Approval of the merger project between BPI and BPVN and of the Business Plan of BANCO POPOLARE

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1 Approval of the merger project between BPI and BPVN and of the Business Plan of BANCO POPOLARE Establishment of a new co-operative Banca Popolare, listed Parent Bank Establishment of two new banks in the form of a joint-stock company ( New BPL and New BPV-SGSP ) Constitution of the 3 rd largest Italian Banking Group by branch network Guidelines approved for the Business Plan The merger project The Boards of Directors of the Banca Popolare Italiana (BPI) and the Banco Popolare di Verona e Novara (BPVN) have approved the plan to merge the two banks, which includes establishment of a new banking company in the form of a cooperative company, whose function will be that of Holding Parent Bank and which will be listed on the Italian stock exchange. The new bank will be called the BANCO POPOLARE Soc. Coop. and will have its registered office in Verona with administrative head offices in Lodi and Verona and stable organization also in Novara. The Banco will focus its business on the savings and loans, in its various forms, to both its own shareholders as well as non-shareholders, being guided by the principles of popular credit, paying special attention to the territory where its subsidiary banks operate and where the Group has its branch network, with particular consideration being given to small and medium-sized enterprises and cooperatives. The following operations will be carried out as part of the merger project: a) conferment by the BPI banking company, essentially made up of its branch network located mainly in areas where the bank traditionally originated and of all controlling interests in other banks that constitute the BPI Group in favour of a joint-stock company ( New BPL ) owned entirely by the Banco Popolare, with registered office and administrative head office in Lodi, on the understanding that the spin off will be subject to execution of the merger; b) conferment by the BPVN banking company, essentially made up of the BPVN branch network located mainly in areas where the bank traditionally originated, in favour of a joint-stock company ( New BPV- SGSP ) owned entirely by the Banco Popolare, with registered office and administrative head office in Verona, on the understanding that the spin off will be subject to execution of the merger. The Banca Popolare di Novara S.p.A., the Credito Bergamasco S.p.A., and the Cassa di Risparmio di Lucca, Pisa e Livorno S.p.A. will respectively maintain their current head offices in Novara, Bergamo and Lucca. The admission to listing on regulated markets managed by the Borsa Italiana S.p.A. and specifically on the Electronic Equities Market (Mercato Telematico Azionario delle Azioni) of the constituent bank, as well as convertible bonds making up the Convertible Debenture Loan 4.75% (CDL) and the "Banca Popolare Italiana Cooperativa Ordinary Share Warrants (Warrants) resulting from loans already issued by the BPI and whose obligations will be accepted by the BPI as a result of the merger, represents a prerequisite for execution of the actual merger. Purpose of operation The Banco Popolare wishes to achieve a company structure and a system of corporate governance that focuses on the pursuit of the following objectives: to align the need for a cohesive management and governing unit with the need for representation of original elements in the banking association and with the presence of principles of economic democracy typical for the model of popular credit. to preserve the original co-operative matrix, to develop mutual customer relationships, and to promote territorial origins in the respective vocational areas, all of which elements will be joined with the major efficiency of branch processes and with the sharing of a joint industrial project that is distinguished by its innovation and market-orientation. 1

2 The new bank s charter The merger will take place by means of establishing a new co-operative company whose charter will include the following: a) term of the company: 31 December 2040; b) share capital: registered capital is variable and unlimited; it is represented by registered shares, each with a nominal value of The charter of the established Banco Popolare also stipulates that the Joint Management Board is authorised to issue a predetermined maximum number of ordinary shares, each with a nominal value of 3.60 and more precisely: 1. until 1 June 2010, for up to 28,468,969.20, by issue of up to 7,908,047 ordinary shares, of a nominal value of 3.60 each, for the sole purpose of converting convertible bonds to CDL from the former BPI, which will be accepted by the established Banco Popolare, on the assumption that prior to completion of the merger, conversion rights must not have been exercised in full by the owners, in accordance with the procedure and terms of the relevant regulation; 2. between 1 July 2008 and 31 December 2010, for up to 178,052,173.20, by issue of up to 49,458,937 ordinary shares, of a nominal value of 3.60 each, for the sole purpose of exercising ex BPI warrants, liabilities for which will be assumed by the established Banco Popolare. The charter also stipulates that the registered capital of the established Banco Popolare may increase by up to 11,691,000, by issue of up to 3,247,500 ordinary shares, of a nominal value of 3.60 each, for the purpose of the stock option plan for which provision has already been made by the management of the former BPVN and its subsidiaries. c) shareholders: no shareholder may own a number of shares whose total nominal value exceeds the legal limit. All individuals duly subscribed to the BPI and BPVN stock register for the purpose of the merger will be subscribed to the Holding stock register with full ability to exercise all administrative rights. According to the by-laws, the annual shareholders meeting for the approval of the allocation of the net income and the annual nomination of the members of the Management Board may be held either in Lodi or in Verona. In its capacity as Parent Bank, the company exercises management, control and coordination activities, issuing regulations to the various components of the Group in accordance with the instructions issued by the Supervisory Authority, as well as ensuring the stability of the Group. Territorial origin In order to make the most of its own origins, the company is devoting special attention to territories where its subsidiary banks operate and where the network can best express its own operational presence in the financial areas traditionally served. With a view to constantly supporting these values, it has been decided that a proportion of the net profit, no less than 7.5%, shall be allocated for purposes of assistance, charity and socio-economic promotion of the territory, resulting in the following territorial distribution: a) 8/24 to the Fondazione BPI; b) 6/24 to the Fondazione Banca Popolare di Novara per il Territorio; c) 1/24 to the Fondazione di culto Banco S. Geminiano e S. Prospero; d) 9/24 to the Fondazione BPV. Business Plan The Business Plan set up in collaboration with Bain & Co. will permit development of the full potential of the Banco Popolare, which as of 30 September 2006 ranked third in Italy for the number of branches (nearly 2,200), with more than 3 million customers, mainly families and small/medium sized businesses in Northern Italy, with approximately 74 billion of direct customer deposits (6 th place on a national scale), 107 billion of indirect deposits and customer loans of around 74 billion (6 th place on a national scale). The strategy of the Banco Popolare is to appeal to the development of traditional core business, enhancing the geographical complementarity of the branch network, with strong ties to the territory and excellence of the buildings produced which, for the first time in a banking consolidation process, will result in greater revenue synergies versus cost synergies. 2

3 The Banco Popolare will benefit from synergies of 500 million, 227 of which relate to cost, 146 to revenue and 127 to productivity alignment. The cost income ratio will stand at 43% at Group level (45% net of Bipitalia Ducato and Efibanca). The ambitious targets scheduled by the Business Plan for will be achieved, thus appealing to the Banco Popolare s key points of excellence: - Strength of the branch network Banca delle Piazze - Efficiency and reliability - Business portfolio - Capital management Strength of the branch network The branch network of the new group differs from it competitors due to the improved quality of the franchise, with an average market share of 10% in Northern Italy and with a market share exceeding 10% in 21 Italian provinces. The excellent geographical positioning of the network is also distinguished by negligible branch overlap and the presence of well-defined territorial offices with clear geographic responsibilities, which will enable the Business Plan to be accomplished more quickly. The "Banca delle Piazze" strategy shared by both Groups, essentially based on territorial origins, will later support growth in the retail and SME sectors. The objective for average annual income growth from is estimated at 10.7%, thanks to the alignment of the productivity of the commercial networks. Efficiency and soundness The Banco Popolare, which has a high level of efficiency to start with, shows average staffing costs below that of the banking system as a whole, in addition to the lower average age (41) of its 21,000 employees and excellent professional skills. Economies of scale will help to contain administrative and information technology costs, whose average annual increase is estimated at 2.1% including depreciation, while staffing costs will record average annual growth of 3.8%, with the staff of the BPI retail banks whose costs will rise by 3% yearly. Administrative expenses will also be kept in check thanks to the positive track record of BPVN. Stability is backed by a capital availability/risk profile ratio which, once the operation is completed, will settle at 6.4% for Tier One and 10% as regards Total Capital Ratio. Business Portfolio Compared to its competitors, Banco Popolare has a diversified, competitive business portfolio that can already on its own generate high profitability and enhance value creation by the commercial branches, ensuring higher returns than the average for commercial banking. The Group will hold a leading position in the consumer credit sector, with 100% of Bipitalia Ducato, 48% of Linea and 20% of Delta; the total market share of the three companies (equivalent to 13.6% in September 2006) actually makes it the leading Italian operator in the sector. In asset management the Group will enjoy strong growth potential as a result of integration of the companies, particularly Aletti Gestielle SGR and Bipitalia Gestioni SGR, achieving a market share of 4%. The Banco Popolare will be the major shareholder in Arca, with a holding of 28%, giving it the opportunity to play a larger role in Italian asset management. The inclusion of Efibanca and Aletti Merchant will create a top Italian player in the merchant banking and investment banking sector. Capital Management The Banco Popolare will enjoy considerable flexibility in Capital Management, since apart from a strong generation of recurrent profits, it can count on the presence of implicit capital gains in the equity investment and property portfolios, on the issue of hybrid financial instruments, the securitisation of loans and new partnerships in specific businesses, starting with the bancassurance. The Tier 1 capital ratio, based on Basel I methodology, is maintained at between 6% and 6.5% over the lifetime of the plan. The total capital ratio will increase from 9% to 10% over the lifetime of the plan. Taking these minimum adequacy ratio targets as firm, in the light of the above-outlined flexibility, and subject to the authorisations from the Bank of Italy, the Boards of Directors of BPVN and BPI shall esamine in detail, in the meetings scheduled on 19 December, the timing and the mode of the Capital Management. 3

4 Corporate Governance and Management The corporate structure is based on a parent holding company, a listed cooperative bank, resulting from the merger of the Banco Popolare di Verona e Novara with the Banca Popolare Italiana, which will co-ordinate the Banco Popolare through direct control of the main retail banks and product companies. Governance of the parent holding company will adopt the dual system in which the Board of Management and the Supervisory Board, together with the shareholders' meeting, constitute the senior corporate bodies. In the parent holding company, positions will be as follows: Chairman of the Supervisory Board: Carlo Fratta Pasini Senior Deputy Chairman of the Supervisory Board: Dino Piero Giarda Deputy Chairman of the Supervisory Board: Maurizio Comoli The other Supervisory Board Members will be: Marco Boroli, Giuliano Buffelli, Guido Castelletti, Pietro Manzonetto, Maurizio Marino, Mario Minoja, Claudio Rangoni Machiavelli Chairman of the Management Board: Divo Gronchi (subject to the reapproval by the shareholders meeting scheduled on 20 January 2007). Chief Executive Officer: Fabio Innocenzi Management of the holding company will be steered by General Managers Massimo Minolfi, in charge of the corporate sector, and Franco Baronio, in charge of the retail sector, who will also act as Managing Directors of the New BPL and the New BPV-BSGSP respectively. The managerial front line will be made up as follows : For the Holding Company Head of the Human Resources Division Giuseppe Apicella Guerra Head of the Operations Division Ottavio Rigodanza Head of the Finance Division Maurizio Faroni Head of Group Loans and credit policies Giovanni Capitanio Head of Corporate Management Division (Legal, Participations and Compliance) Lucio Menestrina Manager of the Corporate Centre (Planning and Management Control, Risk Management, Special Projects, Investor Relations) Marco Franceschini Head of the RES (Specialist External Networks) Maurizio Di Maio Head of the Public Relations office Marco Grassi Head of the Corporate office Andrea Santini Head of the Retail office Emanuele Giustini Head of the Planning and management control office Alberto Gasparri Head of the Administration and Balance sheet office Gianpietro Val Head of the Group Audit office Giancarlo Castelli. The New BPV-SGSP (whose Managing Director will be Franco Baronio) will have the following managerial structure: General Manager Giorgio Papa Joint General Manager Francesco Minotti Deputy General Managers Silvano Piacentini and Giordano Simeoni. The structure of the New BPL (whose Managing Director will be Massimo Minolfi) will be: General Manager Luigi Negri Deputy General Managers Antonio Maurino, Paolo Landi and Giuseppe Malerbi In the BPN, the current Managing Director, Domenico De Angelis, and the current General Manager, Maurizio Di Maio, will be backed up by the Deputy General Managers Carlo Lombardi, Fabrizio Marchetti and Bruno Pezzoni. The operational centres of the parent bank are to be located as follows: Verona as registered office of both the parent bank and the Retail and Operational divisions. 4

5 Lodi as the head office of the Corporate Division (including the head office of the Nuova Efibanca) and the Finance Division. Novara as the head office of the Specialist External Networks and Banca Diretta. In particular, as regards the Retail sector, a strategy of market penetration and promoting customer loyalty will be pursued, based on expanding the package on offer, with particular attention to complementing and constantly updating the product range, family credit and innovative transaction services, with a view to positioning the Banco Popolare as the partner of reference for existing customers and thereby attracting new ones, especially drawing on the existing portfolio of relationships (private, professional and smallbusiness customers). As regards the Corporate sector, on the other hand, the focus in developing the business will be on medium-sized firms and companies with strong territorial ties, making use of existing service units and the excellent customer franchise of the two groups, providing more comprehensive cover of customers' financial requirements. In particular, alongside traditional services, it will be possible to offer more highly developed products and banking services, as well as corporate finance and capital markets services (building on the specialist establishments), backed by a higher level of customer service and greater profitability. In terms of organisational structure, the New BPL will have a network of around 530 branches, spread over the territory in which it was historically based; in addition, it will have control over the territorially based banks Banca Popolare di Crema S.p.A., Banca Popolare di Cremona S.p.A., Banca Popolare di Mantova S.p.A. and Banca Caripe S.p.A. The New BPV-SGSP will have a network of around 530 branches, spread over the territory in which it was historically based. The two new Banks will enjoy considerable operational independence, subject to Group policies, as regards both credit appraisal processes and commercial policies. The Board of Directors of the New BPL and the New BPV-SGSP will comprise between 12 and 16 executive and non-executive directors, who will hold office for three years. At least two-thirds of the members of the board will be chosen from representatives of the areas in which the new BPL group and BPVN respectively are based and these members will not have executive functions. At least one-quarter of the members of the Board of Nuova BPL and Nuova BPV-SGSP will be executive Directors. The first non-executive directors of Nuovo BPL and Nuovo BPV-SGSP will be chosen and appointed at the time of incorporation of the banks, from the Boards of BPI and BPVN respectively. The executive directors will be chosen by mutual agreement. Synergies The Business Plan provides for the achievement of synergies of 500 million by Cost Synergies amount to 227 million overall: - 91 million from personnel costs, where an estimated 1350 staff members will be saved, of which around 840 will be incentive-based voluntary departures and 510 will result from lower turnover (hiring/severance) - 67 million from integration of IT and back-office systems, as a result of economies of scale and adopting Group best practice - 69 million from savings on administrative costs, as a result of economies of scale and adopting Group best practices Income synergies amount to 146 million overall, with 77 million from internalising income from retail and corporate products, 35 million from extending the model of specialist external networks to the BPI branches and 31 million from BPVN adopting BPI best practice in the consumer credit sector. Bringing the productivity of the commercial branches of the Banca Popolare Italiana in line with the best practice of Banco Popolare Verona and Credito Bergamasco, which will provide them with a more efficient model of territorial organisation, a better IT and credit management system, greater incentives and a broader and more competitive product portfolio, will raise additional income of 127 million. 5

6 Volume and profitability targets of the Business Plan ( /bn) CAGR CUSTOMER LOANS 12.9% DIRECT CUSTOMER FUNDS 7.7% ASSETS UNDER MANAGEMENT 7.9% Estimated Consolidated Income Statement data ( /MM) CAGR Total volumes (average) 8.7% Operating income 10.7% - Net financial income % - Other net revenues 10.7% Operating costs 3.2% Operating profit 18.9% The scale of the target asset and economic aggregates in the Business Plan becomes even clearer from the key performance indicators, shown in the table: Financial ratio 2010 BANKING VOLUMES PROFITABILITY COST OF CREDIT RISK CAPITAL ADEQUACY Loans/Direct deposits 107% Asset under Mgnt/Indirect deposits 49% Cost /Income 2 45% Pay Out Ratio 3 ~50% EPS 2.85 Loan loss provisions/ Customer loans 0.45% TIER 1 6.4% Total capital ratio 10.0% Lodi-Verona, 13 December Net interest income + Dividends and profit/losses of companies carried at equity. 2 Net Efibanca and Ducato 3 Ratio calculated on recurrent net income 6

7 BANCO POPOLARE DI VERONA E NOVARA BANCA POPOLARE ITALIANA Press Relations Press Office tel: tel.: /257 relazest@bpv.it tel.: /514 Investor Relations Investor Relations tel: / tel.: investor.relations@bpv.it investor.relations@bipielle.it (IR section) 7