Consolidated interim report on operations as at 30 September 2013

Transcription

1 Consolidated interim report on operations as at 30 September 2013

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3 Contents Banca popolare dell'emilia Romagna Banking Group contents Directors and officers of the Parent Company at the date of approval of the consolidated interim report on operations as at 30 September 2013 page 5 Group interim report on operations as at 30 September 2013 page 7 CONSOLIDATED FINANCIAL STATEMENTS Consolidated financial statements as at 30 September 2013 Consolidated balance sheet page 81 Consolidated income statement page 82 Statement of consolidated comprehensive income page 83 Statement of changes in consolidated shareholders' equity page 84 CONSOLIDATED EXPLANATORY NOTES Form and content of the consolidated interim report as at 30 September 2013 page 89 Information on the consolidated balance sheet page 99 Information on the consolidated income statement page 127 Information on risks and related hedging policy page 141 Information on consolidated shareholders equity page 145 Information on business combinations page 157 3

4 ATTACHMENTS contents Financial statements of the Parent Company as at 30 September 2013 Balance sheet page 167 Income statement page 168 Income statement by quarter page 169 Statement of changes in shareholders' equity page 170 Pro-forma financial statements of the Parent Company Balance sheet as at 31 December 2012 page 171 Income statement as at 30 September 2012 page 173 Certification on the consolidated quarterly financial statements as at 30 September 2013 page 175 4

5 Directors and officers of the Parent Company at the date of approving of the consolidated interim report on operations as at 30 September 2013 directors and officers Board of Directors Chairman: * Ettore Caselli Deputy chairmen: * Alberto Marri * Piero Ferrari * Giosuè Boldrini Chief Executive Officer: * Luigi Odorici Directors: Antonio Angelo Arru Giulio Cicognani * Pietro Ferrari Elisabetta Gualandri Manfredi Luongo Giuseppe Lusignani Valeriana Maria Masperi Giuseppina Mengano Fioravante Montanari Daniela Petitto * Deanna Rossi * Erminio Spallanzani * Angelo Tantazzi * Members of the Executive Committee Board of Statutory Auditors Chairman: Romano Conti Acting Auditors: Carlo Baldi Guglielmo Cacchioli Fabrizio Corradini Pier Paolo Ferrari Substitute Auditors: Luigi Fontana Luigi Attilio Mazzocchi 5

6 Board of Arbiters directors and officers Members: Miranda Corradi Federico Ferrari Amorotti Vittorio Rossi Roberto Bernardi Massimo Turchi Substitute members: Pier Luigi Cerutti Philip Bergamini General Management General Manager: Fabrizio Togni Deputy General Managers: Alessandro Vandelli Eugenio Garavini Manager responsible for preparing the company s financial reports Manager responsible for preparing the company s financial reports Emilio Annovi 6

7 GROUP INTERIM REPORT ON OPERATIONS as at 30 September 2013 Banca popolare dell Emilia Romagna Banking Group 7

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9 Gruppo BPER. La nostra forza è la tua forza. Banca Popolare dell Emilia Romagna Banca della Campania Banca di Sassari Banca Popolare del Mezzogiorno Banca Popolare di Ravenna Banco di Sardegna Cassa di Risparmio di Bra Questo è il marchio del Gruppo BPER. Un gruppo bancario composto da 7 banche con oltre 1300 sportelli e uomini.

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11 Contents INTRODUCTION 1. SIGNIFICANT EVENTS AND STRATEGIC TRANSACTIONS 1.1 Strategic transactions 1.2 The Group's Business Plan 1.3 Structured finance transactions 1.4 Recovery of doubtful loans 1.5 Other significant events group interim report 2. L'AREA DI CONSOLIDAMENTO DEL GRUPPO BPER 2.1 Group structure as at 30 September Composition of the Group at 30 September Changes in the scope of consolidation 3. RESULTS OF OPERATIONS 3.1 Introduction 3.2 Performance ratios 3.3 Balance sheet aggregates 3.4 Capital for supervisory purposes and capital ratios 3.5 Reconciliation of consolidated net profit/shareholders' equity 3.6 Income statement aggregates 3.7 Group employees 3.8 Geographical organisation of the Group 4. OTHER INFORMATION 4.1 Treasury shares 4.2 Ratings 4.3 Inspections by the Supervisory Authorities on Group Banks and Companies 4.4 Disclosure of exposures to sovereign debt held by listed companies 4.5 Main litigation and legal proceedings pending 5. SIGNIFICANT SUBSEQUENT EVENTS AND OUTLOOK FOR OPERATIONS 5.1 Subsequent events 5.2 Outlook for operations 11

12 INTRODUCTION group interim report After a second quarter that saw an acceleration in global economic growth, the third quarter of 2013 will probably show only a slight decrease in this upward trend. The trend in place since the end of the previous period will be further consolidated, with industrialised countries that ought to see the growth differential versus emerging nations getting narrower, after being negative for years. Fears about a decline in the amount of U.S. quantitative easing (the unconventional monetary policy adopted by Federal Reserve to support the economy and financial markets) have, in fact, caused a rush of investors to withdraw investments from developing countries and this has had a negative impact on the strength of their economic growth. Increasing imbalances in the balance of payments and geopolitical tensions have contributed to this trend. As regards individual countries, the economy in the USA continues to be supported by the "wealth effect". Rising financial markets (the S&P500 stock market posted new all-time highs during the quarter), the recovery in the real estate market and the labour market in slow but progressive improvement all help consumption and business confidence. However, the Federal Reserve has been worried about the marked increases in yields on U.S. government bonds and mortgages, which rose in May following fears, that subsequently failed to materialise, of "tapering", i.e. a gradual reduction in unconventional monetary stimulus from September In the third quarter, the Eurozone is expected to confirm the signs of recovery shown in the second quarter, when GDP turned in growth of 0.3% q/q thanks to better than expected figures from the German, Portuguese and French economies: this should be Europe coming out of recession after six consecutive quarters of falling GDP. Inflation (CPI +1.1% y/y in September 2013) continued its downward trend and does not worry the ECB which, in addition to keeping official interest rates at an all-time low of 0.5%, introduced for the first time in early July forward guidance for the expectations of markets and investors about future levels of interest rates. For the ECB, key rates, and therefore all those of the ECB, will remain at current levels, or even lower, for an extended period of time and this should help keep interest rates low on the money market. In the third quarter, after the eighth consecutive negative figure for GDP (the second quarter of 2013 posted a fall of 0.3% q/q) Italy was shaken by new worries about political stability, which fuelled tensions on local financial markets (which subsequently declined). At a macro level, inflation has continued to decline (+0.9% y/y in September 2013) and there has been an improvement in business and consumer confidence, but unemployment and public debt are continuing to rise. Among the major events of the quarter, in addition to what we have already said about central banks, worth noting is the "shutdown" in America. On 30 September 2013, the American fiscal year came to an end without Congress having passed the necessary laws to authorise the financing of certain federal agencies, which led to their temporary closure, putting thousands of public employees on compulsory leave. This, together with the October deadline for the public debt ceiling, left the world in a climate of uncertainty on the economic and financial front during the last quarter of Source: Bloomberg 12

13 1. SIGNIFICANT EVENTS AND STRATEGIC TRANSACTIONS 1.1 Strategic transactions Merger of Cassa di Risparmio della Provincia dell Aquila S.p.A., Banca Popolare di Lanciano e Sulmona S.p.A. and Banca Popolare di Aprilia S.p.A. to be absorbed by Banca popolare dell Emilia Romagna s.c. On 11 January 2013, the Board of Directors of Banca popolare dell Emilia Romagna s.c. ("BPER" or the "Merging Company") and the Boards of Directors of Cassa di Risparmio della Provincia dell Aquila s.p.a. (CARISPAQ), Banca Popolare di Lanciano e Sulmona s.p.a. (BPLS) and Banca Popolare di Aprilia s.p.a. (BPA) approved a merger plan for CARISPAQ, BPLS and BPA ("Companies Being Merged" or Banks of Central Italy) to be absorbed by BPER. The merger, which forms part of the activities envisaged in the Group's Business Plan, designed to simplify and streamline the organisational structure and governance of the Group, as well as to optimise and enhance resources and reduce operating costs, was approved by the Bank of Italy on 5 March The merger took place in a simplified form in accordance with art bis of the Italian Civil Code, as the merging company held more than 90% of the companies being merged. The Boards of Directors of the companies taking part in the merger, assisted by independent advisors, decided on the following share exchange ratios, without any balances to be paid in cash: 1.01 BPER ordinary shares for every CARISPAQ ordinary share; 1.76 BPER ordinary shares for every BPLS ordinary share; 8.76 BPER ordinary shares for every BPA ordinary share. Under art bis of the Italian Civil Code, the shareholders of the companies to be merged, other than BPER, had the right to have their shares bought by the merging company at a price set in the same way as for withdrawal. As the merger implicitly involved a heterogeneous transformation of the companies being merged and a modification of the voting and participation rights, the shareholders of the companies other than BPER, who did not vote in favour of the merger resolution, had the right to withdraw for all or part of the shares that they held, pursuant to art et seq of the Italian Civil Code. The liquidation value of the shares was determined by the Boards of Directors of the companies being merged, having obtained a favourable opinion from their Statutory Auditors and Independent Auditors, as follows: Euro 8.90 per CARISPAQ ordinary share; Euro per BPLS ordinary share; Euro per BPA ordinary share. These amounts were also defined as the consideration to be paid to shareholders of the companies being merged, who exercised their put option pursuant to art bis of the Italian Civil Code. group interim report On 8 March 2013, having obtained the necessary approval from the Supervisory Authority, the Parent Company filed the Merger Plan with the Modena Companies Register and on 11 March 2013 filed the deeds for the simplified procedure pursuant to art bis of the Italian Civil Code. This documentation remained available on file for thirty days prior to the merger resolution and, until it was adopted, it was also published on the Bank s website ( On 23 April 2013, after the approval of the Extraordinary Shareholders' Meetings of the three banks being merged on 14 April for BPLS and on 18 April for CARISPAQ and BPA, the Board of Directors of the Parent Company BPER approved the merger by absorption of the three 13

14 group interim report subsidiaries, as well as the related changes to art. 6 of BPER's articles of association (filed with the Modena Companies Register on 24 April 2013). The merger took place on the weekend of 25 and 26 May, with legal effect from 27 May 2013 and from 1 January 2013 for accounting and tax purposes. Nadia s.p.a. acquires controlling stakes in two property companies With a view to streamlining and reorganising its real estate assets, on 30 January 2013 Nadia s.p.a. signed an agreement to take over the holdings of the other two shareholders and to become the sole shareholder of Immobiliare Reiter s.p.a., already 34% owned at 31 December Within the same project, Nadia took over full control of another property company Galilei Immobiliare s.r.l.. The acquisition of these companies by Nadia s.p.a. will make it possible to monitor and manage more effectively the development of building land owned by the two companies, as well as the disposal of assets that are held for sale. Optima changes its name With effect from 1 February 2013, Optima s.p.a. SGR changed its name to Optima s.p.a. SIM, having obtained all the necessary approvals from the competent authorities, moving its head office from Milan to Modena. Sale of a controlling interest in IMMO.BI s.r.l. (property company) On 25 February 2013, the Parent Company reached an agreement with Sequenza s.p.a. to sell its entire controlling interest (80.90%) in Immo.Bi s.r.l. for Euro 245, The company, which at 31 December 2012 was shown under "Non-current assets and disposal groups held for sale", was excluded from the scope of consolidation in the first quarter of BPER acquires control of Cassa di Risparmio di Bra On 7 February 2013, having obtained the necessary approvals from the authorities, Banca popolare dell Emilia Romagna s.c. ("BPER") and Fondazione Cassa di Risparmio di Bra ("Fondazione") went ahead with the "Share purchase and sale contract" signed on 20 September 2012, involving the sale of 35.98% of Cassa di Risparmio di Bra ("CR Bra") by the Fondazione to BPER for a total of Euro 23.9 million, paying 50% in cash and the rest in fixed-rate BPER Lower Tier II Subordinated Bonds, maturity 7 years. This transaction gives BPER ownership of a 67% controlling interest in the share capital of CR Bra, which means including it in the scope of consolidation. With a letter dated 17 May 2013, the Bank of Italy authorised the changes to CR Bra's articles of association needed to reflect the fact that it now belongs to the BPER Group, as well as to carry out the increase in capital needed to strengthen its capital, as required by the Supervisory Authority at the beginning of the year. On 11 June 2013, CR Bra convened an extraordinary shareholders' meeting to approve an increase in capital of Euro 20,000,000, carried out by issuing 12,500,000 new shares; of these, 8,375,000 were subscribed by BPER and 4,125,000 by Fondazione. 14

15 Arca Impresa Gestioni SGR s.p.a. On 21 March 2013, after a period of exclusive negotiations with Iniziativa Gestione Investimenti SGR s.p.a., the shareholding in Arca Impresa Gestioni SGR s.p.a., which was held 100% by BPER, was transferred, as the required authorisations had all been granted to the buyer. Arca Impresa Gestioni SGR s.p.a. is an asset management company that specialises in the promotion and management of closed-end private equity funds; at the end of 2012 it managed four funds, two of which are in the investment phase, while the other two have nearly completed their disinvestment. On 23 July 2013, the parties decided on the final selling price and a price adjustment of Euro thousand was paid. Following completion of its sale, the company is no longer included in the scope of consolidation, having been shown under "Non-current assets and disposal groups held for sale" at 31 December group interim report Serfina Banca s.p.a. On 4 June 2013 BPER's Board of Directors decided to acquire the banking business of Serfina Banca s.p.a. in accordance with the objectives laid down in the Parent Company's Business Plan, having completed the due diligence and reached an agreement with the Trade Unions. On 15 July 2013, the Parent Company and Serfina Banca s.p.a. signed an agreement for BPER to purchase the affiliate's banking business, subject to the outcome of its shareholders' meeting. Serfina's shareholders' meeting held on 19 July voted in favour of selling the banking business on the following terms: the price is estimated at Euro 6,215 thousand, based on the company's book balances at 31 December 2012, net of the assets/liabilities not transferred and a further provision for loan losses; the company's winding-up pursuant to art of the Italian Civil Code and consequent measures, as stipulated in the sale agreement (art. 4.1). The transaction was completed on 30 September 2013, when the assets and liabilities that form part of the banking business were acquired and the winding-up of company took effect for legal purposes as it was impossible to achieve its corporate purpose, resulting in its liquidation. The assets acquired, on the basis of the book figures at 30 September 2013, amount to Euro 65,345 thousand, of which Euro 59,166 thousand are loans, against liabilities acquired of Euro 59,269 thousand, of which Euro 48,807 thousand are customers deposits, including Euro 11,333 thousand of bonds. At the same time, the two former Serfina Banca branches were structured as small branches linked to BPER as part of the Territorial Division of Lanciano (Chieti and Pescara Branch no. 3). 1.2 The Group's Business Plan At the meeting on 13 March 2012, the Board of Directors of Banca popolare dell'emilia Romagna approved the Business Plan: "The new BPER Group: growth, value and territory in a country that is changing". The Business Plan was then presented to the financial community on 14 March By developing the projects contained in the Business Plan, the Group has set as its main objective for to achieve an adequate level of profitability that is sustainable over time, through: 15

16 group interim report greater efficiency and higher revenue; containment of the cost base; strengthening of the Group's operational machine; in accordance with the strong local presence that has always been a characteristic of the BPER Group. The principal measures of the Business Plan can be divided into two broad categories: ordinary and extraordinary measures, originally made up of 82 projects, of which 68 ordinary and 14 extraordinary. To date, the 82 original projects envisaged in the Master Plan have been reduced to 74 by grouping four of them together and rescheduling another four beyond As regards implementation and the progress being made on these original projects, to date, 49 are in progress and 6 have already been completed (including all of the mergers with BPER envisaged in the Plan). The most important worth mentioning, including those in 2012, include: the integration of Meliorbanca (in 2012); the absorption of CARISPAQ, BPLS and BPA by the Parent Company, as explained in the section entitled "Strategic transactions"; a new model of governance for the Parent Company (already concluded in 2012): establishment of the roles of Chief Risk Officer (CRO), Chief Lending Officer (CLO), Chief Operating Officer (COO) and Chief Financial Officer (CFO) to enhance risk management and strengthen credit management; a new model of governance for Group banks (started in 2012): a new organisational model for the Group banks not involved in mergers is currently being adopted. It is geared to higher business orientation and faster implementation of the Parent Company's guidelines, with a particular focus on the Commercial and Lending functions; the "Efficient management of the Group's non-performing loans" project (started in 2012). Under ordinary operations: enhancement of multi-channel strategy; "Basel 2" programme: the BPER Group started work back in 2007 on the Basel 2 Programme, which is now in its final stages, dedicated to the optimisation and maintenance of the IRB (Internal Rating Based) system in terms of organisation, methodology and IT; collective agreement for the staff: on 9 April 2013, the Bank completed the process of verifying, together with the Trade Unions, the Personnel Manoeuvre included in the Group Framework Agreement signed on 15 September 2012 to simplify the Group's organisation and reduce overall operating costs in a structural manner. The main objective of the agreement was to reduce the workforce by 450 people, through voluntary application to join the redundancy incentive plan and access to the banking sector's Solidarity Fund for income support. At the end of this verification process, the acceptance period was extended by four months, with a consequent increase in the number of members and a higher cost for around Euro 9 million, which was already provided for in the Income Statement at 30 June

17 1.3 Structured finance transactions One of the guidelines of the Business Plan is to maintain an adequate liquidity profile. Accordingly, various initiatives were planned with a view to diversifying the forms of medium/long term financing, initially through Eurosystem's open market operations, while waiting for a revitalisation of operators' interest in transactions with Italian counterparties, which today is limited. In this context, the following actions were completed during the period under review: under the long-term programme of Guaranteed Bank Bonds ("Covered Bonds") of Euro 5 billion, intended for institutional investors, with the approval of the basic prospectus by the Luxembourg "Commission de Surveillance du Secteur Financier" on 30 November 2011, updated on 8 August 2013, a third portfolio was sold on 1 July 2013 for a total of some Euro 700 million, made up not only of BPER's 2012 production, but also of the loans of the three banks recently merged with BPER (CARISPAQ, BPLS and BPA). This sale was preparatory for a new bond issue, the third of the programme, for a total of Euro 750 million, which was carried out on 15 October 2013, as specified in the last part of this report under "Significant subsequent events and outlook for operations"; securitisation of loans to SMEs: similar to the Estense Finance operation carried out in 2009, in 2012 it was decided to sell and securitise loans issued by BPER, acquiring on subscription all of the securities originated by the operation, in order to have available additional instruments eligible for refinancing with the ECB. The loans involved in the sale were performing loans made to SMEs for a total of Euro 2.2 billion. The buyer was Estense S.M.E. s.r.l., a special purpose vehicle which issued Senior Securities (Class A) for Euro 1.5 billion, rated A-/A (low) by Standard & Poor s and DBRS respectively, and Junior Securities (Class B), which are unrated, for Euro 0.7 billion. In February 2013, the Senior issue became available for refinancing operations with the ECB, once it had obtained eligibility from the Central Bank of Luxembourg. The Senior Security is currently amortising according to expectations and the residual nominal capital after the payment date in September 2013 amounts to Euro 1,169 million; a "Multi-originator securitisation of lease receivables was carried out jointly by Sardaleasing and ABF Leasing through the sale without recourse of a portfolio of performing lease receivables, selected according to specific objective criteria, in a lump sum to a special purpose vehicle ("SPV") called MULTI LEASE AS s.r.l.. The sale of the receivables was formalised on 1 February 2013 and published in the Official Gazette no. 16 of 7 February The total value of the receivables sold amounted to approximately Euro 1,018 million, of which around Euro 580 million (57%) attributable to Sardaleasing and Euro 438 million (43%) to ABF Leasing. A "multi-originator" structure was chosen as it permitted a significant reduction in costs, in terms of both initial structuring costs and subsequent management costs. The SPV financed the purchase price of the receivables by issuing: group interim report Senior Class A securities of Euro 625,900,000, ISIN IT , rating: S&P s A and Fitch "A-", listed on the Dublin Stock Exchange and recognised as eligible by the Irish Central Bank; Junior Class B1 securities, of Euro 168,431,000, ISIN IT , unrated and unlisted, subscribed by the seller ABF Leasing; Junior Class B2 securities of Euro 223,417,000, ISIN IT , unrated and unlisted, subscribed by the seller Sardaleasing. 17

18 group interim report The aim is again to raise funds for the benefit of the entire Banking Group, at competitive costs, through refinancing with the ECB. The Senior Security is currently amortising according to expectations and the residual nominal capital after the payment date in July 2013 amounts to Euro million. 1.4 Recovery of doubtful loans: securitisations and other financial transactions Avia Pervia transaction Following the example of the Parent Company and Meliorbanca at the end of the previous year, on 21 March 2013, the other Group banks, excluding Cassa di Risparmio di Bra, contributed to the multi-originator securitisation of Avia Pervia s.r.l. (9.9% owned by BPER), with the sale of a portfolio of mortgage loans and unsecured loans classified by the Originators as non-performing, for a total transfer price of Euro million. 70% of the portfolios acquired (the "up-front purchase price") was financed by the SPV issuing on 17 May 2013 a series of asset-backed securities, unrated and unlisted, which will be fully subscribed by the Originators, while the other 30% (the "deferred purchase price") was financed by means of a credit line granted by the selling banks. As mentioned previously, the transaction is considered as a type of multi-originator securitisation, which involves the banks as both originators and investors. Consequently, as the risks and benefits of the portfolios have not been transferred, these loans have not been reversed out of the assets of the Group Banks. The management of items in dispute has been assigned to the Originator banks themselves (as sub-servicers) coordinated by a Group Company, Nettuno Gestione Crediti s.p.a. (as the master servicer). Efficient management of non-performing loans should enable the Group to take extraordinary measures to reduce the stocks of such positions, while also optimising the direct costs involved in managing them. The following table summarises the assigned portfolios and related issues (the BPER portfolio also includes the one relating to the sale made by the former Meliorbanca, which was merged in November 2012). 18

19 Originator bank Number of positions Nominal value (GBV) Sale proceeds Up-front purchase price Deferred purchase price Banca popolare dell'emilia Romagna 724 1, Banco di Sardegna group interim report Banca Popolare del Mezzogiorno Banca della Campania Banca Popolare di Aprilia Banca Popolare di Lanciano e Sulmona Banca Popolare di Ravenna Banca di Sassari Cassa di Risparmio della Provincia dell Aquila TOTAL 1,714 2, Mutina transaction Of the various securitisations carried out within the Group, still outstanding is the multi-originator one carried out in 2002 with Mutina s.r.l. (wholly owned by BPER), which was scheduled to expire during As regards management of this operation, based on checks carried out by Nettuno Gestione Crediti, acting as Master Servicer, there was evidence that the procedures for recovery of the non-performing loans transferred takes longer than estimated at the time the securities were issued, though the results are still positively assessed. So, as reflected in the updated dynamic Business Plan, taking into account that the SPV will continue to collect proceeds from the securitised portfolios well beyond the legal deadline of the Junior Securities (the second maturity date) and at least until December 2018, at the end of last year, an amendment to the maturity date was made, postponing the second maturity date, originally scheduled for 9 August 2013, to 9 February Polis fund During the first half of 2013, the BPER Group took part, together with 12 other banks, in the launch of "Asset Bancari III", a closed-end real estate mutual investment fund managed by Polis SGR. Operations began on 26 June 2013 with the early closure of subscriptions and an initial capital of Euro 98,750 thousand, divided into 395 units with a nominal value of Euro 250 thousand each. The BPER Group subscribed 82 units for a total nominal value of Euro 20,500 thousand, of which 61, valued at Euro 15,250 thousand resulting from the contribution of property portfolios by ABF Leasing and Melior Valorizzazioni Immobili and 21, valued at Euro 5,250 thousand, from the subscription of commitments to be released by paying in cash. Against these contributions, the Fund can acquire mortgage-backed non-performing loans from the participating companies. Following the conclusion of the first property contributions, 45 units were assigned to the portfolio valued at Euro 11,250 thousand, and included under "Financial assets available for sale". 19

20 group interim report Securis Real Estate Fund On 25 June 2013, Sardaleasing and Beni Stabili Gestioni SGR s.p.a. stipulated the first contribution of properties to the Securis Real Estate Fund, a closed-end real estate mutual investment fund reserved for qualified investors. This is a block of 20 properties worth a total of around Euro 8,238 thousand. The assets relate to positions in default for a net book value of Euro 8,841 thousand, which generated a loss of approximately Euro 600 thousand on the books of the subsidiary of the Banco di Sardegna. The contribution led to the subscription of 120 new units of the Fund with a provisional value of Euro 70,582 per unit, for a total of Euro 8,470 thousand. 1.5 Other significant events Earthquake in Emilia-Romagna: BPER supports its customers The earthquake that in May 2012 tragically hit the territory where the Parent Company has its historical roots was commented on in considerable detail in the annual report. Work on repairing the damage and restoring infrastructure and production facilities continued in 2013, with BPER in the front line. The Parent Company was recognised as support bank for the provision of subsidies to households and businesses affected by the earthquake, as established by the regional ordinances n. 29/2012 (for residential properties) and n. 57/2012 and subsequent (for business activities). Note that from December 2012, when this facility came to an end, the BPER Group autonomously extended the suspension of loan repayments up to June In June 2013 the BPER Group signed up for the ABI Agreement, which aimed to provide a further extension of this benefit to 31 December 2013 for customers still in difficulty. In addition to any immediate damage to the Group's assets, the earthquake also resulted in a need to pursue new activities to support and protect BPER's core activities, which immediately involved: mapping the effects of the earthquake on customers; one-to-one analysis of customers in critical situations; monitoring the evolution of critical situations over time. Immediately after the event, the branches involved, coordinated by the Markets Department, which collected and processed the data, carried out a census of 20,400 customers, in order to record the impact of the earthquake on their production (companies) or professional activities (individuals). Based on the data obtained from the census and ever since 30 June 2012, BPER arranged for a system of penalties to rating scores and to the value of guarantees to take into account the effects of the earthquake, resulting in additional prudential provisions on loans in the area concerned. Then, from July 2012, analyses and analytical monitoring of the most critical customers were carried out, above all business customers based in the so-called "red zone" and with loans in excess of Euro 100,000 at the time of the earthquake. The results of this process demonstrated that the earthquake had a significant impact with serious consequences on the business situation for a limited number of customers, even if they represented exposures of almost Euro 7 million. On the other hand, the majority of companies located within the scope of the investigation and granted loans of more than Euro 100,000, which had declared damages to their property and/or production facilities immediately after the earthquake, managed to overcome their difficulties 20

21 during the 12-month period under observation, either by their own means or the intervention of the shareholders, or thanks to insurance reimbursements. So in light of the results of these analyses, the analytical evaluations of impaired positions and considering that further investigations tend to indicate that the negative effect of the earthquake is already reflected in our internal ratings for both Corporate and Retail customers, the system of penalties originally applied was eliminated from 30 June group interim report Affiliated companies On 31 January 2013, the Board of Directors of the affiliate Cassa di Risparmio di Savigliano s.p.a. approved a bonus issue increase in capital pursuant to art of the Italian Civil Code, mainly using property revaluation reserves to strengthen its capital ratios, above all its Tier 1 capital ratio. The Extraordinary Shareholders' Meeting of Cassa di Risparmio di Savigliano held on 12 September 2013 approved the bonus issue increase in capital and the consequent change in the Articles of Association. At the board meeting of 17 December 2012, the Directors of Alba Leasing s.p.a. approved the Guidelines of the Business Plan which includes, in particular, its obtaining bank status. This transformation from its current status as a finance company under art. 107 requires it first to achieve adequate levels of capitalisation; to achieve this objective, the Board of the company has decided to ask the shareholders for fresh capital. On 28 January 2013, the Board of Directors of BPER approved the plan to subscribe the Euro 70 million increase in the subsidiary's share capital. As a result, Alba Leasing's share capital has gone from Euro 255 million to Euro 325 million. The Parent Company took part by subscribing 25,501,000 shares for a total of Euro 25.5 million, leaving its percentage ownership the same as at 31 December Alba Leasing's Business Plan, which was approved by the subsidiary's Board of Directors on 25 May 2013, provides, among other things, for the start of the reorganisation and rationalisation of the operating structure in order to achieve improvements in efficiency, as well as the revision of the service model in favour of the distribution network. Appointments and resignations from the Board of Directors of the Parent Company BPER On 11 January 2013, the Board of Directors of BPER voted unanimously to co-opt Pietro Ferrari onto the Board to replace Alessandro Fagioli, who resigned on 18 December Pietro Ferrari comes from Modena and graduated with a degree in Civil Engineering from the University of Bologna. In 1982, he joined the family business, Ing. Ferrari s.p.a., as sole director and in 1990 he became CEO. He holds various corporate positions and has been the President of the Modena branch of Confindustria since June The Shareholders' Meeting of 20 April confirmed Mr. Ferrari for the next three-year period On 23 April 2013, as a result of the appointments made by the Shareholders' Meeting of 20 April, the Board of Directors of Banca Popolare dell'emilia Romagna, decided to reconfirm Luigi Odorici as CEO. The same meeting also approved the appointment of Giosuè Boldrini as Deputy Chairman, who joins the other two Deputy Chairmen, Alberto Marri and Piero Ferrari. 21

22 On 4 July 2013, Mario Zucchelli, Independent Director has resigned from the post of Director of BPER due to conditions of incompatibility of office, in compliance with the provisions of art. 36 of Decree Law 201 of 6 December 2011, converted into Law 214 of 22 December group interim report The Board is currently made up of eighteen members, nine of whom are part of the Executive Committee. J.E.S.S.I.C.A. Sardinia Urban Development Fund In 2006, a joint initiative of the European Commission of the EIB, in collaboration with the Council of Europe Development Bank (CEB) gave rise to J.E.S.S.I.C.A. (Joint European Support for Sustainable Development in City Areas), a tool designed to encourage investment in urban areas by promoting the revolving use of European Structural Funds for projects of urban development, made available to the regions of EU Member States, also to foster the creation of public-private partnerships. The operating agreement was signed in July 2012 at the Regional Planning Centre of the Sardinia Region in Cagliari, between the European Investment Bank (EIB) and Banco di Sardegna, which in partnership with Sinloc (Sistemi iniziative locali) s.p.a. will manage the J.E.S.S.I.C.A. Sardinia Urban Development Fund. The resources acquired will amount to Euro 33 million and will be invested on a revolving basis in urban transformation projects, tourism infrastructure and local public transport, to which may be associated approximately Euro 99 million of co-financing from Banco di Sardegna directly for selected projects. Additional resources will be made available by the EIB through Banco di Sardegna. At 30 September 2013, the J.E.S.S.I.C.A. Fund, the activity of which is still starting, has received Euro 5 million and disbursed to Banco di Sardegna and Sinloc s.p.a. commissions for a total of Euro 430 thousand. 22

23 2. SCOPE OF CONSOLIDATION OF THE BPER GROUP 2.1 Group structure as at 30 September 2013 Bearing in mind the various matters discussed in the introduction, the Group structure at 30 September 2013 is as follows. group interim report 23

24 91.162% SITUATION AS AT 30/09/2013 Numera S.p.A % Tholos S.p.A % % Banca Popolare di Ravenna S.p.A % Cassa di Risparmio di Bra S.p.A % Banca della Campania S.p.A % Banca Popolare del Mezzogiorno S.p.A % Banco di Sardegna S.p.A % (a) % Banca di Sassari S.p.A % 1.000% % Banca Popolare dell'emilia Romagna (Europe) International S.A % Emilia Romagna Factor S.p.A % Optima S.p.A. - SIM % BPER Services S.C.p.A % (b) % 5.000% Sardaleasing S.p.A % Estense Covered Bond S.r.l % ABF Leasing S.p.A % Nettuno Gestione Crediti S.p.A % Nadia S.p.A % Modena Terminal S.r.l % BPER Trust Company S.p.A % EMRO Finance Ireland Limited % Mutina S.r.l % a) b) Equivalent to % of the entire Capital Stock consisting of ordinary, preferred and savings shares, the latter being non voting shares. The following banks also are shareholders of BPER Services S.C.p.A.: Banco di Sardegna S.p.A. (4.762%), Banca di Sassari S.p.A. (0.400%), Banca popolare di Ravenna S.p.A. (0.400%), Banca della Campania S.p.A. (0.400%), Banca popolare del Mezzogiorno S.p.A. (0.400%), Optima S.p.A. SIM (0.400%) and Sardaleasing S.p.A. (0.400%). In addition to the above members of the banking group, the scope of consolidation also includes the following subsidiaries of: - the Parent Bank: Melior Valorizzazioni Immobili S.r.l. ( %), Sarda Vibrocementi S.r.l. ( %) and Italiana Valorizzazioni Immobiliari S.r.l. ( %) - Banca della Campania S.p.A: Polo Campania S.r.l. ( %), - Nadia S.p.A.: Galilei Immobiliare S.r.l. ( %) and Immobiliare Reiter S.p.A. ( %), which are not members of the banking group, since they do not contribute directly to its activities.

25 2.2 Composition of the Group at 30 September 2013 The BPER Group has been registered since 7 August 1992 with code no in the Register of Banking Groups referred to in art. 64 of Legislative Decree 385 of 1 September group interim report The following is a list of the Banks and Companies included in the scope of consolidation at 30 September 2013, split between subsidiary banks and companies (consolidated line-by-line) and associate banks and companies (consolidated under the equity method). Details are also provided of the percentage held by the Group, with further specific information provided, where necessary, by means of footnotes. A) Companies consolidated on a line-by-line basis: 1) Banca popolare dell'emilia Romagna s.c., based in Modena (Parent Company) 2) Banca Popolare di Ravenna s.p.a., based in Ravenna (86.965%); 3) Banca Popolare del Mezzogiorno s.p.a., based in Crotone (96.772%); 4) Banca Popolare dell Emilia Romagna (Europe) International s.a., based in the Grand Duchy of Luxembourg (100%) 1 ; 5) Banca della Campania s.p.a., based in Naples (99.273%); 6) Banco di Sardegna s.p.a., based in Cagliari, which is held as follows: 51% of ordinary shares, % of preference shares and % of savings shares (without voting rights, listed on the Italian Stock Exchange), representing % of total capital; 7) Banca di Sassari s.p.a., based in Sassari (97.694%) 2 ; 8) Cassa di Risparmio di Bra s.p.a., based in Bra (Cuneo) (67%); 9) EMRO Finance Ireland limited, based in Dublin (Ireland), Irish investment company (100%); 10) Nadia s.p.a., based in Modena, property company (100%); 11) Modena Terminal s.r.l., based in Campogalliano (Modena), the activities of which are the storage of goods, the storage and ageing of cheeses and the cold storage of meat and perishable products (100%); 12) BPER Services s.cons.p.a., based in Modena, IT services consortium (100%) 3 ; 13) Mutina s.r.l., based in Modena, used as a vehicle for the securitisation of receivables (100%); 14) Nettuno Gestione Crediti s.p.a., based in Bologna, provider of debt recovery services (100%); 1 held by: the Parent Company (99%) and Banca Popolare di Ravenna s.p.a. (1%). 2 held by: Banco di Sardegna s.p.a. (79.722%) and the Parent Company (17.972%). 3 held by: the Parent Company (92.838% of which: 1.200% following the merger of Banca popolare di Aprilia s.p.a., Banca popolare di Lanciano e Sulmona s.p.a. and CARISPAQ s.p.a. which held 0.400% each), Banco di Sardegna s.p.a. (4.762%), Banca di Sassari s.p.a. (0.400%), Banca popolare di Ravenna s.p.a. (0.400%), Banca della Campania s.p.a. (0.400%), Banca popolare del Mezzogiorno s.p.a. (0.400%), Optima s.p.a. SIM (0.400%) and Sardaleasing s.p.a. (0.400%). 25

26 15) ABF Leasing s.p.a., based in Milan, a leasing company (100%); 16) Emilia Romagna Factor s.p.a, based in Bologna, a factoring company (60.710%); group interim report 17) Optima s.p.a. SIM, based in Modena, investment broker (100%); 18) Sardaleasing s.p.a., based in Sassari, leasing company (96.162%) 4 ; 19) Numera s.p.a., based in Sassari, IT company and subsidiary of Banco di Sardegna which holds 100% of share capital; 20) Tholos s.p.a., based in Sassari, property company and subsidiary of Banco di Sardegna which holds 100% of share capital; 21) Estense Covered Bond s.r.l. based in Conegliano (Treviso), a vehicle for the issue of Guaranteed Bank Bonds under art. 7 bis of Law 130/99 (60%); 22) Bper Trust Company s.p.a., based in Modena, with the role of trustee for trusts established by customers, as well as provider of advice on trust matters (100%); In addition to the above members of the banking group, the scope of consolidation also includes the following direct and indirect subsidiaries that are not members of the banking group, since they do not contribute directly to its activities, but are fully consolidated: Melior Valorizzazioni Immobili s.r.l. (100%); Immobiliare Reiter s.p.a. wholly owned by Nadia s.p.a.; Galilei Immobiliare s.r.l. wholly owned by Nadia s.p.a.. The following companies are not part of the Banking Group as they do not contribute to its activities: Sarda Vibrocementi s.r.l. (100%): not consolidated as it was only acquired a few months ago and it had not yet been possible to exercise control; the investment is therefore consolidated at equity; Italiana Valorizzazioni Immobiliari s.r.l. (100%), a company set up on 5 September 2013 for the management and enhancement of real estate assets acquired as a result of enforcing guarantees on problem loans. The company is still dormant at 30 September 2013 and the investment has been allocated to "Financial assets available for sale"; Polo Campania s.r.l. wholly owned by Banca della Campania s.p.a.. The company is still dormant at 30 September 2013 and the investment has been allocated to "Financial assets available for sale". 4 held by: Banco di Sardegna s.p.a. (91.162%) and the Parent Company (5%). 26

27 B) Companies consolidated under the equity method 1) Cassa di Risparmio di Fossano s.p.a., based in Fossano (Cuneo) (23.077%); 2) Cassa di Risparmio di Saluzzo s.p.a., based in Saluzzo (Cuneo) (31.019%); 3) Cassa di Risparmio di Savigliano s.p.a., based in Savigliano (Cuneo) (31.006%); group interim report 4) Banca della Nuova Terra s.p.a., based in Milan (30.369%); 5) Alba Leasing s.p.a., based in Milan (36.430%); 6) CO.BA.PO. - Consorzio Banche Popolari s.con., based in Bologna (26.044%) 5 ; 7) Sofipo Fiduciaire SA, based in Lugano, held by Banca Popolare dell Emilia Romagna (Europe) International s.a which holds 30% of share capital; 8) CONFORM - Consulenza Formazione e Management s.c.a.r.l., based in Avellino (49.405%) 6 ; 9) Sintesi 2000 s.r.l., based in Milan (33.333%); 10) CAT progetto Impresa Modena s.c.r.l., based in Modena (20%); 11) Resiban s.p.a., based in Modena (20%); 12) Unione Fiduciaria s.p.a., based in Milan (24%); 13) Atriké s.p.a., based in Modena (45%); 14) Sarda Factoring s.p.a., based in Cagliari (21.484%); 7 15) Emil-Ro Service s.r.l., based in Bologna (25%) Changes in the scope of consolidation Companies consolidated on a line-by-line basis On 30 January 2013 Nadia s.p.a. signed a purchase agreement to take over the interest of the two other shareholders and thus to become the sole shareholder of Immobiliare Reiter s.p.a., already 34% owned at 31 December Within the same project, Nadia took over full control of another property company Galilei Immobiliare s.r.l.. The other 66% of Immobiliare Reiter s.p.a. was bought at the symbolic price of Euro 2,000 as the balance sheet used for valuation purposes, prepared at 30 November 2012 by the Board of Directors of the company, shows zero net equity due to losses. In any case, the former shareholders have been exempted from any obligation to finance and recapitalise the company, as it is the acquiring company that will ensure its recapitalisation. On 25 March 2013, the Shareholders' Meeting of Immobiliare Reiter approved coverage of the accumulated losses and recapitalisation of the company. At 30 September 2013, the company has a reconstituted share capital of Euro 900 thousand; on 7 February 2013, the Parent Company acquired 35.98% of Cassa di Risparmio di Bra s.p.a., already 31.02% owned at 31 December 2012, giving it a 67% controlling interest, 5 held by: the Parent Company (23.587%) and Banca Popolare di Ravenna s.p.a. (2.457%). 6 held by: the Parent company (40.476%), Banca della Campania s.p.a. (5.952%) and Banco di Sardegna s.p.a.(2.976%). 7 held by: Banco di Sardegna s.p.a. (13.401%) and the Parent Company (8.083%). 8 held by: the Parent company (16.667%) and Emilia Romagna Factor s.p.a. (8.333%). 27

28 group interim report as explained in the previous chapter on "Significant events and strategic transactions". The Euro 20 million cash increase in the subsidiary's capital was completed on 11 June As a result, its share capital went from Euro 20.8 million to Euro 27.3 million. The Parent Company subscribed 8,375,000 shares for a total amount of Euro 13.4 million; the sale of the majority holding (80.90%) in Immo.Bi. s.r.l. was completed on 25 February 2013; the liquidation of Arca Merchant International s.a. was completed on 28 February It has been eliminated from the Banking Group; the sale of the 100% investment in Arca Impresa Gestioni SGR s.p.a. was completed on 21 March 2013; The merger of CARISPAQ, BPLS and BPA with the Parent Company was completed on 27 May The merger took effect for tax and accounting purposes from 1 January 2013; Italiana Valorizzazioni Immobiliari s.r.l., which is wholly owned by the Parent Company, was set up on 5 September 2013 for the management and development of real estate assets acquired as a result of enforcing guarantees on problem loans. The following changes also took place in the Parent Company's interest in certain subsidiary banks and companies during the period: Banco di Sardegna s.p.a.: the Parent Company's previous holding of % was raised to % after buying savings shares on the market; Banca Popolare di Ravenna s.p.a.: formerly held % by the Parent Company, it rose to % following various purchases from shareholders; Banca Popolare del Mezzogiorno s.p.a.: formerly held % by the Parent Company, it rose to % following various purchases from shareholders; Banca della Campania s.p.a.: formerly held % by the Parent Company, it rose to % following various purchases from shareholders; Banca di Sassari s.p.a.: formerly held % by the Parent Company, it rose to % following various purchases from shareholders. Companies consolidated under the equity method Cassa di Risparmio di Bra s.p.a. and Immobiliare Reiter s.p.a. are no longer classified as "significant investments" as BPER has taken over control of them, directly or indirectly, as mentioned in the previous point; Emilia Romagna Factor s.p.a. sold its entire 50% investment in Ekaton s.r.l. on 28 February 2013.; On 14 June 2013, the Parent Company acquired control of Sarda Vibrocementi s.r.l., as part of a complex debt collection operation, by subscribing a capital increase of Euro 3,000,000, offset by a receivables of the same amount against an equity that had been written off to cover past losses. As already mentioned, it was not fully consolidated; the Parent Company sold its entire 20% investment in Felsinea Factor s.p.a. on 19 September 2013; the Agreement for the sale by Serfina Banca s.p.a. to the Parent Company of assets and activities making up the banking business, as already mentioned in the section entitled "Significant events and strategic transactions", was executed on 27 September This transaction was followed by the simultaneous liquidation of the company with immediate annulment of the Board of Directors, of the pre-existing shareholder agreements and, consequently, of BPER's significant influence: Serfina (held %) is therefore no 28