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BANCA CARIGE GROUP

HALF-YEAR REPORT AS AT 30 JUNE 2018

CONTENTS STRUCTURE OF THE BANCA CARIGE GROUP 3 PARENT COMPANY'S BOARD OF DIRECTORS, BOARD OF STATUTORY AUDITORS AND INDEPENDENT AUDITORS AS AT THE DATE OF APPROVAL

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FINANCIAL HIGHLIGHTS FOR THE GROUP 6 INTERIM REPORT ON OPERATIONS 8Real economy and money market 9Strategy and business performance 10Key events in the first half of 2018 12Main risks and uncertainties and outlook on operations 18Related-Party Disclosure 21Performance of subsidiaries in the reporting period 21 HALF-YEAR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 22Transition to the new financial reporting standard IFRS 9 23Consolidated Financial Statements 46- Consolidated Balance Sheet 47- Consolidated Income Statement 48- Consolidated Statement of Comprehensive Income 49- Statement of Changes in Consolidated Shareholders’ Equity 50- Consolidated Statement of Cash Flows 52Explanatory notes 53- Restatement of prior period balances in compliance with the provisions of IFRS 5 (Non-current Assets Held

for Sale and Discontinued Operations) 53

- Accounting policies 55- Scope and methods of consolidation 64- Subsequent events 66- Profit & Loss and Balance Sheet results 68- Balance sheet items, funding and lending 74- Related-party transactions 84- Treasury shares, statement of cash flows and shareholders' equity 85- Distribution channels and HR management 86- Risk control 88- Segment reporting 96 ANNEXES 99 CERTIFICATION OF THE HALF-YEAR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PURSUANT TO ARTICLE 81-TER OF CONSOB REGULATION NO. 11971 OF 14 MAY 1999, AS SUBSEQUENTLY AMENDED AND SUPPLEMENTED

103

INDEPENDENT AUDITORS’ REVIEW REPORT ON THE HALF-YEAR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

105

NOTE The following conventional signs are used in the tables: - when data is nil

… when data is not significant

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STRUCTURE OF THE BANCA CARIGE GROUP

Malacalza Investimenti

20.639%

Volpi Gabriele 9.087%*

The Capital Investment Trust

5.428%**

S.G.A. Società per la gestione di

attività5.397%

Market59.449%

Banking business Fiduciary/Trust activities Financial activities

60%

100%

96,95% 100%

60%

Carige REOCO S.p.A.

Carige Covered Bond S.r.l.

Carige Covered Bond 2 S.r.l.

60%

60%

5% Lanterna Finance S.r.l.

Lanterna Lease S.r.l.

Lanterna Consumer S.r.l.

5%

5%

Real estate activities

Argo Mortgage 2 S.r.l.

100%

Dati al 30/6/2018

** via Pop 12 S.à r.l.

* via Compania Financiera Linestar

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PARENT COMPANY'S BOARD OF DIRECTORS, BOARD OF STATUTORY AUDITORS AND

INDEPENDENT AUDITORS AS AT THE DATE OF APPROVAL

BOARD OF DIRECTORS BOARD OF STATUTORY

AUDITORS CHIEF EXECUTIVE OFFICER AND GENERAL MANAGER Paolo Fiorentino* DIRECTORS Sara Armella** Remo Angelo Checconi* Giacomo Fenoglio Giulio Gallazzi Luisa Marina Pasotti Luciano Pasquale* Giuseppe Pericu Massimo Pezzolo Ilaria Queirolo Lucia Venuti

CHAIRMAN Carlo Lazzarini STANDING AUDITORS Fiorenza Dalla Rizza Giancarlo Strada ALTERNATE AUDITORS Stefano Chisoli INDEPENDENT AUDITORS EY S.p.A. MANAGER RESPONSIBLE FOR PREPARING THE COMPANY’S FINANCIAL REPORTS Mauro Mangani

** Chairman of the Executive Committee * Member of the Executive Committee

The Board of Directors was appointed by the Ordinary Shareholders’ Meeting on 31/03/2016 for the 2016-2017-2018 financial years, hence with term of office until the date of the Shareholders’ Meeting called to approve the financial statements as at 31/12/2018. Further to the resignation of Beniamino Anselmi, Director and Chairman of the Executive Committee, on 01/08/2016, the Board of Directors, in its meeting of 11/10/2016, co-opted Giuseppe Pericu to serve as a Member of the Bank's Board of Directors pursuant to Article 2386 of the Italian Civil Code, with term of office expiring on the date of the next Shareholders' Meeting. Director Pericu was concurrently appointed to serve on the Appointment Committee, with recommendation for Chairmanship, which he subsequently accepted on 07/02/2017. Further to the resignation of Giampaolo Provaggi, Director and Member of the Executive Committee, on 21/10/2016, the Board of Directors, in its meeting of 10/02/2017, co-opted Massimo Pezzolo to serve as a Member of the Bank's Board of Directors pursuant to Article 2386 of the Italian Civil Code, with term of office expiring on the date of the next Shareholders' Meeting. Therefore, the Ordinary Shareholders' Meeting of 28/3/2017 appointed Giuseppe Pericu and Massimo Pezzolo to serve as members of the Board of Directors for the same term of office as for the other Directors, expiring on the date of the Shareholders’ Meeting called to approve the financial statements for the year ending 31/12/2018. Thereafter, further to the resignations of Directors Elisabetta Rubini (on 17/05/2017), Paola Girdinio (on 07/06/2017), Claudio Calabi (who also served as Chairman of the Executive Committee), Alberto Mocchi and Maurizia Squinzi (on 12/06/2017), the Board of Directors, in its meeting of 21/06/2017, co-opted Paolo Fiorentino, Francesca Balzani, Stefano Lunardi and Ilaria Queirolo to serve as Members of the Bank's Board of Directors pursuant to Article 2386 of the Italian Civil Code, with term of office expiring on the date of the next Shareholders' Meeting. At its meeting of 11/07/2017, the Board of Directors also co-opted Luisa Marina Pasotti to serve as a Member of the Bank's Board of Directors pursuant to Article 2386 of the Italian Civil Code, with term of office expiring on the date of the next Shareholders' Meeting. Following revocation, on 09/06/2017, of the powers delegated to Mr. Bastianini in his capacity as Chief Executive Officer and General Manager and further to termination of his office as General Manager on 13/06/2017, the foregoing Board of Directors' Meeting of 21/06/2017 appointed Director Paolo Fiorentino to serve as the Bank’s Chief Executive Officer and General Manager as of the same date. Further to the resignation of Director Guido Bastianini on 08/09/2017, the Board of Directors, at its meeting of 13/09/2017, co-opted Giacomo Fenoglio to serve as a Member of the Bank's Board of Directors pursuant to Article 2386 of the Italian Civil Code, with term of office expiring on the date of the next Shareholders' Meeting. In its ordinary session, the Shareholders' Meeting of 28/09/2017 thus appointed Paolo Fiorentino, Francesca Balzani, Stefano Lunardi, Ilaria Queirolo, Luisa Marina Pasotti and Giacomo Fenoglio to serve on the Board of Directors, with their terms of office expiring on the same date as applies to the other members of the Board of Directors, at the end of their 2016-2018 three-year term. On 28 September, in light of the Shareholders’ Meeting confirmation of the appointment of Paolo Fiorentino to serve as Director of the Bank, the Board of Directors resolved to confirm Fiorentino as the Chief Executive Officer, along with the responsibilities and powers he was vested with at the meeting of 21/06/2017. On 25/06/2018 and 27/06/2018 Mr. Giuseppe Tesauro and Mr. Stefano Lunardi respectively tendered their resignation from their positions. On 06/07/2018, Director Ms Francesca Balzani tendered her resignation from her position as Director with effect as of the date of the Shareholders’ Meeting called to appoint the new Chair of the Bank. By letter dated 1 August 2018, Director Francesca Balzani brought forward to that same date the full effect of her resignation. On 16 July 2018, Deputy Chairman Vittorio Malacalza tendered his resignation from his position with immediate effect from the time of his replacement by the soon to be convened Shareholders’ Meeting, whatever method of appointment of the new Deputy Chairman will be concretely applicable, depending on whether the whole Board needs to be renewed or not. Vittorio Malacalza, Deputy Chairman of the Board of Directors, decided to bring forward to 3 August 2018 the full effect of the resignation he had tendered.

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With regard to all of the foregoing resignations and subsequent appointments, the Board of Directors redefined at the time in force the composition of the Board-internal Committees, which is today as follows: = Risk Committee: Giulio Gallazzi (Chairman), Francesca Balzani and Giacomo Fenoglio; = Appointment Committee: Giuseppe Pericu (Chairman), Massimo Pezzolo and Lucia Venuti; = Remuneration Committee: Giulio Gallazzi (Chairman), Luisa Marina Pasotti and Ilaria Queirolo. The Executive Committee was appointed by the foregoing Board of Directors' Meeting of 04/04/2016, with term of office for its elected members (in addition to the Chief Executive Officer who is a Member by right) expiring on the date of the Shareholders' Meeting called to approve the financial statements for the year ending 31/12/2018, except for Director Luciano Pasquale, who was appointed to serve as a Member of the Executive Committee in the BoD meeting of 13/06/2017. As stated, further to the resignation tendered by Director Calabi on 16/06/2017, Director Sara Armella, on a recommendation from the Board of Directors, assumed the role of Chair of the Executive Committee, the composition of which is thus as follows: Sara Armella (Chair), Paolo Fiorentino, Remo Angelo Checconi and Luciano Pasquale. Finally, again at the Meeting of 04/04/2016, Director Luciano Pasquale was appointed as a Member of the Credit Committee by the Board of Directors. The Board of Statutory Auditors currently in office was appointed by the Ordinary Shareholders' meeting of 28/03/2017, with term of office expiring on the date of the Shareholders' Meeting called to approve the financial statements for the year ending 31 December 2019. Further to the resignation of Auditor Maddalena Costa with effect from 25 January 2018, the Alternate Auditor Francesca De Gregori took office on the same date as Standing Auditor, with term of office until the next Shareholders' Meeting. By resolution of the Shareholders' Meeting of 29 March 2018, Ms Francesca De Gregori was confirmed as Standing Auditor and Ms. Fiorenza Dalla Rizza appointed as Alternate Auditor, either with term of office expiring on the date of the Shareholders' Meeting called to approve the financial statements as at 31/12/2019. On 16 April 2018, Ms. Francesca De Gregori then communicated that, due to personal reasons, she was unable to accept the office of Standing Auditor: the position of Standing Auditor was taken over on the same date by Alternate Auditor, Ms. Fiorenza Dalla Rizza, with term of office expiring on the date of the next Shareholders' Meeting.

5

FINANCIAL HIGHLIGHTS FOR THE GROUP

Change absolute %

* Before value adjustments and net of debt securities classified as L&R.

Change absolute %

With respect to published accounts, 2017 balances are reflective of the effects resulting from the application of IFRS 5 "Non-current assets held for sale and discontinued operations" withregard to the income statement and the restatements of the balance sheet, against the same assets being discontinued, carried out for a better comparison of balance sheet data (asfurther described in the paragraph "Balance sheet items, funding and lending" of this report).

24,768.8

21,627.4

17,062.2

4,565.2

21,797.8

11,550.7

10,247.1

38,860.0

15,171.0

3,342.0

471.9

2,012.7

24,919.7

21,515.5

16,858.8

4,656.6

21,292.1

11,397.2

9,895.0

38,151.0

15,509.7

2,934.6

600.3

2,633.2

Total assets

Funding (A+B)

- Direct deposits (a)

- Due to banks (B)

Indirect deposits (c+d)

- Assets under Management (c)

- Assets under Custody (d)

Overall funding (a+c+d)

- Loans to customers at amortised cost *

- Loans to banks at amortised cost *

- Net bad loans to customers

Share capital and reserves

Balance sheet figures (EUR mln)

(150.9)

112.0

203.4

(91.4)

505.7

153.5

352.1

709.0

(338.7)

407.4

(128.4)

(620.5)

(0.6)

0.5

1.2

(2.0)

2.4

1.3

3.6

1.9

(2.2)

13.9

(21.4)

(23.6)

219.2

178.3

(53.7)

(20.5)

261.8

33.3

(241.3)

(154.9)

Net interest and other banking income

Net income from banking activities

Profit (loss) before tax from continuing operations

Net profit (loss) for the period attributable to the Parent Company

Income statement figures (EUR mln)

30/06/2018 30/06/2017

(42.5)

144.9

187.6

134.4

(16.2)

…

(77.7)

(86.8)

30/06/2018 31/12/2017

Situation as at Change30/06/2018 31/12/2017 absolute %

RESOURCES (end of period)

Number of branches 503 529 (26) (4.9)

Headcount 4,385 4,642 (257) (5.5)

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90.2%

-1.0%

-1.0%

3.1%

94.1%

-7.3%

-6.8%

3.9%

Cost/income ratio

ROE

Restated ROE

Bad loans/Total loans *

KPIs (%) (1)

30/06/2018 30/06/2017*Comparable figures as at 31 December 2017

(1) In order to facilitate the understanding of the Group's economic and financial performance, some Alternative Performance Measures ("APMs") have been identified. These indicators also represent the tools that aid the directors themselves in identifying operational trends and making decisions about investments, allocation of resources and other operational decisions. For a correct interpretation of these APMs, taking into account the guidelines issued by the ESMA on 5 October 2015 and in force since 3 July 2016, the following is highlighted:

i. these indicators are constructed exclusively based on historical data of the Group and are not indicative of the future performance of the Group itself; ii. APMs are not required by international accounting standards ("IFRS") and, although they are derived from the Group's consolidated financial statements, they are not subject to audit; iii. APMs must not be considered as substitutes for the indicators provided by the reference accounting standards (IFRS); iv. said APMs shall be referenced when reading the Group's financial information drawn from the Group's consolidated financial statements; v. the definitions of the indicators used by the Group, as they do not derive from the reference accounting standards, may not be homogeneous with those adopted by other companies /

groups and therefore comparable with them. With reference to profitability indicators, the above mentioned APMs have been selected and represented as the Group believes that:

• The Cost / Income ratio, calculated as the ratio between operating expenses and net operating income, is one of the main indicators of the Bank's and the Group's management efficiency; the lower the value expressed by this indicator, the greater the efficiency.

• Return on Equity (ROE) obtained by dividing the result for the period by the net equity of the Group net of the result for the period, and the Return on Equity Adjusted (ROE Adjusted), obtained by dividing the result for the period by the Group's shareholders' equity net of the result for the period and of the valuation reserves, are economic indicators on the profitability of equity. These indicators are used to verify the rate of return on risk capital, or what makes the capital transferred to the company by the shareholders. They can be considered as a synthesis of the overall economy, considering how the management managed to manage its own resources to increase business results.

• The Net bad loans / Deposits from customers indicator is representative of the incidence of bad loans on total deposits from customers. Reported below are the reference values for the calculation method of selected APMs: − Cost income ratio: ratio of core operating expenses (Income Statement items 190 (former 180), 210 and 220 (former 200 and 210) net of tax recoveries under item 230 (former 220),

contributions to the Single Resolution Fund and Deposit Guarantee Scheme, DTA fees, non-core administrative expenses and non-recurring net adjustments to/recoveries on property and equipment and intangible assets) to net core operating income (Income Statement items 30, 60, 70, 80, 90, 100 (excluding 100(a)) and 110 (for the securities component only) net of non-recurring items and 230 (former 220) net of tax recoveries);

− ROE: ratio of Net Profit (Loss) for the period attributable to the Parent Company (Income Statement item 350 (former 340)) to the Group’s share capital and reserves (Balance Sheet Liabilities items 120, 150, 160, 170 and 180 (former 140, 170, 180, 190 and 200))

− Adjusted ROE: ratio of Net Profit (Loss) for the period attributable to the Parent Company (Income Statement item 350 (former 340)) to the Group’s share capital and reserves net of valuation reserves (Balance Sheet Liabilities items 150, 160, 170 and 180 (former 170, 180, 190 and 200))

− Bad loans to total loans: ratio calculated as Net balance-sheet bad loans to customers divided by Net loans to customers (Balance Sheet item 40(a) (former 70) net of debt securities at amortised cost).

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INTERIM REPORT ON OPERATIONS

8

REAL ECONOMY AND MONEY MARKET

2017 was a year of sustained and synchronised global economic growth. During the first months of 2018, in a still positive environment, the first signs of risk emerged that may cause a slowdown in the economic growth and a potential deterioration of the economic cycle. The rise in oil prices risks eroding the purchasing power of families and, hence, their consumption, while uncer-tainty persists due to the enactment of protectionist economic policies in the United States, Brexit negotia-tions in Europe and the new political course in Italy. In the United States, economic growth has been positive for nine years with average growth rates close to 2%.At present, the economic environment is characterised by the expansionary tax policies pursued by the Trump administration, which are generating a higher federal budget deficit, and by the introduction of tariffs on imports, which are expected to contribute to supporting domestic economy and reducing the trade deficit. Protectionist measures, initially introduced against China and later extended to the Europe-an Union, Canada and Mexico, affect a small percentage of world trade; however, their intensification could generate uncertainty and risks for the economy and investments worldwide. U.S. GDP is expected to grow by 2.9% in 2018, 2.4% in 2019, before slowing further to +2% in 2020. China has started to show a less sustained growth pace than in 2017, both in retail sales and invest-ments, as a consequence of tighter rules on shadow banking and lending, which have contributed to re-ducing the level of financing to support the economy. The Chinese government has announced that it will take actions in response to the trade sanctions introduced by the United States and it may use part of the compulsory reserves to support the companies affected by duties to address any potential repercussions on the economy. In the Euro Area, economic expansion remains widespread, although some indicators proved to be lower than expected. The first quarter and the forecasts for the second quarter show a 0.4% GDP growth com-pared to +0.7% in the previous quarters. The slowdown is accounted for by a sustained growth in the second half of 2017, temporary supply-side factors and a lower stimulus from foreign trade, partly due to the strengthening of the Euro last year. Uncertainties stem from the above-mentioned protectionist poli-cies (which have a direct impact on exports and on the level of business confidence), the rise in the price of crude oil, which could have a negative impact on GDP, and exchange rate trends. The growth in em-ployment throughout most of the countries of the Euro Area and the strengthening of household budgets, a prerequisite for access to credit, have helped sustain the trend in private consumption. GDP is expected to increase by 2.1%, 1.8% and 1.4% in 2018, 2019 and 2020 respectively. In Italy, political uncertainties arose in connection with the formation and programme of the new gov-ernment, which caused fluctuations and a significant increase in risk premiums on Italy's public debt, es-pecially in the second half of May. Tensions had a limited contagion effect on other countries and, alt-hough the crisis of confidence partially subsided, the spread has stabilised at levels higher than the aver-age of the previous months. In the first quarter, GDP grew by 0.3%, reflecting the positive contribution of stock-piling, but slowed down compared to the trend of 4Q17 (+0.4%) due to lower exports and invest-ments. The economic indicators show that this trend is expected to continue in the second quarter (+0.2%). GDP is therefore expected to increase by 1.2% in both 2018 and 2019 and by 1% in 2020. On 14 June 2018, the Governing Council of the European Central Bank considered that the ample de-gree of monetary accommodation adopted in recent years has led to considerable progress ensuring the continued sustained convergence of inflation towards levels that are below, but close to, 2% over the medium term. Support to the economic and financial system through net purchases of public and private sector securities under the Asset Purchase Programme (APP) will continue until the end of December 2018 (today's EUR 30 bn monthly pace of net asset purchases will be reduced to EUR 15 bn as of Sep-tember 2018). Further stimulus will come from reinvesting the principal payments on maturing securities purchased and the leverage from benchmark interest rates. Interest rates are expected to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure target inflation levels. In April, the trend in bank loans in Italy was back in line with the annual average of the Euro Area (+2.9%) on the back of the good performance of loans to households and loans to businesses, which grew by EUR 3 bn during the month. Loans to households benefited from a growth in home mortgages

9

and consumer loans, backed by good terms and conditions offered and a stabilisation of the real estate market. Loans to businesses, at the beginning of the year, were positively affected by the end of the refer-ence period for determining the interest rate applied to TLTRO II loans. Lending, expected to slow down during 2018, will continue to be characterised by selective customer acquisition, ample liquidity in the system to support the self-funding of businesses, reduced net interest income from loans to large compa-nies and the application of the new financial reporting standard IFRS9, which requires major provisions on high credit risk loans including those not classified as NPEs. A further EUR 2.7 bn decrease was achieved in the stock of gross bad loans in the first four months of 2018; the disposal transactions car-ried out by credit institutions will lead to an additional EUR 56 bn reduction in NPEs by the end of 2018. In terms of funding, the EUR 7 bn decrease recorded in April was mainly attributable to the reduction in bonds issued and was partially offset by the positive contribution of foreign funding. On the back of the positive trend in the current account component, total deposits grew by EUR 1.6 bn, while low interest rates penalised term deposits, which will, however, return to growth -together with other forms of medi-um- and long-term investment- when policy rates and repayments of TLTRO II start rising again. In the first half of 2018, the banks' capitalisation was essentially stable and the return to profit combined with a reduction in risk-weighted assets are also expected to contribute to capital strengthening in the fu-ture. Profitability shows that Net Interest and Other Banking Income was positively affected by commis-sions, specifically management, brokerage and advisory service fees, while Net Interest Income will con-tinue to be penalised by a narrowing spread and a non-fully performing trend in loans to businesses. Profitability benefited from a reduction in the cost of risk and the containment of administrative expenses, which, despite investments in technology and innovation, will be reduced including as a consequence of the ongoing rationalisation of the bank branch network and lower personnel expenses, as set out in the business plans of the industry's key players.

STRATEGY AND BUSINESS PERFORMANCE

On 13 September 2017, Banca Carige’s Board of Directors approved the 2017-2020 Business Plan (hereinafter the “Business Plan”) entitled "2017-2020 Carige Transformation Programme", with the Bank's strategic vision revolving around four key pillars:

- capital strengthening; - asset quality; - operating efficiency; - commercial relaunch.

A stronger Group balance-sheet structure covering all actions to strengthen the Group’s capital structure which will make it possible to restore higher capital ratios than the European Central Bank’s targets (hereinafter also the “ECB”), some of which have already been implemented, such as a capital increase for a total amount of EUR 544.4 mln, including conversion to equity of a portion of the securities in-volved in the Liability Management Exercise and the final agreement signed by the Bank on 10 May 2018 for the disposal of the bad loan management platform to Credito Fondiario S.p.A., for a total sale price of EUR 31 mln. Other one-off transactions are under way to support the Group's capital strength including the disposal of the POS transactional business and credit card distribution for which a ten-year partnership agreement was entered into with Nexi S.p.A. on 3 April 2018 providing for the Bank's dis-posal of the Merchant Acquiring business for a consideration of up to EUR 25 mln, the disposal of Credi-tis Servizi Finanziari S.p.A. under a binding agreement signed on 6 December 2017 for the assignment of 80.1% of the investment for a total of EUR 80.1 mln and the disposal of certain readily marketable re-al estate assets. The strengthening of asset quality will be achieved through a major NPE de-risking effort. On 30 March 2018 the Bank submitted to the European Central Bank its Non Performing Exposures strategy for the 2018-2020 period (the “NPE Strategy”) which outlines the ordinary and extraordinary actions to acceler-

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ate the de-risking programme under the 2017-2020 Carige Transformation Programme approved in September 2017. The strategic goals set out in the NPE Strategy include the need to continue deleverag-ing, which was started in 2017 to reduce the NPE stock (including, inter alia the disposal of EUR 500 mln worth of Unlikely-to-pay exposures) and resulted in a significant asset quality improvement for the Group and a stronger internal governance in the management of the NPE portfolio. By approving its NPE Strat-egy, the Group decided to proceed with the disposal of a further portfolio of bad loans up to a gross car-rying amount of EUR 1 bn; which was not included in the Business Plan approved by the Board of Direc-tors on 13 September 2017 with senior notes backed by the Italian Government guarantee (GACS). Closing of the NPE disposal transaction, including its accounting and regulatory derecognition, is ex-pected to take place by the end of the year. Again with a view to implementing specific de-risking and de-leveraging actions, the Business Plan and the NPE Strategy document envisage specific measures for Unlikely-to-pay exposures, with a special fo-cus on large tickets, also including their workout by the newco Carige Reoco S.p.A., which will step in for individual transactions traceable to loans classified as non-performing with a view to maximising recovery from mortgage loan collaterals. The combined effect of disposals and write-offs, on the one hand, and NPE management on the other, as set out in the NPE Strategy, will contribute to accelerating the reduction of the NPE stock (-34.5% in 2017), with the gross NPE stock expected to amount to approximately EUR 2.1 bn by 2020, a signifi-cantly better level than the SREP targets (EUR 4.6 bn for 2018 and EUR 3.7 bn for 2019). Capital strengthening and asset quality improvement combined are expected to enable the Bank to ob-tain a more balanced financial structure with benefits in terms of both cost of funding and funding mix, which will reverberate positively on the Group’s liquidity control. As regards operating efficiency, the Business Plan will allow for a comprehensive overhaul of the Group’s operating and management model; a number of actions are planned to be implemented for the rational-isation and simplification of the Head Office structure and Branch Network, in the aim to reduce both personnel expenses (through headcount optimisation) and other administrative expenses. In this context, the signing on 18 December 2017 of a specific agreement with the trade unions for the voluntary access to the "Solidarity Fund" by the Group's employees is highlighted. In view of streamlining its organisational structure by enhancing operating efficiency, simplifying the IT environment and ensuring greater flexibility to obtain a shift towards digital banking, as a prerequisite for responding to new business needs, on 30 May 2018 Banca Carige finalised the closing of the agree-ment for the outsourcing of the Group’s IT system to IBM Italia S.p.A., the world’s premier information infrastructure technology provider. Under the agreement, the IT structure, including 134 FTEs, was transferred, as of 1 June 2018, to a Newco called Dock, 81% owned by IBM and 19% owned by Banca Carige. Thanks to a collaborative partnership with IBM, the Carige Group will have the opportunity to leverage the specialised expertise and investment capacity of a world leader in advanced IT technology development, so as to achieve high efficiency standards and a competitive edge in its digital systems. In particular, the transformation pro-gramme envisages the introduction of innovative technologies, bigdata analytics and cognitive compu-ting, aimed at improving the Group’s commercial competitiveness. Once the capital strengthening, asset quality optimisation and operating efficiency improvement actions are implemented, the Group will be in a position to focus on the last pillar of its Business Plan, i.e. com-mercial relaunch. This objective will be pursued by enhancing the value of the Carige Group’s strengths: market coverage and a focus on small-medium customers (retail, the small business and SMEs). Over the next few years, the Business Plan will pursue the objective of filling the gap of productivity be-tween the Group and market benchmarks by growing in asset management, loans to the small business segment and mortgage loans to households, with Branch Managers playing a decisive role as their pri-mary objective will be to reinforce the advisory service for households and the Small Business. The role of the Branch Manager as a strategic element for the Bank's commercial relaunch is the corner stone of the multi-year agreement signed on 3 July 2018 between the University of Genoa and Banca Carige for the

11

introduction of multiple editions of the second-level Master's degree programme in Banking Franchise Management. This initiative envisages the hiring of participants on a permanent employment contract basis from the first day of their master's attendance and is a concrete and innovative measure for a rapid labour market inclusion of newly-graduated young talents. However, for the purpose of product development, the product offering for customers will be reviewed by adopting an Open Architecture model aimed at taking advantage of best market offers for highly ad-vanced, sophisticated products, while Core Commercial Banking products will continue to be developed in-house. The “2017-2020 Carige Transformation Programme” charters the path for a return to profit as of 2018 and compliance with regulatory requirements for capital and liquidity adequacy. With reference to derisk-ing strategies, the implementation of the NPE Strategy approved in March 2018 will enable a reduction -as early as by the end of 2018- in the stock of on-balance sheet NPEs to levels below the SREP threshold required by the ECB for the end of 2019 while, at the same time, ensuring compliance with the coverage ratios required under the SREP process. Net profit (loss) for the 2018 six-month period was a negative EUR 20.5 mln with Net Interest Income amounting to EUR 109.2 mln, Net fee and commission income totalling EUR 120.4 mln and Operating expenses standing at EUR 270.1 mln. Direct funding from retail and corporate customers stood at EUR 14.5 bn at the end of the first six months of 2018, up from year-end volumes (EUR 14 bn). Among the trend drivers was an increase in savings deposits and current accounts despite a decline in funding from bonds. The institution-al/wholesale funding component fell to EUR 2.6 bn. As a combined result of the above factors, total di-rect funding amounted to EUR 17.1 bn as at 30 June 2018 (EUR 16.9 bn at the end of 2017). Indirect funding increased to EUR 21.8 bn, mainly as a result of trends in Assets under Management (+3.6%) and, to a minor extent, Assets under Custody (+1.3%). Loans to customers were substantially stable during the six-month period at EUR 17.3 bn (+0.5%), with the institutional component totalling EUR 0.6 bn down 3% on December 2017. With regard to the liquidity profile, the Group had a Liquidity Coverage Ratio (LCR) of 155% as at the end of June 2018, in line with the value set in the Business Plan and in the Funding Plan and well in ex-cess of the regulatory minimum threshold required for 2018 (100%).

KEY EVENTS IN THE FIRST HALF OF 2018

THE PARENT COMPANY, BANCA CARIGE Progress of the Business Plan and development of the NPE Strategy On 2 February 2018, the Board of Directors approved the project for the outsourcing of the Group’s IT system to IBM Italia S.p.A.; subsequently, on 27 March 2018 the Board of Directors approved the sign-ing of the agreements concerning the foregoing project and formally started the ECB authorisation pro-cess. On 2 February 2018, the Board of Directors also approved the guidelines of the 2018 Budget, with a focus on the business as usual for the Bank to revert to profitability. The 2017-2020 Business Plan targets were confirmed, as was the reduction of the cost/income ratio to be pursued in the next three years. Following the Board of Directors’ approval of the structure of the merchant acquiring business disposal transaction on 20 February 2018, Banca Carige S.p.A. and Nexi S.p.A., a leading player in the man-agement of payment services, on 3 April 2018 entered into a ten-year partnership for the distribution of new, innovative payment products and services through the Carige Group’s distribution network. The agreement provides for the Bank's disposal of the Merchant Acquiring business to Nexi Payments S.p.A., a company controlled by Nexi, for an expected consideration of up to EUR 25 mln.

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On 27 March 2018, Banca Carige’s Board of Directors approved the Non Performing Exposure strategy which outlines the key actions designed to reduce the Group’s NPE stock level. To this end, the Group has decided to proceed with the disposal of an additional bad loan portfolio for a gross amount of up to EUR 1 bn, on top of the already-planned disposal of Unlikely to Pay (UTP) exposures for a gross amount of approximately EUR 500 mln. On 21 June 2018 with regard to the NPE reduction process, the Board of Directors approved two loan disposal transactions for a gross amount of approximately EUR 50 mln. On 10 May 2018, the Bank signed the final agreement -effective as of 14 May 2018- for the disposal of the bad loan management platform to Credito Fondiario, for a total sale price of EUR 31 mln. The agreement provides for the transfer of 53 FTEs and the formal start of a 10-year partnership between the Bank and Credito Fondiario for the management and collection of part of the Group's bad loans, ensur-ing higher quality standards in line with best market practices. On 30 May 2018 Banca Carige finalised the closing of the agreement for the outsourcing of the Group’s IT system with IBM, the world’s premier information infrastructure technology provider. Dialogue with the European Central Bank

Following submission of the Recovery Plan in December 2016, the ECB provided the Bank with an as-sessment letter on 12 September 2017, containing its findings and recommendations as well as a request for two reviews of the Recovery Plan: one by 31/12/2017 and the other by 31/03/2018; the former was approved by the Board of Directors and sent to the ECB on 16 January 2018, while the latter was ap-proved on 27 March 2018 and sent to the ECB by the specified deadlines.

As part of the its ordinary inspection activity, the ECB conducted an on-site inspection concerning the "Accuracy of methods used to calculate the Group's capital position" from 27 February to 19 July 2017, during which some preliminary points for attention emerged leading in some cases to their correction im-pacts being included in the calculation of the RWAs as early as by 30 June 2017 and, in other cases, during the second half of the year. The final version of the inspection report was received on 24 Novem-ber 2017, while the final version of the recommendations for the inspection report findings was received on 11 April 2018, together with the internal time schedule for the execution of the proposed corrective measures. The Bank submitted its action plan to the ECB on 11 May 2018 and will submit its monitoring of the action plan progress quarterly to the ECB. In the first half of 2018, quarterly monitoring reports on ongoing on-site and remote inspections were al-so sent to the ECB. With regard to the on-site inspection aimed at assessing "Collateral, provisions and securitisations” which was carried out from 7 March to 29 July 2016, the Bank received the final results on 6 March 2017, whereby the ECB illustrated the Supervisory Authority’s expectations and the corrective actions which the Bank was expected to adopt so as to address the shortcomings identified during the inspection. On 5 April 2017, the Bank’s action plan to remediate the findings identified in its procedures was sent to the ECB. The action plan is now at an advanced stage of implementation and, as part of the quarterly moni-toring activity, the Bank submitted its status report as at 30 September 2017 and 31 December 2017 on 16 October 2017 and 2 February 2018 respectively. The last monitoring report approved by the Board of Directors relates to 31 March 2018; at the moment, monitoring as at 30 June 2018 is underway. By the prescribed deadlines, the Bank has fulfilled the requests contained in the 2018 SREP letter. Besides establishing prudential requirements for 2018, the ECB requested the Bank to: submit the revision of the ICAAP and ILAAP policies by 30 April 2018; to continue providing the ECB with additional consolidated information regarding its non-performing loans; to report on the status of the implementation of the plan on a six-month basis, with a view to addressing the high level of NPEs and enforced collaterals; and, as a result, to submit an updated operational and strategic plan by 30 March 2018. The ECB also requested that an updated framework for managing credit risk be sent by 31 March 2018, along with a plan for strengthening the functions of the secretariat to the Board of Directors and a plan on how to address

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some of the shortcomings in the area of internal governance which are still pending as of the inspection conducted in 2015. On 16 March 2018, the ECB sent its draft results on the second part of the thematic review on IFRS9 which the Bank followed-up on with its comments on 30 March 2018. On 10 April 2018 the ECB sent a final version of its recommendations (to be implemented by July 2018), which the Bank followed-up on for acceptance on 24 April 2018. In response to the request for updating the plan concerning the inspection on the Bank's capacity to quantify and manage liquidity risk, funding risk and the interest rate risk in the banking book, which the Bank received from the ECB on 13 November 2017, Banca Carige sent its updated action plan to the ECB on 16 January 2018. On 6 February 2018, the Bank informed the ECB that, during the Board of Directors' Meeting of 2 Feb-ruary 2018, it had approved the outsourcing of the Group's IT system which was subsequently carried out through a contribution in kind for the acquisition of the ICT segment. On 15 February 2018 the Bank received a letter from the ECB announcing the start of an inspection on credit and counter-party risk. The on-site inspection started in April 2018 and was completed with on-site audits on 3 August 2018. The analysis and preliminary results provided by the inspectors are being com-pleted as is the drafting of the Bank's follow-up response to the ECB findings described in detail in the section “Main risks and uncertainties and outlook on operations” of the present report. On 16 May 2018, the ECB sent the Bank its final report on the Data quality and information flows on-site inspection, followed by the draft recommendations presented during the closing meeting of 25 July 2018 whose final version will become available shortly.

On 4 April 2018 the ECB requested the submission of a Capital Conservation Plan updated as at the end of 2018 and additional information including a revised Budget and a new Funding Plan and Con-tingency Funding Plan updated as at the end of 2018. The Group fulfilled all requests by the prescribed deadlines.

On 4 June 2018, the ECB communicated to the Supervised Entity its concerns regarding the credibility and feasibility of the CCP it had received, requiring that it be updated and a Contingency Funding Plan be prepared. On 22 June 2018 the Bank promptly fulfilled the request by complying with the prescribed deadlines.

On 20 July 2018, the ECB notified a draft decision setting out that: “1) the Supervised Entity shall hold a Shareholders Meeting with the purpose of appointing a new Chair of the Board of Directors at the latest by 30 September 2018; 2) the ECB did not to approve the CCP submitted by the Supervised Entity on 22 June 2018, 3) the Supervised Entity shall present to the ECB at the latest by 30 November 2018 a plan, approved by the Board of Directors, to restore and ensure in a sustainable manner compliance with capi-tal requirements at the latest by 31 December 2018. This plan should assess all options including a business combination”.

The draft decision also states that “if a business combination solution is pursued in order to ensure in a sustainable manner compliance with capital requirements, the ECB will set a new date as of which at the latest compliance with all capital requirements shall be achieved in order to reflect the needs of such business combination transaction.”

The Bank will send its comments on the whole ECB draft decision by the prescribed deadlines.

Further details on the foregoing letter by the ECB can be found in the section “Events after the reporting period”.

With regard to relationships with the Single Resolution Board (SRB): on 24 April 2018 the Bank received from the ECB the Carige Group Resolution Plan prepared by the SRB together with a work plan including priority actions for 2018, encouraging the Bank to express its opinion concerning the resolution plan

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overview. On 24 May 2018 the Bank sent its comments about the key items of the Resolution Plan ap-proved by the Board of Directors.

Approval of the 2017 Financial Statements and appointments/resignations of mem-bers of the Board of Directors and Board of Statutory Auditors On 25 January 2018, Ms. Maddalena Costa tendered her resignation as Standing Auditor with immedi-ate effect, due to the impossibility of reconciling her position with increasing professional commitments. In accordance with the provisions of the Articles of Association and the Italian Civil Code, the outgoing Standing Auditor was succeeded in office by Alternate Auditor Ms. Francesca De Gregori on the same date, with term of office expiring on the date of the next Shareholders' Meeting. On 16 April2018, Ms. Francesca De Gregori communicated that, due to personal reasons, she was unable to accept the office of Standing Auditor she had been appointed to by resolution of the Shareholders' Meeting of 29 March 2018. In accordance with the provisions of the Articles of Association and the Italian Civil Code, the position of Standing Auditor was taken over by Alternate Auditor, Ms. Fiorenza Dalla Rizza, with term of office expir-ing on the date of the next Shareholders' Meeting. On 9 February 2018, Banca Carige’s Board of Directors approved the Group's preliminary consolidated results as at 31 December 2017. On 6 March 2018 the Board of Directors of Banca Carige approved the Draft Bank Separate and Group Consolidated Financial Statements for the year ending 31 December 2017, the annual Corporate Governance and Ownership Structure Report for 2017 pursuant to art. 123-bis of the Italian Consolidated Law on Finance, as well as the Group’s 2017 Non-Financial Report pursuant to Law Decree no. 254/2016. On 29 March 2018 the ordinary Shareholders' Meeting approved the 2017 separate Financial State-ments of the Parent Company, Banca Carige S.p.A., resolving that the net loss of EUR 386 mln be car-ried forward and acknowledged the Group consolidated financial statements as at 31 December 2017. On 25 June 2018, the Chairman, Prof. Giuseppe Tesauro, tendered his resignation with immediate ef-fect from his office of Member and Chairman of the Board of Directors of the Company. The resignation was explained in terms of divergences concerning the governance and management of Banca Carige. On 27 June 2018 Mr. Stefano Lunardi, Member of the Board of Directors and Member of the Bank's Risk Committee, tendered his resignation with effect from the same date motivating his decision with his dissent and disagreement with the Company’s governing body as to the bank's management and gov-ernance vision. On 6 July 2018 Ms. Francesca Balzani tendered her resignation with effect as of the date of the Share-holders’ Meeting called to appoint the new Chairman, motivating her decision with divergences concern-ing the Bank’s governance. Through a subsequent communication of 1 August 2018, Ms. Francesca Balzani decided to bring the full effect of her resignation forward to 1 August and motivated her decision by reiterating the divergences concerning the Bank’s governance. By a letter dated 9 July 2018 addressing the Bank's Board of Directors, POP 12 S.à.r.l., holding 5.428% of the Company's share capital, requested that a shareholders' meeting be called pursuant to art. 2367 of the Italian Civil Code, to be held as soon as possible, though not before the second week of Septem-ber 2018, in order to discuss and resolve on the following items on the agenda:

- proposal to dismiss the Board of Directors in office; - election of the Board of Directors, should the proposal to dismiss the Board of Directors in office

be approved; - election of the Chairperson of the Board of Directors and -should the proposal to dismiss the

Board of Directors in office be approved- of the Deputy Chairperson of the Board of Directors; - determination of the remuneration of the Board of Directors, should the proposal to dismiss the

Board of Directors in office be approved. On 10 July 2018 the Board of Directors resolved that the convening, by the end of September 2018, of the Shareholders' Meeting required for the appointment of Directors and the integration of the Board of Statutory Auditors, be deferred until the Board of Directors' meeting of 3 August 2018 in light, inter alia,

15

of the request submitted by the shareholder POP 12 S.à.r.l. by means of a communication received after the required deadlines for integrating the afore-mentioned meeting agenda had expired. Furthermore, on a proposal from the Appointment Committee, the Board of Directors resolved to fill a vacancy in the Risk Committee by appointing Independent Director Giacomo Fenoglio as a new Risk Committee member. On 16 July 2018 the Bank received the resignation of Mr. Vittorio Malacalza from directorship “with im-mediate effect from the time of my replacement by the soon to be convened Shareholders’ Meeting, whatever method of appointment of the new Deputy Chairman will be concretely applicable, depending on whether the whole Board needs to be renewed or not”, stating that his decision was motivated by dis-agreements and divergences with the governing body of the Company as to the Bank’s management and governance vision, with reference made, inter alia, to the considerations contained in the resignation let-ters of former Chairman, Mr. Giuseppe Tesauro, former Director, Mr. Stefano Lunardi, and Director, Ms. Francesca Balzani. On 3 August 2018, Mr. Vittorio Malacalza, Deputy Chairman of the Board of Direc-tors, decided to bring forward to 3 August the full effect of the resignation he had tendered. By a letter of 23 July 2018 Malacalza Investimenti S.r.l., holding 20.639% of the Company's share capi-tal, requested that a shareholders' meeting be called pursuant to art. 2367 of the Italian Civil Code, in order to discuss and resolve on the following items on the agenda:

- proposal to dismiss all members of the Board of Directors in office; - election of a new Board of Directors subject to prior determination of the number of Board mem-

bers pursuant to Article 18 of the Articles of Association, should the proposal referred to under item 1 of the agenda be approved;

- determination of Directors' remuneration should a new Board of Directors be appointed. Management of the liquidity position On 9 February 2018, the Board of Directors approved the disposal of one or more portfolios of eligible residential and commercial mortgage loans - originated or renegotiated by Banca Carige S.p.A. and Banca del Monte di Lucca S.p.A. to the extent allowed by applicable law and the Programmes - for a maximum total nominal amount of EUR 1,500 mln (of which EUR 500 mln relating to the OBG2 pro-gramme) - to the special-purpose vehicles, Carige Covered Bond S.r.l. and Carige Covered Bond 2 S.r.l., under the scope of the OBG1, OBG2 and OBG3 issuing programmes, as well as the granting of subordinated debt, in one or more tranches, by the transferring bank to the foregoing vehicles in connec-tion with each portfolio sold, for a maximum amount equal to the value of the assets sold. On 16 April 2018, as part of the OBG2 and OBG3 programmes, two disposal transactions of a loan book of 1,644 mortgage contracts, at a sale price equal to their book value (EUR 177.8 mln), were fi-nalised. Under the OBG3 programme, a covered bond issuance for EUR 115 mln was finalised in April 2018, which is currently held in the securities portfolio and used for refinancing operations with the European Central Bank. On 9 February 2018, the Board of Directors approved the restructuring of the Lanterna Finance securiti-sation transaction, in particular by modifying the characteristics of the securities issued and not yet re-paid, the disposal of one or more new loan portfolios to the special-purpose vehicle Lanterna Finance for up to a maximum amount of EUR 500 mln and the issuance of new securities. The transaction was re-structured in the first half of the year by retranching the securities issued by Lanterna Finance in 2015 (with an increase in Class A notes from EUR 5.3 mln to EUR 200 mln and a reduction in Class B notes from EUR 331.8 mln to EUR 137.1 mln),selling an additional portfolio of bad mortgage and signature loans to Lanterna Finance for an amount of EUR 411.3 mln and issuing two additional tranches of notes for an amount of EUR 260 mln Class A notes and EUR 153 mln Class B notes.

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Other events On 2 February 2018, the Board of Directors of the Parent Company vested the Chief Executive Officer with the powers to communicate to the subsidiary Centro Fiduciario C.F. S.p.A. that it was no longer in the Company's interest to continue operating in the trust services sector and that, consequently, condi-tions were not there for the company to obtain registration as a trust in the new Register pursuant to art. 106 of Legislative Decree no. 385/93 and therefore asked the subsidiary to fulfil its obligations towards its customers and the Supervisory Authoritiesas are required to discontinue operations and relinquish the procedures for obtaining registration in the above-mentioned Register. On 28 March 2018, the Shareholders’ Meeting of Centro Fiduciario C.F. S.p.A. resolved to wind up the company, appointing a receiver. On 5 April 2018 the wind-up period of the company began and on 6 June 2018, the Ministry of Economic Development appointed a Standing Commissioner to verify the wind-up progress. On 9 February 2018 the Board of Directors resolved to no longer pursue the plan for merger by absorp-tion of Banca Cesare Ponti S.p.A. into the parent company Banca Carige S.p.A. The previous resolution on the subject was accordingly deemed superseded. At its meetings of 20 February 2018 and 6 March 2018, the Board of Directors approved the organisational restructuring and redefinition of the Group's current private banking model. On 29 June 2018, the Bank announced the appointment of Mr. Michele Ungaro as General Manager of Banca Cesare Ponti S.p.A. with effect from 1 July 2018. The organisa-tional restructuring and redefinition of the Group's current private banking model fit within the 2017-2020 Business Plan and are attained with the on-boarding of a staff member having a long-standing ex-perience in the banking sector in general and, more specifically, in private banking. On 21 June 2018, the Board of Directors decided to challenge the arbitral award issued on 4 May 2018 on conclusion of the arbitration proceedings that had been initiated against Amissima Vita S.p.A. on 22 November 2016. For more information, please see “Disposal of Insurance Companies – Guarantees and Commitments” in the “Accounting Policies” Section. On 30 June 2018, Banca Carige was assigned the following ratings by international ratings agencies Moody’s and Fitch: − Moody’s: 'Caa2' for the long term and 'Not Prime' for the short term; in its latest rating action of 13

December the agency raised the Bank's baseline credit assessment by three notches, to 'caa1' from 'ca', recognising that the extraordinary transactions carried out by Carige will improve its creditworthi-ness. This upgrade was counterbalanced by the reduction in subordinated and senior unsecured debt which, in the agency's calculation models, translates into a lower loss-absorbing capacity of these in-struments and, therefore, into an increased loss-given-failure for the bank's deposits and senior unse-cured bonds; in addition, the agency revised downward its view of a likelihood of government support in the event of resolution, thus compensating for the upgrade of the baseline credit assessment and leaving, in fact, the issuer rating unaffected at 'Caa2', with the outlook changing to 'stable' from previ-ous 'negative'. The 'B3' rating on long-term deposits was also affirmed, with outlook changed to 'nega-tive' from previous 'developing';

− Fitch Ratings: ‘B-' for the long term and 'B' for the short term; in the last rating action of 25 January 2018, the agency affirmed the long and short-term ratings previously assigned and removed them from CreditWatch negative (dating back to 10 April 2017), placing the ratings in negative outlook. The outlook reflects Fitch's view of the bank's weak prospects for ongoing medium-term structural profitability and the high level of non-performing loans left on its books even after the two disposals carried out in 2017 for an amount of over EUR 2 bn.

OTHER GROUP COMPANIES On 5 February 2018, the Extraordinary Shareholders' Meeting of Carige REOCO S.p.A. resolved to del-egate to the Board of Directors, pursuant to art. 2443 of the Italian Civil Code, the powers -to be exer-cised by no later than 31 March 2019- for the purpose of increasing share capital against consideration, in divisible form, with a right of option, in one or more issues and in one or more tranches, via the issu-

17

ance of new ordinary shares with no indication of par value and having regular dividend entitlement, for a maximum total amount of EUR 19.5 mln, vesting it with all powers required to give effect to the trans-action. The Extraordinary Shareholders' Meeting thus resolved to amend article 5 of the Articles of Asso-ciation regarding Share Capital. In their meeting of 5 February 2018, the Boards of Directors of Banca Cesare Ponti and Banca del Mon-te di Lucca, within the scope of the Parent Company’s direction and coordination activity, resolved to modify the outsourcer of the Information System, identifying for this purpose the NewCo controlled by IBM Italia S.p.A. and invested in by the Parent Company Banca Carige S.p.A. The Boards of Directors of Banca Cesare Ponti and Banca del Monte di Lucca, at their meetings of 23 and 28 February 2018 respectively, approved the outsourcing of the bad loan management and workout activities to Credito Fondiario S.p.A. At the meeting held on 5 March 2018, the Board of Directors of Banca Cesare Ponti acknowledged the organisational restructuring plan of Banca Cesare Ponti, which had already been approved by the Board of Directors of Banca Carige at the meeting of 20 February 2018. At the same meeting, the Board of Di-rectors also resolved to close five of the Bank's branches (Agency A in Milan, the Head Office in Como, the branches in Brescia, Monza and Varese). On 22 March 2018, the Ordinary Shareholders’ Meeting of Banca Cesare Ponti approved the Financial Statements as at 31 December 2017, resolving that the net loss for 2017, amounting to EUR 1,699,775.86, be covered by share premiums. On 23 March 2018, the Ordinary Shareholders’ Meeting of Banca del Monte di Lucca approved the Fi-nancial Statements as at 31 December 2017, resolving that the net loss of EUR 12,310,576.63 for fi-nancial year 2017 be carried forward.

MAIN RISKS AND UNCERTAINTIES AND OUTLOOK ON OPERATIONS

After a 2017 of sustained and synchronised global economic growth, the first signs of risk emerged in the first months of 2018, which may cause a slowdown in the economic growth and a potential deterioration of the economic cycle. The rise in oil prices risks eroding the purchasing power of families and, hence, their consumption, while uncertainty persists due to the enactment of protectionist economic policies in the United States, Brexit negotiations in Europe and the new political course in Italy. The financial market of operation continues to be affected by all-time low interest rates and a still critical (albeit decreasing and gradually improving) level of credit risk. Italy's economic growth continued at a slightly more moderate pace (GDP is estimated to grow by 1.2% in 2018, less than in the other major European countries) and was fuelled by domestic demand against a backdrop of expansionary economic policies, positive trends in the labour markets and favourable lend-ing conditions. The slowdown in the pace of recovery was caused by weaker exports and investments, de-spite tax reliefs introduced by the government. The Banca Carige Group manages the risks typical of the banking business -including liquidity, market, credit and compliance risk- by using regulatory models and more advanced methods that have, over time, made it possible to expand the range of risks monitored and improve the assessment of capital ad-equacy from both a regulatory and an economic point of view. The origin of the main risks and uncertainties lies in the macroeconomic context which is still character-ised by weak growth particularly in our country, where the current political situation, with issues related to the formation of the new government and its programme, is rather unstable. The continuously evolving regulatory framework is an element of uncertainty with specific regard to li-quidity and capital profiles and the IRRBB rate (with impacts caused by the adoption of IFRS 9, a new def-inition of default, more stringent rules on exposures with sovereign states, the EU-wide process of trans-position of the new Stable Funding and Leverage Ratio regulatory frameworks, changes in the calculation of the capital requirement on credit risk) and, more in general, the entire supervisory mechanism (Bank-ing Union, Single Supervisory Mechanism (SSM), the introduction of the Bank Recovery and Resolution

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Directive (BRRD), the introduction of the bail-in mechanism as a tool for the resolution of failing banks); chief among the uncertainties connected with the SSM are the findings that may emerge as a result of the ongoing on-site and remote inspections conducted by the ECB on the Bank’s operations. The characteristics of the macroeconomic environment and the financial system in particular are also re-flected in the elements of uncertainty of the Banca Carige Group, which, as already described in other sections of this report, were raised in the discussions with the ECB, although it was confirmed that Direc-tors' management is focused on containing and continuously monitoring the risks inherent in banking ac-tivities. The turbulence and uncertainty on the Italian financial markets, which further increased in the first half of 2018, along with the Group's own situation, justify the limited appetite shown by investors for Banca Carige's Tier 2 Capital instruments. Uncertainties exist with regard to the persistence of this situation on the financial markets and consequently to the underwriting of the Bank's instruments. The Group is strongly focused on RWA-reduction measures including the disposal of non-core assets, in relation to which there are uncertainties as to the most favourable timing for the Group to obtain the best conditions with third parties. This also includes the initiatives underway for the disposal of the UTP portfo-lio and the securitisation of the bad loan portfolio, which are on track and will presumably be finalised in the second half of 2018. In particular, the UTP disposal plan, which included the subdivision of the portfolio held for sale into var-ious clusters in order to best channel the offers from potential bidders, is currently in the phase of collec-tion and analysis of the offers received, which are binding for some of these clusters, whereas the dead-line for the submission of binding offers for other segments is set for September 2018. The Bank’s rele-vant units are currently analysing the offers received. Moreover, since the entire scope of the disposal project is larger than set in the NPE Strategy as the Bank's final target, the Bank will only be able to make a well-pondered decision on the disposals once the offers for all the clusters have been collected and analysed. Finally, it should be noted that these initiatives, by their very nature, are part of negotiations with third parties and include uncertainties in terms of timing and amounts. Another important aspect is represented by the Group's past financial performance, which was affected by: the large NPL share of total assets and related uncertainties as to how this risk should be managed, an increasingly compressed Net Interest Income due to lower financial leverage, and reduced operating efficiency which required the adoption of ever more stringent cost curbing initiatives in the prior period and in the current year. The Italian banking system tensions following the resolution of smaller financial institutions and the uncer-tainties emerging during the capital increase had an impact on the Bank's liquidity position and increased its reputational risk, as a result of the negative perception of the Bank's image by customers and inves-tors, including in consideration of the recent events occurring at the governance level, as mentioned above. With regard to the uncertainties associated with the additional potential negative effects deriving from the ECB's on-site inspection on credit and counterparty risk, as indicated in the paragraph concerning t"Key events in the first half of 2018", the following information is provided. The scope of the inspection was the Corporate and SME Corporate loan portfolio. More specifically, the inspection team carried out a credit file review on a sample of approximately 300 Corporate and SME Corporate credit exposures for a gross exposure of approximately EUR 3.5 bn, of which approximately 150 positions classified as performing or past due for an amount of approximately EUR 1.1 bn, approx-imately 120 exposures classified as UTPs for an amount of EUR 2 bn and approximately 30 positions classsified as bad loans for an amount of approximately EUR 0.4 bn. With reference to the exposures analysed and classified as non-performing exposures (mainly UTPs), their average coverage as at 30 June 2018 was approximately 38%. Preliminary results are being discussed with the relevant corporate units; discussions show that, at the present stage of analysis, the requests made by the inspection team are essentially a consequence of the adoption of different valuation methods (haircut of collateral, recovery times, etc.) compared to those currently used by the Bank. Moreover, the scope of the credit file review also includes exposures that are part of the NPE disposal process launched by the Group in the first half of the year. The Bank therefore believes that the finalisa-

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tion of the foregoing disposal process in the second half of 2018 could lead to a partial 'response' to the preliminary requests made by the inspection team. In view of the fact that the valuation process carried out so far, the outcome of which is reflected in this Firs-Half Report, is in line with the accounting models it has adopted, the Bank has initiated a process of analysis and further examination; once such process is completed, amendments may need to be intro-duced -subject to the necessary internal approval process- to the current valuation methods while addi-tional loan loss provisions and changes to the classifications of these positions may need to be adopted. Group operations will be carried out in compliance with the most significant economic, financial and capital objectives outlined in the new Business Plan and in the NPE Strategy (the guidelines of which are reported in the above section “Strategy and Business Performance”), approved by the Board of Directors of Banca Carige on 13 September 2017 and 27 March 2018, which include the new strategic guide-lines for managing Non-Performing Exposures (NPEs) and the capital strengthening actions designed to complete the Group’s de-risking process. In consideration of the Group’s specific economic, capital and financial situation which, as at 30 June 2018, was not compliant with the Total Capital Ratio (TCR) required by the ECB as specified in the SREP Decision of 27 December 2017, and alterations in governance due to multiple resignations in the Board of Directors, the Board attentively assessed the going concern assumption. Following the assessment and having regard to the requirements of IAS 1 and guidance provided in Document no. 2 of 6 February 2009, jointly issued by the Bank of Italy, Consob and ISVAP as subse-quently updated, the Board of Directors concluded that the Group reasonably expects to continue oper-ating as a going concern in the foreseeable future, primarily in light of the: • implementation of the actions included in the 2017-2020 Business Plan, approved by the Board

of Directors on 13 September 2017. In particular, the disposal of the bad loan management platform and the outsourcing of the Group's information system were carried out in the first half of 2018. Preliminary agreements have already been entered into for the disposal of the Merchant Acquiring business and the consumer credit company Creditis Servizi Finanziari S.p.A., with their closing being expected to take place during the second half of 2018. The necessary authorisa-tions from the Supervisory Authorities are pending for the disposal of the consumer credit com-pany to become effective;

• implementation of the actions included in the NPE Strategy, approved by the Board of Directors on 27 March 2018. In particular, during the first half of the year, projects were initiated with a view to disposing of a portfolio of bad loans for an amount up to EUR 1 bn and credit exposures classified as unlikely to pay for a total of approximately EUR 500 mln; moreover, as part of the de-risking process launched in implementation of the NPE Strategy, the Group has already com-pleted the disposal of two credit exposures for a total gross amount of approximately EUR 50 mln;

• Board of Directors’ decision of 3 August 2018 about convening a Shareholders' Meeting on 20 September 2018 to resolve, inter alia, upon (i) the proposals for dismissing the Board of Directors in office and appointing a new governing body, which were submitted by shareholders POP 12 S.à.r.l. and Malacalza Investimenti S.r.l., pursuant to art. 2367 of the Italian Civil Code; (ii) filling the vacancies in the Board of Directors by appointing the Chair and Deputy Chair in particular, pursuant to article 2364, paragraph 1(2) of the Italian Civil Code and article 18, paragraph 11, of the Articles of Association, should the foregoing proposals not be approved;

• approval, by 30 November 2018, by the renewed Board of Directors under the new chairman-ship, of a comprehensive plan to restore and ensure compliance with the capital requirements by 31 December 2018 at the latest. This plan should assess all options including a business combi-nation.

The implementation of the above actions, combined with the execution of all other initiatives set out in the 2017-2020 Business Plan and the NPE Strategy, as well as the implementation of any additional ac-tions which will need to be put in place to meet the requests that the ECB communicated in its draft deci-sion of 20 July 2018, reveal that the Group has the reasonable expectation that it will continue as a go-ing concern for the foreseeable future and will comply with the prudential Own Funds and liquidity re-

20

quirements imposed by the ECB on 27 December 2017, contingent upon its ability to absorb the impact of meeting the NPL reduction targets and minimum NPL coverage levels required. The reasonable expectation to continue as a going concern in the foreseeable future is also based on compliance, as at 30 June 2018, with the minimum consolidated CET1 capital requirement and liquidity ratio required by the ECB and the fact that the measures set out in the Business Plan -particularly a sub-ordinated debt issuance of up to EUR 200 mln and the disposal of additional non-core assets- are ade-quate to restore the TCR at a level in excess of the SREP thresholds recommended by the ECB, along with the additional options required by the ECB. The Board emphasises that failure to execute such measures may have significant adverse effects on the overall economic, capital and financial situation of the Bank and the Group, with potential impacts on their capacity to operate as a going concern. On the basis of the above, subject to the effective implementation of the above-listed actions, Directors are of the opinion that the Group has the forward-looking ability to comply with the capital requirements set under the Supervisory Review and Evaluation Process (SREP) in the foreseeable future. Therefore, even considering the uncertainties deriving from the current market environment, as well as from the outcome of the forthcoming completion of the non-performing loan disposal and the potential effects of the ongoing inspection by the Supervisory Authority, the Half-Year Condensed Consolidated Fi-nancial Statements were prepared on the going-concern basis.

RELATED-PARTY DISCLOSURE This half-year financial report includes the information required by IAS 24 – Related party disclosures – published in November 2009 by the IASB (EC Reg. 632/2010 of 19 July 2010). The Group conducts market-regulated business with shareholders of Banca Carige who can exert signifi-cant influence, investees and other related parties. For details of existing relations, please refer to the paragraph “Related-Party Transactions” in the Explanatory Notes to the Half-Year Condensed Consoli-dated Financial Statements.

PERFORMANCE OF SUBSIDIARIES IN THE REPORTING PERIOD As at 30 June 2018, Banca del Monte di Lucca S.p.A. posted a net profit of EUR 0.9 mln, compared with a net loss of EUR 8.6 mln in the same period of the previous year. Overall funding amounted to EUR 1,216 mln, compared to EUR 1,176.7 mln in December 2017, of which EUR 745.8 mln from direct funding (+8.6%) and EUR 470.2 mln from indirect funding (-4.1%). Gross loans to customers totalled EUR 655 mln (+1.6% as compared to December 2017). Banca Cesare Ponti S.p.A. posted a net profit of EUR 380 thousand, compared with a EUR 1 mln loss achieved in June 2017. Overall funding amounted to EUR 2,084 mln, compared to EUR 2,245.1 mln in December 2017, of which EUR 247 mln from direct funding (+5.4%) and EUR 1,837.1 mln from indirect funding (-8.6%). Gross loans to customers totalled EUR 56 mln (EUR 60.2 in December 2017). Creditis posted a net profit of EUR 9.3 mln as at 30 June 2018, up from the EUR 7.8 mln result regis-tered in June 2017. As at 30 June 2018, Carige REOCO posted a net loss of EUR 369 thousand.

21

HALF-YEAR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

22

TRANSITION TO THE NEW FINANCIAL REPORTING STANDARD IFRS 9

Foreword The IFRS 9 accounting standard “Financial Instruments” replaces the provisions of IAS 39 “Financial Instruments: Recognition and Measurement” as from 1 January 2018. The process to replace IAS 39 was initiated by the IASB mainly in order to respond to concerns that arose during the financial crisis concerning the timeliness with which the impairment of financial assets is recognised. IFRS 9 was published by the IASB on 24 July 2014 and its endorsement by the EU took place with the publication of Regulation (EU) No. 2016/2067 of 22November 2016 in the Official Journal of the European Union. This consolidated half-year report is therefore the first accounting period prepared with the application of the IFRS 9 accounting rules. More specifically, this information has been prepared to allow an adequate understanding of the process of the transition from the international reporting standard IAS 39 “Financial instruments: recognition and measurement”, which was applied until 31 December 2017 to the international reporting standard IFRS 9 “Financial instruments”. It is composed of a summary overview of the most important aspects of the new standards, together with a description of the transition process in the Banca Carige Group, together with information on the first time adoption of IFRS 9 in terms of qualitative and quantitative impacts. To complete the information, we underline that in accordance with an express provision of Legislative Decree No. 38/2005, at national level, having maintained its powers to define accounting statements and schedules and the contents of the Explanatory Notes to the Financial Statements, the Bank of Italy issued the 5th update of Circular No. 262/05 “Bank's Financial Statements: layouts and preparation” on 22 December 2017. 1. IFRS 9 “Financial instruments” 1.1 The three chapters of IFRS 9 IFRS 9 is organised into the following three main chapters:

- Classification and measurement of financial instruments; - Impairment; - Hedge accounting.

Classification and measurement In the first area, IFRS 9 requires the classification of financial assets to be guided, on the one hand, by their contractual cash flow characteristics and, on the other hand, by the entity's business model for which the assets are held. In replacement of the previous four accounting categories, under IFRS 9 financial assets may be classified into three categories, according to the two drivers indicated above:

Financial assets measured at amortised cost; Financial assets measured at fair value through other comprehensive income (for debt

instruments, the reserve is reclassified to profit or loss if the instrument is sold) and, Financial assets measured at fair value through profit or loss.

Financial assets can be recognised in the first two categories and can therefore be measured at amortised cost or at fair value through other comprehensive income, only if it is demonstrated that they give rise to cash flows that are Solely Payments of Principal and Interest - the “SPPI Test”. Equity

23

instruments are always recognised in the third category and measured at fair value through profit or loss unless the entity makes an irrevocable election at initial recognition to present subsequent changes in the fair value of equity instruments not held for trading in other comprehensive income, which will never be recycled to profit or loss, even if the financial instrument is sold (Financial assets measured at fair value through other comprehensive income without “recycling”). No major amendments are introduced with respect to the classification and measurement of financial liabilities under IAS 39. The sole change relates to the accounting treatment of own credit risk: for financial liabilities designated at fair value (fair value option liabilities), the standard requires that changes in fair value attributable to the change in own credit risk be recognised through other comprehensive income, unless this treatment creates or enlarges an accounting mismatch in profit or loss, whereas the remaining amount of changes in the fair value of the liabilities must be presented in profit or loss. Impairment With respect to impairment, a model has been introduced for instruments measured at amortised cost and fair value through other comprehensive income (other than equity instruments) based on the concept of “expected loss” instead of the “incurred loss” envisaged by IAS 39, aimed at recognising losses in a more timely manner. IFRS 9 requires that entities recognise expected credit losses over the next 12 months (stage 1) starting from initial recognition of the financial instrument. The time horizon for calculating expected losses is the entire residual life (full lifetime) of the asset being measured if credit risk has increased "significantly" since initial recognition (stage 2) or if it is impaired (stage 3). More specifically, the introduction of the new impairment rules involves the:

allocation of performing financial assets to different credit risk stages (staging), which correspond to value adjustments based on 12-month Expected Credit Losses (ECL) (Stage 1), or lifetime ECL over the remaining life of the instrument (Stage 2) if there is a significant increase in the credit risk (SICR) determined by comparing the Probabilities of Default at the initial recognition date and at the reporting date;

allocation of the credit-impaired financial assets to Stage 3, again with value adjustments based on lifetime ECLs;

inclusion of forward-looking information in the calculation of the ECL, also consisting of information on the evolution of the macroeconomic scenario.

Hedge Accounting Finally, with regard to hedge accounting, the new model for hedging - which, however, does not apply to macro-hedging - aims to ensure that accounting treatment is consistent with risk management activity and to enhance disclosure of risk management activity by the reporting entity. Summary of the impacts of first-time adoption as at 1 January 2018 The introduction of the new standard had a negative impact of EUR 239.4 mln on net accounting equity (Group and Non-Controlling Interests) as at 1 January 2018, of which:

a positive EUR 28.5 mln impact from the new rules for classification and measurement of financial assets and liabilities;

a negative EUR 355.3 mln impact from the new impairment model applied to financial assets measured at amortised cost and to commitments and guarantees given;

a positive EUR 89.7 mln tax impact; a negative EUR 2.3 mln impact from the non-controlling interests’ share of equity.

1.2 The transition to IFRS 9 in the Banca Carige Group 1.2.1 Application choices This sub-section describes the application choices made by the Group on First-Time Adoption together with a brief prior consideration of the provisions of the new accounting standard in the Group context.

24

The impacts of first-time adoption of IFRS 9 were quantified on the basis of the findings of the project activity and the application of decisions made by the Group on which detailed information is given later in this section. It is worth providing prior information about the choices of a “general” nature made by the Banca Carige Group regarding the scope of Group companies subject to the new standard, the recognition of the impacts on own funds resulting from the application of the new impairment rules, according to the recent amendments made to prudential regulations, and the presentation of the comparative figures in the year of first time adoption of the standard:

On 12 December 2017, the European Parliament and the Council issued Regulation (EU) no. 2017/2395 "Transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds", which updates Regulation no. 575/2013 CRR, adding the new article 473 bis "Introduction of IFRS 9", which gives banks the possibility of mitigating the impact on their own funds resulting from the introduction of IFRS 9 over a transitional period of 5 years (from March 2018 to December 2022) by neutralising the impact on CET1 through the application of scaling factors over time. On 31 January 2018, Banca Carige communicated to the ECB its intention to adopt for all the Banks of the Group the progressive “phase in” regime introduced by Regulation (EU) no. 2017/2395, which dilutes the IFRS 9 transition impact on own funds over 5 years, by including in its CET1 a portion -decreasing over time down to zero- of the difference between the new credit loss provisions calculated in accordance with IFRS9, and the credit loss provisions calculated by applying IAS39. From 2018, banks that opt for the transitional arrangements will, however, be required to provide market disclosure regarding their “fully loaded” Available Capital, RWAs, Capital Ratios and Leverage Ratio, in accordance with the EBA Guidelines issued on 12 January 2018;

Lastly, with regard to the methods of presentation of the effects of first-time adoption of the

standard, the Group has exercised the option established in paragraph 7.2.15 of IFRS 9 and paragraphs E1 and E2 of IFRS 1 “First-Time Adoption of International Financial Reporting Standards”, according to which – subject to the retrospective application of the new measurement and presentation rules required by the standard – an entity does not need to restate on a like-for-like basis the comparative information with prior periods in the financial statements of the annual reporting period that includes the date of initial application of the new standard. According to the instructions contained in the document issuing the 5th update of Circular 262 “Bank financial statements: layouts and preparation”, banks that make use of the exemption from the requirement to restate the comparative information must nonetheless include a reconciliation statement in the first financial statements prepared based on the new Circular 262. This statement must show the method used and provide a reconciliation between the information from the last approved financial statements and the first financial statements prepared according to the new provisions. The form and content of this disclosure is left to the independent discretion of the company's competent bodies.

A brief analysis is provided below of the main areas of impact of the new financial reporting standard as identified above, as well as the main choices made in this regard by the Banca Carige Group. 1.2.2 Classification and measurement Financial assets IFRS 9 lays down the following criteria for the classification of financial assets:

a) the Business Model under which they are held; b) the contractual cash flow characteristics of the financial assets.

25

a) The business models pursuant to IFRS 9 The Banca Carige Group has defined its Business Models by analysing and surveying the different ways in which financial instruments are managed in order to generate cash flows, thereby substantially confirming the portfolio management strategies applied under the rules of IAS 39. Given the strategic importance of the Business Models under IFRS 9, the Group analysed its portfolios of financial instruments (debt instruments, equity instruments, loans and receivables and shares in funds) existing as at 31 December 2017, adopting a special policy for their definition. Hold to Collect (HTC) The objective of this business model is to hold financial assets in order to collect contractual cash flows over the life of the instrument. Given the management strategy underlying the HTC Business Model, sales of portfolios associated with the model must be appropriately assessed. According to the standard the following may nevertheless be deemed consistent with the HTC business model:

sales of determined assets when there is an increase in the assets' credit risk; infrequent sales (even if significant in value) or sales of insignificant value, both individually and

in aggregate (even if frequent); sales made close to the maturity of the financial assets and when the proceeds from the sales

approximate the collection of the remaining contractual cash flows. With specific reference to the sales “significance”, the Group -in a specific internal regulation- has formulated the criteria for considering sales carried out for reasons not explicitly specified by the standard as admissible, which is to say sales of financial instruments made close to their maturity, or due to an increase in credit risk or in order to meet unforeseen liquidity needs. The Banca Carige Group has associated the HTC Business Model to the:

debt instruments that may be subject to the management approaches of that Business Model; the bank's entire loan book, irrespective of the borrower type (banks or customers) and the type of

financing. Hold to Collect and Sell (HTC&S) The objective of the HTC&S business model is achieved by both collecting contractual cash flows and selling financial assets. By definition therefore the Business Model involves a number of sales, of greater significance and frequency than for the HTC business model, without nevertheless imposing frequency or significance restrictions on them. The Banca Carige Group has associated to the HTC&S Business Model approximately 62% of its portfolio of debt securities which had been classified as financial assets available for sale under IAS 39. For the remaining part of its debt securities, the Group has reclassified the portfolio by taking account, as foreseen by the standard, of the underlying business model on the IFRS 9 first-time adoption date. These reclassifications concerned, in particular, debt securities measured at fair value through other comprehensive income under IAS 39, which were included in a Hold to Collect business model on FTA and therefore measured using the amortised cost method, if they passed the SPPI test. Other business models (FVTPL) An entity adopts this Business Model when decisions are made based on the assets' fair values and it manages the assets to realise those fair values (in this case, the entity's objective typically results in active buying and selling) or in any event when the objective of such a Business Model is not achieved by those described above (HTC&S and HTC). The sales associated with this business model are normally more frequent and more significant than under the HTC&S Business Model.

26

The Banca Carige Group has associated to “Other Business Models” all financial instruments classified as financial assets held for trading. b) The objective characteristics of the financial assets Under IFRS 9, only financial instruments the contractual terms of which give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding may be classified as financial assets measured at amortised cost or as financial assets measured at fair value through other comprehensive income. In order to ascertain whether financial instruments meet the aforementioned characteristics, they must be tested by using the “Solely Payments of Principal and Interest test” (SPPI test), as well as the “Benchmark Test” in the presence of clauses involving the “Modified Time Value of Money”. Solely Payments of Principal and Interest (SPPI) Test Steps were taken on first-time adoption to analyse the portfolios of debt and credit instruments existing as at 31 December 2017 by:

taking a differentiated approach according to the level of standardisation of contracts, conducting a “benchmark cash flow test” with a methodology that simulates trends in the interest

rate curves based on historical information about clusters of similar products in terms of rate applied and instalment payment frequency.

On First-Time Adoption only a very limited portion of the debt and credit instruments did not pass the SPPI due to their objective characteristics and were thus measured at FVTPL (Fair Value Through Profit or Loss). Financial assets are classified and measured as shown below on the basis of the Business Model and the objective characteristics mentioned above.

Bank of Italy Balance sheet item pursuant to Circ. 262/2005

Category Subjective/objective characteristicsType of financial

instrument

20. Financial assets at fair value through profit or lossa) financial assets held for tradingb) financial assets designated at fair valuec) other financial assets mandatorily at fair value

Financial assets at “FVTPL”

This criterion classifies and measures financial assets:• held for trading;• where designation as at FVTPL eliminates or significantly reduces an accounting mismatch;• that, even though they are associated with HTC and HTC&S Business Models, envisage cash flows that do not solely consist of payments of principal and interest;• managed on a fair value basis.

All types of financial instrument may be recognised within this category.

30. Financial assets at fair value through other comprehensive income

Financial assets at “FVTOCI"

This category classifies:a) debt instruments and loans:- associated with the HTC&S Business Model; and- whose contractual cash flows consist solely of payments of principal and interest.b) equity instruments for which the “OCI election” is adopted.

Debt instruments (securities and loans) and equity instruments may be recognised within this category.

40. Financial assets at amortised costa) loans to banksb) loans to customers

Financial assets at “Amortised Cost”

This criterion classifies and evaluates financial assets:- associated with the HTC Business model; and- whose contractual cash flows solely consist of payments of principal and interest and that are held for the purpose of collecting contractual cash flows.

Only debt instruments (securities and loans) may be recognised within this category.

Financial liabilities As concerns financial liabilities, the provisions of IAS 39 have been almost entirely transposed to IFRS 9. The standard allows entities to opt (in continuity with IAS 39), to measure financial liabilities at “fair value through profit or loss” criterion if certain conditions are met (i.e. the “fair value option”), but nevertheless recognising changes in the fair value of financial liabilities due to changes in the credit rating of the issuer through other comprehensive income and no longer through profit or loss, unless the accounting

27

treatment creates or enlarges an accounting mismatch in profit or loss, in which latter case the entity shall present all gains or losses on that liability in profit or loss. The Banca Carige Group has decided not to make use of the “fair value option” for financial liabilities. All financial liabilities measured at fair value under IAS 39 have accordingly been classified as Financial liabilities at amortised cost - Securities issued. Derivatives Lastly, to complete the information, we report that IFRS 9 does not have any impact on the classification of derivative instruments, which, in line with IAS 39 accounting, continue to be measured at fair value through profit or loss. 1.2.3 Modification of contractual cash flows As already reported, the derecognition rules of IFRS 9 continue in line with the provisions of IAS 39. However, the new standard requires the accounting treatment summarised in the table below with regard to modifications to the contractual cash flows of financial assets. Renegotiation/modification of

the contractual termsAccounting treatment

“Substantial” modificationThe entity must derecognise the financial instrument that has been modified and recognise a new financial asset on the basis of the new contractual terms and conditions.

“Non-substantial” modification

If the modification is not deemed “substantial” and does not therefore result in derecognition of the instrument, the entity shall calculate the present value of the renegotiated or modified cash flows of the financial asset and recognise the difference between that value and the gross book value prior to the modification through profit or loss.

With a view to determining the significance of modifications of financial assets, the Banca Carige Group makes an assessment of:

quality, if the modification implies the inclusion of a clause which changes the outcome of the SPPI test, the original asset should be derecognised and the new modified financial asset should be recognised;

quantity, if the SPPI criterion is met, the entity should assess whether there is any substantial difference in the Present Value of the contractual cash flows.

1.2.4 Impairment The IFRS 9 impairment model, which has a forward-looking vision, requires immediate recognition of credit losses even if they are only expected as opposed to IAS 39, according to which the measurement of credit losses is based solely on those resulting from past events and current conditions. Unlike in IAS 39, IFRS 9 contains a single impairment model that must be applied to all financial assets measured at amortised cost and to those measured at fair value through other comprehensive income as well as to financial guarantees and loan commitments. The most discretionary aspects of the standard, identified during the project activities, relate to how to calculate the impairment of financial instruments (loans and receivables and debt instruments) classified

28

and measured at amortised cost or at fair value through other comprehensive income (FVOCI), and concern the following:

the stage allocation of financial instruments when an entity determines that there have been significant increases in credit risk; and

incorporation of ‘forward-looking’ scenarios in the definition of both stage allocation and the expected credit loss (ECL).

In accordance with IFRS 9 impairment rules, financial assets that are not impaired at the time they are purchased (or originated), are divided into three stages and the recognition of expected credit losses is determined on the basis of the stage to which they are assigned as summarised in the table below.

Stage Performing/Non performingCalculation of the expected loss

amount

Stage 1

Performing financial assets for which no significant increase in credit risk has been recorded since initial recognition or whose credit risk is considered low.

Proportional to the amount of 12-month expected credit losses (the expected credit losses that result from default events on a financial instrument, that are possible within the 12 months after the reporting date).

Stage 2Performing financial assets for which a significant increase in credit risk has been recorded since initial recognition.

Proportional to the amount of the expected credit losses over the lifetime of the instrument (expected losses tha result from default events on financial instruments considered possible over the lifetime of the financial asset).

Stage 3 Non-performing financial assets.Proportional to the amount of the expected credit losses over the lifetime of the instrument.

The stage allocation model currently implemented by the Group, in order to classify financial instruments in stage 2, is based on a combination of absolute and relative criteria. In particular, absolute criteria include:

30 days past due: IFRS 9 makes explicit reference to the case in which an exposure shows a delay in the fulfilment of contractual obligations as an example of a possible indicator of classification in stage 2, given the deterioration of the account relationship. An entity can rebut this presumption when it has reasonable and supportable information available that demonstrates that even if contractual payments become more than 30 days past due, this does not represent a significant increase in the credit risk of a financial instrument but depends on other factors (e.g. type of counterparty). Currently, in the absence of analyses to verify the risk profile of the type of exposures and in compliance with a prudential principle, the Bank maintains this criterion as a variable for the classification of positions in stage 2. For this purpose, the Bank considers the number of days past due associated with individual accounts which is used for FINREP reporting purposes, adopting absolute materiality thresholds for the past due on individual positions.

Forborne Exposures: forborne exposures are receivables that have benefited from special forbearance measures (concessions), consisting in the modification of contractual terms and conditions or refinancing of loans, following a substantial change in the borrower’s economic conditions that could be interpreted as an indication of a significantly compromised economic condition. The forbearance status is therefore considered as evidence that credit risk has increased significantly since initial recognition, given that the definition of forbearance itself makes reference to a condition of financial difficulty of the borrower. For the purpose of “stage allocation”, this condition must be considered as a criterion of automatic classification in stage 2 only for financial assets that are not credit-impaired.

29

Performance Monitoring Indicators: in order to measure any increase in credit risk with respect to the date of initial recognition, a number of performance monitoring indicators are also used, since the rationale underlying the early warning systems and the purpose of stage 2 are considered to be very similar and consist in identifying possible critical issues related to creditworthiness at an early stage. All positions included in monitoring phases 3, 4 and 5 of the Bank's performance monitoring system, corresponding to the higher-risk phases of "pre-problem" loans, are therefore classified in stage 2.

With reference to the "relative criteria", in order to assess the significant increase in credit risk, it is necessary to compare the degree of risk of each exposure at the date of initial recognition and at the reporting date. In addition, IFRS 9 provides for the adoption of a simplified impairment approach for trade receivables, contract assets and lease receivables, according to which an entity shall always measure the overall loss allowance at an amount equal to lifetime expected credit losses. The banks of the Carige Group adopt the simplified approach only for trade receivables and contract assets that do not contain a significant financing component in accordance with IFRS 15. The "general approach" is instead adopted for the impairment of trade receivables or contract assets that contain a significant financing component in accordance with IFRS 15 and for lease receivables that result from transactions that are within the scope of IAS 17. The objective of the impairment requirements, irrespective of whether the assessment of credit risk is performed on a collective or individual basis, is that of recognising lifetime expected credit losses for significant increases in the financial instrument’s credit risk since initial recognition, by considering all reasonable and supportable information (including forward-looking information) that is available without undue cost or effort. Expected loss is calculated as the sum of the products of PD (Probability of Default), LGD (Loss Given Default), EAD (Exposure at Default) and discount rate, at different time instants (ti) that reflect the repayment schedules for the individual exposures within a 1-year time horizon (ECL 1 year) or over the entire expected lifetime of the credit exposure (Lifetime ECL). Finally, the Impairment model takes into consideration the forward-looking disposal of a comprehensively identified portfolio of potentially marketable gross non-performing loans (bad loans and UTPs) with a high probability of sale, in line with the 2017-2020 Business Plan and as part of the NPE Strategy. 1.2.5 Purchased or Originated Credit-Impaired (POCI) financial assets In accordance with IFRS 9, “purchased or originated credit-impaired financial assets” are defined as exposures that are credit-impaired at the purchase or origination date. IFRS 9 states the following with regard to these exposures:

the estimate of the expected credit loss should always be calculated on the basis of the lifetime expected loss of the financial instrument;

interest revenue is recognised by applying the 'credit-adjusted effective interest rate' (“Credit Adjusted EIR”), i.e. the rate that discounts all expected future cash flows back to the amortised cost at initial recognition, taking account of expected credit losses amongst other aspects.

1.2.6 Hedge accounting In the area of Hedge Accounting, the changes to the accounting rules relate solely to general hedging and are closely tied to the Group's choice to exercise the opt-in/opt-out option (i.e. the possibility of applying the criteria established by the new IFRS 9 rather than continuing to apply the previous criteria established by IAS 39). Based on the assessments conducted on the current management of hedging

30

transactions, it has been decided to exercise the opt-out option upon FTA of IFRS 9. As a result, all types of hedging transactions continue to be managed using the methods adopted in the past, in line with the provisions of IAS 39. 2. Impacts from the date of initial application of IFRS 9

This section shows the reconciliations of the accounting balances as at 1 January 2018 as a result of the application of the new classification and measurement requirements of IFRS 9. 2.1 Reconciliation schedules and explanatory notes 2.1.1 Restatement of balance-sheet balances as at 31 December 2017 (under IAS 39) to the new Financial Statement items (under IFRS 9) as required by the fifth update of Bank of Italy Circular No. 262/2005. The schedules below show the reconciliations between the Financial Statements of the Full-Year Report as at 31 December 2017 and the Financial Statements introduced by the new Bank of Italy Circular no. 262, which reflect the adoption of the preparation criteria established by IFRS 9. In these statements, the accounting balances as at 31 December 2017 (figures determined according to IAS 39) are reconciled to the new accounting captions, according to the reclassifications required as a result of the new classification criteria introduced by IFRS 9 and based on the analyses carried out (already described above), with application of the new measurement criteria.

31

Assets

a) c

urre

nt

b) d

efer

red

Adjustment to net carrying

amountsTax effect

10. Cash and cash equivalents 296,581 296,581 296,581 296,581

Financial assets at fair value through profit or loss

2,453 2,453 185,063 187,516 (3,392) 184,124

a) financial assets held for trading 2,453 2,453 2,453 2,453

b) financial assets designated at fair value - - - -

c) other financial assets mandatorily at fair value

- 185,063 185,063 (3,392) 181,671

30.Financial assets at fair value through other comprehensive income

2,052,898 2,052,898 (680,665) 1,372,233 1,645 1,373,878

Financial assets at amortised cost 2,934,607 15,753,934 18,688,541 495,602 19,184,143 (299,780) 18,884,363

a) loans to banks 2,934,607 2,934,607 (13,097) 2,921,510 (236) 2,921,274

b) loans to customers 15,753,934 15,753,934 508,699 16,262,633 (299,544) 15,963,089

50. Hedging derivatives 29,581 29,581 29,581 29,581

60.Change in value of macro-hedged financial assets (+/-)

- - -

70. Equity investments 98,569 98,569 98,569 98,569

90. Property and equipment 738,442 738,442 738,442 738,442

100. Intangible assets 35,005 35,005 35,005 35,005

o which:- goodwill - - -

Tax assets 794,737 1,155,773 1,950,510 1,950,510 90,580 2,041,090

a) current 794,737 794,737 794,737 794,737

b) deferred 1,155,773 1,155,773 1,155,773 90,580 1,246,353

120.Non-current assets and disposal groups held for sale

608,077 608,077 608,077 248 222 608,547

130. Other assets 419,047 419,047 419,047 419,047

Total assets 296,581 2,453 - 2,052,898 2,934,607 15,753,934 29,581 98,569 738,442 35,005 794,737 1,155,773 608,077 419,047 24,919,704 - 24,919,704 (301,279) 90,802 24,709,227

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sset

sav

aila

ble

for sa

le

50. Fi

nanc

ial a

sset

s he

ld to

mat

urity

IFRS 9 items IAS 39 items

Total assets 01.01.2018

100. Eq

uity in

vestm

ents

120. Pr

oper

ty a

nd e

quip

men

t

130. In

tang

ible

ass

ets

150. N

on-c

urre

nt a

sset

s an

ddi

spos

al g

roup

s he

ld fo

r sa

le

160. O

ther

ass

ets

Total assets 31.12.2017 - 5th

update of Circ. 262/2005

Financial instruments

reclassification under IFRS 9

Total assets 01.01.2018following

IFRS 9 reclassification

Adjustments to carrying amounts due to transition to

IFRS 9140. Ta

xas

sets

60. Lo

ans

to b

anks

70. Lo

ans

to c

usto

mer

s

32

Liabilities

a) c

urre

nt

b) d

efer

red

a) p

ost-

empl

oym

ent

bene

fits

b) o

ther

al

lowan

ces

for ris

ks a

nd

char

ges

Adjustment to measurement

criteriaTax

Financial liabilities at amortised cost 4,656,624 12,624,541 3,885,829 21,166,994 348,459 21,515,453 3,847 21,519,300

a) due to banks 4,656,624 4,656,624 4,656,624 4,656,624

b) due to customers 12,624,541 12,624,541 12,624,541 12,624,541

c) securities issued 3,885,829 3,885,829 348,459 4,234,288 3,847 4,238,135

20. Financial liabilities held for trading 850 850 850 850

30.Financial liabilities at fair value through profit or loss

348,459 348,459 (348,459) - -

40. Hedging derivatives 224,971 224,971 224,971 224,971

50.Change in value of macro-hedged financial liabilities (+/-)

- - -

Tax liabilities 3,557 12,980 16,537 16,537 184 16,721

a) current 3,557 3,557 3,557 3,557

b) deferred 12,980 12,980 12,980 184 13,164

70.Liabilities associated with groups of assets held for sale

193,808 193,808 193,808 672 82 194,562

80. Other liabilities 474,579 474,579 (27,540) 447,039 447,039

90. Employee termination indemnities 59,417 59,417 59,417 59,417

Allowances for risks and charges - 34,410 130,830 165,240 27,540 192,780 24,145 216,925

a) commitments and guarantees given - 27,540 27,540 24,145 51,685

b) post-employment benefits 34,410 34,410 34,410 34,410

c) other allowances for risks and charges 130,830 130,830 130,830 130,830

Total liabilities 4,656,624 12,624,541 3,885,829 850 348,459 224,971 3,557 12,980 193,808 474,579 59,417 34,410 130,830 22,650,855 - 22,650,855 28,664 266 22,679,785

60. H

edgi

ng d

eriv

ativ

es

10. D

ue to

ban

ks

20. D

ue to

cus

tom

ers

30. Se

curit

ies

issu

ed

40. Fi

nanc

ial l

iabi

litie

s he

ld fo

r tra

ding

50. Fi

nanc

ial l

iabi

litie

s at

fa

ir va

lue

thro

ugh

prof

it an

d lo

ss

10.

60.

100.

IFRS 9 items IAS 39 items

Total liabilities 01.01.2018

Transition to IFRS 9

90. Liab

ilitie

s as

soci

ated

with

gro

ups

of a

sset

s he

ld

for sa

le

100. O

ther

liab

ilitie

s

110. Em

ploy

ee te

rmin

atio

nin

dem

nitie

s 120.

Allo

wan

ces

for ris

ks

and

char

ges

Total liabilities 31.12.2017 - 5th

update of Circ. 262/2005

Financial instruments

reclassification pursuant to IFRS

9

Total liabilities 01.01.2018 following

IFRS 9 reclassification

80. Ta

x lia

bilit

ies

33

Shareholders’ equity

IAS 39

IFRS 9

Change in measurement

criteriaTax

120. Valuation reserves (140,633) (140,633) - (140,633) 34,661 (11,036) (117,008)

150. Reserves (684,857) (684,857) - (684,857) (361,500) 100,719 (945,638)

160. Share premium reserve 628,364 628,364 - 628,364 628,364

170. Share capital 2,845,857 2,845,857 - 2,845,857 2,845,857

180. Treasury shares (-) (15,572) (15,572) - (15,572) (15,572)

190. Non-controlling interests (+/-) 24,125 24,125 - 24,125 (3,105) 854 21,874

200. Net profit (loss) for the period (+/-) (388,435) (388,435) - (388,435) (388,435)

Total shareholders’ equity (140,633) (684,857) 628,364 2,845,857 (15,572) 24,125 (388,435) 2,268,849 - 2,268,849 (329,944) 90,537 2,029,442

Total liabilities and shareholders' equity

24,919,704 24,919,704 (301,280) 90,803 24,709,227

IFRS 9 items IAS 39 items

220. Pr

ofit

(loss

)fo

r th

e pe

riod

(+/-

)

Total shareholders’

equity 31.12.2017 - 5th

update of Circ. 262/2005

Total shareholders’

equity 01.01.2018 following

IFRS 9 reclassification

Total shareholders’

equity 01.01.2018

Financial instruments

reclassification pursuant to

IFRS 9

Transition to IFRS 9

190. Sh

are

capi

tal

200. Tr

easu

ry s

hare

s (-

)

210. N

on-c

ontro

lling

inte

rests

(+/-

)

140. Va

luat

ion

rese

rves

170. Re

serv

es

180. Sh

are

prem

ium

rese

rves

34

With regard to the new Circular no. 262, there has been a change in the presentation of the financial assets, which instead of the previous captions Loans to customers, Loans to banks, Investments held to maturity, Financial assets available for sale, Financial assets measured at fair value through profit or loss and Financial assets held for trading, are now classified under the new captions Financial assets at fair value through profit or loss, Financial assets at fair value through other comprehensive income and Financial assets at amortised cost. With regard to the new official formats introduced by the Bank of Italy, in addition to the changes relating to the presentation of cumulative adjustments to guarantees given and loan commitments described above, the previous captions relating to amounts due to banks, amounts due to customers and securities issued are now all included under caption “10. Financial liabilities at amortised cost”. With a focus on the Group's most significant reclassifications, a breakdown is provided below for each type of financial instrument. Debt securities Debt securities classified as financial assets held for trading as at 31 December 2017 (EUR 1.5 mln) were reclassified as financial assets measured at fair value through profit or loss; debt securities that were classified as loans to customers (EUR 244.3 mln) were reclassified as financial assets at amortised cost. Debt securities classified as financial assets available for sale (EUR 1,740 mln) were reclassified:

- for an amount of EUR 1,060 mln into financial assets measured at fair value through other comprehensive income as they are held with an HTC&S business model and have passed the SPPI test;

- for an amount of EUR 615.4 mln into financial assets measured at amortised cost, as they are

held with an HTC business model and have passed the SPPI test. A EUR 33.9 mln positive effect -inclusive of measurement and impairment impact- is registered on these assets as a result of the transition to IFRS 9;

- for an amount of EUR 63.9 mln into financial assets measured at fair value through profit or loss, of which:

o EUR 50.2 mln relating to financial instruments under the HTC business model, mostly connected to securitisations that have failed the SPPI test and are therefore mandatorily measured at the FVTPL;

o EUR 13.7 mln relating to financial instruments under the HTC&S business model, mainly units in UCITs which, under IFRS 9, are considered as debt securities to be measured at FVTPL.

20. Financial assets held for

trading

30. Financial assets designated

at fair value through profit and

loss

40. Financial assets available

for sale

50. Financial assets held to

maturity

60. Loans to banks

70. Loans to customers

Total as at 31.12.2017

Transition to IFRS 9

Total as at 01.01.2018

20.Financial assets at fair value through profit or loss

1,490 63,888 65,378 65,378

30.Financial assets at fair value through other comprehensive income

1,060,245 1,060,245 1,060,245

40. Financial assets at amortised cost 615,378 244,250 859,628 33,954 893,582

Total 1,490 - 1,739,511 - - 244,250 1,985,251 33,954 2,019,205

IFRS 9 items IAS 39 items

35

Equity instruments Equity instruments entirely classified as financial assets available for sale as at 31 December 2017 (EUR 313.4 mln) were reclassified:

- for an amount of EUR 312 mln into financial assets measured at fair value through other comprehensive income following the decision to irrevocably apply the option of designating them at FVTOCI (without recycling to profit or loss);

- for an amount of EUR 1.4 mln into financial assets measured at fair value through profit or loss, following the decision not to apply the option of designating them at FVTOCI.

Transition to IFRS 9 has had a positive impact of EUR 1.6 mln on financial assets at fair value through other comprehensive income.

20. Financial assets held for

trading

30. Financial assets designated

at fair value through profit and

loss

40. Financial assets available

for sale

50. Financial assets held to

maturity

60. Loans to banks

70. Loans to customers

Total as at 31.12.2017

Transition to IFRS 9

Total as at 01.01.2018

20.Financial assets at fair value through profit or loss

1,399 1,399 - 1,399

30.Financial assets at fair value through other comprehensive income

311,988 311,988 1,645 313,633

40. Financial assets at amortised cost - - - -

Total - - 313,387 - - - 313,387 1,645 315,032

IFRS 9 items IAS 39 items

Loans Loans classified as loans to banks for an amount of EUR 2.9 bn and loans to customers for an amount of EUR 15.5 bn as at 31 December 2017, were reclassified primarily into financial assets measured at amortised cost. Furthermore, following SPPI failure, EUR 13.1 mln of loans to banks and EUR 106.7 mln of loans to customers were reclassified into financial assets measured at fair value through profit or loss, causing an overall negative impact of EUR 3.4 mln from transition to IFRS 9. Transition to IFRS 9 has had a negative impact on financial assets measured at amortised cost due to the new impairment model.

20. Financial assets held for

trading

30. Financial assets designated

at fair value through profit and

loss

40. Financial assets available

for sale

50. Financial assets held to

maturity

60. Loans to banks

70. Loans to customers

Total as at 31.12.2017

Transition to IFRS 9

Total as at 01.01.2018

20.Financial assets at fair value through profit or loss

13,097 106,679 119,776 (3,392) 116,384

30.Financial assets at fair value through other comprehensive income

- - - - -

40. Financial assets at amortised cost 2,921,510 15,403,005 18,324,515 (333,734) 17,990,781

Total - - - - 2,934,607 15,509,684 18,444,291 (337,126) 18,107,165

IFRS 9 items IAS 39 items

Derivatives Derivatives, classified as financial assets held for trading for an amount of EUR 963 thousand, were entirely classified as financial assets at fair value through profit or loss. Here follows a breakdown of reclassified financial liabilities:

10. Due to banks

20. Due to customers

30. Securities issued

40. Financial liabilities held

for trading

50. Financial liabilities

designated at fair value through profit and loss

Total as at 31.12.2017

Transition to IFRS 9

Total as at 01.01.2018

10.Financial liabilities at amortised cost

4,656,624 12,624,541 3,885,829 - 348,459 21,515,453 3,847 21,519,300

20.Financial liabilities held for trading

- - - 850 - 850 850

30.Financial liabilities at fair value through profit or loss

- - - - - - -

Total 4,656,624 12,624,541 3,885,829 850 348,459 21,516,303 3,847 21,520,150

IFRS 9 items IAS 39 items

Loans

36

Financial liabilities classified as due to banks and due to customers, amounting to EUR 4.7 bn and 12.6 bn respectively as at 31 December 2017, were entirely classified as financial liabilities measured at amortised cost. Securities issued Securities classified as securities issued, amounting to EUR 3.9 bn as at 31 December 2017, were entirely classified as financial liabilities measured at amortised cost. Securities recognised under financial liabilities measured at fair value, amounting to EUR 348.5 mln as at 31 December 2017, were reclassified into financial liabilities measured at amortised cost following the decision not to opt for the "FV Option", with an IFRS 9 transition effect of EUR 3.8 mln. Derivatives Derivatives, recognised as financial liabilities held for trading for an amount of EUR 850 thousand, are still classified in the same category. 2.1.2 Reconciliation between the Balance Sheet as at 31 December 2017 (which incorporates the new presentation requirements of IFRS 9) and the Balance Sheet as at 1 January 2018 (which incorporates the new measurement and impairment requirements of IFRS 9) The following tables show the impact on the individual items of the balance sheet assets and liabilities under the 5th update of Bank of Italy Circular no. 262/2005 deriving from the application of the "measurement" and "impairment” requirements of IFRS 9 with additional focus being placed on related tax impacts. In particular, on a like-for-like assets and liabilities basis as at 31 December 2017, balance sheet items were initially restated on the basis of the reclassifications of financial instruments into the new categories of IFRS 9. "Measurement" and "impairment” impacts with related tax effects are also reported. In particular:

the column "Change of measurement criteria" shows the changes in value, for each balance sheet item, due to different measurement metrics;

the "Impairment" column shows the changes in value, for each balance sheet item, due to the adoption of the new impairment model ("expected credit losses") introduced by IFRS 9;

the "Tax effects" column shows the tax effects of the First Time Adoption of IFRS 9, calculated in accordance with the methods illustrated below.

The column "Total assets 01.01.2018" shows, for each item, the new values of assets, liabilities and shareholders' equity calculated following the transition to IFRS 9, as resulting from the algebraic sum of the values shown in the previous columns described above. In accordance with the provisions of IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors," the effects of the first-time adoption of a new accounting standard are recognised in equity.

37

2.1.2.1 Assets

20. Financial assets held for

trading

40. Financial assets available

for sale

60. Loans to banks

70. Loans to customers

Change in measurement

criteria

Tax effect on measurement

criteriaImpairment

Tax effect on impairment

10. Cash and cash equivalents 296,581 296,581 296,581

20.Financial assets at fair value through profit or loss

2,453 65,287 13,097 106,679 187,516 (3,392) 184,124

a) financial assets held for trading 2,453 2,453 2,453

b) financial assets designated at fair value - - -

c) other financial assets mandatorily at fair value

- 65,287 13,097 106,679 185,063 (3,392) 181,671

30.Financial assets at fair value through other comprehensive income

2,052,898 (680,665) 1,372,233 1,645 1,373,878

40. Financial assets at amortised cost 18,688,541 615,378 (13,097) (106,679) 19,184,143 34,090 (333,870) 18,884,363

a) loans to banks 2,934,607 (13,097) 2,921,510 (236) 2,921,274

b) loans to customer 15,753,934 615,378 (106,679) 16,262,633 34,090 (333,634) 15,963,089

50. Hedging derivatives 29,581 29,581 29,581

60.Change in value of macro-hedged financial assets

- - -

70. Equity investments 98,569 98,569 98,569

90. Property and equipment 738,442 738,442 738,442

100. Intangible assets 35,005 35,005 35,005

110. Tax assets 1,950,510 1,950,510 (9,229) 99,809 2,041,090

a) current 794,737 794,737 794,737

b) deferred 1,155,773 1,155,773 (9,229) 99,809 1,246,353

120.Non-current assets and disposal groups held for sale

608,077 608,077 248 222 608,547

130. Other assets 419,047 419,047 419,047

Total asset s 24,919,704 - - - - 24,919,704 32,343 (9,229) (333,622) 100,031 24,709,227

IFRS 9 items

TOTAL ASSETS as at 31.12.2017 FOLLOWING RECLASSIFICATION TO NEW ITEMS CIRC. 262

Financial instruments reclassification due to transition to IFRS 9 TOTAL ASSETS as at 31.12.2017 FOLLOWING FTA IFRS9 RECLASSIFICATION

Adjustments to carrying amounts due to transition to IFRS 9

TOTALASSETS

01.01.2018

Classification and measurement The different classification of financial assets in the new categories required by IFRS 9 and the consequent different measurement metrics had a positive impact (before tax) on the Consolidated Shareholders' Equity of the Banca Carige Group of EUR 32.3 mln, as detailed below:

- the adjustment to the carrying amount of the financial assets resulting from the change in the business model, mainly attributable to the debt securities portfolio, had a total gross positive impact on Consolidated Shareholders’ Equity of EUR 34.1 mln. This effect is due to the reclassification of financial assets available for sale to a Hold to Collect business model, with consequent recalculation of the carrying amount and derecognition of the AFS reserve;

- the fair value adjustment of the financial assets following failure to pass the SPPI test resulted in a gross negative impact on Consolidated Shareholders' Equity of EUR 3.4 mln, mainly relating to loans and receivables;

- the use of the OCI option for equity instruments classified as financial assets available for sale

and measured at cost produced a gross positive impact on Consolidated Shareholders' Equity of EUR 1.6 mln.

Impairment The application of the new impairment rules (expected credit losses) on financial assets measured at amortised cost (on-balance sheet exposures) resulted in a negative impact of EUR 333.9 mln, as detailed below:

- EUR 333.7 mln higher loan losses, of which EUR 333.4 mln relating to loans to customers and EUR 236 thousand relating to loans to banks;

- EUR 136 thousand higher losses on securities.

EUR 248 thousand higher adjustments are also registered in non-current assets held for sale and discontinued operations in relation to the equity investment held in Creditis (with a tax effect of EUR 222 thousand).

38

2.1.2.2 Liabilities

30. Financial liabilities at fair value through profit or loss

100. Other liabilities

Adjustment tomeasurement

criteria

Tax effect on adjustment to measurement

criteria

ImpairmentTax effect

on impairment

10. Financial liabilities at amortised cost 21,166,994 348,459 21,515,453 3,847 21,519,300

a) due to banks 4,656,624 4,656,624 4,656,624

b) due to customers 12,624,541 12,624,541 12,624,541

c) securities issued 3,885,829 348,459 4,234,288 3,847 4,238,135

20. Financial liabilities held for trading 850 850 850

30.Financial liabilities at fair value through profit or loss

348,459 (348,459) - -

40. Hedging derivatives 224,971 224,971 224,971

60. Tax liabilities 16,537 16,537 178 6 16,721

a) current 3,557 3,557 3,557

b) deferred 12,980 12,980 178 6 13,164

70.Liabilities associated with groups of assets held for sale

193,808 193,808 672 82 194,562

80. Other liabilities 474,579 (27,540) 447,039 447,039

90. Employee termination indemnities 59,417 59,417 59,417

100. Allowances for risks and charges 165,240 27,540 192,780 24,145 216,925

a) commitments and guarantees given 27,540 27,540 24,145 51,685

b) post-employment benefits 34,410 34,410 34,410

c) other allowances for risks and charges 130,830 130,830 130,830

120. Valuation reserves (140,633) (140,633) 34,622 (11,023) 39 (13) (117,008)

150. Reserves (684,857) (684,857) (6,124) 1,616 (355,376) 99,103 (945,638)

160. Share premium reserve 628,364 628,364 628,364

170. Share capital 2,845,857 2,845,857 2,845,857

180. Treasury shares (-) (15,572) (15,572) (15,572)

190. Non-controlling interests (+/-) 24,125 24,125 (3) - (3,102) 854 21,874

200. Net profit (loss) for the period (+/-) (388,435) (388,435) (388,435)

Total l i abi l i t i es 24,919,704 - - 24,919,704 32,342 (9,229) (333,622) 100,032 24,709,227

TOTALLIABILITIES01.01.2018

IFRS 9 items

TOTAL LIABILITIES as at 31.12.2017 FOLLOWING RECLASSIFICATION TO NEW ITEMS CIRC. 262

Financial instruments reclassification due to transition to

IFRS 9TOTAL LIABILITIES as at 31.12.2017 FOLLOWING FTA IFRS9 RECLASSIFICATION

Adjustments to carrying amounts due to transition to IFRS 9

With reference to the items on the liabilities side of the balance sheet as at 1 January 2018, we point out:

- the reclassification of EUR 348.5 mln of financial liabilities measured at fair value into the portfolio of financial liabilities measured at amortised cost following the Group's decision not to apply the fair value option, with a measurement effect of EUR 3.9 mln;

- EUR 24 mln higher adjustments with respect to the value of guarantees given and loan commitments (irrevocable and revocable); this increase was due to the application of the new rules on impairment (including forward-looking information), as well as to the enlargement of the scope of application, which also includes revocable commitments.

EUR 672 thousand higher adjustments are also registered in non-current assets held for sale and discontinued operations in relation to the equity investment held in Creditis (with a tax effect of EUR 82 thousand). Finally, shareholders' equity showed an improvement in valuation reserves by EUR 34.6 mln and the recognition of a negative retained earnings reserve (the FTA reserve) of EUR 361.5 mln before tax, reflecting:

- EUR 6.1 mln impact from changes to the measurement criteria; - EUR 355.4 mln impact from the new impairment model for financial assets and commitments

and guarantees given. 2.1.3 Reconciliation between IAS 39 Shareholders' Equity and IFRS 9 Shareholders' Equity The schedule below shows the reconciliation between the Consolidated Shareholders’ Equity as at 31 December 2017, as presented in the 2017 Full-Year Report, and the opening Consolidated Shareholders' Equity as at 1 January 2018, after the transition to IFRS 9, which reflects the effects described above.

39

Effect oftransition

to IFRS9

IAS 39 Shareholders’ Equity - 31.12.2017 2,268,849

of which: Group 2,244,724

of which: non-controlling interests 24,125

CLASSIFICATION AND MEASUREMENT

Adjustment to carrying amount of financial assets resulting from change in “Business Model” 34,091

Fair value adjustment of financial assets failing the SPPI test (3,391)

Adjustment of carrying amount of financial assets resulting from the exercise of the OCI option 1,645

Adjustment of carrying amount of financial liabilities resulting from the reclassification of financial liabilities at fair value through profit or loss (3,846)

Reclassification from valuation reserves to retained earnings reserves: -

- net change in valuation reserves due to application of new classification and measurement rules (1,115)- net change in retained earnings reserves due to application of new classification and measurement rules 1,115

Tax effect on measurement (9,407)

IMPAIRMENT

Application of the new (ECL) impairment model to loans measured at amortised cost: (331,058)

Application of the new (ECL) impairment model to guarantees given and loan commitments (irrevocable and revocable) (24,145)

Application of the new (ECL) impairment model to debt securities measured at amortised cost: (135)

Reclassification from valuation reserves to retained earnings reserves: - - net change in valuation reserves due to impairment of financial assets designated at fair value through other comprehensive income 39- net change in retained earnings reserves due to impairment of financial assets designated at fair value through other comprehensive income (39)

Tax effect on impairment 99,090

Allocation of IFRS 9 transition effects to non-controlling interests (2,251)

Total IFRS 9 transition effects - 1.01.2018 (239,407)

IFRS 9 Shareholders’ Equity - 1.1.2018 2,029,442

of which: Group 2,007,568

of which: non-controlling interests 21,874 In particular, reclassifications have been made to the valuation reserves and retained earnings reserve (FTA reserve), both as a result of the application of the new classification and measurement criteria and the application of the new impairment model. With regard to the former, reclassifications were made for an amount of EUR 1.1 mln, with no impact on Consolidated Shareholders' Equity, due to the reclassification of debt securities and units of investment funds recognised as AFS financial instruments under IAS 39 into assets mandatorily measured at fair

40

value through profit and loss under IFRS 9, with the former AFS reserve (-EUR 1.1 mln) being re-allocated to a retained earnings reserve. For debt securities classified as “Financial assets at fair value through other comprehensive income”, the application of the new impairment rules resulted in a EUR 39 thousand increase in the valuation reserve and a corresponding negative effect on retained earnings reserves, with no impact on Consolidated Shareholders' Equity. Transition to IFRS 9 shows the following impacts on prudential ratios and own funds due to the Classification & Measurement requirements and the Impairment model based on expected losses:

- a negative impact on CET 1 of EUR 422.4 mln on a “fully loaded” basis and EUR 89.8 mln based on the application of the phase-in regime (mitigating the impact over 5 years);

- a negative impact on total own funds of EUR 421.6 mln on a “fully loaded” basis and EUR 88.9 thousand based on the application of the phase-in regime;

- a negative impact on RWAs of EUR 501.9 mln on a “fully loaded” basis and EUR 139.3 mln based on the application of the phase-in regime;

- an impact on the CET 1 capital ratio of -174 bps on a "fully loaded” basis and +25 bps based on the application of the phase-in regime;

- an impact on the Total capital ratio of -173 bps on a "fully loaded” basis and +25 bps based on the application of the phase-in regime.

Impacts on Own Funds

FTA impact (b)1.1.2018

(c)=(a)-(b)FTA impact

(d)1.1.2018

(e)=(a)-(d)

Total CET 1 1,902,156 (422,423) 1,479,733 (89,764) 1,812,392

Total Own Funds 1,932,240 (421,594) 1,510,646 (88,935) 1,843,305

RWA 15,329,671 (501,873) 14,827,798 (139,321) 15,190,350

31.12.2017IAS 39

(a)

IFRS 9 Fully loaded

IFRS 995% Phased-in

Impacts on prudential ratios

FTA impact (basis points)

1.1.2018FTA impact

(basis points)1.1.2018

CET1 capital ratio 11.7% (174) 10.0% 25 12.0%

Total capital ratio 11.9% (173) 10.2% 25 12.2%

31.12.2017IAS 39

IFRS 9 Fully loadedIFRS 9

95% Phased-in

41

2.2 Reconciliation of the Loan loss reserve under IAS 39 A reconciliation of balance amounts under IAS 39 and under IFRS 9 as at 1 January 2018 is provided below:

Stage 1 Stage 2 Stage 3

Loans to customers 2,224,346 (65,759) 1,779 47,100 284,618 2,492,084

Loans to banks 4,288 - 236 - - 4,524

Debt securities - - 175 - - 175

Loans included in the group of assets being discontinued

26,424 - (645) 398 - 26,177

Total 2,255,058 (65,759) 1,545 47,498 284,618 2,522,960

Reserve as at 31.12.2017 under IAS 39

Write-off Reserve under IAS 39 due to exposures mandatorily at fair value

Reserve as at 01.01.2018

under IFRS 9

Delta IAS 39 - IFRS 9 impairment

The new Classification and Measurement requirements and the new impairment model based on expected losses have had the following impacts:

- derecognition of EUR 65.8 mln worth of loss provisions on loans that were reclassified at fair value through profit or loss after failure of the SPPI test;

- higher value adjustments: EUR 1.5 mln in relation to assets classified in stage 1; EUR 47.5 mln in relation to financial assets classified in stage 2; EUR 284.6 mln in relation to financial assets classified in stage 3.

2.3 Reconciliation of provisions under IAS 37 and balances under IFRS 9 as at 1 January 2018 A reconciliation as at 1 January 2018 of provisions under IAS 37 and under IFRS 9 in relation to commitments and guarantees given is provided below:

Stage 1 Stage 2 Stage 3

Signature loans to customers 27,540 (1,615) 655 7,057 33,637

Signature loans to banks - - - - -

Revocable and irrevocable commitments

- 1,405 417 16,227 18,049

Margins included in the group of assets being discontinued

- 70 45 557 672

Total 27,540 (140) 1,117 23,841 52,358

Delta IAS 39 - IFRS 9 impairmentReserve as at

01.01.2018 under IFRS 9

Reserve as at 31.12.2017 under IAS 39

Application of the new rules on impairment (with the incorporation of "forward looking" information and the extension of the scope of application, including revocable commitments) resulted in higher adjustments with respect to guarantees and (irrevocable and revocable) commitments given to disburse funds, of which:

- a reversal of EUR 140 thousand in relation to signature loans and margins classified in stage 1 (of which EUR 70 thousand higher provisions for margins included in the group being discontinued);

42

- EUR 1.1 mln concerning signature loans to customers classified in stage 2 (of which EUR 45 thousand for margins included in the group of assets being discontinued);

- EUR 23.8 mln in relation to signature loans to customers and margins classified in stage 3 (of which EUR 557 thousand for margins included in the group of assets being discontinued).

43

2.4 Breakdown and stage allocation of the exposures at amortised cost subject to IFRS 9 impairment testing and related ECL A breakdown is provided below of the credit quality of the exposures at amortised cost, before and after adoption of IFRS 9. Financial assets: breakdown and stage allocation and related ECL as at 1 January 2018 - IFRS 9*

Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total

- Debt securities 893,718 - - 893,718 136 - - 136 893,582 - - 893,582

- Loans to banks 2,913,018 - 12,780 2,925,798 236 - 4,288 4,524 2,912,782 - 8,492 2,921,274

- Loans to customers 11,010,271 1,837,337 4,713,984 17,561,592 35,727 83,288 2,373,070 2,492,085 10,974,544 1,754,049 2,340,914 15,069,507

- Loans included in groups of assets held for sale

548,342 39,918 24,202 612,462 2,880 2,527 20,770 26,177 545,462 37,391 3,432 586,285

Total 15,365,349 1,877,255 4,750,966 21,993,570 38,979 85,815 2,398,128 2,522,922 15,326,370 1,791,440 2,352,838 19,470,648

Gross exposure Overall value adjustments Net exposure

* debt securities allocated to stage 1 primarily consist in government bonds at amortised cost Financial assets: credit exposure as at 31 December 2017 - IAS 39

PerformingNon-

PerformingTotal Performing Non-Performing Total Performing Non-Performing Total

- Debt securities 244,250 - 244,250 - - - 244,250 - 244,250

- Loans to banks 2,926,115 12,780 2,938,895 - 4,288 4,288 2,926,115 8,492 2,934,607

- Loans to customers 12,948,442 4,785,588 17,734,030 78,992 2,145,354 2,224,346 12,869,450 2,640,234 15,509,684

- Loans included in groups of assets held for sale

608,112 24,202 632,314 5,654 20,770 26,424 602,458 3,432 605,890

Total 16,726,919 4,822,570 21,549,489 84,646 2,170,412 2,255,058 16,642,273 2,652,158 19,294,431

Gross exposure Overall value adjustments Net exposure

44

2.5 Fair value as at 30 June 2018 of financial assets and liabilities reclassified at amortised cost With reference to financial assets and liabilities that have been reclassified to be measured at amortised cost, the standard requires that the following be indicated:

the fair value of financial assets or financial liabilities as at the end of the reporting period; the fair value gain or loss that would have been recognised in profit or loss or in other

comprehensive income during the year if the financial assets or liabilities had not been reclassified.

Assets

20. Financial assets held for trading

(IAS 39)

40. Financial assets available for sale

(IAS 39)40. Financial assets at amortised cost (IFRS 9)

Fair value as at 31.12.2017 - 615,378

Fair value as at 30.06.2018 - 589,075

Profit/(loss) in PL under IAS 39 as at 30.06.2018 - -

Profit/(loss) in OCI under IAS 39 as at 30.06.2018 - (26,275)

Financial assets available for sale reclassified at amortised cost have a fair value of EUR 589.1 mln and if they had not been reclassified into financial assets measured at amortised cost, a EUR 26.3 mln loss in OCI would have been recognised. Liabilities

40. Financial liabilities held for

trading (IAS 39)

50. Financial liabilities designated at fair value through profit or loss (IAS 39)

10. Financial liabilities at amortised cost (IFRS 9)

Fair value as at 31.12.2017 - 348,459

Fair value as at 30.06.2018 (net of buybacks and repayments) - 178,951

Profit/(loss) in PL under IAS 39 as at 30.06.2018 - (378)

Profit/(loss) in OCI under IAS 39 as at 30.06.2018 -

Financial liabilities measured at fair value reclassified into financial liabilities measured at amortised cost as at 30 June 2018, have a fair value of EUR 179.0 mln1, and the impact that would have been recorded in the income statement had the fair value measurement been maintained is EUR 378 thousand. Specifically, these liabilities consist in bonds issued and treated at Fair Value under IAS 39 to avoid accounting mismatches with the derivative instruments that are operationally related to them. Closing these derivatives in 2017 resulted in the fair value classification option becoming unavailable and the entire portfolio being reclassified into securities measured at amortised cost, as required by IFRS 9.

1 The item shows a negative change compared to the prior period due to the maturity of a bond issued by the bank and recognised under financial liabilities measured at fair value.

45

CONSOLIDATED FINANCIAL STATEMENTS

46

CONSOLIDATED BALANCE SHEET

ASSETS (EUR/000)

Situation as at30/06/2018 31/12/2017

IFRS 9 IAS 3910. 10. CASH AND CASH EQUIVALENTS 282,371 296,581

20. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 179,459

20. a) 20. FINANCIAL ASSETS HELD FOR TRADING 1,410 2,453

20. c) OTHER FINANCIAL ASSETS MANDATORILY AT FAIR VALUE 178,049

30.FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

939,726

40. FINANCIAL ASSETS AVAILABLE FOR SALE 2,052,898

40. FINANCIAL ASSETS AT AMORTISED COST 19,644,972

40. a) 60. LOANS TO BANKS 3,341,991 2,934,607

40. b) 70. LOANS TO CUSTOMERS 16,302,981 15,753,934

50. 80. HEDGING DERIVATIVES 20,039 29,581

70. 100. EQUITY INVESTMENTS 94,032 98,569

90. 120. PROPERTY AND EQUIPMENT 730,804 738,442

100. 130. INTANGIBLE ASSETS 41,209 35,005

110. 140. TAX ASSETS 1,930,332 1,950,510

110. a) 140. a) CURRENT 749,702 794,737

110. b) 140. b) DEFERRED 1,180,630 1,155,773

- of which under Law no. 214/2011 527,486

120. 150. NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALE 617,855 608,077

130. 160. OTHER ASSETS 287,967 419,047

TOTAL ASSETS 24,768,766 24,919,704

LIABILITIES AND SHAREHOLDERS’ EQUITY (EUR/000)

IFRS 9 IAS 39 30/06/2018 31/12/2017

10. FINANCIAL LIABILITIES AT AMORTISED COST 21,627,403

10. a) 10. DUE TO BANKS 4,565,188 4,656,62410. b) 20. DUE TO CUSTOMERS 13,597,153 12,624,54110. c) 30. SECURITIES ISSUED 3,465,062 3,885,829

20. 40. FINANCIAL LIABILITIES HELD FOR TRADING 839 85030. 50. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS - 348,459

40. 60. HEDGING DERIVATIVES 247,455 224,97160. 80. TAX LIABILITIES 36,688 16,537

60. a) 80. a) CURRENT 23,439 3,55760. b) 80. b) DEFERRED 13,249 12,980

70. 90. LIABILITIES ASSOCIATED WITH GROUPS OF ASSETS HELD FOR SALE 111,596 193,80880. 100. OTHER LIABILITIES 436,786 474,57990. 110. EMPLOYEE TERMINATION INDEMNITIES 56,235 59,417

100. 120. ALLOWANCES FOR RISKS AND CHARGES: 237,434 165,240

100. a) COMMITMENTS AND GUARANTEES GIVEN 51,723100. b) 120. a) POST-EMPLOYMENT BENEFITS 31,605 34,410100. c) 120. b) OTHER ALLOWANCES FOR RISKS AND CHARGES 154,106 130,830

120. 140. VALUATION RESERVES (113,578) (140,633)150. 170. RESERVES (1,333,634) (684,857)160. 180. SHARE PREMIUM RESERVE 629,578 628,364170. 190. SHARE CAPITAL 2,845,857 2,845,857180. 200. TREASURY SHARES (-) (15,572) (15,572)190. 210. NON-CONTROLLING INTERESTS (+/-) 22,182 24,125200. 220. NET PROFIT (LOSS) FOR THE PERIOD (+/-) (20,503) (388,435)

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 24,768,766 24,919,704

47

CONSOLIDATED INCOME STATEMENT

INCOME STATEMENT (EUR/000)

IFRS 9 IAS 39 1H2018 1H2017

10. 10. Interest and similar income 199,963 239,358o.w.: interest income calculated using the effective interest rate method 196,124

20. 20. Interest and similar expense (90,714) (118,415)30. 30. NET INTEREST INCOME 109,249 120,94340. 40. Fee and commission income 135,165 137,26050. 50. Fee and commission expense (14,752) (15,137)60. 60. NET FEE AND COMMISSION INCOME 120,413 122,12370. 70. Dividends and similar income 10,454 10,62580. 80. Net profit (loss) from trading 546 6,61290. 90. Net profit (loss) from hedging 778 (900)

100. 100. Profits (losses) on disposal or repurchase of: (18,262) 2,825100. a) financial assets at amortised cost (19,882)100. b) financial assets at fair value through other comprehensive income 1,039

100. b) financial assets available for sale 1,491100. c) 100. d) financial liabilities 581 1,334

110. 110. Profits (losses) on financial assets/liabilities at fair value through profit or loss (3,943) (456)110. b) other financial assets mandatorily at fair value (3,943)

120. 120. NET INTEREST AND OTHER BANKING INCOME 219,235 261,772130. 130. Net losses/recoveries on impairment of: (39,672) (228,426)

130. a) financial assets at amortised cost (39,662)130. a) loans (217,418)

130. b) financial assets at fair value through other comprehensive income (10)130. b) financial assets available for sale (11,151)130. d) other financial activities 143

140. Gains (losses) due to modifications not resulting in derecognition (1,272)150. 140. NET INCOME FROM BANKING ACTIVITIES 178,291 33,346180. 170. NET INCOME FROM BANKING AND INSURANCE ACTIVITIES 178,291 33,346190. 180. Administrative expenses (264,437) (281,010)

190. a) 180. a) personnel expenses (145,355) (151,687)190. b) 180. b) other administrative expenses (119,082) (129,323)

200. 190. Net provisions for risks and charges (27,198) (17,295)200. a) commitments and guarantees given (37)200. b) other net provisions (27,161)

210. 200. Net adjustments to/recoveries on property and equipment (6,312) (7,894)220. 210. Net adjustments to/recoveries on intangible assets (2,876) (11,755)230. 220. Other operating expense (income) 30,696 37,480240. 230. OPERATING EXPENSES (270,127) (280,474)250. 240. Profits (losses) on equity investments 4,257 5,767280. 270. Profits (losses) on disposal of investments 33,864 31290. 280. PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS (53,715) (241,330)300. 290. Taxes on income from continuing operations 18,568 70,632310. 300. PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS (35,147) (170,698)320. 310. Profit (loss) after tax from discontinued operations 14,954 12,326330. 320. PROFIT (LOSS) FOR THE PERIOD (20,193) (158,372)340. 330. Non-controlling interests 310 (3,464)350. 340. NET PROFIT (LOSS) FOR THE PERIOD ATTRIBUTABLE TO THE PARENT COMPANY (20,503) (154,908)

Earnings Per Share (in EUR)- Basic 0.000 -0.187- Diluted 0.000 -0.187

As shown in the section "Accounting policies" in the Explanatory Notes, 1H2017 balances reflect, with respect to those published, changes resulting from the application of IFRS 5 "Non-current assets held for sale and discontinued operations".

48

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (EUR/000)

Situation as at

IFRS 9 IAS 391H2018 1H2017

10. 10. PROFIT (LOSS) FOR THE PERIOD (20,193) (158,372)

Other comprehensive income after tax not reversed in profit or loss

20. Equity instruments at fair value through other comprehensive income 9270. 40. Defined benefit plans 869 38990. 60. Share of valuation reserves of equity investments valued at equity - (24)

Other comprehensive income after tax reversed in profit or loss120. 90. Cash flow hedges 7,643 8,588

140.Financial assets (other than equity instruments) at fair value through othercomprehensive income

(5,175)

100. Financial assets available for sale (6,079)170. 130. Total other comprehensive income after tax 3,429 2,874180. 140. COMPREHENSIVE INCOME (Item 10+170) (16,764) (155,498)190. 150. Consolidated comprehensive income attributable to non-controlling interests 309 (3,457)

200. 160.Consolidated comprehensive income attributable to the ParentCompany

(17,073) (152,041)

49

STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY AS AT 30/06/2018

(EUR/000)

Issu

ance

of n

ew s

hare

s

Purc

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of t

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30/0

6/2

018

Share capital: 2,874,249 - 2,874,249 - - - - - - - - - - - 2,845,857 28,392a) ordinary shares 2,874,248 - 2,874,248 - - - - - - - - - - - 2,845,856 28,392b) other shares 1 - 1 - - - - - - - - - - - 1 -

Share premium reserve 630,211 630,211 - - 1,214 - - - - - - - - 629,578 1,847Reserves: (685,916) (263,029) (948,945) (393,364) - 439 - - - - - - - (1,333,634) (8,236)a) from profit (737,188) (263,029) (1,000,217) (393,364) - 439 - - - - - - - - (1,384,906) (8,236)b) other 51,272 51,272 - - - - - - - - - - - 51,272 -

Valuation reserves (140,759) 23,622 (117,137) - - (1) - - - - - 3,429 (113,578) (131)

Equity instruments - - - - - - - - - - - - - - -

Treasury shares (15,572) - (15,572) - - - - - - - - - - - (15,572) -

Net profit (loss) for the period (393,364) - (393,364) 393,364 - - - - - - - - - (20,193) (20,503) 310

Group shareholders' equity 2,244,724 (237,156) 2,007,568 - - 1,653 - - - - - - (17,073) 1,992,148 X

Non-controlling interests 24,125 (2,251) 21,874 - - (1) - - - - - - - 309 X 22,182

Changes in the period

Non

-con

trolli

ng in

tere

sts

as a

t 30/0

6/2

018

Rese

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nd o

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out

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Transactions onshareholders’ equity

Am

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at 3

1/1

2/2

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Cha

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Am

ount

s as

at 0

1/0

1/2

018

Allocation of profit (loss)from prior period

50

STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY AS AT 30/06/2017

(EUR/000)

Issu

ance

of n

ew s

hare

s

Purc

hase

of t

reas

ury

shar

es

Extra

ordi

nary

distri

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div

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ds

Cha

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in e

quity

instru

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ts

Der

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on

treas

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Stoc

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Cha

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quity

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hold

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equi

ty a

s at

30/0

6/2

017

Share capital: 2,819,814 - 2,819,814 - - - - - - - - - - - 2,791,422 28,392a) ordinary shares 2,819,728 - 2,819,728 - - - - - - - - - - - 2,791,336 28,392b) other shares 86 - 86 - - - - - - - - - - - 86 -

Share premium reserve 182,127 182,127 (4,326) - - - - - - - - - - 175,954 1,847Reserves: (393,786) - (393,786) (291,742) - - - - - - - - - (684,469) (1,059)a) from profit (445,058) - (445,058) (291,742) - - - - - - - - - - (735,741) (1,059)b) other 51,272 51,272 - - - - - - - - - - - 51,272 -

Valuation reserves (158,236) - (158,236) - - - - - - - 2,874 (155,233) (129)

Equity instruments - - - - - - - - - - - - - - -

Treasury shares (15,572) - (15,572) - - - - - - - - - - - (15,572) -

Net profit (loss) for the period (296,068) - (296,068) 296,068 - - - - - - - - - (158,372) (154,908) (3,464)

Group shareholders' equity 2,109,235 - 2,109,235 - - - - - - - - - (152,041) 1,957,194 X

Non-controlling interests 29,044 - 29,044 - - - - - - - - - - (3,457) X 25,587

Changes in the period

Non

-con

trolli

ng in

tere

sts

as a

t 30/0

6/2

017

Rese

rves

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nd o

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Cha

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erve

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Transactions onshareholders’ equity

Am

ount

s as

at 3

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2/2

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Cha

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Am

ount

s as

at 0

1/0

1/2

017

Allocation of profit (loss)from prior period

51

CONSOLIDATED STATEMENT OF CASH FLOWS

Direct method

A. OPERATIONS 30/06/2018 30/06/2017

1. Cash flow from (used in) operations 25,587 3,246- interest income received (+) 190,482 225,909- interest expense paid (-) (82,267) (130,715)- dividends and similar income (+) 10,454 10,625- net fee and commission income (+/-) 124,825 124,983- personnel expenses (-) (137,777) (145,527)- net insurance premiums collected - - - other insurance revenues and expenses (-) - - - other costs (-) (118,771) (129,419)- other income (+) 51,398 64,480- taxes and duties (-) (22,971) (24,548)- costs/revenues after tax from discontinued operations (+/-) 10,214 7,458

2. Cash flow from (used in) financial assets (222,800) (41,374)- financial assets held for trading 1,344 2,106- financial assets designated at fair value - - - other financial assets mandatorily at fair value (335)- financial assets at fair value through other comprehensive income 431,874- financial assets available for sale 232,484- financial assets at amortised cost (835,550)- loans to customers 441,002- loans to banks: on demand 134,294- loans to banks: other (824,381)- other assets 179,867 (26,879)

3. Cash flow from (used in) financial liabilities 48,795 40,667- financial liabilities amortised cost 28,504- due to banks: on demand 5,158- due to banks: other 923,966- due to customers (406,195)- securities issued (828,269)- financial liabilities held for trading 692 (5,646)- financial liabilities designated at fair value - (11,621)- other liabilities 19,599 363,274

Net cash flow from (used in) operations (148,418) 2,539

B. INVESTMENT ACTIVITIES1. Cash flow from 148,805 2,882

- sale of equity investments 1,817 - - dividends collected on equity investments 8,762 2,848- sale/reimbursement of financial assets held to maturity - - sale of property and equipment 97,201 34- sale of intangible assets - - - sales of subsidiaries and business branches 41,025 -

2. Cash flow used in (15,060) (16,250)- purchase of equity investments - - - purchase of financial assets held to maturity - - purchase of property and equipment (1,583) (12,236)- purchase of intangible assets (13,477) (4,014)- purchase of subsidiaries and business branches - -

Net cash flow from (used in) investment activities 133,745 (13,368)C. FUNDING ACTIVITIES

- issue/purchase of treasury shares 460 - - issue/purchase of equity instruments - - - dividend distribution and other purposes - - - sale/purchase of non-controlling interests -

Net cash flow from (used in) funding activities 460 -

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING THE PER (14,213) (10,829)EUR/000 KEY: (+) from; (-) used in

RECONCILIATION

30/06/2018 30/06/2017

Cash and cash equivalents at the beginning of the period 296,584 297,412

Net increase (decrease) in cash and cash equivalents during the period (14,213) (10,829)

Cash and cash equivalents: effect of changes in exchange rates - -

Cash and cash equivalents at the end of the period 282,371 286,583

(EUR/000)

CONSOLIDATED STATEMENT OF CASH FLOWS

Items

As shown in the section "Accounting policies" in the Explanatory Notes, 1H2017 balances reflect, with respect to those published, changes resulting from the application of IFRS 5 "Non-current assets held for sale and discontinued operations".

52

EXPLANATORY NOTES

Restatement of balances of prior period accounts in compliance with IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations)

This section provides a detailed description of the restatement of the income statement and the cash flow statement for the first half of 2017, following classification of Creditis Servizi Finanziari S.p.A. under groups of assets held for sale.

INCOME STATEMENT (EUR/000)

1H2017 publishedApplication of

IFRS 51H2017 restated

10. Interest and similar income 259,818 (20,460) 239,35820. Interest and similar expense (119,239) 824 (118,415)30. NET INTEREST INCOME 140,579 (19,636) 120,94340. Fee and commission income 138,676 (1,416) 137,26050. Fee and commission expense (15,488) 351 (15,137)60. NET FEE AND COMMISSION INCOME 123,188 (1,065) 122,12370. Dividends and similar income 10,625 - 10,62580. Net profit (loss) from trading 6,612 - 6,61290. Net profit (loss) from hedging (900) - (900)100. Profits (losses) on disposal or repurchase of: 2,825 - 2,825

b) financial assets available for sale 1,491 - 1,491d) financial liabilities 1,334 - 1,334

110. Profits (losses) on financial assets/liabilities designated at fair value (456) - (456)120. NET INTEREST AND OTHER BANKING INCOME 282,473 (20,701) 261,772130. Net losses/recoveries on impairment of: (229,792) 1,366 (228,426)

a) loans (218,784) 1,366 (217,418)b) financial assets available for sale (11,151) - (11,151)d) other financial activities 143 - 143

140. NET INCOME FROM BANKING ACTIVITIES 52,681 (19,335) 33,346170. NET INCOME FROM BANKING AND INSURANCE ACTIVITIES 52,681 (19,335) 33,346180. Administrative expenses (283,834) 2,824 (281,010)

a) personnel expenses (151,787) 100 (151,687)b) other administrative expenses (132,047) 2,724 (129,323)

190. Net provisions for risks and charges (17,510) 215 (17,295)200. Net adjustments to/recoveries on property and equipment (7,906) 12 (7,894)210. Net adjustments to/recoveries on intangible assets (11,984) 229 (11,755)220. Other operating expense (income) 37,785 (305) 37,480230. OPERATING EXPENSES (283,449) 2,975 (280,474)240. Profits (losses) on equity investments 5,767 - 5,767270. Profits (losses) on disposal of investments 31 - 31280. PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS (224,970) (16,360) (241,330)290. Taxes on income from continuing operations 66,598 4,034 70,632300. PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS (158,372) (12,326) (170,698)310. Profit (loss) after tax from discontinued operations - 12,326 12,326320. PROFIT (LOSS) FOR THE PERIOD (158,372) - (158,372)330. Non-controlling interests (3,464) - (3,464)340. NET PROFIT (LOSS) FOR THE PERIOD ATTRIBUTABLE TO THE PARENT COMPANY (154,908) - (154,908)

Earnings Per Share (in EUR)- Basic -0.187 - -0.187- Diluted -0.187 - -0.187

53

A. OPERATIONS1H17 published

Application of IFRS 5

1H17 restated

1. Cash flow from (used in) operations 3,246 - 3,246- interest income received (+) 245,589 (19,680) 225,909- interest expense paid (-) (132,681) 1,966 (130,715)- dividends and similar income (+) 10,625 - 10,625- net fee and commission income (+/-) 127,702 (2,719) 124,983- personnel expenses (-) (147,100) 1,573 (145,527)- net insurance premiums collected - - - - other insurance revenues and expenses (-) - - - - other costs (-) (136,322) 6,903 (129,419)- other income (+) 64,309 171 64,480- taxes and duties (-) (28,876) 4,328 (24,548)- costs/revenues from groups of assets held for sale after tax (+/-) - 7,458 7,458

2. Cash flow from (used in) financial assets (41,374) - (41,374)- financial assets held for trading 2,106 - 2,106- financial assets designated at fair value - - - - financial assets available for sale 232,484 - 232,484- loans to customers 441,002 - 441,002- loans to banks: on demand 134,294 - 134,294- loans to banks: other (824,381) - (824,381)- other assets (26,879) - (26,879)

3. Cash flow from (used in) financial liabilities 40,667 - 40,667- due to banks: on demand 5,158 - 5,158- due to banks: other 923,966 - 923,966- due to customers (406,195) - (406,195)- securities issued (828,269) - (828,269)- financial liabilities held for trading (5,646) - (5,646)- financial liabilities designated at fair value (11,621) - (11,621)- other liabilities 363,274 - 363,274

Net cash flow from (used in) operations 2,539 - 2,539

B. INVESTMENT ACTIVITIES1. Cash flow from 2,882 - 2,882

- sale of equity investments - - - - dividends collected on equity investments 2,848 - 2,848- sale/reimbursement of financial assets held to maturity - - - - sale of property and equipment 34 - 34- sale of intangible assets - - - - sales of subsidiaries and business branches - - -

2. Cash flow used in (16,250) - (16,250)- purchase of equity investments - - - - purchase of financial assets held to maturity - - - - purchase of property and equipment (12,236) - (12,236)- purchase of intangible assets (4,014) - (4,014)- purchase of subsidiaries and business branches - - -

Net cash flow from (used in) investment activities (13,368) - (13,368)C. FUNDING ACTIVITIES

- issue/purchase of treasury shares - - - - issue/purchase of equity instruments - - - - dividend distribution and other - - -

Net cash flow from (used in) funding activities - - -

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING THE PERIOD (10,829) - (10,829)

EUR/000 KEY: (+) from; (-) used in

CONSOLIDATED STATEMENT OF CASH FLOWSDirect method

54

ACCOUNTING POLICIES The half-year condensed consolidated financial statements of the Banca Carige Group as at 30 June 2018, submitted to the Board of Directors for approval at its meeting on 3 August 2018, were prepared in compliance with IAS 34 (Interim reporting). For the valuation and measurement of the accounting items, the Group applied the international accounting standards (IAS/IFRS) and related interpretations (SIC/IFRIC), officially endorsed by the European Commission and effective as at 30 June 2018, while referring, as needed, to guidance provided by the Bank of Italy in its Circular no. 262 of 22/12/2005 - 5th update of 22 December 2017 (Banks' Financial Statements: Layout and Preparation). The half-year condensed consolidated financial statements, prepared using the Euro as the accounting currency, drafted in condensed form as permitted by IAS 34, are composed of the Balance Sheet, the Income Statement, the Statement of Comprehensive Income, the Statement of Changes in Shareholders’ Equity, the Cash Flow Statement and the Explanatory Notes. Unless otherwise specified, the amounts indicated in the Financial Statements and in the Explanatory Notes are expressed in thousands of Euro. In the first half of 2018 the review and integration of international accounting standards, interpretations or amendments continued, which partially apply for periods beginning on or after 1 January 2018. In particular, the following international accounting standards (IAS/IFRS) were endorsed in the first six months of 2018: - “Annual Improvements to IFRS Standards 2014-2016”: Reg. (EU) 2018/182 of 7 February 2018; - “Clarifications and measurements of share-based payments transactions - Amendments to IFRS 2”: Reg. (EU) 2018/289 of 26 February 2018; - “Amendments to IAS 40 Transfers of Investment Property”: Reg. (EU) 400/2018 of 14 March 2018 - “Amendments to IFRS 9 Financial Instruments: Prepayment features with negative compensation”: Reg. (EU) 498/2018 of 22 March 2018. Finally, during the first half of 2018 the International Accounting Standards Board (IASB) published the following documents: - “Amendments to IAS 19 - Plan Amendment, Curtailment or Settlement”; - “Conceptual Framework for Financial Reporting”. REGULATORY UPDATES Reported below is an update on the progress status of the analyses carried out by the Group to assess the effects deriving from the application of the following international accounting standards. IFRS 9 "FINANCIAL INSTRUMENTS" IFRS 9 ”Financial Instruments”, published by the IASB in July 2014 and endorsed by the European Commission with Regulation no. 2067/2016 is effective for accounting periods beginning on or after 1 January 2018. This interim financial report is therefore the first accounting period prepared with the application of the IFRS 9 accounting rules. More specifically, this information was prepared to allow an adequate understanding of the process of transition from the international reporting standard IAS 39 “Financial instruments: recognition and measurement”, which was applied until 31 December 2017 to the international reporting standard IFRS 9 “Financial instruments”. For further details please refer to the section “Transition to the new financial reporting standard IFRS 9”. IFRS 15 “REVENUE FROM CONTRACTS WITH CUSTOMERS” The new accounting principle IFRS 15 published by the IASB in May 2014 (subsequently amended in

55

September 2015) and endorsed by the European Commission with Regulation no. 2016/1905 is effective for accounting periods beginning on or after 1 January 2018. IFRS 15 introduces new requirements for an entity to recognise, in the income statement, revenue representing the transfer of promised goods or services to customers; in particular, this principle is delivered in a five-step model framework to: 1) identify the contract(s) with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contract; 5) recognise revenue when (or as) the entity satisfies a performance obligation. The principle also provides specific guidelines of the accounting of incremental costs incurred for obtaining or fulfilling a contract, requiring that the Bank must recognise them as assets, in the event of specific conditions (e.g. if the costs are expected to be recovered). Finally, the principle provides other guidelines on the application of the model’s general requirements to specific elements, such as, for example, variable consideration, sales with a right of return, relationship between agent and principal and licensing. Application of this standard will require the exercise of judgement of the impact in terms of accounting methods, business practices and possible effects on underlying systems and processes. To this end, the Group has launched a specific project in order to:

o analyse the accounting policies currently in use at the Group entity for the recognition of revenues from sales of goods or services and to identify any impacts resulting from the application of the new accounting principle;

o identify the main areas of “accounting policy election” by the Bank; o analyse the possible impacts in terms of accounting rules and financial reporting, business

strategies and operational processes. As for the first time adoption of IFRS 15, likewise effective for annual periods beginning on or after 1 January 2018, no significant impacts associated with the introduction of the new accounting principle emerged from the analyses conducted. IFRS 16 “LEASES” IFRS 16, effective 1 January 20192 and endorsed by the European Commission with Regulation no. 2017/1986 of 31 October 2017, will replace IAS 17 ("Leasing") and associated interpretations (IFRIC 4 – “Determining Whether an Arrangement Contains a Lease”; SIC15 – “Operating Leases – Incentives”; SIC 27 –“ Evaluating the Substance of Transactions in the Legal Form of a Lease”). IFRS 16 introduces significant changes to the accounting treatment of leases in the lessee’s financial statements. In particular, the standard provides a single lessee accounting model, superseding the IAS 17 approach and eliminating the distinction between operating or finance leases. Specifically, this model requires the recognition of an asset, that relates to the right of use of the leased asset and, at the same time, the lease liability arising from the lease payments defined in the contract. The approach to lessor accounting, instead, remains substantially unchanged from the provisions of IAS 17 (the only change is that the disclosure requirements have been expanded). The objective of IFRS 16’s disclosures is for additional information to be provided in the notes to the financial statements. During the first quarter of 2018, the Group started an assessment of the qualitative and quantitative impacts resulting from the introduction of IFRS 16, in terms of accounting and business methodologies, as well as the possible effects on the Group’s systems and operational processes.

2 Earlier application is permitted if IFRS 15 - 'Revenue from Contracts with Customers’ has also been applied.

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SECURITISATIONS COMPLETED BY THE BANCA CARIGE GROUP IN THE FIRST HALF OF 2018 Securitisation of loans structured through the special purpose vehicle, Lanterna Finance in 2018 (under Italian securitisation law no. 130 of 30 April 1999) The transaction, which was completed in May 2018, involved the transfer without recourse of performing (mortgage and signature) loans by Banca Carige and Banca del Monte di Lucca to the vehicle Lanterna Finance S.r.l. (in which Banca Carige currently has a 5% holding) for a total price of EUR 413 mln. Lanterna Finance S.r.l. issued EUR 260 mln worth of senior notes and EUR 153 mln worth of junior notes. The senior tranche was underwritten by an institutional investor, while the junior tranche was underwritten by Banca Carige and Banca del Monte di Lucca. As a guarantee for the senior bond holders a EUR 5.2 mln cash reserve was set up. Since the bonds issued were reserved for an institutional investor, they were not rated. In the transaction Banca Carige and Banca del Monte di Lucca acted as Servicers, Corporate Servicers, and underwriters of the junior bonds. The transaction Arranger is Banca IMI S.p.A. Given the characteristics of the securitisation, the assets sold were not derecognised, as substantially all the risks and rewards of the assets sold were retained by Banca Carige and Banca del Monte di Lucca. NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALEAs part of the comprehensive effort to strengthen the Group’s capital structure included in the 2017-2020 Business Plan, the disposal of a number of assets was planned, including:

the branch of business relating to Merchant Acquiring; the consumer credit company Creditis.

For the purposes of preparing the Half-Year Condensed Consolidated Financial Statements as at 30 June 2018, the Group carried out the analyses necessary to verify the fulfilment of the requirements of paragraphs 7 and 8 of IFRS 5 for classifying assets or groups of assets as "Non-current assets held for sale and discontinued operations". These analyses, partly in light of the progress status of the Company’s asset sale transactions contained in the 2017-2020 Business Plan, let to believe that the aforementioned requirements are met to an extent limited to the disposal of the consumer credit company Creditis, to which the accounting criteria provided for by IFRS 5 have thus been applied. In fact, for this transaction, the disposal is highly probable given that, on 6 December 2017, binding agreements were entered into, with closing expected within one year. As for the Merchant book/acquiring business, given the minor significance of the balance sheet and income statement items of this segment, they continued to be presented separately in the half-year condensed Consolidated Financial Statements as at 30 June 2018.

GOING CONCERN In consideration of the Group’s specific economic, capital and financial situation which, as at 30 June 2018, was not compliant with the Total Capital Ratio (TCR) required by the ECB in the SREP Decision of 27 December 2017 and alterations in governance stability due to multiple resignations in the Board of Directors, the Board attentively assessed the going concern assumption. Following the assessment and having regard to the requirements of IAS 1 and guidance provided in Document no. 2 of 6 February 2009, jointly issued by the Bank of Italy, Consob and ISVAP as subsequently updated, the Board of Directors concluded that the Group reasonably expects to continue operating as a going concern in the foreseeable future, primarily in light of the:

• implementation of the actions included in the 2017-2020 Business Plan approved by the Board of Directors on 13 September 2017. In particular, the disposal of the bad loan management platform and the outsourcing of the Group's information system were carried out in the first half of 2018. Preliminary agreements have already been entered into for the disposal of the Merchant Acquiring business and the consumer credit company Creditis Servizi Finanziari S.p.A., with their closing being expected to take place during the second half of 2018. The necessary authorisations from the Supervisory Authorities are pending, for the disposal of the consumer credit company to become effective;

57

• implementation of the actions included in the NPE Strategy, approved by the Board of Directors on 27 March 2018. In particular, during the first half of the year, projects were initiated with a view to disposing of a portfolio of bad loans for an amount up to EUR 1 bn and credit exposures classified as unlikely to pay for a total of approximately EUR 500 mln; moreover, as part of the de-risking process launched in implementation of the NPE Strategy, the Group has already completed the disposal of two credit exposures for a total gross amount of approximately EUR 50 mln;

• Board of Directors’ decision of 3 August 2018 about convening a Shareholders’ Meeting on 20 September 2018 to resolve, inter alia, upon (i) the proposals for dismissing the Board of Directors in office and appointing a new governing body, which were submitted by the shareholders POP 12 S.à.r.l. and Malacalza Investimenti S.r.l. pursuant to article 2367 of the Italian Civil Code; (ii) filling the vacancies in the Board of Directors, particularly by appointing the Chair and Deputy Chair, pursuant to article 2364, paragraph 1(2) of the Italian Civil Code and article 18, paragraph 11, of the Articles of Association, should the foregoing proposals not be approved;

• approval of a comprehensive plan to restore and ensure compliance with capital requirements in a sustainable manner by the renewed Board of Directors under the new chairmanship at the latest by 31 December 2018. This plan should assess all options including a business combination.

The implementation of the above actions, combined with the execution of all other initiatives set out in the 2017-2020 Business Plan and in the NPE Strategy as well as the implementation of any additional actions which will need to be put in place to meet the requests that the ECB communicated in its draft decision of 20 July 2018, reveal that the Group has the reasonable expectation that it will continue as a going concern for the foreseeable future and will comply with the prudential Own Funds and liquidity requirements imposed by the ECB on 27 December 2017, contingent upon its ability to absorb the impact of meeting the NPL reduction targets and minimum NPL coverage levels required. The reasonable expectation to continue as a going concern in the foreseeable future is also based on compliance, as at 30 June 2018, with the minimum consolidated CET1 capital requirement and liquidity ratio required by the ECB and the fact that the measures set out in the Business Plan -particularly a subordinated debt issuance of up to EUR 200 mln and the disposal of additional non-core assets- are adequate to restore the TCR at a level in excess of the SREP thresholds recommended by the ECB, together with the additional options called for by the ECB. The Board emphasises that failure to execute such measures may have significant adverse effects on the overall economic, capital and financial situation of the Bank and the Group, with potential impacts on their capacity to operate as a going concern. On the basis of the above, subject to the effective implementation of the above-listed actions, Directors are of the opinion that the Group has the forward-looking ability to comply with the capital requirements set under the Supervisory Review and Evaluation Process (SREP) in the foreseeable future. Therefore, even considering the uncertainties deriving from the current market environment, as well as from the outcome of the forthcoming completion of the non-performing loan disposal and the potential effects of the ongoing inspection by the Supervisory Authority, the half-year condensed Consolidated Financial Statements were prepared on the going-concern basis. ESTIMATES AND ASSUMPTIONS IN THE PREPARATION OF THE HALF-YEAR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND ASSOCIATED UNCERTAINTIES Preparation of the half-year condensed consolidated financial statements requires the use of estimates and assumptions for the calculation of certain cost and revenue components and for the valuation of assets and liabilities. Estimates and assumptions are more likely to be used for the fair value measurement of amounts recognised in relation to financial assets measured at amortised cost (loans to customers and loans to banks), other financial assets mandatorily measured at fair value, intangible fixed assets and the quantification of provisions for personnel, provisions for risks and charges, as well as the

58

assessment of tax items. Loans were classified according to strict guidelines which are reflective of the consequences of the negative developments in the economic environment; loan-related valuations were estimated on the basis of evidence emerging from the monitoring of existing relations with borrowers and their economic-financial situation. It should be noted that an extension or worsening of the current economic-financial crisis may cause a further deterioration of the borrowers' and issuers' financial conditions which could result in higher losses on loans granted or on financial assets purchased, than those currently estimated and accordingly considered during preparation of the half-year condensed consolidated financial statements. For the assessment of loans as at 30 June 2018, the Group has applied the criteria defined for its impairment models which are based on ordinary debt collection strategies and take into consideration the forward-looking prospects for the disposal of a comprehensively identified, potentially marketable portfolio of gross non-performing loans (bad loans and UTPs) with a high probability of sale, in line with the 2017-2020 Business Plan and as part of the NPE Strategy. The estimates adopted in the course of the impairment process are therefore influenced by the uncertainties connected with the outcome of the non-performing loan disposal process currently underway. Impairment based on forward-looking disposal prospects was adjusted on the basis of the latest information available and in the presence of binding offers accepted by the Group. The estimates are also influenced by guidance given by the Supervisory Authority during the on-site inspection on credit and counterparty risk. The inspection is still underway and its results are being analysed and further examined by the Group’s competent units. During preparation of these half-year condensed consolidated financial statements, credit risk adjustments were made on HTC and HTC&S securities for an amount of EUR 224 thousand. In addition, the item "Financial assets mandatorily measured at fair value" includes loans and receivables that did not pass the SPPI test, the carrying amount of which, in these half-year condensed consolidated financial statements, amounts to EUR 109.8 mln. With reference to intangible fixed assets, the Group extended the estimated useful life of its software during the first half of 2018, including in light of the ten-year agreements signed as part of the IT system outsourcing transaction described elsewhere in this Half-Year Report. With regard to quantification of the provisions for personnel and for risks and charges, an assessment is being made to estimate the amount, if due, and the timing of any potential expenditure connected with the fulfilment of obligations deemed likely to occur. In accordance with the provisions of IAS 37, the Group discloses in its half-year condensed consolidated financial statements those lawsuits which are deemed to give rise to a “likely” obligation. Considering the significant amount of deferred tax assets recognised on the asset side of the Financial Statements and, specifically, deferred tax assets that cannot be converted into tax credits pursuant to Law no. 214/2011, the valuation process put in place by the directors for their recognition is important. This process is affected by the use of assumptions and estimates, essentially associated with the determination of taxable income, the expected recovery time frame and the correct interpretation of tax legislation. As early as from the 2017 year-end financial statements, partly with the aid of external consultants, the Group has carried out an analysis, which should be referred to for further details, aimed at verifying whether the forecasts of future profitability are such as to guarantee their reabsorption and justify their recognition and retention in the financial statements (known as “probability test”). The recognition, on first-time adoption of IFRS 9, of new deferred tax assets mainly associated with the treatment of impairment losses on loans based on the expected credit loss (ECL) approach, made it necessary to update the information on the results of the probability test already carried out on the accounts as at 1/1/2018, to also consider the effects of the first-time application of the new standard. The test carried out on the basis of the assumptions already made in the 2017 financial statements has

59

once again demonstrated the probability that the DTAs may be recovered. As was previously explained, the test has always been carried out only on deferred tax assets that are not likely to be converted into tax credits, on the basis of the information contained in the 2017-2020 Business Plan and additional assumptions described in greater detail in the 2017 financial statements, which are referred to for additional guidance. On a consolidated basis, in the absence of volatility assumptions, corporate income tax (IRES) DTAs recognised in the financial statements would basically be absorbed by 2037. However, with assumptions of volatility in the taxable income forecasts being embedded in the model, a 60% probability of full recovery of DTAs -still on a consolidated basis- was shown in the presence of a volatility of 9% for the period between 2035 and 2041 (90% by 2044), which extends to the 2033 - 2052 period, if a volatility of over 18% is assumed. DISPOSAL OF INSURANCE COMPANIES – GUARANTEES AND COMMITMENTS On 5 June 2015, Banca Carige and Primavera Holdings S.r.l., a company controlled by funds affiliated to Apollo Global Management LLC, completed the disposal of the entire share capital held by Banca Carige in Carige Vita Nuova S.p.A. and in Carige Assicurazioni S.p.A. (hereinafter “Amissima Vita S.p.A.” and “Amissima Assicurazioni S.p.A.”). On the date of disposal, a distribution agreement valid until 31 December 2024 and renewable for a similar period, was entered into by Banca Carige, the Group's banks (excluding Banca Cesare Ponti) and Creditis (hereinafter also the "Distributors") with the Insurance Companies for the distribution of the Insurance Companies' life and non-life insurance products, in line with the insurance distribution plan, against payment of contractually defined commissions to the Distributors. Banca Carige constantly monitors, including for operational management purposes, Line 1 and Line 3 life insurance production performance. In 2017, the Bank achieved its objectives for Line 1 net production, but it did not for Line 3. Penalties were thus imposed for an amount of EUR 4 mln. For 2018, the distribution trend of Line 1 and Line 3 insurance products and the sales network focus on marketing such insurance products pursuant to applicable regulations and in compliance with the customers' actual economic needs, indicate that the Bank will be able to meet its business targets. Moreover, under the Sale and Purchase Agreement warranties and indemnities are provided, which are referenced to in Part A “Accounting Policies" in the Consolidated Financial Statements as at 31 December 2015. In particular, indemnities are possibly envisaged with regard to: − certain insurance policies, should claims be settled for an amount exceeding either the allocated

reserves as at the reference date set in the disposal agreement (30 June 2014), or any additional provisions relating to the same reserves;

− specific disputes, should the final expenditure exceed the provisions existing as at the above-mentioned reference date.

With regard to the foregoing agreements, the following is highlighted: − on 17 June 2016, the Board of Directors resolved to take action against Cesare Castelbarco

Albani, former Chairman of the Company, Mr. Piero Montani, former Chief Executive Officer of the Company, and some affiliates of the Apollo Group (Apollo Management Holdings L.P., Apollo Global Management L.L.C., Apollo Management International L.L.P., Amissima Holdings S.r.l., Amissima Assicurazioni S.p.A., Amissima Vita S.p.A.) to obtain compensation for damages arising from the disposal of Banca Carige's equity investments in the Insurance Companies and other conducts subsequently held by the same Group; in their response to the claim, the defendants filed their counterclaims for an amount of approximately EUR 622 mln, regarding which the Bank, supported by the opinions of its legal counsels, believes no pre-conditions exist for the Bank to be sentenced to pay for damages;

− on 22 November 2016, Banca Carige lodged an application for arbitration with the Chamber of Arbitration of Milan, requesting that the clauses of the Distribution Agreement entered into with Amissima Vita (former Carige Vita Nuova) concerning the obligation of exclusivity, distribution targets and penalties be declared null and void and that the Distribution Agreement be accordingly

60

declared null or ineffective in its entirety. With regard to the above action, Amissima Holding S.r.l. claimed for compensation (quantified on a preliminary basis at EUR 200 mln) in relation to the hypothesis that it may lose the arbitration proceedings; following in-depth analyses carried out with the assistance of its legal consultants, the Bank considered the hypothesized claim for damages completely unfounded. On 3 May 2018, the Arbitration Panel rejected the requests of the Carige Group's banks and confirmed the validity and effectiveness of the aforementioned Agreement. Consequently, Amissima Vita's request for payment of the penalties accrued in 2016 was accepted, amounts already fully provisioned for by the Bank as at 31 December 2016. The Arbitration Panel also stated that, with regard to the proposed nullity of the Agreement due to its violation of the IDD Directive (2016/97/EU), an opinion on the matter could not be formulated until a legislative decree was issued in execution of the delegated power to adopt a law for the transposition of the Directive (which was later adopted under Legislative Decree no. 68/2018). Therefore, the grounds for nullity may be proposed again, without prejudice to the Arbitrators' ruling, further to and on the basis of the above mentioned decree. Moreover, with no prejudice to the new judicial action that may be initiated on the grounds described above, the arbitration award may be challenged before the Milan Court of Appeal, pursuant to art. 829 para. 3, second subparagraph (“An appeal may under all circumstances be brought against a decision on grounds of public order“). Therefore, by a decision of the Board of Directors dated 21 June 2018, the Bank decided to challenge the arbitration award.

As at the date of closing of this reporting period, the Bank has reassessed the whole set of contractual relationships in place with the Apollo Group. Although the Bank remains convinced of the foundedness of the argumentations it provided as part of the foregoing proceedings and of the reasons it raised against the counterparties’ out-of-court claims, the Bank -without prejudice to such reasons- has sufficient elements available to quantify the potential risk arising from said claims for damages/penalties and deems it essentially consistent with the terms and assumptions of paragraph 14 of IAS 37 to adjust the already existing provisions in this regard, bringing the total amount of provisions for risks and charges, as at 31 December 2017, to EUR 38.2 mln. Following a similar assessment made in the first half of 2018, the funds for risks and charges were further increased by EUR 32.3 mln. This adjustment brought the total provisions for risks and charges relating to the sale and purchase agreement to EUR 67 mln (net of the amounts used during the first half of the year in execution of the decision made by the Arbitration Panel within the framework of the aforesaid arbitration award).

WRIT OF SUMMONS BROUGHT BY MR. SABA MARCO BEFORE THE COURT OF GENOA FOR THE ASSIGNMENT OF MONEY FOUND OR COMPENSATION FOR THE DISCOVERY OF MONEY This dispute is due to an appeal for a Preliminary Technical Expert's Report notified to Banca Carige on 2 August 2016, with which the appellants, Mr. Saba Marco and Mana Bond Ltd, requested the Court of Genoa to ascertain the existence of off-balance sheet monetary assets for EUR 25,476 mln resulting from a value “generated” by the Bank, not accounted for in the cash flows, therefore not recorded in the financial statements. The Bank replied by challenging the opposing petitions in every respect. The Court of Genoa, by decision of 9 February 2017, confirmed in the claim of 15 March 2017, declared the claim of the plaintiffs inadmissible, sentencing them to pay the expenses. With writ of summons dated 12 February 2018, Mr. Saba requested the Judge to sentence the Bank to pay him the recovered sum, amounting to EUR 25,476 mln, pursuant to Article 929 of the Italian Civil Code, according to which, if the owner of the recovered item is not found, the item belongs to the finder: in this specific case, as the Bank had not claimed the money “found” by Mr. Saba, the money would, in his opinion, have become his property. Alternatively, the plaintiff requested to be paid 1/20 of the amount of the money found, as a reward pursuant to Article 930 of the Italian Civil Code. The Bank appointed a trusted external legal counsel for its assistance and entered an appearance before the court: the preliminary phase is currently in progress and the deadlines for filing pleadings have been set; the proceedings have been adjourned to 25 October 2018 for examination of the preliminary motions. At present, the Bank, taking into account the outcome of the proceedings for interim measures initiated by the same plaintiff in relation to the same matter, which ended with a rejection order by the

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Court of Genoa, as confirmed in the complaint against the interim measures, considers the claim unfounded and the relative risk of losing as remote, subject to an update, as soon as information becomes available that makes it possible to formulate a more accurate prediction. INFORMATION ON FAIR VALUE IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Therefore, it is a sort of “exit price” under current market conditions, regardless of whether that price is directly observable or estimated using valuation techniques. IFRS 13 determines that a specific level should be assigned to fair value according to a hierarchy which, in decreasing order of priority, categorises fair value into three levels:

• level 1: the fair value is determined directly on the basis of quoted prices observed in active markets for assets or liabilities that are identical to the ones being measured; specific emphasis is placed on determining the principal market or, in its absence, the most advantageous market as well as the possibility that the firm preparing the financial statements can carry out the transaction at the market price on the date of measurement;

• level 2: fair value is calculated on the basis of inputs other than quoted prices referred to in level 1 which are directly or indirectly observable;

• level 3: fair value is calculated on the basis of unobservable inputs and is based on the assumptions it is presumed market participants would make to calculate the value of the instrument.

The inputs used to calculate the fair value of an instrument could be categorised into different levels of the fair value hierarchy; in these cases, the instrument is classified in its entirety in the same level of the hierarchy in which the lowest level input is classified. In the event significant adjustments are made to level 2 inputs with respect to the total fair value of the instrument, the latter is classified in level 3 of the fair value hierarchy if these adjustments use significant unobservable inputs. As compared to the annual report for the year ended 31 December 2017, no adjustments to the fair value hierarchy criteria were made. Financial instruments measured at fair value – level 3 include the equity investment in the Bank of Italy (EUR 302.4 mln). FAIR VALUE HIERARCHY: ACCOUNTING PORTFOLIOS, BREAKDOWN BY LEVEL OF FAIR VALUE (EUR/000)

IFRS 9 IAS 39 L1 L2 L3 L1 L2 L3

1.Financial assets at fair value through profit or loss

633 1,237 177,589

a) 1. Financial assets held for trading 167 1,237 6 1,485 967 1C other financial assets mandatorily at fair value 466 - 177,583

2.Financial assets at fair value through other comprehensive

income626,576 - 313,150

3. Financial assets available for sale 1,676,166 - 376,7323. 4. Hedging derivatives - 20,039 - - 29,581 -

Total financial assets designated at fair value 627,209 21,276 490,739 1,677,651 30,548 376,733 1. 1. Financial liabilities held for trading - 839 - - 850 -

2. 2. Financial liabilities at fair value through profit or loss - - - 348,459 - -

3. 3. Hedging derivatives - 247,455 - - 224,971 - Total financial liabilities designated at fair value - 248,294 - 348,459 225,821 -

Key:

L1 = Level 1; L2 = Level 2; L3 = Level 3

30/06/2018 31/12/2017

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EUR/000 BV FV BV FV

Item

Financial assets at amortised cost 19,644,972 20,262,746 18,688,541 19,837,262

Financial liabilities at amortised cost 21,627,403 21,039,813 21,166,994 20,569,131

BV = Book Value

FV = Fair Value

30/06/2018 31/12/2017

2017 figures refer to the items “Loans to banks” and “Loans to customers” for assets and to the items “Due to banks”, “Dueto customers” and “Securities issued” for liabilities. OTHER ASPECTS The Half-Year Condensed Consolidated Financial Statements contained in this Half-Year Report were submitted to a limited review by EY S.p.A. according to the auditing engagement conferred on this auditing firm by resolution of the Shareholders’ Meeting of 27 April 2011 for the nine-year period 2012-2020.

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SCOPE AND METHODS OF CONSOLIDATION 1. EQUITY INVESTMENTS IN SUBSIDIARIES AND JOINT VENTURES According to the IASs/IFRSs, the scope of consolidation includes all directly or indirectly controlled entities. The concept of control applied is that outlined in IFRS 10 - Consolidated financial statements. At the reporting date, no jointly controlled companies were identified, to which IFRS 11 - Joint Arrangements applies. Please note that the company Centro Fiduciario CF S.p.A. was wound up on 5 April 2018. 1. Equity investments in wholly owned subsidiaries

held by % held Actual % Potential %A. CompaniesA.1 Consolidated line-by-lineBanking Group 1. Banca CARIGE SpA Genoa Genoa 2. Banca del Monte Lucca SpA Lucca Lucca 1 A1.1 60.00 3. Banca Cesare Ponti SpA Milan Milan 1 A1.1 100.00 4. Creditis Servizi Finanziari SpA Genoa Genoa 1 A1.1 100.00 5. Centro Fiduciario C.F. SpA in liquidation Genoa Genoa 1 A1.1 96.95 6. Argo Mortgage 2 Srl Genoa Genoa 1 A1.1 60.00 7. Carige Covered Bond Srl Genoa Genoa 1 A1.1 60.00 8. Carige Covered Bond 2 Srl Genoa Genoa 1 A1.1 60.00 9. Lanterna Finance Srl (4) Genoa Genoa 4 A1.1 5.0010. Lanterna Consumer Srl (4) Genoa Genoa 4 A1.1 5.0011. Lanterna Lease Srl (4) Genoa Genoa 4 A1.1 5.0012. Carige Reoco SpA Genoa Genoa 1 A1.1 100.00

Key(1) Type of relationship: 1 = majority of voting rights at ordinary shareholders’ meetings 2 = dominant influence at ordinary shareholders’ meetings 3 = agreements with other shareholders 4 = other forms of control 5 = unified management pursuant to art. 26, paragraph 1 of Legislative Decree 87/92 6 = unified management pursuant to art. 26, paragraph 2 of Legislative Decree 87/92(2) Voting rights available at ordinary shareholders’ meetings, both actual and potential(3) Value entered only if other than the percentage of ownership

Company nameShareholding relationship

Type of

relationship

(1)

Registere

d office

Voting rights (2) (3)

(4) Self-securitisation SPV, controlled under the requirements of IFRS 10

Operating

office

As regards the scope of business, subsidiaries can be divided into banking institutions (Banca Carige S.p.A, Banca del Monte di Lucca S.p.A, Banca Cesare Ponti S.p.A.), consumer credit companies (Creditis Servizi Finanziari SpA), trust companies (Centro Fiduciario C.F. S.p.A. in liquidation), special-purpose vehicles for securitisations (Argo Mortgage 2 S.r.l., Lanterna Finance S.r.l., Lanterna Lease S.r.l. and Lanterna Consumer S.r.l.) and special-purpose vehicles for the issuance of covered bonds (Carige Covered Bond Srl and Carige Covered Bond 2 Srl) and a real estate company (Carige Reoco S.p.A.). As regards the special-purpose vehicles Argo Mortgage 2 S.r.l., Lanterna Finance S.r.l., Lanterna Lease S.r.l., Lanterna Consumer S.r.l., Carige Covered Bond S.r.l. and Carige Covered Bond 2 S.r.l., it is noted that they were all consolidated line by line. The assets were not derecognised from the financial statements of the respective transferors under either the securitisations or disposals for the issuance of covered bonds, as all connected risks and rewards were substantially retained by the Group. The Half-Year Condensed Consolidated Financial Statements were prepared using the reporting packages as at 30 June 2018 made available by the Parent Company and the other consolidated

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entities, as approved by their respective governing bodies and drafted according to the IASs/IFRSs approved and effective as at the reporting date, according to guidance provided by the Parent Company. All subsidiaries were included in the scope of consolidation. Excluded from the scope of consolidation, however, were non-investees for which shares with voting rights were received on pledge, inasmuch as the guarantee obtained was intended as a credit protection instrument and not as an instrument to exercise influence over the companies in question. 2. OTHER INFORMATION Investments in associates, i.e. companies subject to significant influence, were measured at equity. With reference to Autostrada dei Fiori, it is noted that the latest reporting package was used, as approved by the Board of Directors, pursuant to the IAS/IFRS accounting standards, for the interim period ending 30 June 2018. Equity investments in companies subject to significant influence (consolidated using the equity method)

Voting rights

held by Shareholding % Actual % Potential %A. Companies consolidated at equity

1. Autostrada dei Fiori Spa Savona Savona Banca Carige SpA 20.62

Company nameShareholding relationship

Registered

office

Operating

office

Companies over which the Group exerts significant influence were measured at cost, in accordance with the general principles set out in the framework for companies that are not considered subject to significant influence. Equity investments in companies subject to significant influence excluded from the equity method

Voting rights

held by Shareholding % Actual % Potential %

1. Nuova Erzelli Srl Genoa Genoa Banca Carige SpA 40.00

Company nameShareholding relationship

Registered

office

Operating

office

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EVENTS AFTER THE REPORTING PERIOD

Below is a summary of the most significant events occurring during the period between the Half Year reporting date and the date the Half-Year Report was approved by the Board of Directors on 3 August 2018. On 22 July 2018, the Bank communicated that it had been notified of a draft decision by the European Central Bank (“ECB”) on 20 July, requiring: 1. “that the Supervised Entity shall hold a Shareholder Meeting with the purpose of appointing a new Chair of the Board of Directors at the latest by 30 September 2018;” This request stemmed from the assessment that: “A fully functional governance structure is in particular crucial at this point in time, in light of the substantial strategic transformation of the Supervised Entity that is needed to ensure compliance with supervisory requirements in a sustainable manner” and “The Supervised Entity’s internal governance is not fully functional and represents a material source of operational and reputational risk. The functioning of the management board has been hindered over time by a high turnover; since 2014, the Supervised Entity’s executive management was handed over to three different CEOs. Among the fifteen original members of the current Board of Directors, appointed in March 2016, ten have resigned – mostly due to internal divergences between the Supervised Entity’s management and the main shareholders’ representatives. The ECB has taken a number of measures to highlight the importance of a well-functioning Board of Directors and encourage the Supervised Entity to take action in this regard.”. “Nevertheless, following the recent resignation of Mr Giuseppe Tesauro, the Board of Directors has not promptly decided on a timeline for the appointment of a new Chair” and “It is the assessment of the ECB that in the current context, a strong leadership is particularly critical to overcome existing differences and align the Board of Directors behind the necessary strategic decisions. This is also pivotal to facilitate the prompt adoption of mitigating measures should execution risks materialise.” In this respect, the Bank confirmed the information it had verbally communicated to the ECB during previous talks, namely that the convening of a Shareholders’ Meeting for the purpose of appointing the new Chair, in full compliance with the provisions of the law, will be on the agenda of the next Board of Directors’ meeting scheduled for 3 August 2018. 2. “to not approve the capital conservation plan (CCP) submitted by the Supervised Entity on 22 June 2018;” in this regard, the ECB noted that “The Supervised Entity has been in breach of the Overall Capital Requirement (OCR) of 13.125% since 1 January 2018. In the first quarter of 2018, the Supervised Entity’s Total Capital Ratio was 12.23%, 89 basis points below the OCR.”. “The Tier 2 issuance forms the cornerstone of the updated CCP. Due to idiosyncratic and market factors, the Supervised Entity’s Tier 2 issuance attempts have proven unsuccessful”. In this regard, the ECB also noted that: “In the CCP submitted on 18 April 2018, a number of RWAs reduction measures (disposal of non-core assets, including real-estate assets, a stake in Autofiori and the disposal of Banca d’Italia shares) were planned to be executed by June 2018. None of the measure was executed by the initial timeline, and the updated CCP postponed the expected execution by one trimester.” In this connection, the Bank -while reserving the right to carry out additional in-depth assessments and evaluations in view of its reply to the ECB- points out that, over the first six months of 2018, it has embarked on a path, on the one hand, towards the issuance of Tier 2 instruments (subordinated bonds) and, on the other, towards the disposal of non-core assets such as the shareholdings in the Bank of Italy and Autofiori. As far as the issuance of tier 2 instruments (subordinated bonds) is concerned, the Bank can but confirm and agree on the need and intention to proceed with said disposals, albeit in the belief that they should

66

be carried out by taking into due consideration the conditions of the market in general and the Italian financial environment in particular, which, over the last few months, has strongly negatively affected not only Banca Carige, but also several other financial and corporate issuers willing to turn to the market to raise new funds. With regard to the potential disposal of non-core assets the Bank confirms that the processes aimed at the best possible disposal of these assets are in progress and the Bank intends to bring said processes to completion by the end of 2018, obviously on condition that the prerequisites are met. 3. “that the Supervised Entity shall present to the ECB at the latest by 30 November 2018 a plan, approved by the Board of Directors, to restore and ensure in a sustainable manner compliance with capital requirements at the latest by 31 December 2018. This plan should assess all options including a business combination.” “If a business combination solution is pursued in order to ensure in a sustainable manner compliance with capital requirements, the ECB will set a new date as of which at the latest compliance with all capital requirements shall be achieved in order to reflect the needs of such business combination transaction.” In reserving the right to make any assessment and determination at its Board of Directors’ meeting, Banca Carige confirms it will honour any legitimate deadline set by the ECB and notes that the Bank will submit its own comments on the entire draft decision prepared by the ECB, as per practice.

67

PROFIT & LOSS AND BALANCE SHEET RESULTS

Following the introduction of IFRS 9 as from 1 January 2018 (section "Transition to the new financial re-porting standard IFRS 9" should be referred to for further details) and the adoption of the 5th update to Bank of Italy Circular no. 262, modifications were made to the income statement which make the figures as at 30 June 2018 not fully comparable with those as at 30 June 2017, which were calculated pursuant to IAS 39; therefore, some of the tables below do not show the changes with respect to the previous pe-riod. With respect to published accounts, 1H17 income statement balances and the subsequent breakdown tables are reflective of the changes described in the section "Restatement of balances of prior period ac-counts in compliance with IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations)" which is referenced to for further details. As at 30 June 2018, the Parent Company's share of profit (loss) for the period amounted to a negative EUR 20.5 mln in the income statement, as against the EUR 154.9 mln loss posted in June 2017. INCOME STATEMENT (EUR/000)

IFRS 9 IAS 39 1H2018 1H2017

10. 10. Interest and similar income 199,963 239,358o.w.: interest income calculated using the effective interest rate method 196,124

20. 20. Interest and similar expense (90,714) (118,415)30. 30. NET INTEREST INCOME 109,249 120,94340. 40. Fee and commission income 135,165 137,26050. 50. Fee and commission expense (14,752) (15,137)60. 60. NET FEE AND COMMISSION INCOME 120,413 122,12370. 70. Dividends and similar income 10,454 10,62580. 80. Net profit (loss) from trading 546 6,61290. 90. Net profit (loss) from hedging 778 (900)

100. 100. Profits (losses) on disposal or repurchase of: (18,262) 2,825100. a) financial assets at amortised cost (19,882)100. b) financial assets at fair value through other comprehensive income 1,039

100. b) financial assets available for sale 1,491100. c) 100. d) financial liabilities 581 1,334

110. 110. Profits (losses) on financial assets/liabilities at fair value through profit or loss (3,943) (456)110. b) other financial assets mandatorily at fair value (3,943)

120. 120. NET INTEREST AND OTHER BANKING INCOME 219,235 261,772130. 130. Net losses/recoveries on impairment of: (39,672) (228,426)

130. a) financial assets at amortised cost (39,662)130. a) loans (217,418)

130. b) financial assets at fair value through other comprehensive income (10)130. b) financial assets available for sale (11,151)130. d) other financial activities 143

140. Gains (losses) due to modifications not resulting in derecognition (1,272)150. 140. NET INCOME FROM BANKING ACTIVITIES 178,291 33,346180. 170. NET INCOME FROM BANKING AND INSURANCE ACTIVITIES 178,291 33,346190. 180. Administrative expenses (264,437) (281,010)

190. a) 180. a) personnel expenses (145,355) (151,687)190. b) 180. b) other administrative expenses (119,082) (129,323)

200. 190. Net provisions for risks and charges (27,198) (17,295)200. a) commitments and guarantees given (37)200. b) other net provisions (27,161)

210. 200. Net adjustments to/recoveries on property and equipment (6,312) (7,894)220. 210. Net adjustments to/recoveries on intangible assets (2,876) (11,755)230. 220. Other operating expense (income) 30,696 37,480240. 230. OPERATING EXPENSES (270,127) (280,474)250. 240. Profits (losses) on equity investments 4,257 5,767280. 270. Profits (losses) on disposal of investments 33,864 31290. 280. PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS (53,715) (241,330)300. 290. Taxes on income from continuing operations 18,568 70,632310. 300. PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS (35,147) (170,698)320. 310. Profit (loss) after tax from discontinued operations 14,954 12,326330. 320. PROFIT (LOSS) FOR THE PERIOD (20,193) (158,372)340. 330. Non-controlling interests 310 (3,464)350. 340. NET PROFIT (LOSS) FOR THE PERIOD ATTRIBUTABLE TO THE PARENT COMPANY (20,503) (154,908)

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More specifically, Net Interest Income amounted to EUR 109.2 mln (EUR 120.9 mln as at June 2017). In particular, Net Interest Income from customers totalled EUR 189.5 mln, whereas Net Interest Income from banks was a negative -EUR 3.1 mln. Interest income stood at EUR 200 mln and interest expense totalled EUR 90.7 mln. It should be noted that, pursuant to the provisions set forth by Bank of Italy Circular no. 262, as from 1 January 2018 Interest revenue includes the effects regulated by IFRS 9 (paragraph 5.4.1), according to which, in the case of credit-impaired financial assets, interest income is calculated by applying the amor-tised cost to the net carrying amount, rather than to the gross carrying amount. The interest rate previous-ly calculated on the gross carrying amount under item 10 and written down for the portion that is not ex-pected to be recovered under item 130 a), is now in fact to be calculated directly on an amount deduct-ed of value adjustments, with Income Statement item 10 thus being used only to recognise the interest expected to be recovered. Discounting-related reversals (i.e. arising from the time value of money), which were likewise determined with reference to the valuation of impaired financial assets, are similarly recog-nised under item 10 and no longer under item 130 a). This new method of calculation and presentation has a negative impact of EUR 6.7 mln on Net Interest Income. Moreover, the foregoing update to Bank of Italy Circular no. 262 specifies that the spreads or margins accrued over interest rate risk hedging derivatives are to be recognised under “Interest and similar in-come” or “Interest and similar expense”, depending on the sign (positive or negative) of the interest-related cash flow that is modified by the derivatives. INTEREST AND SIMILAR INCOME (EUR/000)

1H2018 1H2017

Financial assets at fair value through profit or loss 1,242 2,093 - financial assets held for trading 258 2,093 - other financial assets mandatorily at fair value 984Financial assets at fair value through other comprehensive income 75 4,046Financial assets at amortised cost: 206,929 231,542 - loans to banks 189 265 - loans to customers 206,740 231,277Hedging derivatives (10,657) -Other assets 1,591 169Financial liabilities 783 1,508Total interest and similar income 199,963 239,358

INTEREST AND SIMILAR EXPENSE (EUR/000)

1H2018 1H2017

Financial liabilities at amortised cost 68,030 76,903 - due to banks 3,269 1,993 - due to customers 17,224 17,309 - securities issued 47,537 57,601Financial liabilities held for trading - 351Financial liabilities at fair value through profit or loss - 8,319Other liabilities and funds 7 86Hedging derivatives 14,844 26,718Financial assets 7,833 6,038Total interest and similar expense 90,714 118,415

Net fees and commissions amounted to EUR 120.4 mln, down 1.4% compared to June 2017. Fee and commission income stood at EUR 135.2 mln, down 1.5% compared to June 2017, primarily on the back of the trends in fees for maintaining and managing current accounts. Fee and commission ex-pense decreased to EUR 14.8 mln (-2.5%), mainly as a result of trends in commissions for guarantees re-ceived (EUR 120 thousand compared with EUR 1.5 mln in June 2017).

69

FEE AND COMMISSION INCOME (EUR/000)

1H2018 1H2017 Absolute %

Guarantees issued 3,488 3,874 (386) (10.0)Portfolio management, brokerage and advisoryservices: 49,204 45,645 3,559 7.8 1. Trading of financial instruments 19 158 (139) (88.0) 2. Currency trading 926 928 (2) (0.2) 3. Portfolio management 1,455 2,237 (782) (35.0) 4. Custody and administration of securities 834 845 (11) (1.3) 6. Placement of securities 22,192 20,359 1,833 9.0 7. Receipt and issue of orders 2,614 2,818 (204) (7.2) 8. Consulting services 16 - 16 … 9. Distribution of third-party services 21,148 18,300 2,848 15.6 - portfolio management 1,055 966 89 9.2 - insurance products 14,005 11,007 2,998 27.2 - other products 6,088 6,327 (239) (3.8)Collection and payment services 27,683 27,894 (211) (0.8)

Securitisation servicing 544 - 544 …Factoring services 390 368 22 6.0Maintenance and management of current accounts 45,855 50,110 (4,255) (8.5)Other services 8,001 9,369 (1,368) (14.6)Total fee and commission income 135,165 137,260 (2,095) (1.5)

Change

FEE AND COMMISSION EXPENSE (EUR/000)

1H2018 1H2017 Absolute %

Guarantees received 120 1,524 (1,404) (92.1)Portfolio management and brokerage services 964 975 (11) (1.1) 1. Trading of financial instruments 174 69 105 … 3. Portfolio management 91 120 (29) (24.2) 4. Custody and administration of securities 654 736 (82) (11.1) 5. Placement of financial instruments 44 48 (4) (8.3)

6. Off-site marketing of financial instruments, products andservices 1 2 (1) (50.0)Collection and payment services 9,792 9,145 647 7.1Other services 3,876 3,493 383 11.0Total fee and commission expense 14,752 15,137 (385) (2.5)

Change

Net gains (losses) from disposal/repurchase of financial assets and liabilities1 amounted to a positive EUR 9.5 mln. More specifically, dividends, mainly traceable to the stake held in the Bank of Italy, totalled EUR 10.5 mln (EUR 10.6 mln in June 2017); net profit (loss) from trading amounted to a positive EUR 546 thou-sand (EUR 6.6 mln in June 2017) and net profit (loss) from hedging was a positive EUR 778 thousand (as compared to a negative EUR 900 thousand in 2017). NET PROFIT (LOSS) FROM TRADING (EUR/000)

1H2018 1H2017 Absolute %

Debt securities (864) 2,856 (3,720) …Total equities, debt securities and UCITS (864) 2,856 (3,720) …Financial derivatives (1,255) (2,128) 873 (41.0)Exchange differences 2,249 7,035 (4,786) (68.0)Other financial assets/liabilities from trading 416 (1,151) 1,567 …Total profit (loss) from trading 546 6,612 (6,066) (91.7)

Change

Losses on disposal of financial assets at amortised cost amounted to EUR 19.9 mln and are traceable to an exchange of positions classified as bad loans under the contractual agreements entered into with

1 Income Statement items 70, 80, 90, 100 b), c) and 110

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Credito Fondiario in December 2017. Net profit (loss) from financial assets and liabilities at fair value through profit or loss amounted to a negative EUR 3.9 mln, and is mainly attributable to the valuation of loans to customers that failed the Solely Payments of Principal and Interests (SPPI) Test and were mandatorily classified under this category. Net interest and other banking income thus totalled EUR 219.2 mln (EUR 261.8 mln in June 2017). With regard to net credit risk adjustments, net provisions totalled EUR 39.7 mln, as against EUR 228.6 mln in June 20172.

NET LOSSES/RECOVERIES ON CREDIT RISK (EUR/000)

1H2018 1H2017

Financial assets at amortised cost: 39,662 217,4181. Loans to banks (939) (56)2. Loans to customers 40,562 217,4743. Debt securities 39 -Financial assets at fair value through other comprehensive income 10 11,151Total net losses/recoveries on credit risk and other financial

items (1) 39,672 228,569

(1) Total net losses/recoveries on loans and other financial items for the first half of 2017 is different from the figureposted in the income statement given that, for the purposes of a like-for-like comparison with the figures for the first halfof 2018, the figure related to IAS 39 income statement item "130 d) Net losses/recoveries on impairment of otherfinancial items" was posted in the following table "Operating expenses" under the line "- commitments and guaranteesgiven".

Net income from banking activities therefore stood at EUR 178.3 mln (EUR 33.3 mln in June 2017). Operating expenses totalled EUR 270.1 mln (EUR 280.5 mln in June 2017). More specifically:

- personnel expenses amounted to EUR 145.4 mln, down 4.2% from June 2017; the decrease is largely accounted for by the headcount reduction during the year due to both the company turn-around and the disposal of branches of business;

- other administrative expenses totalled EUR 119.1 mln, down 7.9% and are inclusive of EUR 11.5 mln in contributions to the National Resolution Fund (EUR 7.5 mln as at June 2017), as well as EUR 6.9 mln worth of DTA charges (EUR 6.9 mln as at June 2017).

Net provisions for risks and charges amounted to EUR 27.2 mln, of which EUR 32.3 mln worth of provi-sions for risks associated to the Insurance Companies’ sales agreement (for more information, please see “Disposal of Insurance Companies – Guarantees and Commitments” in the “Accounting Policies” Sec-tion). Net adjustments to/recoveries on property and equipment and intangible assets amounted to EUR 9.2 mln (EUR 19.6 mln in June 2017) and benefited from a reduction in amortisation due to the sale -via the transfer and subsequent disposal of the controlling interest- of the ICT branch of business comprising IT hardware and base software, and the recalculation of the useful life for amortisation purposes of the ap-plication software that was not transferred but is the object of a specific contractual agreement entered into with the IT partner for the entire term of the outsourcing agreement, as described in more detail in the section relating to the key events, to which reference is made.

2 With regard to the effects deriving from the new provisions set forth in the updates to Bank of Italy Circular no. 262 and the new methods for calculating the interest rate on credit-impaired financial assets at amortised cost pursuant to IFRS 9, reference should be made to the comments made to item 10 above. Moreover, as of this year, net provisions for commitments and guarantees given are posted under item “Net provisions for risks and charges” rather than under item “Net value adjustments”.

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OPERATING EXPENSES (EUR/000)

Change

1H2018 1H2017 Absolute %

Personnel expenses 145,355 151,687 (6,332) (4.2)Other administrative expenses 119,082 129,323 (10,241) (7.9) - overhead expenses 73,090 87,357 (14,267) (16.3) - contribution to the National Resolution Fund and FITD 11,510 7,536 3,974 52.7 - indirect taxes (1) 27,549 27,484 65 0.2 - DTA charges 6,933 6,946 (13) (0.2)Net provisions for risks and charges 27,198 17,152 10,046 58.6 - commitments and guarantees given 37 (143) 180 … - other net provisions 27,161 17,295 9,866 57.0Amortisation on: 9,188 19,649 (10,461) (53.2) - tangible assets 6,312 7,894 (1,582) (20.0) - intangible assets 2,876 11,755 (8,879) (75.5)Other operating expense (income) (30,696) (37,480) 6,784 (18.1)

Total operating expenses (2) 270,127 280,331 (10,204) (3.6)(1) Taxes recovered from customers are posted to item 230 of the Income Statement “Other operating income (expenses)”.(2) Total operating expenses for the first half of 2017 is different from the figure posted in the income statement given that, for the purposes of alike-for-like comparison with the figures for the first half of 2018, the figure related to IAS 39 income statement item "130 d) Net losses/recoverieson impairment of other financial items" was posted under the line "- commitments and guarantees given".

Other net operating income stood at EUR 30.7 mln (EUR 37.5 mln as at June 2017); the 18.1% gap is mainly attributable to the reduction in other operating income, which includes lower amounts recovered for litigation expenses (in 2017 two bad loan disposals were finalised, which made it possible to reduce both the exposures and the recovery of the associated legal expenses). OTHER OPERATING INCOME/EXPENSE (EUR/000)

1H2018 1H2017 Absolute %

Lease payments receivable 1,945 2,287 (342) (15.0)Third-party charges: 28,644 31,124 (2,480) (8.0) recovery of credit facility fees 6,161 7,991 (1,830) (22.9) recovery of taxes (1) 22,321 22,966 (645) (2.8) customer insurance premiums 162 167 (5) (3.0)Other income 4,980 7,931 (2,951) (37.2)Total other income 35,569 41,342 (5,773) (14.0)Losses on lawsuits and out-of-court settlements (2,446) (1,342) (1,104) 82.3Expenses for improvement of third parties’ assets (102) (160) 58 (36.3)Other expenses (2,325) (2,360) 35 (1.5)Total other expenses (4,873) (3,862) (1,011) 26.2Total net operating income 30,696 37,480 (6,784) (18.1)

Change

(1) The item consists of taxes recovered from customers, whose cost is posted to sub-item 180 b) "Other administrative expenses" in theincome statement.

In light of the considerations above and having regard to gains on both equity investments and disposal of investments (relating to the disposal of the bad loan management platform and IT outsourcing, de-scribed in greater detail in the Half-Year Report section ‘Key events in the first half of 2018’) for an ag-gregate amount of EUR 38.1 mln, the profit (loss) before tax from continuing operations was a negative EUR 53.7 mln (as against a negative EUR 241.3 mln in June 2017). Considering the EUR 18.6 mln worth of tax recoveries and the EUR 15 mln worth of profit from discon-tinued operations, the loss for the period amounted to EUR 20.2 mln.

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PROFIT (LOSS) AFTER TAX FROM DISCONTINUED OPERATIONS (EUR/000)

1H2018 1H2017

Profit from discontinued operations 14,954 12,326-1. Income 23,419 22,183-2. Expenses (3,785) (5,823)-3. Profit (loss) from valuation of groups of assets and associated liabilities - --4. Profit (loss) from disposal - --5. Taxes and duties (4,680) (4,034) Net of the non-controlling interests' share of loss for the period, the Parent Company's share of profit (loss) for the period amounted to a negative EUR 20.5 mln (-EUR 154.9 mln in June 2017). Including the income components directly booked to equity, the Parent Company’s share of total com-prehensive income was a negative EUR 17.1 mln.

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FUNDING, LENDING AND BALANCE SHEET ITEMS

Following the introduction of the new accounting standard IFRS 9 (section "Transition to the new financial reporting standard IFRS 9" should be referred to for further details), the Balance Sheet was amended so that a like-for-like comparison between the figures as at 30 June 2018 and those as at 31 December 2017 is not possible. The tables below show the figures as at 30 June 2018 determined on the basis of the new IFRS 9 accounting standard and the figures at 31 December 2017 determined on the basis of the IAS 39 accounting standard previously adopted, with the exception of the tables on loans at amor-tised cost and credit quality which also include the figures as at 1 January 2018 determined on the basis of IFRS 9.

ASSETS (EUR/000)

Situation as at30/06/2018 31/12/2017

IFRS 9 IAS 3910. 10. CASH AND CASH EQUIVALENTS 282,371 296,581

20. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 179,459

20. a) 20. FINANCIAL ASSETS HELD FOR TRADING 1,410 2,453

20. c) OTHER FINANCIAL ASSETS MANDATORILY AT FAIR VALUE 178,049

30.FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

939,726

40. FINANCIAL ASSETS AVAILABLE FOR SALE 2,052,898

40. FINANCIAL ASSETS AT AMORTISED COST 19,644,972

40. a) 60. LOANS TO BANKS 3,341,991 2,934,607

40. b) 70. LOANS TO CUSTOMERS 16,302,981 15,753,934

50. 80. HEDGING DERIVATIVES 20,039 29,581

70. 100. EQUITY INVESTMENTS 94,032 98,569

90. 120. PROPERTY AND EQUIPMENT 730,804 738,442

100. 130. INTANGIBLE ASSETS 41,209 35,005

110. 140. TAX ASSETS 1,930,332 1,950,510

110. a) 140. a) CURRENT 749,702 794,737

110. b) 140. b) DEFERRED 1,180,630 1,155,773

- of which under Law no. 214/2011 527,486

120. 150. NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALE 617,855 608,077

130. 160. OTHER ASSETS 287,967 419,047

TOTAL ASSETS 24,768,766 24,919,704

LIABILITIES AND SHAREHOLDERS’ EQUITY (EUR/000)

IFRS 9 IAS 39 30/06/2018 31/12/2017

10. FINANCIAL LIABILITIES AT AMORTISED COST 21,627,403

10. a) 10. DUE TO BANKS 4,565,188 4,656,62410. b) 20. DUE TO CUSTOMERS 13,597,153 12,624,54110. c) 30. SECURITIES ISSUED 3,465,062 3,885,829

20. 40. FINANCIAL LIABILITIES HELD FOR TRADING 839 85030. 50. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS - 348,459

40. 60. HEDGING DERIVATIVES 247,455 224,97160. 80. TAX LIABILITIES 36,688 16,537

60. a) 80. a) CURRENT 23,439 3,55760. b) 80. b) DEFERRED 13,249 12,980

70. 90. LIABILITIES ASSOCIATED WITH GROUPS OF ASSETS HELD FOR SALE 111,596 193,80880. 100. OTHER LIABILITIES 436,786 474,57990. 110. EMPLOYEE TERMINATION INDEMNITIES 56,235 59,417

100. 120. ALLOWANCES FOR RISKS AND CHARGES: 237,434 165,240

100. a) COMMITMENTS AND GUARANTEES GIVEN 51,723100. b) 120. a) POST-EMPLOYMENT BENEFITS 31,605 34,410100. c) 120. b) OTHER ALLOWANCES FOR RISKS AND CHARGES 154,106 130,830

120. 140. VALUATION RESERVES (113,578) (140,633)150. 170. RESERVES (1,333,634) (684,857)160. 180. SHARE PREMIUM RESERVE 629,578 628,364170. 190. SHARE CAPITAL 2,845,857 2,845,857180. 200. TREASURY SHARES (-) (15,572) (15,572)190. 210. NON-CONTROLLING INTERESTS (+/-) 22,182 24,125200. 220. NET PROFIT (LOSS) FOR THE PERIOD (+/-) (20,503) (388,435)

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 24,768,766 24,919,704

74

Overall funding from customers – direct and indirect deposits – totalled EUR 38,860 mln as at 30 June 2018, up 1.9% as compared to December 2017. Direct deposits amounted to EUR 17,062.2 mln, whilst indirect deposits totalled EUR 21,797.8 mln. The latter accounted for 56.1% of overall funding from customers, with 53% consisting in Assets under Man-agement and 47% in Assets under Custody. OVERALL FUNDING (EUR/000)

Situation as at Change 30/06/2018 31/12/2017 absolute %

Total (A+B) 38.860.008 38.150.968 709.040 1,9

Direct deposits (A) (1)

17.062.215 16.858.829 203.386 1,2 % share of Total 43,9% 44,2%Indirect deposits (B) 21.797.793 21.292.139 505.654 2,4 % share of Total 56,1% 55,8% - Assets under Management 11.550.686 11.397.154 153.532 1,3 % share of Total 29,7% 29,9% % share of Indirect deposits 53,0% 53,5% - Assets under Custody 10.247.107 9.894.985 352.122 3,6 % share of Total 26,4% 25,9% % share of Indirect deposits 47,0% 46,5%(1) Items 10 b), 10 c) and 30 of Balance Sheet liabilities

Overall funding, including direct funding and deposits from banks, amounted to EUR 21,627.4 mln, substantially stable during the first half of the year (+0.5%). Direct deposits increased by 1.2% to EUR 17,062.2 mln, mainly on the back of the short-term compo-nent, which increased by 8.3% to EUR 12,953.3 mln, whereas the medium/long-term component de-creased by 16% to EUR 4,109 mln. More specifically, direct retail funding, for a total amount of EUR 14,506.7 mln, was up 3.7% in the six-month period, whereas institutional funding (EUR 2,555.5 mln) was down 11.1%. With regard to direct funding, amounts due to customers totalled EUR 13,597.2 mln, up 7.7%, primarily on the back of the positive trend in current accounts and demand deposits (which settled at EUR 12,227.5 mln; +9.7%), which more that offsets the decrease in time deposits (EUR 1,191.7 mln; -9.3%). Securities in issue, almost entirely consisting in bonds to customers, amounted to EUR 3,465.1 mln (-10.8% from December 2017). It must be noted that liabilities measured at fair value as at June 2018 are nil because on the first-time adoption of IFRS 9 they were reclassified among Securities in issue at amortised cost. With regard to the average term to maturity, short-term funding totalled EUR 12,953.3 mln (EUR 11,964.3 mln as at December 2017), accounting for 75.9% of total funding (71% as at December 2017), whilst medium-to-long term funding totalled EUR 4,109 mln (EUR 4,894.5 mln as at December 2017), accounting for 24.1% of total funding (29% as at December 2017). Amounts due to banks stood at EUR 4,565.2 mln, as against EUR 4,656.6 mln as at December 2017. The overall amount of refinancing operations with the ECB (T-LTRO 2) totalled EUR 3,500 mln.

75

FUNDING (EUR/000)

Situation as at Change

30/06/2018 31/12/2017 Absolute %

Total (A + B) 21,627,403 21,515,453 111,950 0.5

Direct deposits (A) 17,062,215 16,858,829 203,386 1.2

Due to customers 13,597,153 12,624,541 972,612 7.7

current accounts and demand deposits 12,227,471 11,141,642 1,085,829 9.7

Term deposits 1,191,673 1,313,280 (121,607) (9.3)

loans 3,535 4,021 (486) (12.1)

other payables 174,474 165,598 8,876 5.4

Securities issued and liabilities designated at fair value through profit and loss 3,465,062 4,234,288 (769,226) (18.2)

Securities issued 3,465,062 3,885,829 (420,767) (10.8)

bonds 3,464,125 3,884,698 (420,573) (10.8)

other securities 937 1,131 (194) (17.2)

Liabilities designated at fair value through profit and loss - 348,459 (348,459) (100.0)

bonds - 348,459 (348,459) (100.0)

short-term 12,953,258 11,964,301 988,957 8.3

% share of total 75.9 71.0

medium-long term 4,108,957 4,894,528 (785,571) (16.0)

% share of total 24.1 29.0

Due to banks (B) 4,565,188 4,656,624 (91,436) (2.0)

Due to central banks 3,500,000 3,500,000 - -

Current accounts and demand deposits 171,314 67,879 103,435 …

Term deposits 583,682 746,949 (163,267) (21.9)

Loans 303,078 325,897 (22,819) (7.0)

Other payables 7,114 15,899 (8,785) (55.3)

Regional data highlights Liguria’s prevailing share [of direct funding] with 46.6% of total. Lombardy is the second-ranking region with a share of 14.3%, followed by Tuscany (12.8%). Veneto’s share of total is 6.7% and Lazio’s 5.2%. The other regions hold shares of less than 5%.

65.4% of amounts due to customers were from households and amounted to EUR 8,886.5 mln; non-financial companies and personal businesses (EUR 2,443.7 mln) accounted for 18%. Financial and in-surance companies contributed EUR 784.1 mln worth of deposits (5.8% of total), private social institu-tions EUR 1,216.8 mln (8.9% of total) and public administrations EUR 265.9 mln (2% of total).

76

DIRECT DEPOSITS - BREAKDOWN BY BUSINESS SEGMENT (EUR/000)

Situation as at30/06/2018 31/12/2017

% %

Public Administration 265,915 2.0% 295,075 2.3%Financial and insurance businesses 784,125 5.8% 492,710 3.9%Non-financial businesses and personal businesses 2,443,723 18.0% 2,175,734 17.2%Private social institutions and non-classified entities 1,216,844 8.9% 679,361 5.4%Households 8,886,546 65.4% 8,981,661 71.1%Total by business segment 13,597,153 100.0% 12,624,541 100.0%

Securities issued 3,465,062 3,885,829

Liabilities designated at fair value - 348,459

Total direct deposits 17,062,215 16,858,829 Indirect deposits, amounting to EUR 21,797.8 mln, were up 2.4% in the six-month period. Assets under Management totalled EUR 11,550.7 mln, up 1.3% during the six-month period, especially as a result of the trend in bancassurance products, which increased by 2.5% to EUR 6,046.1 mln. Mutual funds and open-ended collective investment schemes (SICAV), totalling EUR 5,193.4 mln, were also on the rise (+1.1%). Assets under Custody amounted to EUR 10,247.1 mln, up 3.6% in the six-month period, on the back of trends in assets pertaining to Amissima Assicurazioni amounting to EUR 6.196,8 (up 10%); a decrease was registered in government bonds (-3.1% to EUR 2,538.1 mln); bonds totalled EUR 651.4 mln (-10.3%), while shares amounted to EUR 860.8 mln (-6.4%). INDIRECT DEPOSITS (EUR/000)

Situation as at Change

30/06/2018 31/12/2017 absolute %

Total (A+B) 21,797,793 21,292,139 505,654 2.4

Assets under Management (A) 11,550,686 11,397,154 153,532 1.3 Mutual funds and open-end collective investment schemes 5,193,415 5,136,297 57,118 1.1 Portfolio management 311,182 360,762 (49,580) (13.7) Bancassurance products 6,046,089 5,900,095 145,994 2.5

Assets under Custody (B) 10,247,107 9,894,985 352,122 3.6 Government securities 2,538,065 2,618,089 (80,024) (3.1) Bonds 651,386 726,393 (75,007) (10.3) Shares 860,807 919,524 (58,717) (6.4) Other 6,196,849 5,630,979 565,870 10.0 As far as indirect deposits are concerned, the Liguria region contributed the highest share, i.e. 62.6% of total, followed by Lombardy (14.8%) and Tuscany (7.3%). The remaining regions contributed less than 5% each.

In terms of breakdown by segment, the two main customer segments -households and financial and in-surance companies- respectively contributed 65.1% and 30% of the total; the share contributed by non-financial businesses and personal businesses was 3.3%.

77

INDIRECT DEPOSITS - BREAKDOWN BY BUSINESS SEGMENT (EUR/000)

Situation as at30/06/2018 31/12/2017

% %

Public Administration 176,017 0.8% 189,245 0.9%Financial and insurance businesses 6,548,671 30.0% 6,026,404 28.3%Non-financial businesses and personal businesses 724,323 3.3% 732,478 3.4%Private social institutions and non-classified entities 166,709 0.8% 170,508 0.8%Households 14,182,073 65.1% 14,173,504 66.6%

Total indirect deposits 21,797,793 100.0% 21,292,139 100.0% Net loans to customers (Balance Sheet item 40 b)) totalled EUR 16,303 mln compared to EUR 15,753.9 mln in December 2017, mainly as a result of the reclassification, on IFRS 9 first-time adoption, of debt securities previously classified at fair value. 66.5% of the item is accounted for by mortgages. LOANS TO CUSTOMERS AT AMORTISED COST(EUR/000)

Situation as at30/06/2018 31/12/2017 absolute %

Current accounts 1,402,181 1,506,888 (104,707) (6.9)Mortgage loans 10,838,964 11,222,115 (383,151) (3.4)Credit cards, personal loans and fifth of salary-backed loans 77,961 72,740 5,221 7.2Leasing 575,661 612,016 (36,355) (5.9)Factoring 76,861 82,831 (5,970) (7.2)Other loans 2,199,382 2,013,094 186,288 9.3

Debt securities 1,131,971 244,250 887,721 …

Total 16,302,981 15,753,934 549,047 3.5

Gross of value adjustments and net of debt securities at amortised cost, loans to customers totalled EUR 17,623.3 mln and were substantially stable (+0.4% compared to 1 January 2018; -0.6% compared to 31 December 2017). Excluding the institutional component, gross loans to retail customers amounted to EUR 17,085 mln, es-sentially stable on December 2017 (-0.5%). As part of this aggregate, a decrease was registered in loans to businesses (-3.1% to EUR 8,967.8 mln), whereas an increase was observed in loans to households (+1.3% to EUR 5,857.5 mln). The short-term component, accounting for 14.3% of total, amounted to EUR 2,525.6 mln, up 4.6% compared to 1 January 2018 (+4.5% compared to 31 December 2017); the medium-long term com-ponent amounted to EUR 13,286.1 mln (-1.4% and -2.6% compared respectively to 1 January 2018 and 31 December 2017). Bad loans were up (+8%) to EUR 1,811.7 mln. Loans to banks, not including debt securities at amortised cost and gross of adjustments for an amount of EUR 3.6 mln, totalled EUR 3,345.6 mln, up from EUR 2,925.8 mln as at 1 January 2018 (EUR 2,938.9 mln in December 2017); 90.8% of this aggregate is accounted for by short-term loans. The net interbank position (difference between loans to and deposits from banks, net of securities at amortised cost) shows a debt exposure of EUR 1,223.2 mln, as compared to EUR 1,722 mln in Decem-ber 2017.

78

LOANS AT AMORTISED COST (1) (EUR/000)

Situation as at Change from 01/01/2018 Change from 31/12/2017

30/06/2018 01/01/2018 31/12/2017 Absolute % Absolute %

Total (A+B) 18,513,001 17,990,781 18,444,291 522,220 2.9 68,710 0.4

Loans to customers (A) 15,171,010 15,069,507 15,509,684 101,503 0.7 (338,674) (2.2)- Gross exposure (2) 17,623,322 17,561,592 17,734,030 61,730 0.4 (110,708) (0.6)

current accounts 1,200,099 1,277,302 1,277,302 (77,203) (6.0) (77,203) (6.0)

mortgage loans 9,054,552 9,155,617 9,256,451 (101,065) (1.1) (201,899) (2.2)credit cards, personal loans and fifth of salary-backed loans 77,163 71,382 71,382 5,781 8.1 5,781 8.1

leasing 499,594 481,101 481,101 18,493 3.8 18,493 3.8

factoring 52,708 56,975 56,975 (4,267) (7.5) (4,267) (7.5)

other loans 2,013,091 1,805,231 1,805,231 207,860 11.5 207,860 11.5

non-performing assets 4,726,115 4,713,984 4,785,588 12,131 0.3 (59,473) (1.2)

-short term 2,525,587 2,415,637 2,416,250 109,950 4.6 109,337 4.5

% share of nominal value 14.3 13.8 13.6

-medium/long term 13,286,070 13,468,073 13,639,898 (182,003) (1.4) (353,828) (2.6)

% share of nominal value 75.4 76.7 76.9

- Bad loans 1,811,665 1,677,882 1,677,882 133,783 8.0 133,783 8.0

% share of nominal value 10.3 9.6 9.5

-Value adjustments (-) 2,452,312 2,492,085 2,224,346 (39,773) (1.6) 227,966 10.2

Loans to banks (B) 3,341,991 2,921,274 2,934,607 420,717 14.4 407,384 13.9- Gross exposure (2) 3,345,576 2,925,798 2,938,895 419,778 14.3 406,681 13.8

compulsory reserves 1,537,240 1,094,297 1,094,297 442,943 40.5 442,943 40.5

current accounts and demand deposits 28,085 27,136 27,136 949 3.5 949 3.5

repurchase agreements 1,149,362 1,041,292 1,041,292 108,070 10.4 108,070 10.4

loans 618,108 750,293 763,390 (132,185) (17.6) (145,282) (19.0)

non-performing assets 12,781 12,780 12,780 1 0.0 1 0.0-

-short term 3,037,006 2,640,737 2,640,737 396,269 15.0 396,269 15.0

% share of nominal value 90.8 90.3 89.9

-medium/long term 308,570 285,061 298,158 23,509 8.2 10,412 3.5

% share of nominal value 9.2 9.7 10.1

-Value adjustments (-) 3,585 4,524 4,288 (939) (20.8) (703) (16.4)

(2) Before value adjustments.

(1) As at 30/06/2018, net of debt securities at amortised cost amounting to EUR 1,131,971 thousand (loans to customers), and as at 31/12/2017, net of debt securitiesclassified as L&R amounting to EUR 244,250 thousand (loans to customers).

In terms of a geographical breakdown, Liguria accounts for 49.8% of loans to customers. Tuscany is the second-ranking region, with a share of 10.8%; Lombardy ranks third with a share of 9.6%.

In terms of a breakdown by segment, non-financial companies and personal businesses accounted for 56.8% of loans to customers, for a total of EUR 10,015.7 mln; the households’ share of total (31.3%) is mostly comprised of mortgages for the purchase of homes. The public administrations’ share of total is 8.2%, while financial and insurance companies account for 3.2% of total.

79

GROSS LOANS TO CUSTOMERS(1) - BREAKDOWN BY BUSINESS SEGMENT (EUR/000)

Situation as at30/06/2018 31/12/2017

% %

Public Administration 1,446,699 8.2% 1,528,288 8.6%Financial and insurance businesses 565,298 3.2% 628,626 3.5%Non-financial businesses and personal businesses 10,015,748 56.8% 10,057,479 56.7%

Construction 2,160,743 12.3% 2,177,746 12.3%Wholesale and retail trade; repair of motorvehicles and motorcycles 1,765,040 10.0% 1,688,683 9.5%Manufacturing 1,709,905 9.7% 1,566,996 8.8%

Real Estate 1,451,269 8.2% 1,575,834 8.9%Transportation and storage 1,036,136 5.9% 1,114,335 6.3%Other 1,892,655 10.7% 1,933,885 10.9%

Private social institutions and non-classified entities 79,004 0.4% 73,271 0.4%Households 5,516,573 31.3% 5,446,366 30.7%Total loans to customers 17,623,322 100.0% 17,734,030 100.0%

(1) Gross of value adjustments and net of debt securities classified as L&R. Loans mandatorily at fair value amounted to EUR 109.8 mln, compared to EUR 116.4 mln as at 1 Janu-ary 2018, of which EUR 95.4 mln in loans to customers and EUR 14.5 mln in loans to banks.

LOANS MANDATORILY AT FAIR VALUE (1) (EUR/000)

Situation as at Change from 01/01/2018

30/06/2018 01/01/2018 Absolute %

Total (A+B) 109,841 116,384 (6,543) (5.6)

Loans to customers (A) 95,391 103,287 (7,896) (7.6)

Performing 79,831 87,554 (7,723) (8.8)

- of which Forborne 70,818 77,665 (6,847) (8.8)

Non-performing 15,560 15,733 (173) (1.1)

- of which Forborne 14,952 15,128 (173) (1.1)

Loans to banks (B) 14,450 13,097 1,353 10.3

Performing 14,450 13,097 1,353 10.3

(1) Net of securities mandatorily at fair value totalling EUR 68,208 thousand at as at 30/06/2018 and EUR 65,287 thousand as at1/1/2018. Non-performing on-balance-sheet loans to customers amounted to EUR 4.726,1 mln, essentially stable with respect to 1 January 2018 (+0.3%; -1.2% compared to December 2017); the corresponding share of gross bad loans to customers out of total gross loans to customers ("gross NPE ratio") was 26.8%. In particular, gross bad loans to customers totalled EUR 1,811.7 mln, up 8%, both compared to 1 Janu-ary 2018 and 31 December 2017, and account for 10.3% of the aggregate. Gross Unlikely-To-Pay exposures to customers amounted to EUR 2,829.9 mln and were down 4.2% compared to 1 January 2018 (-6.5% on December 2017). Past due exposures, also consisting entirely in loans to customers, totalled EUR 84.6 mln, with an in-crease of 4.8% compared to 1 January 2018 and 31 December 2017. The percentage coverage of non-performing on-balance-sheet loans to banks and customers is 49.6% compared to 50.3% recorded as at 1 January 2018 and to 44.8% recorded as at 31 December 2017; in particular, bad loans show a coverage of 74%, (76.8% including write-offs), Unlikely-To-Pay exposures of 35% (35.3% inclusive of write-offs) and past-due exposures of 18%, values that guarantee full compli-ance with the coverage targets set by the ECB. As a whole, losses on loans to customers (including performing exposures) amounted to EUR 2,452.3 mln.

80

QUALITY OF LOANS AT AMORTISED COST (EUR/000)

01/01/2018

% % %

(b) / (a) (b) / (a) (b) / (a)(a) (b) (a)-(b) (a) (b) (a)-(b) (a) (b) (a)-(b)

On-balance-sheet loans

Non-performing loans

Bad loans 1,811,665 1,339,781 471,884 74.0 1,677,882 1,250,633 427,249 74.5 1,677,882 1,077,590 600,292 64.2

- customers 1,811,665 1,339,781 471,884 74.0 1,677,882 1,250,633 427,249 74.5 1,677,882 1,077,590 600,292 64.2

Unlikely-To-Pay exposures 2,842,649 996,071 1,846,578 35.0 2,968,162 1,112,200 1,855,962 37.5 3,039,766 1,057,558 1,982,208 34.8

- banks 12,781 3,325 9,456 26.0 12,780 4,288 8,492 33.6 12,780 4,288 8,492 33.6

- customers 2,829,868 992,746 1,837,122 35.1 2,955,382 1,107,912 1,847,470 37.5 3,026,986 1,053,270 1,973,716 34.8

Past due 84,582 15,219 69,363 18.0 80,720 14,525 66,195 18.0 80,720 14,494 66,226 18.0

- customers 84,582 15,219 69,363 18.0 80,720 14,525 66,195 18.0 80,720 14,494 66,226 18.0

Total non-performing loans 4,738,896 2,351,071 2,387,825 49.6 4,726,764 2,377,358 2,349,406 50.3 4,798,368 2,149,642 2,648,726 44.8

- banks 12,781 3,325 9,456 26.0 12,780 4,288 8,492 33.6 12,780 4,288 8,492 33.6

- customers 4,726,115 2,347,746 2,378,369 49.7 4,713,984 2,373,070 2,340,914 50.3 4,785,588 2,145,354 2,640,234 44.8

- of which Forborne 1,707,549 705,318 1,002,231 41.3 1,771,143 727,104 1,044,039 35.4 1,790,386 633,820 1,156,566 35.4

Performing loans

- banks 3,332,795 260 3,332,535 0.0 2,913,018 236 2,912,782 0.0 2,926,115 - 2,926,115 -

- customers 12,897,207 104,566 12,792,641 0.8 12,847,608 119,015 12,728,593 0.9 12,948,442 78,992 12,869,450 0.6

Total performing loans 16,230,002 104,826 16,125,176 0.6 15,760,626 119,251 15,641,375 0.8 15,874,557 78,992 15,795,565 0.5

- of which Forborne 620,187 23,061 597,126 3.7 674,675 33,869 640,806 2.1 757,964 15,597 742,367 2.1

Total on-balance-sheet loan 20,968,898 2,455,897 18,513,001 11.7 20,487,390 2,496,609 17,990,781 12.2 20,672,925 2,228,634 18,444,291 10.8

- banks 3,345,576 3,585 3,341,991 0.1 2,925,798 4,524 2,921,274 0.2 2,938,895 4,288 2,934,607 0.1

- customers 17,623,322 2,452,312 15,171,010 13.9 17,561,592 2,492,085 15,069,507 14.2 17,734,030 2,224,346 15,509,684 12.5

(1) As at 31/03/2018, net of debt securities at amortised cost amounting to EUR 1,131,971 thousand (loans to customers), and as at 31/12/2017, net of debt securities classified as L&R amounting to EUR 244,250 thousand (loans to customers).

30/06/2018 (1)

Gross exposure

Value adjustments

Net exposure

31/12/2017

Gross exposure

Value adjustments

Net exposure

Gross exposure

Value adjustments

Net exposure

A geographic breakdown of bad loans shows that Liguria has the largest share of total (48.5%), followed by Tuscany (12.3%) and Lombardy (12%).

The breakdown by business segment shows a total amount of bad loans for non-financial companies and personal businesses of EUR 1,584.5 mln (87.5%). The highest share of bad loans is in the “Construc-tion” segment (EUR 651.8 mln, 36%), followed by “Manufacturing activities” (EUR 272.5 mln, 15%). The “Households” segment ranks second in volume and accounts for 10.4% of the total.

BAD LOANS TO CUSTOMERS (1) - BREAKDOWN BY BUSINESS SEGMENT (EUR/000)

Situation as at

30/06/2018 31/12/2017% %

Public Administration 2,650 0.1% 2,911 0.2%Financial and insurance businesses 30,576 1.7% 14,684 0.9%Non-financial businesses and personal businesses 1,584,523 87.5% 1,486,795 88.6%

Construction 651,793 36.0% 569,987 34.0%Manufacturing 272,545 15.0% 236,142 14.1%Wholesale and retail trade; repair of motorvehicles and motorcycles 232,536 12.8% 216,447 12.9%Real Estate 178,383 9.8% 215,507 12.8%Accommodation and food services 71,480 3.9% 68,623 4.1%Other 177,786 9.8% 180,089 10.7%

Private social institutions and non-classified entities 4,620 0.3% 3,231 0.2%Households 189,296 10.4% 170,261 10.1%Total bad loans 1,811,665 100.0% 1,677,882 100.0%

(1) Gross of value adjustments and net of debt securities classified as L&R.

81

The gross bad loans/total loans ratio is 10.3%. For non-financial companies and personal businesses the ratio is higher than Group average and stands at 15.8%. BAD LOANS/TOTAL LOANS (1) - BREAKDOWN BY BUSINESS SEGMENT (percentage values)

Situation as at30/06/2018 31/12/2017

Public Administration 0.2% 0.2%Financial institutions 5.4% 2.3%Non-financial businesses and personal businesses 15.8% 14.8% - of which (2):

Construction 30.2% 26.2%Wholesale and retail trade; repair of motorvehicles and motorcycles 13.2% 12.8%Manufacturing 15.9% 15.1%Real Estate 12.3% 13.7%Transportation and storage 4.3% 4.8%

Private social institutions and non-classified entities 5.8% 4.4%Households 3.4% 3.1%

Total 10.3% 9.5%

(1) Gross of value adjustments and net of debt securities classified as L&R.(2) Main business segments in terms of overall credit exposure. The securities portfolio amounted to EUR 2,140.1 mln, up 5.9% as compared to 1 January 2018. As shown in the table below, debt securities (EUR 1,809.6 mln) make up 84.6% of the portfolio (alt-hough consisting mainly of government securities, this item also includes securities issued by securitisa-tion vehicles). Equities amounted to EUR 315.1 mln and include the 4.03% equity investment in the Bank of Italy, amounting to EUR 302.4 mln. Units in UCITS (Undertakings for Collective Investment in Trans-ferable Securities) totalled EUR 15.4 mln. Net of the stake in the Bank of Italy, Italian Government bonds account for 83.2% of the total with a fi-nancial duration of 3 years. As regards the breakdown under the international accounting standards (IAS/IFRS), securities at amor-tised cost totalled EUR 1,132 mln and accounted for 52.9% of the securities portfolio; financial assets at fair value through other comprehensive income amounted to EUR 939.7 mln (43.9% of the securities portfolio); financial assets mandatorily at fair value stood at EUR 68.2 mln, whereas securities Held For Trading (HFT) totalled EUR 172 thousand. SECURITIES PORTFOLIO (EUR/000)

Situation as at Change from 01/01/2018 Change from 31/12/2017

30/06/2018 01/01/2018 31/12/2017 Absolute % Absolute %

Debt securities 1,809,640 2,005,489 1,966,279 (195,849) (9.8) (156,639) (8.0)

Held for trading 172 1,490 1,490 (1,318) (88.5) (1,318) (88.5)

Mandatorily at fair value 51,440 50,172 1,268 2.5At fair value through other comprehensive income

626,057 1,060,245 (434,188) (41.0)

Available for sale 1,720,539

At amortised cost 1,131,971 893,582 244,250 238,389 26.7 887,721 …

Equity instruments 315,068 315,032 318,643 36 0.0 (3,575) (1.1)

Mandatorily at fair value 1,399 1,399 - -At fair value through other comprehensive income

313,669 313,633

Available for sale 318,643

Units in UCITS 15,369 13,716 13,716 1,653 12.1 1,653 12.1

Mandatorily at fair value 15,369 13,716 1,653 12.1

Available for sale 13,716

Total 2,140,077 2,334,237 2,298,638 (194,160) (8.3) (158,561) (6.9)

of which:

Held for trading 172 1,490 1,490 (1,318) (88.5) (1,318) (88.5)

Mandatorily at fair value 68,208 65,287 2,921 4.5At fair value through other comprehensive income 939,726 1,373,878

Available for sale 2,052,898

At amortised cost 1,131,971 893,582 244,250 238,389 26.7 887,721 …

The exposure to financial instruments that the market considers as ‘high-risk’ according to the definition in the Recommendation issued by the Financial Stability Forum on 7 April 2008, as later confirmed by joint document no. 2 issued by the Bank of Italy / CONSOB / ISVAP on 6 February 2009, amounted to EUR 4 thousand.

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The exposure relates to securities arising from leveraged finance transactions for a book value of EUR 4 thousand, all of which feature a protected/guaranteed structure, micro-hedged for specific risks or, in any case, redeemed at par at maturity. Equity investments totalled EUR 94 mln (EUR 98.6 mln in December 2017) and are in relation to ‘Auto-strada dei Fiori’, a company subject to significant influence, valued under the equity method, and com-panies carried at cost. The decrease is attributable to the reduction in Autostrada dei Fiori shareholders' equity following the distribution of dividends by the company. ANNUAL CHANGES IN EQUITY INVESTMENTS (EUR/000)

30/06/18 31/12/2017

A. Opening balance 98,569 94,235B. Increases (4,533) 4,408

B.1 Purchases - -B.2 Write-backs - -B.3 Revaluations - -B.4 Other increases (4,533) 4,408

C. Decreases 4 74

C1. Sales - -C2. Value adjustments 4 74

C3. Other decreases - -

D. Closing balance 94,032 98,569 Tax assets and liabilities respectively amounted to EUR 1,930.3 mln and EUR 36.7 mln. Deferred tax assets totalled EUR 1,180.5 mln. Lastly, the table of non-current assets and groups of assets held for sale and associated liabilities is given below. NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALE AND ASSOCIATED LIABILITIES(EUR/000) Situation as at Change

30/06/2018 31/12/2017 absolute %

B. Discontinued operations 617,855 608,077 9,778 1.6Financial assets at amortised cost 610,244 605,890 4,354 0.7Property and equipment 17 35 (18) (51.4)Intangible assets 1,054 1,098 (44) (4.0)

Other assets 6,540 1,054 5,486 …D. Liabilities associated with discontinued operations 111,596 193,808 (82,212) (42.4)Financial liabilities at amortised cost 102,565 188,636 (86,071) (45.6)Funds 687 464 223 48.1Other liabilities 8,344 4,708 3,636 77.2

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RELATED-PARTY TRANSACTIONS

As at 30 June 2018, asset and liability transactions between related parties (with the exception of direc-tors’ and statutory auditors’ fees, which are published annually in the Explanatory Notes to the Consoli-dated Financial Statements) were as follows: RELATIONS WITH SHAREHOLDERS AND OTHER INDIVIDUALS THAT MAY EXERCISE SIGNIFICANT INFLUENCE AND WITH INVESTEES (1)

(EUR/000)

Assets Liabilities Guarantees Income Expenses Dividends (2)

and commitments

3,081 14,562 1,638 31,092 3,296 -

Companies subject to significant influence - 18,247 51 - 36 8,762

TOTAL 3,081 32,809 1,689 31,092 3,332 8,762

(1) Relations with subsidiaries included in the scope of consolidation were not taken into account.

RELATIONS WITH OTHER RELATED PARTIES (EUR/000)

Assets Liabilities Guarantees Income Expenses Purchase of assetsand commitments and services

17,299 21,434 2,121 100 38 -

17,299 21,434 2,121 100 38 -

Carige shareholders and other individuals that may exercise significant influence

(2) Dividends collected by companies subject to significant influence netted off in the consolidation process are not shown.

It should be noted that the "Income" column includes EUR 31 mln deriving from the disposal of the bad loan management platform to Credito Fondiario S.p.A., which was resolved upon by the Board of Direc-tors on 4 December 2017, with the preliminary agreement being signed on 6 December 2017. Lastly, the final agreement was entered into on 10 May 2018, effective as of 14 May 2018, as already de-scribed in the section "Key events in the first half of 2018" of this Report, to which reference should be made. Overall, the share of the total of transactions with related parties is shown in the following table:

AMOUNT/% SHARE OF TRANSACTIONS WITH RELATED PARTIES AS AT 30/06/2018 (EUR/000)

Amount of transactions

with related parties

Amount offinancial statement

item

% share

AssetsItem 70 - Loans to customers 20,380 16,302,981 0.1%Other assets - 8,465,785 0.0%

LiabilitiesItem 20 - Due to customers 54,243 13,597,153 0.4%Other liabilities (1) - 8,919,849 0.0%

Income StatementItem 10 - Interest income 126 199,963 0.1%Item 20 - Interest expense (94) (90,714) 0.1%Other positive items in the income statement 31,066 217,380 14.3%Other negative items in the income statement (2) (3,276) (380,344) 0.9%

(1) The % share is calculated on 'other liabilities', except for those referring to the shareholders' equity.(2) The % share is calculated on 'other negative items', except for value adjustments on goodwill, taxes and profit (loss) attributable to non-controlling interests. Based on IAS 24 – Related-party disclosures – published in November 2009 (EC Regulation no. 632/2010 of 19 July 2010) include: - executives with strategic responsibility for the entity and its Parent Company; this refers to those who

have the power and responsibility, directly or indirectly, for the management and control of the Parent Company's activities, including Directors, Statutory Auditors, the CEO or General Manager, and level 1 Managers (identified as of 01/04/2015).

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- close relatives of one of the parties referred to under the item above; this refers to persons who are expected to influence, or be influenced by, the interested party in their relations with the Group and therefore, by way of example, may include the cohabitant partner and dependants of the interested party or cohabitant partner.

- parties controlled or jointly controlled by one of the parties referred to under the items above.

Described below are the most significant transactions with related parties and connected persons re-solved upon during the first quarter of 2018, which fall under the assumption of exemption from the de-cision-making process laid down in the Regulation for related parties and connected persons: - transactions related to the covered bond issuance programmes and securitisations via the special-

purpose vehicles Carige Covered Bond S.r.l., Carige Covered Bond 2 S.r.l., Lanterna Finance S.r.l. and Argo Mortgage 2 S.r.l.;

- granting EUR 80,000,000 worth of new credit lines and EUR 142,030,000 worth of renewals of ex-isting loans to Creditis Servizi Finanziari S.p.A.

TREASURY SHARES, STATEMENT OF CASH FLOWS AND SHAREHOLDERS’ EQUITY

As at 30 June 2018, the Bank held a total of 219,511 treasury shares in its portfolio, plus 44 old ordi-nary shares with a nominal value of Italian Lira 10,000 per share, equivalent to approximately 2 current ordinary shares. The latter shares derive from the conversion of share capital into Euros, resolved upon by the Extraordinary Shareholders’ Meeting of 6 December 2001 and subsequent stock split: as at today, 6 non-dematerialised ordinary shares have not been presented for conversion and, therefore, it has not been possible to fulfil the obligations set out in the aforementioned resolution, which requires a minimum threshold of 50 old shares. During the period no sales of treasury shares were carried out. As regards the Statement of cash flows, EUR 14.2 mln worth of liquidity was used by the Group in the six-month period of 2018. Liquidity used in operations amounted to a total of EUR 148.4 mln; in particular, a cash flow of EUR 25.6 mln was generated in operations, EUR 222.8 mln cash was used in financial as-sets, EUR 48.8 mln cash was generated by financial liabilities. Cash generated by investment activities amounted to EUR 133.7 mln, while that absorbed by funding activities totalled 460 thousand. After deduction of treasury shares totalling EUR 15.6 mln, equity amounted to EUR 1,992.1 mln as at 30 June 2018 and consisted of: share capital for an amount of EUR 2,845.9 mln, share premiums amount-ing to EUR 629.6 mln, negative reserves totalling EUR 1,333.6 mln, negative valuation reserves for an amount of EUR 113.6 mln (of which EUR 93.3 mln referring to the negative cash flow hedge reserve) and a loss for the period totalling EUR 20.5 mln. The Parent Company’s share of consolidated shareholders’ equity and consolidated net profit (loss) for the period are obtained from Banca Carige's shareholders’ equity and net profit (loss) for the period through the following changes:

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(EUR/000)Shareholders' equity of which net

profit (loss)

Balance as at 30/06/2018 - as per Parent Company's financial statements 1,905,925 (11,176)

Difference from carrying amount (4,638) 13,549

Value adjustments to allocated gains -

Impairment of goodwill recognised in the consolidated financial statements (51,931) -Cancellation, at consolidated level, of impairment of equity investments in subsidiaries 163,978 255

Dividends distributed by subsidiaries and written off (13,491) (13,491)

Dividends distributed by associated companies and written off (8,762) (8,762)

Reversal of AFS reserves of Insurance Group companies following disposal - -

Higher consolidated writedown on Insurance Group measured under IFRS 5 - -

Other 1,067 (878)

Consolidated balance as at 30/06/2018 1,992,148 (20,503)

RECONCILIATION BETWEEN PARENT COMPANY AND CONSOLIDATED EQUITYAND PROFIT (LOSS) FOR THE PERIOD

DISTRIBUTION CHANNELS AND HR MANAGEMENT

The Carige Group’s distribution system is organised into traditional and remote channels. As at 30 June 2018, the Carige Group branch network consisted of 503 traditional branches, down from 529 at the end of 2017. Giving effect to the process for the rationalisation of the branch network set forth in the 2017-2020 Business Plan, 21 branches of Banca Carige were closed, including the for-eign branch in Nice, and 5 branches of Banca Cesare Ponti which, with a customer base that is less de-pendent on the location of the branch and managed individually by the Private Bankers, remain opera-tional in the branches in Milan and Genoa. A further 11 Carige branches were also closed given that, in light of the often significant distances between the branches of destination and with a view to increasing customer retention, a "remoting" operation was deemed appropriate. Traditional channels are founded on a customer service specialisation model in which relationship man-agers are dedicated to the various customer segments. More specifically, the model envisages private banking, affluent and mass market advisors dedicated to the relationship with -and expansion of- the consumer customer base; corporate banking and small business advisors are instead dedicated to the various categories of business customers. The personal financial advisory service for higher-profile customers is based on a total of 88 private banking relationship managers and 502 affluent banking relationship managers. In addition to the personal financial advisory service comes the financial advisory service for businesses which relies on 180 corporate banking advisors, of whom 4 large corporate and 176 mid corporate, or-ganised into 59 teams and 329 small business advisors. Remote channels include the ‘Bancomat’ ATMs, Bancacontinua self-service branches and on line services (internet banking, mobile banking and the contact centre). A total of 620 Bancomat ATMs were operat-ing at the end of June 2018 (632 in December 2017), while the number of Bancacontinua cash ma-chines remained unchanged at 17. In order to reduce the work load of branches and speed up the over-the-counter transactions for current account holders, the Group has introduced 164 cash-in machines for cash or cheques in 162 branches. In the branches involved, 37% of payments which could be migrated were transferred to the automatic cash-in process, in the first six months of 2018. Noteworthy in the on-line segment is the platform for consumer customers to access the Group's services via web (Carige OnLine) and smartphone (Carige Mobile), which was gradually unified and implement-ed; the number of Internet Banking contracts for consumer customers increased to 385,470. On-line services are constantly spreading out: 50% of consumer customers have subscribed for the service and a growth by approximately 3% was observed in activations during the year. Access to the portal is moving towards mobile banking and transactions carried out via this channel have doubled in the last two years. As regards mobile banking, the number of downloads of the Carige Mobile App is exceeded 275 thou-sand.

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During 1H18, the contact centre managed more than 140 thousand phone calls (58 thousand inbound and 85 thousand outbound) and almost 28 thousand e-mails.

DISTRIBUTION NETWORK

A) TRADITIONAL CHANNELS30/06/2018 31/12/2017

number % number %

NORTH WEST 281 55.9 296 56.0

Liguria 188 37.4 197 37.2 - Genoa 103 20.5 109 20.6 - Savona 48 9.5 49 9.3 - Imperia 20 4.0 21 4.0 - La Spezia 17 3.4 18 3.4Lombardy 52 10.3 58 11.0Piedmont 40 8.0 40 7.6Aosta Valley 1 0.2 1 0.2NORTH EAST 52 10.3 54 10.2Veneto 37 7.4 39 7.4Emilia Romagna 15 3.0 15 2.8CENTRE 101 20.1 108 20.4Tuscany 67 13.3 69 13.0Lazio 29 5.8 32 6.0Marche 3 0.6 5 0.9Umbria 2 0.4 2 0.4SOUTH AND ISLANDS 69 13.7 70 13.2Sicily 49 9.7 50 9.5Sardinia 11 2.2 11 2.1Apulia 9 1.8 9 1.7

ABROAD: Nice (France) - - 1 0.2Total number of branches 503 100.0 529 100.0

30/06/2018 31/12/2017

Private banking consultants 88 94Corporate banking consultants 180 184Affluent segment consultants 502 505Small business consultants 329 324Total consultants 1,099 1,107

B) REMOTE CHANNELSBancomat ATMs 620 632

Self-service "Bancacontinua" branches 17 18Retail Internet Banking (1) 385,470 377,028(1) Number of contracts. In June 2018, the Group's headcount totalled 4,385 employees (4,642 in December 2017), of whom 4,381 on open-ended contract. Executives and middle managers accounted respectively for 1.2% (52 units) and 27.3% (1,196 units) of the aggregate, with the rest of personnel accounting for 71.5% (3,137 units). Front-end staff makes up 74.5% of total headcount (3,269 units). Women account for 48.5% of the Group’s total workforce; 53% of female personnel are based in Ligu-ria. The average age of Group employees is about 49 years, and the average length of service is 23 years. The breakdown of employees by level of education shows a share of graduates of nearly 37%. The first half of 2018 registered 270 employment relationship terminations (54 of which for attaining eli-gibility for retirement, including incentive-based retirement) and 13 new hires. Employment relationship

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terminations also include 186 employment relationships ended due to the disposal of a branch of busi-ness (53 in Debt collection and 133 in ICT).

BREAKDOWN OF PERSONNEL30/06/2018 31/12/2017

number % number %

Grade

Executives 52 1.2 59 1.3 Middle managers 1,196 27.3 1,222 26.3 Other employees 3,137 71.5 3,361 72.4

Total 4,385 100.0 4,642 100.0

Activity Head office 1,116 25.5 1,320 28.4

Market 3,269 74.5 3,322 71.6

RISK CONTROL

A. General The Parent Banca Carige, in compliance with the law and regulations and the provisions of the Corpo-rate Governance Code for listed companies, has adopted an Internal Control System (ICS) designed to detect, measure and continually verify the risks typical of the Bank's activities. From an operational per-spective, the ICS includes 3 levels of control: - Line controls (1st level) for the purpose of ensuring the correct performance of operations; these are

carried out by the operating units or built-in in the IT procedures; - Risk management controls (2nd level), aimed at defining the methods for measuring risk and verifying

compliance with the limits assigned to the various operating functions and monitoring the attainment of their respective risk-return objectives. These controls are assigned to units other than operating units, i.e.: the Manager in charge of preparing the company’s accounting documents, Risk Manage-ment, Rating Systems Validation, Compliance, Anti-Money Laundering;

- Internal auditing (3rd level) is performed by the Internal Control department (which is different and in-dependent from the operating units) and is aimed at assessing both the adequacy and effectiveness of first and second level controls and is designed to identify irregularities, breaches of procedures and regulations and evaluate the functional efficiency of the Internal Control System as a whole.

Risk-taking policies in the Carige Group are set by the RAF (Risk Appetite Framework), approved by the Parent Company's Board of Directors, which defines the risk-return target profile which the Group intends to adopt in line with its business model and Strategic Plan. The Parent Company performs steering and supervision functions in respect of all risks, primarily via an integrated risk management of Pillar 1 and Pillar 2 risks under the Bank of Italy's supervisory instructions (Circ. no. 285 of 17 December 2013 as later amended). The different risk categories are monitored by the 2nd level control functions and results are subject to pe-riodic reporting to the Board of Directors, Risk Committee, Risk Control Committee and Top Manage-ment. It should be recalled that in prior years a number of significant measures were taken to qualitatively and quantitatively strengthen the Internal Auditing, Risk Management and Compliance functions of the Parent Company and further activities are in progress to reinforce the supporting information system. Partly in light of the observations made at a Group level by the ECB within the SREP process and further to subse-quent inspections, progress was made throughout the year in improvement initiatives aimed at further strengthening risk management and control at Group level. Finally, the Group continued to implement

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the activities -currently in progress- aimed at strengthening anti-money laundering controls and the relat-ed IT architecture. In this regard no provisions for risks and charges were made as the requirements set out by IAS 37 do not apply.

*** - *** As at 30 June 2018, the Group had a phased-in Total Capital Ratio of 12%, a phased-in Tier 1 Ratio of 11.9% and a phased-in Common Equity Tier 1 Ratio of 11.9%, higher than the minimum regulatory lev-els. The CET1 Ratio is higher than both the regulatory limits and the 9.625% minimum threshold required by the ECB under the SREP process for 2018, and the Pillar 2 Guidance threshold of 11.175%. The TCR is higher than the 9.875% regulatory limit and lower than the 13.125% minimum threshold re-quired by the ECB under the SREP process for 2018. The fully-phased in TCR is 10.2%, the T1R is 10.1% and the CET1R is 10%.

(EUR/000)

30/06/2018 31/12/2017

Bis III with IFRS9 Bis III p.i.Common Equity Tier 1 capital before deductions 2,340,377 2,364,585Share capital 2,845,856 2,845,856Reserves from profit and other reserves (1,333,634) (684,858)Share premium reserve 629,577 628,363Profit (+) / Loss (-) for the period (20,503) (388,435)OCI reserves (1) (113,578) (140,634)IFRS9 Phase-in impact on CET1 332,659Bis III Phase-in impact on CET1 - 104,293

Deductions from common equity Tier 1 capital 562,838 462,429Goodwill - -Bis III deductions with 10% threshold - -Bis III deductions with 17.65% threshold - -Excess of deduction from AT1 items over AT1 capital - -Other negative elements and prudential filters 562,838 462,429

Common Equity Tier 1 capital (CET1) 1,777,539 1,902,156

Additional Tier 1 capital (AT1) 2,500 2,001

AT1 instruments (capital) 1 1AT1 instruments (share premium) 0 0Innovative capital instruments (Grandfathering) 2,498 2,000Phase in - impact on AT1 - -Excess of deduction from AT1 items over AT1 capital - -

Tier 1 (T1) (CET1+AT1) 1,780,038 1,904,157

Tier 2 (T2) 15,187 28,084

Own Funds (T1+T2) 1,795,226 1,932,240

BREAKDOWN OF CONSOLIDATED OWN FUNDS

(1) In accordance with the entry into force of the new IFRS9 financial reporting standard, the reserve for EU government bond atamortised cost is not included in the CET1.

Situation as at

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(EUR/000)

30/06/2018 31/12/2017

Bis III with IFRS9 Bis III p.i.Own FundsCommon Equity Tier 1 capital 1,777,539 1,902,156Additional Tier 1 capital 2,500 2,001Tier 1 capital 1,780,038 1,904,157Tier 2 capital 15,187 28,084

Own Funds 1,795,226 1,932,240

Risk-weighted assetsCredit risk 13,282,669 13,558,328Credit risk Bis III (1) 652,275 733,412Market risk 7,190 4,270Operational risk 1,033,660 1,033,660

Total risk-weighted assets 14,975,794 15,329,671

Capital requirementsCredit risk 1,062,613 1,084,666Credit risk Bis III 52,182 58,673Market risk 575 342Operational risk 82,693 82,693

Total 1,198,064 1,226,374

Ratios

Common Equity Tier 1 capital/Total risk-weighted assets 11.9% 12.4%

Tier 1 capital/Total risk-weighted assets 11.9% 12.4%Own Funds/Total risk-weighted assets 12.0% 12.6%

CONSOLIDATED OWN FUNDS AND SOLVENCY RATIOS

(1) Includes risk weights for DTAs and non-deductible material and non-material investments.

Situation as at

B. Risks The applicable prudential regulatory framework (Bank of Italy circular no. 285/2013) and guidance from the Regulator (EBA Consultation Paper, December 2015 – “Guidelines on ICAAP and ILAAP information collected for SREP purposes” and ECB's letter of January 2016 – “Supervisory expectations on ICAAP and ILAAP and harmonised information collection on ICAAP”) provide for banks to implement a regular pro-cess for identifying all material risks they are exposed to, in relation to their operations and reference markets. Once a year, the Group identifies a risk map via an internal assessment and defines whether an exposure to the individual exposure types identified is material or not. Credit and counter-party risk The Group has long adopted internal rating systems for the selection and classification of borrowers into the main customer segments (Corporate and Retail). These rating systems also play an important opera-tional role in loan granting, risk management and Group governance. In particular, the system of delegated powers for the approval of loan applications, which is structured according to customer risk profile, is based on expected loss. As part of the ICAAP submitted to the European Central Bank on 27 April, credit risk was assessed by us-ing an own portfolio model. Country risk and transfer risk profiles are but marginal and therefore not significant for the Group; in any case, the assessment of any potential risk profiles falls within the wider scope of credit risk.

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Market risk Market risk is measured on the securities and derivatives portfolio by daily calculating the Value at Risk (VaR) via a historical simulation approach, with a 99% confidence interval and a ten-day holding period. The exchange rate risk and Gamma and Vega risk on options are calculated using the Bank of Italy's standardised approach. Base risk is not significant. Operational, IT and model risk In order to increase its control on these risks, the Banca Carige Group implemented a framework for measuring, managing and monitoring operational risks in line with the best practices in the banking sys-tem, which was adopted in the same year by the Parent Company’s Board of Directors; the framework was put in operation between the end of 2015 and the beginning of 2016. During 2017 and the first six months of 2018, the fine-tuning of both processes and measurement mod-els continued. As regards the process of collection of operating losses –Historical data collection (HDC)– some adjustments were made with a view to gradually migrating from the previously in use method of centralised data collection to a decentralised collection as laid down in the ORM framework with an ev-er-increasing involvement of all organisational units and, in particular, of the function-holders playing specific roles within the ORM framework (e.g. ORM coordinator, Risk Owners). Concerning the Risk Self-Assessment (RSA) process, used to investigate the future level of risk perceived by the various Risk Owners identified in the project activities, it is noted that the second RSA campaign on operational and IT risks is at an advanced stage and that the results shall be submitted to the Board of Directors and used in the ICAAP 2018 Report. As regards the measurement and quantification of operational risk, the Standardised Approach was adopted for regulatory purposes (title 3 of Regulation EU 575/2013), whereas an ad-hoc Operational Risk VaR model was developed to measure internal capital based on the time-series of operational losses registered at Group level. In addition, the 2018 ICAAP Report also introduced innovations regarding the Pillar II capital estimates against IT and model risk. More specifically, for both risks, the information used in the Risk Self Assessment process was quantified based on specific quantification models. Reputational risk The Carige Group has undertaken a process aimed at developing, within its Risk Management process-es, a systematic framework for the ongoing measurement, management and monitoring of reputational risk, by setting up processes, methodologies and tools that are consistent with the Group’s size, the bank-ing system practices and the relevant regulatory guidelines. More specifically, 2018 ICAAP introduced new metrics for the quantification and monitoring of reputational risk: 1) RRI indicator for the ongoing monitoring of the level and trend of corporate reputation, based on information available on the stock market; 2) Reputational risk Var model for quantifying Pillar II capital, including on the basis of infor-mation available on the stock market; and 3) quarterly collection of Key Risk Indicators impacted by cor-porate reputation, for which a qualitative analysis is provided based on their performance and for the various reference stakeholders. Sovereign risk (securities in the banking book) Exposure to sovereign risk for the positions included in the “Hold to collect and sell” (HTC&S) portfolio is measured including for stress testing purposes on the basis of the methodology applied under the 2018 EBA stress testing process. The choice of the scope of analysis is reflective of the accounting criteria (posi-tions at fair value through OCI) and the scope provided for by the EBA stress testing process. Stress fac-tors and the severity of the stress applied are consistent with those defined for the ICAAP stress scenario. The methodology defined by the EBA for the stress exercise provides for the revaluation of the positions on the basis of a specific macro-economic stress scenario (the Macro Economic Adverse Scenario). Risk of excessive financial leverage This risk is monitored by calculating the leverage indicator set out in Bank of Italy circular no. 285/2013 as well as through an accounting-based operational management indicator, which compares sharehold-ers' equity with total assets.

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Rate risk The rate risk analysis is conducted via Gap analysis, Duration analysis and Sensitivity analysis techniques using behavioural models in relation to demand items and prepayments. In addition, at a consolidated level, the Parent Company periodically monitors its exposure to rate risk applying the supervisory stand-ardised approach. Concentration risk As part of the ICAAP submitted to the European Central Bank on 27 April 2018, both single name and geo-sectoral concentration risk was assessed by using the own portfolio model, which was introduced to measure credit risk. Real estate risk The Carige Group's real-estate risk consists in potential losses due to the negative fluctuation of the Group companies' real-estate portfolio value; customer-owned mortgaged properties are excluded. The assessment of real-estate risk and the consequent absorption of internal capital makes reference to the methodology used for the ECB's Comprehensive Assessment and is diversified depending on whether the property is or is not ‘for own use’. Business risk Business risk is a component of strategic risk and is to be intended as the risk of adverse or unexpected changes in profits/margins compared to forecasts, related to volatility in turnover due to competitive pressure or market situations. The method for calculating internal capital for business risk is based on the analysis of the volatility of the Group’s net fees and commissions. The rates of change in the income from commissions are calculated and assuming that these values are homogeneously distributed the rate of change of the net commissions is calculated, which corresponds to a 99.7% confidence interval - associated with the target rating that is in line with the Group’s profile and the 12-month time horizon. Liquidity risk Liquidity risk management provides for multiple analyses to be conducted in order to assess the financial equilibrium of both treasury items and structural liquidity. Short-term liquidity risk is measured and monitored on a daily basis through the preparation of a maturity ladder. With the aim of maintaining a prudential trend in treasury cash flows, the Carige Group has adopted a series of operating limits and alert thresholds for the cumulated net funding gap. Daily moni-toring is also envisaged for total cumulative gap, which is inclusive of liquidity reserves, not to fall below the expected limits and alert levels, so that the level of the liquidity buffer is adequate to cover the esti-mated liquidity needs. The total cumulative gap is submitted to a stress analysis. Stress testing is based on a methodological framework that combines the application of systemic and Group-specific stress factors. The Liquidity Coverage Ratio (LCR), which measures the stock of high-liquidity assets over the net cash outflows is also monitored in a 30-day stress scenario. Measurement and monitoring of structural liquidity are conducted through a structural maturity ladder, which includes demand items covering a period of up to 20 years and beyond and includes certain or modelled capital flows generated by all the balance sheet items. In this regard the Risk Management de-partment has defined indicators for structural liquidity in terms of a gap ratio on maturity dates beyond one year and the relative monitoring limits. Operational limits and warning thresholds are also defined for the NSFR indicator. Along with the management methods described above, which provide for risk mitigation through the cre-ation of adequate reserves to offset potential outflows, a method for quantifying liquidity risk is also en-visaged, with an impact on the Group’s equity as part of the capital allocation process for risks that are difficult to quantify. Metrics consist of quantifying the additional costs that the Group could incur to replenish the minimum amount of readily liquidable reserves should a stress scenario occur.

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Strategic, securitisation and residual risk Strategic risk is monitored using scorecards which permit a quantitative analysis of the strategic planning process and the degree of completion of the initiatives in the strategic plan. Moreover, strategic risk in-cludes business risk, which is monitored by quantifying adverse and unexpected changes in net fee and commission income with respect to expected figures. Securitisation risk is measured qualitatively, by mon-itoring cash flows expected from the securitisation transaction, the entities involved in the transaction and legal aspects. Finally, the residual risk is quantified as the difference between the total potential write-downs recorded following second-level controls and the value actually adjusted following reclassifica-tions. Equity investment risk The risk of potential losses in value arising from non-speculative financial investments in companies not included in the scope of consolidation is considered as non-material for the Group; nevertheless, equity investments are assessed based on the applicable accounting standards. Prudential limits on the acquisi-tion of investments and specific limits on investments in non-financial companies are monitored over time. Defined-benefit pension risk Partly in light of the measures taken by the Group in 2017 in relation to Pension Funds pertaining to the Carige Group, the risk is deemed as non-material. Money laundering and terrorist financing risk A risk that identifies the criminal acts involving money laundering, namely the conversion and transfer of property from a criminal activity or their purchase, detention and use, as well as the concealment or dis-guise of the true nature of the illicit origin of the property. The risk is monitored by a self-assessment method focusing on the identification of real and potential risks to which an intermediary is or might be exposed, as well as by an adequacy analysis of both the organisational structure and corporate control units to ensure vulnerabilities are identified. The overall residual risk to which the intermediary is exposed was later determined to be low as a result of the initiatives undertaken and implemented to strengthen internal governance and processes. C. Risks related to ongoing proceedings Further to the investigations initiated by the Genoa Public Prosecutor’s Office, criminal proceedings no. 10688/2013 of the General Register of Crimes were instituted, in which the Bank's former Chairman Giovanni Berneschi is indicted for the offences set out in articles 2622, paragraphs 3 and 4 (false corpo-rate communications to the detriment of the company, shareholders or creditors) and 2637 (market ma-nipulation) of the Italian Civil Code, as well as embezzlement under art. 646 of the Italian Criminal Code. To the Bank’s knowledge, the facts involved in the charge were partly inferred from the findings identified by the Bank of Italy and Consob as a result of their inspections. As part of the above, with regard to the offences that constitute a precondition for the entity's liability pur-suant to Legislative Decree no. 231, being such offences attributed to a person in a senior position, the Bank was recorded in the roll of suspects due to the administrative offence resulting from a crime under article 25-ter of Legislative Decree no. 231 for false corporate communications to the detriment of the company, shareholders or creditors (art. 2622 of the Italian Civil Code) and for market manipulation (art. 2637 of the Italian Civil Code). The investigations focused, among other aspects, on the regularity of loan granting and the overall management of relations with borrowers, as well as on the compliance of the internal organisational models for loan granting and management and the preparation of financial statements with the banking industry's legislation. It should be noted that, regardless of any evaluation of the legitimacy of the charge levelled against the Bank, the risks resulting from the most severe sanction-ing treatment theoretically applicable to the Bank for the unlawful acts contested are estimated not to ex-ceed EUR 2 mln. After the foregoing proceedings no. 10688/2013 of the General Register of Crimes were transferred to

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the Public Prosecutor's office of Rome for reasons of territorial jurisdiction, proceedings no. 61126/2015 of the General Register of Crimes were initiated at the Public Prosecutor's office in Rome, levelling charg-es of obstruction of public regulators (pursuant to article 2638 of the Italian Civil Code) and market ma-nipulation (pursuant to article 2637 of the Italian Civil Code). The above-mentioned charges were lev-elled against some members of the Board of Directors in office at the time of the facts for both cases, whereas the criminal offence of obstruction of public regulators was also levelled against the then Gen-eral Manager and other bank executives. Banca Carige is being investigated under Legislative Decree no. 231/2001 in relation to the Company’s direct liability for administrative offences committed in its in-terest of for its benefit pursuant to article 25-ter lett. s) of Legislative Decree no. 231/2001 and article 25-ter lett. r) of Legislative Decree no. 231/2001. The first preliminary hearing was held on 4 May 2018, in which the Bank entered an appearance before the court and filed a document seeking to bring a civil action only against the natural persons, the Bank of Italy (for art. 2638 of the Italian Civil Code, i.e. obstruction of supervisory control), Consob (for art. 2638 of the Italian Civil Code) and the Codacons (for both charges, i.e. obstruction of supervisory con-trol and market manipulation pursuant to art. 2637 of the Italian Civil Code); in this respect, it should be noted that, at the subsequent hearing held on 13 July 2018, the Preliminary Hearing Judge ruled in fa-vour of the civil actions against Consob and the Bank of Italy solely with reference to the charge referred to in art. 2638 of the Italian Civil Code, against the shareholders solely with reference to the charge re-ferred to in art. 2637, and the Codacons with reference to both charges; the Preliminary Hearing Judge declared that the remaining part of claimed civil action was inadmissible (and therefore also with refer-ence to the charges against Banca Carige as indicted entity pursuant to Legislative Decree 231/01). The preliminary hearing was therefore postponed to other 3 dates reserved for discussions of all the parties; the hearing reserved for Banca Carige will be held on 26 October 2018. Further criminal proceedings are pending before the Court of Genoa (no. 17008/2014 of the General Register of Criminal Offences Genoa Public Prosecutor’s Office - no. 4281/2015 of the General Regis-ter of Criminal Offences of the the Court of Genoa) with charges for criminal offences including criminal association, fraud, money laundering and others, connected with the management of the Group’s former Insurance companies, levelled against Mr Berneschi and other individuals. The Bank is the civil claimant in the foregoing proceedings. At the end of the trial phase, on 22 February 2016 the Court of Genoa delivered a judgement of first in-stance against, among others, Mr. Giovanni Berneschi, sentencing him to eight years and two months in prison, in addition to the confiscation of assets for an amount of EUR 26.8 mln and payment of damages to the Bank, to be determined in civil proceedings. The conviction in criminal proceedings also led to a third party liability against the defendants that were held responsible for the crime of depletion of the injured parties (the Bank and the insurance companies). The Court of Genoa referred the assessment of the caused damage to the competent civil court in light of the complexity of the transactions carried out. The Court's sentence highlighted Berneschi's hegemonic role in the management of the Bank's loan posi-tions, which enabled the former Chairman to acquire unlawful profits. All of the defendants challenged the decision of 22 February 2017 and a proceedings was therefore brought before the Court of Appeals of Genoa; the proceedings ended on 6 July 2018, when the Court of Appeals of Genoa delivered the judgement against the defendants Berneschi, Calloni, Menconi, Cav-allini, Averna, Giorgi di Vistarino, Priori and Vallebuona: the prison sentences against the defendants (with the exception of the Averna, Giorgi di Vistarino and Priori positions) were increased, most likely by virtue of the aggravating factor of transnationality referred to in art. 4 of Legislative Decree 146/2006 (the aggravating factor was instead excluded by the court at first instance). In particular, the sentence against Giovanni Berneschi was increased to 8 years and 7 months of impris-onment. The amount of the confiscation ordered against Berneschi was also redetermined at EUR 21,461,657 (EUR 23,562,657 for Menconi and EUR 11,716,657 for Cavallini). With reference to the position of the Bank, a civil claimant in the foregoing proceeding, the decision of the first instance was confirmed, which had ordered the defendants to pay damages, referring the settle-ment to the civil court; the defendants were also ordered to reimburse the costs of the appeal proceed-ings.

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Further to a jurisdictional plea raised by the defence of one of the defendants in the foregoing proceed-ings, the indictment position of the afore-mentioned defendant was ordered to be tried separately and transferred to the Court of Milan as part of new criminal proceedings, now in the trial phase; the Bank is likewise the civil claimant in the latter proceedings (no. 27020/2015 of the general register of criminal offences of the Milan Public Prosecutor's Office - no. 7015/16 Court of Milan). Lastly, additional criminal proceedings (no. 7577/2015 of the general register of criminal offences Gen-oa Public Prosecutor’s Office) are being conducted in relation to the criminal offences of obstruction of public regulators, money-laundering and concurrence in income tax evasion for which the Bank's former Chairman Giovanni Berneschi is indicted, together with three seconded employees with management du-ties at the Centro Fiduciario C.F. S.p.A., and the Centro Fiduciario itself, pursuant to articles 25-ter and 25-octies of Legislative Decree no. 231. At the hearing of 7 December 2016, the Preliminary Hearing Judge delivered a 'no case to answer' judgement for Mr. Giovanni Berneschi and the three foregoing employees of Centro Fiduciario on some charges, and adjourned the hearing for Mr Berneschi and other indictees for the offences of money laundering, omitted tax return, fraudulent conveyance of assets and abetting. At the end of the preliminary hearing, Centro Fiduciario defined its position by filing a petition for plea bargain which led to the payment of a EUR 400 thousand administrative sanction.

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SEGMENT REPORTING In accordance with the "management approach" defined by IFRS 8, the Carige Group has identified i as its main operating segments the customer segments selected according to the customer segmentation approach used by the Group. In line with the introduction above and in connection with the Group’s distribution and management model, the main business units identified are:

• the Retail segment, reflecting information on customers who have been segmented as retail con-sumers and who are classified as Mass Market, Affluent or Private banking customers; this seg-ment includes data and figures from Centro Fiduciario;

• the Corporate segment, which includes customers segmented as legal persons and belonging to the Large Corporate, Corporate, Public Institutions and Small Business categories.

• the Corporate Centre, including both the ancillary activities of the Group's vehicle companies and banking activities items not related to corporate customers;

• cancellations, i.e. the intragroup relations treated as intragroup ancillary cancellations or as rev-enues/costs from external customers.

Creditis results are not shown under P&L and balance sheet items in segment reporting due to the fact that the Company’s accounts were classified as “Assets held for sale” following the application of IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”.

In 1H18, the customer segments reported the following operating results:

- The Consumer segment’s Net interest and other banking income totalled EUR 113.7 mln (51.9% of the Group's total), net income from banking and insurance amounted to EUR 106.9 mln and oper-ating expenses came to EUR 180.1 mln (66.7% of the Group's total). These values are reflected in a loss from continuing operations of EUR 73.2 mln. With regard to volumes, loans to customers stood at EUR 5,208 mln (31.9% of the Group's total), amounts due to customers totalled EUR 10,457 mln (76.9% of the Group's total); debt securities in is-sue and financial liabilities designated at fair value through profit and loss amounted to EUR 800 mln; indirect funding amounted to EUR 14,977 mln. Overall funding totalled EUR 26,234 mln and ac-counts for 67.5% of the Group total. - The Corporate segment’s Net interest and other banking income totalled EUR 119.8 mln (54.6% of the Group’s total), income from banking and insurance activities amounted to EUR 85.5 mln and operating expenses came to EUR 63 mln (23.3% of the Group’s total): these figures are expressive of a loss from continuing operations of EUR 22.6 mln. From a funding/lending volumes standpoint, loans to customers amounted to EUR 10,076 mln (61.8% of the Group's total), amounts due to customers totalled EUR 3,089 mln (22.7% of the Group's total), debt securities issued amounted to EUR 27 mln and indirect funding amounted to EUR 6,821 mln which is mostly due to the relationship with companies Amissima Vita and Amissima As-sicurazioni. Overall funding totalled EUR 9,937 mln and accounts for 25.6% of the Group’s total. The Corporate Centre reported a EUR 22.6 mln operating profit in 1H18, whereas funding/lending volumes were affected by the reduction in institutional bonds (debt securities in issue).

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Customer segments (EUR/000)

Consumer CorporateCorporate

CentreCancellations

Total consolidated

comprehensive income

-5.6% -12.3% -39.4% 36.8% -16.2%

Net interest and other banking income

-6,734 -16,812 -10,726 -8,266 -42,537

6 months 2018 113,677 119,757 16,514 -30,713 219,235

6 months 2017 (1) 120,411 136,568 27,240 -22,447 261,7720.3% -227.7% 210.9% 57.1% 452.9%

Net income from banking activities(2) 269 152,517 34,002 -9,518 177,268

6 months 2018 106,943 85,547 50,120 -26,198 216,412

6 months 2017 (1) 106,674 -66,969 16,119 -16,680 39,144-9.3% 6.0% 19.7% 13.6% -3.7%

Operating expenses 18,371 -3,554 -4,520 50 10,347

6 months 2018 -180,111 -62,953 -27,483 420 -270,127

6 months 2017 (1) -198,481 -59,399 -22,963 369 -280,474-20.3% -117.9% -430.8% 58.0% -77.7%

Profit (loss) from continuing operations

18,639 148,962 29,481 -9,468 187,615

6 months 2018 -73,168 22,594 22,637 -25,778 -53,715

6 months 2017 (1) -91,807 -126,368 -6,844 -16,311 -241,330

-0.3% -0.1% 46.0% 2.2% 3.5%

Loans to customers -17,523 -5,187 589,874 -18,118 549,047

30/06/2018 5,208,333 10,076,245 1,873,556 -855,153 16,302,981

31/12/2017 5,225,855 10,081,432 1,283,682 -837,035 15,753,9342.4% 29.8% 158.5% 191.6% 7.7%

Due to customers 245,956 709,887 240,376 -223,605 972,612

30/06/2018 10,456,543 3,088,837 392,054 -340,281 13,597,153

31/12/2017 10,210,587 2,378,950 151,679 -116,675 12,624,541-37.2% -32.4% -16.5% 590.2% -18.2%

Securities issued and financial liabilities

designated at fair value through profit or loss

-474,039 -12,982 -475,609 193,404 -769,226

30/06/2018 800,421 27,138 2,411,328 226,175 3,465,062

31/12/2017 1,274,460 40,120 2,886,937 32,771 4,234,288-0.6% 9.6% #DIV/0! #DIV/0! 2.4%

Other financial assets -90,114 595,768 0 0 505,654

30/06/2018 14,976,835 6,820,958 0 0 21,797,793

31/12/2017 15,066,949 6,225,190 0 0 21,292,139-1.2% 15.0% -7.7% 36.0% 1.9%

Overall funding -318,196 1,292,673 -235,234 -30,202 709,040

30/06/2018 26,233,799 9,936,933 2,803,382 -114,106 38,860,008

31/12/2017 26,551,996 8,644,260 3,038,616 -83,904 38,150,968

(2) Including gains (losses) on equity investments, disposal of investments and impairment of goodwill.

(1) As shown in the paragraph "Accounting policies" of the Explanatory Notes, balances as at 30/06/2017 reflect, with respect to thosepublished, changes resulting from the application of IFRS 5 "Non-current assets held for sale and discontinued operations".

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Customer segments (% of total)

Consumer CorporateCorporate

CentreCancellations

Total consolidatedcomprehensive

income

Net interest and other banking income

6 months 2018 51.9 54.6 7.5 -14.0 100.0

6 months 2017 (1) 46.0 52.2 10.4 -8.6 100.0

Net income from banking activities(2)

6 months 2018 49.4 39.5 23.2 -12.1 100.0

6 months 2017 (1) 272.5 -171.1 41.2 -42.6 100.0

Operating expenses

6 months 2018 66.7 23.3 10.2 -0.2 100.0

6 months 2017 (1) 70.8 21.2 8.1 -0.1 100.0

Profit (loss) from continuing operations

6 months 2018 136.2 -42.1 -42.1 48.0 100.0

6 months 2017 (1) 38.0 52.4 2.8 6.8 100.0

Loans to customers

30/06/2018 31.9 61.8 11.5 -5.2 100.0

31/12/2017 33.2 64.0 8.1 -5.3 100.0

Due to customers

30/06/2018 76.9 22.7 2.9 -2.5 100.0

31/12/2017 80.9 18.8 1.2 -0.9 100.0

Securities issued and financial liabilities

designated at fair value through profit or loss

30/06/2018 23.1 0.8 69.6 6.5 100.0

31/12/2017 30.1 0.9 68.2 0.8 100.0

Other financial assets

30/06/2018 68.7 31.3 0.0 0.0 100.0

31/12/2017 70.8 29.2 0.0 0.0 100.0

Overall funding

30/06/2018 67.5 25.6 7.2 -0.3 100.0

31/12/2017 69.6 22.7 7.9 -0.2 100.0

(2) Including gains (losses) on equity investments, disposal of investments and impairment of goodwill.

(1) As shown in the paragraph "Accounting policies" of the Explanatory Notes, balances as at 30/06/2017 reflect, with respect to thosepublished, changes resulting from the application of IFRS 5 "Non-current assets held for sale and discontinued operations".

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ANNEXES

99

IAS/IFRS DESCRIPTION ENDORSING EC REGULATION(Date of publication in the Official Journal of the European Community)

Framework (1) Framework

IAS 1 Presentation of Financial Statements

Reg. 1274/2008 (18/12/2008); Reg. 53 (22/01/2009), Reg. 70 (24/01/2009), Reg. 494 (12/06/2009), Reg. 243/2010 (24/03/2010); Reg. 149/2011 (19/02/2011); Reg. 475/2012 (06/06/2012); Reg. 301/2013 (28/03/2013); Reg. 1255/2012 (29/12/2012); Reg. 2113/2015 (24/11/2015); Reg. 2406/2015 (19/12/2015); Reg. 2067/2016 (29/11/2016), Reg. 2016/1905 (22/09/2016)

IAS 2 Inventories Reg. 1126/2008 (29/11/2008), Reg. 70 (24/01/2009); Reg. 1255/2012 (29/12/2012); Reg. 2067/2016 (29/11/2016), Reg. 2016/1905 (22/09/2016)

IAS 7 Statement of Cash Flows

Reg. 1126/2008 (29/11/2008), Reg. 1260 (17/12/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009); Reg. 494/2009 (12/06/2009); Reg. 243/2010 (24/03/2010); (EU) Reg. 1174/2013 (20/11/2013); (EU) Reg. 1990/2017 (6/11/2017)

IAS 8 Accounting Policies, Changes in Estimates and ErrorsReg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009); Reg. 1255/2012 (29/12/2012); Reg. 2067/2016 (29/11/2016)

IAS 10 Events after the Reporting Period

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (23/01/2009), Reg. 1142 (27/11/2009); Reg. 1255/2012 (29/12/2012); Reg. 2067/2016 (29/11/2016)

IAS 12 Income tax

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 495 (12/06/2009); Reg. 1255/2012 (29/12/2012); (EU) Reg. (UE) 1174/2013 (20/11/2013); Reg. 2067/2016 (29/11/2016), Reg. 2016/1905 (22/09/2016); (EU) Reg. 1989/2017 (6/11/2017)

IAS 16 Property, Plant and equipment

Reg. 1126/2008 (29/11/2008), Reg. 1260 (17/12/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009);Reg. 495 (12/06/2009); Reg. 1255/2012 (29/12/2012); Reg. 301/2013 (28/03/2013); Reg. 28/2015 (9/01/2015); Reg. 2113/2015 (24/11/2015); Reg. 2231/2015 (03/12/2015), Reg. 2016/1905 (22/09/2016)

IAS 19 Employee Benefits

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009); Reg. 475/2012 (06/06/2012); Reg. 1255/2012 (29/12/2012); Reg. 29/2015 (09/01/2015); Reg. 2343/2015 (16/12/2015); Reg. 2018/182 (07/02/2018)

IAS 20Accounting for Government Grants and Disclosure of Government Assistance

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009); Reg. 1255/2012 (29/12/2012); Reg. 2067/2016 (29/11/2016)

IAS 21 The Effects of Changes in Foreign Exchange Rates

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 69 (24/01/2009), Reg. 494 (12/06/2009); Reg. 149/2011 (19/02/2011); Reg. 1255/2012 (29/12/2012); Reg. 2067/2016 (29/11/2016); Reg. 2067/2016 (29/11/2016)

IAS 23 Financial chargesReg. 1260 (17/12/2008), Reg. 70/2009 (24/01/2009); Reg. 2113/2015 (24/11/2015); Reg. 2067/2016 (29/11/2016)

IAS 24 Related Party DisclosuresReg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 632/2010 (20/07/2010); (EU) Reg. 1174/2013 (20/11/2013); Reg. 28/2015 (09/01/2015)

IAS 26 Accounting and Reporting by Retirement Benefit Plans Reg. 1126/2008 (29/11/2008)

IAS 27 Separate Financial Statements

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 69/2009 (24/01/2009), Reg. 70/2009 (24/01/2009), Reg. 494/2009 (12/06/2009); Reg. 1254/2012 (29/12/2012); Reg. 1174/2013 (21/11/2013); Reg. 2441/2015 (18/12/2015)

IAS 28 Investments in Associates and Joint Ventures

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009), Reg. 494 (12/06/2009), Reg. 495 (12/06/2009); Reg. 149/2011 (19/02/2011); Reg. 1254/2012 (29/12/2012); Reg. 1255/2012 (29/12/2012); Reg. 2441/2015 (18/12/2015); Reg. 1703/2016 (22/09/2016); Reg. 2067/2016 (29/11/2016); Reg. 2067/2016 (29/11/2016); Reg. 2018/182 (07/02/2018)

IAS 29 Financial Reporting in Hyperinflationary EconomiesReg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009)

IAS 32 Financial instruments: presentation

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 53/2009 (22/01/2009), Reg. 70/2009 (24/01/2009), Reg. 494 (12/06/2009), Reg. 495 (12/06/2009), Reg. 1293/2009 (24/12/2009); Reg. 149/2011 (19/02/2011); Reg. 1255/2012 (29/12/2012); Reg. 1256/2012 (29/12/2012); Reg. 301/2013

IAS 33 Earnings per Share

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 494 (12/06/2009), Reg. 495 (12/06/2009); Reg. 1255/2012 (29/12/2012); Reg. 2067/2016 (29/11/2016)

IAS 34 Interim Financial Reporting

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009), Reg. 495 (12/06/2009); Reg. 149/2011 (19/02/2011); Reg. 1255/2012 (29/12/2012); Reg. 301/2013 (28/03/2013); (EU) Reg. 1174/2013 (20/11/2013); Reg. 2343/2015 (16/12/2015); (EU) Reg. 2406/2015 (19/12/2015), Reg. 2016/1905 (22/09/2016)

IAS 36 Impairment of Assets

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 69/2009 (24/01/2009), Reg. 70/2009 (24/01/2009), Reg. 495 (12/06/2009), Reg. 243/2010 (24/03/2010); Reg. 1255/2012 (29/12/2012); Reg. 1374/2013 (20.12.2013); Reg. 2113/2015 (24/11/2015); Reg. 2067/2016 (29/11/2016), Reg. 2016/1905 (22/09/2016)

List of IAS/IFRS standards endorsed by the European Commission as at 30.06.2018

100

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 495 (12/06/2009); Reg. 28/2015 (09/01/2015); Reg. 2067/2016 (29/11/2016), Reg. 2016/1905 (22/09/2016)

IAS 38 Intangible assets

Reg. 1126/2008 (29/11/2008), Reg. 1260 (17/12/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009), Reg. 495 (12/06/2009), Reg. 243/2010 (24/03/2010); Reg. 1255/2012 (29/12/2012); Reg. 28/2015 (09/01/2015); Reg. 2231/2015 (03/12/2015), Reg. 2016/1905 (22/09/2016)

IAS 39 Financial Instruments: recognition and measurement

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 53 (22/01/2009), Reg. 70 (24/01/2009); Reg. 494 (12/06/2009), Reg. 495 (12/06/2009), Reg. 824/2009 (10/09/2009); Reg. 839/2009 (16/09/2009); Reg. 1171/2009 (01/12/2009); Reg. 243/2010 (24/03/2010); Reg. 149/2011 (19/02/2011); Reg. 1255/2012 (29/12/2012); (EU) Reg. 1174/2013 (20/11/2013); Reg. 1375/2013 (20/12/2014); Reg. 28/2015 (09/01/2015); Reg. 2343/2015 (16/12/2015); Reg. 2067/2016 (29/11/2016), Reg. 2016/1905 (22/09/2016)

IAS 40 Investment Property

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009); Reg. 1255/2012 (29/12/2012); Reg. 1361/2014 (18/12/2014); Reg. 2113/2015 (23/11/2015), Reg. 2016/1905 (22/09/2016); Reg. 2018/400 (14/03/2018)

IAS 41 AgricultureReg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009); Reg. 1255/2012 (29/12/2012); Reg. 2113/2015 (24/11/2015)

IFRS 1 First-time Adoption of International Financial Reporting Standards

Reg. 1126/2008 (29/11/2008), Reg. 1260 (17/12/2008), Reg. 1274 (18/12/2008), Reg. 69 (24/01/2009), Reg. 70 (24/01/2009), Reg. 254 (26/03/2009), Reg. 494 (12/06/2009), Reg. 495 (12/06/2009), Reg. 1136 (26/11/2009), Reg. 1164 (01/12/2009), Reg. 550/2010 (24/06/2010), Reg.

IFRS 2 Share-based Payment

Reg. 1126/2008 (29/11/2008), Reg. 1261 (17/12/2008), Reg. 495 (12/06/2009), Reg. 243/2010 (24/03/2010); Reg. 244/2010 (24/03/2010); Reg. 1255/2012 (29/12/2012); Reg. 28/2015 (09/01/2015); Reg. 2067/2016 (29/11/2016); Reg.289/2018 (26/02/2018)

IFRS 3 Business Combinations

Reg. 1126/2008 (29/11/2008), Reg. 495/2009 (12/06/2009);Reg. 149/2011 (19/02/2011); Reg. 1255/2012 (29/12/2012); (EU) Reg. 1174/2013 (20/11/2013); Reg. 1361/2014 (18/12/2014); Reg. 28/2015 (09/01/2015); Reg. 2067/2016 (29/11/2016), Reg. 2016/1905 (22/09/2016)

IFRS 4 Insurance Contracts

Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. 494/2009 (12/06/2009), Reg. 1165/2009 (01/12/2009); Reg. 1255/2012 (29/12/2012); Reg. 2406/2015 (19/12/2015); Reg. 2067/2016 (29/11/2016), Reg. 2016/1905 (22/09/2016); Reg. 2017/1988 (03/11/2017)

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. 70/2009 (24/01/2009); Reg. 494/2009 (12/06/2009), Reg. 1142/2009 (27/11/2009), Reg. 243/2010 (24/03/2010); Reg. 1255/2012 (29/12/2012); Reg. 2343/2015 (16/12/2015); Reg. 2067/2016 (29/11/2016)

IFRS 6 Exploration for and Evaluation of Mineral Resources Reg. 1126/2008 (29/11/2008); Reg. 1255/2012 (29/12/2012);

IFRS 7 Financial instruments: disclosures

Reg. 1126/2008 (29/11/2008),Reg. 1274/2008 (18/12/2008), Reg. 53/2009 (22/01/2009), Reg. 70/2009 (24/01/2009), Reg. 495/2009 (12/06/2009), Reg. 824/2009 (10/09/2009); Reg. 1165/2009 (01/12/2009), Reg. 574/2010 (01/07/2010); Reg. 149/2011 (19/02/2011); Reg. 1205/2011 (22/11/2011) ; Reg. 1256/2012 (29/12/2012); (EU) Reg. 1174/2013 (20/11/2013); Reg. 2343/2015 (16/12/2015); Reg. 2406/2015 (19/12/2015); Reg. 2067/2016 (29/11/2016); Reg. 2018/182 (07/02/2018)

IFRS 8 Operating segments

Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. 243/2010 (24/03/2010); Reg. 632/2010 (20/07/2010); Reg. 28/2015 (01/01/2015); Reg. 2406/2015 (19/12/2015)

IFRS 9 Financial instrumentsReg. 2016/1905 (22/09/2016); (EU) Reg. (UE) 2067/2016 of 22 November 2016 - published on 29/11/2016; Reg. 498/2018 (22/03/2018)

IFRS 10 Consolidated Financial Statements

Reg. 1254/2012 (29/12/2012); Reg. 313/2013 (04/04/2013); Reg. 1174/2013 (21/11/2013); Reg. 2441/2015 (18/12/2015); Reg. 1703/2016 (22/09/2016); Reg. 2018/182 (07/02/2018)

IFRS 11 Joint arrangementsReg. 1254/2012 (29/12/2012); Reg. 313/2013 (04/04/2013); Reg. 2173/2015 (25/11/2015); Reg. 2441/2015 (18/12/2015)

IFRS 12 Disclosure of interests in other entities

Reg. 1254/2012 (29/12/2012); Reg. 313/2013 (04/04/2013); Reg. 1174/2013 (21/11/2013); Reg. 1703/2016 (22/09/2016); Reg. 2018/182 (07/02/2018)

IFRS 13 Fair Value MeasurementReg. 1255/2012 (29/12/2012); Reg. 1361/2014; Reg. 28/2015 (18/12/2014); Reg. 2067/2016 (29/11/2016)

IFRS 15 Revenue from Contracts with CustomersReg. 2016/1905 (22/09/2016); Reg. 2017/1987 (31/10/2017)

IFRS 16 Leasing Reg. 1986/2017 (31/10/2017)

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SIC / IFRIC DESCRIPTION ENDORSING EC REGULATION(Date of publication in the Official Journal of the European Community)

IFRIC 1Changes in Existing Decommissioning, Restoration and Similar Liabilities

Reg. 1126/2008 (29/11/2008), Reg. 1260/2008 (17/12/2008), Reg. 1274/2008(18/12/2008)

IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments Reg. 1126/2008 (29/11/2008), Reg. 53/2009 (22/01/2009), Reg. 301/2013 (28/03/2013); Reg. 2067/2016 (29/11/2016)

IFRIC 5Rights arising from interests in Decommissioning, Restoration and Environmental Rehabilitation Funds

Reg. 1126/2008 (29/11/2008); Reg. 2343/2015 (16/12/2015); Reg. 2067/2016 (29/11/2016)

IFRIC 6Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment Reg. 1126/2008 (29/11/2008)

IFRIC 7Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies

Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008); Reg. 2343/2015 (16/12/2015)

IFRIC 10 Interim Financial Reporting and ImpairmentReg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008); Reg. 2067/2016 (29/11/2016)

IFRIC 12 Service Concession ArrangementsReg. 254/2009 (26/03/2009); Reg. 2231/2015 (03/12/2015); Reg. 2067/2016 (29/11/2016), Reg. 2016/1905 (22/09/2016)

IFRIC 14The Limit on a Defined Benefit Asset, Minimum Funding Requirementsand their Interaction

Reg. 1263/2008 (17/12/2008); Reg. 1274/2008 (18/12/2008), Reg. 633/2010 (20/07/2010)

IFRIC 16 Hedges of Net Investment in a Foreign OperationReg. 460/2009 (05/06/2009); Reg. 243/2010 (24/03/2010); Reg. 2067/2016 (29/11/2016)

IFRIC 17 Distributions of Non-cash Assets to Owners Reg. 1142/2009 (27/11/2009)IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments Reg. 662/2010 (24/07/2010); Reg. 2067/2016 (29/11/2016)IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine Reg. 1255/2012 (29/12/2012)

IFRIC 21 LeviesReg. 634/2014 (14/06/2014) (see amendment to Reg. 634 of 08.2014, page 11)

IFRIC 22 Foreign Currency Transactions and Advance Consideration Reg. 519/2018 (28/03/2018)

SIC 7 Introduction of the Euro Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. 494/2009 (12/06/2009)

SIC 10 Government Assistance – No Specific Relation to Operating Activities Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008)

SIC 25Income Taxes – Changes in the Tax Status of an Enterprise or its Shareholders Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008)

SIC 29 Disclosure – Service Concession ArrangementsReg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. 254/2009 (26/03/2009)

SIC 32 Intangible Assets – Website CostsReg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. 2016/1905 (22/09/2016)

(1) The framework of the international accounting standards is not an applicable accounting standard and it cannot be used to justify exceptions to the standards adopted.However, it can be used to interpret and apply existing standards. The objectives of the reference framework include support to the IASB and national accounting standardboards for the development of new standards and the implementation of convergence projects for national and international standards. In case of conflict between thereference framework and some accounting standards, the international accounting standard shall always prevail. It is divided into four main sections: a) the objective of thefinancial statements; b) the qualitative characteristics that determine the usefulness of information in financial statements; c) the definition, recognition and measurement of theelements that form the financial statements; d) concepts of capital and capital conservation.

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CERTIFICATION OF THE HALF-YEAR CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS PURSUANT TO ARTICLE 81-TER OF CONSOB REGULATION NO. 11971 OF 14 MAY 1999, AS SUBSEQUENTLY AMENDED AND SUPPLEMENTED

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Certification of the half-yearly condensed consolidated financial statements pursuant to art. 81-ter of Consob Regulation no. 11971 of

14 May 1999 and subsequent amendments and additions 1. The undersigned Paolo Fiorentino, in his capacity as Chief Executive Officer, and

Mauro Mangani, in his capacity as Manager responsible for preparing the Company's financial reports, of Banca CARIGE S.p.A. certify, taking also into consideration Article 154-bis, paragraphs 3 and 4, of the Italian Legislative Decree no. 58 of 24 February 1998:

- the adequacy in relation of the Company features and

- the actual application

of the administrative and accounting procedures put in place for preparing the half-yearly condensed consolidated financial statements, in the first half of 2018.

2. The assessment of the adequacy of the administrative and accounting procedures put in place for preparing the half-yearly condensed consolidated financial statements as at 30 June 2018 is based on a Model defined by Banca CARIGE S.p.A. consistently with the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organisations of the Treadway Commission, which represents the international commonly accepted standard for internal control system.

3. The undersigned also certify that:

3.1 the half-yearly condensed consolidated financial statements:

a) have been drawn up in compliance with applicable international accounting standards recognised by the European Community pursuant to European Parliament and Council Regulation no. 1606/2002 of 19 July 2002;

b) correspond to the results of the accounting books and records;

c) are suitable to provide a true and correct representation of the asset and liabilities and of the economic and financial situation of the issuer and of the group of companies included in the scope of consolidation.

3.2 The interim report on operations contains a reliable analysis of the references to the more significant events occurred in the first six months of this financial year and their impact on the half-yearly condensed consolidated financial statements, together with a description of the main risks and uncertainties faced in the remaining six months of the financial year. The interim report on operations also contains a reliable analysis of the information on significant related party transactions.

Genoa, 3 August 2018

Chief Executive Officer Paolo Fiorentino

Manager responsible for preparing the Company’s financial reports

Mauro Mangani

This document has been translated into the English language solely for the convenience of international readers.

It has been signed on the Italian original version.

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INDEPENDENT AUDITORS’ REVIEW REPORT ON THE HALF-YEAR CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

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EY S.p.A.Sede Legale: Via Po, 32 - 00198 RomaCapitale Sociale Euro 2.525.000,00 i.v.Iscritta alla S.O. del Registro delle Imprese presso la C.C.I.A.A. di RomaCodice fiscale e numero di iscrizione 00434000584 - numero R.E.A. 250904P.IVA 00891231003Iscritta al Registro Revisori Legali al n. 70945 Pubblicato sulla G.U. Suppl. 13 - IV Serie Speciale del 17/2/1998Iscritta all’Albo Speciale delle società di revisioneConsob al progressivo n. 2 delibera n.10831 del 16/7/1997

A member firm of Ernst & Young Global Limited

EY S.p.A.Via XX Settembre, 4216121 Genova

Tel: +39 010 5308111Fax: +39 010 588636ey.com

Review report on the interim condensed consolidated financial statements(Translation from the original Italian text)

To the Shareholders ofBanca Carige S.p.A. – Cassa di Risparmio di Genova e Imperia

Introduction

We have reviewed the interim condensed consolidated financial statements, comprising the balancesheet, the income statement, the statement of comprehensive income, the statement of changes inshareholders’ equity, the statement of cash flows and the related explanatory notes of Banca CarigeS.p.A. – Cassa di Risparmio di Genova e Imperia and its subsidiaries (the “Banca Carige Group” or the“Group”) as of 30 June 2018. The Directors of Banca Carige S.p.A. – Cassa di Risparmio di Genova eImperia are responsible for the preparation of the interim condensed consolidated financialstatements in conformity with the International Financial Reporting Standard applicable to interimfinancial reporting (IAS 34) as adopted by the European Union. Our responsibility is to express aconclusion on these interim condensed consolidated financial statements based on our review.

Scope of Review

We conducted our review in accordance with review standards recommended by Consob (the ItalianStock Exchange Regulatory Agency) in its Resolution no. 10867 of 31 July 1997. A review of interimcondensed consolidated financial statements consists of making inquiries, primarily of personsresponsible for financial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing (ISA Italia) and consequently does not enable us to obtainassurance that we would become aware of all significant matters that might be identified in an audit.Accordingly, we do not express an audit opinion on the interim condensed consolidated financialstatements.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interimcondensed consolidated financial statements of the Banca Carige Group at June 30, 2018 are notprepared, in all material respects, in conformity with the International Financial Reporting Standardapplicable to interim financial reporting (IAS 34) as adopted by the European Union.

Emphasis of matter

Without modifying our conclusions, we draw attention to the disclosure provided in the “AccountingPolicies – Going Concern” paragraph included in the explanatory notes.

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In consideration of the Group’s specific economic, capital and financial situation which, as at 30 June2018, was not compliant with the Total Capital Ratio (TCR) required by the European Central Bank(ECB), as specified in the Supervisory Review and Evaluation Process (SREP) Decision of 27December 2017, and alterations in governance due to multiple resignations in the Board of Directors,the Board attentively assessed the going concern assumption.

Following the assessment and having regard to the requirements of IAS 1 and guidance provided inDocument no. 2 of 6 February 2009, jointly issued by the Bank of Italy, Consob and ISVAP assubsequently updated, the Board concluded that the Group reasonably expects to continue operatingas a going concern in the foreseeable future, primarily in light of the:

• implementation of the actions included in the 2017-2020 Business Plan, approved by theBoard of Directors on 13 September 2017. In particular, the disposal of the bad loanmanagement platform and the outsourcing of the Group's information system were carriedout in the first half of 2018. Preliminary agreements have already been entered into for thedisposal of the Merchant Acquiring business and the consumer credit company CreditisServizi Finanziari S.p.A., with their closing being expected to take place during the secondhalf of 2018. The necessary authorisations from the Supervisory Authorities are pending forthe disposal of the consumer credit company to become effective;

• implementation of the actions included in the NPE Strategy, approved by the Board ofDirectors on 27 March 2018. In particular, during the first half of the year, projects wereinitiated with a view to disposing of a portfolio of bad loans for an amount up to EUR 1 billionand credit exposures classified as unlikely to pay for a total of approximately EUR 500million; moreover, as part of the de-risking process launched in implementation of the NPEStrategy, the Group has already completed the disposal of two credit exposures for a totalgross amount of approximately EUR 50 million;

• Board of Directors’ decision of 3 August 2018 about convening a Shareholders' Meeting on20 September 2018 to resolve, inter alia, upon (i) the proposals for dismissing the Board ofDirectors in office and appointing a new governing body, which were submitted byshareholders POP 12 S.à.r.l. and Malacalza Investimenti S.r.l., pursuant to article 2367 ofthe Italian Civil Code; (ii) filling the vacancies in the Board of Directors by appointing theChair and Deputy Chair in particular, pursuant to article 2364, paragraph 1(2) of the ItalianCivil Code and article 18, paragraph 11, of the Articles of Association, should the foregoingproposals not be approved;

• approval, by 30 November 2018, by the renewed Board of Directors under the newchairmanship, of a comprehensive plan to restore and ensure compliance with the capitalrequirements by 31 December 2018 at the latest. This plan should assess all optionsincluding a business combination.

The implementation of the above actions, combined with the execution of all other initiatives set outin the 2017-2020 Business Plan and the NPE Strategy, as well as the implementation of anyadditional actions which will need to be put in place to meet the requests that the ECB communicatedin its draft decision of 20 July 2018, reveal that the Group has the reasonable expectation that it willcontinue as a going concern for the foreseeable future and will comply with the prudential Own Fundsand liquidity requirements imposed by the ECB on 27 December 2017, contingent upon its ability toabsorb the impact of meeting the NPL reduction targets and minimum NPL coverage levels required.

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The reasonable expectation to continue as a going concern in the foreseeable future is also based oncompliance, as at 30 June 2018, with the minimum consolidated CET1 capital requirement andliquidity ratio required by the ECB and the fact that the measures set out in the Business Plan(particularly a subordinated debt issuance of up to EUR 200 million and the disposal of additionalnon-core assets) are adequate to restore TCR at a level in excess of the SREP thresholdsrecommended by the ECB, along with the additional options required by the ECB. The Boardemphasizes that failure to execute such measures may have significant adverse effects on the overalleconomic, capital and financial situation of the Bank and the Group, with potential impacts on theircapacity to operate as a going concern.

On the basis of the above, subject to the effective implementation of the above-listed actions,Directors are of the opinion that the Group has the forward-looking ability to comply with the capitalrequirements set under the SREP in the foreseeable future. Therefore, even considering theuncertainties deriving from the current market environment, as well as from the outcome of theforthcoming completion of the non-performing loan disposal and the potential effects of the ongoinginspection by the Supervisory Authority, of which information is also given In the paragraph“Accounting policies - Estimates and Assumptions in the preparation of the half-year condensedconsolidated financial statements and associated uncertainties” included in the explanatory notes,the half-year condensed Consolidated Financial Statements were prepared on the going-concernbasis.

Genoa, 9 August 2018

EY S.p.A.Signed by: Guido Celona, partner

This report has been translated into the English language solely for the convenience of internationalreaders

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