Italian government-guaranteed bonds (3Y LTROs) and Italian banks

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1 Italian government-guaranteed bonds (3Y LTROs) and Italian banks This report focuses on Italian government-guaranteed bonds (GGBs). These have started to enter the secondary market at a time when Italian government bonds (BTPs) have become increasingly expensive as a result of the improving economic and political picture in Italy and the ongoing hunt for yield. In our view, Italian GGBs offer interesting yield pick-ups (some Italian GGBs that mature in 217 are priced at 11-2bp ASW, or above 5bp over BTPs, and, in extreme cases, up to some 13-17bp over BTPs, depending on the issuer) at similar risk levels as BTPs. We deem these GGBs to be explicit, irrevocable first-demand guarantees. Also, while unconditionality poses some questions, we believe that the reputational risk of the Italian state not honoring its guarantee is prohibitive. This entry of GGBs into the secondary market was largely triggered by the ECB s decision to end their eligibility as ECB collateral in March 215 if they are own-use and hence issued by the same bank that posted them as collateral at the ECB (3Y LTROs). However, a "non-own-use GGB can be sold on the secondary market and can be used as ECB collateral by the buyer, while the risk weighting is % if the buyer is a bank in an EU member state. It is worth noting that a significant number of GGBs mature as late as 217. This stems from Italian banks taking advantage of cheap funding at a time when funding was expensive (211/212). While Italian banks have, so far, kept significant ECB refinancing as a safety net in case market sentiment worsens again and as cheap funding, the ECB ruling eliminates that benefit for own-use GGBs and puts real pressure on Italian banks to deal with GGBs that mature after 1 March 215. Also, banks only have some 1 months left to deal with this matter. All outstanding Italian GGBs are based on Article 8 of Legislative Decree No. 21/211, which was transformed into Law No. 214 on 22 Dec 211 ( Article 8 ) and makes the GGBs comparable. Based on Bloomberg data, we counted 24 GGBs, of which the 2 largest issues represent 76%, or EUR 4.2bn, of all outstanding GGBs (EUR 52.7bn). Among these GGBs, the 2 banks responsible for the largest issues account for 88% of all outstanding GGBs or EUR 46.4bn. Some EUR 15.6bn, or 3% of all outstanding GGBs, will mature upon the introduction of the ECB s ban of own use GGBs on 1 March 215, while some EUR 37.2bn, or 7%, will mature thereafter. Of these 7%, around 6% mature in 1Q17, which is in line with the maximum allowable 5Y term in the guarantee law. Some 58% of GGBs will mature along with the 3Y LTROs in 215. With respect to the Regulation EU No. 575/213 (Capital Requirements Regulation [CRR]), exposures to EU member states' central governments, which are denominated and funded in the domestic currency of the respective central government, can be assigned a risk weight of %. With respect to the CRR, transferable assets representing claims on or guaranteed by the central government of a member state qualify as extremely high quality liquid assets. Hence, we deem these bonds to be fully eligible for the liquidity coverage ratio (LCR) without any haircut or other restrictions. Contents Italian government-guaranteed bonds 2 Banned: own-use of GGBs as ECB collateral (1 March 215) 5 List of Italian GGBs maturing after February 215 _ 6 Options to deal with leftover GGBs 7 Eligible bonds for the guarantee 8 Nature of the guarantee 9 RWAs, LCR, non-own-use 1 Investment and pricing considerations 11 Spreads Italian GGBs, BTPs, unsecured 13 Selected issuers maturity overviews up to 217 _ 16 Selected issuers ratings, P&L, B/S & key ratios 19 Trade ideas 21 List of all outstanding Italian GGBs 22 Italian economy Snapshot 26 Investment metrics: major Italian banks 28 Latest earnings of major Italian banks 38 Intesa Sanpaolo 38 Banca MPS 39 UBI Banca 4 Banco Popolare Scarl 41 Mediobanca 42 Banca Popolare di Milano 43 Banca Popolare dell'emilia Romagna 44 Credito Valtellinese 45 Authors Dr. Tilo Höpker, Senior Credit Analyst (UniCredit Bank) tilo.hoepker@unicredit.de Valentina Stadler, Deputy Head of Financials Credit Research (UniCredit Bank) valentina.stadler@unicredit.de Bloomberg UCCR Internet UniCredit Research page 1 See last pages for disclaimer.

2 Italian government-guaranteed bonds Italian government-guaranteed bonds entering the secondary market at interesting yield pick-ups but credit risk similar to Italian government bonds (BTPs) Italian government-guaranteed bonds (GGBs) have started to enter the secondary market at a time when Italian government bonds (BTPs) have become increasingly expensive due to the improving economic and political picture in Italy and the ongoing hunt for yield. In our view, Italian GGBs offer interesting yield pick-ups. Some Italian GGBs, which mature in 217, are priced at 11-2bp ASW spread or above 5bp over BTPs and, in extreme cases, up to some 13-17bp over BTPs depending on the issuer at similar risk levels as BTPs. We deem these GGBs to be explicit, irrevocable first-demand guarantees. Also, while unconditionality poses some questions, we believe the reputational risk posed to the Italian state of not honoring its guarantee is prohibitive (we look into this issue in detail later in this report). The entry of GGBs into the secondary market was largely triggered by the ECB s decision to end their eligibility as ECB collateral in March 215 if they are own-use and hence issued by the same bank that posted them as collateral at the ECB. As most GGBs were issued for own use in order to create eligible collateral for the ECB s 212 3Y LTROs, the majority of GGBs mature at about the same time as the 3Y LTROs (1H15), while the other GGBs have to be dealt with somehow by the affected issuers. Against this backdrop, it is worth noting, that a significant amount of GGBs mature as late as 217. This stems from Italian banks taking advantage of cheap funding at a time when funding was expensive (211/212). Genesis of the GGBs On 6 Dec 211, at the peak of the financial crisis, the Italian state introduced Article 8 ( Misure per la stabilita' del sistema creditizio or Measures for the stability of the banking system) as part of Legislative Decree No. 21/211 ( decreto-legge 6 dicembre 211, n. 21, recante disposizioni urgenti per la crescita, l'equità e il consolidamento dei conti pubblici or containing urgent measures for growth, equity and the consolidation of public finances) which was transformed into Law No. 214 on 22 Dec 211 (referred to as Article 8 ). As their names indicate, these measures were carried out in order to stabilize the Italian credit system and to provide Italian banks with state guarantees on their bonds, which could then be posted as ECB collateral for muchneeded liquidity: 3Y LTROs. OUTSTANDING ITALIAN GGBS: SWOT-ANALYSIS Strengths/Opportunities Similar credit risk as Italian government bonds (BTPs) Sometimes significant yield pick-ups Many interesting GGBs have yet to enter the market Only one type of GGBs Overview of the potential GGB secondary market Italian banks were the largest drawer of 3Y LTROs and have not started reimbursing in earnest Weaknesses/Threats Questions regarding the conditionality of the guarantee Illiquid and non-transparent Source: UniCredit Research All outstanding Italian GGBs are based on Article 8, which makes them comparable to each other. As an aside, Article 8 section 34 also mentions the possibility of a state guarantee within the framework of emergency liquidity assistance (ELA) until 3 June 212, which, to our knowledge, has not been tapped by a single Italian bank. Based on Bloomberg data, we have counted 24 GGBs, of which the 2 largest issues represent 76%, or EUR 4.2bn, of all outstanding GGBs (EUR 52.7bn). Among these GGBs, the 2 banks responsible for the largest issues account for 88% of all outstanding GGBs or EUR 46.4bn. Some EUR 15.6bn, or 3%, of all outstanding bonds will mature upon the introduction of the ECB s ban of own use GGBs on 1 March 215, while some EUR 37.2bn, or 7%, will mature thereafter. Of these 7%, some 6% will mature in 1Q17 in line with the maximum-allowable 5Y term in the guarantee law. Some 58% of GGBs will mature along with the 3Y LTROs in 215. According to Bloomberg (as of 26 May 214), total LTRO liquidity drawn (tranches I and II) was some EUR 583bn, of which some EUR 389bn are outstanding. The two largest drawers were Italy and Spain. Italy drew some EUR 25bn (35% of total drawn) and has some EUR 159bn (41% of total outstanding) outstanding, while Spain drew some EUR 175bn (3% of total drawn) but now only has some EUR 97bn (25% of total outstanding) outstanding. UniCredit Research page 2 See last pages for disclaimer.

3 ...what to do with own-use Italian GGBs once LTRO repayments start in earnest? The next-largest player, Belgium, lags significantly in drawn and outstanding amounts: it drew some EUR 44bn (8% of total drawn) and has some EUR 36bn (9% of total outstanding) outstanding. Hence, Italy has some real catching up to do in reimbursing LTROs, both because it is the largest drawer and because it has not really started reimbursing LTROs in earnest. According to the Bank of Italy, by 23 April 214, 38 of the 112 Italian counterparties of the 3Y LTROs had repaid EUR 79bn or 31% of the total amount vs. 62% for the euro area. This compares to the picture on 6 November 213: 22 of the 112 Italian counterparties had repaid EUR 38bn or 15% of the total amount vs. 39% for the euro area as Italian banks remained more cautious. As of May, the Bank of Italy estimates, assuming continued favorable market conditions, that Italian banks will have an adequate buffer of liquid assets to lower their debt with the Eurosystem down to pre-sovereign-debt crisis levels. Only very few small banks (<1% of Italian banking system assets) would have to align the decrease in liquid assets with plans to raise funding, according to the Bank of Italy. However, the Bank of Italy has also said that, in a more prudent scenario (in which market conditions are roughly the same as in 213), total assets held by banks that would have to expand their funding are estimated to be close to 9%. The questions thus are as follows: 1. at what pace will Italian banks keep reimbursing LTROs (early); 2. how much of these LTRO amounts rely on Italian GGBs as collateral; and 3. what to do with these own-use Italian GGBs once LTRO repayments start in earnest? LTROS (MATURING 1H15) AMOUNTS DRAWN AND OUTSTANDING FOR ITALIAN BANKS Description Total LTRO drawn (EUR) Outstanding amount (after repayment) EUR ALL BANKS (that have publicly disclosed information) - ITALY 24,63,58, 159,33,58, Intesa Sanpaolo SpA 36,,, LTRO I 12,,, LTRO II 24,,, Banca Monte dei Paschi di Siena SpA 29,,, 29,,, LTRO I 14,,, 14,,, LTRO II 15,,, 15,,, UniCredit SpA 26,1,, 21,1,, LTRO I 16,1,, 11,1,, LTRO II 1,,, 1,,, Cassa Depositi e Prestiti SpA 26,,, 26,,, LTRO II 26,,, 26,,, Banco Popolare SC 13,5,, 13,5,, LTRO I 1,,, 1,,, LTRO II 3,5,, 3,5,, Iccrea Banca SpA 12,6,, 12,6,, LTRO I 7,6,, 7,6,, LTRO II 5,,, 5,,, Unione di Banche Italiane SCPA 12,,, 12,,, LTRO I 6,,, 6,,, LTRO II 6,,, 6,,, Mediobanca SpA 7,5,, 7,,, LTRO I 4,,, 3,5,, LTRO II 3,5,, 3,5,, Banca Nazionale del Lavoro SpA 5,194,548, 5,194,548, LTRO I 5,194,548, 5,194,548, Credito Emiliano SpA 5,,, 2,5,, LTRO I 2,5,, LTRO II 2,5,, 2,5,, Banca Popolare dell'emilia Romagna Scrl 4,4,, 4,4,, LTRO I 2,4,, 2,4,, LTRO II 2,,, 2,,, Continued overleaf UniCredit Research page 3 See last pages for disclaimer.

4 LTROS AMOUNTS DRAWN AND OUTSTANDING FOR ITALIAN BANKS (CONT.) Description Total LTRO drawn (EUR) Outstanding amount (after repayment) EUR Banca delle Marche SpA 4,35,, 4,35,, LTRO I 1,35,, 1,35,, LTRO II 3,,, 3,,, Banca Popolare di Milano Scarl 4,25,, 3,75,, LTRO I 2,25,, 1,75,, LTRO II 2,,, 2,,, Banca Popolare di Vicenza 3,3,, 3,3,, LTRO I 1,1,, 1,1,, LTRO II 2,2,, 2,2,, Banca Piccolo Credito Valtellinese Scarl 3,25,, 2,95,, LTRO I 1,5,, 1,5,, LTRO II 1,75,, 1,45,, Banca Mediolanum SpA 2,9,, 2,9,, LTRO I 2,,, 2,,, LTRO II 9,, 9,, Banca Carige 1,9,, 1,9,, LTRO I 1,3,, 1,3,, LTRO II 6,, 6,, Banca Popolare di Sondrio SCARL 1,8,, 1,3,, LTRO I 1,3,, 1,3,, LTRO II 5,, Banca Popolare dell'etruria e del Lazio 1,3,, 1,3,, LTRO I 1,1,, 1,1,, LTRO II 2,, 2,, Banca Generali SpA 1,2,, 1,2,, LTRO I 2,, 2,, LTRO II 1,,, 1,,, Unipol Banca SpA 85,, 85,, LTRO I 25,, 25,, LTRO II 6,, 6,, Banca Popolare dell'alto Adige - Volksbank Suedtirol SCPA 5,, 5,, LTRO I 2,, 2,, LTRO II 3,, 3,, Cassa di Risparmio di Bolzano SpA 5,, 5,, LTRO I 5,, 5,, Banco di Desio e della Brianza SpA 4,, 4,, LTRO I 2,, 2,, LTRO II 2,, 2,, Mediocredito Trentino Alto Adige SpA 3,, 3,, LTRO II 3,, 3,, Banca Sella Holding SpA 25,, 25,, LTRO I 25,, 25,, Banca Popolare di Cividale SCPA 13,, 13,, LTRO II 13,, 13,, Banca Popolare Valconca SCRL 5,, 5,, LTRO II 5,, 5,, Banca Popolare del Lazio Societa' Cooperativa per Azioni 4,1, 4,1, LTRO I 4,1, 4,1, Banca Popolare di Cortona 19,5, 19,5, LTRO II 19,5, 19,5, Banca Popolare di Sviluppo Scpa 19,, 19,, LTRO II 19,, 19,, Source: Bloomberg UniCredit Research page 4 See last pages for disclaimer.

5 GGBs represent EUR 52bn or 16% of the collateral pool by the Italian banking system to the Eurosystem According to the latest available financial stability report (May 214) by the Bank of Italy (which refers to the ECB), Italian banks had some EUR 325bn of collateral posted to the Eurosystem as of March 214, down from EUR 353bn in September 213. While government bonds represented some EUR 11bn or 31% of the collateral pool, covered bank bonds represented 19% or EUR 62bn and government-guaranteed bank bonds EUR 52bn or 16% of the collateral pool (down from EUR 71bn or 2% in September 213). The Bank of Italy also pointed out that Italian banks recourse to Eurosystem credit was down to EUR 23bn from EUR 231bn in November (and from the peak of EUR 284bn in July 212). This further decrease was again driven by the early repayment of 3Y LTRO funds, according to the Bank of Italy. We reiterate that as the Bank of Italy stated by 23 April, 38 of the 112 Italian counterparties of the 3Y LTROs had repaid EUR 79bn or 31% of the total amount vs. 62% for the euro area. Furthermore, we also reiterate that the Bank of Italy has estimated assuming continued favorable market conditions that Italian banks will have an adequate buffer of liquid assets to lower their debt with the Eurosystem down to pre-sovereign-debt crisis levels. Again, only very few small banks (<1% of the Italian banking system assets) would have to compensate for their decrease in liquid assets by raising funding, according to the Bank of Italy. In any event, there is ongoing pressure to repay the 3Y LTROs. At the end of 213, several Italian banks announced that they were going to cancel own-use GGBs in light of the reimbursement of 3Y LTROs (early). The Bank of Italy said the intention of this is to save paying commission fees to the state. An alternative scenario, however, is to convert GGBs then free from early LTRO repayments from their current shortterm funding (LTROs maturing in 1H15) to medium-term funding (maximum 5Y terms according to the state-guarantee law). Own-use of GGBs as ECB collateral is banned as of 1 March 215 Real pressure on Italian banks to deal with GGBs that mature after 1 March 215 Banned: own-use of GGBs as ECB collateral (1 March 215) Also, on 22 March 213, the ECB adopted Decision ECB/213/6, which changes the use of certain uncovered government-guaranteed bank bonds as collateral. According to this, as of 1 March 215, such GGBs can generally no longer be used as collateral in Eurosystem monetary policy operations issued by the counterparty itself or an entity closely linked to that counterparty (referred to as own-use ). This aims to ensure the equal treatment of counterparties in Eurosystem monetary policy operations. According to Article 5, section 4, of the guidelines of the ECB from 2 March 213 (ECB/213/4), temporary derogations for up to three years are only possible in exceptional cases and only if the issuer provides a funding plan that shows how the own-use of GGBs will be phased out during that time. It is interesting to note in this context that the ECB Decision from 22 March 213 does not have such an explicit exception nor does it refer to these guidelines. Hence, while most GGB maturities are synchronized with the LTRO tranches maturities (see tables below), this poses the further question of what to do with the corresponding and still outstanding material number of GGBs after 1 March 215. While Italian banks have so far kept significant ECB refinancing as a safety net in the event that market sentiment worsens again and as cheap funding, the ECB ruling eliminates that benefit for own-use GGBs and puts real pressure on Italian banks to deal with GGBs that mature after 1 March 215. Moreover, banks have only some 1 months left to deal with this matter. UniCredit Research page 5 See last pages for disclaimer.

6 List of Italian GGBs maturing after February 215 ITALIAN GGBS MATURING AFTER FEBRUARY 215 IN ORDER OF DESCENDING MATURITY (ALL BULLET EUR, NON-RATED) Short Name Coupon Maturity Issue Date Amount Issued Amount Outstanding Ask Price YAS ASW Spread Ask Yield To Maturity ISIN Number BANCA POP BARI* 5 6/28/217 6/28/212 14,, 14,, IT CREDITO VALTELLI 5.5 6/18/217 6/18/212 5,, 5,, n.a. n.a. n.a. IT CREDITO EMILIANO 5.4 6/15/217 6/15/212 26,, 26,, n.a. n.a. n.a. IT48253 INTESA SANPAOLO /28/217 3/28/212 4,,, 4,,, n.a. n.a. n.a. IT BANCA POP MILANO* 5.9 3/23/217 3/23/212 5,, 5,, IT BANCA POP EMILIA 4.4 3/23/217 3/23/212 4,, 4,, IT48375 BANCO POPOLARE 3.7 3/23/217 3/23/212 1,6,, 1,6,, n.a. n.a. n.a. IT CASSA RISP FERRA 4.5 3/23/217 3/23/ ,, 125,, IT VENETO BANCA 5 3/23/217 3/23/212 3,, 3,, n.a. n.a. n.a. IT BANCA CARIGE /2/217 3/2/212 6,, 6,, IT MONTE DEI PASCHI 3.5 3/2/217 3/2/212 4,,, 4,,, IT BANCA BOLOGNA /28/217 2/28/212 3,, 3,, IT4815 BCC CARAVAGGIO 5.2 2/28/217 2/28/212 1,, 1,, IT BCC PONTASSIEVE 5 2/28/217 2/28/212 1,, 1,, IT BANCA CENTRO EMI /27/217 2/27/212 7,5, 7,5, IT STEFANO MARTELLA 6.5 2/27/217 2/27/212 23,, 23,, IT UBI BANCA SPCA /27/217 2/27/212 1,,, 1,,, n.a. n.a. n.a. IT BCC CASTIGLIONE 5 2/24/217 2/24/212 5,, 5,, IT BANCA CIVIDALE 6.5 2/23/217 2/23/212 5,, 5,, n.a. n.a. n.a. IT BP CIVIDALE SCPA 6.5 2/23/217 2/23/212 75,, 75,, IT48857 CASSA RAIFFEISEN 6 2/23/217 2/23/212 5,, 5,, IT BANCA MEDIO FVG 4.8 2/22/217 2/22/212 65,, 65,, IT48311 BANCA POP SPOLET 6 2/21/217 2/21/212 7,, 7,, n.a. n.a. n.a. IT48212 CASS RISP CHIETI 5.8 2/2/217 2/2/212 6,, 6,, IT CASSA CENTRALE 6 2/2/217 2/2/212 5,, 5,, IT CASSA RISP ASTI 6.5 2/2/217 2/2/212 1,, 1,, IT CASSA RISP BOLZA 5.5 2/17/217 2/17/212 2,, 2,, IT BANCA SELLA 6 2/16/217 2/16/212 1,, 1,, IT BANCA POP ALTO /3/217 2/3/212 8,, 8,, IT CR RAVENNA /3/217 1/3/212 9,, 9,, IT UNIPOL BANCA SPA /2/217 1/2/212 2,, 2,, IT DEXIA CREDIOP 8 1/17/217 1/17/212 4,, 4,, IT UNICREDIT SPA /16/217 1/16/212 8,, 8,, IT BANCA MARCHE 5.5 1/11/217 1/11/212 3,, 3,, IT CASSA RISP CESEN /9/217 1/9/212 1,, 1,, IT UNICREDIT SPA 6.5 1/2/217 1/2/212 2,5,, 2,5,, IT UNIONE DI BANCHE 7 1/2/217 1/2/212 1,,, 1,,, IT BCC COLLI MORENI 5.2 2/21/216 2/21/212 29,, 29,, IT UNICREDIT SPA 6 1/2/216 1/2/212 2,5,, 2,5,, IT BP CIVIDALE SCPA 5.6 6/27/215 6/27/212 1,, 1,, IT BANCA POP ETRURI 4.6 6/2/215 6/2/212 1,, 1,, n.a. n.a. n.a. IT CREDITO EMILIANO 4.2 6/15/215 6/15/212 54,, 54,, IT48246 INTESA SANPAOLO /28/215 3/28/212 4,,, 4,,, n.a. n.a. n.a. IT48667 BANCA POP EMILIA 4 3/23/215 3/23/212 85,, 85,, IT BANCO POPOLARE /23/215 3/23/212 1,4,, 1,4,, IT CASSA RISP FERRA 3.5 3/23/215 3/23/212 25,, 25,, IT48692 VENETO BANCA /23/215 3/23/212 7,, 7,, n.a. n.a. n.a. IT BANCA CARIGE 6 3/2/215 3/2/212 8,, 8,, IT CASSA RISP CENTO 5 3/2/215 3/2/212 9,, 9,, IT MONTE DEI PASCHI 2.6 3/2/215 3/2/212 6,,, 6,,, n.a. n.a. n.a. IT ,159,5, 37,159,5, *GGB according to unconfirmed UniCredit information. Source: Bloomberg, company data, UniCredit Research UniCredit Research page 6 See last pages for disclaimer.

7 Options to deal with leftover GGBs Reasons for choosing to sell on the secondary market Timing of entry into the secondary market How Italian banks have chosen among these options so far Options to deal with leftover GGBs Italian banks have different options available for dealing with leftover GGBs: 1. to use them in private repo transactions; 2. to sell them to investors or "non-own-use banks, which could then post them as collateral themselves; 3. to cancel them entirely with regulatory approval (e.g. EUR 12bn of Intesa GGBs on 11 March; UBI Banca did the same after reimbursing EUR 3bn of its GGBs on 7 March). GGBs with maturities in 217 that are sold on the secondary market would replace 3Y LTRO liquidity (which, due to its 215 maturity, is now effectively only short-term funding) with actual medium-term funding (maturity in 217) at cheap terms (tighter spreads) because of the attached guarantee (lowered by the guarantee fee). This guarantee would be of particular benefit to smaller and fundamentally weaker banks that still face restricted market access. There may also be some tactical selling well before 1 March 215 in order to avoid competition with other GGB issues, which would increasingly be entering the market starting some time at the end of 214. According to the Bank of Italy, several Italian banks have already announced their intention to cancel own-use GGBs before maturity with the intention of saving on commission fees for the state in light of reimbursing the 3Y LTROs. As stated, with its announcement on 7 March, UBI Banca joined those banks and cancelled EUR 3bn of its GGBs. Also, at the end of 213, Intesa reimbursed all of its EUR 36bn LTROs and switched some EUR 21bn of this into standard ECB open-market operations, with maturities ranging from one week to three months. Intesa said that this would give it more efficiency and flexibility in its liquidity management and a cheaper alternative to short-term wholesale funding. Also, on 11 March 214 and with regulatory approval, Intesa cancelled all EUR 12bn of its retained GGBs which had never been put on the market. In May, Banco Popolare s board of directors approved subject to receiving the necessary authorisation the cancellation of GGBs provided as collateral for the 3Y LTROs for a nominal EUR 3.1bn and partial early repayment of some EUR 2.8bn in LTRO financing. Also, on 15 May, UniCredit announced its intention to cancel GGBs with a combined nominal value of EUR 1.1bn, for which it said it already received the required authorizations. On the other hand, some GGBs have entered the secondary market and, despite our general view that only the ECB s ban on own-use of GGBs after 1 March 215 will put real pressure on Italian banks to deal with GGBs, some banks are even considering selling GGBs with earlier maturities on the secondary market, as was apparently the case with Cassa di Risparmio di Ferrara (CRFERR), Banca Monte dei Paschi di Siena (MONTE) and Unipol (UNIIM), for example. On 29 April 214, Banca Monte Paschi announced its plan to reduce its LTRO funds from EUR 28bn to EUR 24bn by end-april and to gradually repay LTRO funds thereafter in 214, according to Bloomberg. Given Banca Monte Paschi s fundamental weaknesses and its associated higher wholesale funding costs, we assume that this bank is a good candidate for placing own-use GGBs on the secondary market. GGBs enter the secondary market According to the Bank of Italy, as of 31 March, the face value of outstanding Italian GGBs fell to EUR 61bn from EUR 86bn in June 212, when the Ministry of the Economy and Finance (MEF) stopped granting guarantees. The EUR 25bn decrease consists of EUR 1bn of maturing securities and of EUR 15bn of cancelled securities to avoid paying commissions to the state. Own-use securities for refinancing operations represented 58.7% of the issued amount; cancelled bonds represented 17.6%; and matured bonds represented 11.8%. Securities in the secondary market represented 12% of all GGBs. Over 5% of these were deposited as collateral by other banks (especially by central credit institutions), and the remainder were either sold or committed to on the collateralized secondary market, according to the Bank of Italy. UniCredit Research page 7 See last pages for disclaimer.

8 Eligible bonds for the guarantee Eligible bonds for the guarantee Eligible debt securities for the guarantee were required to conform to several requirements (Article 8) and were granted by the Bank of Italy on the basis of the assessment of the capitalization of the applicant bank and its ability to cope with obligations (Article 8, sections 2 and 23). Also, the amount of the guarantee was required to be limited to that which was strictly necessary to restore the ability of medium-to-long-term funding for the respective bank (Article 8, section 6). What follows is a legally non-binding excerpt of these requirements from a credit analyst s perspective. The decree and subsequent law were only available in Italian, and we would advise investors to seek legal counsel before acting on this information: Implied within Article 8, sections 1 and 12, eligible security types for the guarantee were either newly issued senior unsecured or newly issued covered bonds. However, we do not know of any actual issue of a guaranteed covered bond. In particular, subordinated debt or capital instruments, structured or otherwise complex products or those having derivative components, were not permissible. According to our interpretation of Article 8, section 1a, securities can be issued under existing bond programs. The debt instruments cannot have any call dates before maturity, must have a fixed coupon and must be denominated in EUR (Article 8, section 1). While extensions are possible by prime ministerial decrees (Article 8, section 1), the allowed maturity for guarantees is generally between three months and five years from the date on which the decree took effect (22 December 211). The MEF was authorized to grant guarantees until 3 June 212 (Article 8, sections 1 and 1a). For Italian covered bonds (conforming to Article 7-bis of law No. 13 from 3 April 1999), for which we know of no actual issue, the maximum term was seven years (Article 8, sections 1 and 1 a). Issuers were required to be Italian banks with a registered office in Italy (Article 8, section 5), and the Bank of Italy had to determine whether the issuer would conform to certain conditions, such as capital adequacy ratios or its ability to meet its obligations (Article 8, section 2). According to Article 8, section 13, the principal of GGBs with a maturity of more than three years could not be greater than a third of the total principal of an issuer s GGBs, and the total amount of GGBs for an issuer could not exceed its regulatory (including Tier-3) capital (Article 8, section 9). According to Article 8, sections 7 and 8, while apparently not affecting guarantees that had already been granted (Article 8, section 8: fatte salve le operazioni già in essere ), the violation of certain rules (e.g. no abuse, such as marketing the guarantee in business communications, etc.) could lead to the exclusion of issuers from future guarantees and it could lead to the European Commission being notified. According to Article 8, sections 14 and 15, and for securities that are also not covered bonds (Article 7-bis of law No. 13 from 3 April 1999), the quarterly payable, annual guarantee fee is based on the nominal amount and the duration of the respective GGB. It consists of a fixed percentage fee (.4pp for maturities over one year or.5pp below one year) plus a risk-related fee, which is generally based on ratings (maturity <one year) or CDS prices (maturity >one year). The fee could not be changed once a guarantee was granted but it could be adapted to future guarantees (Article 8, section 2). UniCredit Research page 8 See last pages for disclaimer.

9 Nature of the guarantee: 1. Explicit 2. Irrevocable 3. Unconditionality? Nature of the guarantee As credit analysts, we cannot provide a legal opinion on the nature or other legal aspects of the guarantee, according to Article 8 of Decree No. 21 (6 Dec 211), which was converted into Law No. 214 (22 Dec 211). Both of these are also only available in Italian, and what follows is an overview from a credit analyst s perspective. A real guarantee (according to our definition) has to fulfil three criteria: 1. it must be explicit, 2. it must be irrevocable and 3. it must be unconditional. 1. A guarantee is explicit if it is explained somewhere, for example, in a specific law, in the bond documentation or in the EMTN program. 2. A guarantee is irrevocable if the guarantee on a bond/issuance program/issuer cannot be removed, i.e. grandfathering exists for all guaranteed bonds. 3. A guarantee is unconditional if the investor can claim the principal and interest directly from the guarantor without any conditions attached. Recently, another feature of a real guarantee has become popular: a guarantee on first demand. With this feature, the guarantor must provide interest/redemption payments immediately upon the investor s first request ( at first demand ). To us, this is implied by a guarantee s unconditional attribute but with increasing sensitivity towards the exact design of guarantee structures, attaching at first demand to a guarantee seems to reassure investors. Looking at the guarantees for the Italian bank bonds, we can make the following observations: The guarantees are explicit, given that they are spelled out in a specific law (Article 8, section 3: La garanzia dello Stato di cui al comma 1 è incondizionata, irrevocabile e a prima richiesta / The guarantee of the state, referred to in paragraph 1, shall be unconditional and irrevocable and first demand ). The guarantee is irrevocable, according to the wording of Article 8, section 3. While violating certain rules (Article 8, sections 7 and 8: e.g. no abuse, such as marketing the guarantee in business communications, etc.) could lead to the exclusion of issuers from future guarantees and it could lead to the European Commission being notified, we understand that a violation would not affect guarantees that have already been granted (Article 8, section 8: fatte salve le operazioni già in essere ). The guarantee is on first demand (Article 8, section 3) by the Italian state and covers principal and interest (Article 8, section 11). However, there are doubts about the unconditionality of the securities: According to Article 8, section 26, the defaulting bank is required to submit a reasoned request to the Department of the Treasury and to the Bank of Italy, to which the relevant documents are attached and in which those financial instruments or contractual obligations that require the intervention and the amounts owed are indicated. The request should normally be made di norma" at least 3 days before the expiration of the guaranteed liabilities (due dates of principal or interest), except in cases of substantiated urgency. In our view, this requirement could potentially be regarded as a condition, and it is, therefore, not exactly clear what happens if the respective issuer does not apply for state intervention or does not do so in a timely enough fashion. Moreover, even if state intervention has been initiated, to our knowledge, it also remains unclear how or when investors actually receive payment and how and if investors need, or can enforce, this payment. UniCredit Research page 9 See last pages for disclaimer.

10 The application for state-guaranteed intervention will be evaluated for admissibility by the MEF s Treasury Department based on the Bank of Italy's evaluation, according to Article 8, section 27. The MEF s Treasury Department should then authorize the intervention of the guarantee on the day before the due date ( autorizza l'intervento della garanzia entro il giorno antecedente la scadenza dell'operazione ). Also, according to Article 8, section 27, where it is not possible to arrange the payment procedures on the basis of the above-mentioned authorization, the Bank of Italy will, apparently, make a payment to a collective account ( la Banca d'italia effettua il pagamento a favore dei creditori mediante contabilizzazione in conto sospeso collettivo ). The payment is to be affected within the following ninety days. While some investors may need 1% clarity on the matter of unconditionality, we feel that the reputational risk for the Italian sovereign to not honor the guarantee is too high. This has been the case so far for Austria, regarding discussions about the potential bail-in of guaranteed Hype Alpe Adria bonds (hot topic in early 214). Moreover, the wording of Article 8, section 3, is clear, and this would likely be one form of exegesis in court if it should come to that: 3. La garanzia dello Stato di cui al comma 1 è incondizionata, irrevocabile e a prima richiesta, which, as credit analysts, we translate as 3. the guarantee of the state, referred to in paragraph 1, shall be unconditional and irrevocable first demand. To summarize, we believe that, despite the questions surrounding the matter of unconditionality, we (as credit analysts) consider the credit risk of Italian GGBs to be aligned with that of the Italian sovereign. Risk-weighting of GGBs Liquidity coverage ratio eligibility of GGBs ECB eligibility for non-ownuse GGBs Implementation of the guarantee for the individual GGB Aftermath of guarantee intervention for the issuer RWAs, LCR, non-own-use With respect to the Regulation EU No 575/213 (the Capital Requirements Regulation [CRR]), exposures to EU member states' central governments, which are denominated and funded in the domestic currency of that central government, can be assigned a risk weight of %. If the guarantee of a GGB is explicit, irrevocable and unconditional, the same risk weight (i.e. %) can be assigned to that GGB. However, if a non-eu country invests in an Italian GGB, the risk-weighting depends on the rating of the warrantor, currently 5% for Italy. With respect to the CRR, transferable assets representing claims on, or guaranteed by, the central government of a member state qualify as extremely high quality liquid assets (Level 1 in Basel III terminology). Hence, we deem these bonds to be fully eligible for the liquidity coverage ratio (LCR) without any haircut or other restrictions. As stated, as of 1 March 215, uncovered bank bonds issued by the counterparty using them, or by entities closely linked to the counterparty and fully guaranteed by a central government (such as a GGB) can no longer be used as collateral by such a counterparty directly or indirectly via covered bonds. However, a GGB can be sold on the secondary market and can be used as ECB collateral by the buyer, while the risk weighting is % if the buyer is a bank in an EU member state. As we understand Article 8, section 1a, the guarantee could be implemented by adapting existing EMTN/bond program documentation or by creating a new program or specific new bond documentation. For example, with regard to its BPBARI 5% 6/28/217, Banca Popolare die Bari chose to refer to the guarantee in Article 9 of the Regolamento. While the International Swaps and Derivatives Association (ISDA) would have the final say, we assume that the non-payment of the principal or a coupon should constitute a general credit event and trigger the immediate payment of principal and accrued interest. Another aftermath of a guarantee intervention would be that the issuer would be required to repay with interest, and this situation will fall under the European rules on state aid. This would entail the submission of a restructuring plan to the European Commission within six months after the default (Article 8, sections 28 and 29). UniCredit Research page 1 See last pages for disclaimer.

11 Investment and pricing considerations Arguments for buying GGBs Potentially available GGB universe Pricing of GGBS In the hunt for yield, many investors have perceived BTPs as trading too tight, while, at same time, they consider Italian banks, especially smaller Italian banks, as unsecured exposure, to be too risky. Italian GGBs may offer a solution to this problem. In our view, Italian GGBs offer a similar credit risk as Italian BTPs (despite their unconditionality, as mentioned earlier) but offer more-interesting yields. We feel that the reputational risk of the Italian sovereign not honoring the guarantee is just too high, as has been the case so far with the GGBs from Austria, Tyrol and Hype Alpe Adria (a hot topic in early 214). The Italian GGBs we see on the secondary market are mostly from issuers with fundamental challenges, such as 3Y GGBs from MONTE. The pricing of Italian GGBs must take several topics into account: Given that ECB eligibility of own-use will end in end-february 215, very-interesting GGB spreads should only be observable after that cut-off date and should lead to a significant spread difference. Despite being guaranteed and, therefore, of similar credit risk to BTPs, Italian GGBs are non-rated, which rules them out for some investors and should lead to a spread premium. Moreover, one must incorporate doubts about the unconditionality of the bonds. The defaulting bank is required to submit an application to request state intervention, and it is not exactly clear how or when the investor will actually get paid. For details, please see above. Given the uncertainty of the unconditionality of GGBs, one cannot simply assign the same remaining credit risk as one allocates to BTPs but should add a spread for the issuer based on the senior unsecured spread. Again, it is hard to give a precise formula, as the bonds are neither senior unsecured nor actual BTPs but are somewhere in-between. Of course, national champions with good fundamentals, such as ISPIM, which apparently does not want to enter the secondary market, would have to be priced differently than smaller Italian banks that have no, or very weak, implicit support and weak fundamentals. This is especially acute for asset quality and capitalization, which is often very weak at smaller Italian banks due to the lasting economic challenges in Italy. The importance of the individual issuer s credit profile may lead to, or has already led to, issuer-linked risk lines. Apart from the fact that most GGBs are still at the ECB, the above bullet points and the often small outstanding amounts make illiquidity a real issue and should lead to the development of a spread premium. Also, GGBs are still in the early stages of entering the secondary market. It is difficult to incorporate all of these aspects into an exact formula. To give an extreme example, one could hardly compare a national champion s GGB, such as an ISPIM 4.28% 3/28/217 (again, ISPIM stated that it does not want to enter the secondary market), which has a very high outstanding amount of EUR 4bn, to a BCC CARAVAGGIO 5.2% 2/28/217 or to a BCC PONTASSIEVE 5% 2/28/217; both of these have an outstanding amount of EUR 1mn. One the other hand, despite its size, MONTE has already come to the secondary market (presumably to preempt the real wave of GGBs). Nevertheless, a combined premium of 5-6bp (ASW) and taking into account the senior unsecured issuer spread over BTP could be a first rule of thumb for value analysis. Thus, spreads of 7-9bp (ASW) over BTP can be very attractive. UniCredit Research page 11 See last pages for disclaimer.

12 Pricing of other bonds with government guarantees Such a pick-up is highly attractive when comparing other issuers with government guarantees. These can be found particularly among European agencies. There are many issuers with explicit, irrevocable and unconditional guarantees from their respective sovereigns. For example, bonds issued by the French agency UNEDIC (with an explicit, unconditional and irrevocable guarantee from the French sovereign) trade around 1-12bp above French sovereign bonds. Bonds issued by Spanish and Austrian agencies with a government guarantee (ICO, FADE, FROB, ASINFAG, OBND) trade in the area of 1-15bp above the Spanish/Austrian sovereign. The highest pick-up of guaranteed agencies over their sovereigns can be found in Germany. Here, the pick-up tends to be larger than it is in other countries due to the benchmark status and associated liquidity premium on Bunds. KFW currently trades with a pick-up of 25-35bp above the German sovereign, further highlighting the attractiveness of Italian GGBs. UniCredit Research page 12 See last pages for disclaimer.

13 Spread comparisons: Italian GGBs, BTPs, unsecured Spreads Italian GGBs, BTPs, unsecured Below, we provide spread comparisons of those Italian GGBs, BTPs and bonds in the unsecured universe that are interesting as a result of their spread levels and our pricing criteria. Also included in the comparison are those bonds that we assume already have (or may) enter the secondary market. The comparison builds on our statements in the section above, titled How Italian banks have chosen between these options so far. We assume that the most likely Italian GGBs to enter the secondary market will probably be 5Y (a result of the ECB s ban on own-use and 3Y LTRO maturities in 215) from issuers that face fundamental challenges, such as MONTE; that have rather difficult market access; or those issuers for whom entering the market makes clear sense from an economic perspective. For this last category of issuer, the spread difference to muchmore-expensive unsecured funding makes entering the secondary market very attractive, even if the guarantee fees are higher for issuers with weaker ratings or fundamentals. ITALIAN GGB VS. UNSECURED VS. BTP (ASW SPREAD) ITALIAN GGB VS. BTP (ASW SPREAD) 3 25 BANCAR 6% 3/15 BPBARI 5% 6/17 PMIIM 5.9% 3/17 bp 25 unsecured 2 15 GGB 1 5 BTP mdur bp CRFERR 3.5% 3/15 CASBOL 5.5% 2/17 2 CRFERR 4.5% 3/17 BANMAR 5.5% 1/17 DEXGRP 8% 1/17 15 BANCAR 6.75% 3/17 BPEIM 4.4% 3/17 CRDEM 4.2% 6/15 UNIIM 5.55% 1/17 BPEIM 4% 3/15 GGB UCGIM 6.5% 1/17 MONTE 3.5% 3/17 1 BTPS 4.75% 5/17 CARCES 5.75% 1/17 BCGAR 5.2% 2/16 5 CIVIDA 6.5% 2/17 BTP BTPS 3% 4/15 BANBOL 5.75% 2/17 CIVIDA 5.6% 6/15 BNSELL 6% 2/17 CENTO 5% 3/15 UCGIM 6% 1/ mdur BANCAR (ASW SPREAD) BANMAR (ASW SPREAD) bp 35 BANCAR (GGB) BANCAR (unsec.) 3 BTP 25 BANCAR 6% 3/ BANCAR 3% 3/15 1 BANCAR 3.5% 2/15 5 BANCAR 3% 2/17 BANCAR 6.75% 3/17 BANCAR 4% 11/17 BANCAR 3.25% 7/17 BTPS 4.75% 5/17 bp BANMAR (GGB) BANMAR (unsec.) BTP BANMAR 5.5% 1/17 BANMAR 4.2% 4/17 BANMAR 4.25% 4/17 BANMAR 5.75% 6/17 BTPS 4.75% 5/17 BANMAR 5.3% 7/17 BANMAR 4.5% 7/17 BTPS 3% 4/ mdur mdur Source: iboxx, MarkIT, Bloomberg, UniCredit Research UniCredit Research page 13 See last pages for disclaimer.

14 BPBARI (ASW SPREAD) BPEIM (ASW SPREAD) bp BPBARI (GGB) BPBARI (unsec.) BTP BPBARI 2.75% 9/16 BPBARI 3.5% 4/17 BPBARI 5% 6/17 BTPS 4.75% 5/17 bp BPEIM (GGB) BPEIM (unsec.) BTP BPEIM 3.2% 6 5/15 BPEIM 3% 5/15 BPEIM 1.75% 2/17 BPEIM 4.85% BPEIM 5% 4/17 1/16 BPEIM 4.4% 3/17 BTPS 4.75% 5/17 BTPS 2.25% 5/ mdur BTPS 3% 4/ mdur CARCES (ASW SPREAD) CASBOL (ASW SPREAD) bp 3 2 CARCES (GGB) CARCES (unsec.) BTP CARCES 1.6% 7/16 CARCES 3.4% 9/17 CARCES 1.8% 8/17 bp CASBOL 2.5% 7/16 CASBOL 5.5% 2/17 CASBOL 2.5% 6/17 1 BTPS 4.75% 5/17 CARCES 5.75% 1/ mdur 1 CASBOL (GGB) BTPS 3.75% BTPS 4.75% CASBOL (unsec.) 8/16 5/17 BTP mdur CIVIDA (ASW SPREAD) CRDEM (ASW SPREAD) bp 2 14 CIVIDA (GGB) CIVIDA (unsec.) BTP 8 CIVIDA 5.6% 6/15 CIVIDA 4.5% 3/17 CIVIDA 4% 2/17 CIVIDA 6.5% 2/17 CIVIDA 3.25% 8/17 CIVIDA 3.15% 8/17 2 BTPS 3% 4/ mdur BTPS 4.75% 5/17 bp CRDEM (GGB) CRDEM (unsec.) BTP CRDEM 4.2% 6/15 BTPS 4.5% 5 7/15 BTPS 3% 4/15 BTPS 3% 6/15 BTPS 3.75% 8/ mdur Source: iboxx, MarkIT, Bloomberg, UniCredit Research UniCredit Research page 14 See last pages for disclaimer.

15 CRFERR (ASW SPREAD) DEXGRP (ASW SPREAD) bp 21 CRFERR 3.5% 3/ CRFERR 4.25% 1/15 CRFERR 4.575% 2/17 CRFERR 3.4% 9/17 CRFERR 4.5% 3/17 BTPS 4.75% 5/17 6 CRFERR (GGB) BTPS 3% 4/15 CRFERR (unsec.) BTP mdur bp DEXGRP 3.6% 6/16 DEXGRP 8% 1/17 DEXGRP 5% 12/17 1 DEXGRP (GGB) BTPS 4.75% DEXGRP (unsec.) BTPS 2.25% 5/17 5/16 BTP mdur MONTE (ASW SPREAD) PMIIM (ASW SPREAD) MONTE (GGB) MONTE (unsec.) BTP MONTE 4.1% 11/16 MONTE 4.3% 3/17 MONTE 4.5% 4/ PMIIM 2.9% 8/16 PMIIM 2% 3/17 PMIIM 2% 1/17 PMIIM 5.9% 3/17 PMIIM 3.875% PMIIM 2.25% 1/17 3/17 bp 15 BTPS 2.75% 11/16 MONTE 4.2% 3/17 MONTE 3.5% 3/17 BTPS 4.75% 5/ mdur bp BTPS 4.75% 5/17 1 BTPS 3.75% 8/16 PMIIM (GGB) PMIIM (unsec.) BTP mdur UNIIM (ASW SPREAD) VENBAN (ASW SPREAD) NO PRICING FOR GGB AVAILABLE 2 UNIIM 5% 1/17 UNIIM 5.55% 1/17 UNIIM 3% 5/17 UNIIM 2.5% 3/ VENBAN (unsec.) BTP VENBAN 4% 1/17 VENBAN 4.5% 12/17 bp 1 BTPS 3.75% 8/16 BTPS 4.75% 5/17 UNIIM (GGB) UNIIM (unsec.) BTP mdur bp 2 1 BTPS 4.75% 5/ mdur Source: iboxx, MarkIT, Bloomberg, UniCredit Research UniCredit Research page 15 See last pages for disclaimer.

16 Selected issuers overall maturity overviews up to 217 Who is likely to convert LTRO/GGB short-term funding into (cheap) medium-term funding? Selected issuers maturity overviews up to 217 The following is an analysis of Italian bank issuers overall maturity overviews up to 217. The issuers included are those which we find interesting according to the above analysis of their spread levels, according to our pricing criteria and due to the fact that we assume they have already entered or may enter the secondary market. The aim of this analysis was to identify those issuers that are likely to convert LTRO/GGB short-term funding into (cheap) mediumterm funding. There are two things to look out for: 1. Which issuers have material (including LTRO) funding maturing in 215 that could be replaced by GGBs that mature in 217? 2. Which issuers have material maturities of GGBs in 217 that could be used to replace such short-term funding (especially LTRO funding) that matures in 215? This can be seen above in the list of GGBs that mature after 1 March 215. BANCAR (EUR MN) BANMAR (EUR MN) 35 3 Subordinated Senior Secured Senior Unsecured Government-Guaranteed Debt Subordinated Senior Secured Senior Unsecured Government-Guaranteed Debt BPBARI (EUR MN) BPEIM (EUR MN) 6 5 Subordinated Senior Unsecured Subordinated Senior Secured Senior Unsecured Government-Guaranteed Debt Source: Bloomberg UniCredit Research page 16 See last pages for disclaimer.

17 CARCES (EUR MN) CASBOL (EUR MN) 3 25 Subordinated Senior Unsecured 8 7 Senior Unsecured Government-Guaranteed Debt CIVIDA (EUR MN) CRDEM (EUR MN) 25 2 Subordinated Senior Unsecured Government-Guaranteed Debt 3 25 Subordinated Senior Secured Senior Unsecured Government-Guaranteed Debt CRFERR (EUR MN) DEXGRP (EUR MN) Subordinated Senior Unsecured Government-Guaranteed Debt Subordinated Junior Subordinated Senior Unsecured Senior Secured Government-Guaranteed Debt Source: Bloomberg UniCredit Research page 17 See last pages for disclaimer.

18 MONTE (EUR MN) PMIIM (EUR MN) 25 2 Subordinated Senior Unsecured Government-Guaranteed Debt Junior Subordinated Senior Secured Subordinated Senior Unsecured Senior Secured UNIIM (EUR MN) VENBAN (EUR MN) 9 8 Subordinated Senior Unsecured Government-Guaranteed Debt 25 Subordinated Senior Unsecured Government-Guaranteed Debt Source: Bloomberg UniCredit Research page 18 See last pages for disclaimer.

19 Selected issuers ratings, P&L, B/S & key ratios SELECTED ISSUERS RATINGS Agency Moody's Banca Carige Caa1 outlook negative S&P B- watch negative Fitch BB outlook negative Banca Popolare di Milano Scarl B1 outlook negative B+ watch negative BB+ outlook negative Banca Popolare di Bari Cassa di Risparmio di Bolzano -- Ba1 outlook negative Banca Popolare dell'emilia Romagna BB- Watch positive BB+ outlook negative Cassa di risparmiodi Ferrara Credito Emiliano Baa3 outlook negative -- BBB- outlook negative -- BBB+ outlook negative Dexia Crediop B2 outlook stable BBoutlook negative BBB outlook negative Source: Rating agencies; UniCredit Research SELECTED ISSUERS P&L HIGHLIGHTS (1Q14) Figures in EUR mn Banca Carige* Banca Popolare di Milano Scarl Banca Popolare di Bari* Cassa di Risparmio di Bolzano* Banca popolare dell'emilia Romagna Cassa di risparmio di Ferrara** Credito Emiliano Dexia Crediop* Net interest revenue Net Fees & commissions Trading income Other Operating Income n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Net Income -1, Total Non-interest expenses Loan-loss provisions 1, Operating profit Pre-tax profit -2, Attributable net profit -1, *Data as of FY13; **data as of FY12; Source: Rating agencies, Bankscope, company data, UniCredit Research SELECTED ISSUERS : B/S HIGHLIGHTS (1Q14) Figures in EUR mn Assets Banca Carige* Banca Popolare di Milano Scarl Banca Popolare di Bari* Cassa di Risparmio di Bolzano* Banca popolare dell'emilia Romagna Cassa di risparmio di Ferrara** Credito Emiliano Dexia Crediop* Cash & cash equivalents Liquid Assets 1,694. 4, , , , ,22.3 Securities 11, , , ,78.8 9, ,47. 8, ,27.9 Customer loans 25, , , , , , , ,912.7 Total assets 42, ,25.5 1, , , , , ,37.1 Risk-weighted assets 21, , , , , , , ,441.6 Liabilities & Equity Total Customer Deposits 14, ,775. 5, , , , , Senior Debt Maturing after 1 Year 9,37. 7, , , ,474. 6,119. 4,272. Subordinated Borrowing 1, , n.a. n.a. Total Equity 1, , , ,22.7 1,154.6 Total Liabilities and Equity 42, ,25.5 1, , , , , ,37.1 *Data as of FY13; **Data as of FY12; Source: Rating agencies, Bankscope, company data, UniCredit Research UniCredit Research page 19 See last pages for disclaimer.