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The UBI Banca Group Consolidated Results as at 31st December 2013
12th March 2014
Disclaimer
This document has been prepared by Unione di Banche Italiane Scpa ("UBI") for informational purposes only and for use in the presentation ofMarch 2014. It is not permitted to publish, transmit or otherwise reproduce this document, in whole or in part, in any format, to any third partywithout the express written consent of UBI and it is not permitted to alter, manipulate, obscure or take out of context any information set out inthe documentthe document.
The information, opinions, estimates and forecasts contained herein have not been independently verified and are subject to change withoutnotice. They have been obtained from, or are based upon, sources we believe to be reliable but UBI makes no representation (eitherexpressed or implied) or warranty on their completeness, timeliness or accuracy. Nothing contained in this document or expressed during thepresentation constitutes financial legal tax or other advice nor should any investment or any other decision be solely based on thispresentation constitutes financial, legal, tax or other advice, nor should any investment or any other decision be solely based on thisdocument.This document does not constitute a solicitation, offer, invitation or recommendation to purchase, subscribe or sell for any investmentinstruments, to effect any transaction, or to conclude any legal act of any kind whatsoever.This document contains statements that are forward-looking: such statements are based upon the current beliefs and expectations of UBI andare subject to significant risks and uncertainties These risks and uncertainties many of which are outside the control of UBI could cause theare subject to significant risks and uncertainties. These risks and uncertainties, many of which are outside the control of UBI, could cause theresults of UBI to differ materially from those set forth in such forward looking statements.Under no circumstances will UBI or its affiliates, representatives, directors, officers and employees have any liability whatsoever (in negligenceor otherwise) for any loss or damage howsoever arising from any use of this document or its contents or otherwise arising in connection withthe document or the above mentioned presentation.For further information about the UBI Group, please refer to publicly available information, including Annual, Quarterly and Interim Reports.By receiving this document you agree to be bound by the foregoing limitations.Please be informed that some of the managers of UBI involved in the drawing up and in the presentation of data contained in this documenteither participated in a stock option plan and were therefore assigned stock of the company or possess stock of the bank otherwise acquired.The disclosure relating to shareholdings of top management is available in the annual reportsThe disclosure relating to shareholdings of top management is available in the annual reports.
Methodology
The “notes on the reclassified financial statements” contained in the periodic financial reports of the Group may be consulted for a fullercomprehension of the rules followed in preparing the reclassified financial statements.
2
Executive summary
PROPOSED DIVIDEND PER SHARE
(€)
0.05 0.06
CORE TIER 1 CET 1 (fully loaded) TOTAL CAPITAL RATIO
FY12 FY13
10.3% 12.6% > 9% > 10% 16.0% 18.9%
LCR & NSFR LEVERAGE (B l 3)* LOAN TO DEPOSIT RATIO
Dec '12 Dec '13 Mar '13 Dec '13 Dec '12 Dec '13
LCR & NSFR LEVERAGE (Basel 3)* LOAN TO DEPOSIT RATIO
> 1 >1 >1 >1
94.0% 95.5%5.07% 5.16%< 100%
Dec '12 Dec '13
NSFR > 1 also net of LTRO
Dec '12 Dec '13Sept' 13 Dec '13
3* On the basis of Basel 3 requirements, the minimum financial leverage ratio is set at 3%, in order to contain total banking debt
and as a consequence, the tier one capital must be equal to at least 3% of on- and off-balance-sheet assets
Executive summary
NET PROFIT
(€ mln)
83
251 149 in 4Q13 49 in 3Q13
-140 in 4Q12
(€ mln)
FY12 FY13
NET INTEREST INCOME NET RESULT FROM FINANCE TOTAL OPERATING INCOME
1,864 1,751 257 325
+3% 4Q/3Q +10% 4Q/4Q
+164% 4Q/3Q +43% 4Q/4Q
3,526 3,437
+14% 4Q/3Q +7% 4Q/4Q+26.1%-6.1% -2.5%
OPERATING EXPENSES
FY12 FY13 FY12 FY13
+10% 4Q/4Q +43% 4Q/4Q
LLPNET OPERATING INCOME
FY12 FY13
+7% 4Q/4Q
1,260 1,295
OPERATING EXPENSES
FY12 FY13
LLPs
+90% 4Q/3Q +4% 4Q/4Q
NET OPERATING INCOME
FY12 FY13
+1% 4Q/3Q 6% 4Q/4Q
+36% 4Q/3Q +30% 4Q/4Q
-5.5% +2.8% +11.3%
FY12 FY13(847) (943)
+4% 4Q/4Q
(2,267) (2,142)
-6% 4Q/4Q +30% 4Q/4Q
4
Executive summary
Announced actions to support future profitability Gross yearly savings at regime
Further staff optimisation (-183 units) to beimplemented within June 2014, enabled by€ 26 mln net leaving incentives booked in
€ 15 mln€ 26 mln net leaving incentives booked in4Q13; € 15 mln savings at regime
Reimbursement of Tier 1 instruments in € 22 mlnFeb/Mar 2014 (€ 340 mln, 595 bps spread)€ 22 mln
Early reimbursement on 7th March 2014 of € 3bln State guaranty bond (€ 2 bln expiring inJan/Feb 2017 and € 1 bln in Feb 2015)*
€ 20 mlnJan/Feb 2017 and € 1 bln in Feb 2015)
5* The remaining € 3 bln will expire in Jan/Feb 2015
Lending volumes: confirmation of first signs of progressive improvement in new origination inflows of medium/long term lending
in bln € 31 Dec '12 30 Sept '13 31 Dec '13 % Yo Y changes
% Qo Q changes
FOCUS ON MEDIUM / LONG TERM STOCK (€ 64 bln)
g g g
46.1 44.5 44.0 -4.6% -1.0%
of which: Private Customers 21.3 21.3 21.4 0.1% 0.2%
Small business 15.2 14.5 14.2 -6.6% -1.7%
Retail 1 Network banks: approx. € 43 bln
New origination
R i b= 86% in FY13
81% i FY12UBI Banca (former Banca 24/7)* 6.7 6.2 6.0 -10.0% -2.7%
Prestitalia* 2.9 2.5 2.4 -15.4% -3.1%
29.5 28.6 27.9 -5.4% -2.3%
f hi h C t 15 4 14 8 14 6 5 3% 1 6%
Corporate
Reimbursement vs. 81% in FY12
mainly thanks to growth in new mortgage loansgranted to:
↗ private customers (+10.7% YoY)****of which: Core corporate 15.4 14.8 14.6 -5.3% -1.6%
Large corporate 7.8 8.2 8.0 2.6% -1.9%UBI Banca (former Centrobanca) 6.3 5.6 5.3 -15.4% -4.7%
0.8 0.8 0.8 1.3% 1.6%Private
p ( )
↗ corporate sector (+11.8% YoY)
while new origination of small business is stilldown (approx. 5%)
16.4 16.0 15.7 -4.8% -2.1%
of which: UBI Leasing 8.1 7.6 7.4 -7.7% -2.0%UBI Factor 2.4 2.2 2.3 -4.4% 5.4%UBI*** 1 7 1 6 1 4 -17 8% -12 6%
Other** 2 Product companies: approx. € 14 bln UBI Leasing, Prestitalia, former Centrobanca, captive consumer finance
New origination= 38% in FY13UBI 1.7 1.6 1.4 17.8% 12.6%
92.9 89.8 88.4 -4.8% -1.6%Total
22% of YoY decrease explained by portfolio
3 Stock in run-off: approx. € 7 bln
Reimbursement= 38% in FY13
Small business: turnover up to €15 mlnCore Corporate: turnover from €15 to €250 mlnLarge Corporate: turnover > €250 mln
22% of YoY decrease explained by portfolioin run off (€ 6.7 bln at end 2013 vs € 7.2 atend 2012, mainly former Banca 24/7 andLeasing) and disposal of BDG (€ 0.2 bln)
6
* Following the merger of Banca 24/7 in UBI Banca, effective July 2012, UBI Banca is managing the remaining stock of non captive mortgages andpersonal and special purpose loans. Prestitalia is managing the “salary backed loan” operations
** Minor companies, IAS adjustments, loans not segmented to commercial portfolios and intercompany eliminations*** UBI net of intercompany; **** Net of mortgages granted to Group employees
UBI Banca’s liquidity position allowed optimisation of higher cost funding with a benefit in terms of NIILoan to Deposit ratio: 95.5%
quarterly annual
100%
80%
IAS amounts in € bln 31 Dec '12 30 Sept '13 31 Dec '13 quarterly % changes
annual % changes
TOTAL DIRECT FUNDING 98.8 92.8 92.6 -0.2% -6.3%
FROM ORDINARY CUSTOMERS 80 3 75 3 74 7 -0 8% -7 1%
Current accounts and depositsevolution YoY reflects fundingstrategy allowed by strongliquidity position (- € 2 5 bln of~80% FROM ORDINARY CUSTOMERS 80.3 75.3 74.7 -0.8% -7.1%
Current accounts & deposits (other than CCG) 44.7 42.6 42.6 0.0% -4.7%CCG (run-off due to new regulation) 0.4 0.0 0.0
Term deposits, other payables and repos 4.7 3.1 2.6 -16.7% -44.8%
liquidity position ( € 2.5 bln ofhigher cost more volatileinstitutional and large corporatefunding) and disposal of BDG inNovember 2013 (- € 0.2 bln).QoQ current accounts are up by
Securities in issue: Network banks + UBI 24.5 23.8 24.1 1.4% -1.6%Extra-captive customers* 3.9 3.8 3.7 -2.3% -6.2%Other (mainly customer CDs) 2.1 2.0 1.7 -17.6% -20.5%
QoQ, current accounts are up by0.5% net of BDG disposal
Term deposits contractionsupports further improvement inmark down (+15 bps YoY and +73
~20% FROM INSTITUTIONAL CUSTOMERS 18.5 17.5 17.9 2.6% -2.9%
Securities in issue:Covered Bonds 6.3 6.3 7.7 23.3% 21.5%
bps 4Q13/4Q12)
€ 0.64 bln soft mandatory con-vertible bond redeemed in July ‘13Retail bonds replacement rate:
In Oct 2013, issuances of: € 1.25 bln Covered Bond
€ 0 75 bln Emtn
EMTN 7.1 5.1 4.2 -17.9% -41.4%CD and ECP 0.8 0.3 0.2 -24.6% -68.7%Preferred shares 0.3 0.3 0.3 0.0% 0.0%
Repos with CCG 3.9 5.5 5.5 -0.4% 39.4%
Retail bonds replacement rate:>100%
€ 0.75 bln Emtn
Full redemption of preferred shares (announced on 27th December 2013) to be completed in March 2014
p
7* Bonds placed on third party banks networks
Securities in issue: retail bonds placed to ordinary customers show significant decrease in spreads
Since 2013, the issuance of retail bonds has beenoptimised and retail bonds are issued by UBI Banca.Network banks, UBI Banca and former Centrobanca*
Maturities Issuances
optimised and retail bonds are issued by UBI Banca.Spreads vs. 6M Euribor on new issuances haveprogressively tightened without affecting thereplacement rate which is still >100%:
(Nominal amounts in € bln, netted of bond repurchases)
Network banks, UBI Banca and former Centrobanca
8.537.33 6 62
125
150
FY13
FY126.62
5.03
In 2013, issuances of retail bonds for approx. € 6.8bln with an average time to maturity of 3 years
1084Q13
2014 2015 2016 2017 and following
bln, with an average time to maturity of 3 years.
Within these issuances the Group have offeredfunding instruments with high social and ethicimpact, i.e.:
2014 Maturities (€ bln) 1Q14 2Q14 3Q14 4Q14 Since the initiative launch (April 2012) to date, UBI Banca and Network Banks have offered
1.91 3.02 1.57 2.02 UBI Community Social Bonds: 45 issuances, i.e. ~ 470 mln/€ average maturity: 30 months charitable donations > 2.4 mln/€
Network banks, UBI Banca and former CB*
8* Centrobanca merged in UBI Banca in May 2013. Extra-captive: bonds placed on third party banks networks
Securities in issue: EMTN and Covered Bonds (Institutional investors)
UBI latest issuances welcomed by the institutional markets; ~ 2 bln/€ bonds maturing throughout 2014 already refinanced
EMTN Covered Bonds*Jan / Feb 2014 issuances Allocation by geography and by investor type
Maturity profile of EMTN and CB stocks € 2 bln issued in 1Q14
0.05
0 55
1.00Jan / Feb 2014 issuances Allocation by geography and by investor type
COVERED BOND
• Size: € 1 bln
• Issued in January 2014
Italian investors 30%
Others 2%
Insurance and pension funds
16%
2.080.97
0 100.80
0 16 0.03
0.55
1.801.05
0.05 1.05
2.611.00January 2014
• Maturity: 10 year (Feb 2024)
• Fixed rate: 3.125% Foreign investors Fund managers
Banks 17%
0.10 0.162014 2015 2016 2017 2018 2019 2020 and
following• Order book: > 4x
EMTN
70% 65%
2014 Maturities (€ bln) 1Q14 2Q14 3Q14 4Q14
EMTN
• Size: € 1 bln
• Issued in February 2014
M t it 5
Italian investors 45%
Others 12%Insurance and
pension funds 19%( )
EMTN 0.04 0.87 0.69 0.48Covered bonds 0.025 0.025
(N i l i € bl )
• Maturity: 5 year (Feb 2019)
• Fixed rate: 2.875%
• Order book: > 4xForeign investors
55%Fund managers
53%
Banks 16%
9* Inclusive of € 0.5 bln of private placement with BEI expiring within 2022 and a tap (related to the 7 year € 1,250 bln public
covered bond 2013-2020) for € 0.25 bln. Further € 1.75 bln retained issue not included
(Nominal amounts in € bln) • Order book: > 4x
Italian Govies proprietary portfolio stable QoQ at around € 19.7 billion
Italian Govies portfolio breakdown: 31 December 2013Financial Assets: Total Portfolio (of which Italian Govies)(€ mln)
HFT (Held for trading)
€ 19.7 bln, IAS values
13%21,383 21,576 21,841
(€ mln)
Not included by ECB in h i
HTM (Held to maturity)AFS (Available for sale)
16%
71%
IT GOVIES
17,966
IT GOVIES
19,445
IT GOVIES
19,738
comprehensive assessment
AFS (Available for sale)31 Dec 12 30 Sept 13 31 Dec 13
21
30 Sept '11 31 Dec '12 31 Dec '13 11 Mar '14
AFS Reserve evolution on Italian Govies(€ mln)
Maturity Profile(market values, € bln)
3 1 1 4 0 22014
-589
-237
-21 3.1
1.1
1.4
4.3
6.4
0.2
2017-2018
2015-2016
2014
-868
Modified Duration of Italian Govies portfolio: 1.7 years
Reference for EBA capital exercise as at
3.2 Over
10
8th Dec 2011
As at 7 March 2014, reimbursed, after obtaining authorisation, € 3 bln ofGovernment Guaranteed bonds. This notwithstanding, total eligible assetsg, gamount to € 33.6 bln. Unencumbered eligible assets at € 18.8 bln
%Eligible assets breakdown
Italian GoviesGov. Guaranteed bonds
Retained securitisations
~ 66%~ 8%
~ 13%
Eligible assets*:
€ 33 6 bln
g
of which
Retained covered bonds ***
Other (ABACO)
~ 8%
~ 5%
€ 33.6 bln(net of haircut)
Unencumberedeligible assets:
€ 18.8 bln
~44% of short term deposits
High-quality available assets guarantee immediate access to liquidity
Eligible assets pledged for LTROs*:
€ 12.3** bln
Eligible assets used in CCG repos:
€ 2.5 bln
11* € 6 bln of LTRO were taken in December 2011, further € 6 bln in February 2012 ** Including among others interest expense accrued *** € 0.9 bln on the €10 bln Retail Mortgages CB Programme, € 1.7 bln on the € 5 bln Commercial Mortgages CB Programme (net of haircut)
MAIN INCOME STATEMENT ITEMS FY13 % h
Net Profit: € 251 mln in 2013 vs. € 83 mln in 2012MAIN INCOME STATEMENT ITEMSFigures in € mln FY12 FY13 % change
Net interest income 1,864 1,751 (6.1%) Net commission income 1,182 1,187 0.4%
of which: performance fees 20 14 (28.1%) Net result from finance includes the capital gain
Net result from finance 257 325 26.1% Other income items 223 175 (21.7%)
Operating income 3,526 3,437 (2.5%) Staff costs (1,374) (1,302) (5.2%)
Net result from finance includes the capital gainon revaluation of stake in Bank of Italy (€ 29 mln)and the disposal of the whole residual participationin Intesa Sanpaolo (€ 50 mln)
Other administrative expenses (702) (660) (6.0%)
Net impairment losses on property, equipment and investment property and intangible assets (191) (180) (5.7%)
Operating expenses (2,267) (2,142) (5.5%)
1 260 1 29 2 8%
Costs benefit from containment actions both interms of headcounts and outsourced services,travel expenses, etc...
Net operating income 1,260 1,295 2.8% Net impairment losses on loans (847) (943) 11.3%
Net impairment losses on other financial assets and liabilities (55) (48) (13.3%)
Net provisions for risks and charges (49) (12) (74.9%)
P fit (l ) f di l f it i t t 15 (7) n s
Contribution to Interbank Deposit Protection Fundin favour of Banca Tercas: € 17 mln gross
Profits (losses) from disposal of equity investments 15 (7) n.s.
Pre-tax profit from continuing operations 323 285 (11.7%)
Taxes on income for the year from continuing operations (121) 55 n.s.
Profit for the year attributable to non-controlling interests (17) (26) 49.6%
Taxes on income include: negative effect of additional IRES taxes established by
Italian Law Decree no. 133/2013 (€ -33 mln)
positive effect of deductibility, for IRAP purposes, ofimpairments on loans introduced by the 2014 StabilityProfit for the year attributable to the shareholders of the Parent
before charges for exit incentives and impairments on tangible andintangible assets
185 315 70.4%
Impairment on tangible and intangible assets(net of tax and non-controlling interests) (38) n.s.
impairments on loans introduced by the 2014 StabilityLaw (€+50 mln)
IRAP tax relief on goodwill (€+213 mln), not previouslyrecognised for prudential reasons
Tax rate net of non-recurring items: 52.1%Charges for exit incentives (net of tax and non-controlling interests) (102) (26) n.s.
Profit for the year 83 251 n.s.
Profit for the year NET OF NON RECURRING ITEMS 97 100 3 0%Profit for the year NET OF NON-RECURRING ITEMS 97 100 3.0%
12Further detail on non-recurring items in annex 7PPA allocated line by line
4Q Net Profit: € 149 mln in 2013 vs. € -46 mln in 2012MAIN INCOME STATEMENT ITEMS 4Q12 3Q13 4Q13 % Y Y % Q QMAIN INCOME STATEMENT ITEMSFigures in € mln 4Q12 3Q13 4Q13 % YoY % QoQ
Net interest income 417 446 459 10.0% 3.0% Net commission income 311 286 299 (3.8%) 4.6%
of which: performance fees 20 14 (28.1%) n.s.Net result from finance 109 59 156 43.2% 164.2% Other income items 54 43 37 (31.8%) (15.0%)
Operating income 891 834 951 6.8% 14.0%
Staff costs (336) (328) (327) (2.7%) (0.2%)
Other administrative expenses (188) (159) (166) (11.8%) 4.6%
Net impairment losses on property, equipment and investment property and intangible assets (50) (45) (45) (9.0%) 1.1%
Operating expenses (574) (532) (538) (6.2%) 1.3%
Net operating income 317 303 413 30.3% 36.4%
Net impairment losses on loans (353) (193) (366) 3.9% 90.1%
Net impairment losses on other financial assets and liabilities (4) (5) (25) n.s. n.s.
Net provisions for risks and charges (28) (3) 2 n.s. n.s.
Profits (losses) from disposal of equity investments 6 (1) (8) n.s. n.s.
Pre-tax profit/loss from continuing operations (62) 101 15 n.s. (84.7%)
Taxes on income for the period from continuing operations 18 (46) 205 n.s. n.s.
Profits for the period attributable to non-controlling interests (2) (6) (8) n.s. 33.6%
Profit/loss for the period attributable to the shareholders of the Parent before charges for exit incentives and impairments on tangible andintangible assets
(46) 49 213 n.s. n.s.
Impairment on tangible and intangible assets(net of tax and non-controlling interests) (38) n.s. n.s.( g )
Charges for exit incentives (net of tax and non-controlling interests) - (26) n.s. n.s.
Profit/loss for the period (46) 49 149 n.s. n.s.
13Further detail on non-recurring items in annex 7PPA allocated line by line
Profit/loss for the period NET OF NON-RECURRING ITEMS (83) 22 26 n.s. 17.8%
Net Interest Income at € 1,751 mln, recovering progressively QoQ in 2013
(€ mln)
1,864 1,751 Given current market
conditions, expected further improvement in 2014
-6.1%
+3.0%
417 428 446 459
, improvement in 2014+2.6%
+4.2%3.0%
further liability cost reduction
higher expected rate of
1Q13 2Q13 3Q13 4Q13FY12 FY13
g pmedium/long term loaninflows
Main driver coming from improvement in customer business: 80% of NII
BUSINESS WITH CUSTOMERS
Net of cost of funding
in bps on avg. STOCK * 4Q12 1Q13 2Q13 3Q13 4Q13
1M Euribor 11 12 12 13 16UBI Group - Customer spread 150 159 161 168 174
Mark up vs 1M Euribor 280 284 281 280 280(€ mln)
335 337 343361 364
Mark up vs 1M Euribor 280 284 281 280 280Short term 382 386 377 365 372Medium-long term 249 253 252 253 252
Mark down vs 1M Euribor -130 -125 -120 -112 -106Sight deposits 49 34 27 22 17
2013 NEW ISSUANCESAvg. markup vs. 1MEuribor on Network
4Q12 1Q13 2Q13 3Q13 4Q13
Sight deposits -49 -34 -27 -22 -17Term deposits -318 -304 -284 -262 -245Retail bonds -154 -151 -154 -149 -149Institutional bonds -174 -174 -176 -177 -186
Network Banks cust. spread** 168 175 175 184 194
Banks:
410 bps m/l term neworigination loans vs.235 bps m/l term avg.stock
14* Average period data referred to the whole consolidated Group (Network banks+ Product companies + UBI), unless otherwise stated** Network Bank customer spread includes subordinated debt
stock
Net Commission Income: +0.4% YoY; +1.2% excluding fee expense on State guaranty bonds and performance fees
Net Commission Income (€ mln) FY12 FY13 %YoY 4Q12 3Q13 4Q13 % 4Q13 vs. % 4Q13 vs. Net Commission Income (€ mln) FY12 FY13 % YoY
Guarantees (on State guaranty bonds) (42.8) (46.5) 8.7%
BANKING RELATED COMMISSIONS 667.0 645.3 -3.2%
of which:
4Q12 3Q13 4Q13 4Q12 3Q13
(11.7) (11.7) (11.7) 0.0 0.0
165.6 157.9 162.7 -1.8% 3.0%
In early March obtainedauthorisation to reimburse€ 3 bln bonds with stateguaranty
0.0% 0.0%
of which:Guarantees (bank ing activity) 48.7 47.6 -2.2%
Collection and payment services 115.1 109.0 -5.3%
Services for factoring transactions 26.2 23.2 -11.6%
Current accounts management 214.2 205.5 -4.0%
11.6 11.6 10.8 -7.5% -7.3%
36.7 26.4 29.1 -20.7% 10.1%
6.8 5.5 5.3 -22.6% -5.0%
56.6 52.2 54.4 -3.9% 4.3%
Fees on collection andpayment services adverselyaffected by sluggish economy
gOther services 262.8 260.1 -1.0%
MANAGEMENT, TRADING & ADVISORY SERVICES* 558.1 588.3 5.4%
of which:
53.8 62.2 63.1 17.2% 1.5%
156.8 139.6 148.0 -5.6% 6.0% Portfolio management netcommissions up by ~ €15 mlnor 6.6% YoY (excl. perf. fees); Placement of securities feesPortfolio management 243.0 252.3 3.8%
Placement of securities 128.8 147.3 14.4%
Third party services distribution 148.5 153.4 3.3%
TOTAL 1,182.3 1,187.1 0.4%
73.4 58.8 78.1 6.4% 32.8%
26.5 33.8 21.7 -18.1% -35.8%
47.4 39.0 39.1 -17.4% 0.4%
310.7 285.9 299.0 -3.8% 4.6%
Placement of securities feesup by nearly €19 mln YoY(14.4%), also thanks to thecontribution of successful UBIPramerica SICAV products (€2.7 bln in 2012 and € 3.1 blnin 2013)TOTAL 1,182.3 1,187.1 310.7 285.9 299.0 in 2013)
Including performance fees bookedonly in 4Q for € 19.7 mln in 2012 and€ 14.2 mln in 2013
15* Includes FX negotiations and excludes performance fees
Discipline in cost containment persists: -5.5% YoY5th consecutive year of progressive reduction in total operating costs y p g p g
STRUCTURAL DROP CONFIRMED
702 660
191 180
2,267 2,142
-5.7%
-5.5%
Other Adm Expenses
D&A (incl. PPA*)
Total oper. costs -865 exits in 2013 also thanks Nov’12/Feb’13 trade union
agreement:
Mar’14 new trade union agreement:183 it ithi J 2014
1,374 1,302
702 660-6.0%
-5.2%Staff costs
Other Adm. Expenses - 183 exits within June 2014- one off costs for € 36 million gross (€ 29 mln net) already
recognised in 4Q13- cost savings estimated at approx. € 15 mln gross at regime in
2015
FY12 FY13
(€ mln)
2015
Drop in other administrative expenses thanks to strong controlactions in place in all main item expenses and notwithstandinghigher commercial campaign costs
Total operating costs (€ mln) of which Staff costs (€ mln) of which Other admin. expense (€ mln)
-6.2%
574 532 538
336 328 327
+1.3% -2.7%
-0.2%-11.8%
+4.6%
4Q12 3Q13 4Q13
328 327
4Q12 3Q13 4Q13
188 159 166
4Q12 3Q13 4Q13
16* PPA effect amounted to € 20.1 mln in 2012 and to € 20.4 mln in 2013
Cost savings generated since the Group’s inception amount to € 457 million (or approx. € 690 taking into account inertial growth*)(or approx. € 690 taking into account inertial growth )
Total normalised Operating Costs Evolution (YoY, in %)
0.1%
FY08/FY07 FY09/FY08 FY10/FY09 FY11/FY10 FY12/FY11 FY13/FY12
0.1%
-5 0%
-1.7% -0.7%
5 5%5.0%-6.2% -5.5%
T t l li d O ti C t T t l li d O ti C tTotal normalised Operating Costs
2,599** Achieved structural savings of € 457l i 6 ( € 690 l
Total normalised Operating Costs
17 6%
(€ mln)
2,142
mln in 6 years (approx. € 690 mlntaking into account inertial growth)
Further estimate of € 15 mln structural
-17.6%
FY07 FY13
yearly savings at regime from 2015(March 2014 trade union agreement )
17* Mainly national labour contract renewals, career advancements, inflation effect, VAT and indirect taxes increase** Pro-forma figure as in 2008 financial report restated to include approx. € 50 mln referred to staff severance provision released one
off, due to amendments to supplementary pension legislation
Evolution of the distribution network reflects changing banking behaviours. Increase in staff dedicated to commercial activity vs. administrative rolesIncrease in staff dedicated to commercial activity vs. administrative roles
Traditional Banking: # Branches
12 4%
Innovative Banking*: Online Banking Customers
1,970 1,944 1,9551,892 1,875
1,727 1 725
-12.4%
708 000928,000
1,070,0001,220,000+190%
1,727 1,725
1 t A il D 08 D 09 D 10 D 11 D 12 D 13
421,000 463,000555,000
708,000
D 07 D 08 D 09 D 10 D 11 D 12 D 13
~ 50% OF TOTAL EMPLOYEES PROVIDE ADVISORY/COMMERCIAL SUPPORT TO CUSTOMERS
1st April 2007
Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec 07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
ADVISORY/COMMERCIAL SUPPORT TO CUSTOMERS
Employees**# Employees*
21,70020,680
20,28519,699 19,407 19 089
-15.5%
27.3%20.5%
28.1% 26.3%
6.8% 6.3% Product Companies
UBI Banca, UBI.S and Network Banks Central OfficesOperating Staff in Network Banks, 19,089
18,337
1st April Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13
37.9% 46.9%
27.3% p g
Commercial Staff in Network Banks
1st April 07 31 Dec 2013
18* Year-end figures** 2007 pro-forma figures to consider change in perimeter
1st April 2007
Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 1st April 07 31 Dec 2013
Lower growth in deteriorated loans stocks in 2013 vs 2012 (€ 1.7 bln vs € 2.4 bln)
- STOCKSLower (-28%) increase in deteriorated loansstocks in 2013 vs 2012: € 1 7 bln vs € 2 4 bln
Gross deteriorated loans amount (€/mln)
+ € 2.4 bln + € 1.7 bln
stocks in 2013 vs 2012: € 1.7 bln vs € 2.4 blnQuarterly CAGR 3.7% in 2013 vs 6.3% in 2012
- INFLOWS & OUTFLOWSInflows from performing loans to deteriorated
8,58910,958
12,674
Inflows from performing loans to deterioratedloans down by 4.2%Significant increase in deteriorated loansreturning to performing: +22.8%
Dec '11 Dec '12 Dec '13
Inflows from performing loans to deteriorated loans andoutflows from deteriorated to performing loans
Dec 11 Dec 12 Dec 13
Inflows from performing loans to deteriorated loans andoutflows from deteriorated to performing loansp g
INFLOWS -OUTFLOWS
-12.1%3,335
p g
(€ mln)
€ mln%
changeInflows from
performing to...Outflows from… to perf. loans
∆(inflows ‐ outflows)
2,9334,307 4,124
Deteriorated Loans FY12 FY13 FY12 FY13 FY12 FY13 YoY
Non Perf. (Sofferenze) 312 145 66 7 246 138 ‐43.9%
Impaired (Incagli) 1,964 1,619 472 487 1,492 1,132 ‐24.1%
-4.2%
971 1,192
Restructured 19 50 54 12 ‐35 38 n.s.
Past due 2,012 2,311 379 686 1,632 1,625 ‐0.4%
Total Deteriorated 4,307 4,124 971 1,192 3,335 2,933 ‐12.1%
+22.8%
19
Dec ‘12 Dec ‘13
Increase in total coverage of deteriorated loans
Stated including write-offs
31 Dec '13pro forma NPLs disposal Coverage 31 Dec '12 30 Sept '13
31 Dec '13including write-offs
31 Dec '13
TRENDS IN NPLs AFFECTED BY:– Disposals of highly provisioned positions:
• 2013: € 103 mln covered at ~93%• 2012: € 108.2 mln covered at ~96%
Total deteriorated loans 26.04% 25.86% 26.52% 36.26% 27.10% 36.69%NPLs (sofferenze) 42.60% 41.30% 41.60% 56.05% 42.54% 56.56%Impaired loans (incagli) 12.63% 14.03% 15.12% 15.12% 15.12% 15.12%Restructured loans 14.84% 15.28% 13.94% 13.94% 13.94% 13.94%
• 2011: € 219.4 mln covered at ~98.5%• …
– Net of one-position (€153 mln) included in2Q13 and not provisioned for seen the highexpectation of full recovery:
Past due loans 2.94% 3.06% 2.83% 2.83% 2.83% 2.83%Performing loans 0.55% 0.57% 0.61% 0.61% 0.61% 0.61%
• Total deteriorated loans coverage = 26.85%• NPLs coverage = 42.71%
Fair value updated every 6 months
type of prevailing guarantee:well over 60% of loan portfolioassisted by collateral (mainly real estate)*
conservative loan to value***:Stocks
D t i t d P f i
Fair value updated every 6 months
Coverage of non collateralised deteriorated loans
Deteriorated Performing
57.8%44.8%> 60%Total loan book
Italian banking system** ~45%
(including write-offs for non performing loans)
Impairedloans 23 5% (D ’ 13)
21.3% (Sept’ 13) +218 bps
62%Impaired loans
Retail
51.9% 42.1%
loans 23.5% (Dec’ 13)
71 8%
bps
63%NPLs
Corporate
Italian banking system** 41%
Management data, figures as at Dec 13, unless otherwise stated
NPLs72.5%(Dec’ 13)
71.8% (Sept’ 13) +69
bps
20* Adding up personal guarantees, over 76% of the portfolio is secured ** Source: Bankit-Bollettino Statistico II/2013, tables TDC30136 and TDC30033*** Arithmetic mean, network banks
Increase in LLPs affected by delay in economic recovery and update in collective impairment calculation parameters* p p
of which NET ANALYTICAL IMPAIRMENTS
(€ mln)
1 112 1 138
∆ = 26
882 908
1,112 1,138
229 230
(€ )
TOTAL NET IMPAIRMENT LOSSES ON LOANS
+48 bps in coverage of totaldeteriorated loans up to26.52% from 26.04% in FY12
943
∆ = 96 FY12 FY13(€ mln)
See annex 5 for further detail
Writedown Writebacks
847
FY12 FY13of which NET COLLECTIVE WRITEDOWNS
FY12 FY13(€ mln)
35
∆ = 70
10% increase in coverage of
-35
FY12 FY13
performing loans up to 61bps from 55 bps in FY12
21* Following authorisations received from the Supervisory Authority, the UBI Group now uses internal models for the calculation of
capital requirements for credit risk – “Corporate” segments (“exposures to businesses”) and “Retail” (sub-portfolios “retail:exposures backed by residential real estate” and “retail: other exposures) – and operational risks
Outlook
The forecasts of all the major study centres show Italy exiting from recession. However, thegrowth forecast is very low
As concerns the UBI Group, under current market conditions, net interest income isexpected to continue to improve, benefiting on the liabilities side from a reduction in thepressure on the cost of funding and on the assets side from the progressive replacement ofpressure on the cost of funding and on the assets side from the progressive replacement ofmedium to long-term loans, made in the past at lower spreads than those practised atpresent
Fee and commission income is expected to be resilient
A further decrease in sovereign debt risk could allow positive results to be achieved fortrading and hedging activity again in 2014, although the magnitude is not easy to predict
The downward trend for administrative expenses will continue, while the performance ofl ill l d d th fi l t f th l f th ti lpersonnel expense will also depend on the final outcome of the renewal of the national
labour contract
Even if economic recovery remains rather weak loss loan provisions should show signs Even if economic recovery remains rather weak, loss loan provisions should show signsof improvement compared to 2013
22
Annexes
23
Reclassified balance sheet: highlightsAnnex 1
% l % t lMAIN ASSETS ITEMS
Financial assets (AFS, HFT, FV, HTM) 21,383 21,576 21,841 2.1% 1.2%
Loans to customers 92 888 89 846 88 421 -4 8% -1 6%
30.09.2013 % annual change
% quarterly change31.12.201331.12.2012MAIN ASSETS ITEMS
Figures in millions of euro
Loans to customers 92,888 89,846 88,421 4.8% 1.6%
Property, equipment and investment property 1,967 1,909 1,798 -8.6% -5.8%
Intangible assets 2,965 2,938 2,919 -1.6% -0.7%
of which: goodwill 2 537 2 537 2 512 1 0% 1 0%of which: goodwill 2,537 2,537 2,512 -1.0% -1.0%
Tax assets 2,628 2,386 2,833 7.8% 18.8%
Other assets 1,060 940 931 -12.2% -0.9%
Total assets 132,434 125,002 124,242 -6.2% -0.6%
% quarterly change31.12.2012 30.09.2013 % annual
change31.12.2013MAIN LIABILITIES AND EQUITY ITEMSFigures in millions of euro
Net interbank position* 9,139 10,948 10,888 19.1% -0.6%
Due to customers 53,758 51,223 50,702 -5.7% -1.0%
Securities issued 45 059 41 546 41 902 -7 0% 0 9%
gg
Securities issued 45,059 41,546 41,902 -7.0% 0.9%
Tax liabilities 666 620 756 13.5% 22.1%
Net worth attributable to the Parent 9,655 9,907 10,089 4.5% 1.8%
N t lli i t t 839 838 842 0 3% 0 5%Non-controlling interests 839 838 842 0.3% 0.5%
Profit for the period 83 102 251 203.3% 146.0%
Total liabilities and equity 132,434 125,002 124,242 -6.2% -0.6%
24* Including €12 bln LTRO
Ratios as at 31 December 2013: Core Tier 1 at 12.60%, Tier 1 at 13.23% and Total Capital Ratio at 18.91%
Annex 2
p
Figures in millions of euro31 Dec 2012 Basel II AIRB
30 Sept 2013*Basel II AIRB
31 Dec 2013*Basel II AIRB
Ti 1 (b f filt ) 8 124 2 8 204 8 353Tier 1 (before filters) 8,124.2 8,204 8,353Preference shares, minorities saving and priv. shares net of grandfathering
382.9 382.9 382.9
Tier 1 capital filters -30.5 -14.9 Tier 1 (after filters) 8,476.6 8,571.5 8,735.6
Increase from June ‘13 followingadoption of AIRB model on RetailCredit Risk
Deductions from Tier 1 -212.9 -638.0 -660.4
of which: negative elements for 50% deduction excess of expected losses over impairment losses
-71.6 -424.2 -437.7
Tier 1 after filters and specific deductions 8,263.7 7,933.5 8,075.1Supplementary capital after filters 4,310.5 4,299.2 4,131.3
Deductions from supplementary capital -212.9 -638.0 -660.4 of which: negative elements for 50% deduction excess of expected losses over impairment losses
-71.6 -424.2 -437.7
Supplementary capital after filters and specific deductions 4 097 7 3 661 2 3 470 9
In 4Q13, updating of PD and LGDhistorical data
Supplementary capital after filters and specific deductions 4,097.7 3,661.2 3,470.9Deductions from Tier 1 + supplementary capital -157.8 - -
Total supervisory capital 12,203.6 11,594.7 11,546.0Credit risk prudential requirements 5,611.6 4,342.0 4,436.5Market risk 78.3 59.5 88.1Operational risk 437.3 421.0 359.1
Total prudential requirements 6,127.1 4,822.6 4,883.6
Tier III subordinated liabilitiesComputable value 55.9 42.5Risk weighted assets 76,589 60,282 61,046
Core Tier I after deductions from Core capital 10.29% 12.53% 12.60% Tier I 10.79% 13.16% 13.23% Total capital ratio 16.01% 19.30% 18.91%
25* AIRB models both on network banks’ Corporate and Retail Credit Risk are applied as from June 2013. In Dec ’12 AIRB models were applied only in the calculation of network banks’ Corporate Credit Risk Data as at 30th September 2013 reported on a basis comparable with December 2012
p
Securities Portfolio Details* Annex 3
Composition of the portfolio 31.12.2012 30.09.2013 31.12.2013
G t b d 91 1% 92 9% 93 2%Government bonds 91.1% 92.9% 93.2%
Corporate bonds (mainly bank issues) 7.7% 6.0% 4.6%
Hedge funds 0.6% 0.6% 0.6%
BY TYPE OF FINANCIAL
INSTRUMENTFunds and shares 0.6% 0.5% 1.6%
Floating rate** 26.0% 27.4% 20.4%
Fixed rate 69.0% 67.7% 74.5%
Structured securities 3.8% 3.8% 3.0%
Shares, funds, convertible bonds 1.2% 1.2% 2.2%
BY FINANCIAL PROFILE
Securities in euro 99.5% 99.6% 99.7%BY CURRENCY
Securites of the euro area 98.1% 98.6% 99.6%
USA securities 1.1% 1.0% 0.0%BY GEOGRAPHICAL
DISTRIBUTION
Investment grade 98.0% 98.9% 99.1%
Average rating Baa1 Baa2 Baa2BY RATINGS (BONDS)
26* Analysis refers to a portfolio which excludes participations, some smaller portfolios and derivatives** Fixed rate securities with asset swaps are considered as floating rate securities; securities in asset swap represent 83% of
floating rate securities as at 31st December 2013
Asset Quality detailsAnnex 4
LOANS TO CUSTOMERS - AS AT 31 DECEMBER 2013GROSS EXPOSURE IMPAIRMENT
LOSSES € mln€ mln %* CARRYING AMOUNT COVERAGE
RATIO %€ mln %*
NPLs (Sofferenze) 6.38% 2,448IMPAIRED LOANS (Incagli) 5.51% 769RESTRUCTURED LOANS 0.95% 122PAST DUE 0 90% 24
3.89%3,437 41.60%4.88%4,314 15.12%0.85%751 13.94%0 91%811 2 83%
5,8855,083
872834PAST DUE 0.90% 24
TOTAL DETERIORATED LOANS 13.74% 3,362
0.91%811 2.83%
10.53%9,312 26.52%TOTAL PERFORMING LOANS 86.26% 482 89.47%79,109 0.61%
TOTAL LOANS TO CUSTOMERS 100% 3 843 100%88 421 4 17%
834
12,674
79,591
92 26
LOANS TO CUSTOMERS - AS AT 30 SEPTEMBER 2013
TOTAL LOANS TO CUSTOMERS 100% 3,843 100%88,421 4.17%92,265
GROSS EXPOSURE IMPAIRMENT LOSSES € mln
NPLs (Sofferenze) 6.11% 2,361
€ mln %* CARRYING AMOUNT
3.73%3,355 41.30%
COVERAGE RATIO %
5,716
€ mln %*
IMPAIRED LOANS (Incagli) 5.36% 703RESTRUCTURED LOANS 0.73% 105PAST DUE 1.02% 29
TOTAL DETERIORATED LOANS 13 22% 3 198
4.79%4,307 14.03%0.65%580 15.28%1.04%926 3.06%
10 21%9 169 25 86%
5,010685956
12 367TOTAL DETERIORATED LOANS 13.22% 3,198 10.21%9,169 25.86%TOTAL PERFORMING LOANS 86.78% 466 89.79%80,677 0.57%
TOTAL LOANS TO CUSTOMERS 100% 3,664 100%89,846 3.92%
12,367
81,143
93,510
27* As a percentage of total loans
Analytical impairments detailsAnnex 5
ANALYTICAL IMPAIRMENTS
Writedowns Writebacks*(€ mln)
4Q13/4Q12: analytical writedowns decreased by 7.7%
414 382805
1,112 1,138
259229 230
143202 245259
4Q
3Q
2Q32 40 52
63 40 34-7.7%805 229 230
164 215 230
239282 281
143 2Q
1Q68 93 75
96 56 69
FY11 FY12 FY13 FY11 FY12 FY13
28* Net of time reversal: € 217 mln in FY11, € 179 mln in FY12 and € 158 mln in FY13
Annex 6
Indirect Funding Evolution
in bln€ Dec 12 Sept 13 Dec 13 Dec 13 vs Sept 13
AUM (excl bancassurance) 26.8 27.8 27.8 0.2%
B 11 3 11 6 11 7 1 3%
+2.6% net of BDGdisposal in November
Bancassurance 11.3 11.6 11.7 1.3%
AUC 32.1 30.7 32.1 4.4%
Total Indirect Funding 70.2 70.1 71.7 2.2%
2013
Mix of AuM: breakdown by fund type in UBI Pramerica
30 Sept 2013 31 Dec 2013 (vs 31 Dec 2012)
Balanced, 14%
Equity, 13%
Fl ibl
Bond, 59%Balanced; 17% (8%)
Equity; 13% (13%)Flexible,
3%
Cash, 11%
(13%)
Flexible; 4% (3%)
Cash; 10% (12%)
Bond; 56% (64%)
29
Source: Assogestioni’s “PATRIMONIO GESTITO* aggregate
* Customers assets managed to which assets received for management under a mandate from other managers are added and from which assetsentrusted under mandate to other managers are subtracted. With reference to UBI Pramerica, as from June ‘12 Assogestioni includes again in thisaggregate the amounts managed by third parties, i.e. approx. € 4.7 bln managed by Prudential
FY2013 and FY2012 non-recurring items: detailPost tax contribution of non-recurring items to net profit of the period (in € mln)
Annex 7
FY 2013 FY 2012
Net stated profit 250.8
Recognition of IRAP* DTA on tax relief on goodwill 212.6
Net stated profit 82.7
Prior year tax credit for deduction for IRES** of IRAP* 60.9
Disposal of equity stake
Profit on the repurchase of financial liabilities
Profit on Bank of Italy stake
56.1
20.5
3 2
on the labour cost
Disposal of shares and investments
Tax realignment pursuant to law n. 111/2011 and law 214/2011 of BPA goodwill recognised in the consolidated
30.1
25.0(subordinated EMTN)
Net impairment losses on tangible and intangible assets
(37.7)
3.2 g gfinancial statement
Tax relief on non-accounting deductions on loan i i d it d f UBI B t t
Gain on public tender offer to purchase pref. shares 15.0
Net impairment losses on AFS financial assets
Modification of 2013 IRES** tax rate
Leaving incentives
(20.7)
(37.5)
(26.0)
Leaving incentives
provisions and write-down of UBI Banca pursuant to law n. 244/2007 (section EC)
(101.9)
8.3
Intervention by the Interbank Deposit Protection Fund (11.4)
Disposal of equity investment (8.5) (1.5)Net impairment losses on tangible and intangible assets
Impairment losses on equity instruments and OICR (50.5)
Net profit excluding non-recurring items 100.2 Net profit excluding non-recurring items 97.3
30* IRAP = regional production tax** IRES = corporate income tax