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

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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 30/03/2009: Share Capital EUR 654,343,585 fully paid-in Reserves EUR 972,645,010 Member of the Interbank Guarantee Fund Interim Report on Operations Q1 2009

2 Contents: ORGANISATIONAL MODEL AND BREAKDOWN OF THE CREDITO VALTELLINESE BANKING GROUP. 3 CONSOLIDATED FINANCIAL HIGHLIGHTS AS AT 31 MARCH RECLASSIFIED CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 MARCH COMMENTS ON THE FINANCIAL STATEMENTS THE MAIN CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT AGGREGATES...11 Total deposits...11 Loans and receivables with customers...11 Inter-bank position...11 Investments...11 Financial assets and liabilities held for trading and Financial assets available for sale...12 Shareholders equity...12 Economic trend of operations...12 COMMENTS BY THE BOARD OF DIRECTORS PERFORMANCE OF THE CREDITO VALTELLINESE SHARE IN THE FIRST THREE MONTHS OF SIGNIFICANT EVENTS DURING THE QUARTER Carifano takeover bid...17 Disposal of the investment in Centrale dei Bilanci...17 Development of the Group s operational structure...17 COMMERCIAL OPERATIONS Cassa Integrazione Guadagni Straordinaria (CIGS) salary support scheme...20 OUTLOOK FOR THE ENTIRE YEAR SIGNIFICANT EVENTS OCCURRING AFTER THE CLOSE OF THE FIRST QUARTER OF NOTES TO THE FINANCIAL STATEMENTS FORM AND CONTENT OF THE INTERIM REPORT ON OPERATIONS...22 CONSOLIDATION PRINCIPLES...22 ACCOUNTING POLICIES...22

3 ORGANISATIONAL MODEL AND BREAKDOWN OF THE CREDITO VALTELLINESE BANKING GROUP The Credito Valtellinese Group adopts a banking operations model that seeks to enhance its local character and its preferential 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 banking and financial organisations. Credito Valtellinese Group DNA, in fact, 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. CREDITO VALTELLINESE Parent Company % 20.81% 39.33% 99.97% 94.85% 41.46% CREDITO ARTIGIANO BANCA DELL ARTIGIANATO E DELL INDUSTRIA CREDITO PIEMONTESE CASSA DI RISPARMIO DI FANO CREDITO SICILIANO 35.79% 100% APERTA SGR CRESET GLOBAL ASSICURAZIONI (*) 24.45% 100% 60% 63.44% BANCAPERTA 12.11% 31.23% MEDIOCREVAL 37.45% 31.29% APERTA FIDUCIARIA 100% 100% FINANZIARIA SAN GIACOMO BANKADATI DELTAS STELLINE 80% 50% 80% 20% 50% 20% TERRITORIAL BANKS BANKS AND SPECIALISED COMPANIES SERVICE COMPANIES (*) Fully consolidated company which, as it is an insurance company, does not form part of the banking group 3

4 The Group operates in 493 branches in the reference territory, through other retail banks as follows ( Market Sector ): - Credito Valtellinese S.c., parent company, cooperative bank listed on the Italian Stock Exchange Market (MTA), organised and managed by Borsa Italiana S.p.A., whose business is centred on principles of solidarity and whose primary objective is to guarantee the improvement of economic, cultural and social wellbeing in the reference territory. Credito Valtellinese is characterised by its constant focus on the territory and on small-scale businesses. Credito Valtellinese operates in the provinces of Sondrio, Lecco, Como, Varese, Bergamo and Trento through a network of 117 branches. - Credito Artigiano S.p.A., founded in 1946 in Milano. In 1995 it joined the Credito Valtellinese Group and in July 1999 was listed on the Stock Market. The Bank currently has 141 branches in Milano, Monza & Brianza, Lodi, Pavia, Cremona, Roma, Firenze, Prato, Pisa, Lucca, Pistoia and Piacenza. - 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 which 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 Padova with 31 branches. - Credito Piemontese S.p.A., operative since 25 February 2008 following the acquisition of 23 branches including 10 in Torino, 9 in the province of Torino 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) to increase its total network to 27 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 41 branches in the provinces of Pesaro, Ancona, Forlì-Cesena, Perugia and Rimini. In this context it performs its banking activities according to territorial development principles adopted since the bank was founded: support to households and business. 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; - 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. 4

5 - 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 art. 107 of the TUB (Italian 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 (Art. 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 Group s scope also includes a number of companies providing services complementary to banking business, with a view to achieving synergies and scale economies ( Production sector ): - Deltas S.p.A., assists the Parent Company in defining Group strategies. Furthermore, Deltas 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, qualifying as Corporate Center, involves the provision of support as regards administration, planning, human resource management, marketing, auditing, legal affairs, compliance and risk management; - Bankadati Servizi Informatici S.p.A. is the Group s single centre for the management and development of ICT activities, 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 through a network of 60 branches. The Parent company holds 25% of its share capital; - Istituto Centrale delle Banche Popolari Italiane S.p.A., of which Credito Valtellinese is already one of the majority shareholders, with a 22.90% investment. The bank provides support in the development of customer financial institutions. This is achieved by promoting initiatives and providing services which aim to increase efficiency and competitiveness as regards payment systems and in areas related to the administration of securities and finance; - Banca della Ciociaria S.p.A. operates in the provinces of Frosinone, Latina and Roma through a network of 15 branches. Credito Valtellinese holds 37.96% of its share capital; - Aperta Gestioni S.A., based in Lugano (Switzerland), operates in the asset management sector. Bancaperta holds 48% of the company s share capital; - Global Assistance S.p.A., an insurance company specialised in the non-life sector, in which the Parent company has a 40% investment. 5

6 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%). 6

7 CONSOLIDATED FINANCIAL HIGHLIGHTS AS AT 31 MARCH 2009 BALANCE SHEET DATA 31/03/ /12/2008 % change 31/03/2008 % change (in thousands of EUR) Loans and receivables with customers 18,808,529 18,374, ,917, Financial assets and liabilities 771, , , Investments 233, , , Total assets 23,530,307 23,563, ,549, Direct deposits from customers(*) 19,525,921 18,653, ,691, Indirect deposits from customers 11,854,164 12,033, ,824, of which: - Managed savings 5,310,987 5,217, ,167, Total deposits 31,380,085 30,687, ,516, Shareholders equity 1,668,888 1,704, ,592, (*) Includes " Deposits from customers " and "Debt securities in issue". BALANCE SHEET RATIOS 31/03/ /12/2008 Indirect deposits from customers / Total deposits 37.8% 39.2% Managed savings / Indirect deposits from customers 44.8% 43.4% Direct deposits from customers / Total liabilities 83.0% 79.2% Customer loans / Direct deposits from customers 96.3% 98.5% Customer loans / Total assets 79.9% 78.0% CREDIT RISK 31/03/ /12/2008 % change Net doubtful loans (in thousands of EUR) 258, , Other net doubtful loans (in thousands of EUR) 385, , Net doubtful loans / Loans and receivables with customers 1.4% 1.3% Other net doubtful loans / Loans and receivables with customers 2.0% 1.8% Hedging of doubtful loans 64.3% 65.2% Hedging of other doubtful loans 5.9% 6.4% FIGURES PER EMPLOYEE (thousands of EUR, number of employees at period end) 31/03/ /12/2008 % change Operating income / Number of employees Total assets / Number of employees 5,461 5, Personnel expenses / Number of employees (*) Costs chargeable to "Other personnel" removed. 7

8 ORGANISATIONAL DATA 31/03/ /12/2008 % change Number of employees 4,309 4, Number of branches Banc@perta line users 125, , INCOME STATEMENT DATA Q Q % change Interest margin 133, , Operating income 198, , Operating costs -128, , Net income from banking activities 69,524 70, Income (loss) before tax from continuing operations 49,692 51, Income after tax from continuing operations 31,354 32, Profit for the period 27,153 26,

9 RECLASSIFIED CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 MARCH 2009 RECLASSIFIED CONSOLIDATED BALANCE SHEET (in thousands of EUR) ASSETS 31/03/ /12/2008 % change Cash and cash equivalents 149, , Financial assets held for trading 572, , Financial assets available for sale 206,622 63, Financial assets held to maturity Loans and receivables with banks 1,628,529 2,174, Loans and receivables with customers 18,808,529 18,374, Hedging derivatives 1, Investments 233, , Property, plant and equipment and intangible assets (1) 1,197,591 1,188, Other assets (2) 731, , Total assets 23,530,307 23,563, (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/ /12/2008 % change Deposits from banks 841,730 1,728, Direct customer deposits (1) 19,525,921 18,653, Financial liabilities held for trading 8,391 11, Hedging derivatives Other liabilities 896, , Provisions for specific purpose (2) 274, , Minority interests 313, , Shareholders equity (3) 1,668,888 1,704, Total liabilities and shareholders equity 23,530,307 23,563, (1) Includes items "20. Due to customers" and "30. Debt securities in issue". (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". 9

10 RECLASSIFIED CONSOLIDATED INCOME STATEMENT (in thousands of EUR) ITEMS Q Q (*) % change Interest margin 133, , Net fee and commission income 50,077 47, Dividends and similar income Income from investments in associates and companies subject to joint control measured at equity 4,122 2, Profit (losses) on trading, hedging activities and disposals/repurchases 6,378 (2,781) n.s. Other operating expenses/income (3) 4,116 4, Operating income 198, , Personnel expenses (77,115) (64,861) Other administrative expenses (1) (42,002) (35,773) Net adjustments to/recoveries on property, plant and equipment and intangible assets (2) (9,561) (7,747) Operating costs (128,678) (108,381) Net income from banking activities 69,524 70, Net losses/recoveries on impairment of loans and other financial assets (20,111) (18,449) 9.01 Net provisions for risks and charges 266 (789) n.s. Profit (losses) on disposal of investments in associates and companies subject to joint control measured at equity Income before tax from continuing operations 49,692 51, Taxes on income from continuing operations (18,338) (19,317) Income after tax from continuing operations 31,354 32, Minority interests (4,201) (5,376) Profit for the period 27,153 26, (*) Figures for the 1 st quarter 2008 were reclassified according to IFRS3, by including the effects of the final cost allocation process regarding the acquisition of Intesa Sanpaolo branches recorded in the Financial Statements as at 31 December 2008, which were recorded as provisional as at 31 March The income for the period was reduced by a total of EUR 226 thousand. (1) Other administrative expenses include taxes and other recoveries recognised to item "220 Other operating expenses/income" (EUR 11,900 thousand for the first quarter 2009, and EUR 9,932 thousand for the first quarter 2008); (2) 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 1,648 thousand for the first quarter 2009, and EUR 1,637 thousand for the first quarter 2008); (3) Other expenses and income correspond to item 220 "Other operating expenses/income" net of the above reclassifications. 10

11 COMMENTS ON THE FINANCIAL STATEMENTS THE MAIN CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT AGGREGATES Total deposits As at 31 March 2009, direct deposits stood at EUR 19,526 million, an increase of 4.7% compared to the EUR 18,653 million recognised as at 31 December 2008 and up 33% on March 2008 (+20.8% without Carifano). Indirect deposits amounted to EUR 11,854 million, a decrease of 1.49% over the year-end figure for 2008 of EUR 12,034 million. Within this aggregate it should be mentioned that managed savings i.e. mutual investment funds, managed customer assets and insurance savings reached EUR 5,311 million, up 1.79% on the year-end figure for 2008 and recording a positive turnaround on last year s performance. Administered savings consisting in securities deposited with Group banks by customers amounted to EUR 6,543 million compared to EUR 6,816 million in December 2008 and EUR 6,657 million in March Total deposits amounting to EUR 31,380 million recorded a 2.26% increase on the EUR 30,687 million as at the end of December 2008 and +14% on 31 March 2008 (+5.7% net of Carifano). Cassa di Risparmio di Fano had a 7.3% impact on total deposits. Loans and receivables with customers As at the end of March 2009, loans and receivables with customers reached EUR 18,809 million, an increase of 2.4% compared to EUR 18,375 million as at 31 December 2008 and up 26% on the figure for March 2008 (+17% net of Carifano). The acquisition of Cassa di Risparmio di Fano had a 7% impact on loans and receivables with customers. As at the end of the quarter, impaired loans net of adjustments totalled EUR 643 million, up by 13% on the EUR 569 million as at 31 December 2008, reflecting the gradual weakening of the economic cycle. The ratio of impaired loans to total loans and receivables with customers was 3.42%, compared to 3.10% at year end, and confirms a limited risk profile despite the objective increase in credit risk. More in detail, net doubtful loans amounted to EUR 258 million, compared to the EUR 237 million recorded at the end of December 2008, accounting for 1.4% of aggregate loans and receivables with customers, against the 1.3% recorded at the end of 2008, of which 64.3% was hedged. Other net doubtful loans stood at EUR 385 million, compared to EUR 331 million as at the end of December 2008, representing 2.0% of total loans and receivables with customers, against the 1.8% recorded at end 2008, of which 5.9% was hedged. Inter-bank position The difference between loans due to and from banks recorded a positive figure of EUR 787 million. Investments Investments in associates and companies subject to joint control, accounted for by the equity method, reached EUR 234 million, increasing compared to the figure recorded as at 31 December 2008 (EUR 213 million). 11

12 Financial assets and liabilities held for trading and Financial assets available for sale Financial assets and liabilities held for trading, represented by debt and equity securities and derivative contracts, as at 31 March 2009 amounted to EUR 564 million, a 25.2% decrease compared to 31 December 2008 due to disinvestments. Financial assets available for sale, mainly consisting of shares held not for trading purposes, totalled EUR 207 million, representing a considerable increase on the EUR 64 million as at the end of December The increase is attributable to the bond component of the portfolio. Shareholders equity Consolidated equity stands at EUR 1,669 million, compared to the previous figure recorded of EUR 1,704 million. The change is linked to the accounting of the Carifano minorities acquisition, completed through the voluntary takeover bid launched by Credito Valtellinese in the period 6 March-26 March Carifano is 94.85% owned by Credito Valtellinese. Economic trend of operations In the first quarter of the year, the interest margin rose to EUR million compared to EUR million for the corresponding period of 2008, a year-on-year increase of 4.7% (or -4% without the Carifano contribution). Net fee and commission income stood at EUR 50.1 million, up 5.8% on the figure of EUR 47.3 million recorded for the corresponding period of last year (+0.4% net of Carifano). Profits on investments in associates and companies subject to joint control carried at equity totalled EUR 4.1 million, recording in increase compared to the first quarter of 2008, whilst the net result for trading, hedging and disposals/repurchases was positive at EUR 6.4 million. Other net operating income, totalling EUR 4.1 million, brought total operating income for the first quarter up to EUR million, representing an increase of 10.7% compared to the first quarter of Carifano contributes 7% to the operating income. Operating expense amounted to EUR million, an increase of 18.7% year on year compared to the EUR million recorded for the first quart of 2008 (+11.5% net of Carifano). In detail, the cost components increased by 18.9% in terms of personnel costs, which amounted to EUR 77.1 million compared to EUR 64.9 million for the first quarter of 2008, and by 17.4% in administrative expenses, which increased from EUR 35.8 million to EUR 42.0 million. The change is strictly linked to the significant expansion of the branch network which as at 31 March 2009 totalled 493 branches, including Carifano branches, compared to 428 in March last year. Net adjustments on property, plant, equipment and intangible assets increased from EUR 7.7 million to EUR 9.6 million, and include EUR 1.1 million amortisation of intangible assets estimated as part of the cost allocation for the business combination regarding the takeover of Carifano. Net income from banking activities therefore stood at EUR 69.5 million, a decrease of 1.6% compared to the result recorded for the first quarter of Losses/recoveries on impairment of loans and provisions for risks and charges essentially earmarked to cover claims from bankruptcy liquidators and the unfavourable outcome of a legal dispute of another nature recorded a combined total of EUR 20.1 million, compared to EUR 18.5 million for the first quarter of Income before tax from continuing operations stood at EUR 49.7 million, down 3.6% year on year compared to the EUR 51.5 million recorded for the corresponding period of Income taxes, estimated at EUR 18.3 million, and minority interests amounting to EUR 4.2 million determined a net income for the parent company of EUR 27.2 million, representing an increase of 1.2% compared to the figure recorded for the first three months of the previous year. 12

13 COMMENTS BY THE BOARD OF DIRECTORS Economy and financial market trends and the economic forecast in the short term 1 The effects of the global financial crisis on the real economy have become particularly aggressive. The strong decrease in the value of wealth, the credit squeeze, the lack of confidence of consumers and businesses have put a brake on demand and production in the major economies, which have recorded considerable job losses. The business consequences in emerging and developing economies, now receiving international credit flows two thirds lower than in 2007, are significant. The decline in international trade weighs heavily on economic activities, risking a further weakening of the banking system. The predictions of international bodies and analysts consulted for the Consensus Forecasts until now have been downgraded. Certain more recent figures, the significance and extent of which will be assessed in the coming weeks, suggest a possible slowdown in the US decline in production, particularly regarding the real estate market and consumption. The effects of exceptional economic policy measures adopted almost worldwide to stimulate the aggregate demand will be verified. Governments and central banks have intensified action to maintaining liquidity at a high level, contributing to the strengthening of banking system equity positions, and stimulating a recovery in lending and in the aggregate demand. The cuts in official rates were without precedent in terms of both extent and frequency. The leading central banks have implemented unconventional monetary transactions with the aim of increasing cash supply, affecting long term interest rates and guaranteeing regular credit market operations for the economy. The extent of central bank balances has expanded enormously. From the second half of 2008, balance of trade policies in almost every country were clearly geared towards expansion, with demand support measures that had not been seen since the end of World War II. The estimates of international bodies indicate an increase in the balance of trade deficit by almost 4 GDP percentage points in the more developed counties and by over 3 points in emerging countries. The intensity of discretional action varies from country to country, reflecting the different impacts of the crisis in terms of the extent of automatic stabilisers and in the level of public debt. The United States recently announced action to remove financial assets with a high level of uncertainty from the banks balances. The position of the international banking system remains difficult in the first months of 2009, though the interbank markets seems to be gradually returning to partial operations. The difficulties are reflected in share prices, the fluctuations of which are largely steered by uncertainty in financial segment developments. Bond spreads remain high. Tension persists even in the financial markets in emerging economies. In the Eurozone, the economic situation deteriorated sharply towards the end of The collapse of exports in the fourth quarter (-6.7% compared to the previous quarter), along with investments, led to a decline in production rates, for which a further drop is forecast for the first few months of this year. Household consumption also fell, despite the strong drop in inflation, probably held back by job market uncertainty. The unemployment rate in the Eurozone has increased, accelerating since the start of The European Central Bank continued its cuts in official rates that began last autumn by reducing its own benchmark rates by 50 basis points in January and by a further 75 between March and April. The inflation reduction process was gradually extended to reserve components, whilst the downward drive adopted originally has stopped. The forecast for inflation, though the forecasts made at the end of 2008 have been reviewed, do not indicate a general, lasting drop in prices. In Italy the negative performance of GDP, which began in spring 2008, became more incisive in the last quarter of the year when GDP fell by 1.9% on the previous quarter, the highest drop since the recession. The net downsizing of exports and investments contributed to this result. The falling employment figures which began in the third quarter of last year continued, and recourse to temporary lay-off schemes through the CIG 1 Bank of Italy Economic Bulletin no. 56 April

14 (Cassa integrazione guadagni) intensified. Net of seasonal factors, the unemployment figure has increased almost incessantly from the third quarter of 2007 onwards. Job prospects uncertainty has offset the stimulating effect of falling inflation on consumption. The economic indicators suggest that economic activity will continue to decline in the first quarter of this year, for the fourth quarter running. There are a number of signs that the strength of the recession is weakening, for example in the recent Bank of Italy-Il Sole 24 Ore survey of companies, but they are not yet sufficient to forecast that declining production will halt. Bank credit and deposits are slowing. The squeeze on bank loans continues due to demand factors, and in the case of corporate credit, also in supply. The quality of credit feels the impact of the deteriorating economic situation. Deposits are also in decline. As of last year the Government and Parliament have adopted measures to protect depositors, sustain bank liquidity and capital, and strengthen intermediary capacity to meet the demand for financing. Last year the profitability of the major Italian banking groups, though on average remaining positive, recorded a strong deterioration. Net of non-recurring income components, profits still fell by about one third compared to The return on equity (ROE) dropped by 4 points to around 7 per cent. Though significant, the growth of the interest margin was insufficient to offset the drop in fee and commission income and crisis-related losses in the trading book. Net interest and other banking income decreased by approximately 7 per cent. Against a substantially stable operating expense, provisions and net adjustments almost doubled, the stronger writedowns being linked to the deterioration of loans - in fact considerable impairment of goodwill and investments were recorded in the balance sheet. Changes to international accounting standards regarding the classification of financial instruments and tax regulations for the realignment and tax redemption of goodwill mitigated the decline in banking profitability. Policies on dividends and capital management recently adopted by the major banking groups led to a strengthening of capital. Preliminary figures included in the quarterly reports, in fact, for December 2008 demonstrate an increase in capital ratios compared to six months earlier. The share markets feel the impact of uncertainty in the financial segments. In the first few months of 2009 the leading share markets recorded consistent losses, generally driven by the strong decrease in financial sector prices. Expectations in recent weeks of a boost from public input in support of the financial systems contributed to a partial recovery, this too largely centred on the financial segment. The implicit volatility of share markets in the US and the Eurozone remained at historically high levels, albeit lower than the peaks recorded last November. In the first quarter of 2009 the general decline of the Borsa Italiana prices (-15%) continued, in line with the major listings in the Eurozone. Breaking a phase of marked decreases that began in January, from the end of the first ten days of March market prices showed signs of a recovery, rising from the lowest level recorded in the last thirteen years. The recovery is mainly due to the strong upturn of the financial segment linked to the announcement of a return to profits of a number of leading British banks and details of the bail-out plans for the US banking system. The fall in market prices in the first quarter of the year is attributable to both a strong decrease in current and expected profits of listed companies and to a further increase in the risk premium required of investors. 14

15 PERFORMANCE OF THE CREDITO VALTELLINESE SHARE IN THE FIRST THREE MONTHS OF 2009 In the first quarter of the year the Credito Valtellinese share recorded a better performance in terms of both the general Borsa Italiana index and in the Comit Bancari sector index, confirming its improved resistance capacity against market shock. The average Credito Valtellinese share price from the beginning of the year to 31 March 2009 was EUR 6.47, peaking at EUR 7.55 on 07/01/2009, and recording a minimum of EUR on 09/03/2009. This performance, calculated by comparing figures as at 31/03/2009 against those for the end of 2008, shows a drop of 12.9%, compared to the 20.7% decrease recorded by the COMIT Bancari benchmark index. Share performance in the first three months of ,200, ,000, , , , , Dec-08 Feb-09 Mar Volumes Prices 15

16 Credito Valtellinese share performance compared with the COMIT Bancari benchmark index over the first three months of Dec-08 Jan-09 Feb-09 Feb-09 Mar-09 Credito Valtellinese Credito Artigiano Mibtel Comit Bancari 16

17 SIGNIFICANT EVENTS DURING THE QUARTER Carifano takeover bid On 6 March 2009, after obtaining the necessary authorisation, the subscription period began on the voluntary takeover bid launched by Credito Valtellinese on 2,002,950 ordinary shares of the subsidiary Carifano Cassa di Risparmio di Fano S.p.A. The bid, forming part of the operation leading to the acquisition of control of this bank based in the Marche region, targeted all ordinary Carifano shareholders, without distinction and on equal terms except for Credito Valtellinese and FCM S.p.A., both committed to a non-subscription agreement of a total 13.37% of the bank s share capital. On closure of the bid period on 26 March 2009, Credito Valtellinese held a total 94.85% investment, for a total outlay of EUR million. Payment of the takeover bid total of EUR 72,029, (EUR per Carifano share cum dividend, i.e. including the coupon for the 2008 Carifano dividend, as specified in Paragraph E.1 of the takeover bid document), was made on 30 March The transfer of ownership of Carifano shares subscribed to the takeover bid took place on the Payment Date. Disposal of the investment in Centrale dei Bilanci On 31 March 2009, Credito Valtellinese and Gemma 4 Srl implemented the Preliminary Contract signed on 13 March 2009 for disposal of the Parent Company's investment in Centrale dei Bilanci S.r.l., thereby completing the final contract for sale of the investment. The provisional sale price was set as EUR 4,303,543, subject to adjustment as at the closing date planned for the end of May. Based on the provisional price, Credito Valtellinese is expected to record gross capital gains from the transaction of approximately EUR 3.9 million Development of the Group s operational structure Branch network. Consistent with the internal line growth objectives of the Strategic Plan, in the reporting period the branch network was further expanded. As at 31 March 2009, the Credito Valtellinese Group s network comprised 493 branches, 117 of which belonging to the Parent company Credito Valtellinese, 141 to Credito Artigiano, 136 to Credito Siciliano, 41 to Carifano, 31 to Banca dell Artigianato e dell Industria and 27 to Credito Piemontese. Specifically, the Parent Company expanded its branch network in the Trentino area with the opening of Branch 2 in Trento and a branch in Riva del Garda, Credito Artigiano opened a new branch in the capital - Branch 25 - and the Crema branch, and Banca dell Artigianato e dell Industria reinforced its presence in the Brescia area with two branches in Montichiari and Oppeano. 17

18 The following table provides a breakdown by province of the Credito Valtellinese Group branch structure as at 31 March

19 Credito Valtellinese BANK PROVINCE 19 NO. BRANCHES Sondrio 43 Como 22 Lecco 15 Bergamo 16 Varese 17 Trento 4 Total branches 117 Credito Artigiano Milan 55 Monza & Brianza 25 Cremona 2 Lodi 1 Pavia 15 Florence 8 Prato 2 Pisa 2 Pistoia 1 Lucca 1 Piacenza 1 Rome 28 Total branches 141 Credito Piemontese Novara 3 Alessandria 4 Verbano Cusio Ossola 1 Turin 19 Total branches 27 Banca dell Artigianato e dell Industria Vicenza 9 Verona 7 Padua 3 Brescia 12 Total branches 31 Credito Siciliano Agrigento 4 Caltanissetta 8 Catania 52 Enna 2 Messina 19 Palermo 26 Ragusa 9 Siracusa 6 Trapani 10 Total branches 136 Carifano Ancona 4 Forlì 1 Pesaro 30 Perugia 1 Rimini 5 Total branches 41 TOTAL GROUP BRANCHES 493

20 Other sales channels. Alongside its traditional branch networks, the Credito Valtellinese Group boasts a consolidated network of alternative channels for the distribution of banking products and services. At the end of September these channels consisted of: DISTRIBUTION CHANNELS 31/03/ /12/2008 Number of ATMs Number of Internet users (active) 125, ,229 Number of POS 18,744 18,621 As at 31 March 2009, the Group numbered 4,309 staff members, compared to 4,293 as at 31 December COMMERCIAL OPERATIONS Cassa Integrazione Guadagni Straordinaria (CIGS) salary support scheme The current economic crisis is generating restructuring, reorganisation and closure of companies, support for which can be obtained from the Cassa Integrazione Guadagni Straordinaria (CIGS). There are cases in which, due to the economic situation, companies are unable to anticipate staff pay and as a result are forced to wait for the start of social security authority support payments. As a response to this need, the ABI and a number of territorial authorities (provincial and regional governments, chambers of commerce) have launched local support initiatives. In adopting these initiatives, in the second half of March 2009, Credito Valtellinese and Credito Artigiano signed specific memoranda of understanding with the provincial governments of Sondrio, Como and Varese and the provincial governments of Milan and Monza & Brianza, respectively, in support of employees and companies in crisis, envisaging credit facilities to employees subject to CIG schemes. In April, Credito Valtellinese signed a similar agreement with the Lecco provincial government. Again on the question of anticipated CIG support, and in the light of the above-mentioned initiatives, Creval developed a product that allows employees to obtain advances on CIG salary support schemes. This product is included among the Group s product list as of mid-april 2009 and is open to all Group bank customers that have made recourse to the CIG schemes. 20

21 OUTLOOK FOR THE ENTIRE YEAR The persistent and widespread negative performance of the economic scenario makes it difficult to forecast the business outlook for the coming months. Nevertheless, the Board of Directors considers it likely that there will be a positive development in balance sheet aggregates and changes in profitability linked to a slight recovery in the interest margin, especially in the second part of the year, and a predictable stronger impact of credit risk due to the continued deterioration of the economic cycle. SIGNIFICANT EVENTS OCCURRING AFTER THE CLOSE OF THE FIRST QUARTER OF 2009 On 6 May 2009 the exercise of the Credito Valtellinese 2009 ordinary share Warrant at the end of the call period (1 April-30 April 2009) was disclosed to the market. Of the 21,397,572 Credito Valtellinese ordinary share Warrant 2009, a total of 21,235, Warrants were exercised, resulting in the subscription of 21,235,503 conversion shares, equal to 99.24% of the maximum total. The 2009 Warrants offered the right of subscription to newly-issued Credito Valtellinese ordinary shares in the ratio of one Conversion Share for every 2009 Warrant exercised, at a price of EUR 5.06 per conversion share. In accordance with the indications provided in Article 1 of the 2009 Warrant Regulations, the call price was set by applying a 20% discount on the average official market price over the period 2 January to 27 March 2009 for Credito Valtellinese shares, weighted by volumes traded. As a result of the subscription of 21,235,503 Conversion Shares, issued by Credito Valtellinese as approved by the Extraordinary Shareholders Meeting of 10 February 2007: - the total value of the transaction for Credito Valtellinese was EUR 107,451,645.18; - the share capital of Credito Valtellinese now totals EUR 728,667,845.50, divided into 208,190,813 ordinary shares with a par value of EUR 3.5 each; - the Parent Company shareholders equity totals over EUR 1.7 billion. The closing of the 2009 Warrant call period and subsequent subscription of Conversion Shares as envisaged in the Regulation, concludes the share capital increase approved by the Extraordinary Shareholders Meeting of 10 February

22 NOTES TO THE FINANCIAL STATEMENTS FORM AND CONTENT OF THE INTERIM REPORT ON OPERATIONS The Interim Report on Operations as at 31 March 2009 provides an overview of the situation of Credito Valtellinese and the companies which 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 art. 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 2008, 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 2008, 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 Cassa di Risparmio di Fano (Carifano) 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 business combination cost allocation has been made partially through the inclusion of a number of provisional estimates, which led to the recognition of new intangible assets amounting to EUR 53 million, and an increase in property values due to the determination of their fair value. These items had a negative effect on the income statement for the period due to recognition of higher amortisation and depreciation amounting to EUR 1.1 million. These values were charged to the relevant items in the balance sheet and income statement. Consequently, also given that the business combination regards the acquisition of 81.63% of the company s share capital, the amount currently recognised as goodwill equals EUR million. With regard to the accounting position for the first quarter of 2008 (comparison period), it should be specified that the interim report included a provisional cost allocation for acquisition of the ISP branches on 25 February 2008 and concluded in the financial statements as at 31 December In this report, in accordance with paragraph 62 of IFRS 3, the economic figures for the first quarter of 2008 (comparison period) were reclassified assuming that the cost allocation process for that transaction had been completed on the date of acquisition (25 February 2008). A lower figure was therefore recorded as interest income, i.e. EUR 52 thousand, higher amortisation of intangible assets amounting to EUR 242 thousand and lower taxes of EUR 39 thousand. Considering a change in minority interests of EUR 29 thousand, a reduction is recorded for the first quarter of 2008 for EUR 226 thousand. 22

23 Suspended items and portfolio items non-liquid due to the settlement currency were not recognised in the related balance sheet items, as their effect was considered insignificant. The breakdown of business volumes by business segment and geographic area was not significant. The consolidated report on operations as at 31 March 2009 was not subject to audit by the independent auditors. THE BOARD OF DIRECTORS Sondrio, 12 May

24 DECLARATION OF THE EXECUTIVE RESPONSIBLE FOR PREPARING CORPORATE ACCOUNTING DOCUMENTS I, the undersigned Executive responsible for preparing corporate accounting documents, hereby declare that pursuant to art. 154 bis, paragraph 2, of the Consolidated Law on Finance, the accounting information provided in this report matches the information reported on the company s documents, books and accounting records. The Executive responsible for preparing corporate accounting documents. Enzo Rocca 24