Credito Valtellinese Società Cooperativa Registered Offices in Piazza Quadrivio 8 Sondrio, Italy Tax code and Sondrio Company Register No.

Transcription

1 Credito Valtellinese Società Cooperativa Registered Offices in Piazza Quadrivio 8 Sondrio, Italy Tax code and Sondrio Company Register No Register of Banks No. 489 Parent Company of the Credito Valtellinese Banking Group Register of Banking Groups No Internet: creval@creval.it Data as at 30/09/09: Share Capital EUR 728,667, fully paid-in Reserves EUR 1,234,707,461 Member of the Interbank Guarantee Fund Interim Report on Operations Q

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3 Company Officers of Credito Valtellinese Board of Directors Chairman Giovanni De Censi Substitute Vice Chairman Angelo Maria Palma Vice Chairman Giuliano Zuccoli Managing Director Miro Fiordi Directors Fabio Bresesti Gabriele Cogliati Michele Colombo Paolo De Santis Aldo Fumagalli Romario Paolo Stefano Giudici Gian Maria Gros Pietro Franco Moro Valter Pasqua Alberto Ribolla Paolo Scarallo Members of the Executive Committee Board of Statutory Auditors Chairman Permanent Auditors Substitute Auditors Angelo Garavaglia Marco Barassi Alfonso Rapella Aldo Cottica Edoardo Della Cagnoletta Panel of Arbitrators Permanent Arbitrators Substitute Arbitrators Emilio Berbenni Francesco Bertini Emilio Rigamonti Adriano Bassi Silvano Valenti General Management General Manager Substitute Vice General Manager Vice General Manager Vice General Manager and Executive in charge of drawing up the corporate accounting documents Miro Fiordi Giovanni Paolo Monti Franco Sala Enzo Rocca Independent auditing firm Reconta Ernst & Young S.p.A. 3

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5 Contents Company Officers of Credito Valtellinese...3 CONSOLIDATED FINANCIAL AND ECONOMIC HIGHLIGHTS AND ALTERNATIVE PERFORMANCE INDICATORS AS AT 31 MARCH ORGANISATIONAL MODEL AND BREAKDOWN OF THE CREDITO VALTELLINESE BANKING GROUP... 9 RECLASSIFIED CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 MARCH COMMENTS ON THE FINANCIAL STATEMENTS MANAGEMENT PERFORMANCE DURING THE QUARTER ECONOMY AND FINANCIAL MARKET TRENDS...17 SIGNIFICANT EVENTS DURING THE QUARTER...20 BUSINESS OUTLOOK SIGNIFICANT EVENTS OCCURRING AFTER THE CLOSE OF THE FIRST QUARTER OF NOTES TO THE FINANCIAL STATEMENTS

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7 CONSOLIDATED FINANCIAL AND ECONOMIC HIGHLIGHTS AND ALTERNATIVE PERFORMANCE INDICATORS AS AT 31 MARCH 2010 STATEMENT OF FINANCIAL POSITION DATA 31/03/ /12/2009 % change 31/03/2009 % change (in thousands of EUR) Loans to customers 20,617,990 20,373, ,821, Financial assets and liabilities 616, , , Investments in associates and companies subject to joint control 246, , , Total assets 25,260,424 24,895, ,530, Direct deposits from customers 20,647,631 20,216, ,526, Indirect deposits from customers 12,909,931 12,636, ,854, of which: - Managed savings 6,206,214 5,874, ,310, Total deposits 33,557,562 32,852, ,380, Shareholders equity 1,929,758 1,927, ,668, FINANCIAL STATEMENT RATIOS 31/03/ /12/2009 Indirect deposits from customers / Total deposits 38.5% 38.5% Managed savings / Indirect deposits from customers 48.1% 46.5% Direct deposits from customers / Total liabilities 81.7% 81.2% Customer loans / Direct deposits from customers 99.9% 100.8% Customer loans / Total assets 81.6% 81.8% CREDIT RISK 31/03/ /12/2009 % change Net doubtful loans (in thousands of EUR) 362, , Other net doubtful loans (in thousands of EUR) 866, , Net doubtful loans / Loans to customers 1.8% 1.7% Other net doubtful loans / Loans to customers 4.2% 3.6% Hedging of doubtful loans 61.6% 62.6% Hedging of other doubtful loans 5.1% 5.2% 7

8 ORGANISATIONAL DATA 31/03/ /12/2009 % change Number of employees 4,412 4, Number of branches Banc@perta line users 144, , ITEMS (amounts in thousands of EUR) Q Normalised Q (*) % change Q Interest margin 118, , ,384 Operating income 197, , ,077 Operating expenses (132,986) (128,175) 3.75 (128,175) Net income from banking activities 64,952 64, ,902 Income (loss) before tax from continuing operations 42,287 45, ,070 Income after tax from continuing operations 24,159 27, ,270 Net income (loss) 20,425 23, ,085 (*) Non-recurring income for the transfer of non strategic shares, classified among Financial assets held for trading, for a total value of EUR 3.7 million net of the related tax effect, are excluded from the results. 8

9 ORGANISATIONAL MODEL AND BREAKDOWN OF THE CREDITO VALTELLINESE BANKING GROUP The Credito Valtellinese Group adopts a banking operations model that seeks to enhance its relations with customers and with the territory, by creating a network formed by a series of local banks, specialised and complementary companies, enhanced by consolidated partnerships with highly qualified banking and financial organisations. Creval s DNA is based on the archetypal matrix of the cooperative bank, therefore the philosophy underlying corporate activities is centred on territorial origins, seeking to become a clear and constant reference point for the local community and to act in close synergy with its economic and social fabric. In order to soundly implement this corporate mission, the Group s organisational and corporate structure incorporates companies focused on the banking business, on the provision of specialist financial services and on support activities, with the aim of pursuing scale and specialist economies and the highest levels of service. PRODUCTION SPECIALISED FINANCE MARKET Credito Valtellinese Credito Artigiano Bancaperta Lussemburgo Gestioni SA Credito Siciliano Creset Servizi Territoriali BAI Aperta SGR Mediocreval Credito Piemontese Carifano Global Assicurazioni [*] Aperta Fiduciaria Finanziaria San Giacomo Deltas Bankadati Stelline Banca Cattolica [*] not included in the banking group as it is an insurance company The Group operates in 518 branches in the reference territory, through retail banks as follows ( Market Sector ): - Credito Valtellinese S.c., parent company, cooperative bank listed on the Electronic Stock Market (MTA), organised and managed by Borsa Italiana S.p.A. (MTA), whose business is centred on principles of solidarity and whose primary objective is to guarantee the improvement of economic, cultural and social well-being in the reference territory. Credito Valtellinese is characterised by its constant focus on the territory and on small-scale businesses. It operates in the provinces of Sondrio, Lecco, Como, Varese, Bergamo and Trento through a network of 125 branches. - Credito Artigiano S.p.A., established in 1946 in Milan. In 1995 it joined the Credito Valtellinese Group and in July 1999 was listed on the Stock Market. The Bank currently has 142 branches in Milan, Monza e Brianza, Lodi, Pavia, Cremona, Rome, Florence, Prato, Pisa, Lucca, Pistoia and Piacenza. 9

10 - Credito Siciliano S.p.A., established in 2002 from the merger by incorporation of Banca Popolare Santa Venera S.p.A. and Leasingroup Sicilia S.p.A. into Banca Regionale Sant Angelo S.p.A. On 1 July 2002, Credito Siciliano also acquired the network of Cassa San Giacomo branches to become one of the largest banks in Sicily. Credito Siciliano s mission is to actively contribute to the island s economy and community through its own commercial network that covers the whole of Sicily with a total of 136 branches. - Banca dell Artigianato e dell Industria S.p.A., established in Brescia in 1997 at the initiative of a committee of promoters comprising local tradesmen, business men and freelance professionals, with the aim of contributing to economic development in the Brescia area. In 2000, it became a member of the Credito Valtellinese Group. Without neglecting reinforcement of its traditional reference territory, the bank is also expanding into the Veneto region, implementing a project that envisages extension of the Credito Valtellinese Group influence to this region. The Bank currently operates in the provinces of Brescia, Vicenza, Verona and Padua with 33 branches. - Credito Piemontese S.p.A., operative since 25 February 2008 following the acquisition of 23 branches including 10 in Turin, 9 in the province of Turin and 4 in the Alessandria area from the Intesa Sanpaolo Group. The Bank later acquired the Verbania and Novara branches from Credito Valtellinese and Credito Artigiano, and opened the Borgomanero and Arona branches (both in Novara province) and Asti, to increase its total network to 28 branches. - Cassa di Risparmio di Fano S.p.A., founded in 1843, joined the Credito Valtellinese banking group as of 3 December 2008 following the Parent Company s acquisition of a controlling interest in the bank s share capital. Carifano operates 45 branches in the provinces of Pesaro, Ancona, Forlì-Cesena, Perugia and Rimini. - Banca Cattolica S.p.A., established in 1928 and based in Montefiascone (VT), joined the Group in 2009 following the Parent Company s acquisition of the 80% controlling interest in the bank s share capital. Banca Cattolica is present in the provinces of Viterbo and Terni with 9 branches. The Group also encompasses a number of other companies providing specialised financial services ( Specialised Finance Sector ): - Bancaperta S.p.A. is the bank specialised in financial asset management services, private banking and real estate financial services; it also acts as the financial centre, coordinating the activities of its subsidiaries and associated companies: Aperta SGR, Global Assicurazioni, Aperta Fiduciaria and Aperta Gestioni; - Aperta SGR S.p.A., an asset management company, wholly controlled by Bancaperta and enrolled on the specific register held by the Bank of Italy. In October 2005, the asset management business previously handled directly by Bancaperta was transferred to Aperta SGR; - Lussemburgo Gestioni SA, Luxembourg-based management company, specialising in the management and administration of UCIs, established with the purpose of widening the range of financial products offered to the customers and of contributing to the development of new business areas, by enhancing the experience gained by the Group in the asset management sector; - Global Assicurazioni S.p.A. is a multifirm insurance agency acting as partner of excellence in the bancassurance sector and, more in general, in the sales network distribution of standard insurance policies. 10

11 - Aperta Fiduciaria S.r.l, a company authorised by the Italian Ministry for Production Activities to perform what is known as static fiduciary services, including the administration of third party assets, the fiduciary registration of the same, mediation in the exercise of related rights, and the representation of shareholders and bondholders; - Mediocreval S.p.A., a bank specialised in the provision and management of medium to long-term financing. The concentrated supervision of the business finance sector is centred on Mediocreval; - Finanziaria San Giacomo S.p.A. is a company included on the Special Register of Intermediaries operating in the financial sector pursuant to Article 107 of the TUB (Consolidated Banking Law). The company purpose is to provide financial activities consisting in the acquisition, management and disposal of problem loans for financial intermediary activities of the Credito Valtellinese Group and its associated companies. - Creset Servizi Territoriali S.p.A., established in 2006 in line with the strategic plan to strengthen the Credito Valtellinese Group in the payment systems and public authority services sectors. The company was formed following the tax collection reform (Article 3, Italian Legislative Decree no. 203 of 30 September 2005) from a business branch split from Rileno S.p.A., former concessionary for the provinces of Como and Lecco. The scope of the Group also includes a number of entities that provide services complementary to the banking business, with a view to achieving synergies and economies of scale ( Production sector ). With the objective of guaranteeing a greater management economic efficiency of the Group and stronger compliance between the modus operandi and the company organisation, in the first half of 2010 the transformation of Bankadati and Deltas in limited consortium companies was resolved. - Deltas Soc. Cons. p.a., consortium company that plays a role of coordination and monitoring to ensure that the various business areas follow the guidelines established by Credito Valtellinese as being in the interests of stability and growth. This role, given the title of Corporate Centre, involves the provision of support for administration, planning, human resource management, marketing, auditing, legal affairs, compliance and risk management; - Bankadati Servizi Informatici Soc. Cons. p A. is the Group s centre for ICT management and development, organisation, back office and support processes. - Stelline Servizi Immobiliari S.p.A. manages the property and artistic assets of all companies in the Group. The company also provides other services such as the preparation of real estate valuations to support the disbursement of credit by the territorial banks and develops initiatives in favour of the local communities. The Credito Valtellinese network is completed by several associates and companies subject to joint control, specifically: - Banca di Cividale S.p.A., a retail bank that operates in Friuli Venezia Giulia and in the Veneto provinces of Belluno, Treviso and Venice through a network of 62 branches. The Parent company holds 25 % of its share capital; - Istituto Centrale delle Banche Popolari Italiane S.p.A., of which Credito Valtellinese is one of the majority shareholders (20.6%), provides support in the development of customer financial institutions; this is achieved by promoting initiatives and providing services that aim to increase the efficiency and competitiveness of payment systems and in areas related to the administration of securities and finance; 11

12 - Banca della Ciociaria S.p.A. operates in the provinces of Frosinone, Latina and Rome through a network of 15 branches. Credito Valtellinese holds % of its share capital; - Aperta Gestioni Patrimoniali SA, based in Lugano (Switzerland), operating in the asset management sector; - Global Assistance S.p.A., an insurance company specialised in the non-life sector, in which the Parent company has a 40% investment; - Istifid S.p.A., financial company and auditing firm, 28.66% owned by Credito Valtellinese. The following subsidiary or associated companies are also included in the Group scope of consolidation: - Omega S.r.l., an associated company of Stelline Servizi Immobiliari S.p.A. (100.00%); - Sondrio Città Centro S.r.l., an associated company of Stelline Servizi Immobiliari S.p.A. (30.00%); - Progetti Industriali Valtellina S.r.l., an associated company of Stelline Servizi Immobiliari S.p.A. (49.00%); - Sondrio Città Futura S.r.l., an associated company of Stelline Servizi Immobiliari S.p.A. (49.00%). Lastly, the map of consolidation is completed with Quadrivio Finance S.r.l., a special purpose company associated with the securitisation implemented in the first half of

13 RECLASSIFIED CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 MARCH 2010 RECLASSIFIED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (in thousands of EUR) ASSETS 31/03/ /12/2009 % change Cash and cash equivalents 155, , Financial assets held for trading 293, , Financial assets available for sale 297, , Financial assets held to maturity 60,054 1 n/a Due from banks 1,662,419 1,437, Loans to customers 20,617,990 20,373, Hedging derivatives Investments in associates and companies subject to joint control 246, , Property, plant and equipment and intangible assets (1) 1,204,820 1,207, Other assets (2) 720, , Total assets 25,260,424 24,895, (1) Includes statement of financial position items "120. Property, plant and equipment" and "130. Intangible assets". (2) Includes items "140. Tax assets" and "160. Other assets". LIABILITIES AND SHAREHOLDERS EQUITY 31/03/ /12/2009 % change Due to banks 1,306,692 1,470, Direct customer deposits (1) 20,647,631 20,216, Financial liabilities held for trading 34,966 39, Other liabilities 792, , Provisions for specific purpose (2) 258, , Minority interests 290, , Shareholders equity (3) 1,929,758 1,927, Total liabilities and shareholders equity 25,260,424 24,895, (1) Includes items "20. Due to customers" and "30. Securities issued". (2) Includes items "80. Tax liabilities", "110. Employee termination indemnities" and "120. Provisions for risks and charges". (3) Includes items "140. Valuation reserves", "160. Equity instruments", "170. Reserves", "180. Share premium reserve", "190. Capital", "200. Treasury shares and "220. Profit (loss) for the period". 13

14 RECLASSIFIED CONSOLIDATED INCOME STATEMENT (in thousands of EUR) ITEMS Q Q % change Interest margin 118, , Net fee and commission income 66,744 50, Dividends and similar income Income from investments in associates and companies subject to joint control carried at equity (1) 2,804 4, Profit (loss) on trading, hedging activities and disposals/repurchases 5,149 6, Other operating expenses/income (4) 4,564 4, Operating income 197, , Personnel expenses (81,872) (77,283) 5.94 Other administrative expenses (2) (41,564) (42,002) Net adjustments to/recoveries on property, plant and equipment and intangible assets (3) (9,550) (8,890) 7.42 Operating costs (132,986) (128,175) 3.75 Net operating margin 64,952 68, Net losses/recoveries on impairment of loans and other financial assets (22,160) (20,111) Net provisions for risks and charges (506) 266 n.s. Profit (losses) on disposal of investments in associates and companies subject to joint control 1 13 n.s. Income (loss) before tax from continuing operations 42,287 49, Taxes on income from continuing operations (18,128) (17,800) 1.84 Income after tax from continuing operations 24,159 31, Minority interests (3,734) (4,185) Profit for the period 20,425 27, (1) Income from investments in associates and companies subject to joint control carried at equity include the profit (loss) on investments carried at equity included in item 240 "Profits (losses) on investments in associates and companies subject to joint control". The residual amount of that item is included in profits (loss) from disposal of investments in associates and companies subject to joint control, together with item 270 "Profits (losses) on disposal of investments"; (2) Other administrative expenses include taxes and other recoveries recognised to item "220 Other operating expenses/income" (EUR 11,863 thousand for the first quarter of 2010, and EUR 11,900 thousand for the first quarter of 2009); (3) Net adjustments to/recoveries on property, plant and equipment and intangible assets include items 200 "Net adjustments to/recoveries on property, plant and equipment", 210 "Net adjustments to/recoveries on intangible assets" and the accumulated depreciation of costs incurred for leasehold improvements, under item 220 "Other operating expenses/income" (EUR 1,547 thousand for the first quarter of 2010, and EUR 1,648 thousand for the first quarter of 2009); (4) Other expenses and income correspond to item 220 "Other operating expenses/income" net of the above reclassifications. 14

15 COMMENTS ON THE FINANCIAL STATEMENTS Statement of financial position aggregates Figures as at 31 March 2010 confirm a positive development in statement of financial position aggregates, thanks to the development of the branch network and the strengthening of the market position, the constant attention in support of real economy of the operating areas, with a further increase of loans to SMEs and to households and new initiatives in favour of companies, within a strict credit risk framework. Direct deposits amounted to EUR 20,648 million, recording an increase of 2.1% compared to December 2009 and 5.7% for the same period last year. Indirect deposits totalled EUR 12,910 million, marking an increase of 2.2% compared to EUR 12,636 in December last year and 8.9% year-on-year. The increase in managed savings was more marked reaching EUR 6,206 million, up 5.6% compared to EUR 5,875 million at the end of 2009 and approximately 17% compared to the first quarter of Total deposits, equal to EUR million, recorded a 2.2% growth compared to EUR 32,853 million at the end of 2009 and 6.9% year-on-year. At the end of March 2010, loans to customers amounted to EUR 20,618 million, up 1.2% compared to the end of 2009 and 9.6% compared to the same period last year. Within a strict credit risk framework, impaired loans, net of value adjustments, totalled EUR 1,228 million, up 13.3% compared to EUR 1,084 million at the end of December Doubtful loans, net of value adjustments, amounted to EUR 362 million compared to EUR 344 million in December 2009, with a 1.76% impact on the loans portfolio compared to 1.69% at the end of 2009 and of which 62% was hedged. Other net doubtful loans stood at EUR 866 million, compared to EUR 741 million as at the end of December 2009, representing 4.20% of loans portfolio, against the 3.64% in the previous year. Said indicators showed a limited credit risk profile, despite the increase in impaired loans consistent with the trend of the economic cycle Economic trend of operations Economic results are influenced by the prolonged drop in market interest rates and by the negative effects of the economic scenario on the cost of credit, in line with the business model focused exclusively on lending activities. To enable a better comprehension of trends indicated below, the first quarter of 2009 included non-recurring income for the transfer of non strategic shares, classified among Financial assets held for trading, for a total value of EUR 3.7 million net of the related tax effect. The interest margin reached EUR million compared to EUR million of the first quarter of 2009 decreasing by 10.4% as a consequence of the marked decrease in market interest rates, effects that were only partly offset by the increase in trading volumes. Net fee and commission income totalled EUR 66.7 million, up 33.3% year-on-year. Income from investments in associates and companies subject to joint control carried at equity totalled EUR 2.8 million. Positive the profit (loss) on trading activities and transfer of AFS totalling EUR 5.1 million, whist the other 15

16 operating income totalled EUR 4.6 million. Operating income reached EUR 198 million, recording a 0.4% increase compared to the first quarter of 2009 (+2.5% net of non-recurring income components). Operating costs amounted to EUR 133 million, an increase of 3.8% year on year. In detail, the cost components increased by 5.9% in terms of personnel costs, which amounted to EUR 81.9 million compared to EUR 77.3 million - due to the expansion of the workforce (ca. +100) related to the development of the commercial network - whereas other administrative expenses passed from EUR 42 million to EUR 41.6 million, decreasing by 1%. Net adjustments to/recoveries on property, plant and equipment and intangible assets reached EUR 9.6 million, up 7.4%. Net operating margin was EUR 65 million, decreasing by 5.7% compared to the same period last year but essentially in line net of non-recurring income components. Losses/recoveries on impairment of loans amounted to EUR 22 million increasing by 10.2% compared to EUR 20 million of the first quarter of The cost of credit, expressed as a percentage of total loans to customers, reached approximately 43 basis points. Income before tax from continuing operations therefore amounted to EUR 42.3 million decreasing by 13.8% compared to the first quarter of 2009 (-6.4% net of non-recurring income components). Income tax for the year, estimated at EUR 18.1 million and minority interests amounting to EUR 3.7 million fix the net profit for the period to EUR 20.4 million, down 24.6% compared to the result of the first quarter of 2009 and decreasing by 12.8% net of non-recurring income components. 16

17 MANAGEMENT PERFORMANCE DURING THE QUARTER ECONOMY AND FINANCIAL MARKET TRENDS 1 The recovery in the world economy continued at the end of 2009 and during the first months of the current year, even if at an uneven rate among countries and areas of the world. In the fourth quarter, GDP accelerated in the United States, in Japan and in the major developing countries; a slight recovery continued in the Eurozone. In all the main advanced economies, the activity continues to be sustained by monetary and tax relaxation policies; in some cases, a temporary support to productivity came from restocking; consumption is held back by the high level of unemployment, investments by uncertainty and by the wide margins of idle capacity. In the main emerging economies, growth continued to be supported by a strong trend in domestic demand. According to the valuations of private analysts, in 2010 the growth in GDP should rank around 3% in the United States, 2% in Japan and 1% in the Eurozone; it should reach 10% in China, 8% in India and 5½% in Brazil. The forecasts published in January by the IMF, being revised, are not very different. International trade - which decreased by more than 12% in is expected to increase by nearly 6%. In the Eurozone, the trend in domestic demand is still weak. In recent months, industrial productivity and business confidence improved, especially in Germany, mostly reflecting the recovery of orders from abroad; retail sales continued to drop and consumer confidence seems to worsen. Monetary policies were still widely expansive. Inflation in the main advanced economies was moderate. The Eurosystem continued the gradual removal of unconventional transactions that, thanks to the improvement of the conditions in financial markets, were not required as in the past; it continued to support the liquidity of the banking system and economic recovery. Tension on Government bond markets were circumscribed - also thanks to the abundant liquidity available on the markets, share prices started to increase moderately; risk premiums of company bonds and of total debt of Developing countries remained steady or slightly decreased. Worries on the sustainability of the Greek national debt were transmitted to a limited extent to the securities market of the main European Countries. The high volatility, from the end of last year, of credit risk premiums on Government bonds showed the concern with which investors considered public finance, strongly worsened in all the advanced Countries following the crisis. Whereas in 2010, the approach of tax policies should remain expansive in most of the countries, deficit reduction plans were announced for the following years. The credibility of these plans is essential for avoiding sharp rises in returns and guarantees the sustainability of public finance. In Italy, economic recovery is still weak - Italian GDP slightly decreased in the fourth quarter of In connection with a slump in consumption and a further decrease in investments(especially in the building industry), exports did not confirm the slight recovery of the third quarter. In the second half of the year as a whole, the economic activity reported a modest expansion compared to the previous six months. 1 Bank of Italy Economic Bulletin no. 60 April

18 More recent figures on industrial productivity and the results of economic surveys indicate a more lively development of the activity during the first months of In particular, the judgements of businesses on the trends for orders and on production expectations improved. It seems that the de-stocking phase has finally come to an end. Signs of improvement in expectations also emerged in the building industry. However, the consumer confidence worsened, reflecting increased worries regarding the economic situation and employment prospects. The fall in the number of employees, that already last year was expressed in a sensible decline in disposable income, continued in the first months of The propensity of businesses to invest is affected by the reduced profits and by the low use of production capacity. Businesses continued to report the ongoing credit squeeze, even if the tightening of lending criteria by the banks stopped. The factors at the base of the weak trend in domestic demand could weigh on the intensity and on the recovery time. In connection with the persistent weakness of domestic demand, the dynamic trend of exports was not enough in itself for returning growth to its high values. During the acute stage of the crisis (from the second quarter of 2008 to the second quarter of 2009) the volume of our foreign sales declined by a quarter, as in Germany, more than France. In the second half of 2009, in connection with a 9.3% growth in world trade, domestic recovery was only 2.6%, compared to 10% of German exports and 5.4% of French exports. In January this year, the volume of Italian exports showed a more marked recovery. Figures in value form a framework that is very similar to the one inferred from figures in quantity. The delay with which our foreign sales followed the trend of world demand is due to the same factors that penalised them previously: a deterioration in price competitiveness higher that the one observed in France and Germany; a segment specialisation still imbalanced to the traditional manufacturing sector; a limited presence in more dynamic emerging markets, such as the Asian markets. Inflation became stable - Consumer price inflation has been gradually accelerating in recent months, stabilising at around 1.5%, a level near to that of the basic component, since the statistical effect on growth rates was over after twelve months from the strong decline in prices of energy reported in the second half of Inflation prospects for 2010 are set to the same level. The Italian banking system. In February, bank lending in the non-financial private sector was standing at the level of twelve months earlier. It slightly decreased compared to three months earlier, reflecting the ongoing lending decline in non-financial companies (-3.9%), compared to a moderate growth of loans to household (4.4%). The decline in loans to businesses remains as a whole consistent with the extended decline of their borrowing requirement, related to recession. The tightening of lending criteria, accentuated in the previous quarters, would have stopped in the fourth quarter of 2009, according to the Italian Banks participating in the Bank Lending Survey in the Eurozone. For what concerns businesses, the monthly survey of ISAE and the quarterly survey carried out together with the Bank of Italy and Il Sole 24 Ore reported, in March, the ongoing credit squeeze, even if less acute compared to the peak of the crisis. The quality level of loans remains historically low. After a strong deterioration of the previous quarters, it continues to suffer from the difficult economic situation. In the fourth quarter of 2009, the ratio in the flow of new adjusted doubtful loans and total loans, net of seasonal factors, was 1.8%. Though sagging compared to 2.2% of the third quarter, the ratio is approximately twice the average level of 2008 and 2007; moreover, the recent decrease could be temporary. Based on preliminary figures of the first two months of 2010, the total exposure for debtors recorded as doubtful for the first time slightly increased compared to the same period in There were some signs of improvement for businesses in the manufacturing sector whereas there was a further deterioration for businesses in other sectors and households. Information regarding other types of impaired loans (substandard, restructured, expired or overdue exposures) show that the deterioration in credit quality to businesses could continue also in the 18

19 following months; in December, their impact on total loans increased, compared to one year ago, from 4.7 to 7.7%. The expansion rate year-on-year of total deposits in Italian banks was moderate in February. Changes in bond issues were low (2%). Resident deposits increased by 7.8%. Current accounts continued to grow at a high rate, especially household current accounts (13.1%), encouraged by a shift to more liquid forms within a context of low rates. Banking profitability continued to decrease in Profits fell on average by about one third; the ROE decreased by about two percentage points, to nearly 4%. The decline in the interest margin, due to the reduction in traded volumes and in rates, was 8%; the drop was offset by the growth in revenues deriving from trading activities. Overall, net interest and other banking income remained stable. As a result of cost containment (-6%), income from banking activities increased by 8%. The deterioration in profitability was determined by the increase in provisions and net adjustments; those on loans, due to the significant deterioration of credit quality, increased by two thirds and absorbed about 60% of the income from banking activities (40% in 2008). According to the expectations of financial analysts, the recovery of the banking profitability should be gradual: results in line with 2008 would be achieved again in Financial markets. Share prices remained nearly unchanged from the beginning of the year. The general Borsa Italiana index dropped significantly at the beginning of the first quarter of 2010, to coincide with the sharpening of the worries on the conditions of the public accounts of Greece and other countries of the area. Quotations increased later on. At the end of March, the index was mainly unchanged compared to the beginning of the year (-0.4%), similarly to what is observed for the index of the main listed companies of the Eurozone. The current and prospective profitability of the listed companies has not significantly changed. 19

20 SIGNIFICANT EVENTS DURING THE QUARTER Capital increase operation On 22 January, the issue of 8,327,632 bonds convertible in Credito Valtellinese ordinary shares was concluded associating 33,310,528 warrants free of charge to be exercised in 2010 and 41,638,160 warrants free of charge to be exercised in During the period of offer in option (30 November 29 December 2009) 206,737,950 option rights were exercised for subscribing 8,269,518 convertible bonds, equal to approximately 99.3% of the offered convertible bonds, for a total value of EUR 620,213,850. In compliance with what was provided for by Article 2441, third subsection, Italian Civil Code, Credito Valtellinese offered on the stock exchange 1,452,850 option rights not exercised during the period of offer during the sessions of 13, 14, 15, 18 and 19 January At the end of the first day of Offer on the Stock Exchange all 1,452,850 option rights were sold, rights fully exercised for subscribing the remaining 58,114 convertible bonds, for a total value of EUR 4,358,550. The offer of the convertible loans forming the 2009/2013 Credito Valtellinese fixed-rate loan convertible with the right of redemption in shares was concluded by subscribing in full the 8,327,632 convertible bonds subjectmatter of the offer itself, for a total value of EUR 624,572,400, excluding commissions and charges, associating all in all 33,310, Warrants and 41,638, Warrants. As a result of the total subscription of the Loan, the intervention of the underwriting consortium promoted and managed by Mediobanca, as Sole Global Coordinator and Sole Bookrunner was not required. Transformation of Deltas and Bankadati into limited consortium companies As part of the specific project defined at the Group level, the transformation of the Deltas and Bankadati Servizi Informatici companies into limited consortium companies was completed during the quarter, subject to the expansion of the shareholding structure of the aforesaid companies to all the companies of the Credito Valtellinese Group. To this end, the Board of Directors of the Parent Company resolved the partial disposal of the investment in Bankadati, equal to 130,000 shares that correspond to 26% of the related share capital, in favour of companies of the Credito Valtellinese Group for EUR 1,588,600, determined on the basis of the shareholders' equity of the aforesaid company on 31 December 2009, value asserted by a special fairness opinion issued by an independent advisor. The Board of Directors of Credito Artigiano resolved the partial disposal of the investment in Deltas, equal to 6,240 shares that correspond to 26% of the related share capital, in favour of other companies of the Credito Valtellinese Group for EUR 436,238, determined on the basis of the shareholders' equity of the aforesaid company on 30 September BAI share capital increase and purchase of shares from private shareholders On 26 February 2010, the period of subscription to the second tranche of the share capital increase of Banca dell Artigianato e dell Industria (BAI) totalling EUR 40,431,522 was concluded, approved by the extraordinary shareholders meeting on 30 March

21 The subscription to the aforesaid transaction implied, on behalf of the Parent Company, an outlay of EUR 25.9 million for the subscription of 3,705,087 shares at the price of EUR 7 per share, EUR 5.16 of which as par value and EUR 1.84 as premium. The outlay of Credito Artigiano, for subscribing 1,202,115 shares totalled EUR 8.4 million. Later, Credito Valtellinese acquired from some private shareholders 2,632,146 ordinary shares of Banca dell Artigianato e dell Industria for a countervalue of EUR 32.3 million. On conclusion of the transaction, the share capital of BAI was 63.1% owned by Credito Valtellinese and 20.8% owned by Credito Artigiano. Development of the Group s operational structure Branch network. In the reporting period, the Credito Valtellinese Group s branch network was further expanded and on 31 March 2010 comprised 518 branches, 125 of which belonging to the Parent company Credito Valtellinese, 142 to Credito Artigiano, 136 to Credito Siciliano, 45 to Carifano, 33 to Banca dell Artigianato e dell Industria, 28 to Credito Piemontese and 9 to Banca Cattolica. Specifically, in the reporting quarter, Banca dell Artigianato e dell Industria reinforced its presence in the Brescia area by opening the Orzinuovi branch, Credito Artigiano opened a new branch of Melegnano in the province of Milan and Credito Piemontese opened the Asti branch. Key: number of branches per bank; CREVAL GROUP; 518 branches. 21

22 Other sales channels. Alongside its traditional branch networks, the Credito Valtellinese Group boasts a network of alternative channels for the distribution of banking products and services. At the end of September these channels consisted of: DISTRIBUTION CHANNELS Number of ATMs Number of Internet users (active) 145, ,129 Number of POS 19,957 18,744 Customer base. As at 31 March 2010, the Group s customers numbered 886,246, a 1.14% increase over the 876,209 for 2009, confirming the Group s capacity to attract new customer relations in the areas of new or recent branch openings, and to maintain its customer base in its provinces of origin. Development of the Group s customer base 876, , % Customer relations are spread across the seven territorial banks: Credito Valtellinese (25%), Credito Artigiano (27%), Credito Siciliano (33%), Carifano (7%), Credito Piemontese (5%) and Banca dell Artigianato e dell Industria (2%), Banca Cattolica (2%). 22

23 Breakdown of Group customers as at 31March 2010 by bank CREDITO PIEMONTESE 5% CARIFANO 7% BANCA CATTOLICA 2% CREDITO VALTELLINESE 25% CREDITO SICILIANO 33% BAI 2% CREDITO ARTIGIANO 27% The breakdown of retail customers by geographical area confirms the traditional stronger presence of the Group in Northern and Central Italy (67% of total customers). The South and Islands segment, with 33.1%, constitutes an important segment of Creval s total customer base. Breakdown of Group customers as at 31 March 2010 by area of residence FOREIGN 0.3% SOUTH AND ISLANDS 32.8% NORTH 52.2% CENTRE 14.8% 23

24 In line with the traditional Creval Group approach to the market, retail customers are mainly private (87.5%), whereas business and Public Authorities with other categories account for the remaining 9.8% and 2.7%, respectively. Breakdown of Group customers as at 31 March 2010 by segment AUTHORITIES AND OTHER 2.7% COMPANIES 9.8% PRIVATE 87.5% At the end of 2009, figures regarding cross-selling at Group level were 2.83 products on average per customer slightly down compared to 31 March 2009 (2.99). Cross selling per bank as at 31 March CREDITO VALTELLINESE CREDITO ARTIGIANO BAI CREDITO SICILIANO CREDITO PIEMONTESE CARIFANO 24

25 Workforce. As at 31 March 2010, the Group numbered 4,412 staff members, compared to 4,415 as at 31 December 2009, with the following breakdown of functions. - Executives: 70 - Middle managers: 1,429 - Professional categories:2,913 Group workforce as at 31 March 2010 Top Managers; 32.4% Middle Managers; 1.6% Professional Categories; 66.0% Commercial operations Starting household moratorium arrangements As from 28 January 2010, the zero-interest suspension of mortgage payments granted to households in financial difficulties was activated. All private customers who stipulated a mortgage loan for the purchase, construction or renovation of the main home with the banks of the Group were able to request - in the presence of difficulties - the suspension of mortgage payments for twelve months. In particular, the opportunity was offered to those who lost their job - both to employees and to certain types of collaboration - or whose company activated forms of reduction or suspension of work such as lay-offs or the socalled social buffers. The possibility of suspension, referring to events that occurred as from 1 January 2009, is also extended to the case in which such measures concerned a member of the family of the borrower, even if not co-holder of the loan. A similar opportunity of suspension is granted to customers in case of death or loss of self-sufficiency by one of the co-holders of the loan. Creval Mutuo ProTetto In the reporting quarter, Creval Mutuo ProTetto was launched, new loan for purchasing the home, dedicated to private customers who want to keep their debt in line with the trend of market interest rates, protecting themselves at the same time against sudden and significant rises. This is a floating rate mortgage loan, indexed to the 3-month Euribor rate or ECB according to the customer's choice, characterised by the presence of a maximum rate pre-established and applied for the entire duration of 25

26 the loan. In virtue of this characteristic, the mortgage rate varies according to the trend of the reference parameter but cannot exceed the maximum 6% threshold. Creval Mutuo ProTetto - with a monthly or quarterly repayment and up to 10, 15 or 20 years - allows to reduce the risk related to the increase in market rates, representing the ideal solution for those who want to combine the convenience of the current rate level with the certainty of an instalment that cannot exceed a prearranged threshold considered sustainable by the customer. Partnership agreement with Compass, company of Mediobanca Last 18 March, the Credito Valtellinese Banking Group concluded an agreement with Compass S.p.A., company 100% owned by Mediobanca, which allows the customers of the Creval Group to access the personal loans of Compass. More specifically, the agreement allows the customers of the banks of the Creval Group to apply for a personal loan - with division into instalments from 12 to 84 months, for a maximum financeable amount of EUR 30,000 - and allows customer shopkeepers to access the wide offer of targeted consumer credit products of Compass. Adoption of the ABI - ANIA guidelines The Credito Valtellinese Group accepted on 25 March 2010 the Guidelines issued by the Italian Banking Association (ABI) and Italian National Association of Insurance Companies (ANIA) concerning insurance policies related to mortgages and loans to bank customers. The said lines aim at introducing, on the one hand, increased flexibility in the management of policies in compliance with the law provisions on portability and early redemption of the loans and, on the other hand, a higher level of transparency on the disclosure provided to the customer. More precisely, with regard to loans combined with an insurance policy, paid with advanced premium in one amount, envisage that, in case of transfer or early redemption of the loan, the insurance coverage continues for the agreed duration and conditions and the borrower can indicate a new beneficiary of the policy; alternatively, the insurance contract can be closed and the customer is entitled to the repayment of the part of the paid premium related to the residual period. In this sense, the policies offered by the Credito Valtellinese Group - through the Global Assicurazioni subsidiary - combined with loans are fully in compliance - with the current regulations in force - and with the principles established by the Guidelines. In particular, the policies placed by the Group related to loans do not contemplate the single payment of advanced premiums. 26

27 BUSINESS OUTLOOK There are still uncertainties of the macroeconomic scenario trend, especially for what concerns recovery time, size and solidity, which are accompanied by the unknown factors related to the crisis in Greece and to the possible repercussions on the financial and currency markets. Albeit expressing a prudent outlook, the Board of Directors forecasts a management performance consistent with that of the last quarter, with a further growth in statement of financial position aggregates and changes in profitability linked to a prolonged phase of levelling of the market interest rates and a non predictable development of the credit risk cost compared to

28 SIGNIFICANT EVENTS OCCURRING AFTER THE CLOSE OF THE FIRST QUARTER OF 2010 Assignment of a new plafond from CDP (Cassa Depositi e Prestiti) Within the agreement between ABI and the CDP (Cassa Depositi e Prestiti) in support of SME operations through the use of funds for medium/long-term projects, the banks of the Creval Credito Valtellinese Group - Credito Artigiano, Credito Siciliano, Banca dell Artigianato e dell Industria, Credito Piemontese, Carifano, Banca Cattolica and Mediocreval - after making use in full of the first fund of EUR 33 million, were the beneficiaries of a second injection of EUR 80 million to finance the business activities of SMEs in the areas covered by the Group in the form of future or in-progress investments or to meet the need to increase working capital. Disposal of 29% of Aperta Gestioni Patrimoniali S.A. On 23 April 2010, the disposal of 29% of the investment held by Bancaperta S.p.A. in the share capital of Aperta Gestioni Patrimoniali S.A., a Swiss asset management company based in Lugano, was completed for a payment of CHF 1.8 million, with overall gross capital gains at individual level of about CHF 450,000. The investment was sold to the Hoderas Holding S.A. company. Due to the said transaction, currently the investment of the Credito Valtellinese Group in Aperta Gestioni Patrimoniali S.A. is 19%. Assignment of impaired loans to Finanziaria San Giacomo The Board of Directors of 11 May 2010 favourably examined the general terms of an infragroup transaction for the assignment without recourse of impaired loans to Finanziaria San Giacomo S.p.A. for an overall net current value of approximately EUR 50 million (28.7 million for Credito Valtellinese; 10.4 million for Credito Artigiano and 9.9 million for Credito Siciliano), for 2,979 positions (Credito Valtellinese 696, Credito Artigiano 802, Credito Siciliano 1,481). Each transaction will be completed within June 2010, according to the book value of the assets to be assigned as at 31 December 2009, considering the financial movements and objective facts occurred from 31 December 2009 to the actual date of assignment, as well as any adjustment made in such time interval according to the IAS/IFRS standards. The Deloitte & Touche S.p.A. company was appointed with the task to assess the reasonableness of the assignment prices. Considering the size of the aggregates, the transactions do not affect significantly the consolidated and separate equity and financial situation and the income statement. 28

29 NOTES TO THE FINANCIAL STATEMENTS FORM AND CONTENT OF THE INTERIM REPORT ON OPERATIONS The Interim Report on Operations as at 31 March 2010 provides an overview of the situation of Credito Valtellinese and of the companies that it directly or indirectly controls, or in which it directly holds the majority of the share capital or has a number of votes that is high enough to ensure a considerable influence on the Ordinary Shareholders Meeting. This financial report was drafted pursuant to Article 154- ter, subsection 5 of Italian Legislative Decree no. 58 of 24 February 1998 (the Consolidated Law on Finance), and does not comply with IAS 34 Interim Financial Reporting. CONSOLIDATION PRINCIPLES The consolidation principles used are the international accounting standards (IAS/IFRS) formally approved by the European Union and mandatory at the time of preparing the interim report, including their relative interpretations. These principles are explained in the consolidated financial statements as at 31 December 2009, to which reference should be made for further details. The consolidated interim report was prepared on the basis of accounting schedules prepared for this purpose by companies included in the consolidation area as at 31 March ACCOUNTING POLICIES The accounting policies used to represent corporate accounting events (recognition, classification and assessment) have not been changed with respect to those adopted in the financial statements as at 31 December 2009, drafted according to IAS/IFRS international accounting standards and which should be referred to for further details. The representation in accounts of the acquisition of control of Banca Cattolica S.p.A. was in accordance with IFRS 3 Business combinations. This reporting standard permits the final allocation of the cost of the business combination within twelve months of the acquisition date. Given the complexity of the allocation process, as at the date of this Interim Report, allocation of the cost of acquisition is not yet complete. The cost of acquisition of EUR 23,018 thousand was recognised under the item Property, plant and equipment and intangible assets of the Reclassified consolidated statement of financial position. With regard to the accounting position for the first quarter of 2009 (comparison period), it should be specified that the interim report included a provisional cost allocation for acquisition of the Cassa di Risparmio di Fano S.p.A. on 3 December 2008 and concluded in the consolidated financial statements as at 31 December In this report, the economic figures for the first quarter of 2009 were reclassified assuming that the cost allocation process for that transaction had been completed on the date of acquisition. A negative change of the interest margin of EUR 1,125 thousand was recorded and lower operating costs of EUR 503 thousand and lower taxes of EUR 539 thousand were included. Considering a change in minority interests of EUR 15 thousand, a reduction was recorded for the first quarter of 2009 for EUR 68 thousand. Suspended items and portfolio items non-liquid due to the settlement currency were not recognised in the related statement of financial position items, as their effect was considered insignificant. The consolidated report on operations as at 31 December 2010 was not subject to audit by the independent auditor. THE BOARD OF DIRECTORS Sondrio, 11 May