Investor Presentation Italian OBG Programme. January PDF Free Download

Investor Presentation Italian OBG Programme January 2011

Executive summary Banco Popolare is delighted to present its Aaa/AAA (Moody s/fitch) rated Obbligazioni Bancarie Garantite (OBG) Programme Banco Popolare Group Banco Popolare Group is the 4th Italian Banking group by total assets ( 136.4 billion as of 30 September 2010) with a leading position in the Northern and Central regions of Italy The Group s business is focused on Retail Banking, with deep local roots in the North regions of Italy. Banking business is mainly focused on households, small businesses and medium-sized corporates (SMEs) Banco Popolare Group has a very solid deposit base, with a loan/deposit ratio of 94% as of 30 September 2010 The Group is rated A2/A-/A- (Moody s/s&p/fitch), with outlook negative for Moody s, S&P and Fitch The OBG programme The Italian legislation provides a strong framework for investors, fully in line with the most advanced European market standards All the bonds issued under the Programme fully benefit from the provisions and protection granted under the Obbligazioni Bancarie Garantite Legislation ( Law ) framework, which is based on the Law 130/1999 Italian Securitisation Framework Italian banking sector overview Significantly less leveraged than the rest of Europe The Northern part of Italy is traditionally the wealthiest area and provides the largest deposit pools The Cover Pool 100% prime Italian, first lien, performing residential mortgages Assets have been legally segregated according to the Law Only fully performing loans added to the Cover Pool WA Current LTV: 51.4%, with a WA OLTV of 52.2% Regional Distribution: 68.8% North, 23.5% Center, 7.7% South Source: Banco Popolare 9M 2010 Report 1

Table of Contents Banco Popolare s OBG Programme 2 Banco Popolare Group 8 Funding Strategy and Liquidity Profile 20 The Italian Mortgage Market 25 Banco Popolare s Mortgage Business 32 Banco Popolare s Underwriting Policies 37 Cover Pool Description 44 Annex 1: Summary of Programme Events 48 Annex 2: Italian OBG vs. European Covered Bond Framework 51 Annex 3: Additional Information on Banco Popolare 53 2

Summary of the Banco Popolare programme Issuer Originator Guarantor Security Structure Cover Pool Maximum LTV Banco Popolare Societá Cooperativa Banca Popolare di Verona, Banca Popolare di Novara, Credito Bergamasco, Banca Popolare di Lodi, Cassa di Risparmio di Lucca Pisa Livorno BP Covered Bond S.r.l. a bankruptcy remote, special purpose entity which benefits from segregation principals well established under law 130/1999 Italian Law-based Covered Bonds (OBG) Exclusively Italian prime residential mortgages 80% at inclusion and capped by the Asset Coverage Test (ACT) Substitute Assets Up to 15% Listing/Denomination Luxembourg Stock Exchange; EUR 50,000 Over-collateralisation Dynamically adjusted via ACT/Interest Coverage Test Ratings Aaa / AAA (Moody s / Fitch ) Asset Monitor Type of Issuance Governing law Arrangers Bondholders Trustee Mazars S.p.A. Jumbo benchmark size Italian RBS, UBS Investment Bank BNP Paribas Risk Weighting 10% 3

Overview of Covered Bond issuance structure Mortgage Pool Swap Counterparties Covered Bond Swap Counterparties Sellers Repayment of subordinated loan Swap Cash Flows Swap Cash Flows Subordinated loan Purchase price Transfer of assets BP Covered Bond S.r.l. (Guarantor) Issuer (Emittente) Guarantee Covered Bonds Proceeds Investors 4

Italian Covered Bond Legal Framework Name of the instruments Legislation Special banking principle Restriction on business activity Asset Allocation Inclusion of hedge positions Obbligazioni Bancarie Garantite Article 7-bis of law 130/1999, Ministry of Economy & Finance decree 310 dated 14 December 2006 and Bank of Italy instructions issued on 17 may 2007 No: any Italian bank fulfilling specific criteria for transfer of Assets and issuance of Covered Bonds N/A Cover assets are segregated by Law through the transfer to a separate entity Hedge position are part of the structural enhancements intended to protect bondholders Integration Assets Up to 15% Geographical scope for public assets Geographical scope for mortgage assets EEA states and Switzerland, subject to a maximum risk weighting of 20% Non-EEA states or local authorities subject to a maximum risk weighting of 20% and up to 10% of the pool EEA and Switzerland LTV barrier residential / commercials 80% / 60% Special Supervision Protection against ALM Protection against credit risk Mandatory over- collateralisation Voluntary over-collateralisation Outstanding OBG to regulatory capital 1st claim in the event of insolvency External support mechanisms Compliance with CRD Compliant with UCITS Art. 22 par. 4 Bank of Italy Yes Mandatory Test and Voluntary Tests Seller may replace, non-eligible, defaulted or non-performing loans To be subject to an asset coverage test on a contractual basis Yes Depending on Tier 1 and total capital ratios. There is no limit as long as the respective bank maintains a total capital ratio above 9% and a tier 1 ratio above 6% All payments are received from the special entity's assets. These payments are expected to be collected in a separate account. Investors continue to receive scheduled payments, as if the issuer had not defaulted In the event of insufficient pool assets proceeds to cover their claim, investors rank pari passu with senior debt holders. There is a simultaneous unsecured dual claim against the issuer and secured against the portfolio held by the specially separated entity Yes Yes 5

Bank of Italy OBG requirements Pursuant to Bank of Italy supervisory regulation (dated 15 May 2007), OBG may only be issued by banks with: minimum consolidated regulatory capital of 500mn minimum Total Capital Ratio of 9% minimum Tier 1 Ratio of 6% In addition the assignment of assets to the cover pool is subject to certain limits based on the bank s total capital and Tier 1 ratios: Total Capital Ratio (TCR) 11% Tier 1 Ratio (T1R) 7% No limits 10% TCR < 11% T1R 6.5% 9% TCR < 10% T1R 6% Up to 60% of the available eligible assets Up to 25% of the available eligible assets Banco Popolare Ratios 1 : Tier 1: 7.6% Total Capital: 10.3% Source: Bank of Italy, Banco Popolare 1 Accounting ratios as of 30/06/2010 6

OC and ALM Matching Requirements Asset Coverage Test (ACT) Minimum 7.5% OC (93% Asset Percentage) adjusted dynamically to protect AAA/Aaa ratings Mandatory Test (by Law) OC Test Net Present Value Test Interest Coverage Test The aggregate outstanding amount of the Cover Pool must be at least equal to the Outstanding Amount of all the OBG issued under the Programme The Net Present Value of the cover pool (net of the SPV general and administrative expenses) including derivatives must beat least equal to the NPV of the outstanding Obbligazioni Bancarie Garantite Interests generated by the cover pool (including derivatives) must be sufficient to cover interest payments under the Obbligazioni Bancarie Garantite Note: These pages contain a summary/overview of the Priority of Payments and Tests. For the official wording please refer to the Base Prospectus 7

Banco Popolare Group at a glance Banco Popolare was established on 1 July 2007 from the merger between Banco Popolare di Verona e Novara and Banca Popolare Italiana. Today, Banco Popolare is the 1 st Italian popolare bank per branch number (2,178) and the 4 th largest Italian bank by total assets. Excellent geographical position, with an average branch market share of 10% in the main regions in northern Italy and a deeply rooted network. Core business focused on retail and SME clients (~88% of total revenues). Total assets: 136.4bn; Net customer loans: 96.1bn; Direct customer deposits: 102.1bn; Indirect customer funds: 77.9bn (of which 32.1bn AuM). Strengthening of the capital position through: 2bn capital increase to be launched in 2011 (to be used also for the repayment of 1.45bn Tremonti Bonds ); the sale of non-core assets under way; the soft mandatory convertible bond issued in March 2010*. Turnaround of Banca Popolare di Lodi starting to bear fruit. Banca Italease: re-organization completed and strong acceleration of the de-risking process (NPLs and watchlist loans of the Release portfolio decreased 1.7bn YTD, resulting in a reduction of 46% in the stock). Data as of 30/09/2010 * Tremonti bond issued in July 2009 for a total of 1.45bn and SMCN issued in March 2010 for 1bn. 9

Solid ratings Short term credit rating: P-1 Long term credit rating: A2 Short term credit rating: F-2 Long term credit rating: A- Short term credit rating: A2 Long term credit rating: A- Outlook: Negative Outlook: Negative Outlook: Negative Franchise Franchise value (C+) remains BP's main strength, although under some pressure if banking subsidiaries are sold to raise capital Liquidity BP scores worse than its Italian peers in our key liquidity ratio [ ] partly due to the consolidation of wholesale-funded Italease. The loan to deposit ratio of 93% in June 2010 was satisfactory Capital Capital adequacy could be strengthened through the disposal of assets if necessary(the sale of Caripe in October 2010 will add 17bp to CT1). Asset Quality The consolidation of Italease in 2009 resulted in the worst level of problem loans in BP's rating peer group. [ ]The bank's senior management is closely involved in the recovery process and is having some success in recovering Italease's largest positions Franchise BP ratings are based on its position as the fourth largest bank in Italy, with a strong franchise in some of Italy s wealthiest regions Liquidity BP monitors and controls its liquidity on the basis of a three year plan, taking into account expected lending volumes. The volume of securities eligible for European Central Bank (ECB) refinancing is substantial: EUR11bn Capital BP s capitalisation has been affected by a series of one off events since 2007 [ ]. Strengthening capitalisation has been one of the bank s main objectives and will continue to be central to its strategy Asset Quality Fitch considers the high level of net impaired loans [ ] a key weakness of the bank, but takes comfort from the bank's good record in managing impaired loans. Fitch takes some comfort from the good quality of the collateral backing some of the group's largest impaired exposures Franchise BP as a highly systemically important institution to Italy, given its leading franchise in the Northern Italian provinces and its 5.2% market share in national retail deposits as of December 2008 Liquidity BP's liquidity profile is adequate overall in the context of much tighter access to funding. Deep territorial roots in north and central Italy tap a large and stable pool of customer deposits that covers most financing needs Capital We are confident about the positive impact of capital strengthening actions that are in progress. As a result, we expect the bank's core Tier 1 ratio to sustainably exceed 7% by 2011 Asset Quality BP's management is committed to significantly strengthen the bank's current weak capital position and to address its large exposure to risky real estate operators and leasing loans that originated through agents and intermediaries during the Banca Italease consolidation Source of comment excerpts: Moody s 05-Oct-2010; Fitch 10-May-2010; S&P 26-Mar-2010. 10

Banco Popolare Group risk profile: low structural risks Business Model Focus on Retail Sound Balance Sheet Structure and Liquidity Pos. Deep local roots in core market territory. Banking business mainly focused on households, small businesses and medium-sized corporate customers. Core business accounts for about 93% of total revenues. Loan/Deposit ratio of 0.94 as of 30 September 2010. Funding needs are structurally covered until 2012. Low leverage. RWA/Total Assets ratio of 67% vs. 55% on average in Italy (and c. 50% on average for European banks). Low risk in assets No Investments in Toxic Assets 97% of the core business is domestic. Strong diversification of the loan portfolio, which was subject to strict valuation rigor and provisioning in 2008. Alignment of all participations in the merchant banking portfolio to market values. No exposure to the subprime mortgage sector, monoliners, CDOs/CBOs. No investment in structured credit products. No investment in structured investment products on market variables. Low VAR of the trading book: max. about 4.9m in 9M 2010 (holding period = 1 day; confidence interval = 99%) about 3.8m on 30 September 2010. 11

Geographical mix: branch network located mainly in wealthy (i) northern Italy, with strong positioning in attractive areas Market share by number of branches (ii) Customer loans by geographical area Branch Market Share: <1% 1%<=X<2.5% 2.5%<=X<7.5% 7.5%<=X<15% => 15% Economically resilient northern Italy accounts for more than 70% of the Group s branch network (more than 80% including Tuscany) South and Islands 7.0% Centre 16.4% North-East 30.0% RoW 1.3% North- West 45.4% Market share by loans and deposits in some of the main regions (as at 30/09/2010) Loans Deposits Veneto 7.95% 8.17% Lombardy 7.11% 5.89% Emilia Romagna 7.92% 7.01% Piedmont 6.69% 5.88% Liguria 8.95% 9.96% Tuscany 7.39% 7.67% Group franchise at a glance Leading player in the Italian domestic market, mainly concentrated in the wealthiest regions of Italy, with good market shares in both loans and deposits: North West: 7.14% (loans) and 6.23% (deposits) North East: 6.85% and 6.43% Low-risk retail clients in Italy Excellent geographical position: average market share by branches in the main regions equal to 10% and above 10% in 20 provinces Franchise quality Well-recognized brands in core market regions (i) All indicated market shares exclude Caripe. (ii) Branch market shares are calculated as of 30 Sept. 2010 and are based on a total of 2,035 domestic branches, of which 1,993 of the Banks of the Territory (excl. 51 branches of Caripe), 36 branches of Banca Aletti, 5 outlets of Efibanca and 1 branch for BP Holding. N.B. Analysis based on Bank of Italy data as at 30/06/2010. Deposit market shares are based on the Bank of Italy s Statistical Bulletin and hence comprise banks fund-raising in the form of deposits (with agreed maturity, sight, overnight and redeemable at notice), savings certificates, CDs, current accounts and repos. 12

Benchmarking Banco Popolare vs. Italian peers ASSETS - /bn NET CUSTOMER LOANS - /bn 1,200 600 559 1,000 800 600 969 677 500 400 300 379 400 200 0 243 136 132 58 52 UCG ISP MPS BP UBI BPER BPM 200 100 0 153 101 96 47 35 UCG ISP MPS UBI BP BPER BPM DIRECT CUSTOMER FUNDS - /bn (including outstanding bonds) BRANCHES 700 600 500 400 590 435 12,000 10,500 9,000 7,500 6,000 9,585 7,669 300 200 100 155 104 102 47 36 4,500 3,000 1,500 2,980 2,178 1,899 1,296 782 0 UCG ISP MPS UBI BP BPER BPM 0 UCG ISP MPS BP UBI BPER BPM Sources: 9M 2010 Reports 13

Commercial model based on core banking business Breakdown of Group total revenues (excludes PPA effects) 100% ~12% ~88% Well rooted regional banks, mainly concentrated in northern Italy Retail Banking revenues representing 88% of total revenues Domestic leader in 27 provinces The remaining 12% is linked to the Private and Investment Banking, Asset Management, Leasing, and other businesses Total revenues Other businesses Commercial bank Focus on core commercial banking business Data as of 30/09/2010 14

Banco Popolare Group structure* Data as of 30/09/2010 HOLDING Network Banks (2,044 branches) # branches indicated in brackets # branches indicated in brackets Product Companies BPV-SGSP (517) Banca ALETTI (36) Private & Investment Banking ALETTI GESTIELLE SGR Asset Management CREBERG (251) AGOS DUCATO Consumer Credit JV with Credit Agricole (61% CA, 39% BP) BP NOVARA (416) EFIBANCA (5) Merchant Banking BP LODI (464) BP Crema BP Cremona (44) (70) AVIPOP Assicurazioni POPOLARE VITA Non-Life Bancassurance JV with AVIVA (49% BP, 51% AVIVA) Life Bancassurance JV with FONDIARIA-SAI (49% BP, 51% FONSAI) CR LUPILI (231) Caripe (51) Sale of 95% stake to Banca Tercas for 228mln finalized on 31/12/2010 BANCA ITALEASE (6) Leasing company * Does not include Treasury branches (31 outlets), one branch of Banco Popolare Holding and foreign banking subsidiaries in Croatia (35 branches), Hungary (10 branches), Czech Rep. (7 branches) and AT Leasing (3 branches). On 09/12/2009, Banco Popolare signed an agreement to sell 100% of Banco Popolare Ceska Rep. 15

After a phase of restructuring and rationalization, focus on core business 2009-2010 from 2011 FOCUS ON: CAPITAL STRENGTHENING SALE OF NON-STRATEGIC PARTECIPATIONS (disposal of Caripe finalised on 31/12/2010) 1.45bn GOVERNMENT BOND (July 2009) 1.0bn SMCN (March 2010) 2.0bn CAPITAL INCREASE (EGM approval in Dec. 2010) BANCA ITALEASE FOCUS ON: CORE BANKING BUSINESS (Households, Small Businesses, Mid-Corporate) PROFITABILITY AND EFFICIENCY NEW BUSINESS PLAN 2011-2013 (to be presented in 2011). RESTRUCTURING LOAN BOOK DE-RISKING TURNAROUND OF BPL RETURNED TO GENERATE PROFIT ASSET QUALITY COST OF CREDIT RISK UNDER CONTROL 16

Customer loans: focus on Retail and SMEs Banco Popolare standalone Gross customer loans Cust. Loans of BdT by segments Comments /bn 86.0 56.5 26,2 29.5 30/09/09 +6.5% 87.6 57.1 30.5 26,2 31/12/09 +4.5% 91.6 58.8 32.8 30/09/10 (period-end data) Mortgage loans Large Corporate Other 15% 39% Mid Corporate 30/09/2010 2% 26% (average data) Households 18% Small Businesses Group gross customer loans rose 6.5% y/y and 4.5% since year-end 2009. In particular, Household loans increased by +10.9% y/y (+7.2% since year-end 2009), while Small Businesses lending grew +10.5% y/y (+7.1% since year-end 2009). Banks of Territory (BdT): increase in customer loans by segments (period-end data) /bn Mortgage loans +7.1% 16.6 +10.9% +7.2% 18.5 17.2 12.3 +10.5% +7.1% 13.6 12.7 28.0 +5.6% 30.0 28.3 10.2 +3.1% +6.9% 10.5 9.8 16.1 5.6 5.0 6.7 7.7 15.5 17.2 5.7 8.0 0.5 0.7 0.7 30/09/09 31/12/09 30/09/10 30/09/09 31/12/09 30/09/10 30/09/09 31/12/09 30/09/10 30/09/09 31/12/09 30/09/10 Households Small Businesses Mid Corporate Large Corporate 17

Credit quality: impaired loans and coverage ratios Banco Popolare standalone Gross impaired loans Net impaired loans /m 8,384.7 744.6 674.7 3,910.6 +7.7% +4.5% 8,642.1 9,030.0 392.5 +34.3% 527.1 722.0 818.5 +13.4% 4,108.7-4.5% 3,925.0 % change since YE 2009-29.2% +21.3% +0.4% /m 5,972.4 707.1 591.7 3,189.8 +9.3% 6,238.3 +4.6% +34.7% 6,525.9 367.9 495.6 652.7 686.9 +5.2% 3,414.5-3.8% 3,284.7 % change since YE 2009-29.9% +16.1% +3.0% +10.0% 3,054.8 3,418.9 3,759.4 +23.1% 1,483.7 1,803.1 +14.2% 2,058.7 +38.8% 31/12/2009 30/06/2010 30/09/2010 31/12/2009 30/06/2010 30/09/2010 NPLs Watchlist Restructured Past due NPLs Watchlist Restructured Past due 92% including real state collateral 30/09/10 30/06/10 NPL coverage: Watchlist loan coverage: Coverage of Past Due N.B.: NPL coverage includes write-offs Coverage of impaired loans 52% including real estate collateral 63.7% 65.8% 16.3% 16.9% 6.0% 6.2% Comments The decrease in the coverage of NPLs over 30/06/2010 is influenced by the change in the portfolio mix: positions up to 250,000 registered an increase (mainly residential mortgage loans: +12%), which has led to less accounting provisions due to a better collateralization (for these specific positions, the total coverage rose from 91% to 94%). The watchlists loan portfolio is well fragmented and characterized by a higher accounting coverage on average for positions > 3m (21%), whereas for the positions up to 500,000 the coverage is represented to a significant degree by RE collateral, with a total coverage (accounting provisions + RE collateral) of 55%. The stock of restructured loans increased by 96m in Q3, of which 78m related to the suppport plan denominated SOS famiglie/ Ditte individuali. The 5 largest positions, which continue to perform in an orderly way, account for 45% of the total. One of these 5 positions, accounting for 13% of the total portfolio, is provisioned against by 15%, plus an additional 29% of real etate collateral solely in favour of our Bank. The increase in Past-Due loans in Q3 2010 brings the stock to 527m, against 392m at 30/06/10, but remains well below the level registered at the end of 2009 ( 745m). This increase is related to the specific period of the year clashing with summer months characterized by a lower level of collection activity; October figures are positive, showing a decrease in the stock to about 400m, hence moving back to the level registered in June. 18

Credit quality: ratios Banco Popolare standalone NON-PERFORMING LOAN RATIOS WATCHLIST LOAN RATIOS 4.70% 3.70% 2.70% 1.70% 3.49% 1.75% 3.68% 3.82% 1.91% 2.08% 4.10% 2.32% 4.80% 4.20% 3.60% 4.46% 3.77% 4.76% 4.06% 4.59% 3.94% 4.29% 3.71% 0.70% Dec-09 Mar-10 Jun-10 Sep-10 3.00% Dec-09 Mar-10 Jun-10 Sep-10 Gross NPL ratio Net NPL ratio Gross watchlist ratio Net watchlist ratio 19

Sound balance sheet structure Total BP standalone direct customer funds o/w: Direct cust. funds of the Banks of the Territory /bn 92,7 10,0 +4.4% 102.1bn including Italease -0.2% 97,0 96,8 8,5 +3.5% 8,8 % chg. 9M 10/ 9M 09-12.0% /bn +2.0% -1.7% 69.4 68.3 o/w: households and small business segments +6.2% 43,5 47,2 +6.1% 50,1 +15.2% 66.9 +2.2% 39,2 41,3-8.2% 37,9-3.3% 45.2 47.0 48.0 30/09/2009 31/12/2009 30/09/2010 Core Deposits (1) Bonds and Other Securities Repos 30/09/09 31/12/09 30/09/10 30/09/09 31/12/09 30/09/10 Loan/Deposit (2) ratios peer comparison (3) Comments 100% 99% 98% 97% 95% Average: 95% 94% Group direct customer funds broadly in line with year-end 2009, however significant growth in the Households and Small Business segments (+6.2% y/y and +2.2% since YE 2009). Sound funding profile with a L/D ratio of 94% as at Sept. 2010. 87% Peer1 Peer2 Peer3 Peer4 Peer5 Peer6 87% Peer7 BP Group Additional funding buffer from: (i) the portfolio of eligible securities of 7.2bn (end of September 2010); (ii) the residential mortgage loan portfolio not used for self-securitisations or the covered bond pool for a total of about 2bn. (1) Core deposits include CDs placed with retail customers. (2) Deposits include the following liability items under the Bank of Italy accounting scheme: item 20 (Due to Customers), item 30 (Securities issued) and item 50 (Financial liabilities designated at fair value); N.B. Banco Popolare bonds placed with retail customers are accounted for under item 50. (3) Peers include ISP, UCG, MPS, UBI, BPER, BPM and Carige. Data based on latest reported figures as at 30/09/2010. 21

Group liquidity profile Banco Popolare Group Breakdown of funding sources 1% 41% 58% Istitutional Bond Retail Bond ECP/ECD Total amount 48.6bn Funding sources Loan to Deposit Ratio historically below 1 5bn OBG Issuance under OBG Programme 25bn EMTN Program in support of medium / long-term lending strategy Source: ALM, 30 September 2010 22

Group debt maturity profile Banco Popolare Group Institutional Retail 6.500 6.000 5.500 502 8.500 8.000 7.500 7.000 5.000 4.500 4.000 3.500 3.000 2.500 2.000 1.500 1.000 500 0 5.429 715 75 50 53 2.330 2.174 300 1.892 1.659 498 491 2010 2011 2012 2013 2014 2015 6.500 6.000 5.500 5.000 4.500 4.000 3.500 3.000 2.500 2.000 1.500 1.000 500 0 140 468 113 4.813 36 10 10 231 2.869 448 4.303 8.054 4.405 2010 2011 2012 2013 2014 2015 /mn Senior Tier I Upper Tier II Lower Tier II /mn Senior Tier I Upper Tier II Lower Tier II Certificates Source: Internal management report, 30 September 2010 23

Banco Popolare Group Sound Liquidity Profile Portfolio of eligible securities 11.0 /bn Institutional funding maturities in 2010 and 2011 (nominal values) Amounts indicated for FY 2010 were re-imbursed. 3.5 /bn 7.5 2.8 3.7 5.5 1.4 1.6 31/12/07 31/12/08 31/12/09 01/12/10 2010 2011 Banco Popolare Banca Italease Comments The Group s liquidity position is satisfactory. In 2010, the Group s funding strategy of issues on the wholesale market continued with: - 500m EMTN senior bond issue in Jan.; - 1bn Covered Bonds (under the 5bn programme) in Feb.; - 500m EMTN senior bond issue in September; - 0.95bn Covered Bonds in Sep.( 0.8bn) and in Oct.( 0.15bn); - 1bn Lower Tier 2 issue in Oct. In addition, the Group successfully completed the issuance of a 1bn convertible bond (four-year maturity). The strong increase of eligible securities in 2009 derives from the use of other securities issued (about 6bn) as part of own securitizations, which shall gradually be substituted by Covered Bonds. The reduction in 2010 is due the unwinding of 2 securitisations (BPL Mortgages 1 & 2), the assets of which have been used for the Covered Bonds. /bn 1.0 3 years Senior EMTN and Covered bond issues in 2009/2010 +165 +145 +138 0.35 1.0 Aug. 09 Sep. 09 Oct. 09 Spread on mid-swap interest rate Covered Bond Covered Bond 5 years 2 years 7 years 3 years 5 years +90 0.5 Jan. 10 +80 1.0 Feb. 10 +170 0.5 Sep. 10 +135 0.95 Sep. Oct. 10 LowerT2 10 years +320 1.0 Oct. 10 24

The Italian loan market Market recovering at good pace in 2010 Smaller than the average Italian mortgage market (18% of GDP vs 40% Euro Area) 350 300 250 200 150 100 50 0 17.4 217 244 12.5 266 280 294 264 8.7 (0.4) 6.2 8.2 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 May-10 Stock ( bn) Annual growth (%) 20 15 10 5 0 (5) 1,000 800 600 400 200 0 292 724 959 Stock as at 30 December 2009 ( bn) 658 Italy France Germany Spain partly in response to low interest rates with low debt/equity ratio 6.00 5.50 5.00 4.50 4.00 3.50 5.32 5.55 4.47 3.87 3.68 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 70 60 50 40 30 20 10 0 62.5 37.6 40.0 18.4 Italy France Germany Spain Average initial interest rate (%) Mortgage debt/gdp as at 31 December 2008 (%) Sources: ECB, Bank of Italy, Agenzia del territorio 26

The Italian loan market Italy s leverage steadily below European peers ratios Total loans/gdp Corporate loans/gdp 120% 60% 100% 50% 80% 60% 40% 40% 30% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2002 2003 2004 2005 2006 2007 2008 2009 2010 Euro Area Italy Euro Area Italy Loans for house purchase/gdp Consumer credit/gdp 45% 8% 30% 6% 4% 15% 2% 0% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2002 2003 2004 2005 2006 2007 2008 2009 2010 Euro Area Italy Euro Area Italy Sources: ECB, data as of September 2010 27

The Italian loan market in 2009: demand and supply Loan breakdown supply by rate type Loan breakdown supply by channel Fixed Rate 38% Mixed Rate 14% Indirect Channel Online 5% Indirect Channel 26% Floating Rate 48% Direct Channel Online 1% Direct Channel 68% Loan transactions Residential RE demand breakdown Other 19% Annexes 36% Residential 45% Replacement 11% Second house 14% Investment 9% First house 66% Sources: Nomisma, press releases 2007 2008 2009 28

The low indebtedness of Italian households At year end-2009, household total financial debt stood at 61% of available income, remaining far lower than in the euro area (95%) or in the UK (150%). The differences are largely attributable to loans for house purchases, representing just 33% of Italian household available income, vs. 59% in the euro area and 93% in the UK The low degree of Italian mortgage penetration drives down the ratio of private debt to GDP. In fact, according to the Bank of Italy on EU-SILC Eurostat figures only 13% of Italian households is currently repaying a mortgage loan versus the around 30% observed in France, Germany and Spain and higher in UK and Netherlands (greater than or equal to 40%) The share of home-owners in Italy is quite high : over 80% of households in 2008 vs. 71% in the euro area, 66% in France and 56% in Germany % of Mortgage-Financed residential transactions Loan to value residential transactions (%) 80 75 70 65 71.170.4 67.9 72.8 74.0 68.8 66.9 66.3 70.570.0 80 75 70 65 71.170.4 67.9 72.8 74.0 68.8 66.9 66.3 70.570.0 60 North-West North-East Centre South & Islands Italian average 60 North-West North-East Centre South & Islands Italian average Source: Bank of Italy Survey-Tecnoborsa 29

The housing market in Italy The dynamics of the loan market is strictly bounded to the residential market developments In 2009 the total deed of sales and purchases registered a negative trend equal to -11,3%. Even if this is still a negative result, it demonstrates some level of recovery versus the previous year (-15,1%). The trend is driven by a soft house price reduction, also recorded in the size of the loan market The first quarter of 2010 confirm this positive trend with an increase in the buy and sell market equal to +2.3% versus the same period in 2009 (according to Istat data). This current increase regards especially the residential market (+93.2%) versus the commercial one Moreover the loan market, on the back of residential property buyers, registered a technical recovery at a national level (+13.7% versus the same period in 2009 according to Istat), with a double digits increase especially in the main cities: Milan +10.3%, Roma +15.6%, Florence almost 20%. On a negative trend is just Turin, with a decrease trend of 2,3% 30

Market share trends Banco Popolare standalone Market share in customer loans * Market share in customer deposits ** +40bps +7bps 4.5% 4.9% 3.98% 4.05% 31/12/08 31/12/09 31/12/08 31/12/09 +53bps 5.86 6.30 6.01 6.13 5.60 5.42 4.87 5.06 5.13 5.18 5.03 5.13 +10bps 3.23 3.55 2.09 2.25 2.94 3.11 2.02 2.12 North East North West Northern Italy Central Southern 2008 2009 North East North West Northern Italy Central Southern 2008 2009 Source: Bank of Italy reporting ABI * Loans: small businesses (producing households), consumer households, non-financial companies. ** Deposits: the system data includes deposits of the postal network. 32

Market share of Banco Popolare Assofin: breakdown by loan scope Evolution of Banco Popolare market share (Assofin: Credito Immobiliare erogato alle famiglie consumatrici ) Breakdown % 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 10% 14.4% 15.4% 14% 6.1% 22% (14.4%) 28% (6.8%) 91% 90% 86% 78% 72% 30% 14% 70% 20% 15% 10% (5%) (10%) (15%) (20%) (25%) 2006 2007 2008 2009 Q3 2010 Flows paid for other loans (including replacements and substitutions) Flows paid for loan purchase Overall Change (%) 5% 0% Growth rate % 8.8% ~8% 8.50% 6.80% 2007 2008 2009 Q3 2010 The other loans keeps on growing, and in the 3Q 2010 they become the 30% of the total, compared to the 22% of 2008. 33

Mortgage: new production and stock New production * (data as of 31/12/2010) Stock * (data as of 31/12/2010) 4,3 4,2 Volume /bn 18 16,9 Volume /bn + 9% vs. 2009 0,1 1,1 Total BP Internal Networks External Networks Total BP Internal Networks External Networks Average mortgage ( /000) 130 130 139 Average Residual Amount ( /000) 89 87 126 Average Maturity (years) 21,3 21,2 28,5 Average Residual Maturity (years) 13,7 13,2 23,9 In 2010 Banco Popolare new production is mainly derived from the internal networks (98%), which also represents approx 94% of total stock * Real Estate and Land Mortgages to private individuals (excluding Banco Popolare Group employees) 34

Breakdown of new production and stock by type New production *- (data as of 31/12/2010) Stock *- (data as of 31/12/2010) New production 2009 33% 67% 69% Fixed 16% 33% 27% 32% Fixed 67% 84% 68% 73% Floating Floating % nr. mortgages % nr. mortgages Mortgages mainly with floating rates on stock (73% of the total). New production (mainly floating rate products) in 2010 (84% of the total), as a consequence of the declining interest rate environment in that year * Real Estate and Land Mortgages (excluding External Networks) 35

Origination and underwriting Sales force All mortgages are originated mainly through banking branches distributed across Italy. A small percentage is originated through a network of primary real estate agents. The initial Cover Pool includes only mortgages originated through the direct channel Underwriting All mortgages are underwritten at branch level The authority that approves the mortgage loan depends mainly on amount requested, length of the loan and evaluation of the automatic valuation tool Sco.Pri ) Underwriting criteria involve scoring and customer limits, with the final decision always being made by a credit officer Property Valuation All mortgage properties are assessed by independent appraisers performed by CRIF All evaluations are based on full physical inspection Mortgage properties involve an insurance policy in favour of Banco Popolare Servicing Banco Popolare performs all of its own servicing through: constant dialogue with clients advanced monitoring system to supervise the performance of the pool dedicated subsidiary to carry out the recovery process of the defaulted loans 37

Summary of the underwriting process DATA COLLECTION AND INPUT Collection of documents from the borrower (financial status & credit performance; as well as property information location, type) EVALUATION OF TOOL Sco.Pri Assessment of borrower s credit-worthiness via internal model, based on borrower s and other available information PROPERTY VALUATION Property appraisal performed by CRIF SANCTIONING Key facts for credit decision Debt to income Credit Score Credit period LTV Age Property appraisal report Additional guarantees ATTRIBUTION OF FILE ACCORDING TO LIMITS Depending on the borrower s (internal rating) and loan s characteristics and falling within a given category of limit, the file is allocated to the appropriate underwriter for the credit decision Pre-closing procedures: Execution of loan & guarantor s contracts Signing of insurance contracts & making of insurance payment Notarisation of the mortgage contract Registration of the property Closing Source: Banco Popolare 38

The Sco.Pri system Sco.pri valuation methodology: high level scheme of the automatic valuation steps Preliminary checks Other checks Financial sustainability checks Downgrading factors Upgrading factors Valuation CPC (internal model) Rating (or CBS Score) Expected Loss (PD x LGD) Adverse credit charges (*) NPL on Bank or System database (*) Arrear (incaglio) on Bank or System database (*) Past due on Bank or System database (*) Cancelled cheque (*) Underage applicant Sever prejudicial elements (*) Under observation positions (*) Called positions (*) Type of applicant Type of mortgage Existence of minimum wage based on Istat poverty threshold Final total indebtedness below 50% of wage mortgage instalment/ disposable income ratio below internal threshold applicant age + mortgage duration equal or above 80 years Lien > 2 Mild prejudicial elements applicant s total net financial assets >= 50% of mortgage Value of pledged securities (**) >= 50% of mortgage Check of monthly value (internal model) Checking of counterparty rating Check of expected loss (%) resulting from counterparty PD and weighted average for all credit lines LGD Inhibited applicant Bankrupted applicant Not to entrust marked applicant (*) check performed on applicant and guarantors (**) if pledged securities >= 100% of mortgage, final result always positive NOTE the disposable income used for all financial checks takes into consideration the cumulated income of applicant and potential loan guarantor. Loan guarantor income not considered if there are prejudicial elements, negative rating (or negative CBS Score if without rating), or it s not a relative of the applicant FINAL RESULT: 4 potential valuations 1 VALID APPLICATION (GREEN) 2 FURTHER ANALYSIS REQUIRED (YELLOW) 3 HIGH RISK APPLICATION (ORANGE) 4 APPLICATION WITH SEVERE PREJUDICIAL ELEMENTS (RED) Ordinary sanctioning powers Sanctioning powers increased by one level Sanctioning powers increased by two levels 39

Appraisal process of mortgage properties Appraisal process before 2008: for mortgages of over 175,000, properties were assessed by independent appraisers, managed by the Special Purpose Loans Group Appraisals Office The external appraiser sent a copy of the valuation to the Appraisals Office and to the proposing branch. The branch sent the valuation together with the notary report to the Special Purpose Loans Group to complete the appraisal process Appraisal of mortgage properties were required regardless of the amount if property were located outside the territorial competencies of the branch, or other s mortgage were already in place or for multiple properties Appraisal process after January 2008: obligation to perform an appraisal process regardless of the amount All real estate appraisal are assigned to the Evaluation Building department of CRIF, which comprises independent appraisers which use standardised and certified evaluation criteria. Key data and information from the appraisal are also used to perform periodic revaluation of the collateral CRIF guarantees the appraisal values and is economically responsible for the evaluations provided The report received from CRIF is sent to the Special Purpose Loans Group to complete the mortgage request process 40

Approving powers in the underwriting process In the following table an example with the approving powers of the different competent bodies for one Bank of the Group Committees and Management (EUR) Board of Directors Over 30,000,000 Executive Committee Up to 30,000,000 Credit Committee Up to 20,000,000 Chief Executive Officer Up to 15,000,000 General Manager Up to 6,000,000 Credit Up to 8,000,000 Business Area Up to 2,500,000 Branches (excluding the London Branch) Up to 275,000 41

Servicing and delinquency management process Actions Timing Performed by First unpaid (0 30 dd) 1 st reminder letter 3 rd day before the end of the month of the missed payment Automatic procedure Branch contact During the month from the missed payment Branch 2 nd missed payments (30 60 dd) 3 rd missed payments (60 90 dd) 4 th missed payment (90 120 dd) 2 nd reminder letter Telephone contact 3rd day before the end of the month of the missed payment During the following 15 days after the second missed payment 3 rd reminder letter In the last 10 days of the calendar month of the 3 rd missed payment Branch contact Direct contact domicile For 30 days from the missed payment For 60 days from the missed payment Automatic procedure Internal call centre Branch Branch External recovery company 1 Partial promise to pay (150 180 dd) Returning to performing or transfer to Arrear/NPL From 150 days to 180 days from the first missed payment Head of Credit Dpt. 6 th missed payment (150 180 dd) Status to arrear (incaglio) At the missed payment for 15 dd Automatic procedure Direct contact at domicile Following the Arrear Department valuation for 75 dd External recovery company 2 9 th missed payment (240 dd) Proposal to NPL status At the missed payment Arrears dpt (incagli) -centralised (Area or head office) Source: Banco Popolare 42

Cover Pool Highlights Current loan balance (EUR) Balance ( ) 4,623,894,888 Number of loans 45,086 Average loan balance ( ) 102,557 >500k 400k - 500k 2,42% 1,73% WA seasoning (years) 2.17 WA remaining term (years) 19.38 Number of borrowers 44,975 WA CLTV 52.18% 300k - 400k 200k - 300k 150k - 200k 3,84% 13,30% 17,49% Percentage of floating rate mortgages 74.75% 100k - 150k 28,88% WA interest rate on floating rate loans (%) 2.06% WA margin on floating rate loans (bps) 122.9 WA interest rate on fixed rate loans (%) 5.32% 50k - 100k <50k 7,27% 25,07% Original LTV (%) Current LTV (%) >100 90-100 80-90 70-80 60-70 50-60 40-50 30-40 20-30 10-20 <10 0,08% 0,29% 2,50% 2,94% 0,30% 6,92% 18,10% 14,71% 13,54% 10,66% 29,96% 70-80 60-70 50-60 40-50 30-40 20-30 10-20 <10 1,06% 5,30% 9,24% 12,55% 14,39% 15,68% 19,21% 22,58% Figures refer to volume of outstanding mortgages Data as of 30 November 2010 44

Cover Pool Highlights Current interest rates (%) Base index for floating rate loans (%) >7.0 6.5-7.0 6.0-6.5 5.5-6.0 5.0-5.5 4.5-5.0 4.0-4.5 3.5-4.0 3.0-3.5 2.5-3.0 2.0-2.5 <2.0 0,04% 0,50% 2,22% 5,49% 1,60% 0,59% 0,58% 7,96% 7,00% 9,47% 25,99% 38,56% Euribor 3m 30,97% Euribor 6m 2,03% Euribor 1m 67% Margin on floating rate loans (bp) Interest rate on fixed rate loans (%) >250 225-250 200-225 175-200 150-175 0,10% 0,22% 0,27% 6,38% 5,80% >7.0 6.0-6.5 6.0-6.5 5.5-6.0 0,04% 0,50% 2,17% 5,42% 125-150 100-125 75-100 50-75 <50 2,13% 0,10% 14,53% 19,21% 26,00% 5.0-5.5 4.5-5.0 4.0-4.5 <4.0 0,67% 1,57% 6,97% 7,92% Figures refer to volume of outstanding mortgages Data as of 30 November 2010 45

Cover Pool Highlights Regional distribution (%) Loan seasoning (years) Figures refer to volume of outstanding mortgages Data as of 30 November 2010 Centre 23,54% Geographical distribution (%) South & Isles 7,69% North 68,76% Remaining term (years) 46 Basilicata Calabria Campania Emilia Romagna Friuli Venezia Giulia Lazio Liguria Lombardia Marche Molise Piemonte Puglia Sardegna Sicilia Toscana Trentino Alto Adige Umbria Valle d'aosta Veneto 0,03% 0,08% 2,72% 13,66% 0,59% 8,30% 7,24% 25,63% 0,16% 0,30% 7,52% 0,57% 0,38% 3,62% 14,37% 0,71% 0,71% 0,31% 13,09% >6yr 6,16% 5yr - 6yr 2,26% 4yr - 5yr 8,86% 3yr - 4yr 10,16% 2yr - 3yr 6,96% 1yr - 2yr 65,60% >30yr 25yr - 30yr 20yr - 25yr 15yr - 20yr 10yr - 15yr 5yr - 10yr <5yr 1,27% 2,19% 18,86% 17,81% 11,90% 23,03% 24,94%

Issuer Event of Default Issuer event of default Failure for a period of 7 days or more to pay any principal or redemption amount or any interest on the Covered Bond of any series or tranche when due for a period of more of 14 days Breach of any material obligations under or in respect of the covered bonds or any of the transaction documents to which it is a party and such failure remains unremedied for 30 days after the representative of the covered bondholders has given written notice Following the delivery of a breach of test notice, the tests are not cured within 30 days The pre-maturity test is breached on a pre-maturity test date falling within 12 months prior to the maturity date and the breach has not been cured before the earlier of (i) 15 business days from the date that the issuer is notified of the breach of the pre-maturity test and (ii) the maturity date An insolvency event of the issuer An article 74 (Italian banking act) event Enforcement of the CB Guarantee The representative of the covered bondholders will serve a notice to pay on the issuer and guarantor stating that an issuer event of default has occurred Upon the service of a notice to pay: each series or tranche of covered bonds will accelerate against the issuer and they will rank pari passu amongst themselves against the issuer the guarantor will pay any amounts due under the covered bonds on the due for payment date in accordance with the provisions of the covered bond guarantee the mandatory tests shall continue to be applied and the amortisation test shall be also applied The Guarantor shall (only if necessary in order to effect timely due payments under the Covered Bonds), direct each Servicer to sell the Receivables respectively assigned by in accordance with the provisions of the Cover Pool Administration Agreement Note: These pages contain a summary/overview of the Priority of Payments and Tests. For the official wording please refer to the Base Prospectus 48

Guarantor Event of Default Failure by the guarantor for a period of 7 days or more to pay any principal or redemption amounts of principal, and/or for a period of 14 days or more to pay any amounts of interest, due for payment in respect of the covered bonds Guarantor event of default Breach of the amortisation test Breach by the guarantor of any material obligations under or in respect of the covered bonds or any of the transaction documents to which it is a party, with such failure remaining unremedied for 30 days after the Representative of the Covered Bondholders has given written notice thereof to the issuer An insolvency event of the guarantor Acceleration notice The Representative of the Covered Bondholders shall serve a notice on the guarantor that a guarantor event of default has occurred, unless an extraordinary resolution is passed resolving otherwise Upon the service of the acceleration notice, all covered bonds will become immediately due and payable by the guarantor at their early redemption amount, together with any accrued interest and they will rank pari passu amongst themselves Note: These pages contain a summary/overview of the Priority of Payments and Tests. For the official wording please refer to the Base Prospectus 49

European Overview on Covered Bond Framework Name of debt Instrument Special Banking Principle Supervision Substitute Collateral Protection Against Mismatching Mandatory overcollateralisation Voluntary overcollateralisation is protected Fulfils UCITS 22(4) Italy Obbligazioni bancarie garantite (OBG) No Bank of Italy Up to 15% Net-present value cover required No Yes Yes Germany Hypothekenpfand-briefe, Öffentliche Pfandbriefe, Schiffspfandbriefe No Bundesanstalt für Finanzdienstleistungsaufsicht and independent trustee Up to 10% Net-present value cover required 102% Yes Yes Spain Cédulas Hipotecarias (CH) Cédulas Territoriales (CT) 125% (CH) No Banco de Espana Not applicable Coverage by nominal value Yes Yes 143% (CT) Obligations Foncières (OF) Yes Commission Bancaire and special supervisor Up to 15% Not compulsory; but all OFs benefit from additional contractual features No Yes Yes France Obligations de financement de l habitat (OFH) Yes Commission Bancaire and special supervisor Up to 15% Not compulsory; but OFHs also benefit from additional contractual features like OFs No Yes Yes French Structured Covered Bond No Commission Bancaire and special supervisor Up to 15% Contractual obligation to neutralise interest and currency risk. Also, downgrade triggers for swap counterparties and different tests to ensure adequate cash flows Subject to asset coverage test Yes T.B.D. Netherlands Dutch Covered Bonds No De Nederlandsche Bank and independent auditor Up to 10% Exposure to interest rate and currency risk is neutralised. In addition, downgrade triggers for swap counterparties, and various tests ensure cash-flow adequacy Subject to asset coverage test Yes From 1 July 2008 onwards Portugal Obrigações Hipotecárias, Obrigações sector público Optional Banco de Portugal Up to 20% Net-present value cover required; in addition, limitation of liquidity risk 105% Yes Yes 51

P&L highlights 9M 2010 Group s results are not directly comparable with 9M 2009 figures, considering that Banca Italease is consolidated starting only from 1 July 2009. 30/09/10 30/09/09 BP Standalone results /m Group BP Standalone BP Standalone TOTAL REVENUES: o/w: net interest income o/w: net commissions o/w: net financial result OPERATING COSTS PROFIT FROM OPERATIONS Net Write-downs on impairment of loans INCOME BEFORE TAXES 2,800.1 2,775.6 2,638.4 1,398.5 1,369.2 1,466.8 956.8 947.5 873.4 398.3 400.2 259.4 (1,798.4) (1,733,8) (1,768.9) 1,001.7 1,041.8 869.6 (608.4) (520.0) (436.9) 357.0 490.1 491.7 105.7 (221.4) (262.4) Net income reaches 275m at 30/09/10 up 43% y/y. Net interest income decreases 6.6% y/y mainly driven by the trend in the euribor rates. Net commissions up 8.5% y/y. Net financial income up 54.3% y/y. Operating costs fall 2.0% y/y. Cost of credit risk remains under control and stands at 76bps (annualised). Taxes on income 467.1 274.7 192.3 NET INCOME OF THE GROUP 53

Investor Presentation Italian OBG Programme. January 2011