directors report on operations The banking group Banca popolare dell Emilia Romagna

Transcription

1 205 directors report on operations The banking group Banca popolare dell Emilia Romagna

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3 Directors' report on operations 207 directors report on operations

4 Shareholders, 208 directors report on operations The general and/or operational information relating to the Group, set out in the Bank's report on operations, is an integral part of this report, together with the information provided on the economic and market situation in the territories in which Group companies are active. This report illustrates the results of the banks and companies that are included within the scope of the. Composition of the Group In terms of the changes in Group structure, the Parent Bank's interest in Banca del Monte di Foggia was transferred to Banca della Campania during the year. Subsequently, in December, Banca della Campania absorbed Banca del Monte di Foggia with the consequence that this bank was struck off and is no longer included within the scope of consolidation. Accordingly, as of 31 December 2006, the Group comprises the companies listed below. The Parent Bank's interest in each is indicated in brackets, together with the interests held by other Group companies that act as their immediate parent. Parent bank: Banca popolare dell'emilia Romagna s.c., based in Modena A) Group banking companies: 1) Banca popolare di Ravenna s.p.a., based in Ravenna (75.957%); 2) Banca popolare di Lanciano e Sulmona s.p.a., based in Lanciano (Chieti) (3.372%), a subsidiary of Finbanche d Abruzzo which holds slightly more than a 50% interest; 3) Banca popolare del Materano s.p.a., based in Matera (67.685%); 4) Banca CRV Cassa di Risparmio di Vignola s.p.a., based in Vignola (Modena) (100%); 5) Banca popolare di Crotone s.p.a., based in Crotone (60.331%); 6) Banca popolare di Aprilia s.p.a., based in Aprilia (55.009%); 7) Banca popolare dell Emilia Romagna (Europe) International s.a., based in the Grand Duchy of Luxembourg (99%); 8) Banca della Campania s.p.a., based in Naples (89.121%); 9) Banco di Sardegna s.p.a., based in Cagliari: 51% of the ordinary shares, % of the preference shares and % of the savings shares (without voting rights, listed on the Stock Exchange) with a total interest of %. The savings shares held for trading by the Parent Bank were also taken into account for consolidation purposes, raising the direct interest held in this sub-holding company to %; 10) CARISPAQ - Cassa di risparmio della provincia dell Aquila s.p.a., based in L Aquila, a subsidiary of Finbanche d Abruzzo which holds % of share capital; 11) Banca di Sassari s.p.a., based in Sassari (10.331%), a subsidiary of Banco di Sardegna which holds % of share capital; 12) Eurobanca del Trentino s.p.a., based in Trento (49.900%).

5 B) Other Group companies: 14) Finbanche d Abruzzo s.p.a., based in L Aquila, a bank holding company (100%); 15) BPER International Advisory Company s.a., an investment holding company based in the Grand Duchy of Luxembourg (90%); 16) Em.Ro. popolare - finanziaria di partecipazioni s.p.a., based in Modena (77.443%); 17) EMRO Finance Ireland limited, an Irish investment company based in Dublin (Ireland) (100%); 18) Nadia s.p.a., a property company based in Modena (100%); 19) EM.RO Immobiliare s.p.a., a property company based in Modena (100%); 20) Modena Terminal s.r.l., based in Campogalliano (Modena), a company for the storage of goods, the storage and ageing of cheeses, and the cold storage of meat and perishable products (52.250%); 21) Metelliana s.p.a., a provider of IT services based in Cava de Tirreni (Sassari) (100%); 22) Mutina s.r.l., based in Modena, a vehicle company for the securitisation of receivables and subsidiary of Em.Ro. popolare s.p.a. which holds 90% of share capital; 23) Nettuno Gestione Crediti s.p.a., based in Bologna, a provider of debt recovery services (1%) and subsidiary of Em.Ro. popolare s.p.a. which holds 99% of share capital; 24) ABF FACTORING s.p.a., a factoring company based in Milan (90%); 25) ABF Leasing s.p.a., a leasing company based in Milan (100%); 26) Optima s.p.a. SGR, based in Milan, investment management company and subsidiary of Em.Ro. popolare s.p.a. which holds 58.3% of share capital; 27) Sardaleasing s.p.a., based in Sassari, a leasing company and subsidiary of Banco di Sardegna which holds % of share capital; 28) Numera s.p.a., based in Sassari, an IT company and subsidiary of Banco di Sardegna which holds 100% of share capital; 29) Tholos s.p.a., based in Sassari, a property company and subsidiary of Banco di Sardegna which holds 100% of share capital. 209 directors report on operations In addition, Group companies hold the following interests in other members of the Group: a) Banca popolare di Ravenna s.p.a. holds: % of Em.Ro. popolare s.p.a.; - 1% of Banca popolare dell Emilia Romagna (Europe) International s.a.; - 6.2% of Optima s.p.a. SGR; b) EM.RO Immobiliare s.p.a. holds 47.75% of Modena Terminal s.r.l.; c) Em.Ro. popolare s.p.a. holds 5% of Sardaleasing s.p.a.; d) Banca popolare dell Emilia Romagna (Europe) International s.a. holds 10% of BPER International Advisory Company s.a.; e) Banco di Sardegna s.p.a. holds: % of Em.Ro. popolare s.p.a., % of Optima s.p.a. SGR; f) Banca della Campania s.p.a. holds: % of Em.Ro. popolare s.p.a., - 4.3% of Optima s.p.a. SGR; g) Banca popolare di Lanciano e Sulmona s.p.a. holds: % of Em.Ro. popolare s.p.a., - 1.1% of Optima s.p.a. SGR; h) CARISPAQ - Cassa di Risparmio della provincia dell Aquila s.p.a. holds: % of Em.Ro. popolare s.p.a.,

6 210 directors report on operations - 2.8% of Optima s.p.a. SGR; i) Banca CRV Cassa di Risparmio di Vignola s.p.a. holds: % of Em.Ro. popolare s.p.a., - 4% of Optima s.p.a. SGR; j) Banca popolare del Materano s.p.a. holds: % of Em.Ro. popolare s.p.a., - 1.6% of Optima s.p.a. SGR; k) Banca popolare di Crotone s.p.a. holds: % of Em.Ro. popolare s.p.a., - 1.5% of Optima s.p.a. SGR; l) Banca popolare di Aprilia s.p.a. holds: % of Em.Ro. popolare s.p.a., - 1% of Optima s.p.a. SGR. In addition to the above companies that belong to the banking group, the scope of consolidation also includes Forum Guido Monzani s.r.l., 90% held by Em.Ro. popolare s.p.a., with the remainder held by the Parent Bank, which is excluded from the banking group since it does not contribute to its banking activities.

7 No quotas or shares in Group companies are held via trust companies or other third parties; furthermore, such parties were not used during the year to buy or sell shares or quotas in Group companies. The carrying amount of the Group's interest in the treasury shares held by consolidated companies, classified as a deduction from liability caption 200, is Euro 34,828,936. The situation is analysed below: 211 directors report on operations Number of shares Total par value Group interest Banca popolare dell'emilia Romagna s.c. 2,191,588 6,574,764 34,804,523 Banca di Sassari s.p.a. 23,703 62,866 24,413 TOTAL ,215,291 6,624,888 34,828,936 TOTAL ,230 2,484,690 2,440,504 Group structure The Group structure at 31 December 2006 is presented below.

8 3,372% 99,000% 90,000% BANCA POPOLARE DI LANCIANO E SULMONA S.P.A. 53,372% 50,000% FINBANCHE D ABRUZZO S.P.A. 100,000% BANCA CRV CASSA DI RISPARMIO DI VIGNOLA S.P.A. 100,000% BANCA POPOLARE DI APRILIA S.P.A. 55,009% BANCA POPOLARE di RAVENNA S.P.A. 75,957% CARISPAQ CASSA DI RISPARMIO DELLA PROVINCIA DELL AQUILA S.P.A. 79,922% 77,443% EM.RO. POPOLARE S.P.A. 100,000% (b) ABF Leasing S.P.A. 100,000% 1,000% 58,300% BANCA POPOLARE DELL EMILIA ROMAGNA (EUROPE) INTERNATIONAL S.A. 100,000% BANCA POPOLARE DI CROTONE S.P.A. 60,331% OPTIMA S.P.A. SGR 100,000% (c) BANCA DI SARDEGNA S.P.A. 51,000% (a) 10,000% 10,33% 79,732% BPER INTERNATIONAL ADVISORY COMPANY S.A. - LUXEMBOURG 100,000% ABF FACTORING S.P.A. 90,000% MUTINA S.R.L. 90,000% BANCA DI SASSARI S.P.A. 90,063% EMRO FINANCE IRELAND LIMITED 100,000% 1,000% NETTUNO GESTIONE CREDITI S.P.A. 100,000% 99,000% SARDALEASING S.P.A. 5,000% 87,077% 92,077% (a) equivalent to 47,229% of the entire Capital Stock consisting of ordinary, preferred and savings shares, the latter being non voting shares. (b) the following banks also are shareholders of Em.Ro. popolare s.p.a.: - Banco di Sardegna s.p.a. (11,447%), - Banca popolare di Lanciano e Sulmona s.p.a. (1,567%), - Banca popolare di Ravenna s.p.a. (1,480%), - Banca della Campania s.p.a. (2,000%), - Carispaq s.p.a. (1,430%), - Cassa di Risparmio di Vignola s.p.a. (1,333%), - Banca popolare del Materano s.p.a. (1,233%), - Banca popolare di Crotone s.p.a. (1,180%), - Banca popolare di Aprilia s.p.a. (0,887%). situation as at EUROBANCA DEL TRENTINO S.P.A. 49,900% BANCA DELLA CAMPANIA S.P.A. 89,121% BANCA POPOLARE DEL MATERANO S.P.A. 67,685% NADIA S.P.A. 100,000% METELLIANA S.P.A. 100,000% EM.RO IMMOBILIARE S.P.A. 100,000% 47,750% NUMERA S.P.A. MODENA TERMINAL S.R.L. 52,250% 100,000% 100,000% THOLOS S.P.A. 100,000% (c) the following banks are shareholders of Optima S.G.R. s.p.a.: - Banco di Sardegna s.p.a. (19,200%), - Banca popolare di Ravenna s.p.a. (6,200%), - Cassa di Risparmio di Vignola s.p.a. (4,000%), - Banca della Campania s.p.a. (4,300%), - Carispaq s.p.a. (2,800%), - Banca popolare del Materano s.p.a. (1,600%), - Banca popolare di Crotone s.p.a. (1,500%), - Banca popolare di Lanciano e Sulmona s.p.a. (1,100%), - Banca popolare di Aprilia s.p.a. (1,000%).

9 Development and scale of the Group The "Banca popolare dell'emilia Romagna" Group was registered - in the Register established pursuant to art. 64 of Decree 385 dated 1 September on 7 August 1992, no directors report on operations The following changes in controlling interests took place during the year: Banca della Campania s.p.a.: previously % held and now % owned following the purchase and subsequent exercise of option rights following a capital increase; Banca del Monte di Foggia s.p.a.: during the year, the Parent Bank transferred control of this bank to Banca della Campania s.p.a. which absorbed it on 28 December 2006; Banca popolare del Materano s.p.a.: formerly % held, now %, following the acquisition of interests from other shareholders; Banca popolare di Lanciano e Sulmona s.p.a.: formerly % held, now %; Banca popolare di Crotone s.p.a.: formerly % held, now %, following the subscription for shares at the time of a capital increase and further purchases from other shareholders; Banca popolare di Ravenna s.p.a.: formerly % held, now %; Banca di Sassari s.p.a.: already % held by Banco di Sardegna s.p.a., the Parent Bank also held a 9.447% interest; this holding has now been increased to % following minor purchases. Group companies The following paragraphs summarise the performance of each of the companies included in the consolidation, bearing in mind that Banco di Sardegna, a sub-holding company, has prepared its own (consolidated by the Group) which contain complete information on the performance of its subsidiary companies. The amounts stated were taken from their official financial, prepared under the accounting standards applicable to each of them. The balance sheets and of income of each company included in the consolidation as of 31 December 2006 could be consulted on the Italian version. Banca popolare di Ravenna The commercial network comprises 56 branches at the end of 2006, 2 more than in December 2005 following the opening of branches in Piove di Sacco (Padua) and Monselice (Padua). The new branch plan for envisages the opening of a further 9 branches and confirms the general direction of expansion into the eastern provinces of the Veneto region (Padua, Venice, Treviso). The economy in this area, where the presence of the BPER Group is still limited, is particularly lively and dynamic. The bank employs 455 persons at year end, up 11 with respect to the prior year. The delegation of personal asset management tasks to Optima Sgr has allowed redeployment of the related human resources to customer relations activities. Work proceeded rapidly throughout the year on the alignment of the organisational structure with the Parent Bank's IT system, which was adopted on 1 October 2005.In addition, considerable effort was dedicated to compliance with the new regulatory instructions

10 214 directors report on operations regarding, in particular, banking transparency, bank transfers and the changes introduced by the Consolidated Banking Law and the Consolidated Finance Law. With regard to the principal aggregates, direct funding increased by 10.67% of the year to Euro 1,392 million. This increase involved all technical forms, with peaks in relation to bonds and repurchase agreements. Indirect deposits also expanded by 6.37% over the year, to 1,367 million euro, despite a slow-down with regard to the management of assets. Lending also performed well, rising by 9.69% over the year to Euro 1,270.6 million at 31 December This aggregate benefited from the growth in mortgages and other lending (+10%), following strong demand from the construction sector including, in particular, housing, commerce and hotels. This said, the statement of income reports the best results: income from banking activities, including a gain of Euro 6.1 million on the disposal of part of the interest held in C.S.E. Soc.Cons., rose by 17.62% to Euro 77.3 million, while the profit from current operations increased by 50.13% to Euro 31.9 million due to the containment of operating costs. After the deduction of income taxes totalling Euro 11.7 million, net income for the year amounted to Euro 20.1 million. This represents an increase of more than 67% with respect to Banca popolare di Lanciano e Sulmona There are 65 branches in the network at year end, located in 8 different provinces; two new branches were opening during 2006: at Loreto Aprutino (Pescara) and San Benedetto del Tronto (Ascoli-Piceno). In addition, the branch at Cepagatti was closed and re-opened at Spoltore (Pescara). The branch plan for focuses the bank's development on the strengthening of its presence in the home territories (Abruzzo and Molise), together with expansion along the Adriatic coast of the Marches. Ten branches will be opened over the next three years. The number of employees increased by 32 during 2006, from 522 to 554 (including those on secondment to Finbanche d Abruzzo), ahead of the new branch openings and the related expansion of activities. BPLS is pursuing the development of alternative distribution channels with respect to the traditional branch network: with regard to virtual banking, the number of POS installations and home banking contracts is significant. Towards year end, Giuseppe Carletti reached pensionable age and retired as General Manager, after having contributed effectively for many years to the growth of the bank. He was replaced by Guido Serafini, the bank's former deputy general manager. The results confirm the growth in the scale and profitability of the bank experienced over the past several years. With regard to the principal aggregates, direct funding rose by 11.57% over the year to Euro 2,383 million, largely via the placement of bonds and the Oriente certificates of deposit. Conversely, indirect deposits were slightly lower (-0.97%) at Euro 234 million. Loans to customers grew significantly (+14.73%) with respect to 2005, reaching about Euro 2,129 million at year end. This rise was mainly due to the demand for home mortgages. Net income was 23.07% higher at Euro 23.5 million. This positive performance was assisted by a marked rise in the interest margin (+26.77% over the year) and the growth in net commission income (+4.56% with respect to 2005) following the higher revenues earned from collection and payment services.

11 Banca popolare del Materano Consistent with the strategic guidelines set out in the business plan, this bank continues to perform well following the organisational and commercial improvements made in prior years. Three branches were opened during the year at Matera, Senise (Potenza) and Corato (Bari), raising the total to 43 at the end of At the same time, the number of employees has risen by 16 to 360. The Group's new branch plan for the next three years envisages further expansion in Puglia, especially in the provinces of Bari and Taranto, and in the province of Potenza. Six new branches will be opened in total. The controlling interest in Ritrimat S.p.A., a tax collection company recently returned to profitability, was sold in July In particular, pursuant to new regulations reforming the sector, this interest has been sold to Equitalia S.p.A. (formerly Riscossione S.p.A.), a stateowned company. The bank has been taken to court by the liquidators of a bankrupt customer, who are claiming a sizeable amount. No provisions have been made in this regard, since the directors and their legal advisors believe that this dispute will be decided in the bank's favour. With regard to the principal aggregates, direct funding has risen by 11.60% since 31 December 2005 to Euro 1,052 million; indirect deposits rose slightly less (+9.14%) to Euro 473 million at year end. Lending to customers totals Euro million; comparison on a consistent basis with 2005 (net of transitory treasury account items), highlights a significant 13.18% increase; net non-performing loans, Euro 5.7 million, have decreased since December 2005 and represent just 0.82% of net lending. The results for the year in terms of economic performance were most satisfactory: net income of Euro 10 million was up 40.01% due to a marked increase in all principal forms of income combined with a smaller rise in operating costs. 215 directors report on operations Banca CRV - Cassa di Risparmio di Vignola Banca CRV SpA achieved satisfactory results in 2006, both with regard to its commercial objectives for volume and earnings, and in qualitative terms. These relate to the improvement of customer loyalty and greater penetration of the target market (private individuals and small and medium-sized businesses). Two new branches were opened during the year at Funo di Argelato (Bologna) and Bologna Fiera, raising the total number of branches to 41. The new branch plan for envisages an increased presence in areas adjoining the bank's home territory in the province of Bologna, as well as in the Apennines near Modena. Four new branches will be opened. The number of employees fell by 8 during the year to 380 at the end of 2006;this largely reflects the direct employment by BPER of CRV personnel, following a period of secondment at the Parent Company due to the centralisation of various administrative activities. The average number of employees was however higher than in 2005, with a consequent impact on costs. In terms of the volume of business, customer deposits rose by 5.25% over the year to about Euro 1,146 million at 31 December 2006.Indirect deposits also rose by 5.07% in 2006, to almost Euro 1,132 million; this reflects the healthy performance of administered assets (+7.51%) and the further weakness of managed assets (-10.42%) due to low customer interest in this type of product.

12 216 directors report on operations There was a satisfactory 8.09% increase in net loans to customers during the year, which amount to Euro 1,143 million at year end. Growth was steady throughout the year, without particular peaks or troughs, thus confirming the renewed stability of customers' borrowing requirements. This performance marks an increased focus on lending to the retail sector and, in particular, to the leading small and medium-sized firms in the bank's catchment area. The apparent reduction in net income to Euro 14.2 million actually reflects, in consistent terms, an increase of % with respect to In particular, net interest income improved and income from banking activities was stable (net of almost 5 million euro of nonrecurring income reported in 2005 on disposal of the investment in Cedadri SpA), while careful credit control and the success of a business restructuring plan in relation to a major loan also contributed, despite a rise in operating costs. Banca popolare di Crotone The last tranche of the programme of capital increases was placed in early This completed action to strengthen the capitalisation of the bank, with four successive capital issues and the placement of a subordinated loan. In addition to gathering new resources for expansion, the purpose of this operation was to consolidate the bank's ties with the local territory. Given the considerable interest shown for the placement of the last tranche, the Parent Bank waived part of its pre-emption rights in order to allow a considerable expansion of the shareholder base. There are now more than 10,000 shareholders, about 1,000 more than at the start of the programme of capital increases at the end of There are 43 branches at year end, one more than at the end of The opening of the Catania branch in December was significant, being the Group's first foothold on the other side of the strait. Following years of growth, Sicily represents a new area of expansion for the bank, while respecting its vocation as a local operation focused on the needs of its home territory. Subsequent to the approval of the 2006 financial, Mimmo Guidotti has resigned as General Manager after leading the bank over the past decade with tireless commitment, care and loyalty. He will now perform important duties on behalf of the Parent Bank. Andrea Molinari, formerly the Deputy General Manager, has been appointed to succeed him with support in this challenging task from the team of professionals developed internally under the guidance and example of Mimmo Guidotti. In volume terms, there was a slight increase in total deposits during 2006, rising +0.76% to Euro 1,129 million from Euro 1,120 million in the prior year. Among these, current accounts continue to represent the largest component (62%). Indirect deposits confirmed the marked increase reported in the prior year (+17.49% since December 2005) to almost Euro 443 million due, in particular, to the growth of the private sector. Loans to customers also rose significantly during 2006 (+15.15% over the year),totalling more than Euro 924 million at year end. About 69% of lending was to businesses, confirming the bank's traditional vocation as a provider of support for the economy and regional growth. Popolare di Crotone reported excellent results due to the higher volumes mentioned, as well as to the constant attention paid to pricing policy, the control of interest rates and the containment of operating costs. Net income of Euro 18 million was 38.34% higher than in 2005, partly due to the gains realised on the disposal of the investments in Ktesios SpA and Eurofiditalia SpA, totalling about Euro 2.8 million gross of tax effect.

13 Banca popolare di Aprilia The network now comprises 20 branches following the opening of the branch in Latina. The Group's branch opening plan envisages further expansion for the bank in the suburbs of Rome (the Rome Eur-Marconi branch is scheduled to open on 10 April 2007). The commercial network and back-office functions employ 163 persons as of 31 December 2006 (8 more than at the end of 2005). The good profitability and growth achieved by the bank in the two prior years were confirmed and, indeed, significantly improved upon in the year just ended. This reflects both the changes made to commercial policy and effective outsourcing designed to benefit in full from the synergies released by sharing the Parent Bank's IT system. With respect to the traditional branch network, the progressive development of alternative distribution channels is worthy of note. In particular: telematic products (internet banking and corporate banking) and POS equipment. The bank's volume of business was satisfactory. Direct funding totals Euro million, up 9.19% over the year, and mainly comprises current accounts and bonds. There was a smaller increase in indirect funding (+5.64%) to Euro million, from Euro million at the end of The rise in lending was more significant, up from Euro 333 million to about Euro 385 million (+15.65%). This was largely due to the demand for secured loans. In terms of the economic indicators, net income was considerably higher at more than Euro 9 million (+35.70% with respect to 2005). In addition to the progress made by the balance sheet aggregates, this was partly due to a gain of about Euro 2.9 million on the disposal of available-for-sale securities. 217 directors report on operations CARISPAQ Cassa di Risparmio della Provincia dell Aquila Three new branches were opened in 2006, in the provinces of Frosinone (Anagni) and L Aquila (Avezzano and the Pile industrial area), raising the total to 47 in 5 different provinces. The Group's branch plan for envisages openings in Umbria, where the BPER Group is not yet present. The move beyond Abruzzo will also broaden the geographical diversification of revenues and risk. The bank employs 450 persons as of 31 December 2006, including 22 on secondment to the immediate parent, Finbanche d Abruzzo. With regard to customer aggregates, particular attention was dedicated to lending which rose by +2.94% over the year to Euro 993 million. Funding was slightly more lively, rising by 3.68% to Euro 1,327.6 million as of 31 December Analysis of this aggregate confirms that the bank's customers continue to prefer bonds, with a further increase in placements (+10.92%). Indirect deposits rose to Euro 1,023.6 million from Euro million at the end of 2005 (+11.31%), with a progressive shift of resources towards mutual funds. The bank achieved excellent results in terms of profitability, reducing the cost-income indicator to 67.63% (from 74.97% in 2005) and increasing productivity. Net income amounted to Euro 6.7 million, a considerable 50.20% increase with respect to the prior year. These results benefited, in particular, from both the increase in the interest margin (+19.03% over the year), due to the changes in interest rates and a widening of the spread, and the careful containment of administrative expenses.

14 Banca della Campania 218 directors report on operations In a significant move, this bank absorbed Banca del Monte di Foggia during This operation, part of the rationalisation and integration of the activities that comprise the BPER Group, means that Banca della Campania is no longer a regional bank and is set to become an important point of reference for banking in the entire South of Italy. The absorption - carried out on a simplified basis (pursuant to art bis of the Italian Civil Code), since the absorbing bank already held more than 90% of the shares in the bank to be absorbed - took place in a number of stages. During the summer, Banca della Campania increased its share capital by Euro 63 million in order to strengthen its equity base. Subsequently (on 4 October 2006), BPER sold Banca della Campania its 98.52% interest in the capital of Monte Foggia. Banca della Campania then approved the absorption of its direct Puglia-based subsidiary, in which a 99.05% interest was held. This operation was completed in December The new organisation of Banca della Campania involves an Area structure responsible for the local branches, thus ensuring that individual units benefit from the increased knowledge of their local markets and the specific nature of the strategic guidance provided in relation to market penetration. These Areas are then grouped into Departments, which are decentralised structures that perform certain governance functions in relation to Area activities. Eight new branches were opened during the year, including the Monte Foggia branch at Trinitapoli (Foggia) and the branch at Giffoni Villa Piana (Salerno), which was opened on the closure of the branch at Cava dei Tirreni. There are now 121 branches. Looking ahead, the Group's branch plan for envisaged 4 openings for Banca del Monte di Foggia and 10 for Banca della Campania. However, with a view to developing faster in Puglia, where the Group is less present than in Campania, the openings envisaged for the former Monte Foggia will be accelerated and rescheduled for In terms of commercial policy, Banca della Campania focuses particular and growing attention on the market represented by local public agencies, having regard for the growth potential of treasury management activities performed on their behalf, in a Region where this sector is especially significant. The bank is party to a significant dispute for which the directors, considering the opinion of their legal advisors, have made no provision. This decision reflects both the possible positive outcome of the dispute and the difficulty of quantifying reliably the extent of any charges that may be incurred. With regard to customer aggregates, direct funding amounts to Euro 3,851 million at year end, up strongly over the year (+8.19 per cent) and more than compensating for the essential stability of the indirect component (+0.42%). Total lending, Euro 2,212 million, was % higher than in the previous year due to more incisive commercial action, especially in relation to home mortgages and the discounting of receivables. Work has also continued on optimisation of the procedures followed for the control and management of risk, following alignment with the Parent Bank's instructions linked with the new internal regulations for lending. In economic terms, the results were satisfactory: net income rose to Euro 29.1 million, up 10.05% from Euro 26.4 million in the prior year.

15 Banco di Sardegna (sub-holding) A number of small changes were made to Banco di Sardegna's scope of consolidation during These will be discussed first, before describing the consolidated results of operations of this sub-holding company. In particular: Bipiesse Riscossioni S.p.A. has been deconsolidated following its sale to Equitalia S.p.A. - formerly Riscossione S.p.A. - (pursuant to Decree 203/2005, converted with modifications into Law 248/2006); the interest in Krenesiel S.p.A., carried at equity, has risen from 39% to 44.65% since two shareholders did not subscribe to a capital increase. The number of branches operated by this Sardinian sub-holding company is unchanged with respect to the prior year (391), since neither the old nor the new branch plans envisage any new branch openings, but just a number of relocations. Together with the network operated by Banca di Sassari, the Sardinian group has a total of 449 branches. Turning to the consolidated numbers, as an initial comment there has been welcome progress with regard to the various aggregates. Direct funding from customers amounts to Euro 9,748 million as of 31 December This represents reasonable (+2.8%) growth since 31 December 2005 due, above all, to the increases in bonds (+10.7%), current accounts (+4.6%) and repurchase agreements (+ 6.3%). Indirect funding also made significant progress (+ 6.2%), mainly in relation to administered assets (+ 7.3%) and, to some extent, managed assets (+ 1.9%). Net lending amounts to Euro 7,380.9 million, down 7.6% over the year (Euro 7,984.3 million at the end of 2005);on a consistent basis, however, lending rose by 7.9% after excluding from the comparative amounts the repurchase agreements outstanding as of 31 December 2005 (Euro 1,140.7 million), given that the consolidated banks did not operate in the repurchase market during In terms of the technical forms of lending, secured loans remain the most significant element (43.8%), while current account overdrafts are also important, having grown significantly during the year (+15.8%). With regard to earnings, consolidated net income amounted to Euro 60 million in 2006, compared with Euro 54.3 million in the prior year. Among the aggregates contributing significantly to these results, the interest margin rose by Euro 30.9 million (about 10 percentage points) to Euro million. Income from banking activities amounted to Euro 424 million, compared with Euro million in 2005, up Euro 9.3 million (+2.2%). This includes income of more than Euro 7.6 million from the sale of substantial financial assets. The reduction in administrative expenses to Euro 309 million from Euro 325 million in 2005 partly reflects the deconsolidation of Bipiesse Riscossioni S.p.A. Significant adjustments were made to loans (net of write-backs) during These totalled Euro 23.4 million, compared with Euro 3.5 million in Such change was mainly due to the "discounting" effect on loans currently in place in favour of Sardegna Riscossione (former Bipierre Riscossioni). The provisions for risks and charges amounted to Euro 15.6 million, compared with Euro 13.6 million in the prior year. The above costs and revenues, together with other minor amounts, contributed to forming the profit from ordinary operations of Euro million which, after the provision for taxation (Euro 47.6 million), resulted in net income of Euro 62.3 million (+10.5%), of which Euro 60 million was attributable to the Group and Euro 2.3 million to the minority shareholders. 219 directors report on operations

16 220 directors report on operations The following paragraphs summarise briefly the results of the banks comprising the Sardinian conglomerate. Banco di Sardegna. The past year consolidated the important innovations introduced in prior years, while also paving the way for future projects now at the planning or initial implementation stages. In particular, a detailed three-year plan (2006/2008) has been devised, with numerous projects covering all the principal strategic, organisational and operational aspects of the bank. To mention just a few, these include the rationalisation of the branch network, personnel training, a departmental reorganisation, the intensification of control activities, the alignment of the investment portfolio with group strategy and improvement of the bank's positioning in the marketplace. The Bank of Italy commenced a routine inspection in June 2006, which was completed in October. Maximum cooperation was provided to the inspectors from the Supervisory Authority, since their work represented a useful opportunity to check, in practice, the validity of the strategic, organisational and operational guidelines adopted. The timing of this checkup was especially meaningful, providing a chance to evaluate the migration to the Parent Bank's IT platform, the adoption of IFRS for the preparation of both the individual and the and, not least, the organisational efforts made to release Group synergies. In terms of current operations, the lively growth in volumes experienced in prior years continued throughout 2006, with benefits for profitability. Direct funding rose by 2.1% to Euro 7,844.4 million, following a further rise in current account deposits and bonds. Indirect deposits also increased, with managed assets up by 2.8% and administered assets ahead by 7.5%. "Performing" loans, after deducting repurchase agreements for the sake of consistency, rose by 8% over the year. Considering net impaired loans, the rise over the year was still 7.4%.This positive performance was led by current account overdrafts and secured loans. Impaired loans, Euro million, are covered by provisions representing 54.1% of the total; within these, the coverage of non-performing loans is 68.7%. The statement of income reflects an interest margin of Euro million (+9.3% with respect to Euro million in 2005), representing the best performance in the past five years; the income from trading in securities was also good, Euro 5.5 million (loss of Euro 2.1 million in the prior year);administrative expenses rose by a modest 3.6% to Euro 247 million; the profit from current operations rose by 30.5% to Euro million. After taxation of Euro 41.1 million, net income was Euro 24.9 million higher (+55.5%) at Euro 69.6 million. The exceptional size of this increase was partly due to the writeback of the investment in Banca di Sassari (by Euro 21.1 million) following the recognition of structural losses in prior years. Ignoring this, the rise in net income to Euro 48.5 million (+8.4%) was still most satisfactory. Banca di Sassari. The commercial policy adopted by the bank during the year was designed to enhance its competitive position, with a view to capturing additional market share. A database of economic, financial and social statistics drawn from all the municipalities on the island was provided to the branch network, enabling each unit to know and understand better its reference market and its positioning with respect to competitors. Special care was taken over the review of pricing in order to find the best combination of conditions, considering their acceptability/sustainability for customers and their profitability for the bank. The Consumer Division established within the bank has consolidated its existing role and developed new activities. The purpose of this division is to supervise the personal credit market and related payment systems for the entire BPER Group.

17 Significantly, over 421,000 credit and debit cards are under management at the end of 2006, compared with 82,000 in Assisted loans totalling Euro 40.8 million were granted in 2006, compared with Euro 22.4 million in the prior year. The money transfer service operated in partnership with Western Union also performed well (98,800 transactions, compared with 87,000 in 2005). At year end, net loans to customers amount to Euro million, up 9.6% from Euro million at the end of 2005, due to the bank's policy of supporting local businesses. Doubtful loans amount to Euro million, including non-performing loans of Euro 58.3 million. Direct funding from customers has risen to Euro 1,319.8 million from Euro in 1,275.5 million in the prior year; indirect deposits also rose from Euro million at the end of 2005 to Euro million in Net income amounted to Euro 8.7 million, compared with Euro 5.0 million in the prior year (+74.8%). Considering the individual aggregates, there was an improvement in the interest margin to Euro 51.9 million, from Euro 45.3 million in the prior year. Net commission income amounted to Euro 21.8 million (Euro 18.0 million in 2005).Despite higher net write-downs of Euro 11.1 million, compared with Euro 6.7 million in 2005, banking income amounted to Euro 65.2 million as against Euro 59.1 million in the prior year. Operating costs rose by just 1.5% from Euro 53.7 million in 2005 to Euro 54.5 million in Sardaleasing. The company achieved record performance in 2006 with the arrangement of 2,268 contracts, totalling Euro million. The rise in volume was 7.04% while the number of active contracts increased by 12.39%. The property sector continued to dominate new business (47.25%), followed by operating assets (28.66%) and vehicle leasing (15.59%). Banco di Sardegna represents the principal channel for the placement of contracts, generating 73.1% of new business. In the context of its mission as a generator of products, the Parent Bank has decided to extend the commercial activities of this company to the entire network of Group banks in the near future. The company's financial have been prepared for the first time under IFRS. The principal asset aggregate, loans to customers, rose 11.7% over the year on a consistent basis to Euro million from Euro million. Alongside the rise in lending, deposits from banks increased to Euro million from Euro million in the prior year. With regard to the statement of income, income from leasing activities rose strongly (+7.8%) to Euro 17,966 thousand from Euro 16,659 thousand in the prior year; against this, net adjustments of impaired loans totalled Euro 3.0 million (writebacks of Euro 2.2 million in 2005), generating the largest change between years. Net income totalled Euro 4.0 million. Numera. This company is active in the IT and systems sector. Net income amounted to Euro 28.8 thousand (Euro 99.5 thousand in 2005). There was a slight increase in the demand for electronic money services in 2006, but a marked decline in the demand for development services performed under contract or at the IT hub. The significant reduction in the provision of TLQ services to private companies was partly offset by a gradual increase in the new WEB services provided to public agencies. Despite a contraction during the first half of the year, the POS installations was up 4.87% at year end with respect to The value of production of Euro 5,952 thousand was essentially in line with the prior year (Euro 5,947 thousand). Costs amounted to Euro 5,850 thousand, slightly (+1.6%) higher than in the prior year (Euro 5,757 thousand). In particular, payroll costs were higher, 221 directors report on operations

18 222 directors report on operations together with the cost of services deriving from maintenance contracts for the hardware and software used to provide new services to customers. Tholos. There were a number of changes in the company's activities during In addition to routine activity in the property sector, operations extended to: the management and exploitation of property via leasing contracts with Banco di Sardegna and its subsidiaries; the management (routine maintenance, improvement and sale) of the nonoperating properties owned by Banco di Sardegna and its subsidiaries; the preparation, as required, of new operating premises for the group; participation in court auctions for the recovery of loans on behalf of Banco di Sardegna and its subsidiaries. In view of these new activities, share capital was increased by Euro 5.2 million and shortterm bank loans were transformed to long term by arranging a new loan of Euro 14 million and overdraft facilities to meet routine requirements. Total assets amount to Euro 35,315 thousand as of 31 December 2006, compared with Euro 27,806 thousand at the end of the prior year. In addition to the capital increase, payables to third parties rose by Euro 1,576 thousand and amounts due to banks increased by Euro 555 thousand. With regard to the statement of income, the value of production rose by Euro 2,015 thousand to Euro 4,592 thousand, from Euro 2,577 thousand in the prior year. This increase largely relates to inventories of Euro 1,919 thousand deriving from court auctions. The cost of production rose to Euro 3,600 thousand from Euro 1,481 thousand in the prior year. The increase of Euro 2,118 thousand relates to assets acquired at court auctions. Net income of Euro 250 thousand was essentially unchanged (Euro 248 thousand). Eurobanca del Trentino s.p.a. This bank has continued to expand, raising the total number of branches to 6 following openings in Parona di Valpolicella, Verona Borgo Venezia and Peschiera del Garda. In the final stages of its start-up, the bank's operations have been structured with ample recourse to the outsourcing services offered by BPER. This was facilitated in April by the adoption of the IT system already used by other Group banks (thus completing the IT alignment of all banking subsidiaries). Migration activities involved intensive training for staff, both in the classroom and at the branches of the Parent Bank, as well as a number of organisational changes. In particular, numerous back-office activities have been centralised at the Parent Bank, which has also been given a mandate for the management of assets. In addition, the Internal Audit, SIM Controller and Credit Control functions have been outsourced to the equivalent departments within BPER. The new business development plan focuses on consolidation of the current position, with just three new branch openings in the period and an increase in capital to sustain the growth in business. There was a marked change in the bank's principal aggregates during 2006:direct funding rose to Euro 20.7 million from Euro 14.7 million at the end of 2005 (+40.38%), while indirect deposits amount to Euro 37.4 million compared with Euro 18.8 million previously, up 98.82%. Net lending also rose considerably, from Euro 23.8 million at the end of 2005 to Euro 48.8 million as of 31 December 2006 ( %). A net loss was nevertheless reported (Euro 1.4 million), largely due to the incidence of overhead costs. The business plan forecasts a breakeven position in 2008, with a move into

19 profitability in the following year. Evidence for the validity of this plan is reflected in the 72.08% rise in income from banking activities during Banca popolare dell'emilia Romagna (Europe) International s.a. 223 directors report on operations Despite working in a market characterised by waning interest from international operators, this subsidiary has managed to consolidate and, in certain sectors, increase its volume of business with respect to the prior year: direct funding from customers rose to Euro million (up 1.48% since December 2005) and lending was 11.1% higher at Euro 52.9 million. Indirect deposits, Euro million, were more than 38% higher. Net income for the year was Euro 1,240 thousand, up 6.1% with respect to This improvement was facilitated by a substantial rise in net commissions (+39.65%), principally deriving from trading in securities on behalf of customers, and in the interest margin (+15.03%), together with the effective control of administrative costs. Finbanche d Abruzzo s.p.a. There were a number of changes during the year in the services provided by this investment holding company to Carispaq and Popolare di Lanciano e Sulmona, its subsidiaries. In particular, the Legal Department was expanded from January 2006 with the secondment of a person from the Popolare, while certain activities of the new Logistics Function have been reorganised, with contractual changes to the way fee income and expense is calculated. In addition, following the transfer of data processing activities to the Parent Bank and the reorganisation of various sectors during the year, while the 5 persons previously dedicated to managing the information system were transferred to the recently-established SAS Planning and Support and Optical Storage offices. Net income for the year amounted to Euro 4,065,961, up 19.25%.This performance was mainly due to the increase in dividends received from subsidiary banks from Euro 3.4 million in 2005 to Euro 4.1 million in Nadia s.p.a. In recent years, unit values (sales and rentals) have increased in the domestic property market, together with the volume of transactions. There are still evident signs of expansion in all segments (residential, services, commercial, manufacturing), suggesting that further growth can be expected in the coming years. This phenomenon involves not only those companies that work actively/directly in the property market, but also those with significant properties on their balance sheets. This is where the activities of Nadia SpA are relevant, playing an important operational role in relation to the purchase of business properties and investment prior to the leasing of space to companies and banks within the BPER Group. Application of this policy, founded on expectations of further rises in property prices, resulted in the purchase of 8 premises for Euro 6.2 million during 2006, 6 of which will be used by new branches. The selection policy applied for disposals followed two key principles, both capable of generating capital gains:

20 224 directors report on operations non-business properties of special architectural merit or which are located in strategic positions; non-business properties that are not leased and which are therefore unproductive. As in the past, property management generated good returns (lease income totalled Euro 5.7 million and other revenues and income amounted to Euro 563 thousand) that fully covered operating costs and contributed to the pre-tax profit of Euro 423 thousand, despite substantial depreciation charges (Euro 2.2 million). The depreciation rates applied are lower than the maximum allowed for fiscal purposes, so that the related assets are written down over a period that more closely reflects their expected useful lives. Following the tax charge, net income amounted to Euro 70 thousand. Em.Ro. popolare s.p.a. In its role as investment holding company for the Group, Em.Ro. popolare made a number of investments in and disposals of equity investments during the year. For brevity, only the principal investments (in absolute terms) are mentioned below: the purchase of 1,155,000 shares in Meliorbanca s.p.a. for a total of Euro 4.2 million; subscription to a capital increase by Mediainvest s.r.l. (Euro 2.0 million; partial conversion into shares of SOFINCO s.p.a. of a bond already held in that company (Euro 2.2 million). subscription to the endowment fund of CIR Food, a cooperative (Euro 3.5 million); subscription on formation for shares in Pellegrini Group s.p.a. (Euro 4.8 million); Decreases reflect the disposal of investments no longer of strategic interest, realising substantial capital gains. The most significant disposals related to: sale to Monte dei Paschi di Siena of the interest held in SI Holding s.p.a. for Euro 2 million, with a capital gain of Euro 1.4 million; sale of the investment held in Wittur AG to a foreign private equity fund; since this holding was written off in 2004, the sale proceeds, net of legal expenses, resulted in extraordinary income of Euro 1.1 million. Net income amounted to Euro 13.7 million, up 24.7% with respect to Income principally comprised dividends of Euro 13.5 million (+9.2%), together with the above disposal gains (essentially in line with the prior year). Costs included interest expense and charges on financial transactions (Euro 4 million), together with the write-down of equity investments by Euro 0.9 million (72.2% less than in the prior year). EMRO Finance Ireland limited Another positive year for this Irish subsidiary, with growth in all principal balance sheet aggregates. Total assets amount to Euro 1,066.4 million at the end of 2006, up 14.45% over the year (Euro million as of 31/12/2005), with excellent net income of Euro 12.8 million, following (and in line with) the exceptional Euro 13.4 million reported in The key factors sustaining this further year of growth were much the same as in 2005;these included the higher interest margin (+ 5.5%), the profit on the disposal of certain securities (+482%), dividends and commissions from advisory work, which were much higher than expected (+36.4%);in addition, the rise in overhead costs was contained to just 8%, despite the much higher increase in the volume of business.

21 The excellent quality of the investment portfolio and lending is worthy of note, since there are no problem or non-performing positions. Lastly, the payments on capital account made in foreign currencies (GBP and HUF) were replaced during the year with equivalent amounts in Euro, given that the original configuration was no longer judged to be optimal. 225 directors report on operations Optima s.p.a. SGR The Group's asset management company has continued to expand and develop well. With regard to the Optima mutual funds, the Promotion and Management functions were separated from 1 January The former was retained by Optima SGR, with the latter delegated to Arca SGR s.p.a. pursuant to art. 36 of the Consolidated Finance Law. The various positions as of 31 December 2006 are summarised below, together with the related changes with respect to the prior year: mutual fund management : total assets of Euro 1,414.5 million, up 8.69% since 31 December 2005 (much better than average for Italian harmonised mutual funds as a whole); personalised asset management under mandate : total assets of Euro 3,083.8 million, down just 1.1%. Optima now manages under mandate almost all the asset management activities of the Group's banks. The company has adopted IFRS from the current year; the impact of the changes with respect to application of the previous standards was modest. With regard to the statement of income, net revenues amounted to about Euro 12.9 million (including Euro 12.1 million from ordinary operations), up 12.89%, while operating costs rose 7.45% to Euro 7.3 million. Pre-tax income totalled Euro 5.3 million and net income was Euro 3.2 million, up 18% on EM.RO Immobiliare s.p.a. The company has continued to purchase property at court auctions, mainly in order to facilitate the recovery of amounts due to Group banks by counterparts in difficulty or who are bankrupt. Participation in various public auctions resulted in the purchase of two property complexes in Avellino and Chieti. Commercial activities also included the sale of available properties on receipt of advantageous offers. The selection of business on this basis resulted in a slight contraction of sales revenues, from Euro 770 thousand in 2005 to Euro 580 thousand in the current year. The resulting net loss was Euro 81 thousand, compared with net income in 2005 of Euro 47 thousand. Modena Terminal s.r.l. This company provides refrigerated and other storage for goods. A new refrigeration unit, under construction since the end of 2004, entered into service in July 2006.On completion of the works, the total investment amounted to Euro 4.2 million. The disruption related to the completion of this work and lower inventory rotation resulted in a minor decrease in revenues (from Euro 3,175 thousand to Euro 3,007 thousand). In particular, revenues from services were slightly lower (down from Euro 3,094 thousand in 2005 to Euro 2,950 thousand in the current year).

22 226 directors report on operations By contrast, the cost of production rose by 5.26% (from Euro 1,097 thousand to Euro 1,155 thousand). Net of depreciation, financial charges and taxation, the net loss reported in the statement of income was Euro 65 thousand, compared with net income of Euro 150 thousand in Metelliana s.p.a. The rationalisation of the Group's IT activities was completed at the start of the year, with the transfer to Modena of processing activities dedicated to customer banks. This involved the transfer to the Parent Bank of the related contracts and cessation of the use of the Parent Bank's processing facilities, with the transfer of the related personnel to Banca della Campania. The company continues to perform IT activities and procedures for Group banks on attractive terms, drawing fully on the synergies offered by use of the Group's shared data processing facilities. Together with the reduction in payroll costs and in leases and rentals, this allows the maintenance of economic and financial equilibrium, despite the reduction in revenues following the transfer of the contracts with customer banks. The value of production, deriving entirely from services provided to the Parent Bank, was slightly more than Euro 2 million (down 80.7%), while costs totalled Euro 1.7 million, down 83.2%. Given the low incidence of financial and extraordinary items, net income after taxation was about Euro 256 thousand. Mutina s.r.l. This is merely the vehicle company for the securitisation and does not carry on other activities; accordingly, its balance sheet aggregates are not meaningful and its of income always reflects a breakeven situation, having recharged its operating costs to the portfolio of loans under management. Recoveries of the non-performing loans securitised via the Group multioriginators transaction totalled Euro 33.5 million during the year. The business plan for the operation has been achieved for the majority of the "blocks" contributed by the participants, with collections during the year of Euro 58.6 million. Recoveries for just four banks have been significantly slower than expected, due to adverse changes with respect to the initial forecasts for certain positions. The third repayment of principal on the senior bonds issued on 17 March 2003 took place on 9 February 2006 (Euro 17.3 million out of Euro 228 million);class C junior bonds totalling Euro 1.9 million (out of Euro million) were also repaid in relation to the former Banca popolare di Salerno, now absorbed by Banca della Campania, and Banca popolare di Lanciano e Sulmona. The fourth repayment of senior bonds took place on 9 August 2006, Euro 10.8 million, representing 4.75% of the securities originally issued. The residual value of the senior bonds still in circulation is therefore Euro million, representing 46.6% of the amount originally issued.

23 In addition, the conditions arose for the redemption of additional junior bonds totalling Euro 1.1 million relating to the former Banca popolare di Salerno and Banca popolare di Lanciano e Sulmona. Further information on this transaction is provided in the (Part E, section C.1). 227 directors report on operations Nettuno Gestione Crediti s.p.a. This servicing company, which collects the non-performing loans securitised by Mutina s.r.l., has again worked effectively. This is confirmed by the extent of the recoveries made during the year, which exceeded Euro 33.5 million. The professionalism of the recovery activities, which include recourse to lawyers, is demonstrated by the net gains of Euro 7.6 million realised with respect to the estimated realisable value of the loans concerned. Revenues of Euro 1,121 thousand mainly related to the company's master servicing activities, which contributed more than Euro 1 million. Costs of Euro 938 thousand principally comprise payroll, office rentals and IT systems. After income taxes of Euro 99 thousand, net income for the year was about Euro 84 thousand. We wish to commemorate here Giuliano Montanari, the company's chairman, who died suddenly at the end of Respected professional and former Deputy General Manager of the Parent Bank, his time in charge of Nettuno established a rigorous and efficient approach to operations that is confirmed by the excellent results described above. ABF FACTORING s.p.a. The company, which joined the Group last year, provides product-specific services to other members of the Group. Turnover for the year amounted to Euro million, up 15.4% with respect to 2005, which is double the average for the sector. Outstanding amounts total Euro million as of 31 December 2006 (including future receivables), with advances of Euro million. The results of operations in 2006 reflect growth of 29.56% with a pre-tax profit of Euro 3,733,700. Net income amounted to Euro 2,582,936, down 17.22% due in large measure to the effect of taxation. The approach for 2007 is to improve and extend relations with Group banks. ABF LEASING s.p.a. The company is prepared its financial for the first time under IFRS, with the consequent pro forma restatement of the 2005 balances for consistency of comparison. Operations are mainly focused on the property sector. The equilibrium between the returns from lending and the cost of funding resulted in net income of more than Euro 6 million, up 19.30% with respect to 2005 (Euro 5.1 million). The level of new business was good in 2006:in particular, the value of new contracts totalled Euro million, up 17.26% with respect to the prior year. The quality of the portfolio of loans is excellent (non-performing loans represent just 0.76% of total lease lending), totalling Euro 1,165.8 million, up 5.57%o.

24 228 directors report on operations Taking account of the proposed dividend payment of Euro 0.8 million, shareholders' equity amounts to Euro 55.2 million, up 10.47% with respect to FORUM GUIDO MONZANI s.r.l. This company is not a member of the banking group but, in accordance with the new international accounting standards, it has been consolidated on a line-by-line basis since 2005.Given the insignificance of the aggregates consolidated, the related accounting information is not presented in the, as would be required by the regulations. As an organiser of congresses and conferences, the company has suffered from the increase in competitive pressure in weak market conditions. Consequently, the loss for the year was Euro 95 thousand. Given the current situation, management has implemented suitable measures to contain overhead costs while waiting for the results of increased promotional activity.

25 Group The criteria adopted for the preparation of the are set out in the (Part A). 229 directors report on operations Having performed all the necessary aggregations and adjustments, the consolidated financial provide a true and complete picture of the Group's financial position and results of operations. The more important financial statement aggregates and captions are presented below on a comparative basis, in thousands of Euro, indicating the changes between years in absolute and percentage terms. Caption Change % Change Direct customer deposits 37,365,608 35,205,090 2,160, Bank deposits 1,729,437 2,490,118 (760,681) Indirect deposits (off-balance sheet) 27,163,103 24,545,366 2,617, of which: managed 4,356,619 4,385,260 (28,641) of which: administered 22,806,484 20,160,106 2,646, Third-party funds under administration or management 66,258,148 62,240,574 4,017, Loans to banks and cash amounts 4,270,881 2,378,667 1,892, Net customer loans 31,274,014 30,626, , including Euro 1,192 million in impaired loans, representing 3.81% of total lending and essentially unchanged with respect to the prior year. This aggregate includes non-performing loans of Euro 470 million, up from Euro 410 million in 2005; the change largely reflects the deterioration of certain loans already classified as impaired and, as such, subjected to specific assessment and covered by adequate provisions. The incidence of non-performing loans with respect to total lending is just 1.50% (1.34% as of 31 December 2005). Caption Change % Change Insurance policy portfolio 1,720,961 1,356, , of which: life sector 1,685,801 1,328, , of which: non-life sector 35,160 28,647 6, Caption Change % Change Financial assets 7,123,045 7,767,763 (644,718) including Euro 1,432.5 million in relation to Financial assets available for sale.

26 Caption Change % Change 230 directors report on operations Investments in non-group companies 245,323 90, , Significant investments (i.e. in non-group companies subject to significant influence, or in which 20% or more of share capital is held) are carried at equity. The increase includes Euro million relating to the purchase of minority interests in four Piemontese savings banks by the Parent Bank, as described in the notes to its individual financial. Caption Change % Change Intangible assets 253, ,114 (241) Intangible assets include goodwill deriving from the purchase of investments in group companies. The total, considered to reflect the fair value of the companies acquired, amounts to Euro million (-0.11%). Impairment testing identified the need to write-down the carrying amount of just one investment, Eurobanca del Trentino, by Euro 258 thousand. Caption Change % Change Net property, plant and equipment 918, ,766 (11,886) including Euro million in relation to property. Caption Change % Change Subordinated liabilities 1,627,012 1,053, , The nominal value of subordinated liabilities convertible into the shares of consolidated banks and companies is Euro million. These liabilities include three bonds totalling Euro million (of which Euro 200 million convertible into shares of the Parent Bank) that were allocated to Fondazione Banco di Sardegna as partial payment for ordinary shares representing the controlling interest in that bank. Similar convertible instruments were used during the prior year to acquire the residual equity interests held by the Cassa di Risparmio di Vignola and Banca del Monte di Foggia Foundations in their respective banks. These total, respectively, Euro 32,669 thousand and Euro 21,040 thousand. Two new bonds totalling Euro million were issued by the Parent Bank during the year: one, not convertible, is linked to Euribor and matures in 2016, the other, convertible into BPER shares, yields interest at a fixed rate of 3.70% with final maturity in 2012.

27 Caption Change % Change Consolidated shareholders' equity 2,952,591 2,299, , Shareholders' equity includes valuation reserves of Euro million, capital instruments amounting to Euro 24.1 million and net income for the year. 231 directors report on operations Caption Change % Change Shareholders' equity attributable to minority interests 885, ,687 7, Caption Change % Change Total shareholders' equity 3,837,934 3,176, , Caption Change % Change Net income for the year 416, ,007 78, Consolidated net income is stated after deducting income taxes of Euro 266 million. This includes the minority interests of Euro 69.6 million. Caption Change % Change Consolidated net income attributable to the Parent Bank 346, ,333 70,

28 232 directors report on operations Consolidated net income comprises the sum of the Group's interest in the net income (losses) of the following Group companies: Banca popolare dell Emilia Romagna s.c. 220,477 thousand Banca popolare di Ravenna s.p.a. 15,299 thousand Banca popolare di Lanciano e Sulmona s.p.a. 12,533 thousand Banca popolare del Materano s.p.a. 6,782 thousand Banca CRV Cassa di Risparmio di Vignola s.p.a. 14,246 thousand Banca popolare dell Emilia Romagna (Europe) International s.a. 1,577 thousand Banca popolare di Crotone s.p.a. 10,997 thousand Banca popolare di Aprilia s.p.a. 5,145 thousand CARISPAQ Cassa di risparmio della provincia dell Aquila s.p.a. 5,366 thousand Banca della Campania s.p.a. 25,938 thousand Banco di Sardegna s.p.a., consolidated amount 29,438 thousand Eurobanca del Trentino s.p.a. (-) 700 thousand Nadia s.p.a. (-) 141 thousand Em.Ro. popolare s.p.a. 13,191 thousand Metelliana s.p.a. 268 thousand Finbanche d Abruzzo s.p.a. 4,067 thousand EMRO Finance Ireland limited 12,789 thousand Mutina s.r.l. - thousand Nettuno Gestione Crediti s.p.a. 77 thousand Optima s.p.a. SGR 2,590 thousand EM.RO Immobiliare s.p.a. (-) 81 thousand Modena Terminal s.r.l. (-) 57 thousand BPER International Advisory Company s.a. 13 thousand ABF FACTORING s.p.a. 2,325 thousand A.B.F. Leasing s.p.a. 6,045 thousand Forum Guido Monzani s.r.l. (-) 87 thousand Total Group share 388,097 thousand Negative consolidation adjustments (-) 41,266 thousand Consolidated net income 346,831 thousand Group companies employ 11,206 persons at 31 December 2006 (11,362 at 31 December 2005). At the same date, Group banks have 1,180 branches in Italy (41 more than in 2005) and 1 in the Grand Duchy of Luxembourg.

29 As required by current regulations, the following statement is presented as of 31 December 2006: Reconciliation of shareholders' equity and net income of the Parent Bank with the related consolidated amounts 233 directors report on operations (in thousands) Increase (decrease) Net income Shareholders' equity AMOUNTS RELATING TO THE PARENT BANK 220,477 2,532,898 DIFFERENCES between the shareholders' equity of companies consolidated on a line-by-line basis (net of minority interests) and the book value of the related equity investments held by their parent companies, 158, ,059 analysed as follows: adjustment of goodwill relating to subsidiaries elimination of intercompany profits and losses share of the results of line-by-line consolidated companies, net of tax effect (258) (8,421) 167,621 DIVIDENDS collected from companies consolidated on a line-by-line basis or carried at equity (54,438) 1,220 DIFFERENCE between the Group's interest in shareholders' equity, including net income, and the book value of companies valued using 21,850 27,414 th it th d TOTAL CONSOLIDATED NET INCOME AND SHAREHOLDERS' EQUITY ,831 2,952,591 TOTAL CONSOLIDATED NET INCOME AND SHAREHOLDERS' EQUITY ,333 2,299,268 Modena, 2 April 2007 The Board of Directors

30 Comparative summary schedules 234 directors report on operations The comparative information for Banca della Campania s.p.a. includes the 2005 information of Banca del Monte di Foggia s.p.a., which was absorbed on 28 December 2006.

31 Direct deposits (in thousands) Company name % Change 1 Banca popolare dell Emilia Romagna s.c. 14,275,952 13,044, Banca popolare di Ravenna s.p.a. 1,412,144 1,277, Banca popolare di Lanciano e Sulmona s.p.a. 2,382,886 2,135, CARISPAQ Cassa di risparmio della provincia dell Aquila s.p.a. 1,327,582 1,280, Banca popolare del Materano s.p.a. 1,051, , Banca CRV Cassa di Risparmio di Vignola s.p.a. 1,145,920 1,088, Banca popolare di Crotone s.p.a. 1,128,850 1,120, Banca popolare dell Emilia Romagna (Europe) International s.a. 901, , Banca popolare di Aprilia s.p.a. 535, , Banca della Campania s.p.a. 3,851,352 3,559, Banca di Sassari s.p.a. 1,342,444 1,281, Banco di Sardegna s.p.a. 8,428,644 8,222, Eurobanca del Trentino s.p.a. 20,700 14, Total banks 37,805,398 35,345, Other companies and consolidation adjustments (439,790) (140,685) Total 37,365,608 35,205, directors report on operations Indirect deposits (in thousands) Company name % Change 1 Banca popolare dell Emilia Romagna s.c. 17,168,621 15,266, Banca popolare di Ravenna s.p.a. 1,367,637 1,285, Banca popolare di Lanciano e Sulmona s.p.a. 234, , CARISPAQ Cassa di risparmio della provincia dell Aquila s.p.a. 1,023, , Banca popolare del Materano s.p.a. 473, , Banca CRV Cassa di Risparmio di Vignola s.p.a. 1,131,701 1,064, Banca popolare di Crotone s.p.a. 443, , Banca popolare dell Emilia Romagna (Europe) International s.a. 227, , Banca popolare di Aprilia s.p.a. 190, , Banca della Campania s.p.a.* 1,415,295 1,409, Banca di Sassari s.p.a. 466, , Banco di Sardegna s.p.a. 4,198,566 3,919, Eurobanca del Trentino s.p.a. 37,360 18, Total banks 28,377,466 25,717, Other companies and consolidation adjustments (1,214,363) (1,171,707) 3.64 Total 27,163,103 24,545,

32 Total deposits 236 directors report on operations (in thousands) Company name Direct Indirect Total % Change on Banca popolare dell Emilia Romagna s.c. 14,275,952 17,168,621 31,444, Banca popolare di Ravenna s.p.a. 1,412,144 1,367,637 2,779, Banca popolare di Lanciano e Sulmona s.p.a. 2,382, ,022 2,616, CARISPAQ Cassa di risparmio della provincia dell Aquila s.p.a. 1,327,582 1,023,558 2,351, Banca popolare del Materano s.p.a. 1,051, ,063 1,524, Banca CRV Cassa di Risparmio di Vignola s.p.a. 1,145,920 1,131,701 2,277, Banca popolare di Crotone s.p.a. 1,128, ,211 1,572, Banca popolare dell Emilia Romagna (Europe) International s.a. 901, ,113 1,128, Banca popolare di Aprilia s.p.a. 535, , , Banca della Campania s.p.a.* 3,851,352 1,415,295 5,266, Banca di Sassari s.p.a. 1,342, ,457 1,808, Banco di Sardegna s.p.a. 8,428,644 4,198,566 12,627, Eurobanca del Trentino s.p.a. 20,700 37,360 58, Total banks 37,805,398 28,377,466 66,182, Other companies and consolidation adjustments (439,790) (1,214,363) (1,654,153) Total 37,365,608 27,163,103 64,528, Due from customers (in thousands) Company name % Change 1 Banca popolare dell Emilia Romagna s.c. 13,574,471 13,032, Banca popolare di Ravenna s.p.a. 1,270,639 1,158, Banca popolare di Lanciano e Sulmona s.p.a. 2,128,665 1,855, CARISPAQ Cassa di risparmio della provincia dell Aquila s.p.a. 993, , Banca popolare del Materano s.p.a. 697, , Banca CRV Cassa di Risparmio di Vignola s.p.a. 1,143,087 1,057, Banca popolare di Crotone s.p.a. 923, , Banca popolare dell Emilia Romagna (Europe) International s.a. 53,364 48, Banca popolare di Aprilia s.p.a. 384, , Banca della Campania s.p.a. 2,211,589 2,004, Banca di Sassari s.p.a. 909, , Banco di Sardegna s.p.a. 6,352,892 7,056, Eurobanca del Trentino s.p.a. 48,803 23, Total banks 30,692,612 29,852, Other companies and consolidation adjustments 581, , Total 31,274,014 30,626,

33 Financial assets (in thousands) Company name % Change 1 Banca popolare dell Emilia Romagna s.c. 2,864,991 3,191, Banca popolare di Ravenna s.p.a. 309, , Banca popolare di Lanciano e Sulmona s.p.a. 148, , CARISPAQ Cassa di risparmio della provincia dell Aquila s.p.a. 165, , Banca popolare del Materano s.p.a. 162,494 91, Banca CRV Cassa di Risparmio di Vignola s.p.a. 154, , Banca popolare di Crotone s.p.a. 161, , Banca popolare dell Emilia Romagna (Europe) International s.a. 23,727 29, Banca popolare di Aprilia s.p.a. 96, , Banca della Campania s.p.a. 803, , Banca di Sassari s.p.a. 127, , Banco di Sardegna s.p.a. 1,367,610 2,199, Eurobanca del Trentino s.p.a. 1,895 10, Total banks 6,386,319 7,400, Other companies and consolidation adjustments 736, , Total 7,123,045 7,767, directors report on operations Non-performing loans (in thousands) Company name Gross non- Net non- % Change Degree of performing performing on 2005 coverage loans loans 1 Banca popolare dell Emilia Romagna s.c. 299, , Banca popolare di Ravenna s.p.a. 20,469 5, Banca popolare di Lanciano e Sulmona s.p.a. 37,520 12, CARISPAQ Cassa di risparmio della provincia dell Aquila s.p.a. 42,962 14, Banca popolare del Materano s.p.a. 29,040 5, Banca CRV Cassa di Risparmio di Vignola s.p.a. 26,068 6, Banca popolare di Crotone s.p.a. 31,638 7, Banca popolare dell Emilia Romagna (Europe) International s.a Banca popolare di Aprilia s.p.a. 7,776 1, Banca della Campania s.p.a. 89,580 29, Banca di Sassari s.p.a. 58,346 18, Banco di Sardegna s.p.a. 727, , Eurobanca del Trentino s.p.a Total banks 1,370, , Other companies 41,905 16, Total 1,412, ,

34 Shareholders' equity and Net income 238 directors report on operations Company name Shareholder s' equity % Change on 2005 Net income (in thousands) % Change on Banca popolare dell Emilia Romagna s.c. 2,312, , Banca popolare di Ravenna s.p.a. 196, , Banca popolare di Lanciano e Sulmona s.p.a. 178, , CARISPAQ Cassa di risparmio della provincia dell Aquila s.p.a. 173, , Banca popolare del Materano s.p.a. 101, , Banca CRV Cassa di Risparmio di Vignola s.p.a. 124, , Banca popolare di Crotone s.p.a. 144, , Banca popolare dell Emilia Romagna (Europe) International s.a. 38, , Banca popolare di Aprilia s.p.a. 78, , Banca della Campania s.p.a. 376, , Banca di Sassari s.p.a. 170, , Banco di Sardegna s.p.a. 969, , Eurobanca del Trentino s.p.a. 30, (1,402) - Total banks 4,897, , Other companies and consolidation adjustments (1,406,473) (83,485) Total 3,491, ,

35 Number of employees and branches Company name Employees Branches Banca popolare dell Emilia Romagna s.c. 3,708 3, Banca popolare di Ravenna s.p.a Banca popolare di Lanciano e Sulmona s.p.a CARISPAQ Cassa di Risparmio della provincia dell Aquila s.p.a Banca popolare del Materano s.p.a Banca CRV Cassa di Risparmio di Vignola s.p.a Banca popolare di Crotone s.p.a Banca popolare dell Emilia Romagna (Europe) International s.a Banca popolare di Aprilia s.p.a Banca della Campania s.p.a. 1,138 1, Banco di Sardegna s.p.a. 2,693 2, Banca di Sassari s.p.a Eurobanca del Trentino s.p.a Total banks 10,957 10,692 1,181 1,140 Non-banking companies Total 11,206 11, directors report on operations

36

37 Consolidated financial 241 consolidated financial The have been translated from those issues in Italy, from the Italian into English language solely for the convenience of international readers. The are the english translations of the italian prepared for and used in Italy. The consolidated financial were prepared using International Financial Reporting Standards (IAS/IFRS); therefore they are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices other than IAS/IFRS.

38 242 consolidated financial Consolidated balance sheet at 31 December 2006 Assets (in thousands) Cash and balances 370, , Financial assets held for trading 4,373,934 4,284, Financial assets at fair value 1,316,622 1,825, Financial assets available for sale 1,432,489 1,657, Due from banks 3,900,048 2,038, Due from customers 31,274,014 30,626, Equity investments 245,323 90, Property, plant and equipment 918, , Intangible assets 253, ,114 - of which: goodwill 240, , Tax assets 445, ,928 a) current 231, ,808 b) deferred 214, , Non-current assets and disposal groups held for sale 13, Other assets 712, ,036 Total assets 45,257,632 43,323,979 Equity and liabilities Due to banks 1,729,437 2,490, Due to customers 25,482,850 23,984, Debt securities in issue 10,504,892 9,791, Financial liabilities held for trading 199, , Financial liabilities at fair value 1,377,862 1,429, Tax liabilities 375, ,564 a) current 299, ,155 b) deferred 75,792 75, Other liabilities 1,151,227 1,442, Provision for termination indemnities 271, , Provisions for risks and charges: 327, ,480 a) pensions and similar commitments 159, ,112 b) other provisions 168, , Revaluation reserves 448, , Equity instruments 24,121 30, Reserves 1,101, , Share premium reserve 317, , Share capital 749, , Treasury shares (34,829) (2,441) 210. Shareholders' equity pertaining to minority interests 885, , Net income (loss) for the year 346, ,333 Total equity and liabilities 45,257,632 43,323,979

39 Consolidated income statement at 31 December 2006 (in thousands) 243 consolidated financial Description Interest and similar income 1,967,213 1,662, Interest and similar expense (681,611) (550,927) 30. Net interest income 1,285,602 1,111, Commission income 501, , Commission expense (58,327) (53,375) 60. Net commission income 443, , Dividends and similar income 19,127 17, Net trading income (59,559) (51,258) 100. Gains/losses on disposal or repurchase of: 63,779 3,309 a) loans and advances b) financial assets available for sale 62,636 11,790 d) financial liabilities 1,089 (8,519) 110. Net change in value of financial assets and liabilities at fair value 16,016 43, Net interest and other banking income 1,768,369 1,607, Net impairment adjustments to: (129,201) (94,895) a) loans and advances (129,372) (94,085) b) financial assets available for sale (57) - d) other financial assets 228 (810) 140. Net income from financial activities 1,639,168 1,512, Administrative costs: (1,058,320) (1,033,573) a) payroll (653,197) (640,015) b) other administrative costs (405,123) (393,558) 190. Net allowances for risks and charges (39,618) (30,795) 200. Net adjustments to property, plant and equipment (38,874) (41,933) 210. Net adjustments to intangible assets (6,069) (6,967) 220. Other operating charges/income 161, , Operating costs (980,888) (956,359) 240. Share of results of subsidiaries and associates 22,652 12, Adjustments to goodwill (1,213) (998) 270. Gains (losses) on disposal of investments 2,289 2, Profit (loss) from current operations before tax 682, , Income taxes on current operations (265,614) (231,723) 300. Profit (loss) from current operations after tax 416, , Net income (loss) for the year 416, , Net income (loss) for the year pertaining to minority interests (69,563) (61,674) 340. Net income (loss) for the year attributable to the Parent Bank 346, ,333

40 244 consolidated financial Statement of changes in consolidated shareholders' equity Balance at Allocation of prior year results Changes during the year Equity at Balance at Changes in opening balances Net income (loss) for the year to Equity transactions Stock options Derivatives on treasury shares Change in equity instruments Changes in reserves Issue of new shares Purchase of treasury shares Extraordinary distribution of dividends Reserves Dividends and other allocations Group Minority interests Group Minority interests Group Minority interests Group Minority interests Group Minority interests Group Minority interests Group Minority interests Group Minority interests Share capital: 220, , , , (94,447) 11,748 8, , ,307 a) ordinary shares 220, , , , (94,447) 11, , ,307 b) other shares Share premium reserve 302, , , , (32,145) 120,863 3,424 (145) , ,990 Reserves: 1,013, ,612 (224,881) 853, , ,355 48,702 - (60,598) (27,993) , ,477 a) from earnings 950, ,612 (224,881) 790, , ,355 48,702 - (60,598) (27,993) , ,477 b) other 62, , ,935 - Valuation reserves: 183,199 47,693 84, ,465 71, ,395 19, ,860 90,346 a) available for sale ,889 61,266 23, , ,739 23,212 b) cash flow hedges c) special revaluation laws 183,199 47, ,199 47, ,922 19, ,121 67,134 Equity instruments ,284 47,230 4, (154) (16,630) ,634 3,927 Treasury shares - - (1,239) (1,239) (28) 7,035 (8,264) (6) (2,441) (34) Net income (loss) for the year 243,091 47, ,091 47,169 (143,355) (48,702) (98,203) ,333 61, ,333 61,674 Shareholders' equity 1,962, ,810 (89,947) 1,910, , (98,203) 97,858 (135,737) 123,016 11,580 (8,409) (6) ,333 61,674 2,299, ,687 Balance at Changes in Balance at Allocation of prior year results Changes during the year Equity at opening balances Equity transactions Net income (loss) for the year to Reserves Dividends and Changes in reserves Issue of new shares Purchase of treasury shares Extraordinary Derivatives on Stock Change in equity other allocations distribution of treasury shares options instruments dividends Group Minority interests Group Minority interests Group Minority interests Group Minority interests Group Minority interests Group Minority interests Group Minority interests Group Minority interests Share capital: 232, , , , (522) 516, , ,785 a) ordinary shares 232, , , , (522) 516, , ,785 b) other shares Share premium reserve 423, , , , (21,329) (101,320) - (5,168) , ,661 Reserves: 935, ,477 (12,898) 922, , ,542 38, ,996 (24,416) (62,778) ,101, ,188 a) from earnings 872, ,477 (12,898) 859, , ,542 38, ,996 (24,416) (62,778) ,101, ,188 b) other 62, , Valuation reserves: 402,860 90, ,860 90, ,382 7,765 (107,851) ,391 98,111 a) available for sale 128,739 23, ,739 23, ,821 9, ,560 32,467 b) special revaluation laws 274,121 67, ,121 67, ,561 (1,490) (107,851) ,831 65,644 Equity instruments 30,634 3,927-30,634 3, (6,378) ,121 4,062 Treasury shares (2,441) (34) - (2,441) (34) ,084 - (62,473) (34,829) (27) Net income (loss) for the year 276,333 61, ,333 61,674 (199,542) (38,127) (100,338) ,831 69, ,831 69,563 Shareholders' equity 2,299, ,687 (12,898) 2,286, , (99,677) 195,379 (38,501) 274,954 - (67,641) 6 - (6,378) ,831 69,563 2,952, ,343 The change in the opening balances at 1 January 2006 is fully explained in Part A.1, Section 5 of the. The changes in treasury shares held are fully described in Part B, Section 15 (Group equity) of the.

41 STATEMENT OF CONSOLIDATED CASH FLOWS Indirect method 245 Operating activities 2006 (in thousands) 2005 consolidated financial 1. Cash generated from operations 856, ,630 net income for the year 346, ,333 net gains/losses from financial assets held for trading and financial assets/liabilities at fair value (10,162) (17,813) gains/losses from hedging activities - - net adjustments due to impairment 129, ,378 net adjustments on property, plant and equipment and intangible assets 46,156 49,898 net provisions for risks and charges and other costs/revenues 78,891 74,111 net premiums not collected - - other insurance income/expense not collected - - unsettled taxes ,723 net adjustments to disposal groups, net of tax effect - - other adjustments Cash generated (absorbed) by financial assets (1,897,728) (3,452,746) financial assets held for trading (100,838) (1,152,725) financial assets at fair value 512,904 (165,197) financial assets available for sale 224,669 (196,352) loans and advances to customers (778,639) (3,551,048) loans and advances to banks: on demand (1,860,172) 1,559,895 loans and advances to banks: other loans - - other assets 104,348 52, Cash generated/absorbed by financial liabilities 1,176,024 2,572,081 deposits from banks: on demand deposits from banks: other deposits due to customers debt securities in issue financial liabilities held for trading financial liabilities at fair value other liabilities (760,681) 319, ,498,766 2,246, , ,731 81,610 (61,282) (55,445) 6,307 (301,792) (77,631) Net cash generated/absorbed by operating activities 135,263 8,965

42 Investing activities consolidated financial 1. Cash generated by 11,030 15,928 sale of equity investments 2 - dividends collected on equity investments - - sale of financial assets held to maturity - - sale of property, plant and equipment 11,028 15,928 sale of intangible assets - - sale of subsidiaries and lines of business Cash absorbed by (207,919) (69,497) purchase of equity investments (149,096) (20) purchase of financial assets held to maturity - - purchase of property, plant and equipment (51,264) (67,455) purchase of intangible assets (7,559) (2,022) purchase of lines of business - - Net cash generated/absorbed by investing activities (196,889) (53,569) Funding activities issue/purchase of treasury shares (7,655) 76,161 issue/purchase of equity instruments - - dividends distributed and other allocations 99,677 (24,388) Net cash generated/absorbed by funding activities 92,022 51,773 Net cash generated/absorbed in the year 30,396 7,169 RECONCILIATION Line items Cash and balances with central banks at beginning of year Total net cash generated/absorbed in the year Cash and balances with central banks: effect of change in exchange rates Cash and balances with central banks at end of year 340, ,268 30,396 7, , ,437

43 EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 247 part A Part A Accounting policies 249 Part B Consolidated balance sheet 275 Part C Consolidated income statement 327 Part D Segment information 347 Part E Information on risks and related hedging policy 351 Part F Information on consolidated equity 403 Part G Business combinations 409 Part H Related-party transactions 413 Part I Equity-based payments 415 Key to abbreviations in tables: FV: fair value FV*: fair value excluding variations due to changes in the credit worthiness of the issuer since the issue date VN: nominal or notional value Q: listed NQ: unlisted

44

45 Part A - ACCOUNTING POLICIES 249 part A

46 250 part A A.1 - GENERAL INFORMATION Section 1 Declaration of compliance with International Financial Reporting Standards The financial at 31 December 2006 have been prepared in accordance with the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Commission pursuant to EC Regulation 1606 of 19 July In this regard, IFRS 7 Financial Instruments: Disclosures has recently been endorsed (EC Regulation 108/2006) and will come into force from Reference was also made, where necessary, to the following sources for interpretations: - Framework for the Preparation and Presentation of Financial Statements issued by the IASB; - Implementation Guidance, Basis for Conclusions and other documents for the interpretation of IAS/IFRS adopted by the IASB or the IFRIC (International Financial Reporting Interpretations Committee); - documents prepared by the Italian Accounting Body (OIC) and the Italian Banking Association (ABI). Lastly, with regard to the schedules and technical formats adopted, the financial have been prepared in accordance with Bank of Italy Circular 262/2005 and the related transitional guidelines dated 22 December 2005 and published in Italian Official Gazette 11 on 14 January Section 2 Basis of preparation The 2006 have been prepared in accordance with Bank of Italy Circular 262/2005 and the related transitional guidelines issued on 22 December 2005, and in compliance with Consob resolution of 14 May 1999 and subsequent amendments in accordance with Decree 310 dated 28 December 2004, as well as with the enabling regulations for art. 9 of Decree 38/2005. The consist of the balance sheet, the income statement, the statement of changes in shareholders' equity, the statement of cash flows and these. Amounts are presented in thousands of euro. They are accompanied by the directors' report on operations. The general criteria underlying the preparation of the financial are presented below in accordance with IAS 1: Going Concern: assets, liabilities and off balance sheet transactions are measured in the context of continuity over time. Accrual Basis of Accounting: costs and revenues are recognised in accordance with the matching principle, regardless of when they are settled. Consistency of Presentation: the presentation and classification of items is maintained over time to ensure that information is comparable, unless specified otherwise in new

47 accounting standards or their interpretations, or unless a change is required to improve the meaningfulness and reliability of the amounts reported. The nature of changes in account presentation or classification is described, together with the related reasons; where possible, the new criterion is applied on a retroactive basis. Materiality and Aggregation: each material class of similar items is presented separately in the financial. Items that are dissimilar in terms of their nature or use are only aggregated if they are individually immaterial. Offsetting: assets and liabilities, income and expenses are not offset unless required or permitted by a standard or an interpretation, or by the Bank of Italy's regulations for the preparation of financial. Comparative Information: comparative information is disclosed in respect of the previous period for all amounts reported in the financial, unless required otherwise by a standard or an interpretation. The notes and attachments also provide additional information deemed useful for the provision of a complete, true and fair view of the Group, even if such information is not expressly required by the regulations. 251 part A The do not distinguish between the banking group and other firms, even those this is required by the regulations, since the amounts relating to the latter aggregate are totally immaterial. No insurance companies are included within the scope of consolidation.

48 252 part A Section 3 Scope of consolidation and methodology 1. Investments in subsidiaries and companies under joint control (consolidated on a proportional basis) Name of company Head office Type of relationship Nature of holding Parent company % held Voting rights A. Companies included in consolidation A.1 Companies consolidated line-by-line 1. Banca popolare di Ravenna s.p.a. Ravenna 1 B.P.E.R Banca pop. di Lanciano e S. s.p.a. Lanciano 1 B.P.E.R Finbanche Banca popolare del Materano s.p.a. Matera 1 B.P.E.R Banca CRV s.p.a. Vignola 1 B.P.E.R Banca popolare di Crotone s.p.a. Crotone 1 B.P.E.R Banca popolare di Aprilia s.p.a. Aprilia 1 B.P.E.R Carispaq s.p.a. L Aquila 1 Finbanche Banca della Campania s.p.a. Naples 1 B.P.E.R Banco di Sardegna s.p.a. Cagliari 1 B.P.E.R. 47, Banca di Sassari s.p.a. Sassari 1 B. Sard B.P.E.R. 10, Eurobanca del Trentino s.p.a. Trento 3 B.P.E.R Banca pop. Em. Rom (Europe) Int. s.a. Luxembourg 1 B.P.E.R B.P.R Finbanche d Abruzzo s.p.a. L Aquila 1 B.P.E.R Em.Ro. popolare s.p.a. Modena 1 B.P.E.R B. Sard B.P.L.S B.P.R B.d.C Carispaq CRV B.P.M B.P.K B.P.A EMRO Finance Ireland ltd. Dublin 1 B.P.E.R Nadia s.p.a. Modena 1 B.P.E.R Metelliana s.p.a. Cava dei Tirreni 1 B.P.E.R Sardaleasing s.p.a. Sassari 1 B. Sard Em.Ro Optima s.p.a. S.G.R. Milan 1 Em.Ro B. Sard B.P.R B.d.C Carispaq B.P.M B.P.K B.P.L.S B.P.A CRV Tholos s.p.a. Sassari 1 B. Sard Numera s.p.a. Sassari 1 B. Sard EM.RO Immobiliare s.p.a. Modena 1 B.P.E.R Mutina s.r.l. Modena 1 Em.Ro Nettuno Gestione Crediti s.p.a. Bologna 1 B.P.E.R Em.Ro Modena Terminal s.r.l. Campogalliano 1 B.P.E.R EM.RO Imm Forum Guido Monzani s.r.l. Modena 1 B.P.E.R Em.Ro BPER Int. Advisory Company s.a. Luxembourg 1 B.P.E.R B.P.E.R.E ABF FACTORING s.p.a. Milan 1 B.P.E.R ABF Leasing s.p.a. Milan 1 B.P.E.R A.2 Companies consolidated on a proportional basis Key (1) Type of relationship: 1 majority of votes at the ordinary shareholders' meeting 2 dominant influence at ordinary shareholders' meeting 3 agreements with other shareholders 4 other forms of control 5 co-ordinated control under art of the Decree 87/92 6 co-ordinated control under art of the Decree 87/92 7 joint control (2) Voting rights at ordinary shareholders' meeting, distinguishing between actual and potential

49 2. Other information Consolidation principles The principles adopted for preparing the are as follows: - on first-time consolidation, the carrying value of the investments in companies consolidated on a line-by-line or proportional basis is eliminated against the shareholders' equity in these companies (or the portion of shareholders' equity that the equity investments concerned represent). The acquisition of interests in companies is recorded using the purchase method defined in IFRS 3, with the recognition of the assets, liabilities and contingent liabilities of purchased companies at their fair value at the time of acquisition, i.e. at the time that effective control over them is obtained. Accordingly, the results of a subsidiary purchased during the year are consolidated from the date of acquisition. Similarly, the results of a subsidiary that is sold are consolidated until the date that control is lost; - any excess of the carrying value of the equity investments referred to above with respect to the interest held in their shareholders' equity, as adjusted to reflect the fair value of assets and liabilities, is classified as goodwill among Intangible assets, while any shortfall is credited to the income statement; 253 part A - purchases of additional interests subsequent to the acquisition of control are not specifically dealt with by IFRS3; in accordance with best practice, any positive or negative differences determined on the above basis that arise in relation to subsequent purchases are recognised as a direct adjustment of equity; - the fairness of the value recorded for goodwill is tested each year (or whenever there is evidence of impairment). The cash-generating unit to which the goodwill was allocated is identified for this purpose. Write-downs reflect the difference between the book value of goodwill and its recoverable value, if lower, as represented by the fair value of the cash generating unit, net of selling costs, or, if higher, its value in use. Any adjustments are recorded in the income statement; - assets, liabilities and equity and income statement items are combined on a line-byline basis; - significant debit and credit balances, off-balance sheet transactions and income and costs arising from transactions between consolidated companies are eliminated; - the shareholders' equity and net income for the year attributable to minority interests in the consolidated companies are classified separately in the balance sheet (as a liability) and the income statement; - the financial used for the line-by-line consolidation are those prepared and approved by the individual companies, as adjusted where necessary for consistency with the international accounting standards adopted for the preparation of the ;

50 254 part A - the book value of significant equity investments held by the parent bank or by other group companies is compared with the related interest in the shareholders' equity of these associated companies carried at equity. Any excess book value - identified on initial consolidation - is included in the carrying value of the investment. Changes in shareholders' equity subsequent to first-time consolidation are classified in caption 240 of the consolidated income statement as " Share of results of subsidiaries and associates ", to the extent that they relate to their net income or losses, while other changes are recognised as a direct adjustment of shareholders' equity; - if there is evidence that the value of a significant investment may be impaired, its recoverable amount is estimated with reference to the present value of future cash flows, including the expected proceeds from the future sale of the investment. If the recoverable amount is lower than the carrying amount, the related difference is charged to the income statement; - investments in associated companies were consolidated with reference to their financial as of 31 December 2006, where available; otherwise, as described in the section on equity investments in Part B of these, reference was made to their latest approved financial as of 31 December No re were made when companies did not adopt IAS/IFRS for the preparation of their financial, by choice and/or due to regulatory requirements, if the effect would have been insignificant in relation to the consolidated results.

51 Section 4 Subsequent events These draft financial were approved on 2 April 2007 by the Board of Directors of the Bank, which also authorised their publication via Borsa Italiana. Reference is made to the detailed information provided in the Significant events and forecast for operations section of the directors' report on operations attached to the individual financial. 255 part A Section 5 Other aspects Changes in accounting policy, accounting estimates and errors a) Pension fund - section B The accounting treatment of the pension fund, applied on FTA and in 2005, was reviewed by the Parent Bank during the year. This fund, which provides for regular pension payments and early death cover, is defined as a "defined contributions" plan for legal and regulatory purposes. On the first-time adoption of IFRS, this fund was treated as a "defined benefits" plan from a strictly accounting standpoint, based on a strict interpretation of IAS 19 that made reference to the early death cover mentioned above. The fund was valued in accordance with IAS 19. An analysis of the actual obligations and risks borne by the Parent Bank has since been carried out and the Fund regulations regarding the above cover have been clarified, with agreement from the Unions. As a consequence, the accounting treatment of the fund has been revised to reflect its real legal and regulatory form, which no longer falls within the scope of IAS 19 for defined benefit plans. Just the early death cover has been valued on an actuarial basis, in accordance with the requirements of IAS 19 for defined benefit plans. Accordingly, the value of the fund in prior years has been redetermined in order to reflect the effects of this more accurate interpretation of its nature. The adverse effect on equity, totalling 11,986 thousand, is reported in the changes in opening balances column of the Statement of changes in shareholders' equity, since the impact on prior years was not particularly significant. For the sake of completeness, the above impact is analysed below: - FTA 1/1/2004: - reduction in equity by 5,463 thousand; financial year: - reduction in equity by 549 thousand; - increase in net income by 876 thousand; financial year: - reduction in equity by 8,205 thousand; - increase in net income by 1,349 thousand.

52 256 part A b) Purchase of additional equity investments when control is already exercised IFRS3, which relates to transactions involving the acquisition of control, does not specifically cover the purchase of additional equity interests when control is already exercised. In the absence of IAS/IFRS governing a particular accounting situation, IAS 8 requires management to use its technical discretion to determine and apply a relevant and reliable accounting treatment. Accordingly, the Parent Bank has taken account of authoritative interpretations and other accounting practices which, in the above circumstances, treat the difference between purchase cost and the minority interests acquired as goodwill (theory of the parent company ) or, alternatively, allocate that difference to the Group's interest in shareholders' equity (theory of the economic entity ). On FTA and preparation of the as of 31 December 2005, the Parent Bank opted to apply the parent company approach, recognising goodwill totalling Euro 40,477 thousand, of which Euro 11,928 thousand related to purchases made in 2004 and Euro 28,549 thousand related to purchases made in On preparation of the as of 31 December 2006, the Parent Bank decided that adoption of the economic entity approach would be more appropriate. As a result, pursuant to IAS 8, the as of 31 December 2005, presented for comparative purposes, have been modified and the statement of changes in shareholders' equity for 2005 highlights the effects on equity that would have been reported had this new approach always been applied. Audit The have been audited, as required by Decree 58 of 24 February 1998, by Deloitte & Touche S.p.A. which was appointed for the three-year term at the Shareholders' Meeting held on 14 May 2005.

53 A.2 MAIN LINE ITEMS IN THE FINANCIAL STATEMENTS 1 - Financial assets held for trading Initial recognition Financial assets represented by debt or equity instruments are initially recognised on the settlement date, while derivative contracts are recognised on the date of signature. In particular, any changes in the fair value of the asset to be received between the settlement date and the earlier arrangement date are recognised at the time of settlement, in the same way in which the asset acquired is recorded. After initial recognition, financial assets held for trading are measured at their fair value; unless stated otherwise, this is represented by the consideration paid for the transaction, without considering any related costs or income attributable to them, which are recorded directly in the income statement. Implicit derivatives (instruments whose characteristics satisfy the definition of a "derivative") embedded in but not closely correlated with hybrid financial instruments, and classified in financial asset or liability categories other than assets or liabilities measured at fair value, are separated from the host contract, reclassified to this category and measured at fair value. The related host contract is measured on the basis applicable to the category in which it is classified. Classification The Group classifies as financial assets held for trading those financial instruments that are held with a view to generating short-term profits deriving from variations in their prices. This category includes the derivative instruments that are not held for hedging purposes. 257 part A Measurement After initial recognition, financial assets held for trading are measured at their fair value. If the fair value of a financial asset becomes negative, it is accounted for as a financial liability. The fair value of financial instruments listed on an active market is determined with reference to market prices (bid prices or, if unavailable, average prices). In the absence of an active market, fair value is determined using assessment methodologies and models that, drawing on market information, take account of all the risk factors affecting the instruments concerned. The following principal methods are used: measurement of listed instruments with similar characteristics; calculation of discounted cash flows; models for the determination of option prices; amounts resulting from recent comparable transactions. As an exception, if the fair value of equity instruments and the related derivatives cannot be reliably determined using the above guidelines, they are valued at cost. Derecognition Financial assets are derecognised on expiry of the contractual rights over the related cash flows or when the financial asset is sold with the transfer of essentially all the related risks and benefits. If the Group sells a financial asset classified in its own trading portfolio, it derecognises the asset on the date it is transferred (the settlement date).

54 258 part A Securities received as part of a transaction that contractually provides for their subsequent sale and securities delivered as part of a transaction that contractually provides for their repurchase are not recorded or eliminated from the financial. Recognition of components affecting the income statement The positive elements of income comprising interest on securities and similar revenues, as well as the differentials and margins from derivative contracts classified as financial assets held for trading, but operationally linked with the financial assets and liabilities measured at fair value (under the fair value option), are recorded in the interest captions of the income statement on an accruals basis. The differentials and margins from other derivative contracts classified in the trading portfolio are recorded as Net trading income. Gains and losses realized on sale or redemption and unrealised gains and losses deriving from changes in the fair value of the trading portfolio are classified as "Net trading income", except for amounts relating to derivative contracts that are operationally linked to assets or liabilities measured at fair value, which are classified as "Net change in value of financial assets and liabilities at fair value". 2 - Financial assets available for sale Initial recognition Financial assets represented by debt or equity instruments are initially recognised on the settlement date, while loans are recognised on the payout date. Financial assets available for sale are initially recorded at fair value; unless stated otherwise, this is represented by the consideration paid for the transaction, including any directlyattributable transaction costs or income. Assets reclassified from "Financial assets held to maturity" are recognised at their fair value at the time of transfer. Classification This category comprises the financial assets, other than derivatives, that have not been classified as held for trading and do not represent interests in subsidiaries, companies under joint control or associates. Measurement Subsequent to initial recognition, assets available for sale continue to be measured at their fair value. As an exception, if the fair value of equity instruments cannot be determined reliably, they are valued at cost. An impairment test is performed at each reporting date to check if there is any objective evidence of a reduction in value. If subsequently the reasons for impairment cease to apply, the amounts concerned are written back without causing the value of the asset to exceed the amortised cost that would have been reported in the absence of earlier adjustments. Derecognition Financial assets are derecognised on expiry of the contractual rights over the related cash flows or when the financial asset is sold with the transfer of essentially all the related risks and benefits.

55 Recognition of components affecting the income statement The return on financial instruments, determined using the effective interest method ( amortised cost basis), is recognised as income on an accruals basis, while gains or losses deriving from changed in fair value are recorded in a specific Equity Reserve until the financial asset is derecognised or a loss in value is recorded. On derecognition or when a loss in value is recorded, the accumulated gains or losses are released to the income statement as, respectively, Gains/losses on disposal or repurchase or Net impairment adjustments, which an adjustment to the specific reserve. If the reasons for recognising a reduction in value cease to apply as a result of subsequent events, the amounts concerned are written back to the income statement, if they relate to loans or debt securities, and to shareholders' equity if equity instruments are concerned. 259 part A 3 - Financial assets held to maturity Introduction The Group did not hold any financial assets of this type at year end. Initial recognition Financial assets are initially recognised on the settlement date. At the time of initial recognition, the financial assets classified in this category are recorded at their fair value, including any directly-attributable costs and revenues. If transferred to this category from Assets available for sale, the fair value of the financial assets at the time of transfer is taken to be their new amortised cost. Classification This category is used to record the debt instruments with payments that are fixed or determinable at fixed intervals which the Group intends and is able to retain until they mature. Investments are reclassified as financial assets held for sale if the intention or ability to retain them changes and it is no longer appropriate to classify them in this category. Measurement Subsequent to initial recognition, financial assets held to maturity are measured at amortised cost. An impairment test is performed at each reporting date to check if there is any objective evidence of a reduction in value. In the event of impairment, the amount of the loss is measured as the difference between the book value of the assets and the present value of the estimated recoverable cash flows, discounted using the original effective interest rate.. If the reasons for recognising a reduction in value cease to apply as a result of subsequent events, the amounts concerned are written back. Derecognition Financial assets are derecognised on expiry of the contractual rights over the related financial flows or when the financial asset is sold with the transfer of essentially all the related risks and benefits of ownership. Recognition of components affecting the income statement

56 260 part A The positive elements of income comprising interest and similar revenues are recorded in the interest captions of the income statement, on an accruals basis, using the effective interest method. Gains and losses on assets held to maturity are recorded in the income statement when the assets are derecognised or suffer a loss in value. Any write-downs in value are charged to the net impairment adjustments caption of the income statement. If the reasons for recognising a reduction in value cease to apply as a result of subsequent events, the amounts concerned are written back to the income statement. 4 Loans Initial recognition Loans are initially recognised on the payout date or, in the case of debt securities, on the settlement date, with reference to the fair value of the financial instrument concerned. This is represented by the amount paid out, or the subscription price, including costs/revenues that are both directly attributable to the individual loans and identifiable from the start of the transaction, even if they are settled at a later time. Costs with the above characteristics are excluded if they are reimbursable by the borrower or represent routine internal administrative costs. The fair value of any lending transactions not arranged on market terms is determined using specific valuation techniques; the difference with respect to the amount paid out or the subscription price is recorded directly in the income statement. Agreements involving the forward repurchase or resale of securities are recorded in the financial as funding or lending transactions. In particular, spot sales with forward repurchases are recorded as a payable for the spot amount collected, while spot purchases with forward resales are recorded as a loan for the spot amount paid. Classification Loans form part of the broadest category of financial instruments and consist of relationships under which the Group has a right to the cash flows deriving from the loan. This caption includes loans to customers and deposits with banks, either made directly or acquired from third parties and not listed on active markets, which involve payments that are either fixed or determinable. The loans caption also includes trade receivables, repurchase agreements and securities subscribed for at the time of issue or private placement and not listed on active markets, with payments that are fixed or determinable. This caption also includes the junior securities deriving from securitisations, which were previously classified in the investment securities portfolio.

57 Measurement After initial recognition, loans are valued at their amortised cost, corresponding to the initially recognised amount less principal repayments, net impairment adjustments and amortisation - calculated using the effective interest method - of the difference between the amount paid out and the amount repayable on maturity, which is generally attributable to the costs/income directly allocated to the individual loans. The effective interest rate is the rate that discounts the flow of estimated payments over the expected duration of the loan back to its initial net book value, inclusive of directly-related costs and revenues. In financial terms, this method of recognition distributes the economic effect of these costs and revenues over the expected residual life of the loan. The amortised cost method is not used in relation to short-term loans (12 months), since the effect of discounting would be negligible. These loans are stated at historical cost. Costs and revenues relating to loans without a fixed term or repayable on demand are recorded directly in the income statement. 261 part A Loans are assessed at the end of each accounting period to identify any objective evidence, arising from events subsequent to initial recognition, that their value may be impaired. This includes positions classified as non-performing, watchlist or restructured loans in compliance with current Bank of Italy regulations, which are consistent with IAS. These impaired (defaulting or non performing) loans are assessed in detail and the adjustment made to each position represents the difference between their book value at the time of measurement (amortised cost) and the present value of expected cash flows, discounted using the original effective interest rate. Expected cash flows take account of the likely recovery period, the estimated realisable value of any guarantees obtained and the probable costs to be incurred to recover the outstanding loan. Cash flows relating to loans which are expected to be recoverable over the short term (12 months) are not discounted. The original effective rate for each loan is not altered, even if the position is restructured with a change in the contractual rate or if, in practical terms, the position ceases to earn contractual interest. The adjustments are recorded in the income statement. The original value of loans is reinstated in subsequent periods, to the extent that the reasons for the adjustments made cease to apply, on condition that this assessment is objectively linked with events that took place subsequent such adjustments. The reversal of the impairment loss may not exceed the amortised cost of the loan had the impairment not been recognised in the past. Individual loans not showing objective evidence of impairment being, normally, performing loans and unsecured loans to parties resident in Countries at risk, are assessed on an overall basis to estimate the level of inherent lending risk. This approach is also applied to positions that are past due or overdrawn for more than 180 days which, although identified by the regulations as impaired loans, are adequately covered by an overall writedown. Such writedown is determined using the impairment methodology applied to performing loans, with a suitable percentage deduction given recognition of the higher level of risk involved. This measurement is made for each category of loans deemed similar in terms of lending risk. The related percentage writedowns are estimated with reference to historical information and data available at the time of measurement, in order to determine the value

58 262 part A of the inherent loss associated with each category. Measurement also takes account of the risk associated with the country in which the counterpart is resident. Any additional write-downs or write-backs are determined separately at the end of each reporting period, with reference to the entire portfolio of performing loans at that time. Derecognition Loans sold are only derecognised if the disposal involved the transfer of essentially all the risks and benefits associated with the loan. Conversely, if the risks and benefits relating to loans that have been sold are retained, these continue to be reported as assets in the balance sheet, even if legal ownership of the loans has been effectively transferred. Even if the transfer of essentially all the risks and benefits cannot be demonstrated, loans are derecognised if no form of control over them has been retained. By contrast, the partial or total retention of such control means that the related loans are reported in the balance sheet to the extent of the residual involvement, as measured by the exposure to changes in the value of the loans sold and to changes in their cash flows. Lastly, loans sold are derecognised, despite retention of the contractual rights to collect the related cash flows, if there is a parallel commitment to pay all such flows and only these to third parties. Recognition of components affecting the income statement The positive elements of income comprising interest and similar revenues are recorded in the interest captions of the income statement, on an accruals basis, using the effective interest method. The costs/revenues attributable to short-term loans, as defined above, are recorded directly in the income statement. Write-downs and any write-backs are recorded in the Net impairment adjustments caption of the income statement. Profits and losses from the sale of loans are classified in the profit/loss on disposal or repurchase of loans and advances caption. 5 - Financial assets at fair value Initial recognition These financial assets are initially recognised on the settlement date. On initial recognition, these financial assets are recorded at their fair value, as represented - unless specified differently - by the consideration paid for the transaction without considering the costs or revenues attributable to the instrument, which are recorded directly in the income statement. Classification Financial assets at fair value include the financial assets, not held for trading, that meet at least one of the following criteria: - classification in this category eliminates accounting asymmetries ; - they are part of groups of assets managed together whose performance is measured at fair value, as part of a documented risk-management strategy; - they contain separable embedded derivatives.

59 Measurement Subsequent to initial recognition, these financial assets are measured at fair value. The fair value of financial instruments listed on an active market is determined using market prices (bid prices or, where unavailable, average prices). In the absence of an active market, fair value is determined using assessment methodologies and models that, drawing on market information, take account of all the risk factors affecting the instruments concerned. The following principal methods are used: measurement of listed instruments with similar characteristics; calculation of discounted cash flows; models for the determination of option prices; amounts resulting from recent comparable transactions. 263 part A Derecognition Financial assets are derecognised on expiry of the contractual rights over the related cash flows or when the financial asset is sold with the transfer of essentially all the related risks and benefits. If the Group sells a financial asset at fair value, it derecognises the asset on the date it is transferred (the settlement date). Securities received as part of a transaction that contractually provides for their subsequent sale and securities delivered as part of a transaction that contractually provides for their repurchase are not recorded or eliminated from the financial. Recognition of components affecting the income statement The positive elements of income represented by interest income are recorded in the interest captions of the income statement on an accruals basis. Gains and losses realized on sale or redemption and unrealized gains and losses deriving from changes in the fair value of the portfolio are classified in the "Net change in value of financial assets and liabilities at fair value" caption. 6 - Hedging transactions Introduction There were no outstanding hedging transactions at year end. Initial recognition There are two types of hedge: fair value hedges: arranged to hedge the exposure to changes in the fair value of a balance sheet item attributable to a given type of risk; cash flow hedges: arranged to hedge the exposure to changes in future cash flows attributable to specific types of risk associated with balance sheet items. Classification Based on specific strategies and policies for the management of risk, the Group may arrange hedges for specific balance sheet items (micro-hedging) in order to reduce the exposure to fluctuations in their fair value generated by a specific risk factor (fair value hedges). Financial instruments are designated as hedges when the relationship between the hedged and the hedging instrument is adequately documented and formalised, if the hedge is effective both at the start and prospectively throughout its life.

60 264 part A Measurement Hedging derivatives are measured at their fair value. Specific tests are performed to verify the effectiveness of hedging transactions. The effectiveness of a hedge depends on the extent to which changes in the fair value of the hedged instrument, caused by changes in the risk factor addressed by the hedge, are offset by changes in the value of the hedging instrument. Effectiveness is established when changes in the fair value of the hedging instrument, caused by the hedged risk factor, almost entirely offset those of the hedged instrument (the percentage limits fall in the range from 80% to 125%). Effectiveness is checked each month for operational purposes and on every official reporting date for accounting purposes, using: prospective tests that justify the application of hedge accounting, by demonstrating the expected effectiveness of the hedge; retrospective tests (fair value hedges) that show the effectiveness of the hedge during the period under review. In other words, these tests measure by how much the actual results differ from the "perfect" hedge. retrospective tests (cash flow hedges) that check the existence of the hedged liabilities, the hedging instruments used and the absence of adverse changes in the credit worthiness of the counterparts linked with the hedging derivatives. Derecognition If transactions do not meet the effectiveness test, hedge accounting - as described above - is terminated and the derivative contract is reclassified as an instrument held for trading. Only instruments involving third parties are classifiable as hedges; all other situations arising from transactions between Group companies are eliminated from the financial. Recognition of components affecting the income statement Income elements are allocated to the relevant income statement captions on the following basis: differentials earned on derivatives that hedge interest-rate risk (and the interest on the hedged positions) are allocated to the interest income and similar revenues or interest expense and similar charges captions; gains and losses deriving from the measurement of hedging instruments and the positions covered by fair value hedges are allocated to the net results of hedging activities caption; gains and losses deriving from measurement of the effective part of cash flow hedges are allocated to a special equity reserve cash flow hedges, net of the related deferred tax effect. Gains and losses relating to the ineffective part of such hedges are recorded in the net results of hedging activities caption of the income statement. 7 - Equity investments Initial recognition Equity investments are recognised on the settlement date. Equity investments are recorded at cost on initial recognition, including any costs and revenues directly attributable to the transaction.

61 Classification This caption comprises both controlling equity interests, where not consolidated on a proportional basis, and interests in associates over which significant influence is exercised. In addition to companies in which the equity interest equals or exceeds 20% (or an equivalent share of the voting rights), equity investments also include interests in companies subject to significant influence as a result of contractual ties, such as the membership of shareholders' syndicates, and those under joint control as a result of contractual, shareholder or other agreements for the joint management of the business and the appointment of directors. 265 part A Measurement Equity investments are carried at equity. If there is evidence that an investment in an associate may be impaired, its recoverable amount is estimated with reference to the present value of future cash flows, including the expected proceeds from the future sale of the investment. If the recoverable amount is lower than the carrying amount, the related difference is charged to the income statement. If the reasons for such impairment cease to apply as a result of an event subsequent to the write-down, the related write-back is credited to the income statement without exceeding the amount of the write-down previously recorded. Derecognition Equity investments are derecognised on expiry of the contractual rights over the related cash flows or when the investment is sold with the transfer of essentially all the related risks and benefits of ownership. Recognition of components affecting the income statement Changes in shareholders' equity subsequent to initial recognition are reflected in the income statement and/or in shareholders' equity, depending on the nature of the events that caused them. Any write-downs/write-backs relating to the impairment of equity investments and gains or losses on the disposal of equity investments are recorded in the Share of results of subsidiaries and associates caption. 8 - Property, plant and equipment Initial recognition Property, plant and equipment are initially recorded at purchase price, including all directly attributable costs of purchasing and bringing the asset to working condition. Expenditure on improvements that will generate future economic benefits is added to the value of the assets concerned, while routine maintenance costs are charged to the income statement. Classification Property, plant and equipment comprise land, property used for operating purposes, installations, furniture, furnishings and all types of equipment.

62 266 part A These are tangible assets that will be used for more than one accounting period and which are held for use in the production of business or the supply of goods and services, for rental to third parties or for administrative purposes. This caption also includes assets held under finance lease contracts, even though the lessor remains the legal owner. Measurement Property, plant and equipment, including investment property, are carried at cost less accumulated depreciation and any accumulated impairment losses. Property, plant and equipment are systematically depreciated over their useful lives, on a straight-line basis, except for: - land acquired separately or included in the value of property, since it has an indefinite useful life. The value of land included in property is only deemed to be separable from the value of stand-alone buildings; the allocation of value between land and buildings is based on independent appraisals; - works of art, since the useful life of a work of art cannot be estimated and its value normally appreciates over time. If there is any evidence at a reporting date that the value of an asset may be impaired, its carrying value is compared with its recoverable value, being its fair value net of any selling costs or its value in use, as represented by the present value of the cash flows generated by the asset, whichever is greater. Any adjustments are recorded in the income statement. If the reasons for recognising an impairment loss cease to apply, the loss can be written back but without exceeding the carrying value that the asset would have had (net of depreciation) if no impairment losses had been recognised in prior years. Derecognition Property, plant and equipment are derecognised on disposal, or when the assets concerned are permanently taken out of use and no further economic benefits are expected from their disposal. Recognition of components affecting the income statement Both the depreciation determined on a straight-line basis and any net impairment adjustments are recorded in the Net adjustments to property, plant and equipment caption of the income statement. Disposal gains and losses are however recorded in the "Gains (losses) on disposal of investments" caption. 9 - Intangible assets Initial recognition An intangible asset can be recognised as goodwill when the positive difference between the fair value of the net assets acquired and the acquisition cost of the equity investment (including related charges) represents its ability to earn income in the future (goodwill). If this difference is negative (badwill) or the goodwill is not justified by the acquired company's ability to earn income, the difference is recorded directly in the income statement. Other intangible assets are initially recognised at cost, as represented by the purchase price paid plus any directly-related costs incurred to obtain use of the assets concerned.

63 Classification Intangible assets are identifiable, non-monetary assets without physical form that are expected to generate economic benefits. The qualifying characteristics of intangible assets are: - identifiability; - control over the resources concerned; - expectation of economic benefits. In the absence of any one of the above characteristics, the acquisition or internal production costs are expensed in the year incurred. Goodwill is represented by the difference between the acquisition cost of an equity investment and the fair value, at the acquisition date, of the assets and other balance sheet items acquired. Other intangible assets are recognised if they are identifiable and reflect legal or contractual rights. 267 part A Measurement The cost of intangible assets is amortised on a straight-line basis over their useful lives. No amortisation is provided if intangible assets have an indefinite useful life, but periodic impairment tests of their carrying value are performed. An estimate of recoverable value is made if there is any evidence of asset impairment at the reporting date. The impairment loss, expensed to income, is the difference between the carrying value of an asset and its recoverable amount. The fair value of goodwill is subjected to an annual impairment test (more frequently if there is evidence of a loss of value). The cash-generating units to which the goodwill was allocated are identified for this purpose. The amount of any impairment loss is determined as the amount by which the goodwill's carrying value exceeds its recoverable amount. The recoverable amount is the higher of the cash-generating unit's fair value, net of any selling costs, or its related value in use. Derecognition Intangible assets are derecognised on retirement and when no further economic benefits are expected. Recognition of components affecting the income statement Both the amortisation charge and any net impairment adjustments to intangible assets other than goodwill are recorded in the Net adjustments to intangible assets caption of the income statement. Disposal gains and losses are however recorded in the "Gains (losses) on disposal of investments" caption. Adjustments to the value of goodwill are recorded in the Adjustments to goodwill caption Non-current assets held for sale and discontinued operations Classification and initial recognition The assets and liabilities of operations due to be sold are classified as non-current assets held for sale and discontinued operations.

64 268 Measurement These assets and liabilities are measured at the lower of their carrying value, determined in accordance with IFRS, or their fair value, net of selling costs. part A Recognition of components affecting the income statement Income and charges (net of tax effect) relating to discontinued operations are classified in the net profit/loss from non-current assets held for sale caption of the income statement Current and deferred taxation Classification Current taxes include advances paid (current assets) and amounts payable (current liabilities) in relation to income taxes for the year. Deferred taxes represent the income taxes recoverable in future periods as a result of deductible temporary differences (deferred tax assets), and the income taxes payable in future periods as a result of taxable temporary differences (deferred tax liabilities). Measurement The Group recognises the effects of current and deferred taxation by applying, respectively, the current tax rates and the theoretical tax rates in force when the related temporary differences reverse. The provision for tax liabilities also takes account any charges that might derive from assessments received or outstanding disputes with the tax authorities. Recognition of components affecting the income statement Changes in tax assets and liabilities are normally recorded in the income taxes on current operations caption. As an exception, those deriving from transactions recognised directly in equity are treated in the same way, and those deriving from business combinations are included in the calculation of goodwill Provisions for risks and charges Initial recognition The provisions for risks and charges cover liabilities whose timing and extent are uncertain, when all the following conditions are met: a current obligation exists at the balance sheet date, deriving from a past event; the origin of the obligation must either be legal (deriving from a contract, regulation or the provisions of law) or implicit (arising when the business causes third parties to expect that commitments will be met, even if these do not fall into the category of legal obligations); a financial outflow is likely; the extent of the obligation can be estimated reliably. Classification This caption includes the provisions relating to long-term benefits and post-employment benefits governed by IAS 19, discussed in point 18 below, and the provisions for risks and charges governed by IAS 37.

65 Measurement Where the time element is significant, the provisions are discounted using current "risk-free" market rates. Provisions are charged to the income statement. 269 Recognition of components affecting the income statement Provisions for risks and charges and the related write-backs, including the effects of the passage of time, are classified in the net provisions for risks and charges caption. part A 13 - Payables and debt securities in issue Initial recognition The initial recognition of these financial liabilities takes place on receipt of the amounts collected or on issue of the debt securities. These liabilities are initially recognised at their fair value, usually corresponding to the amount collected or the issue price, plus any additional costs/proceeds directly attributable to the individual funding transaction or issue that are not reimbursed by the creditor. This does not include internal administrative costs. The fair value of financial liabilities issued on below market terms is estimated and the difference with respect to their market value is recorded directly in the income statement. Structured instruments are considered to include compound debt instruments linked to equities, foreign currencies, credit instruments or indices. If such instruments are not classified as Financial liabilities at fair value, the embedded derivative is separated from the primary contract and represents a derivative in its own right, if the separation criteria are satisfied. The embedded derivative is recorded at its fair value, while the value of the primary contract represents the difference between the total amount collected and the fair value of the embedded derivative. The issue of instruments convertible into shares in the Bank involves the recognition, on the issue date, of both a financial liability and an equity element. In particular, the value of a financial liability with the same cash flows but without conversion rights is deducted from the overall value of the instrument. The residual value is then attributed to the equity element of the convertible bond. Classification Due to banks, Due to customers, and Securities in issue comprise the various forms of interbank and customer funding, as well as the funding obtained via the issue of certificates of deposit and bonds, net of any repurchases, that are not classified as Financial liabilities at fair value.

66 270 part A Measurement Following initial recognition, financial liabilities are valued at amortised cost. Current liabilities (within 12 months) are an exception, since the time factor is not significant. These are recorded at the amount collected and any related costs are charged to the income statement on a straight-line basis over the contractual duration of the liability. Any separated embedded derivatives are measured at fair value and the related changes are recorded in the income statement. Derecognition Financial liabilities are derecognised when they expire or are settled. The repurchase of securities issued in prior periods results in their derecognition. The difference between the carrying amount of the liability and the amount paid to settle it is recorded in the income statement. The renewed placement of treasury securities subsequent to their repurchase is deemed to represent a new issue, with the recognition of a new placement price, without any effect on the income statement. Recognition of components affecting the income statement The negative elements of income represented by interest and similar charges are recorded in the interest captions of the income statement on an accruals basis, using the effective interest method. Costs/revenues relating to short-term payables are recorded directly in the income statement. The difference between the book value of a liability and the amount paid to settle it is recorded in the Gains/losses on disposal or repurchase Financial liabilities held for trading Initial recognition The criteria applied for the recognition of financial assets held for trading (see Section 1 above) are adopted, with suitable modifications. Classification This caption includes the negative fair value adjustment of trading derivatives and the fair value of the liabilities deriving from technical shorts generated by trading in securities. Measurement The criteria applied for the measurement of financial assets held for trading (see Section 1 above) are adopted, with suitable modifications. Derecognition The criteria applied for the derecognition of financial assets held for trading (see Section 1 above) are adopted, with suitable modifications. Recognition of components affecting the income statement The criteria applied for the recognition of income components of financial assets held for trading (see Section 1 above) are adopted, with suitable modifications.

67 15 - Financial liabilities at fair value Initial recognition These liabilities are initially recognised at fair value, net of transaction costs or revenues. Classification This caption includes the financial liabilities to be measured at fair value through the income statement, if one of the following conditions are met: the fair value designation eliminates or reduces significant distortions in the accounting treatment of financial instruments; the management and/or measurement of a group of financial instruments at fair value through the income statement is consistent with a risk management or investment strategy adopted internally by the Bank and suitably documented in this regard; the instrument contains an embedded derivative that significantly modifies the cash flows of the host instrument and must be separated. Measurement Subsequent to initial recognition, financial liabilities are measured at fair value. The fair value of financial instruments listed on an active market is determined with reference to market prices. In the absence of an active market, fair value is determined using generally-accepted assessment methodologies and models that draw on such market information as: measurement of listed instruments with similar characteristics; calculation of discounted cash flows; models for the determination of option prices; amounts resulting from recent comparable transactions. 271 part A Derecognition Financial liabilities at fair value are derecognised when they expire or are settled. The repurchase of securities issued in prior periods results in their derecognition. The renewed placement of treasury securities subsequent to their repurchase is deemed to represent a new issue, with the recognition of a new placement price, without any effect on the income statement. Recognition of components affecting the income statement The negative elements of income represented by interest are recorded in the interest captions of the income statement on an accruals basis. The results of measurement are recorded in the Net change in value of financial assets and liabilities at fair value caption, together with the profits and losses arising on settlement, using the same criterion adopted in relation to securities issued Currency transactions Initial recognition On initial recognition, foreign currency transactions are recorded in the reporting currency, by translating the foreign currency amounts using the exchange rates prevailing on the transaction dates.

68 272 part A Measurement At each reporting date, the amounts originally denominated in a foreign currency are measured as follows: - monetary items are translated using the closing rate for the period; - non-monetary items carried at historical cost are translated using the exchange rate on the date of the transaction; - non-monetary items carried at fair value are translated using the closing rate for the period. Derecognition The criteria applying to the balance sheet captions concerned are used. The exchange rate applying on the settlement date is used. Recognition of components affecting the income statement Exchange differences deriving from the settlement of monetary items or from the translation of monetary items using rates other than the initial translation rate, or the closing rate at the end of prior periods, are recorded in the income statement for the period in which they arise. When gains or losses relating to a non-monetary item are recorded in shareholders' equity, the related exchange differences are also recorded in equity. Conversely, when gains or losses are recorded in the income statement, the related exchange differences are also recorded in the income statement Insurance assets and liabilities There were no outstanding hedging transactions at year end Other information Treasury shares Any treasury shares held are stated at purchase cost and classified, with negative sign, in the Treasury shares caption. Profits or losses deriving from their subsequent sale are recorded as changes in shareholders' equity in the "Share premium" caption. Leasehold improvements These costs have been classified as other assets, since they cannot be recorded as part of property, plant and equipment, as required by Bank of Italy instructions. The related amortisation is recorded in the other operating charges/income caption. Employee benefits Classification Employee benefits, excluding short-term amounts such as wages and salaries, comprise: post-employment benefits; other long-term benefits. Post-employment benefits are, in turn, sub-divided into defined-contribution plans and defined benefit plans, depending on the nature of the benefits envisaged:

69 under defined contribution plans, the employer makes fixed contributions and has no legal or constructive obligation to make further contributions if the fund does not hold sufficient assets to pay all employee benefits; defined benefit plans are all post-employment benefit plans other than defined contribution plans. The provision for termination indemnities (TFR) is deemed to be a defined-benefits plan. Other long-term benefits comprise employee benefits that are not due entirely within twelve months of the end of the year in which employees accumulated their right to them. Initial recognition and measurement The value of a defined-benefit obligation is represented by the present value of the future payments necessary to settle the obligations deriving from work performed by employees in the current and prior years. This present value is determined using the Projected Unit Credit Method. The employee benefits included as other long-term benefits, such as long-service bonuses that are paid on reaching a pre-determined level of seniority, are recorded among the Provisions for risks and charges for an amount determined at the reporting date using the "Projected Unit Credit Method". The provision for termination indemnities is recorded as a separate liability, while the other post-employment benefits and long-term benefits are recorded among the provisions for risks and charges. 273 part A Recognition of components affecting the income statement Service costs are recorded as payroll costs, together with the related accrued interest. Actuarial gains and losses relating to post-employment, defined benefit plans are recorded in shareholders' equity in the year they are identified. These actuarial gains and losses are reported in the Schedule of recorded gains and losses, as required by IAS 1. The actuarial gains and losses relating to other long-term benefits are recorded as part of payroll costs in the year they are identified.

70

71 Part B - INFORMATION ON THE CONSOLIDATED BALANCE SHEET 275 part B

72 276 part B ASSETS Section 1 - Cash and balances Line item Cash and balances: breakdown Banking group Other businesses a) Cash 370, , ,437 b) Unrestricted deposits with Central Banks Total 370, , ,437

73 Section 2 - Financial assets held for trading Line item Financial assets held for trading: breakdown by sector 277 part B Description/Amounts Banking group Other businesses Listed Unlisted Listed Unlisted A. Cash assets 1. Debt securities 2,018, , ,327,845 3,003, Structured securities 55,414 84, , Other debt securities 1,962, , ,188,408 3,003, Equity instruments 6, ,001 7, Mutual funds , Loans Repurchase agreements Other Impaired loans Assets sold but not derecognised 1,957,373 19, ,977,266 1,159,459 Total A 3,981, , ,311,129 4,172,141 B. Derivatives 1. Financial derivatives , , , For trading , , Connected with the fair value option - 30, , Other - 4, , Credit derivatives For trading Connected with the fair value option Other Total B , , ,699 Total 3,982, , ,373,934 4,284,840

74 278 part B 2.2 Financial assets held for trading: breakdown by debtor/issuer Description/Amounts Banking group Other businesses A. Cash assets 1. Debt securities 2,327,845-2,327,845 3,003,829 a) Governments and Central Banks 1,806,382-1,806,382 2,652,641 b) Other public entities c) Banks 407, , ,994 d) Other issuers 113, , , Equity instruments 6,001-6,001 7,501 a) Banks b) Other issuers: 5,907-5,907 7,342 - insurance companies financial companies non-financial companies 5,566-5,566 7,094 - other Mutual funds , Loans a) Governments and Central Banks b) Other public entities c) Banks d) Other parties Impaired assets a) Governments and Central Banks b) Other public entities c) Banks d) Other parties Assets sold but not derecognised 1,977,266-1,977,266 1,159,459 a) Governments and Central Banks 1,935,840-1,935,840 1,116,154 b) Other public entities c) Banks 30,373-30,373 8,544 d) Other issuers 11,053-11,053 34,761 Total A 4,311,129-4,311,129 4,172,141 B. Derivatives - a) Banks 51,638-51,638 91,697 b) Customers 11,167-11,167 21,002 Total B 62,805-62, ,699 Total 4,373,934-4,373,934 4,284,840

75 2.3 Financial assets held for trading: trading derivatives attributable to the banking group Type of derivatives/ underlying assets Interest rates Currency and gold Equity instruments Loans Other A. Listed derivatives 1) Financial derivatives with exchange of capital options purchased other derivatives without exchange of capital options purchased other derivatives ) Credit derivatives with exchange of capital without exchange of capital Total part B B. Unlisted derivatives 1) Financial derivatives 32,581 6, ,869 62, ,671 with exchange of capital 4,550 6, ,546 22,187 - options purchased 4,489 1, ,434 8,440 - other derivatives 61 5, ,112 13,747 without exchange of capital 28, ,869 50,900 90,484 - options purchased other derivatives 27, ,869 50,811 90,447 2) Credit derivatives with exchange of capital without exchange of capital Total 32,581 6, ,869 62, ,671 Total 32,585 6, ,896 62, ,699 The other column includes hybrid derivatives consisting of several basic derivatives with differing risk profiles (equity linked swap, 13,000 thousand; commodity swap, 4,325 thousand, and metal basket swap, 5,521 thousand).

76 280 part B 2.4 Financial assets held for trading (other than those sold but not derecognised and impaired assets): change in year attributable to the banking group Changes/underlying assets Debt securities Equity instruments Mutual funds Loans 2006 A. Opening balance 3,003,829 7,501 1,352-3,012,682 B Increases 16,905,114 27,015 1,540-16,933,669 B.1 Purchases 15,950,503 25,439 1,535-15,977,477 B.2 Positive changes in fair value 4, ,126 B.3 Other changes 950, ,066 C Decreases 17,581,098 28,515 2,875-17,612,488 C.1 Sales 13,275,623 27,774 2,870-13,306,267 C.2 Redemptions 2,692, ,692,987 C.3 Negative changes in fair value 39, ,964 C.4 Other changes 1,573, ,573,270 D. Closing balance 2,327,845 6, ,333,863

77 Section 3 - Financial assets at fair value Line item Financial assets at fair value: breakdown by sector 281 part B Description/Amounts Banking group Other businesses Listed Unlisted Listed Unlisted Debt securities 430,843 97, , , Structured securities 50,725 34, , Other debt securities 380,118 63, , , Equity instruments 79,221 3, ,578 82, Mutual funds 335,532 74, , , Loans Structured Other Impaired loans Assets sold but not derecognised 244,764 50, , ,770 Total 1,090, , ,316,622 1,825,708 Cost 1,065, ,307,970 N.D. This line item comprises financial assets that are managed operationally and measured strategically at fair value, as described in para. 9.b of IAS 39. This category also includes certain financial instruments with embedded derivatives that are not held for trading (para. 9.c of IAS 39).

78 282 part B 3.2 Financial assets at fair value: breakdown by debtor/issuer Description/Amounts Banking group Other businesses Debt securities 528, , ,826 a) Governments and Central Banks 261, , ,859 b) Other public entities c) Banks 178, , ,047 d) Other issuers 87,897-87, , Equity instruments 82,578-82,578 82,850 a) Banks 31,664-31,664 28,072 b) Other issuers: 50,914-50,914 54,778 - insurance companies 13,525-13,525 24,097 - financial companies non-financial companies 33,666-33,666 28,990 - other 3,344-3, Mutual funds 409, , , Loans a) Governments and Central Banks b) Other public entities c) Banks d) Other parties Impaired loans a) Governments and Central Banks b) Other public entities c) Banks d) Other parties Assets sold but not derecognised 295, , ,770 a) Governments and Central Banks 160, , ,289 b) Other public entities c) Banks 117, ,748 48,002 d) Other parties 17,183-17,183 3,479 Total 1,316,622-1,316,622 1,825,708 As indicated in part A of these, this line item includes securities measured at fair value, as well as the related derivative instruments, in order to eliminate obvious accounting asymmetries. Over 50 percent of mutual funds are bond-related.

79 3.3 Financial assets at fair value (other than those sold but not derecognised and impaired assets): change in year attributable to the banking group Debt securities Equity instruments Mutual funds Loans 2006 A. Opening balance 992,826 82, ,262-1,460,938 B Increases 572,660 66, , ,619 B.1 Purchases 414,601 48, , ,088 B.2 Positive changes in fair value 839 7,756 9,553-18,148 B.3 Other changes 157,220 9,728 1, ,383 C Decreases 1,036,793 66,431 87,164-1,190,388 C.1 Sales 337,921 64,361 84, ,342 C.2 Redemptions 636, ,230 C.3 Negative changes in fair value 11,563 2,062 2,976-16,601 C.4 Other changes 51, ,215 D. Closing balance 528,693 82, ,898-1,021, part B

80 284 Section 4 - Financial assets available for sale Line item 40 part B 4.1 Financial assets available for sale: breakdown by sector Description/Amounts Banking group Other businesses Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 1. Debt securities 378,371 67, ,371 67, ,237 78, Structured securities Other debt securities 377,836 67, ,836 67, ,237 78, Equity instruments 367, , , , , , Valued at fair value 367, , , , , , Valued at cost - 144, , Mutual funds 3,632 23, ,632 23,741 2,150 10, Loans Impaired loans Assets sold but not derecognised 240,022 17, ,022 17,282 24,007 - Total 989, , , ,271 1,233, , Financial assets available for sale: breakdown by debtor/issuer Description/Amounts Banking group Other businesses Debt securities 446, , ,785 a) Governments and Central Banks 67,257-67, ,584 b) Other public entities c) Banks 120, , ,990 d) Other issuers 258, , , Equity instruments 701, , ,935 a) Banks 562, , ,699 b) Other issuers: 138, , ,236 - insurance companies 13,855-13,855 9,462 - financial companies 30,168-30,168 50,689 - non-financial companies 73,075-73,075 87,508 - other 21,376-21,376 4, Mutual funds 27,373-27,373 12, Loans a) Governments and Central Banks b) Other public entities c) Banks d) Other parties Impaired loans a) Governments and Central Banks b) Other public entities - - c) Banks d) Other parties Assets sold but not derecognised 257, ,304 24,007 a) Governments and Central Banks 79,457-79,457 22,733 b) Other public entities 3,808-3,808 - c) Banks 126, ,606 1,274 d) Other parties 47,433-47,433 - Total 1,432,489-1,432,489 1,657,215

81 4.5 Financial assets available for sale (other than those sold but not derecognised and impaired assets): change in year attributable to the banking group Debt securities Equity instruments Mutual funds Loans 2006 A. Opening balance 739, ,935 12,488-1,633,208 B Increases 269, ,595 19, ,781 B.1 Purchases 225,098 74,321 3, ,557 B.2 Positive changes in fair value , ,402 B.3 Writebacks 931 2, ,303 - booked to income statement - # booked to shareholders' equity 931 2, ,303 B.4 Transfer from other portfolios B.5 Other changes 43,136 39,842 15,541-98,519 C Decreases 562, ,470 4,115-1,055,226 C.1 Sales 169, ,544 2, ,917 C.2 Redemptions 177, ,812 C.3 Negative changes in fair value 4,959 3, ,479 C.4 Impairment write-downs 2, ,406 - booked to income statement booked to shareholders' equity 2, ,349 C.5 Transfer from other portfolios C.6 Other changes 208,084 20, ,612 D. Closing balance 446, ,060 27,373-1,174, part B Section 5 - Financial assets held to maturity Line item 50 There are no amounts in this section.

82 286 Section 6 - Due from banks Line item 60 part B 6.1 Due from banks: breakdown by sector attributable to the banking group Type of transaction/amounts A. Due from Central Banks 83, , Restricted deposits Compulsory reserve 83, , Repurchase agreements Other B. Due from banks 3,816,572 1,647, Current accounts and demand deposits 1,489,687 96, Restricted deposits 1,599,104 1,206, Other loans 543, , Repurchase agreements 228, Finance leases Other 315, , Debt securities 14, Structured securities Other debt securities 14, Impaired loans Assets sold but not derecognised 169,115 - Total (book value) 3,900,048 2,038,230 Total (fair value) 3,900,973 2,038, Financial leases Finance lease loans: distribution of installments Time bands Present value 2006 Present value 2005 up to 3 months 86 - between 3 and 12 months 86 - beyond 1 year up to 5 years beyond 5 years Total 555 -

83 Section 7 Due from customers Line item Due from customers: breakdown by sector 287 part B attributable to the banking group Type of transaction/amounts Current accounts 6,216,169 7,088, Repurchase agreements - 1,390, Mortgage loans 12,802,274 10,778, Credit cards, personal loans and assignments of one-fifth of salary 1,095,907 1,199, Financial leases 1,550,046 1,143, Factoring 141,265 96, Other transactions 7,716,440 7,053, Debt securities 124, , Structured securities Other debt securities 123, , Impaired loans 1,191,624 1,151, Assets sold but not derecognised 435, ,506 Total (book value) 31,274,014 30,626,393 Total (fair value) 31,443,820 31,128,451 Assets sold but not derecognised include 825 impaired loans referred to Banco di Sardegna.

84 7.2 Due from customers: breakdown by debtor/issuer 288 part B attributable to the banking group Type of transaction/amounts Debt securities: 124, ,519 a) Governments - - b) Other public entities 4,836 1,972 c) Other issuers 119, ,547 - non-financial companies 8,876 9,915 - financial companies 97, ,027 - insurance companies 13,852 13,605 - other Loans to: 29,522,101 28,751,577 a) Governments 98, ,764 b) Other public entities 315, ,286 c) Other parties 29,108,333 28,101,527 - non-financial companies 20,398,023 17,619,659 - financial companies 1,502,633 3,538,212 - insurance companies 24,401 28,440 - other 7,183,276 6,915, Impaired loans: 1,191,624 1,151,791 a) Governments - - b) Other public entities 2,617 1,474 c) Other parties 1,189,007 1,150,317 - non-financial companies 939, ,087 - financial companies 19,400 33,189 - insurance companies 4 2,059 - other 229, , Assets sold but not derecognised: 435, ,506 a) Governments - - b) Other public entities - - c) Other parties 435, ,506 - non-financial companies 357, ,475 - financial companies 2, insurance companies other 75,522 1,031 Total 31,274,014 30,626, Financial leases Finance lease loans: distribution of installments Time bands Present value 2006 Present value 2005 up to 3 months 71,445 48,208 between 3 and 12 months 165, ,421 beyond 1 year up to 5 years 621, ,143 beyond 5 years 692, ,825 Total 1,550,046 1,143,597

85 Section 8 - Hedging derivatives Line item 80 There are no amounts in this section. 289 part B Section 9 - Remeasurement of financial assets backed by general hedges Line item 90 There are no amounts in this section.

86 290 Section 10 - Equity investments Line item 100 part B 10.1 Investments in companies under joint control (carried at equity) and companies subject to significant influence: disclosures Name Head office Type of relationship Nature of holding % of votes Parent company % held B. Companies 1 CO.BA.PO Consorzio Banche Popolari dell Emilia Romagna Bologna 8 B.P.E.R (1) 2 Gruppo Operazioni Underwriting Banche Popolari s.r.l. Milan 8 B.P.E.R CONFORM Consorzio Formazione Manageriale Avellino 8 B.P.E.R B.d.C Arca Vita s.p.a. ( ) Verona 8 Em.Ro. pop Sofipo Fiduciarie s.a. Lugano 8 B.P.E.R. Europe Janua B. & A. Broker s.p.a. Milan 8 Em.Ro. pop Sintesi 2000 s.r.l. Milan 8 Em.Ro. pop Immobiliare Reiter s.p.a. Modena 8 Nadia s.p.a Arca SGR s.p.a. Milan 8 Em.Ro. pop Unione Fiduciaria s.p.a. Milan 8 Em.Ro. pop CAT Progetto Impresa Modena scarl Modena 8 Em.Ro. pop ABF Finance s.r.l. Milan 8 ABF Leasing Resiban s.p.a. Modena 8 Em.Ro. pop Fincoop Sarda s.r.l. Cagliari 8 B.d.S Krenesiel s.p.a. Sassari 8 B.d.S Cassa di Risparmio di Bra s.p.a. Bra 8 B.P.E.R Cassa di Risparmio di Fossano s.p.a. Fossano 8 B.P.E.R Cassa di Risparmio di Saluzzo s.p.a. Saluzzo 8 B.P.E.R Cassa di Risparmio di Savigliano s.p.a. Savigliano 8 B.P.E.R (1) includes the 2.457% held by Banca Popolare di Ravenna s.p.a. Key 8 = associated company

87 10.2 Investments in companies under joint control and companies subject to significant influence: accounting information Name A. Companies carried at equity A.1 Under joint control A.2 Subject to significant influence Total assets Total revenues Net income/ (loss) Shareholders' equity Consolidated book value 1 CO.BA.PO Consorzio Banche Popolari dell Emilia Romagna Gruppo Operazioni Underwriting Banche Popolari s.r.l (9) CONFORM Consorzio Formazione Manageriale 5,627 2, Arca Vita s.p.a. ( ) 3,880, ,380 33, ,387 71,541 5 Sofipo Fiduciarie s.a. 8,764 2, , Janua B. & A. Broker s.p.a. 13,604 7, , Sintesi 2000 s.r.l Immobiliare Reiter s.p.a. 14,820 9, , Arca SGR s.p.a. 210, ,813 16,587 97,899 16, Unione Fiduciaria s.p.a. 35,444 20,598 2,101 25,703 4, CAT Progetto Impresa Modena scarl ABF Finance s.r.l Resiban s.p.a. 1,267 1,830 (193) Fincoop Sarda s.r.l Krenesiel s.p.a. 4,578 3,433 (671) Cassa di Risparmio di Bra s.p.a. 732,408 41,588 3,896 60,071 33, Cassa di Risparmio di Fossano s.p.a. 921,582 47,767 5,900 97,460 37, Cassa di Risparmio di Saluzzo s.p.a. 729,337 40,148 5,892 76,631 46, Cassa di Risparmio di Savigliano s.p.a. 699,342 37,645 3,216 67,480 34,288 Fair Value Total 7,259,585 1,180,426 70, , , part B The amounts relate to the latest approved financial (31 December 2006) of the individual companies Equity investments: changes in the year Banking group Other businesses A. Opening balance 90,312-90,312 76,384 B Increases 174, ,796 24,423 B.1 Purchases 149, , B.2 Writebacks B.3 Revaluations B.4 Other changes 25,700-25,700 24,403 C Decreases 19,785-19,785 10,495 C.1 Sales C.2 Adjustments ,926 C.3 Other changes 19,518-19,518 8,569 D. Closing balance 245, ,323 90,312 E. Total revaluations F. Total adjustments ,926

88 292 Section 11 - Technical reserves carried by reinsurers Line item 110 part B There are no amounts in this section. Section 12 - Property, plant and equipment Line item Property, plant and equipment: analysis of assets valued at cost Assets/Values Banking group Other businesses A. Assets used in business 1.1 Owned 701, , ,575 a) land 171, , ,295 b) buildings 457, , ,733 c) furniture 31,730-31,730 22,512 d) IT equipment 19,017-19,017 20,808 e) other 21,383-21,383 24, Purchased under finance leases 2,543-2,543 5,484 a) land b) buildings ,154 c) furniture d) IT equipment 2,244-2,244 3,613 e) other Total A 703, , ,059 B. Investment property 2.1 Owned 215, , ,707 a) land 71,123-71,123 72,454 b) buildings 144, , , Purchased under finance leases a) land b) buildings Total B 215, , ,707 Total , , ,766 The Group has opted to measure both assets used in the business and investment property at cost.

89 12.3 Property, plant and equipment used for business purposes: changes in year attributable to the banking group 293 Land Buildings Furniture IT equipment Other A. Opening gross amount 175, , , , ,131 1,151,558 1,138,357 A.1 Total net reductions in value - 96,432 97, ,512 94, , ,713 A.2 Opening net amount 175, ,709 28,865 24,421 18, , ,644 B. Increases ,638 8,754 14,101 12,725 57,858 64,209 B.1 Purchases ,640 8,725 12,438 11,724 47,167 53,654 B.2 Capitalised improvement expenditure - 1, ,897 3,277 B.3 Writebacks B.4 Fair value increases booked to: a) shareholders' equity b) income statement B.5 Positive exchange rate adjustments B.6 Transfers from investment property ,245 B.7 Other changes - 6, ,663 1,001 8,789 6,033 C. Decreases 5,542 28,438 5,889 17,261 9,111 66,241 62,794 C.1 Sales 523 4, , ,471 12,822 C.2 Depreciation - 13,057 5,493 10,315 6,769 35,634 37,379 C.3 Impairment charges booked to: ,349 a) shareholders' equity b) income statement ,349 C.4 Fair value decreases booked to: a) shareholders' equity b) income statement C.5 Negative exchange rate adjustments C.6 Transfers to: 5,019 11, ,175 - a) investment property 5,019 11, ,175 - b) assets related to discontinued operations C.7 Other changes ,604 1,838 5,961 11,244 D. Closing net amount 171, ,909 31,730 21,261 21, , ,059 D.1 Total net reductions in value - 86,932 73, ,395 81, , ,763 D.2 Closing gross amount 171, , , , ,163 1,067,445 1,147,822 part B

90 12.4 Investment property: changes in the year 294 Banking group Other businesses part B Land Buildings Land Buildings Land Buildings Land Buildings A. Opening balance 72, , , ,253 69, ,774 B. Increases 5,031 14, ,031 14,979 3,557 10,495 B.1 Purchases 11 1, ,674 3,557 10,244 B.2 Capitalised improvement expenditure B.3 Positive changes in fair value B.4 Writebacks B.5 Positive exchange rate adjustments B.6 Transfers from assets used in business 5,019 11, ,019 11, B.7 Other changes 1 1, , C. Decreases 6,361 17, ,361 17, ,016 C.1 Sales 54 2, , ,831 C.2 Depreciation - 3, ,240-3,205 C.3 Negative changes in fair value C.4 Impairment charges C.5 Negative exchange rate adjustments C.6 Transfers to other asset portfolios 3,788 4, ,788 4,929-1,245 a) property used in business ,245 b) non-current assets related to discontinued operations 3,788 4, ,788 4, C.7 Other changes 2,519 6, ,519 6, D. Closing net amount 71, , , ,116 72, ,253 D1 Total net reductions in value - 8, , D2 Closing gross amount 71, , , , E. Valuation at fair value 76, , , ,961 n.d. n.d.

91 Section 13 - Intangible assets Line item Intangible assets: breakdown by type 295 part B Assets/Values Banking group Other businesses Finite duration Undefined duration Finite duration Undefined duration Finite duration Undefined duration Finite duration Undefined duration A.1 Goodwill # 240,905 # - # 240,905 # 242,118 A.1.1 attributable to the group # 240,905 # - # 240,905 # 242,118 A.1.2 pertaining to minority interests # - # - # - # - A.2 Other intangible assets 12, ,968-11,996 - A.2.1 Carried at cost: 12, ,968-11,996 - a) intangible assets generated internally b) other assets 12, ,968-11,996 - A.2.2 Carried at fair value: a) intangible assets generated internally b) other assets Total 12, , , ,905 11, ,118 Intangible assets mainly comprise applications software measured at cost and amortised on a straight-line basis over their useful lives which, having regard for obsolescence, does not exceed five years.

92 13.2 Intangible assets: change in year attributable to the banking group part B Goodwill Other intangible assets: generated internally Other intangible assets: other Fin Undef Fin Undef A. Opening balance 245, , , ,698 A.1 Total net reductions in value 2, ,537-64,427 57,244 A.2 Opening net amount 242, , , ,454 B. Increases ,559-7,559 40,090 B.1 Purchases ,559-7,559 30,571 B.2 Increases in internally generated intangible assets # B.3 Writebacks # B.4 Positive changes in fair value # booked to shareholders' equity # booked to income statement # B.5 Exchange gains B.6 Other changes ,519 C. Decreases 1, ,587-7,800 8,430 C.1 Sales C.2 Adjustments 1, ,069-7,282 7,809 - amortisation # - - 6,069-6,069 6,360 - writedowns 1, ,213 1,449 - shareholders' equity # income statement 1, ,213 1,449 C.3 Negative changes in fair value # booked to shareholders' equity # booked to income statement # C.4 Transfers to discontinued operations due for disposal C.5 Exchange losses C.6 Other changes D. Closing net amount 240, , , ,114 D.1 Total net value adjustments 4, ,402-39,505 64,434 E. Closing gross amount 245, , , ,548 F. Valuation at cost 242, , ,968 - Further, more detailed information on the nature of goodwill and the related dynamics is provided in Part G Business combinations of these.

93 Section 14 - Tax assets and liabilities Asset line item 140 and liability line item part B 14.1 Deferred tax assets: breakdown Deferred tax assets principally originated from adjustments to loans, the write-down of financial assets and provision for guarantees given, repayment claims from bankruptcy receivers and outstanding legal disputes Deferred tax liabilities: breakdown Deferred tax liabilities principally originated from gains on financial assets and provisions for loans recorded solely for fiscal purposes Change in deferred tax assets (with contra-entry to income statement) Banking group Other businesses Opening balance 213, , , Increases 41,693-41,693 86, Deferred tax assets recognised during the year 36,961-36,961 86,938 a) relating to prior years 1,993-1,993 1,346 b) due to changes in accounting policies ,033 c) writebacks d) other 34,968-34,968 47, New taxes or increases in tax rates Other increases 4,140-4, Decreases 48,485-48,485 89, Deferred tax assets cancelled during the year 42,610-42,610 79,690 a) reversals 42,610-42,610 79,259 b) written down as no longer recoverable c) change in accounting policies Reduction in tax rates Other decreases 5,844-5,844 9, Closing balance 206, , ,349

94 14.4 Change in deferred tax liabilities (with contra-entry to income statement) 298 part B Banking group Other businesses Opening balance 47,010-47, , Increases 14,636-14,636 31, Deferred tax liabilities recognised during the year 14,285-14,285 30,874 a) relating to prior years b) due to changes in accounting policies ,151 c) other 14,199-14,199 16, New taxes or increases in tax rates Other increases Decreases 14,528-14,528 93, Deferred tax liabilities cancelled during the year 12,724-12,724 88,127 a) reversals 12,590-12,590 86,552 b) due to changes in accounting policies c) other Reduction in tax rates Other decreases 1,800-1,800 5, Closing balance 47,118-47,118 47, Change in deferred tax assets (with contra-entry to shareholders' equity) Banking group Other businesses Opening balance 3,771-3,771 5, Increases 11,796-11,796 10, Deferred tax assets recognised during the year 11,419-11,419 10,960 a) relating to prior years 11,405-11,405 - b) due to changes in accounting policies ,962 c) other , New taxes or increases in tax rates Other increases Decreases 7,297-7,297 12, Deferred tax assets cancelled during the year 1,228-1,228 1,408 a) reversals 1,228-1,228 1,408 b) written down as no longer recoverable c) due to changes in accounting policies Reduction in tax rates Other decreases 6,069-6,069 11, Closing balance 8,270-8,270 3,771

95 14.6 Change in deferred tax liabilities (with contra-entry to shareholders' equity) Banking group Other businesses Opening balance 28,399-28,399 97, Increases 16,505-16,505 16, Deferred tax liabilities recognised during the year 16,410-16,410 15,601 a) relating to prior years ,030 b) due to changes in accounting policies ,591 c) other 16,327-16,327 1, New taxes or increases in tax rates Other increases Decreases 16,230-16,230 85, Deferred tax liabilities cancelled during the year 12,228-12,228 1,368 a) reversals 12,228-12,228 1,368 b) due to changes in accounting policies - - c) other Reduction in tax rates , Other decreases 4,002-4,002 28, Closing balance 28,674-28,674 28, part B

96 300 part B Section 15 - Non-current assets and disposal groups held for sale and associated liabilities Asset line item 150 and liability line item Non-current assets and disposal groups held for sale: breakdown by type Banking group Other businesses A. Individual assets A.1 Equity investments 5,186-5,186 - A.2 Property, plant and equipment 8,457-8,457 - A.3 Intangible assets A.4 Other non-current assets Total 13,643-13,643 - B. Groups of assets (discontinued operations) B.1 Financial assets held for trading B.2 Financial assets at fair value B.3 Financial assets available for sale B.4 Financial assets held to maturity B.5 Due from banks B.6 Due from customers B.7 Equity investments B.8 Property, plant and equipment B.9 Intangible assets B.10 Other assets Total C. Liabilities associated with individual assets held for sale C.1 Payables C.2 Securities C.3 Other liabilities Total D. Liabilities associated with groups of assets held for sale D.1 Due to banks D.2 Due to customers D.3 Debt securities in issue D.4 Financial liabilities held for trading D.5 Financial liabilities at fair value D.6 Provisions D.7 Other liabilities Total Pursuant to IFRS 5, this line item comprises those assets subject to an approved disposal plan for which steps have been taken to find buyers. These assets are stated at the lower of their carrying amount or their fair value, net of disposal costs. Consistent with this classification, this line item comprises: Em.Ro. popolare's interest in Leasinvest s.p.a. which, at the end of 2005, was included within the scope of consolidation and measured using the equity method. This equity investment is the subject of a pre-sale agreement with Conad Società Cooperativa involving disposal of the 141,282 shares currently held by the investment company for Euro 8,268 million. This transaction is due to be completed during the first half of The carrying amount of the asset was determined with reference to its 2006 equity value, since this is lower than the price agreed for the sale transaction. Properties belonging to CARISPAQ Cassa di risparmio dell Aquila S.p.A. that are no longer required for its business activities; these assets have not been depreciated from the date the bank decided to sell them.

97 15.3 Information on investments in companies subject to considerable influence but not measured using the equity method Company name Leasinvest s.p.a. (Bologna) Share capital 20,800 Parent company Em.Ro. popolare s.p.a. % held Total assets Total revenues Net income / (loss) Shareholders' equity Book value % 29,054 8,356 2,925 14,698 5, part B Section 16 - Other assets Line item Other assets: breakdown Taxes withheld on interest, withholdings and tax credits on dividends, advance taxation 55,267 45,450 Amounts recoverable from the tax authorities for higher taxes paid for previous years and related accrued interest 10,240 5,033 Sundry amounts to be charged to customers 124, ,711 Net value of adjustments for collection of loans on behalf of third parties - 13,117 Bank charges to be debited to customers or banks 18,360 24,227 Coupons and securities collectible on demand 960 1,103 Cheques being processed 28,609 39,849 Cheques drawn on other banks 227, ,367 Items relating to security transactions 13,034 12,353 Items in transit with branches 4,047 5,557 Pension fund assets 77,491 71,570 Leasehold improvement expenditure 19,642 15,098 Gold, silver and precious metals Accrued income and prepaid expenses 16,904 36,817 Other items for sundry purposes 115, ,761 Total 712, ,036

98 302 part B LIABILITIES AND EQUITY Section 1 - Due to banks Line item Due to banks: breakdown by sector Type of transaction/members of the group Banking group Other businesses Due to Central Banks Due to other banks 1,729,437-1,729,437 2,490, Current accounts and demand deposits 205, , , Restricted deposits 526, , , Loans 565, , , financial leases other 565, , , Payables for commitments to repurchase own equity instruments 12,816-12,816 12, Liabilities relating to assets sold but not derecognised 377, ,842 1,143, repurchase agreements 377, ,842 1,143, other Other payables 41,084-41,084 70,046 Total 1,729,437-1,729,437 2,490,118 Fair value 1,731,824-1,731,824 2,490,118 Pursuant to para. 16 and 23 of IAS 32, sub-caption 2.4 includes a financial liability associated with the commitment to repurchase shares in Eurobanca del Trentino, a subsidiary. This relates to an American style put option, to be exercised by the date of approving the 2006 financial, granted to the minority shareholders. This option commits Banca popolare dell Emilia Romagna to repurchase shares for an amount currently estimated to be Euro 12.8 million. The recorded liability is matched by a corresponding reduction in the equity of minority interests.

99 Section 2 - Due to customers Line item Due to customers: breakdown by sector 303 part B Type of transaction/members of the group Banking group Other businesses Current accounts and demand deposits 20,953,903-20,953,903 20,154, Restricted deposits 354, , , Public funds administered 73,954-73,954 92, Loans 453, , , financial leases , other 452, , , Payables for commitments to repurchase own equity instruments Liabilities relating to assets sold but not derecognised 3,248,081-3,248,081 2,706, repurchase agreements 2,826,781-2,826,781 2,706, other 421, , Other payables 399, , ,244 Total 25,482,850-25,482,850 23,984,084 Fair value 25,484,280-25,484,280 23,605,334 The amount indicated in point 4.1 relates to the residual payable by certain group companies to Teleleasing. 2.5 Finance lease payables Total minimum future payments for lease transactions: Time bands Present value 2006 Present value 2005 up to 3 months 53 - between 3 and 12 months beyond 1 year up to 5 years beyond 5 years - - Total 591 1,002

100 304 Section 3 - Debt securities in issue Line item 30 part B 3.1 Debt securities in issue: breakdown by sector Type of security/members of Book Fair value Book Fair the group value value value Banking group Other businesses Book value Fair value Book value Fair value A. Listed securities 1,312,091 1,305, ,312,091 1,305,047 1,125,343 1,143, Bonds 1,312,091 1,305, ,312,091 1,305,047 1,125,343 1,143, structured 916, , , , other 395, , , ,834 1,125,343 1,143, Other securities structured other B. Unlisted securities 9,192,801 9,142, ,192,801 9,142,105 8,665,982 8,738, Bonds 5,095,464 5,044, ,095,464 5,044,768 4,243,117 4,315, structured 301, , , , other 4,793,865 4,741, ,793,865 4,741,426 4,243,117 4,315, Other securities 4,097,337 4,097, ,097,337 4,097,337 4,422,865 4,422, structured other 4,097,337 4,097, ,097,337 4,097,337 4,422,865 4,422,859 Total 10,504,892 10,447, ,504,892 10,447,152 9,791,325 9,882, Analysis of line item 30 "Debt securities in issue": subordinated securities B.P.E.R. subordinated convertible bond loan 4%, ,500 B.P.E.R. subordinated convertible bond loan 4%, ,801 78,902 B.P.E.R. subordinated convertible bond loan floating rate 6-month Euribor, , ,252 B.P.E.R. subordinated non convertible bond loan floating rate 6- month Euribor +30 bp, ,779 25,622 B.P.E.R. subordinated non convertible bond loan floating rate 3- month Euribor +90 bp, , ,494 B.P.E.R. subordinated convertible bond loan 4%, , ,766 B.P.E.R. subordinated convertible bond loan 3.75%, ,644 32,639 B.P.E.R. subordinated convertible bond loan 3.75%, ,248 20,073 B.P.E.R. subordinated non convertible bond loan floating rate 3- month Euribor +42 bp, ,707 - B.P.E.R. subordinated non convertible bond loan 3.70% ,356 - Total Parent Bank 1,579, ,248 B.P.R. subordinated convertible bond loan 2.5%, ,564 7,436 B.P.K. subordinated convertible bond loan 3.4%, ,179 3,136 B.S.S. subordinated convertible bond loan floating rate CARISPAQ subordinated convertible bond loan 3.75%, ,899 4,875 B.d.S. subordinated convertible bond loan floating rate 12-month Euribor ,444 18,961 B.d.S. subordinated convertible bond loan floating rate 6-month Euribor +20 bp ,516 14,949 B.d.S. subordinated convertible bond loan, floating rate 12-month Euribor ,684 1,659 Total group 1,624,058 1,047,273

101 Section 4 - Financial liabilities held for trading Line item Financial liabilities held for trading: breakdown by sector Banking group Other businesses Type of security/members of the group FV* FV FV* NV FV FV* NV FV FV* NV FV NV Q NQ Q NQ Q NQ Q NQ A. Cash liabilities 1. Due to banks Due to customers Debt securities # # # # 3.1 Bonds # # # # structured # # # # other bonds # # # # 3.2 Other securities # # # # structured # # # # other # # # # Total A B. Derivatives 1. Financial derivatives # ,652 # # - - # # ,652 # # ,569 # 1.1 For trading # ,963 # # - - # # ,963 # # 43 92,100 # 1.2 Connected with the fair value option # - 13,689 # # - - # # - 13,689 # # - 11,469 # 1.3 Other # - - # # - - # # - - # # - - # 2. Credit derivatives # - 7 # # - - # # - 7 # # - 7 # 2.1 For trading # - 7 # # - - # # - - # # - - # 2.2 Connected with the fair value option # - - # # - - # # - 7 # # - 7 # 2.3 Other # - - # # - - # # - - # # - - # Total B # ,659 # # - - # # ,659 # # ,576 # Total 2006 # ,659 # # - - # # ,659 # # ,576 # The amount of 4 thousand included among the cash liabilities represents a technical short position. Derivatives connected with the fair value option are related to debt securities listed in the Financial Liabilities at fair value (item 50 of Liabilities). 305 part B

102 4.4 Financial liabilities held for trading: derivatives attributable to the banking group part B Type of derivatives/underlying assets Interest rates Currency and gold Equity instruments Loans Other A. Listed derivatives 1) Financial derivatives With exchange of capital options issued other derivatives Without exchange of capital options issued other derivatives ) Credit derivatives With exchange of capital Without exchange of capital Total A B. Unlisted derivatives 1) Financial derivatives 23, , , ,569 With exchange of capital , ,511 48,992 - options issued - 1, ,945 2,645 - other derivatives , ,566 46,347 Without exchange of capital 23, ,141 54,577 - options issued other derivatives 23, ,089 54,543 2) Credit derivatives With exchange of capital Without exchange of capital Total B 23, , , ,576 Total , , , ,619 The other column includes hybrid derivatives consisting of several basic derivatives with differing risk profiles (equity linked swap, 825 thousand and gold swap, 24 thousand).

103 Section 5 - Financial liabilities at fair value Line item Financial liabilities at fair value: breakdown by sector Banking group Other businesses FV* FV FV* NV FV FV* NV FV FV* NV FV Type of security/members of the group NV Q NQ Q NQ Q NQ Q NQ 1. Due to banks # # # # 1.1 Structured # # # # 1.2 Other # # # # 2. Due to customers # # # # 2.1 Structured # # # # 2.2 Other # # # # 3. Debt securities 1,352,195-1,377,862 # # 1,352,195-1,377,862 # 1,355,204-1,429,680 # 3.1 Structured 129, ,972 # # 129, ,972 # 195, ,129 # 3.2 Other 1,222,832-1,230,890 # # 1,222,832-1,230,890 # 1,159,480-1,204,551 # Total 1,352,195-1,377,862 1,377, ,352,195-1,377,862 1,377,862 1,355,204-1,429,680 1,429,680 As indicated in part A of these, this line item includes securities measured at fair value, as well as the related derivative instruments, in order to eliminate obvious accounting asymmetries. 307 part B

104 5.3 Financial liabilities at fair value: changes in year 308 Due to banks Due to customers Debt securities in issue 2006 part B A. Opening balance - - 1,429,680 1,429,680 B Increases , ,676 B.1 Issues ,269 86,269 B.2 Sales B.3 Positive changes in fair value - - 3,993 3,993 B.4 Other changes ,609 44,609 C Decreases , ,494 C.1 Purchases C.2 Redemptions , ,116 C.3 Negative changes in fair value ,018 26,018 C.4 Other changes ,125 45,125 D. Closing balance - - 1,377,862 1,377,862

105 Section 6 - Hedging derivatives Line item 60 There are no amounts in this section. 309 part B Section 7 - Remeasurement of financial liabilities backed by general hedges Line item 70 There are no amounts in this section. Section 8 - Tax liabilities Line item 80 See asset section 14. Section 9 - Liabilities associated with non-current assets held for sale Line item 90 See asset section 15.

106 310 Section 10 - Other liabilities Line item 100 part B 10.1 Other liabilities: breakdown Amounts available to banks 10,024 8,619 Amounts available to customers 382, ,583 Net value of adjustments for collection of loans on behalf of third parties 43, ,941 Staff emoluments and related social contributions 74,386 58,761 Amounts to be paid to third parties for coupons, securities and dividends to be collected 95,715 53,310 Amounts to be paid to the tax authorities on behalf of customers and personnel 69,073 51,879 Bank transfers for clearance 307, ,316 Advances for the purchase of securities 1,075 3,925 Due to suppliers 58,810 58,139 Capital of the charitable foundations Third-part payments as surety for loans ,624 Stamp duty to be paid to the tax authorities Repayment to be made to I.N.P.S Provisions for guarantees given 8,939 5,269 Pension fund liabilities 171 1,307 Items in transit 1, Accrued expenses and deferred income 15,252 23,076 Other liabilities to third parties 81, ,402 Total 1,151,227 1,442,437

107 Section 11 - Provision for termination indemnities Line item part B 11.1 Termination indemnities: change in year Banking group Other businesses A. Opening balance 282, ,716 B. Increases 21,649-21,649 B.1 Provisions 20,844-20,717 B.2 Other increases C. Decreases 33,336-33,336 C.1 Payments made 22,817-22,025 C.2 Other decreases 10,519-11,311 D. Closing balance 271, , Other information Changes in termination indemnities during the year Description/Amounts A. Opening balance 282,716 B. Increases 21, Pension cost relating to current work 12, Financial charges 8, Contribution to the plan by employees - 4. Actuarial losses Translation differences - 6. Pension cost of prior work - 7. Other changes 750 C. Decreases 33, Benefits paid 22, Pension cost of prior work - 3. Actuarial gains 9, Translation differences - 5. Reductions - 6. Positions closed Other changes 1,069 D. Closing balance 271, , Description of the principal actuarial assumptions The following tables detail the principal demographic and financial assumptions made in order to quantify the provision using the Projected Unit Credit Method. Principal actuarial assumptions/% Discounting rates (average values) 4.26% 3.62% Expected increase in remuneration 3.30% 3.29% Turnover 2.73% 2.09% Rate of inflation 1.50% 1.60%

108 312 part B In addition to the average data included in the table, the approach taken to identify the principal actuarial assumptions is described below: Discounting rates: using the interest rate curve at the measurement date, reflecting the issue of bonds by leading firms. Expected increase in remuneration: time series analysis (last three years) of payroll records, taking the terms of the national payroll agreement into account together with forecasts for inflation. The assumptions made about payroll increases took account of grade, seniority, age and gender. Turnover: time series analysis (last three years) of the phenomena giving rise to the terminations and adjustments to take account of any anomalies that occurred in the past. The assumptions made about turnover took account of grade, seniority, age and gender. Inflation rate: the inflation forecasts contained in the current Economic and Financial Planning Document were used. Commencing from 1 January 2007, the Finance Law and related enabling legislation envisage significant changes to the regulations governing termination indemnities, including the right for individual workers to choose how their future indemnities will be allocated. In particular, workers may allocate their termination indemnities to pre-determined supplementary pension plans or elect to retain them with their employer (in the latter case, the contributions accruing will be paid into a treasury account held by INPS). At present, it is too early to determine how this will affect the actuarial calculation of the termination indemnities accrued as of 31 December In particular, this is because of uncertainties regarding the interpretation of the recent regulations, the various alternative ways of applying IAS 19 in relation to future provisions and the consequent changes required to the actuarial calculations already made and, lastly, the impossibility of determining how workers will elect to allocate their indemnities by 30 June next Comparative information: history of the plan Description/Amounts Present value of provisions (+) 271, Fair value of assets servicing the plan (-) Plan deficit (surplus) (±) 248, Adjustments to plan liabilities based on historical experience - actuarial (gains)/losses (9,395) Adjustments to plan assets based on historical experience The adjustments based on historical experience solely comprise actuarial gains and losses.

109 Section 12 - Provisions for risks and charges Line item Provisions for risks and charges: breakdown 313 part B Items/Components Banking group Other businesses Post-retirement benefits 159, , , Other provisions for risks and charges 168, , , legal disputes 109, ,690 91, personnel expenses 36,986-36,986 23, other 21,445-21,445 17,905 Total 327, , , Provisions for risks and charges: change in the year Items/Components Banking group Other businesses 2006 Postretirement benefits Other provisions Post-retirement benefits Other provisions Post-retirement benefits Other provisions A. Opening balance 144, , , ,368 B. Increases 28,845 70, ,845 70,175 B.1 Provisions 10,528 62, ,528 62,550 B.2 Changes due to the passage of time 2,400 2, ,400 2,518 B.3 Changes due to variations in the discount rate B.4 Other changes 15,864 4, ,864 4,975 C. Decreases 13,541 35, ,541 35,422 C.1 Utilisations during the year 5,418 18, ,418 18,547 C.2 Changes due to variations in the discount rate 2,775 1, ,775 1,341 C.3 Other changes 5,348 15, ,348 15,534 D. Closing balance 159, , , ,121 The other increases (B.4) take account of Euro 12,374 thousand, for pensions, and Euro 1,682 thousand, for other provisions, reflecting changes in their opening balances.

110 12.3 Defined-benefit pension plans 314 part B 1. Description of plans The pension plans cover Banca popolare dell Emilia Romagna, referred to in the individual financial, and Cassa di risparmio della provincia dell Aquila and Cassa di risparmio di Vignola, which are described below. The pension plans are not separate legal entities and their assets are invested together with the Bank's other assets. 2. Changes in the plans during the year Changes in the plans during the year Description/Amounts Cassa di risparmio della Cassa di risparmio di Vignola provincia dell Aquila Opening balance 8,350 8,052 4,374 4,134 A. Increases 239 1, Pension cost relating to current work Financial charges Contribution to the plan by employees Actuarial losses Translation differences Pension cost of prior work Other changes B. Decreases Benefits paid Pension cost of prior work Actuarial gains Translation differences Reductions Positions closed Other changes Closing balance 7,695 8,350 4,022 4,374 The table shows the changes in the employee pension fund. The actuarial gains and losses are recorded in an equity reserve. 3. Changes in plan assets during the year and other information There are no plan assets that meet the requirements of IAS Reconciliation of the present value of the plans, the present value of the plan assets and the assets and liabilities recorded in the balance sheet Since there are no plan assets and given that the Group recognises actuarial gains and losses in the period in which they arise, the present value of the funds coincides with the value of the liabilities recorded in the balance sheet.

111 5. Description of the principal actuarial assumptions Description of the principal actuarial assumptions The principal actuarial assumptions used to value the Group's pension plans are described below. Principal actuarial assumptions/% Discounting rates (average values) 4.27% 3.66% Expected increase in remuneration 1.50% 1.60% Rate of inflation 1.50% 1.60% 315 part B The methodology followed to determine the principal actuarial assumptions is explained in the notes to the individual financial. 6. Comparative information Comparative information: history of the plan Cassa di risparmio della provincia dell Aquila Description/Amounts Defined-benefit Defined-benefit Defined-benefit pension plans pension plans pension plans Present value of provisions (+) 7,695 8,350 8, Fair value of assets servicing the plan (-) Plan deficit (surplus) (±) 7,695 8,350 8, Adjustments to plan liabilities based on historical experience - actuarial (gains)/losses (130) (873) (671) 5. Adjustments to plan assets based on historical experience Cassa di risparmio di Vignola Description/Amounts Defined-benefit Defined-benefit Defined-benefit pension plans pension plans pension plans Present value of provisions (+) 4,022 4,374 4, Fair value of assets servicing the plan (-) Plan deficit (surplus) (±) 4,022 4,374 4, Adjustments to plan liabilities based on historical experience - actuarial (gains)/losses (218) Adjustments to plan assets based on historical experience The adjustments based on historical experience solely comprise actuarial gains and losses. The contributions to the pension plan for 2007 are expected to be essentially in line with those.

112 12.4 Provisions for risks and charges - other provisions Legal disputes part B Items Legal disputes Opening balance 91,690 Charge for the year 32,785 Other increases 1,652 Other decreases (10,853) Utilisation during the year (5,584) Closing balance 109,690 The legal disputes as of 31 December 2006 comprise court cases, 43,707 thousand, and bankruptcy repayment claims, 65,983 thousand. There are no contingent liabilities for potential risks that are not covered by provisions in the 2006 financial Personnel charges Personnel charges relate to the specific benefits granted to employees, based on their length of service, which are governed by IAS 19. The changes are shown in the following table as an aid to understanding the phenomenon. Description/Amounts Other payroll provisions Opening balance 23,773 - Changes in opening balance 1,682 A. Increases 22, Pension cost relating to current work 17, Financial charges Contribution to the plan by employees Actuarial losses Translation differences Pension cost of prior work Other changes 4,448 - B. Decreases 10, Benefits paid 9, Pension cost of prior work Actuarial gains Translation differences Reductions Positions closed Other changes Closing balance 36,986 - Changes in opening balance on the increase refer to the effects of previous years due to the evaluation of the premature death guarantee provided for by the Pension Plan Section B Other provisions The provision for charitable donations is classified together with the provisions for other risks and charges. The changes during the year are analysed for greater clarity in the table below. Items Other provisions Balance at 1/1/ ,905 Allocation of 2005 net income 11,615 Uses in ,075 Residual balance 21,445

113 Section 13 - Technical reserves Line item 130 There are no amounts in this section. 317 part B Section 14 - Redeemable shares Line item 150 There are no amounts in this section.

114 318 part B Section 15 - Group equity Line items 140, 160, 170, 180, 190, 200 and Group equity: breakdown Description/Amounts Share capital 749, , Share premium 317, , Reserves 1,101, , (Treasury shares) (34,829) (2,441) a) Parent Bank (34,805) (2,409) b) subsidiaries (24) (32) 5. Valuation reserves 448, , Equity instruments 24,121 30, Net profit (loss) for the year attributable to the Group 346, ,333 Total 2,952,591 2,299,268 The Group recorded the nominal value of the treasury shares held as of 31 December 2005 in the Treasury shares line item, while the premium paid was deducted from the Reserves line item; this caption also included the profits deriving from trading in treasury shares. For greater clarity and based on a more precise interpretation of Bank of Italy Circular 262 dated 22 December 2005, the financial as of 31 December 2006 report the entire purchase price paid by the Group for treasury shares in the Treasury shares line item and the profit/loss deriving from trading in treasury shares in the share premium reserve line item Share capital and Treasury shares : breakdown Share capital relates solely to the Parent Bank. Share capital is represented solely by ordinary shares with a par value of Euro 3 (three) each. Treasury shares: breakdown Company Number Par value Banca popolare dell Emilia Romagna 2,191,588 6,575 Banca di Sassari 23, Total 2,215,291 6,599

115 15.3 Share capital - Number of shares of the Parent Bank: change in year Line items/types Ordinary Other A. Shares in issue at the beginning of the year 77,537, fully paid 77,537, not fully paid - - A.1 Treasury shares (-) 802,980 - A.2 Shares in issue: opening balance 76,734,978 - B. Increases 173,894,495 - B.1 New share issues 172,273, for payment: 17,197, on business combinations on conversion of bonds 1,472, exercise of warrants other 15,724, bonus issues: 155,075, to employees to directors other 155,075,916 - B.2 Sale of treasury shares 1,621,467 - B.3 Other changes - - C. Decreases 3,010,075 - C.1 Cancellation - - C.2 Purchase of treasury shares 3,010,075 - C.3 Disposal of businesses - - C.4 Other changes - - D. Shares outstanding: closing balance 247,619,398 - D.1 Treasury shares (-) 2,191,588 - D.2 Shares in issue at the end of the year 249,810, fully paid 249,810, not fully paid part B 15.6 Valuation reserves: breakdown Items/Components Banking group Other businesses Financial assets available for sale 278, , , Property, plant and equipment Intangible assets Hedges of foreign investments Cash-flow hedges Exchange differences Non-current assets held for sale and discontinued operations Special revaluation laws 169, , ,121 Total 448, , ,860

116 15.7 Valuation reserves: change in year attributable to the banking group part B Financial assets available for sale Property, plant and equipment Intangibl e assets Hedges of foreign investments Cashflow hedges Exchange differences Non-current assets held for sale and discontinued operations Special revaluation laws A. Opening balance 128, ,121 B. Increases 197, ,730 B.1 Increases in fair value 176, B.2 Other changes 21, ,730 C. Decreases 48, ,020 C.1 Decreases in fair value C.2 Other changes 39, ,020 D. Closing balance 278, ,831 The valuation reserves relate solely to companies that belong to the banking group Valuation reserves for financial assets available for sale: breakdown Assets/Values Banking group Other businesses Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve 1. Debt securities 4,761 2, ,761 2,326 10, Equity instruments 276, , , Mutual funds 1, , Loans Total 282,709 4, ,709 4, , Valuation reserves for financial assets available for sale: change in year attributable to the banking group Debt securities Equity instruments Mutual funds Loans 1. Opening balance 10, , Positive changes 3, ,919 2, Increases in fair value 1, , Release to the income statement of negative reserves , from impairment from disposal , Other changes 2,734 16, Negative changes 11,677 34,998 1, Reductions in fair value 4,820 2,536 1, Impairment write-downs 24 4, Release to the income statement of positive reserves - - from disposal 5,483 14, Other changes 1,350 13, D. Closing balance 2, , The valuation reserves for assets available for sale relate solely to companies that belong to the banking group.

117 Subordinated liabilities Par value Equity instruments B.P.E.R. subordinated convertible bond loan 4%, % 31/12/ ,000 6,667 B.P.E.R. subordinated convertible bond loan floating rate 6-month Euribor, floating rate 31/12/ ,000 7,168 B.P.E.R. subordinated non convertible bond loan floating rate 6-month Euribor + 0.2%, floating rate 31/12/ ,325 - B.P.E.R. subordinated non convertible bond loan floating rate 3-month Euribor + 0.9%, floating rate 28/06/ ,000 - B.P.E.R. subordinated convertible bond loan 4%, % 31/12/ ,059 3,521 B.P.E.R. subordinated convertible bond loan 3.75%, % 31/12/ , B.P.E.R. subordinated convertible bond loan 3.75%, % 31/12/ ,041 1,049 B.P.E.R. subordinated non convertible bond loan floating rate 3-month Euribor +42 bp, floating rate 23/03/ ,500 - B.P.E.R. subordinated convertible bond loan 3.70%, % 31/12/ ,854 3,841 B.P.R. subordinated convertible bond loan 2.5%, % 31/12/2008 7, B.P.K. subordinated convertible bond loan 3.4%, % 31/12/2008 3, B.S.S. subordinated convertible bond loan 5%, % 01/04/ CARISPAQ subordinated convertible bond loan 3.75%, % 31/12/2010 5, B.d.S. subordinated convertible bond loan floating rate 12-month Euribor floating rate 01/07/ , B.d.S. subordinated convertible bond loan floating rate 6-month Euribor +0.20% floating rate 01/07/2007 7,390 - B.d.S. subordinated convertible bond loan floating rate 12-month Euribor floating rate 01/07/2007 1, Total group 1,627,012 24, part B These liabilities include three bonds totalling Euro million (of which Euro 200 million convertible into shares of the Parent Bank) which have been allocated to Fondazione Banco di Sardegna as part payment for ordinary shares representing the controlling interest in that bank. Similar convertible instruments were used during the year to acquire the residual equity interests held by the Cassa di risparmio di Vignola and Banca del Monte di Foggia Foundations in their respective banks. These total, respectively, Euro 32,669 thousand and Euro 21,040 thousand.

118 322 part B Section 16 - Shareholders' equity pertaining to minority interests Line item Shareholders equity pertaining to minority interests : breakdown Description/Amounts Banking group Other businesses Share capital 168, , , Share premium 167, , , Reserves 377, , , (Treasury shares) (27) - (27) (34) 5. Valuation reserves 98,111-98,111 90, Equity instruments 4,062-4,062 3,927 7.Net income (loss) for the period pertaining to minority interests 69,563-69,563 61,674 Total 885, , ,687 Treasury shares repurchased: shareholders equity pertaining to minority interests Company Number Par value Banca di Sassari 26, Total 26, Valuation reserves: breakdown Items/Components Banking group Other businesses Financial assets available for sale 32,467-32,467 23, Property, plant and equipment Intangible assets Hedges of foreign investments Cash-flow hedges Exchange differences Non-current assets held for sale and discontinued operations Special revaluation laws 65,644-65,644 67,134 Total 98,111-98,111 90, Equity instruments: breakdown and change in year A. Opening balance 3,927 - B. Increases 285 4,183 B.1 Issues - 27 B.2 Other changes 285 4,156 C. Decreases C.1 Redemptions - - C.2 Other changes D. Closing balance 4,062 3,927

119 16.4 Valuation reserves for financial assets available for sale: breakdown Assets/Values Banking group Other businesses Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve 1. Debt securities , Equity instruments 31, , , Mutual funds Loans Total 32, , , part B 16.5 Valuation reserves: change in year attributable to the banking group Financial assets available for sale Property, plant and equipment Intangible assets Hedges of foreign investments Cash-flow hedges Exchange differences Non-current assets held for sale and discontinued operations Special revaluation laws A. Opening balance 23, ,134 B. Increases 23, B.1 Increases in fair value 20, B.2 Other changes 2, C. Decreases 13, ,737 C.1 Reductions in fair value 2, C.2 Other changes 11, ,737 D. Closing balance 32, ,644

120 Other information 324 part B 1. Guarantees given and commitments Operations Banking group Other businesses ) Financial guarantees 2,915,043-2,915,043 2,522,820 a) Banks 87,698-87,698 80,786 b) Customers 2,827,345-2,827,345 2,442,034 2) Commercial guarantees 2,858,587-2,858,587 2,306,097 a) Banks 107, ,320 64,566 b) Customers 2,751,267-2,751,267 2,241,531 3) Irrevocable commitments to make loans 1,470,170-1,470,170 2,401,878 a) Banks 297, , ,428 - certain to be called on 213, , ,475 - not certain to be called on 84,142-84, ,953 b) Customers 1,172,583-1,172,583 1,991,450 - certain to be called on 779, , ,585 - not certain to be called on 393, ,019 1,004,865 4) Commitments underlying credit derivatives: protection sold ) Assets lodged to guarantee the commitments of third parties 204, , ,941 6) Other commitments 33,699-33, ,499 Total 7,482,221-7,482,221 8,016, Assets lodged to guarantee the bank's liabilities and commitments Portfolio Financial assets held for trading 2,123,005 2,753, Financial assets at fair value 391, , Financial assets held for sale 260, , Financial assets held to maturity Due from other banks 169, Due from customers 485, , Property, plant and equipment - - The amounts reported in the table mainly relate to funding repurchase agreements.

121 5. Administration and dealing on behalf of third parties: banking group Type of service Trading in financial instruments on behalf of third parties a) Purchases 1,357, , settled 1,349, , not settled 8,091 2,169 b) Sales 749, , settled 744, , not settled 5,353 3, Portfolio management a) Individual 2,908,712 3,013,098 b) Collective 1,414,490 1,301, Custody and administration of securities a) Third-party securities on deposit: associated with activities as a custodian bank (excluding portfolio management) 3,867,185 5,207, securities issued by consolidated companies - 2, other securities 3,867,185 5,205,092 b) Other third-party securities on deposit (excluding portfolio management): other 27,637,781 26,900, securities issued by consolidated companies 5,683,271 6,051, other securities 21,954,510 20,849,436 c) Third-party securities in custody with others 27,151,026 27,713,867 d) Own securities in custody with others 4,809,167 6,673, Other transactions 5,345, , part B

122

123 327 Part C - INFORMATION ON THE CONSOLIDATED INCOME STATEMENT part C

124 328 Section 1 Interest Line items 10 and 20 part C 1.1 Interest and similar income: breakdown attributable to the banking group Items/technical forms Performing financial assets Debt Loans securities Impaired financial assets Other assets Financial assets held for trading 75, ,527 81,374 96, Financial assets at fair value 30, ,074 43, Financial assets available for sale 22, ,156 25, Financial assets held to maturity Due from banks , ,294 81, Due from customers 780 1,600,804 72,390-1,673,974 1,413, Hedging derivatives # # # Financial assets sold but not derecognised 57,571 6, , Other assets # # # ,839 Total 187,064 1,701,717 72,390 6,042 1,967,213 1,662,499 The interest income and similar revenues were generate solely by members of the banking group. 1.3 Interest and similar income: other information Interest income on foreign currency assets Interest income on foreign currency assets 37,726 31, Interest income on finance lease transactions Interest income on finance lease transactions 93,061 72, Interest income on loans using public funds Interest income on loans using public funds 22 20

125 1.4 Interest and similar expense: breakdown attributable to the banking group Items/technical forms Payables Securities Other liabilities Due to banks 52,719 # - 52,719 61, Due to customers 277,145 # - 277, , Debt securities in issue # 229, , , Financial liabilities held for trading , Financial liabilities at fair value - 44,298-44,298 40, Liabilities relating to assets sold but not derecognised 78, , Other liabilities # # Hedging derivatives # # Total 407, , , ,927 The interest expenses and similar charges were solely incurred by members of the banking group. 329 part C 1.6 Interest and similar expense: other information Interest expense on foreign currency liabilities Interest expense on foreign currency liabilities 28,614 22, Interest expense on the liability under finance leases Interest expense on the liability under finance leases Interest expense on third-party funds under administration Interest expense on third-party funds under administration 1,363 1,111

126 330 Section 2 - Commissions Line items 40 and 50 part C 2.1 Commission income: breakdown attributable to the banking group Type of service/segments a) Guarantees given 21,796 19,996 b) Credit derivatives - - c) Management, brokerage and consulting services 199, , trading in financial instruments 2,007 1, trading in foreign exchange 20,829 19, portfolio management individual 15,393 15, collective 13,508 12, custody and administration of securities 6,086 6, custodian bank 5,687 5, placement of securities 65,798 67, acceptance of instructions 13,649 12, consultancy 4,994 3, distribution of third-party services 51,375 42, portfolio management individual collective insurance products 15,754 14, other products 34,878 27,762 d) Collection and payment services 119, ,428 e) Servicing for securitisation transactions 1,865 2,076 f) Services for factoring transactions 1,902 2,244 g) Tax collection services - 30,493 h) Other services 157, ,443 Total 501, ,699 Commission income was earned solely by members of the banking group.

127 2.2 Commission income: distribution channels for products and services: banking group Channels/Segments a) At own branches 145, , portfolio management 28,901 27, placement of securities 65,688 69, distribution of third-party services and products 51,375 40,652 b) Door-to-door portfolio management placement of securities distribution of third-party services and products - 1 c) Other distribution channels portfolio management placement of securities distribution of third-party services and products part C 2.3 Commission expense: breakdown attributable to the banking group Services/Segments a) Guarantees received b) Derivatives on loans - - c) Management and brokerage services 4,289 3, trading in financial instruments 1,515 1, trading in foreign exchange portfolio management own portfolio third-party portfolio custody and administration of securities 2,607 2, placement of financial instruments door-to-door sales of securities, financial products and services - - d) Collection and payment services 16,991 17,888 e) Other services 36,783 31,901 Total 58,327 53,375 Commission expense was incurred solely by members of the banking group.

128 332 part C Section 3 Dividends and similar income Line item Dividends and similar income: breakdown Items/Income Banking group Other businesses Dividends Income from mutual funds Dividends Income from mutual funds Dividends Income from mutual funds Dividends Income from mutual funds A. Financial assets held for trading ,910 - B. Financial assets available for sale 16, ,200-5, C. Financial assets at fair value 1,617 1, ,617 1,228 1,322 1,335 D. Equity investments - # - # - # - # Total 17,899 1, ,228 16,203 1,627

129 Section 4 Net trading income Line item Net trading income: breakdown 333 part C attributable to the banking group Transactions/Income items Gains Dealing profits Losses Trading losses Net result 2006 Net result Financial assets held for trading 3,792 12,569 (15,536) (8,991) (8,166) (8,177) 1.1 Debt securities 3,202 11,583 (14,933) (8,850) (8,998) (8,711) 1.2 Equity instruments (383) (137) 1, Mutual funds - 5 (220) (4) (219) Loans Other Financial liabilities held for trading Debt securities Payables Other Other financial and liabilities: exchange differences # # # # 114,236 16, Derivatives 24,538 45,955 (10,077) (67,641) (165,629) (60,055) 4.1 Financial derivatives 24,538 45,955 (10,077) (67,641) (165,629) (60,055) - on debt securities and interest rates 20,028 38,669 (9,944) (32,940) 15,813 (9,596) - on equity instruments and equity indices (37) (251) 169 (587) - on currency and gold # # # # (158,404) (47,306) - other 4,431 6,908 (96) (34,450) (23,207) (2,566) 4.2 Credit derivatives Total 28,330 58,524 (25,613) (76,632) (59,559) (51,258) Trading activities are carried out solely be members of the banking group. Section 5 Net hedging gains (losses) Line item 90 There are no amounts in this section.

130 334 part C Section 6 - Gains (losses) on disposals/repurchases Line item Gains (losses) on disposals/repurchases: breakdown Banking group Other businesses Items/income items Profits Losses Net result Profits Losses Net result Profits Losses Net result Profits Losses Net result Financial assets 1. Due from banks Due from customers Financial assets available for sale 64,267 (1,631) 62, ,267 (1,631) 62,636 12,179 (389) 11, Debt securities 6,947 (1,398) 5, ,947 (1,398) 5, (195) (74) 3.2 Equity instruments 54,673 (228) 54, ,673 (228) 54,445 11,898 (194) 11, Mutual funds 2,647 (5) 2, ,647 (5) 2, Loans Financial assets held to maturity Total assets 64,321 (1,631) 62, ,321 (1,631) 62,690 12,217 (389) 11,828 Financial liabilities 1. Due to banks Due to customers (594) 1,089 1,023 (9,542) (8,519) 3. Debt securities in issue 1,683 (594) 1, ,683 Total liabilities 1,683 (594) 1, ,683 (594) 1,089 1,023 (9,542) (8,519)

131 Section 7 Net change in value of financial assets and liabilities at fair value Line item part C 7.1 Net change in value of financial assets/liabilities at fair value: breakdown attributable to the banking group Transactions/Income items Gains Gains on disposals Losses Losses on disposals Net result 2006 Net result Financial assets 18,986 11,965 (15,168) 1,386 14,397 39, Debt securities 2,518 1,539 (11,288) 1,255 (8,486) (1,349) 1.2 Equity instruments 6,916 8,556 (1,988) 7 13,477 16, Mutual funds 9,552 1,870 (1,892) 124 9,406 25, Loans Financial liabilities 30,202 1,661 (4,492) ,662 3, Debt securities 30,202 1,661 (4,492) ,662 3, Due to banks Due to customers Foreign currency financial assets and liabilities: exchange differences # # # # (1,543) 2, Derivatives 9, (31,265) 1,442 (23,500) (1,719) 4.1 Financial derivatives 9, (31,265) 1,442 (23,510) (1,719) - on debt securities and interest rates 4,786 - (30,017) 1,071 (26,302) (6,829) - on equity instruments and equity indices on currency and gold # # # # other 4, (1,248) 371 2,784 5, Credit derivatives Total 58,371 13,651 (50,925) 3,537 16,016 43,842 Assets and liabilities are measured at fair value solely by members of the banking group.

132 336 part C Section 8 - Net impairment adjustments Line item Net impairment adjustments to loans: breakdown attributable to the banking group Transactions/I ncome items Write-offs Adjustments Writebacks Type Portfolio Type Portfolio Other Interest Other writeba cks Interest Other writeba cks A. Due from banks ,646 1,646 3,230 B. Due from customers (28,281) (220,962) (40,406) 31, , (131,018) (97,315) Total (28,281) (220,962) (40,406) 31, , ,059 (129,372) (94,085) 8.2 Net impairment adjustments to financial assets available for sale: breakdown attributable to the banking group Transactions/Inco me items Adjustments Writebacks Type Type Write-offs Other Interest Other A. Debt securities B. Equity instruments (32) (25) # # (57) - C. Mutual funds - - # - D. Loans to banks E. Loans to customers Total (32) (25) - - (57) Net impairment adjustments to other financial assets: breakdown attributable to the banking group Transactions/I ncome items Writeoffs Adjustments Writebacks Type Portfolio Type Portfolio Other Interest Other writebacks Interest Other writebacks A. Guarantees given - (1,562) (934) - 2, (1,141) B. Credit derivatives C.Commitments to make loans D. Other transactions Total - (1,562) (934) - 2, (810) These adjustments were made solely by members of the banking group.

133 Section 9 Net premiums Line item 150 There are no amounts in this section. 337 part C Section 10 Net other insurance income/expense Line item 160 There are no amounts in this section.

134 338 Section 11 - Administrative costs Line item 180 part C 11.1 Payroll: breakdown Type of expense/segments Banking group Other businesses ) Employees 644, , ,133 a) wages and salaries 469, , ,938 b) social security charges 120, , ,269 c) termination indemnities ,688 d) pension expenses e) provision for termination indemnities 20,844-20,844 20,548 f) provision for post-retirement benefits and similar commitments 13,331-13,331 13,660 - defined contribution 9,525-9,525 10,532 - defined benefit 3,806-3,806 3,128 g) payments to external supplementary pension funds 12,116-12,116 11,064 - defined contribution 12,116-12,116 11,064 - defined benefit h) costs deriving from payment agreements based on own capital instruments i) other personnel benefits 8,959-8, ) Other personnel 2,069-2,069 8,764 3) Directors 6,307-6,307 4,118 Total 653, , , Average number of employees, by level: banking group Employees 11,285 11,082 a) Managers b) Total officials 2,660 2,559-3rd and 4th level 1,152 1,069 c) Other employees 8,479 8,400 Other personnel 20 6

135 Effective number of employees, by level: banking group Employees 11,206 11,362 a) Managers b) Total 3rd and 4th level supervisors 1,522 1,140 c) Total 1st and 2nd level supervisors 1,164 1,494 d) Other employees 8,362 8,595 Other personnel part C Forum Guido Monzani s.r.l., a consolidated company that is not a member of the banking group, had 2 employees throughout the year Post-retirement defined benefit plans: total costs Defined-benefit pension plans Other administrative costs: breakdown Taxation 89,743 87,109 Stamp duty 66,789 63,583 Taxes on stock exchange contracts 1,695 1,647 Local property tax (ICI) 3,576 3,378 Other 17,683 18,501 Other costs 315, ,449 Maintenance and repairs 37,904 33,233 Rental expense 35,826 35,963 Post office, telephone and telegraph 26,378 27,885 Data transmission fees and use of databases 26,898 20,734 Advertising 14,829 13,006 Legal and other consulting 26,178 24,794 Lease of IT hardware and software 13,338 20,478 Insurance 17,665 17,084 Cleaning of office premises 11,443 10,865 Printing and stationery 9,629 10,125 Energy and fuel 14,315 11,670 Transport 13,131 12,845 Staff training and expense refunds 8,017 8,146 Information and surveys 12,981 14,578 Security 9,392 8,854 Use of external data gathering and processing services 8,763 5,055 Membership fees 3,798 3,645 Condominium expenses 1,631 1,498 Sundry other 23,264 25,991 Total 405, ,558

136 340 Section 12 Net allowances for risks and charges Line item 190 part C 12.1 Net provisions for risks and charges: breakdown Type of risks and charges A. Provisions (50,896) (36,295) 1. for legal disputes (34,982) (27,011) 2. other (15,914) (9,284) B. Writebacks 11,278 5, for legal disputes 10,909 2, other 369 2,648 Total (39,618) (30,795) Section 13 - Net adjustments to property, plant and equipment Line item Net adjustments to property, plant and equipment: breakdown attributable to the banking group Assets/Income items Depreciation Impairment adjustments Writebacks Net result 2006 Net result 2005 A. Property, plant and equipment A.1 Owned (37,472) - - (37,472) (39,976) - for business purposes (34,232) - - (34,232) (37,657) - for investment purposes (3,240) - - (3,240) (2,319) A.2 Purchased under finance leases (1,402) - - (1,402) (1,957) - for business purposes (1,402) - - (1,402) (1,345) - for investment purposes (612) Total (38,874) - - (38,874) (41,933)

137 Section 14 - Net adjustments to intangible assets Line item Net adjustments to intangible assets: breakdown 341 part C attributable to the banking group Assets/Income items Amortisation Impairment adjustments Writebacks Net result 2006 Net result 2005 A. Intangible assets A.1 Owned (6,069) - - (6,069) (7,809) - internally generated other (6,069) - - (6,069) (7,809) A.2 Purchased under finance leases Total (6,069) - - (6,069) (7,809) Section 15 - Other operating charges and income Line item Other operating charges: breakdown Description/Amounts Reimbursement of interest for collections and payments settled through the clearing house 10,065 6,915 Amortisation of leasehold improvements reclassified to other assets 5,211 5,724 Out-of-period expense 2,064 2,749 Other charges 13,696 2,680 Total 31,036 18, Other operating income: breakdown Description/Amounts Commissions, rights and account expense recoveries 67,284 61,799 Rental income 8,506 7,726 Tax recoveries 78,175 72,410 Recovery of interest for collections and payments settled through the clearing house 11,025 8,405 Tax collection income - 2,340 Other income 28,039 22,297 Total 193, ,977

138 342 part C Section 16 - Share of profit (loss) of equity investments Line item Share of profit/loss of equity investments: breakdown Income item/segments Banking group Other businesses ) Companies under joint control Net result ) Companies subject to significant influence - A. Income 23,397-23,397 14, Revaluations 22, , Profit from disposals Writebacks Other positive changes 1,034-23,397 - B. Charges (745) - (745) (2,009) 1. Writedowns (346) - (346) (2,009) 2. Impairment write-downs (265) - (265) - 3. Loss from disposals (134) - (134) - 4. Other negative changes Net result 22,652-22,652 12,282 Total 22,652-22,652 12,282 Section 17 Net gains (losses) arising on fair value adjustments to property, plant and equipment and intangible assets Line item 250 There are no amounts in this section. Section 18 Adjustments to goodwill Line item Adjustments to goodwill: breakdown This amount comprises: impairment of Euro 955 thousand in the goodwill recorded in the financial of Sardaleasing s.p.a. following the purchase of a line of business from Leasinvest s.p.a.; impairment of Euro 258 thousand in the goodwill of Eurobanca del Trentino s.p.a..

139 Section 19 Gains (losses) on disposal of investments Line item part C 19.1 Profit (loss) from disposal of investments: breakdown Income item/segments Banking group Other businesses A. Buildings 1,719-1,719 1,877 - profit from disposals 1,723-1,723 1,946 - loss from disposals (4) - (4) (69) B. Other assets profit from disposals 1,313-1, loss from disposals (743) - (743) (95) Net result 2,289-2,289 2,081 Section 20 - Income taxes on current operations Line item Income taxes on current operations: breakdown Income item/segments Banking group Other businesses Current taxes (258,714) - (258,714) (218,566) 2. Change in prior period income taxes Reduction in current taxes Change in deferred tax assets (6,792) (6,792) (40,643) 5. Change in deferred tax liabilities (108) - (108) 27, Income taxes for the year (265,614) - (265,614) (231,723)

140 344 part C Section 21 Profit (loss) after tax on non-current assets held for sale Line item 310 There are no amounts in this section. Section 22 Net profit (loss) for the year attributable to minority interests Line item Details of line item 330 Net income for the attributable to minority interests Net income for the year attributable to minority interests 69,563 61,674 This line item mainly relates to the share of the results for the year attributable, based on the respective equity ratios, to the minority shareholders of Banco di Sardegna (Euro 31.6 million), of BP Lanciano e Sulmona (Euro 10.9 million), Crotone (Euro 7.2 million), Aprilia (Euro 4.2 million), Ravenna (Euro 4.8 million), as well as Banca della Campania (Euro 3.2 million). Section 23 Other information The information contained in the above sections is deemed to be detailed and complete, thus providing a full picture of the consolidated results.

141 Section 24 - Earnings per share IAS 33 requires disclosure of basic and diluted earnings per share (EPS), specifying how each is calculated. Basic earnings per share reflects the relationship between the earnings attributable to ordinary shareholders and the weighted average number of shares outstanding during the year. Diluted earnings per share reflects the relationship between the earnings used to calculate basic EPS, as adjusted by the economic effects of converting all outstanding convertible bonds into shares at year end, and the number of shares used to calculate basic EPS, as adjusted by the weighted average of the potential ordinary shares with a diluting effect deriving from the conversion of bonds outstanding at year end. The basic and diluted earnings per share information for 2005 is restated below, as required by para. 64 of IAS 33, following the bonus capital increase that took place in June. 345 part C Attributable earnings Weighted average ordinary shares Earnings per share (Euro) Attributable earnings Weighted average ordinary shares Earnings per share (Euro) Basic EPS 340, ,082, , ,011, Diluted EPS 354, ,747, , ,845, The following tables reconcile the weighted average number of ordinary shares outstanding used to calculate basis earnings per share with the number of ordinary shares used to calculate diluted earnings per share; they also reconcile net income for the year with the net income used to determine basic and diluted earnings per share Average number of ordinary shares (fully diluted) Weighted average number of outstanding ordinary shares for basic EPS calculation 233,082, ,011,037 Weighted dilutive effect of the potential conversion of convertible bonds 48,664,656 16,834,554 Weighted average number of outstanding ordinary shares for diluted EPS calculation 281,747, ,845, Other information Net income for the year 346, ,333 Allocations not attributable to the shareholders (6,597) (5,144) Net income for basic EPS calculation 340, ,189 Change in income and charges deriving from conversion 14,260 17,660 Net income for diluted EPS calculation 354, ,849

142 346 part C Lastly, as required by para. 66 of IAS 33, the basic and diluted consolidated earnings per share are restated below for the shares with normal enjoyment rights and for those carrying rights from December 2006, which were issued last December at the time of the Parent Bank's capital increase for cash. Weighted average Enjoyment 12/06 Normal enjoyment ordinary shares Attributable earnings Earnings per share (Euro) Attributable earnings Earnings per share (Euro) Basic EPS 233,082, , , Diluted EPS 281,747, , ,

143 Part D - SEGMENT INFORMATION 347 part D

144 348 part D This section of the analyses the economic and financial information of the Group by business segment, as required by IAS 14.In particular, the BPER Group has decided to present its results on the following basis: Primary segment: economic and financial information analysed by business segment Secondary segment: economic and financial information analysed by geographical area A. Primary segment The primary segment presents economic and financial information for the following business segments: Retail: commercial activity with the following customer segments - Small Businesses (individual and personal businesses) - Private (private individuals and entrepreneurs) Corporate: commercial activity with the following customer segments - Public Administrations - Financial companies - Non-resident, non-financial companies - Non-banking Group companies - Micro businesses - Large Corporate Finance: treasury, management of the Group's investment portfolio, access to financial markets and specialist operational support for the commercial network Corporate Center: corporate governance, strategic decisions and related guidelines (shareholders' equity, equity investments, etc.) and other activities not directly related to other business areas (acting as custodian bank, generation of rental income etc.) Other business segments: business segments of other Group companies that do not carry on banking activities

145 A.1 Distribution by business segment: income statement Based on the requirements established in IAS 14, the income statement by business sector contains the following information: Line item captions Retail Corporate Finance Corporate Center Other business segments Net interest income 684, ,284 7, , ,285,602 Net commission income 325, , , ,404 Income from banking activities 969, ,331 65, ,659 21,041 1,768,369 Segment revenues , ,181 65, ,659 20,439 1,639,168 Segment revenues , ,974 79, ,368 51,503 1,512,724 Operating costs (571,036) (198,928) (25,350) (171,531) (14,043) (980,888) Segment results , ,253 40,058 (5,463) 6, ,008 Segment results , ,310 65,764 42,328 9, ,730 The above line items have been allocated to the business segments using the information held on the management information system, which has been reconciled with the accounting system. Total 349 part D A.2 Distribution by business segment: balance sheet Based on the requirements established in IAS 14, the balance sheet by business sector contains the following information: Line item captions Retail Corporate Finance Corporate Center Other business segments Financial assets 4,951 2,727 6,134, ,132 7,123,045 Due from banks 4 13,112 3,821,185-65,747 3,900,048 Due from customers 10,905,704 20,160, ,354 31,274,014 Other assets 406, ,979 24,869 2,014, ,692 2,960,525 Total assets ,317,139 20,400,774 9,980,289 2,014,505 1,544,925 45,257,632 Total assets ,219,577 19,009,063 8,428,961 1,930,905 1,735,473 43,323,979 Due to banks - 372, , ,683 1,729,437 Due to customers 18,670,173 6,502,435 23, ,566 25,482,850 Other liabilities and equity 8,438,384 3,413,439 40,255 5,004,808 1,148,459 18,045,345 Total equity and liabilities ,108,557 10,288, ,828 5,004,942 1,856,708 45,257,632 Total equity and liabilities ,868,382 9,461,812 1,097,626 5,011,998 1,884,161 43,323,979 Balance sheet information has been allocated to the business segment using the criteria adopted for the allocation of the income statement. Total

146 350 part D B. Secondary segment The secondary segment analyses the economic and financial information into the following geographical areas: Italy Abroad The geographical areas are defined with reference to the residence of the individual operating units of the banks and group companies. Each bank/group company has been allocated in full to a single geographical area, as follows: BPER (Europe ) International, EmRo Finance and BPER International Advisory Company allocated to the Abroad geographical area. Other companies and Group banks allocated to the Italy geographical area Based on the requirements of IAS 14, the Income statement and the Balance Sheet for the BPER Group's geographical areas contain the following information: Income statement: Revenues by geographical area Balance sheet: Assets by geographical area B.1 Distribution by geographical area: income statement Line item captions Italy Abroad Total Income from banking activities 1,758,203 10,166 1,768,369 Segment revenues ,629,591 9,578 1,639,169 Segment revenues ,492,816 19,908 1,512,724 B.2 Distribution by geographical area: balance sheet Line item captions Italy Abroad Total Total assets ,259, ,860 45,257,632 Total assets ,413,892 1,950,564 43,323,979

147 PART E - INFORMATION ON RISKS AND RELATED HEDGING POLICY 351 part E

148 Section 1 Risks faced by the banking group 352 part E 1.1 Credit risk QUALITATIVE INFORMATION General aspects The established vocation of the Group, confirmed again in 2006, is to finance all the principal socio-economic players in its chosen territories. Multiple initiatives and innovations have focused on meeting the developing needs of the market, both in the Retail macrosegment and in the Corporate macrosegment. These activities, planned at Group level, have been implemented by all members of the Group, although with differing intensities and approaches having regard for the nature and requirements of their specific territories. In the Retail segment, the range of home mortgages to individuals has been further extended to cover repayments of up to 30 years; in addition, the range of personal loans and consumer credit products has been completely renewed. In the same area, special attention has been focused on placement of the BperCard Revolving credit card issued by the Consumer Division Banca di Sassari. With regard to Small Business customers, Group banks have confirmed their position as a point of reference in their local economies, especially in relation to firms operating in the commerce, tourism, business and personal services, and agricultural sectors. Business in the Corporate segment has developed both with regard to short-term loans, supporting the current activities of firms at a time of steady economic recovery, and in relation to long-term lending. In this area, special attention has been dedicated to supporting the growth and development of the more dynamic firms; in particular, Finprogex has been launched to finance internationalisation projects with loans backed by 70% guarantees from SACE S.p.A. As part of initial trials, credit ratings were used in a number of these cases to determine loan pricing. The importance of the confidi channel for guaranteeing the loans made to small and medium-sized businesses was confirmed over the past year, not least in the territories most recently entered by the Group. Significant support has also been provided to the construction industry, given the ongoing buoyancy of the market in this important economic sector. Again within the corporate segment, the Group has also worked intensively with partner companies that specialise in leasing and factoring transactions. Lastly, there has been further expansion in the area of special lending. Coordinated by a dedicated team within the Parent Bank, these loans meet the needs of medium and largesized companies, especially when faced with a change in business direction. 2. Credit risk management policies The Group attributes great importance to the management of credit risk, represented by the unexpected deterioration of the credit standing of a counterpart, in order to ensure adequate profitability in an environment of controlled risk, as well as to safeguard the financial strength and properly measure and disclose the level of risk generated by relations with customers. This explains the considerable efforts and investments made over time to improve our systems for the management, measurement and control of credit risk, thereby gradually coming into line with the best practice envisaged by the new Basel 2 Accord.

149 2.1 Organisational aspects The primary aspects of the process of credit risk management within the Group are based on a clear segregation of the lending functions, which report to the Loans Departments of each bank (working with reference to the guidelines established by the Parent Bank), from the functions that monitor first and second-level credit risk. At Parent Bank level, the Board of Directors is responsible for establishing the degree of aversion to overall risk applied by the banking group; the Board of Statutory Auditors and Group Audit are, on the other hand, responsible for assessing the adequacy and effectiveness of the system of internal controls and, therefore, the system adopted for the control of risks and risk management activities. The Parent Bank is responsible for ensuring proper compliance with risk control policies and procedures, while general management at subsidiary bank level works within the established guidelines. Specific offices within each bank monitor the individual accounts, manage defaulting situations and recover loans, again with reference to the guidelines established by the Parent Bank and, where appropriate, outsourcing certain activities to it. 2.2 Systems for managing, measuring and monitoring The Group uses many tools to measure and monitor credit risk in relation to both performing and non-performing loans: in addition to the normal techniques, a number of innovative tools are also being developed and tested internally. These include, in particular, the internal rating systems that are being worked on together by various business functions (especially those responsible for the measurement of risk), as part of work to comply with the requirements of the new Basel 2 Accord which has already been adopted in Italy. The objective, to be achieved in stages, is to implement and subsequently validate various advanced methodologies for the measurement of credit risk and the calculation of capital adequacy. The Parent Bank has started testing the internal rating system for small and medium-sized firms and backtesting the probability of default (PD) found with 2005 amounts, using the actual information available at the end of The numeric results of this analysis were in line with those envisaged by the Basel 2 Accord in terms of the reliability of the ratings attributed to customers; despite this, the system will be further improved by the addition of an expert system for the qualitative assessment of business customers, and a system that will enable account managers to make exceptions to the ratings proposed by the model, within predetermined limits and for good reason. With regard to the retail segment, the internal rating system for micro businesses and individuals has been released; this comprises a behavioural module used to determine a periodic rating for customers, and an acceptance module used when paying-out loans. The other credit risk parameters monitored are exposure at default (EAD) and loss given default (LGD). The operational model for LGD is used to determine the general loss provisions required in relation to performing loans. The loss coefficient is determined with reference to the recoveries and the costs incurred on non-performing positions over a period of years, as discounted using suitable rates and adjusted, using cure-rate methodology, to align the results with the definition of default used by the internal rating systems. This approach is already consistent with Basel 2 requirements, although it is now necessary to recover all relevant information regarding closed loan recovery actions, in order to achieve the standard of compliance required by the Bank of Italy. In this area, the Group is adopting innovative tools to build a database of all relevant information about current impaired loans needed to estimate easily and accurately the LGD. 2.3 Credit risk mitigation techniques One of the most significant aspects of the Basel 2 Accord consists of the broadening of the credit risk mitigation techniques considered when determining capital adequacy. This is accompanied by a more precise definition of the legal, economic and organisational requirements for the recognition of tools as suitable for this purpose. 353 part E

150 354 part E With reference to secured guarantees, the Group usually obtains first and/or other mortgages on residential and other property, as part of retail lending and loans to building firms, as well as liens on securities and cash. An internal procedure is being developed in relation to property mortgages, with a view to gathering information in a more organised fashion on the property assets of borrowers and on the property given in guarantee. This will be useful in future for assessing the quality of such guarantees, as required by the new regulations. The principal types of unsecured guarantees consist of specific guarantees and restricted omnibus guarantees, mainly given by entrepreneurs in favour of their companies and by parent companies in favour of their subsidiaries in the form of binding letters of patronage. The guarantees given by various guarantee consortiums in favour of their members firms are becoming more significant. 2.4 Impaired financial assets Impaired financial assets are managed with reference to a series of internal classifications based on the quality of the debtor and the risks associated with each transaction, as required by the supervisory regulations. The classification of each anomalous position is decided with reference to an internal regulation that governs in detail the level of monitoring required give the type of anomaly that has occurred: certain changes in status are automatic, while others are made after a subjective assessment of the performance of the positions concerned. The tools available identify on a timely basis any signs of deterioration in the relationship that might lead to its classification as an anomalous position. The consistency of the classification of an anomalous position with respect to the internal regulations is assured by automated periodic checks that apply these regulations to the entire population, comparing the results with the current classification. An assessment of the adequacy of the adjustments made with respect to the requirements of the internal regulations is also made in the same way. If the anomalous conditions cease, the position is reclassified to a less serious status after the completion of subjective and analytical assessments. These may result, in the best cases, in a return of the position to performing status. Similar monitoring is performed in relation to receivables that are past due by more than a given period of time.

151 QUANTITATIVE INFORMATION Lending quality A.1 Impaired and performing loans: size, adjustments, trends, economic and territorial distribution 355 part E A.1.1 Distribution of financial assets by portfolio and quality of lending (book values) Portfolio/quality Banking group Other businesses Total Nonperformin l Watchlist loans Restructured exposures Exposures past due Country risk Other assets Impaired loans 1. Financial assets held for trading ,373, ,373, Financial assets available for sale ,501 1,428, ,432, Financial assets held to maturity Due from banks ,932 3,884, ,900, Due from customers 469, ,229 44, , ,080, ,274, Financial assets at fair value ,322 1,313, ,316, Financial assets being sold , , Hedging derivatives Total , ,229 44, ,793 22,634 41,086, ,302,542 Total , ,273 90, ,288 14,590 39,237, ,432,386 Other A.1.2 Distribution of financial assets by portfolio and quality of lending (gross and net values) Portfolio/quality Gross exposure Impaired loans Specific General adjustments portfolio adjustments Net exposure Gross exposure Other assets General portfolio adjustments Net exposure Total (net exposure) A. Banking group 1. Financial assets held for trading # # 4,373,934 4,373, Financial assets available for sale ,432, ,432,067 1,432, Financial assets held to maturity Due from banks ,900, ,900,048 3,900, Due from customers 2,292,313 1,094,066 5,798 1,192,449 30,410, ,884 30,081,565 31,274, Financial assets at fair value # # 1,316,202 1,316, Financial assets being sold ,435-5,435 5, Hedging derivatives # # - - Total ,293,155 1,094,066 5,798 1,193,291 35,749, ,900 41,109,251 42,302,542 Total ,299,495 1,119,353-1,180,142 33,436, ,467 39,252,244 40,432,386

152 A.1.3 Cash and off-balance sheet exposures to banks: gross and net values 356 part E Type of exposure/amounts Gross exposure Specific adjustments General portfolio adjustments Net exposure A. Cash exposures A.1 Banking group a) Non-performing loans b) Watchlist loans c) Restructured exposures d) Exposures past due e) Country risk 18,862 # ,671 f) Other assets 5,460,801 # - 5,460,801 Total 5,479, ,479,472 B. Off-balance sheet exposures B.1 Banking group a) Impaired b) Others 1,005,069 # 1,123 1,003,946 Total 1,005,069-1,123 1,003,946 A.1.4 Cash exposures to customers: dynamics of gross impaired loans and loans subject to country risk Type Nonperforming loans Watchlist loans Restructured exposures Exposures past due Country risk A. Opening gross exposure ,489 including: sold but not derecognised B. Increases ,862 B1. transfers from performing loans B2. transfers from other categories of impaired exposure B3. other increases ,862 C. Decreases ,489 C1. transfers to performing loans ,248 C.2 write-offs C3. collections C4. proceeds from disposals C.5 transfers to other categories of impaired exposure C.6 other decreases D. Closing gross exposure ,862 including: sold but not eliminated from the balance sheet

153 A.1.5 Cash exposures to customers: dynamics of total writedowns Type Nonperforming loans Watchlist loans Restructure d exposures Exposures past due Country risk A. Total opening adjustments ,837 including: sold but not eliminated from the balance sheet B. Increases B.1 adjustments B.2 transfers from other categories of impaired exposure B.3 other increases C. Decreases ,646 C.1 write-backs on valuation ,646 C.2 write-backs due to collections C.3 write-offs C.4 transfers from other categories of impaired exposure C.5 other decreases D. Total closing adjustments including: sold but not derecognised part E A.1.6 Cash and off-balance sheet exposures to customers: gross and net values Type of exposure/amounts Gross exposure Specific adjustments General portfolio adjustments Net exposure A. Cash exposures A.1 Banking group a) Non-performing loans 1,412, , ,893 b) Watchlist loans 627, , ,229 c) Restructured exposures 62,131 17,755-44,376 d) Exposures past due 190,591-5, ,793 e) Country risk 4,156 # 193 3,963 f) Other assets 35,892,527 # 329,516 35,563,011 Total 38,189,838 1,094, ,507 36,760,265 B. Off-balance sheet exposures B.1 Banking group a) Impaired 45,299 8,439-36,860 b) Others 6,785,644 # 45 6,785,599 Total 6,830,943 8, ,822,459

154 358 part E A.1.7 Cash exposures to customers: dynamics of gross impaired loans and loans subject to country risk Type Nonperforming loans Watchlist loans Restructure d exposures Exposures past due Country risk A. Opening gross exposure 1,347, , , ,644 4,211 including: sold but not derecognised 19, B. Increases 339, ,595 19,996 89,181 3,736 B.1 transfers from performing loans 63, ,160 9,470 85,598 - B.2 transfers from other categories of impaired exposure 215,374 22,155 8,076 1,779 - B.3 other increases 59,931 55,280 2,450 1,804 3,736 C. Decreases 273, ,422 81, ,234 3,791 C.1 transfers to performing loans 1, ,616 17,398 64, C.2 write-offs 131,590 1,335 14, C.3 collections 120, ,210 38, C.4 proceeds from disposals , C.5 transfers to other categories of impaired exposure 5, ,066 5,691 22,179 - C.6 other decreases 14,258 3,097 3,120 31,209 3,686 D. Closing gross exposure 1,412, ,621 62, ,591 4,156 including: sold but not derecognised 19, A.1.8 Cash exposures to customers: dynamics of total writedowns Type Nonperforming loans Watchlist loans Restructured exposures Exposures past due Country risk A. Total opening adjustments 937, ,175 32,501 2, including: sold but not derecognised 18, B. Increases 250,360 72,841 12,918 3, B.1 adjustments 186,965 71,292 11,762 3, B.2 transfers from other categories of impaired exposure 38, , B.3 other increases 24,989 1, C. Decreases 244,762 86,624 27, C.1 write-backs on valuation 49,876 33,436 5, C.2 write-backs due to collections 47,524 8,905 5, C.3 write-offs 131,590 1,335 14, C.4 transfers to other categories of impaired exposure 1,082 37, C.5 other decreases 14,690 5, D. Total closing adjustments 942, ,392 17,755 5, including: sold but not derecognised 18, A.2 Classification of exposures based on external and internal ratings A.2.1 Distribution of cash and "off-balance sheet" exposures by external rating class (book values) Exposures with external ratings are not significant. A.2.2 Distribution of cash and "off-balance sheet" exposures by internal rating class (book values) Information on the classes of internal rating are illustrated in para. 2.2.

155 A.3 Distribution of guaranteed exposures by type of guarantee A.3.1 Guaranteed cash exposures to banks and customers Personal guarantees (2) Total (1+2) Secured guarantees (1) Amount of exposure Credit derivatives Guarantees given Banks Other parties Other public entities Governme nts Banks Other parties Other public entities Governm ents Properties Securities Other assets 1. Guaranteed exposures to banks 23, ,389 18,502 24, fully guaranteed 23, ,389 18,502 24, partially guaranteed Guaranteed exposures to customers 23,946,659 12,401,068 1,020, , , ,594 10,297,854 24,202, fully guaranteed 20,095,315 12,383, , , ,460 58,860 9,066,314 22,460, partially guaranteed 3,851,344 18, ,030 40, , ,734 1,231,540 1,742, part E

156 360 part E A.3.2 Guaranteed off-balance sheet exposures to banks and customers Secured guarantees (1) Personal guarantees (2) Total (1+2) Amount of exposure Credit derivatives Guarantees given Banks Other parties Other public entities Governme nts Banks Other parties Other public entities Govern ments Properties Securities Other assets 1. Guaranteed exposures to banks fully guaranteed partially guaranteed Guaranteed exposures to customers 527,522 16,499 16,875 1, , , , fully guaranteed 386,847 16,499 14,778 1, , , , partially guaranteed 140,675-2, ,681 52,907

157 A.3.3 Guaranteed impaired cash exposures to banks and customers Total Excess fair value, guarant ee Guarantees (Fair Value) Guarante ed exposure Amount of exposure Personal guarantees Secured guarantees Credit derivatives Endorsement credits Other parties Nonfinancial compan ies Insurance companies Banks Financial business es Other public entities Govern ments and central banks Other parties Nonfinancial compani es Insurance companies Banks Financial business es Other public entities Govern ments and central banks Other asset Secu rities Proper ties 1. Guaranteed exposures to banks % or more between 100% and 150% between 50% and 100% up to 50% Guaranteed exposures to customers 688, , ,216 23,279 6, , , , % or more 458, , ,347 7,687 1, , , between 100% and 150% 146, ,573 4,075 9,371 3, , , between 50% and 100% 58,720 53, ,219 1, , ,583 54,291 1, up to 50% 24,671 10,903-1, , ,039 9, part E

158 362 part E A.3.4 Guaranteed impaired off-balance sheet exposures to banks and customers Total Excess fair value, guarantee Guarantees (fair value) Guaranteed exposure Amount of exposure Secured guarantees Personal guarantees Credit derivatives Endorsement credits Other parties Nonfinancial com panies Insurance companies Banks Financial businesses Other public entities Govern ments and central banks Other parties Nonfinancial com panies Insurance companies Banks Financial businesses Other public entities Govern ments and central banks PropertiesSecurities Other assets 1. Guaranteed exposures to banks % or more between 100% and 150% between 50% and 100% up to 50% Guaranteed exposures to customers 3,420 2, ,990 2, % or more between 100% and 150% 2,306 2, ,701 2, between 50% and 100% up to 50%

159 Distribution and concentration of lending B.1 Distribution by sector of cash and off-balance sheet exposures to customers Governments and central banks Other public entities Financial businesses Insurance companies Non-financial companies Other parties Exposures/ Counterparts Net exposure Portfolio adjustme nts Specific adjustme nts Gross exposure Net exposure Portfolio adjustme nts Specific adjustm ents Gross exposure Net exposure Portfolio adjustme nts Specific adjustme nts Gross exposure Net exposure Portfolio adjustme nts Specific adjustme nts Gross exposure Net exposure Portfolio adjustme nts Specific adjustme nts Gross exposure Net exposure Portfolio adjustme nts Specific adjustme nts Gross exposure A. Cash exposures A.1. Non-performing loans ,873 20, ,119, , , , ,495-81,248 A.2. Watchlist loans , ,607 33,113 23,220-9, ,013 95, ,119 93,689 14,079-79,610 A.3 Restructured exposures , , ,385 16,784-35, A.4 Exposure past due ,132-3, ,535 71,976-2,197 69,779 A.5 Other exposures 4,388,630 # 915 4,387, ,080 # 2, ,829 2,445,623 # 60,014 2,385,609 90,355 # 4 90,351 20,306,166 # 213,585 20,092,581 8,335,829 # 52,940 8,282,889 Total A 4,388, ,387, , , ,459 2,510,168 44,746 60,015 2,405,407 90, ,355 22,093, , ,182 21,032,549 8,773, ,964 55,137 8,513,780 B. Off-balance sheet exposures B.1 Non-performing loans ,148 3,333-5,815 6,507 1,919-4,588 B.2 Watchlist loans ,112 2,895-17,217 1, ,371 B.5 Other impaired assets , ,396 4, ,440 B.4 Other exposures 52,517 # - 52,517 18,012 # - 18, ,036 # - 177,036 2,900 # - 2,900 4,889,586 # - 4,889,586 1,645,611 # 45 1,645,566 Total B 52, ,517 18, , , ,051 2, ,900 4,922,242 6,228-4,916,014 1,658,147 2, ,655,965 Total ,441, ,440, , , ,471 2,687,293 44,820 60,015 2,582,458 93, ,255 27,016, , ,182 25,948,563 10,432, ,101 55,182 10,169,745 Total ,941, ,941, , , ,797 3,844,002 56,584 56,570 3,730,848 79,928 2,037-77,891 19,792, , ,734 19,115,728 8,878, ,298 87,918 8,266,388 The comparative information does not include off-balance sheet exposures. B.2 Distribution of loans to non-financial businesses (a) other services for sale 3,826,388 3,512,679 (b) wholesale and retail services, recoveries and repairs 3,695,329 3,192,762 (c) construction and public works 3,313,820 2,860,654 (d) food, beverages and tobacco-based products 913,753 1,033,338 (e) agricultural and industrial machinery 658,578 1,149,922 (f) other sectors 8,397,783 7,232,866 Total 20,805,651 18,982, part E

160 364 part E B.3 Territorial distribution of the cash and off-balance sheet exposures to customers Italy Other EU countries America Asia Rest of the world Exposures/Geographic al areas Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure A. Cash exposures A.1. Non-performing loans 1,402, ,880 10, A.2. Watchlist loans 599, ,416 28,247 5, A.3 Restructured exposures 58,332 41,945 3,799 2, A.4 Exposure past due 190, , A.5 Other exposures 35,025,653 34,701, , , , ,054 3,749 3,747 51,083 51,042 Total A 37,275,773 35,886, , , , ,055 3,749 3,747 51,083 51,042 B. Off-balance sheet exposures B.1 Non-performing loans 15,749 10, B.2 Watchlist loans 21,715 18, B.3 Other impaired assets 7,835 7, B.4 Other exposures 6,573,477 6,573, , ,244 2,688 2, Total B 6,618,776 6,610, , ,244 2,688 2, Total ,894,549 42,496, , , , ,743 3,796 3,794 51,271 51,188 Total ,643,411 34,275,343 2,165,639 2,121, , ,506 1,696 1,605 49,320 49,319 The comparative information for 2005 does not include off-balance sheet exposures.

161 B.4 Territorial distribution of cash and off-balance sheet exposures to banks Italy Other EU countries America Asia Rest of the world Exposures/Geographi cal areas Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure A. Cash exposures A.1. Non-performing loans A.2. Watchlist loans A.3 Restructured exposures A.4 Exposure past due A.5 Other exposures 4,968,751 4,968, , ,361 28,255 28,255 23,047 23,047 81,058 81,058 Total 4,968,751 4,968, , ,361 28,255 28,255 23,047 23,047 81,058 81,058 B. Off-balance sheet exposures B.1 Non-performing loans B.2 Watchlist loans B.3 Other impaired assets B.4 Other exposures 898, ,637 72,289 71,912 2,861 2,843 29,847 29,138 1,435 1,416 Total B 898, ,637 72,289 71,912 2,861 2,843 29,847 29,138 1,435 1,416 Total ,867,388 5,867, , ,273 31,116 31,098 52,894 52,185 82,493 82,474 Total ,266,857 3,265, , ,423 31,639 31,361 5,718 5, The comparative information for 2005 does not include off-balance sheet exposures. B.5 Significant risks (pursuant to supervisory regulations) a) Amount - 1,147,864 b) Number part E

162 366 part E C. Securitisation transactions and disposal of assets C.1 Securitisation transactions No additional «own» securitisations were launched during the fiscal year 2006 QUALITATIVE INFORMATION QUANTITATIVE INFORMATION C.1.1 Exposures deriving from securitisations, analysed by type of underlying asset Cash exposures Guarantees given Credit lines Type of underlying asset/exposures Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Senior Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure A. With own underlying assets a) Impaired 21,583 21, ,140 93, , , ,234 21, b) Others B. With underlying assets of third parties a) Impaired b) Others 103, ,846 51,214 51,214 9,637 9,637 1,567 1,

163 C.1.2 Exposures deriving from the principal own securitisations, analysed by type of asset securitised and by type of exposure Cash exposures Guarantees given Credit lines Type of asset securitised/exposures Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value A. Derecognised in full A.1 Mutina Srl - non-performing loans 21, ,535 87, , , A.2 Sardegna N 1 Lim. - mortgage loans , B. Derecognised in part C. Not derecognised part E

164 368 part E C.1.3 Exposures deriving from the principal third party securitisations, analysed by type of asset securitised and by type of exposure Cash exposures Guarantees given Credit lines Type of underlying assets/exposure Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Senior Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value 2 A.1A.1. ZOO II (Cl.A2) 2, ABS A.2 Cremonini Srl 10, trade receivables A.3 Ryder Evergreen (Cl.A) 2, ABS A.4 ABest 3 (Cl. A) loans A.5 Aphex Capital Plc 5, ABS A.6 Adagio I CLO (A1) 3,020 (4) loans A.7 Arcobaleno Finance 1, loans A.8 Line AAA Srl (Cl. A) 501 (1) consumer loans A.9 Asgard CDO (Cl.A1) 2,983 (15) ABS A.10 Asgard CDO (Cl.B1) 2,990 (9) ABS A.11 Arran Residential 2,015 (1) residential mortgage loans A.12 Berica Res. (Cl.A2) 2, residential mortgage loans A.13 Eurocredit (I-A) 1, securities

165 Cash exposures Guarantees given Credit lines Type of underlying assets/exposure Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value A.14 Harbourmaster 2 (A1) 4,010 (16) loans A.15 Lombarda Lease Fin. 983 (2) leasing A.16 Dryden , loans A.17 Italease Fin.6 (Cl.A2) 4, leasing A.18 Euromax V 1, ABS A.19 Tricolore Funding Srl 5, leasing A.20 Harbourmaster 8 2, loans A.21 Credico Finance 2 1, mortgage loans A.22 Sintonia Finance 4,258 (4) mortgage loans A.23 Berica MBS (Cl.3A) 2,242 (7) mortgage loans A.24 Residence ,718 (8) mortgage loans A.25 Bancaja 6 (Cl.A2) 1,544 (3) mortgage loans A.26 Siena Mortgages ,559 (5) mortgage loans A.27 Herme 10 (Cl.A) 2, mortgage loans 369 part E

166 370 part E Cash exposures Guarantees given Credit lines Type of underlying assets/exposure Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value A.28 Orio Finance (Cl.A) 4,632 (11) mortgage loans A.29 Asti Finance Srl (Cl.A) 2, mortgage loans A.30 Sestante Finance Srl 1,959 (1) mortgage loans A.31 Sestante Finance 3 Srl 3, mortgage loans A.32 Pallas II (Cl.A2) 1, ABS A.33 Pallas II (Cl.B) 1, ABS A.34 Prospero CLO II 1,520 (17) loans A.35 Sunrise 1 (Cl.A) 1, consumer loans A.36 Vallauris CLO (A) 1,015 (1) loans A.37 Voba Finance , residential mortgage loans A.38 FIPF TV 05/23 A public buildings A.39 SCCI TV 7/16 S8 ABS 1, contribution credits A.40 SCCI TV 7/19 S10 ABS 1, contribution credits A.41 Millesime CDO - - 2,959 (50) ABS

167 Cash exposures Guarantees given Credit lines Type of underlying assets/exposure Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value A.42 Ryder Evergreen ABS A.43 Arran Residential - - 1,511 (1) residential mortgage loans A.44 Bancaja 9 (Cl.B) - - 2,001 (4) residential mortgage loans A.45 DMPL IV (Cl.B) - - 1, , mortgage loans A.46 Bosphorous Fin.Serv. - - payment orders A.47 Geldilux Ltd - - 2, loans A.48 Astrea (A) - - 1,601 (2) mortgages and other loans A.49 Harbourmaster 2 (B1) - - 1,004 (1) loans A.50 Coast Inv. Cl.B securities A.51 Coast Inv. Cl.A securities A.52 Ulisse 1 SpA (Cl.B) mortgage loans A.53 Italease Fin.6 (Cl.B) - - 1, leasing A.54 Berica Res. (Cl.B) - - 2, residential mortgage loans A.55 Tricolore Funding Srl - - 2, leasing 371 part E

168 372 part E Cash exposures Guarantees given Credit lines Type of underlying assets/exposure Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value A.56 Italease Fin.7 (Cl.B) - - 1,001 (1) leasing A.57 Delphinus 2003-I - - 1,528 (7) mortgage loans A.58 Dryden , loans A.59 UCI 5 B (2) mortgage loans A.60 Atlantes Mortgages (2) mortgage loans A.61 Bancaja 6 (Cl.B) - - 1,015 (2) mortgage loans A.62 Siena Mortgages ,016 (2) mortgage loans A.63 Harbourmaster , loans A.64 Orio Finance (Cl.B) (1) mortgage loans A.65 Asti Finance Srl (Cl.B) mortgage loans A.66 Auburn Securities - - 2,245 (2) mortgage loans A.67 Granite Mortgages - - 1,509 (1) mortgage loans A.68 Sestante Finance mortgage loans A.69 Delphinus 2006-I - - 1, mortgage loans

169 Cash exposures Guarantees given Credit lines Type of underlying assets/exposure Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Net exposure Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value Adjustme nts/ writebacks Book value A.70 Chalet Finance (Cl.B) - - 2,015 (5) mortgage loans A.71 Haus Ltd - - 2,022 (9) mortgage loans A.72 Sagres Douro II (B) - - 1, residential mortgage loans A.73 Sagres Douro II (C) - - 2,019 (1) residential mortgage loans A.74 Sunrise 1 (Cl.B) - - 1,004 (1) consumer loans A.75 Taurus (B) - - 1,502 (3) commercial mortgage loans A.76 Vallauris CLO (B) - - 2,030 (4) loans A.77 Voba Finance , residential mortgage loans A.78 ZOO ABS BV (Combo) , ABS A.79 ESI ,003 (33) loans A.80 Jupiter Finance ,449 (13) loans A.81 Astrea (B) mortgages and other loans A.82 Sintonia TV 03/30 4, mortgage loans 373 part E

170 C.1.4 Exposures to securitisations analysed by portfolio and by type 374 Exposure/Portfolio Trading At fair value Available for sale Held to maturity Loans * part E 1. Cash exposures , ,445-93, , ,685 - Senior , , , ,296 - Mezzanine , ,178 39,371 - Junior - - 9,637-93, , , Off-balance sheet exposures , , ,981 - Senior , ,240 1,750 - Mezzanine Junior ,231 (*) By convention, this column includes the off-balance sheet exposures relating to Guarantees given and credit lines. C.1.5 Total amount of the securitised assets underlying junior securities or other forms of credit enhancement Assets/Values Standard securitisations Synthetic securitisations A. Own underlying assets 220,926 - A.1 Derecognised in full 220, Non-performing loans 220,926 # 2. Watchlist loans - # 3. Restructured exposures - # 4. Exposures past due - # 5. Other assets - # A.2 Derecognised in part Non-performing loans - # 2. Watchlist loans - # 3. Restructured exposures - # 4. Exposures past due - # 5. Other assets - # A.3 Not derecognised Non-performing loans Watchlist loans Restructured exposures Exposures past due Other assets - - B. Underlying assets of third parties 113,300 - B.1 Non-performing loans - - B.2 Watchlist loans - - B.3 Restructured exposures - - B.4 Exposures past due - - B.5 Other assets 113,300 - The multi-originator transactions known as "Mutina" was arranged in 2002, with the securitisation of non-performing loans granted by nine group banks. The characteristics of this operation were described in detail in prior years. Although the securitisation does not change the Group's risk profile, it does make it possible: to improve the composition of assets held by the originator banks as well as by the Group as a whole; to make the recovery strategy more efficient and standardised by centralising this activity within a team of legal experts; to reduce costs and to exercise a rigorous, direct control over the lending positions most at risk.

171 C.1.6 Interest in vehicle company Company name Head office Interest % Mutina s.r.l. Modena 90% ABF Finance s.r.l. Milan 49% Mutina s.r.l. is a member of the BPER banking group. C.1.7 Assets of servicer - collections of securitised loans and reimbursement of securities issued by the vehicle company Percentage of securities redeemed (at year end) Vehicle company Securitised assets Loan collections during the year Senior Mezzanine Junior Performing assets Impaired loans Performing assets Impaired loans Performing assets Performing Impaired loans Performing Impaired loans Impaired loans 220,926-33, % % , , % Mutina s.r.l. ABF Finance s.r.l. 375 part E

172 376 part E C.2 Transfers C.2.1 Financial assets sold but not derecognised Due from banks Due from customers Total Financial assets held to maturity Financial assets held for trading Financial assets at fair value Financial assets available for sale Technical forms/portfolio Financial assets sold and recognised in full (full value) Financial assets sold and recorded in part (book value) Financial assets sold and recorded in full (book value) Financial assets sold and recognised in full (full value) Financial assets sold and recorded in part (book value) Financial assets sold and recorded in full (book value) Financial assets sold and recognised in full (full value) Financial assets sold and recorded in part (book value) Financial assets sold and recorded in full (book value) Financial assets sold and recognised in full (full value) Financial assets sold and recorded in part (book value) Financial assets sold and recorded in full (book value) Financial assets sold and recognised in full (full value) Financial assets sold and recorded in part (book value) Financial assets sold and recorded in full (book value) Financial assets sold and recognised in full (full value) Financial assets sold and recorded in part (book value) Financial assets sold and recorded in full (book value) 3,134,383 A. Cash assets 1,977, , , , , ,533, Debt securities 1,977, , , , Equity instruments # # # # # # # # # - 3. Mutual funds # # # # # # # # # 600, Loans , , Impaired loans B. Derivatives # # # # # # # # # # # # # # # - Total ,977, , , , , ,134,383 Total ,159, , , , ,137,742 C.2.2 Financial liabilities relating to financial assets sold but not derecognised Total Due from customers Due from banks Financial assets held to maturity Financial assets available for sale Financial assets at fair value Liabilities/Portfolio assets Financial assets held for trading 1. Due to customers 1,662, ,174 92, , ,984 3,135,369 a) for assets recorded in full 1,662, ,174 92, , ,984 3,135,369 b) for assets recorded in part Due to banks 308,444 9,111 60, ,842 a) for assets recorded in full 308,444 9,111 60, ,842 b) for assets recorded in part Total ,971, , , , ,984 3,513,211 Total ,194, ,994 22, ,343 48,455 1,954,314

173 1.2 Market risk Interest rate risk - Trading portfolio reported for supervisory purposes QUALITATIVE INFORMATION A. General aspects 377 part E As a primary activity, the Group trades on own account. The trading portfolio does not normally include hybrid or innovative derivatives. Arbitrage and short-term speculative activity with regard to listed derivatives are highly marginal with respect to routine trading on own account. The trading portfolio is managed to take account of the interest rate risk associated with the overall asset/liability situation. The underlying strategy for trading on own account is to maximise the risk/yield profile of the trading portfolio, considering both the rate risk element and the credit risk element. The size of the trading portfolio is closely linked with the liquidity position of the treasury function. B. Management and measurement of interest rate risk Implementation of the new Value at Risk (VaR) system for measuring market risk was completed during the second half of 2006, giving the Banca Popolare dell Emilia Romagna Group a system of daily controls in line with market standards. VaR represents the estimated maximum potential loss, determined based on probabilities, that may be suffered by the aggregate concerned over a given time horizon (depending on the degree of liquidity of the portfolio) at a pre-determined level of probability (consistent with the investor's degree of risk aversion). The methodology used to calculate the VaR belongs to the variance-covariance class of models (which approximates well the level of risk inherent in the aggregates analysed, as long as the transactions with a non-linear pay-off comprise only a minimal part of the portfolio), whereby the overall risk depends on the sensitivity of each position to changes in market factors, the volatility of their yields and the degree of correlation between them. The methodologies used to monitor market risks also include an analysis of sensitivity based on parallel shifts (deterministic approach) in the market rate curves. Currently, the daily calculation of Value at Risk makes reference to two distinct time horizons, in order to meet both regulatory and operational requirements. An analysis is performed with a 10-day time horizon and a 99% confidence interval in order to satisfy the Bank of Italy's requirements (Circular 229 dated 21 April 1999 and subsequent amendments) for models that are used to calculate capital adequacy in relation to market risk. This is supported by a further analysis with the same confidence interval, but with a daily time horizon, both to monitor the dynamics of market risk in relation to the Bank's portfolio and to provide a consistent dataset to recognising profits and losses for this aggregate. This model is only used for internal management purposes and is not involved in the calculation of the capital adequacy requirements regarding market risk. Risk control activities are centralised within the Parent Bank and are carried out by a dedicated Risk Monitoring team. Periodic information is assured by the distribution of a specific set of daily and monthly reports.

174 378 part E QUANTITATIVE INFORMATION 2. Trading portfolio reported for supervisory purposes: internal models and methodologies for the analysis of sensitivity The VaR determined over time horizons of ten days and one day is set out below, in relation to the rate risk associated with the trading portfolio reported for supervisory purposes as of 31 December Descriptive data VaR Time horizon: 10 days Confidence interval: 99% Type of operation Present value VaR Var/Present Value VaR Time horizon: 1 day Confidence interval: 99% VaR Var/Present Value Bot 1,170, % % Btp 400,653 1, % % Cct 1,220, % Other government securities 873, % % Bonds 790,969 2, % % Derivatives/Transactions to be settled 30,657 1, % % Effect of diversification (3,244) (1,025) Total portfolio 4,486,119 2, % % The value of the trading portfolio as of 31 December 2006 given a parallel shift of +/- 100 basis points (sensitivity analysis) is set out below bp -100 bp 31-Dec-06 (23,154) 23, Dec-05 (63,020) 67,690

175 1.2.2 Interest rate risk - Banking book QUALITATIVE INFORMATION 379 A. General aspects, management and measurement of interest rate risk The interest rate risk faced by the Group's banking book derives from the routine transformation of maturities typical of banking activities and, specifically, reflects mismatches between balances sensitive to changes credit and debit interest rates, in terms of amount, maturity, duration and rate. The difference sensitivity of funding and lending gives rise to two types of risk: the first, an earnings risk, relates to the volatility of future cash flows and, consequently, affects the expected interest margin; the second, an equity risk, relates to changes in the economic value of shareholders' equity. The measurement methodology is based on indicators of the sensitivity of the interest margin and the economic value of shareholders' equity to uniform parallel changes in market interest rates over a time horizon of 12 months. This procedure is applied to each monthly gap between assets and liabilities arising within this period of time. Great importance is attached to the management of demand items without a contractuallydefined maturity, which have a delayed and partial reaction to changes in market rates. For these, the model assumes a holding period of 5 years and considers specific statistical parameters, drawn from an analysis of time-series information (beta, viscosity, present value, average duration), that describe their dynamics in the various market scenarios analysed. The analysis of interest-rate risk is reported each month to top management, the Board of Statutory Auditors and the functional departments concerned. Currently, the analysis of asset & liability management is produced using a static model. Work is now in progress to implement a new ALM system that takes dynamic measures of the exposure to interest-rate risk into account, consistent with the latest, more sophisticated monitoring requirements. part E B. Fair value hedges As mentioned earlier, the Group arranges operational hedges against the risk of changes in fair value, which are recognised for accounting purposes using the Fair Value Option. C. Cash flow hedges The Group does not arrange any cash flow hedges.

176 380 part E QUANTITATIVE INFORMATION 2. Banking book: internal models and other methodologies for the analysis of sensitivity Year end (31/12/2006) and trend data (minimum, average, maximum) for the year is provided below in relation to the change in the interest margin on the banking book following a parallel shift of +/-100 basis points bp -100 bp 31-Dec-06 59,968 (34,869) MAX 66,403 (41,113) MIN 43,238 (18,745) AVERAGE 58,398 (34,010) 31-Dec-05 39,430 (16,270) Year end (31/12/2006) and annual trend (minimum, maximum, average) information in relation to changes in the value of the banking book due to a parallel shift of +/- 100 basis points (sensitivity analysis) bp -100 bp 31-Dec ,842 (317,932) MAX 331,842 (317,932) MIN 278,701 (262,610) AVERAGE 315,547 (301,398) 31-Dec ,300 (226,640)

177 1.2 Price risk - Trading portfolio reported for supervisory purposes QUALITATIVE INFORMATION 381 A. General aspects The Group makes medium-term speculative investments in the stock markets, in commodity derivatives, in mutual funds and, to a margin extent, in hedge funds. This activity is however just a small part of the transactions carried out in the bond markets. The objective of the investment strategy underlying trading in these financial instruments is to maximise the overall risk/yield profile via appropriate diversification. B. Management and measurement of price risk The daily monitoring and control of the price risk associated with the trading portfolio for supervisory purposes is performed via the Value-at-Risk (VaR) analyses described in the section entitled Interest-rate risk trading portfolio for supervisory purposes. Specifically, the risk related to shares is estimated for each position with respect to a global or sector benchmark index, while the estimate for individual funds is made with reference to a set of risk factors that reflect the management strategy adopted. The overall risk is then determined with reference to the volatility and the correlation between the various risk factors. The Parent Bank's Risk Monitoring team determines the exposure to price risk each day and summarises it monthly in a specific VaR report. part E

178 382 part E QUANTITATIVE INFORMATION 1. Trading portfolio reported for supervisory purposes: cash exposures in equities and mutual funds Type of exposure/amounts Listed Book value Unlisted A. Equity instruments 6,001 - A.1 Shares 6,001 - A.2 Innovative capital instruments - - A.3 Other forms of capital - - B. Mutual funds 17 - B.1 Italian law open-end harmonised open end, not harmonised closed end reserved hedge funds - - B.2 Other EU nations harmonised open end, not harmonised closed end, not harmonised - - B.3 Non-EU nations open end closed end - - Total ,018 - Total , Trading portfolio for supervisory purposes: internal models and other methodologies for the analysis of sensitivity The VaR determined over time horizons of ten days and one day is set out below, in relation to the price risk associated with the trading portfolio reported for supervisory purposes as of 31 December Descriptive data VaR Time horizon: 10 days Confidence interval: 99% Type of operation Present value VaR Var/Present Value VaR Time horizon: 1 day Confidence interval: 99% VaR Var/Present Value Equity instruments 6, % % Mutual funds and Sicavs 5, % % Derivatives/Transactions to be settled Effect of diversification (43) (13) Total portfolio 11, % %

179 1.2.4 Price risk - Banking book QUALITATIVE INFORMATION 383 A. General aspects, management and measurement of price risk This portfolio mainly comprises shares classified as available for sale, mutual funds and SICAVs. The portfolio is monitored using the VaR methodology described in the section entitled Interest-rate risk trading portfolio for supervisory purposes with the further indications set out in the section entitled Price risk trading portfolio for supervisory purposes. The Parent Bank's Risk Monitoring team determines the exposure to price risk each day and summarises it monthly in a specific VaR report. part E B. Hedging of price risk The VaR determined over time horizons of ten days and one day is set out below, in relation to the price risk associated with the banking book as of 31 December 2006.

180 QUANTITATIVE INFORMATION Banking book: cash exposures in equities and mutual funds part E Items Listed Book value Unlisted A. Equity instruments 446, ,224 A.1 Shares 446, ,214 A.2 Innovative capital instruments - - A.3 Other forms of capital - 10 B. Mutual funds 339,164 98,107 B.1 Italian law 264,955 51,508 - open-end harmonised 206,995 19,810 - open end, not harmonised 32,607 7,397 - closed end 23,076 8,510 - reserved - 15,791 - hedge funds 2,277 - B.2 Other EU nations 74,209 39,395 - harmonised 54,405 2,068 - open end, not harmonised 14,365 21,300 - closed end, not harmonised 5,439 16,027 B.3 Non-EU nations - 7,204 - open end - 7,204 - closed end - - Total , ,331 Total , , Banking book: internal models and other methodologies for the analysis of sensitivity The VaR determined over time horizons of ten days and one day is set out below, in relation to the price risk associated with the trading portfolio reported for supervisory purposes as of 31 December Descriptive data VaR Time horizon: 10 days Confidence interval: 99% Type of operation Present value VaR Var/Present Value VaR Time horizon: 1 day Confidence interval: 99% VaR Var/Present Value Equity instruments 590,598 56, % 17, % Mutual funds and Sicavs 381,092 6, % 2, % Derivatives/Transactions to be settled (2,852) 4, % 1, % Effect of diversification (6,436) (2,036) Total portfolio 968,838 60, % 19, %

181 1.2.5 Exchange risk QUALITATIVE INFORMATION 385 A. General aspects, management and measurement of exchange risk The Group is exposed to exchange risk as a consequence of routine funding and lending activities and, to a marginal extent, in relation to speculative activities. The Group's Risk Monitoring team determines the exposure to exchange risk each day and summarises it monthly in a specific VaR report. part E B. Hedging of exchange risk The Group uses plain vanilla instruments for the operational hedging of exchange risk.

182 QUANTITATIVE INFORMATION Distribution of assets, liabilities and derivatives by foreign currency part E Items US Dollars Currency Sterling Yen Canadian Dollars Swiss Francs Other currencies A. Financial assets 507, ,697 32,600 23,576 94,958 93,926 A.1 Debt securities 195,671 99, ,778-82,056 A.2 Equity instruments 6, A.3 Loans to banks 144,594 17,140 12,019 11,048 20,496 10,294 A.4 Loans to customers 151,205 4,654 19, ,462 1,102 A.5 Other financial assets 9, B. Other assets 3,125 1, , C. Financial liabilities 474, ,888 2,371,105 14,687 79,240 16,456 C.1 Due to banks 233,911 94,117 9,832 10,663 75,737 12,218 C.2 Due to customers 236,036 10,805 34,210 4,023 3,406 4,213 C.3 Debt securities 1,956-2,327, C.4 Other financial liabilities 2,656 2, D. Financial derivatives 366,488 42,921 2,462,479 56,889 30, ,153 - Options 36,238 5, , ,790 - long positions 34,879 5, , short positions 1, ,206 - Other 330,250 37,421 2,335,009 56,544 30,977 98,363 - long positions 157,145 15,513 2,276,865 1,962 6,655 35,225 - short positions 173,105 21,908 58,144 54,582 24,322 63,138 Total assets 702, ,241 2,437,049 26, , ,275 Total liabilities 649, ,796 2,429,249 69, ,562 80,800 Net balance 53,178 14,445 7,800 (43,126) (751) 49, Internal models and other methodologies for the analysis of sensitivity The VaR determined over time horizons of ten days and one day is set out below, in relation to the exchange risk faced by the Banca Popolare dell Emilia Romagna Group as of 31 December VaR Time horizon: 10 days Confidence interval: 99% VaR Time horizon: 1 day Confidence interval: 99% 5,904 1,867

183 1.2.6 Derivative products A. Financial derivatives A.1 Trading portfolio for supervisory purposes: notional values at the end of period and average Exchange rates and gold Other values Equity instruments and stock indices Debt securities and interest rates Type of transaction/underlyings Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 1. Forward rate agreements Domestic currency swaps Interest rate swaps - 587, , , Currency interest rate swaps Basis swaps - 137, ,466-87, Swap of stock indices Swap of real indices Futures 7, ,195-13, , ,108 57,337-33,706 62,490-38,402 12,000-12,000 6,000-6,000 6,000-6, Cap options - 119,827 - purchased - 57, issued - 62, Floor options - 12,000 - purchased - 6, issued - 6, Other options 4,500 9, , , ,500 4, , ,054 - purchased 4,500 9, ,737-97, ,500 4, , ,241 - plain vanilla 4,500 9, , ,000 4,893 92, ,146 - exotic ,012-32,673-15,500-54,185-70,095 - issued , ,260-73,813 - plain vanilla , ,209-42,643 - exotic , ,051-31, Forward contracts 34,910 48,944 2, , , ,471 9,489 1,090,232 - purchases 28,612 18, , , ,473 3, ,662 - sales 6,298 30,277 1, , , ,531 5, ,134 - currency against currency , Other derivative contracts ,767-7, Total 47, ,731 2,604 6, , ,267 50,247 1,749,329 22,781 2,283,986 Averages 113, ,620 3,653 17, ,050, , ,281 2,048,002 n.d. n.d. The other values column comprises derivatives with underlying metals, Euro 18,500 thousand, and other commodities, Euro 22,281 thousand. 387 part E

184 388 part E A.2 Banking book: notional amounts at period end and average A.2.2 Other derivatives Exchange rates and gold Other values Equity instruments and stock indices Debt securitiesand interest rates Type of transaction/underlyings Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 1. Forward rate agreements Interest rate swaps - 1,111, ,111,476-1,364, Domestic currency swaps Currency interest rate swaps Basis swaps - 1,289, ,289,809-1,519, Swap of stock indices Swap of real indices Futures Cap options - 10, ,885-10,846 - purchased - 7, ,598-7,423 - issued - 3, ,287-3, Floor options - 3, ,835-4,000 - purchased issued - 3, ,835-4, Other options - 402, ,595-10,575-15, , ,012 - purchased - 402, ,864-5,377-9, , ,375 - plain vanilla , ,048-20,790 - exotic - 401, ,388-5,377-9, , ,585 - issued ,731-5,198-5, , ,637 - plain vanilla , ,115-68,068 - exotic ,616-5,198-5, , , Forward contracts ,889, ,889,157-2,209,210 - purchases ,889, ,889,157-2,209,210 - sales currency against currency Other derivative contracts Total - 2,818, ,595-2,899,732-15,565-6,012,949-6,035,622 Averages - 3,121, ,720-2,692,944-19,653-6,221,015 n.d. n.d. This table reports the derivatives embedded in other financial instruments not held for trading for Euro 533,879 thousand, of which Euro 403,533 thousand has been separated for financial reporting purposes. The other values column comprises derivatives with underlying metals, Euro 11,300 thousand, and other commodities, Euro 4,265 thousand.

185 A.3 Financial derivatives: purchase and sale of underlyings Exchange rates and gold Other values Equity instruments and stock indices Debt securitiesand interest rates Type of transaction/underlyings Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted A. Trading portfolio for supervisory purposes 47, ,265 2,604 6, , ,267 50,247 1,611,863 22,781 2,196, With exchange of capital 4,500 9, , , , , ,155,716 - purchases , , ,657 - sales 4,500 9,800-2, , , , ,971 - currency against currency , Without exchange of capital 42, ,465 2,249 4, ,267 45, ,074 22,715 1,040,946 - purchases 29, , ,500 30, ,598 5, ,038 - sales 12, ,834 1,638 3, ,767 14, ,476 17, ,908 - currency against currency B. Banking book: - 1,528, ,595-2,899,732-15,565-4,723,140-4,516,145 B.1 For hedging With exchange of capital purchases sales currency against currency Without exchange of capital purchases sales currency against currency B.2 Other derivatives - 1,528, ,595-2,899,732-15,565-4,723,140-4,516, With exchange of capital - 398,000-42,244-2,889, ,329,401-2,681,827 - purchases - 398,000-16,376-2,889, ,303,533-2,625,440 - sales , ,868-55,667 - currency against currency Without exchange of capital - 1,130, ,351-10,575-15,565-1,393,739-1,834,318 - purchases - 915, ,888-5,377-9,686-1,050,364-1,332,817 - sales - 214, ,463-5,198-5, , ,501 - currency against currency part E

186 390 part E A.4 Financial derivatives over the counter : Positive fair value - counterpart risk Counterpart/Underlyings Debt securitiesand interest rates Equity instruments and stock indices Exchange rates and gold Other values Different underlyings Offset Future exposure Gross offset Future exposure Gross not offset Gross offset Future exposure Gross not offset Gross offset Future exposure Gross not offset Gross offset Future exposure Gross not offset A. Trading portfolio for supervisory purposes A.1 Governments and central banks A.2 Public entities A.3 Banks 8,805-1, ,989-2,127 9,008-3, A.4 Financial businesses A.5 Insurance A.6 Non-financial companies ,034-1, A.7 Other parties Total ,672-2, ,051-4,179 9,027-3, Total ,821-1, ,313 10,739-7,038 5,020-4, B. Banking book B.1 Governments and central banks B.2 Public entities B.3 Banks 27,060-2,370 4,644-8, , B.4 Financial businesses 1, B.5 Insurance B.6 Non-financial companies B.7 Other parties 4, Total ,432-2,455 4,644-8, , Total ,613-11,605 3,944-15,871 6,790-6,665 2,796-1,

187 A.5 Financial derivatives over the counter : Negative fair value - financial risk Counterpart/Underlyings Debt securitiesand interest rates Equity instruments and stock indices Exchange rates and gold Other values Different underlyings Offset Future exposure Gross offset Future exposure Gross not offset Gross offset Future exposure Gross not offset Gross offset Future exposure Gross not offset Gross offset Future exposure Gross not offset A. Trading portfolio for supervisory purposes A.1 Governments and central banks A.2 Public entities A.3 Banks 7,890-1, ,265-1, A.4 Financial businesses , A.5 Insurance A.6 Non-financial companies , A.7 Other parties Total ,740-1, ,060-2, Total ,354-5, ,693-5, B. Banking book B.1 Governments and central banks B.2 Public entities B.3 Banks 16,842-2, B.4 Financial businesses 3, B.5 Insurance B.6 Non-financial companies B.7 Other parties , ,791-26,551 2, Total ,305-2,983 4, ,868-26,560 2, Total ,254-1,101 3, ,379-15,371 2, part E

188 A.6 Residual life of financial derivatives over the counter : notional value 392 part E Underlyings/residual value Within 12 months Beyond 1 year up to 5 years Over 5 years A. Trading portfolio for supervisory purposes 939, , ,823 1,749,329 A.1 Financial derivatives on debt securities and interest rates 167, , , ,731 A.2 Financial derivatives on equity instruments and stock indices 731 5, ,819 A.3 Financial derivatives on exchange rates and gold 763,288 23, ,512 A.4 Financial derivatives on other values 7,767 32,500-40,267 B. Banking book 3,836,862 1,105,380 1,070,707 6,012,949 B.1 Financial derivatives on debt securities and interest rates 755, ,927 1,070,707 2,818,057 B.2 Financial derivatives on equity instruments and stock indices 200,651 78, ,595 B.3 Financial derivatives on exchange rates and gold 2,880,788 18,944-2,899,732 B.4 Financial derivatives on other values - 15,565-15,565 Total ,776,632 1,780,116 1,205,530 7,762,278 Total ,179,926 2,027,045 2,111,937 8,318,908 Total

189 B. Credit derivatives B.1 Credit derivatives: notional amounts at year end and average 393 Type of transaction Trading portfolio for supervisory purposes Single Multiple counterpart counterparts (basket) Single counterpart Other transactions Multiple counterparts (basket) Notional value Notional value Notional value Notional value part E 1. Purchases of protection 1.1 With exchange of capital Without exchange of capital Total Total Averages Sales of protection 2.1 With exchange of capital Without exchange of capital - - 1,567 - Total ,567 - Total ,750 - Averages B.4 Residual life of credit derivatives: notional value Underlyings/residual value Within 12 months Beyond 1 year up to 5 years Over 5 years A. Trading portfolio for supervisory purposes - - 1,567 1,567 A.1 Credit derivatives with reference obligation with rating A.2 Credit derivatives with reference obligation without rating - - 1,567 1,567 B. Banking book B. Credit derivatives with reference obligation with rating B. Credit derivatives with reference obligation without rating Total ,567 1,567 Total ,750 1,750 Total

190 1.3 Liquidity risk 394 QUALITATIVE INFORMATION part E A. General aspects, management and measurement of liquidity risk Liquidity risk is currently monitored on a quarterly basis by the Risk Monitoring Team, using the methodology proposed by the supervisory authorities. As mentioned earlier, new monitoring methodology is currently being implemented that reflects the latest and most widely-adopted market practices. Liquidity risk is minimised by seeking to broadly match the average maturities of funding and lending, and by suitable diversification of both shorterterm loans and the providers of funds. In this context, the Treasury Office at the Parent Bank monitors overall Group liquidity on a daily basis and optimises short-term management mainly by recourse to transactions in the Interbank Deposit Market. The securities portfolio, invested mainly in government securities, is used as a valid alternative for the management of liquidity risk since they can be refinanced with the ECB and/or sold directly in the market.

191 QUANTITATIVE INFORMATION 1. Distribution of financial assets and liabilities by residual maturity Currency: Euro Items/Time period Demand 1 to 7 days 7 to 15 days 15 days to 1 month 1 to 3 months 3 to 6 months 6 to 12 months 1 to 5 years Over 5 years 395 part E Cash assets 8,986, ,492 1,353,754 2,029,851 3,735,938 1,772,316 1,066,010 4,290,966 16,558,698 A.1 Government securities , , , ,302 1,717, ,493 A.2 Listed debt securities 525 2,033-2,534 41,007 57,161 21, , ,437 A.3 Other debt securities ,610 5,933 78,757 44, , ,839 A.4 Mutual funds 12, ,792 A.5 Loans 8,971, ,329 1,353,724 1,786,116 3,146, , ,966 1,710,115 15,290,137 - banks 1,165, , ,917 29, , ,861 18, , customers 7,805, , ,807 1,756,914 2,240, , ,799 1,462,366 15,290,137 Cash liabilities 21,597, , ,847 1,417,456 2,263,240 1,160, ,200 5,675,164 1,668,893 B.1 Deposits 21,501, , ,414 1,266,680 1,566, ,252 92, , ,285 - banks 305, ,913 37,029 81, ,449 50,074 42, ,832 45,639 - customers 21,196, , ,385 1,185,232 1,134, ,178 49,405 15, ,646 B.2 Debt securities 96, ,158 88, , , , ,850 5,557,154 1,173,603 B.3 Other liabilities Off-balance sheet transactions 14, , ,500 56,477 6,194 13,888 1,017,033 1,519,754 C.1 Financial derivatives with exchange of capital - 82, ,500 10,118 5,610 11,737 40,148 30,817 - long positions - 35, ,500 7,638 3,379 6,939 21,115 12,907 - short positions - 46, ,480 2,231 4,798 19,033 17,910 C.2 Deposits and loans to be received 11, , ,793 - long positions - 486, ,092 - short positions 11, , ,701 C.3 Irrevocable commitments to make loans 2, , , , ,144 - long positions 2, , ,151 50, ,144 - short positions ,383 -

192 396 part E 1. Distribution of financial assets and liabilities by residual maturity Currency: US Dollars Items/Time period Demand 1 to 7 days 7 to 15 days 15 days to 1 month 1 to 3 months 3 to 6 months 6 to 12 months 1 to 5 years Over 5 years Cash assets 5,527 40,866 22,957 41,074 61,687 30, ,042 60,838 27,249 A.1 Government securities , A.2 Listed debt securities ,703 2,305 72,056 48,464 11,258 A.3 Other debt securities ,729 2,709 A.4 Mutual funds ,560 A.5 Loans 5,527 40,595 22,957 41,074 59,984 27,720 22,390 7, banks ,889 8,949 1,794 13,577 6,702 9,308 5, customers 5, ,008 39,280 46,407 21,018 13,082 2, Cash liabilities 232,499 18,592 29,974 62,427 30,029 8,994 1,958 2, B.1 Deposits 232,499 18,592 29,974 62,427 30,029 8,994 1, banks 2,536 13,967 19,271 59,135 22,275 7, customers 229,963 4,625 10,703 3,292 7,754 1,052 1, B.2 Debt securities ,956 - B.3 Other liabilities Off-balance sheet transactions 1,770 6, , ,146 8,697 C.1 Financial derivatives with exchange of capital , ,146 1,073 - long positions , short positions ,009 C.2 Deposits and loans to be received 1,770 4, ,413 - long positions - 3, ,985 - short positions 1,770 1, ,428 C.3 Irrevocable commitments to make loans - 1, ,211 - long positions ,211 - short positions - 1,

193 1. Distribution of financial assets and liabilities by residual maturity Currency: Sterling Items/Time period Demand 1 to 7 days 7 to 15 days 15 days to 1 month 1 to 3 months 3 to 6 months 6 to 12 months 1 to 5 years Over 5 years Cash assets 1,322 10, , ,514 73,494 5,480 A.1 Government securities A.2 Listed debt securities ,542-2,979 71,451 3,763 A.3 Other debt securities ,492 2,043 1,680 A.4 Mutual funds A.5 Loans 1,322 10, , banks 1,002 10, customers Cash liabilities 8,874 4,439 8,953 43,573 25,113 1, B.1 Deposits 8,874 4,439 8,953 43,573 25,113 1, banks 11 4,221 8,953 43,435 23, customers 8, ,908 1, B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions 2,287 8, ,595 C.1 Financial derivatives with exchange of capital long positions short positions C.2 Deposits and loans to be received 2,287 8, ,583 - long positions - 5, ,116 - short positions 2,287 2, ,467 C.3 Irrevocable commitments to make loans long positions short positions part E

194 398 part E 1. Distribution of financial assets and liabilities by residual maturity Currency: Yen Items/Time period Demand 1 to 7 days 7 to 15 days 15 days to 1 month 1 to 3 months 3 to 6 months 6 to 12 months 1 to 5 years Over 5 years Cash assets 4, ,737 7,295 12,808 1, ,281 1,194 A.1 Government securities A.2 Listed debt securities A.3 Other debt securities A.4 Mutual funds A.5 Loans 4, ,737 7,295 12,808 1, ,275 1,167 - banks 4, , , customers ,976 8,612 1, ,275 1,167 Cash liabilities 7,454 3, , , , , ,416 7,502 - B.1 Deposits 7,440 3,176-4,713 4, banks ,773 4, customers 6,585 2, B.2 Debt securities , , , , ,411 7,502 - B.3 Other liabilities Off-balance sheet transactions C.1 Financial derivatives with exchange of capital long positions short positions C.2 Deposits and loans to be received long positions short positions C.3 Irrevocable commitments to make loans long positions short positions

195 1. Distribution of financial assets and liabilities by residual maturity Currency: Others Items/Time period Demand 1 to 7 days 7 to 15 days 15 days to 1 month 1 to 3 months 3 to 6 months 6 to 12 months 1 to 5 years Over 5 years Cash assets 7, ,051 58,623 37,331 5,726 1,918 75, A.1 Government securities A.2 Listed debt securities A.3 Other debt securities ,754 75, A.4 Mutual funds A.5 Loans 7, ,051 58,623 37,331 5, banks 6, ,487 15,466 10,346 1, customers ,564 43,157 26,985 3, Cash liabilities 24, ,845 45,070 33,855 1, B.1 Deposits 24, ,845 45,070 33,855 1, banks 7, ,547 45,024 33,750 1, customers 16, B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions 47 5, ,716 C.1 Financial derivatives with exchange of capital long positions short positions C.2 Deposits and loans to be received 39 4, ,716 - long positions - 4, short positions ,677 C.3 Irrevocable commitments to make loans long positions short positions part E

196 400 part E 2. Distribution of financial liabilities by sector Exposures/Counterparts Governments and central banks Other public entities Financial businesses Insurance companies Non-financial companies Other parties 1. Due to customers 257,329 1,141,228 1,470,014 68,158 7,528,489 15,017, Debt securities in issue 7,115 8,708 1,571, , ,296 7,994, Financial liabilities held for trading ,584-2, , Financial liabilities at fair value , ,691 1,253,972 Total Total ,247,301 2,011, ,548 5,084,432 26,709, Geographical breakdown of financial liabilities Exposures/Counterparts Italy Other EU countries America Asia Rest of the world 1. Due to customers 25,079, ,436 66,841 5,590 17, Due to banks 983, ,179 1, , Debt securities in issue 9,013,757 1,489,020 1, Financial liabilities held for trading 183,815 12,570 3, Financial liabilities at fair value 1,374,727 2, Total Total ,119,177 2,585,864 66,529 9,887 17,370

197 1.4 Operational risks QUALITATIVE INFORMATION 401 A. General aspects, management and measurement of operational risk Operational risks comprise the risk of loss due to the inadequacy, malfunctioning or weakness of internal processes, human resources or systems, or to external events. This category does not include strategic and PR risks, but does include legal risks deriving from violation of or non-compliance with laws and regulations. Assessment of the exposure to these risks and the effects of adequate measures to mitigate them calls for a suitable combination of qualitative and quantitative information. The qualitative element ( self risk assessment ) consists in assessing the risk profit of each organisational unit, considering potential future losses, the effectiveness of the system of controls and adequacy of the way risk mitigation techniques are applied. The quantitative element is essentially based on a statistical analysis of historical loss data. Since the information available about losses from certain types of event is not always significant, the internal data can be supplemented by information from the banking system. Measures adopted for the prevention of risk during the year have included further work at Group level on the business continuity project with the enhancement of security strategies and the strengthening of prevention and emergency measures. In this context, having completed the impact and vulnerabilities analysis, operational procedures have been established for assuring appropriate levels of continuity for critical systems at times of crisis, and specific projects have begun with a view to raising the level of IT security. part E

198 402 part E QUANTITATIVE INFORMATION With regard to quantitative information, the banking group was a founder member of the Operating Loss Observatory (D.I.P.O.) promoted by the Italian Banking Association. In this context, work to update the internal database with information about operating losses continued throughout the year. These events, mostly relating to thefts and hold-ups, are documented with enough information to provide a complete historical record that will be used, in future, to apply the internal model for the calculation of risk. This profile is monitored as part of risk management activities. The events reported by the Group to the Observatory during the past year are summarised below. Line of Business Type of Event Number of Events Broking and placement Retail Banking Retail Customers Retail Banking Card Management Gross Loss Insurance Recoveries Management of customers' accounts Performance, delivery and management of the process External Fraud 69 5, Damage to tangible assets Performance, delivery and management of the process , Performance, delivery and management of the process Management of customers' accounts Retail Brokerage Performance, delivery and management of the process ,313 - TOTAL 170 7, Although the reporting in relation to event on line concerns a number of positions, the events was actually an isolated episode.

199 Part F INFORMATION ON CONSOLIDATED EQUITY 403 part F

200 404 Section 1 Consolidated shareholder s equity part F QUALITATIVE INFORMATION Group shareholders' equity comprises share capital and all types of reserve, together with net income for the year. In accordance with current supervisory regulations, the Group is required to maintain a minimum capital adequacy ratio of 8%, which is the normal limit for banking groups. Compliance with this limit is monitored constantly by the appropriate departments within the Bank, partly with a view to maintaining the supervisory "free capital" needed to sustain the Group's growth strategies. QUANTITATIVE INFORMATION Consolidated shareholders' equity at 31/12/2006, breakdown: Description/Amounts Share capital 749, , Share premium 317, , Reserves 1,101, , (Treasury shares) (34,829) (2,441) a) Parent Bank (34,805) (2,409) b) subsidiaries (24) (32) 5. Valuation reserves 448, , Equity instruments 24,121 30, Net profit (loss) for the year attributable to the Group 346, ,333 Total 2,952,591 2,299,268 Shareholder s equity pertaning to minority interests at 31/12/2006, breakdown: Description/Amounts Banking group Other businesses Share capital 168, , , Share premium 167, , , Reserves 377, , , (Treasury shares) (27) - (27) (34) 5. Valuation reserves 98,111-98,111 90, Equity instruments 4,062-4,062 3, Net income (loss) for the year pertaining to minority interests 69,563-69,563 61,674 Total 885, , ,687

201 Section 2 - Capital and capital adequacy ratios 2.1 Scope of application of the regulations The capital adequacy and ratios were determined in accordance with the instructions from the Bank of Italy dated 3 April 2006, being the 11th amendment to Circular 155/91 Instructions for the reporting of capital adequacy and prudent coefficients. These instructions require the calculations to be based on the financial prepared in accordance with IAS/IFRS. An important aspect of the new regulations has been the introduction of precautionary filters to safeguard the quality of capital for supervisory purposes and reduce the potential volatility introduced by application of the new standards. As specifically required by the new regulations, consolidated amounts that do not related to members of the banking group have also been eliminated. 405 part F 2.2 Capital for supervisory purposes A. Qualitative information 1. Tier 1 capital Tier 1 capital includes share capital, the share premium reserve, reserves and the portion of net income for the year that is not allocated for dividends or other distributions. Treasury shares held and intangible assets are deducted from tier 1 capital. 2. Tier 2 capital Tier 2 capital includes the valuation reserves, net of the corresponding prudent filter, and the relevant portion of the subordinated bonds in issue. 3. Tier 3 capital There are no elements for inclusion in Tier 3 capital.

202 B. Quantitative information 406 part F A. Basic capital (tier 1 before the application of precautionary filters) 2,809,078 2,171,682 Precautionary filters of tier 1 capital - positive IFRS precautionary filters negative IFRS precautionary filters - - B. Tier 1 capital after the application of precautionary filters 2,809,078 2,171,682 C. Supplementary capital (tier 2 before the application of precautionary filters) 1,809,245 1,336,481 Precautionary filters for tier 2 capital - positive IFRS precautionary filters negative IFRS precautionary filters (138,452) (75,976) D. Tier 2 capital after the application of precautionary filters 1,670,793 1,260,505 E. Total tier 1 and tier 2 capital after the application of precautionary filters 4,479,871 3,432,187 Items to be deducted from tier 1 and tier 2 capital (333,848) (478,731) F. Capital for supervisory purposes 4,146,023 2,953,456

203 2.3 Capital adequacy A. Qualitative information As already mentioned in Part E of these, compliance with the tier 1 and overall capital adequacy limits is monitored on a constant basis by the relevant departments, as part of the wider process of Asset and Liability Management. 407 part F B. Quantitative information Description/amounts Unweighted amounts Weighted amounts/requirements A. Assets at risk A.1 Credit risk 45,539,844 41,337,009 35,568,433 32,615, Standard methodology Cash assets 39,243,197 35,689,188 29,849,316 27,373, Exposures to: 1.1 Governments and central banks 1,379,792 2,120, Public entities 563, , , , Banks 4,246,940 2,588, Other parties 23,534,443 22,047,826 23,437,985 21,976, Mortgage loans on residential buildings 6,148,368 5,030,003 3,074,185 2,515, Mortgage loans on nonresidential buildings Shares, equity investments and subordinated assets 759,238 1,088, ,923 1,095, Other cash assets 2,610,694 2,191,421 1,626,049 1,183,811 Off-balance sheet assets 6,296,647 5,647,821 5,719,117 5,242, Guarantees and commitments to: 1.1 Governments and central banks 212,480 23, Public entities 22,247 7,671 5,030 1, Banks 334, ,801 60,577 64, Other parties 5,677,540 5,186,333 5,643,072 5,155, Derivative contracts with: 2.1 Governments and central banks Public entities Banks 48,575 99,587 9,715 19, Other parties 1,445 2, ,360 B. Capital adequacy requirements B.1 Credit risk # # 2,845,475 2,609,261 B.2 Market risk 1. Standard methodology # # 32,595 54,352 including: - risk for positions in debt securities # # 29,588 41,267 - risk for positions in equities # # 1,164 1,472 - exchange risk # # - 7,113 - other risks # # 1,843 4, Internal models # # risk for positions in debt securities # # risk for positions in equities # # exchange risk # # - - B.3 Other precautionary requirements # # 196, ,881 B.4 Total precautionary requirements # # 3,074,787 2,840,494 C. Risk assets and capital ratios C.1 Risk-weighted assets # # 38,434,838 35,506,175 C.2 Tier 1 capital/risk-weighted assets (Tier 1 capital ratio) # # 7.31% 6.12% C.3 Capital for supervisory purposes/risk-weighted assets (Total capital ratio) # # 10.79% 8.32%

204

205 Part G BUSINESS COMBINATIONS 409 part G

206 Section 1 Transactions carried out during the year 410 part G 1.1 Business combinations There were no business combinations, as defined in IFRS 3, at a consolidated level during the year. There was however an intercompany merger in order to improve operational efficiency in the Campania-Puglia regions. In particular, the absorption of Banca del Monte di Foggia SpA by Banca della Campania SpA took legal effect on 28 December 2006, with the filing of the merger deed with the Naples Companies Register. The international standards (IAS/IFRS) do not currently cover the criteria for reporting business combinations between companies in the same Group ( under common control ). In the absence of guidelines, IAS 8 requires management to establish its own policy for appropriate disclosures, having regard for the treatment recommended in similar cases by other IAS/IFRS and the requirements of other standard-setting bodies. Given that the substance of the transaction is a simple reorganisation within the Group, it was deemed appropriate to maintain the carrying values already recorded. The merger deficit amounted to Euro 13.5 million. This was recognised in the financial of the absorbing company in accordance with the pooling-of-interest method indicated by US GAAP, via a reduction in the post-merger value of shareholders' equity. This approach is consistent with that taken on the first-time adoption of IFRS, in relation to a similar transaction that took place in The effects of the above detailed transaction were not taken into account for the drawing up of the consolidated balance sheet.

207 1.2 Other information on business combinations Changes in goodwill during the year The changes in goodwill deriving from business combinations are summarised below: Assets/Values Opening gross amount at 31/12/ , ,810 Net cumulative adjustments at 31/12/2005 2,348 1,350 Goodwill at 31/12/ , ,460 Increases - 1,656 - business combinations during the year - 1,656 - other - - Decreases 1, adjustments recorded during the year 1, disposals - - Closing net balance at 31/12/ , ,118 Net cumulative adjustments at 31/12/2006 1,135 2,348 Closing gross balance at 31/12/ , , part G As mentioned in Part A.1, Section 5 of these, the value of goodwill as of 31 December 2005 has been restated following a change in the criterion adopted for recording the purchase of additional equity interests in subsidiary companies. The goodwill arising during the year and that already recorded in the financial are summarised in the following table: Goodwill Group companies 238, , Banks ,490 - Banca Popolare di Ravenna s.p.a. 6,875 6,875 - Banca Popolare di Lanciano e Sulmona s.p.a. 1,655 1,655 - Banca Popolare del Materano s.p.a. 1,072 1,072 - Banca CRV Cassa di Risparmio di Vignola s.p.a. 2,273 2,273 - Banca Popolare di Crotone s.p.a. 5,052 5,052 - Banca del Monte di Foggia s.p.a. - 2,647 - Banca Popolare di Aprilia s.p.a. 10,150 10,150 - Carispaq Cassa di risparmio dell Aquila s.p.a. 13,477 13,477 - Banca della Campania s.p.a. 51,346 48,699 - Banco di Sardegna s.p.a. 140, ,428 - Banca di Sassari s.p.a. 4,904 4,904 - EuroBanca del Trentino s.p.a Other companies 1,657 1,657 - ABF Leasing s.p.a. 1,657 1, Other 2,016 2,971 - Leasinvest s.p.a. line of business 2,016 2,971 Total 240, ,118

208 412 Section 2 Transactions arranged subsequent to year end part G There are no events reported in the Transactions arranged subsequent to year end section of these.

209 Part H RELATED PARTY TRANSACTIONS 413 part H

210 1. Information on the remuneration of directors and managers 414 part H Items Directors 4,304 3,335 Statutory Auditors Managers (members of General Management, as defined in the articles of association) 1,479 1,193 The amounts indicated were determined in accordance with para. 16 of IAS 24. The amount relating to Managers includes the provisions to the pension funds (Euro 34 thousand) and for termination indemnities (Euro 92 thousand) recorded by the Parent Bank. 2. Related party disclosures Assets Liabilities Guarantees given Revenues Costs Associated companies 17, ,104 6, ,619 Directors, Statutory Auditors, Managers 8,816 45,301 2, ,014 Other related parties 425,300 98,686 82,182 20,241 2,058 Total , ,081 91,288 21,279 6,691 Total , ,479 53,749 14,910 1,333 Other related parties comprise parties controlled or significantly influenced by Directors, Statutory Auditors or Managers, or parties that may exercise significant influence over these individuals. There are no critical outstanding balances or transactions with related parties. They all relate to routine banking and other services and arose normally during the period, as a consequence of needs and requirements in the common interests of the parties or, where applicable, of the Group. The conditions applied to individual intercompany balances and transactions with these companies are much the same as those currently applied in the market. Assets Liabilities Guarantees given Revenues Costs Total reference amounts ,257,632 41,419,698 5,773,630 2,661,973 1,829,294 Total reference amounts ,323,979 40,147,024 4,828,917 2,373,175 1,655,943 The total reference amounts for revenues include interest income, commission income and other operating income; costs include interest expense, commission expense, other operating expenses and administrative expenses. Weighting of balances with related parties with respect to the total economic and balance sheet aggregates Assets Liabilities Guarantees Revenues Costs given Total % 0.81% 1.58% 0.80% 0.37% Total % 0.61% 1.11% 0.62% 0.08%

211 Part I EQUITY-BASED PAYMENTS There are no amounts in the Equity-based payments section. 415 part I

212

213 Attachments: - Consolidated balance sheet (with comparative figures at 31 December 2005) - Consolidated income statement (with comparative figures at 31 December 2005) - Consolidated income by quarter for the year to 31 December Indipendent auditor's report - Geographical organisation of the Group 417 The following documents, which are not attached to the Consolidated Financial Statement as at 31 December 2006, could be consulted on the italian version: - Statutory Auditors report - subsidiaries, associates and under joint control companies balance sheets - property list.

214 418 Consolidated balance sheet at 31 December 2006 Assets (in thousands) Change % Change 10. Cash and balances 370, ,437 30, Financial assets held for trading 4,373,934 4,284,840 89, Financial assets at fair value 1,316,622 1,825,708 (509,086) Financial assets available for sale 1,432,489 1,657,215 (224,726) Due from banks 3,900,048 2,038,230 1,861, Due from customers 31,274,014 30,626, , Equity investments 245,323 90, , Property, plant and equipment 918, ,766 (11,886) Intangible assets 253, ,114 (241) of which: goodwill 240, ,118 (1,213) Tax assets 445, ,928 40, a) current 231, ,808 43, b) deferred 214, ,120 (2,293) Non-current assets and disposal groups held for sale 13,643-13, Other assets 712, ,036 (158,955) Total assets 45,257,632 43,323,979 1,933, Equity and liabilities Change % Change 10. Due to banks 1,729,437 2,490,118 (760,681) Due to customers 25,482,850 23,984,084 1,498, Debt securities in issue 10,504,892 9,791, , Financial liabilities held for trading 199, ,619 96, Financial liabilities at fair value 1,377,862 1,429,680 (51,818) Tax liabilities 375, ,564 29, a) current 299, ,155 29, b) deferred 75,792 75, Other liabilities 1,151,227 1,442,437 (291,210) Provision for termination indemnities 271, ,716 (11,687) Provisions for risks and charges: 327, ,480 50, a) pensions and similar commitments 159, ,112 15, b) other provisions 168, ,368 34, Revaluation reserves 448, ,860 45, Equity instruments 24,121 30,634 (6,513) Reserves 1,101, , , Share premium reserve 317, ,498 (106,488) Share capital 749, , , Treasury shares (34,829) (2,441) (32,388) Shareholders' equity pertaining to minority interests 885, ,687 7, Net income (loss) for the year 346, ,333 70, Total equity and liabilities 45,257,632 43,323,979 1,933,

215 Consolidated income statement at 31 December Description (in thousands) Change % Change 10. Interest and similar income 1,967,213 1,662, , Interest and similar expense (681,611) (550,927) (130,684) Net interest income 1,285,602 1,111, , Commission income 501, ,699 (33,968) Commission expense (58,327) (53,375) (4,952) Net commission income 443, ,324 (38,920) Dividends and similar income 19,127 17,830 1, Net trading income (59,559) (51,258) (8,301) Gains/losses on disposal or repurchase of: 63,779 3,309 60,470 1, a) loans and advances b) financial assets available for sale 62,636 11,790 50, d) financial liabilities 1,089 (8,519) 9, Net change in value of financial assets and liabilities at fair value 16,016 43,842 (27,826) Net interest and other banking income 1,768,369 1,607, , Net impairment adjustments to: (129,201) (94,895) (34,306) a) loans and advances (129,372) (94,085) (35,287) b) financial assets available for sale (57) - (57) d) other financial assets 228 (810) 1, Net income from financial activities 1,639,168 1,512, , Administrative costs: (1,058,320) (1,033,573) (24,747) 2.39 a) payroll (653,197) (640,015) (13,182) 2.06 b) other administrative costs (405,123) (393,558) (11,565) Net allowances for risks and charges (39,618) (30,795) (8,823) Net adjustments to property, plant and equipment (38,874) (41,933) 3, Net adjustments to intangible assets (6,069) (6,967) Other operating charges/income 161, ,909 5, Operating costs (980,888) (956,359) (24,529) Share of results of subsidiaries and associates 22,652 12,282 10, Adjustments to goodwill (1,213) (998) (215) Gains (losses) on disposal of investments 2,289 2, Profit (loss) from current operations before tax 682, , , Income taxes on current operations (265,614) (231,723) (33,891) Profit (loss) from current operations after tax 416, ,007 78, Net income (loss) for the year 416, ,007 78, Net income (loss) attributable to minority interests (69,563) (61,674) (7,889) Net income (loss) for the year attributable to the Parent Bank 346, ,333 70,

216 420 Consolidated income by quarter for the year to 31 December 2006 Description 1st quarter nd quarter rd quarter th quarter 2006 (in thousands) 10. Interest and similar income 447, , , ,712 1,967, Interest and similar expense (149,589) (160,539) (176,534) (194,949) (681,611) 30. Net interest income 298, , , ,763 1,285, Commission income 129, , , , , Commission expense (12,330) (15,586) (13,692) (16,719) (58,327) 60. Net commission income 117, ,234 86, , , Dividends and similar income 1,456 16,063 1, , Net trading income (13,680) (12,613) (15,291) (17,975) (59,559) 100. Gains/losses on disposal or repurchase of: 8,894 34,987 6,059 13,839 63,779 a) loans (968) 54 b) financial assets available for sale 8,902 34,631 4,712 14,391 62,636 c) financial liabilities (23) , Net change in value of financial assets and liabilities at fair value 10,803 (17,795) 5,481 17,527 16, Net interest and other banking income 422, , , ,772 1,768, Net impairment adjustments on: (9,890) (37,924) (33,732) (47,655) (129,201) a) loans and advances (10,099) (37,414) (33,172) (48,687) (129,372) b) financial assets available for sale - (71) (345) 359 (57) d) other financial assets 209 (439) (215) Net income from financial activities 412, , , ,117 1,639, Administrative costs: (261,161) (272,845) (234,693) (289,621) (1,058,320) a) payroll (162,657) (168,533) (144,943) (177,064) (653,197) b) other administrative costs (98,504) (104,312) (89,750) (112,557) (405,123) 190. Net allowances for risks and charges (6,397) (9,146) (5,018) (19,057) (39,618) 200. Net adjustments to property, plant and equipment (9,527) (9,763) (9,741) (9,843) (38,874) 210. Net adjustments to intangible assets (1,365) (1,577) (1,515) (1,612) (6,069) 220. Other operating charges/income 37,876 39,767 40,435 43, , Operating costs (240,574) (253,564) (210,532) (276,218) (980,888) 240. Share of results of subsidiaries and associates (45) 7,222 (803) 16,278 22, Adjustments to goodwill (306) (506) (187) (214) (1,213) 270. Gains (losses) on disposal of investments ,214 2, Profit (loss) from current operations before tax 171, , , , , Income taxes on current operations (69,302) (65,043) (68,290) (62,979) (265,614) 300. Profit (loss) from current operations after tax 102,611 98,316 98, , , Net income (loss) for the year 102,611 98,316 98, , , Net income (loss) for the year pertaining to minority interes (21,836) (12,323) (19,543) (15,861) (69,563) 340. Net income (loss) for the year pertaining to the Parent Bank 80,775 85,993 78, , ,

217

218

219 423 geographical organisation of the group geographical organisation of the group

220 424 group banks geographical organisation of the group 1 Banca popolare dell Emilia Romagna s.c. 13 Grand-Duché du Luxembourg 2 Banca CRV Cassa di Risparmio di Vignola s.p.a. 3 Banca popolare di Ravenna s.p.a. 4 Banca popolare di Lanciano e Sulmona s.p.a. 12 Trento 5 6 Banca popolare del Materano s.p.a. Banca popolare di Crotone s.p.a. 10 Genova 1-10 Milano 1 Lodi 1 Piacenza 1 Cremona 1 Mantova 1-10 Parma 1-3 Ferrara 1-2 Reggio E. 1-2 Modena 1-3 Ravenna 1-2 Bologna 10 Livorno 1 Verona 1 Pistoia 1 Lucca 1 Prato 10 Pisa 3 Firenze 3 Venezia 3 Padova 3 Rovigo 1-3 Forlì-Cesena 1 Rimini 1 Pesaro-Urbino 1 Ancona Banca popolare di Aprilia s.p.a. CARISPAQ Cassa di Risparmio della provincia dell Aquila s.p.a. Banca della Campania s.p.a. 10 Banco di Sardegna s.p.a. 11 Banca di Sassari s.p.a. 12 Eurobanca del Trentino s.p.a. 13 Banca Popolare dell Emilia Romagna (Europe) s.a. 4 Ascoli Piceno 4 Teramo 4-8 Pescara 10 Viterbo 8 Rieti 4-8 L Aquila 4 Chieti Roma 7 Latina 8-9 Frosinone 4 Isernia 4 Campobasso 4-9 Foggia Olbia-Tempio Pausania 9 Benevento 9 Caserta 5 Bari Sassari 9 Napoli 9 Avellino Nuoro 9 Salerno 5 Potenza 5 Matera 5 Taranto Oristano Ogliastra Medio Campidano Cagliari Carbonia-Iglesias 6 Cosenza 6 Crotone 6 Vibo Valentia 6 Catanzaro 6 Reggio C. 6 Catania

221 Group banks Details BPER CRV BPRA BPLS BPMT BPKR BPAP CRAQ BCAM BSAR BSSS EURB LUX Total 2005 Emilia Romagna Bologna Ferrara Forlì Cesena Modena Parma Piacenza Ravenna Reggio Emilia Rimini Abruzzo Chieti L Aquila Pescara Teramo Basilicata Matera Potenza Calabria Catanzaro Cosenza Crotone Reggio Calabria Vibo Valentia Campania Avellino Benevento Caserta Naples Salerno Lazio Frosinone Latina Rieti Rome Viterbo Liguria Genoa Lombardy Cremona Mantua Lodi Milan Marche Ancona Ascoli Piceno Pesaro-Urbino Molise Campobasso Isernia Puglia Bari Foggia Taranto Sardinia Cagliari Carbonia-Iglesias Medio Campidano Nuoro Ogliastra Olbia-Tempio Pausania Oristano Sassari Sicily Catania Tuscany Florence Leghorn Lucca Pisa Pistoia Prato Trentino-Alto Adige Trento Veneto Padua Rovigo Venice Verona Luxembourg Total ,181 1,140 Total , The number of branches operated by BCAM (Banca della Campania) in 2005 takes account of the 16 branches taken over on the absorption of Banca del Monte di Foggia in geographical organisation of the group

222

223 Concept, graphic design and printing Poligrafico Artioli S.p.A., Modena, Italy Printed in Italy July 2007

224