial instrument is usually equal to the amount disbursed or the cost
incurred in buying it.
Subsequent to initial recognition, loans and advances to customers are measured at amortised cost.
This is their initially-recorded value as decreased/increased by repayments of principal, writedowns/write-backs and the amortisation – determined using the effective interest method – of the
difference between the amount paid out and that repayable on maturity, which typically represents
costs/income directly attributable to the individual loans.
The effective interest rate is the rate that discounts the flow of estimated future payments over the
expected duration of the loan so as to obtain exactly the net book value at the time of initial
recognition, which includes directly-related transaction costs/revenues and all fees paid or received
between the contracting parties. This financial method of accounting distributes the economic effect of
costs/income over the expected residual life of each loan.
Estimates of the flows and the contractual duration of the loan take account of all contractual clauses
that could influence the amounts and due dates (such as early repayments and the various options
that can be exercised), but without considering any expected losses on the loan.
The amortised cost method is not applied to short-term loans, since the discounting effect would be
negligible, and these are therefore stated at cost. The same measurement criterion is applied to loans
without a fixed repayment date or which are repayable upon demand.
At every reporting date an analysis is performed to identify any problem loans for which there is
objective evidence of possible impairment. This category includes loans classified as “nonperforming”, “watchlist”, “restructured” or “past due”, as defined by the supervisory regulations.
The adjustment to the value of each loan represents the difference between its amortised cost (or cost
for short-term and demand loans) at the time of measurement and the discounted value of the related
future cash flows, determined using the original effective interest rate.
Key elements in determining the present value of future cash flows comprise the estimated realizable
value of loans, also taking account of any available guarantees, the expected timing of recoveries and
the forecast loan-recovery costs. Cash flows relating to loans due to be recovered in the short term
(12/18 months) are not discounted.
The approach taken for case-by-case determination of the recoverable value of non-performing loans
depends on their amount, applying the following criteria:
up to Euro 25,000: the positions are analyzed case-by-case but are not discounted, since they are
frequently not taken to court, but sold after the usual attempts to obtain recovery on an amicable
basis; these loans generally remain in this category for not more than 12/18 months, representing
the short term;
from Euro 25,000 to Euro 150,000: the positions are analyzed on a case-by-case basis to
estimate the amount recoverable, which is discounted over the average recovery period,
based on past experience and statistics;
amounts exceeding Euro 150,000 are analyzed on a case-by-case basis to estimate the
amount recoverable, which is discounted over the likely recovery period, as determined
by the competent corporate functions.
Watchlist loans exceeding Euro 150,000 are analyzed on a case-by-case basis to estimate the amount
recoverable, which is discounted over the likely average recovery period, based on past experience
and statistics. The remaining positions are assessed on a collective basis using Probability of Default
(PD) and Loss Given Default (LGD) parameters (which differ according to the amounts concerned),
- 93 -
with the related future nominal cash flows discounted over the estimated average recovery period,
based on past experience and statistics.
Restructured loans are valued by discounting the “implied” loss arising from the restructuring of the
position. If no evidence of impairment emerges from the valuation, the positions are assessed
collectively using PD and LGD parameters, calculated on the basis of past experience and statistics
that are intended to estimate the latent loss. The related estimated future cash flows are discounted
over the estimated average recovery period, as determined with reference to past experience and
statistics. If, instead, the analysis shows evidence of an impairment loss, the restructured loans are
classified either in the watchlist or as non-performing and valued in accordance with the rules
applying to these categories.
Past due exposures are written down on a collective basis. This test is performed by grouping loans
into categories that reflect a similar degree of credit risk. The related loss percentages are then
estimated with reference to past experience and statistics, in order to measure the inherent loss for
each category of loan. Estimated future cash flows are determined using PD and LGD parameters by
technical form and the resulting flows are discounted on the basis of average recovery times,
determined with reference to past experience and statistics.
Loans for which no objective evidence of loss has been individually identified, i.e. performing loans,
are tested for impairment on an overall basis. This test is performed by grouping loans into categories
that reflect a similar degree of credit risk. The related loss percentages are then estimated with
reference to past records, in order to measure the inherent loss for each category of loan. Estimated
future cash flows are determined using PD and LGD parameters by technical form and the resulting
flows are discounted on the basis of average recovery times, determined with reference to past
experience and statistics.
The expected loss (equal to gross value x PD x LGD) is adjusted for the Loss Confirmation Period
(LCP), which expresses the average delay between the deterioration of the debtor’s financial
conditions (“incurred loss”) and the actual classification of individual exposures as defaulted, for
various categories of homogeneous loans; its purpose is to “adjust” PD, which is typically expressed
on an annual time span.
No write-downs are recorded in relation to loans represented by “repurchase agreements” and
securities lending, or to loans to non-profit organisations, local and public administrations and Cassa
di Compensazione e Garanzia (Italy’s securities clearing house).
Provisions made for an impaired loan are only reversed if the credit quality has improved to the extent
that timely recovery of the principal and interest, with respect to the original terms for the loan
contract, is reasonably certain, or if the amount actually recovered exceeds the recoverable amount
estimated previously. Only for non-performing loans, write-backs also include the positive effect of
discounting adjustments made due to the progressive reduction in the estimated time required to
recover the related loans.
Adjustments, net of previous provisions and the partial or total recovery of amounts previously
written down, are recorded in the “net impairment adjustments to loans and advances” line item of
the income statement.
Derecognition
Loans and advances are derecognized as assets when they are deemed to be unrecoverable or are
transferred together with substantially all the related risks and benefits.
- 94 -
5. Financial assets at fair value
Classification
This line item comprises monetary financial instruments of a structured kind (meaning that one or
more embedded derivatives is present) and/or those related to trading derivatives entered into with
an external counterparty for the purposes of transferring the risks of the financial asset held (under the
so-called “fair value option”, or FVO), unless classified as “Financial assets held for trading”.
In particular, the FVO is used when it eliminates or significantly reduces accounting imbalances
deriving from the inconsistent recognition of financial instruments that are related (natural hedges) or
covered by derivative contracts which, due to difficulties and complexities, cannot be recognized as
hedges.
Financial instruments are designated as financial assets at fair value upon initial recognition. They
cannot be reclassified subsequently.
Recognition, measurement, derecognition and recording of income and expense
The principles applying to the recognition, measurement, derecognition and recording of income and
expense relating to financial assets at fair value are the same as those relating to “financial assets held
for trading”.
Gains and losses realized on sale or redemption and unrealized gains and losses deriving from
changes in the fair value of financial assets/liabilities at fair value are classified as “net change in
financial assets and liabilities at fair value” in the income statement.
6. Hedging transactions
Classification
Hedging transactions are intended to neutralize possible losses on certain elements or groups of
elements due to a given risk (e.g. a rise in interest rates), via the generation of profits from the hedging
instruments if the events associated with that risk should actually occur.
Hedging transactions are conducted solely in the form of derivative contracts with counterparties
outside of the Group to whom the risk is transferred. The use of internal deals is therefore not
permitted.
At the time that a hedging transaction is arranged, it is classified as one of the following types of
hedge:
fair value hedge of a given asset or liability: the objective is to hedge the exposure to changes in
fair value of an item caused by one or more risks;
cash flow hedge attributable to a particular asset or liability: the objective is to hedge the exposure
to changes in the future cash flows associated with an item caused by given risks;
hedge of the effects of an investment denominated in foreign currency: the objective is to hedge the
risks associated with investing in a foreign operation denominated in foreign currency.
Hedging transactions can refer to individual financial instruments and/or groups of financial
assets/liabilities.
The transaction is classified as a hedge if it has been formally designated as such, there is a
documented relationship between the hedged instrument and the hedging instrument, and it is highly
effective both at the start of the hedge and throughout its life.
- 95 -
A hedge is considered highly effective if changes in the fair value of the instrument being hedged or of
the related expected cash flows are offset by those of the hedging instrument. More precisely, the
hedge is effective when changes in the fair value (or cash flows) of the hedging instrument neutralize
the changes in the hedged instrument, deriving from the risk being hedged, within an interval of 80%125%.
The effectiveness of the hedge is assessed at the start of the hedge and throughout its life and, in
particular, on each reporting date, using:
prospective tests that justify the adoption of hedge accounting by showing the expected
effectiveness of the hedge in future periods;
retrospective tests that show the effectiveness of the hedge during the reference period.
If the tests do not confirm the effectiveness of the hedge, the hedge accounting described above is
terminated and the related derivative contract is reclassified among the “financial assets (liabilities)
held for trading”. In addition, hedging transactions are no longer classified as such if:
the hedge ceases;
the transaction expires, is sold, terminated or exercised;
the hedged item is sold, expires or is redeemed;
the hedge no longer meets the criteria to qualify for hedge accounting.
Recognition
Hedging derivatives are initially recognized at fair value on their subscription date.
Subsequent to initial recognition, hedging derivatives are stated at fair value on the basis described
below:
in the case of fair value hedges, changes in the value of the hedged item (but only for the portion
attributable to the hedged risk) and the hedging instrument are reflected in the income statement.
In this way, changes in the fair value of the hedged item are substantially offset against the
opposite changes in the fair value of the hedging instrument. Any difference, representing the
ineffective portion of the hedge, therefore represents the net effect of the hedge on profit or loss,
which is booked to “Net hedging gains (losses)”;
in the case of cash flow hedges, changes in the fair value of the hedging transaction are recorded in
equity, to the extent that the hedge is effective, and are only released to the income statement when
the related cash flows are actually generated by the hedged item. If the hedge is not effective,
changes in the fair value of the hedging instrument are recorded in the income statement as “other
operating charges/income”;
hedges of investments denominated in foreign currency are recorded in the same way as cash flow
hedges.
Hedging contract differentials are booked to “interest income” or “interest expense” depending on
whether they are positive or negative.
Derecognition
Hedging transactions are derecognized on disposal if all the risks and benefits associated with them
are substantially transferred as a result.
- 96 -
Classification
The item includes investments in associated companies and joint ventures.
Recognition
Investments in associated companies and joint ventures are carried at equity in accordance with IAS
28. Under this method, equity investments are initially recognised at cost and subsequently adjusted to
reflect changes in the Group’s interest in their equity. Differences between the cost of an investment
and the Group’s interest in its equity at the acquisition or initial consolidation date are reflected in its
carrying amount, if they cannot be attributed to specific assets or liabilities.
Measurement
Subsequent to acquisition, the value of investments in associated companies, in entities over which the
Group exercises significant influence and joint ventures is adjusted to reflect changes in the Group’s
interest in their equity value.
Equity investments are tested for impairment by estimating their recoverable amount, which takes
account of the present value of the future cash flows to be generated by them, including their final
disposal value and/or other factors.
Any resulting impairment adjustments, being the difference between the carrying amount of the
investments concerned and their recoverable value, are charged to “Profit (loss) from equity
investments” in the income statement.
If the reasons for impairment adjustments cease to apply, due to events arising subsequent to their
recognition, the write-down is reversed by crediting the same line item in the income statement for an
amount not exceeding the original impairment loss.
Derecognition
Equity investments are derecognized on expiry of the contractual rights over the related financial
flows, or when the investment is sold with the transfer of substantially all the related risks and benefits
of ownership.
Recognition of income and expense
In accordance with IAS 28, the Group’s interest in the results of associated companies, entities subject
to significant influence and joint ventures is recognized in “Profit (loss) from equity investments” in
the income statement.
8. Property, plant and equipment
Classification
This line item comprises the fixed assets held for the generation of income, for rent or for
administrative purposes, such as land, business property, investment property, installations, furniture,
furnishings, all types of equipment and works of art.
Property, plant and equipment also include leasehold improvements, if they can be separated from the
related assets. If these items are expected to generate future benefits, but are not functionally and
operationally independent, they are classified as “other assets” and depreciated over the expected
useful life of the improvements or the residual lease period, whichever is shorter.
- 97 -
Amounts paid in advance to acquire and restructure assets not yet used for productive purposes are
capitalized, but not depreciated.
Property, plant and equipment held “for business purposes” is defined as that held for supplying
services or for administrative purposes, while “investment property” is defined as that held to earn
rentals and/or for capital appreciation.
Recognition
Property, plant and equipment are initially recorded at cost, including all directly attributable costs of
bringing them to working condition.
Expenditure that improves an asset or increases the future economic benefits expected from the asset
is allocated to the asset concerned and depreciated over its remaining useful life.
Subsequent to initial recognition, property, plant and equipment held “for business purposes” are
stated at cost, net of accumulated depreciation and any impairment losses, consistent with the “cost
model” described in paragraph 30 of IAS 16. Property, plant and equipment are systematically
depreciated over their useful lives on a straight-line basis, except for:
land, whether acquired separately or included in the value of buildings, which is not depreciated
since it has an indefinite useful life. With regard to free-standing properties, the value of the land
is separated from the value of the related buildings by reference to internal and/or independent
expert appraisals, unless this information is directly available from the purchase contract;
works of art, which are not depreciated since they normally have an indefinite useful life and their
value is likely to increase over time;
investment properties, which are stated at fair value in accordance with IAS 40.
The depreciation charge for assets acquired during the period is determined on a daily basis from the
time they enter into service. The depreciation charge for assets sold and/or retired during the period is
determined on a daily basis up to the date of disposal and/or retirement.
At each reporting date, if there is evidence that the value of an asset, other than investment property,
may be impaired, its carrying value is compared with its recoverable value, being either its fair value
net of any selling costs or its value in use, represented by the present value of the future cash flows to
be generated by the asset, whichever is greater. Any adjustments are recorded as “net adjustments to
property, plant and equipment” in the income statement.
If the reasons for recognizing an impairment loss cease to apply, the consequent write-back cannot
cause the value of the asset to exceed its net book value (after depreciation) had no impairment losses
been recognized in prior periods.
Investment properties covered by IAS 40 are stated at the market value determined by independent
appraisals, with changes in their fair value recorded in “net gains (losses) arising on fair value
adjustments to property, plant and equipment and intangible assets” in the income statement.
Derecognition
Property, plant and equipment are derecognized upon disposal or when they are retired from use on a
permanent basis and no economic benefits are expected from their disposal.
- 98 -
9. Intangible assets
Classification
This line item reports non-monetary assets without physical form that have the following
characteristics:
identifiability;
control over the assets concerned;
existence of future economic benefits.
If any one of these characteristics is absent, the related purchase or internally-generated cost is
expensed in the period incurred.
Intangible assets include, in particular, applications software used over a number of years,
“intangibles” associated with the valuation of customer relationships identified on allocation of the
purchase price paid for lines of business, and other identifiable intangible assets representing legal or
contractual rights.
This line item also includes goodwill, representing the positive difference between the purchase cost
and the fair value of assets and liabilities acquired as a result of business combinations. In particular,
an intangible asset is recorded as goodwill when the positive difference between the fair value of the
net assets acquired and their purchase cost (including related charges) represents their ability to
generate future earnings. If this difference is negative (badwill) or if the goodwill is not justified by the
ability of the acquired assets/liabilities to generate future earnings, the difference is recorded directly
in the income statement.
With reference to the goodwill recognised upon changes in a parent’s ownership interest in
subsidiaries already under control, the changes of a parent’s ownership interest in a subsidiary (that
do not result in loss of control) are accounted for as “equity transactions”. As a result, the difference
between the additional purchase consideration (for a company in which a controlling interest is
already held) and the corresponding share of equity will be accounted for directly as a decrease in
equity.
Recognition
Intangible assets are initially recorded at cost, including any directly-related charges.
Measurement
Subsequent to initial recognition, intangible assets are stated at cost, net of accumulated amortisation
and any impairment losses, in accordance with the “cost model” described in paragraph 74 of IAS 38.
Intangible assets with a finite useful life are amortised systematically on a straight-line basis over their
estimated useful lives.
The amortisation charge for assets acquired during the period is determined on a daily basis from the
time they enter into service. The amortisation charge for those sold and/or retired during the period is
determined on a daily basis up to the date of disposal and/or retirement.
If there is evidence that the value of an intangible asset may be impaired, its carrying amount is
compared with its recoverable value. Any adjustments are recorded in “net adjustments to intangible
assets” in the income statement.
If the reasons for such impairment losses cease to apply due to events arising subsequent to the writedown, the appropriate write-backs are credited to the same income statement line item. Such writebacks cannot cause the value of the asset to exceed its net book value (after amortisation) had no
impairment losses been recognized in prior periods.
Assets with an indefinite useful life, such as goodwill, are not amortised but their carrying value is
tested periodically for impairment, as required by IAS 36. Any impairment losses, representing the
- 99 -
difference between the carrying value of the asset and its recoverable value, are charged to
“adjustments to goodwill” in the income statement. Impairment losses recognised for goodwill cannot
be reversed in later periods.
Derecognition
Intangible assets are derecognised from the statement of financial position if no future economic
benefits are expected, or on disposal.
10. Non-current assets held for sale and discontinued operations and liabilities associated
with discontinued operations
Classification
These line items comprise all non-current assets/liabilities and discontinued operations held for sale,
as defined by IFRS 5, i.e. those individual assets/liabilities or groups of assets/liabilities held for sale
whose carrying amount will be recovered principally via sale rather than continuous use. This
category also includes “discontinued operations” which, by convention, are also referred to as “groups
of assets/liabilities held for sale”.
Measurement
Non-current assets/liabilities (or discontinued operations) held for sale are measured at the lower of
their carrying amount or their fair value, net of selling costs, except for the following assets which
continue to be valued in accordance with the related accounting policies:
deferred tax assets;
assets deriving from employee benefits;
financial instruments;
investment property.
Recognition of income and expense
Income (interest income, dividends, etc.) and charges (interest expense, depreciation, etc.) relating to
individual non-current assets (or discontinued operations) held for sale and the related liabilities are
classified in the normal line items, while the income (interest income, dividends, etc.) and charges
(interest expense, depreciation, etc.) relating to discontinued operations are classified, net of the
related current and deferred taxation, in “profit (loss) from non-current assets held for sale, net of
tax” in the income statement.
The depreciation of depreciable assets ceases in the period in which they are classified as non-current
assets held for sale.
- 100 -
11. Current and deferred taxation
Income taxes, calculated in accordance with current fiscal legislation and applying the corporate
income tax (IRES) and regional business tax (IRAP) rates expected at year-to the estimated taxable
amount of the period, are recorded in the income statement on an accruals basis in line with the costs
and revenues that generated them, except for those relating to items debited or credited directly to
equity; for consistency, the tax on such items is also booked to equity.
Income taxes reported in the income statement represent a prudent estimate of the current tax charge
and the related changes in deferred tax assets and liabilities. In particular, deferred tax assets and
liabilities are determined with reference to temporary differences between the book value of assets and
liabilities and their tax bases.
Deferred tax assets are recognized if they are likely to be recoverable, determined with reference to
the Group’s ongoing ability to generate taxable income.
Deferred tax assets and liabilities are recorded in the statement of financial position as, respectively,
“Tax assets” and “Tax liabilities”, on an open account basis without offset.
In the case of current taxes, payments on account for individual taxes are offset against the related tax
payable, with positive balances reported as “tax assets: current” and negative balances as “tax
liabilities: current”.
In accordance with paragraph 52b of IAS 12, no provision for deferred taxation has been recorded in
relation to the reserves and revaluation surpluses that are in suspense for tax purposes, since their
distribution is not envisaged; in this regard, the Group has not carried out, and has no short or
medium-term plans to carry out, any activities which could give rise to the payment of deferred taxes.
12. Provisions for risks and charges
12.1 Pensions and similar commitments
IAS 19 classifies pension funds as post-employment benefits, making a distinction between defined
contribution plans and defined benefit plans. The company pension fund for employees of the former
subsidiary Cariprato (absorbed into the Parent Bank Banca Popolare di Vicenza effective 1 January
2010) is split into two sections:
1) a capitalization section, qualifying as a defined contribution plan, for which the Bank only has the
obligation to pay an annual amount calculated on the basis of salary paid to fund participants. This
section is not recognized in the statement of financial position, in compliance with IAS 19. The costs
of the annual payment by the Bank are recognized in the income statement;
2) a supplementary section, qualifying as a defined benefit plan, which is recognized in provisions for
risks and charges in the statement of financial position. The benefits are assured by the return on
the investments and by the mathematical reserve, calculated annually by an independent actuary.
12.2 Other provisions
In accordance with IAS 37, the provisions for risks and charges reflect known obligations (legal or
constructive) deriving from past events, the settlement of which is likely to involve the use of
economic resources whose timing and extent are uncertain, on condition that a reliable estimate can be
made of the amount needed to settle them at the end of the reporting period. Where the effect of the
time value of money is material because the liability’s settlement date is deferred, the provisions are
discounted using current market rates.
- 101 -
Provisions are re-examined at each reporting period and adjusted to reflect the best current estimate.
These are recorded in the appropriate line items of the income statement, depending on the “nature”
of the expense. In particular, provisions for future personnel expenses in connection with bonuses and
other incentive schemes are classified in “Payroll” costs, provisions for tax risks and charges are
classified in “Income taxes” and provisions for potential losses not directly attributable to specific line
items in the income statement are reported in “Net provisions for risks and charges”.
13. Payables and debt securities in issue
Classification
Amounts due to banks and amounts due to customers include the various forms of interbank and
customer funding (current accounts, restricted and unrestricted deposits, loans, repurchase
agreements, etc.), while debt securities in issue report all the liabilities in respect of the Group’s own
issues (savings certificates, certificates of deposit, bonds not classified as “financial liabilities at fair
value”, etc.).
All the financial instruments issued are reported in the financial statements net of any amounts
repurchased and include those which have expired at the reporting date but which have not yet been
repaid.
Recognition
These financial liabilities are initially recorded on receipt of the amounts collected or on the issue of
the debt securities.
They are initially recognized at the fair value of the liabilities, as uplifted for any directly-attributable
acquisition costs/revenues. Costs and revenues with the above characteristics are excluded if they are
reimbursable by the borrower or represent normal internal administrative costs.
The initial fair value of a financial liability usually corresponds to the amount received.
If the conditions set out in IAS 32 and 39 are satisfied, any derivatives embedded in the above financial
liabilities are separated and accounted for separately.
Measurement
Following initial recognition, the above financial liabilities are stated at amortised cost using the
effective interest method, except that short-term liabilities continue to be stated at nominal value since
the effect of discounting is negligible.
Derecognition
Financial liabilities are derecognized when they expire or are settled. Derecognition also applies when
issued securities are repurchased, even if such acquisition is only temporary. Any differences between
the book value of the derecognized liability and the amount paid are recorded as “gains (losses) on
disposal or repurchase of financial liabilities” in the income statement. If, subsequent to repurchase,
the securities are placed back in the market, this transaction is treated as a new issue and the liabilities
are recorded at the new placement price.
- 102 -
14. Financial liabilities held for trading
Classification
This line item reports short positions arising from trading activities and derivatives not designated as
effective hedging instruments that have a negative fair value.
Derivative contracts include embedded derivatives which are attached to a primary financial
instrument, known as the “host contract” when they have been recognized separately from the host
and forward transactions in currencies, securities, goods and precious metals.
An embedded derivative is recognized separately from the host contract when all of the following
conditions are satisfied:
its economic characteristics and risks are not closely related to those of the “host” contract;
the separated embedded instrument meets the definition of a derivative;
the hybrid instrument is not measured at fair value through the income statement.
If the fair value of a derivative contract subsequently becomes positive it is recorded as a financial
asset held for trading.
Financial instruments are designated as financial liabilities held for trading upon initial recognition,
except if former hedging derivatives with a negative fair value at the reference date are reclassified as
“financial liabilities held for trading” after a hedging relationship has become ineffective. They cannot
be reclassified subsequently.
The recognition, measurement, derecognition and recording of the effects on the income statement of
the above financial liabilities are described in the earlier paragraph on “financial assets held for
trading”.
15. Financial liabilities at fair value
Classification
This line item reports bonds issued that are related to trading derivatives entered with an external
counterparty for the purposes of transferring one or more risks associated with the liability issued (fair
value option).
Financial instruments are designated as financial liabilities at fair value upon initial recognition. They
cannot be reclassified subsequently.
The recognition, measurement, derecognition and recording of the effects on the income statement of
the above financial liabilities are described in the earlier paragraph on “financial assets at fair value”.
16. Transactions in foreign currency
Foreign currency assets and liabilities include not only those denominated in a currency other than the
euro, but also those that carry financial indexation clauses linked to the euro exchange rate against a
specific currency or a specific basket of currencies.
Foreign currency assets and liabilities are split between monetary and non-monetary items for
currency translation purposes.
- 103 -
Recognition
Foreign currency transactions are initially recognized in euro, by translating the foreign currency
amount using the spot exchange rate prevailing on the date of the transaction.
Measurement
At the end of each reporting period:
foreign currency monetary items are translated using the closing rate;
non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction;
non-monetary items that are measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was determined.
Exchange differences arising from the settlement of monetary items or from the translation of
monetary items using rates other than the initial translation rate, or the closing rate at the end of the
prior period, are recorded in the income statement for the period under “net trading income”, or if
such differences relate to financial assets/liabilities accounted for under the fair value option
permitted by IAS 39, under “Net changes in financial assets and liabilities at fair value”.
When gains or losses on non-monetary items are recognized in equity, the exchange differences on
them are also recognized in equity in the same period. Similarly, when gains or losses on nonmonetary items are recognized in the income statement, the exchange differences on them are also
recognized in the income statement in the same period.
17. Other information
17.1 Provision for severance indemnities
According to IFRIC, the provision for severance indemnities is a “post-employment benefit”
qualifying as a “defined benefit plan”, the value of which according to IAS 19 must be determined on
an actuarial basis. As a consequence, the period-end actuarial valuation of this line item is carried out
with reference to earned benefits using the Projected Unit Credit Method. This method involves the
projection of future payments with reference to past trends and statistical analyses and probabilities,
adopting suitable demographic techniques. This makes it possible to calculate the severance
indemnities accruing at a specific date on an actuarial basis, distributing the cost over the entire
remaining service of the current workforce, and no longer presenting them as a cost payable as if the
business were to cease trading on the reporting date.
The provision for severance indemnities has been valued by an independent actuary using the method
outlined above.
17.2 Repurchase agreements and securities loans
“Repurchase agreements”, which obligate the buyer to resell/repurchase the assets of the transaction
(e.g., securities) and “securities loans” wherein the collateral is represented by cash that returns to be
fully available to the bearer, are treated as loans against securities and, therefore, the amounts received
and paid are recorded as payables and loans. In particular, the aforesaid “repurchase agreements” and
“securities loans” completed for funding purposes are recognised in the financial statements as
payables for the amount received, while when completed for lending purposes they are recognised as
receivables for the amount paid. These transactions do not determine movements in the securities
portfolio. Accordingly, the cost of borrowing and income from lending are recorded as interest in the
income statement.
- 104 -
17.3 Fee and commission income and expense
For fee and commission income and expense, the period-end accounting results are used,
supplemented by non-accounting verifications for the purpose of recording the fees and commissions
accruing for the half-year.
17.4 Other administrative costs
Other administrative costs are recorded on an accruals basis, taking account of the agreements signed
up to 30 June, as well as the estimates of consumption which has not yet been invoiced. These
estimates are primarily based on the updated half-year budget and, based on past experience, are in
line with the accruals principle.
17.5 Criteria for determining the fair value of financial instruments
IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants in the principal (or most advantageous)
market at the measurement date, at current market conditions (i.e. a closing price), irrespective of
whether the price is directly observable or is estimated using a valuation technique.
In the case of financial instruments listed in active markets, the fair value is determined on the basis of
the most advantageous market prices to which the Group has access (using the official or other
equivalent price on the last trading day of the period in question). In this connection, a financial
instrument is considered listed in an active market if the transactions involving that financial
instrument take place frequently and with sufficient volumes to provide useful information for
determining the price on an ongoing basis.
In the absence of an active market, fair value is determined using valuation techniques generally
accepted in financial practice aimed at estimating the price at which an orderly sale or transfer of a
liability between market participants would take place at the measurement date, at current market
conditions. In the hierarchical order in which they are reported, these valuation techniques call for the
use of:
1. the latest NAV (Net Asset Value) published by the management companies of harmonized
funds (UCITS - Undertakings for Collective Investment in Transferable Securities), Hedge
Funds and SICAVs;
2. quoted prices for the assets or liabilities in inactive markets (e.g., those obtainable from external
info providers such as Bloomberg and/or Reuters) and/or by electronic trading systems that
do not have the characteristics required to be defined as active markets) or prices of similar
assets or liabilities in active markets;
3. the fair value obtained from valuation models (e.g. Discounted Cash Flow Analysis, Option
Pricing Models), which estimate all of the possible factors that condition the fair value of a
financial instrument (cost of money, credit risk, liquidity risk, volatility, exchange rates, early
repayment, etc.) based on observable market data, also for similar instruments, at the valuation
date. If it proves impossible to refer to market data for one or more risk factors, we use internal
parameters based on past experience and statistics (the valuation models are reviewed
periodically to ensure that they are still completely reliable);
- 105 -
4. price indications provided by the issuer, adjusted if necessary to take account of counterparty
and/or liquidity risk (e.g. the unit value communicated by the management company for
closed-end funds reserved for institutional investors or other kinds of mutual funds other than
those mentioned in point 1, the redemption value determined according to the issue
regulations for insurance contracts);
5. for equity instruments, where the valuation techniques mentioned above are not applicable: i)
the prices of direct transactions on the same security or on similar securities observed within an
appropriate time interval with respect to the measurement date; ii) the value shown in
independent appraisals, if available; iii) the value corresponding to the portion of net equity
held as shown in the company’s latest approved financial statements; iv) the cost, adjusted if
necessary to take account of material impairment, where the fair value cannot be reliably
determined.
The initial fair value of a financial instrument is always assumed to be equal to the price paid for
acquisition of the asset or to the price collected for the sale of the liability, including ancillary
costs/revenues. However, when in particular, specifically documented situations there is a significant
deviation between the price of the transaction and the fair value, the financial instrument shall be
recognised at a value (the fair value) different from the price of the transaction. In this regard, with
specific reference to the own-account trades of financial instruments with the Group’s own
customers, reference is made to the specific policy adopted by the Group (“Pricing policy”).
Given these considerations and in compliance with IFRS 13, the Bank/Group classifies fair value
measurements according to a hierarchy (Fair Value Hierarchy) that reflects the reliability of the inputs
on which the measurements are based. This hierarchy consists of the following levels:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the
entity can access at the measurement date;

Level 2 - inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly. This level also includes the valuation techniques
based on market approaches that mainly use data observable on the market, prices obtained
from external info providers and the valuations of mutual funds based on the NAV
communicated by the management company, the value of which is updated and published
periodically (at least once a month) and represents the amount at which the position can be
wholly or partially liquidated on the investor’s initiative;

Level 3 - input that are unobservable for the asset or liability but that reflect the assumptions
that market participants would use when pricing the asset or liability. This level includes prices
provided by the issuer counterparty or derived from independent appraisals and those
obtained with valuation models that do not use observable market data to estimate significant
factors affecting the fair value of the financial instrument. The level also includes the
measurements of unlisted equities corresponding to the fraction of shareholders’ equity held in
the company or derived from direct transactions observed over an appropriate time interval. It
also includes financial instruments maintained at cost.
- 106 -
INFORMATION ABOUT FAIR VALUE
Transfers between portfolios
In 2008 the Group took up the reclassification option for financial instruments permitted by the
amendments to IAS 39 “Financial instruments: recognition and measurement” and to IFRS 7
“Financial instruments: disclosures” contained in the “Reclassification of Financial Assets” published
by the IASB on 13 October 2008 and endorsed by the European Commission on 15 October 2008 with
Regulation EC 1004/2008.
The disclosures required by paragraph 12A (b) and (e) of IFRS 7 relating to the above reclassifications
will now be provided.
Type of financial
Origination portfolio
instrument
Debt securities
Mutual Funds
Financial assets available for
sale
Financial assets held for
trading
Book value at Fair value at
Destination portfolio
30/06/2014
Loans and receivibles
Income components in the
Income components booked
absence of transfers (before
during the period (before
tax)
30/06/2014
tax)
Valuation
Other
Valuation
Other
107,363
106,130
9,138
577
-
1,375
Financial assets available for
sale
2,401
2,401
86
-
86
-
Total
109,764
108,531
9,224
577
86
1,375
Fair value hierarchy
The assets and liabilities measured regularly at fair value are classified in the following table
according to the IFRS 13 fair value hierarchy.
Financial assets/liabilities at fair value
1. Financial assets held for trading
30/06/2014
L1
31/12/2013
L2
L3
L1
L2
L3
115,308
4,448,624
886
70,827
1,997,399
836
- Debt securities
88,499
84,560
-
49,831
49,138
-
- Equities
26,683
-
-
20,996
-
-
- Mutual funds
-
-
-
-
-
-
- Loans
-
-
-
-
-
-
126
4,364,064
886
-
1,948,261
836
4,897,284
447,750
363,634
3,249,480
472,756
372,041
- Debt securities
4,801,958
35,512
7,336
3,178,528
72,710
8,543
93,357
21,482
235,332
65,854
20,855
242,078
- Derivatives
- Equities
- Mutual funds
1,969
390,756
94,329
5,098
379,191
95,165
- Loans
-
-
26,637
-
-
26,255
3. Hedging derivatives
-
142,277
-
-
74,934
-
4. Attività materiali
-
-
138,813
-
-
138,191
5. Attività immateriali
-
-
-
-
-
-
5,012,592
5,038,651
503,333
3,320,307
2,545,089
511,068
1. Financial liabilities held for trading
77,056
3,841,070
-
52,999
1,680,167
-
- Due to banks
76,915
-
-
52,999
-
-
- Due to customers
-
-
-
-
-
-
-
-
-
-
-
-
141
3,841,070
-
-
1,680,167
-
2. Financial liabilities at fair value
-
1,752,973
-
-
1,712,199
-
- Due to banks
-
-
-
-
-
-
- Due to customers
-
-
-
-
-
-
-
1,752,973
-
-
1,712,199
-
3. Hedging derivatives
-
683,974
-
-
411,093
-
77,056
6,278,017
-
52,999
3,803,459
-
Total
- Derivatives
Total
L1= Level 1, L2= Level, 2 L3= Level 3
- 107 -
Key:
The Group assigns the maximum priority to prices quoted on active markets11. If prices directly
observable on active markets are not available, valuation techniques that maximize recourse to the
information available in the market and influenced as little as possible by subjective assessments or
internal assumptions are used. The valuation techniques and inputs used for the various types of
financial instruments regularly measured /not measured at fair value for which prices quoted in
active markets are not available are described below.
To determine the fair value of debt securities non-listed in an active market the Group resorts, where
available, to prices observed in inactive markets and/or recent transactions that took place with
similar instruments in active markets (the so-called comparable approach). For example, the price
indications that can be deduced from Infoproviders such as Bloomberg and Reuters, the exchange
prices quoted on Security Exchanges or electronic trading circuits which do not however qualify to be
considered active markets or operational deal pricing of individual contribution specialised in
transacting with financial instruments subject to valuation. The fair value determined this way is
assigned Fair Value Hierarchy level 2.
If no source of information is available as described above or if the Group deems that the sources
available do not reflect the true fair value of the financial instrument, valuation models of the
Discounting Cash Flow that predominately use inputs observable in the market to estimate the
possible factors that condition the fair value of a financial instrument (cost of money, credit risk,
liquidity risk, volatility, exchange rates, early repayment, etc.) are used. The fair value determined
this way is also assigned Fair Value Hierarchy level 2. In the instance where it proves impossible to
refer to market data for one or more risk factors, we use internal parameters based on past experience
and statistics which, where significant, entail the assignment of a Fair Value Hierarchy level 3.
To determine the fair value of an equity instrument not quoted in an active market, the Group resorts
to:
prices of direct transaction on the securities themselves or on similar securities observed in an
appropriate interval with respect to the valuation date;
the value shown in independent appraisals, if available;
the value corresponding to the portion of net equity held as shown in the company’s latest
approved financial statements.
No adjustments are made to the aforementioned values. The fair value determined this way is
assigned Fair Value Hierarchy level 3.
In the instance of equities, the fair value of which cannot be reliably determined as described above
and that present a singularly insignificant exposure (less than € 500 thousand), we opted to retain the
cost, adjusted if necessary to take account of impairment.
It is specified that the Group classified certain equity investments not quoted in active markets for
which, however, observable “prices” are available, such as, for example, the share value established
by the shareholders’ meeting for co-operative banks or the Bank of Italy’s valuation determined by
law, as Fair Value level 2.
To determine the fair value of mutual funds not quoted in an active market, the Group uses the NAV
communicated by the Management Company without making any adjustment thereto.
The Group considers “active markets” to be regulated markets in the Italian Regulated Markets List
authorized by CONSOB, in the Regulated Markets List Section concerning foreign markets recognised pursuant
to the European Community legal system pursuant to art. 67, par. 1 of Italian Legislative Decree 58/98 and to
the Regulated Markets List recognised pursuant to art. 67, par. 2 of Italian Legislative Decree 58/98, with the
exclusion of the Luxembourg market. This decision was made in consideration of the fact that these Security
Exchanges should guarantee volumes so as to minimise the so-called bid-ask spread.
11
- 108 -
Mutual funds, the NAV of which is updated and published periodically (at least monthly), and
represents the amount at which the position can be wholly or partially liquidated on the investor’s
initiative, are classified at Fair Value Hierarch level 2. In contrast, to investments of the type
characterised by significant levels of illiquidity (for example, hedge funds, private equity funds, and
more generally closed-end real estate funds) a Fair Value Hierarchy level 3 is assigned. An analogous
capitalisation is also used for capitalisation certificates held and measured based on the redemption
value reported by the issuer.
To measure own-issue bonds, specific Discounting Cash Flow type measurement models are used
that call for the discounting of expected cash flows through the use of a discount curve representative
both of the funding spread, established by the issuer on the primary market, and of any change in the
creditworthiness, again of the issuer, during the life of the loan. The funding spread is made equal to
the borrowing cost determined with the activation of the “hedge” or, if absent, based on the spreads
with which the “hedge” could have been stipulated at the time of the bond issue. The spread
representative of the change of creditworthiness is determined only when a specialised agency
announces a change in the Bank’s rating subsequent to issue date of the individual bond. This is
assumed to be equal to the average cumulative probabilities of default for issuers in the financial
institutions sector with the same rating as the issuer Bank (pre- and post-downgrade) identifiable
from the report published by the rating agency Standard & Poor’s. The change in the above
mentioned PD is then translated into a credit spread equivalent applied to the single bond issues. This
valuation technique (fair value level 2) is consistent with the quantification bond’s initial fair value
that is always carried in the financial statements as the exchange value collected for the transfer of the
liability.
To determine the fair value of the Over the counter (OTC) derivatives, valuation techniques that
predominately use significant inputs based on parameters observable in the market ( Interest rate curve,
Volatilities, Credit curve, Spot price, etc.) that are deduced impartially every day by the info-provider
Reuters, are used. An adjustment determined on the basis of so-called EL (Expected Loss) obtained
multiplying the probability of default associated with the counterparty based on the internal rating
system and estimated on a time horizon equal to the residual life of each individual derivative
contract, by the LGD (Loss Given Default) of the money at call, is applied to the current contracts
with the (corporate and retail) customers who present a positive market value for the Group. No
value adjustment attributable to the counterparty risk arising out of the positive market value for the
Group (CVA), or arising from a negative market value for the Group (DVA), is instead introduced to
the OTC derivative instruments traded with market counterparties with which specific bilateral
offsetting agreements secured by “credit support annex” agreements that regulate the financial
guarantees in cash collateral subject to daily marginalisation.
A similar treatment is also observed for transactions carried out with investee companies in which the
Group has a significant stake resulting in a situation of significant influence or a joint venture.
Finally, the fair value of the property, plant and equipment held for investment purposes is deduced
from appraisals made by outside companies updated on an annual basis, as at 31 December each
year. The fair value determined this way is assigned Fair Value Hierarchy level 3.
“Day one profit/loss” disclosure
The Group did not undertake any transactions during the year involving the recognition of “day one
profit/loss”.
- 109 -
CONSOLIDATED RESULTS OF OPERATIONS
SCOPE OF CONSOLIDATION
At 30 June 2014, the scope of consolidation of the BPVi Group is as follows:
Companies carried at net
equity
Companies consolidated
line-by-line
Parent Bank
S.c.p.A.
100%
Banca Nuova
S.p.A.
66.85%
Farbanca S.p.A.
100%
100%
99.99%
0.58%
NEM SGR S.p.A.
1.41%
BPVI Multicredito
S.p.A.
Fondo NEM
Imprese
95%
Fondo NEM
Imprese 2
99.42%
Industrial
Opportunity Fund
40%
ABC Assicura S.p.A.
98.59%
40%
60%
Berica Vita S.p.A.
Cattolica Life Ltd.
0.10%
Prestinuova S.p.A.
Servizi Bancari
S.c.p.A.
14.92%
40%
100%
96%
60%
60%
BPV Finance
International Plc
1%
Società Cattolica di
Assicurazione S.c.p.A.
0.10%
1.66%
1%
1%
47.95%
SEC Servizi
S.c.p.A.
46 %
1%
San Marco S.r.L
0.04%
99.92%
Immobiliare
Stampa S.c.p.A.
Magazzini Generali
Merci e Derrate S.p.A.
0.04%
25%
56.67%
100%
Giada Equity Fund
Monforte 19 S.r.l.
Popolare Assessoria e Consultoria Ltda, a subsidiary of which the Parent Bank holds a 99% equity
investment, was excluded from the scope of consolidation and valued at cost being that its value is
insignificant with respect to the Group’s consolidated financial statements.
With respect to 31 December 2013, there were no changes in the shareholdings of subsidiaries
companies or companies over which significant influence is exercised, with the exception of the
interest held in Interporto della Toscana Centrale SpA, that dropped below the threshold of 20%
subsequent to the BPVi Group’s non-participation in the share capital increase that the investee
carried out in 2013. Not recognising other elements that, pursuant to IAS 28, prove the existence of a
significant influence over the company, it was reclassified among “Financial assets available for sale”.
- 110 -
It is noted however that the new IFRS 10, which came into effect on 1 January 2014, resulted in the
extension of the BPVi Group’s scope of consolidation that now includes the mutual funds managed
by the subsidiary Nem Sgr among its “subsidiaries”. The mutual fund “Giada Equity Fund” instead
is included among investments over which significant influence is exercised.
*************
The financial statements of the Banca Popolare di Vicenza Group at 30 June 2014 therefore comprise
the financial and operating information reported by the Parent Bank and its direct and indirect
subsidiaries and associated companies.
The statements of financial position and income statements used for consolidation purposes
according to line-by-line and equity methods were those referred to 30 June 2014, with the exceptions
set out below. These statements were adjusted, where necessary, to align them with the correct and
consistent IAS/IFRS standards applied by the Group. The financial statements of companies
consolidated line-by-line, but presented using formats that differ from those established in Bank of
Italy Circular 262 of 22 December 2005 and subsequent amendments, have also been reclassified in
accordance with these formats.
The investment in San Marco Srl was carried at the equity value reported in its financial statements at
31 December 2013. Finally, it is specified that the value of the equity investment in Magazzini
Generali Merci e Derrate SpA was written off being that it has a negative net equity in the latest
approved financial statements (financial period 2013).
IAS 1.
12
- 111 -
THE MAIN AGGREGATES IN THE STATEMENT OF FINANCIAL POSITION
Banking business
Banking business
Total funding
Loans to cusotmers
Total
in milioni di €
30/06/2014 31/12/2013 30/06/2013
Changes
Jun/14 - Dec/13
(+/-)
48,937
30,073
79,010
50,714
30,893
51,033
31,209
81,607
82,242
RACCOLTA DIRETTA
%
Changes
Jun/14 - Jun/13
(+/-)
%
-1,777
-820
-3.5%
-2.7%
-2,096
-1,136
-4.1%
-3.6%
-2,597
-3.2%
-3,232
-3.9%
RACCOLTA DIRETTA
At 30 June 2014, the Group’s banking business, comprising total funding and loans to customers,
reached Euro 79,010 million, down by 3.2% compared to Euro 81,607 million at 31 December 2013.
This aggregate marks a drop of 3.9% over the year.
The reflexive trend of the aggregate under consideration is for the most part attributable to the
repurchase agreements and in particular to those conducted on the Euro MTS market managed by the
Cassa Compensazione e Garanzia whose volumes noticeably decreased in the half year. Net of the
above mentioned trading operation, the aggregate value under consideration grew 0.3% in the half
year and 2.4% over twelve months.
Total funding
Total funding
Direct funding
Indirect funding
Total
in milioni di €
30/06/2014 31/12/2013 30/06/2013
Changes
Jun/14 - Dec/13
(+/-)
29,244
19,693
48,937
31,663
19,051
50,714
RACCOLTA DIRETTA
33,230
17,803
51,033
%
Changes
Jun/14 - Jun/13
(+/-)
%
-2,419
642
-7.6%
3.4%
-3,986
1,890
-12.0%
10.6%
-1,777
-3.5%
-2,096
-4.1%
RACCOLTA DIRETTA
At 30 June 2014, the Group’s total funding, i.e. the sum of direct funding and indirect funding,
amounted to Euro 48,937 million, down by 3.5% compared to Euro 50,714 million at the end of 2013.
In detail, direct funding amounted to Euro 29,244 million compared to the Euro 31,663 million of 31
December 2013 (-7.6%), whilst indirect funding totalled Euro 19,693 million, up by +3.4% compared
to the end of 2013.
Year on year, the aggregate value dropped by 4.1% penalised by the drop in direct funding (-12%)
only in part mitigated by the good performance of indirect funding (+10.6%).
The reflexive trend of the aggregate under consideration is for the most part attributable to the
repurchase agreements conducted with the Cassa Compensazione e Garanzia. Net of the above
mentioned trading operation, the aggregate value under consideration grew 0.6% in the half year
and 5.5% over twelve months.
- 112 -
Direct funding
At 30 June 2014, Group direct funding, comprising the sum of amounts “Due to customers” (Line
item 20), “Debt securities in issue” (Line item 30) and “Financial liabilities at fair value” (Line item
50), total Euro 29,244 million, down 7.6% since the end of 2013 and by 12% year on year.
The downward trend of the aggregate under consideration is for the most part attributable to the
repurchase agreements (-83.2% in the first half of the year, -91.8% over twelve months) and in
particular to those conducted on the Euro MTS market managed by the Cassa Compensazione e
Garanzia [clearing house] whose volumes noticeably decreased in consideration of the fact that, in
the first half of the year, the BPVi Group’s short-term liquidity was characterized by noticeably
positive values. Net of the above mentioned trading operation, the aggregate value under
consideration shows a drop much more limited in the first half of the year (-1.2%) and a growth of
2.4% over twelve months.
Direct funding
30/06/2014 31/12/2013 30/06/2013
Changes
Jun/14 - Dec/13
(+/-)
Current accounts and demand deposits
Time deposits
Repurchase agreements
Bonds
Certificates of deposit and other securities
Other payables
13,087
3,734
416
8,078
139
3,790
13,185
3,932
2,478
8,518
152
3,398
12,410
3,789
5,071
9,004
146
2,810
-98
-198
-2,062
-440
-13
392
Total
29,244
31,663
33,230
-2,419
in milioni di €
RACCOLTA DIRETTA
%
-0.7%
-5.0%
-83.2%
-5.2%
-8.6%
11.5%
Changes
Jun/14 - Jun/13
(+/-)
677
-55
-4,655
-926
-7
980
-7.6% -3,986
%
5.5%
-1.5%
-91.8%
-10.3%
-4.8%
34.9%
-12.0%
RACCOLTA
DIRETTA
Even the other traditional
sources
of funding show, from the start of the year, a decrease that is
consequence both of the Group’s decision to limit the more burdensome component of funding, in
particular that carried out with financial companies and businesses, and the clientele’s tendency to
move to asset management instruments favoured by the current market conditions. In detail: current
accounts and demand deposits -0.7%, time deposits -5%, bonds -5.2% certificates of deposit and
other securities -8.6%.
In contrast, other payables increased by 11.5% with respect to the end-of-year figure for 2013, a
change almost entirely attributable to the liabilities relating to assets sold and not derecognized
(Euro 3,188 million at 30 June 2014, Euro 2,808 million at 31 December 2013) that represents the
matching entry of the loans sold within the purview of own securitisations that do not meet the
derecognition requirements under IAS 39, and were therefore reinstated under asset line item 70. The
aforesaid liabilities, posted net of the cash available to the various special purpose entities and
generated with the periodic collection of the instalments of the securitised mortgages, represent the
share of the Asset Backed Securities issued by the special purpose entities and placed on the market.
In this regard, a new securitisation transaction of performing residential mortgages (Berica ABS 3)
was executed in the first half of 2014; its senior tranches (a nominal Euro 835 million) were all placed
on the market.
The year on year changes in the above aggregate substantially reflect the trends identified during the
first half of 2014, confirming in particular both the strong growth in “other payables” (34.9%) and the
decline in time deposits (-1.5%) and bonds (-10.3%) and some repurchase agreements (-91.8%).
Moving counter-current instead are current accounts and demand deposits which grew by 5.5% over
the year.
- 113 -
Indirect funding
At 30 June 2014, the market value of the Group’s indirect funding amounted to Euro 19,693 million,
with a positive change of 3.4% compared to the figure at the end of December 2013. The comparison
on an annual basis records a growth of 10.6%.
Indirect funding
Assets under administration
Shares
Other securities
Treasury shares
Assets under management
Mutual funds/Sicav
Portfolio management
Pension premiums
Total
management accounting
30/06/2014 31/12/2013 30/06/2013
Changes
Jun/14 - Dec/13
(+/-)
13,590
1,391
7,400
4,799
3,975
3,855
120
2,128
14,013
1,880
7,199
4,934
2,997
2,828
169
2,041
13,197
1,517
7,048
4,632
2,604
2,320
284
2,002
19,693
19,051
17,803
RACCOLTA DIRETTA
-423
-489
201
-135
978
1,027
-49
87
642
%
Changes
Jun/14 - Jun/13
(+/-)
%
-3.0%
393
-26.0% -126
2.8%
352
-2.7%
167
32.6% 1,371
36.3% 1,535
-29.0% -164
4.3%
126
3.0%
-8.3%
5.0%
3.6%
52.6%
66.2%
-57.7%
6.3%
3.4% 1,890
10.6%
Source:
In the half year, this aggregate was characterised by the positive contribution of pension premiums
(+4.3%) and of assets under management (+32.6%), which in turn benefited from the positive
performance of “mutual funds” (+36.3%) whilst “portfolio management” (-29%) confirmed the
negative trend of recent years. On the other hand, assets under administration declined (-3%): in this
segment, only “shares” grew (+2.8%), whilst “other securities” and “treasury shares” contracted by
26% and 2.7%, respectively.
Overall year on year growth was 10.6%, thanks to the positive contribution of all segments, with
assets under administration growing by 3%, assets under management by 52.6%, and pension
premiums by 6.3%.
- 114 -
Loans to customers
At 30 June 2014, loans to customers net of adjustments (asset line item 70 in the consolidated
statement of financial position) amount to Euro 30,073 million, down by 2.7% since 31 December 2013
which is almost entirely attributable to the decrease of financial transactions with central
counterparties, in particular the repurchase agreements made with Cassa di Compensazione e
Garanzia. Net of the above mentioned trading operation, in fact, loans and advances to customers
show a positive trend (+0.3% gross loans), contrary to the average figure of the Italian credit system (1.0%)13.
The comparison on an annual basis records a drop of 3.6%.
In line with the co-operative bank’s mission to support the territory from the perspective of greater
risk segmentation, loans to private customers (+0.4%) and small businesses (+4.3%) grew in the first
half of the year compared with lower volumes for large corporate customers (-2.3%). New issues in
the first half year amount to nearly Euro one billion.
Loans to customers
30/06/2014 31/12/2013 30/06/2013
(+/-)
RACCOLTA 5,036
DIRETTA4,932
in milioni di €
Current
accounts
RACCOLTA
Repurchase agreements
Mortagages
Credit cards, personal loans and salary
assignment
Other transactions
Debt securities
Total
in milioni di €
Changes
Jun/14 - Dec/13
DIRETTA
1,544
17,826
4,991
1,623
18,212
2,251
18,023
Changes
Jun/14 - Jun/13
%
104
-707
-197
(+/-)
2.1%
-31.4%
-1.1%
%
45
-79
-386
0.9%
-4.9%
-2.1%
555
551
534
4
0.7%
21
3.9%
4,638
474
4,754
382
5,491
358
-116
92
-2.4%
24.1%
-853
116
-15.5%
32.4%
30,073
30,893
31,209
-820
-2.7%
+8,4%
RACCOLTA
DIRETTA
IMPIEGHI CON CLIENTELA
-1,136
-3.6%
+2,4%
In the first half of 2014, aggregate performance is characterised by growth in current accounts
(+2.1%), credit cards, personal loans and salary assignment (+0.7%), and debt securities (+24.1%)
whilst repurchase agreements decline (-31.4%), as well as mortgages (-1.1%) and other transactions (2.4%).
The decline in other transactions in particular feels the effects of the contraction in guarantee margins
deposited with the Cassa di Compensazione e Garanzia in view of lesser repurchase agreements
entered into on the Euro MTS market (Euro 50 million at 30 June 2014, Euro 154 million at 31
December 2013) and the net imbalance generated with the reinstatement of the assets transferred in
self-securitisations; this exposure in fact represents the cash available at the various special purpose
vehicles for repayment of the Asset Backed Securities issued (Euro 116 million at 30 June 2014, Euro
231 million at 31 December 2013).
The increase of debt securities is partially attributable to certain investments made in the half-year in
ABS securities and in “Minibonds” within transactions where the Group oversaw the corresponding
structuring phase and that, in actual fact, represent an innovative form of financing productive
business in the geographic area of choice.
13
Source: “Moneta e Banche” by Bank of Italy at 30 June 2014. The system figure refers to total of gross loans to private customers,
Insurance companies and Pension funds, Other financial institutions (net of Central Counterparties), Non-financial institutions and
Families).
- 115 -
Loans to customers include assets sold but not derecognized totalling Euro 7,903 million (Euro 7,373
million at 31 December 2013) in relation to the securitisations originated by the Group14. These
transactions do not meet the derecognition requirements of IAS 39, so the residual securitised assets
at the reporting date have been “reinstated” in the financial statements, in the relevant technical
forms.
The change in the aggregate in discussion on an annual basis show a growth in current accounts
(+0.9%), personal loans and salary assignment (+3.9%) and securities (+32.4%), whilst repurchase
agreements declined (-4.9%), along with mortgages (-2.1%), and other transactions (-15.5%).
Loans / direct funding ratio
in milioni di €
Loans
to customers
Direct funding
Net imbalance
in milioni di €
30/06/2014 31/12/2013 30/06/2013
Changes
Jun/14 - Dec/13
(+/-)
RACCOLTA DIRETTA
30,893
30,073
RACCOLTA DIRETTA
29,244
829
31,209
33,230
31,663
+8,4%
+2,4%
RACCOLTA
DIRETTA
-770
102.8%
%
(+/-)
%
-820
-2,419
-2.7%
-7.6%
-1,136
-3,986
-3.6%
-12.0%
1,599
-207.7%
2,850
-141.0%
+2,4%
-2,021
Changes
Jun/14 - Jun/13
97.6%
93.9%
The “Loans / direct funding ratio” amounts to 102.8%, up by 5.2 percentage points from the figure at
31 December 2013 and by 8.9 percentage points with respect to that at 30 June 2013.
Net of existing repurchase agreements operations traded on the Euro Mts market with Cassa di
Compensazione e Garanzia and related guarantee margins, the loans/direct funding ratio at 30 June
2014 comes in at 100.8%, up by only 1 percentage point with respect to 31 December 2013, but up by
4.9 percentage points over the 30 June 2013 figure.
Quality of credit
Changes
Impaired loans net
30/06/2014
Non performing loans
Watchlist loans
Restructured loans
Loans past due
in milioni di €
Total
in milioni di €
31/12/2013
(+/-)
1,712.0
1,602.4
449.2
521.1
RACCOLTA DIRETTA
RACCOLTA DIRETTA
4,284.7
+8,4%
RACCOLTA DIRETTA
%
1,566.7
1,353.8
506.7
485.2
145.3
248.6
-57.5
35.9
9.3%
18.4%
-11.3%
7.4%
3,912.4
372.3
9.5%
+2,4%
At 30 June 2014, net impaired loans to customers showed an increase in absolute value of Euro 372.3
million compared to 31 December 2013 (+9.5%). In detail, non-performing loans grew by 9.3%,
watchlist loans by 18.4 %, past due exposures by 7.4%, whilst restructured loans declined by 11.3%.
14
With the exception of the Berica Residential MBS 1 transaction which was carried out before 1 January 2004, and for
which the securitised assets were not “reinstated” on the first-time adoption of IAS-IFRS, as allowed by IAS 1.
- 116 -
It is likewise specified that, subsequent to the entry into force on 1 January 2014 of the new prudential
supervisory framework named “Basel 3”, the methods for identifying past due exposures were
modified; they no longer require the so-called “transaction approach”, which “Basel 2” rules
previously in force instead made mandatory for exposures guaranteed by real estate.
In the tables that follow, the details of the loans to Group customers at 30 June 2014 and at 31
December 2013 are shown distinctly for each category of impaired loans as well as for the performing
loans.
30 June 2014
Categories
Gross
exposure
Adjustments
Net
exposures
Impaired loans
Watchlist loans
Restructured loans
Loans past due
Performing loans
Loans to customers and debt securities
Repurchase agreements and collateral margin
5,937.4
3,039.0
1,887.0
469.2
542.2
25,880.7
24,286.8
1,593.9
1,652.7
1,327.0
284.6
20.0
21.1
92.2
92.2
-
4,284.7
1,712.0
1,602.4
449.2
521.1
25,788.5
24,194.6
1,593.9
Total
31,818.1
1,744.9
30,073.2
6,234.8
1,950.1
3,336.4
% loans
gross
%
coverage
% net
loans
18.66%
9.55%
5.93%
1.47%
1.70%
81.34%
76.33%
5.01%
27.84%
43.67%
15.08%
4.26%
3.89%
0.36%
0.38%
0.00%
14.25%
5.69%
5.33%
1.49%
1.73%
85.75%
80.45%
5.30%
4,284.7
19.41%
31.28%
14.25%
1,624.4
1,712.0
10.39%
48.69%
5.69%
Adjustments
Net
exposures
Impaired loans
(included partial write-offs for bankruptcy proceedings)
Credit Cost
1.04%
31 December 2013
Categories
Gross
exposure
Impaired loans
Watchlist loans
Restructured loans
Loans past due
Performing loans
Loans to customers and debt securities
Repurchase agreements and collateral margin
5,378.9
2,755.7
1,593.7
525.0
504.5
27,074.5
24,669.4
2,405.1
1,466.5
1,189.0
239.9
18.3
19.3
94.2
94.2
-
3,912.4
1,566.7
1,353.8
506.7
485.2
26,980.3
24,575.2
2,405.1
Total
32,453.4
1,560.7
30,892.7
5,679.5
1,767.1
3,056.3
1,489.6
% loans
gross
%
coverage
% net
loans
16.57%
8.49%
4.91%
1.62%
1.55%
83.43%
76.01%
7.41%
27.26%
43.15%
15.05%
3.49%
3.83%
0.35%
0.38%
0.00%
12.66%
5.07%
4.38%
1.64%
1.57%
87.34%
79.55%
7.79%
3,912.4
17.34%
31.11%
12.66%
1,566.7
9.33%
48.74%
5.07%
Impaired loans
Credit Cost
1.44%
The coverage parameter of impaired loans, i.e. total adjustments as a percentage of gross lending,
excluding partial write-offs for bankruptcy proceedings (the so-called “liquidations”), passed from
27.26% at 31 December 2013 to 27.84% at 30 June 2014. The coverage of impaired loans, including
partial write-offs for bankruptcy proceedings still in progress at 30 June 2014, was 31.28% with
respect to the 31.11% at 31 December 2013. In detail, net impaired loans to customers at 30 June 2014
are analyzed as follows:
non-performing loans, representing 5.69% of net loans (5.07% at 31 December 2013), amount to
Euro 1,712 million with a coverage percentage, determined without taking into account partial
write-offs for bankruptcy proceedings, of 43.67% (43.15% at 31 December 2013). The coverage
percentage, including write-offs for bankruptcy proceedings still in progress on that date, was
48.69% (48.74% at the end of 2013);
watchlist loans, representing 5.33% of net loans (4.38% at 31 December 2013), amount to Euro
1,602.4 million with a percentage coverage of 15.08% (15.05% at the end of 2013);
net restructured loans total Euro 449.2 million, with a coverage percentage of 4.26% (3.49% at the
end of 2013);
- 117 -
net past due exposures amount to Euro 521.1 million with a percentage coverage of 3.89% (3.83%
at the end of 2013).
Lastly, the general provision for performing loans to customers (excluding repurchase agreements
and guarantee margins not impaired) amounted to Euro 92.2 million at 30 June 2014, assuring
coverage of 0.38%, unchanged with respect to the end of 2013.
The credit cost on a yearly basis, defined as the ratio between net adjustments to cash loans to
customers and gross loans to customers (excluding repurchase agreements and guarantee margins)
amounted to 1.04% (1.44% at 31 December 2013).
The interbank position
At 30 June 2014, the Group’s net exposure on the interbank market, given by the algebraic sum of
amounts due from banks (asset line item 60) and amounts due to banks (liability line item 10)
amounted to Euro -4,624.3 million, up Euro 364.8 million compared to figure at 31 December 2013.
(in millions euro)
Changes
30/06/2014
31/12/2013
(+/-)
%
Position with Central Banks
Repurchase agreements position
Net exposure through cash collateral
Unsecured position
Debt securities
(3,258.8)
(673.5)
592.1
(1,311.0)
26.9
(2,915.9)
(738.1)
625.5
(1,309.8)
78.8
(342.9)
64.6
(33.4)
(1.2)
(51.9)
11.8%
-8.8%
-5.3%
0.1%
-65.9%
Total
(4,624.3)
(4,259.5)
(364.8)
8.6%
The position with Central Banks includes Euro -3,348.6 million in three-year refinancing operations
with the ECB (LTRO - Longer Term Refinancing Operations), in which the Bank participated by
forming a pool of assets eligible as collateral, including Euro 2 billion of own-issue bonds guaranteed
by the State. There is also the time deposit connected with maintaining the compulsory reserve (Euro
+89.8 million).
The repurchase agreements position had a negative imbalance of Euro 673.5 million, down
compared to Euro -738.1 million at 31 December 2013.
The net exposure through cash collateral had a positive balance of Euro 592.1 million (Euro 625.5
million at 31 December 2013) and refers to mutual guarantees, aimed at mitigating credit risk, that are
exchanged on a daily basis with all major market operators with which the Group carries out OTC
derivative and repo/bond buy sell back transactions, quantified on the basis of the market value of
existing positions. The guarantees are regulated by international standards (CSA/GMRA) subscribed
with the various market counterparties on existing ISDA agreements that regulate the aforesaid
transactions.
The net unsecured position is equal to -1,311 million and is stable with respect to the figures at the
end of 2013. The O/N funding, used for temporary coverage of cash imbalances, amounted to zero.
- 118 -
Financial assets and liabilities
The Group’s cash financial assets at 30 June 2014 amount to Euro 5,956.7 million, versus Euro 4,262.9
million at 31 December 2013 (+39.7%).
Changes
Cash financial assets
30/06/2014
31/12/2013
(+/-)
%
Financial assets held for trading (1)
- Debt securities: Governments and Central Banks
- Debt securities: other issuers
- Quoted equities
199.7
73.0
100.0
26.7
120.0
49.8
49.2
21.0
Financial assets available for sale (2)
- Debt securities: Governments and Central Banks
- Quoted equities
- Unquoted equities
- Mutual funds
- Loans
5,708.7
4,775.5
69.3
93.4
256.8
487.1
26.6
4,094.3
3,179.6
80.2
65.9
262.9
479.5
26.2
1,614.4
1,595.9
(10.9)
27.5
(6.1)
7.6
0.4
39.4%
50.2%
-13.6%
41.7%
-2.3%
1.6%
1.5%
48.3
48.3
48.6
48.6
(0.3)
(0.3)
-0.6%
-0.6%
5,956.7
4,262.9
Financial assets held to maturity
Total
(3)
79.7
23.2
50.8
5.7
1,693.8
66.4%
46.6%
103.3%
27.1%
39.7%
Asset line item 20 from the consolidated statement of financial position
(3) Asset line item 50 from the consolidated statement of financial position
(1)
(2)
At 30 June 2014, the Group’s cash financial assets refer to:
assets held for trading (asset line item 20) that comprise 3.4% of the Group’s cash financial
assets, having grown by Euro 79.7 million compared to 31 December 2013 (+66.4%), as a result
of the greater investments made on all types of financial instruments carried under the item in
consideration;
financial assets available for sale (asset line item 40) that represent 95.8% of the Group’s cash
financial assets, following an increase by Euro 1,614.4 million (+39.4%) with respect to the
balances at the end of 2013 as a result of the new investments in Italian government bonds.
financial assets held to maturity (asset line item 50) that account for 0.8% of the Group’s cash
financial assets and amount to Euro 48.3 million (Euro 48.6 million at 31 December 2013).
Exposures to sovereign debt, representing 81.4% of the Group’s cash financial assets at 30 June 2014
refer for the most part to Italian government bonds (Euro 4,846.6 million), and to a lesser degree
Argentine government bonds (Euro 1.9 million). Refer to the specific paragraph of the report on
operations for the respective details.
The Group’s financial liabilities held for trading amount to Euro 76.9 million (Euro 53 million at 31
December 2013, and are entirely related to technical mismatches on Italian Government bonds.
- 119 -
The breakdown of trading derivatives is shown below. If their fair value is positive, they are recorded
under asset line item 20; if their fair value is negative, they are recorded under liability line item 40.
30/06/2014
Trading derivatives
31/12/2013
Positive fair Negative Positive fair
value
value (1)
fair value (2)
Negative
fair value
Derivatives on debt securities and interest rates
Derivatives on equities and equity indices
Derivatives on exchange rates and gold
4,221.4
0.4
16.4
(3,822.7)
(1.6)
(9.8)
1,775.6
0.4
23.7
(1,640.7)
(0.1)
(8.1)
Total
4,238.2
(3,834.1)
1,799.7
(1,648.9)
(1)
(2)
Liability line item 40 from the consolidated statement of financial position
The exposures in derivatives on debt securities and interest rates reflect the effects of the strategies for
managing the banking book. To optimise their costs, the various hedging transactions entered into by
the Group transit the trading portfolio.
The breakdown of “hedging” derivatives is shown below. They are recorded under asset line item 80
(positive fair values) and under liability line item 60 (negative fair values), with the exception of the
fair value options (“natural hedges”), which instead are recorded under asset line item 20 (positive
fair values) and under liability line item 40 (negative fair values).
30/06/2014
Hedging derivatives
Positive fair
value
Negative
fair value
31/12/2013
Nominal Value
Positive fair
value
Negative
Nominal Value
fair value
(1)
84.5
15.4
33.3
35.8
(204.0)
(120.7)
(83.3)
-
3,984.8
455.0
985.0
2,095.9
448.9
70.0
23.4
0.6
46.0
(344.8)
(280.1)
(59.5)
(5.2)
-
5,404.1
1,530.0
957.2
2,126.5
790.4
Cash flow hedging (1)
- debt securities
- mortgages
- due to customers
- own bond issues
57.8
57.8
-
(480.0)
(441.0)
(39.0)
-
9,855.0
2,805.0
7,050.0
-
4.9
4.9
-
(66.3)
(15.0)
(51.3)
-
6,900.0
200.0
6,700.0
-
- debt securities
- mortgages
- due to customers
- own bond issues
126.8
126.8
(7.1)
(7.1)
2,982.5
2,982.5
149.4
149.4
(31.3)
(31.3)
2,570.0
2,570.0
Total
269.1
(691.1)
16,822.3
224.3
(442.4)
14,874.1
Fair value hedging
- debt securities
- mortgages
- due to customers
- own bond issues
Fair value option
(2)
Positive fair value = Asset line item 80 from the consolidated statement of financial position; negative fair value = Liability line item
60 from the consolidated statement of financial position
(2) Positive fair value = Asset line item 20 from the consolidated statement of financial position; negative fair value = Liability line item
40 from the consolidated statement of financial position
(1)
The fair value hedges pertain to interest rate risk on specific fixed-rate and floating rate with
maximum rate mortgage portfolios classified as “Loans and advances to customers”, on individual
own-issue bonds recorded among “Securities in issue”, on sight positions (current accounts and
demand deposits) recorded among “loans and advances to customers”, on a debt security recorded
among “Loans and advances to banks”, and on Italian government bonds recorded among “financial
assets available for sale”.
- 120 -
To represent the aforesaid hedging transactions, the Group opted for the “Micro Fair Value Hedge”
accounting model for those relating to own-issue bonds and to investments in government bonds,
while it used the “Macro Fair Value Hedge” model for those relating to mortgages, with the
consequent recognition of the revaluations of the hedged assets (Euro 63.2 million at 30 June 2014
versus Euro 38.1 million at 31 December 2013) in Asset line item 90 “Remeasurement of financial
assets backed by macro hedges”. A similar choice was also made for the hedges of on-demand items
for the amounts due to customers, with the consequent recognition of fair value changes in the
hedged liabilities (Euro +36.3 million at 30 June 2014, Euro -2.8 million at 31 December 2013) under
liability line item 70 “Remeasurement of financial liabilities backed by macro hedges”.
The cash flow hedges pertain to specific portfolios of floating rate mortgages recorded among “loans
and advances to customers” and to Italian Government bonds recorded among “financial assets
available for sale”, in particular inflation linked BTP. The underlying assets of cash flow hedging
derivatives for mortgages refer both to tailor-made interest rate swaps that replicate the amortisation
schedule and the method of indexing the hedged assets and to the related swaption collars that
enable to limit the consequences of any sudden changes in the interest rate curve. Overall, cash-flow
hedged floating rate loans amount to Euro 2,950 million, versus Euro 3,350 million at 31 December
2013.
Finally, the fair value option is used to manage own-issue bonds related, from their origin, to
derivative contracts entered into in order to mitigate their interest rate risk.
OTC derivatives entered into with market counterparties, mostly banks, is almost entirely secured
by bilateral offsetting agreements that provide the option of offsetting creditor positions with debtor
positions in case of counterparty default. Moreover, in order further to attenuate credit risk, specific
Credit Support Annex contracts were stipulated, which regulate the cash collateral financial
guarantees marginalised every day with the various counterparties with which the Group operates.
The following table shows the Group’s net exposure in derivatives, determined on the basis of the net
fair values of all existing contracts with a single counterparty with respect to the transactions that are
secured by a bilateral offsetting agreement, whilst the remaining transactions are posted on the basis
of the fair value of each individual contract.
30/06/2014
Derivatives
Positive fair
value
OTC derivatives with market counterparties
- covered by bilateral offsetting arrangements
- not covered by bilateral offsetting arrangements
OTC derivatives with Group clients
430.5
426.0
4.5
85.9
Negative
fair value
(525.5)
(517.8)
(7.7)
(8.8)
The exposures with positive fair values with market counterparties are secured by cash collaterals
deposited with the Parent Bank BPVi, amounting to Euro 399.4 million.
Derivative contracts having positive fair value with Group customers also include gross impaired
exposures of Euro 9.4 million, which have been written down by Euro 2.9 million to take account of
the related credit risk. The remaining performing positions, instead, were written down by Euro 8.3
million.
- 121 -
Equity investments
Equity investments (asset line item 100) amounted to Euro 408.2 million (Euro 385 million at 31
December 2013) and refer mostly to the interests held in the insurance companies of the Cattolica
Assicurazioni Group.
Name
Net profit
(loss) (1)
%
held
Subsidiary companies not included in the scope of consolidation (valued
at cost)
1. Popolare di Vicenza Assessoria e Consultoria Ltda
Equity (1)
Book value
Fair value
99%
n.s.
n.s.
10
X
14.92%
7,090
214,575
308,239
40%
523
7,822
9,190
X
3. Berica Vita SpA (3)
40%
2,228
31,277
30,698
X
4. ABC Assicura SpA (3)
40%
79
4,567
4,984
X
46%
(14)
192
873
X
25%
(357)
(248)
-
X
Associated companies (subject to significant influence carried at equity)
1. Società Cattolica di Assicurazione SCpA
2. Cattolica Life Ltd
5. San Marco Srl
(2)
(4)
6. Magazzini Generali Merci e Derrate SpA
(4)
7. Sec Servizi SCpA (5)
8. Partecipazioni detenute tramite schemi di investimento (6)
138,473
49.81%
-
13,073
13,073
X
n.s.
n.s.
n.s.
41,093
X
Total
408,160
Net income (loss) for the period and equity presented refer to the part attributable to the BPVi Group based on the percent
interests held in the investment.
(2) The data in the table refer to the consolidated financial statements at 30 June 2014.
(1)
The data in the table are taken from the “Group Reporting Package” used by the parent company “Società Cattolica di
Assicurazione” to prepare the group’s consolidated financial statements at 30 June 2014.
(3)
(4)
The data in the table refer to the financial statements at 31 December 2013.
The percentage held is determined by adding the percentage held directly by the Parent Bank, Banca Popolare di Vicenza
(47.95%), to those held indirectly through the subsidiaries Banca Nuova (1.66%), Farbanca (0.10%) and Prestinuova (0.10%).
(5)
This regards the “Giada Equity Fund” over which significant influence is exercised and some individual interests held by
the funds Nem Imprese, Nem Imprese, II, and Industrial Opportunity Fund managed by the subsidiary Nem Sgr.
(6)
The analyses of the equity investments held at 30 June 2014 have not revealed the existence of
elements suggesting the existence of impairment to be recorded in the income statement under IAS
36. With specific reference to the equity investment held in Cattolica Assicurazioni, after the
significance growth in 2013 (+53.9%), in the period from 30 December 2013 to 30 June 2014, the stock
market price dropped 16.8%, maintaining however a positive performance (+3.9%) over an annual
time horizon. Contrary to the market quotation trend, the analysts’ target price during the first half of
2014 was revised upward from € 17.1 per share to € 18 per share (it had been € 15.5 in June 2013),
compared with a shareholders’ equity per share of € 25.3. In addition to the above submissions, in
IAS 1.
15
- 122 -
light of the analysis carried out on the results achieved by the associated company in the period and
on the revenue synergies deriving from the partnership agreement as well as the cost of capital, no
loss indicators (the so-called trigger events) were revealed to suggest the equity investment suffered
an impairment. Therefore, the value of the equity investment will be determined in accordance with
IAS 36 at the end of the year.
The breakdown of “Property, plant and equipment” (asset line item 110) is shown below.
Property, plant and equipment
Changes
30/06/2014
31/12/2013
(+/-)
%
Property, plant and equipment carried at cost
Land
Buildings
Furniture
Electronic equipment
Other
83,268
308,502
21,184
8,900
67,920
81,363
303,118
22,364
7,428
70,836
Property, plant and equipment carried at fair value
Land
Buildings
27,461
111,352
27,461
110,730
622
0.0%
0.6%
Total
628,587
623,300
5,287
0.8%
1,905
5,384
(1,180)
1,472
(2,916)
2.3%
1.8%
-5.3%
19.8%
-4.1%
Property, plant and equipment for business purposes are systematically depreciated in each year on a
straight-line basis using rates that reflect the residual useful lives of the related assets.
The breakdown of “Intangible assets” (asset line item 120) is shown below.
Intangible assets
Changes
30/06/2014
31/12/2013
(+/-)
Goodwill
Capitalized software and user licenses
Other assets
929,862
5,015
13,518
927,362
6,147
14,224
Total
948,395
947,733
%
2,500
(1,132)
(706)
662
0.3%
-18.4%
-5.0%
0.1%
Intangible assets with a definite useful life (other than goodwill) are amortised systematically on a
straight-line basis over their estimated useful lives.
“Other intangible assets” refers mainly to intangibles identified as part of the purchase price
allocation process relating to the acquisition of 61 branches from the UBI Group at the end of 2007. In
fact, IFRS 3 states that the cost of a business combination (such as the acquisition of the 61 UBI
branches) must be accounted for using the purchase method and that the price paid be allocated to
the assets acquired and liabilities assumed as measured at their respective fair values. The
“intangibles” which express the value of customer relationships acquired are being amortized over
the period they are expected to benefit (the average life is estimated as 17 years for intangibles
- 123 -
relating to individual customers and as 12 years for corporate customers, corresponding to the related
retention rates).
On 1 June 2014, the BPVi Group purchased 16 bank branches from the Carife bank group (14 in
Lazio, 2 in Emilia Romagna) paying an overall consideration of Euro 2.5 million which, pending
completion of the Purchase Price Allocation process, was temporarily recorded among goodwill.
At 30 June 2014, therefore, goodwill consisted of:
 Euro 440,144 thousand in goodwill paid by the Parent Bank to acquire 61 branches from the UBI
Group on 31 December 2007;

Euro 208,580 thousand in respect of the merger deficit relating to the former subsidiary Cariprato
SpA, which was absorbed into the Parent Bank in date 31 December 2010;

Euro 120,198 thousand representing the residual goodwill paid to the former Group banks that
sold their businesses to the Parent Bank in 2000;

Euro 55,930 thousand in respect of the merger deficit relating to the former subsidiary Banca
Nuova SpA which was absorbed into the Parent Bank on 28 February 2012;

Euro 52,889 thousand representing the residual goodwill paid for the purchase of 46 bank
branches from the Intesa Group during 2001;

Euro 36,000 thousand representing the residual goodwill paid to Banca AntonVeneta for the
purchase of 30 branches in eastern Sicily at the end of 2004;

Euro 6,223 thousand arising on consolidation of the subsidiary Farbanca SpA;

Euro 4,121 thousand in goodwill paid to acquire a business unit from Banca Steinhauslin &C.;

Euro 2,500 thousand in goodwill paid by the Parent Bank to acquire 16 branches from the Carife
Group on 1 June 2014;

Euro 1,619 thousand in goodwill paid to acquire the “Palermo Branch” business from Banca
Popolare Commercio e Industria (UBI Group) on 1 March 2009;

Euro 1,482 thousand in respect of the merger deficit relating to the former subsidiary BPVi Fondi
Sgr SpA, which was absorbed into the Parent Bank in date 1 December 2013;

Euro 176 thousand in respect of the merger deficit relating to the former subsidiary Nordest
Merchant SpA, which was absorbed into the Parent Bank in date 1 December 2013.
For goodwill, being an intangible asset with indefinite useful life, at the end of each year the carrying
amount is tested for impairment, whilst at the closing date of the condensed interim financial
statements, in accordance with IAS 36, the existence of signs of impairment in the value of the
goodwill (“trigger events”) is checked.
In this regard, the external and internal indications set out in IAS 36 were therefore analysed at 30
June 2014; the outcome of this test led to the conclusion that no impairment test is needed on goodwill
allocated to the Group’s CGUs; such tests shall be conducted at the closing date of the 2014 financial
statements.
In fact, with reference to external indicators, it should be noted that the market environment that
continues to be characterised by high volatility, with system and industry projections that, in the
medium-long term, do not point to any significant trend changes relative to the forecasts used for the
impairment test for the financial statements at 31 December 2013, and that the cost of capital (Ke) to
be applied to the bank CGUs calculated with the same methods as the most recent impairment test
show a decline. With reference to the financial performance of the Group’s 3 bank CGUs (BPVi, Banca
Nuova, and Farbanca), the analysis on the data at 30 June 2014 show operating results and net profit
greater than the same period of the previous year.
Having considered the external nature of the indicators and the CGU’s half-year results, and
considering that further updating of the financial forecasts of the Group’s 2012-2014/16 Business
- 124 -
Plan, on which the data are based, was approved this past 11 March, this making it difficult to express
judgements on the results after just a few months of operations, the targets reflected in the plan and
the conclusions drawn upon the completion of the impairment tests at 31 December 2013 are
currently, in light of these considerations, still deemed to be valid hence any updates to the
projections and the conduction of a new impairment test are adjourned until the end of 2014.
Provision for severance indemnities
Total
Changes
30/06/2014
31/12/2013
(+/-)
75,841
75,298
%
543
0.7%
According to IFRIC, the “Provision for severance indemnities” (liability line item 110) is a “postemployment benefit” qualifying as a “defined benefit plan”, the value of which according to IAS 19
must be determined on an actuarial basis. As a consequence, the period valuation of this amount was
carried out by an independent actuary using the Projected Unit Credit Method with reference to
earned benefits. This method involves the projection of future payments with reference to past trends
and statistical analyses and probabilities, adopting suitable demographic techniques. This makes it
possible to calculate the severance indemnities accruing at a specific date on an actuarial basis,
distributing the cost over the entire remaining service of the current workforce, and no longer
presenting them as a cost payable as if the business were to cease trading on the reporting date.
The valuation of the employee severance indemnities carried out at 30 June 2014 and performed in
conformity with the method indicated above, brought to light a deficit of Euro 2.9 million (Euro 1.2
million at 31 December 2013) in the payable, determined in accordance with current laws and with
the National Collective Labour Agreement, compared to the result of the actuarial valuation.
Consequently, the negative effect of the actuarial valuation equal to Euro 1.7 million was partly
accounted for in the income statement (Euro 346 thousand), with the remainder (Euro 1.3 million)
was recorded in the Equity valuation reserve.
Provisions for risks and charges
The breakdown of “Provisions for risks and charges” (liability line item 120) is shown below.
30/06/2014
Changes
31/12/2013
(+/-)
%
5,386
5,681
(295)
-5.2%
- legal disputes
- bankruptcy claims
- bonus system and other personnel expenses
- complaints and other
52,545
26,386
8,506
5,396
12,257
54,608
24,094
9,296
8,830
12,388
(2,063)
2,292
(790)
(3,434)
(131)
-3.8%
9.5%
-8.5%
-38.9%
-1.1%
Total
57,931
60,289
(2,358)
-3.9%
“Provisions for pensions and similar charges” refer to the Supplementary Section of the pension fund,
a defined benefit plan of the former subsidiary Cariprato, absorbed into the Parent Bank B.P.Vi. on 31
December 2010.
- 125 -
The provision for employment costs refers mainly to employee redundancy incentives. The “Other”
provisions for risks and charges relate to contingent liabilities connected to fiscal disputes, litigation
with customers, and other sundry charges.
Tax assets and liabilities
The breakdown of “Tax assets” (asset line item 140) is shown below.
Tax assets
Deferred tax assets booked to income statement
- Goodwill subject to impairment and franking
Changes
30/06/2014
31/12/2013
(+/-)
%
- Taxed provisions for risks and charges
- Other
467,648
216,920
216,920
217,750
216,156
15,595
17,383
448,883
234,296
234,296
191,894
190,290
14,422
8,271
18,765
(17,376)
(17,376)
25,856
25,866
1,173
9,112
4.2%
-7.4%
-7.4%
13.5%
13.6%
8.1%
110.2%
Deferred tax assets through equity
- Revalutations of financial asset available for sale
- Cash-flow hedges
160,131
23,544
135,764
76,624
55,609
20,520
83,507
(32,065)
115,244
109.0%
-57.7%
561.6%
735
88
495
-
33,332
45,216
661,111
570,723
- of which DTA convertible Law 214/2011
- Adjustments to loans to costomers
- of which DTA convertible Law 214/2011
- Actuarial gains (losses) on defined-benefit pension plans
- Other
Current tax assets
Total
240
88
(11,884)
90,388
48.5%
n.s.
-26.3%
15.8%
The breakdown of “Tax liabilities” (liability line item 80) is shown below.
Tax liabilities
Changes
30/06/2014
31/12/2013
(+/-)
%
Deferred tax liabilities through the income statement
- Tax implications of goodwill amortization
- Gains in installments
- Other
130,746
99,281
5,264
26,201
119,723
93,137
1,568
25,018
11,023
6,144
3,696
1,183
9.2%
6.6%
235.7%
4.7%
Deferred tax liabilities through equity
- Revalutations of financial asset available for sale
- Cash-flow hedges
- Other
189,075
165,202
15,740
8,133
21,880
11,420
2,327
8,133
167,195
153,782
13,413
-
764.1%
1346.6%
576.4%
0.0%
1,689
45,723
(44,034)
321,510
187,326
Current tax liabilities
Total
134,184
-96.3%
71.6%
In compliance with the Bank of Italy Circular 262 dated 22 December 2005, and subsequent
amendments, “Tax assets” (asset line item 140) and “Tax liabilities” (liability line item 80) in the
statement of financial position only include those tax assets and liabilities (current and deferred)
recognized in accordance with IAS 12 (governing income taxes), while other tax credit/debit balances
are reported in “Other assets” (asset line item 160) and “Other liabilities” (liability line item 100) of
the statement of financial position.
- 126 -
Other assets and liabilities
The breakdown of “Other assets” (asset line item 160) is shown below.
Other assets
- Transactions in transit
- Fiscal items
- Leasehold improvements
- Adjustments to non-liquid portion of notes
- Accrued income and prepaid expenses not allocated to
specific accounts
- Other miscellaneous items
Total
Changes
30/06/2014
31/12/2013
(+/-)
%
136,772
55,031
15,135
-
67,420
46,836
17,724
99,814
69,352
8,195
(2,589)
(99,814)
6,765
3,717
3,048
82.0%
116,579
73,201
43,378
59.3%
330,282
308,712
21,570
7.0%
102.9%
17.5%
-14.6%
-100.0%
“Leasehold improvements” consist of improvement expenditure that cannot be separated from the
assets themselves, meaning that it cannot be separately recognized in property, plant and equipment.
These costs are amortised over the period they are expected to benefit or the residual duration of the
lease, whichever is shorter.
The breakdown of “Other liabilities” (liability line item 100) is shown below.
Other liabilities
- Transactions in transit
- Employee salaries and contributions
- Due to suppliers
- Fiscal items
- Allowance for risks on guarantees and commitments
- Adjustments for non-liquid balances relating to the
portfolio
- Accrued expenses and deferred income not allocated to
specific accounts
- Other miscellaneous items
Total
Changes
30/06/2014
31/12/2013
(+/-)
%
318,793
33,467
25,504
25,944
12,901
191,259
28,841
37,297
40,411
10,692
529,080
-
529,080
n.s.
10,541
7,659
2,882
37.6%
106,931
71,705
35,226
49.1%
1,063,161
387,864
675,297
174.1%
127,534
4,626
(11,793)
(14,467)
2,209
66.7%
16.0%
-31.6%
-35.8%
20.7%
The adjustments of illiquid portfolio entries pertain to the accounting reclassifications prescribed by
Bank of Italy Circular no. 262 “Banks’ financial statements: layout and preparation” on bills and
documents for collection or after collection for which the related debit or credit value has not yet
accrued at the reporting date.
- 127 -
Equity
Banca Popolare di Vicenza’ equity at 30 June 2014 amounted to Euro 3,704.1 million, reporting an
increase of 56.8 million euro (+1.6%) with respect to the figure at the end 2013.
The definition of consolidated capital used by the Group corresponds to the sum of the following line
items: 140 “Valuation reserves”, 150 “Redeemable shares”, 160 “Equity instruments”, 170 “Reserves”,
180 “Additional paid-in capital”, 190 “Capital stock”, 200 “Treasury shares” and 220 “Net income
(loss) for the period”.
Group equity
(in millions euro)
Capital stock
Reserves
Valuation reserves
Equity instruments
Treasury shares
Equity
Net income for the period
Total equity
Changes
30/06/2014
31/12/2013
(+/-)
311.2
2,727.6
584.0
181.7
3.3
(125.7)
3,682.1
22.0
3,704.1
313.7
2,767.4
586.3
16.4
3.3
(7.8)
3,679.3
(32.0)
3,647.3
%
(2.5)
(39.8)
(2.3)
165.3
(117.9)
-0.8%
-1.4%
-0.4%
n.s.
n.s.
2.8
0.1%
n.s.
n.s.
56.8
1.6%
During January 2014, the Parent Bank Banca Popolare di Vicenza, in executing the “financed” share
capital increase transaction intended for new shareholders that closed out at the end of December
2013, issued 308,554 new shares for an overall exchange value of Euro 19.3 million posted partially
under the item Capital stock (Euro 1.2 million) and partially under the item Share-premium (Euro
18.1 million). During the half-year, the above-mentioned line items were also affected by the
redemption of 986,459 shares, for an exchange value of Euro 61.7 million, subject to subsequent
cancellation due to hereditary succession and debt collection activities.
Euro -32 million of the change in Reserves can be attributed to covering the 2013 loss. The profits
earned by the BPVi Group in the quarter were likewise allocated to the item under consideration with
the closing of certain mortgage cash flows hedging activities for the transfer of the valuation reserves
matured up to such it dates (approximately Euro 27.8 million net of the related tax effect). The
remaining changes were associated with the measurement of the Companies consolidated at net
equity.
Equity instruments, amounting to Euro 3.3 million at 30 June 2014, reflect the equity component
reported separately in accordance with IAS 32 embedded in the convertible subordinated bond “BPVi
15^ Emissione 2009-2016”, and in the convertible bond “BPVi 2013-2018 Convertibile” issued within
the scope of the share capital increase transaction executed in the previous period.
Treasury shares at 30 June 2014 equal Euro 125.7 million (Euro 7.8 million at 31 December 2013,
corresponding to 2,011,261 shares.
In the half year, the valuation reserves increased by Euro 165.3 million compared to 31 December
2013, as a combined effect of the positive changes in fair value recognised in the half-year on
“financial assets available for sale”, and in particular on Italian government bonds and the negative
changes in fair value recorded on derivatives hedging the cash flows of certain Government bonds
recorded among financial assets available for sale.
- 128 -
The “valuation reserves” also include the reserves deriving from the actuarial valuation of defined
benefit pension plans, the reserves arising from the valuation of land, buildings and works of art at
deemed cost upon the first-time adoption of IAS/IFRS, together with the reserves relating to special
revaluation laws. They also include the valuation reserves of the investees measured at equity.
The following table shows the breakdown of valuation reserves as at 30 June 2014 compared to 31
December 2013.
Valuation reserves
(in millions euro)
Changes
30/06/2014
31/12/2013
(+/-)
- Italian government securities
- Other debt securities
- Quoted equities
- Unquoted equities
- Mutual funds
Cash-flow hedges
- Italian government securities
- Mortagages
Actuarial gains (losses) on defined-benefit pension plans
Portion of valuation reserves of equity investments
carried at equity
Special revaluation laws
Total
%
354.5
280.7
2.3
10.2
54.9
6.4
0.1
(280.4)
(293.1)
12.7
(40.9)
(87.2)
(3.5)
8.6
50.0
(8.8)
0.1
(41.5)
(10.5)
(31.0)
395.4
367.9
5.8
1.6
4.9
15.2
(238.9)
(282.6)
43.7
n.s.
n.s.
n.s.
18.6%
9.8%
n.s.
575.7%
n.s.
n.s.
(7.3)
(6.4)
(0.9)
14.1%
28.4
18.7
9.7
51.9%
86.4
86.4
-
-
181.7
16.4
165.3
1007.9%
The shares of the Parent Bank, Banca Popolare di Vicenza, which is one of the Relevant Issuers listed
in CONSOB Resolutions 11.768/98 and 11.862/99, are dematerialized and centralized with Monte
Titoli, in accordance with the provisions of Italian Legislative Decree 58/98 and Italian Legislative
Decree 213/98.
The following table reports the Bank’s purchases and sales of its shares in accordance with Article 18
of the articles of association.
Number of % on Equity
(1)
shares
Treasury shares
124,039
0.15%
Purchases
Sales
3,686,794
1,799,572
4.44%
2.17%
Treasury shares at 30 June 2014
2,011,261
2.42%
Treasury shares at 31 December 2013
1
Percentage determined with reference to the number of shares comprising capital stock at 30 June 2014
- 129 -
Own funds and prudential ratios
The Own funds and the prudential ratios at 30 June 2014 were determined in accordance with the
new regulatory framework of Basel 3, including the transitory provisions and the national
discretionary powers, that came into effect starting from 1 January 2014 subsequent to the issuing of
the Regulation (EU) 575/2013 dated 26 June 2013 (CRR) and the Directive 2013/36/EU dated 26 June
2013 (CRD IV). The comparison with the 31 December 2013 figures is therefore not homogeneous and
is not presented.
Regulatory capital and capital adequacy
ratio
30/06/2014
(in millions euro)
Commn Equity Tier 1
2,503.0
486.3
Tier 2
Deductions
Total Capital
2,989.3
Credit and counterparty risk
Credit Value Adjustment
Market risk
Operational risks
2,079.0
61.7
50.6
151.0
Total prudential requirements
2,342.3
Risk-weighted assets
Common Equity Tier 1 Ratio
Tier 1 Ratio
Total Capital Ratio
29,278.8
8.55%
8.55%
10.21%
Own funds amount to Euro 2,989.3 million and include the portion of profit for the period, all of
which considered to increase the value of reserves. Furthermore, the Group availed itself of the right
to sterilize the valuation reserves relating to debt securities issued by central governments of
European Union countries held in the “Financial assets available for sale” portfolio; therein including
the relative cash flow hedge reserve.
The Common Equity Tier 1 Ratio and the Tier 1 Ratio both amount to 8.55%, whilst the Total Capital
ratio is equal to 10.21%. Nevertheless, also considering the capital increase by Euro 608 million of
the Parent Bank, Banca Popolare di Vicenza, completed last 8 August with full subscription of the
shareholders, the Common Equity Tier 1 and Tier 1 Ratio on 30 June 2014 would be 10.67% whilst
the Total Capital Ratio would be 12.38%.
The fully phased ratios, i.e., calculated based upon the rules that will be in effect at the end of the
transitory period, are substantially aligned with those presented above, the effects of the so-called
“transitional adjustment” being rather insignificant for the Group.
- 130 -
Capital adequacy requirements were calculated using the following methods.
risk-weighted assets used for determining the credit and counterparty risk requirement have
been quantified using the standard method and simplified credit risk mitigation (CRM), by
adopting unsolicited external ratings provided by the ECAI DBRS for the supervisory
portfolios “Exposures to Central governments or central banks” and by ECAI Moody’s, S&P
and Fitch relating to “Elements that represent positions relating to securitisations” and
unsolicited ratings by the ECAI Cerved Group for the supervisory portfolio “Exposures to
Companies”;
the market risk requirement is determined using the standard method, under which
sensitivity models are used to represent derivatives involving interest rates and debt
securities;
the operational risks requirement was determined using the basic method.
COMMENTS ON THE INCOME STATEMENT
The Group ended the first half of 2014 with a net income of Euro 22 million, a result reflecting the
increased marginality of traditional bank activities.
The net profit from operating activities in fact increased by 9% with respect to 30 June 2013, thanks
to the increase in operating income (+4.1%) and to the substantial stability of operating charges
(+0.9%). Of the revenue components, the Net fee and commission income grew 8.7% whereas the net
financial income marks a +4% improvement as an effect, above all, of the positive trend of the
characteristic component of the net interest income (+17.5% net of the contribution by the investment
portfolio and hedging activities). The cost/income ratio amounts to 57.5%, an improvement of 1.4
percentage points from the figure at the end of the previous period.
Net impairment adjustments attain high absolute values. The prudent policy regarding provisions
for impaired loans that allowed hedging levels previously elevated at the end of 2013 to be
substantiated also continued in the first half of 2014, with a slight increase. The credit costs, that came
in at 1.04% declined slightly.
To better appreciate the contribution made to net income by the various areas of operations, the
trends in the principal performance indicators that characterised the first six months of 2014 are
discussed below and compared with those in the same period of the prior year. It is hereby stated that
the net income of the first half year of 2013 was redetermined as an effect of the retrospective
adoption of the new accounting standard IFRS 10 – “Consolidated financial statements”, as pointed
out in the paragraph “Comparative information” of the Accounting Policies.
First of all, the reconciliation of the items of the “reclassified” income statement, commented below,
with those prescribed in accordance with Bank of Italy Circular no. 262 “Banks’ financial statements:
layout and preparation” are provided.
Key:
Net interest income: income statement item 30.
Dividends and profit (loss) from equity investments: income statement items 70 and 240 net of impairment adjustments (Euro -556
thousand at 30 June 2014, absent at 30 June 2013).
Net financial income: “Net interest income” + “Dividends and profit (loss) from equity investments”.
Net fee and commission income: income statement item 60.
Net profit from the property portfolios: income statement items 80, 90, 100, and 110.
Other operating charges/income: income statement item 220, excluding “recovery of stamp duty and other indirect taxes” (Euro +31,961
thousand at 30 June 2014, Euro +25,333 thousand at 30 June 2013) and “depreciation for expenses on third party property improvement”
(Euro -3,804 thousand at 30 June 2014, Euro -4,008 thousand al 30 June 2013).
- 131 -
Operating income: “Net financial income” + “Net fee and commission income” + “Net profit from the property portfolios” + “Other
operating charges/income”.
Administrative costs: “Payroll” + “Other administrative costs” as defined below.
Payroll: income statement item 180 a).
Other administrative costs: income statement item 180 b) net of income for “recovery of stamp duty and other indirect taxes” (Euro +31,961
thousand at 30 June 2014, Euro +25,333 thousand at 30 June 2013).
Depreciation: income statement items 200 and 210 including “depreciation for expenses on third party property improvement” (Euro -3,804
thousand at 30 June 2014, Euro -4,008 thousand al 30 June 2013).
Net operating costs: “Administrative costs” + “Depreciation”.
Net profit from operating activities: “Operating income” + “Net operating costs” as defined above.
Net impairment adjustments: income statement items 130 net of impairment adjustments of the investment securities recorded under
income statement item 240 (Euro -556 thousand at 30 June 2014, absent at 30 June 2013). “Of which on loans and advances” refers to income
statement item 130 a).
Net provisions for risks and charges: income statement item 190.
Gains (losses) on disposal/evaluation of investments: income statement items 250 and 270.
Net income for the period before income tax: “Net profit from operating activities” + “Net impairment adjustments” + “Net provisions for
risks and charges” + “Gains (losses) on disposal/evaluation of investments”.
Income tax: income statement item 290.
Profit (loss) from disposal groups, net of tax: income statement items 260 and 310.
Minority interests: income statement item 330.
Reclassified Income Statement
Changes
30/06/2014 30/06/2013
%
(+/-)
Net interest income
Dividends and Profit (loss) from equity investments
Net profit for the property portfolios
Other operating charges/income
259,975
18,888
256,381
11,756
3,594
7,132
1.4%
60.7%
278,863
268,137
10,726
4.0%
147,040
111,452
135,283
113,070
11,757
(1,618)
8.7%
-1.4%
27,973
26,555
1,418
5.3%
Net Operating income
565,328
543,045
22,283
4.1%
Administrative costs:
- payroll
- other administrative costs
(313,784)
(200,155)
(113,629)
(311,596)
(197,779)
(113,817)
(2,188)
(2,376)
188
0.7%
1.2%
-0.2%
(18,009)
(17,174)
(835)
4.9%
(331,793)
233,535
(328,770)
214,275
(3,023)
19,260
0.9%
9.0%
(187,020)
(157,442)
(7,325)
18
(192,986)
(187,398)
(3,804)
43
5,966
29,956
(3,521)
(25)
-3.1%
-16.0%
92.6%
-58.1%
39,208
17,528
Income tax
Profit (loss) from disposal groups, net of tax
(16,666)
-
(17,478)
-
(504)
(113)
Depreciation
Net Operating costs
- of which on loans and advances
Net provisions for risks and charges
Gains (losses) on disposal/evaluation of investments
Minority interests
Net income
22,038
(63)
21,680
123.7%
812
-
-4.6%
-
(391)
22,101
346.0%
n.s.
The net interest income at 30 June 2014 amounted to Euro 260 million, up by 1.4% compared to 30
June 2013 thanks to the increased marginality of traditional bank activities, lending/deposit with
customers (Euro +25.4 million, +13.1%) that benefits from both the careful management of the spread
applied to customers and from the streamlining of funding sources, made possible by the Group’s
solid structural liquidity, that allowed funding costs to be contained. The contribution from the
- 132 -
investment portfolio has declined whilst the contribution from interest rate hedges carried out on part
of the assets of the banking book is positive.
Including dividends (Euro 9.9 million, +19.3% compared to June 2013) and the profit (loss) from
equity investments (Euro 8.4 million, compared with 3.4 million of 30 June 2013), the Group’s net
financial income amounted to Euro 278.9 million, up by 4% compared to the same period of the
previous year.
Net fee and commission income, at 30 June 2014, is equal to Euro 147 million, up 8.7% with respect
to the 135.3 million of 30 June 2013. On the front of revenue, the income associated with the indirect
funding, in particular from the assets under management and social security compartments
increased, along with those associated with financial transaction structuring activities, thanks to the
starting of the new trading operation on the so-called “minibonds”, as well as those regarding current
accounts and collection and payment services that benefits the development of the customer base. On
the cost front, the expenses paid to customers for securities lending and borrowing decreased sharply
whereas the commissions passed back to agents and financial promoters as a consequence of the
investments made by the Group for the development of the variable cost distribution networks, in
particular, through the subsidiary BPVi Multicredito, increased.
Net profit from the property portfolios is equal to Euro 111.5 million and dropped slightly with
respect to the Euro 113.1 million of the first half of 2013. Trading activity performed well (Euro +54.7
million, +86.6%), whilst the contribution of profits realised on Italian Government securities classified
among “financial assets available for sale”, obtained both with sales and with the early closure of
certain hedges dropped (Euro 65.5 million, versus Euro 79.4 million at 30 June 2013). The contribution
from disposal/evaluation of investments and of the correlated “hedging” derivatives are negative,
with a final loss of Euro 7.2 million, including the negative effect (approximately Euro 3.4 million)
connected to the reduction (pull to par), due to the passing of time, in profits deriving from the
change in the Bank’s creditworthiness recorded in past periods on its bonds measured at fair value.
Other operating income amounted to Euro 28 million and increased by 5.3% on 30 June 2013,
especially as a result of the growth in recovered expenses.
For the aforesaid reasons, the net operating income thus amounted to Euro 565.3 million, up by 4.1%
over the same period of 2013.
The net operating costs amounted to a total of Euro 331.8 million, up 0.9% with respect to the figure
of the first half of 2013. This increase is mainly attributable to payroll costs (+1.2%) which, in
comparison with the corresponding period of the previous year, experienced growth in the variablecost portion as a consequence of one a one-off bonus awarded to employees on the verge of renewing
their Supplementary Company Agreements in the half year, that more than offset the drop in other
components. Other administrative costs remain substantially unchanged (-0.2%) whereas
depreciation grew 4.9% (equal to Euro 835 thousand).
Therefore, at 30 June 2014, net profit from operating activities amounted to Euro 233.5 million, up by
9% compared to the same period of 2013, with cost/income16 ratio dropped to 57.5%, an improvement
of 1.4 percentage points compared to 58.9% at 30 June 2013.
Net impairment adjustments amounted to Euro 187 million, versus Euro 193 million in June 2013 (3.1%).
This indicator is calculated by dividing “operating costs” (income statement item 230 after net allocations to
provisions for risks and charges by net interest and other banking income (income statement item 120).
16
- 133 -
Euro 157.4 million of the above-mentioned adjustments refer to loans and advances, a figure that
reflects the prudent reserving policy pursued by the Group even during the first half of 2014 that
substantiated hedging levels on impaired loans, with a slight increase, already up at the end of 2013.
Credit costs,17 that came in at 1.04% declined slightly (1.24% at 30 June 2013).
Impairment adjustments to financial assets available for sale amounted to Euro 26.8 million (Euro
4.5 million at 30 June 2013) and were recorded applying the Group’s policy on the process for
identifying impairment losses on financial assets available for sale. These mainly refer to private
equity exposures taken on through investment plans and to an equity investment in an unlisted
company acquired during a reorganization transaction, carried out in the previous years through the
“transformation” of the receivables from the company itself.
Finally, the provisions on guarantees given to customers totalled Euro 2.2 million (Euro 1 million at
30 June 2013) and also include the commitments with the FITD, whereas the impairment charges
implemented on investment securities are equal to Euro 556 thousand and refer, in the amount of
Euro 109 thousand, to the zeroing of the unit values held in the company Magazzini Generali and, for
the remaining amount, to write-downs on private equity funds subject to line-by-line consolidation.
Net provisions for risks and charges grew (Euro 7.3 million at 30 June 2014, vs Euro 3.8 million in
June 2013), mainly as a consequence of the discounting effect in a context of dropping rates. Gains
(losses) on disposal/evaluation of investments (Euro 18 thousand at 30 June 2014, Euro 43 thousand
at 30 June 2013) attained insignificant values.
Net income for the period before income tax therefore settled at Euro 39.2 million, versus Euro 17.5
million in June 2013 (+123.7%).
Income taxes amounted to Euro 16.7 million (tax rate18 of 42.5%), compared with Euro 17.5 million at
30 June 2013 (the tax rate was 99.7%). At 30 June 2014 the Regional Business Tax (IRAP), was
quantified according to the new rate established by Italian Law Decree no. 66/2014, converted by
Law no. 89/2014, and the stock of deferred tax assets and liabilities existing at 31 December 2013 was
also revised. Lastly, it is pointed out that Italian Law Decree no. 66/2014 of 24 April 2014 – published
in the Official Gazette no. 95 of 24 April 2014 – raised from 12% to 26% the rate of the substitute tax
due by banks on the revaluation of the shares held in Bank of Italy. The higher substitute tax due by
virtue of the aforesaid Law Decree by the BPVi Group in relation to the share held in Bank of Italy
amounted to Euro 1.4 million. The change in tax rate relative to the same period of the previous year
is due, in addition to the aforementioned effects, also to the deductibility from IRAP of adjustments to
loans introduced by the 2014 Stability Law.
The Profit (loss) from disposal groups, net of tax is null in both periods. It should be noted, however,
that the result of 30 June 2013 was determined as the imbalance between the gross gains of Euro 21
million (Euro 15.2 million net of the related tax effect) realised by the former subsidiary BPVi Fondi
Sgr (absorbed into the Parent Bank BPVi on 1 December 2013) with the disposal of the “mutual
funds” and “G.P.A.” business lines to Arca Sgr and the impairment of Euro 15.2 million recorded on
the consolidation difference existing on the former subsidiary being that, subsequent to the above
mentioned disposal transaction, a portion of the corporate assets to which the aforementioned
goodwill referred no longer existed.
Minority interests, i.e. net income attributable to investments of minority stockholders, amounted to
Euro 504 thousand compared with Euro 113 thousand at 30 June 2013.
The indicator is calculated as the ratio between “Net impairment adjustments on: loans and advances” and
gross customer loans, excluding guarantee margins and repurchase agreements because neither one is
impaired.
18 The indicator is calculated as the ratio of “Income taxes” over “Net income for the period before income tax”.
17
- 134 -
Thus, net income amounted to Euro 22 million versus a loss of Euro 63 thousand recorded in the first
half of 2013.
Reconciliation of equity and net income of the Parent Bank with the related consolidated amounts
The following table reconciles equity and net income reported in the Parent Bank’s separate interim
financial statements at 30 June 2014 with the corresponding figures in the consolidated financial
statements at that date.
30/06/2014
(in thousand of Euro)
of which:
net income
for the
period
Equity
Parent bank's statement of financial position
3,701,890
32,585
Year results pertaining to the Gruop, as to:
- companies consolidated line-by-line
- companies valued at shareholders'equity
18,511
8,755
18,511
8,755
Differences compared to carrying values, as to:
68,908
2,818
5
357
Write-off of dividends collected during the year from:
Derecognition of intercompany profit and loss
Derecognition of intercompany capital gains from
discontinuing and contributing operations
Other consolidation adjustments
Consolidated statement of financial position
(4,584)
(90,522)
(30,308)
(8,618)
(76)
906
(1,696)
(79)
3,704,080
22,038
Consolidated equity pertaining to the Parent Bank is equal to Euro 3,704.1 million, Euro 2.2 million
greater than that reported in the Parent Bank’s half year accounts.
Consolidated net income, amounting to Euro 22 million, was Euro 10.6 million lower than the Parent
Bank’s. Recall however that the Parent Bank’s results include the entire contribution of the dividend
resolved on by the subsidiaries and affiliates for the 2013 profit (loss), whereas the result recorded by
the aforesaid companies in the first half of 2014 is included in the consolidated net income (loss).
- 135 -
INFORMATION ON THE COMPANIES OF THE BPVI GROUP
This section provides an overview of the performance by BPVI Group Companies in the first half of
2014.
The tables which follow summarize the contribution of the Group’s various Companies to the
principal asset aggregates (direct funding, indirect funding, loans to customers) for the purpose of
identifying their effect on total operations and of providing a global overview of the Group’s banking
operations.
Direct funding
(in million euro)
Banca Nuova
Farbanca
Other companies
Total
Indirect funding
(in million euro)
25,707
88.0%
(424)
3,400
11.6%
320
(189)
131
0.4%
6
0.0%
0.0%
29,244
100.0%
Individual
results
(1,186)
Eliminations and
consolidation
adjustments
Contribution to consolidated
(+/-)
%
(10)
18,404
93.4%
1,276
(17)
1,259
6.4%
31
(1)
30
0.2%
0.0%
19,721
(28)
19,693
100.0%
Individual
results
26,849
Banca Nuova
3,115
Farbanca
Prestinuova
RACCOLTA DIRETTA
Eliminations and
consolidation
adjustments
(+/-)
(1,194)
-
%
25,655
85.2%
3,115
10.4%
464
(8)
456
1.5%
391
-
391
1.3%
409
1.4%
47
0.2%
30,073
100.0%
427
Other companies
Total
--
18,414
in milioni di €
BPV
Finance
%
(573)
Farbanca
(in million euro)
(+/-)
3,824
30,430
Banca Nuova
Loans to customers
26,280
6-
Total
Eliminations and
consolidation
adjustments
Individual
results
47
31,293
- 136 -
(18)
-
(1,220)
Individual
results
pertaining to
the Group
Net income
(in thousand of Euro)
Banca Nuova
Farbanca
Total banks
Prestinuova
BPV Finance
BPVi Multicredito
Nem Sgr
Fondo Nem Imprese
Fondo Nem Imprese II
Fondo Industrial Opportunity Fund
32,585
2,771
1,022
36,378
1,209
12,651
144
584
(58)
(741)
(7)
Total financial companies
13,782
Immobiliare Stampa
Servizi Bancari
Monforte 19
182
Total service companies
182
Companies carried at equity
8,944
Elimination of intercompany dividends
(38,926)
Impairment of consolidation differences
759
Other intercompany eliminations and consolidation adjustments 919
Net income pertaining to the Group
22,038
% Contribution to
consolidated
147.9%
12.6%
4.6%
165.1%
5.5%
57.4%
0.7%
2.6%
-0.3%
-3.4%
0.0%
62.5%
0.0%
0.0%
0.8%
0.8%
40.6%
-176.6%
3.4%
4.2%
100.0%
The following pages contain the summary indicators (from the statement of financial position and
income statement, as well as data about the organisations) and the main indicators of the Parent Bank
Banca Popolare di Vicenza and of the subsidiaries Banca Nuova, Farbanca, Prestinuova, and BPV
Finance. For the other subsidiaries, instead, a short comment on the operating performance of the
first half of 2014 is provided.
- 137 -
Summary indicators of the Parent Bank Banca Popolare di Vicenza
Banking business
- of which goodwill
Total Assets
Tier 1 capital (1)
Regulatory capital (1)
Core Tier 1 Capital Ratio (1)
Reclassified Income Statement figures (2)
Net operating costs
Net income
Changes
30/06/2014
71,544
26,281
18,414
26,849
-3,609
4,979
4,808
1,033
893
42,844
3,702
2,581
3,065
26,666
9.68%
9.68%
11.50%
31/12/2013
73,593
28,404
17,856
27,333
-3,522
3,597
3,483
1,034
891
42,115
3,679
2,730
3,360
18,826
14.50%
14.50%
17.85%
(+/-)
%
-2,049
-2,123
558
-484
-87
1,382
1,325
-1
2
729
23
-149
-295
7,840
-4.82 p.p.
-4.82 p.p.
-6.35 p.p.
-2.8%
-7.5%
3.1%
-1.8%
2.5%
38.4%
38.0%
-0.1%
0.00
1.7%
0.6%
-5.5%
-8.8%
41.6%
Changes
30/06/2014
202.6
497.3
-279.4
217.9
-169.2
42.1
32.6
30/06/2013
(+/-)
204.9
467.8
-273.4
194.5
-176.4
14.9
5.7
%
-2.3
29.5
-6.0
23.4
7.2
27.2
26.9
-1.1%
6.3%
2.2%
12.0%
-4.1%
182.6%
471.9%
Changes
Numero sportelli bancari
Financial promoters
Loans to customers / direct funding
Total Assets / Equity (leverage)
Cost/Income (4)
Net impaired loans /Net loans
Net non-performing loans/Net loans
Credit cost (7)
30/06/2014
4,474
563
56
102.16%
11.6 x
54.14%
14.20%
5.72%
31.01%
48.30%
0.37%
1.09%
(1) The
31/12/2013
4,367
545
34
96.23%
11.4 x
58.46%
12.70%
5.14%
30.85%
48.32%
0.38%
1.53%
(+/-)
107
18
22
5.93 p.p.
0.2 x
-4.32 p.p.
1.50 p.p.
0.58 p.p.
0.16 p.p.
-0.02 p.p.
0.00 p.p.
-0.44 p.p.
%
2.5%
3.3%
64.7%
figures at 31 December 2013 were determined with the prudential supervisory rules of Basel 2 previously in force.
except for the different numbering of the same items in the individual statement with respect to the consolidated statement.
(3) This indicator is calculated by dividing “operating costs” (income statement item 200 after net allocations to provisions for risks and
charges) by net interest and other banking income (income statement item 120).
(6) The indicator is calculated by annualising the ratio between “Net impairment adjustments on: loans and advances” and gross customer
loans, excluding intercompany transactions, guarantee margins and repurchase agreements not being subject to impairment.
(2)
- 138 -
Summary indicators of Banca Nuova
Banking business
- of which goodwill
Total Assets
Tier 1 capital (1)
Net operating costs
Net income
30/06/2014
8,215,494
3,824,176
1,275,946
3,115,372
700,245
118,367
118,365
120,113
110,000
4,659,506
324,076
210,672
245,086
2,456,270
8.58%
8.58%
9.98%
30/06/2014
43,636
71,714
-49,279
22,435
-16,070
5,562
2,771
30/06/2014
31/12/2013
8,235,655
3,897,354
1,199,098
3,139,203
690,544
162,897
162,896
121,313
110,000
4,815,135
310,055
207,193
215,213
1,914,950
10.82%
10.82%
11.24%
30/06/2013
35,997
69,570
-50,058
19,512
-14,632
4,052
466
31/12/2013
Changes
%
(+/-)
-20,161
-0.2%
-73,178
-1.9%
76,848
6.4%
-23,831
-0.8%
9,701
-44,530
1.4%
-27.3%
-44,531
-27.3%
-1,200
-1.0%
-
0.0%
-155,629
14,021
3,479
29,873
541,320
-2.24 p.p.
-2.24 p.p.
-1.26 p.p.
-3.2%
4.5%
1.7%
13.9%
28.3%
Changes
%
(+/-)
7,639
2,144
779
2,923
-1,438
1,510
2,305
21.2%
3.1%
-1.6%
15.0%
9.8%
37.3%
494.6%
Changes
%
(+/-)
715
719
-4
-0.6%
Outlets
708
109
81.47%
14,4 x
714
114
80.55%
15,5 x
-6
-5
0.92 p.p.
-1.1 x
-0.8%
-4.4%
Cost/Income (4)
66.29%
14.28%
5.58%
66.15%
13.14%
5.12%
0.14 p.p.
1.14 p.p.
0.46 p.p.
33.11%
32.83%
0.28 p.p.
51.05%
50.89%
0.16 p.p.
0.36%
0.37%
-0.01 p.p.
Credit cost (7)
0.95%
1.14%
-0.19 p.p.
(1) The
(2)
- 139 -
Summary indicators of Farbanca
Banking business
Total Assets
Tier 1 capital (1)
Net operating costs
Net income
30/06/2014
814,959
319,804
31,156
463,999
-99,126
489,882
58,581
57,509
57,509
357,740
16.08%
16.08%
16.08%
30/06/2014
4,766
5,925
-2,557
3,368
-1,005
2,514
1,529
30/06/2014
31/12/2013
830,806
334,399
29,205
467,202
-83,137
494,726
60,584
57,037
57,037
306,935
18.58%
18.58%
18.58%
30/06/2013
Changes
(+/-)
-15,847
-14,595
1,951
-3,203
-15,989
-4,844
-2,003
472
472
50,805
-2.50 p.p.
-2.50 p.p.
-2.50 p.p.
-1.9%
-4.4%
6.7%
-0.7%
19.2%
-1.0%
-3.3%
0.8%
0.8%
16.6%
Changes
(+/-)
4,315
5,668
-2,616
3,052
-2,189
863
358
30/06/2013
%
%
451
257
59
316
1,184
1,651
1,171
10.5%
4.5%
-2.3%
10.4%
-54.1%
191.3%
327.1%
Changes
(+/-)
%
33
31
2
6.5%
Outlets
32
1
145.1%
8.4 x
32
1
139.7%
8.2 x
0
0
5.4 p.p.
0.2 x
0.0%
0.0%
Cost/Income (4)
Impaired loans coverage (%)
Non-performing loans coverage (%)
Performing loans coverage (%)
43.16%
2.72%
0.52%
42.45%
70.51%
0.45%
35.14%
2.82%
0.41%
38.95%
73.66%
0.45%
8.02 p.p.
-0.10 p.p.
0.11 p.p.
3.50 p.p.
-3.15 p.p.
0.00 p.p.
0.42%
0.70%
-0.28 p.p.
Credit cost (5)
(1) The
(2)
- 140 -
Summary indicators of Prestinuova
Statement of Financial Position figures,
Regulatory Capital and Capital adequacy ratios
Loans to customers
- of which goodwill
Total Assets
Tier 1 capital (1)
Reclassified Income Statement figures
(2)
Changes
30/06/2014
31/12/2013
(+/-)
391,366
-352,524
4,096
4,000
410,672
35,337
30,482
30,482
245,418
12.42%
12.42%
12.42%
409,817
-367,492
4,111
4,000
421,119
35,134
30,158
30,158
256,192
11.77%
11.77%
11.77%
%
-18,451
14,968
-15
-10,447
203
324
324
-10,774
0.65 p.p.
0.65 p.p.
0.65 p.p.
-4.5%
-4.1%
-0.4%
0.0%
-2.5%
0.6%
1.1%
1.1%
-4.2%
Changes
30/06/2014
31/12/2013
(+/-)
Net operating costs
Net income
4,627
4,423
-2,129
2,294
-216
2,108
1,209
4,806
4,698
-3,039
1,659
-182
1,428
743
%
-179
-275
910
635
-34
680
466
-3.7%
-5.9%
-29.9%
38.3%
18.7%
47.6%
62.7%
Changes
30/06/2014
31/12/2013
(+/-)
Outlets
Representative Offices
Cost/Income (4)
Impaired loans coverage (%)
Non-performing loans coverage (%)
Performing loans coverage (%)
Credit cost (5)
13
14
0
1
11.62 x
48.11%
2.71%
0.00%
10.44%
100.00%
0.88%
0.11%
23
43
8
3
11.99 x
61.40%
2.52%
0.00%
10.45%
100.00%
0.81%
0.15%
-10
-29
(8)
(2)
-0.37 p.p.
-13.29 p.p.
0.19 p.p.
0.00 p.p.
-0.01 p.p.
0.00 p.p.
0.07 p.p.
-0.04 p.p.
%
-43.5%
-67.4%
-100.0%
-66.7%
The figures were determined with the prudential supervisory rules of Basel 2.
To reconcile the restated profit & loss data and the income statement items prescribed by Bank of Italy measure of 16 December 2009
updated on 21 January 2014, references is made to the “key” cited in the paragraph "Comments on the Income Statement" of these
explanatory notes.
(3) The average number of employees is calculated as the weighted average number of employees where the weighting is given by the
number of months worked in the year.
(4) This indicator is calculated as the ratio between “Administrative costs” (income statement line item 110), plus adjustments to Property,
plant and equipment and intangible assets (income statement line items 120 and 130), plus Other operating income and charge (income
statement line item 160) and Net interest and other banking income.
(5) The indicator is calculated by annualising the ratio between “Net impairment adjustments on financial assets” and Loans and advances.
(1)
(2)
- 141 -
Summary indicators of BPV Finance
Statement of Financial Position figures,
Regulatory Capital and Capital adequacy ratios
Securities
- of which Governement Bonds
- of which debt securities issued by financial institutions
- of which asset backet securities originated by the Group
- of which asset backet securities originated by third parties
- of which equity securities
- of which funds and sicav
Loans to customers
Total Assets
Changes
30/06/2014
31/12/2013
(+/-)
1,045,739
517,352
170,305
57,511
81,405
4,327
214,839
100,890
-954,087
1,312,419
146,048
704,222
174,290
161,323
59,772
87,823
2,749
218,265
99,186
-667,038
950,566
136,200
%
341,517
343,062
8,982
-2,261
-6,418
1,578
-3,426
1,704
-287,049
361,853
9,848
48.5%
196.8%
5.6%
-3.8%
-7.3%
57.4%
-1.6%
1.7%
43.0%
38.1%
7.2%
Changes
30/06/2014
30/06/2013
(+/-)
Net operating costs
Net income
4,582
15,033
-928
14,105
378
14,483
12,651
5,292
23,525
-835
22,690
871
23,561
20,543
%
-710
-8,492
-93
-8,585
-493
-9,078
-7,892
-13.4%
-36.1%
11.1%
-37.8%
-56.6%
-38.5%
-38.4%
Changes
30/06/2014
31/12/2013
(+/-)
Cost/Income
7
8.99 x
6.17%
7
6.98 x
3.55%
%
0
2.01 p.p.
2.62 p.p.
To reconcile the restated profit & loss data, explicit reference is made to the “key” cited in the paragraph "Comments on the Income
Statement" of these explanatory notes.
(1)
- 142 -
0.0%
Nem Sgr Spa
The Company, wholly owned by Banca Popolare di Vicenza, continued to manage the funds
“Industrial Opportunity fund”, “Nem Imprese” and “Nem Imprese II” in the first half of 2014.
The Company closed the first half of 2014 with a net income of Euro 584 thousand (Euro 702 thousand
at 30 June 2013).
It is likewise specified that the three funds managed by the subsidiary Nem Sgr are subject to line-byline consolidation being that the prerequisites of “Control” anticipated by the new accounting
standard IFRS 10 came into force on 1 January 2014. The cumulative result for these funds at 30 June
2014 is negative by Euro 806 thousand.
Servizi Bancari Scpa
This company provides back office services to the Group’s banks; its shareholders are Banca Popolare
di Vicenza with a 96% controlling interest and Banca Nuova, Farbanca, Prestinuova, and Sec Servizi,
each of which hold 1% each.
The company broke even in the first half of 2014, as it is a non-profit co-operative.
Immobiliare Stampa Scpa
The Company, 99.92% owned by Banca Popolare di Vicenza, and 0.04% held by Banca Nuova S.p.A.
and Servizi Bancari S.C.p.A., respectively, manages the real estate portfolio of the Group, provides
real estate services and carries out administrative activities relating to the management of group
properties leased to third parties and of third-party properties leased by Group banks.
The company broke even in the first half of 2014, as it is a non-profit co-operative.
Monforte 19 Srl
This Company is a wholly-owned subsidiary of Banca Popolare di Vicenza; its business is the letting
and rental of own buildings to third parties, as well as the management and administration of the
buildings. Monforte 19 is the owner of two prime properties in Milan, one of which let to companies
outside the Banking Group, and the other a property in Prato, formerly used as a barracks by the
military police and which can now be converted for residential/office use following recent changes in
town planning policy.
The Company closed the first half of 2014 with a net income of Euro 182 thousand (Euro 783 thousand
at 30 June 2013).
BPVi Multicredito
This Company, formed in 2013 is a wholly-owned subsidiary of Banca Popolare di Vicenza; its
business is the performance of the financial agency activities under art. 128-quarter of Italian
Legislative Decree 385/93 and subsequent amendments.
The Company closed the first half of 2014 with a net income of Euro 144 thousand.
- 143 -
SEGMENT INFORMATION
The composition of the various business segments is as follows:
Banks:
Banca Popolare di Vicenza SCpA
Banca Nuova SpA
Farbanca SpA
Product companies:
Prestinuova SpA
Service companies:
Servizi Bancari SCpA
Immobiliare Stampa SCpA
Monforte 19 Srl
BPVi Multicredito
Private Equity:
NEM Sgr SpA
Proprietary Trading:
BPV Finance (International) Plc
- 144 -
Distribution by business segments: income statement
Line items/Business segments
Service
companies
Corporate &
Asset
Investment
Management
Banking
Commercial
banks
Product
companies
Net interest income (line item 30)
250,983
4,627
Net fee and commission income (line item 60)
146,655
Dividends and similar income (line item 70)
Net change in financial assets and liabilities
(line items 80, 90, 100 and 110)
48,267
-
-
-
603
101,596
-
-
-
9,856
-
-
378
(1,847)
(206)
Net impairment adjustments (line item 130)
(186,243)
(216)
Administrative costs (line item 180)
Net provisions for risks and charges (line
item 190)
Net adjustments to property, plant and
equipment (line items 200 and 210)
Other operating charges/income
(line items 220, 240, 260 and 270)
(350,637)
(2,125)
Profit (loss) from current operations before
tax (line item 280)
1,299
598
(10)
4,582
Other
331
259,975
11
147,040
(8)
(15,443)
(1,012)
(924)
(94)
(40)
-
(8)
(4)
Total
(38,926)
(383)
9,944
111,452
(186,464)
24,396
(345,745)
-
(7,325)
85
(14,205)
(7,221)
30
(8,777)
(15)
(5,486)
55,524
13
24,873
(473)
-
(15,401)
64,536
50,147
2,108
2,601
(244)
14,483
(29,887)
39,208
The “Other” column includes intercompany eliminations and consolidation adjustments.
Distribution by business segments: statement of financial position
Line items/Business segments
Loans to customers (line item 70)
Commercial
banks
Product
companies
Service
companies
Corporate &
Asset
Investment
Management
Banking
Other
Total
30,428,672
391,366
-
47,234
426,520
(1,220,591)
30,073,201
Deposits with banks and liquid assets (line
items 10 and 60)
4,572,470
12,335
19,169
3,550
49,138
(2,086,114)
2,570,548
Financial assets (line items 20, 40, 50 and 80)
9,604,639
-
-
23,830
835,581
-
10,464,050
Equity investments (line item 100)
1,179,355
35
102
34,825
-
(806,157)
408,160
Property, plant & equipment & intangible
assets (line items 120 and 130)
1,152,792
4,096
499,432
20
14
(79,372)
1,576,982
401,979
447
6,838
1,910
49
(17,774)
393,449
Total assets
47,339,907
408,279
525,541
111,369
1,311,302
(4,210,008)
45,486,390
Due to customers (line item 20)
21,083,096
-
4,268
-
1,504
(61,919)
21,026,949
7,407,852
364,859
242,119
15,909
1,117,193
(2,125,226)
7,022,706
Financial liabilities (line items 30, 40, 50 and
60)
13,920,946
-
-
-
22,524
(1,124,337)
12,819,133
Other liabilities (line items 100, 110 and 120)
1,198,791
9,968
19,531
1,249
22,653
(18,991)
1,233,201
43,610,685
374,827
265,918
17,158
1,163,874
(3,330,473)
42,101,989
Other assets (line items 90 and 160)
Deposits from banks (line item 10)
Total liabilities
The “Other” column includes intercompany eliminations and consolidation adjustments.
- 145 -
BUSINESS COMBINATIONS
The transfer agreement for the transfer of the business unit comprised of the Turin branch from Banca
Popolare di Spoleto under Special Management to the Parent Bank Banca Popolare di Vicenza of the
Torino became effective on 1 January 2014. The accounting position of the business unit at the
disposal date is as follows:
Business Line " Torino branch"
Accounting position as at 1st January 2014
Assets
Liabilities
-
Other assets
-
Interbank loans and advances
Total Assets
165
8,921
685
282
-
Due to customers
Other liabilities
31,135
3,620
2
24,704
34,757
Total Liabilities
34,757
The consideration paid for the purchase of the above-mentioned branch being equal to Euro 1, the
transaction generated no goodwill requiring recognition based on IFRS 3.
The transfer agreement for the transfer of the business unit comprised of 16 bank branches, of which 2
in Emilia Romagna and 14 in Lazio, from Cassa di Risparmio di Ferrara under Special Management to
the Parent Bank Banca Popolare di Vicenza also became effective on 1 June 2014. The accounting
position of the business unit at the disposal date is as follows:
Business Line "Carife branches"
Accounting position as at 1st June 2014
Assets
-
Other assets
-
Interbank loans and advances
Total Assets
Liabilities
980
114,437
854
5,760
-
Due to customers
Other liabilities
167,567
71
1,631
695
47,933
169,964
Total Liabilities
169,964
The temporary consideration paid for the purchase of the above-mentioned business unit was equal
to Euro 2.5 million which, pending completion of the Purchase Price Allocation process, was
temporarily recorded among goodwill.
- 146 -
RELATED-PARTY TRANSACTIONS
1. Information on the remuneration of key management personnel
The following table reports the remuneration paid to key management personnel in the first half of
2014.
Managers with
strategic
responsibilities
a)
Short-term benefits
5,258
b)
Post-employment benefits
c)
Other long-term benefits
-
d)
Indemnities due on termination of employment
-
e)
Share-based payments
-
172
Total
5,430
Key management personnel comprise members of the Parent Bank’s General Management team, as
defined in its articles of association, as well as its serving directors and statutory auditors.
The remuneration categories included in the above table comprise:
a) Short-term benefits: this includes: i) for General Management: wages, salaries and related social
security contributions, payment in lieu of vacation and sick leave, incentives and benefits in kind,
such as medical assistance, housing, company cars and goods and services provided free or at
reduced cost; ii) for Directors and Statutory Auditors: attendance fees, remuneration for the
performance of their duties (also for similar positions held with Group companies);
b) Post-employment benefits: these include the company contributions to pension funds (pension
and retirement plans, life insurance and health care subsequent to termination) and the provision
for severance indemnities recorded on the basis required by law and in-house agreements;
c) Other long-term benefits: there are no other long-term benefits worthy of mention (such as leave
of absence or sabbaticals related to length of service, bonuses linked to anniversaries, other
benefits linked with length of service, disability benefits and, if due more than twelve months
after the reporting date, profit share, incentives and deferred remuneration);
d) Indemnities due on termination of employment: these include the amounts paid for early
termination prior to pensionable age, incentives for voluntary redundancy and incentives for
early retirement;
e) Share-based payments: these include the cost of shares granted on achieving a certain length of
service or specific objectives.
- 147 -
2. Information on related-party transactions
“Related-party transactions” are defined as all transactions with parties defined as such in IAS 24.
More specifically, with reference to the organisation and governance of the Group, the following
parties are deemed to be “related parties”:
- companies under joint control: companies over which the Group exercises joint control, whether
directly or indirectly;
- associated companies: companies over which the Group exercises significant influence, whether
directly or indirectly;
- key management personnel, i.e. members of General Management of the Parent Bank and its banking
subsidiaries, the General Manager and/or Managing Director of the other subsidiaries, the
Directors and Statutory Auditors of the Parent Bank and other Group companies;
- “close relatives” of key management personnel;
- companies controlled by, jointly controlled by or associated with key management personnel or their close
family;
- parties that manage pension plans for the Group’s employees and any other parties related to the Group.
“Close relatives” are deemed to be: (a) companion and children of the related party; (b) children of
the companion; (c) dependents of the related party or of their companion.
The following tables summarize the balances and transactions with related parties during the period
and their impact on cash flow, according to their classification at 30 June 2014.
Statement of financial position
Related parties
- Associated companies
- Companies under joint control
- Managers with strategic responsibilities
Loans and
Deposits
advances
Other assets1
from
to
banks
customers
Other
Due to
customers liabilities2
Guarantees
and
commitments
- Other related parties3
-
41,008
36,400
184,694
61
7,679
-
121,661
8,486
49,617
472,144
4,555
7,121
20,034
24
40,564
Total related parties
-
262,102
7,740
-
179,764
483,821
60,622
2,398,377
30,073,201
10,652,055
7,022,706
21,026,949
13,198,320
2,961,218
Total statement of financial position
% incidence
1 Asset
2
Loans and
advances
to banks
0.00%
0.87%
0.07%
0.00%
0.85%
3.67%
2.05%
line items 20, 40, 50 and 160 from the consolidated statement of financial position.
Liability line items 30, 40, 50 and 100 from the consolidated statement of financial position.
Include the close relatives of key management personnel, companies controlled by, jointly controlled by or associated with key
management personnel or their close family, and parties that manage pension plans for the Group’s employees and any other parties
related to the Group.
3
- 148 -
Income statement
Related parties
Interest
income
- Associated companies
- Companies under joint control
- Managers with strategic responsibilities
- Other related parties
2
Total related parties
Total statement of financial position
% incidence
Interest
expense
Net fee and Other costs
/ other
commission
income
revenues 1
778
350
2,681
(10,393)
(101)
(423)
15,763
68
629
(28,559)
(5,430)
6
3,809
(10,917)
16,460
(33,983)
611,263
(351,288)
147,040
(289,615)
0.62%
3.11%
11.19%
11.73%
1 Line
items 180 and 220 from the consolidated income statement. They include the remuneration paid to key management personnel of the
Parent Bank only.
Include the close relatives of key management personnel, companies controlled by, jointly controlled by or associated with key
management personnel or their close family, and parties that manage pension plans for the Group’s employees and any other parties
related to the Group.
2
Cash flows
Related parties
30/06/2014
Loans and advances to banks
Other assets 1
(15,963)
16
Total cash flows with related parties
(15,947)
Total liquidity absorbed by financial assets
349,871
% incidence
1 Asset
-4.56%
line items 20, 40, 50 and 160 from the consolidated statement of financial position.
Related parties
30/06/2014
Due to banks
Due to customers
Other liabilities
39,924
(9,889)
2
Total liquidity generated by financial liabilities
% incidence
1
30,035
(2,492,584)
-1.20%
Liability line items 30, 40, 50 and 100 from the consolidated statement of financial position.
- 149 -
Related parties
30/06/2014
Interest income and similar revenues
Interest expense and similar charges
1
Other income/other costs 3
3,809
(10,917)
16,460
(33,983)
(24,631)
Total cash flow from operations
% incidence
106,773
-23.07%
Line items 180 and 220 from the consolidated income statement.
- 150 -
CERTIFICATION OF THE FINANCIAL REPORTING MANAGER
- 151 -
CERTIFICATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
PURSUANT TO ART. 81-TER OF CONSOB REGULATION NO.11971 OF MAY 14, 1999, AS
AMENDED AND UPDATED
1.The undersigned
– Cav. Lav. Dott. Giovanni Zonin, as Chairman of the Board of Directors, and
– Dott. Massimiliano Pellegrini, as Financial Reporting Manager of Banca Popolare di Vicenza S.c.p.A.,
taking into account of the provisions of Article 154-bis, paragraphs 3 and 4 of Legislative Decree No. 58 of
24 February 1998, do hereby certify:
• the adequacy in relation to the enterprise's characteristics and
• the effective application of the administrative and accounting procedures for preparing the half-year
condensed consolidated financial statements, during the first half of 2014.
2. The adequacy of the accounting and administrative processes for preparing the half-year condensed
consolidated financial statements at 30 June 2014 has been evaluated on the basis of an internal procedure
established by Banca Popolare di Vicenza S.c.p.A. in compliance with the Internal Control - Integrated
Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
which are internationally accepted frameworks for internal control system.
3. It’s also certified that:
3.1 The half year condensed consolidated financial statements:
a) have been prepared in compliance with applicable international accounting standards recognized by the
European Community pursuant to European Parliament and Council Regulation no. 1606/2002 of 19
July 2002;
b)
correspond to the results of the book and accounts;
c) give a true and fair presentation of the balance sheet, profit and loss and financial position of the issuer
and of the companies included in the scope of consolidation.
3.2 The interim report on operations contains a reliable analysis of the most significant events that occurred
in the first six months of the year and their impact on the half-year condensed consolidated financial
statements, as well as a description of the main risks and uncertainties concerning the remaining six
months of the year. The interim report on operations also contains a reliable analysis of information on
significant related-party transactions.
Vicenza, August 29, 2014
The Chairman of the Board of Directors
Financial Reporting Manager
Cav. Lav. Dott. Giovanni Zonin
Dott. Massimiliano Pellegrini
- 152 -
AUDITORS’ REPORT ON REVIEW OF
CONSOLIDATED FINANCIAL STATEMENTS
- 153 -
CONDENSED
INTERIM
- 154 -
- 155 -

consolidated half-year report at 30 june 2014

Transcription

Similar documents

EQUITY - RBFCU

Milano - Italy tel. +39 02 43910069

Flyer ESCI Conference Poland 2015

TOUROPARC ZOO

II Europejski Kongres Języków Obcych PASE

Riga Cup participation step by step:

COMPANY PRESENTATION

Spring 2011 - RC SSE Federal Credit Union

BRAZOSP RT DEBT CONSOLIDATION LOANS