(Art. 82 of Consob Resolution of May 14, 1999)

Transcription

1 Banca Lombarda e Piemontese CONSOLIDATED QUARTERLY REPORT AS OF SEPTEMBER 30, 2004 (Art. 82 of Consob Resolution of May 14, 1999) 1

2 The macroeconomiic piicture The indicators confirmed the recovery of the international economy during the third quarter. In particular, there was a significant rise in manufacturing output in both the United States and Japan, with a slight upturn in employment levels. However the US index of confidence, as expressed by both firms and households, eased back in September. The steady rise in crude oil prices did not affect the retail price index in the third quarter, which indicated an inflation rate of less than 3%. In the Euro area, industrial output continued to grow, albeit only slightly. There were no signs of improvement in employment levels, with unemployment stuck at 9%. Retail price inflation for the year to September was 2.2%. Within the Euro zone, the economic situation in Italy showed signs of improvement in certain sectors, such as metalworking and wooden products, while the condition of textiles, leather goods, electricals and precision products remains critical. The climate of confidence among businesses was essentially unchanged, while household confidence reached its peak since the start of the year. On the inflation front, the rise in the retail price index during the year to September eased back to 2.1%. Having regard for developments in the European economy, the European Central Bank did not move to alter reference interest rates during the period. The principal stock exchanges retreated during the third quarter, with the Dow Jones Eurostoxx index down 1% since the start of the year. In Italy, the rise in the volume of bankiing busiiness was consistent with the trends established in the earlier months. Lending rose by about 6%, led by long-term loans (up 12.2%), while short-term loans decreased again by around 2%. With reference to market segments, lending to families in the form of mortgages and consumer credit was, once again, the most active area. Considering total lending to households and businesses, the weighting of the former in Italy is still relatively low (36% households and 64% businesses) compared with the average for the Euro zone (55% households and 45% businesses). The quality of lending has remained stable, with non-performing loans representing 2% of total loans. In terms of deposits, the annualised growth rate of the direct element was 6.6% at the end of the third quarter, given the demand for bonds (up 12.1%). The rise in deposits was more modest, up 3.5%. Current accounts rose 6.6% over the year to more than 520 billion euro, representing about 75% of total deposits (excluding bonds). Turning to asset management, the value of mutual funds managed by Italian intermediaries rose to 517 billion euro, up slightly since the end of 2003 (514 billion euro). In particular, bonds and flexible funds have performed best. 2

3 Performance of the Banca Lombarda Group duriing the quarter The Banca Lombarda Group performed well during the third quarter of 2004, both in terms of business development and with regard to the results achieved. The following discussion covers the development of the distribution network, the principal trends in banking business and the operating and financial results achieved. Development of the distribution network Branches Two Lombarda Points, one in La Spezia and the other in Taranto, were closed during the quarter, together with the Banco di Brescia branch at Tuscania in the province of Viterbo; while a branch was opened in Rome. Region Province Banca Banco di San CR di Giorgio Tortona Banca di Valle Camonica Banca Regionale Europea Banco di Brescia Banca Lombarda Banca Lombarda P.I. Grand total ABRUZZO L AQUILA 1 1 PESCARA 1 1 Total ABRUZZO CAMPANIA NAPLES 1 1 SALERNO 1 1 Total CAMPANIA 2 2 EMILIA-ROMAGNA PARMA PIACENZA 8 8 BOLOGNA 1 1 Total EMILIA-ROMAGNA FRIULI-V. GIULIA PORDENONE 3 3 UDINE 9 9 Total FRIULI-VENEZIA GIULIA LAZIO LATINA ROME VITERBO FROSINONE 1 1 Total LAZIO LIGURIA GENOA IMPERIA 7 7 SAVONA 9 9 Total LIGURIA LOMBARDY BERGAMO BRESCIA COMO CREMONA LECCO LODI 2 2 MANTUA MILAN PAVIA SONDRIO 9 9 VARESE Total LOMBARDY (following) 3

4 (straight) Region Province Banca Banco di San CR di Tortona Giorgio Banca di Valle Camonica Banca Regionale Europea Banco di Brescia Banca Lombarda Banca Lombarda P.I. Grand total PIEDMONT ALESSANDRIA ASTI 2 2 CUNEO NOVARA 4 4 TURIN VERCELLI 2 2 Total PIEDMONT PUGLIA BARI 1 1 FOGGIA 1 1 Total PUGLIA 2 2 TUSCANY MASSA CARRARA 1 1 GROSSETO 1 1 LUCCA 1 1 PRATO 1 1 PISA 1 1 Total TUSCANY TRENTINO - A. A. TRENTO 2 2 Total TRENTINO-ALTO ADIGE 2 2 UMBRIA TERNI 1 1 Total UMBRIA 1 1 VAL D' AOSTA AOSTA 1 1 Total VAL D' AOSTA 1 1 VENETO PADUA 3 3 TREVISO 3 3 VENICE VERONA VICENZA 4 4 Total VENETO Total ITALY LUXEMBOURG LUXEMBOURG 1 1 FRANCE NICE 1 1 Grand total The network of financial consultants As of September 30, 2004, the Group's network of financial consultants, comprising the networks of the Parent Bank and Banca Lombarda Private Investment, comprised 556 persons (including 20 trainee consultants). In August, Banca Lombarda Private Investment S.p.A. signed a preliminary agreement for the purchase from Banco di Desio e della Brianza S.p.A. of its financial consultancy business. As of June 30, 2004, the business acquired had 86 consultants and assets under management of more than 260 million euro. The agreed consideration of 3.1 million euro may be revised with reference to the performance of the business acquired. This investment is consistent with the strategy designed to strengthen the network in areas without adequate coverage, adopting an operating structure that is based essentially on variable costs. 4

5 Human resources The Group employed 7,535 persons as of September 30, 2004, including 361 under fixedterm contracts and 568 part-timers. This was 85 more than at the comparative date in This statistic includes the employees of Gestioni Lombarda Suisse, which joined the Group subsequent to the first semester of Excluding these staff, the number of employees would have been 73 higher. The table below compares employment as of September 30, 2004 and September 30, EMPLOYEES AS OF CHANGE COMPANY 09/30/ /30/2004 NUMBER % BANCA LOMBARDA % BANCO DI BRESCIA 2,966 2, % BANCA LOMBARDA INTERNATIONAL % BANCA REGIONALE EUROPEA 1,972 1, % BANCA DI VALLE CAMONICA % CASSA DI RISPARMIO DI TORTONA % BANCO DI SAN GIORGIO % B.CA LOMB. PRIVATE INVESTMENT % LOMBARDA SISTEMI E SERVIZI % SBS LEASING % CBI FACTOR % SILF % VENETA FACTORING % FINANCIERA VENETA n.s. CAPITALGEST % GRIFOGEST % GESTIONI LOMBARDA SUISSE n.s. MERCATI FINANZIARI % SOLOFID % SIFRU S.I.M % CAPITALGEST ALTERN. INVEST % GRAND TOTAL 7,450 7, % 5

6 The more significant changes related to: Banca Lombarda, whose increase in personnel was due to further strengthening of the governance structure and to enlargement of the network of Private Bankers and Banca Lombarda Points; Banco di Brescia, whose reduction in personnel was mostly due to use of the Solidarity fund to support the income, employment and retraining of banking personnel, and to leavers who were not replaced; SILF, whose increase in personnel is associated with implementation of the company's plans to expand both its commercial network and support structures; SBS Leasing, whose increase in personnel was due to both the replacement of persons on maternity leave and the creation of new jobs in support of the sales network. Work also continued on reducing the number of staff and improving the allocation of resources between Group companies. The preferred method involved transferring individual employment contracts, taking account of needs associated with plans to merge the IT/operations of subsidiaries and the completion of projects to develop the Group's operations and commercial activities. The number of employees admitted to the Solidarity fund to support the income, employment and retraining of banking personnel, as established in the trade union agreements signed by all Group banks and Lombarda Sistemi e Servizi, was as follows in the third quarter of 2004 (in addition to applications already made in prior years): COMPANY ACCESS TO THE SOLIDARITY FUND (3rd Quarter 2004) BANCA LOMBARDA E PIEMONTESE 4 LOMBARDA SISTEMI E SERVIZI 3 BANCO DI BRESCIA 23 BANCA REGIONALE EUROPEA 35 BANCA DI VALLE CAMONICA 3 BANCA CASSA RISPARMIO TORTONA 1 BANCO DI SAN GIORGIO 1 TOTAL 70 These leavers were mostly replaced with new hires, but who represented no more than 35% of those admitted to the Fund. 6

7 Lending and near-banking business Lending continued to grow strongly during the first nine months of the year, reaching almost 25 billion euro following a rise of 11.4% since the third quarter of last year. Lending to customers is analysed below. (Amounts in millions of euro) Sept.-04 Sept.-03 % Change Commercial banking loans 20, , % of which mortgages 9, , % Near-banking loans 4, , % of which factoring 1, , % of which leasing 2, , % of which consumer credit % Total 24, , % The rise in lending to customers by the commercial banks was significant (up 9.6%), led in particular by the demand for mortgages (19.8%). The most lively element of near-banking activities was the consumer credit granted by Silf (+42.1%), followed by the rise in leasing (+31.6%). Direct deposits and asset management Direct deposits benefited again from strong growth during the third quarter (+8.9%) with respect to the comparative period, significantly outpacing the expansion of the banking system as a whole. In particular, there was sustained growth in relation to both current accounts and bonds. Net inflows into mutual funds during the first nine months of 2004 amounted to 239 million euro, while the Assoreti system reported outflows of 8.3 billion euro. As a result, market share has improved from 2.2% at the end of 2003 to 2.3% in September With reference to the weighting of assets under management by the Group, there has been an increase in bonds (from 37.1% to 44.3%) and a reduction in monetary funds (from 39.1% to 34.1% ). With regard to product innovation in the area of asset management, the products offering guaranteed returns have been restyled, in order to better reflect changing customer preferences. The new product known as Gestione ZeroCento will be placed by the network from November. In addition, the range of agreements with other European investment houses has been expanded; the Sicavs administered by them are now used by the Group's Private Relationship Managers in the management of their clients' portfolios. 7

8 Bancassurance The insurance premiums taken by the Group during the first nine months of the year exceeded 906 million euro. Efforts to innovate with regard to the product range included the launch during the third quarter of new issues of Risparmio Più Vip Edizione Limitata. This line guarantees a minimum return of 2.5%, which customers have found to be very attractive. In addition, the placement of Tutela il Domani, a conventional policy with LTC (Longterm Care) cover, initially distributed solely by Banco di Brescia, has been extended to all banks in the group. With regard to the Loss sector, the launch of the Creso Business account took place alongside the placement and sale of an insurance package for small economic operators, developed together with Europe Assistance, comprising: - Patente Base policy which provides the Assured whose driving licence has been suspended following a road accident with a daily income, the reimbursement of legal and appraisal fees, and a contribution towards the cost of recovering the points lost; - Patente Gold policy which insures the same risks as the Base version, but with double the level of cover; - Diaria da Ricovero e Ingessatura which provides daily income in case of accident requiring hospitalisation or the wearing of casts. Payment services A number of steps were taken during the third quarter of 2004 to innovate and promote the various payment services. In the field of Money cards, numerous campaigns have targeted specific customer segments, focusing mainly on subscriptions for prepaid S MPRE cards and the wider use of S MPRE revolving credit cards. This action has improved the placement of S MPRE credit cards with 225,000 cards held by customers by September During the third quarter, the S MPRE per te loyalty programme won an important international prize at a meeting in Brussels, organised by the Promotional Marketing Council, for European firms with the best promotion and marketing programmes in their respective sectors of activity. With regard to current accounts, the new Creso Business package was launched for small economic operators, such as freelance professionals, artisans and shopkeepers. There are two version of this new policy, Base and Gold; the key element is insurance cover that has been carefully designed to meet the requirements of a specific type of customer. Banca Lombarda stock The total number of Banca Lombarda shares outstanding at the end of September was 318,131,868. With respect to the first half of 2004, a further 657,881 shares have been issued to service the stock option plan and 52,701 shares have been issued following the exercise of 3,425,565 warrants. The number of shares issued by September 30 following the exercise of warrants totals 1,111,789. The number of warrants exercisable before the end of 2004 is 214,386,286, corresponding to 3,298,251 shares. 8

9 At the end of September the market price of Banca Lombarda shares was euro, down 1.5% since the start of the year, which is consistent with the performance of the Mib banking index (-1.6%), although the Mibtel index has risen 4%. This performance reflects the greater stability of our shares, which is much appreciated during bear markets; the measurement of performance over the past three years highlights growth of 10.3%, as against +3.7% for Mibtel and +4.1% for the Italian banking index. Performance from 10/01/01 to 9/30/ Banca Lombarda Mibtel Italian banking index /01/01 01/01/02 04/01/02 07/01/02 10/01/02 01/01/03 04/01/03 07/01/03 10/01/03 01/01/04 04/01/04 07/01/04 Accounttiing polliiciies and priinciiplles The quarterly report as of September 30, 2004 has been prepared in accordance with art. 82 of the Consob Regulations approved by resolution of May 14, It reflects the consolidated results and financial position of Banca Lombarda and the banks, financial companies and other business-related companies that it controls. This report has been prepared using the same accounting policies and principles adopted for the year-end financial statements, except for the valuation of securities listed on official markets, which have been valued using their period-end prices rather than their average prices for September. This valuation is considered to reflect market trends and the performance of the related financial derivatives more closely. The change has had no significant impact on stockholders' equity or the results for the period. 9

10 Elimination of fiscal interference and other tax-related items Decree 37 of 6 February 2004, which also amended the Consolidated Banking Law for consistency with the new company law (Decree 6 of January 17, 2003), abrogated arts and 39.2 of Decree 87/92 which allowed banks to record adjustments and provisions solely for tax purposes (so-called "fiscal interference"). The abrogation of these articles means that tax-deductible adjustments and provisions cannot be recorded in the statement of income if they are not required for statutory reporting purposes, but solely for fiscal purposes. This change in the criteria for preparing statutory financial statements has not affected the consolidated financial statements of the Banca Lombarda Group, given that the adjustments and provisions recorded by Group companies solely for tax purposes were already eliminated on consolidation. Introduction of the "consolidated tax group" and other tax reforms The tax reform includes: a) a specific regime (art. 117 et seq. of the new Consolidated Income Tax Law) to determine a single taxable income for groups of companies. In substance, the regulation envisages that losses incurred by companies can be offset against the income earned by other companies belonging to the same Group; b) a different tax treatment for dividends received (art. 90 of the new Consolidated Income Tax Law) which, with regard to Group companies, means that such dividends are totally exempt if both the parent and the subsidiary are taxed together under the consolidated tax group regulations. Establishment of a consolidated tax group involves exercising the options envisaged by art. 118, for which the related enabling regulations are currently awaited. * * * The accounting policies adopted by the Group are described more fully in the notes to the consolidated financial statements as of December 31, * * * Quarters and half years are considered to be self-contained accounting periods. Scope off consolliidattiion The quarterly consolidated financial statements include the financial statements of the Parent Bank, Banca Lombarda e Piemontese S.p.A., and those subsidiary companies operating, directly or indirectly, in the banking, financial and related sectors. Noncontrolling investments, representing at least 20% of capital, in companies operating in the banking, financial and related sectors are carried at equity, as are other subsidiaries not operating in those sectors. Holdings of less than 20% are carried at cost. 10

11 Consolidation line-by-line The following changes regarding equity investments consolidated line-by-line have taken place since December 31, 2003 (essentially unchanged with respect to June 30, 2004): - purchase of a 1.92% interest in the capital stock of CBI Factor S.p.a.: this company is now 99.15% held by the Parent Bank; - purchase by the Parent Bank of a 0.05% interest in the capital stock of Banco di San Giorgio S.p.A.: this bank is now 86.75% held by the Group; - purchase of 100% of the capital stock of Caboto International S.p.A. SA (now Gestioni Lombarda (Suisse) S.A.) through Banca Lombarda International S.p.A.. In this latter regard, given the small amounts concerned, pro forma information has not been prepared for the comparison of financial and economic information. Equity method The Parent Bank's interest in Brescia On Line has decreased from 20% to 10% since December 31, 2003; this company is therefore no longer carried at equity in the consolidated financial statements, but at cost. Infformattiion requiired by CONSOB communiicattiion no off February 15,, 2001 For the information required by Consob, reference should be made to the Explanatory Notes to the Consolidated Financial Statements as of December 31, 2003 with regard to: Tax benefits included in Decree 153 of May 17, 1999; Assisted mortgages for construction (Law 133 of May 13, 1999); Unassisted fixed-rate mortgages (Decree 394 of December 29, 2000). With regard to Compound interest: ruling dated November 4, 2004, handed down by the Supreme Court of Appeal declared void clauses governing the quarterly compounding of interest included in contracts signed prior to Taking note of this Supreme Court ruling, the Bank will assess the situation with a view to advising Group banks on how they should behave with regard to outstanding disputes, after having carefully studied the reasons for the ruling. 11

12 Thiird quarter 2004 resullts of the Banca Lombarda Group The consolidated financial position and results of operations of the Banca Lombarda e Piemontese Group for the period ended September 30, 2004, are summarised below. RECLASSIIFIIED CONSOLIIDATED BALANCE SHEET (Amoouunnt ( tss i nn thhoouussaannddss t oof f eeuurroo) ) ASSETS % Change Sept Sept Sept Dec Cash and deposits with central banks and post offices 130, , , % % Loans to customers 24,978,563 22,428,636 23,584, % 5.91% of which: - lending 24,731,221 22,185,922 23,336, % 5.98% - non-performing loans 247, , , % -0.23% Due from banks 2,490,570 2,906,994 2,383, % 4.50% Securities 1,673,702 2,302,537 1,663, % 0.64% Equity investments 491, , , % 2.94% Intangible and tangible fixed assets 874, , , % 0.14% Goodwill arising on application of the equity method and on consolid. 684, , , % -4.58% Other assets 1,556,532 2,251,119 1,649, % -5.65% TOTAL ASSETS 32,881,262 31,791,040 31,499, % 4.39% LIABILITIES AND STOCKHOLDERS' EQUITY % Change Sept Sept Sept Dec Due to customers 14,260,377 14,067,870 14,680, % -2.86% Securities issued 9,290,912 7,559,362 7,688, % 20.84% TOTAL DEPOSITS 23,551,289 21,627,232 22,369, % 5.28% Due to banks 2,289,273 2,970,494 2,829, % % Provisions for specific use 472, , , % % Other liabilities 2,728,618 3,100,991 1,866, % 46.19% Minority interests 458, , , % -0.18% Subordinated liabilities 1,349,369 1,316,150 1,305, % 3.33% Stockholders' equity: - Capital stock, reserves and retained earnings 1,912,962 1,648,238 1,888, % 1.32% - Net income for the period 118, , , % n.s. TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 32,881,262 31,791,040 31,499, % 4.39% 12

13 Priinciipall assssett ballancess At the end of the quarter, total lending to customers was 24,979 million euro, up 11.4% since September 30, 2003, and 5.9% since December As mentioned earlier, the strong growth derives from the long-term element of mortgages, together with the demand for consumer credit and leasing. Lending has been based on careful risk selection in order to protect asset quality. Net nonperforming loans amount to 247 million euro (+1.9%) or 0.99% of total loans, as against 1.1% last year. The net interbank lending position is 201 million euro, compared with a net borrowing position of 63 million euro at the end of September The value of securities held, 1,674 million euro, has decreased by 27.3% since September 30, 2003, but is essentially unchanged with respect to the end of This contraction mainly relates to the dealing securities portfolio, which has decreased from 1,911 to 1,481 million euro on the maturity of securities that were not replaced. Priinciipall lliiabiilliitty ballances Customer deposits amount to 23,551 million euro, up 8.9% since September 30, 2003 (+5.3% with respect to December 31, 2003). Customer deposits, including the shortest-term balances, are up 1.4% with respect to the corresponding period of last year (-2.9% since the end of 2003), while securities issued have increased sharply (+22.9% since September 2003 and +20.8% since December 2003). This performance was sustained, in part, by the issue of bonds by the Parent Bank. Indirect deposits, including technical reserves, total 42,347 million euro at the end of September, up 5.8% compared with the corresponding period of last year and 4.5% since the end of Assets under management have risen by 8.2% to 23,885 million euro. Growth was largely driven by asset management and insurance policies. Assets under administration, 18,462 million euro, are up 2.8%. (Amounts in millions of euro) Change % Sept. 30, 2004 Sept. 30, 2003 Dec. 31, 2003 Sept. 30, 2004 Sept. 30, Sept. 30, Dec. 31, 2003 Managed Portfolios + Funds 18,103 17,317 17, % 3.56% Technical reserves 5,782 4,766 4, % 17.81% TOTAL ASSET MANAGEMENT* 23,885 22,083 22, % 6.69% ASSET ADMINISTRATION 18,462 17,951 18, % 1.75% TOTAL INDIRECT DEPOSITS 42,347 40,033 40, % 4.48% * The amounts at include 200 million euro relating to Gestioni Lombarda Suisse Sa., acquired in May. 13

14 RECLASSIIFIIED CONSOLIIDATED STATEMENT OF IINCOME (Amounts In thousands of euro) SITUATION AS OF Change / rd QUARTER Change 3rd QTR. 04/ Amount % Amount % Banking margin 573, ,297 13, % 196, ,491 13, % Dividends 28,275 17,128 11, % 1, n.s. Net interest income 601, ,425 25, % 197, ,136 14, % Commission income and expenses 292, ,281 23, % 94,550 92,133 2, % Other income, net 102,089 97,246 4, % 33,740 36,163-2, % Net commission and other income 394, ,527 27, % 128, , % Profits (losses) on financial transactions 28,576 35,887-7, % 7,403 10,600-3, % Net income from services 422, ,414 20, % 135, ,896-3, % Net interest and other banking income 1,024, ,839 45, % 333, ,032 11, % Administrative costs -564, ,298 28, % -188, ,796 10, % payroll -337, ,462 16, % -111, ,501 4, % other administrative costs -226, ,836 12, % -77,374-71,295 6, % Gross operating income 459, ,541 17, % 144, ,236 1, % Total adjustments to tangible and intangible assets -117, ,066 13, % -42,047-37,222 4, % Adjustments to loans -70,343-68,576 1, % -19,384-17,861 1, % Provisions for liabilities and charges -14,787-9,187 5, % -2,740-1,477 1, % Adjustments to financial fixed assets, net ,252-1, % ,332-1, % Income from investments carried at equity 3,399 3, % 890 1, % Income (loss) from operating activities 259, ,942-2, % 80,795 86,650-5, % Extraordinary income (expense), net 8,877 14,635-5, % -1,759 4,809-6, % Income before income taxes 268, ,577-8, % 79,036 91,459-12, % Income taxes for the period -125, ,776-14, % -42,326-49,695-7, % Use of consolidated provision for liabilities and charges % Change in reserve for general banking risks Minority interest in net income for the period -24,187-30,580-6, % -8,152-10,012-1, % Net income/loss 118, ,121 12, % 28,558 31,752-3, % During the first nine months of 2004, nett iintterrestt iincome amounted to million euro, up 25.1 million euro (+4.4%) compared with the period ended September 30, Within net interest income, the banking margin has risen by 2.5%. The economic benefit of the strong growth in volumes was attenuated by a reduction in the interest-rate spread by 30 basis points. Comparison of the third quarter of 2004 with the comparative period in 2003 highlights a significant 7.4% rise in the banking margin. Dividends rose 65.1% over the first nine months, essentially due to the pay out by Banca Intesa, which included the bonus allotment of ordinary shares. Considering just the third quarter, net interest income rose 7.8% as a result of the growth in volumes by both the Group's banks and its near-banking companies. 14

15 Nett iincome ffrrom serrviices, million euro, has increased by 20.5 million euro (+5.1%) with respect to the first nine months of This rise was mainly due to the lively upswing in commissions (+8.5%), especially those earned from asset management and insurance savings, as well as to the improvement in other operating income (+5.0%), which benefited from income deriving from the securitisation of leasing assets. Profits from financial transactions have fallen by 20.4% due to adverse market conditions. The fall in net income from services during the third quarter was entirely due to the reduction in profits from financial transactions. Nett iintterrestt and ottherr bankiing iincome was 1,024.5 million euro, 4.7% higher than in the previous year. The increase in net interest and other banking income during the third quarter was slightly lower than the rise over the first nine months of the year (+3.5%). Admiiniisttrrattiive costts rose by 5.3% during the period and 5.6% in the quarter, to million euro. Payroll costs (337.9 million euro) were 5.1% higher, including the estimated cost of renewing the national payroll contract, which is currently being negotiated. Other administrative expenses (226.9 million euro) have risen by 5.6%, reflecting in part the impact of specific commercial action, including the Pattichiari project, designed to enhance communication and relations with our customers. Operrattiing iincome was million euro, 3.9% higher than in the corresponding period of last year. Adjjusttmentts tto ttangiiblle and iinttangiiblle ffiixed assetts amounted to million euro, up 12.9% on last year. This rise was largely due to increased depreciation following the revaluation of property at the end of 2003, as well as to an increase in the adjustment of deferred charges relating to the recourse made to the Solidarity Fund. The cost/income ratio of 63.2% has risen with respect to the situation reported as of September 30, 2003 (61.8%). The percentage rise during the third quarter was consistent with that during the first nine months of the year. A detailed valuation of non-performing and problem loans, together with the general valuation of performing loans, involved booking nett wrriittedowns of 70.3 million euro, up 2.6%. The cost of lending, determined from the ratio of net adjustments for loan losses to total lending, was 3 basis points lower than in the prior period at 0.28%. Considering the third quarter alone, net adjustments for loan losses were up 8.5%. Prroviisiions fforr lliiabiilliittiies and charrges, 14.8 million euro, were 5.6% higher than in the prior year. This higher amount includes prudent provisions against claims received from customers in relation to investment services, having regard for possible additional claims in the future. The percentage increase in the quarter was higher than the rise over the first nine months of the year. 15

16 Adjjusttmentts tto ffiinanciiall ffiixed assetts totaled 0.9 million euro, down 1.4 million euro with respect to IIncome ffrrom operrattiing acttiiviittiies was million euro, down 0.9% with respect to the comparative period of last year; the third quarter performance was 6.8% lower than in the comparative period of Exttrraorrdiinarry iittems produced net income of 8.9 million euro, compared with 14.6 million euro in the first nine months of The latter amount included 6.3 million euro released from provisions recorded in prior years that had already been taxed. Net extraordinary losses in the third quarter of 1.8 million euro compare with net income of 4.8 million euro in the third quarter of Taxes, million euro, have decreased by 10.1% with respect to the position reported as of September 30, The effective tax rate has fallen from 50.5% to 46.8%, given the increase in tax-exempt income. Nett iincome fforr tthe perriiod, million euro, was 11.7% higher than in the corresponding period of last year. By contrast, net income for the quarter was 10.1% lower than in the third quarter of * * * Adopttiion off iintternattiionall accounttiing sttandards ((IAS)) The IAS project is progressing in accordance with the master plan, in order to complete the transition to the new accounting standards by the legal deadline. With reference to the consolidated financial statements of the Banca Lombarda e Piemontese Group, the application of international accounting standards mainly affects the calculation of loan adjustments, hedge accounting policies, the valuation of derivatives, the valuation of goodwill and goodwill arising on consolidation, and the criteria for recording employee termination indemnities and the provisions for risks and charges. Significant subsequent events and outlook for the rest of the year Two of the three corporate transactions comprising the reorganization of the Group's network of financial consultants were completed during October. This project involves concentrating the activities of all financial consultants within Banca Lombarda Private Investment. Accordingly, Banca Lombarda e Piemontese has conferred on Banca Lombarda Private Investment the business comprising the Banca Lombarda Points, the network of financial consultants and its private banking division. In exchange, Banca Lombarda Private Investment reserved for the Parent Bank a capital increase of 9 million euro, representing the value of the above business. 16

17 Banca Lombarda Private Investment has also acquired from Banco di San Giorgio the business represented by the customer base served by its financial consultants for 3.2 million euro. In addition, the transfer from Banco di Brescia to Banca Lombarda Private Investment of the contracts with customers served by its financial consultants will take effect during November During November, Banca Lombarda subscribed for its share (49.9%) of the capital increase by Lombarda Vita from 55.3 million to 80 million euro, involving an investment of 12.3 million euro. This increase is intended to equip the insurance company with the capital structure required to support the current significant expansion of its operations. Lastly, Banca Lombarda e Piemontese did not withdraw from the Banca Intesa shareholders' agreement by the October 15 deadline and, accordingly, will remain party to this agreement for the next three years, contributing 2.37% of that bank's ordinary capital representing a weighting of 5.80% within the agreement. Membership of this agreement is highly strategic for the Group, which is able to actively participate in the management of Italy's principal banking group and maintain preferential relations with it. Assuming that there are no significant changes in the general economic situation, the principal trends identified during the first nine months of the year in relation to the Banca Lombarda e Piemontese Group are expected to continue. 17

18 ATTACHMENTS Ballance sheet as of and

19 CONSOLIDATED BALANCE SHEET (Amounts In thousands of euro) ASSETS Cash and deposits with central banks and post offices 130, , , Due from banks 2,490,570 2,906,994 2,383, Loans to customers 24,978,563 22,428,636 23,584,079 Securities 1,673,702 2,302,537 1,663,036 dealing securities 1,481,488 1,910,554 1,284,489 investment securities 192, , , Equity investments 490, , , Equity investments in Group companies 1,571 1,619 1,823 a) carried at equity 1,571 1,619 1, Goodwill arising on consolidation 684, , , Goodwill arising on application of the equity method Intangible fixed assets 144, , ,477 of which: - start-up costs goodwill 16,124 26,786 24, Tangible fixed assets 729, , , Other assets 1,076,060 1,538,561 1,169, Accrued income and prepaid expenses: 480, , ,664 a) accrued income 397, , ,719 b) prepaid expenses 82,974 74,050 71,945 TOTAL ASSETS 32,881,262 31,791,040 31,499,073 19

20 CONSOLIDATED BALANCE SHEET (Amounts In thousands of euro) LIABILITIES AND STOCKHOLDERS' EQUITY Due to banks 2,289,273 2,970,494 2,829, Due to customers 14,260,377 14,067,870 14,680, Securities issued 9,290,912 7,559,362 7,688, Public funds administered 793 1,149 1, Other liabilities 2,513,723 2,589,941 1,592, Accrued expenses and deferred income: 214, , ,927 a) accrued expenses 180, , ,457 b) deferred income 33,243 26,780 24, Provision for termination indemnities 170, , , Provisions for liabilities and charges: 302, , ,526 a) pensions and other commitments 24,284 25,535 26,051 b) taxation 222, , ,685 c) other 55,818 43,815 52, Reserve for general banking risks 64,338 64,088 64, Subordinated liabilities 1,349,369 1,316,150 1,305, Negative goodwill arising on consolidation 25,622 25,622 25, Negative goodwill arising on application of the equity method Minority interests 458, , , Capital stock 318, , , Additional paid-in capital 631, , , Reserves: 746, , ,431 a) legal reserve 132, , ,641 d) other reserves 613, , , Revaluation reserves 127,178 25, , Retained earnings (Accumulated losses) Net income (loss) for the period 118, , ,059 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 32,881,262 31,791,040 31,499,073 20