exclusive negotiation phase entered into with Apollo for disposal of the consumer credit company,

Transcription

1 PRESS RELEASE BOARD OF DIRECTORS APPROVES BANCA CARIGE'S PRELIMINARY CONSOLIDATED ACCOUNTS AS AT 31 DECEMBER The whole year was centred around strengthening capital and increasing the efficiency of the Group; a commercial re-launch programme was fine-tuned in the last part of the year as an instrument, inter alia, to return to profitability Phased-in CET1 ratio at 8.4% as at 31 December 2014, expected to further improve to approximately 12% on the back of the soon to be implemented actions included in the Capital Plan. First steps in the implementation of the Capital Plan: exclusive negotiation phase entered into with Apollo for disposal of the consumer credit company, Creditis shortlisting of four non-binding bidders for the purchase of Banca Cesare Ponti forthcoming closing of the agreement entered into with Apollo in October 2014 for the disposal of the Insurance Companies Activities for financial and credit risk profile mitigation continued throughout the year: - provisions for on-balance-sheet loans to customers were recognised for an amount of EUR mln (EUR 1,039.9 mln in 2013), corresponding to an annualised cost of credit of 273 bps (423 bps in 2013), inclusive of provisions arising from the Asset Quality Review (AQR). 1 It is noted that the Bank has classified and measured the assets, liabilities and profit & loss items of the Insurance Companies, as well as of Banca Cesare Ponti and Creditis according to the provisions of the IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations), restating the profit and loss balances for With regard to balance-sheet data, although the afore-mentioned standard does not call for a restatement of comparative data as at 31 December 2013, this press release contains some restated comparative data in addition to the historical figures reported in the accounting tables, in order to allow for a a like-for-like comparison.

2 - coverage ratios for non-performing loans to customers have increased accordingly: 39.9% for total non-performing loans (36.0% as at December 2013) and 58.5% for bad loans (56.3% as at December 2013), confirming the Bank's alignment with the higher banking system levels for Italian regional banks (including write-offs, the coverage ratios rise to 41.3% and 60.5%, respectively) - Risk-weighted assets (RWA) significantly reduced from EUR 23.1 bn to EUR 20.5 bn Operational efficiency improvements completed with the definition of the 600 incentive-based early retirements identified in the Business Plan and other remuneration-revising measures (for EUR 50 mln worth of cost savings a year, when at steady state) and rationalisation of the branch network, with closure of 36 branches, out of the 80/90 closures envisaged in the Business Plan; forthcoming closure of an additional 20 branches. Commitment to giving new commercial momentum continues: - core" component (i.e. current accounts and deposits) up 5.5% (to EUR 14.6 bn) with overall funding holding firm (EUR 47.3 bn; +4.1% Y/Y) - good performance in assets under management (EUR 10.2 bn; +8.9% Y/Y), driven by mutual funds (EUR 5.3 bn; +14.2%), with EUR 0.7 bn in net funding - Bancassurance on the rise, with placement of approx. EUR mln worth of new premiums by the branch network (net written premiums +5.1%, totalling EUR 210 mln) a comprehensive effort for the relaunch of the network's commercial activities has been initiated based on a dedicated Retail segment project which redefines the Group's sales and distribution model towards a 'to-be' Hub & Spoke structure The Parent Company's share of profit/loss for the period is -EUR mln (-EUR 1,761.7 mln in 2013); net of non-recurring items recognised in the year, the profit/loss for the period would have closed at -EUR mln, inclusive of the overall compliance with the AQR findings which had identified the need for higher loan provisions for an amount of EUR 290 mln after tax. 2

3 Strategic guidelines for capital strengthening implemented during the year In today's meeting chaired by Cesare Castelbarco Albani, Banca Carige's Board of Directors has approved the Preliminary Consolidated Accounts as at 31 December 2014, as presented by the Chief Executive Officer Piero Luigi Montani. Business management during the year focused on the priority of implementing the measures for securing and improving the efficiency of the Group which had been identified in the Business Plan, while the last part of the year saw the introduction of a comprehensive sales-boosting programme, in view of a stable return to profitable business. The capital strengthening activities completed over the year allow for the attainment of an 8.4% phased-in CET1 ratio as at 31/12/2014. A further significant improvement in the CET1 ratio is expected as a result of the soon to be implemented actions included in the Capital Plan, which will contribute such an additional capital amount to raise the CET1 ratio to approximately 12%. On occasion of the approval of the draft Financial Statements scheduled for March 2015, the Bank will give effect to the new Business Plan for which, in line with the Capital Plan, foresees, amongst other measures, the following: a share capital increase via a rights issue for the Bank's shareholders, pre-underwritten by leading banking and financial institutions for an amount of up to EUR 700 mln; disposal of the consumer credit company, Creditis, with exclusive negotiations entered into with Apollo; disposal of the private bank, Cesare Ponti, with 4 bidders already shortlisted for admission to the second phase of the disposal process, consisting in the submission of non-binding offers; closing of the Insurance Companies' disposal agreement with Apollo at a sales price of EUR 310 mln In parallel with capital strengthening, the intense effort of credit and financial risk profile mitigation conducted as of the last quarter of 2013 continued via: - the recognition of provisions for on-balance-sheet loans to customers for an amount of EUR mln (1,039.9 mln in 2013), corresponding to an annualised cost of credit of 273 bps (423 bps in 2013); during the year, the aggregate was affected by provisions arising from adjustments to the processes, methodologies and application parameters for the 3

4 classification and assessment of loans, including in light of the observations made by the European Central Bank after completion of the Asset Quality Review (AQR). - a conservative loan assessment policy which, in addition to the full-scope compliance with the AQR findings, was reflected in a significant increase in coverage ratios: 39.9% for total non-performing loans (36.0% as at December 2013) and 58.5% for bad loans (56.3% as at December 2013); including write-offs, the coverage ratio for non-performing loans rises to 41.3% and that of bad loans reaches 60.5%. - the simultaneous reduction in RWAs from EUR 23.1 to EUR 20.5 bn. - drastic reduction of the bank's securities portfolio (from EUR 6.1 bn as at 31/12/2013 to today's EUR 2.8 bn, net of the shareholding in the Bank of Italy) and its average term to maturity from 3 to 1.9 years over the same period; - full early repayment of the LTRO (initially amounting to EUR 7 bn) and simultaneous participation in the T-LTRO programme for an amount of EUR 1.1 bn; - unencumbered ECB-eligible assets increased to EUR 3.8 bn to consolidate the Bank s liquidity position; liquidity coverage ratio (LCR) at 157% The second phase of the Plan, focusing on improving operational efficiency, has been progressing along the following lines of action: - completion of union negotiations for the definition of the ca. 600 incentive-based early retirements set out in the Plan and a full-scale review of the remuneration structure; - rationalisation of the branch network, approximately 50% completed, with closure of 36 branches; - definition of the Head Office new organisational setup and completion of the Management Team was affected by the macro-economic environment and Plan execution initiatives The persistent difficulties of the macro-economic environment and the intense efforts conducted as part of the Business Plan were reflected in the business performance of the Group: the recognition of non-recurring 2 items caused the profit/loss for the period to close at -EUR mln; net of these 2 The main non-recurring items after tax are traceable for an amount of: EUR mln to the capital loss arising from measurement under IFRS 5 of the insurance companies held for sale; EUR 43.9 mln to higher personnel expenses primarily arising from the new union agreement; EUR 11.6 mln to the impairment of goodwill on CR Carrara; EUR 1.5 mln to costs associated with the closure of 36 branches; EUR 9.8 mln to a higher net tax impact. 4

5 one-offs, the year would have closed at -EUR mln, inclusive of the overall recognition of AQR-related provisions (totalling approximately EUR 290 mln after tax). Overall funding, amounted to EUR 47.3 bn (+4.1% Y/Y). As part of direct funding (EUR 26.4 mln; +6.8% Y/Y), the core component (i.e. current accounts and deposits) was up 5.5% (to EUR 14.6 bn) despite a difficult business environment. The re-opening of bond issuance programmes for customers allowed for over EUR 450 mln worth of placements to date, contributing to the positive trend in funding. Indirect funding, totalling EUR 20.9 bn, was up 0.9% Y/Y on account of the positive performance in asset management (EUR 10.2 bn, +8.9%). The strong drive for products placed by the network continues: net funding from mutual funds amounted to EUR 0.7 bn, while bancassurance products were placed for an amount of EUR 4.5 bn (vs. EUR 4.3 bn in 2013, +4.9%), both propped up by trends in the financial markets. The uncertainties of the macro-economic environment and the widespread credit reduction in the Italian banking system, were reflected in the slowdown in loans 3 (EUR 26.5 bn; -1.2% Y/Y). Excluding the institutional component, essentially consisting in repos and interest-bearing postal bonds, a 6.3% slowdown was observed for the aggregate; as part of this item, loans to businesses witnessed a sharper drop (-11.2% Y/Y) than loans to customers (-5.5% Y/Y). Non-performing loans were up 14.1% Y/Y to EUR 6.5 bn. Lower funding/lending volumes and substantially stable average spreads were reflected in the trends in Net Interest Income (EUR mln; -17.9% from 2013); lower margins were mainly the result of the downsizing of the securities portfolio -for the purpose of improving the liquidity and risk profile of the Group- and classification of part of the loan book as bad loans. Although backed by a positive performance in asset management, net fees and commissions (EUR mln) Y/Y (-5.7%) were affected by lower revenues associated with the disposal of the Asset Management Company finalised on 30 December 2013; fees and commissions on lending were weighed down by low volumes. Bancassurance placement fees, totalling EUR 16.1 mln, are not included in the aggregate due to consolidation-related intragroup cancellations. Net income from trading/valuation of financial assets, totalling EUR mln, has notably improved since 2013 (EUR 69.0 mln excluding revenues associated with the effect from adjustments to the fair value measurement methods used for securities issued by the Bank, including those for which the Group has adopted the Fair Value Option, totalling EUR 40.1 mln) 3 Net of debt securities classified as L&R. 5

6 and reflects the contribution from divestment of part of the AFS securities portfolio, in line with the objective of financial risk profile mitigation. Operating costs (EUR mln) net of non-recurring items arising from Plan-implementing actions, were down 7.9%. Personnel expenses (EUR mln) were up Y/Y on account of nonrecurring costs associated with the incentive-based early retirements and remuneration structure review recognised during the year (EUR 59.0 mln), which will contribute an expected gross benefit of approximately EUR 50 mln a year, when at steady state. Finally, provisions for on-balance-sheet loans to customers were recognised in profit and loss for an amount of EUR mln (vs. EUR 1,039.9 mln in 2013), corresponding to an annualised cost of credit of 273 bps (vs. 423 bps in 2013). These provisions are inclusive of the overall compliance with the AQR findings, which had identified the need for higher provisions for a gross amount of EUR 416 mln. In conclusion, the result is affected by measurement of the assets held for sale under IFRS 5 at the lower of the book value and the fair value net of selling costs, which has led to a total negative effect of EUR mln. DISCLOSURE OF ADDITIONAL INFORMATION PURSUANT TO ART. 114, PARA. 5, OF LEGISLATIVE DECREE no. 58/1998 Further to CONSOB's request of 30 January 2015, the information about the accounting effects arising from the quantitative findings of the Asset Quality Review ( AQR ) is reported below. a) Credit file Review The Credit File Review conducted as part of the AQR has identified the need for higher provisions (net of write-backs) for a total amount of EUR 216 mln. The Bank has conducted a detailed review of the individual positions identified, with a view to making the appropriate adjustments, in light of a more updated base of information concerning the borrowers' situation and values of collateral than the one available at the time of preparation of the financial statements for As a result of the assessment conducted, the Bank has recognised significant impairment losses and write-offs with a consequent increase in total provisions for an aggregate amount of EUR 222 mln, with respect to the request for EUR 216 mln, for positions identified during the AQR as non-performing exposures (relating to the entire portfolio subject to the Credit File Review). 6

7 Moreover, the natural development of positions over the year has led to the transition to nonperforming status of additional positions which had been identified as performing exposures during the AQR, with the consequent increase in provisioning for an additional amount of EUR 82 mln. b) Projection of Findings The statistical Projection of Findings from the Credit File Review has identified adjustments for a total of EUR 94 mln. Despite noting that these projections derive from statistical methods used within the framework of a prudential exercise and are not expected to be automatically reflected in the financial statements, the Bank has taken account of the adjustments identified by the ECB, introducing certain alignments to its policies, procedures and parameters in use for loan assessment. In particular, the specific guidelines for an objective identification of loss events have been reviewed and the same approaches to second-level control processes have been adopted as were used in the AQR exercise. In line with guidance provided by the ECB during the AQR, a specific LGD-related adjustment has been introduced for the assessment of lower-amount non-performing loans subject to collective provisioning, according to the criteria illustrated under item c. Collective Provisioning below, with an effect of EUR 27 mln on the Financial Statements as at 31 December Finally, additional initiatives have been introduced and are expected to be completed by the end of financial year 2015, for the purpose of further adjusting the methods for updating the time to recovery and interest rate used to determine the present value of the recovery amount with a view to considering the effects of the current economic cycle. As a result of the alignments carried out, the Bank has had an assessment conducted on the adequacy of provisions calculated for the unsampled portfolio. The assessment has revealed that, in the course of 2014, the increase in provisioning on the aforementioned portfolio (only for positions which, as at 31 December 2014, were classified as bad loans and substandard loans) was EUR 126 mln following the ongoing alignment of exposure valuation, as compared to the EUR 94 mln total arising from the AQR statistical projection of findings. c) Collective provisioning The Collective Provisions Analysis conducted as part of the AQR exercise has identified higher provisions for performing loans for an aggregate amount of EUR 106 mln. In line with guidance provided by the ECB for risk parameters and for the purpose of an earlier factoring-in of the effects from the rating model review which will take place in 2015, an adjustment for collective provisions 7

8 was introduced in the 2014 Financial Statements so as to reflect the effects from a re-calibration of PD and LGD over shorter time horizons and inclusive of Downturn factors for the corporate segment. An approach more in line with the point in time perspective specified by the ECB was therefore adopted, while at the same time preserving the overall consistency of the methodological approach underlying the Group s loan assessment model. The alignment of parameters used for the calculation of collective provisioning has increased the provisions for the whole portfolio of performing loans by a total amount of EUR 90 mln, of which EUR 83 mln for its corporate component, which registered a fall in exposures by over EUR 1.5 bn in In terms of coverage ratios, the application of this adjustment to (performing) positions subject to collective assessment generated a 60 bps increase in the coverage ratio as compared to the end of 2013; in particular, the performing corporate portfolio registered a coverage ratio increase by approximately 140 bps from 1.6% at the end of 2013 to 3.0% as at 31/12/2014. Therefore, by applying this coverage ratio to the exposure as at 31/12/2013, the amount of provisions would have totalled EUR 102 mln. d) Level 3 Fair Value Level 3 fair value exposures were not part of the AQR scope for the Carige Group. **** In conclusion, with reference to Consob's request to disclose information about the i) Common Equity Tier 1 ratio as at 31/12/2014 as part of reporting to the Supervisory Authority and ii) additional own funds required by the ECB, if any, notice is hereby given that: i) the Common Equity Tier 1 ratio as at 31/12/2014 is 8.4% ii) The Bank shall disclose information about the additional own funds required by the ECB, if any, and its directors' relevant considerations as soon as it receives the final decision by the European Supervisory Authority. **** The draft Full-Year Report for the Banca Carige Group will be approved by the Board of Directors in its meeting on 3 March 2015 and will be made available under the terms and through the means set out by regulations in force at Banca Carige's registered office and on its corporate website relations/bilanci. 8

9 **** Declaration of the Manager responsible for preparing the Company s financial reports pursuant to art. 154-bis, para. 2 of Legislative Decree no. 58/1998 (Consolidated Law on Finance)) Pursuant to Article 154-bis, paragraph 2, of the Italian Consolidated Law on Finance, the undersigned, Luca Caviglia, in his capacity as the Manager responsible for preparing Banca Carige S.p.A.'s financial reports, declares that the accounting information contained in this Press Release corresponds to the underlying documentary evidence and accounting records. **** The Banca Carige Group's Preliminary Consolidated Accounts as at 31 December 2014 will be presented to the financial community in a conference call scheduled for 12 February 2015 at (CET). A live webcast will also be available. Dial-in numbers and other details to access the conference call can be found on the Bank's corporate website ( under 'Investor Relations'. Genoa, 11 February 2015 INVESTOR RELATIONS COMMUNICATIONS Roberta Famà Antonello Amato Massimo Turla Alfredo Majo Via Cassa di Risparmio 15 Via Cassa di Risparmio GENOVA GE GENOVA GE tel tel fax fax investor.relations@carige.it relazioni.esterne@carige.it AD HOC COMMUNICATION ADVISORS Giorgio Zambeletti Sara Balzarotti Tel: mobile: giorgio.zambeletti@ahca.it sara.balzarotti@ahca.it 9

10 PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE BANCA CARIGE GROUP 10

11 CONSOLIDATED BALANCE SHEET ASSETS (thousands of EUR) Change 31/12/ /12/2013 absolute % 10 -CASH AND CASH EQUIVALENTS 329, ,280 (9,886) FINANCIAL ASSETS HELD FOR TRADING 67, ,697 (64,935) FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT AND LOSS - 258,633 (258,633) FINANCIAL ASSETS AVAILABLE FOR SALE 3,037,414 10,544,587 (7,507,173) LOANS TO BANKS 754,732 1,218,989 (464,257) LOANS TO CUSTOMERS 23,682,831 25,476,359 (1,793,528) HEDGING DERIVATIVES 201, ,811 75, EQUITY INVESTMENTS 92,482 91, TECHNICAL INSURANCE RESERVES REASSURED WITH THIRD PARTIES SUBJECT TO JOINT CONTROL - 155,233 (155,233) PROPERTY, PLANT AND EQUIPMENT 769,760 1,070,877 (301,117) INTANGIBLE ASSETS 116, ,067 (71,919) of which: - goodwill 57, ,479 (49,334) TAX ASSETS 2,032,517 2,083,257 (50,740) -2.4 a) current 1,034, , ,218 b) deferred 998,054 1,785,012 (786,958) b1) of which pursuant to Law 214/ ,312 1,425,756 (672,444) NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS 6,854,768-6,854, OTHER ASSETS 370, ,933 (100,706) TOTAL ASSETS 38,309,560 42,156,275 (3,846,715) -9.1 LIABILITIES AND SHAREHOLDERS' EQUITY (thousands of EUR) Change 31/12/ /12/2013 absolute % 10 -DEPOSITS FROM BANKS 1,877,094 8,161,242 (6,284,148) DEPOSITS FROM CUSTOMERS 17,332,987 14,817,367 2,515, SECURITIES ISSUED 8,121,888 9,217,979 (1,096,091) FINANCIAL LIABILITIES HELD FOR TRADING 11,667 14,567 (2,900) FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT AND LOSS 964,726 1,296,816 (332,090) HEDGING DERIVATIVES 515, ,998 57, TAX LIABILITIES 24, ,242 (227,821) (a) current 12,891 94,683 (81,792) (b) deferred 11, ,559 (146,029) LIABILITIES ASSOCIATED TO NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS 6,474,615-6,474, OTHER LIABILITIES 640, ,430 (171,662) EMPLOYEE TERMINATION INDEMNITIES 82,588 89,232 (6,644) ALLOWANCES FOR RISKS AND CHARGES: 446, ,415 70, a) post employment benefits 393, ,900 72, b) other allowances 52,448 54,515 (2,067) TECHNICAL RESERVES - 5,017,768 (5,017,768) VALUATION RESERVES (190,025) (123,950) (66,075) RESERVES (426,348) 296,061 (722,409) 180 -SHARE PREMIUM RESERVE 368,856 1,020,990 (652,134) SHARE CAPITAL 2,576,863 2,177, , TREASURY SHARES (20,283) (21,282) NON-CONTROLLING INTERESTS (+/-) 52,071 55,838 (3,767) NET PROFIT (LOSS) (+/-) (543,591) (1,761,657) 1,218, TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 38,309,560 42,156,275 (3,846,715)

12 CONSOLIDATED INCOME STATEMENT (figures in thousands of EUR) Change absolute % 10 - INTEREST AND SIMILAR INCOME 795, ,105 (195,876) INTEREST EXPENSE AND SIMILAR EXPENSE (441,632) (560,385) 118, NET INTEREST INCOME 353, ,720 (77,123) FEE AND COMMISSION INCOME 296, ,910 (17,771) FEE AND COMMISSION EXPENSE (50,897) (53,771) 2, NET FEE AND COMMISSION INCOME 245, ,139 (14,897) DIVIDENDS AND SIMILAR INCOME 18,265 4,765 13, NET PROFIT (LOSS) FROM TRADING 4,926 (278,438) 283, NET PROFIT (LOSS) FROM HEDGING 2,031 (10,319) 12, GAINS (LOSSES) ON DISPOSAL OR REPURCHASE OF: 90, ,935 (261,447) a) loans 2,623 (1,096) 3,719 b) financial assets available for sale 85, ,403 (243,265) c) financial assets held to maturity - 21,261 (21,261) d) financial liabilities 2,727 3,367 (640) NET PROFIT (LOSS) FROM FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE ,113 (39,746) NET INTEREST AND OTHER BANKING INCOME 714, ,915 (83,999) NET IMPAIRMENT LOSSES/REVERSALS ON: (669,433) (1,084,200) 414, a) loans (645,527) (1,042,784) 397, b) financial assets available for sale (1,452) (14,127) 12, d) other financial transactions (22,454) (27,289) 4, NET INCOME FROM BANKING ACTIVITIES 45,483 (285,285) 330,768 NET INCOME FROM FINANCIAL AND INSURANCE ACTIVITIES 45,483 (285,285) 330, ADMINISTRATIVE EXPENSES: (660,815) (632,816) (27,999) 4.4 a) personnel expenses (411,503) (378,157) (33,346) 8.8 b) other administrative expenses (249,312) (254,659) 5, NET PROVISIONS FOR RISKS AND CHARGES (5,629) (5,941) NET ADJUSTMENTS TO/ RECOVERIES ON PROPERTY, PLANT AND EQUIPMENT (20,801) (21,744) NET ADJUSTMENTS TO/ RECOVERIES ON INTANGIBLE ASSETS (28,593) (30,119) 1, OTHER OPERATING EXPENSES (INCOME) 102, ,088 (3,707) OPERATING EXPENSES (613,457) (584,532) (28,925) GAINS (LOSSES) ON INVESTMENTS IN ASSOCIATES AND JOINT VENTURES 4,939 98,475 (93,536) IMPAIRMENT ON GOODWILL (15,919) (1,654,363) 1,638, GAINS (LOSSES) FROM DISPOSAL OF INVESTMENTS (179) (276) PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS (579,133) (2,425,981) 1,846, TAXES ON INCOME FROM CONTINUING OPERATIONS 170, ,141 (625,244) PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS (408,236) (1,629,840) 1,221, PROFIT (LOSS) AFTER TAX FROM NON-CURRENT ASSETS HELD FOR SALE (138,706) (146,868) 8, NET PROFIT (LOSS) FOR THE PERIOD (546,942) (1,776,708) 1,229, NON-CONTROLLING INTERESTS (3,351) (15,051) 11, PARENT COMPANY'S NET PROFIT (LOSS) (543,591) (1,761,657) 1,218, (*) The 2013 balances reflect, with respect to the published balances, the changes resulting from the application of IFRS 5 "Non-current Assets Held for sale and Discontinued Operations". 12