CONDENSED INTERIM CONSOLIDATED REPORT ON OPERATIONS AS AT 31 MARCH 2013

Transcription

1 CONDENSED INTERIM CONSOLIDATED REPORT ON OPERATIONS AS AT 31 MARCH 2013 Credito Valtellinese Società Cooperativa Registered Offices in Piazza Quadrivio 8 Sondrio, Italy Tax code and Sondrio Company Registration No Register of Banks No. 489 Parent of the Credito Valtellinese Banking Group Register of Banking Groups No Website: creval@creval.it Share Capital EUR 1,516,698, Member of the Interbank Guarantee Fund This is an English translation of the Italian language original Resoconto intermedio di gestione al 31 marzo 2013 that has been prepared solely for the convenience of the reader. The Italian language original Resoconto intermedio di Gestione al 31 marzo 2013 is available on 1

2 Company Officers of Credito Valtellinese Board of Directors Chairman Giovanni De Censi Deputy Chairman Aldo Fumagalli Romario Managing Director Miro Fiordi Directors Mario Anolli Mariarosa Borroni Isabella Bruno Tolomei Frigerio Gabriele Cogliati Michele Colombo Paolo De Santis Gionni Gritti Antonio Leonardi Livia Martinelli Alberto Ribolla Francesco Naccarato Paolo Scarallo Board of Statutory Auditors Chairman Standing Auditors Substitute Auditors Angelo Garavaglia Giuliana Pedranzini Luca Valdameri Edoardo Della Cagnoletta Anna Valli General Management General Manager Co-General Manager Deputy General Managers Miro Fiordi Luciano Camagni Umberto Colli Enzo Rocca Franco Sala Mauro Selvetti Manager in charge of financial reporting Simona Orietti Indipendent Auditors KPMG S.p.A. 2

3 Contents CONSOLIDATED HIGHLIGHTS AND ALTERNATIVE PERFORMANCE INDICATORS AS AT 31 MARCH ORGANISATIONAL MODEL OF THE CREDITO VALTELLINESE GROUP... 6 THE GENERAL ECONOMIC FRAMEWORK... 8 SIGNIFICANT EVENTS DURING THE FIRST QUARTER THE OPERATIONAL STRUCTURE, THE CUSTOMERS, THE PERSONNEL.. 11 RECLASSIFIED CONSOLIDATED FINANCIAL STATEMENTS COMMENTS ON THE FINANCIAL STATEMENTS INFORMATION ON RISKS AND RELATED HEDGING POLICIES CURRENT-YEAR OUTLOOK NOTES TO THE FINANCIAL STATEMENTS

4 CONSOLIDATED HIGHLIGHTS AND ALTERNATIVE PERFORMANCE INDICATORS AS AT 31 MARCH 2013 STATEMENT OF FINANCIAL POSITION 31/03/ /12/2012 % change (in thousands of EUR) Loans and receivables with customers 21,467,399 22,007, Financial assets and liabilities 5,417,264 3,653, Equity investments 241, , Total assets 30,721,360 29,896, Direct funding from customers 23,074,847 22,102, Indirect funding from customers 10,943,533 11,200, of which: - Managed funds 4,947,310 4,937, Total funding 34,018,380 33,303, Equity 1,965,661 1,981, SOLVENCY RATIOS 31/03/ /12/2012 Tier 1 Capital/Risk-weighted assets 8.21% 8.13% Regulatory Capital/Risk-weighted assets 11.43% 11.49% FINANCIAL STATEMENT RATIOS 31/03/ /12/2012 Indirect funding from customers / Total funding 32.2% 33.6% Managed funds / Indirect funding from customers 45.2% 44.1% Direct funding from customers / Total liabilities 75.1% 73.9% Customer loans / Direct funding from customers 93.0% 99.6% Customer loans / Total assets 69.9% 73.6% CREDIT RISK 31/03/ /12/2012 % change Net non-performing loans (in thousands of EUR) 687, , Other net doubtful loans (in thousands of EUR) 1,746,068 1,484, Net non-performing loans / Loans and receivables with customers 3.2% 2.8% Other net doubtful loans / Loans and receivables with customers 8.1% 6.7% Hedging of non-performing loans 58.9% 59.7% Hedging of other doubtful loans 11.2% 13.4% Cost of credit (*) 1.05% 1.61% (*) Calculated as the annualised ratio between the net impairment losses on loans and year-end loans. 4

5 ORGANISATIONAL DATA 31/03/ /12/2012 % change Number of employees 4,348 4, Number of branches Banc@perta line users 213, , INCOME STATEMENT DATA Q Q % change (in thousands of EUR) Net interest income 107, , Operating income 190, , Operating costs (127,053) (133,664) Operating profit 63,150 78, Pre-tax profit from continuing operations 6,885 38, Post-tax profit from continuing operations , Profit for the period attributable to the owners of the parent , OTHER FINANCIAL INFORMATION Q Q Cost/Income ratio 66.8% 65.8% 62.9% 5

6 ORGANISATIONAL MODEL OF THE CREDITO VALTELLINESE GROUP The Credito Valtellinese Banking Group consists of territorial banks, specialised 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. The current group structure is graphically represented below. Structure of the Credito Valtellinese Group MARKET SPECIALISED FINANCE CORPORATE CENTER Credito Valtellinese Credito Siciliano Carifano Aperta Fiduciaria Mediocreval Finanziaria San Giacomo Bankadati Stelline Creset Servizi Territoriali Global Assicurazioni (*) Global Broker (*) (*) Insurance companies subject to management and coordination by Credito Valtellinese pursuant to Articles 2497 et seq. of the Italian Civil Code 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 specialised 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 benefits 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 2013, the Credito Valtellinese Group is present on the national territory with a network of 544 Branches, in eleven regions, through the territorial banks characterising the Market Segment : 6

7 - Credito Valtellinese S.c., the Parent, present with its network of 368 branches, most of which are in Lombardy, as well as in Valle d Aosta, Piemonte, Veneto, Trentino Alto Adige, Emilia Romagna, Toscana and Lazio - Carifano S.p.A., with a branch network of 40 branches, mainly in the Marche region, as well as in Umbria, Perugia and Orvieto. - Credito Siciliano S.p.A. is present in all the provinces of Sicilia with 136 branches and in Roma and Torino with two branches dedicated to loans against pledges. The following companies characterise the Specialised Finance Sector : - Aperta Fiduciaria S.r.l., a company authorised to perform what is known as static fiduciary services, administration of third party assets and fiduciary registration. - Mediocreval S.p.A., a company specialised in disbursing medium to long-term loans, business finance and leases. - Finanziaria San Giacomo S.p.A., a company specialised in the management of nonperforming loans mainly of the financial intermediaries of the Group. - Creset Servizi Territoriali S.p.A., a company specialised in the management of local tax services, treasury and cash services on behalf of public local authorities present in the territories of the Group banks. - Global Assicurazioni S.p.A. 1, a multi-firm insurance agency in the bancassurance sector and, more in general, in the sales network distribution of standard insurance policies. - Global Broker S.p.A. 2, a company specialised in the insurance brokerage targeting the SME segment. The companies providing services complementary to banking business characterising the Production Segment complete the Group: - Bankadati Servizi Informatici società consortile per Azioni 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 independently develops initiatives in favour of the local communities of reference. 1 Company subject to management and coordination by Credito Valtellinese and therefore included in the scope of consolidation, even if not included in the Group, pursuant to the supervisory provisions, in that it carries on insurance activities. 2 See previous note. 7

8 THE GENERAL ECONOMIC FRAMEWORK The general economic framework 3 In the first quarter of 2013, there were signs of a strengthening economy in the United States and in some emerging economies. As a whole, this year global growth is expected to remain modest but pick up in The trend of the budget policy in the United States and of the total debt crisis in Europe remains uncertain. In the Eurozone, the cyclical weakness has not disappeared. After the drop in GDP in the fourth quarter of 2012, the economic activity in the Eurozone grew almost steady in the first quarter of this year. However, domestic demand remains weak also in countries not affected by the total debt crisis. The decline of inflation - which fell below 2 per cent for the first time since continues and is expected to decrease further in the coming months; price reasonableness is confirmed by the intentions of businesses and by household expectations. The ECB's monetary policy remained expansionary. The Eurosystem loans to banks operating in the area decreased as a result of the voluntary early repayment of part of the funds obtained in the two transactions carried out in December 2011 and February The ECB s Executive Council confirmed that the monetary policy would remain accommodating until needed, with the full allotment of the liquidity required to the banks. At the beginning of April, the Council made it clear that it was ready to act, based on the valuation of incoming information in the near future. In Italy, after a further sharp contraction in GDP in the fourth quarter of 2012, the indicators for the first three months of this year suggest that the product may have declined further, but at a slower pace. The decline in industrial production grew almost steady as a whole in the first quarter, thanks to the good performance of sales abroad. However, the financial conditions and the trend of business confidence remain uncertain. The information inferable from the economic surveys does not foresee until now important changes to short-term prospects; the scope for recovery remains mainly related to the trend of confidence of operators and of the financial conditions in the coming months, as well as to their effect on investment. The valuations of the entrepreneurs do not show an improvement in investment incentives, but expectations on foreign orders improved slightly, albeit in a volatile context. Trade receivables towards public administrations affect the liquidity of businesses. The Government has defined measures to pay trade payables of public administrations and to pay tax refunds totalling EUR 40 billion during this year and in The measure will improve the conditions of businesses and will have a positive macroeconomic impact; the size of the effects will depend on how much time it will take to carry out the intervention and on how the businesses will use the funds. The current balance of payments has broken even. In 2012, the balance of the current account of the balance of payments recorded a significant improvement: after seven years, it showed 3 Extracted from the Bank of Italy Economic Bulletin no. 72 April published on 17 April

9 positive values in the fourth quarter. This was due both to the decline in domestic demand - which contained imports - and to the positive trend of exports. The decline in employment continues. Year-on-year average, employment decreased by 0.3 per cent compared to 2011, in connection with a strong increase in job openings. The trends observed in the first months of 2013 show the ongoing weakness of employment. In February, the unemployment rate reached 11.6 per cent. Real per capita salaries, which decreased in 2012 to a greater extent than in 2011, should continue to drop during the current year, albeit at a slower pace. Inflation further decreased. As the effects of past increases in indirect taxation got exhausted and energy prices declined sharply, the drop in inflation continued also in Italy: the index harmonised in March was 1.8 per cent, just above the average in the Eurozone, a value in line with the expectations for the current year. Surveys with entrepreneurs report a very modest adjustment of price lists due to the weakness of domestic demand. Financial markets. The performance of the financial markets was positive as a whole. In the first weeks of the year, the improvement of the financial market conditions in the Eurozone started in the summer of 2012 continued. In countries affected by the total debt crisis, the yields of Italian Government bonds recorded decreases in January; the balances on the TARGET2 payment system, reflecting movements of private capital among their countries, showed as a whole a decrease in deficits. In the most recent weeks, new tensions were recorded on the European stock markets and on the total debt markets in connection with renewed uncertainties related to growth in Europe, to the outcome of the Italian elections and especially to the crisis in Cyprus, which pointed out problems in coordinating European and national authorities. The increase in the yields of Italian Government bonds of the countries most exposed to tensions was however largely transitory. The Italian financial markets were affected by the political uncertainty to a limited extent. Interest-rate spreads between Italian Government bonds and the corresponding German bonds increased as from the end of January, recording wide fluctuations, but remain well below the peaks reached in From the beginning of April, the spreads decreased to 307 basis points over the ten-year duration (12 points less than at the end of 2012). The latest figures available on the TARGET2 payment system report a recovery of capital inflows from abroad to our country, as well. However, the bank liabilities (shares, CDS) were affected by the methods of intervention in the Cyprus crisis. Bond issues, positive in January, stopped. Starting from the end of 2012, share prices remained almost unchanged in Italy, whereas they recorded increases in the Eurozone and in the United States (2 and 11 per cent, respectively). The expected variability of the prices, derived from the prices of the options on indices, increased from February, with sharp rises in connection with the Italian elections and the intensification of the crisis in Cyprus. The ratio between current profits of listed companies and their capitalisation decreased by about half a percentage point, slightly above the long-term average value. The Italian index of the banking segment, which until the first half of March was in line with the all-share index, marked a strong downward trend, partially recovered in April, reflecting tensions linked to the Cypriot crisis; early in the year, bank shares fell in value by 7 per cent. Sensitive price declines were also observed in the electricity sector and telecommunications (by 6 and by 7 9

10 per cent, respectively), whereas prices increased significantly in the consumer goods sector and software (by 15 and by 27 per cent, respectively). The Italian banking system In a context characterised by highly uncertain economic prospects, the drop in loans to businesses and households continued, albeit at a slower pace than in the second half of Both the weakness of demand and the still tight lending criteria contributed to this. The deterioration of asset quality induced by the recession weighs on the latter; the economic downturn impacted on the profitability of Italian intermediaries. At the end of 2012, the non-performing entry rate of loans to businesses was close to the levels observed during the recession at the beginning of the Nineties, the one of loans to households recorded more moderate values. However, the capital structure of the Italian banks remains solid, able to cope with the unfavourable economic conditions, as recently confirmed by the International Monetary Fund as part of the evaluation program of the financial sector. During December, the average core tier 1 ratio of the Italian banking groups was more than 10 per cent (10.9 for the five main operators). The average cost of new loans to businesses remained more or less the same from November, at EUR 3.5 per cent; the average rates applied to loans for amounts exceeding EUR 1 million and those up to one million amounted to 2.9 and 4.4 per cent, respectively. The cost of new household loans, decreasing gradually from the beginning of 2012, remained almost unchanged between November and February, at 3.8 per cent. The rate on the new mortgages was steady (3.5 per cent) for floating-rate transactions, which represent more than two thirds of the total loans, and decreased by two-tenths of a percentage point (4.6 per cent) for fixed-rate transactions. The margins on riskier loans expanded due to the perception of a high credit risk. The retail funding of Italian banks is confirmed strong; the difficulties for funding on international markets diminished, although not completely reabsorbed. From the end of November to the end of February, the size of resident customer deposits with Italian banks still increased of about EUR 38 billion. The growth rate over 12 months rose to 7.9 per cent (from 6.8 in November). The acceleration reflects that of the deposits held by households. 10

11 SIGNIFICANT EVENTS DURING THE FIRST QUARTER Update on the company restructuring project As part of the works for simplifying the corporate structure of the Group, contemplated by the Strategic Plan, during the quarter, the merger into the Parent of Deltas, Società consortile per Azioni, owned by Credito Valtellinese, was completed with legal effects as from 31 March Moreover, on 1 March 2013, a framework agreement was signed with Istifid Società Fiduciaria e di Revisione S.p.A., which contemplates the sale of Aperta Fiduciaria to Istifid for a value calculated on the basis of the financial statements of Aperta Fiduciaria on the effective date of the operation on 1 July Issue of fixed-rate Senior bonds on the Euromarket of EUR 400 million On 15 January 2013, Credito Valtellinese launched on the Euromarket a new fixed-rate senior bond with a 2 year and a half maturity, of EUR 400 million, targeting institutional investors. The investors were considerably interested in the operation, as part of the Euro Medium Term Note (EMTN) Program valid for a plafond of EUR 5 billion, with a final order book totalling more than EUR 500 million and with the participation of more than 84 investors well diversified by type. THE OPERATIONAL STRUCTURE, THE CUSTOMERS, THE PERSONNEL The territorial network As at 31 March 2013, the branches forming the territorial network of the Credito Valtellinese Group, unchanged compared to the end of December 2012, are 544, as represented below. 11

12 231 BRANCHES (CREVAL) 1 BRANCH (CREVAL) 29 BRANCHES CREVAL 28 CR. SICILIANO 1 14 BRANCHES (CREVAL) 11 BRANCHES (CREVAL) 23 BRANCHES (CREVAL) 9 BRANCHES (CREVAL) 37 BRANCHES (CARIFANO) CREDITO VALTELLINESE 368 CREDITO SICILIANO 136 CARIFANO 40 CREVAL GROUP BRANCHES CREVAL 51 CR. SICILIANO 1 3 BRANCHES (CARIFANO) 134 BRANCHES (CR. SICILIANO) Other distribution channels The following other distribution channels complete the operational structure: DISTRIBUTION CHANNELS 31/03/2013 Number of ATMs 653 Number of POS 21,873 At the end of March 2013, active Internet users in the Group customers that have performed at least one transaction in the last six months total 213,524, compared to 204,458 at the end of December last year, increasing by more than 8.8%. The customer base As at 31 March 2013, the Group s customers numbered 934,514, constantly up both year-on-year (+ 2.8%) and on a quarterly basis (+0.8% compared to the end of the 2012 year), confirming the Group's capacity to attract new customers and maintain its customer base in its territories of origin, with a retention rate of 98%. 12

13 The personnel At the end of March, the workforce of Group companies totalled 4,348 staff. Other 27 staff are seconded to companies/organisations outside the Group, including Fondazione Gruppo Credito Valtellinese, Global Assistance, Fondo Pensione per i Dipendenti del Gruppo Credito Valtellinese and Aperta SGR. The figure is compared to 4,362 at the end of In terms of professional categories, the total workforce of 4,348 can be broken down as follows: - 59 executives; - 1,543 middle managers; - 2,746 workers in other professional categories. Workforce as at 31 March % 36% 63% Executives Middle managers Professional categories 13

14 RECLASSIFIED CONSOLIDATED FINANCIAL STATEMENTS RECLASSIFIED STATEMENT OF FINANCIAL POSITION (in thousands of EUR) ASSETS 31/03/ /12/2012 % change Cash and cash equivalents 177, , Financial assets held for trading 249, , Available-for-sale financial assets 5,204,001 3,489, Held to maturity investments 201, , Loans and receivables with banks 1,024,334 1,630, Loans and receivables with customers 21,467,399 22,007, Equity investments 241, , Property, equipment and investment property and intangible assets (1) 825, , Non-current assets held for sale and disposal groups Other assets (2) 1,329,382 1,058, Total assets 30,721,360 29,896, (1) Include the items "120.Property, equipment and investments property" (EUR 469,827 thousand as at 31 March 2013 and EUR 474,283 thousand as at 31 December 2012) and "130.Intangible assets" (EUR 355,715 thousand as at 31 March 2013 and EUR 354,834 thousand as at 31 December 2012); (2) Include the items "140.Tax assets" (EUR 639,173 thousand as at 31 March 2013 and EUR 625,116 thousand as at 31 December 2012) and "160.Other assets" (EUR 690,209 thousand as at 31 March 2013 and EUR 433,635 thousand as at 31 December 2012). (in thousands of EUR) LIABILITIES AND EQUITY 31/03/ /12/2012 % change Due to banks 4,253,089 4,545, Direct funding from customers (1) 23,074,847 22,102, Financial liabilities held for trading 12,118 15, Hedging derivatives 225, , Liabilities associated with non-current assets held for sale and disposal groups Other liabilities 915, , Provisions for specific purpose (2) 268, , Equity attributable to non-controlling interests 4,749 5, Equity (3) 1,965,661 1,981, Total liabilities and equity 30,721,360 29,896, (1) Includes the items "20.Due to customers" (EUR 17,240,179 thousand as at 31 March 2013 and EUR 16,054,685 thousand as at 31 December 2012) and "30.Securities issued" (EUR 5,834,668 thousand as at 31 March 2013 and EUR 6,047,965 thousand as at 31 December 2012); (2) Include the items "80.Tax liabilities" (EUR 135,175 thousand as at 31 March 2013 and EUR 123,242 thousand as at 31 December 2012), "110.Post-employment benefits" (EUR 63,369 thousand as at 31 March 2013 and EUR 63,912 thousand as at 31 December 2012) and "120.Provisions for risks and charges" (EUR 70,240 thousand as at 31 March 2013 and EUR 70,827 thousand as at 31 December 2012); 14

15 (3) Includes the items "140.Valuation reserves"(eur -104,976 thousand as at 31 March 2013 and EUR -88,736 thousand as at 31 December 2012), "160.Equity instruments" (EUR 197,825 thousand as at 31 March 2013 and EUR 197,825 thousand as at 31 December 2012), "170.Reserves" (EUR -197,267 thousand as at 31 March 2013 and EUR 125,395 thousand as at 31 December 2012), "180.Share premium reserve" (EUR 554,635 thousand as at 31 March 2013 and EUR 554,648 thousand as at 31 December 2012), "190.Share capital" (EUR 1,516,699 thousand as at 31 March 2013 and EUR 1,516,699 thousand as at 31 December 2012),"200.Treasury shares" (EUR -1,527 thousand as at 31 March 2013 and EUR -1,518 thousand as at 31 December 2012), and "220.Profit (Loss) for the period" (EUR 272 thousand as at 31 March 2013 and EUR -322,439 thousand as at 31 December 2012). RECLASSIFIED INCOME STATEMENT (in thousands of EUR) ITEMS Q Q % change Net interest income 107, , Net fee and commission income 64,972 64, Profit of equity-accounted investees (1) 1,550 4, Net trading and hedging income (expense) and profit (loss) on sales/repurchases 11,000 14, Other operating net income (4) 4,816 3, Operating income 190, , Personnel expenses (76,087) (81,087) Other administrative expenses (2) (41,555) (42,883) Depreciation/amortisation and net impairment losses on property, equipment and investment property and intangible assets (3) (9,411) (9,694) Operating costs (127,053) (133,664) Operating profit 63,150 78, Net impairment losses on loans and receivables and other financial assets (56,050) (39,082) Net accruals to provisions for risks and charges (212) (1,445) Net gains (losses) on sales of investments (3) (3) - Pre-tax profit from continuing operations 6,885 38, Income taxes (6,152) (18,072) Post-tax profit from continuing operations , Post-tax profit from discontinued operations n/a Profit for the period attributable to non-controlling interests (461) (1,938) Profit for the period attributable to owners of the parent , (1) Profit of equity-accounted investees includes the amount included in item 240.Net gains on investments. The residual amount of that item is included in gains on sales of investments, together with item 270.Net gains on sales of investments"; (2) Other administrative expenses include taxes and other recoveries recognised to item "220.Other operating net income" (EUR 13,604 thousand in the first quarter of 2013 and EUR 14,094 thousand in the first quarter of 2012); (3) Depreciation/amortisation and net impairment losses on property, equipment and investment property and intangible assets include items 200.Depreciation and net impairment losses on property, equipment and investment property", 210. Amortisation and net impairment losses on intangible assets" and the accumulated depreciation of costs incurred for leasehold improvements, included item 220.Other operating net income" (EUR 1,500 thousand in the first quarter of 2013, and EUR 1,399 thousand in the first quarter of 2012); (4) Other income and costs correspond to item 220.Other operating net income" net of the above reclassifications. 15

16 The figures for the period of comparison were adjusted in compliance with what is provided by IFRS 5 as a result of the transfer of the subsidiaries Aperta SGR S.p.A. and Lussemburgo Gestioni S.A. occurred in COMMENTS ON THE FINANCIAL STATEMENTS Statement of financial position aggregates As at 31 March 2013, loans and receivables with customers amounted to EUR 21.5 billion, down by 2.5% compared to EUR 22 billion as at December The trend, consistent with the performance of the sector, is part of a context characterised by highly uncertain economic prospects and weakness of demand both for the private sector and by the SMEs. Furthermore, the prolonged economic downturn determined negative effects on credit quality. At the end of the third quarter, impaired loans, net of impairment losses, totalled EUR 2.4 billion compared to EUR 2.1 billion at the end of the year. In this context, non-performing loans, net of impairment losses, totalled EUR 687 million compared to EUR 615 million at December 2012, showing an 11.8% increase, with a 3.2% impact on the total loans portfolio, and an approximately 59% hedging degree. Other doubtful loans amounted to EUR 1,746 million, up by 17.6% compared to EUR 1,485 million at the end of the year, with an 8.1% impact on the total loans portfolio compared to 6.7% of the previous period. These include EUR 936 million compared to EUR 798 million in December of substandard loans, EUR 172 million compared to EUR 180 million in December 2012 of restructured exposures, and EUR 637 million of past due exposures, compared to EUR 506 million at the end of the previous quarter. The following table shows detailed information on credit quality. (in thousands of EUR) Gross exposure Impairment losses as at 31/03/2013 Net exposure % hedging Impaired loans Non-performing loans 1,670, , , Substandard loans 1,111, , , Restructured exposures 195,807-23, , Past due exposures 657,833-20, , Total impaired loans 3,636,316-1,202,923 2,433, Performing loans 19,140, ,110 19,034,006 Total loans and receivables with customers 22,776,432-1,309,033 21,467,399 Direct funding records a positive trend, reaching EUR 23.1 billion, up by 4.4% compared to EUR 22.1 billion in December It should be noted, at the beginning of the quarter, the issue on the Euromarket of senior bonds totalling EUR 400 million, targeting institutional investors. Indirect funding, whose trend is dependent on market volatility, amounts to EUR 10.9 billion at the year end, down by 2.3% compared to EUR 11.2 billion in December The managed funds component, showing EUR 4.9 billion is mainly unchanged, whereas assets under 16

17 administration, amounting to EUR 6 billion, is decreasing by 4.3%. Total funding reached EUR 34 billion, up by 2% compared to December Financial assets amounted to EUR 5.7 billion compared to 3.9 billion at the end of the previous year and are mainly represented by Italian Government bonds recorded in the AFS portfolio that increase from EUR 3.4 billion to 5.1 billion. In particular, as at 31 March 2013, the Italian Government bonds are present in the portfolio of Financial assets held for trading totalling EUR 174 million, in the portfolio of Available-for-sale financial assets totalling EUR 5,127 million (the equity reserve related to them, net of the tax effect, is negative and amounts to EUR million) and in the portfolio of Held to maturity investments totalling EUR 10.1 million. The liquidity position has further improved considerably. The net balance of overall liquidity within three months amounts currently to EUR 4 billion. Similarly, the loans and receivables with customers/direct funding ratio stood at 93% as at 31 March Equity and capital ratios As at 31 March 2013, equity attributable to owners of the parent amounted to EUR 1,966 million. The Regulatory Capital amounted to EUR 2,229 million in connection with risk-weighted assets (RWA) of EUR 19,502 million. The core capital ratio amounted to 8.2%, compared to 8.1% in December 2012, whereas the total capital ratio was equal to 11.4% compared to 11.5% at the end of With regard to the share capital, the request to the Bank of Italy for obtaining the authorisation for the refund of the financial instruments set forth in Article 12 of Italian Law Decree no. 185/2008 the so-called Tremonti bonds issued in December 2009 totalling EUR 200 million and currently calculated in the Core tier 1, which, vice versa, may not be included in the CET1 in view of Basel 3, was formalised. The shortfall in terms of the Core Tier 1 ratio will be offset as a priority by optimisations of the RWA already planned during the first half of 2013 as well as through the extraordinary exercise of the 2014 Warrants during the period ranging from 2 to 31 May 2013 as announced to the market on 27 April. Income statement In the first quarter of 2013, the net interest income stood at EUR 108 million decreasing both compared to EUR 125 million of the first quarter of last year and compared to EUR 120 million of 4Q12, affected by the combined effect of the level of short-term interest rates which remains at historic low points the reduction of loans and receivables with customers, as well as by a higher cost of funding, which are also affected by higher costs related to the issue on institutional markets occurred in the first weeks of January. The net fee and commission income amounted to EUR 65 million, up by 0.8% year-on-year. The quarterly figures of the aggregate show vice versa a decrease compared to the fourth quarter of

18 Trading and hedging income (expense) and profit (loss) on sales/repurchases of AFS amounted to EUR 11 million compared to EUR 15 million of the comparison period. The Operating income totalled EUR 190 million decreasing by 10.5% compared to EUR 212 million of the first quarter of Operating costs, totalling EUR 127 million, showed a 5% regression year-on-year, as a result of a strict control and effective cost saving actions. The reduction of the personnel expenses of 6.2% was more marked, favoured also by the annual decrease in staff (FTE) of 120. In detail, personnel expenses stood at EUR 76 million, compared to EUR 81 million, whereas other administrative expenses of EUR 41.6 million decreased by 3.1% compared to EUR 42.9 million in the first quarter of Operating profit reached EUR 63 million, marking a decrease of 19.9% against EUR 78.8 million recorded for the corresponding period of the previous year. Impairment losses on loans and other financial assets reached EUR 56 million, decreasing compared to EUR 39 million of the first quarter of 2012, with a cost of credit, expressed as a percentage of total loans and receivable with customers, of 105 basis points. Pre-tax profit from continuing operations amounted to approximately EUR 6.9 million, compared to EUR 38.3 million of the previous year. Income taxes for the period, estimated in EUR 6.2 million, are affected by the IRAP taxation that, in the presence of a sharp drop in revenue, affects more than proportionally the profit, as a result of the non-deductibility of impairment losses on loans and of personnel expenses. Together with profits attributable to non-controlling interests of EUR 0.5 million, the result for the period achieved a break-even point INFORMATION ON RISKS AND RELATED HEDGING POLICIES During the quarter, the Group's risk profile was substantially consistent with the strategic guidelines defined by the control bodies and with the relevant risk-taking and risk management policies. As at 31 March 2013, the regulatory capital of the Group of EUR 2,229 million meets the requirements established by the prudential supervisory provisions. Credit risk The persisting economic downturn reduced the demand for loans by businesses, whose higher level of risk contributed to reduce and make more selective the financing offer by the Banks. This results in the drop in loans and receivables with customers and the deterioration of credit quality. The degree of concentration of loans, both by counterparty and by geographical area and economic sector, did not report significant changes; exposures classified as large exposure are equally limited. Stress tests carried out do not show significant changes in the risk profile. At the end of the quarter, the capital requirement for credit risk hedging amounted to EUR 1,443 million compared to a regulatory capital of EUR 2,229 million; the impact on the regulatory capital amounted to approximately 64.7%. 18

19 Market risk As at 31 March 2013, the portfolio has a limited risk profile in terms of market risk factors (interest rate, price and exchange). The portfolio consists almost completely of bonds (mainly Italian Government bonds and securities issued by banks) in Euro and with a low duration. During the quarter, the Value at Risk (VaR) of the portfolio, estimated over a 10-day period and a 99% confidence interval, varied from EUR 807,000 to EUR 1,359,000, ranging from 0.29% to 1.28% in relation to the value of the portfolio. At the date of this Report, the capital requirement in connection with market risks, which includes the derivative trading instruments, amounted to EUR 4.5 million; the impact on the regulatory capital amounted to approximately 0.2%. Interest rate risk on the banking book Considering the persistence of volumes and the stickiness of the rates of on sight items (behavioural profile), the exposure of the Group to instantaneous shocks to the rate curve is moderate. Under ordinary conditions, the internal capital in connection with interest rate risk is EUR 25.3 million, 1.1% of the regulatory capital. In a stress scenario, the exposure would stand at EUR 94.0 million, 4.2% of the regulatory capital. Liquidity risk As at 31 March 2013, the Group liquidity situation does not show critical issues either from the structural perspective or with regard to the short-term position. In the quarter, the Banks of the Group regularly fulfilled all their obligations upon expiry and the funding operations falling due were renewed without particular problems or tensions. There are assets readily convertible into cash, mainly allocated in the portfolios of Credito Valtellinese, deemed appropriate to the current and perspective requirements of the Group as a whole. In particularly serious adverse scenarios, constructed by combining both idiosyncratic and systemic stress tests, these reserves would ensure full coverage of the supposed outflows for a period longer than 90 days (the minimum regulatory survival period is 30 days). During the quarter, the overall liquidity net balance was largely above the minimum limit (report). The application of the combined stress test leads to a positive overall liquidity net balance in all the time horizons of the liquidity ladder. Operational risks During the quarter, there were no significant changes in operational risk, which remains limited. As from the supervisory reports of 31 December 2012, the Group adopted the Traditional Standardised Approach (TSA) to calculate the capital requirements in connection with operational risks, at the individual level for the Parent Credito Valtellinese and for the subsidiaries Credito Siciliano, Carifano and Mediocreval, and in combined use with the BIA method, at the consolidated level. 19

20 On the date of preparation of this report, the capital requirement in connection with operational risks amounts approximately to EUR 113 million. The impact on the regulatory capital amounted to 5.0%. CURRENT-YEAR OUTLOOK According to the most recent main forecasts, the recovery of the business, mainly driven by domestic demand, will determine a moderate growth only in 2014, whereas in 2013, households will continue to experience a further reduction in disposable income, with inevitable consequences on the recovery in consumption compared to the previous year. The deterioration phase of the purchasing power should stop only in At the same time, the recovery of the propensity to invest by businesses seems unlikely due to the minimum levels of capacity used and to the persisting weakness of internal demand. This scenario will continue to affect the recovery of operating margins. The performance of traded volumes remains limited whereas the impact of the credit risk cost is high with negative effects on the profitability of the bank, at least until the improvement of the prospects for economic growth. NOTES TO THE FINANCIAL STATEMENTS FORM AND CONTENT OF THE INTERIM REPORT ON OPERATIONS The Interim Report on Operations as at 31 March 2013 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, paragraph 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 IFRS formally approved by the European Union and mandatory at the time of preparing the interim report, including their relative interpretations. These standards are explained in the consolidated financial statements as at 31 December 2012, to which reference should be made for further details. 20

21 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 The scope of consolidation is unchanged compared to 31 December 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 2012, drafted according to IFRS (to which reference should be made for further details), except for those amended by IASB and approved through the issue of new EU Regulations. In comparison with the standards included in the financial statements, it is pointed out that as from 1 January 2013 IFRS 13-Fair Value Measurement came into force, a standard that defines the fair value, a reference framework for its measurement and requires additional disclosures on the measurements. On 1 March 2013, a framework agreement was signed with Istifid Società Fiduciaria e di Revisione S.p.A., which contemplates the sale of Aperta Fiduciaria. The transaction is effective as from 1 July As at 31 March 2013, pursuant to IFRS 5, the asset and liability items of the asset classified as held for sale, were shown separately in the Reclassified Statement of Financial Position. The income statement figures of the period of comparison (first quarter of 2012) were restated, in compliance with what was required by IFRS 5, to reflect retroactively the economic effects deriving from the classification as assets held for disposal in 2012 of the subsidiaries Aperta Sgr and Lussemburgo Gestioni S.A. transferred at year-end. Costs and revenue related to assets held for disposal, net of intragroup items, were reported separately in the income statement under Post-tax profit from discontinued operations. The reclassifications concern net fee and commission income of EUR 1,669 thousand, personnel expenses of EUR 411 thousand, other administrative expenses of EUR 226 thousand and taxes of EUR 94 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 interim report on operations as at 31 December 2013 was not subject to audit by the independent auditor. 21

22 DECLARATION OF THE MANAGER IN CHARGE OF FINANCIAL REPORTING The undersigned manager in charge of financial reporting, Simona Orietti, pursuant to Article 154- bis of the Consolidated Law on Finance hereby declares that the accounting information provided in this interim report on operations as at 31 March 2013 matches the information reported on the company s documents, books and accounting records. Manager in charge of financial reporting. Simona Orietti 22