BANCA MEDIOLANUM S.p.A. Quarterly Report on Operations as at September 30,

Transcription

1 BANCA MEDIOLANUM S.p.A. Quarterly Report on Operations as at September 30,

2 Table of Contents 2 Corporate Bodies of Banca Mediolanum S.p.A. 3 Scope of Consolidation as at September 30, 4 The key results of the Mediolanum Group at the end of the third quarter of 12 Quarterly Report on Operations 46 Consolidated Financial Statements as at September 30, 54 Notes 70 Banca Mediolanum Interim Dividend 86 Declaration by the Corporate Financial Reporting Manager 88 Glossary

3 Registered Office: Meucci Building, Via F. Sforza Basiglio Milano Tre (Milan) Share capital Euro 600,064, fully paid up Tax, VAT and Milan Register of Companies Registration No Quarterly Report on Operations as at September 30,

4 Corporate Bodies of Banca Mediolanum S.p.A. Board of Directors Ennio Doris Edoardo Lombardi Giovanni Pirovano Massimo Antonio Doris Luigi Berlusconi Bruno Bianchi Luigi Del Fabbro Annalisa Sara Doris Paolo Gualtieri Angelo Renoldi Carlos Javier Tusquets Trias de Bes Chairman of the Board of Directors Deputy Chairman Deputy Chairman Chief Executive Officer Director Director Director Director Director Director Director Board of Statutory Auditors Arnaldo Mauri Adriano Angeli Marco Giuliani Chairman of the Board of Statutory Auditors Statutory Auditor Statutory Auditor General Manager Gianluca Bosisio Corporate Financial Reporting Manager Angelo Lietti Board Secretary Luca Maria Rovere Independent Auditors Deloitte & Touche S.p.A. 2

5 Scope of Consolidation as at September 30, 100% Bankhaus August Lenz & Co. (German Company) Mediolanum Vita S.p.A. 100% 100% Mediolanum Comunicazione S.p.A. 100% Mediolanum Gestione Fondi SGR p.a. Mediolanum Fiduciaria S.p.A. 100% Mediolanum Assicurazioni S.p.A. Banca Esperia S. p.a. 100% 100% 50% 100% 2,60% PI Servizi S.p.A. Mediolanum International Life Designated Activity Company (Irish Company) 100% 92% 100% Mediolanum Asset Management Ltd (Irish Company) Mediolanum International Funds Limited (Irish Company) GAMAX Management (AG) (Luxembourg) 3% Fermi & Galeno Real Estate S.r.l. 5% 100% 100% Banco Mediolanum S.A. (Spanish Company) Fibanc S.A. (Spanish Company) 99,998% 0,74% Mediobanca S.p.A. Mediolanum Pensiones S.A., S.G.F.P. (Spanish Company) 99,999% Mediolanum gestión S.G.I.I.C., S.A. (Spanish Company) 99,999% Companies forming part of the Mediolanum Banking Group. Since Mediobanca holds treasury shares, the total shareholding amounts to 3.40% of the voting capital. 3

6 The key results of the Mediolanum Group at the end of the third quarter of Economic Performance The Mediolanum Group closed the third quarter of with a net profit of Euro million (Euro million as at September 30, 2015). The very positive trend in the third quarter of net commission income, compared to overall costs in line with previous quarters, allowed the recovery of profitability levels close to those of the previous year. As at September 30,, total assets under administration by the Mediolanum Group reached the balance of Euro 74,281.7 million, with a growth of Euro +3,600.1 million compared to the balance as at year-end 2015 (December 31, 2015: Euro 70,681.6 million) and Euro +7,322.5 million compared to the balance as at September 30, 2015 (September 30, 2015: Euro 66,959.2 million). Consolidated Income Statement Key Items - Consolidated Income Statement Euro/millions Commission income Net financial income Net insurance income Equity Method Valuation Net income from other investiments (5.3) Other revenues (809.0) (838.5) Total Costs (13.6) (1.5) (45.4) (70.0) of wich Guarantee fund contribution(*) Taxes Net result Sept. 30, Sept. 30, 2015 (*) As at September 30, 2015, the portion of Banca Mediolanum was still not recognized and was valued in the 2015 financial statements for a total amount of Euro 19.2 million. Quarterly evolution of the key consolidated economic data Euro/millions Net financial income 57.3 Commission income Q1 Q2-3.7% Q3 Total Sept. 30, Q1 Q2 +8.6% +18.4% Q3 Total Sept. 30, Q3 Total Sept. 30, +3.4% Total Costs Net Result (272.1) (809.0) (271.8) 97.1 (265.1) 73.2 Q1 Q2 +2.5% Q3 +0.1% Total Sept. 30, Q1 Q % +38.7%

7 Commission income: breakdown by nature Euro/millions Entry fees Management fees Performance fees Banking service fees and revenues Other fees Sept. 30, Sept. 30, 2015 Costs: breakdown by nature Euro/million (344.5) (372.3) Network commission expenses (41.3) (43.7) Other commission expenses (359.7) (355.5) Administrative expenses Guarantee fund contributions Amortization and Depreciation Net allocations for risks Sept. 30, (13.6) (1.5) (22.7) (18.3) (27.2) (47.2) Sept. 30, 2015 Commission income: breakdown by operating segments Euro/millions Banking Asset Management Insurance Spain Germany Sept. 30, Sept. 30, 2015 Costs: breakdown by operating segments Euro/millions Banking (219.3) (276.7) Asset Management Germany Sept. 30, (308.5) (195.6) (217.7) Insurance Spain (262.9) (45.9) (64.8) (27.9) (28.2) Sept. 30,

8 Data for inflows and assets Net inflows Euro/millions 2,148.4 Banca Mediolanum - Assets under Management Banca Mediolanum - Assets under Administration 3, ,776.8 (101.8) Banca Esperia Group (*) Spain Germany Sept. 30, (9.2) Sept. 30, 2015 Assets under Administration (**) Euro/millions 61, ,034.2 Banca Mediolanum 8, ,595.6 Banca Esperia Group (*) Spain Germany Sept. 30, 3, , Dec. 31, 2015 (*) The figures relating to Banca Esperia were considered in proportion to the percentage of ownership (50%). (**) The figures relating to Assets under Administration refer to Retail customers only. 6

9 Customers Performance of the Customer Base Units ( 1.000) 1,200 1,164 1,150 1,128 1,100 1,077 1,082 1,066 1,040 1,050 1,111 1,043 1, Dec. 31, 2011 Dec. 31, Dec. 31, 2010 Dec. 31, 2013 Total Customers Italy Dec. 31, 2014 Sept. 30, 2015 First Holders Dec. 31, 2015 Sept. 30, No. of Account Holders 2 Customers of the Italian market holders of a Group product. Customers of Banca Mediolanum holders of bank account. Average assets per customer Average assets Sept. 30, 2015 Dec. 31, 2015 Sept. 30, Dec. 31, 2010 Dec. 31, Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2014 Average assets per customer 1 1 Average Assets related to customers in the Italian market and relating to first holder. 7

10 Alternative performance indicators1 Consolidated equity ratios as at September 30, Common Equity Tier Tier 1 Ratio Total Capital Ratio 20.4% 20.4% 20.5% Data expressed in % Evolution of Common Equity Tier 1 Ratio Data expressed in % 20.0% 10.0% 18.4% 18.5% 18.5% 18.8% 19.7% 19.7% 20.2% 20.4% Dec. 31, 2014 March 31, 2015 June 30, 2015 Sept. 30, 2015 Dec. 31, 2015 March 31, June 30, Sept. 30, 0.0% Capital Adequacy - Financial Conglomerate Sept. 30, Dec. 31, ,794 1,484 Banking capital requirements Insurance capital requirements Equity surplus (deficit) Euro/millions Bank-oriented financial conglomerate Equity Evolution of the equity Surplus of the Financial Conglomerate Euro/millions Dec. 31, 2014 March 31, 2015 June 30, 2015 Sept. 30, 2015 Dec. 31, March 31, June 30, Sept. 30, Following the entry into force of the new Solvency II regime for insurance companies, it is noted that the data relating to the requirements of the insurance sector and the related portion of equity corresponding to the reconciliation reserve were calculated in accordance with the new sector regulations. However, we used the data as at June 30, since, as at the date of preparation of this Quarterly Report on Operations, the values for the first nine months of were not yet available. The values presented in this disclosure may be subject to updating when reporting to the Supervisory Authorities. 1 8

11 Information on shares Sept. 30, Dec. 31, 2015 Number of ordinary shares (units) 739,047, ,401,857 Listing at the end of the period (Euro) 5,90 7,31 Market capitalization (millions of Euro) 4,360 5,398 Shareholders equity (millions of Euro) 2,186 2,070 Earnings per share Euro Sept. 30, Sept. 30, 2015 Basic earnings per share (basic EPS) Diluted earnings per share (diluted EPS) (*) (*) Net income attributable to holders of ordinary shares, divided by the weighted average of ordinary shares in issue. Consolidated risk indicators Sept. 30, Dec. 31, 2015 Loans to customers (Euro/thousands) 7,606,206 7,478,108 Loans to customers - net impaired assets/ Loans to customers (values in %) Value adjustments to gross impaired assets/ Loans to customers gross impaired assets (values in %) 0.85% 0.79% 47.12% 46.77% Net non-performing/loans to customers (values in %) 0.28% 0.24% Operational structure Units Sept. 30, Sept. 30, 2015 Dec. 31, 2015 Number of Employees 2,709 2,665 2,703 Number of financial advisors 5,302 5,216 5,224 For the definitions used in this summary of results, reference is made to the Glossary section at the end of the Document. 9

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13 Quarterly Report on Operations

14 Quarterly Report on Operations Macroeconomic scenario During the reporting period, the international financial markets were guided, in particular, by the expectations and actual monetary policy decisions of major central banks, engaged in monitoring the performance of the economies of the respective countries and in assessing any interventions; also some elements of economic and political uncertainty remain, while the data from Great Britain is monitored to estimate the effects of the referendum on the exit from the European Union (Brexit). With reference to the banking system, in July, investors attention was focused on the results of the tests conducted by the European Banking Authority (EBA) on 51 major systemic banks in the Eurozone; to this effect, strong elements of uncertainty remain on the financial sector as a whole. The trend of the world economy showed signs of recovery for emerging countries and a mild slowdown in Europe, where the impact of the British referendum has appeared rather attenuated so far. Global growth is likely to remain modest, in a scenario affected by an electoral cycle that will involve several advanced economies (the US, France, Germany, the Netherlands) and the increasing difficulty of monetary policy to affect aggregate demand. At its meeting of September 8, the European Central Bank decided not to introduce any changes to the quantitative easing plan under way, nor to extend the maturity of the same planned for March Refinancing rates were confirmed at 0%, while rates on marginal deposits and marginal lending remained unchanged at -0.40% and 0.25%, respectively. From a macroeconomic perspective, the consumer price index (CPI) flash estimate of September grew by 0.4% on an annual basis, compared with the previous 0.2%, confirming expectations. With regard to GDP growth, the data showed an increase of +0.3% q/q in the second quarter of, in line with as indicated by the consensus, however down from the previous +0.5%. According to the International Monetary Fund (IMF), the Eurozone will grow by +1.7% in, while it is expected to grow by +1.5% in the following year (+0.1% compared to the estimates in July). On September 21, the Federal Reserve decided to keep its monetary policy unchanged, postponing any decision to December (an intervention in November is considered less likely because of the concurrent presidential elections). The President, Janet Yellen, emphasized that the choice is not to be attributed to a lack of confidence in economic recovery, but rather can be explained by the hope of a closer approach to the objectives set, consistent with the data from the labour market, which has already reached satisfactory levels. According to the Governor, the conditions are now mature for a rate hike later this year, in a context of attenuated short-term risks. The apparent uncertainty among Fed members regarding the direction to be taken in terms of monetary policy had resulted, in President Yellen s intervention at the symposium in Jackson Hole, in the statements of several members of the FOMC in favour of an interest rate hike. With regard to macroeconomic data, GDP for the second quarter of grew by 1.4% q/q annualized, compared to 1.1% in the previous reading (1.3% estimate) and 0.8% recorded in the first three months of ; in August, 151 thousand new jobs were created in the non-agricultural sector, against the 180 thousand expected and the 252 thousand of the previous month, while the unemployment rate remained stable at 4.9%. The US economic growth estimates have been revised downwards by the IMF, expected to expand by +1.6% in from +2.2% indicated in July, while for the following year, +2.2% is estimated (0.3% less than previous estimates). 12

15 It is noted that US financial markets were influenced by the news of an agreement reached between OPEC countries on the limitation of daily oil production at million barrels per day. During an informal meeting in Algiers, Saudi Arabia granted an exemption to Iran of said ceiling until it reaches the objective of bringing production to pre-sanction levels (4 million barrels per day). The decision has had a positive effect on oil prices, stock markets and the bond markets of the Eurozone periphery countries, while the ten-year German recorded a decline from the absolute maximum. However, the impact of the OPEC s decision is mitigated by the simultaneous increase of oil production from Russia (+400 thousand barrels per day), which is now seeking an agreement between OPEC countries and non-opec countries. With reference to the Japanese economy, the country remains on a modest growth path, despite the ample monetary stimulus in place and the provision of massive expansionary fiscal measures. The Government announced a new stimulus plan of Yen 28 thousand billion (of which 13 destined to fiscal measures), with the aim of revitalizing the Japanese economy, weighed down by the global slowdown and the uncertainties related to the Brexit. The business plan was the prelude for the Bank of Japan (BoJ) to the implementation of new accommodative measures announced in the meeting of July 29: an increase of the monetary stimuli was approved, with an expansion of ETF purchases to Yen 6 thousand billion per year from the previous 3.3 and the doubling of the dollar funding program (to Dollars 24 billion); however, expectations were disappointed for a further cut in deposit rates and an increase in government bond purchases, the main tools used to expand the monetary base which, instead, will continue to grow at a rate of Yen 80 thousand billion per year until reaching the inflation target of 2.0%. In addition, at its meeting on September 21, the BoJ announced a change in strategy with regard to monetary policy, shifting the focus on the control of the rate curve (rather than on increasing the monetary base), with the intent to maintain yields on ten-year government bonds at current levels (close to 0%). Governor Kuroda added that the Central Bank will do everything possible to maintain the stability of exchange rates, closely monitoring the impact on the real economy. In this context, Moody s confirmed its A1 rating with a stable outlook: the decision was justified by the slow but steady progress of the reforms in place, which could encourage an increase in inflation and reverse the upward trend of public debt, with respect to a financing cost of the country that will continue to be low. In terms of inflation, the consumer price index (CPI) recorded a decline of -0.5% on an annualized basis in August, showing a marginal worsening compared to the previous -0.4%, however in line with expectations. The core figure (excluding the most volatile components) amounted to +0.2% yoy, in line with expectations, however slightly worse than the previous +0.3%. In its meeting of August, the Bank of England cut interest rates to a record low of 0.25%, accompanying the operation with a quantitative easing plan that provides for the purchase of government bonds for a total amount of Pounds 60 billion, bringing the program to 435 billion. These measures were accompanied by a purchase plan of corporate bonds for 10 billion and a facilitated refinancing fund of Pounds 100 billion to encourage lending by banks to the real economy. In light of the scenario described, industrial activity recorded a strong recovery in September: the final reading of the manufacturing PMI in the UK, prepared by Markit/CIPS, was 55.4 points, reaching the highest level in the last 10 months, a clear sign of recovery after the sharp drop following the victory of the Brexit; support elements of manufacturing activity include net exports, which benefited from the weakness of the Pound. In terms of the evolution of economic and financial activities, the country s GDP recorded an increase of +0.7% q/q in the second quarter of the year; this figure was revised upwards from the first reading that indicated a change +0.6% q/q, while the figure on an annual basis highlighted lower growth, from +2.2% to +2.1%. On July 29, the results were announced of the tests conducted by the European Banking Authority (EBA) on 51 major systemic banks in the area: the adverse scenario, to which the banks were subjected, showed a substan- 13

16 tially solid system, in which almost no bank slipped below 5.5%, the minimum capital threshold considered in the 2014 stress test. In detail, the five Italian banks involved in the exercise of the EBA (Monte dei Paschi, Intesa San Paolo, Unicredit, Banco Popolare, Ubi) showed an average CET1 of 7.7%. In terms of country aggregate, in relation to the average CET1 for 2018, Great Britain ranks above Italy at 8.5%, preceded by Spain (8.6%), the Netherlands (9.0%), Germany (9.5%) and France (9.7%). Lastly, considering only the impact of the test, Italian banks demonstrate, in aggregate, to react better than German ones, dispelling 409 basis points compared to 537 of Germany. Internationally, major uncertainties remain: China s economic performance remains uncertain, despite the data for August showed a modest improvement in business confidence, a moderate recovery in exports and industrial production, a stabilization of investments and credit growth. The GDP growth rate remained unchanged in the second quarter at +6.7% y/y, while inflation reached the minimum year to date in August, down from expectations to +1.3% y/y from +1.8% in July. In Germany, the party of Chancellor Angela Merkel has shown signs of political weakness in the regional elections, while the US presidential elections will be in November. Financial Markets Since the beginning of the year and in the third quarter of, international stock markets respectively recorded a performance of +3.8% and +4.4% (MSCI World Index in Dollars). In the USA, the S&P 500 index recorded a positive performance of +6.1% and +3.3% and the Nasdaq Composite positive of +6.1% and +9.7%; European stock exchanges on average have recorded a decline since the beginning of the year, with the STOXX Europe 600 index down respectively -6.3% and up +3.9%. In detail, the Dutch (+2.4% and +3.8% AEX), English (+10.5% and +6.1% FTSE 100) and French (-4.1% and +5.0% CAC 40), Swiss (-7.7% and +1.5% SMI) and German (-2.2% and +8.6% DAX) stock exchanges have showed better performance compared to the Italian (-23.4% and +1.3% FTSE MIB) and Spanish (-8.0% and +7.6% IBEX 35) stock exchanges; in Asia, the Japanese market (-13.6% and +5.6% Nikkei 225) underperformed the Australian (+2.6% and +3.9% S&P/ASX 200) and Hong Kong (+6.3% and +12.0% HANG SENG) stock exchanges. Emerging stock markets achieved on average a positive result respectively of +13.8% and +8.3% (MSCI Emerging Markets index in Dollars). Since the beginning of the year and particularly in the third quarter of, the German government curve recorded reductions in yields compared to the end of the previous year on the various maturities: at 2 years, compared to the -0.35% return as at the end of 2015, it amounted to -0.66% as at June 30 and -068% as at September 30; at 5 years, there was a decline respectively to -0.57% as at June 30 and to -0.58% as at September 30 from -0.05% as at December 31; in the same way, at 10 years, it amounted respectively to -0.13% and -0.12% from 0.63%, at 30 years to 0.38% and 0.45% from 1.49%. The spread between Italian and German debt on the ten-year maturity went from an initial 96 basis points to 138 as at June 30 to 130 as at September 30; while on two-year maturity it went from an initial 31 basis points to 54 as at June 30 and to 56 points as at September 30. In the period, the Italian government curve recorded the following yield reductions: at 2 years from, -0.03% as at December 31, 2015 to -0.11% as at June 30 and September 30; at 5 years, from 0.50% respectively to 0.29% and 0.26%, 10 years from 1.60% to 1.26% and 1.19%; at 30 years, from 2.70% recorded as at December 31, 2015 to 2.28% as at June 30 and 2.25% as at September 30. The spread between Spanish and German debt on the ten-year maturity went from an initial 113 basis points to 129 as at June 30 and 99 as at September 30. As at September 30, the US government curve presents a yield at 2 years of 0.76%, up from 0.58% as at June 30, 14

17 but down from the initial 1.05%, while the yield at 10 years amounted to 1.59% against 2.27% as at December 31, 2015 and 1.47% as at June 30. In the first quarter, there has been an initial increase in yields on high yield markets and emerging markets, largely corrected in the second and third part of the period. Yields of emerging markets changed on average from 6.71% as at year-end 2015 to 5.59% as at June 30 and to 5.25% as at September 30 (JPMorgan Emerging Markets Global Sovereign Index, JPEGSOYD Index), with a minimum level of 5.13% recorded on September 7 and a maximum level of 7.13% recorded on January 20; in high yield markets, yields decreased from 8.74% as at December 31 to 7.27% as at June 30 to 6.17% as at September 30 (Barclays US Corporate High Yield Index, LF98YW Index), recording a minimum of 6.07% on September 8 and a maximum of 10.10% on February 11. The Euro exchange rate against the US dollar closed 2015 at The single currency recorded a positive change year to date until September 30 of +3.43%, closing the third quarter at ; with regard to the third quarter, the exchange rate showed a positive change of +1.16% from to Instead, the weakening observed in September is consistent with the indications that emerged from the minutes of the ECB, which confirmed the willingness to further increase the monetary stimulus if needed, dispelling doubts on the possibility that the Frankfurt Institute is considering an imminent tapering. In, the Euro exchange rate to the British pound went from an initial to as at September 30, recording an increase of %, with a maximum of on August 15, following the sharp depreciation of the British currency in the aftermath of the referendum on the exit of the country from the EU. In the third quarter, from a level of as at June 30, the appreciation of the Euro against the Pound was +3.81%. The performance of the Euro-Yen exchange rate is mainly influenced by the monetary policy actions of the respective central banks, both characterized by an expansionary orientation. The overall weakening of the Euro in 2015 (from at the beginning of the year to as at December 31, 2015) has continued also into, thanks also to the expansion of the monetary easing program by the European Central Bank. Since the beginning of the year, the exchange rate showed a decrease of %, while in the third quarter of -0.60%, with a minimum recorded in the quarter of (on July 8) and a maximum of (on July 20). Yen purchases were intensified especially on June 24 thanks to the connotation of the Japanese currency as a safe haven: the exchange rate recorded an intraday minimum of The Banking Market 1 Funding According to the first estimates of the SI-ABI in September, Euro-denominated inflows from customers of all banks in Italy, represented by resident customer deposits (deposits in bank accounts, term deposits net of receivables sales, deposits repayable upon notice and repurchase agreements; deposits are net of operations with central counterparties) and bonds (net of those repurchased by banks) decreased by about 22 billion on an annual basis, showing an annual change of -1.3% (-0.9% the previous month; -1.5% in September 2015). More specifically, funding from resident customers amounted to Euro 1,656.9 billion; before the start of the crisis in late 2007 the amount of bank deposits was about Euro 1,513 billion ( billion from the end of 2007 to date); as follows: 1,000.5 billion of customer deposits ( billion from the end of 2007 to date) and billion of bonds ( billion since 2007). The observation of the various components shows the clear gap between short-term and medium/long-term sourc- 1 Source: ABI Monthly Outlook - October - Summary. 15

18 es. Deposits of resident customers (in current account, deposit certificates, repurchase agreements net of operations with central counterparties, term deposits connected with sales of receivables) recorded a trend of +3.4% in September, an increase in absolute value on an annual basis of over Euro 43 billion. The amount of deposits reached a level of 1,328.6 billion at the end of September. The annual change of the bonds 2 amounted to -16.6% (-16.6% also in August ), showing a decrease in absolute value on an annual basis of over Euro 65 billion. The amount of bonds amounted to Euro billion. In August, the trend for deposits abroad was down 3 : in particular, those of Italian banks totalled about Euro billion, 6.6% lower than a year earlier (-5.7% the previous month). The portion of foreign deposits of total funding stood at 11.9% (12.5% a year earlier). The net flow of funding from abroad in the period between August 2015 and August was negative by about Euro 21.5 billion. In August, net inflows from abroad (foreign deposits less foreign loans) amounted to about Euro billion (-2.4% change in the trend). Of total domestic lending, it was equal to 6.7% (6.8% a year earlier), while foreign loans also at the same date amounted to about Euro billion. The ratio foreign loans/foreign deposits amounted to 58.3% (60.1% a year earlier). The harmonized statistics of the European System of Central Banks observe that the average rate on deposits from customers (which includes the return of deposits, bonds and repurchase agreements in Euro applied to households and non-financial companies) was 1.02% in September (1.04% the previous month; 2.89% at the end of 2007). The rate on deposits in Euro applied to households and non-financial companies was 0.42% (0.43% the previous month), that of bonds settled at 2.78% (2.82% in August ), and the rate on repurchase agreements at 1.36% (1.34% the previous month). On the secondary market for government securities, the Rendistato, i.e. the figure related to the basket of securities with a residual life over one year traded at the Italian Stock Exchange (MOT), stood at 0.73% in September, 6 basis points higher than the previous month (0.66% record low) and 55 basis points below the value of September In September, the gross yield on the secondary market for CCT amounted to 0.19% (0.18% in August, 0.42% in September 2015). With reference to the BTP, in the average of September, average yield was 1.18% (1.80% in September 2015). Lastly, the annualized gross average yield on Treasury Bills went from -0.25% to -0.27% in the period August September. Lending The dynamics of bank loans expressed a slight improvement in September, albeit at values close to zero. Based on preliminary estimates, total loans to Italian residents (private sector and public authorities, net of repurchase agreements with central counterparts) stood at Euro 1,807.7 billion, with a change of -0.4% yoy (-0.7% the previous month). At the end of 2007 before the start of the crisis said loans amounted to 1,673 billion; since then marking a growth of Euro billion in absolute value. The annual change of loans to Italian residents to the private sector was also close to zero 4 (-0.4%). At the end of September, they amounted to Euro 1,540.1 billion (1,450 billion at the end of 2007, about +90 billion since then to present). 2 Bonds (resident and not) are net of those repurchased by banks. 3 Indebtedness to non-residents: deposits of MFIs, Central Administrations, other Public Administrations and other residents in other Eurozone countries and the rest of the world. 4 Other Italian residents: non-financial companies consumer households, family businesses, non-profit institutions, insurance companies, pension funds and other financial institutions net of repurchase agreements with central counterparties. 16

19 Also in September, loans to households and non-financial companies amounted to Euro 1,411 billion, marking an annual change of -0.01% (-0.2% the previous month). At the end of 2007, these loans amounted to 1,279 billion, with an increase in the period of over 132 billion in absolute value. If we consider the breakdown by maturity segment, we note that in the short-term (up to 1 year) has recorded an annual increase of -4% (-5.1% in August ), while the medium and long-term (over 1 year) changed by +1.3% (+1.4% in August ). In August, the dynamics of loans to non-financial corporations amounted to -0.2% (-5.9% in November 2013, the most negative value). The trend dynamics in total loans to households grew 5 (+1.5% in August ; -1.5% in November 2013). Also in August, the total amount of outstanding mortgages of households recorded a positive change of +1.9% against the end of July 2015 (when there had already been signs of improvement), also confirming on the basis of data on existing loans, the recovery of the mortgages market, initially with a peak in new mortgages. In September, interest rates on loans stood at very low levels in Italy. The reports of the SI-ABI show that the weighted average rate on total loans to households and non-financial companies developed by ABI in September amounted to 2.97% (record low), 2.99% the previous month; 6.18% at the end of The rate on Euro loans to households for house purchases which summarizes the trend of fixed and variable rates and is also influenced by the change of the composition of disbursements based on the type of mortgage amounted to a record low of 2.05% (2.16% the previous month). Of the total new mortgages, almost two-thirds are fixed-rate mortgages: in the last month, the portion of the flow of fixed-rate loans amounted to 71.2% (66.1% the previous month; 66.3% in July ). The rate on new loans in Euro to non-financial companies stood at 1.67% in September (1.66% the previous month; 5.48% record low at the end of 2007). Non-performing loans Non-performing loans net of write-downs, in August, amounted to about Euro 84.7 billion, a marginal increase compared to 84.4 billion the previous month. Compared to the same month the previous year, they decreased by about 1.3 billion (-1.5% annual increase, down compared to +5.3% at year-end 2015). The ratio of net non-performing loans to total loans was 4.76% (4.73% as at July and 4.79% as at August 2015). The Insurance Market 6 From an initial estimate prepared by ANIA, in the first nine months of, new individual life insurance inflows in Italy from Italian companies and representatives of companies outside the EU, including the additional single 5 Consumer households and family businesses 6 Source: ANIA TRENDS Life New Production September. 17

20 premiums, amounted to Euro 65.0 billion, recording a decrease of -11.7% compared to the volumes achieved in the same period of the previous year. Also considering the new premiums of EU sample companies, with premiums in the nine months of Euro 12.6 billion (-11.3% compared to the 2015 figure), total new life business amounted to Euro 77.6 billion, 11.6% less than the same period the previous year. With regard to Italian and non-eu companies, in the first nine months of, class I premiums related to new individual policies amounted to Euro 48.4 billion, quite stable compared to the same period the previous year. Inflows of new premiums on Class V policies were also positive and amounted to Euro 1.3 billion, a decrease of -30.0% compared to the first nine months of The remaining portion of new life production was represented by Class III premiums (only Unit-Linked), which reached Euro 15.3 billion from the beginning of the year (-35.0%). Contributions related to new individual adhesions to pension schemes, totalling Euro 0.9 billion, increased over the first nine months of 2015 (+14.5%). Commercial initiatives in the third quarter Banking Area The offer of Banca Mediolanum in the banking area in the third quarter of was focused on enhancing and ensuring continuity of the new commercial offering Mediolanum For You, a promotion calibrated on the profile of each Customer to provide a number of important benefits including personalized offers in terms of creditor rates. Also with a view to offer differentiation and personalization, it is noted that starting September 3, the equity offering was differentiated regarding the Double Chance product for brackets of amounts recognizing a creditor rate of up to 3.75% on the Double Chance Account. As of September 1,, the offer of American Express Cards has been expanded in order to respond fully to the new Mediolanum For You segmentation so we can offer products with different features and service levels in line with the needs of different customer clusters. Also, in addition to the American Express Carta Oro Mediolanum, Carta Verde and Carta Platino American were introduced. In the Credit area, in the third quarter of, Banca Mediolanum managed to maintain a strong competitive position in mortgages in the most attractive segments (low loan to value and lower durations). In terms of disbursements, Banca Mediolanum recorded good sales volumes of Euro 705 million (+7% compared to the same period of 2015). In relation to loans, as of July 1,, the new list came into force, which has seen a reduction of spreads to keep the offer for customers competitive. In terms of progressive production, there was a drop from the previous year, recording a disbursement volume of Euro 350 million (Euro 397 million disbursed in the same period of 2015) however with good signs of recovery in the last two months of the quarter just ended also thanks to the support of specific marketing campaigns on the customer base. Instead, with regard to current account credit openings, there was a decrease over the previous year with disbursements corresponding to Euro 293 million (Euro 348 million in 2015). Asset Management Area The third quarter of was strongly oriented to the consolidation of as achieved in the first half of the year. In fact, with the introduction in the first half of of the five new Funds belonging to the family Mediolanum 18

21 Best Brands and the new investment service Intelligent Investment Strategy, there has been great attention to providing adequate info/training support to the Commercial Network. Instead, regarding direct distribution of Third-Party Funds, although there are no new products or agreements with other Investment Firms, the implementation of the digitization process continues, now regarding additional subscriptions and conversions, developed with a view to making the offer consistent with the entire distribution model proposed by Banca Mediolanum. Insurance Area With a view to increasing the level of service customization, new additions were introduced regarding the Mediolanum My Life product. In particular, in the third quarter of, the Mediolanum My Life offer was extended with the introduction of My Life Special, a new version developed with innovative features thanks to the attribution of an entry bonus. Finally, during the quarter, by issuing new tranches, continuity was given to the offer of Mediolanum Più, Unit- Linked policy issued by Mediolanum International Life, which invests mainly in government and corporate bond securities with the aim to provide protection of capital invested at maturity and, during the contract term, to distribute periodic predefined amounts. Protection Area As of September 22,, the offer Protezione has been enriched with a new product, Mediolanum Capitale Casa, a policy that allows customizing coverage according to the protection needs of Customers, choosing from three different guarantees, which are listed below and also available separately: Guarantee A: Damage to properties with Earthquake Option; Guarantee B: Damage to content with Theft Option of content (choice between Base and Plus version); Guarantee C: Third Party Liability. The policy is always completed by the mandatory assistance package Casa No Problem (Guarantee D), provided in partnership with Europ Assistance S.p.A., which provides a team of craftsmen (plumbers, locksmiths, electricians) in case of emergency. The important coverage accompanying the protection of the property from events such as fire, lightning, explosion, electrical phenomenon or damage from water pipeline is the Earthquake Option, which allows insuring the properties located throughout Italy from damage from earthquakes. The policy also makes it possible to simultaneously insure two properties such as, for example, habitual residence and a vacation home. In this case, Customers can benefit from a discount of 15%. Lastly, Customers can benefit from a discounted premium for the guarantee Third Party Liability in the case of simultaneous purchase of another guarantee, A and/or B. Disclosure Obligations to the Public Legislative Decree no. 25 of, which transposed the new Transparency directive, has eliminated the obligation of publication of the Quarterly Report on Operations. The decree attributed to Consob the right to provide, with specific regulation, any additional disclosure requirements, with respect to the annual financial statements and half-year report, only subsequent to an impact assessment that takes account also of the guidelines of the other European Union countries, in most of which the obligation has been abolished for all issuers. However, 19

22 companies may decide to publish additional financial information on a voluntary basis, in the content and manner deemed most appropriate. Banca Mediolanum has chosen to publish in any case additional financial information for the first quarter of to ensure continuity with the past. Mediolanum Group s performance The situation of the accounts as at September 30, showed a net profit of Euro million compared to net income for the first nine months of the previous year amounted to Euro million (-2%). The result as at September 30,, before taxes, amounted to Euro million compared to Euro million in the same period of the previous year, a decrease of Euro -31 million. The result for the period was affected by the decline in commission income of Euro million compared to the same period of the previous year. With respect to a moderate growth in management fees of Euro million, both subscription and performance fees decreased respectively by Euro million and Euro million. The net financial income recorded a decrease of Euro 22.6 million, mainly in relation to the performance of financial markets that have seen a decrease in interest rates with consequent negative impacts on the items of the financial statements measured at fair value. Net income from other investments increased by Euro 21 million. The change is mainly attributable to the profit on the sale of the investment in CartaSi by Banca Mediolanum (approximately Euro million) and the transaction related to VISA Europe by the German and Spanish subsidiaries (Euro +9.2 million). As at September 30,, costs decreased by approximately Euro 29.5 million compared to the same period of the previous year. In particular, network commission expenses decreased by Euro 27.8 million due to the reduction of net inflows relative to asset management products with specific reference to subscription fees income. Net provisions for risks and charges decreased by Euro 20 million. It is noted that the year 2015 had been affected by an extraordinary provision by the Spanish Group Banco Mediolanum (Euro million), while in, against an ameliorative second-instance sentence, a portion of the above provision was instead released for about Euro 6 million. Administrative expenses increased by Euro 4.2 million compared to the comparative period mainly due to higher corporate communication expenses (Euro +3.0 million) and interventions for customers affected by natural disasters (Euro +1.3 million). The item Contributions and Guarantee Funds as at September 30, amounted to Euro 13.6 million against Euro 1.5 million recorded as at September 30, The balance as at September 30, includes the provision pertaining to the Group of the funds Deposit Guarantee Schemes and Single Resolution Fund. In 2015, the allocation of said funds had been the subject of accounting by Banca Mediolanum S.p.A. starting from the last quarter of 2015, i.e. the date of enactment of the implementing regulations. Therefore, at year-end 2015, the funds accounted by Banca Mediolanum included the ordinary contribution for 20

23 the funds Deposit Guarantee Schemes and Single Resolution Fund for Euro 7.6 million plus Euro 11.6 million of outstanding contribution for the bailout of Banca delle Marche, Banca dell Etruria e del Lazio, Cassa di Risparmio di Chieti and Cassa di Risparmio di Ferrara. It is pointed out that the economic data presented in the document for comparative purposes are those of the Mediolanum Group in the configuration that saw Mediolanum S.p.A. as the Parent Company and were not reclassified, since the current scope of consolidation is the same as the previous configuration. The figures for the comparative period may have been reclassified if deemed appropriate in order to improve comparability. 21

24 Inflows and Assets under Administration Net Inflows Euro/millions Sept. 30, Sept. 30, 2015 Change (%) ITALY Funds and Unit-Linked Products 2, ,759.3 (33%) of which directly in Funds 1, ,211.9 (25%) of which My Life Unit Linked ,699.1 (66%) of which Other Unit Linked (151.7) n.s. Other Insurance Products - Life (214.0) (347.8) (38%) Total Assets under Management 2, ,411.5 (33%) Third-party structured securities (138.8) (294.6) (53%) Total Assets under Management + Structured securities 2, ,116.8 (31%) Total Assets under Administration 2, n.s. Freedom life policies (247.9) (401.2) (38%) Total Assets under Administration including Freedom 1,776.8 (101.8) n.s. BANCA MEDIOLANUM 3, , % BANCA ESPERIA GROUP (*) (33%) Total ITALY 4, , % SPAIN (59%) GERMANY 69.8 (9.2) n.s. TOTAL FOREIGN MARKET (42%) TOTAL NET INFLOWS 4, , % (*) The figures relating to Banca Esperia were considered in proportion to the percentage of ownership (50%). Net inflows for the domestic market as at September 30, recorded a positive balance of Euro +4,035.2 million versus Euro +3,179.5 million in the comparative period (+27%). With particular reference to Banca Mediolanum, net inflows were positive for Euro +3,925.2 million compared to Euro +3,015.0 million as at September 30 of the previous year (+30%), of which Euro +2,148.4 million referring to Assets under Management (AuM) (September 30, 2015: Euro 3,116.8 million). More specifically, net inflows in mutual funds, either through direct investment or through investments in Unit- Linked policies, showed a balance of Euro +2,501.3 million (September 30, 2015: Euro +3,759.3 million). The product My Life recorded a decrease of Euro -1,125.2 million over the comparative period. Net inflows in other life insurance products, with the exception of Unit-Linked and Freedom policy, were rather negative for Euro million (September 30, 2015: Euro million). The Mediolanum Plus policy, linked to the Freedom account, continues to record a negative balance, which amounted to Euro million, albeit to a lower extent with respect to the comparative period (-38%). Assets under administration recorded a positive balance for Euro +1,776.8 million compared to a negative balance of Euro million in the first nine months of Excluding the Freedom policies, net inflows for Assets under Administration were positive for Euro +2,024.7 million compared to a positive balance of Euro million as at September 30,

25 Assets under Administration (*) As at September 30,, total assets under administration by the Mediolanum Group reached the balance of Euro 74,281.7 million, with a growth of Euro +3,600.1 million compared to the balance as at year-end 2015 (December 31, 2015: Euro 70,681.6 million) and Euro +7,322.5 million compared to the balance as at September 30, 2015 (September 30, 2015: Euro 66,959.2 million). Euro/millions Sept. 30, Dec. 31, 2015 Sept. 30, 2015 ITALY Funds and asset management and Unit-Linked Policies 41, , ,456.9 Freedom life policies Other Insurance Products 1, , ,869.9 Banking products 17, , ,968.7 BANCA MEDIOLANUM 61, , ,868.6 BANCA ESPERIA GROUP (**) 8, , ,311.8 Total ITALY 70, , ,180.4 SPAIN 3, , ,302.2 GERMANY TOTAL FOREIGN MARKETS 4, , ,778.8 TOTAL ASSETS UNDER ADMINISTRATION 74, , ,959.2 (*) The figures relating to consolidated Assets under Administration refer to Retail customers only. (**) The figures relating to Banca Esperia were considered in proportion to the percentage of ownership (50%). The number of Banca Mediolanum Family Bankers has reached 4,369 compared to 4,387 as at December 31, The average portfolio per capita managed per Family Banker has continued to grow and amounted to approximately Euro 14.2 million (December 31, 2015: Euro 13.3 million). The number of private bankers was 465 (December 31, 2015: 446 people) with an average portfolio per capita, which stood at Euro 33.2 million (December 31, 2015: Euro 31.1 million). 23

26 Inflows and Assets under Administration by operating segments Italy Banking The analysis of assets under administration, on a management basis, is set out below: Euro/millions Sept. 30, Dec. 31, 2015 Change (%) Current account deposits 14, , % Banca Mediolanum Bonds (25%) Third-party structured Bonds (20%) Securities in custody and under administration 2, ,084.6 (1%) Repurchase agreements n.s. Total Assets under Administration 17, , % The number of current accounts amounted to 885,111, of which 109,021 deposit accounts, an increase of 44,415 units compared to the figures of year-end Italy Asset Management Gross inflows in mutual funds and assets managed amounted to Euro 5,865.3 million, a decrease of 36% compared to the balance of the same period the previous year, for Euro 9,226.5 million, mainly due to the decrease in gross inflows of Best Brands Funds and in My Life policy. Gross Inflows Euro/millions Sept. 30, Sept. 30, 2015 Change (%) Best Brands funds of funds 2, ,349.9 (41%) Challenge Funds (37%) Other Italian mutual funds ,292.9 (33%) Third-party funds and others managed (15%) Total direct inflows in mutual funds 4, ,698.7 (37%) My Life Unit-Linked ,782.5 (56%) Other Unit-Linked % Total mutual funds and management 5, ,226.5 (36%) 24

27 The analysis of assets managed in Mutual Funds, on a management basis, is as follows: Euro/millions Sept. 30, Dec. 31, 2015 Change (%) Best Brands funds of funds 17, , % Portfolio funds of funds (5%) Challenge funds 13, , Hedge funds of funds (22%) Other Italian mutual funds 7, , % Real estate funds (2%) Third-party funds and others managed 1, , % Adjustments for Group funds included in funds of funds and managed (434.1) (458.0) (5%) Funds included in My Life Unit Linked 3, , % Funds included in Other Unit Linked 11, , Adjustments for own funds included in Unit Linked (14,108.4) (13,769.7) (2%) Total asset management and mutual fund products 41, , % As at September 30,, assets under management amounted to Euro 41,882.5 million, an increase of 5% compared to year-end 2015 (December 31, 2015: Euro 39,820.7 million). Italy Insurance LIFE At the end of 2015, total assets managed amounted to Euro 16,778.0 million versus Euro 17,233.3 million at the end of the period under review, an increase of +3%. Euro/millions Sept. 30, Dec. 31, 2015 Change (%) Unit-Linked Products 15, , % Index-Linked Products (41%) Traditional Products 1, , Total Life Products (excluding Freedom ) 17, , % Freedom policies (49%) The table below shows the breakdown of inflows as at September 30, : Euro/millions Sept. 30, Sept. 30, 2015 Change (%) Multi-year and recurring premiums (3%) Single and collective premiums 1, ,914.6 (44%) Total new business 1, ,950.3 (43%) In-force pension plans (1%) Other in-force business (5%) Total Portfolio (3%) Total premiums written excluding Freedom 1, (33%) Freedom policy premiums ,389.4 (57%) Total gross premiums 2, ,953.1 (42%) 25