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 site: creval@creval.it Data as at 30/09/2006: Share Capital EUR 272,913,873 fully paid-in Reserve EUR 546,883,364 Member of the Interbank Guarantee Fund QUARTERLY REPORT as at 30 September 2006

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3 Contents: GROUP STRUCTURE... 4 CONSOLIDATION AREA...4 CONSOLIDATED FINANCIAL AND ECONOMIC HIGHLIGHTS AS AT 30 SEPTEMBER CONSOLIDATED FINANCIAL STATEMENTS AS AT 30 SEPTEMBER COMMENTS ON THE FINANCIAL STATEMENTS THE MAIN CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT AGGREGATES...11 Total deposits...11 Loans...11 The inter-bank market...12 Other financial assets and liabilities...12 Shareholders equity...12 The economic trend of operations...12 COMMENTS BY THE MEMBERS OF THE BOARD OF DIRECTORS PERFORMANCE OF CREDITO VALTELLINESE STOCK...14 SIGNIFICANT EVENTS DURING THE QUARTER...15 International economic situation...15 The Group s branch structure and workforce...16 The rating of the Parent Company and of Bancaperta...18 Commercial activity...18 The reorganisation project for the tax collection sector...19 Reorganisation of the lending area beyond the short term...19 Promoting the local area...20 SIGNIFICANT EVENTS OCCURRING AFTER THE END OF THE FIRST QUARTER OF The development of the branch network...21 Banca della Ciociaria...21 Purchase of SIA shares from ABI...21 The Credito Valtellinese Group joins the 10 th PattiChiari initiative: Switching accounts how to switch your account...21 OUTLOOK FOR THE WHOLE YEAR EXPLANATORY NOTES FORM AND CONTENT OF THE CONSOLIDATED QUARTERLY REPORT...23 CONSOLIDATION PRINCIPLES...23 ACCOUNTING POLICIES...23

4 GROUP STRUCTURE Composition of the Credito Valtellinese Banking Group as at 30 th September 2006 CREDITO VALTELLINESE Parent Company 65.69% 39.24% 39.76% CREDITO ARTIGIANO 20,81% BANCA DELL ARTIGIANATO E DELL INDUSTRIA CREDITO SICILIANO 35.79% 99.43% 100% CREVAL BANKING CRESET (*) APERTA SGR APERTA FIDUCIARIA 100% 24.45% 63.44% BANCAPERTA 100% 12.11% 100% FINANZIARIA SAN GIACOMO 31.23% MEDIOCREVAL 37.44% 31.29% 10% 10% BANKADATI DELTAS STELLINE CRYPTO 80% 50% 80% 70% 20% 50% 20% 10% REGIONAL BANKS SPECIALISED BANKS & COMPANIES SERVICE COMPANIES (*) Inclusion into the Banking Group is currently underway. CONSOLIDATION AREA The network structure of the Credito Valtellinese Banking Group as at 30 th September 2006 consists of four territorial banks, seven specialised companies operating in the financial sector (three of which are banks) and four service companies. The traditional lending activity is carried out by the parent bank Credito Valtellinese S.c., by Credito Artigiano S.p.A., Credito Siciliano S.p.A. and Banca dell Artigianato e dell Industria S.p.A. within their respective geographical area, covering five regions. The Group companies specialised in financial activities are the following: 4

5 Bancaperta S.p.A., a bank operating in the financial sector, payment systems and bancassurance; Mediocreval S.p.A., responsible for monitoring group loans, managing legal disputes, providing legal consultancy, managing leasing contracts and medium/long-term loans; Finanziaria San Giacomo S.p.A., a company that carries out financial activity consisting in buying, managing and disinvesting non-performing loans; Creset Servizi Territoriali S.p.A., a company operating a tax collection services for Local Authorities in the provinces of Lecco and Como; Aperta Fiduciaria S.r.l., a company that carries out asset administration and fiduciary services; Aperta SGR S.p.A., an asset management company; Creval Banking S.p.A.. Finally, the Group s operating companies are: Bankadati Servizi Informatici S.p.A., responsible for managing the Information Technology area; Stelline Servizi Immobiliari S.p.A., with the function of supervising the real estate area; Deltas S.p.A., supporting the parent company in managing a joint strategic objective, providing management consultancy and directly managing the key stages in the Group production processes; Crypto S.p.A., responsible for supervising the development of the application software. The main changes to the structure of the Banking Group that took place during the first nine months of 2006 were: Credito Valtellinese increased its equity investment in Creval Banking S.p.A. (+10.03%) following the transfer of the remaining investment held by Julius Baer Holding S.A. on the basis of the joint-venture agreement, now terminated; Finanziaria San Giacomo S.p.A. was set up, a company wholly owned by Mediocreval S.p.A.; Rileno S.p.A. left the Group consolidation area after control of the company was transferred to Riscossione S.p.A., a public company. As a result of this transfer and on the basis of the new legal system introduced by the Law no. 248/2005, the company now operates a tax collection service; Creset Servizi Territoriali S.p.A., wholly-owned by the parent company Credito Valtellinese, was established following the breaking up of the company structure related to local taxation of Rileno S.p.A., in accordance with the aforesaid Law no. 248/2005. The financial statements of the companies listed in the previous table have been consolidated with those of the parent company Credito Valtellinese according to the line-by-line method. 5

6 JOINTLY CONTROLLED AND AFFILIATED COMPANIES The following companies were valuated according to the equity method: Rajna Immobiliare S.r.l., established following the breaking up of the real estate business from Ripoval S.p.A. (the control of this company was transferred to Riscossione S.p.A. pursuant to the above-mentioned Law no. 248/2005). Credito Valtellinese holds 50% of its share capital, equivalent to EUR 20,000; Global Assistance S.p.A., a company operating in the insurance sector with registered offices in Milan and a share capital of EUR 2,583,000. The parent company Credito Valtellinese holds a 40% equity investment in this company; Global Assicurazioni S.p.A., a company operating in the insurance sector with registered offices in Milan. Bancaperta holds a 40% equity investment in its share capital, which amounts to EUR 120,000; Istituto Centrale delle Banche Popolari Italiane S.p.A., with registered offices in Milan and share capital of EUR 33,148,239, in which Credito Valtellinese holds 22.5% of the voting rights that can be exercised at Ordinary Shareholders' Meetings; Aperta Gestioni S.A., with registered offices in Lugano (Switzerland). Bancaperta holds a 48% equity investment in its share capital, which amounts to CHF 3,500,000; Banca di Cividale S.p.A., with registered offices in Cividale del Friuli (Udine) and a share capital of EUR 54,000,000, in which Credito Valtellinese holds a 25% equity investment. 6

7 CONSOLIDATED FINANCIAL AND ECONOMIC HIGHLIGHTS AS AT 30 SEPTEMBER 2006 BALANCE SHEET FIGURES 30/09/ /06/ /12/2005 Var. % (1) Var. % (2) (in thousands of euro) Loans to customers ,28% 10.27% Other financial assets and liabilities ,31% 36.26% Equity investments ,52% -0.25% Total assets % 11.92% Direct customer deposits ,34% 11.28% Indirect customer deposits ,31% 5.71% including: -Managed savings ,61% 1.03% Total deposits ,84% 8.36% Shareholders equity ,37% 14.09% (1) Compared to 30 June of the current financial year. (2) Compared to 31 December of the previous financial year. ECONOMIC/FINANCIAL RATIOS 30/09/ /06/ /12/2005 Indirect customer deposits / Total deposits 51.2% 50.5% 52.5% Managed savings / Indirect customer deposits 48.7% 50.0% 51.0% direct customer deposits / Total liabilities 80.3% 81.0% 80.8% Loans to customers / direct customer deposits 93.2% 93.2% 94.0% Loans to customers / Total assets 74.9% 75.5% 76.0% LENDING RISK 30/09/ /06/ /12/2005 Var. % (1) Var. % (2) Net non-performing loans (in thousands of euro) 180, , , % 6.40% Other net doubtful loans (in thousands of euro) 223, , , % 22.84% Net non-performing loans / Loans to customers 1.7% 1.6% 1.7% Other net doubtful loans / Loans to customers 2.1% 2.0% 1.8% Hedging of non-performing loans 71.5% 72.8% 74.4% Hedging of doubtful loans 5.7% 5.7% 6.4% (1) Compared to 30 June of the current financial year. (2) Compared to 31 December of the previous financial year. FIGURES PER EMPLOYEE 30/09/ /06/ /12/2005 Var. % (1) Var. % (2) (in thousands of euro, number of employees at period end) Interest income / Number of employees % 6.41% Total assets / Number of employees 4,384 4,218 3, % 11.38% Payroll (*) / Number of employees % 6.67% (*) Reduced by the cost attributable to Other personnel. (1) Compared to 30 June of the current financial year. (2) Compared to 31 December of the previous financial year. 7

8 FURTHER INFORMATION 30/09/ /06/ /12/2005 Var. % (1) Var. % (2) Number of employees 3,314 3,373 3, % 0.49% Number of branches % 4.62% Banc@perta users 244, , , % 11.66% (1) Compared to 30 June of the current financial year. (2) Compared to 31 December of the previous financial year. PROFIT AND LOSS ACCOUNT FIGURES 3rd Quarter /01/ /09/2006 3rd Quarter /01/ /09/2005 Var. % (1) Var. % (2) (in thousands of euro) Interest income 88, ,304 77, , % 13.17% Net interest and other banking income 141, , , , % 11.30% Net profit (loss) of financial management 128, , , , % 11.05% Gross operating result 39, ,121 31,127 85, % 23.11% Profit for the period 17,899 51,590 14,034 44, % 15.94% (1) Compared to the third quarter of the previous financial year. (2) Compared to the period 01 January-30 September of the previous financial year. 8

9 CONSOLIDATED FINANCIAL STATEMENTS AS AT 30 SEPTEMBER 2006 RECLASSIFIED CONSOLIDATED BALANCE SHEET (in thousands of EUR) ASSETS 30/09/ /06/ /12/2005 Var. % (1) Var.% (2) Cash and deposits 100,016 96, , % % Financial assets held for trading 1,463,734 1,459,608 1,080, % 35.45% Available-for-sale financial assets 41,563 38,248 30, % 34.95% Financial assets held until expiry % 0.00% Loans to banks 834, , , % 22.56% Loans to customers 10,876,637 10,739,058 9,863, % 10.27% Derivative hedging contracts - 3,382 3, % % Equity investments 150, , , % -0.25% Tangible and intangible fixed assets 580, , , % 1.16% Non-current assets and group of assets being sold - 35, % - Other asset items 481, , , % 1.55% Total assets 14,529,377 14,225,879 12,981, % 11.92% (1) Compared to 30 June of the current financial year. (2) Compared to 31 December of the previous financial year. LIABILITIES AND SHAREHOLDERS' EQUITY 30/09/ /06/ /12/2005 Var. % (1) Var. % (2) Due to banks 1,035, , , % 20.44% Direct customer deposits 11,672,106 11,517,561 10,488, % 11.28% Trading financial liabilities 5,059 5,568 13, % % Liabilities connected with group of assets being sold - 18, % - Other liabilities items 553, , , % 24.30% Provisions for specific allocation 201, , , % -8.77% Third-party equity 199, , , % 1.03% Shareholders equity 862, , , % 14.09% Total liabilities and shareholders equity 14,529,377 14,225,879 12,981, % 11.92% (1) Compared to 30 June of the current financial year. (2) Compared to 31 December of the previous financial year. 9

10 RECLASSIFIED CONSOLIDATED INCOME STATEMENT (in thousands of EUR) ITEMS 3rd Quarter /01/ /09/2006 3rd Quarter /01/ /09/2005 Var. % (1) Var. % (2) Interest income and similar revenues 157, , , , % 24.71% Interest expense and similar charges -69, ,990-41, , % 45.84% Interest income 88, ,304 77, , % 13.17% Net commission 44, ,949 44, , % 5.54% Dividends and other revenue 137 1, , % % Net profit (loss) of trading activities and of financial instruments a 6,070 15,943 3,850 11, % 32.97% Net profit (loss) of hedging activity % % Profit/Loss from disposal of other financial assets 2,584 3, , % % Net interest and other banking income 141, , , , % 11.30% Net value adjustments to other financial assets -13,421-34,179-10,263-29, % 14.19% Net profit (loss) of financial management 128, , , , % 11.05% Payroll -53, ,567-49, , % 8.73% Other administrative expenses -38, ,195-37, , % 5.86% Net provisions to risks and charges reserves -1,782-5, , % 26.46% Net value adjustments to tangible and intangible fixed assets -6,424-19,166-6,668-17, % 8.14% Other operating income 11,543 33,759 10,013 29, % 14.96% Operating costs -88, ,655-84, , % 7.00% Gross operating result 39, ,121 31,127 85, % 23.11% Profit/Loss from equity investments 2,949 9,327 2,473 8, % 15.03% Value adjustments to goodwill % % Profit/Loss from disposal of equity investments % % Profit/Loss from current operations gross of tax 42, ,509 33,381 93, % 22.76% Income taxes -20,853-55,081-17,281-43, % 26.44% Profit/Loss from current operations net of taxes 21,736 59,428 16,100 49, % 19.53% Profit/Loss from non-current assets being sold, net of taxes , % % Profit/Loss pertaining to third parties -2,954-8,765-2,569-6, % 29.56% Profit for the period pertaining to the parent company 17,899 51,590 14,034 44, % 15.94% (1) Compared to the third quarter of the previous financial year. (2) Compared to the period 01 January-30 September of the previous financial year. 10

11 COMMENTS ON THE FINANCIAL STATEMENTS The Consolidated Quarterly Report as at 30 th September 2006 was drawn up pursuant to art. 82 of the Regulation approved by CONSOB with deliberation no of 14 th May 1999 and subsequent amendments and integrations. The report was presented in accordance with the indications given in Attachment 3D of the said Regulation. The reclassified Consolidated Quarterly Report was prepared on the basis of the IAS/IFRS international accounting principles. The balance sheet information as at 30th September 2006 was compared with the figures as at 30 th June 2005 and 31 st December The items and the Income Statement aggregates relating to the 3 rd quarter and to the period 1 st January th September 2006 were compared with those registered in the same periods in THE MAIN CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT AGGREGATES Total deposits Direct customer deposits as at 30 th September 2006 totalled EUR 11,672.1 million, with a increase by 1.3% compared to EUR 11,517.6 million as at 30 th June 2006 and by 11.3% compared to EUR 10,488.9 million registered at 31 st December Group indirect customer deposits came to EUR 12,249.1 million, highlighting a EUR million increase (+4.3%) compared to 30 th June 2006 and EUR 662 million (+5.7%) compared to 31 st December Within this aggregate, the managed savings, which comprise mutual investment funds, managed customer assets and insurance savings, amounted to EUR 5,971.2 million and in the third quarter increased by 1.6% (+1% compared to 31 st December 2005). Administered savings, consisting of the securities that customers deposit with the Group banks, came to EUR 6,277.9 million (+7% compared to 30 th June 2006 and +10.6% compared to 31 st December 2005). Managed savings make up 48.7% of the total aggregate. Total customer deposits the sum of direct and indirect deposits totalled EUR 23,921.2 million, rising 2.8% in the quarter and 8.4% compared to the figure of EUR 22,076.1 million registered at the end of December Loans Loans to customers at the end of September 2006 amounted to EUR 10,876.6 million, increasing by EUR million (+1.3%) in the third quarter of 2006 and by EUR 1,013.4 million (+10.3%) compared to EUR 9,863.2 million as at 31 st December

12 Net non-performing loans amounted to EUR million versus EUR million registered in December Other doubtful loans came to EUR million, rising by 22.8% in comparison with the figure as at the end of December This was mostly due to loans due. The ratio between net non-performing loans and net loans to customers was 1.7% and unchanged in relation to the percentage registered as at 31 st December The ratio between other net doubtful loans (problem loans and loans overdue/due) and net loans to customers was 2.1%, on the increase in comparison with the percentage registered at the end of 2005 (1.8%). Both indicators show a limited lending risk profile. The inter-bank market The Group s net exposure as a borrower on the inter-bank market amounted to EUR million. Other financial assets and liabilities Financial assets and liabilities held for trading as at 30 th September 2006, represented by securities and derivative contracts, amounted to EUR 1,458.7 million, a 36.7% increase compared to 31 st December Available-for-sale financial assets, mainly consisting of shares held not for trading purposes, totalled EUR 41.6 million, a 35% growth compared to the figure as at December Shareholders equity As at 30 th September 2006, the net consolidated shareholders equity of the Group amounted to EUR million, highlighting an increase by 2.4% in the quarter and by 14.1% when compared to EUR million as at 31 st December The economic trend of operations The analysis of the Income Statement data shows that interest income in the third quarter of 2006 was EUR 88.2 million, with a 14.5% increase in comparison with EUR 77.1 million of the third quarter of The figure for the first nine months of 2006 was EUR million, 13.2% higher than the same period of With regards to the contribution given by the interest income to the net interest and other banking income, in the third quarter of 2006 interest income was 62.3% and 61% for the first nine months of 2006 (in 2005 these percentages were 61% and 60% respectively). Net interest and other banking income for the third quarter of 2006 amounted to EUR million (+12% compared to the third quarter of 2005); as for the first nine months of 2006, the same item amounted to EUR 412 million (+11.3% compared to the same period of 2005). This positive variation can be attributed to the increase in net commission, which was EUR million for the first nine months of 2006 (+5.5%). If we sum the net value adjustments to other financial assets for EUR 13.4 million for the quarter (EUR 34.2 million for the first nine months of 2006) with the net interest and other banking income, we obtain the net profit (loss) of financial management. This intermediate 12

13 result grew by 10.4% over the last quarter and by 11.1% over the first nine months of the year. Operating costs the sum of payroll, other administrative expenses, net provisions to risks and charges reserves and net value adjustments to tangible and intangible fixed assets adjusted by other operating income, amounted to EUR 88.4 million for the third quarter of 2006 (EUR 84,9 million in the third quarter of 2005) and EUR million for the first nine months of 2006 (versus EUR million for the same period of 2005). The gross operating result for the quarter was EUR 39.6 million (+27.2%) and EUR million for the first nine months of the year (+23.1%). After accounting profit from equity investments of EUR 2.9 million (EUR 9.3 million in the first nine months, up 15%), income taxes for EUR 20.9 million (EUR 55,1 million in the first nine months, up 26.4%) and profit pertaining to third parties for EUR 3 million (EUR 8.8 million in the first nine months, up 29.6%), the consolidated profit for the period amounted to EUR 17.9 million (EUR 51.6 million in the first nine months), with an increase by 27.5% compared to the third quarter of 2005 and by 15.9% compared to the first nine months of

14 COMMENTS BY THE MEMBERS OF THE BOARD OF DIRECTORS PERFORMANCE OF CREDITO VALTELLINESE STOCK In the course of the first nine months of 2006, the Credito Valtellinese stock benefited from the good performance of stock exchanges worldwide. The charts below show that its lowest price of EUR was registered on 14 th June 2006, while the highest price of EUR was registered on 27 th February Over the quarter under analysis, the average price of the stock was EUR Performance of the stock in the first nine months of , , , , , /01/ /01/2006 Source: Bloomberg, adjusted values 20/01/ /01/ /02/ /02/ /03/ /03/ /03/ /03/ /04/ /04/ /04/ /05/ /05/2006 Volume 29/05/ /06/ /06/ /06/2006 Price Prezzo 06/07/ /07/ /07/ /08/ /08/ /08/ /09/ /09/ /09/ ,0 10,5 10,0 14

15 Performance of the Credito Valtellinese stock compared with the COMIT banking index over the first nine months of 2006 (base 30 th December 2005 = 100) /12/ /01/ /01/ /02/ /02/ /03/ /03/ /04/ /04/ /05/ /05/ /06/ /06/ /06/ /07/ /07/ /08/ /08/ /09/ /09/2006 Credito Prezzo Valtellinese azione Credito stock Valtellinese price Comit Indice banking Comit Bancari index Source: Bloomberg, adjusted values SIGNIFICANT EVENTS DURING THE QUARTER International economic situation The pace of the world economic expansion has slowed down over the last few months. But it is important to notice that despite the further slowdown forecast by indicators, the world s economy should continue its sustained growth above the historical average also in the rest of the year. The slowdown has especially affected the US economy. In the third quarter its GDP grew by 1.6%, one percentage point less than in the previous quarter, and was heavily affected by the downturn of investments in residential construction. Also the Japanese economy registered a significant slowdown, going from 0.8% in the first quarter to 0.2% in the second. The result for the period was negatively influenced by the trend of public expenditure and housing investments. In the emerging Asian countries, the economy continued its strong growth thanks to a vigorous internal demand and boisterous foreign trading. In the second quarter, China s economy registered a trend variation of its production by 11.3%, showing little sensitivity towards the restrictions imposed by monetary authorities. Also the economies of the main Latin American countries maintained good growth levels, benefiting from the positive performance of internal as well as foreign demand. In the second quarter, the expansion of the GDP for EMU countries gathered momentum, going from 0.8% to 0.9% thanks to the contribution given by internal demand and 15

16 investments. Thanks to this, it was possible to compensate the far from brilliant performance of consumption. The recovery of the Italian economy continued, with the GDP showing a 0.5% growth in the period under analysis, slightly lower than the 0.7% registered in the previous period. A contribution to the favourable trend of the national economy, which continues to be below par compared to that of other European countries, was given by the positive evolution of internal demand and foreign trade. Starting from August, oil prices decreased consistently, having a positive impact on inflation of consumption prices in the EMU Area and keeping it below 2%. The need to limit the risk of medium-term price increases led the European Central Bank to intervene twice, in August and October, and raise the interest rate for refinancing operations by 25 basis points. Sustained by the declarations of President Trichet, who defined the current rate levels as low, the markets envisage a further increase of policy rates by a quarter of a point by the end of the year. The Group s branch structure and workforce As at 30 th September 2006, the Group numbered 3,326 staff members 12 of whom are seconded at Companies and organisations outside the Group perimeter, versus 11 as at 30 th June 2006 compared to 3,384 resources as at 30 th June Staff members are distributed in the various Group companies as follows: Credito Valtellinese 897 Credito Artigiano 918 Credito Siciliano 923 Banca dell Artigianato e dell Industria 99 Bancaperta 131 Mediocreval 21 Aperta SGR 15 Creset Servizi Territoriali 13 Deltas 87 Bankadati Servizi Informatici 134 Stelline Servizi Immobiliari 52 Crypto 35 Creval Banking 1 It is reminded that the agreement for the transfer of the equity investment held in Rileno S.p.A. (corresponding to 100% of the share capital) to Riscossione S.p.A. was signed on 27 th September. Since 1 st October 2006, Riscossione S.p.A. has been operating as a national tax collector on behalf of the Inland Revenue, in application of the provisions of Law no. 248/2005. As a result Rileno (with a workforce of 88 staff members) has now left the Group s perimeter. Moreover, prior to the transfer of the equity investment to Riscossione S.p.A, the Board of Directors of Rileno had resolved, in accordance with the law, to break up the company business related to local taxation by setting up Creset Servizi Territoriali S.p.A., a company that is currently operating in the aforesaid sector employing 13 staff members. The commercial network of the Credito Valtellinese Group as at 30 th September 2006 consisted of 362 branches. During the third quarter, Credito Artigiano opened 4 new branches: agency no. 23 in Milan, Arcore, Magenta (in the province of Milan) and Empoli (in the province of Florence). Banca dell Artigianato e dell Industria inaugurated the new branch 16

17 in Villafranca di Verona. Credito Siciliano, continuing the branch network rationalisation process started last year, closed the branch in Aciplatani (in the province of Catania) and inaugurated two new branches, one in Catania agency no. 9 and one in Sciacca (in the province of Agrigento). The following table summarises the network structure of the Credito Valtellinese Group by province as at 30 th September 2006, compared with the situation at the end of the two previous quarters. BANKS provinces 30/09/06 30/06/06 31/12/05 Credito Valtellinese Sondrio Como Lecco Bergamo Varese Total branches Credito Artigiano Milan Pavia Florence Prato Pistoia Rome Total branches Banca dell Artigianato e dell Industria Vicenza Verona Brescia Total branches Credito Siciliano Agrigento Caltanissetta Catania Enna Messina Palermo Ragusa Siracusa Trapani Total branches TOTAL BRANCHES

18 The rating of the Parent Company and of Bancaperta Following the annual review carried out in July, during the quarter Moody s, the international agency, confirmed the rating that has been assigned to Credito Valtellinese and its subsidiary Bancaperta since 2001, with stable outlook. The rating is broken down as follows: - Long Term Rating BAA1 - Short Term Rating P-2 - Bank Financial Strength C- Commercial activity Products With regards to the marketing activity carried out during the quarter, the range of mortgages for companies was reviewed, with a view to enhance the products with even more flexibility and offering better ways to meet customers needs, particularly by extending the maximum duration of mortgages to 15 years and that of unsecured loans up to 7 years. The range of products reserved for private customers was also expanded with the introduction of the new product called Fido Progetto, an unsecured mortgage loan designed for those who need to fund purchases of a considerable amount but do not intend to activate a mortgage. Moving on to the investment sector, a new 6-year index-linked policy was launched called Global Domani 5. A new Personal Fund Plus assets management line was also introduced, called Obbligazionario Tasso Variabile Euro-in, thanks to which customers can benefit from the variations of the rate set in 2006 by the Central European Bank. Finally, during the quarter we started some rationalisation activities around the product and service range and we adapted the product offer to the provisions introduced by the Law no. 248/06 (known as Bersani Law ). Marketing programming area In order to support the achievement of the sales targets set in the budget, new marketing campaigns were launched during the quarter. Their purpose was: - to support the sales of the life and non-life bancassurance sector; - to improve Group s customer retention levels through sales initiatives targeting the socalled dormant accounts. In order to enable a daily monitoring of the progress towards meeting the target for each marketing campaign, specific control and analysis tools were set up within the Group s planning and management control system, which could be accessed by the regional sales structures via the company s intranet. Linea Banc@perta At the end of September 2006, the Banc@perta line counted 244,653 customers, compared to 237,032 as at 30 th June 2006 (+3.2%). 18

19 The reorganisation project for the tax collection sector In the course of the quarter, we completed the project related to reorganising the tax collection activities carried out by the Credito Valtellinese Group and adapting it to the new legal system introduced by the Law no. 248/2005. The objective remains to continue with the Group activity in the tax collection sector, as permitted by the aforesaid law. More specifically, on 20 th September a public breaking-up deed was signed concerning the local tax collection business carried out by Rileno S.p.A. a concessionary for the national tax collection service for the provinces of Como and Lecco by setting up a new company called Creset Servizi Territoriali S.p.A., a company of the Credito Valtellinese Group operating as collector of local taxes. Creset, which has a share capital of EUR 2.6 million entirely held by the parent company, started operating as a local tax collector on 2 nd October It is reminded that the set of assets and liabilities transferred defined on the basis of the financial statements figures of Rileno S.p.A. as at 31 st December 2005 is represented by assets for EUR 15.9 million and liabilities for EUR 15.1 million. The EUR 0.8 million difference, together with the amount of EUR 1.9 million paid in cash by the sole shareholder Credito Valtellinese, represent the Company s share capital. Rileno had 88 staff members, who have since left the perimeter of Group activities. The final stage of the reorganisation project was the signing, on 27 th September, of the agreement for the transfer of the equity investment held in Rileno S.p.A. (corresponding to 100% of the share capital) to Riscossione S.p.A. Since 1st October 2006, Riscossione S.p.A. has been operating as a national tax collector on behalf of the Inland Revenue, in application of the provisions of Law no. 248/2005. On the same date 50% of the share capital of Ripoval S.p.A., a concessionary operating as a tax collector for the province of Sondrio (its share capital is jointly held by Credito Valtellinese and Banca Popolare di Sondrio) was transferred to Ripoval S.p.A.. The amount of these transactions provisionally set on the basis of the value of the companies shareholders equity transferred on 30 September 2006 will undergo a specific audit, to be performed in the 15 days following the approval of the financial statements as at 30 th September It is noted that the financial statements related to the transfer were approved on 7 th November, with regards to Ripoval, and on 8 th November, with regards to Rileno. The amount thus calculated will be settled through the subscription to which Credito Valtellinese is already obliged - of new shares issued for the purpose of an increase in Riscossione S.p.A. s share capital. The operation will be completed by 28 th February Reorganisation of the lending area beyond the short term As already mentioned in the Interim Report as at 30th June 2006, non-performing loans were transferred without recourse from Mediocreval S.p.A. to Finanziaria San Giacomo S.p.A. on 7 th July, at a total price of EUR 107 million. The final price of the transfer was determined on the basis of the accounting value of the loans as at 31 st March 2006 in accordance with the IAS/IFRS accounting principles, adjusted in relation to the financial movements that occurred between the end of the first quarter of 2006 and 7 th July 2006, the adjustments made during that period of time according to the IAS/IFRS criteria and the further adjustments made in the same period and connected with the occurring of extraordinary events such as bankruptcies or other similar proceedings. This operation was funded with a loan of EUR 115 million issued by the controlling company Mediocreval and repayable at market rates. In the course of August, problem loans held by Banca dell Artigianato e dell Industria were transferred to Finanziaria San Giacomo S.p.A. for a total of EUR 1.3 million. Thanks to the successful completion of the above-mentioned transfers, Mediocreval could avail itself, in the 19

20 second half of the financial year, of the full operation in the lending area beyond the short term, as amply described in another part of this document. Following the resolutions made by Board of Directors of the parent company on 12 th September 2006 and of Mediocreval on 22 nd September 2006 concerning the changes to Mediocreval s organisational structure and the appointment of Managers the subsidiary company started operating in the lending area beyond the short term and we can consider the project that started in December 2005 as essentially completed. Therefore, as at 1 st October, medium/long-term industrial, real-estate and commercial loans to companies amounting to more than EUR 1 million and with a duration of over 5 years are granted directly by Mediocreval, which looks after also their management. Loans to families are still granted by the regional Banks, except for the transactions amounting to more than EUR 1 million and with a duration of more than 10 years, which fall into Mediocreval s sphere of competence. Promoting the local area During the quarter, Fondazione Gruppo Credito Valtellinese worked intensively as usual and started various initiatives in different sectors of institutional competence. With regards to the culture and art activity, it is worth mentioning the exhibition dedicated to the painter Edoardo Fraquelli, inaugurated on 13 th July at the Credito Valtellinese s gallery in Sondrio and at Museo di Storia dell Arte (Art History Museum). Credito Siciliano s Gallery in Acireale hosted an exhibition called Sicilia, which displayed 40 works by Sicilian artists of the period between the post-war years and the 1970s. In September, we inaugurated the exhibition titled Recuperi e Restituzioni. Tesori nascosti dal territorio (Recoveries and Returns. Hidden treasures from the local area, the natural continuation of the 2005 exhibition called Legni sacri e preziosi: Scultura lignea in Valtellina e Valchiavenna tra Gotico e Rinascimento (Sacred and precious woods. Wood sculpture in Valtellina and Valchiavenna between Gothic and Renaissance). In this quarter, we also continued our ongoing support and charitable activity in favour of institutions and associations working for the promotion of local communities. 20

21 SIGNIFICANT EVENTS OCCURRING AFTER THE END OF THE FIRST QUARTER OF 2006 The development of the branch network In the period after 30 th September 2006, the Group s branch network was enlarged with the opening of a new Banca dell Artigianato e dell Industria branch in Bassano del Grappa (in the province of Vicenza). On 13 th November, the parent company Credito Valtellinese inaugurated a new branch in Brembate di Sopra (in the province of Bergamo). On the same date Credito Siciliano opened the Ispica branch (in the province of Ragusa) and closed the one in Vallelunga Pratameno (in the province of Caltanissetta). At the time of preparing this report, the Group had a total of 364 branches. Banca della Ciociaria Within the framework of the strategic cooperation agreed in October 2005 between Credito Valtellinese and Banca della Ciociaria aimed at developing operational synergies in Central Italy new agreements were signed which will enable the parent company to increase its equity investment in Banca della Ciociaria s share capital from 10% to 37.9%. The highest price expected to be paid for the acquisition of the equity investment is EUR 20.6 million. According to the signed agreements: the definition of governance rules are shared by entering into agreements with some shareholders of Banca della Ciociaria; the equity investment held by Credito Valtellinese in Banca della Ciociaria s share capital may be further increased by exercising a purchase option granted by the current shareholders who have entered into the shareholders agreements. Purchase of SIA shares from ABI On 13 th October 2006 the Credito Valtellinese Group accepted the sale offer made by ABI and purchased 535,947 shares of SIA Società Interbancaria per l Automazione S.p.A.. The price paid per share was EUR 7, equivalent to a total of EUR 3,751,629. The Group s overall equity investment comprises 1,180,239 shares, equivalent to 3.39% of the share capital of SIA S.p.A.. The Credito Valtellinese Group joins the 10 th PattiChiari initiative: Switching accounts how to switch your account The new initiative called Cambio Conto Come cambiare il Conto Corrente (Switching accounts how to switch your account) of the PattiChiari Project, promoted by ABI, was inaugurated on 16 th October. The Credito Valtellinese Banking Group immediately joined this initiative, which aims at improving the mobility of accounts and making transferring services from one bank to another easier. 21

22 OUTLOOK FOR THE WHOLE YEAR The Board of Directors of Credito Valtellinese believes that the Group s activity in the remaining months of 2006 will continue to grow at a regular rate and that the financial economic objectives achieved will be consistent with the budget forecasts. 22

23 EXPLANATORY NOTES FORM AND CONTENT OF THE CONSOLIDATED QUARTERLY REPORT The Consolidated Quarterly Report as at 30 th September 2006 refers to Credito Valtellinese (Parent Company) and the companies in which the parent company 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. CONSOLIDATION PRINCIPLES The consolidation principles used are the international accounting principles (IAS/IFRS) formally approved by the European Union and in effect at the time of preparing the quarterly report, included its interpretations. The consolidated quarterly report has been drawn up on the basis of accounting schedules prepared for this purpose by the companies included in the consolidation area referring to the date of 30 th September ACCOUNTING POLICIES The accounting policies did not change with respect to the Consolidated Financial Statements for the financial year ending on 31 st December Please refer to the said document for further details. Steps were not taken to reinstate the non-liquid portfolio items by settlement value date to the pertinent balance sheet accounts. THE BOARD OF DIRECTORS Sondrio, 14 th November