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

Transcription

1 Credito Valtellinese Società Cooperativa Registered Offices in Piazza Quadrivio 8 Sondrio, Italy Tax code and Sondrio Company Register No Register of Banks No. 489 Parent Company of the Credito Valtellinese Banking Group Register of Banking Groups No Internet: creval@creval.it Data as at 30/06/2011: Share Capital EUR 945,604, Reserves EUR 1,182,790, Member of the Interbank Guarantee Fund INTERIM REPORT AS AT 30 JUNE 2011

2 Company Officers of Credito Valtellinese Board of Directors Chairman Substitute Vice Chairman Vice Chairman Managing Director Directors Members of the Executive Committee Giovanni De Censi Angelo Maria Palma Giuliano Zuccoli Miro Fiordi 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 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 Emilio Berbenni Francesco Bertini Emilio Rigamonti Substitute Arbitrators Adriano Bassi Silvano Valenti General Management General Manager Co-General Manager Vice General Manager Vice General Manager Vice General Manager Miro Fiordi Luciano Camagni Umberto Colli Enzo Rocca Mauro Selvetti Executive in charge of drawing up the corporate accounting documents Simona Orietti Independent auditing firm Reconta Ernst & Young S.p.A. 2

3 Contents CONSOLIDATED HIGHLIGHTS AND ALTERNATIVE PERFORMANCE INDICATORS AS AT 30 JUNE ORGANISATIONAL MODEL AND BREAKDOWN OF THE CREDITO VALTELLINESE BANKING GROUP... 6 INTERIM REPORT ON OPERATIONS... 9 The reference macroeconomic context... 9 Significant events during the half year The group's operational structure and the commercial performance indicators Performance of Credito Valtellinese stock Information on the main financial items and on consolidated income statement figures Transactions with related parties, risks and going concern prospects Business outlook and significant events occurring after the close of the interim period CONDENSED CONSOLIDATED INTERIM REPORT FINANCIAL STATEMENTS Consolidated Balance sheet Consolidated Income Statement Consolidated Statement of Comprehensive Income Statement of changes in consolidated shareholders equity Consolidated statement of cash flows Direct method NOTES TO THE FINANCIAL STATEMENTS Accounting Policies Breakdown of the main balance sheet items Breakdown of the main income statement items Information on risks and hedging policies Information on consolidated equity Transactions with related parties Segment Reporting CONDENSED CONSOLIDATED INTERIM REPORT DISCLOSURE PURSUANT TO ARTICLE 81 TER OF CONSOB REGULATION NO OF 14 MAY 1999, AS AMENDED AUDITORS REPORT

4 Interim Report Credito Valtellinese Group CONSOLIDATED HIGHLIGHTS AND ALTERNATIVE PERFORMANCE INDICATORS AS AT 30 JUNE 2011 BALANCE SHEET DATA 30/06/ /12/2010 % change 30/06/2010 % change (in thousands of EUR) Loans to customers 22,819,881 22,004, ,239, Financial assets and liabilities 2,203,196 1,458, ,816 n/a Investments in associates and companies subject to joint control 215, , , Total assets 28,269,181 26,760, ,471, Direct deposits from customers 22,278,026 21,664, ,146, Indirect deposits from customers 12,740,981 12,609, ,687, of which: - Managed savings 5,774,894 6,008, ,206, Total deposits 35,019,007 34,273, ,833, Shareholders equity 2,078,149 2,002, ,884, SOLVENCY RATIOS 30/06/ /12/2010 Tier 1 Regulatory Capital/Risk-weighted assets 6.58% 6.31% Regulatory Capital/Risk-weighted assets 9.70% 9.52% FINANCIAL STATEMENT RATIOS 30/06/ /12/2010 Indirect deposits from customers / Total deposits 36.4% 36.8% Managed savings / Indirect deposits from customers 45.3% 47.6% Direct deposits from customers / Total liabilities 78.8% 8% 81.0% Customer loans / Direct deposits from customers 102.4% 101.6% Customer loans / Total assets 80.7% 82.2% 2% CREDIT RISK 30/06/ /12/2010 % change Net doubtful loans (in thousands of EUR) 509, , Other net doubtful loans (in thousands of EUR) 923, , Net doubtful loans / Loans to customers 2.2% 2% 2.1% Other net doubtful loans / Loans to customers 4.0% 3.4% Hedging of doubtful loans 60.0% 0% 60.4% Hedging of other doubtful loans 7.2% 7.2% Cost of credit (*) 0.63% 0.61% (*) Calculated as the ratio between the net value adjustments due to deterioration of loans and year-end loans. FIGURES PER EMPLOYEE (thousands of EUR, number of employees at period end) 30/06/ /12/2010 % change Operating income / Number of employees Total assets / Number of employees 6,260 5, Personnel expenses (*) / Number of employees (*) Costs non chargeable to employees removed. 4

5 ORGANISATIONAL DATA 30/06/ /12/2010 % change Number of employees 4,516 4, Number of branches Banc@perta line users 174, , INCOME STATEMENT DATA (in thousands of EUR) 1st half of st half of 2010 % change Interest margin 251, , Operating income 429, , Operating expenses -284, , Net income from banking activities 145, , Income (loss) before tax from continuing operations 71,656 66, Income (loss) after tax from continuing operations 37,059 34, Net income 32,277 29, OTHER ECONOMIC INFORMATION 1st half of st half of 2010 Cost/Income ratio 66.2% 67.2% Basic EPS Diluted EPS INFORMATION ON SHARES Number of ordinary shares (*) 269,067,464 Listed price at end of the year 2,816 Average listed price for the year 3,269 Average stock-market capitalisation (in millions of EUR) 771 Shareholders equity per share (*) 7,724 (*) The calculation does not consider treasury shares in portfolio Fitch Ratings Issuer Default (long term) BBB+ Short term F2 Individual C Support 3 Outlook Stable Moody's Ratings Long Term Rating A3 Short term Rating P-2 Bank Financial Strength C- Outlook Negative 5

6 ORGANISATIONAL MODEL AND BREAKDOWN OF THE CREDITO VALTELLINESE BANKING GROUP The Credito Valtellinese Banking Group currently 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 30 June 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 Segment, each focused exclusively on the specific areas of origin: - Credito Valtellinese S.c., Parent Company of the Group, 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, Toscana - in the areas of Florence and Prato in addition to Lucca, Pisa and Pistoia - as well as in Lazio, Rome, Grottaferrata and Pomezia. 6

7 - Credito Siciliano S.p.A. is present in all the provinces of Sicilia with 136 branches and in Rome with a branch dedicated to loan against pledge. - Banca dell Artigianato e dell Industria S.p.A., present in the provinces of Brescia, Padua, Verona and Vicenza with 37 branches. - Credito Piemontese S.p.A., present 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 46 branches. - Banca Cattolica S.p.A. is present in the provinces of Viterbo and Terni with 8 branches. - Credito del Lazio S.p.A., present with 15 branches in the provinces of Frosinone, Latina and Rome. The following companies characterise the Specialised Finance Sector : - 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, in which the asset management activities are centralised. 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 in the bancassurance sector and, more in general, in the sales network distribution of standard insurance policies. Global Broker S.p.A., company specialised in the insurance brokerage segment targeting the SME segment. 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., company specialised in disbursing medium to long-term loans, business finance and leasing. - Finanziaria San Giacomo S.p.A., for the management of impaired loans mainly of the financial intermediaries of the Group. - Creset Servizi Territoriali S.p.A., for the management of local tax services, treasury and cash services on behalf of local authorities present in the territories of the Group banks. 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. 7

8 - 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. 8

9 INTERIM REPORT ON OPERATIONS The reference macroeconomic context 1 The general economic framework Global growth continues albeit at a moderate pace. In the first quarter of 2011, the world economy slowed down, curbed by the weakening of growth in the United States and a sharp contraction in Japan, where the economic effects of the earthquake proved worse than expected. In emerging countries, the business continued to grow at a constant rate. However, there are some signs of a slowdown in some of these economies. Inflation increased, particularly in emerging economies. In the second quarter, the prices of raw materials, after increases in previous months, fell, remaining however at levels higher than those of earlier this year. In advanced economies, the underlying inflation remains relatively moderate; increases in raw materials were not reflected significantly on inflation prospects. In emerging economies, increases in the prices of raw materials are instead fuelling a strong growth in prices, contrasted with measures to make the monetary conditions less accommodating. In the Eurozone, GDP strengthened in the first quarter; it continued to grow, albeit more moderate, in the second quarter. The acceleration of GDP in the first quarter of the year reflected the recovery of investments in buildings, which fell, especially in Germany in the previous months, due to the adverse weather conditions, as well as the acceleration of expenditure on capital goods. The growth of the product continued in the second quarter at a moderate pace. In June, the -coin indicator issued by the Bank of Italy, which estimates its basic component, slightly decreased. In June, the harmonised index of consumer prices in the Eurozone increased by 2.7 percent over twelve months. To contain the risk of rising inflation and prevent deterioration in expectations, in July, the ECB s Executive Council increased by 25 basis points the lowest rate on the main refinancing operations, to 1.50%. According to the estimates of the major public and private forecasters, inflation should return below 2 percent in Tensions in financial markets increased. In spring, the volatility in financial markets increased, reflecting the increased uncertainty on the intensity of international recovery and renewed tensions on the total debt in the Eurozone. Since June, despite the adoption of a new adjustment plan in the public accounts by the Greek Parliament and the decision of the Eurogroup on 2 July to disburse to Greece a new tranche of loans, the tensions in financial markets increased and extended due to the continuing uncertainty on the prospects of public finances in some countries of the area. Tensions have also invested our country. They affected share prices and the differential between the yield of 10-year T-bills and that of the corresponding German securities, which reached the highest values since the start of the Monetary Union, increasing the urgent need to strengthen public finances. The aim of the public finance measures prepared by the Government is to achieve the breakeven in 2014 and quickly reduce the debt-gdp ratio. It is divided into a decree-law and an implementation bill for tax and welfare reform. In the original formulation, the interventions included in the decree were evaluated in nearly 18 billion for 2013 and beyond 25 for 2014; the measures to be defined in order to carry out the implementation law should have reduced the deficit by about 2 billion in 2013 and 15 in The amendments to the Decree-Law 1 Extracted from the Bank of Italy Economic Bulletin no. 65 July published on 15 July

10 introduced during the parliamentary debate have reinforced the measure and further improved the balances for the four-year period. Inflation increased, but it should gradually decrease towards the end of the year. In June, the inflation, measured on the basis of the consumer price index for all the national community, reached 2.7%. Excluding food and energy components, inflation is more contained (2%). The dynamics of consumer prices should fall, back below 2% in 2012, with the decrease of the effect of price increases of raw materials. In perspective, growth in Italy continues at a moderate pace. Projections of the Bank of Italy allow for an Italian GDP growth of 1% this year and 1.1% in The main contribution to the product trend would continue to come from exports; given the contextual increase in imports, the contribution of foreign trade to GDP growth would be essentially zero this year and slightly positive next year. The recovery of investments would strengthen gradually; the growth of consumption would remain lower than that of GDP. The Italian banking system The bank lending to the private non-financial sector continues to grow apace: the increase in May was 5.7% in the quarter net of the seasonal component and per year, and higher than the average values of the Eurozone. Loans to businesses increased by 6.1%, the household credit sector by 5.2%, mainly driven by the trend of loans for purchasing homes. The strong trend of loans to businesses continues to reflect mainly the dynamics of demand, arising from the financing needs for inventory and working capital. In the first quarter of the year, the offer policies of intermediaries were slightly more restrictive only for some specific customer segments. According to the economic surveys on businesses, carried out by Istat and the Bank of Italy in collaboration with Il Sole 24 Ore, in June a credit squeeze was reported by a small number of enterprises Bank rates increased, reflecting the increase in the rates of the money market. The flow of doubtful loans showed signs of slowdown. In the first quarter of 2011, the flow of new adjusted doubtful loans, albeit high, showed signs of slowdown. The possible development of credit quality in the coming months remains uncertain. Preliminary figures show that the total exposure for debtors recorded as doubtful for the first time in April decreased compared to the same period in However, loans to businesses in difficulty (substandard and restructured loans) remained high and stood at 5.9% of loans. Bank deposits accelerated significantly, 1.8% in the twelve months ending in May. The increase reflected the trend of bond issues and deposits of non-residents; the latter increased in connection with the recovery of inter-bank transactions. Current accounts suffered a sharp contraction, mainly concentrated in the sector of financial companies. For households, the decline was modest (-0.4 per cent) and entirely offset by the growth of other deposits. The adjustment of debit interest rates to the new monetary conditions was moderate. Profitability increased, reflecting both the improvement in income from banking activities, as well as minor provisions and net losses/recoveries on impairment of loans. Benefiting largely from the strengthening of the capital, capital ratios of the major groups have grown significantly. The core tier 1 ratio rose from 7.4 at the end of 2010 to 7.8 in March. We can estimate that it grew further to about 8.6 percent, thanks to the recapitalisation operations that ended later. 10

11 The financial market In the second quarter of the year, the general Borsa Italiana index dropped by 7 per cent, against a 2% drop of the index of the main listed companies in the Eurozone. After the slight recovery recorded in April, also driven by the positive trend of profits announced by enterprises, from the beginning of May share prices decreased. The sharpening of the fears of a Greek debt restructuring as well as the uncertainty fuelled by increases in commodity prices and the slowdown of economic recovery in the United States contributed to this. In the first thirteen days of July, indexes in Italy and in the Eurozone decreased by 5 and 4 per cent, respectively. 11

12 Significant events during the half year The new strategic plan During the first half of the current year, the new Strategic Plan of the Credito Valtellinese Group was approved. It outlines the guidelines for the development of the Group for the next four years and identifies 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 stakeholders. The company restructuring project To achieve the outlined objectives, the company restructuring project of the Creval Group, and mainly of the branch network, is particularly important, to be carried out also through merger operations. In particular, the project contemplates: the merger by incorporation into the Credito Valtellinese S.c. Parent Company of Bancaperta S.p.A., Credito Piemontese S.p.A. and Banca dell Artigianato e dell Industria S.p.A. subsidiaries; the merger by incorporation into Credito Artigiano S.p.A. 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 company reorganisation is expected to be fully 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 and 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 into 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 about 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, 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 equity investments in Bancaperta and Banca dell Artigianato e dell Industria In anticipation of the merger by incorporation of Bancaperta and Banca dell Artigianato e dell Industria into Credito Valtellinese, within the company reorganisation project outlined, on 26 April 2011, the acquisition by the Parent Company of the minority shares held in Bancaperta by Credito Artigiano and Credito Siciliano and in BAI by Credito Artigiano, respectively, was completed. In detail, the operation resulted in the transfer to the Credito Valtellinese Parent Company of the following interests: - 1,029,600 ordinary shares of Bancaperta S.p.A., equal to 24.44% of the share capital, by Credito Artigiano, - 510,120 ordinary shares of Bancaperta S.p.A., equal to 12.11% of the share capital, by Credito Artigiano, - 4,007,055 ordinary shares of Banca dell Artigianato e dell Industria S.p.A., equal to 20.81% of the share capital, by Credito Artigiano. The fees for the transfer were determined on the basis of evaluations of the independent advisor, Equita SIM S.p.A., 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. As a result of the operation, the Parent Company holds the entire share capital of Bancaperta and 95.15% of Banca dell'artigianato e dell'industria. Approval of the merger by incorporation into Credito Artigiano of Banca Cattolica and Credito del Lazio On 14 April 2011, the merger by incorporation of Banca Cattolica and Credito del Lazio into Credito Artigiano drawn up by Article 2501-ter of the Italian Civil Code, was approved by their Boards of Directors. Share exchange ratios were determined on the basis of evaluations of advisors specially appointed by their Boards of Directors of the concerned companies - 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, without cash adjustments: - 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. The operation - already authorised by the Bank of Italy pursuant to Article 57 of Italian Legislative Decree 385/93, will be submitted to the approval of the Extraordinary Shareholders' meetings of the relevant companies called on 6 September The merger is expected to be fully implemented within October Public purchase offer of all shares of Banca Cattolica Still in view of the implementation of the merger by incorporation of Banca Cattolica into Credito Artigiano on 15 March 2011, the Board of Directors of the Parent Company approved the voluntary public purchase offer pursuant to Article 102 of the Consolidated Law on Finance aimed at the purchase of all shares of Banca Cattolica not already held by Credito Valtellinese, representing 16.7% of the share capital of the subsidiary. The Public purchase offer - targeted without distinction and on equal terms to all Banca Cattolica shareholders other than the tenderer Credito Valtellinese for a unit price of EUR 58 per share - ended on 16 May 2011, with the contribution by subscribing to the offer of 101,851 shares, representing 16.04% of its share capital, for a total value of EUR 5.9 million. 13

14 Following the Public purchase offer, the equity investment of Credito Valtellinese stands at 99.35% of the share capital of Banca Cattolica. Purchase of minority shares of Credito del Lazio Still, firstly to the implementation of the merger by incorporation of Credito del Lazio into Credito Artigiano, on 23 June 2011 there was the completion of the purchase by Credito Valtellinese of another percentage investment, representing 34.55% of the share capital of Credito del Lazio, by some minority shareholders, for a consideration of about EUR 28 million. The bank is currently controlled by Credito Valtellinese with a percentage equal to about 90%. Approval of the merger by incorporation into Credito Valtellinese of Bancaperta, Credito Piemontese and Banca dell Artigianato e dell Industria The merger by incorporation of Bancaperta, BAI and Credito Piemontese into Credito Valtellinese, to be carried out in simplified form pursuant to Articles 2505 and 2505 bis of the Italian Civil Code since Bancaperta is wholly held, whereas BAI and Credito Piemontese are held by more than ninety percent was approved by the Board of Directors of the same companies on 7 June Share exchange ratios were determined on the basis of evaluations of Deloitte Financial Advisory Services S.p.A. - advisor specially appointed by the Boards of Directors of the Parent Company, BAI and Credito Piemontese - as set below, without cash adjustments: - 2 Credito Valtellinese ordinary shares for each ordinary share of BAI; Credito Valtellinese ordinary shares, for each ordinary share of Credito Piemontese. The establishment of any share exchange ratio pursuant to Article 2505, paragraph 1, of the Italian Civil Code is not provided for the incorporation of Bancaperta, a wholly owned subsidiary. The operation will be approved by the Board of Directors of the Parent Company, with resolution resulting from public deed, pursuant to Article 36, paragraph 4, of the articles of association, similarly to Bancaperta, in pursuance of Article 2505, paragraph 2, of the Italian Civil Code and of Article 20, paragraph 3, of the articles of association, whereas for Credito Piemontese and BAI, the Merger will be submitted to the approval by their Extraordinary Shareholders' meetings. Subject to obtaining the relevant approval by the Bank of Italy, the merger is expected to be implemented in November The reorganisation of the branch network The reorganisation of the branch network, with the review of the territorial structure and of the decision-making processes, was started with the approval by the Board of Directors of Credito Artigiano of the new organisational structure of the company that, as from 18 July 2011, consisted in the establishment of two new Regional Areas, the Milan Regional Area, to which the branches located in Lombardy are functionally assigned in addition to the Piacenza branch and the Centre Regional Area, to which the Branches located in Toscana and Lazio refer. The new structures are attributed functions of commercial and operational coordination, with appropriate autonomy also concerning credit risk monitoring, with the aim to further enhance the competitive advantage represented by the proximity of the Territories concerned. The new organisational structure will be extended gradually to all the commercial structure of the Group, in parallel to the implementation of the company reorganisation project outlined, with a view to be fully operational within the current year. Infragroup transfer of the branch of Orvieto from Banca Cattolica to Carifano Always within the reorganisation of the branch network, which as already shown contemplated the establishment of geographical areas focused exclusively on the specific 14

15 operational areas, and considering the assignment of the branch network present in the Marche and Umbria regions in New Carifano, effective as from 16 May 2011 the branch of Orvieto of Banca Cattolica was transferred to Carifano. The consideration of the operation, calculated on the basis of the financial situation of the business unit subject-matter of the transfer, amounted to EUR 0.5 million. *** According to the applicable accounting standards, the operations that lead to the acquisition of minority shares of companies already controlled are considered like transactions between shareholders and therefore recorded as a contra-entry in the shareholders equity. Moreover, business combinations carried out among entities under common control, excluded from the scope of application of IFRS 3, given the reorganisational purpose of these operations were recorded in continuity of accounting values in the financial statements of the involved companies, without the recognition of economic effects. Conversion of the first tranche of the "2009/2013 Credito Valtellinese fixed-rate convertible loan with the right of redemption in shares" On 22 June 2011, the period (24 May - 22 June 2011) for the conversion of the first tranche (equal to 1/3 of the par value) of the 2009/2013 Credito Valtellinese fixed-rate convertible loan with the right of redemption in shares issued at the end of 2009 was completed, as well as for the exercise, during the same period, of the full conversion right in advance of the remaining par value, pursuant to Article 2503-bis, paragraph 2, of the Italian Civil Code, in anticipation of the merger by incorporation into Credito Valtellinese of Bancaperta, BAI and Credito Piemontese. At the end of the conversion period, 34,527,157 Credito Valtellinese newly issued ordinary shares were subscribed - representing an increase in share capital of EUR 120,845, with a net increase in shareholders equity of EUR 98.4 million and benefit in terms of Core Tier 1 of about 50 basis point. More specifically, the following were issued: - 23,934,029 conversion shares as a result of exercising the conversion option of the par value falling due established by the Loan Regulation, - 10,593,128 conversion shares as a result of exercising the conversion option in advance, pursuant to Article 2503-bis, paragraph 2, of the Italian Civil Code. Therefore, as a result of the issue of 34,527,157 Creval ordinary shares, the share capital of Credito Valtellinese as at 30 June 2011, is EUR 945,604,527.00, divided into 270,172,722 ordinary shares with a par value of EUR 3.5 each. 15

16 The group's operational structure and the commercial performance indicators Branch network As at 30 June, the branch 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: DISTRIBUTION CHANNELS 30/06/ /06/2010 % change Number of ATMs % Number of Internet users (active) 174, ,921 15% Number of POS 20,557 20,566 (0.04%) 16

17 Customer base and commercial performance indicators The key factors of the success of the Creval Group business model are customer relations, which form part of the broader concept of relational capital a relationship of trust with shareholders, customers, suppliers, local communities, institutions and, more in general, all the stakeholders and they contribute significantly to the consolidation and increase in the value of the Bank. The value intrinsic to the retail business lies in the trust-based relationship with customers, on which the corporate approach to generating medium/long-term wealth is founded. As at 30 June 2011, the Group s customers numbered 894,639, a +8.7% increase compared to the same period in 2010, confirming the Group s capacity to attract new customer relations in the areas of new or recent branch openings, and to maintain its customer base in its territories of origin. Customer by quarter Customer relations are spread across the four territorial banks: Credito Valtellinese (24%), Credito Artigiano (26%), Credito Siciliano (31%), Carifano (7%), Credito Piemontese (5%), Banca dell Artigianato e dell Industria (3%), Banca Cattolica (2%) and Credito del Lazio (2%). 17

18 Breakdown of customers as at 30 June 2011 by territorial bank The breakdown of retail customers by geographical area confirms the traditional stronger presence of the Group in Northern and Central Italy (69% of total customers). However, the South and Islands segment, with 31%, constitutes an important segment of the Group s total customer base. Breakdown of customers as at 30 June 2011 by Area of residence 18

19 Retail customers are mainly private (87%), whereas business and Public Authorities with other categories account for the remaining 10% and 3%, respectively. Breakdown of customers as at 30 June 2011 by segment Authorities and other 3% Companies 10% Private 87% The cross selling indicator - which attests a high degree of optimisation of commercial relations - is positive. Cross Selling trend /12/ /12/ /03/ /06/2011 The observation of customer complaints received is also characterised by a high level of attention to quality and transparency of relations. The total complaints received during the year (168) shows a very low level of legal cases with customers and down by 24% compared to the first half of the previous year. Complaints represent 0.02% of total Group customers. Workforce As at 30 June 2011, the Group numbered 4,516 staff members, compared to 4,514 as at 31 December 2010, with the following breakdown of functions. 19

20 Executives: 73 Middle managers: 1,573 Professional categories: 2,870. Group workforce as at 30/06/

21 Performance of Credito Valtellinese stock After a slight recovery in April, the Italian bank quotes decreased in May, and subsequently were affected by tensions on total debt. In the first half of 2010, the average listed price for the Credito Artigiano share was EUR 3.269, with a minimum of EUR recorded on 24 June and a maximum of EUR on 21 January. The average listed price of the half year decreased by 0.8% on the closing price of 2010, while the Comit Bancari index recorded a reduction of 10.5% for the same period. The charts below show the trend of Credito Valtellinese share prices in the first half of The second chart shows the Credito Valtellinese and Credito Artigiano share performance compared with FTSE - ALL SHARE and COMIT BANCARI. CREDITO VALTELLINESE SHARE PERFORMANCE CHART 21

22 CREDITO VALTELLINESE AND CREDITO ARTIGIANO SHARE PERFORMANCE COMPARED WITH FTSE IT- ALL SHARE AND COMIT BANCARI Source: Bloomberg, adjusted values 22

23 Information on the main financial items and on consolidated income statement figures The interim results are commented upon in summary format, drawn up on a consolidated basis, reclassified according to the presentation criteria considered most appropriate for presenting a fair view of the Group s operating performance. The aggregates and reclassifications regarding items of the financial statements as envisaged in Bank of Italy Circular no. 262/05 - First Update are detailed below. The reclassified consolidated balance sheet is shown below. (in thousands of EUR) ASSETS 30/06/ /12/2010 % change Cash and cash equivalents 178, , Financial assets held for trading 146, , Financial assets available for sale 1,591, , Financial assets held to maturity 517, , Due from banks 775,176 1,089, Loans to customers 22,819,881 22,004, Hedging derivatives n/a Investments in associates and companies subject to joint control 215, , Property, plant and equipment and intangible assets (1) 1,237,408 1,249, Other assets (2) 786, , Total assets 28,269,181 26,760, (1) Include the items "120. Property, plant and equipment and 130. Intangible assets. (2) Include the items 140. Tax assets and "160. Other assets". (in thousands of EUR) LIABILITIES AND SHAREHOLDERS EQUITY 30/06/ /12/2010 % change Due to banks 2,280,555 1,887, Direct customer deposits (1) 22,278,026 21,664, Financial liabilities held for trading 9,856 14, Hedging derivatives 42, Other liabilities 1,099, , Provisions for specific purpose (2) 216, , Minority interests 264, , Shareholders equity (3) 2,078,149 2,002, Total liabilities and shareholders equity 28,269,181 26,760, (1) Include the items "20. Due to customers" and "30. Securities issued". (2) Include the 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". 23

24 Customer deposits (in millions of EUR) 30/06/ /12/2010 % change Current accounts and unrestricted deposits 13,644 13, Repurchase agreements 1, Deposits and other liabilities Total due to customers 15,838 15, Securities issued 6,440 6, Total direct deposits 22,278 21, Administered savings 6,966 6, Asset management 2,723 2, Mutual funds 1,338 1, Insurance savings 1,714 1, Total assets under management 5,775 6, Total direct deposits 12,741 12, Total deposits 35,019 34, As at 30 June 2011 direct customers deposits total EUR 22,278 million, up by 2.8% compared to December of the previous year. The analysis of each technical type shows a marked growth, more than 30% for repurchase agreements, a 3% increase in current accounts and unrestricted deposits, whilst bond issues, included in securities issued, showed a 2.6% decrease. The institutional component, within the Euro Medium Term Note Program amounted to EUR 1,848 million, up by about EUR 118 million compared to December The overall aggregate also includes subordinated bond loans for a total of EUR 1,031 million and that lead to the additional regulatory capital amounting to EUR 714 million. The annual update of the Euro Medium Term Note Program, subscribed on last 9 June, will allow the Credito Valtellinese Group to issue financial instruments with a view to raising capital through international institutional investors by up to a maximum EUR 3 billion. Indirect deposits totalled EUR 12,741 million, slightly up on EUR 12,609 million at the end of the financial year, thanks to the administered component, which recorded a 5.5% increase compared to December and reached EUR 6,966 million, whereas asset management, which totalled EUR 5,775 million, showed a 3.9% decrease during the same period. More specifically, there was an increase in portfolio management amounting to EUR 2,723 million, similarly to the insurance component that recorded a total of EUR 1,714 million, whilst mutual funds management slightly increased to EUR 1,338 million. As at 30 June 2011, total deposits, including both direct and indirect components, reached EUR 35,019 million compared to EUR 34,273 million in December 2010, showing an increase of 2.2%. 24

25 Loans to customers (in millions of EUR) 30/06/ /12/2010 % change Current accounts 7,224 7, Mortgages 9,632 9, Credit cards, personal loans and salary-backed loans Other transactions 4,092 4, Impaired assets 1,433 1, Total Net Loans 22,820 22, Value adjustments Total Gross Loans 23,772 22, At the end of the interim period, loans to customers reached EUR 22,820 million and showed a 3.7% increase compared to EUR 22,004 million in December of the previous year, confirming the constant attention of the Group in support of the production company system of the operating areas. The analysis by technical type shows a marked positive trend of mortgages, up by 5%, amounting to EUR 9,632 million, whereas current accounts, totalling EUR 7,224 million (+ 1.5% compared to December 2010) and credit cards, personal and salary-backed loans, totalling EUR 439 million (+ 1.9% compared to December 2010) show a slight increase. Credit quality Impaired loans/loans to customers Gross exposure Value adjustme nts Net exposure Gross exposure Value adjustme nts 30/06/ /12/2010 Net exposure A. Impaired loans 2, ,433 1, ,222 Doubtful loans 1, , Substandard loans Restructured exposures Past-due exposures B. Performing loans 21, ,387 20, ,782 Total 23, ,820 22, ,004 At the end of the interim period, impaired loans totalled EUR 1,433 million, net of EUR 952 million value adjustments, up by 17.3% compared to EUR 1,222 million for the previous year and still reflecting the ongoing and widespread weakness of the economic cycle. In detail, doubtful loans net of value adjustments totalled EUR 510 million compared to EUR 464 million of the previous year, showing a 9.8% increase, with a 2.2% impact on the loans portfolio almost unchanged compared to the end of the year. Other doubtful loans amounted to EUR 923 million, up by 21.9% compared to EUR 758 million of the previous year. The ratio of doubtful loans to total loans to customers, net of value adjustments, stood at 4.0%, compared to 3.4% in December

26 The total value adjustments on impaired loans totalled EUR 835 million compared to EUR 767 million in December The amount referring to doubtful loans totalled EUR 763 million compared to EUR 709 million and with hedging of 60%, unchanged compared to the end of the financial year. The amount referring to other doubtful loans totalled EUR 72 million compared to EUR 58 million, with a hedging of 7.2%, unchanged compared to December Financial assets and liabilities held for trading, financial assets available for sale and held to maturity The breakdown of financial assets and liabilities held for trading, financial assets available for sale and held to maturity are summarised below: Financial instruments 30/06/ /12/2010 % change Financial assets and liabilities held for trading Bonds and other debt securities Equity securities and UCI quotas Derivative financial instruments with positive fair value Total assets held for trading Derivative financial instruments with negative fair value Total assets and liabilities held for trading Financial assets available for sale Bonds and other debt securities 1, Equity securities and UCI quotas Total financial assets available for sale 1, Financial assets held to maturity Bonds and other debt securities Total financial assets held to maturity As at 30 June 2011, financial assets held for trading recorded an amount of EUR million compared to EUR million in December 2010; the portfolio mainly consists of bonds. Financial liabilities held for trading amounted to EUR 9.8 million compared to 14.7 of the previous year. Financial assets available for sale amounted to EUR 1,592 million, compared to EUR 864 million in December 2010, of which EUR 1,521.1 million concern debt securities and EUR 2.5 million of quotas of UCI, whilst the remaining part mainly consists of share investments that are not attributable to subsidiaries, companies under joint control or associated companies. The change in bonds is due to purchases of government bonds in the half year. The exposure to interest rate risk generated by the fixed-rate Italian Government bonds held of a total of EUR 600 million of par value, was mitigated by resorting to hedging derivatives (IRS) stipulated with counterparties of primary standing. Financial assets held to maturity amounted to EUR 518 million compared to EUR 376 million at the end of 2010 and are represented by bonds and government bonds issued by banks. 26

27 Exposure to total debt With reference to the Group's exposure in bonds issued by Central and local governments and government entities as well as loans granted to the same, it is specified that the Group has exposures substantially towards the Italian State. The table below shows the book value of the exposures to total debt broken down by portfolio (AFS Financial assets available for sale, HFT Financial assets held for trading, HTM Financial assets held to maturity, L&R Due from banks and Loans to customers). Figures are expressed in thousands of EUR. Portfolio Country AFS HFT HTM L&R Total AFS reserve (*) Italy 1,506,832 25,168 13,257-1,545,257-23,144 Germany - 1-3,418 3,419 - Other Countries Overall total 1,506,832 25,184 13,257 3,418 1,548,691-23,144 (*) Net of the tax effect Lending refers to loans granted to Central and local public administrations. For further details, please refer to what is indicated in the notes to the financial statements in the "Accounting policies" section. Investments in associates and companies subject to joint control The total value of such investments as at 30 June 2011, measured at equity, was EUR 216 million, down compared to EUR 230 million at the end of 2010, mainly due to the transfer of the investment held in Banca di Cividale, as more widely represented elsewhere in this Report. The portfolio represents only investments in companies subject to joint control and to significant influence - companies in which Credito Valtellinese has a direct or indirect holding of at least 20% of voting rights, "potential" voting rights or, albeit with a lower percentage, has the power to influence financial and management policy through specific legal positions. The portfolio consisted mainly of the investments illustrated below (amounts in thousands of EUR). Description % held as at 30/06/2011 Book value as at 30/06/2011 % held as at 31/12/2010 Book value as at 31/12/2010 Banca di Cividale S.p.A , ,922 Istituto Centrale Banche Popolari Italiane S.p.A , ,848 Other - 9,119-8,309 Total 215, ,079 27

28 Group shareholders equity As at 30 June 2011, Group shareholders equity amounted to EUR 2,078 million, compared to the EUR 2,003 million recorded in December The statement of reconciliation between parent company shareholders' equity and net profit and the corresponding values resulting from the consolidated financial statements on the same date, is illustrated below. STATEMENT OF RECONCILIATION BETWEEN PARENT COMPANY SHAREHOLDERS' EQUITY AND NET PROFIT AND GROUP SHAREHOLDERS' EQUITY AND NET PROFIT 30/06/ /12/2010 Shareholders' equity of which: Shareholders' equity of which: net profit net profit (loss) (loss) Balances from Parent Company statements 2,169,989 41,595 2,083,414 52,804 Investee company results according to separate financial statements: - consolidated on a line-by-line basis 36,857 36,857 50,261 50,261 - measured at equity 8,004 8,004 20,753 20,753 Amortisation of positive differences - current year past years (119,674) - (119,674) - Differences compared to book values for: - companies consolidated on a line-by-line (101,523) - (101,391) - companies measured at equity 85,368 (1,236) 69,733 Adjustments to dividends collected during the year: - on retained earnings - (51,164) - (56,477) - on current year profit Other consolidation adjustments - elimination of infragroup profit and loss 2,450 (2,163) 3,480 1,952 - other adjustments (3,322) 384 (3,708) 37 Balances from consolidated financial statements 2,078,149 32,277 2,002,868 69,330 The amortisation of positive differences (related to past years) refers to the amortisation of goodwill carried out prior to the application of international accounting standards IAS/IFRS. 28