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 31/12/2010: Share Capital EUR 824,759, Reserves EUR 1,259,366,028 Member of the Interbank Guarantee Fund Interim Report on Operations as at 31 March 2011

2 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 Co-General Manager Vice General Manager Vice General Manager Vice General Manager Manager in charge of preparing the corporate accounting documents Independent statutory auditing firm Miro Fiordi Luciano Camagni Umberto Colli Mauro Selvetti Enzo Rocca Simona Orietti Reconta Ernst & Young S.p.A. 2

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4 Contents CONSOLIDATED FINANCIAL AND ECONOMIC HIGHLIGHTS AND ALTERNATIVE PERFORMANCE INDICATORS AS AT 31 MARCH ORGANISATIONAL MODEL AND BREAKDOWN OF THE CREDITO VALTELLINESE BANKING GROUP... 7 MANAGEMENT PERFORMANCE DURING THE QUARTER... 9 ECONOMY AND FINANCIAL MARKET TRENDS... 9 SIGNIFICANT EVENTS DURING THE QUARTER THE GROUP'S OPERATIONAL STRUCTURE RECLASSIFIED CONSOLIDATED FINANCIAL STATEMENTS COMMENTS ON THE FINANCIAL STATEMENTS SIGNIFICANT EVENTS OCCURRING AFTER THE CLOSE OF THE QUARTER BUSINESS OUTLOOK NOTES TO THE FINANCIAL STATEMENTS DECLARATION OF THE MANAGER IN CHARGE OF DRAWING UP THE CORPORATE ACCOUNTING DOCUMENTS

5 CONSOLIDATED FINANCIAL AND ECONOMIC HIGHLIGHTS AND ALTERNATIVE PERFORMANCE INDICATORS AS AT 31 MARCH 2011 BALANCE SHEET DATA 31/03/ /12/2010 % change 31/03/2010 % change (in thousands of EUR) Loans to customers 22,425,856 22,004, ,618, Financial assets and liabilities 1,583,594 1,458, , Investments in associates and companies subject to joint control 217, , , Total assets 27,269,394 26,760, ,260, Direct deposits from customers 21,840,887 21,664, ,647, Indirect deposits from customers 12,748,302 12,609, ,909, of which: - Managed savings 5,830,317 6,008, ,206, Total deposits 34,589,189 34,273, ,557, Shareholders equity 2,043,798 2,002, ,929, FINANCIAL STATEMENT RATIOS 31/03/ /12/2010 Indirect deposits from customers / Total deposits 36.9% 36.8% Managed savings / Indirect deposits from customers 45.7% 47.6% Direct deposits from customers / Total liabilities 80.1% 81.0% Customer loans / Direct deposits from customers 102.7% 101.6% Customer loans / Total assets 82.2% 82.2% CREDIT RISK 31/03/ /12/2010 % change Net doubtful loans (in thousands of EUR) 481, , Other net doubtful loans (in thousands of EUR) 867, , Net doubtful loans / Loans to customers 2.1% 2.1% Other net doubtful loans / Loans to customers 3.9% 3.4% Hedging of doubtful loans 60.0% 60.4% Hedging of other doubtful loans 7.2% 7.2% Cost of credit (*) 0.60% 0.61% (*) Calculated as the ratio between the net value adjustments due to deterioration of loans and year-end loans. ORGANISATIONAL DATA 31/03/ /12/2010 % change 31/03/2010 % change Number of employees 4,515 4, , Number of branches Banc@perta line users 168, , ,

6 INCOME STATEMENT DATA Q Q % change Interest margin 125, , Net fee and commission income 75,186 66, Operating income 215, , Operating expenses (137,164) (133,029) 3.11 Net income from banking activities 78,105 65, Net losses/recoveries on impairment of loans and other financial assets (33,577) (22,160) Income (loss) before tax from continuing operations 45,239 42, Income after tax from continuing operations 26,008 24, Net income 22,392 20, OTHER ECONOMIC INFORMATION Q Q Cost/Income ratio 63.7% 64.9% 67.2% 6

7 ORGANISATIONAL MODEL AND BREAKDOWN OF THE CREDITO VALTELLINESE BANKING GROUP The Credito Valtellinese Banking Group consists of territorial banks, specialised finance companies and special purpose companies for the provision of services - with a view to achieving synergies and economies of scale - to all the companies of the Group. [*] Company subject to management and coordination by the Parent Company pursuant to Articles 2497 et sequitur of the Italian Civil Code, not included in the banking group as it is an insurance company) The Organisational Model of the Group, defined a company network model, assigns the reference market share to the territorial banks and the required operating support to the specialised finance and special-purpose companies. Therefore, it is based on the full enhancement of the distinctive skills of each member, with the purpose of achieving the maximum efficiency and competitiveness, on their functional and operational correlation, on the adoption in the corporate process management of the same rules and methods. This allows to overcome size restrictions and fully benefit from the advantage of proximity with regard to the areas of choice, combining effectively specialisation and flexibility, production and distribution functions. As at 31 March 2011, the Credito Valtellinese Group is present on the national territory with a network of 543 Branches, in ten regions, through the territorial banks characterising the Market Area, each focused exclusively on the specific areas of origin: - Credito Valtellinese S.c., parent company, present with its network of 128 branches in Lombardia, in the provinces of Sondrio, Lecco, Como, Varese, Bergamo, and in Trentino Alto Adige. - Credito Artigiano S.p.A., with 144 branches is present in Lombardia - in Milan and in the provinces of Monza and Brianza, Pavia, Cremona and Lodi - in Piacenza, in Toscana - in the areas of Firenze and Prato in addition to Lucca, Pisa and Pistoia - as well as in Lazio, Roma, Grottaferrata and Pomezia. - Credito Siciliano S.p.A., covers the whole of Sicilia with a total of 136 branches and Roma, with a branch dedicated to loan against pledge. - Banca dell Artigianato e dell Industria S.p.A., present in the provinces of Brescia, Padova, Verona and Vicenza with 37 branches. 7

8 - Credito Piemontese S.p.A., with a network of 29 branches, all in the cisalpine region. - Carifano Cassa di Risparmio di Fano S.p.A, with a significant presence in the Marche region, in addition to the provinces of Forlì-Cesena, Rimini and Perugia, through a network of 45 branches. - Banca Cattolica S.p.A. is present in the provinces of Viterbo and Terni with 9 branches. - Credito del Lazio S.p.A. is present with 15 branches in the province of Frosinone, Latina and Roma. The following companies characterise the Specialised Finance Segment : - Bancaperta S.p.A., financial centre of the Group, bank specialised in financial asset management services, private banking, as well as real estate financial services and centralised group treasury management. This bank controls: Aperta SGR S.p.A., an asset management company. Lussemburgo Gestioni S.A., Luxembourg-based management company, specialising in the management and administration of UCIs. Global Assicurazioni S.p.A. is a multifirm insurance agency acting as partner in the bancassurance sector and, more in general, in the sales network distribution of standard insurance policies. 1 Global Broker S.p.A. company specialised in the insurance sector targeting the SME segment. Aperta Fiduciaria S.r.l, a company authorised to perform static fiduciary services, the administration of third party assets and fiduciary registration. - Mediocreval S.p.A., a bank specialised in medium to long-term financing, business finance and leasing. - Finanziaria San Giacomo S.p.A., for the management of impaired loans mainly of financial intermediaries of the Group. - Creset Servizi Territoriali S.p.A., for local tax management, Treasury and cash services on behalf of local authorities present in the territories of the banks of the Group. The companies providing services complementary to banking business characterising the Production Segment complete the Group: - Deltas soc. consortile P. A., forms the Corporate centre of the Group, supports the Parent Company in defining and governing the overall business plan, coordinates and provides support for administration, planning, human resource management, marketing, auditing, legal affairs, compliance and risk management. - Bankadati Servizi Informatici Soc consortile 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 real estate holdings of the Group companies, prepares real estate valuations to support the disbursement of credit by the Territorial Banks and develops independently initiatives in favour of the local communities of reference. 1 companies subject to management and coordination by Credito Valtellinese and therefore included in the Group consolidation area, even if not included in the banking group, pursuant to the supervisory provisions, in that they carry on insurance activities 8

9 MANAGEMENT PERFORMANCE DURING THE QUARTER ECONOMY AND FINANCIAL MARKET TRENDS 2 The world growth remains steady: the world economy continues to expand, driven by the strong growth in Developing Countries, the recovery of the United States and the strengthening of the recovery in the Eurozone. According to projections by the International Monetary Fund (IMF), world GDP growth, accounting for 5.0 percent in 2010, will continue at a rate of 4.5 percent this year and next. As from the end of 2010, the flows of international trade, temporarily slowed last autumn, returned to accelerate. In Japan, after a recovery of production in the first two months of this year, the effects of the earthquake that hit the country in March are currently difficult to estimate, considering the size of the earthquake and the involvement of the nuclear power plant of Fukushima. The price increase of raw materials continued in the first months of the year Oil prices, on the up compared to last summer due to the strengthening of world demand, further increased as from February following the riots in North Africa and the Middle East; futures contracts allow for a stabilisation in the coming months. Prices of basic food commodities were up again in the first quarter and in April, exceeding the peaks of August In advanced countries, the impact on consumer price inflation has been significant; although net of food and energy components, the price trend continues to be moderate. In emerging economies, inflationary pressures intensified, fuelled by high growth rates at levels close to potential rates. Tensions on the total debt of some Countries of the Eurozone, with alternating stages for over a year, increased in February and early March; they toned down only partially after the meeting of 11 March of Heads of State and Government of Eurozone countries, which decided to extend the lending capacity of the European Financial Stability Facility and outlined the characteristics of the European Stability Mechanism that will replace it in The Government crisis and the reduction of the creditworthiness of Portugal resulted in a sharp increase in risk premiums on Portuguese public debt, which decreased after the acceptance of the official request for loan from the European Union and the IMF. In the Eurozone, GDP continued to expand in the fourth quarter of last year (0.3 percent over the previous period); in 2010, the product increased by 1.8 percent. However, growth was inconsistent: high in Germany (3.6 percent), more moderate in France and in Italy (1.6 and 1.3 percent), almost nil in Spain. In the first few months of 2011, growth could be strengthened, as reported by the industrial production trend and quality surveys with businesses, reflected in the level reached in March by the -coin indicator. Consumer price inflation increased, reaching 2.5 percent year-on-year on average in the first quarter of this year (from 2.0 in the previous period). The increase is largely due to the acceleration in energy and food prices, due to the rise in raw materials. The ECB Council raised the official rates: in a context characterised by the strengthening of the production recovery and soaring commodity prices, in April, the Council of the European Central Bank decided to increase by 25 basis points the minimum interest rate on the main refinancing operations, reaching 1.25 percent. In Italy, GDP continues to grow albeit at a moderate pace. In the fourth quarter of 2010, GDP in Italy increased by 0.1 percent compared to the previous period. It grew by 1.3 percent year-on-year average. The trend of the domestic demand (by 1.7 percentage points) and the recovery of exports (by 2.2 points) contributed to this growth; however, the net contribution of foreign trade was -0.4 points due to the high growth of imports stimulated by the domestic demand. A modest acceleration in production in the first quarter of 2011 is expected, as indicated by the slight recovery of industrial production and by the more lively trend in exports in January and February. Industrial business confidence and expectations on the demand also improved, reaching good levels. 2 Bank of Italy Economic Bulletin no. 60 April updated with data available on 11 April

10 Consumption is held back by the negative trend of real income: the spending behaviours of households are prudent, affected by labour market conditions and the trend of disposable income, which decreased in real terms in The consumption trend, which turned positive last year, did not increase over the last few months, according to indications from the retail sales trend that dropped in January, and consumer confidence, whose gradual improvement was interrupted at the beginning of The expectations on the increase in prices slightly worsened, in line with the current inflation trends. Consumer price inflation, stable at around 1.7 percent in the second half of 2010, reached 2.3 on average in the first quarter, measured according to the change year-on-year of the consumer price index for all the national community. The increase reflects mainly the increase in energy and food prices, weighing more heavily on the purchasing power of less privileged families, for which they represent more than 40 percent of consumption. However, inflation measured net of these components remained moderate, even if slightly up during the first months of the year due to increases in transport services and in some items at regulated price. Employment is lagging: very different levels of production compared to the levels before the recession and a still high incidence of laid-off employees hinder the rise in employment. After a slight increase in the fourth quarter of 2010, the number of employed persons is lowered in the first two months of this year to the minimum levels of last summer. Recruitment with flexible and part-time contracts increased again; permanent full-time positions continued to decrease. The unemployment rate remained stable on last year's average values, whereas the incidence of long-term unemployed persons and youth unemployment increased. The Italian banking system. The growth of bank loans to the non-financial private sector increased to 4.9 percent year-on-year ending in February (from 3.3 last November). The increase in the quarter reached 6.7 percent (from 5.5). The acceleration has reflected that of loans to non-financial companies (8.0 percent in the three months ending in February), which involved enterprises operating in the manufacturing and service segment, in connection with an unchanged and still moderate trend of loans to enterprises in the building industry. The increase in the quarter of household loans for purchasing homes remained stable at around 5 percent. The trend of business credit is driven by the trend in demand, which remains consistent with the economic situation. According to the replies of the Italian banks participating in the Bank Lending Survey in the Eurozone, in the fourth quarter of 2010, major financing requirements are largely connected with debt restructuring; the lending criteria remained essentially unchanged, in spite of moderate tensions on the criteria applied to specific segments of customers deemed more risky. In the monthly survey of Istat and the quarterly survey carried out in March by the Bank of Italy in collaboration with Il Sole 24 Ore, an ongoing credit squeeze was reported by a small number of enterprises. Interest rates on new bank loans recorded small changes since last November. The cost of short-term loans to businesses, including those on current accounts, increased by a tenth of a percentage point, to 3.7 percent in February; the cost of new household loans increased by two tenths for fixed-rate lending (at 4.4 percent) and by one tenth for floating-rate lending (at 2.6 percent). The portion of fixed-rate loans continued to increase in the composition of new household loans, and reached 28 percent of total loans in February (from 22 and 11 percent of November and August 2010, respectively). Last February, the Government, the Italian Banking Association (ABI) and the major employers' associations have signed an agreement extending to 31 July the deadline for complying with the moratorium arrangements set up in August 2009 for loans to small and medium-sized enterprises facing temporary financial difficulties. Companies that have already benefited from this instrument can lengthen the maturity of the debt, within the limit of three years, and use specific tools to manage interest-rate risk. Companies strengthening their assets have the possibility of raising a loan proportional to the increase of capital. According to data provided by the Ministry of economy and finance, in December 2010 about 190,000 applications for suspension of loans were accepted, totalling more than EUR 56 billion. In the first quarter of 2010, the ratio between the flow of new adjusted doubtful loans and total loans decreased to 1.7 percent, net of seasonal factors and per year (from 2.0 of the previous quarter), however high compared to 10

11 the average level of the two-year period (1.1 percent). Credit quality improved for loans to financial companies and, to a lesser extent, for loans to enterprises in the South and households; it remained unchanged for companies operating in Centre and North Italy. Based on preliminary figures of the first two months of 2011, the total exposure for debtors recorded as doubtful for the first time slightly decreased compared to the same period in The reduction has focused in particular on businesses whose portion of loans in temporary difficulty however increased (5.9 percent of loans in January). The trend of total deposits in Italian banks remained weak (0.6 percent for the twelve months ending in February). Current accounts showed as a whole a negative change (-1.8 percent); accounts held by households recorded a modest growth and those held by non-financial companies a sharp reduction, in connection with the restructuring of the portfolio with more profitable instruments. Bond issues also decreased, albeit slightly (-0.1 percent), in line with the worsening of the credit squeeze according to the Italian Banks participating in the Bank Lending Survey in the Eurozone. According to the consolidated reports of the five major groups, in 2010 the banking profitability was basically in line with that of the previous year: the return on capital and reserves (ROE) remained around 4 percent. Profits were up 5 percent, benefiting from the disposal of non-strategic activities, limitation of operating expenses and lower provisions and value adjustments, especially those connected with the deterioration of credit quality (-16 percent). However, the latter continues to absorb more than half of the operating result. The interest margin shrank by 7 percent, reflecting the low level of interest rates and the weak dynamics of volumes traded. Other revenues remained steady: the increase in fees has offset the decline in revenues of trading activities, which was affected by the tensions of total debt markets. Net interest and other banking income fell by 4 percent. Financial markets. As from January, the Borsa Italiana marked a recovery, albeit with large variations. In the first quarter of the year, the general Borsa Italiana index slightly increased (6 percent, compared to 4 for the Eurozone as a whole). Until the second ten days of February, share prices were driven upwards by the good performance of profits announced by enterprises and by a temporary reduction of tensions on total debts in the Eurozone. Later on, prices marked a decline, reflecting the turbulence in Government bond markets, uncertainty on new mechanisms for the resolution of total debt crisis in the Eurozone and geopolitical tensions in North Africa. In March, concerns about the economic effects of the earthquake in Japan have triggered a further drop in prices. In the first ten days of April, stock market indices have risen by about 2 percent both in Italy and in the Eurozone. 11

12 SIGNIFICANT EVENTS DURING THE QUARTER The new strategic plan During the quarter, the Board of Directors approved the new Strategic Plan, which outlines the guidelines for the development of the Credito Valtellinese Group for the next four years and defines the actions for achieving the pre-established key objectives of efficiency, competitiveness and profitability, in a path oriented to the creation of sustainable value in the medium to long term in favour of all the stakeholders. Among the strategic objectives, the restructuring of the Creval Group is particularly important and contemplates: - the merger by incorporation in the Credito Valtellinese S.c. Parent Company of the Bancaperta S.p.A., Credito Piemontese S.p.A. and Banca dell Artigianato e dell Industria S.p.A. subsidiaries; the merger by incorporation in the Credito Artigiano S.p.A. listed subsidiary of Banca Cattolica S.p.A., Credito del Lazio S.p.A. and Carifano Cassa di Risparmio di Fano S.p.A. and the subsequent conferment of the branch network present in the Marche and Umbria regions, in a new company, especially set-up, which, with the Carifano brand, will keep the territorial monitoring of those regions; - the overall reorganisation of the network and the establishment of Regional Areas, with the aim of further enhancing the proximity to the territories of origin. The said corporate restructuring project is expected to be implemented within the current year, subject to obtaining the necessary authorisations by the competent authorities. As at the date of this report, the implementation steps were already formalised or more extraordinary transactions were defined, as a preparation to the carrying-out of the outlined project, detailed below. Review of the Creval Group - Banca Popolare di Cividale Group agreements An agreement aimed at amending, in part, the strategic cooperation agreements signed in May 2004, taking account in particular of the merger by incorporation of Banca dell' Artigianato e dell' Industria in Credito Valtellinese, was signed on 22 March 2011 between Credito Valtellinese and Banca Popolare di Cividale within the current year, subject to obtaining the necessary authorisations by the competent authorities. By virtue of the agreements reached, Banca Popolare di Cividale transferred to Credito Valtellinese the investment, equal to 10% of the share capital, of Banca dell Artigianato dell Industria for an amount of EUR 16.7 million. Then, following the transfer, shareholders' agreements signed by Credito Valtellinese and Credito Artigiano, on the one hand, and Banca Popolare di Cividale, on the other, concerning their respective investments in BAI, were cancelled. Still according to the same agreements, Credito Valtellinese transferred to Banca Popolare di Cividale an investment - corresponding to 5% of its share capital - of Banca di Cividale S.p.A., bank controlled by Popolare di Cividale, for an amount of EUR 20.3 million. As a result of this operation, the remaining investment held by Creval in Banca di Cividale stands at 20% of the share capital of the latter. 12

13 Infragroup transfer of the branch of Orvieto from Banca Cattolica to Carifano In March 2011, a preliminary contract for the transfer of the branch of Orvieto from Banca Cattolica to Carifano was signed effective as from next 16 May. The operation, within the restructuring project of the territorial network of the Group that contemplates the establishment of nine Regional areas focused exclusively on the specific operational areas, is preparational to the assignment of the branch network present in the Marche and Umbria regions in "New Carifano". The consideration of the transaction is temporarily calculated as EUR 0.5 million, based on the financial situation of the business unit subject-matter of the transfer as at 31 December 2010, it will be established definitely by June 2011, depending on the financial situation of the business unit related to the effective date of the transaction. Takeover bid of all shares of Banca Cattolica In view of the implementation of mergers under the corporate restructuring project, on 15 March 2011, the Board of Directors approved the voluntary takeover bid pursuant to Article 102 of the TUB (Italian banking law)aimed at the purchase of all shares of the subsidiary Banca Cattolica not already held by Credito Valtellinese, representing 16.7% of the share capital of Banca Cattolica. Therefore, the offer targeted - without distinction and on equal terms - all Banca Cattolica shareholders other than the offeror Credito Valtellinese for a unit price of EUR 58 for each share of Banca Cattolica to the takeover bid, therefore a maximum of 6.15 million. The subscription period started on 26 April and will end on 16 May, with date of payment fixed on 19 May Merger by incorporation in Credito Artigiano of Banca Cattolica and Credito del Lazio On 14 April 2011, the Boards of Directors of Credito Artigiano, Banca Cattolica and Credito del Lazio approved the merger by incorporation of Banca Cattolica and Credito del Lazio into Credito Artigiano drafted pursuant to Art ter of the Italian Civil Code. Share exchange ratios were determined on the basis of evaluations of advisors specially appointed by their Boards of Directors - Equita SIM S.p.A. for Credito Artigiano and Deloitte Financial Advisory S.p.A. for Banca Cattolica and Credito del Lazio - as set below: - 20 Credito Artigiano ordinary shares, for each ordinary share of Banca Cattolica; - 3 Credito Artigiano ordinary shares, for each ordinary share of Credito del Lazio. Infragroup transfer of minority shares in Bancaperta and Banca dell Artigianato e dell Industria During the quarter, the transfer to the parent bank Credito Valtellinese of 1,029,600 Bancaperta S.p.A. ordinary shares, equal to 24.44% of the share capital, by Credito Artigiano and 510,120 Bancaperta S.p.A. ordinary shares, equal to 12.11% of the share capital, by Credito Siciliano, as well as 4,007,055 Banca dell Artigianato e dell Industria S.p.A. ordinary shares, equal to 20.81% of the share capital, by Credito Artigiano, was also approved. 13

14 The fees for the transfer were determined definitively on 14 April 2011, on the basis of evaluations of the independent advisor specially appointed by the Boards of Directors of the transferor banks, in EUR for each Bancaperta share, and therefore, for a total of EUR 36.7 million for the investment of Credito Artigiano and EUR 18.2 million for the investment of Credito Siciliano and EUR 8.68 for each BAI share, for a total consideration of EUR 34.8 million. The transfer of the investments at issue - as a result of which the Parent Company will hold the entire share capital of Bancaperta and 95.15% of Banca dell'artigianato e dell'industria - is expected to be completed by May THE GROUP'S OPERATIONAL STRUCTURE Branch network. As at 31 March, the territorial network of the Credito Valtellinese Group, unchanged compared to the end of the 2010 financial year, consists of 543 branches, broken down as follows. 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: 14

15 DISTRIBUTION CHANNELS 31/03/ /03/2010 Number of ATMs Number of Internet users (active) 168, ,741 Number of POS 20,232 19,957 Workforce. As at 31 March 2011, the Group numbered 4,515 staff members, compared to 4,514 as at 31 December 2010, with the following breakdown of functions. - Executives: 74 - Middle managers: 1,504 - Professional categories: 2,937 Group workforce as at 31 March

16 RECLASSIFIED CONSOLIDATED FINANCIAL STATEMENTS RECLASSIFIED BALANCE SHEET ASSETS 31/03/ /12/2010 % change Cash and cash equivalents 172, , Financial assets held for trading 252, , Financial assets available for sale 888, , Financial assets held to maturity 457, , Due from banks 913,803 1,089, Loans to customers 22,425,856 22,004, Hedging derivatives Investments in associates and companies subject to joint control 217, , Property, plant and equipment and intangible assets (1) 1,244,704 1,249, Other assets (2) 697, , Total assets 27,269,394 26,760, (1) Includes balance sheet 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/ /12/2010 % change Due to banks 1,829,352 1,887, Direct customer deposits (1) 21,840,887 21,664, Financial liabilities held for trading 14,372 14, Other liabilities 991, , Provisions for specific purpose (2) 264, , Minority interests 284, , Shareholders equity (3) 2,043,798 2,002, Total liabilities and shareholders equity 27,269,394 26,760, (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". 16

17 RECLASSIFIED INCOME STATEMENT ITEMS Q Q % change Interest margin 125, , Net fee and commission income 75,186 66, Dividends and similar income Income from investments in associates and companies subject to joint control carried at equity (1) 5,796 2, Profit (losses) on trading, hedging activities and disposals/repurchases 4,357 5, Other operating expenses/income (4) 4,014 4, Operating income 215, , Personnel expenses (85,854) (81,872) 4.86 Other administrative expenses (2) (41,097) (41,564) Net adjustments to/recoveries on property, plant and equipment and intangible assets (3) (10,213) (9,593) 6.46 Operating costs (137,164) (133,029) 3.11 Net operating margin 78,105 65, Net losses/recoveries on impairment of loans and other financial assets (33,577) (22,160) Net provisions for risks and charges (632) (506) Profit (losses) on disposal of investments in associates and companies subject to joint control 1,343 1 n/a Income (loss) before tax from continuing operations 45,239 42, Taxes on income from continuing operations (19,231) (18,157) 5.92 Income after tax from continuing operations 26,008 24, Minority interests (3,616) (3,744) Profit for the period 22,392 20, (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 12,541 thousand in the first quarter of 2011, and EUR 11,863 thousand in the first quarter of 2010); (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 1,537 thousand in the first quarter of 2011, and EUR 1,547 thousand in the first quarter of 2010); (4) Other expenses and income correspond to item 220 "Other operating expenses/income" net of the above reclassifications. 17

18 COMMENTS ON THE FINANCIAL STATEMENTS Balance sheet aggregates At the end of March 2011, direct deposits amounted to EUR 21,841 million recording a 0.8% growth compared to the end of December 2010 and 5.8% year-on-year. Indirect deposits amounted to EUR 12,748 million, up 1.1% compared to December last year, due to the positive trend of the administered component, equal to 4.8%, whereas managed savings, totalling 5,830 million, decelerated by 3% compared to the end of Total deposits reached EUR 34,589 million with a 0.9% increase compared to December 2010 and more than 3% compared to the corresponding period of the previous year. Loans to customers amounted to EUR 22,426 million and increased by 1.9% compared to December 2010 and by 8.8% compared to March At the end of the quarter, impaired loans, net of value adjustments, totalled EUR 1,348 million, compared to 1,222 million as at December 2010, and up 10.3%. In detail, doubtful loans net of value adjustments totalled EUR 481 million compared to EUR 465 million, showing a 3.6% increase, with a 2.1% impact on the total loans portfolio and a 60% hedging degree, unchanged compared to December Other net doubtful loans stood at EUR 867 million, compared to EUR 758 million as at December 2010, up 14.5%, and representing 3.9% of loans portfolio, compared to 3.4% in December The hedging degree amounted to 7.2%, unchanged compared to December Said indicators showed a limited credit risk profile, despite the increase in impaired loans due to the ongoing weak economic cycle. Shareholders equity still including last year's profit amounted to EUR 2,044 million. Economic trend of operations As at 31 March 2011, the interest margin rose to EUR 126 million compared to EUR 119 million for the corresponding period of 2010, up 6% year-on-year, benefiting from the slight recovery of market interest rates as from the fourth quarter last year. Net fee and commission income totalled EUR 75 million, up by 12.6% compared to EUR 66.7 million for the corresponding period last year. Income from investments in associates and companies subject to joint control carried at equity totalled EUR 5.8 million compared to EUR 2.8 million for the corresponding period last year. Positive the profit (loss) on securities trading, hedging and disposal/repurchase activities totalling EUR 4.4 million, whilst the other operating income totalled EUR 4 million. Total operating income amounted to EUR 215 million, recording an increase of 8.7% against EUR 198 million recorded in the first quarter last year. Operating costs amounted to EUR 137 million, an increase of 3.1% year on year. In detail, cost components increased by 4.9% in terms of personnel costs, which increased by approximately 100 employees year-on-year in relation to the expansion of the branch network (+ 25 Branches) and amounted to EUR 86 million, whereas other administrative expenses amounted to EUR 41 million. Net adjustments to/recoveries on property, plant and equipment and intangible assets reached EUR 10.2 million, up 6.5%. 18

19 The net operating margin reached EUR 78 million, marking an increase of 20% against the EUR 65 million recorded for the corresponding period of the previous year. Net losses/recoveries on loans and other financial assets totalled EUR 33.6 million and up compared to 38.5 million of the fourth quarter of 2010 and stable compared to the third quarter of the previous year. The cost of credit reached approximately 60 basis points, unchanged compare to the end of the last financial year. Taking also into account the profits on disposal of investments of EUR 1 million, income (loss) before tax from continuing operations amounted to EUR 45 million, recording an increase of 6.8% compared to the first quarter of Income tax for the year, estimated at EUR 19 million and minority interests amounting to EUR 4 million fix the net profit for the period to EUR 22.4 million, up 9.4% compared to the result of the first quarter of SIGNIFICANT EVENTS OCCURRING AFTER THE CLOSE OF THE QUARTER Apart from what is indicated in the previous chapters, within the broader context of the implementation of the Strategic Plan, no significant event occurred that could have a material effect on the state of affairs of the company or on the report provided hereunder. BUSINESS OUTLOOK The continuing uncertainties of the macroeconomic scenario trend, especially in our Country, worsened by the repeated tensions on the total debts of some Countries of the Eurozone as well as by the anxieties related to the geopolitical crisis of North-African and Middle-Eastern Countries, still persuade the Board of Directors to prudent assessments on the business outlook of the months to come. In this context, a growth in balance sheet aggregates and an increase in changes in profitability can be forecast, thanks to the actions outlined by the new Strategic plan and, in particular, to the synergies deriving from the corporate restructuring operations that are expected to be implemented within the current year, taking also into account the positive effects of the trend in interest rates. 19

20 NOTES TO THE FINANCIAL STATEMENTS FORM AND CONTENT OF THE INTERIM REPORT ON OPERATIONS The Interim Report on Operations as at 31 March 2011 is prepared in consolidated format and 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. Special purpose companies are included as required. 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 related interpretations. These principles are explained in the consolidated financial statements as at 31 December 2010, 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 scope of consolidation as at 31 March ACCOUNTING POLICIES The accounting policies used for representing corporate accounting events (recognition, classification and assessment) have not been changed with respect to those adopted in the financial statements as at 31 December 2010, drafted according to IAS/IFRS international accounting standards and which should be referred to for further details, except for those amended by IASB and approved through the issue of new EU Regulations. With regard to the accounting position for the first quarter of 2010 (comparison period), it should be specified that the interim report included a provisional cost allocation for acquisition of Banca Cattolica S.p.A. on 23 December In this report, the economic figures for the first quarter of 2010 were reclassified assuming that the cost allocation process for that transaction had been completed on the date of acquisition. A positive change of the interest margin of EUR 133 thousand was recorded and higher adjustments on intangible assets of EUR 43 thousand and higher taxes of EUR 29 thousand were included. Considering a change in minority interests of EUR 10 thousand, an increase of EUR 51 thousand is recorded for the first quarter of Suspended items and non-liquid portfolio items by settlement currency were not recognised in the related balance sheet items, as their effect was considered insignificant. The consolidated report on operations as at 31 March 2011 was not subject to audit by the independent auditor. THE BOARD OF DIRECTORS Sondrio, Tuesday, 10 May

21 DECLARATION OF THE MANAGER IN CHARGE OF PREPARING THE CORPORATE ACCOUNTING DOCUMENTS The undersigned manager in charge of preparing the corporate accounting documents, Simona Orietti, pursuant to Article 154 bis, subsection 2, of the TUB (Italian banking law) hereby declares that the accounting information provided in this report matches the information reported on the company s documents, books and accounting records. Manager in charge of preparing the corporate accounting documents Signed: Simona Orietti 21