Credito Valtellinese Società Cooperativa a r.l. Registered Offices in Piazza Quadrivio 8, Sondrio, Italy Tax Code and Sondrio Companies Register No.

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1 Credito Valtellinese Società Cooperativa a r.l. Registered Offices in Piazza Quadrivio 8, Sondrio, Italy Tax Code and Sondrio Companies Register No Registered Bank No 489 Parent Bank of the Credito Valtellinese Group Registered Banking Group No Internet Site: creval@creval.it Data as at : Share Capital EUR 198,031,953 Reserves EUR 361,545,229 Member of the Fondo Interbancario di Tutela dei Depositi (Interbank Deposit Protection Fund) QUARTERLY REPORT as at 31st March 2005

2 Contents: GROUP STRUCTURE... 3 THE SCOPE OF CONSOLIDATION...3 CONSOLIDATED FINANCIAL AND ECONOMIC HIGHLIGHTS... 5 CONSOLIDATED ACCOUNTING SCHEDULES AS AT 31ST MARCH COMMENTS AND OBSERVATIONS OF THE DIRECTORS REGARDING THE OPERATING RESULTS IN... 9 FIRST QUARTER PERFORMANCE OF THE CREDITO VALTELLINESE STOCK...9 SIGNIFICANT EVENTS DURING THE QUARTER...10 International Economic Situation...10 Development of the Group s Operational Structure...11 Commercial Business...12 Euro Medium Term Notes...13 BAI Increase in Share Capital...13 Promotion of the Local Area...13 Change-over to IAS/IFRS International Accounting Principles...14 NOTES ACCOMPANYING THE ACCOUNTING SCHEDULES THE MAIN CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT AGGREGATES...15 Total deposits...15 Loans...16 Portfolio Securities...16 Shareholders Equity...16 Economic Performance for the Period...17 SIGNIFICANT EVENTS AFTER FIRST QUARTER Institutional Profiles...18 Credito Valtellinese 2.8% Convertibile Bond...18 BAI Increase in Share Capital...19 Communication Activities...19 Development of the Local Network...19 OUTLOOK FOR THE WHOLE PERIOD EXPLANATORY NOTES FORM AND CONTENTS OF THE CONSOLIDATED QUARTERLY REPORT...20 CONSOLIDATION PRINCIPLES...20 ACCOUNTING PRINCIPLES...21 OTHER INFORMATION

3 GROUP STRUCTURE Composition of the Credito Valtellinese Banking Group as at 31st March 2005 Mappa Group Structure Gruppo as al at CREDITO VALTELLINESE Capogruppo 65,82% 21,79% 39,45% CREDITO ARTIGIANO 37,86% BANCA DELL ARTIGIANATO E DELL INDUSTRIA CREDITO SICILIANO 35,79% 100% RILENO APERTA SGR (*) APERTA FIDUCIARIA 100% 24,45% 63,44% BANCAPERTA 100% 12,11% 31,23% CASSA SAN GIACOMO 37,41% 31,29% 10% 10% BANKADATI DELTAS STELLINE CRYPTO (*) 80% 50% 80% 70% 20% 50% 20% 10% BANCHE Local Banks TERRITORIALI BANCHE Specialized E SOCIETA Banks and SPECIALIZZATE Companies SOCIETA Service Sompanies DI PRODUZIONE (*)Its insertion in the banking group is currently being completed. THE SCOPE OF CONSOLIDATION The main changes to the scope of consolidation during the first quarter of 2005 are as follows: - the increase by Credito Valtellinese of its equity investment in Credito Artigiano (+0.32%), mainly owing to conversion of the fifth instalment of the Credito Artigiano TV convertibile subordinato bond, and in Banca dell Artigianato e dell Industria (+7.39%), owing to conversion of the fifth instalment of the B.A.I. TV convertibile subordinato bond and the purchase of additional share quotas; - the entrance into the scope of consolidation of Crypto (subsidiary of the parent company, Credito Artigiano, Credito Siciliano and Bancaperta), already an affiliated company. 3

4 The financial statements of the companies reported in the table above have been consolidated line-by-line with those of the parent company Credito Valtellinese. AFFILIATED AND JOINT CONTROLLED COMPANIES The company Julius Baer Creval Private Banking S.p.A, jointly controlled by Credito Valtellinese and Julius Bear Holding Ltd., was consolidated on a proportional basis. The percentage of equity investment is equal to 48.34%. The following affiliated companies have been consolidated according to the net equity method: - Ripoval S.p.A., tax collection service concessionaire for the province of Sondrio, with head offices in Sondrio, in which Credito Valtellinese own 50% of the share capital of EUR 2,582,300; - Global Assistance S.p.A., an insurance company with head offices in Milan and share capital amounting to EUR 2,583,000, 40% of which held by the parent company Credito Valtellinese; - the 40% equity investment, corresponding to EUR 120,000 of share capital, held by Bancaperta in Global Assicurazioni S.p.A., a company operating in the insurance sector, with head offices in Milan; - Istituto Centrale delle Banche Popolari S.p.A., with head offices in Milan and share capital of EUR 33,148,239, of which Credito Valtellinese owns 22.5% of voting rights exercisable at ordinary shareholders meetings; - Aperta Gestioni SA, with head offices in Lugano (Switzerland), in which Bancaperta has a 48% stake, amounting to CHF 3,500, Banca di Cividale S.p.A., with head offices in Cividale del Friuli (Udine) and share capital amounting to EUR 54,000,000, of which Credito Valtellinese holds a 22.22% stake. 4

5 CONSOLIDATED FINANCIAL AND ECONOMIC HIGHLIGHTS BALANCE SHEET FIGURES 31/03/ /12/2004 Var. % (thousands of Euro) Loans to customers 8,702,060 8,240, % Securities 1,406,269 1,354, % Equity investments 129, , % Total assets 11,702,086 11,412, % Direct customer deposits (*) 9,923,126 9,656, % Indirect customer deposits 10,776,127 10,455, % of which: - Managed savings 4,389,394 4,208, % Total deposits 20,699,253 20,111, % Shareholders equity 527, , % (*)Includes items: 20 "Due to customers"; 30 "Securities issued"; 40 "Third-party assets under administration"; 110 "Subordinated liabilities"". ECONOMIC/FINANCIAL RATIOS 31/03/ /12/2004 Indirect customer deposits / Total deposits 52.1% 52.0% Managed savings / Indirect customer deposits 40.7% 40.3% Direct customer deposits / Total liabilities 84.8% 84.6% Loans to customers / Direct customer deposits 87.7% 85.3% Loans to customers / Total assets 74.4% 72.2% CREDIT RISK 31/03/ /12/2004 Var. % Net non-performing loans (thousands of Euro) 248, , % Other net doubtful loans (thousands of Euro) 113, , % Net non-performing loans / Loans to customers 2.9% 3.0% Other net doubtful loans / Loans to customers 1.3% 1.4% INFORMATION ON EMPLOYEES 31/03/ /12/2004 Var. % (thousands of Euro, no. employees at period end) Interest and other banking income / Number of employees % Total assets / Number of employees 3,666 3, % Payroll costs / Number of employees % 5

6 OTHER INFORMATION 31/03/ /12/2004 Var. Number of employees 3,193 3, % Number of branches % Users of line 194, , % INCOME STATEMENTFIGURES Q Q Var. % (thousands of Euro) Interest income 71,051 65, % Interest and other banking income 126, , % Gross operating result 34,975 29, % Gross profit 25,995 20, % Net profit for the period 8,391 5, % 6

7 CONSOLIDATED ACCOUNTING SCHEDULES AS AT 31ST MARCH 2005 RECLASSIFIED CONSOLIDATED BALANCE SHEET (in thousands of euros) ASSETS 31/03/ /12/2004 Var. % Cash and deposits with central banks and post offices 100, , % Due from banks 427, , % Loans to customers 8,702,060 8,240, % Dealing securities 1,403,755 1,352, % Fixed assets - securities 2,514 2, % - equity investments 129, , % - tangible and intangible 301, , % Positive differences in consolidation and shareholders equity 109, , % Other assets 524, , % Total assets 11,702,086 11,412, % LIABILITIES 31/03/ /12/2004 Var. % Due to banks 376, , % Direct customer deposits 9,923,126 9,656, % of which: - subordinated liabilities 369, , % Other liabilities 525, , % Provisions for specific use 191, , % Minority interests 158, , % Shareholders equity 527, , % Total liabilities 11,702,086 11,412, % GUARANTEES AND COMMITMENTS 31/03/ /12/2004 Var. % Guarantees 768, , % Commitments 753, , % Total 1,522,521 1,363, % 7

8 RECLASSIFIED CONSOLIDATED INCOME STATEMENT (in thousands of euros) Q Q Var. % Interest income and similar revenues 110, , % Interest expense and similar charges -39,360-36, % Interest income 71,051 65, % Profits of equity investments valued at shareholders equity and dividends 2,432 1, % Net commissions 45,120 41, % Income from financial transactions 5,199 4, % Other net income (1) 2,786 3, % Interest and other banking income 126, , % Net administrative expenses -80,284-74, % a) net payroll costs (2) -48,454-45, % b) other net administrative expenses (3) -31,830-29, % Value adjustments to tangible and intangible fixed assets -11,329-11, % Gross operating result 34,975 29, % Net value adjustments to loans and provisions -7,853-6, % Provisions for risks and charges -1,392-1, % Net value adjustments to financial fixed assets % Ordinary income 25,725 21, % Extraordinary profit (loss) % Gross profit 25,995 20, % Income taxes for the period -14,394-11, % Change in reserve for general banking risks -1,036-1, % Profit for the period pertaining to minority interests -2,174-1, % Net profit for the period 8,391 5, % (1) Net of recovery of other administrative expenses, equal to EUR 7,298 thousand (4,382 during the first quarter 2004) and of recovery of third-party payroll costs, equal to EUR 12 thousand (12 during the first quarter 2004). (2) Adjusted downwards for the recovery of costs related to third-party personnel, equal to EUR 12 thousand (12 during the first quarter 2004), and adjusted upwards for the cost of personnel received from third parties, equal to EUR 56 thousand (362 during the first quarter 2004). (3) Net of recovery of other administrative expenses, equal to EUR 7,298 thousand (4,382 during the first quarter 2004) and of the cost of personnel received from third parties, equal to EUR 56 thousand (362 during the first quarter 2004). 8

9 COMMENTS AND OBSERVATIONS OF THE DIRECTORS REGARDING THE OPERATING RESULTS IN FIRST QUARTER 2005 PERFORMANCE OF THE CREDITO VALTELLINESE STOCK Throughout first quarter 2005, Credito Valtellinese shares maintained an average value very close to EUR 10, highlighting a growth that took the shares from a minimum value of EUR 9,349, recorded on , to a maximum value of EUR 10,703 recorded on The minimal oscillation in price recorded during the quarter confirms the low volatility of the stock. The figures below illustrate share performance from the beginning of 2005 and a comparison with the Comit banking index. Performance of the stock during the first three months of , , ,000 Credito Valtellinese Performance Andamento Credito Valtellinese Volume Quotazione Price , , , , ,000 50, Jan-05 6-Jan Jan Jan Jan Jan Jan-05 1-Feb-05 4-Feb-05 9-Feb Feb-05 Source: Bloomberg, adjusted values 17-Feb-05 t 22-Feb Feb-05 2-Mar-05 7-Mar Mar Mar Mar Mar Mar

10 Performance of the Credito Valtellinese stock compared to the Comit banking index during the first three months of 2005 (base 31st December 2004 = 100) Comparison between Confronto Cred. Valt. and - indice the Comit banking index quotazione Credito Valtellinese Credito Valtellinese Price Comit indice Banking comit bancario Index /30/2004 7/14/2004 7/28/2004 8/11/2004 8/25/2004 9/8/2004 9/22/ /6/ /20/ /3/ /17/ /1/ /15/ /29/2004 1/12/2005 1/26/2005 2/9/2005 2/23/2005 3/9/2005 3/23/2005 4/6/2005 4/20/2005 t Source: Bloomberg, adjusted values SIGNIFICANT EVENTS DURING THE QUARTER International Economic Situation After reaching a peak in 2004, despite remaining steady, international economic growth is showing signs of slowing down. Indeed, the context is characterized by persistent tension over the price of oil and the pursuit of more cautious economic policies than in the past, aimed at promoting more balanced growth, especially in China. On the whole, the expansion of the international gross domestic product should fall from 5% in 2004 to 4% expected for the year underway. The rate of economic growth has varied greatly in the different geographical areas. Though on one hand the United States and China have led world expansion thanks to the contribution of internal demand, on the other hand, the EMU and Japan still find themselves in a difficult situation due to the modest amount of internal demand 10

11 and a decrease in exports. On the whole, the development of the economy in the emerging countries is confirmed as positive. Despite the price of oil remaining at quite high levels, there has been no great pressure on inflation, also because of the smaller amount of energy needed for manufacturing. This, together with the moderate economic growth and the on-going weakness of the dollar compared to the euro, caused the European Central Bank to strengthen its orientation towards a neutral monetary policy. The imbalances in the payments have not eased up, with the worsening of the US trade deficit against the growing surplus accumulated by the Asian countries. Nevertheless, the expectations of further increases in American interest rates have stemmed the weakening of the dollar that the fundamentals suggest is happening. The other imbalances that distinguish the United States economy, that is, the public deficit and the high rate of debt among families compared to their disposable income, show no sign of attenuating. With specific reference to the situation in Italy, the uncertain trend which has been going on for some years continued. Economic activity underwent a large reduction in the last part of 2004, also conditioning the trend in the first months of this year. The most dynamic components of the total demand were the investments in constructions and exports, which benefited from the steady expansion of world trade. However, this was to a limited extent, confirming the fragility of the Italian production system in terms of competition. In light of the current situation, it is difficult to suggest that economic growth for 2005 is likely to exceed the 1% increase recorded in 2004 by any degree. Development of the Group s Operational Structure As at 31st March 2005, Credito Valtellinese Group counted 329 branches. During first quarter 2005 a new branch was opened in Romano di Lombardia in the province of Bergamo for the parent company Credito Valtellinese. Credito Artigiano revised the organizational structure of the network in the region of Tuscany, transferring and remodelling the head offices and branch no. 4 in Florence. Banca dell Artigianato e dell Industria inaugurated a new branch in Montecchio Maggiore, increasing its presence in the local area of Vicenza. As far as Credito Siciliano is concerned, the commitment to streamline the network of branches translated into the transfer of the Mazzarino branch. As at 31st March 2005, total personnel of the Group was equal to 3,193 employees, compared to 3,121 employees as at 31st December

12 Commercial Business New Products The first quarter 2005 was characterized by the restyling of the current accounts in the Armonia line, with the introduction of a series of implementations for all the variants offered to the different types of customers, also concerning with reference to the Silver and Gold formulas the possibility to subscribe to the accident insurance policy Conto Sicuro free of charge and the opportunity to benefit from discounts on the rate for the American Express Oro card. Alongside these innovations, and with the goal of acquiring new customers, the CambioBanca service was promoted. Thanks to this service it is possible to resolve bureaucratic difficulties connected to passing over from another credit institution free of charge. As part of the insurance solutions offered by the Credito Valtellinese group, in the first months of the year for those who intend to take care of their future economic security a new product called Global Futura 4 was created in the Linea Rendita Futura line. It is an index-linked policy consisting of a base in bonds and an option linked to the performance of a group of three primary international share indexes, aimed at those who intend to grasp the opportunities offered periodically by international markets while favouring the defence of their capital over time. In terms of promotional initiatives supporting the marketing of group products, in the first quarter a competition with prizes was launched called La sicurezza ti premia, linked to the products on offer in the bank-assurance damage sector. The initiative is in collaboration with the Beghelli Spa group, and it intends to promote the main insurance solutions offered to customers to respond to the need for safety in daily life. Banc@perta Line During the quarter, as part of the initiatives aimed at improving and expanding the on-line services, customers with banc@perta Internet contracts have been given the possibility to renew their TV licence, something which could only be done at ATM cash machines. The large commitment of the group in the Internet banking sector finds acknowledgement in the last on-line finance report made by the auditing company KPMG, which puts the Credito Valtellinese group in sixth place in the Italian leader board for the use of applications of this type, with a market share of 3.5%, only beaten by some of the biggest Italian banking groups and the post office. As at the end of March 2005, the Banc@perta line had a total of 194,423 customers, with an increase of almost 9,000 units compared to data as at 31st December

13 Euro Medium Term Notes On 14th March 2005 a lower tier II subordinated variable rate bond was issued for an overall total of EUR 150 million, aimed at Italian and foreign investors as part of the EMTN programme. The operation which was completed with total success for our group is aimed at acquiring medium-term types of deposit that are different from traditional ones in order to ensure an additional source for financing investments and a balanced array of deposits and loans in terms of maturity. It gives specific reference to medium and long-term financing operations which still enjoy a high number of requests from customers, especially from the private segments. BAI Increase in Share Capital On 30th March 2005, the Banca dell Artigianato e dell Industria shareholders meeting approved the project for a separable increase in share capital to offer as an option to shareholders for the maximum amount of EUR 80,925,600: EUR 59,653,728 in share capital and EUR 21,271,872 in share premium reserve. The project plans the issue of a maximum 11,560,800 shares in several blocks at the unit price of EUR 7.00 by 30th March EUR 5.16 of the share price is the nominal value and EUR 1.84 for the share premium reserve. The meeting also resolved to give the express delegation to the Board of Directors to define the size of the single blocks, the relative underwriting reports, the dates when the new shares can be used, as well as the timing and methods of carrying out the operations in line with the legal and supervisory regulations. The operation responds to the need to strengthen the bank s own means so that it can provide suitable support for the local and business expansion project of the controlled bank of Brescia in the north-east, Progetto Veneto, as provided for in the group s strategic plan. Promotion of the Local Area On the occasion of the World Skiing Championships which took place in Bormio and Santa Caterina from 28th January to 13th February 2005, the Fondazione Credito Valtellinese set up important cultural and artistic initiatives. First of all, we point out the production of the book: Un secolo di turismo in Valtellina. Viaggio tra storia e attualità (A Century of Tourism in Valtellina. A Journey Through History to the Present Day), co-published by Mondadori Electa, 13

14 accompanied by a travelling photographic exhibition centred on the economic, cultural and civil history of the Alpine district in the last century. Again as part of the initiatives for the Skiing Championships, there was a particularly important exhibition organized in collaboration with the Municipality of Sondrio and dedicated to the Swiss sculptor Alberto Giacometti entitled Alberto Giacometti. Percorsi Lombardi (Alberto Giacometti. Journey Through Lombardy). In addition, the Museo Valtellinese di Storia e Arte di Sondrio hosted the exhibition Legni sacri e preziosi. Scultura lignea in Valtellina e Valchiavenna tra Gotico e Rinascimento (Sacred and Previous Wood. Wood Sculpture in Valtellina and Valchiavenna between the Gothic and Renaissance Periods), again in collaboration with the Fondazione Gruppo Credito Valtellinese. Change-over to IAS/IFRS International Accounting Principles Credito Valtellinese will draw up its consolidated financial statements as at 31/12/2005 on the basis of the IAS/IFRS international accounting principles, in accordance with what is laid down by the EC regulation no. 1606/2002 and Italian legislative decree no. 38/2005. In conformance with the provisions in the CONSOB resolution no of 14th April 2005, the new principles in the mid-year accounts will be applied as of the third quarterly report. The half-year report will include special tables to compare the values determined on the basis of the criteria used to draw up the financial statements for the previous year and the same values determined upon application of the international accounting principles. We inform you that the auditing companies have been given the task of checking the data resulting from the change-over process. The main procedures created for the change-over to the IAS/IFRS principles are shown hereafter divided into sectors. The general layout of the accounting system currently in use is suitable for the new outlines. However, these have led to the implementation of new processes and new procedures and in some cases the revision of those already existing. Lending Area We have bought and installed a product for managing the amortized cost of performing loans and write-downs of doubtful loans. This procedure occupies an intermediate position in the company s computer system with respect to the operating and summary applications, acquiring basic data from the operating application and transforming it in conformance with the new requirements and then transferring it to the administrative area s summary applications. Finance Area The securities in the portfolios of the single group companies have been reclassified into the categories provided for by IAS 39 (financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables 14

15 and available- for-sale). The portfolios managed by the operators have been redefined as a result. The financial derivatives have also been suitably reclassified under hedging and trading instruments in application of the rules laid down in the principle. The process for determining the fair value has been redefined. Administration Area The real estate has been evaluated in order to determine the initial value. These analyses have also made it possible to separate the value of the land from the value of the property. As a consequence, the income management procedure is currently being brought into line. In addition, the methods for calculating the termination indemnities have also been redefined, basing them on actuarial methods. The summary systems (accounting, financial statements and management checks) have been suitably changed to absorb the different accounting methods and the new consolidated financial statements. NOTES ACCOMPANYING THE ACCOUNTING SCHEDULES In accordance with CONSOB regulations regarding preparation of the quarterly report, the balance sheet data as at 31st March 2005 was compared to the relevant data as at 31st December The items and income statement aggregates relative to Q were compared with the corresponding period in THE MAIN CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT AGGREGATES Total deposits As at 31st March 2005 direct deposits amounted to EUR 9,923.1 million, recording a 2.8% increase with respect to the EUR 9,656 million at 31st December Indirect customer deposits at the end of March 2005, amounting to EUR 10,776.1 million, showed an increase of 3.1% with respect to 31st December An analysis of total indirect deposits of the Group indicates that: savings managed, consisting of securities deposited with the banks in the Group, amount to EUR 5,356.6 million (+2.1% compared to the end of December 2004); assets under management, which consist of mutual investment funds and management of customer assets, amounted to EUR 4,389.4 million (with a 4.3% increase compared to 31st December 2004), while insurance savings amounted to EUR 1,030.1 million, a growth of 3.1% compared to the figure at the end of

16 Total customer deposits, calculated as the sum of direct and indirect deposits, reached EUR 20,699.3 million, a growth of EUR million (+2.9%) compared to the EUR 20,111.7 million at the end of December EUR million of this increase is due to the growth in direct deposits and EUR million in indirect deposits. Loans At the end of March 2005, the volume of loans to customers issued amounted to EUR 8,702.1 million, a growth of 5.6% compared to the EUR 8,240.2 million at 31st December Net non-performing loans at 31st March 2005 amounted to EUR million, essentially in line (-0.1%) with the figures at the end December The ratio of net non-performing loans to total loans to customers is equal to 2.9%, showing a slight improvement compared to the 3% at 31st December Portfolio Securities Portfolio securities 1 of the Group at the end of the period amounted to EUR 1,406.3 million, an increase of 3.8% compared to the EUR 1,354.8 million at 31st December Dealing securities, amounting to EUR 1,403.8 million, represented 99.8% of the entire figure, while investment securities amounted to EUR 2.5 million (0.2% of the whole portfolio), with a 10% decrease compared to the figure at the end of Shareholders Equity At 31st March 2005 the consolidated shareholders equity 2 of the Group amounted to EUR million, a slight decrease compared to the EUR million at 31st December The aggregate Portfolio securities includes: 20 Treasury bills and similar securities that can be used for refinancing with central banks, 50 Bonds and other debt instruments, 60 Shares, quotas and other equity-based securities. 2 Net consolidated shareholders equity includes the items: 100 Reserve for general banking risks, 120 Negative consolidation differences, 130 Negative shareholders equity differences, 150 Share capital, 160 Issue premiums, 170 Reserves (sub-items a, b, c, d), 200 Result for the period. 16

17 Economic Performance for the Period Analysis of the income statement demonstrates that interest income during first quarter 2005 amounted to EUR 71.1 million, a growth of 9.2% compared to the EUR 65 million during the corresponding period of the previous year. Services income, consisting of net commissions and other net income, totalled EUR 47.9 million during the first three months of 2005, an increase of 8.3% compared to the EUR 44.2 million of the corresponding period in More specifically, total net commissions amounted to EUR 45.1 million (+9.8%), while other net income amounted to EUR 2.8 million. Income from financial transactions during the first three months of 2005 amounted to EUR 5.2 million (up 18.2% compared to the EUR 4.4 million during the same period in 2004). Interest and other banking income, calculated as the sum of interest income and services income, profits of companies valued at shareholders equity and dividends (EUR 2.4 million during the first three months of the current year) and net income from financial transactions, amounted to EUR million during first quarter 2005, an increase of 9.7% compared to the corresponding period in Operating costs, consisting of net administrative expenses and value adjustments to tangible and intangible fixed assets, amounted to EUR 91.6 million in the first quarter 2005 (EUR 86.1 million in the same period in 2004). Gross operating result for the quarter reached EUR 35 million, up 19.6% compared to same period in Ordinary income, obtained by subtracting net value adjustments to loans and financial fixed assets and provisions for risks and charges (EUR 9.3 million) from the gross operating result, amounted to EUR 25.7 million, up 21.1% compared to the figure for the first quarter Income from extraordinary operations (EUR 0.3 million) resulted in a gross profit for the first three months of the year of EUR 26 million (up 26.3% compared to the corresponding period in 2004). Net profit for the period, after deducting income taxes, the change in reserve for general banking risks and profit for the period pertaining to minority interests, amounted to EUR 8.4 million for the quarter, up 42.4% compared to the EUR 5.9 million of the first quarter

18 SIGNIFICANT EVENTS AFTER FIRST QUARTER 2005 Institutional Profiles The extraordinary and ordinary shareholders meeting of the parent company Credito Valtellinese was held on 16th April The extraordinary meeting approved a project to change some articles in the company s Articles and Association, due to the completion of the corporate law reform, which was started with the law made under delegate powers of 3rd October 2001 and introduced with Italian legislative decree no. 6 of 17th January In the ordinary meeting, the shareholders approved the financial statements as at and made resolutions concerning: - the renewal of the authorization for the Board of Directors to proceed, where necessary and in the sphere of normal dealing activities aimed at encouraging the circulation of stock, with purchasing or reimbursing its own shares, as well as reallocating or cancelling them; - the confirmation to the office of board members: Messrs Giovanni De Censi, Mario Cotelli, Franco Bettini and Giuliano Zuccoli; - the appointment of Mr Emilio Rigamonti to the office of statutory arbitrator for FY The Board of Directors, united at the end of the meeting, confirmed Mr Giovanni De Censi in the office of chairman of the Board of Directors. During the months of March and April the meetings of the other companies in the group also took place, approving the draft budgets as at and, where necessary, making the required resolutions regarding the renewal of offices within the company. Credito Valtellinese 2.8% Convertibile Bond We remind you that as at 13th April the phase for repayment of the first instalment of the Credito Valtellinese 2.8% convertibile bond concluded, amounting to EUR 300 nominal value for each bond with an original nominal value of EUR The bond bearers were given the right to request the conversion of the amount into 43 shares in our bank as of instead of the reimbursement of the instalment, corresponding to a conversion value of EUR per share. In this connection, we point out that the transaction concluded with the conversion of almost all of the matured instalment (98.75%); as a consequence, the share 18

19 capital went from EUR 198,031,953 to EUR 235,405,446, divided into 78,468,482 shares with a nominal unit value of EUR 3. BAI Increase in Share Capital In the meeting of 20th April 2005, using the delegation given to them, the bank from Brescia s Board of Directors laid down the methods for carrying out the first part of the increase resolved by the extraordinary meeting of 30th March as shown below: - maximum amount of the block: EUR 40.4 million; - underwriting ratio: 3 new shares to every 4 old ones; - shares available as of: 1st July As an indication, the offer period has been arranged for the month of July 2005, after the end of the period for exercising the "Prestito BAI TV convertibile subordinato cum warrant" warrants and upon fulfilment of the necessary obligations required by the law and the applicable regulations. Communication Activities The institutional campaign promoted at the end of 2004 was the starting point for creating two successive adverts for the Famiglia Sicura and Global Casa products. These adverts also feature the valori in corso (values underway) slogan, and will be broadcast on various television channels as well as appearing in the national and local press. Development of the Local Network In the period following the end of the quarter, the group s network was enriched with the opening of 5 new branches, 4 under Credito Artigiano (Abbiategrasso, Vigevano, Melzo and Pistoia) and 1 under Credito Valtellinese (branch no. 6 in Como). 19

20 OUTLOOK FOR THE WHOLE PERIOD Despite the ongoing difficult economic context, the book results for the first quarter 2005 are positive, fully in line with the objectives in the budget. It is considered that the group can continue to grow in a harmonic and balanced manner in the remaining part of the year, with further expansion of the operating volumes and the improvement of all the main economic indicators. EXPLANATORY NOTES FORM AND CONTENTS OF THE CONSOLIDATED QUARTERLY REPORT The consolidated quarterly report as at 31st March 2005 has been drawn up in accordance with the regulations approved by CONSOB with ruling no of 14 May The report includes Credito Valtellinese (the parent company) and the companies operating in the lending and financial sector or whose main operations are instrumental to those of the parent company in which the latter directly holds a majority equity investment or has enough votes to exercise a significant influence at the ordinary shareholders' meetings. We point out that in the income statement published certain items have been reclassified, the amounts of which have been highlighted in the footnotes of the accounting schedules. CONSOLIDATION PRINCIPLES The consolidation principles applied are those set forth under Italian Legislative Decree no. 87/1992, by Provision no. 166 of the Bank of Italy, dated 30 July 2002 and subsequent modifications thereto, as well as the accounting principles in force, issued by the National Board of Chartered Accountants. The consolidated quarterly report has been drawn up on the basis of accounting schedules specifically prepared by the companies included in the scope of consolidation as at 31st March

21 ACCOUNTING PRINCIPLES The accounting principles have not been modified with respect to the report of the year ended 31/12/2004. Consequently, refer to said document for detailed information. It is highlighted that unlike methods used until now, the listed securities are booked using the precise market prices for the year end instead of the arithmetic average of the prices in the last month. The change resulted in greater capital gains, amounting to EUR 0.9 million. Note that the non-liquid portfolio items were not recorded in the relevant accounts of the balance sheet for settlement. OTHER INFORMATION The distribution of business by category and geographical area is not significant. THE BOARD OF DIRECTORS Sondrio, Tuesday 10th May